stockpurchaseagreementfinalf.htm - Generated by SEC Publisher for SEC Filing










EXECUTION VERSION








CONFIDENTIAL
TREATMENT REQUESTED UNDER 


C.F.R. SECTION 24b-2. 


 


[****] INDICATES OMITTED
MATERIAL THAT IS THE 


SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST 


FILED SEPARATELY WITH THE
COMMISSION. 


 


THE OMITTED MATERIAL HAS
BEEN FILED 


SEPARATELY WITH THE
COMMISSION. 


 


 


 


 


 


 


 


 


 


STOCK PURCHASE
AGREEMENT


 


 


BY AND AMONG


 


 


 


 


 


KI ACQUISITION
INC.


 


and


 


THE SHAREHOLDERS SET FORTH ON SCHEDULE 1
ATTACHED HERETO


 


 


 


AND


 


 


INNOPHOS, INC.


 


 


 


 


Dated October 31,
2011


 
















 










 








 








STOCK
PURCHASE AGREEMENT


 


THIS STOCK PURCHASE AGREEMENT (this
“Agreement”) is made on October 31, 2011, by and among (a) KI
Acquisition Inc., a Delaware corporation (the “Company”), (b) each
of shareholders set forth on Schedule 1 attached hereto which are all of
the shareholders of the Company (each a “Shareholder” and collectively,
the “Shareholders”), and (c) Innophos, Inc., a Delaware corporation (“Buyer”). 


 


WHEREAS, the Shareholders own all
of the issued and outstanding capital stock of the Company (collectively, the “Shares”);
and


 


WHEREAS, the Shareholders desire to
sell to Buyer, and Buyer desires to purchase from the Shareholders, the Shares,
on the terms and conditions set forth in this Agreement.


 


NOW, THEREFORE, in consideration of
the mutual covenants contained in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Company, the Shareholders and Buyer agree as follows:


 


Article 1

DEFINITIONS


Capitalized terms used in this
Agreement shall have the meanings set forth below.


 


1.1             
“Action” shall mean any action, written demand, charge or
grievance, cause of action, lawsuit, claim, complaint, criminal prosecution,
audit (other than regular audits of financial statements by outside auditors),
inspection, hearing,  arbitration, inquiry, proceeding or investigation by or
before any court, governmental or other regulatory or administrative agency or
commission or arbitral panel.


1.2             
“Affiliate” or “Affiliates” shall mean, with
respect to any Person, any other Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, such first Person.  As used in this definition, “control”
(including, with correlative meanings, “controlled by” and “under common
control with”) means possession, directly or indirectly, of power to direct or
cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise).


1.3             
“Agreement” shall have the meaning set forth in the
introductory paragraph.


1.4             
“Allocation Schedule” shall have the meaning set forth in Section
8.2(d). 


1.5             
“Basket” shall have the meaning set forth in Section
9.3(a). 


1.6             
“Business” shall mean the business of manufacturing and
selling specialty minerals and custom processing of minerals and other
nutritional ingredients sold in bulk as conducted by the Company and the
Subsidiary as of the date of this Agreement.


 







 










 








 








1.7             
“Business Day” shall mean any day that is not a Saturday,
Sunday, federal, State of Illinois or State of New Jersey legal holiday, or
other day on which banks located in Chicago, Illinois or in Cranbury, New
Jersey are authorized or required by Law to be closed.


1.8             
“Buyer” shall have the meaning set forth in the
introductory paragraph.


1.9             
“Buyer Indemnified Parties” shall have the meaning set
forth in Section 9.2(a). 


1.10         
“Buyer’s Knowledge” shall mean the actual, conscious
awareness of [****], without any
obligation of inquiry.  


1.11         
“Closing” shall have the meaning set forth in Section
8.1. 


1.12         
“Closing Cash Payment” shall have the meaning set forth in
Section 2.3(e). 


1.13         
“Closing Date” shall have the meaning set forth in Section
8.1. 


1.14         
“Closing Net Working Capital Deficiency Amount” shall mean
the amount by which the Net Working Capital Amount set forth on the Final
Closing Statement is less than the Estimated Net Working Capital Amount.


1.15         
“Closing Net Working Capital Excess Amount” shall mean the
amount by which the Net Working Capital Amount set forth on the Final Closing
Statement is greater than the Estimated Net Working Capital Amount.


1.16         
“Closing Statement” shall have the meaning set forth in Section
2.4(b). 


1.17         
“Closing Statement Objection” shall have the meaning set
forth in Section 2.4(e). 


1.18         
“Closing Statement Dispute” shall have the meaning set
forth in Section 2.4(f)(i). 


1.19         
“Code” shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereof.


1.20         
“Company” shall have the meaning set forth in the
introductory paragraph.


1.21         
“Company Assets” shall have the meaning set forth in Section
3.7(a). 


1.22         
“Company Closing Payments” shall mean the Transaction
Expenses, accrued and unpaid Tax Liabilities and Indebtedness of the Company
and the Subsidiary as of the Effective Time.


1.23         
“Confidential Information” shall mean this Agreement and
the Transaction Documents and all proprietary information belonging or relating
to the Business, the Company or the Subsidiary which is not generally known to
the public, including but not limited to, business or trade secrets (under
applicable trade secrets or other Law), price lists, methods, formulas,
know-how, customer and supplier lists, distributor lists, product costs,
marketing plans, research and development and financial information.


 







2










 








 








1.24         
“CPA Firm” shall mean the Salt Lake City, Utah office of Grant Thornton LLP.


1.25         
“CW Downer” shall mean C.W. Downer & Co.


1.26         
“Current Assets” shall mean all assets of the type
classified on and calculated pursuant to the requirements listed on the 2010
Financial Statements under the line items for “Accounts Receivable,” “Cash”,
“Inventory”, “Pre-Paid Expenses” and “Other Current Assets” of the Company and
the Subsidiary. 


1.27         
“Current Liabilities” shall mean all Liabilities of the
type classified on and calculated pursuant to the 2010 Financial Statements
under the line items for “Accounts Payable,” “Accrued Expenses” and “Other
Current Liabilities” of the Company and the Subsidiary; provided, that
notwithstanding the foregoing, Current Liabilities shall exclude (i) any
current maturities of long-term debts, (ii) any accrued Taxes, (iii) any
accrued interest expenses and (iv) any Liabilities that arise, are accelerated
or the amount of which is increased (to the extent of such increase) as a
result of the consummation of the transactions contemplated by this Agreement.


1.28         
“Disclosure Schedules” or “Schedule” shall mean
those schedules delivered by the Company and the Shareholders to Buyer and
attached to this Agreement.


1.29         
“EBITDA” shall mean the consolidated Company
earnings before interest, taxes, depreciation and amortization determined in
accordance with GAAP.


1.30         
“Effective Time” means 11:59 p.m. in Chicago, Illinois on the Closing Date.


1.31         
“Employee Benefit Plans” shall mean any of the following
(whether written, unwritten):  (a) any “employee welfare benefit plan,” as
defined in Section 3(1) of ERISA; (b) any “employee pension benefit plan,” as
defined in Section 3(2) of ERISA; or (c) any other plan, policy, program,
arrangement or agreement which provides employee benefits or benefits to any
current or former employee, dependent, beneficiary, director, independent
contractor or like person, including, but not limited to, any severance
agreement or plan, bonus or incentive plan, stock option, restricted stock,
stock bonus or deferred bonus plan, salary reduction, or change of control
agreement.


1.32         
“Environmental Law” shall mean all applicable United
States federal, state or local Laws and all United States common law regulating
or relating to the protection of the environment, pollution, contamination and
discharges or releases of Hazardous Materials into the environment, including,
but not limited to, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation, and Liability Act, as
amended, 42 U.S.C. 9601 et seq., the Federal Toxic Substances Control Act, 15
U.S.C. 2601 et seq., Federal Resource Conservation and Recovery Act as amended,
42 U.S.C. 6901 et seq., the Federal Hazardous Material Transportation Act, the
Clean Water Act and the Federal Clean Air Act, each as amended, and the
regulations promulgated thereunder.


1.33         
“Escrow Account” means the account with the Escrow Agent
into which the Escrow Amount is deposited.


 







3










 








 








1.34         
“Escrow Agent” shall mean MB Financial Bank.


1.35         
“Escrow Agreement” shall have the meaning set forth in Section
2.3(a). 


1.36         
“Escrow Amount” means the sum of the Indemnity Escrow
Amount, the Working Capital Escrow Amount, and the Litigation Escrow Amount.


1.37         
“Estimated Closing Payments” shall mean the estimated
amount of the Company Closing Payments provided in the Estimated Closing
Statement.


1.38         
“Estimated Closing Statement” shall have the meaning set
forth in Section 2.4(c). 


1.39         
“Estimated Net Working Capital Amount” shall mean the
Company’s good faith estimate of the Net Working Capital Amount as of the
Effective Time, as set forth on the Estimated Closing Statement.


1.40         
“ERISA” shall mean the Employee Retirement Income Security
Act of 1974, as amended, or any successor Law.


1.41         
“ERISA Affiliate” shall mean each Person that is treated
as a single employer with the Company for purposes of Section 414 of the Code.


1.42         
“Final Closing Statement” shall mean: (a) the Preliminary
Closing Statement if (i) no Closing Statement Objection is delivered to
Buyer during the thirty (30) day period specified in Section 2.4,
or (ii) Shareholders’ Representative and Buyer so agree in writing; or (b) the
Preliminary Closing Statement, as adjusted by (i) the written agreement of Shareholders’
Representative and Buyer, and/or (ii) the CPA Firm in accordance with Section
2.4. 


1.43         
“Financial Statements” shall have the meaning set forth in
Section 3.5. 


