Exhibit 10.13


 


ASSET PURCHASE AGREEMENT


 


THIS ASSET PURCHASE AGREEMENT dated as of the 17th day of November,
2004 (this “Agreement”), is made and entered into by and among Merit Medical
Systems, Inc. (“Purchaser”), MedSource Packaging Concepts LLC, a Virginia
limited liability company (“Seller”), and each of the following individual
residents of the Commonwealth of Virginia: Robert E. Hale (“Hale”), Charles
Long (“Long”), Gary W. Kazee (“Kazee”), Willis P. Blackwood (“Blackwood”),
Robert C. Walker (“Walker”), Tommy J. West (“West”), and David T. Richardson (“Richardson”)
(all such individuals collectively are referred to as the “Members,” and
individually each a “Member”), relating to the sale of the assets of Seller’s
medical supplies and products packaging, marketing, distribution, sales and
services business to Purchaser.  Robert
E. Hale shall serve as the “Member Representative” for purposes of this
Agreement.


 


WHEREAS, each of the board
of directors of Purchaser and the Members and managers of Seller has approved,
and deems it advisable and in the best interests of its respective shareholders
or members to consummate the sale by Seller and acquisition by Purchaser of the
Acquired Assets (as defined herein), subject only to those liabilities
expressly assumed herein by Purchaser, upon the terms set forth herein.


 


WHEREAS, the Members are the sole members of Seller, and each of the
Members has approved of, and consented to, the sale of the Acquired Assets to
Purchaser.


 


NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:


 


ARTICLE I- DEFINITIONS AND INTERPRETATION


 


Section 1.1                                      Definitions.  For all purposes of this Agreement, except as
otherwise expressly provided or unless the context clearly requires otherwise:


 


“Accounts
Receivable” means any and all trade accounts, notes and other receivables of
Seller in respect of the Business and all claims relating thereto or arising
therefrom.


 


“Affiliate” shall have the meaning set forth in Rule 12b-2
of the Exchange Act.


 


“Agreement” or “this Agreement” shall mean this Asset Purchase
Agreement, together with the Exhibits hereto and the Disclosure Schedule.


 


“Applicable Law” shall mean any law, regulation, rule, order, judgment
or decree to which the Business, the Acquired Assets or Seller is subject.


 


“Acquired Assets” has the meaning set forth in Section 2.1(a).


 


“Associate” shall have the meaning set forth in Rule 12b-2
of the Exchange Act.


 


“Assumed Contracts” shall have the meaning set forth in Section 2.1(a)(ii).


 


“Assumed Liabilities” has the meaning set forth in Section 2.3.


 





















 


“Business” shall mean the medical supplies and products packaging,
marketing, distribution, sales and services business heretofore conducted by
Seller, including the Acquired Assets and all the goodwill appurtenant to such
business.


 


“Closing” shall mean the closing referred to in Section 3.1.


 


“Closing Date” shall mean the date of execution hereof.


 


“COBRA” shall mean Sections 601 through 607 of ERISA, Section 4980B
of the Code, and any comparable state or foreign laws requiring the provision
of continuation coverage for former employees under any Seller group health
plan.


 


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


 


“Contract” shall mean any agreement, contract, purchase or sale order,
mortgage, indenture, lease, franchise or other instrument relating to the
Business to which Seller is a party or by which the Business or any of the
Acquired Assets is bound.


 


“Computer Software” shall mean computer software programs, databases
and all documentation related thereto.


 


“Defect” shall mean a defect or impurity of any kind, whether in
design, workmanship, manufacture, processing, or otherwise, including any
dangerous propensity associated with any reasonably foreseeable use of an item,
or the failure to warn of the existence of any defect, impurity, or dangerous
propensity other than the dangerous propensities inherent therein.


 


“Disclosure Schedule” shall mean the disclosure schedule of even
date herewith prepared and signed by each of the Seller and the Members and
delivered to Purchaser simultaneously with the execution hereof.


 


“Encumbrances” shall mean any and all liens, charges, security
interests, options, claims, mortgages, charges, easements, restrictions on use
of enjoyment, pledges, proxies, voting trusts or agreements, obligations,
understandings or arrangements imposing restrictions on title or use or other
restrictions on title or transfer of any nature whatsoever.


 


“Environmental Claim” shall mean any claim, action, cause of action,
investigation or notice (written or oral) by any Person alleging actual or
potential liability for investigatory, cleanup or governmental response costs,
or natural resources or property damages, or personal injuries, attorneys’ fees
or penalties relating to (i) the presence, or release into the
environment, of any Materials of Environmental Concern at any location owned or
operated by Seller related to the Business, now or in the past, or (ii) circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law.


 


“Environmental Law” shall mean each federal, state, local and foreign
law and regulation relating to pollution, protection or preservation of human
health or the environment, including ambient air, surface water, ground water,
land surface or subsurface strata, and natural resources, and including each
law and regulation relating to emissions, discharges, releases or threatened
releases of Materials of Environmental


 


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Concern, or otherwise relating to the manufacturing, processing,
distribution, use, treatment, generation, storage, containment (whether above
ground or underground), disposal, transport or handling of Materials of
Environmental Concern, or the preservation of the environment or mitigation of
adverse effects thereon and each law and regulation with regard to record
keeping, notification, disclosure and reporting requirements respecting
Materials of Environmental Concern.


 


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


 


“ERISA Affiliate” shall mean any trade or business, whether or not
incorporated, that together with Seller would be deemed a “single employer”
within the meaning of Section 4001(b) of ERISA.


 


“Escrow Agreement” shall have the meaning set forth in Section 2.5(b).


 


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


 


“Financial Statements” shall mean each of the Business’ (i) balance
sheets as of June 30, 2004, March 31, 2004, and each of December 31,
2003, 2002 and 2001; (ii) statements of operations for the three month and
six month periods ending March 31, 2004 and June 30, 2004,
respectively, and for the 12-month periods ended December 31, 2003,
2002 and 2001, respectively; and (iii) statements of cash flows for the
three month and six month periods ending March 31, 2004 and June 30,
2004, respectively, and for the 12-month periods ended December 31,
2003, 2002 and 2001, respectively.


 


“GAAP” shall mean United States generally accepted accounting
principles, as consistently applied.


 


“Governmental
Entity” shall mean a court, arbitral, tribunal, administrative agency or
commission or other governmental or regulatory authority or agency or any
state, city, county, or other governmental or quasi-governmental body having
any jurisdiction over the Business, Acquired Assets, Seller or Members.


 


“Indebtedness” shall mean (i) all indebtedness for borrowed money
or for the deferred purchase price of property or services (other than current
trade liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), (ii) any other indebtedness that is
evidenced by a loan agreement, note, bond, debenture or similar instrument, (iii) all
obligations under financing leases, (iv) all liabilities secured by any
lien on any property, and (v) all guarantee obligations.


 


“Intellectual Property” shall mean all (i) trademarks (U.S. and
foreign registered and unregistered trademarks, trade dress, domain names,
service marks, logos, trade names, business names and all registrations and
applications to register the same), (ii) patents (issued U.S. and foreign
patents and pending patent applications, patent disclosures, and any and all
divisions, continuations, continuations-in-part, reissues, reexaminations, and
extensions thereof, any counterparts claiming priority therefrom, utility
models, patents of importation/confirmation, certificates of invention and like
statutory rights), (iii) copyrights (U.S. and foreign registered and unregistered
copyrights, including those in computer software and databases, rights of
publicity and all registrations and applications to register the same), (iv) trade
secrets (all categories of trade secrets as defined in the Uniform Trade
Secrets Act, including business information), (v) licenses (all licenses
and agreements pursuant to which Seller has acquired rights in or to any
trademarks, patents or copyrights used by or for the benefit of the Business,
or


 


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licenses and agreements pursuant to which Seller has licensed or
transferred the right to use any trademark, patent or copyright which
constitutes a part of the Acquired Assets), and (vi) all proprietary and
confidential information of Seller and all of Seller’s other information and
intangible property rights that are currently owned by Seller or the Business
for the benefit of the Business or used in the Business or that is necessary to
conduct the Business as presently conducted, including, without limitation: (a) trade
secrets, technical information, know-how, designs, processes, patents, patent
applications, and copyrights, and all improvements thereof, (b) all data,
files, books and records, customer lists, and order information, (c) the
name “MedSource Packaging Concepts” (and any derivatives of such name), and (d) all
Internet domain names and sites, email addresses, telephone numbers (and
related directory listings) and similar information and rights.


 


“Knowledge of Seller” concerning a particular area or aspect of the
Acquired Assets, Business or related affairs shall mean the knowledge of each
Member and of each of Seller’s management personnel of the Business and all
knowledge which was or could have been obtained upon inquiry by such of Seller’s
management level employees whose duties would, in the normal course of Seller’s
affairs, result in such management level employees having knowledge concerning
such area or aspect.


 


“Lease” shall mean each lease pursuant to which Seller (for the use or
benefit of the Business) leases any real or personal property.


 


“Liabilities” shall mean the debts, liabilities, claims, demands,
expenses, commitments and obligations (whether accrued or not, known or
unknown, disclosed or undisclosed, fixed or contingent, asserted or unasserted,
liquidated or unliquidated, arising prior to, at or after the Closing) of
Seller (other than the Retained Liabilities).


 


“Material Adverse Effect” means an effect on the financial condition,
results of operations, prospects or business of the Business or the Acquired
Assets or Liabilities of the Business, each taken as a whole (other than as a
result of changes (a) in law or applicable regulations or the official
interpretations thereof, or (b) in GAAP) that may reasonably be considered
material by Purchaser in its evaluation of Seller and the Business.


 


“Materials of Environmental Concern” shall mean chemicals, pollutants,
contaminants, wastes, toxic or hazardous substances, materials and wastes,
petroleum and petroleum products, asbestos and asbestos-containing materials,
polychlorinated biphenyls, lead and lead-based paints and materials, and radon.


 


“Multiemployer Plan” has the meaning set forth in Section 3(37) of
ERISA.


 


“Payoff Consideration” has the meaning set forth in section 2.5(a).


 


“Permits” means permits, certificates, licenses, filings, approvals and
other authorizations of any Governmental Entity.


 


“Person” shall mean a natural person, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Entity or other entity or
organization.


 


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“Plan” shall mean each deferred compensation and each incentive
compensation, stock or unit purchase, stock or unit option and other equity
compensation plan, program, agreement or arrangement; each severance or
termination pay, medical, surgical, hospitalization, life insurance and other “welfare”
plan, fund or program (within the meaning of Section 3(1) of ERISA);
each profit-sharing, unit bonus or other plan, fund, or program that is a “pension
plan” (within the meaning of Section 3(2) of ERISA); each employment,
termination or severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored, maintained
or contributed to, or required to be contributed to, by Seller or by any ERISA
Affiliate, or to which Seller or an ERISA Affiliate is party or has any
obligations, whether written or oral, for the benefit of any Member, manager,
consultant, employee or former employee of the Business.


 


“Product” shall mean any product or component thereof, built, designed,
manufactured, shipped, sold, marketed, distributed, packaged and/or otherwise
introduced into the stream of commerce by Seller on behalf of the Business,
including any product sold by Seller as the distributor, agent, or pursuant to
any other contractual relationship with a third-party manufacturer or vendor.


 


“Purchase Price” has the meaning set forth in Section 2.5(a).


 


“Purchaser” shall mean Merit Medical Systems, Inc., a Utah
corporation.


 


“Purchaser Indemnified Persons” shall mean Purchaser and each of its
Affiliates.


 


“Purchaser
Losses” shall mean any and all actual losses, liabilities, damages, judgments,
settlements and expenses (including interest and penalties recovered by a third
party with respect thereto and reasonable attorneys’ fees and expenses and
reasonable accountants’ fees and expenses incurred in the investigation or
defense of any of the same or in asserting, preserving or enforcing any of the
rights of Purchaser arising under Article IX) incurred by any of the
Purchaser Indemnified Persons that arise out of:


 


(i)                                     any breach by any
of Seller or Members of any of their representations and warranties contained
in or made by or pursuant to this Agreement;


 


(ii)                                  any of the events,
circumstances or conditions described in Section 4.16 hereof, any
pollution or threat to human health or the environment that (A) is related
in any way to the Business or management, use, control, ownership or operation
of the properties of the Business prior to the Closing, including all on-site
and off-site activities involving Materials of Environmental Concern, and (B) occurred,
existed, or arises out of conditions or circumstances that occurred or existed,
or was caused, in whole or in part, on or before the Closing Date, whether or
not the pollution or threat to human health or the environment is described in
the Disclosure Schedule; or any Environmental Claim against the Business or any
Person whose liability for such Environmental Claim the Business has assumed or
retained either contractually or by operation of law;


 


(iii)                               any breach by any of the
Seller or Members of any of their covenants in this Agreement that survive the
Closing;


 


(iv)                              any of the Retained
Liabilities; or


 


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(v)                                 the
waiver by the Parties of Virginia’s “Bulk Sales” statute.


 


All statements contained in any exhibit, schedule or other writing
delivered by any of the Seller or Members pursuant hereto or in connection with
the Transactions shall be deemed representations and warranties.


 


“Real Property” shall mean the real property that is the subject of the
Real Property Lease.


