Exhibit 10.1


 


 




 





 


STOCK PURCHASE AGREEMENT


 


DATED
AS OF FEBRUARY 27, 2006


 


BY
AND AMONG


 


LEAP TECHNOLOGIES,


 


LAB CONNECTIONS, INC.


 


AND


 


MOCON, INC.


 




 





 

















 


LIST
OF DEFINED TERMS


 


	
  Term

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  Agreement

  	
   

  	
  8.13

  
	
  Annual
  Financial Statements

  	
   

  	
  2.6

  
	
  Authority/Authorities

  	
   

  	
  2.3

  
	
  Base
  Purchase Price

  	
   

  	
  1.2(a)

  
	
  Closing

  	
   

  	
  1.6

  
	
  Closing Date

  	
   

  	
  1.6

  
	
  Closing
  Balance Sheet

  	
   

  	
  1.2(d)

  
	
  Confidentiality
  Agreement

  	
   

  	
  4.4

  
	
  Consent/Consents

  	
   

  	
  2.4

  
	
  Disclosure
  Schedule

  	
   

  	
  2

  
	
  Expiration
  Date

  	
   

  	
  7.1

  
	
  Financial
  Statements

  	
   

  	
  2.6

  
	
  GAAP

  	
   

  	
  2.6

  
	
  Indemnified
  Party

  	
   

  	
  7.5(a)

  
	
  Indemnifying
  Party

  	
   

  	
  7.5(a)

  
	
  Intellectual
  Property Rights

  	
   

  	
  2.22

  
	
  Knowledge

  	
   

  	
  8.3

  
	
  Latest
  Balance Sheet

  	
   

  	
  2.6

  
	
  Law/Laws

  	
   

  	
  2.3

  
	
  License(s)

  	
   

  	
  2.20

  
	
  Lien

  	
   

  	
  2.3

  
	
  Loss

  	
   

  	
  7.2

  
	
  Net Tangible
  Assets

  	
   

  	
  1.2(c)

  
	
  Objection
  Period

  	
   

  	
  1.2(d)

  
	
  Properties

  	
   

  	
  2.23

  
	
  Purchase
  Price

  	
   

  	
  1.2(a)

  
	
  Purchaser

  	
   

  	
  Preamble

  
	
  Seller

  	
   

  	
  Preamble

  
	
  Shares

  	
   

  	
  Preamble

  
	
  Stock
  Purchase

  	
   

  	
  Preamble

  
	
  Taxes

  	
   

  	
  2.12

  
	
  Tax Returns

  	
   

  	
  2.12

  
	
  Termination
  Date

  	
   

  	
  1.3

  



 

















 


STOCK
PURCHASE AGREEMENT


 


THIS STOCK PURCHASE AGREEMENT, dated as of February 27, 2006, is
by and between Leap Technologies, a North Carolina corporation (the “Purchaser”),
Lab Connections, Inc., a Minnesota corporation (the “Company”) and
MOCON, Inc., a Minnesota corporation (the “Seller”).


 


A.            The Seller owns all of
the issued and outstanding shares of capital stock of the Company
(collectively, the “Shares”).


 


B.            The
Purchaser desires to purchase from the Seller, and the Seller desires to sell
to the Purchaser, the Shares (the “Stock Purchase”), upon the terms and
subject to the conditions set forth herein.


 


C.            The
parties hereto wish to make certain representations, warranties, covenants and
agreements in connection with the Stock Purchase.


 


Accordingly, and in consideration of the representations, warranties,
covenants, agreements and conditions contained in this Agreement, the parties
hereto agree as follows:


 


ARTICLE 1


 


PURCHASE AND SALE OF SHARES


 


1.1           Purchase
and Sale of Shares. On the Closing Date (as defined below), the Seller
shall, sell, transfer, assign, convey and deliver to the Purchaser, and the
Purchaser shall purchase from the Seller, all of the Seller’s right, title and
interest in and to the Shares, free and clear of any Lien (as defined below).


 


1.2           Purchase
Price.


 


(a)           The
total consideration to be paid by the Purchaser to the Seller for the Shares
(the “Purchase Price”) will be an amount equal to Five Hundred Seventeen
Thousand Two Hundred Ninety Six Dollars ($517,296) (the “Base Purchase Price”) in cash, plus or minus, as the case may be, the post-Closing
adjustment set forth in Section 1.2(c) below.


 


(b)           At
the Closing, the Purchaser will pay the Seller, by wire transfer of immediately
available funds, the Base Purchase Price to a bank account designated by the
Seller.


 


(c)           The
parties hereby understand, acknowledge and agree that the Base Purchase Price
has been calculated using the Company’s unaudited balance sheet as of January 31,
2006. If the Net Tangible Assets as of Closing are more than or less than the
Net Tangible Assets as of January 31, 2006, the Purchase Price will be
adjusted accordingly. “Net Tangible Assets” means the difference between (i) the
sum of accounts receivable, inventory and net property and equipment and (ii) the
sum of accounts payable, accrued payroll and taxes, warranty reserve and
accrued expenses. Notwithstanding any of the foregoing, in no event will any
adjustment be made pursuant to this Section 1.2(c) if the difference
(either more than or less than)  between
the Net Tangible Assets as of January 31, 2006 and the Net Tangible Assets
as of the Closing is less than $10,000.


 

















 


(d)           Within
20 business days following the Closing Date, the Purchaser will prepare and
deliver to the Seller a balance sheet of the Company as of the Closing (the “Closing
Balance Sheet”) setting forth the Purchaser’s calculation of the Net
Tangible Assets of the Company as of the Closing and the resulting Purchase
Price. The Seller will have the right to review and copy the books and records
of the Company and supporting work papers of the Company and the Purchaser relating
to the preparation of the Closing Balance Sheet and the calculation of the
Purchase Price and will have a period of 20 business days (the “Objection
Period”) after delivery of the Closing Balance Sheet in which to provide
written notice to the Purchaser of any objections thereto. The Closing Balance
Sheet and the resulting Purchase Price will be deemed to be accepted by the
Seller, and will become final and binding on the parties on the later of the
expiration of the Objection Period or the date on which all objections have
been resolved by the parties. If the Seller gives any notice of objection to
the Purchaser within the Objection Period, then the Seller and the Purchaser
will attempt in good faith to resolve any dispute concerning the item(s) subject
to such objection.


 


1.3           The
Closing. Unless this Agreement has been terminated and the transactions
contemplated have been abandoned pursuant to Article 6 hereof, a closing
(the “Closing”) will be held on or about February 28, 2006 at 10:00 a.m.,
Minneapolis, Minnesota local time or at such other time as the parties may
agree upon (the “Closing Date”); provided, however, that
if any of the conditions provided for in Article 5 hereof have not been
satisfied or waived by such date, then the party to this Agreement which is
unable to satisfy such condition or conditions, despite the reasonable
commercial efforts of such party, will be entitled to postpone the Closing by
notice to the other parties until such condition or conditions will have been
satisfied (which such notifying party will seek to cause to happen at the
earliest practicable date) or waived, but in no event will the Closing occur
later than ten (10) days following the date of this Agreement (the “Termination
Date”). The Closing will be held at such time and place as the parties may
agree, at which time and place the documents and instruments necessary or
appropriate to effect the transactions contemplated herein will be exchanged by
the parties. By agreement of the parties the Closing may be effected by
facsimile. The Purchaser and the Seller agree to use reasonable best efforts to
effect the Closing upon execution of this Agreement or as soon thereafter as is
reasonably practicable.


 


1.4           Deliveries
at the Closing.


 


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


 


(i)            the
Base Purchase Price;


 


(ii)           a
closing certificate of the Purchaser, in form and substance reasonably
satisfactory to the Seller and its counsel, dated as of the Closing Date, to
evidence compliance with the conditions set forth in Section 5.2 hereof
and such other matters as may be reasonably requested by the Seller;


 


(iii)          certified
copies of resolutions of the board of directors (or its equivalent) of the
Purchaser authorizing the execution, delivery and performance of this Agreement
and the transactions contemplated hereby; and


 


(iv)          any
other documents, instruments and writings required to be delivered by the
Purchaser at or prior to the Closing in connection with the transactions
contemplated hereby.