1.44         
“GAAP” shall mean generally accepted accounting principles
in the United States of America.


1.45         
“Governmental Authority” means any United States or
foreign governmental authority, including but not limited to any national,
federal, territorial, state, commonwealth, province, territory, county,
municipal, district, local governmental jurisdiction of any nature or any other
governmental, self-regulatory or quasi-governmental authority of any nature
(including any governmental department, division, agency, bureau, office,
branch, court,  commission, tribunal, or other governmental instrumentality) or
any political or other subdivision or part of any of the foregoing.


1.46         
“Hazardous Materials” shall mean any flammable material,
explosives, radioactive materials, gasoline, petroleum products, asbestos, urea
formaldehyde, polychlorinated biphenyls and other hazardous materials,
hazardous wastes, hazardous or other toxic substances as to which Liabilities
or requirements may be imposed under any applicable Environmental Law.


1.47         
“HMB” shall mean Horwood Marcus & Berk Chartered.


 







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1.48         
“Indebtedness” means, without duplication, (i) any
obligations of the Company or the Subsidiary for borrowed money whether
current, short-term, long-term, secured or unsecured, (ii) any obligations
of the Company or the Subsidiary evidenced by any note, bond, debenture or
other debt security, (iii) any obligations of the Company or the
Subsidiary for the reimbursement of letters of credit, bankers’ acceptance or
similar credit transactions, (iv) any obligations of the Company or the
Subsidiary under any currency, interest rate swap, hedge or similar instrument,
(v) all obligations for principal, interest, premiums, penalties, fees,
expenses and breakage costs and other obligations related to any of the
Indebtedness set forth in clauses (i) through (iv), (vi) all obligations under
any capital leases, (vii) all obligations for any bonuses, severance or other
payments payable in connection with a change of control of the Company or the
Subsidiary, (viii) all amounts payable in connection with the redemption and
cancellation of all outstanding Stock-Based Awards, (ix) all amounts payable in
connection with the termination of the Affiliate Transactions set forth on Schedule
7.5, (x) all obligations of the types described in clauses (i) through
(ix) above of any Person other than the Company or the Subsidiary, the payment
of which is guaranteed, directly or indirectly, by the Company or the
Subsidiary.


1.49         
“Indemnified Persons” shall mean the Persons entitled to
indemnification under Article 9. 


1.50         
“Indemnifying Persons” shall mean the Persons obligated to
indemnify an Indemnified Person under Article 9. 


1.51         
“Indemnity Escrow Amount” shall mean [****]. 


1.52         
“Indemnity Escrow Release Date” shall have the meaning set
forth in Section 9.1.


1.53         
“Intellectual Property” shall mean all patents, patent
rights, trademarks, trademark registrations, trade names, service marks, service
mark registrations, copyrights, inventions, trade secrets and other similar
rights, applications for any of the foregoing, and licenses therefor, in each
case owned or otherwise held by the Company or the Subsidiary.


1.54         
“Interim Balance Sheet Date” shall have the meaning set
forth in Section 3.5. 


1.55         
“Law” means any state, federal or foreign code, law
(including common law), ordinance, regulation, reporting or licensing
requirement, rule, or statute applicable to a Person or its assets,
Liabilities, or business, including those promulgated, interpreted or enforced
by any Governmental Authority.


1.56         
“Leases” shall have the meaning set forth in Section
3.17(b). 


1.57         
“Leased Real Property” shall have the meaning set forth in
Section 3.17(b). 


1.58         
“Liability” shall mean any liability or obligation,
whether known or unknown, asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, and whether due or to become
due, regardless of when asserted.


1.59         
“Licenses” shall have the meaning set forth in Section
3.13(a). 


 







5










 








 








1.60         
“Lien” shall mean any security interest, pledge, mortgage,
deed of trust, lien, charge, encumbrance, proxy, voting trust or voting
agreement.


1.61         
“Litigation Escrow Amount” shall mean [****]. 


1.62         
“Litigation SH Representative” shall have the meaning set
for in Section 6.1(b). 


1.63         
“Loan Payoff Amounts” shall have the meaning set forth in Section
2.3(b). 


1.64         
“Losses” shall mean any and all losses, claims, damages,
liabilities, judgments, settlements, debts, penalties, fines, diminution in
value, obligations, interest, reasonable expenses (including reasonable
attorneys’ fees), assessments and Taxes, whether or not involving a Third-Party
Claim or between the Parties.  In no event shall Losses take into account any
multiple of earnings or EBITDA.


1.65         
“Material Adverse Effect” shall mean an event, change or
occurrence that, individually or together with any other event, change or
occurrence would have an adverse effect on (i) the Business, assets,
properties, liabilities, results of operations or condition (financial or
otherwise) of the Company and the Subsidiary, taken as a whole that would
reasonably be expected to cause the Company to experience Losses in excess of [****]; or (ii) the ability of the Company
or the Shareholders to timely perform their obligations under this Agreement or
to consummate the transactions contemplated in this Agreement and the
Transaction Documents.


1.66         
“Net Working Capital Amount” shall mean the aggregate
amount of the Current Assets minus the aggregate amount of the Current
Liabilities, in each case as reflected on the Estimated Closing Statement, the
Preliminary Closing Statement, or the Final Closing Statement, as the case may
be, all in accordance with Section 2.4.  Notwithstanding anything to the
contrary herein, in no event shall the Net Working Capital Amount include any
amount with respect to Taxes, Indebtedness or Transaction Expenses.  


1.67         
“Order” means any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign Governmental Authority.


1.68         
“Owned Real Property” shall have the meaning set forth in Section
3.17(a). 


1.69         
“Party” or “Parties” shall mean the Shareholders, the
Company and/or Buyer, as the case may be.


1.70         
“Payoff Letters” have the meaning set forth in Section
8.2(l). 


1.71         
“Permits” means any approvals, authorizations,
certificates, franchises, licenses, permits or consents of all Governmental
Authorities.


 







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1.72         
“Permitted Liens” shall mean (a) all Liens that are set
forth on Schedule 3.7(a), (b) all Liens that are reflected or
reserved against in the Financial Statements, (c) all Liens that arise out of
Taxes or general or special assessments not in default and payable without
penalty or interest or the validity of which is being contested in good faith
by appropriate proceedings, (c) all Liens of carriers, warehousemen, mechanics,
materialmen and other similar persons or otherwise imposed by Law incurred in
the ordinary course of business for sums not yet delinquent or being contested
in good faith, (d) all Liens that relate to deposits made in the ordinary
course of business in connection with workers’ compensation, unemployment
insurance and other types of social security, or (e) all Liens not otherwise
described above that do not materially detract from the value of, or impair the
use or marketability of the affected properties or assets and which in the
aggregate do not exceed [****]. 


1.73         
“Person” shall mean any individual, firm, corporation,
limited liability company, partnership, trust or other entity, and shall
include any successor (by merger or otherwise) of such entity, and any
Governmental Authority.


1.74         
“Preliminary Closing Statement” shall have the meaning set
forth in Section 2.4(c). 


1.75         
“Purchase Price” shall have the meaning set forth in Section
2.2. 


1.76         
“Recent Balance Sheet” shall have the meaning set forth in
Section 3.5. 


1.77         
“Releasees”  shall have the meaning set forth in Section
7.8. 


1.78         
“Releasors” shall have the meaning set forth in Section
7.8. 


1.79         
“Representation and Warranty Insurance Policy” shall have
the meaning set forth in Section 8.2(n). 


1.80         
“Representation and Warranty Insurance Premium Amount”
shall have the meaning set forth in Section 2.3(d). 


1.81         
“Scheduled Contracts” shall have the meaning set forth in Section
3.12(a). 


1.82         
“Securities Act” means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.


1.83         
“Shareholder” or “Shareholders” shall have the meaning set
forth in the introductory paragraph.


1.84         
“Shareholders’ Defense Amount” shall mean [****]. 


1.85         
“Shareholder Indemnified Parties” shall have the meaning
set forth in Section 9.2(c). 


1.86         
“Shareholders’ Knowledge” shall mean the actual awareness
of [****], after reasonable commercial
inquiry thereby as to the specific fact or matter at issue.


 







7










 








 








1.87         
“Shareholders’ Personal Property” shall be those items
listed on Schedule 1.87. 


1.88         
“Shareholders’ Representative” shall have the meaning set
forth in Section 6.1(a). 


1.89         
“Shares” shall have the meaning set forth in the recitals
to this Agreement.


1.90         
“Stock-Based Awards” shall have the meaning set forth in Section
3.1(c). 


1.91         
“Subsidiary” shall mean Kelatron Corporation, a Delaware
corporation.


1.92         
“Target Working Capital Amount” shall mean [****]. 


1.93         
“Tax” or “Taxes” shall mean all taxes, charges,
fees, duties, levies or other assessments, including income, gross receipts,
net proceeds, ad valorem, real and personal property (tangible and intangible),
sales, use, franchise, excise, value added, license, payroll, unemployment,
environmental, customs duties, capital stock, disability, stamp, user,
transfer, fuel, excess profits, windfall profits, severance and employees’
income withholding and Social Security taxes any other like governmental
charges imposed by the United States or by any state, municipality, subdivision
or instrumentality of the Unites States, by any other tax authority or by any
Governmental Authority, including all applicable interest, penalties or
additions to tax attributable to such taxes.


1.94         
“Tax Return” shall mean any report, return, document,
declaration, payee statement or other information or filing required to be
filed or provided by the Company to any Tax authority with respect to Taxes.


1.95         
“Third-Party Claim” shall have the meaning set forth in Section
9.5. 


1.96         
“Transaction Documents” shall mean each agreement,
document, certificate and instrument being executed by a Party pursuant to this
Agreement.