 


“Real Property Leases” shall mean those two certain Leases, (a) the
first, dated 4/25/01, between Seller and Carl York, Jr., and Richard Lert,
Trustees of the Ariana Austin Fairbanks of 1976 Waimalu Trust; Carl York, Jr.,
and Richard Lert, Trustees of the Ariana Austin Fairbanks Trust, dated April 28,
1978; Carl York, Jr., and Linda S. Dalby, Trustees of the 1976 Waimalu
Mauku Trust; and Carl York, Jr., and Linda S. Dalby, Trustees of the
Waibalu Mauko Trust, dated February 27, 1980 (Landlord), and (b) the
second, dated November 10, 2000, between Seller and Eskimo Pie
Corporation, which Lease was assigned, effective May 15, 2003, to 901
Moorefield LLC (Landlord), and includes all rights and appurtenances pertaining
to such lease and property, including all easements, rights, interests,
tenements, hereditaments and privileges.


 


“Required Consents” shall mean consents related to agreements which
involve the payment or receipt by Seller of amounts in excess of $5,000 per
annum or other agreements that may be material or have a material impact on the
Business.


 


“Retained Assets” has the meaning set forth in Section 2.2.


 


“Retained Liabilities” has the meaning set forth in Section 2.4.


 


“Seller Indemnified Persons” shall mean each of Seller and its Affiliates.


 


“Seller Losses” shall mean any and all actual losses, liabilities,
damages, judgments, settlements and expenses (including interest and penalties
recovered by a third party with respect thereto and reasonable attorneys’ fees
and expenses and reasonable accountants’ fees and expenses incurred in the
investigation or defense of any of the same or in asserting, preserving or
enforcing any of Seller’s rights) incurred by any of the Seller Indemnified
Persons arising out of:


 


(i)                                     any breach by
Purchaser of any of its representations and warranties contained in or made by
or pursuant to this Agreement; or


 


(ii)                                  any breach by
Purchaser of any of its covenants in this Agreement that survive the Closing.


 


“Tax” or “Taxes” shall mean all taxes, charges, fees, duties, levies,
penalties or other assessments imposed by any federal, state, local or foreign
governmental authority, including income, gross receipts, excise, property,
sales, gain, use, license, custom duty, unemployment, capital stock, unit or
membership interest, transfer, franchise, payroll, withholding, social
security, minimum estimated, profit, gift, severance, value added, disability,
premium, recapture, credit, occupation, service, leasing, employment,


 


6





















 


stamp and other taxes, and shall include interest, penalties or
additions attributable thereto or attributable to any failure to comply with
any requirement regarding Tax Returns.


 


“Tax Audit” shall mean any deficiency, proposed adjustment, adjustment,
assessment audit, examination or other administrative or court proceeding,
suit, dispute or other claim.


 


“Tax Return” shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
such document prepared on a consolidated, combined or unitary basis and also
including any schedule or attachment thereto, and including any amendment
thereof.


 


“Title IV Plan” shall mean a Plan that is subject to Section 302
or Title IV of ERISA or Section 412 of the Code.


 


“Transactions” shall mean all the transactions provided for or
contemplated by this Agreement.


 


“Transfer Taxes” shall mean all sales (including, without limitation,
bulk sales), use, transfer, recording, ad
valorem, privilege, documentary, gains, gross receipts,
registration, conveyance, excise, license, stamp, duties or similar Taxes and
fees.


 


“Warrant” shall have the meaning set forth in Section 2.5(a).


 


Section 1.2                                      Interpretation.


 


(a)                                  Whenever
the words “include,” “includes” or “including” are used in this Agreement they
shall be deemed to be followed by the words “without limitation.”


 


(b)                                 The
words “hereof,” “herein” and “herewith” and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole and
not to any particular provision of this Agreement, and article, section,
paragraph, exhibit and schedule references are to the articles, sections,
paragraphs, exhibits and schedules of this Agreement unless otherwise
specified.


 


(c)                                  The
meaning assigned to each term defined herein shall be equally applicable to
both the singular and plural forms of such term, and words denoting any gender
shall include all genders.  Where a word
or phrase is defined herein, each of its other grammatical forms has a
corresponding meaning.


 


(d)                                 A
reference to any party to this Agreement or any other agreement or document
shall include such party’s successors and permitted assigns.


 


(e)                                  A reference to
any legislation or to any provision of any legislation shall include any
amendment to, and any modification or re-enactment thereof, any legislative
provision substituted therefore and all regulations and statutory instruments
issued thereunder or pursuant thereto.


 


(f)                                    As
used in this Agreement, any reference to any event, change or effect being
material or having a material adverse effect on or with respect to any entity
(or group of entities taken as a whole) means such event, change or effect is
materially adverse to (i) the prospects, consolidated financial condition,
businesses or results of operations of such entity as a whole (or, if used with
respect thereto, of


 


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such group of entities taken as a whole) or (ii) the ability of
such entity (or group) to consummate the Transactions.


 


(g)                                 The
parties have participated jointly in the negotiation and drafting of this
Agreement.  In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any provisions of this Agreement.


 


ARTICLE II- PURCHASE AND SALE OF ASSETS


 


Section 2.1                                      Sale and
Transfer of Assets.


 


(a)                                  On
the terms set forth in this Agreement, at the Closing, Seller shall sell,
convey, assign, transfer and deliver to Purchaser, and Purchaser shall
purchase, acquire and accept from Seller, free and clear of any Encumbrances,
all right, title and interest in and to the assets, properties and rights of
the Business as those assets exist on Closing, other than the Retained Assets,
as that term is defined in Section 2.2, (collectively, the “Acquired
Assets”), including, without limitation, the following:


 


(i)                                     the
assets set forth on Section 2.1(a)(i) of the Disclosure Schedule;


 


(ii)                                  all of Seller’s
rights and benefits under those contracts, purchase orders, leases, proposals
or bids relating to the Business identified in Section 2.1(a)(ii) of
the Disclosure Schedule (the “Assumed Contracts”);


 


(iii)                               all of Seller’s
books, files and records relating to the Business, the Acquired Assets or
Assumed Liabilities, except for certain books and records described on Section 2.1(a)(iii) of
the Disclosure Schedule;


 


(iv)                              all personal computers
and software related to or used in connection with the Acquired Assets or
Business;


 


(v)                                 all inventory,
supplies, and other consumables related to or used in connection with the
Acquired Assets or Business (the “Inventory”);


 


(vi)                              all Permits used or held
for use in connection with the Acquired Assets or Business, solely to the
extent such Permits may be assigned or transferred;


 


(vii)                           all Accounts Receivable of
the Business;


 


(viii)                        all rights under the Real
Property Lease and any other real property used or held for use by the Seller
or in connection with the Business, together with (i) all buildings, other
facilities and other structures and improvements related thereto, (ii) all
rights, privileges, hereditaments and appurtenances appertaining thereto or to
any of such buildings or other facilities or other structures or improvements,
and (iii) all fixtures, leasehold improvements, installations, equipment
(including furniture, fax machines and other office equipment) and other
property attached thereto or located thereon;


 


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(ix)                                all prepayments,
deposits or advances related to Assumed Contracts;


 


(x)                                   all equipment,
machinery, vehicles, tools, equipment replacement and spare parts and supplies
owned by Seller and used or held for use in connection with the Acquired Assets
or Business;


 


(xi)                                any advertising or
promotional materials related to or used in connection with the Acquired Assets
or Business;


 


(xii)                             all goodwill related to
the Business and Acquired Assets including the name “MedSource Packaging
Concepts”;


 


(xiii)                          all manufacturer’s warranties
to the extent related to the Acquired Assets or Business and all claims under
such warranties;


 


(xiv)                         all prepaid expenses of the
Business;


 


(xv)                            all promissory notes or
notes receivable in favor of the Business;


 


(xvi)                         all security deposits, earnest
deposits, and all other forms of security placed with Seller related to or in
connection with the Acquired Assets or Business for the performance of a
contract or agreement;


 


(xvii)                      all of Seller’s other tangible
and intangible assets and properties which are used in connection with the
Business; and


 


(xviii)                   all right, title and
interest in and to the Intellectual Property of Seller used in connection with
the Business or the Acquired Assets including all of the Trade names and
Trademarks listed on Schedule 2.1(a)(xviii).


 


To the extent any Acquired Assets are owned, managed or leased by any
subsidiary of Seller, (i) such items are included within the term “Acquired
Assets,” (ii) such subsidiary is deemed to be included within the term “Seller,”
and (iii) Seller shall cause each such subsidiary, at the Closing, to
convey such Acquired Assets to Purchaser, or to Seller for conveyance to
Purchaser, in accordance with the provisions hereof.


 


Section 2.2                                      Retained
Assets.  Notwithstanding Section 2.1,
all of Seller’s right, title and interest in the following properties, assets
and rights shall be excluded from the Acquired Assets (collectively, the “Retained
Assets”):


 


(i)                                     the assets set
forth in Section 2.2 of the Disclosure Schedule;


 


(ii)                                  any assets and
associated claims arising out of Retained Assets or Retained Liabilities;


 


(iii)                               all contracts between
Seller and a third party in which the third party or Seller is in material
default or breach or is the subject of bankruptcy, insolvency, or similar
proceedings;


 


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(iv)                              any asset, offset,
refund, insurance proceeds, receipts and other benefits related to litigation
for which Seller is retaining the liability related to such litigation;


 


(v)                                 all Tax refunds;


 


(vi)                              all
cash and cash equivalents of Seller; and


 


(vii)                           the
record books of Seller.


 


Section 2.3                                      Assumption of
Liabilities.


 


(a)                                  At
the Closing, Purchaser shall assume the following Liabilities of the Business
(collectively, the “Assumed Liabilities”):


 


(i)                                     all Liabilities
set forth on Section 2.3 of the Disclosure Schedules;


 


(ii)                                  all obligations under
the Assumed Contracts to be performed subsequent to the Closing Date; and


 


(iii)                               all obligations under
the Real Property Lease to be performed subsequent to the Closing Date.


 


(b)                                 Nothing
contained in this Section 2.3 or in any instrument of assumption executed
by Purchaser at the Closing shall release or relieve Seller or the Members from
their representations, warranties, covenants and agreements contained in this
Agreement or any certificate, schedule, instrument, agreement or document
executed pursuant hereto or in connection herewith, including, without
limitation, Seller’s and the Members’ indemnification obligations in accordance
with the provisions of Article IX hereto.


 


Section 2.4                                      Retained
Liabilities.  Notwithstanding
anything in this Agreement to the contrary, Purchaser shall not assume, and
shall be deemed not to have assumed, any Liabilities of Seller or the Business
except as provided in Section 2.3(a), and Seller shall be solely and
exclusively liable with respect to, and shall pay, perform or discharge, and
indemnify Purchaser against any loss, liability, damage or expense arising from
all Liabilities of Seller and the Business to the extent such Liability would
be considered a Retained Liability under this Section 2.4, whether
disclosed or undisclosed, whether known or unknown, whether asserted or unasserted,
other than the Assumed Liabilities (collectively, the “Retained Liabilities”),
including, without limitation, those Liabilities set forth below:


 


(i)                                     all
Liabilities relating to the Retained Assets;


 


(ii)                                  all Liabilities that
Seller has expressly agreed to retain, pay for or be responsible for pursuant
to this Agreement;


 


(iii)                               all Liabilities of the
Business arising out of the conduct of the Business on or prior to Closing,
including, without limitation, all warranty, replacement or other claims with


 


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respect to Products or Inventory held by Seller or in process of being
shipped as of the Closing Date, unless otherwise expressly set forth herein;


 


(iv)                              all Liabilities of the
Business under Environmental Laws arising from activities occurring on or prior
to the Closing;


 


(v)                                 all Liabilities of the
Business for Taxes attributable to any period (or portion thereof) ending on or
prior to Closing, including all Taxes arising out of the Business or the Acquired
Assets, including any ad  valorem, real or personal or intangible
property, sales, personal, social security or other Taxes which are not due or
assessed until after Closing but which are attributable to any period (or
portion thereof) ending on or prior to Closing;


 


(vi)                              all Liabilities of the
Business to the current or former employees of the Business or their family
members relating to or arising out of any period on or prior to the Closing
(including, without limitation, all Liabilities under or with respect to Plans,
and all Liabilities with respect to vacation or sick or comp pay or benefits);


 


(vii)                           all Liabilities of Seller
arising out of or related to any Encumbrances on any Acquired Asset;


 


(viii)                        all Liabilities for death,
personal injury, other injury to Persons or property damage relating to,
resulting from, caused by or arising out of, directly or indirectly, use of or
exposure to Acquired Assets or Products (or any part or component) designed,
manufactured, serviced, leased or sold, or services performed, by the Seller or
Business, including, without limitation, any such Liabilities based on
negligence, strict liability, design or manufacturing Defect, conspiracy,
failure to warn, or breach of express or implied warranties of merchantability or
fitness for any purpose or use or allegations concerning any of the foregoing
related to events or activities occurring on or prior to the Closing Date;


 


(ix)                                all Liabilities arising
from contracts related to the Business entered into by Seller which, for
whatever reason, are not assignable to Purchaser as listed on Section 2.4(a)(ix) of
the Disclosure Schedule;


 


(x)                                   all Liabilities
arising out of or relating to the Business or Acquired Assets or Products of
the Business and arising from events or circumstances occurring on or prior to
the Closing (or any part or component) or services which are performed by the
Business which constitute, may constitute, or are alleged to constitute a tort,
breach of contract or violation of, or noncompliance with any Applicable Law,
including, without limitation, relating to employment, workers’ compensation,
occupational health and safety, occupational disease, occupational injury,
toxic tort or Environmental Law;


 


(xi)                                any retrospective
premiums, reinsurance payments, payments under reimbursement contracts or other
adjustments under any insurance policy maintained for the benefit of the
Business or its respective predecessors covering any Liability that is a
Retained Liability;


 


11





















 


(xii)                             all Liabilities of Seller
under any guaranties issued, granted or provided in connection with the
Business for activities, sales or services performed on or prior to the Closing
Date;


 


(xiii)                          all tort claims or other
claims of any kind or nature related to the Products sold by Seller on or prior
to the Closing Date; and


 


(xiv)                         all other Liabilities to the
extent relating to or arising out of the operations or businesses of Seller
other than the Assumed Liabilities.