 


2

















 


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


 


(i)            stock
certificate or certificates representing the Shares, which certificate or
certificates shall be duly endorsed to the Purchaser or accompanied by duly
executed stock powers in form satisfactory to the Purchaser;


 


(ii)           all
corporate books and records, including stock ledgers and minute books and other
similar property of the Company;


 


(iii)          all
Consents required to be obtained and delivered by the Seller as set forth in Section 2.4
of the Disclosure Schedule;


 


(iv)          closing
certificate of the Seller, in form and substance reasonably satisfactory to the
Purchaser and its counsel, dated as of the Closing Date, to evidence compliance
with the conditions set forth in Section 5.3 hereof and such other matters
as may be reasonably requested by the Purchaser;


 


(v)           certified
copies of resolutions of the board of directors of the Seller authorizing the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby; and


 


(vi)          any
other documents, instruments and writings required to be delivered by the
Seller pursuant to this Agreement at or prior to the Closing in connection with
the transactions contemplated hereby.


 


ARTICLE 2


 


REPRESENTATIONS AND WARRANTIES OF THE SELLER
AND THE COMPANY


 


The Seller and
the Company jointly and severally represents and warrants to the Purchaser that
each of the representations and warranties contained in this Article 2 are
true and correct, and will be true and correct as of the Closing Date, except
as noted in the disclosure schedule (the “Disclosure Schedule”) attached
hereto as Exhibit 1. The Disclosure Schedule is divided into
sections which correspond to the sections and subsections of this Article 2
and the Seller and the Company represents and warrants that the Disclosure Schedule is
true and accurate in all material respects. Nothing in the Disclosure Schedule will
be deemed adequate to disclose an exception to a representation or warranty
made herein, unless the Disclosure Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable detail.


 


2.1           Corporate
Organization. Each of the Seller and the Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Minnesota, with corporate power and authority to own, operate and lease its
respective properties and assets. The Company has heretofore delivered to the
Purchaser complete and correct copies of the Company’s articles of
incorporation and bylaws, as presently in effect. Except as set forth in the
Disclosure Schedule, the Company is duly qualified or licensed to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing, except where the failure
to be so qualified, licensed or in good standing in such other jurisdiction
would not, individually or in the aggregate, have a material adverse effect on
the business of the Company taken as a whole. The Company does not, directly or


 


3

















 


indirectly,
own or control or have any capital, equity, partnership, participation or other
interest in any corporation, partnership, joint venture or other business
association or entity.


 


2.2           Authorization
and Enforceability. Each of the Seller and the Company has full corporate
power and authority to enter into this Agreement and to carry out the
transactions contemplated herein. The Board of Directors of each of the Seller
and the Company has taken all action required by law, the articles of
incorporation and bylaws of the Seller and the Company, or otherwise, to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein and no other corporate
action is necessary to authorize the execution, delivery and performance of
this Agreement by the Seller or the Company and to consummate the transaction
contemplated herein in accordance with applicable Laws (as defined below). This
Agreement has been duly authorized, executed and delivered by each of the
Seller and the Company. Assuming the due authorization, execution and delivery
hereof by the Purchaser, this Agreement is the valid and binding legal
obligation of each of the Seller and the Company, enforceable against the
Seller and the Company in accordance with its terms.


 


2.3           Non-Contravention.
Except as set forth in the Disclosure Schedule, neither the execution, delivery
and performance of this Agreement nor the consummation of the transactions
contemplated herein will: (a) violate or be in conflict with any provision
of the articles of incorporation or bylaws of the Seller or the Company; or (b) be
in conflict with, or constitute a default, however defined (or an event which,
with the giving of due notice or lapse of time, or both, would constitute such
a default), under, or cause or permit the acceleration of the maturity of, or
give rise to any right of termination, cancellation, imposition of fees or
penalties under, any debt, note, bond, lease, mortgage, indenture, license,
obligation, contract, commitment, franchise, permit, instrument or other
agreement or obligation to which the Seller or the Company is a party or by
which the Seller, the Company or any of their respective properties or assets
is or may be bound or result in the creation or imposition of any mortgage,
pledge, lien, security interest, encumbrance, restriction, adverse claim or
charge of any kind (collectively, a “Lien”) upon the Shares or any of
the assets of the Company; or (c) violate any statute, treaty, law,
judgment, writ, injunction, decision, decree, order, regulation, ordinance or
other similar authoritative matters (sometimes hereinafter separately referred
to as a “Law” and sometimes collectively as “Laws”) of any
foreign, federal, state or local governmental or quasi-governmental,
administrative, regulatory or judicial court, department, commission, agency,
board, bureau, instrumentality or other authority (hereinafter sometimes
separately referred to as an “Authority” and sometimes collectively as “Authorities”).


 


2.4           Consents
and Approvals. Except as set forth in the Disclosure Schedule, no consent,
approval, order or authorization of or from, any individual or entity,
including without limitation any Authority, is required in connection with the
execution, delivery or performance of this Agreement by the Seller or the
Company or the consummation by the Seller or the Company of the transactions
contemplated herein (hereinafter sometimes separately referred to as a “Consent”
and sometimes collectively as “Consents”).


 


2.5           Capitalization.
The authorized capital stock of the Company consists of 1,000 shares of common
stock, $0.01 par value, of which 1,000 shares are issued and outstanding as of the
date hereof. All issued and outstanding shares of capital stock of the Company
are duly authorized, validly issued, fully paid and nonassessable and are
without, and were not issued in violation of, any preemptive rights. All issued
and outstanding shares of capital stock of the Company are owned (of record and
beneficially) solely by the Seller, and the Seller has good and marketable
title to all such issued and outstanding shares, free and clear of all Liens. Except
as set forth in the Disclosure Schedule: 
(i) there are no outstanding options, warrants, conversion
privileges or other rights to purchase or acquire any shares of capital stock
or other equity securities of the Company or any outstanding securities that
are convertible into or


 


4

















 


exchangeable
for such shares, securities or rights; and (ii) there are no contracts,
commitments, understandings, arrangements or restrictions by which the Company
is bound to issue or acquire any additional shares of its capital stock or
other equity securities or any options, warrants, conversion privileges or
other rights to purchase or acquire any capital stock or other equity
securities of the Company or any securities convertible into or exchangeable
for such shares, securities or rights.


 


2.6           Financial
Statements. The Company has previously furnished the Purchaser copies of
unaudited balance sheets and statements of income as of and for the fiscal
years ended December 31, 2003, 2004 and 2005 (the “Annual Financial
Statements”) and the unaudited balance sheet as of January 31, 2006
(the “Latest Balance Sheet”) and the related unaudited statement of
income for the one-month period then ended (the “Financial Statements”).
Except as set forth in the Disclosure Schedule, the Financial Statements (which
include the Latest Balance Sheet) (i) are in accordance with generally
accepted accounting principles (“GAAP”) consistently applied as of the
dates reflected therein and for all periods reflected therein, (ii) fairly
present the financial position of the Company as of the respective dates
thereof, and with respect to the statements of income for the periods then
ended, and (iii) accurately state the various account balances as of the
dates reflected therein and accurately state the changes in such account
balances for the periods reflected therein. Except as set forth in the
Disclosure Schedule, the Company has no liability or obligation of any nature,
asserted or unasserted, accrued, absolute or contingent or otherwise, and
whether due or to become due, that is required to be set forth in accordance
with GAAP that is not reflected or reserved against on the Latest Balance
Sheet, except those that may have been incurred after the date of the Latest
Balance Sheet in the ordinary course of business and consistent with past
practices.


 


2.7           Litigation.
There are no claims, actions, suits or proceedings by any private party or by
any governmental body or authority (including any nongovernmental
self-regulatory agency), nor any investigations or reviews by any federal,
state, local or foreign body or authority (including any nongovernmental
self-regulatory agency), against or affecting the Company, that are pending or,
to the knowledge of the Seller or the Company, threatened, at law or in equity.