1.97         
“Transaction Expenses” means the fees, expenses and
disbursements of the Company, the Subsidiary, the Shareholder Representative or
any Shareholder and their respective agents, representatives, brokers, finders,
financial advisors, accountants and counsel incurred in connection with this
Agreement, the Transaction Documents and the transactions contemplated hereby
and thereby, including negotiation, legal, travel and due diligence expenses,
and fees and expenses owed to Horwood Marcus & Berk Chartered, C.W. Downer,
Frattali & Salem, and Hadley Capital in connection with the transactions
contemplated by this Agreement and the other Transaction Documents and fifty
percent (50%) of the fees charged by the Escrow Agent in connection with the
transactions contemplated by this Agreement and the other Transaction Documents
..


1.98         
“WARN Act” shall have the meaning set forth in Section
3.15(d)


1.99         
“Working Capital Escrow Amount” means [****]. 


 







8










 








 








Article 2

PURCHASE AND SALE


2.1             
Purchase and Sale of Shares.  Upon the terms and subject
to the conditions of this Agreement, at the Closing each Shareholder will sell,
convey, transfer and deliver to Buyer, and Buyer shall purchase from each
Shareholder, the Shares set forth opposite each Shareholder’s name on Schedule 2.1 
free and clear of all Liens.


2.2             
Purchase Price.  In full consideration for the sale,
transfer, conveyance and delivery of the Shares to Buyer, the aggregate
purchase price (the “Purchase Price”) for the Shares shall be Twenty One
Million Dollars ($21,000,000.00), subject to adjustment and deductions as set
forth herein.


2.3             
Payment.  The Purchase Price shall be payable as follows: 


(a)               
Payment to Escrow Agent for Escrow Account.  At Closing,
Buyer shall deposit the Escrow Amount into an escrow account by wire transfer
of immediately available funds pursuant to the terms of the Escrow Agreement
substantially in the form attached to this Agreement as Exhibit 2.3(a)
(the “Escrow Agreement”). 


(b)              
Payments to Lenders and Payment of Transaction Expenses. 
At Closing, Buyer shall pay on behalf of the Company, or shall cause the
Company to pay, by wire transfer of immediately available funds (A) the amounts
necessary to pay off in full the Indebtedness set forth on Schedule 2.3(b) 
(the “Loan Payoff Amounts”) pursuant to the Payoff Letters and (B) the
Transaction Expenses and other Company Closing Payments that Buyer specifies
are to be paid off at Closing in accordance with the payment instructions
provided by the Company to Buyer at least three (3) Business Days prior to the
Closing Date. 


(c)               
Payment to Shareholders’ Representative.  At Closing,
Buyer shall pay on behalf of the Shareholders, the Shareholders’ Defense Amount
to the Shareholders’ Representative, by wire transfer of immediately available
funds.


(d)              
Payment to Insurance Company.  At Closing, Buyer shall pay
on behalf of the Shareholders, the amount of the insurance premium (the “Representation
and Warranty Insurance Premium Amount”) for the Representative and Warranty
Insurance Policy, by wire transfer of immediately available funds, to the
applicable insurance broker or insurance carrier as instructed in writing by
the Shareholders’ Representative prior to the Closing.


(e)               
Payment to Shareholders. At Closing, Buyer shall pay to
the Shareholders (in accordance with the Allocation Schedule) by wire transfer
of immediately available funds an aggregate amount (the “Closing Cash
Payment”), equal to the result of: 


(i)                 
the Purchase Price; minus 


(ii)               
the Escrow Amount; minus 


(iii)              
the Shareholders’ Defense Amount; minus   


 







9










 








 








(iv)             
the Representation and Warranty Insurance Premium Amount; minus 


(v)               
the Estimated Closing Payments; plus 


(vi)             
the amount, if any, by which the Estimated Net Working Capital
Amount exceeds the Target Working Capital Amount, OR minus  the amount,
if any, by which the Target Working Capital Amount exceeds the Estimated Net
Working Capital Amount.


It is acknowledged and agreed that
upon making the payments set forth in this Section 2.3 in accordance
with the Payoff Letters and the Allocation Schedule, Buyer shall have satisfied
its obligations to pay the Purchase Price pursuant to this Agreement.


 


2.4             
Post-Closing Adjustments to Purchase Price. 


(a)               
Adjustment to Purchase Price.  Following the Closing, the
Purchase Price shall be adjusted on a dollar-for-dollar basis to the extent
that (i) the Net Working Capital Amount as determined pursuant to this Section
2.4 is greater than or less than the Estimated Net Working Capital Amount,
(ii) the Company Closing Payments are greater than or less than the Estimated
Closing Payments, or both.


(b)              
Closing Statement.  As used in this Agreement, “Closing
Statement” shall mean an unaudited statement of the Estimated Closing
Payments and the Net Working Capital Amount as of the Effective Time, and shall
be prepared in accordance with the terms of this Agreement and Schedule 2.4(b). 


(c)               
Estimated Closing Statement.  For purposes of determining
the Closing Cash Payment payable by Buyer at the Closing, at least three (3)
Business Days prior to the Closing Date, the Company shall, in good faith and
in consultation with Buyer, prepare, or cause to be prepared, and deliver to
Buyer a Closing Statement that shall represent the Company’s reasonable
estimate of the Company Closing Payments and the Net Working Capital Amount as
of the Effective Time (the “Estimated Closing Statement”).  Buyer shall
have the right to review and comment on the Estimated Closing Statement and the
parties shall resolve in good faith any disputes relating to the calculations
set forth in the Estimated Closing Statement.


(d)              
Preliminary Closing Statement.  Within forty-five (45)
days after the Closing Date, the Company shall in consultation with
Shareholders’ Representative prepare, or cause to be prepared, and deliver to
Shareholders’ Representative a Closing Statement (the “Preliminary Closing
Statement”) that shall specify the amount of any adjustment to the Purchase
Price in accordance with Section 2.4(a)  to be paid pursuant to Section
2.4(g).  


 







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(e)               
Objection to Preliminary Closing Statement; Payment With
Respect to Agreed Items.  Within thirty (30) days after the Preliminary
Closing Statement is delivered to Shareholders’ Representative pursuant to Section
2.4(d), Shareholders’ Representative and its accountants and
representatives shall complete its review of the Preliminary Closing
Statement.  If Shareholders’ Representative objects to all or any portion of
the Preliminary Closing Statement, it shall inform Buyer on or prior to the
last day of such thirty (30) day period by delivering a written notice to Buyer
(a “Closing Statement Objection”) setting forth in reasonable detail the
basis of such objections and the adjustment to the Company Closing Payments or
the Net Working Capital Amount set forth thereon that Shareholders’
Representative believes should be made, including, but not limited to,
objections based on mathematical errors or on the Preliminary Closing Statement
not being prepared in accordance with Section 2.4(b).  Any item not
disputed in the Closing Statement Objection shall be deemed final.  In the
event that no Closing Statement Objection is delivered to Buyer pursuant to
this Section 2.4(e), the Preliminary Closing Statement shall be
considered the Final Closing Statement for all purposes hereunder, and the
applicable Party shall pay (i) the Closing Net Working Capital Deficiency
Amount or the Closing Net Working Capital Excess Amount, as applicable,
pursuant to Section 2.4(g); (ii) any excess or deficiency
applicable to the Company Closing Payments pursuant to Section 2.4(h);
or (iii) both.


(f)                
Dispute Resolution Following Closing Statement Objection. 


(i)                 
Negotiation.  If Shareholders’ Representative delivers a
Closing Statement Objection to Buyer pursuant to Section 2.4(e), then
Shareholders’ Representative and Buyer shall promptly meet and attempt in good
faith to resolve any dispute or disagreement relating to the Preliminary
Closing Statement and the calculation of the Net Working Capital Amount, the
Company Closing Payments, or both (the “Closing Statement Dispute”). 


(ii)               
Resolution by CPA Firm.  If Shareholders’ Representative
and Buyer are unable to resolve the Closing Statement Dispute within fifteen
(15) days after the delivery of a Closing Statement Objection to Buyer, then
Shareholders’ Representative or Buyer may elect to have the Closing Statement
Dispute resolved by the CPA Firm, who shall, acting as experts and not as
arbitrators, determine on the basis of the standards set forth in Section
2.4, and only with respect to the remaining accounting-related differences
so submitted to the CPA Firm (and not by independent review), whether and to
what extent, if any, the Net Working Capital Amount as derived from the
Preliminary Closing Statement requires adjustment.  In connection with the
engagement of the CPA Firm, each Party shall execute reasonable engagement
letters and supply such other documents, information and access to relevant
accounting personnel and advisors promptly following the reasonable request
therefore by the CPA Firm, provided, in the event a Party fails to do
so, the CPA Firm shall determine the relevant matter to which the Closing
Statement Dispute relates against the failing Party in all respects.  Each
Party may submit such data and information to the CPA Firm as such Party deems
appropriate.  The CPA Firm shall be instructed to perform its services no later
than sixty (60) days after submission of the Closing Statement Dispute to it,
and, in any case, as soon as practicable after such submission, giving due
regard to the intention of the Parties to resolve such dispute as efficiently
and inexpensively as possible.  In resolving the Closing Statement Dispute, the
CPA Firm shall (A) utilize the criteria set forth in Section 2.4, and
(B) not assign a value to any item greater than the greatest value for such
item claimed by any Party, or less than the smallest value for such 







11










 








 








item claimed by any Party, as presented to the CPA Firm pursuant
hereto.  The CPA Firm shall not have any authority with respect to matters
arising in connection with this Agreement other than as set forth in this Section
2.4(f)(ii). 