 


Section 2.5                                      Purchase Price;
Warrant; Escrow Agreement.


 


(a)                                  Subject
to the terms of this Agreement, in consideration of the aforesaid assumption of
the Assumed Liabilities and the sale, conveyance, assignment, transfer and
delivery to Purchaser of the Acquired Assets, at the Closing, Purchaser shall (i) pay
on behalf of Seller those certain liabilities of Seller set forth on Exhibit A
attached hereto (such liabilities are collectively referred to as the “Payoff
Consideration”) according to the payment instructions set forth on such
exhibit, and (ii) deliver seven separate warrants to purchase an aggregate
of 100,000 shares of common stock of the Purchaser, in a form substantially
similar to that set forth as Exhibit B attached hereto (the “Warrant,” and
collectively with the Payoff Consideration, the “Purchase Price”) to the Escrow
Agent (as such term is defined in the Escrow Agreement).  The exercise price of the shares issuable
upon exercise of the Warrant shall be equal to the average closing price of
Purchaser’s common stock as reported by the Nasdaq stock market for the ten
trading days immediately preceding the Closing Date.


 


(b)                                 On
the Closing Date, the Warrant shall be placed in escrow, and be subject to the
terms of that certain Escrow Agreement, a form of which is attached hereto as Exhibit C,
in addition to the terms of this Agreement. 
The Warrant shall remain in escrow for a period of 12 months from the
Closing Date and shall be a source of recovery for the Purchaser against any
Purchaser Losses.  In the event of each
and any Purchaser Losses, Seller and Member Representative, on behalf of the
Members, may elect, within 15 days from the initial notice related thereto by
Purchaser to Seller according to the Escrow Agreement, either of the following
methods to repay such Purchaser Losses: (i) to have the number of shares
issuable upon exercise of the Warrant reduced by the amount of any Purchaser
Losses, according to the following formula: (A) each amount of Purchaser
Losses shall be divided by the amount by which each share issuable upon
exercise of the Warrant exceeds the exercise price thereof (if any) on the date
when any amount of Purchaser Losses is established, and (B) the quotient
determined according to (A) above shall be the number of shares issuable
under the Warrant that are canceled as of such date; or (ii) Seller,
Member Representative or any of the Members, as determined among themselves,
may pay to Purchaser the amount of such Purchaser Losses in cash.  If Purchaser has not received such amount in
cash according to (ii) above within 15 days of the initial notice by
Purchaser to Seller according to the Escrow Agreement, Seller and the Member
Representative, on behalf of the Members, shall conclusively be deemed to have
accepted the reduction in shares issuable under the Warrant as set forth in (i) above.  Upon each event resulting in a reduction in
the number of shares exercisable upon issuance of the Warrant, the Warrant
shall be canceled and Purchaser shall deliver a new warrant, containing terms
identical to the Warrant other than the reduction in the number of shares
issuable upon exercise according to this Section 2.5(b), to the Escrow
Agent.


 


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(c)                                  In
the event that the shares issuable upon exercise of the Warrant, according to
the terms of this Agreement and the Warrant, become exercisable during the term
in which the Warrant is subject to the Escrow Agreement, then Seller and the
Member Representative, on behalf of the Members, may elect to (i) choose
to exercise all or a part of the Warrant (according to the terms of the
Warrant) and receive the shares issuable upon such exercise, and (ii) if a
registration statement with respect to such shares filed with the Securities
and Exchange Commission has been declared effective, sell such shares according
to all applicable laws, rules and regulations.  Notwithstanding the foregoing, each of
Seller, the Member Representative and the Members acknowledge and agree that
all such shares issued upon exercise of the Warrant, and all such proceeds
received upon sale of any such shares, shall be made payable to the Escrow
Agent and subject to the Escrow Agreement in the same manner that the Warrant
was held in the Escrow Agreement.


 


Section 2.6                                      Allocation of
Purchase Price; Tax Filings. 
Purchaser and Seller shall allocate the Purchase Price plus Assumed
Liabilities among the Acquired Assets in the manner to be determined by
Purchaser in the exercise of its reasonable discretion.  Each of Purchaser and Seller shall (i) timely
file all forms (including Internal Revenue Service Form 8594) and Tax
Returns required to be filed in connection with such allocation, (ii) be
bound by such allocation for purposes of determining Taxes, (iii) prepare
and file, and cause its Affiliates to prepare and file, its Tax Returns on a
basis consistent with such allocation, and (iv) take no position, and
cause its Affiliates to take no position, inconsistent with such allocation on
any applicable Tax Return, in any audit or proceeding before any taxing authority,
in any report made for Tax, financial accounting or any other purposes, or
otherwise.  In the event that such
allocation is disputed by any taxing authority, the party receiving notice of
such dispute shall promptly notify the other party hereto concerning the
existence and resolution of such dispute.


 


ARTICLE III- THE CLOSING


 


Section 3.1                                      The Closing.  Upon the terms of this Agreement, the
consummation of the transactions contemplated by this Agreement (the “Closing”)
shall take place on the date of execution of this Agreement, unless another
date or place is agreed in writing by each of the parties hereto.  The Closing shall occur at the offices of
Parr Waddoups, Brown, Gee & Loveless at 10:00 a.m. local time, or
at such other place or time as the parties shall agree.


 


Section 3.2                                      Deliveries by
Seller.  At the Closing, Seller shall
deliver or cause to be delivered to Purchaser (unless previously delivered),
the following:


 


(a)                                  duly
executed Bills of Sale for the personal property in customary form reasonably
acceptable to Purchaser;


 


(b)                                 duly
executed Assignment of Contracts for the Assumed Contracts in customary form
reasonably acceptable to the Purchaser;


 


(c)                                  all
documents of title and instruments of conveyance necessary to transfer record
and/or beneficial ownership to Purchaser of all vehicles and any other property
owned by Seller which are included in the Acquired Assets as part of the
Business and which require execution, endorsement and/or delivery of a document
in order to vest record or beneficial ownership thereof in Purchaser;


 


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(d)                                 assignments
of all Intellectual Property which is listed in Section 3.2(e) of the
Disclosure Schedule as owned by Seller for the benefit of the Business;


 


(e)                                  assignment
of the Real Property Lease;


 


(f)                                    executed
copies of the Required Consents referred to in Section 4.5 hereof;


 


(g)                                 all
documents containing or relating to “know-how” to be acquired by Purchaser
pursuant hereto;


 


(h)                                 all
of the books and records of Seller relating to the Business, except as
otherwise required by law and except as are set forth in Section 2.1(a)(iii) of
the Disclosure Schedule;


 


(i)                                     a
certification of non-foreign status for Seller in the form and manner which
complies with the requirements of Section 1445 of the Code and the
regulations promulgated thereunder;


 


(j)                                     all
Permits referred to in Article 2.1(a)(vi) hereof;


 


(k)                                  any
other certifications from Seller or any of its Affiliates which may be required
under Applicable Law necessary to establish that no Taxes are due to any taxing
authority for which the Purchaser could have liability to withhold and pay with
respect to the transfer of the Business;


 


(l)                                     all
such other deeds, endorsements, assignments and other instruments as, in the
reasonable opinion of Purchaser’s counsel, are necessary to vest in Purchaser
good and marketable title to the Acquired Assets;


 


(m)                               all
other previously undelivered documents required to be delivered by Seller to
Purchaser at or prior to the Closing in connection with the Transactions; and


 


(n)                                 the
opinion of counsel referred to in Section 7.2(b) hereof.


 


Section 3.3                                      Deliveries by
Purchaser.  At the Closing, Purchaser
shall deliver or cause to be delivered to Seller (unless previously delivered),
the following:


 


(a)                                  evidence of
payment in full of each item of the Payoff Consideration;;


 


(b)                                 executed copy
of the Warrant;


 


(c)                                  executed
copies of any assumption or assignment document related to the Assumed
Liabilities that Purchaser is required (in its reasonable judgment) to execute
; and


 


(d)                                 such
other documents as are required to be delivered by Purchaser to Seller pursuant
to this Agreement.


 


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ARTICLE IV- REPRESENTATIONS AND WARRANTIES


OF THE SELLER AND MEMBERS


 


Except as specifically set forth in the Disclosure Schedule prepared
and signed by Seller and Members and delivered to Purchaser simultaneously with
the execution hereof, Seller and Members, jointly and severally, represent and
warrant to Purchaser that all of the statements contained in this Article IV
are true and complete as of the date hereof. 
Each exception set forth in the Disclosure Schedule and each other
response to this Agreement set forth in the Disclosure Schedule is
identified by reference to, or has been grouped under a heading referring to, a
specific individual section of this Agreement and, except as otherwise
specifically stated with respect to such exception, relates only to such
section.  In the event of any
inconsistency between statements in the body of this Agreement and statements
in the Disclosure Schedule (excluding exceptions expressly set forth in
the Disclosure Schedule with respect to a specifically identified
representation or warranty), the statements in the body of this Agreement shall
control.


 


Section 4.1                                      Authorization.  Seller has full power and authority to
execute and deliver this Agreement and to consummate the Transactions.  The execution, delivery and performance by
Seller of this Agreement and the consummation by it of the Transactions have
been duly authorized and unanimously consented to by Seller’s manager(s), if
any, and the Members, and no other member action on the part of Seller is
necessary to authorize the execution and delivery by Seller of this Agreement
or the consummation by it of the Transactions.


 


Section 4.2                                      Binding
Agreement.  This Agreement has been
duly executed and delivered by Seller, Members and, assuming due and valid
authorization, execution and delivery thereof by Purchaser, this Agreement is a
valid and binding obligation of Seller and Members enforceable against such
persons in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws of general application affecting enforcement of creditors’
rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefore may be brought.


 


Section 4.3                                      Organization;
Qualification of Seller.  Seller (i) is
a limited liability company organized, validly existing and in good standing
under the laws of the Commonwealth of Virginia; (ii) has full power and
authority to carry on the Business as it is now being conducted and to own the
Business; and (iii) is duly qualified or licensed to do business as a
foreign entity in good standing in every jurisdiction in which the conduct of
the Business requires such qualification or, if not so qualified in any such
jurisdiction, it can become so qualified in such jurisdiction without any
material adverse effect (including assessment of state taxes for prior years)
upon its business and properties.  Seller
has heretofore made available to Purchaser complete and correct copies of the
certificate or articles of organization and operating agreement of Seller as
presently in effect or other organizational documents.


 


Section 4.4                                      Subsidiaries
and Affiliates.  Section 4.4 of
the Disclosure Schedule sets forth the jurisdictions in which Seller is
qualified to do business, the authorized and outstanding capital of Seller,
along with the membership interest owned by each Member.


 


Section 4.5                                      Required
Consents and Approvals; No Violations. 
Except as set forth on Section 4.5 of the Disclosure Schedule none
of the execution, delivery or performance of this Agreement by Seller or any
Member, the consummation by Seller of the Transactions or compliance by Seller
or any Member with any of the provisions hereof will (i) conflict with or
result in any breach of any provision of


 


15





















 


the certificate or articles of organization, operating agreement or similar
organizational documents of Seller, (ii) require any filing with, or
permit, authorization, consent or approval of, any Governmental Entity or other
Person (including, without limitation, consents from parties to loans,
contracts, leases and other agreements to which any of Seller or a Member is a
party), (iii) require any consent, approval or notice under, or result in
a violation or breach of, or constitute (with or without due notice or the
passage of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, any of the terms, conditions or
provisions of any contract, agreement, arrangement or understanding to which
Seller or any Member is a party or by which the Business or Acquired Assets are
bound, or (iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Seller, the Business, the Acquired Assets, or any of
their properties or assets.


 


Section 4.6                                      Financial
Statements.  True and complete copies
of the Financial Statements, together with the related auditors reports (if
applicable), are included in Section 4.6 of the Disclosure Schedule.  The Financial Statements have been prepared
from, are in accordance with and accurately reflect, the books and records of Seller,
comply in all material respects with applicable accounting requirements and
income tax filing requirements, have been prepared on a consistent basis during
the periods involved (except as may be stated in the notes thereto) and fairly
present the financial position and the results of operations and cash flows
(and changes in financial position, if any) of Seller and the Business as of
the times and for the periods referred to therein (subject, in the case of
unaudited statements, to normally recurring year-end audit adjustments which
are not material either individually or in the aggregate).