 


2.8           Absence
of Certain Changes. Except as set forth in the Disclosure Schedule and
except as authorized by this Agreement, and except as is in the ordinary course
of business and consistent with past practice, since January 31, 2006, the
Company has not:


 


(a)           Suffered
any adverse change in its condition (financial or otherwise), working capital,
assets, properties, liabilities, obligations, reserves or businesses, or
experienced any event or failed to take any action which could reasonably be
expected to have a material adverse effect on the business of the Company taken
as a whole;


 


(b)           Suffered
any loss, damage, destruction or other casualty (whether or not covered by
insurance) or suffered any loss of officers, employees, dealers, distributors,
independent contractors, customers, or suppliers or other favorable business
relationships which could reasonably be expected to have a material adverse
affect on the business of the Company taken as a whole;


 


(c)           Declared,
set aside, made or paid any dividend or other distribution in respect of its
capital stock, or purchased or redeemed any shares of its capital stock;


 


(d)           Issued
or sold any shares of its capital stock, or any options, warrants, conversion,
exchange or other rights to purchase or acquire any such shares or any
securities convertible into or exchangeable for such shares;


 


5

















 


(e)           Incurred
any indebtedness for borrowed money;


 


(f)            Mortgaged,
pledged, or subjected to any material lien, lease, security interest or other
charge or encumbrance any of its material properties or assets, tangible or
intangible;


 


(g)           Acquired
or disposed of any material assets or properties;


 


(h)           Forgiven
or canceled any material debts or claims, or waived any material rights;


 


(i)            Entered
into any material transaction;


 


(j)            Granted
to any officer or salaried employee or any other employee any material increase
in compensation in any form or made any material payments for severance or
termination pay;


 


(k)           Entered
into any material commitment for capital expenditures for additions to plant,
property or equipment; or


 


(l)            Agreed,
whether in writing or otherwise, to take any action described in this Section.


 


2.9           Title
to Property; Condition. Except as set forth on the Disclosure Schedule, the
Company has good and merchantable right, title and interest in and to all of
the machinery, equipment, terminals, computers, vehicles, personal property and
all other assets reflected in the Latest Balance Sheet and all of the assets
purchased or otherwise acquired since the date of the Latest Balance Sheet for the
Company (except for such assets as may have been sold or otherwise disposed of
in the ordinary course of business since the date of the most recent balance
sheet included in the Financial Statements), subject to no mortgage, pledge,
lien or security interest of any kind or nature (whether or not of record). Except
as set forth on the Disclosure Schedule, the items of equipment and other
personal property of the Company that are necessary to the conduct of the
business of the Company are in good operating condition and repair and fit for
the intended purpose thereof, ordinary wear and tear excepted, and no material
maintenance, replacement or repair has been deferred or neglected. The Company
owns no real property. The Disclosure Schedule sets forth a list of all
leased real property and includes the name of the lessor, the monthly rent
amount, the duration (including renewal options) and includes a copy of each of
the leases related thereto.


 


2.10         Inventories.
Except as set forth on the Disclosure Schedule, all inventory of the Company
reflected in the Latest Balance Sheet consists of a quality and quantity usable
and salable in the ordinary course of business, and the present quantities of
all inventory of the Company are reasonable in the present circumstances of the
business of the Company as currently conducted, except for items of obsolete,
overstocked or below standard quality, all of which are immaterial to the overall
financial condition of the Company taken as a whole and which have been fully
reserved for on the Latest Balance Sheet.


 


2.11        Receivables
and Payables. Except as set forth on the Disclosure Schedule, (i) the
Company has good right, title and interest in and to all its accounts
receivable, notes receivable and other receivables reflected in the Latest
Balance Sheet and those acquired and generated since the date of the Latest
Balance Sheet for the Company included in the Financial Statements (except for
those paid since such date); (ii) none of such receivables is subject to
any mortgage, pledge, lien or security interest of any kind or nature (whether
or not of record); (iii) except to the extent of applicable reserves shown
in the


 


6

















 


Latest Balance
Sheet included in the Financial Statements, all of the receivables owing to the
Company constitute valid and enforceable claims arising from bona fide
transactions in the ordinary course of business, and the Company has not
received any written or oral claims or refusals to pay, or granted any rights
of set-off, against any thereof; and (iv) to the knowledge of the Company
and the Seller, there is no reason why any receivable will not be collected in
accordance with its terms, other than for such receivables which are not in
excess of the reserves established therefor and reflected in the most recent
balance sheet for the Company included in the Financial Statements. The Seller
has previously provided the Purchaser a schedule of the aging of accounts
receivable of the Company (by monthly integrals) as of January 31, 2006
prepared in accordance with GAAP consistently applied.


 


2.12         Tax
Matters. For the purposes of this Agreement, the term “Taxes” means
all federal, state, local, foreign and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, real or personal property, windfall profits,
customs, duties or other taxes, fees, assessments, charges or levies of any
kind whatever, together with any interest and any penalties, additions to tax
or additional amounts with respect thereto, and the term “Tax” means any one of
the foregoing Taxes. In addition, the term “Tax Returns” means all
returns, declarations, reports, statements and other documents required to be
filed with any Authority in respect of Taxes, and the term “Tax Return” means
any one of the foregoing Tax Returns. To the knowledge of the Company and the
Seller, except as set forth on the Disclosure Schedule:


 


(a)           Filing
of Tax Returns. All Tax Returns required to be filed on or prior to the
date hereof by the Company with respect to Taxes of the Company have been
properly completed and duly filed on a timely basis and in correct form. As of
the time of filing, the foregoing Tax Returns correctly reflected the facts
regarding the income, business, assets, operations, activities, status or other
matters of the Company or any other information required to be shown thereon. There
is no material omission, deficiency, error, misstatement or misrepresentation,
whether innocent, intentional or fraudulent, in any Tax Return filed by the
Company for any period.


 


(b)           Payment
of Taxes. With respect to all amounts of Taxes imposed upon the Company, or
for which the Company is or could be liable, whether to taxing Authorities (as,
for example, under Law) or to other persons or entities (as, for example, under
tax allocation agreements), with respect to all taxable periods or portions of
periods ending on or before the Closing Date, all applicable Tax Laws and
agreements have been or will be fully complied with, and all such amounts of
Taxes required to be paid by the Company to taxing Authorities or others on or
before the date hereof have been duly paid or will be paid on or before the
Closing Date; the reserves for all such Taxes reflected in the Latest Balance
Sheet are adequate and there are no liens for such Taxes upon any property or
assets of the Company, except for liens that relate to current taxes and
assessments not yet due and payable or where the Company is contesting such
Taxes in good faith. The Company has withheld and remitted all amounts required
to be withheld and remitted by it in respect of Taxes. Except as set forth in the
Disclosure Schedule, the Seller has not, since the Latest Balance Sheet,
received any dividend or other distribution (whether in cash, stock or property
or any combination thereof) in respect of any the Company’s capital stock or
equity interest to pay Taxes.


 


(c)           Audits
and Extensions. Except as set forth in the Disclosure Schedule, neither the
federal Tax Returns of the Company nor any state or local or foreign Tax Return
of the Company have been examined by the Internal Revenue Service or any
similar state or local or foreign Authority and, except to the extent shown
therein, all deficiencies asserted as a result of such examinations have been
paid or finally settled and no issue has been raised by the Internal Revenue
Service or any similar state or local or foreign Authority in any such
examination which,


 


7

















 


by application of similar
principles, reasonably could be expected to result in a proposed deficiency for
any other period not so examined. Except as set forth in the Disclosure
Schedule, all deficiencies and assessments of Taxes of the Company resulting
from an examination of any Tax Returns by any Authority have been paid and
there are no pending examinations currently being made by any Authority nor has
there been any written or oral notification to the Company of any intention to
make an examination of any Taxes by any Authority. Except as set forth in the
Disclosure Schedule, there are no outstanding agreements or waivers extending
the statutory period of limitations applicable to any Tax Return for any
period.


 


(d)           Independent
Contractors and Employees. For purposes of computing Taxes and the filing
of Tax Returns, the Company has not failed to treat as “employees” any
individual providing services to the Company who would be classified as an “employee”
under the applicable rules or regulations of any Authority with respect to
such classification.


 


2.13         Insurance.
The Disclosure Schedule contains an accurate and complete list of all
policies of fire and other casualty, general liability, theft, life, workers’
compensation, health, directors and officers liability, business interruption
and other forms of insurance owned or held by the Company, specifying the
insurer, the policy number, the term of the coverage and, in the case of any “claims
made” coverage, the same information as to predecessor policies for the
previous five years. All present policies are in full force and effect and all
premiums that are due as of the date hereof and as of the Closing Date with
respect thereto have been paid. The Company has not been denied any form of
insurance in the 12 month period prior to the date hereof and no policy of
insurance has been revoked or rescinded during the past three years, except as
described on the Disclosure Schedule.