(iii)              
Payment of Fees of CPA Firm.  Payment of all fees and
expenses of the CPA Firm in connection with the services provided pursuant to Section
2.4(f)(ii) shall be split evenly among Buyer and the Shareholders, with the
Buyer paying fifty percent (50%) of such fees and the Shareholders paying the
remaining fifty percent (50%) of such fees.


(g)               
Payment of Closing Net Working Capital Deficiency Amount or
Closing Net Working Capital Excess Amount.  Subject to Section 2.4(i),
in the event the Final Closing Statement contains a Closing Net Working Capital
Deficiency Amount, then Shareholders’ Representative and Buyer shall deliver
joint written instructions to the Escrow Agent to disburse to Buyer a portion
of the Working Capital Escrow Amount equal to the Closing Net Working Capital
Deficiency Amount and if such amount is less than the Working Capital Escrow
Amount, disburse the remaining portion of the Working Capital Escrow Amount to
the Shareholder’s Representative.  Subject to Section 2.4(i), in the
event the Closing Net Working Capital Statement contains a Closing Net Working
Capital Excess Amount, then Buyer shall pay Shareholders’ Representative the
Closing Net Working Capital Excess Amount and Buyer and Shareholders’
Representative shall deliver joint written instructions to the Escrow Agent
instructing the Escrow Agent to release the Working Capital Escrow Amount to
Shareholders’ Representative. 


(h)               
Payment of Company Closing Payments Excess or Deficiency
Amount.  Subject to Section 2.4(i), in the event the Final Closing
Statement contains any excess or deficiency applicable to the Company Closing
Payments then, (i) any such deficiency shall be paid to Buyer: (A) first
from the Working Capital Escrow Account to the extent of funds therein, then
(B) by the Shareholders on a several (and not joint and several) basis, pro
rata, based on the portion of the Closing Cash Payment received by them; and
(ii) any such excess shall be paid by Buyer to the Shareholders, pro rata,
based on the portion of the Closing Cash Payment received by them.


(i)                 
Netting of Payments Required to Be Made Pursuant to Sections 2.4(g)
and 2.4(h).  Any payment or disbursement required to be made by 
Buyer under Section 2.4(g) shall be net of any amount required to be
paid or disbursed to  Buyer under Section 2.4(h).  Any payment
required to be made or disbursed to  Buyer under Section 2.4(g)
shall be net of any amount required to be paid or disbursed by  Buyer
under Section 2.4(h). 


2.5             
Documentation.  Buyer shall provide Shareholders’
Representative with such information and documentation as may be reasonably
requested by Shareholders’ Representative for reviewing the Preliminary Closing
Statement.












12










 








 








 


Article
3



REPRESENTATIONS AND WARRANTIES


OF THE
SHAREHOLDERS AND THE COMPANY


 


The Shareholders and the Company
hereby, severally, represent and warrant to Buyer as follows:


 


3.1             
Organization; Capitalization. 


(a)               
Organization.  The Company is a corporation duly organized
and validly existing, and in good standing under the laws of the State of
Delaware.  The jurisdictions in which the Company is qualified or licensed to
do business are set forth on Schedule 3.1(a).  The Company (i) has
all requisite corporate power and authority to own its properties and assets
and to carry on the Business, and (ii) is in good standing and is duly
qualified to transact business as a foreign corporation in each jurisdiction
where the nature of property owned or leased by it or the conduct of its
business requires it to be so qualified, except where the failure to be in good
standing or to be duly qualified to transact business in such foreign
jurisdiction would not, individually or in the aggregate, have a Material
Adverse Effect.


(b)              
Capitalization.  The authorized capital stock of the
Company consists of:


(i)                 
2,550,000 authorized shares of $0.0001 par value common stock, of
which 853,702 shares are issued and outstanding;


(ii)               
60,000 authorized shares of $0.0001 par value Series A Preferred
stock, of which 57,583 shares are issued and outstanding;


(iii)              
660,000 authorized shares of $0.0001 par value Series B Preferred
stock, of which 654,430 shares are issued and outstanding;


(iv)             
200,000 authorized shares of $0.0001 par value Series C Preferred
stock, of which 178,808 shares are issued and outstanding; and


(v)               
215,000 authorized shares of $0.0001 par value Series D Preferred
stock, of which 106,680 shares are issued and outstanding.


 







13










 








 








(c)               
The Shares set forth opposite the Shareholders’ names on Schedule 2.1 
constitute all of the issued and outstanding capital stock of the Company.  All
of the Shares have been validly issued and are fully paid and nonassessable. 
Other than as set forth on Schedule 3.1(c), there are none of the
following (collectively, “Stock-Based Awards”): (i) outstanding options,
warrants, rights, calls, commitments or demands of any character granted or
issued by or binding upon the Company for the purchase or acquisition of any
equity or debt securities of the Company from the Company, (ii) securities
convertible into or exchangeable for any equity or debt securities of the
Company, or (iii) capital appreciation rights, phantom stock plans, securities
with profit participation rights or features or similar obligations or
commitments of the Company. No securities of the Company have been issued or
purchased by the Company, the Subsidiary, or any Shareholder in violation of,
or in a manner which could give rise to any material liability under, the
Securities Act, or the securities or Blue Sky laws of any country, state,
territory or other jurisdiction (whether foreign or domestic).


(d)              
The Company has delivered to Buyer true and complete copies of
the articles of incorporation and by-laws, as amended, of the Company, as well
as the minute books, stock books and stock transfer records of the Company. 
The minute books, stock books and stock transfer records contain true and
complete minutes and records of all issuances and transfers of capital stock of
the Company and of all minutes and records of all meetings, proceedings and
other actions of the shareholders, board of directors and/or committees of the
board of directors of the Company from the date of incorporation of such entity
and all such meetings, proceedings and actions have been duly, legally and
properly held or taken.  


3.2             
Subsidiary.  


(a)               
Subsidiary Capitalization.  The Company does not own,
directly or indirectly, any capital stock or other securities of any Person
other than the Subsidiary.  All the outstanding capital stock of the Subsidiary
is owned directly by the Company free and clear of all Liens and all material
claims or charges of any kind, and are validly issued, fully paid and
non-assessable.  There are no (i) outstanding options, warrants, rights,
calls, commitments or demands of any character granted or issued by or binding
upon the Subsidiary for the purchase or acquisition of any equity or debt
securities of the Subsidiary from the Subsidiary, (ii) securities convertible
into or exchangeable for any equity or debt securities of the Subsidiary, or
(iii) capital appreciation rights, phantom stock plans, securities with profit
participation rights or features or similar obligations or commitments of the
Subsidiary. No securities of the Subsidiary have been issued or purchased by
the Company, the Subsidiary, or any Shareholder in violation of, or in a manner
which could give rise to any liability under, the Securities Act, or the
securities or Blue Sky laws of any country, state, territory or other
jurisdiction (whether foreign or domestic).


 







14










 








 








(b)              
Subsidiary Organization.  Subsidiary is a corporation duly
organized and validly existing, and in good standing under the laws of the
State of Delaware.  The jurisdictions in which Subsidiary is qualified or
licensed to do business are set forth on Schedule 3.2(b).  Subsidiary
(i) has all requisite corporate power and authority to own its properties and
assets and to carry on the Business, and (ii) is in good standing and is
duly qualified to transact business as a foreign corporation in each
jurisdiction where the nature of property owned or leased by it or the conduct
of its business requires it to be so qualified, except where the failure to be
in good standing or to be duly qualified to transact business would not,
individually or in the aggregate, have a Material Adverse Effect.


(c)               
The Company has delivered to Buyer true and complete copies of
the articles of incorporation and by-laws, as amended, of the Subsidiary, as
well as the minute books, stock books and stock transfer records of the
Subsidiary.  The minute books, stock books and stock transfer records contain
true and complete minutes and records of all issuances and transfers of capital
stock of the Subsidiary and of all minutes and records of all meetings,
proceedings and other actions of the shareholders, board of directors and/or
committees of the board of directors of the Subsidiary from the date of
incorporation of such entity and all such meetings, proceedings and actions
have been duly, legally and properly held or taken.  


3.3             
Authority.  The Company has the requisite corporate power
and corporate authority to execute and deliver this Agreement and the
Transaction Documents to which the Company is a party, to perform its
obligations under this Agreement and the Transaction Documents and to
consummate the transactions contemplated hereby and thereby.  The execution,
delivery and performance of this Agreement and the Transaction Documents to
which the Company is a party and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of the Company, and this Agreement has
been duly and validly executed and delivered by the Company.  This Agreement
and the Transaction Documents to which the Company is a party have been duly
and validly executed and delivered by the Company and, assuming the due execution
and delivery thereof by the other parties thereto, constitute the valid and
binding obligations of the Company (if any to the extent that a Transaction
Document constitutes an obligation), enforceable against the Company in
accordance with their terms, subject to the effect of bankruptcy, insolvency,
reorganization, liquidation, dissolution, moratorium or other similar laws
relating to or affecting the rights of creditors generally and to the effect of
the application of general principles of equity (regardless of whether
considered in proceedings at law or in equity).


 







15










 








 








3.4             
No Conflicts.  Other than as set forth on Schedule 3.4,
the execution, delivery and performance of this Agreement and the Transaction
Documents to which the Company is a party by the Company and the consummation
of the transactions contemplated hereby and thereby will not (a) violate
any provision of the Company’s or Subsidiary’s Certificate of Incorporation or
bylaws, (b) violate any provision of, require the consent of any Person
party to, or be an event that is a violation of, result in a breach or
termination of, or result in the acceleration of or entitle any party to
accelerate any obligation under, or result in the imposition of any Lien upon
any of the Shares or the Company’s assets or properties pursuant to any Lien,
lease, agreement, instrument, order, arbitration award, judgment or decree to
which any of the Company or the Subsidiary is a party or by which it is bound,
or (c) violate or conflict with any provision of material Law or Order of any
Governmental Authority to which either the Company or the Subsidiary is
subject.