 


Section 4.7                                      Books and
Records.  Seller’s books of account
and other records relating to the Business are complete and correct in all
material respects and have been maintained in accordance with sound business
practices.


 


Section 4.8                                      Liabilities.  Seller has sufficient assets (including
without limitation the Retained Assets) apart from the Acquired Assets to
satisfy all liabilities of Seller that are not being assumed or paid off by
Purchaser pursuant to this Agreement (including without limitation the Retained
Liabilities).  Seller and Members
represent and warrant that the assets of Seller not being sold to Purchaser
will be used by Seller and Members to satisfy all liabilities of the Seller
that are not being assumed by Purchaser in this Agreement or satisfied by the
Payoff Consideration.  Except as
disclosed in the Financial Statements and as set forth in Section 4.8 of
the Disclosure Schedule, the Business has no liability or obligation of any
nature, (including, without limitation, any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or unfixed, known or unknown, asserted or
unasserted, liquidated or unliquidated, secured or unsecured) that has, or
would be reasonably likely to have, a Material Adverse Effect.  The liabilities to be paid by Purchaser as
part of the Purchase Price are all of the liabilities of Seller and there are
no other liabilities of Seller.  Upon
Purchaser paying the Purchase Price, by Purchaser waiving the requirements of
Virginia’s “Bulk Sales” statute, no party will have any claim against the
Acquired Assets or against Purchaser for failure to comply with Virginia’s Bulk
Sales statute and Seller and the Members, jointly and severally, will indemnify
and hold Purchaser harmless against all such liability, loss, cost or expense.


 


Section 4.9                                      Accounts
Receivable.  All Accounts Receivable
of the Business represent sales actually made in the ordinary course of
business.  Each of the Accounts
Receivable to be included in the Acquired Assets will be collected in full,
within 90 days from the Closing Date.


 


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Section 4.10                                Material Contracts.


 


(a)                                  Section 4.10(a) of
the Disclosure Schedule sets forth the following, including any legally
binding oral agreements or arrangements covered by the following:


 


(i)                                     each agreement
that materially or adversely affects or materially restricts the freedom of
Seller to compete in its lines of business or with any Person or in any
geographical area, for any length of time, or otherwise to conduct its business
as presently conducted or materially and adversely affect or materially
restrict, the business, operations, assets, properties or condition (financial
or other) of the Business as currently conducted;


 


(ii)                                  each of Seller’s
collective bargaining or union contract or agreement and each employment or
severance contract or agreement which constitutes a part of the Acquired Assets
related to an employee of the Business;


 


(iii)                               each contract or
agreement for the receipt of maintenance, consulting or other services which
constitutes a part of the Acquired Assets, except those contracts or agreements
terminable without penalty on 30 or fewer days’ notice or those involving the
receipt or payment of less than $5,000;


 


(iv)                              each contract or
agreement for the purchase of equipment, materials or supplies which
constitutes a part of the Acquired Assets, except those contracts or agreements
terminable without penalty on 30 or fewer days’ notice or those involving the
receipt or payment of less than $5,000;


 


(v)                                 each contract or
agreement with any employee or third party which constitutes a part of the
Acquired Assets which is not terminable without penalty on 30 or fewer days’
notice;


 


(vi)                              other than this
Agreement, each agreement for the acquisition or disposition of Acquired Assets
in an amount of $5,000 or more;


 


(vii)                           all leases and loans,
capitalized or other, for Acquired Assets which are leased, or owned, by Seller
and which are not Retained Liabilities;


 


(viii)                        each indemnification agreement
entered into by Seller in the last two years from the date hereof which
constitutes a part of the Acquired Assets and each such agreement entered into
prior thereto if Seller has any continuing obligations to perform services
thereunder;


 


(ix)                                each agreement which
involves the receipt or payment of more than $5,000 which constitutes a part of
the Acquired Assets and (1) is not terminable without Liability, penalty
or premium (whether imposed by contract, law, regulation or otherwise) on 30 or
fewer days’ notice or (2) has an unexpired term of over one year;


 


(x)                                   each agreement,
warranty, contract, or lease involving more than $5,000 relating to any of the
Acquired Assets; and


 


(xi)                                each Assumed Contract.


 


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(b)                                 Seller
has made available to Purchaser true, correct and complete copies of all
agreements set forth in Section 4.10(a) of the Disclosure Schedule (the
“Material Contracts”).


 


(c)                                  Except
as set forth in Section 4.10(c) of the Disclosure Schedule, each
Material Contract is in full force and effect, has not been modified or amended
and constitutes the legal, valid and binding obligation of Seller, as the case
may be, as a party thereto, in accordance with the terms of such
agreement.  To the Knowledge of Seller,
each Material Contract is a legal, valid and binding obligation of the other
party or parties to such Material Contract. 
In the past twelve months, Seller has not given or received a notice of
default under (whether oral or written) or had any material dispute with
respect to any Material Contract.


 


Section 4.11                                Absence of Certain
Changes.  Except as set forth in Section 4.11
of the Disclosure Schedule, since December 31, 2003, the Business has been
conducted only in the ordinary and usual course consistent with past practice,
and neither Seller (with respect to the Acquired Assets) nor the Business has
or could reasonably be expected to have:


 


(a)                                  suffered
any Material Adverse Effect;


 


(b)                                 except
as set forth in Section 4.11(b) of the Disclosure Schedule, incurred
any liability or obligation (absolute, accrued, contingent or otherwise) except
items incurred in the ordinary course of business and consistent with past
practice, none of which exceeds $5,000 (counting obligations or liabilities
arising from one transaction or a series of similar transactions, and all
periodic installments or payments under any lease or other agreement providing
for periodic installments or payments, as a single obligation or liability), or
increased, or experienced any change in any assumptions underlying or methods
of calculating, any bad debt, contingency or other reserves;


 


(c)                                  except
as set forth in Section 4.11(c) of the Disclosure Schedule, paid,
discharged or satisfied any claim, liability or obligation (whether absolute,
accrued, contingent or otherwise) other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities and obligations reflected or reserved against in Seller’s
latest balance sheet or incurred in the ordinary course of business and
consistent with past practice since the date of such balance sheet;


 


(d)                                 permitted
or allowed any of its property or assets (real, personal or mixed, tangible or
intangible) to be subjected to any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind, except for liens for current
taxes not yet due, except as set forth in Section 4.11(d) of the
Disclosure Schedule;


 


(e)                                  except
as set forth in Section 4.11(e) of the Disclosure Schedule, written
down the value of any inventory or written off as uncollectible any notes or
accounts receivable, except for immaterial write-downs and write-offs in the
ordinary course of business and consistent with past practice;


 


(f)                                    except
as set forth in Section 4.11(f) of the Disclosure Schedule, cancelled
any debts or waived any claims or rights of substantial value;


 


(g)                                 sold,
transferred, or otherwise disposed of any of its properties or assets (real,
personal or mixed, tangible or intangible), except in the ordinary course of
business and consistent with past practice;


 


18





















 


(h)                                 except
as set forth in Section 4.11(h) of the Disclosure Schedule, disposed
of or permitted to lapse any rights to the use of any Intellectual Property, or
disposed of or disclosed to any Person other than representatives of Purchaser
any trade secret, formula, process, know-how or other Intellectual Property not
theretofore a matter of public knowledge;


 


(i)                                     except
as set forth in Section 4.11(i) of the Disclosure Schedule, granted
any general increase in the compensation of employees of the Business
(including any such increase pursuant to any bonus, pension, profit-sharing or
other plan or commitment) or any other increase in the compensation payable or
to become payable to any employee of the Business, and no such increase is
customary on a periodic basis or required by agreement or understanding;


 


(j)                                     except
as set forth in Section 4.11(j) of the Disclosure Schedule, made any
single capital expenditure or commitment in excess of $5,000 for additions to
property, plant, equipment or intangible capital assets or made aggregate
capital expenditures and commitments in excess of $10,000 (on a Business-wide
basis) for additions to property, plant, equipment or intangible capital
assets;


 


(k)                                  declared,
paid or set aside for payment any dividend or other distribution in respect of
its units or membership interests;


 


(l)                                     made
any change in any method of accounting or accounting practice; or


 


(m)                               paid,
loaned or advanced any amount to, or sold, transferred or leased any properties
or assets (real, personal or mixed, tangible or intangible) to, or entered into
any agreement or arrangement with, any of its Members or managers or any
Affiliate or Associate of any of its Members or managers except for
compensation to employees at rates not exceeding the rates of such fees and
compensation paid during the year ended December 31, 2003.


 


Section 4.12                                Title to Assets;
Encumbrances.  Seller has good, valid
and marketable title to all the Acquired Assets that it purports to own (tangible
and intangible) free and clear of all Encumbrances.  Upon closing the transactions as contemplated
in this Agreement, Purchaser will own the Acquired Assets free and clear of all
Encumbrances.  The rights, properties and
other assets to be conveyed to Purchaser pursuant hereto include all rights,
properties and other assets used by Seller to conduct the Business or necessary
to permit Purchaser to conduct the Business after the Closing in all material
respects in the same manner as such business has been conducted by Seller prior
to the date hereof.


 


Section 4.13                                Real Property.


 


(a)                                  Seller
owns no real property.  Section 4.13(a) of
the Disclosure Schedule sets forth the location of the leased Real
Property, and includes a status report therefore.  To the knowledge of the Seller, there are no
proceedings, claims, disputes or conditions affecting the Real Property that
might curtail or interfere with the use of such property.  To the knowledge of the Seller, neither the
whole nor any portion of the Real Property nor any other Acquired Asset is
subject to any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any public authority, nor to the Knowledge
of Seller has any such condemnation, expropriation or taking been
proposed.  Seller is not a party to any
lease, assignment or similar arrangement under which any Seller or Member is a
lessor, assignor or otherwise makes available for use by any third party any
portion of the Real Property.


 


19





















 


(b)                                 Seller
has not received any notice of, or other writing referring to, any requirements
or recommendations by any insurance company that has issued a policy covering
any part of the leased Real Property or related property or by any board of
fire underwriters or other body exercising similar functions, requiring or
recommending any repairs or work to be done on any part of the Real Property,
which repair or work has not been completed.


 


(c)                                  Seller
has obtained all appropriate certificates of occupancy, licenses, easements and
rights of way, required to use and operate the Real Property in the manner in
which the Real Property is currently being used and operated by Seller.  True and complete copies of all such
certificates, permits and licenses to the extent they are in the possession of
Seller have heretofore been furnished to Purchaser.  Seller (with respect to the Business) has all
approvals, permits and licenses (including any and all environmental permits)
necessary to operate the Real Property as currently operated, and no such
approvals, permits or licenses will be required, as a result of the
Transactions, to be issued after the date hereof in order to permit Purchaser
and the Business, following the Closing, to continue to operate the Real
Property in the same manner as heretofore, other than any such approvals,
permits and licenses that are ministerial in nature and are normally issued in
due course upon application therefore without further action by the applicant.


 


(d)                                 Except
as set forth in Section 4.13(e) of the Disclosure Schedule, there are
no material, unusual matters which could delay, prevent, prohibit, impair or
materially limit the currently intended use or occupancy of the Real Property.


 


Section 4.14                                Leases.


 


(a)                                  Section 4.14(a) of
the Disclosure Schedule contains an accurate and complete description of
the terms of the Real Property Leases.  A
true and complete copy of each lease has been delivered to Purchaser.  The Real Property Leases are valid, binding
and enforceable upon Seller, and to the Knowledge of Seller, upon the other
party thereto in accordance with their terms and are in full force and
effect.  To the Knowledge of Seller, the
leasehold estate created by each of the Real Property Leases is free and clear
of all Encumbrances.  Except for the
failure to pay rent, the exact amount of such rent that is owed as of the date
hereof is set forth on Section 4.14(a) of the Disclosure Schedule and
is a part of the Payoff Consideration and is accrued and identified on Seller’s
financial statements, there are no existing defaults by Seller under either of
the Real Property Leases.  No event has
occurred that (whether with or without notice, lapse of time or the happening
or occurrence of any other event) would constitute a default under the Real
Property Leases.  Seller has no reason to
believe that the lessor under either of the Real Property Leases will not
consent (where such consent is necessary) to the consummation of the
Transactions without requiring any modification of the rights or obligations of
the lessee thereunder.


 


(b)                                 Section 4.14(b) of
the Disclosure Schedule contains an accurate and complete description of
the terms of each Lease.  True and
complete copies of each such lease has been delivered to Purchaser.  Each Lease is valid, binding and enforceable
upon Seller, and to the Knowledge of Seller, upon the other party thereto in
accordance with its terms and is in full force and effect.  To the Knowledge of Seller, the leasehold
estate created by each Lease is free and clear of all Encumbrances.  There are no existing defaults by Seller
under any Lease.  No event has occurred
that (whether with or without notice, lapse of time or the happening or
occurrence of any other event) would constitute a default under any Lease.  Seller has no reason to believe that the
lessor under any Lease will not consent (where such consent is


 


20





















 


necessary) to the consummation of the Transactions without requiring
any modification of the rights or obligations of the lessee thereunder.


 


Section 4.15                                Condition of Assets.