 


2.14         Benefit
Plans.


 


(a)           The
Disclosure Schedule lists each employee benefit plan, policy or practice including,
but not limited to, plans described in Section 4(3) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), and including
employee “fringe benefits” such as, without limitation, plans, policies and
practices regarding education and dependent care assistance, flexible spending
accounts, cafeteria plans, vacations, sabbaticals and leaves of absence, sick
leave and disability and each incentive or bonus compensation, deferred
compensation, equity based compensation or perquisite plan, policy or practice,
to which the Company is a party, or by which it is bound with respect to any
employee of the Company or their spouses, dependents or beneficiaries or which
benefits a Company employee (a “Benefit Plan”). With respect to each Benefit
Plan, Seller has provided or made available to Purchaser the current summary
plan description (and all summaries of material modifications) or other
descriptive materials provided to plan participants describing the Benefit
Plans. Pursuant to Section 4.8, the Company’s status as a participating employer
under the Benefit Plans will be terminated effective as of the Closing Date.


 


(b)           Neither
the Seller nor the Company has any liability or obligation, whether known or
unknown, direct or indirect, fixed or contingent or otherwise, with respect to (i) any
“multiemployer plan” described in Sections 3(37) or 4001(a)(3) of ERISA; (ii) any
defined benefit plan described in Section 3(35) of ERISA; or (iii) any
pension plan subject to the requirements of Title IV of the ERISA or Section 412
of the Code, in each case with respect to any such plan that is or has been
maintained, contributed to or sponsored by the Company, Seller or any other “person,”
within the meaning of Section 7701(a)(1) of the Code, that together
with the Company is considered a single employer pursuant to Sections 414(b),
(c), (m) or (o) of the Code or Sections 3(5) or 4001(b)(1) of ERISA
(an “ERISA Affiliate”).


 


8

















 


(c)           The
Company has performed all material obligations required to be performed by it
under each Benefit Plan and each Benefit Plan has been established and
maintained in material compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA and the Code.


 


(d)           Each
Benefit Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code has
either received a favorable determination letter or opinion letter from the IRS
with respect to such Benefit Plan as to its qualified status under the Code or
has a period of time remaining under applicable Treasury regulations or IRS
pronouncements in which to apply for and obtain such a letter.


 


(e)           There
are no actions, suits or claims pending, or, to the knowledge of the Company,
threatened or anticipated (other than routine claims for benefits) against any
Benefit Plan or against the assets of any Benefit Plan to the extent there is
any liability to the Company.


 


(f)            The
Company may terminate or discontinue its participation in each Benefit Plan in
accordance with its terms, without liability to the Company or Purchaser (other
than ordinary administration expenses and contributions owed by the Company
typically incurred in a termination event).


 


(g)           Seller,
the Company and each ERISA Affiliate have complied with the health care
continuation requirements of Section 4980B of the Code or Part 6 of
Subtitle B of Title I of ERISA (“COBRA”).


 


2.15         Bank
Accounts; Powers of Attorney. The Disclosure Schedule sets forth:  (i) the names of all financial
institutions, investment banking and brokerage houses, and other similar
institutions at which the Company maintains accounts, deposits, safe deposit
boxes of any nature, and the names of all persons authorized to draw thereon or
make withdrawals therefrom and a description of such accounts; and (ii) the
names of all persons or entities holding general or special powers of attorney
from the Company and copies thereof.


 


2.16         Contracts
and Commitments; No Default.


 


(a)           Except
as set forth on the Disclosure Schedule, the Company:


 


(i)            does
not have any written or oral contract, commitment, agreement or arrangement
with any person which (1) requires payments individually in excess of $50,000
annually or in excess of $75,000 over its term (including without limitation
periods covered by any option to extend or renew by either party) and (2) is
not terminable on thirty (30) days’ or less notice without cost or other
liability;


 


(ii)           does
not pay any person or entity cash remuneration at the annual rate (including
without limitation guaranteed bonuses) of more than $75,000 for services
rendered as a consultant;


 


(iii)          is
not restricted by agreement from carrying on its business or any part thereof
in any geographical area or from competing in any line of business with any
person or entity;


 


9

















 


(iv)          is
not subject to any obligation or requirement to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
person or entity;


 


(v)           is
not party to any agreement, contract, commitment or loan requiring payments in
excess of $750,000 over its term and not terminable by the Company on thirty
(30) days’ or less notice without cost or liability to which any of its
directors, officers or the Seller or any “affiliate” or “associate” (as defined
in Rule 405 as promulgated under the Securities Act of 1933) thereof is a
party;


 


(vi)          is
not subject to any contract, commitment, agreement or arrangement with any “disqualified
individual” (as defined in Section 280G(c) of the Code) which
contains any severance or termination pay liabilities which would result in a
disallowance of the deduction for any “excess parachute payment” (as defined in
Section 280G(b)(1) of the Code) under Section 280G of the Code;
and


 


(vii)         does
not have any distributorship, dealer, manufacturer’s representative, franchise
or similar sales contract relating to the payment of a commission by the
Company.


 


(b)           True
and complete copies (or summaries, in the case of oral items) of all items
disclosed pursuant to Section 2.16(a) have been made available to the
Purchaser for review. Except as set forth on the Disclosure Schedule, to the
knowledge of the Company and the Seller, all such items are valid and
enforceable by and against the Company in accordance with their respective
terms; the Company is not in breach, violation or default, in any material
respect, in the performance of any of its material obligations thereunder, and
no facts or circumstances exist which, whether with the giving of due notice,
lapse of time, or both, would constitute a material breach, violation or
default, in any material respect, thereunder or thereof; and, to the knowledge
of the Company and the Seller, no other parties thereto are in breach,
violation or default, in any material respect, thereunder or thereof, and no
facts or circumstances exist which, whether with the giving of due notice,
lapse of time, or both, would constitute such a breach, violation or default in
any material respect thereunder or thereof.


 


2.17         Orders,
Commitments and Returns. Except as set forth on the Disclosure Schedule and
except as are not material to the business of the Company, all accepted and
unfulfilled orders for the sale of products and the performance of services
entered into by the Company and all outstanding contracts or commitments for
the purchase of supplies, materials and services by or from the Company were
made in bona fide transactions in the ordinary course of business. Except as
set forth on the Disclosure Schedule, to the knowledge of the Company and the
Seller, there have been no claims in the 12 month period prior to the date
hereof against the Company to return products by reason of alleged
over-shipments, defective products or otherwise, or of products in the hands of
customers, retailers or distributors under an understanding that such products
would be returnable.


 


2.18        Labor
Matters. The Disclosure Schedule sets forth a list of all current employees
and includes their position, wage and salary information and years of service
with the Company for each person. There are no claims, actions, suits or
proceedings by any past or current employee of the Company against the Company
that are pending or, to the knowledge of the Seller or the Company, threatened,
at law or in equity. Except as set forth on the Disclosure Schedule and
except as are not material to the business of the Company:  (i) to the knowledge of the Company and
the Seller, the Company 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 and wages and


 


10

















 


hours,
including without limitation any such laws respecting employment discrimination
and occupational safety and health requirements, and has not and is not engaged
in any unfair labor practice; (ii) there is no unfair labor practice
complaint against the Company pending or, to the knowledge of the Company and the
Seller, threatened before the National Labor Relations Board or any other
comparable government authority; (iii) there is no labor strike, dispute,
slowdown or stoppage actually pending or, to the knowledge of the Company
and the Seller, threatened against or directly affecting the Company; (iv) no
collective bargaining agreement is binding and in force against the Company or
currently being negotiated by the Company; (v) the Company is not
delinquent in payments to any person for any wages, salaries, commissions,
bonuses or other direct or indirect compensation for any services performed by
them or amounts required to be reimbursed to such persons; and (vi) within
the 12 month period prior to the date hereof there has not been any expression
of intention to the Company by any officer or key employee to terminate such
employment.


 


2.19        Dealers
and Suppliers. Except as set forth on the Disclosure Schedule, there has
not been in the 12 month period prior to the date hereof any material adverse
change in the business relationship of the Company with any dealer of or
supplier to the Company.