3.5             
Financial Statements.  Attached hereto as Schedule 3.5
are true, correct and complete copies of the following financial statements of
the Company and the Subsidiary (collectively, the “Financial Statements”): 
(a) audited consolidated balance sheets, statements of income and
retained earnings, statements of cash flows, and changes in stockholders’
equity,  as of and for the fiscal years ended December  31, 2009 and December
31, 2010 (including related notes, and schedules if any); and
(b) unaudited consolidated balance sheet of the Company as of
August 31, 2011 (the “Recent Balance Sheet”), and unaudited consolidated
statements of income, changes in stockholders’ equity, cash flows  and retained
earnings (including related notes and  schedules, if any) for the period
beginning  January 1, 2011 and ending August 31, 2011 (the “Interim Balance
Sheet Date”).  The Financial Statements were (i) prepared in the ordinary
course of business from the regular financial books and records of the Company
in accordance with GAAP consistently followed throughout the periods indicated
(provided  that the unaudited statements are subject to normal year end
adjustments and footnotes and other presentation items which are not material),
and (ii) fairly represent, in all material respects, the consolidated financial
condition of the Company and the consolidated results of operations, changes in
stockholders’ equity, cash flows transactions, assets, liabilities,  and
earnings of the Company for the periods or as of the dates set forth in the Financial
Statements.  Subject to the reserves and allowances therefor, all of the
accounts receivable of the Company set forth on the Recent Balance Sheet
represent valid obligations arising from sales actually made in the ordinary
course of business, and to the Shareholders’ Knowledge, no Person has any
intention not to pay or inability to pay any such account receivable when due. 
Neither the Company nor the Subsidiary has received any advice or notification
from its independent certified public accountants that it has used any improper
accounting practice that would have the effect of not reflecting or incorrectly
reflecting in the Financial Statements or its books and records, any
properties, assets, liabilities, revenues or expenses.


3.6             
Absence of Certain Changes.  Since December 31, 2010:


(a)               
there have not been any Material Adverse Effects in regard to the
Company or the Subsidiary and to the Shareholders’ Knowledge there have been no
events, changes or occurrences which would reasonably be expected to have a
Material Adverse Effect in regard to the Company or the Subsidiary;


 







16










 








 








(b)              
with respect to the Business, the Company and the Subsidiary have
operated the Business in the ordinary course consistent with past practice and
preserved their business organizations intact and have used commercially
reasonable efforts to keep available the services of their employees and to
preserve their relationships with their customers and others with whom they do
business;


(c)               
with respect to the Business, neither the Company, nor the
Subsidiary have delayed or postponed the payment of accounts payable or other
Liabilities either involving more than [****] 
(individually) or outside the ordinary course of business;


(d)              
with respect to the Business, neither the Company, nor the
Subsidiary have canceled, compromised, waived, or released any Action (or
series of related Actions) either involving more than [****] 
or outside the ordinary course of business;


(e)               
Except as otherwise provided on Schedule 3.6(e), neither
the Company nor the Subsidiary has committed to make any capital expenditure
not paid for or accrued prior to the Closing Date, except for commitments for
capital expenditures not exceeding [****] 
in the aggregate made in the ordinary course of business;


(f)                
Except as otherwise provided on Schedule 3.6(f), neither
the Company nor the Subsidiary has entered into any severance agreements,
retention agreements or any other long-term commitments with any employee,
officer or consultant;


(g)               
Neither the Company nor the Subsidiary has materially defaulted
under any Scheduled Contract;


(h)               
Except as provided on Schedule 3.6(h), neither the
Company, nor the Subsidiary has made any change in its accounting methods,
principles or practices; or


(i)                 
neither the Company nor the Subsidiary has granted or incurred
any obligation for any increase in the compensation of any of its officers or
employees (including, but not limited to, any increase pursuant to any bonus,
pension, profit-sharing, retirement or other plan or commitment), except for
raises and bonuses to its officers, managers or employees in the ordinary
course of business and consistent with past practice.


3.7             
Title to Assets; Sufficient Assets. 


(a)               
Title to Assets.  Each of the Company and the Subsidiary
has good, transferable and indefeasible title (fee or leasehold) to all of the
properties and assets which it purports to own and which are included in the
Business, free and clear of any Liens other than Permitted Liens (the “Company
Assets”). 


 







17










 








 








(b)              
Sufficient Assets.  The Company Assets constitute all of
the properties, assets, rights, interests, and claims used in connection with
the Business and which are necessary to operate the Business as conducted by
the Company and the Subsidiary and in compliance in all material respects with
all applicable Laws, contracts and Permits as of the Closing and to perform all
of the liabilities and obligations of the Business as they exist at the
Closing.   Except as set forth on Schedule 3.7(b), all of the Company
Assets, are, free from material patent defects and to Shareholders’ Knowledge
free from material latent defects, have been maintained in accordance with
normal industry practice (and, where applicable, generally accepted standards
of good engineering practice), and are in a condition (subject to normal wear
and tear), that is suitable for the purposes for which they are presently
used.   


3.8             
Litigation.  Except as disclosed on Schedule 3.8,
there are no Actions pending or, to the Shareholders’ Knowledge, threatened
against the Company or the Subsidiary.  Except as disclosed on Schedule 3.8,
there are no judgments or outstanding orders, injunctions, writs, decrees,
stipulations or awards (whether rendered by a court or administrative agency,
or by arbitration) against the Company or the Subsidiary, or any of the
directors, officers, employees, or agents of the Company or the Subsidiary in
their capacities as such.  There are no Actions pending, or to Shareholders’
Knowledge, threatened by, against, or affecting the Company or the Subsidiary
in connection with or relating to the transactions contemplated hereby.


3.9             
Undisclosed Liabilities.  Neither the Company nor the
Subsidiary have any Liabilities except:  (a) Liabilities clearly and
accurately reflected on the liability side of the Financial Statements,
(b) Liabilities which have arisen after the Interim Balance Sheet Date in
the ordinary course of business, or (c) as disclosed on Schedule 3.9. 


3.10         
Compliance with Laws.  Except as set forth on Schedule
3.10, the Company and the Subsidiary are in material compliance with all
Laws applicable to the Business, and neither the Company, nor the Subsidiary
has received notice of any such alleged noncompliance with respect thereto that
has not been resolved.  


3.11         
Insurance.  Schedule 3.11 sets forth a true and
complete list of the insurance policies maintained by the Company and the
Subsidiary that cover the Company Assets and the operations of the Business,
including a summary of each policy identifying the carrier, limits, premiums
and whether such policies are occurrence or claims made policies.  All policies
and binders for the current policy year are valid and in full force and effect
and all premium due thereon as of the date of this Agreement have been paid.  There
are no material claims, by or with respect to the Company or the Subsidiary,
pending under any of the liability insurance policies listed on Schedule
3.11, or disputes with insurers with respect thereto.  Neither the Company,
nor the Subsidiary has received any written notice regarding any cancellation
or termination of, refusal of any coverage or rejection of any claim under, or
material adjustment in the amount of the premiums payable with respect to any
liability insurance policy listed on Schedule 3.11. 


 







18










 








 








3.12         
Contracts. 


(a)               
Scheduled Contracts.  Schedule 3.12(a) sets forth
all of the following contracts to which any of the Company or the Subsidiary is
a party or by which any of them is bound (collectively, the “Scheduled
Contracts”), true and complete copies of which have been provided to Buyer:


(i)                 
contracts with any Shareholder or any Affiliate of any
Shareholder, or any family member of such person;


(ii)               
contracts for the sale of any assets of the Company or the
Subsidiary or the grant to any Person of any rights to purchase any of its
assets in each case other than contracts/grants in the ordinary course of
business of the Company and the Subsidiary or for consideration less than [****]; 


(iii)              
contracts with independent sales representatives;


(iv)             
contracts containing covenants of the Company or the Subsidiary
not to compete with any Person in any geographical area or covenants of any
other Person (other than employees) not to compete with the Company or the
Subsidiary in any geographical area;


(v)               
contracts relating to any Indebtedness or the guarantee by the
Company or the Subsidiary of any such Indebtedness (other than contracts
evidencing trade payables in the ordinary course of business);


(vi)             
any other contract that involves the receipt or expenditure of
more than [****]  in the aggregate;


(vii)            
written employment or severance agreements with employees of the
Company or the Subsidiary, or any non-compete agreement with or binding upon
any such employee;


(viii)          
contracts for any capital expenditure in excess of [****]  outside the ordinary
course of business and other than the scheduled replacement or upgrade of
equipment;


(ix)             
agreements or commitments for the purchase or sale of any goods
or services (other than contracts entered into in the ordinary course of
business) and involving payments under any individual contract in excess of [****], which is not cancelable on thirty (30)
days notice or less without penalty;


(x)               
agreements or commitments for the acquisition of assets or any
interest in any business enterprise involving the payment of more than [****], individually or [****], in the aggregate;


 







19










 








 








(xi)             
licenses and other agreements involving any Intellectual Property
(other than open source software, contracts for commercially available “off the
shelf” software licenses, non-disclosure agreements and work-for-hire
agreements, in each case, entered into in the ordinary course of business);


(xii)            
any settlement, conciliation or similar agreement with any
Governmental Authority, or resolving any material pending or threatened Action
against the Company, the Subsidiary or the Shareholders, or that creates
monitoring or reporting obligations to any Government Authority outside of the
ordinary course of business;


(xiii)          
any agreement that contains any provision pursuant to which the
Company or the Subsidiary is obligated to indemnify or make any indemnification
payments to any Person and that was not entered into in the ordinary course of
business;


(xiv)          
joint venture agreements or teaming agreements; and


(xv)           
any other contract not otherwise covered by clauses (i) through (xiv)
above, that was not entered into in the ordinary course of business or that is
otherwise material to the Business.