 


(a)                                  Except
as set forth in Section 4.15(a) of the Disclosure Schedule, none of
the Acquired Assets have any Defects and all Acquired Assets are in good operating
condition and repair and are adequate and fit for the uses to which they are
being put.  Other than the Acquired
Assets, no item of property or other asset is necessary for the operations and
business of the Business or of Seller as conducted as of the Closing Date.  To the Knowledge of Seller, none of the
Acquired Assets is in need of maintenance or repairs except for ordinary,
routine maintenance and repairs that are not material in nature or cost.  Seller has not received notification that it
is in violation of any applicable building, zoning, health or other law,
ordinance or regulation in respect of the Acquired Assets.


 


(b)                                 Except
as set forth on Section 4.15(b) of the Disclosure Schedule, all raw
material, work-in-process and finished goods inventory of Seller (i) is of
a quantity and quality usable or salable in the ordinary course of business
except for obsolete inventory which has been written down on Seller’s June 30,
2004 balance sheet to its net realizable value, and (ii) is reflected on the
Financial Statements at the lower of cost or market, and all such inventory
shown on the Financial Statements has been acquired by Seller for value.


 


Section 4.16                                Environmental
Matters.


 


(a)                                  Seller
is in material compliance with all Environmental Laws.  Such compliance includes, but is not limited
to, Seller’s possession of all permits and other governmental authorizations
required under all applicable Environmental Laws, and compliance with the terms
and conditions thereof.  Each permit and
other governmental authorization currently held by Seller (pursuant to the
Environmental Laws) is specifically identified in Section 4.16(a) of
the Disclosure Schedule.


 


(b)                                 Except
as set forth in Section 4.16(b) of the Disclosure Schedule, Seller
has not received any communication (written or oral), whether from a
Governmental Entity, citizens group, employee or otherwise, that alleges that
Seller is not in full compliance with all Environmental Laws.  Seller has delivered to Purchaser prior to
the execution of this Agreement all information that is in the possession of or
reasonably available to Seller regarding environmental matters pertaining to,
or the environmental condition of, Seller or the compliance (or non-compliance)
by the Business with any Environmental Laws.


 


(c)                                  There
is no Environmental Claim by any Person that is pending or threatened against
the Seller, the Business or the Acquired Assets, or against any Person whose
liability for any Environmental Claim Seller has retained or assumed either
contractually or by operation of law.


 


(d)                                 Except
as set forth in Section 4.16(d) of the Disclosure Schedule, there are
no past or present actions, activities, circumstances, conditions, events or
incidents, including the release, emission, discharge, presence or disposal of
any Materials of Environmental Concern, that could form the basis of any
Environmental Claim against Seller, the Business or the Acquired Assets, or, to
the Knowledge of Seller, against any Person whose liability for any
Environmental Claim Seller has retained or assumed either contractually or by
operation of law.


 


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(e)                                  Without
in any way limiting the generality of the foregoing, (i) all on-site and
off-site locations where Seller or the Business has (previously or currently)
stored, disposed or arranged for the disposal of Materials of Environmental
Concern are specifically identified in Section 4.16(e) of the
Disclosure Schedule, (ii) all underground storage tanks, and the capacity
and contents of such tanks, located on any property owned, leased, operated or
controlled by Seller for the use or benefit of the Business are specifically
identified in Section 4.16(e) of the Disclosure Schedule, (iii) to
the Knowledge of Seller there is no asbestos contained in or forming part of
any building, building component, structure or office space owned, operated or
controlled by the Business and (iv) to the Knowledge of Seller no PCBs or
PCB-containing items are used or stored at any property owned, operated or
controlled by Seller for the benefit of the Business.


 


(f)                                    Seller
has provided to Purchaser a copy of each assessment, report, datum, result of
investigations or audit, and other information that is in the possession of or
reasonably available to Seller regarding environmental matters pertaining to or
the environmental condition of the Business or the Acquired Assets, or the
compliance (or noncompliance) by Seller, the Business or the Acquired Assets
with any Environmental Laws.


 


(g)                                 Except
as set forth in Section 4.16(g) of the Disclosure Schedule, Seller is
not, and none of the Acquired Assets are, subject to any Environmental Laws
requiring (i) the performance of site assessment for Materials of
Environmental Concern, (ii) the removal or remediation of Materials of
Environmental Concern, (iii) the giving of notice to, or receiving the
approval of, any Governmental Entity or (iv) the recording or delivery to
any other Person of any disclosure document or statement pertaining to
environmental matters by virtue of the Transactions or as a condition to the
effectiveness of any of the Transactions.


 


Section 4.17                                Contracts and
Commitments.


 


(a)                                  Except
as set forth in Section 4.17(a) of the Disclosure Schedule, no Person
has any agreement, option, understanding or commitments or any right or
privilege (whether by law, preemptive or contractual) capable of becoming an
agreement, option or commitment, for the purchase or other acquisition from
Seller of the Business or any of the Acquired Assets.


 


(b)                                 The
Business has no agreements, contracts, commitments or restrictions that require
the making of any charitable contribution.


 


(c)                                  Except
as set forth in Section 4.17(c) of the Disclosure Schedule, no
material purchase contracts or commitments of the Business continue for a
period of more than 12 months or are in excess of the normal, ordinary and
usual requirements of business.


 


(d)                                 Except
as set forth in Section 4.17(d) of the Disclosure Schedule, the
Business has no outstanding contracts with managers, employees, agents,
consultants, advisors, salesmen, sales representatives, distributors or dealers
that are not cancelable by it on notice of not longer than 30 days and without
liability, penalty or premium or any agreement or arrangement providing for the
payment of any bonus or commission based on sales or earnings.


 


22





















 


(e)                                  Except
as set forth in Section 4.17(e) of the Disclosure Schedule, the
Business has no employment agreement, or any other agreement that contains any
severance or termination pay liabilities or obligations.


 


(f)                                    Except
as set forth in Section 4.17(f) of the Disclosure Schedule, Seller is
not (with respect to the Acquired Assets or Business) in material default under
or in violation of, nor is there any valid basis for any claim of default under
or violation of, any contract, commitment or restriction to which it is a party
or by which it is bound which defaults and violations in the aggregate would
have a Material Adverse Effect upon the Business.


 


(g)                                 Set
forth in Section 4.17(g) of the Disclosure Schedule is a list of
each employee and their current compensation and benefits.


 


(h)                                 Except
as set forth in Section 4.17(h) of the Disclosure Schedule, Seller
(with respect to the Acquired Assets or Business) are not restricted by
agreement from carrying on their business anywhere in the world.


 


(i)                                     Seller
has no outstanding agreement to acquire any debt obligations of others.


 


(j)                                     Except
as set forth in Section 4.17(j) of the Disclosure Schedule, none of Seller,
the Acquired Assets or the Business has any power of attorney outstanding or
any obligations or liabilities (whether absolute, accrued, contingent or
otherwise), as guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any Person, corporation, partnership,
joint venture, association, organization or other entity.


 


Section 4.18                                Customers and
Suppliers.  Except as set forth in Section 4.18
of the Disclosure Schedule, there has not been a Material Adverse Effect
because of a change in the business relationship of the Business during the
period January 1, 2004 through the date hereof with any supplier or vendor
from whom the Business purchased more than 5% of the equipment, goods or
services (on a consolidated basis) which it purchased during the same
period.  To the Knowledge of Seller, the
consummation of the Transactions will not have a Material Adverse Effect on any
vendor, supplier or subcontractor relationship. 
Set forth on Section 4.18 of the Disclosure Schedule is a list
of the ten largest vendors of the Business during the first nine months of
2004.


 


Section 4.19                                Insurance.  Section 4.19 of the Disclosure Schedule sets
forth (a) a true and complete list and description of all insurance
policies, other insurance arrangements and other contracts or arrangements for
the transfer or sharing of insurance risks by Seller or the Business or with
respect to the Acquired Assets in force on the date hereof with respect to the
business or assets of the Business for the last ten years, together with a
statement of the aggregate amount of claims paid out, and claims pending, under
each such insurance policy or other arrangement through the date hereof and (b) a
description of such risks which the Business or the managers or Members of
Seller has designated as being self-insured. 
The Business has policies of insurance issued by an insurer that Seller
believes is financially sound and reputable of the type and in amounts Seller
believe is customarily carried by Persons conducting businesses or owning
assets similar to those of the Business. 
All such policies are in full force and effect, all premiums due thereon
have been paid and the Business is otherwise in compliance in all material
respects with the terms and provisions of such policies.  Furthermore, (a) the Business has not
received any notice of cancellation or non-renewal of any such policy or
arrangement nor is the termination of any


 


23





















 


such policies or arrangements threatened, (b) there is no claim
pending under any of such policies or arrangements as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
arrangements, (c) the Business has received no notice from any of its
insurance carriers that (i) any insurance premiums will be increased in
the future or (ii) that any insurance coverage presently provided for will
not be available to the Business in the future on substantially the same terms
as now in effect or (iii) any claims have been denied by the insurer and
no such notice is expected to be received, and (d) none of such policies
or arrangements provides for any retrospective premium adjustment, experienced-based
liability or loss sharing arrangement affecting the Business.


 


Section 4.20                                Casualties.  Since December 31, 2003, Seller has not
been affected in any way as a result of flood, fire, explosion or other
casualty that would have a Material Adverse Effect (whether or not material and
whether or not covered by insurance). 
Seller is not aware of any circumstance which is likely to cause it to
suffer any material adverse change in its business, operations or prospects,
other than general economic conditions and typical industry risks.


 


Section 4.21                                Litigation.  Except as set forth in Section 4.21 of
the Disclosure Schedule, there is no action, claim, charge, audit, suit,
inquiry, proceeding or investigation by or before any Governmental Entity or
brought by any third party pending or, to the Knowledge of Seller, threatened
against or involving the Business or the Acquired Assets, or which questions or
challenges the validity of this Agreement or any action taken or to be taken by
Seller pursuant to this Agreement or in connection with the Transactions.  To the Knowledge of Seller, there is no basis
for any such action, proceeding or investigation.  Seller is not subject to any judgment, order
or decree which may have a Material Adverse Effect on the Acquired Assets or Seller’s
ability to acquire any property or conduct the Business.


 


Section 4.22                                Compliance with
Laws; Permits and Licenses.


 


(a)                                  Each
of Seller and the Business have complied, in a timely manner and in all
material respects with all laws, rules and regulations, ordinances,
judgments, decrees, orders, writs and injunctions of all United States federal,
state, local, foreign governments and agencies thereof that affect the
business, properties or assets of the Business or the Acquired Assets, and to
the Knowledge of Seller there are no circumstances that, if not remedied or
modified, would prevent or materially interfere with such compliance.


 


(b)                                 Seller
and the Business has in effect and obtained all Permits necessary to conduct
the Business as it is presently being conducted in accordance with the ordinances,
rules, requirements and regulations of any Governmental Entity having
jurisdiction over its properties or activities, and there has occurred no
default under any such Permit, and to the Knowledge of Seller there are no
Permits or licenses that, if not obtained, would prevent or materially
interfere with the conduct of the Business as it is presently being
conducted.  A list of all Permits
necessary to conduct the Business is attached hereto as Section 4.22(b) of
the Disclosure Schedule.


 


(c)                                  Without
limiting the foregoing, (i) the operations of the Business do not violate
or fail to comply in any material respect with applicable health, fire, safety,
zoning or building codes, laws or ordinances, rules or regulations; (ii) Seller
has not received any notice not heretofore complied with or in the process of
being complied with, from any Governmental Entity having jurisdiction over its
properties or activities, or any insurance or inspection body, that its
operations or any of its properties, facilities, equipment, or business
procedures or practices fail to comply in all material respects with any
Applicable


 


24





















 


Law, ordinance, regulation, building or zoning law, or requirement of
any public authority or body; and (iii) there are no pending or, to the
Knowledge of Seller, threatened actions or proceedings by any Governmental
Entity alleging violations in any material respect of such codes, laws or
ordinances.


 


Section 4.23                                Employee Benefit
Plans.


 


(a)                                  Section 4.23(a) of
the Disclosure Schedule contains a true and complete list of all Plans
(other than at will employment arrangements that may be terminated at any time
without liability).  Neither Seller nor
any ERISA Affiliate has any commitment or formal plan, whether legally binding
or not, to create any additional employee benefit plan or modify or change any
existing Plan that would affect any employee or former employee of the Business
or Seller.


 


(b)                                 Seller
has heretofore delivered to Purchaser a true and complete copy of each Plan and
any amendments thereto (or if a Plan is not a written Plan, a description
thereof), each agreement creating or modifying any related trust, insurance
contract, or other funding vehicle for such plan, the most recent annual report
and summary plan description required under ERISA or the Code and the most
recent determination letter (or master prototype opinion letter, if applicable)
issued by the Internal Revenue Service with respect to each Plan intended to
qualify under Section 401 of the Code.


 


(c)                                  Except as
listed in Section 4.23(c) of the Disclosure Schedule:


 


(i)                                     All contributions (including
all employer contributions and employee salary reduction contributions) that
are due have been made within the time periods prescribed by ERISA or the Code
to each Plan that is a “pension plan” within the meaning of Section 3(2) of
ERISA (a “Pension Plan”) and all contributions for any period ending on or
before the Closing Date which are not yet due have been made to each such
Pension Plan or accrued in accordance with the past custom and practice of
Seller.  All premiums or other payments
for all periods ending on or before the Closing Date have been timely paid with
respect to each Plan that is a “welfare plan” within the meaning of Section 3(1) of
ERISA.