 


2.20         Licenses
and Other Operating Rights. To the knowledge of the Company and the Seller,
the Company has all material licenses, permits, approvals and other
governmental authorizations necessary to own its properties and assets and to
carry on its business as presently being conducted (individually and
collectively, the “License(s)”). All such Licenses are listed on the
Disclosure Schedule and, except as set forth therein, the Company has
complied in all material respects with the provisions of each License. Each
such License is valid and in full force and effect. Except as set forth on the
Disclosure Schedule, the continuation, validity and effectiveness of each such
License will in no way be affected by the consummation of the transactions
contemplated by this Agreement. To the knowledge of the Company and the Seller,
the Company has not breached any material provision of and is not in default in
any material respect under the terms of, any such License.


 


2.21         Compliance
with Law. Except as set forth on the Disclosure Schedule, and without
limiting the scope of any other representations or warranties contained in this
Agreement, but without intending to expand the scope of such other
representations and warranties, to the knowledge of the Company and the Seller,
the assets, properties, business and operations of the Company are and have
been in compliance in all material respects when taken as a whole with all laws
applicable to the ownership and conduct of their assets, properties, business
and operations.


 


2.22         Intellectual
Property Rights. The Company owns the industrial and intellectual property
rights, including without limitation the patents, patent applications, patent
rights, trademarks, trademark applications, trade names, service marks, service
mark applications, copyrights, computer programs and other computer software,
inventions, know-how, trade secrets, technology, proprietary processes and
formulae (collectively, “Intellectual Property Rights”) described on the
Disclosure Schedule. Except as set forth on the Disclosure Schedule, the use of
all Intellectual Property Rights required for the conduct of the businesses of the
Company as presently conducted does not and will not infringe or violate the
intellectual property rights of any person or entity. Except as described on the
Disclosure Schedule, the Company does not own or use any Intellectual Property
Rights pursuant to any written license agreement or has not granted any person
or entity any rights, pursuant to a written license agreement or otherwise, to
use the Intellectual Property Rights.


 


2.23         Hazardous
Substances and Hazardous Wastes. Except as set forth on the Disclosure
Schedule:


 


11

















 


(a)           To
the Company’s and the Seller’s knowledge, there is not now, nor has there ever
been, any disposal, release or threatened release of Hazardous Materials (as
defined below) on, from or under properties now or ever owned or leased by or
to the Company (the “Properties”). There has not been generated by or on
behalf of the Company any Hazardous Material. To the Company’s and the Seller’s
knowledge, no Hazardous Material has been disposed of or allowed to be disposed
of on or off any of the Properties during the period that the Company owned or
leased the property which may give rise to a clean-up responsibility, personal
injury liability or property damage claim against the Company or the Company
being named a potentially responsible party for any such clean-up costs,
personal injuries or property damage or create any cause of action by any third
party against the Company. For purposes of this subsection, the terms “disposal,”
“release,” and “threatened release” shall have the definitions assigned thereto
by the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, and the term “Hazardous Material” means any hazardous or
toxic substance, material or waste or pollutants, contaminants or asbestos
containing material which is or becomes regulated by any Authority in any
jurisdiction in which any of the Properties is located. The term “Hazardous
Material” includes without limitation any material or substance which is (i) defined
as a “hazardous waste” or a “hazardous substance” under applicable Law, (ii) designated
as a “hazardous substance” pursuant to Section 311 of the Federal Water
Pollution Control Act, (iii) defined as a “hazardous waste” pursuant to Section 1004
of the Federal Resource Conservation and Recovery Act, or (iv) defined as
a “hazardous substance” pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended.


 


(b)           To
the Company’s and the Seller’s knowledge, none of the Properties is (or, with
respect to past Properties and Properties of former subsidiaries, was at the
time of disposition) in violation of any Law (with respect to past Properties
and Properties of former subsidiaries, Laws in effect at the time of disposition)
relating to industrial hygiene or to the environmental conditions on, under or
about such Properties, including without limitation soil and ground water
condition and there are (or at the time of disposition were) no underground
tanks or related piping, conduits or related structures. During the period that
the Company owned or leased the Properties, neither the Company nor, to the
Company’s knowledge, any third party used, generated, manufactured or stored
on, under or about such Properties or transported to or from such Properties
any Hazardous Materials and there has been no litigation brought or threatened
against the Company or any settlements reached by the Company with any third
party or third parties alleging the presence, disposal, release or threatened
release of any Hazardous Materials on, from or under any of such Properties.


 


2.24         Brokers.
Neither the Seller, the Company nor any of their respective directors,
officers, shareholders, agents or employees have employed any broker, finder,
or financial advisor or incurred any liability for any brokerage fee or
commission, finder’s fee or financial advisory fee, in connection with the
transactions contemplated hereby, nor is there any basis known to the Seller or
the Company for any such fee or commission to be claimed by any such person;
provided, however, that the Seller has engaged an independent consultant in
connection the transactions contemplated hereby, which fee or commission will
be entirely borne by the Seller.


 


12

















 


ARTICLE 3


 


REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER


 


The Purchaser represents and warrants to the Seller as of the date
hereof as follows:


 


3.1           Organization.
The Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of North Carolina.


 


3.2           Authorization
and Enforceability. The Purchaser has full corporate power and authority to
enter into this Agreement and to carry out the transactions contemplated herein.
This Agreement has been duly authorized, executed and delivered by the
Purchaser and no other company action is necessary for the consummation by the
Purchaser of the transactions contemplated herein. Assuming the due
authorization, execution and delivery hereof by the Company and the Seller,
this Agreement is the valid and binding legal obligation of the Purchaser
enforceable against it in accordance with its terms.


 


3.3           Non-Contravention.
Neither the execution, delivery and performance of this Agreement nor the
consummation of the transactions contemplated herein will: (a) violate or
be in conflict with any provision of the articles of incorporation or
organization, bylaws, limited liability company agreement or similar operating
agreement of the Purchaser; or (b) be in conflict with, or constitute a
default, however defined (or an event which, with the giving of due notice or
lapse of time, or both, would constitute such a default), under, or cause or
permit the acceleration of the maturity of, or give rise to any right of
termination, cancellation, imposition of fees or penalties under, any debt,
note, bond, lease, mortgage, indenture, license, obligation, contract,
commitment, franchise, permit, instrument or other agreement or obligation to
which the Purchaser is a party, which conflict or default would have an adverse
effect on the ability of the Purchaser to consummate the transactions
contemplated by this Agreement; or (c) violate any Law of any Authority,
which violation would have an adverse effect on the ability of the Purchaser to
consummate the transactions contemplated by this Agreement.


 


3.4           Consents
and Approvals. No Consent of any person, including any Authority, is
required in connection with the execution, delivery or performance of this
Agreement by the Purchaser or the consummation by the Purchaser of the
transactions contemplated herein.


 


3.5           Brokers.
Neither the Purchaser nor any of its managers, directors, officers, members,
agents or employees have employed any broker, finder, or financial advisor or
incurred any liability for any brokerage fee or commission, finder’s fee or
financial advisory fee, in connection with the transactions contemplated
hereby, nor is there any basis known to the Purchaser for any such fee or
commission to be claimed by any such person.


 


3.6           Financial
Ability to Perform. The Purchaser has sufficient funds to pay all amounts
required to be paid hereunder at the Closing and to take such other actions as
may be required by it to consummate the transactions contemplated hereby.