(b)              
No Default.  All of the Scheduled Contracts are in full
force and effect and are the legal, valid and binding obligations of the
Company or the Subsidiary, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies generally and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).  Neither the
Company nor the Subsidiary is in default in any material respect under any
Scheduled Contract, nor to the Shareholders’ Knowledge, is any other party to
any Scheduled Contract in default thereunder in any material respect.  To the
Shareholders’ Knowledge, no event has occurred that, with notice or lapse of
time, would constitute a material breach or default or permit termination,
modification, or acceleration under any Scheduled Contract.


(c)               
Except as disclosed on Schedule 3.12(c), each product sold
or delivered by the Company and/or the Subsidiary which was manufactured by the
Company and/or the Subsidiary in the last [****] 
has been in conformity with all applicable specifications under any Scheduled
Contract and all express and implied warranties, and the Company has no
Liability (and there is no basis for any present or future Action against the
Company giving rise to any Liability) for replacement or repair thereof or
other damages in connection therewith, subject only to the reserve for product
warranty claims set forth on the face of the Recent Balance Sheet (rather than
in any notes thereto) as adjusted for the passage of time through the date
hereof in accordance with the past custom and practice of the Company.  Except
as disclosed on Schedule 3.12(c), no product sold or delivered by the
Company or the Subsidiary which was manufactured by the Company and/or the
Subsidiary during the last [****]  is
subject to any guaranty, warranty, or other indemnity beyond the Company’s
and/or Subsidiary’s applicable standard terms and conditions of sale or lease,
true and complete copies of which have been provided to Buyer.


 







20










 








 








3.13         
Licenses, Approvals, Other Authorizations, Consents, Reports,
Etc.


(a)               
Authorizations; Pending Actions.  Schedule 3.13(a)
sets forth a true and complete list of all material governmental licenses,
Permits, franchises and other authorizations of any Governmental Authority
necessary to operate the Business (the “Licenses”).  Except as set forth
on Schedule 3.13(a), the Company and the Subsidiary possess or have
been granted all Licenses.  Except as set forth on Schedule 3.13(a), all
Licenses are in full force and effect.  Except as set forth on Schedule
3.13(a), no proceeding is pending or, to the Shareholders’ Knowledge,
threatened in writing seeking the revocation or limitation of any License.  


(b)              
Further Actions.  Except as specified on Schedule
3.13(b), no permit, order, authorization, consent, waiver or approval of or
by, or any notification of or filing with, any Person (Governmental Authority
or otherwise) is required in connection with the execution, delivery and
performance by the Company or the Subsidiary of this Agreement or the consummation
of the transactions contemplated hereby, except for those that become
applicable solely as a result of the specific regulatory status of Buyer or its
Affiliates.


3.14         
Taxes. 


(a)               
Filing of Tax Returns.  The Company and Subsidiary have
timely filed all Tax Returns that they were required to file under all federal,
state, local and foreign Tax Laws applicable to the Company, the Subsidiary and
the Business and in each case with due regard to all extensions.  Each such Tax
Return was true, correct and complete in all material respects and were
prepared in compliance with all applicable Laws.  With respect to the Business,
all Taxes (whether or not shown on any Tax Return) due and payable have been
paid in full by the Company and the Subsidiary, and there are no Taxes (whether
or not shown on any Tax Return) that are past due.  Any Taxes that are not yet
payable have been adequately accrued on the books and records of the Company. 
There are no Tax deficiencies (including penalties and interest) of any kind
assessed against or relating to either the Business with respect to any taxable
period ending on or before, or including, the date hereof of a character or
nature that would result in Liens or claims on any of the Company Assets or
that would result in any claim against Buyer.


(b)              
Tax Withholding.  All Taxes that the Company is required
by Law to withhold or collect, including sales and use taxes and amounts
required to be withheld for Taxes of employees, creditors and all other third
parties have been duly withheld or collected and, to the extent required, have
been paid over to the proper Governmental Authority or are held in separate
bank accounts for such purpose.


(c)               
No Actions.  There are no Actions with respect to any
Taxes or Tax Returns of the Company or the Subsidiary either (i) claimed
or raised by any Government Authority in writing or (ii) to the
Shareholders’ Knowledge, threatened or impending.  Neither the Company, nor the
Subsidiary has waived any statute or period of limitations with respect to any
Tax or agreed, or been requested by any Government Authority to agree, to any
extension of time with respect to any such Tax.  No extension of time within
which to file any Tax Return of the Company or the Subsidiary has been
requested, granted or currently is in effect.


 







21










 








 








(d)              
Tax-Exempt Property.  None of the Company Assets
(i) are property required to be treated as being owned by another Person
pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, or (ii) constitutes “tax-exempt
use property” or “tax-exempt bond financed property” within the meaning of
Section 168 of the Code.


3.15         
Labor Matters.  


(a)               
Compliance With Laws.  The Company and the Subsidiary are
in material compliance with all applicable federal and state Laws relating to
the employment of labor, including the provisions thereof relating to wages,
hours, collective bargaining, and the payment of Social Security and other
payroll and/or withholding taxes, and are not liable for any arrears of wages
or any tax or penalty for failure to comply with any of the aforesaid laws or
requirements, including the National Labor Relations Act, the Occupational
Safety and Health Act of 1970, the Employee Retirement Income Security Act of
1974, Title VII of the Civil Rights Act of 1964, the Fair Labor Standards Act,
the WARN Act (as defined below), and the Age Discrimination in Employment Act
of 1967.  The Company and the Subsidiary have completed and retained the
required Form I-9 employment verification paperwork for all existing employees
pursuant to the Immigration Reform and Control Act of 1986.


(b)              
No Work Stoppages.  During the past [****], there has not been, there is not
presently pending or existing, and to Shareholders’ Knowledge, there is not
threatened:  (i) any strike, lockout, picketing, hand-billing, concerted
work stoppage or slowdown, or labor dispute  with respect to any employees of
the Company or the Subsidiary, or (ii) any lockout by the Company or the
Subsidiary of any employees, (iii) labor or employment Action, and there is no
representation petition pending or, to Shareholders’ Knowledge, threatened with
respect to any employee of the Company or the Subsidiary.


(c)               
Employees.  Schedule 3.15(c) sets forth a complete
and correct list setting forth the current (i) names, work location, job title,
current base wage or salary rate of every individual currently employed by the
Company or the Subsidiary, and any other compensation payable or potentially
payable to them (including housing allowances, compensation payable pursuant to
bonus, deferred compensation or commission arrangements or other compensation)
under each Employee Benefit Plan in which they participate or are eligible to
participate, leave of absence status, accrued but unused vacation, sick time,
or other paid time off, and (ii) names and total amount of payment(s) received
during the twelve (12) month period preceding the date hereof for every
independent contractor and consultant who is or was engaged to render services
to the Company or the Subsidiary and whose aggregate amount of payment(s)
received therefor is or was in excess of [****]. 
Buyer has been provided with true and complete copies of all manuals,
brochures, agreements and other documents setting forth personnel policies
applicable to the employees of Company and/or the Subsidiary.


(d)              
WARN Act.  Within the past [****],
neither the Company nor the Subsidiary have implemented any “plant closing” or
“mass layoff” as those terms are defined in the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. § 2101 et seq., and the
regulations issued thereunder (the “WARN Act”). 


 







22










 








 








(e)               
Employment Agreements.  Other than those set forth in Schedule 3.15(e),
neither the Company nor the Subsidiary have entered into any employment
agreements or contracts with any Person.  The Company and the Subsidiary have
performed all obligations required to be performed thereby under all contracts
and agreements set forth on Schedule 3.15(e), and, to the Shareholders’
Knowledge, no other party to any such contract, agreement, or instrument is in
default thereunder.


3.16         
Employee Benefit Plans. 


(a)               
Compliance and Qualification.  Schedule 3.16(a)
lists each Employee Benefit Plan that the Company or any ERISA Affiliate
maintains or to which the Company or any ERISA Affiliate contributes or is a
participating employer and in which any Employee participates or is owed
benefits or for which an obligation by or Liability of the Company currently
exists.  With respect to each Employee Benefit Plan, the Company has delivered
to Buyer true and complete copies of all current plan documents, including all
amendments thereto and summary plan descriptions, including all subsequent
summaries of material modification, the most recent determination letter (or
opinion letter) received from the Internal Revenue Service, copies of the three
most recently filed Form 5500 annual reports, and all related trust agreements,
insurance policies or other funding vehicles associated with such Employee
Benefit Plan, as applicable.  Each Employee Benefit Plan of the Company and the
Subsidiary (i) complies in all material respects with all applicable
requirements of ERISA and the Code, and is operated in material compliance with
its terms; (ii) is operated in such a manner as to qualify, where appropriate,
for both federal and state purposes, for income tax exclusions to its
participants, tax exempt income for its funding vehicle, and the allowance of
deductions with respect to contributions thereto; (iii) that is intended
to be qualified under Section 401(a) of the Code has received a determination
from the Internal Revenue Service that such Employee Benefit Plan is so
qualified, and to Shareholders’ Knowledge, nothing has occurred since the date
of such determination that would cause such determination letter to become
unreliable; and (iv) has no Liabilities with respect to ERISA or the Code, nor
do any circumstances exist that would reasonably be expected to result in, any
such Liabilities (excluding any Liabilities with respect to the termination of
any Employee Benefit Plan after the Closing).