 


(ii)                                  Other than a Multiemployer
Plan, no Plan that is a Pension Plan has been completely or partially
terminated or been the subject of a “reportable event” within the meaning of Section 4043
of ERISA.  No proceeding by the PBGC to
terminate any such Pension Plan has been instituted or, to the Knowledge of
Seller or any Member or manager (or employee with responsibility for employee
benefits matters) of Seller, threatened. 
The market value of assets under each Pension Plan (including any
Pension Plan that is a Multiemployer Plan) equals or exceeds the present value
of all vested and non-vested liabilities thereunder, as calculated in accordance
with the terms of the Plan and the PBGC or other regulatory agency methods,
factors, and assumptions applicable to a Pension Plan terminating on the date
hereof.


 


(iii)                               Neither Seller nor any ERISA
Affiliate has incurred, and none of Seller or any Member or manager (or
employee with responsibility for employee benefits matters) of Seller has any
reason to expect that Seller or any ERISA Affiliate will incur, any Liability
(other than for PBGC premiums) to any Person under Title IV of ERISA or under the
Code with respect to any Pension Plan, including, without limitation, any “withdrawal
liability” within the meaning of


 


25





















 


Section 4201
of ERISA or other liability under Subtitle E of Title IV of ERISA with respect
to any Multiemployer Plan.


 


(iv)                              No “complete withdrawal” or “partial
withdrawal” (within the meaning of ERISA Sections 4203 and 4205, respectively)
has occurred with respect to Seller or any ERISA Affiliate of Seller under any
Multiemployer Plan, no liability for any such withdrawal has been asserted, and
no events or circumstances have occurred which could result in any such
complete or partial withdrawal (other than the sale contemplated by this
Agreement).  Neither Seller nor ERISA
Affiliate of Seller is bound by any contract or agreement, or has any
obligation or liability, described in Section 4204 of ERISA.


 


(d)                                 None
of Seller, the Business, any ERISA Affiliate, any Plan nor any trust
thereunder, nor any trustee or administrator thereof has engaged in a
transaction with respect to a Plan pursuant to which either a civil penalty
under Section 409 or Section 502(i) of the ERISA or a tax under Section 4975
or 4976 of the Code could be imposed.


 


(e)                                  Each
Plan that covers employees of Seller or the Business has been operated and
administered in all material respects in accordance with its terms and
Applicable Law, including ERISA and the Code. 
In the case of any Plan maintained for the benefit of employees in
Canada or otherwise outside the United States, such Plan has complied with all
Applicable Laws of the country in which the Plan is maintained and operated.


 


(f)                                    Each
Plan which covers employees of Seller or the Business that is intended to be “qualified”
within the meaning of Section 401(a) of the Code is so qualified, and
the trusts maintained thereunder are exempt from taxation under Section 501(a) of
the Code.  Each Plan intended to satisfy
the requirements of Code Sections 125 or 501(c)(9) has
satisfied such requirements.


 


(g)                                 No
Plan provides medical, surgical, hospitalization or death benefits (whether or
not insured) for employees or former employees of the Business or the Seller
for periods extending beyond their retirement or other termination of service,
other than (i) coverage mandated by COBRA, (ii) death benefits under
any Pension Plan.


 


(h)                                 Neither
Purchaser nor the Business will, as a result of the consummation of the
Transactions be liable to any current or former employee or their dependants of
Seller or the Business for any severance pay, unemployment compensation or any
other payment or liability under any Plan, except as expressly provided in this
Agreement.  The consummation of the
Transactions will not, either alone or in combination with another event,
accelerate the time of payment or vesting, or increase the amount of any
compensation under any Plan that covers employees of Seller or the Business.


 


(i)                                     Except
for routine claims for benefits, there are no pending, threatened or
anticipated claims with respect to any Plan, by any employee of Seller or the
Business.


 


Section 4.24                                Taxes.


 


(a)                                  All
Tax Returns required to be filed on or prior to the Closing Date by or with
respect to the Acquired Assets or the operations or the income of Seller and
the Business have, within the time and manner prescribed by law, been duly
filed with the appropriate tax authorities. 
All such Tax Returns are


 


26





















 


true, correct, and complete in all respects
and all Taxes shown to be due on such Tax Returns have been paid.  Seller has timely paid or caused to be paid
all Taxes required to be paid or have made adequate reserves therefore for all
taxable years or periods ending on or before the Closing Date and for the
portion of the taxable year or period through and including the Closing Date in
the case of any taxable period that begins before and ends after the Closing
Date.  Purchaser will not incur any
Transfer Taxes as a result of the sale of the Business and the Acquired Assets
hereunder.


 


(b)                                 There
are no Encumbrances for Taxes upon any of the Acquired Assets except for
statutory liens for Taxes not yet due.


 


(c)                                  Other
than any Tax Returns that have not yet been required to be filed, Seller has
made available to Purchaser true and correct copies of the United States
federal income Tax Return and any material state, local or foreign Tax Return
filed by Seller for each of the taxable years ended December 31, 2001,
2002, and 2003.


 


(d)                                 Seller
currently is not the beneficiary of any extension of time within which to file
any Tax Return.  No claim has ever been
made by an authority in a jurisdiction where Seller does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction.


 


(e)                                  Seller
has withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, Member, or other third party. 
Seller has withheld and remitted in a timely manner all sales and use
taxes required to be collected from third persons.


 


(f)                                    None
of Seller or any Member or manager (or employee responsible for Tax matters) of
Seller expects any authority to assess additional Taxes for any period for
which Tax Returns have been filed.  There
is no dispute or claim concerning any Liability related to Tax matters of
Seller either (i) claimed or raised by any authority in writing or (ii) as
to which Seller and the Members and managers (and employees responsible for Tax
matters) of Seller has Knowledge based upon personal contact with any agent of
such authority.


 


(g)                                 Seller
has not waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.


 


(h)                                 The
unpaid Taxes of Seller (i) did not, as of December 31, 2003, exceed
the reserve for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between the book and Tax income) set
forth on the face of Seller’s December 31, 2003 balance sheet (rather than
in any notes thereto) and (ii) will not exceed that reserve as adjusted
for the passage of time through the Closing Date in accordance with the past
custom and practice of Seller in filing their Tax Returns.


 


(i)                                     Seller
is not a party to any Tax allocation or sharing agreement.  Seller (i) has not been a member of an
affiliated group filing a consolidated federal income Tax Return, or (ii) has
no liability for the Taxes of any Person (other than Seller) under Reg. § 1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract or otherwise.


 


27





















 


Section 4.25                                Intellectual
Property.


 


(a)                                  Section 4.25(a) of
the Disclosure Schedule sets forth a true and complete list of all Intellectual
Property and Computer Software used or held for use in connection with the
Business, together with all licenses related to the foregoing, whether Seller
or the Business is the licensee or licensor thereunder.


 


(b)                                 Seller
is the sole and exclusive owner or valid licensee of all Intellectual Property,
free and clear of all Encumbrances.


 


(c)                                  All
patents, registrations and applications for Intellectual Property that are
owned by Seller or are used in and are material to the conduct of the Business
as currently conducted (i) are valid, subsisting, in proper form and are
enforceable, and have been duly maintained, including the submission of all
necessary filings and fees in accordance with the legal and administrative
requirements of the appropriate jurisdictions and (ii) have not lapsed,
expired or been abandoned, and no patent, registration or application therefore
to the Knowledge of Seller is the subject of any opposition, interference,
cancellation proceeding or other legal or governmental proceeding before any
Governmental Entity in any jurisdiction.


 


(d)                                 Seller
owns or has the valid right to use all of the Intellectual Property used by it
or held for use by it in connection with its business.  To the Knowledge of Seller, there are no
conflicts with or infringements of any Intellectual Property by any third
party.  The conduct of the Business as
currently conducted to the Knowledge of Seller, does not conflict with or
infringe in any way on any proprietary right of any third party.  There is no claim, suit, action or proceeding
pending or, to the Knowledge of Seller, threatened against Seller or the
Business (i) alleging any such conflict or infringement with any third
party’s proprietary rights or (ii) challenging the ownership, use,
validity or enforceability of the Intellectual Property.


 


(e)                                  The
Computer Software used by the Business was either (i) developed by
employees of Seller or the Business within the scope of their employment, (ii) developed
on behalf of Seller or the Business by a third party, and all ownership rights
therein have been assigned or otherwise transferred to or vested in Seller or
the Business, as the case may be, pursuant to written agreements or (iii) licensed
or acquired from a third party pursuant to a written license, assignment, or
other contract that is in full force and effect and of which neither of Seller
nor the Business is in material breach.


 


(f)                                    All
consents, filings, and authorizations by or with Governmental Entities or third
parties necessary with respect to the consummation of the Transactions, as they
may affect the Intellectual Property, have been obtained.


 


(g)                                 Neither
Seller, nor the Business, has entered into any consent, indemnification,
forbearance to sue, settlement agreement or cross-licensing arrangement with
any Person relating to the Intellectual Property or, to the Knowledge of
Seller, any Intellectual Property licensed by Seller or the Intellectual
Property of any third party, except as contained in any license agreements
listed in Section 4.25(g) of the Disclosure Schedule.


 


(h)                                 Neither
Seller, nor the Business, is, nor will be as a result of the execution and
delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Intellectual Property, as long as the Required Consents set forth in Section 4.5
of the Disclosure Schedule are obtained.


 


28





















 


Section 4.26                                Labor Matters.


 


(a)                                  There
is no labor strike, dispute, campaign, slowdown, stoppage or lockout
actually pending, or to the Knowledge of Seller, threatened against or
affecting the Business or Seller, and during the past five years there has not
been any such action.


 


(b)                                 Except
as set forth in Section 4.26 of the Disclosure Schedule, neither Seller
(with respect to the Business) nor the Business is a party to or bound by any
collective bargaining or similar agreement with any labor organization or work rules or
any practices agreed to with any labor organization or employee association
applicable to employees of Seller or the Business.


 


(e)                                  No
collective bargaining agreement which is binding on Seller (with respect to the
Business) or the Business restricts any of them from relocating or closing any
of their operations.


 


(f)                                    Except as set
forth in Section 4.26(f) of the Disclosure Schedule, the Business has
not experienced any work stoppage or other labor difficulty in the past 5
years.


 


(g)                                 A
true and complete copy of each written personnel policy, rule and
procedure applicable to employees of the Business is included in Section 4.26(g) of
the Disclosure Schedule.


 


(h)                                 Each
of Seller (with respect to the Acquired Assets) and the Business is and has at
all times been, in compliance, in all material respects, with all Applicable
Laws respecting employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and health, and is not
engaged in any unfair labor practices, as defined in the National Labor Relations
Act or other Applicable Laws.


 


(i)                                     There
is no unfair labor practice charge or complaint against Seller (with respect to
the Acquired Assets) or the Business pending or, to the Knowledge of Seller,
threatened before the National Labor Relations Board or any similar state or
foreign agency.


 


(j)                                     There
is no presently pending grievance arising out of any collective bargaining
agreement or other grievance procedure.


 


(k)                                  To
the Knowledge of Seller, no charge with respect to or relating to the Business
is pending before the Equal Employment Opportunity Commission or any other
agency responsible for the prevention of unlawful employment practices.


 


(l)                                     Neither
Seller (with respect to the Business) nor the Business has received notice of
the intent of any federal, state, local or foreign agency responsible for the
enforcement of labor or employment laws to conduct an investigation with
respect to or relating to the Business, and no such investigation is in
progress.


 


(m)                               There
are no complaints, lawsuits or other proceedings pending or, to the Knowledge
of Seller, threatened in any forum by or on behalf of any present or former
employee of Seller or the Business, any applicant for employment or classes of
the foregoing alleging breach of any express or


 


29





















 


implied contract of employment, any laws
governing employment or the termination thereof or other discriminatory,
wrongful or tortious conduct in connection with the employment relationship.


 


(n)                                 Since
the enactment of the WARN Act,  (i) neither
Seller, nor the Business, has effectuated a “plant closing” (as defined in the
WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the Business, (ii) there
has not occurred a “mass layoff” (as defined in the WARN Act) affecting any
site of employment or facility of Business, (iii) the Business has not
been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar state,
local or foreign Law or regulation and (iv) none of Business’ employees
has suffered an “employment loss” (as defined in the WARN Act) during the six-month
period prior to the date hereof.


 


(o)                                 Section 4.26(o)
of the Disclosure Schedule sets forth a true and complete list of all
employees and independent contractors of Seller, and includes the current
annual salary being paid to each employee and independent contractor and the
bonus to which each such employee or independent contractor is entitled to for
the 2004 year, and the expected payment date of such bonus.


 


Section 4.27                                Brokers or Finders.  No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any broker’s
or finder’s fee or any other commission or similar fee in connection with any
of the Transactions.