 


ARTICLE 4


 


COVENANTS AND OTHER AGREEMENTS


 


4.1          Conduct
of Business. The Company will maintain its assets and properties and carry
on its business and operations only in ordinary course in substantially the
same manner as planned and previously operated; and the Company will use
commercially reasonable efforts to preserve intact its business organizations,
existing business relationships (including without limitation its relationships
with


 


13

















 


officers,
employees, dealers, distributors, independent contractors, customers and
suppliers), goodwill and going concern value. Except as specifically set forth
on the Disclosure Schedule, and except in the ordinary course of business and
consistent with past practice, and except as may be expressly authorized by
this Agreement or otherwise agreed in writing by the Purchaser, from the date
hereof until the Closing, the Company will not:


 


(a)           Amend
its articles of incorporation or bylaws;


 


(b)           Borrow
or agree to borrow any funds;


 


(c)           Pay,
discharge or satisfy any claims, liabilities or obligations;


 


(d)           Permit
or allow any of its properties or assets material to the operation of its
businesses to be subjected to any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind, except liens that relate to
current taxes and assessments not yet due and payable or that are being
contested in good faith;


 


(e)           Write
down the value of any inventory or write off as uncollectable any notes or
accounts receivable or any trade accounts or trade notes;


 


(f)            Cancel
or amend any debts, waive any claims or rights or sell, transfer or otherwise
dispose of any properties or assets, other than for such debts, claims, rights,
properties or assets which, individually or in the aggregate, are not material
to the conduct of its businesses;


 


(g)           License,
sell, transfer, pledge, modify, disclose, dispose of or permit to lapse any
right to the use of any intellectual property rights other than for such
intellectual property rights which, individually or in the aggregate, are not
material to the conduct of its businesses;


 


(h)           Terminate,
enter into, adopt, institute or otherwise become subject to or amend in any
material respect any collective bargaining agreement or employment or similar
agreement or arrangement with any of its directors, officers or employees; (B) enter
into, adopt, institute or otherwise become subject to or amend in any material
respect any Benefit Plan, except as provided in Section 4.8; (C) grant
or become obligated to grant any general increase in the compensation of any
directors, officers or employees (including without limitation any such
increase pursuant to any Benefit Plan);


 


(i)            Make
or enter into any commitment for capital expenditures for additions to
property, plant or equipment individually in excess of $25,000.00;


 


(j)            Declare,
pay or set aside for payment any dividend or other distribution in respect of
its capital stock or other securities (including without limitation
distributions in redemption or liquidation) or redeem, purchase or otherwise
acquire any shares of its capital stock or other securities; (B) issue,
grant or sell any shares of its capital stock or equity securities of any
class, or any options, warrants, conversion or other rights to purchase or
acquire any such shares or equity securities or any securities convertible into
or exchangeable for such shares or equity securities; (C) become a party
to any merger, exchange, reorganization, recapitalization, liquidation,
dissolution or other similar corporate transaction; or (D) organize any
new subsidiary, acquire any capital stock or other equity securities or other
ownership interest in, or assets of, any person or entity or otherwise make any
investment by purchase of stock or securities, contributions to capital,
property transfer or purchase of any properties or assets of any person or
entity;


 


14

















 


(k)           Pay,
lend or advance any amounts to, or sell, transfer or lease any properties or
assets to, or enter into any agreement or arrangement with, any director,
officer, employee or shareholder;


 


(l)            Terminate,
enter into or amend in any material respect any item identified in the
Disclosure Schedule, or take any action or omit to take any action which will
cause a breach, violation or default (however defined) under any such item; or


 


(m)          Agree,
whether in writing or otherwise, to take any action described in this Section.


 


4.2           No
Solicitation of Alternate Transaction. The Seller and the Company shall
not, and shall ensure that their respective agents and other representatives,
shall not, enter into, or continue any negotiations or discussions with, any
third party in respect of any other proposed transaction involving the sale of
the Shares or the sale of all or a substantially all of the Company’s assets. In
addition, the Seller and the Company and their respective agents and other
representatives shall not solicit or entertain offers from, negotiate with or
encourage or facilitate any inquires by third parties to purchase the Shares or
the all or a substantially all of the Company’s assets. Notwithstanding the
foregoing, the Purchaser acknowledges and agrees that the Seller and the
Company have previously actively marketed the sale of the Shares or assets of
the Company and that the Seller’s or the Company’s receipt of and response to a
proposal or inquiry by a third party whom was contacted by the Seller or the
Company prior to the date hereof shall not constitute a breach of this Section 4.2
if such response does no more than indicate that the Seller and the Company
have entered into a definitive agreement to sell the Shares and have agreed not
to negotiate with any other third parties with respect to a transaction
involving the sale of the Shares at this time.


 


4.3           Full
Access to the Purchaser. Throughout the period prior to the Closing, and
only during the normal business hours of the Company, the Company will afford
to the Purchaser and its directors, officers, employees, counsel, accountants,
investment advisors and other authorized representatives and agents, access to
the facilities, properties, books and records of the Company in order that the
Purchaser may have full opportunity to make such investigations regarding the Company
as the Purchaser will desire to make of the affairs of the Company, as long as
such access does not substantially interfere with the business of the Company.


 


4.4           Confidentiality.
The Purchaser and the Seller agree to comply with, and to cause their
respective representatives to comply with, in all respects, all of their
respective obligations under that certain Confidential Disclosure Agreement
between the Purchaser and the Seller dated May 2, 2005 (the “Confidentiality
Agreement”), and in no event will the negotiation, entering into or
termination of this Agreement be deemed to waive or otherwise adversely affect
the rights and obligations of the parties under the Confidentiality Agreement,
which rights and obligations will continue in full force and effect in accordance
with their terms.


 


4.5           Public
Announcements. None of the parties hereto shall make any public
announcement with respect to the transactions contemplated herein without the
prior written consent of the other parties; provided, however, that any of the
parties hereto may at any time make any announcements which are required by
applicable Law or the rules of the Nasdaq Stock Market so long as the
party so required to make an announcement promptly upon learning of such
requirement notifies the other parties of such requirement and discusses with
the other parties in good faith the wording of any such announcement.


 


15

















 


4.6           Further
Assurances. Each party hereto shall, before, at and after Closing, execute and
deliver such further instruments and take such other actions as the other party
may reasonably require in order to carry out the intent of this Agreement.


 


4.7           Notification.
At all times from the date hereof until the Closing, each party will promptly notify
the other in writing of the occurrence of any event which it reasonably
believes will or may result in a failure by such party to satisfy the
conditions specified in Article 5.


 


4.8           Benefit
Plans. The Seller shall take, or shall cause to be taken, all necessary
actions to terminate the Company’s status as a participating employer in the
Benefit Plans, such termination to be effective as of the Closing Date. The
Purchaser shall take, or shall cause to be taken, all necessary actions to
ensure that the Company’s employees who will remain employees of the Company
immediately after the Closing will be covered by the Purchaser’s benefit plans
effective immediately after the Closing.


 


4.9           Manufacturing
Agreement. The Seller agrees to use commercially reasonable efforts to
enter into and to negotiate in good faith the terms of a one-year manufacturing
agreement with the Purchaser, on terms mutually acceptable to the Purchaser and
the Seller, as soon as reasonably practicable after the Closing.


 


ARTICLE 5

CLOSING CONDITIONS


 


5.1           Conditions
to Obligations of Each Party. The respective obligations of each party to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, or waiver if possible, at or prior to the Closing of the
following conditions:


 


(a)           No
Injunction. Neither the
Purchaser, the Company nor the Seller shall be subject to any order, decree or
injunction of a court of competent jurisdiction within the United States that (i) prevents
or materially delays the consummation of the transactions contemplated by this
Agreement, or (ii) would impose any material limitation on the ability of
the Purchaser to acquire the Shares.


 


(b)           No
Proceeding or Litigation. No
suit, action, investigation, inquiry or other proceeding by any Authority or
other person or entity shall have been instituted or threatened which delays or
questions the validity or legality of the transactions contemplated hereby.


 


5.2           Conditions
to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment, or waiver, at or prior to
the Closing of the following additional conditions:


 


(a)           Representations
and Warranties True. Each
representation and warranty of the Company and the Seller contained in this
Agreement, in the Disclosure Schedule and in all certificates or other
documents delivered by the Company and the Seller to the Purchaser, shall have
been true and correct in all material respects, and the Purchaser shall have
received a certificate to such effect signed by a duly authorized executive
officer of the Company and the Seller.


 


(b)           Performance. The Company and the Seller shall have
performed and complied in all material respects with all agreements, obligations,
covenants and conditions required by this Agreement to be performed or complied
with by the Company or the Seller on or prior to the


 


16

















 


Closing, and the Purchaser
shall have received a certificate to such effect signed by a duly authorized
executive officer of the Company and the Seller.


 


(c)           Consents. The Company and the Seller shall have
obtained all Consents required on its part to perform its obligations under,
and consummate the transactions contemplated by, this Agreement, in form and
substance satisfactory to the Purchaser, and the Purchaser shall have received
evidence satisfactory to it of the receipt of such Consents.


 


(d)           Material
Adverse Effect. Since the date of this Agreement, there shall not have
occurred any change, event, occurrence, state of facts or development that has
had, or could reasonably be expected to have, individually or in the aggregate,
a material adverse effect on the Company.