(b)              
No Multiemployer Plans.  Neither of the Company, the
Subsidiary nor any ERISA Affiliate has at any time participated in or made
contributions to or had any other liability with respect to, any “employee
benefit plan” (as such term is defined in Section 3(3) of ERISA) which is
(i) a “multiemployer plan” (within the meaning of Section 3(37) of ERISA),
or (ii) subject to Section 302 or Title IV of ERISA or Section 412 of the Code.


(c)               
No Prohibited Transactions.  No Person has entered into
any nonexempt “prohibited transaction” (as such term is defined in ERISA and
the Code) with respect to any Employee Benefit Plan of the Company and the
Subsidiary.


(d)              
Amendment.  Except as set forth on Schedule 3.16(d),
each Employee Benefit Plan of the Company and the Subsidiary may be amended,
terminated, modified or otherwise revised following the Closing.


 







23










 








 








(e)               
No Retiree Benefits.  No Employee Benefit Plan of the
Company or the Subsidiary provides medical, health, life insurance or other
welfare type benefits to retirees or former employees or individuals who
terminate (or have terminated) employment with the Company, the Subsidiary or
any ERISA Affiliate, or the spouses or dependents of any of the foregoing,
except for limited continued medical benefit coverage for former employees,
their spouses and other dependents as required to be provided under Section
4980B of the Code or Part 6 of Subtitle B of Title I of ERISA (COBRA) or
applicable similar state Law.


(f)                
Contributions.  All contributions and premium payments
(including all employer contributions and employee salary reduction
contributions) that are due have been made within the time periods prescribed
by ERISA and the Code to each Employee Benefit Plan of the Company and the
Subsidiary, and all contributions and premium payments for any period ending on
or prior to the Closing Date that are not yet due have been made to each
Employee Benefit Plan of the Company and the Subsidiary, or accrued in
accordance with past custom and practice.


(g)               
Disclosures.  All required reports, descriptions and
disclosures have been filed or distributed appropriately and in accordance with
applicable law with respect to each Employee Benefit Plan.  The requirements of
Part 6 of Subtitle B of Title 1 of ERISA and of Section 4980B of the Code has
been met in all material respects with respect to each Employee Benefit Plan
that is a group health plan.  


(h)               
Audits.  There are no unresolved claims, proceedings,
audits, investigations or disputes under the terms of, or in connection with,
any Employee Benefit Plan (other than routine undisputed claims for benefits)
and no action, legal or otherwise, has been commenced with respect to any such
claim, proceeding, audit, investigation or dispute. 


(i)                 
Fiduciary Liability.  The Company does not have and, to
the Shareholders’ Knowledge, no fiduciary has, any Liability for breach of
fiduciary duty or any failure to act or comply in connection with the
administration or investment of the assets of any Employee Benefit Plan.  


(j)                
Actions.  No Action with respect to the administration or
the investment of the assets of any Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the to the Shareholders’ Knowledge,
threatened, and there is no basis for any such Action.  


(k)              
Excess Parachute Payments.  No amount paid or payable by
the Company or any ERISA Affiliate in connection with the transactions
contemplated hereby could be an “excess parachute payment” within the meaning
of Section 280G of the Code (or any corresponding provisions of state, local or
foreign law).  


 







24










 








 








(l)                 
409A.  No Employee Benefit Plan and no grants, awards or
benefits thereunder are subject to Section 409A of the Code or, if subject to
Section 409A of the Code, have failed, in form or operation, to meet the
requirements of Section 409A of the Code and Treasury regulations and all other
applicable guidance promulgated thereunder.  There is no Employee Benefit Plan
to which the Company or any ERISA Affiliate is a party covering any Employee
that could require the Company or any ERISA Affiliate to compensate any
employee for tax-related payments under Section 409A of the Code (or any
similar state law) or excise taxes paid pursuant to Section 4999 of the Code. 


3.17         
Real Property.   


(a)               
Owned Property.  The Company owns the real property listed
on Schedule 3.17(a)  (the “Owned Real Property”). The Company
has good and marketable title, in fee simple, to such Owned Real Property and
to all structures and fixtures attached or appurtenant to or used in connection
therewith, free and clear of any Liens, claims or rights of any kind, nature or
description whatsoever, except for the Permitted Liens.  Buyer has been
provided with copies of all existing title policies, reports and surveys of the
Owned Real Property in the Company’s possession or under its control.


(b)              
Leases.  Schedule 3.17(b) lists all real property
leased or subleased to the Company or the Subsidiary (the “Leased Real
Property”).  The Company has delivered to Buyer true, correct and complete
copies of the leases, subleases, licenses and other agreements for occupancy,
including all amendments, extensions and other modifications thereto (the “Leases”)
with respect to each Leased Real Property as listed in Schedule 3.17(b). 
With respect to each Lease listed in Schedule 3.17(b): 


(i)                 
Each Lease is legal, valid, binding, enforceable, and in full
force and effect, subject to the effect of bankruptcy, insolvency,
reorganization, liquidation, dissolution, moratorium or other similar laws
relating to or affecting the rights of creditors generally and to the effect of
the application of general principles of equity (regardless of whether
considered in proceedings at law or in equity).


(ii)               
Neither the Company nor the Subsidiary is in material breach or
default under any Lease, nor, to the Shareholders’ Knowledge, is any other
party to any Lease in default thereunder in any material respect.  To the
Shareholders’ Knowledge, no event has occurred that, with notice or lapse of
time, would constitute a material breach or default or permit termination,
modification, or acceleration under any Lease.


(iii)              
No security deposit or portion thereof deposited with respect to
any Lease has been applied in respect of a breach of or default under any Lease
that has not been redeposited in full. 


(iv)             
Neither the Company, nor the Subsidiary owes, or will owe in the
future, any brokerage commissions or finder’s fees with respect to any Lease. 


(v)               
Neither the Company, nor the Subsidiary has subleased, licensed
or otherwise granted any Person the right to use or occupy the leased real
property or any portion thereof.


 







25










 








 








(vi)             
Neither the Company, nor the Subsidiary has collaterally assigned
or granted any other Lien in any Lease or any interest therein.


(vii)            
There are no Liens against the Company or the Subsidiary  on the
estate or interest created by any Lease.


(viii)          
Neither the Company or the Subsidiary, nor to the Shareholders’
Knowledge, any third party, has repudiated or waived any material provision of
any Lease.


(c)               
The Company or the Subsidiary has a validly existing and
enforceable leasehold or subleasehold interest in the premises demised under
each of the Leases, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors’
rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
Law).  The rental set forth in each of the Leases is the actual rental being
paid, and there are no separate agreements or understanding with respect to the
same.  The improvements located on the real property under the Leases are in
reasonable condition in all material respects (except for ordinary wear and
tear, normal repairs and maintenance).  


(d)              
The Owned Real Property and the Leased Real Property and the use
thereof conform in all material respects with all covenants and restrictions
and all applicable building, zoning, environmental, land use and other
applicable Laws.


 


3.18         
Environmental Matters.  Except as set forth on Schedule
3.18, or in the Phase 1 Reports with respect to the Owned Real Property
attached to such Schedule, other than as to matters that would not have a
Material Adverse Effect (a) neither the Company, nor the Subsidiary is in
violation of any Environmental Law as of the Closing (whether in conducting the
Business or otherwise) and (b) neither the Company, nor the Subsidiary has
received written notice of any Action pending from any Governmental Authority
with respect to any alleged noncompliance with, or Liability under, any
Environmental Law, including any such Action relating to the release,
discharge, spillage, or disposal (onsite or offsite) into the environment of
any Hazardous Material.  During the preceding five (5) years, neither the
Company, nor the Subsidiary has received any written notice from any
Governmental Authority or third party alleging that it is not in material
compliance with any Environmental Law or has any material Liability under any
Environmental Law.  None of the Company, the Subsidiary, or their predecessors
or Affiliates, has directly caused any release of petroleum or a “hazardous
substance,” as that term is defined in the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq.,
in excess of a reportable quantity on any real property owned or leased by any
Seller Entity which release remains unresolved, or has otherwise released,
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or exposed any Person to, any Hazardous Material, or
owned or operated any property or facility which is or has been contaminated by
any Hazardous Material, so to as to give rise to any material Liabilities of
the Company, the Subsidiary or their predecessors or Affiliates (including any
material investigative, corrective or remedial obligations) under any
Environmental Law.  Without limiting the foregoing, each of the Company and the
Subsidiary has obtained, and has at all times complied in all material respects
with, all Permits, licenses and 







26










 








 








other authorizations
required under applicable Environmental Laws to operate the Business, except
where the failure to do so would not reasonably be expected to have a Material
Adverse Effect.  The Company has furnished to Buyer all environmental audits, assessments
and reports and all other documents materially bearing on environmental, health
or safety Liabilities relating to the Company, the Subsidiary or their
Affiliates’ or predecessors’ past or current properties, facilities or
operations, in each case which are in their possession or under their
reasonable control.


3.19         
Intellectual Property. 


(a)               
Complete lists of the Intellectual Property, including any rights
applied for by the Company or the Subsidiary) are set forth on Schedule
3.19(a).  To Shareholders’ Knowledge, the Intellectual Property is valid,
subsisting and enforceable, and the Company and the Subsidiary have used their
commercially reasonable efforts to maintain, enforce and protect the same.  


(b)              
The Company and the Subsidiary’s rights of ownership or use of
any Intellectual Property shall not be adversely affected by the transactions
contemplated hereto.  Other than as set forth on Schedule 3.19(b), the
Intellectual Property is exclusively owned by the Company and the Subsidiary,
free and clear of any Liens other than Permitted Liens, and the Intellectual
Property is sufficient to operate the Business as conducted by the Company and
the Subsidiary as of the date of this Agreement.