 


Section 4.28                                Full
Disclosure.  No representation
or warranty by Seller contained in this Agreement and no statement contained in
any document (including, without limitation, financial statements and the
Disclosure Schedule), certificate, or other writing furnished or to be
furnished by Seller to Purchaser or any of its representatives (excluding
financial forecasts, and other forward looking projections or information)
pursuant to the provisions hereof or in connection with the Transactions,
contains or will contain any untrue statement of material fact or omits or will
omit to state any material fact necessary, in light of the circumstances under
which it was made, in order to make the statements herein or therein not
misleading.  None of Seller, its managers
or the Members is aware of any fact that may, either alone or in combination
with any other fact, cause a Material Adverse Effect.


 


ARTICLE V- REPRESENTATIONS AND
WARRANTIES OF PURCHASER


 


Purchaser represents and warrants to Seller that:


 


Section 5.1                                      Organization.  Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of Utah, and has all
requisite corporate or other power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to be so organized, existing
and in good standing or to have such power, authority, and governmental
approvals would not have, individually or in the aggregate, a material adverse
effect on the ability of Purchaser to consummate the Transactions.


 


Section 5.2                                      Authorization;
Validity of Agreement; Necessary Action.  Purchaser has full corporate power and
authority to execute and deliver this Agreement and to consummate the
Transactions.  The execution, delivery
and performance by Purchaser of this Agreement and the consummation of the
Transactions have been duly authorized by Purchaser’s board of directors, and
no other corporate action on the part of Purchaser is necessary to authorize
the execution and delivery by


 


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Purchaser of this Agreement or the consummation of the Transactions.  No vote of, or consent by, the holders of any
class or series of stock is necessary to authorize the execution and delivery
by Purchaser of this Agreement or the consummation by it of the Transactions.  This Agreement has been duly executed and
delivered by Purchaser, and, assuming due and valid authorization, execution
and delivery hereof by Seller and Members, is a valid and binding obligation of
Purchaser, enforceable against it in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws of general application affecting
enforcement of creditors’ rights generally, and (ii) the availability of
the remedy of specific performance or injunctive or other forms of equitable
relief may be subject to equitable defenses and would be subject to the
discretion of the court before which any proceeding therefore may be brought.


 


Section 5.3                                      Consents
and Approvals; No Violations. 
Except as set forth in Section 5.3 of the Disclosure Schedule, none
of the execution, delivery or performance of this Agreement by Purchaser, the
consummation by it of the Transactions or compliance by it with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of its articles of incorporation or bylaws, (ii) require any
filing with, or permit, authorization, consent or approval of, any Governmental
Entity, (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which
Purchaser is a party or by which it or any of its respective properties or
assets may be bound, or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Purchaser, or any of its
properties or assets, excluding from the foregoing clauses (ii), (iii) and
(iv) such violations, breaches or defaults which would not, individually
or in the aggregate, have a material adverse effect on the ability of Purchaser
to consummate the Transactions or which arise from the regulatory status of
Seller.


 


Section 5.4                                      Brokers or
Finders.  None of Purchaser nor any
of its Affiliates has entered into any agreement or arrangement entitling any
agent, broker, investment banker, financial advisor or other firm or Person to
any broker’s or finder’s fee or any other commission or similar fee in
connection with any of the Transactions.


 


ARTICLE VI- COVENANTS


 


Section 6.1                                      Subsequent
Actions.


 


(a)                                  If
at any time after the Closing Purchaser will consider or be advised that any
deeds, bills of sale, instruments of conveyance, assignments, assurances or any
other actions or things are necessary or desirable to vest, perfect or confirm
ownership (of record or otherwise) in Purchaser its right, title or interest
in, to or under any or all of the Acquired Assets or otherwise to carry out
this Agreement, Seller and Members
shall execute and deliver all deeds, bills of sale, instruments of conveyance,
powers of attorney, assignments and assurances and take and do all such other
actions and things as may be reasonably requested by Purchaser in order to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in Purchaser or otherwise to carry out this
Agreement.


 


(b)                                 After
the Closing, each of Purchaser, Seller and Members
shall:


 


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(i)                                     make available to
the other parties and to any taxing authority as reasonably requested all
information and documents relating to Taxes of the Seller or any Taxes imposed
on the Business or Acquired Assets for which the party may have liability;


 


(ii)                                  provide timely
notice to the other parties in writing of any pending or threatened Tax Audit,
assessments or litigation of any manner with respect to Seller or the Business
for which the other party may have liability under this Agreement; and


 


(iii)                               furnish the others with
copies of all correspondence received from any taxing authority in connection
with any Tax Audit or information request with respect to any taxable period
for which the other may have liability under this Agreement.


 


(c)                                  In
case at any time after the Closing Date any further action is necessary, proper
or advisable to carry out the purposes of this Agreement, as soon as reasonably
practicable, each party hereto shall take, or cause its proper officers,
directors, Member and managers to take, all such necessary, proper or advisable
actions.


 


Section 6.2                                      Publicity.  The initial press release and any subsequent
public disclosures regarding the transactions contemplated hereby, if any, with
respect to the execution of this Agreement shall be as determined by
Purchaser.  Neither Seller nor Members
shall make any public announcement regarding this Agreement or the transaction
contemplated hereby without the prior written approval of Purchaser.


 


Section 6.3                                      Waiver
of Bulk Sales Requirement. 
Each party waives compliance with any applicable bulk sales laws,
including without limitation the Uniform Commercial Code Bulk Transfer
provisions.  Seller and Members, jointly
and severally, agree to pay and discharge in due course and will indemnify and
save harmless Purchaser from and against all claims made by creditors of
Seller, including expenses and attorneys’ fees incurred by Purchaser in
defending against such claims, except those expressly assumed by Purchaser
pursuant hereto.


 


Section 6.4                                      Completion
of Non-assignable Contracts. 
Seller and Members shall use their commercially reasonable efforts to
obtain any consent, approval or amendment required to negotiate and/or assign
any contract or agreement included in the Acquired Assets, or any other
Acquired Asset to be assigned to Purchaser hereunder and Purchaser shall use
all commercially reasonable efforts to fulfill Seller’s obligations under such
contracts.  Seller shall keep Purchaser
reasonably informed from time to time of the status of the foregoing and
Purchaser shall cooperate with Seller in this regard.  To the extent that the rights of Seller under
any contract or agreement included in the Acquired Assets, or under any other
asset to be assigned to Purchaser hereunder, may not be assigned without the
consent of another Person which has not been obtained prior to the Closing,
this Agreement shall not constitute an agreement to assign the same if an attempted
assignment would be unlawful.  If any
such consent has not been obtained or if any attempted assignment would be
ineffective or would impair Purchaser’s rights under the instrument in question
so that Purchaser would not acquire the benefit of all such rights, then
Seller, to the maximum extent permitted by Applicable Law and the instrument,
shall act as Purchaser’s agent in order to obtain for Purchaser the benefits
thereunder and shall cooperate, to the maximum extent permitted by Applicable
Law and the instrument, with Purchaser in any other reasonable arrangement
designed to provide such benefits to Purchaser (including, without limitation,
by entering into an equivalent arrangement).


 


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Section 6.5                                      Tax Matters.  With respect to any ad valorem or other property taxes imposed
upon or assessed with respect to any of the Acquired Assets for the tax year in
which Closing occurs, Seller shall pay the portion of
such taxes that relate to the period ending on the Closing Date (determined on
a daily pro rated basis).


 


Section 6.6                                      Further
Assurances.  Each party shall
cooperate with the other, and execute and deliver, or use its commercially
reasonable efforts to cause to be executed and delivered, all such other
instruments, including instruments of conveyance, assignment and transfer, and
to make all filings with and to obtain all consents (including Required
Consents), approvals or authorizations of any Governmental Entity or other
regulatory authority or any other Person under any Permit, agreement, indenture
or other instrument, and take all such other actions as such party may
reasonably be requested to take by the other party hereto from time to time,
consistent with the terms of this Agreement, in order to effectuate the
provisions and purposes of this Agreement and the transactions contemplated
hereby.


 


Section 6.7                                      Restrictions
on Transfer of Warrant and Shares Underlying Warrant.


 


(a)                                  The
Warrant and the common stock issuable upon exercise of the Warrant
(collectively with the Warrant, the “Securities”) are being acquired for
investment for Seller’s own account, not as nominee or agent, and not with a
view to the resale or distribution of any part thereof, and Seller has no
present intention of selling, granting any participation in or otherwise
distributing the same.  Seller is
familiar with the phrase “acquired for investment and not with a view to
distribution” as it relates to the Securities Act of 1933, as amended (the “Securities
Act”) and state securities laws and the special meaning given to such term by
the Securities and Exchange Commission (the “SEC”).  Seller does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
grant participations to such person or to any third person, with respect to the
Securities.


 


(b)                                 Seller
understands that the Securities are being issued without registration under the
Securities Act on the ground that the Transactions and the issuance of
Securities hereunder is exempt from registration under the Securities Act under
one or more exemptions available thereunder, including, without limitation,
Regulation D, and that Purchaser’s reliance on such exemption is predicated on
Seller’s representations, warranties and covenants set forth herein.  Seller realizes that the basis for the
exemption may not be present if, notwithstanding such representations,
warranties and covenants, Seller has in mind merely acquiring the Securities or
any portion thereof for a fixed or determinable period in the future, or for a
market rise, or for sale if the market does not rise.  Seller does not have any such intention.  Seller acknowledges that Purchaser is not
required to rely on such exemption and may rely on any other exemption
available to it at the time of such issuance. 
Seller shall provide such additional representations, warranties and
covenants as Purchaser may require in connection the reliance on any other
exemption.


 


(c)                                  Seller
has reviewed all of the public filings made by Purchaser with the SEC, and any
other information that Seller considers necessary or appropriate for deciding
whether to purchase the Securities. 
Seller has had an opportunity to ask questions and receive answers from
Purchaser regarding the business, properties, prospects and financial condition
of Purchaser and to obtain additional information necessary to verify the
accuracy of any information furnished to Seller or to which Seller had
access.  Seller has received no, and is not
relying upon any, representations, written or oral, from Purchaser, or its
officers, directors, employees, attorneys or agents.  In making the decision to accept the


 


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Warrant as part of the consideration for the Transactions, Seller has
relied solely upon independent investigations made by Seller or its
representatives without assistance of Purchaser or its officers, directors,
employees, attorneys or agents.  None of
the following information has ever been represented, guaranteed or warranted to
Seller, expressly or by implication, by any person:


 


(i)                                     The
approximate or exact length of time that Seller will be required to hold the
Securities;


 


(ii)                                  The
percentage of profit and/or amount of or type of consideration, profit or loss
to be realized, if any, as a result of an investment in Purchaser; or


 


(iii)                               The
possibility that the past performance or experience on the part of Purchaser or
any affiliate, officer, director, employee or agent of Purchaser, might in any
way indicate or predict the results of ownership of the Securities or the
potential success of Purchaser’s operations.


 


(d)                                 Seller
and Members are experienced in evaluating and investing in private placement
transactions of securities of companies in a similar stage as Purchaser and
acknowledges that each are able to fend for himself or itself, to bear the
economic risk of an investment in the Securities and each has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of the investment in the Securities.


 


(e)                                  Seller
understands that neither the Securities nor any portion thereof may be sold,
transferred or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Securities (or such portion thereof) or an
available exemption from registration under the Securities Act, the Securities
and each portion thereof must be held indefinitely.  Seller
is aware that neither the Securities nor any portion thereof may be sold
pursuant to Rule 144 promulgated under the Securities Act unless all of
the conditions of Rule 144 are met.


 


(f)                                    To
the extent applicable, each certificate or other document evidencing any of the
Securities may be endorsed with the legends substantially in the form set forth
below:


 


The
following legends under the Securities Act:


 


NEITHER
THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER
ANY STATE SECURITIES LAWS.  THIS WARRANT
AND SAID SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
NEITHER THIS WARRANT, SAID SHARES OR ANY INTEREST THEREIN MAY BE
TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
A REGISTRATION STATEMENT IN EFFECT WITH RESPECT THERETO UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.


 


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Purchaser may endorse such certificates with each legend imposed or
required by its articles of incorporation, bylaws or applicable state
securities laws.


 


Section 6.8                                      Registration
of Stock Underlying Warrant. 
Purchaser shall use its commercially reasonable efforts to (i) promptly
following the Closing, but no later than sixty (60) days thereafter, prepare
and file with the Securities and Exchange Commission one Registration Statement
on Form S-3 to effect a registration covering the resale of the
shares of common stock issuable upon exercise of the Warrant, and (ii) have
such registration statement declared effective as soon as practicable.


 


Section 6.9                                      Warranty
Responsibility.  From and
after the Closing Date, Seller covenants to accept the liability and
responsibility of any warranty, replacement or similar claims related to
Products existing as of Closing.


 


Section 6.10                                Licenses, Contracts,
Etc.  Seller and Members hereby
covenant and agree to use their best efforts to assist Purchaser in obtaining
the necessary licenses to operate the Business.


 


Section 6.11                                Consulting
and Employment Agreements.  In
connection with the Closing, Purchaser and each of Hale, Long and Kazee shall
enter into consulting or employment agreements in forms substantially similar
to those set forth as Exhibit E hereto in the case of Hale, Exhibit F
hereto in the case of Long, and Exhibit G hereto in the case of Kazee.  Each of Hale, Long and Kazee hereby
acknowledge and agree that Purchaser would not have entered into this Agreement
but for each of Hale, Long and Kazee agreeing to the terms set forth in each of
their respective consulting or employment agreements attached hereto, and in
particular, to the agreement by each of Hale, Long and Kazee to the terms
thereof related to covenants not to compete and similar matters.