 


5.3           Conditions
to Obligations of the Seller. The
obligations of the Seller to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, or waiver, at or prior to the
Closing of the following additional conditions:


 


(a)           Representations
and Warranties True. Each
representation and warranty of the Purchaser contained in this Agreement and in
all certificates or other documents delivered by the Purchaser to the Seller
shall have been true and correct in all material respects, and the Seller shall
have received a certificate to such effect signed by a duly authorized
executive officer of the Purchaser.


 


(b)           Performance. The Purchaser shall have performed and
complied in all material respects with all agreements, obligations, covenants
and conditions required by this Agreement to be performed or complied with by
the Purchaser on or prior to the Closing, and the Seller shall have received a
certificate to such effect signed by a duly authorized executive officer of the
Purchaser.


 


(c)           Consents. The Purchaser shall have obtained all
Consents required on its part to perform its obligations under, and consummate
the transactions contemplated by, this Agreement, in form and substance
satisfactory to the Seller, and Seller shall have received evidence
satisfactory to it of the receipt of such Consents.


 


ARTICLE 6

TERMINATION AND ABANDONMENT


 


6.1           Termination.
This Agreement may be terminated and the transactions contemplated herein may
be abandoned at any time prior to the Closing only:


 


(a)           by
mutual consent of the Purchaser and the Seller;


 


(b)           by
either the Purchaser or the Seller if, without fault of such terminating party,
the Closing shall not have occurred on or before the Termination Date, unless
such date is extended upon the mutual written agreement of the Purchaser and
the Seller;


 


(c)           by
either the Purchaser or the Seller if a court of competent jurisdiction or an
administrative, governmental or regulatory authority has issued a final
nonappealable order, decree or ruling, or taken any other action, having the
effect of permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement;


 


17

















 


(d)           by
the Seller if any of the conditions specified in Sections 5.1 and 5.3 hereof
has not been met or waived by the Seller at such time as such condition can no
longer be satisfied by the Termination Date;


 


(e)           by
the Seller if there has been a material breach of any representation, warranty,
covenant or agreement on the part of the Purchaser set forth in this Agreement
of which notice has been given to the Purchaser in writing by the Seller and
which has not been fully cured or cannot be fully cured within the earlier of (i) 30
days of the receipt of such notice or (ii) 5 days prior to the Closing
Date;


 


(f)            by
the Purchaser if any of the conditions specified in Sections 5.1 and 5.2
hereof has not been met or waived by the Purchaser at such time as such
condition can no longer be satisfied by the Termination Date; or


 


(g)           by
the Purchaser if there has been a material breach of any representation,
warranty, covenant or agreement on the part of the Seller set forth in this
Agreement of which notice has been given to the Seller in writing by the
Purchaser and which has not been fully cured or cannot be fully cured within
the earlier of (i) 30 days of the receipt of such notice or (ii) 5
days prior to the Closing Date.


 


6.2           Procedure
and Effect of Termination. In the event of termination by the Purchaser or
the Seller pursuant to Section 6.1, written notice thereof shall
immediately be given to the other party and this Agreement shall terminate, the
transactions contemplated hereby shall be abandoned without further action by
any of the parties hereto. Notwithstanding the foregoing, the obligations set
forth in Section 4.4 (Confidentiality), Section 4.5 (Public
Announcements), and Article 8 (Miscellaneous Provisions) or this Section 6.2
shall survive termination of this Agreement, and nothing herein shall relieve
any party from its obligations with respect to any breach of this Agreement
occurring prior to a termination. In such event, each party shall, upon
request, redeliver all documents, work papers and other material of any other
party (and all copies thereof) relating to the transactions contemplated
herein, whether so obtained before or after the execution hereof, to the party
furnishing the same.


 


ARTICLE 7


 


SURVIVAL AND INDEMNIFICATION


 


7.1           Survival
of Representations, Warranties and Covenants; Investigation. All
representations and warranties of the parties contained in this Agreement shall
survive the Closing Date for a period ending on the one-year anniversary date
of this Agreement, except that the representations and warranties set forth in
Sections 2.2, 2.5 and 3.2 shall survive forever. The covenants and agreements
contained herein shall survive the Closing without limitation as to time unless
the covenant or agreement specifies a term, in which case such covenant or
agreement shall survive for the period specified. The respective expiration
dates for the survival of the representations and warranties and the covenants
shall be referred to herein as the relevant “Expiration Date.”


 


7.2           Seller’s
Indemnification of Purchaser. After the Closing Date, the Seller shall
indemnify and hold harmless the Purchaser and each of the Purchaser’s officers,
directors and employees and the Purchaser’s affiliates from and against any
damage, liability, taxes, loss or expense (including reasonable attorneys’
fees) and against all claims in respect thereof, whether or not involving a
third-party claim (a “Loss”) sustained, incurred, paid or required to be
paid by the Purchaser or the Purchaser’s officers, directors, employees or
affiliates which arises out of (i) any untrue representation of, or breach
of warranty by, the Seller in any part of this Agreement or in any of the
documents or agreements required to 


 


18

















 


be executed
and delivered by or on behalf of the Seller pursuant to this Agreement, notice
of which is given to the Seller prior to the relevant Expiration Date; and (ii) any
nonfulfillment of any covenant, agreement or undertaking of the Seller in any
part of this Agreement or in any of the documents or agreements required to be
executed and delivered by or on behalf of the Seller pursuant to this
Agreement.


 


7.3           Purchaser’s
Indemnification of Seller. After the Closing Date, the Purchaser shall
indemnify and hold harmless the Seller and each of the Seller’s officers,
directors and employees and the Seller’s affiliates from and against any Loss
sustained, incurred, paid or required to be paid by the Seller or the Seller’s
affiliates which arises out of (i) any untrue representation of, or breach
of warranty by, the Purchaser in any part of this Agreement or in any of the
documents or agreements required to be executed and delivered by or on behalf
of the Purchaser pursuant to this Agreement, notice of which is given to the
Seller prior to the relevant Expiration Date; (ii) any nonfulfillment of
any covenant, agreement or undertaking of the Purchaser in any part of this
Agreement or in any of the documents or agreements required to be executed and
delivered by or on behalf of the Purchaser pursuant to this Agreement; or (iii) any
liabilities or obligations, or claims or causes of action against the Seller or
its affiliates to the extent arising from the operation of the business of the
Company during any period or periods after the Closing Date.


 


7.4           Limitations
on Indemnification Liabilities. In the event of any claim by the Purchaser
for indemnity from the Seller for any breach of warranty by Seller other than
the representations and warranties set forth in Section 2.2 or 2.5, the
Purchaser shall not be entitled to indemnification therefore unless the Purchaser
has sustained Losses in excess of Ten Thousand Dollars ($10,000) in the
aggregate, in which event the Purchaser shall be entitled to indemnification
for the full amount of all Losses suffered or incurred including such Ten
Thousand Dollars ($10,000) of Losses. The aggregate liability of the Seller is
limited to one-half of the Purchase Price. In no event will any indemnifying
party hereunder be liable for loss of profit or consequential damages arising
out of or resulting from any matter to which such person is entitled to
indemnification hereunder.


 


7.5           Claims
for Indemnification.


 


(a)           General.
The parties intend that all indemnification claims be made as promptly as
practicable by the party seeking indemnification (the “Indemnified  Party”).
Whenever any claim shall arise for indemnification hereunder the Indemnified
Party shall promptly notify the party from whom indemnification is sought (the “Indemnifying
Party”) of the claim in writing and, when known, the facts constituting the
basis for such claim. The failure to so notify the Indemnifying Party shall not
relieve the Indemnifying Party of any liability that it may have to the
Indemnified Party except to the extent the Indemnifying Party demonstrates that
the defense of such action is prejudiced thereby.