 


Section 6.12                                Transition
of Employee Benefit Plans. 
Except for those Plans listed on Section 6.23 of the Disclosure Schedule (“Assumed
Plans”), Purchaser is not assuming and shall have no Liability under or with
respect to any Plans.  In the case of any
Assumed Plans, Purchaser’s and Seller’s Liability shall be apportioned as
follows: Purchaser shall be liable for obligations arising after the Closing
and Seller shall be responsible for all obligations arising on or prior to the
Closing.  From and after the date hereof,
Seller shall remain responsible for offering and providing continuing group health
plan coverage under COBRA to all “M&A qualified beneficiaries” within the
meaning of Treasury Regulation Section 54.4980B-9 and to any other
Persons entitled to such COBRA coverage with respect to the Plans, and shall
not take or allow any action that would transfer Liability for such COBRA
continuation coverage to Purchaser.


 


Section 6.13                                Member
Representative.  Each of the
Members acknowledge and agree that the Member Representative shall represent
all Members, and each of the Members hereby designate and empower the Member
Representative to act for all of the Members with respect to any matters
related to this Agreement and the transactions contemplated hereby following
the Closing, including, without limitation, all matters relating to notices, the
Warrant, the Escrow Agreement and any related matters.  Any such act by the Member Representative
shall be binding upon and enforceable against each of the Members.


 


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ARTICLE VII- INDEMNIFICATION


 


Section 7.1                                      Indemnification;
Remedies.


 


(a)                                  Seller
and Members, jointly and severally, shall indemnify, defend and hold harmless
the Purchaser Indemnified Persons from and against and in respect of all
Purchaser Losses and all Retained Liabilities.


 


(b)                                 Purchaser
shall indemnify and hold Seller Indemnified Persons harmless from and against
Seller Losses.


 


Section 7.2                                      Notice
of Claim; Defense.  Purchaser
on one hand and Seller and Members on the other hand shall give each other
prompt notice of any third-party claim that may give rise to any
indemnification obligation under this Article XII, together with the
estimated amount of such claim, and Seller shall have the right to assume the
defense (at Seller’s expense) of any such claim through counsel of Seller’s own
choosing by so notifying Purchaser within 30 days of the first receipt by
Seller of such notice from Purchaser; provided, however, that any
such counsel shall be reasonably satisfactory to Purchaser.  Failure to give such notice shall not affect
the indemnification obligations hereunder in the absence of actual and material
prejudice.  If, under applicable
standards of professional conduct, a conflict with respect to any significant
issue between any Purchaser Indemnified Person and Seller exists in respect of
such third-party claim, Seller shall pay the reasonable fees and expenses of
such additional counsel as may be required to be retained in order to eliminate
such conflict.  Seller shall be liable
for the fees and expenses of counsel employed by Purchaser for any period
during which Seller has not assumed the defense of any such third-party claim
(other than during any period in which Purchaser will have failed to give
notice of the third-party claim as provided above).  If Seller assumes such defense, Purchaser
shall have the right to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by Seller, it
being understood that Seller shall control such defense.  If Seller chooses to defend or prosecute a
third-party claim, Purchaser shall cooperate in the defense or prosecution
thereof, which cooperation shall include, to the extent reasonably requested by
Seller, the retention, and the provision to Seller, of records and information
reasonably relevant to such third-party claim, and making employees of the
Business available on a mutually convenient basis to provide additional
information and explanation of any materials provided hereunder.  If Seller chooses to defend or prosecute any
third-party claim, Purchasers shall agree to any settlement, compromise or
discharge of such third-party claim that Seller may recommend and that, by its
terms, discharges Purchaser and any of its Affiliates from the full amount of
liability in connection with such third-party claim; provided, however,
that, Seller shall not consent to, and Purchaser shall not be required to agree
to, the entry of any judgment or enter into any settlement that (i) provides
for injunctive or other non-monetary relief affecting Purchaser or any of its
Affiliates or (ii) does not include as an unconditional term thereof the
giving of a release from all liability with respect to such claim by each
claimant or plaintiff to each Purchaser Indemnified Person that is the subject
of such third-party claim.


 


Section 7.3                                      Survival
of Indemnification Claims. 
The indemnification obligations set forth in this Article XII shall
survive the Closing.


 


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Section 7.4                                      Tax
Effect of Indemnification Payments. 
All indemnity payments made by Seller to Purchaser Indemnified Persons,
or by Purchaser Indemnified Persons to Seller, pursuant to this Agreement shall
be treated for all Tax purposes as adjustments to the consideration paid with
respect to the Acquired Assets.


 


Section 7.5                                      Effect
of Investigation.  The right
to indemnification, payment of Purchaser Losses or for other remedies based on
any representation, warranty, covenant or obligation of Seller and Members
contained in or made pursuant to this Agreement shall not be affected by any
investigation conducted with respect to, or any knowledge acquired (or capable
of being acquired) at any time, whether before or after the execution and
delivery of this Agreement, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant or obligation.  The waiver of any condition to the obligation
of Purchaser to consummate the Transactions, where such condition is based on
the accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, shall not affect the right to
indemnification, payment of Purchaser Losses, or other remedy based on such
representation, warranty, covenant or obligation.


 


Section 7.6                                      Survival
of Covenants, Representations and Warranties.  Except for the representations and warranties
set forth in Section 4.1, Section 4.2, Section 4.12, Section 4.16,
Section 4.24, Section 4.27 and Section 6.5, each of which shall survive forever, the
remaining representations and warranties of Seller and Members made herein or
in any other documentation delivered pursuant to this Agreement and the
covenants and agreements to be performed on or prior to the Closing Date shall
survive until the date two years following the Closing Date; provided,
that (a) expiration of a representation, warranty, covenant or agreement
shall not affect the obligations of a party with respect to claims for
indemnification for which notice has been given to the indemnifying party in
accordance with this Article XII prior to such expiration and (b) all
covenants, agreements and indemnification matters that contemplate or may
involve actions to be taken or obligations in effect after the Closing shall
survive the Closing Date.


 


ARTICLE VIII- MISCELLANEOUS


 


Section 8.1                                      Fees and
Expenses.  All costs and expenses
incurred in connection with this Agreement and the consummation of the
Transactions shall be paid by the party incurring such expenses, except as
specifically provided to the contrary in this Agreement.  Seller and Members are expressly responsible
for the payment of all Transfer Taxes arising from the transactions
contemplated hereunder.


 


Section 8.2                                      Amendment
and Modification.  This
Agreement may be amended, modified and supplemented in any respect, but only by
a written instrument signed by all of the parties hereto expressly stating that
such instrument is intended to amend, modify or supplement this Agreement.


 


Section 8.3                                      Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed given when delivered
personally, sent by first-class mail with return receipt or sent by an
overnight courier service, such as Federal Express, to the parties at the
following addresses (or at such other address for a party as shall be specified
by such party by like notice):


 


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If to Purchaser, to:


 


Merit Medical Systems, Inc.


Attn: President


1600 West Merit Parkway


South Jordan, Utah 84095


 


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


 


Parr Waddoups Brown Gee & Loveless


Attn:  Scott W. Loveless


185 South State Street, Suite 1300


Salt Lake City, Utah 84111


Telecopy:  (801) 532-7750


 


and


 


If to Seller, to:


 


MedSource Packaging Concepts, LLC


C/o Robert E. Hale


14121 Helmsley Road


Midlothian, VA 23113


Attention: Manager or Members


Telecopy: (804) 267-1875


 


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


 


Gordon D. Fronk, Esq.


Suite 700 Nottingham Centre


502 Washington Avenue


Towson, Maryland 21204


Telecopy: (410) 823-0451


 


If to the Member Representative, to:


 


Robert E. Hale


14121 Helmsley Road


Midlothian, VA 23113


Telecopy:  (801) 379-7575


 


or to such other address as a party may
from time to time designate in writing in accordance with this section.  Each notice or other communication given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been received (a) on the business day it is received, if
sent by


38





















 


personal delivery, or (b) on the first business day after sending,
if sent priority overnight by a nationally recognized overnight courier,
properly addressed and prepaid, or (c) upon receipt, if sent by mail
(regular, certified or registered); provided, however, that
notice of change of address shall be effective only upon receipt.


 


Section 8.4                                      Counterparts.  This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties.


 


Section 8.5                                      Entire
Agreement; No Third Party Beneficiaries.  This Agreement, the Disclosure Schedule and
other schedules, annexes, and exhibits hereto (a) constitute the entire agreement
and supercede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof and thereof and
supersede and cancel all prior agreements, negotiations, correspondence,
undertakings, understandings and communications of the parties, oral and
written, with respect to the subject matter hereof, and (b) are not
intended to confer upon any Person other than the parties hereto and thereto
any rights or remedies hereunder.


 


Section 8.6                                      Severability.  Any term or provision of this Agreement that
is held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. 
If the final judgment of a court of competent jurisdiction or other authority
declares that any term or provision hereof is invalid, void or unenforceable,
the parties agree that the court making such determination shall have the power
to reduce the scope, duration, area or applicability of the term or provision,
to delete specific words or phrases, or to replace any invalid, void or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
or unenforceable term or provision.


 


Section 8.7                                      Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah without giving
effect to the principles of conflicts of law thereof.


 


Section 8.8                                      Enforcement;
Venue.  The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached.  It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any court of the United States located in the
State of Utah or in Utah state court, this being in addition to any other
remedy to which they are entitled at law or in equity.  In addition, each of the parties hereto (a) consents
to submit itself to the personal jurisdiction of any Federal court located in
Salt Lake County in the State of Utah or any Utah state court located in Salt
Lake County in the event any dispute arises out of this Agreement or any of the
Transactions, (b) agrees that it shall not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (c) agrees that it shall not bring any action relating to this Agreement
or any of the Transactions in any court other than as set forth above.


 


Section 8.9                                      Election
of Remedies.  Neither the
exercise of nor the failure to exercise a right of set-off or to give notice of
a claim under this Agreement will constitute an election of remedies or limit


 


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Purchaser or any of the Purchaser Indemnified Persons on the one hand,
or Seller or any of the Seller Indemnified Persons on the other hand, in any
manner in the enforcement of any other remedies that may be available to any of
them, whether at law or in equity.


 


Section 8.10                                Assignment.  Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
content of the other parties, except that Purchaser may assign, in their sole
discretion, any or all of their rights and interests hereunder to any Affiliate
of Purchaser.  Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.


 


Section 8.11                                Headings.  The article, section, paragraph and other
headings contained in this Agreement are inserted for convenience of reference
only and shall not affect in any way the meaning or interpretation of this
Agreement.


 


Section 8.12                                Attorneys’
Fees.  If a legal action or
other proceeding is brought for enforcement of this Agreement because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys’ fees and costs incurred, both before
and after judgment, in addition to any other relief to which they may be
entitled.


 


 


[remainder of page intentionally
left blank; signature page follows]


 


40





















 


IN WITNESS WHEREOF, Purchaser, Seller, Members and the Member Representative
have executed this Agreement or caused this Agreement to be executed by their
respective officers, members or managers thereunto duly authorized as of the
date first written above.


 


	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  Merit Medical Systems, Inc.,

  
	
   

  	
  a Utah corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Fred P. Lampropoulos

  	
   

  
	
   

  	
   

  	
  President and CEO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  MEDSOURCE PACKAGING CONCEPTS, LLC,

  
	
   

  	
  a Virginia limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Robert E. Hale

  	
   

  
	
   

  	
   

  	
  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MEMBERS:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Robert
  E. Hale,

  
	
   

  	
  an
  individual resident of the Commonwealth of Virginia

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Charles
  Long,

  
	
   

  	
  an individual resident of the Commonwealth of Virginia

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Gary
  W. Kazee,

  
	
   

  	
  an
  individual resident of the Commonwealth of Virginia

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Willis
  P. Blackwood,

  
	
   

  	
  an
  individual resident of the Commonwealth of Virginia

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Robert
  C. Walker,

  
	
   

  	
  an individual resident of the Commonwealth of Virginia

  
						



 


41





















 


	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tommy
  J. West,

  
	
   

  	
  an individual resident of the Commonwealth of Virginia

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  David
  T. Richardson,

  
	
   

  	
  an
  individual resident of the Commonwealth of Virginia

  
	
   

  	
   

  
	
   

  	
  MEMBER REPRESENTATIVE:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Robert
  E. Hale

  
	
   

  	
  an
  individual resident of the Commonwealth of Virginia

  



 


42





















 


EXHIBIT A


 


 


Seller’s Liabilities


 


 


[see attached]


 


43





















 


EXHIBIT B


 


 


Form of Warrant


 


 


[see attached]


 


44





















 


EXHIBIT C


 


 


Form of Escrow
Agreement


 


 


[see attached]


 


45





















 


EXHIBIT D


 


 


Purchase Price Allocation


 


 


[see attached]


 


46





















 


EXHIBIT E


 


 


[Hale Agreement]


 


 


[see attached]


 


47





















 


EXHIBIT F


 


 


[Long Agreement]


 


 


[see attached]


 


48





















 


EXHIBIT G


 


 


[Kazee Agreement]


 


 


[see attached]


 


49