 


(b)           Claims
by Third Parties. With respect to claims made by third parties, the
Indemnifying Party shall be entitled to assume control of the defense of such
action or claim with counsel reasonably satisfactory to the Indemnified Party,
provided, however, that:


 


(i)            the
Indemnified Party shall be entitled to participate in the defense of such claim
and to employ counsel at its own expense to assist in the handling of such
claim;


 


(ii)           no
Indemnifying Party shall consent to (x) the entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the
giving by each claimant or plaintiff to each Indemnified Party of a release
from all liability in


 


19

















 


respect of such claim, or (y)
if, pursuant to or as a result of such consent or settlement, injunctive or
other equitable relief would be imposed against the Indemnified Party or such
judgment or settlement could materially interfere with the business, operations
or assets of the Indemnified Party; and


 


(iii)          if
the Indemnifying Party does not assume control of the defense of such claim in
accordance with the foregoing provisions within five (5) business days
after receipt of proper notice of the claim, the Indemnified Party shall have
the right to defend such claim in such manner as it may deem appropriate at the
cost and expense of the Indemnifying Party, and the Indemnifying Party will
promptly reimburse the Indemnified Party therefor in accordance with this Article 7;
provided that the Indemnified Party shall not be entitled to consent to the
entry of any judgment or enter into any settlement of such claim that does not
include as an unconditional term thereof the giving by each claimant or
plaintiff to each Indemnifying Party of a release from all liability in respect
of such claim without the prior written consent of the Indemnifying Party if,
pursuant to or as a result of such consent or settlement, injunctive or other
equitable relief would be imposed against the Indemnifying Party or such
judgment or settlement could materially interfere with the business, operations
or assets of the Indemnifying Party.


 


7.6           Exclusive
Remedies. The parties agree that, from and after the Closing Date, except
as provided in Section 8.1, the sole and exclusive legal remedy of each
party with respect to any and all claims relating to and arising out of
misrepresentation or breach of any representation, warranty, covenant or
agreement made by the other party to this Agreement, or otherwise in connection
with the transactions contemplated by this Agreement, will be pursuant to the
provisions of this Article 7.


 


ARTICLE 8


 


MISCELLANEOUS PROVISIONS.


 


8.1           Specific
Performance. The parties hereto 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. Accordingly,
the parties further agree that each party will be entitled to an injunction or
restraining order to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other right or
remedy to which such party may be entitled under this Agreement, at law or in
equity.


 


8.2           Expenses.
Except as otherwise provided in this Agreement, the Purchaser and the Seller
shall each bear its respective costs, fees and expenses in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby, including without
limitation fees, commissions and expenses payable to brokers, finders,
investment bankers, consultants, exchange or transfer agents, attorneys, accountants
and other professionals, whether or not the transactions contemplated herein
are consummated.


 


8.3           Knowledge.
As used in this Agreement or the instruments, certificates or other documents
required hereunder, the term “knowledge” of an entity (or words to similar
effect, such as “knowingly”) means the actual knowledge and conscious awareness
by any executive officer of such entity.


 


8.4           Amendment
and Modification. Subject to applicable Law, this Agreement may be amended
or modified by the parties hereto at any time prior to the Closing with respect
to any of the terms


 


20

















 


contained
herein; provided, however, that all such amendments and modifications must be
in writing duly executed by all of the parties hereto.


 


8.5           Waiver
of Compliance; Consents. Any failure of a party to comply with any
obligation, covenant, agreement or condition herein may be expressly waived in
writing by the party entitled hereby to such compliance, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. No single or partial exercise of a
right or remedy shall preclude any other or further exercise thereof or of any
other right or remedy hereunder. Whenever this Agreement requires or permits
the consent by or on behalf of a party, such consent shall be given in writing
in the same manner as for waivers of compliance.


 


8.6           No
Third Party Beneficiaries. Nothing in this Agreement shall entitle any
person or entity (other than a party hereto and its respective successors and
assigns permitted hereby) to any claim, cause of action, remedy or right of any
kind.


 


8.7           Notices.
All notices, requests, demands and other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
and effective: (a) on the date of delivery, if delivered personally; (b) on
the date of the return receipt acknowledgement, if mailed, postage prepaid, by
certified or registered mail, return receipt requested; or (c) on the date
such transmission is made and confirmation of receipt obtained, if sent by
facsimile, telecopy, telegraph, telex or other similar telegraphic
communications equipment:


 


	
   

  	
  If to
  Purchaser:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  To:

  	
  Leap
  Technologies

  	
   

  	
   

  
	
   

  	
  610 Jones
  Ferry Road

  	
   

  	
   

  
	
   

  	
  P.O. Box
  969

  	
   

  	
   

  
	
   

  	
  Carrboro, NC
  27510

  	
   

  	
   

  
	
   

  	
  Attention:
  Werner Martin

  	
   

  	
   

  
	
   

  	
  Telephone:
  (919) 929-8814

  	
   

  	
   

  
	
   

  	
  Facsimile:
  (919) 929-8956

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  With a copy
  to:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attention: 

  	
   

  	
   

  	
   

  
	
   

  	
  Telephone:
  (        )
            -         

  	
   

  	
   

  
	
   

  	
  Facsimile:
  (        )
            -         

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  If to
  Seller:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  To:

  	
  MOCON, Inc.

  	
   

  	
   

  
	
   

  	
  7500 Boone
  Avenue North

  	
   

  	
   

  
	
   

  	
  Minneapolis,
  MN 55428

  	
   

  	
   

  
	
   

  	
  Attention:
  Darrell B. Lee

  	
   

  	
   

  
	
   

  	
  Telephone:
  (763) 493-7217

  	
   

  	
   

  
	
   

  	
  Facsimile:
  (763) 493-6358

  	
   

  	
   

  
								



 


21

















 


	
   

  	
  With a copy
  to:

  	
   

  	
   

  	
   

  
	
   

  	
  Oppenheimer
  Wolff & Donnelly LLP

  	
   

  	
   

  
	
   

  	
  Plaza VII
  Building, Suite 3300

  	
   

  	
   

  
	
   

  	
  45 South
  Seventh Street

  	
   

  	
   

  
	
   

  	
  Minneapolis,
  MN 55402-1609

  	
   

  	
   

  
	
   

  	
  Attention:
  Amy E. Culbert

  	
   

  	
   

  
	
   

  	
  Telephone:
  (612) 607-7287

  	
   

  	
   

  
	
   

  	
  Facsimile:
  (612) 607-7100

  	
   

  	
   

  



 


or to such other person or address as the Purchaser or the Seller shall
furnish to the other parties hereto in writing in accordance with this Section 8.7.


 


8.8           Assignment.
This Agreement and all of the provisions hereof shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned (whether voluntarily, involuntarily,
by operation of law or otherwise) by any of the parties hereto without the
prior written consent of the other parties.


 


8.9           Governing
Law; Jurisdiction. This Agreement and the legal relations among the parties
hereto shall be governed by and construed in accordance with the internal
substantive laws of the State of Minnesota (without regard to the laws of
conflict that might otherwise apply) as to all matters, including without
limitation matters of validity, construction, effect, performance and remedies.
Each of the parties hereto hereby irrevocably and unconditionally consents to
submit to the exclusive jurisdiction of the courts of the State of Minnesota or
the United States of America located in the State of Minnesota for any action,
suit or proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby or relating to the other agreements referred
to herein, and agrees not to commence any action, suit or proceeding relating
thereto except in such courts.


 


8.10         Severability.
Any term or provision of this Agreement which is invalid or unenforceable in
any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.


 


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


 


8.12         Headings.
The table of contents and the headings of the sections and subsections of this
Agreement are inserted for convenience only and shall not constitute a part
hereof.


 


22

















 


8.13         Entire
Agreement. The exhibits and other writings incorporated in this Agreement
or any such exhibit or other writing are part of this Agreement, together they
embody the entire agreement and understanding of the parties hereto in respect
of the transactions contemplated by this Agreement and together they are
referred to as “this Agreement” or the “Agreement”. There are no
restrictions, promises, warranties, agreements, covenants or undertakings,
other than those expressly set forth or referred to in this Agreement. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to the transaction or transactions contemplated by this
Agreement, whether oral, written or otherwise, including without limitation
that certain letter of intent dated as of September 12, 2005, as amended
on January 12, 2006 between the Purchaser and the Seller.


 


 


[Remainder of page intentionally
left blank]


 


23

















 


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.


 


 


	
   

  	
  LEAP TECHNOLOGIES

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Werner Martin

  
	
   

  	
  Its:

  	
   President
  / CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LAB CONNECTIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Darrell B. Lee

  
	
   

  	
  Its:

  	
   V.P. &
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MOCON, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Darrell B. Lee

  
	
   

  	
  Its:

  	
   V.P. &
  CFO

  



 


24