(c)               
Except as set forth on Schedule 3.19(c), to Shareholders’
Knowledge, the use of the Intellectual Property in the Business as presently
conducted or otherwise, does not constitute an unauthorized use, infringement,
misappropriation or other violation of the  rights to the Intellectual Property
of any other Person.  Except as set forth on Schedule 3.19(c), there are
no Actions against the Company or the Subsidiary that were either made within
the past six (6) years, are presently pending or, to Shareholders’ Knowledge,
threatened, contesting the validity, use, ownership or enforceability of any
Intellectual Property, and, to Shareholders’ Knowledge, there is no reasonable
basis for any such Action to exist.  Except as set forth on Schedule 3.19(c),
to Shareholders’ Knowledge, there has not been, nor is there presently, any
unauthorized use, infringement, misappropriation or other violation of any of
Intellectual Property by any other Person.  The Company and the Subsidiary have
the full right to possess, use, copy, distribute, display, transfer and license
their respective Intellectual Property in the manner in which it is currently
possessed, used, copied, distributed, displayed, transferred or licensed.


3.20         
Affiliate Transactions.  Except as set forth on Schedule
3.20, neither the Company nor the Subsidiary is a party to any contract or
agreement other than an Employee Benefit Plan with any of its employees,
officers, directors, Shareholder, or any of such Persons’ respective Affiliates
or family members (each, an “Affiliate Transaction”).  Except for any
Employee Benefit Plan or as set forth on Schedule 3.20, no member
of the family of any officer, director, Shareholder or Affiliate of the Company
or the Subsidiary is directly or indirectly interested in any contract,
agreement or arrangement with the Company or the Subsidiary.


 







27










 








 








3.21         
Customers and Suppliers.  Schedule 3.21(a) sets
forth the 10 largest customers (measured by dollar volume) of the Company and
the Subsidiary during each of the 2010 calendar year and the period beginning
January 1, 2011 and ending on the Interim Balance Sheet Date, together with
aggregate sales to such customer during such periods.  Schedule 3.21(b)
sets forth the 10 largest suppliers (measured by dollar volume) to the Company
and the Subsidiary during each of the 2010 calendar year and the period
beginning January 1, 2011 and ending on the Interim Balance Sheet Date,
together with aggregate purchases from such supplier during such periods. 
Other than as set forth on Schedule 3.21(c), none of such customers
or suppliers has terminated or materially and adversely changed, or to
Shareholders’ Knowledge has threatened to terminate or materially and adversely
change, its relationship with the Company and the Subsidiary on or after the
date hereof.


3.22         
Absence of Questionable Payments.  Neither the
Shareholders, the Company nor the Subsidiary or any director, officer, agent,
employee or other Person acting on behalf of any of them has (a) used any corporate
or other funds for unlawful contributions, payments, gifts or entertainment, or
made any unlawful expenditures relating to political activity to government
officials or others or established or maintained any unlawful or unrecorded
funds in violation of Section 104 of the Foreign Corrupt Practices Act of 1977
(15 U.S.C. §79dd-2), as amended, or any other applicable Law; or
(b) accepted or received any unlawful contributions, payments,
expenditures or gifts.


3.23         
Brokers, Finders, Etc.  Other than CW Downer, neither the
Company nor the Subsidiary has employed or entered into any agreement with, nor
are the Company or the Subsidiary subject to, any valid claim of any broker,
finder or other intermediary in connection with the transactions contemplated
by this Agreement or the Transaction Documents who might be entitled to a fee
or commission in connection with such transactions.


3.24         
Disclosure.  Neither the representations and the warranties
of the Company and the Shareholders contained in this Agreement or the other
Transaction Documents nor any statement contained in any Schedule, Exhibit,
certificate or other instrument furnished to Buyer under or in connection
herewith or therewith, contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained herein or therein not misleading.












28










 








 








 


Article 4

SEVERAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS


Each Shareholder, on behalf of
itself and not in conjunction with any other Shareholder, hereby represents and
warrants to Buyer as follows:


 


4.1             
Authority.  Each Shareholder has the requisite power and
authority to execute and deliver this Agreement and the Transaction Documents
to which such Shareholder is a party and to consummate the transactions
contemplated hereby and thereby.  The execution, delivery and performance of
this Agreement and the Transaction Documents to which each Shareholder is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary action on the part of
such Shareholder.  This Agreement and the Transaction Documents to which each
Shareholder is a party have been duly and validly executed and delivered by
such Shareholder and, assuming the due execution and delivery thereof by the
other parties thereto, constitute the valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization, liquidation,
dissolution, moratorium or other similar laws relating to or affecting the
rights of creditors generally and to the effect of the application of general
principles of equity (regardless of whether considered in proceedings at law or
in equity).


4.2             
No Conflicts.  Other than as set forth on Schedule 4.2,
the execution, delivery and performance of this Agreement and the Transaction
Documents to which each Shareholder is a party by such Shareholder and the
consummation of the transactions contemplated hereby and thereby will not
(a) violate any provision of, or result in a breach or termination of, or
result in the acceleration of or entitle any party to accelerate any obligation
under, or result in the imposition of any Lien upon any of the Shares pursuant
to any Lien, lease, agreement, instrument, order, arbitration award, judgment
or decree to which such Shareholder is a party or by which it is bound, or (b)
violate or conflict with any provision of material Law or Order of any
Governmental Authority to which such Shareholder is subject.


4.3             
Title
to Shares.  Except as otherwise provided on Schedule 4.3,
each Shareholder is the sole record owner of the Shares set forth opposite such
Shareholder’s name on Schedule 2.1, free and clear of all Liens.  All of
such Shareholder’s Shares have been received by such Shareholder in compliance
with all preemptive, statutory or contractual rights, if any, of any Person. 
Each Shareholder has the full power, right and authority to vote and transfer
the Shares owned by such Shareholder.  Each Shareholder (a) does not own or
have any right to any equity interest in the Company other than the Shares held
by such Shareholder, and (b) does not have or hold any Lien against the Company
or the Subsidiary or any Company Assets or properties.


4.4             
Organization.  Each Shareholder who is not an individual
is duly organized and validly existing, and in good standing under the laws of
its state of organization.    Each such Shareholder has all requisite corporate
power and authority to own its properties and assets and to carry on its
business.


 







29










 








 








4.5             
Brokers, Finders, Etc.  Except as provided on Schedule
4.5, no Shareholder has employed or entered into any agreement with, nor is
any Shareholder subject to, any valid claim of any broker, finder or other
intermediary in connection with the transactions contemplated by this Agreement
who might be entitled to a fee or commission in connection with such
transactions.


Article 5

REPRESENTATIONS AND WARRANTIES OF BUYER


Buyer hereby represents and
warrants to each of the Shareholders as follows:


 


5.1             
Organization.  Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware. 
Buyer has full power and authority to execute and deliver this Agreement and the
Transaction Documents to which Buyer is a party, to perform its obligations
hereunder and thereunder, and to consummate the transactions contemplated
hereby and thereby.


5.2             
Authority.  Buyer has all requisite corporate power
and authority to execute and deliver this Agreement and the Transaction
Documents to which Buyer is a party, and to perform Buyer’s obligations
hereunder and thereunder, and to consummate the transactions contemplated
hereby and thereby.  The execution, delivery and performance of this Agreement
and the Transaction Documents to which Buyer is a party, and the consummation
of the transactions contemplated therein, have been duly and validly authorized
by all necessary action on the part of Buyer.  This Agreement and the
Transaction Documents to which Buyer is a party have been duly and validly
executed and delivered by Buyer and, assuming the due execution and delivery
thereof by the other parties thereto, constitute the valid and binding
obligations of Buyer (if and to the extent that a Transaction Document
constitutes and obligation), enforceable against Buyer in accordance with their
terms, subject to the effect of bankruptcy, insolvency, reorganization,
liquidation, dissolution, moratorium or other similar laws relating to or
affecting the rights of creditors generally and to the effect of the
application of general principles of equity (regardless of whether considered
in proceedings at law or in equity).


5.3             
No Conflicts.  The execution, delivery and performance of
this Agreement and the Transaction Documents to which Buyer is a party by Buyer
and the consummation of the transactions contemplated hereby and thereby will
not (a) violate any provision of Buyer’s certificate of incorporation or
bylaws, (b) violate any provision of, or be an event that is a violation of,
result in a breach or termination of, or result in the acceleration of or
entitle any party to accelerate any obligation under, or result in the imposition
of any Lien upon any of Buyer’s assets or properties pursuant to any Lien,
lease, agreement, instrument, order, arbitration award, judgment or decree to
which Buyer is a party or by which it is bound, or (c) violate or conflict with
any provision of material Law or Order of any Governmental Authority to which
Buyer is subject.


 







30










 








 








5.4             
Brokers, Finders, Etc.  Buyer has not employed or entered
into any agreement with, nor is Buyer subject to, any valid claim of any
broker, finder or other intermediary in connection with the transactions
contemplated by this Agreement who might be entitled to a fee or commission in
connection with such transactions.


5.5             
Acquisition of Shares for Investment.  Buyer and its
Affiliates have such knowledge and experience in financial and business matters
that each is capable of evaluating the merits and risks of Buyer’s purchase of
the Shares.  Buyer acknowledges that the Shareholders have not made, and do not
make, any representation and warranty about the Company’s or the Business’s
future, including the Company’s future business, income, operation or
performance.  Buyer acknowledges that Buyer and its Affiliates understand the
risk of owning and operating a business such as the Company, and know and
understand that past or prior results do not assure future success, that many
matters beyond the control of Buyer and its Affiliates, the Company and/or the
Shareholders can and will effect the success of the Company and the Business,
and that none of the Shareholders has promised, assured or guaranteed success
of the Company or the Business following the Closing.  Buyer agrees that Shares
purchased hereunder may not be sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of without registration under the Securities
Act of 1933, as amended, except pursuant to an exemption from such registration
available thereunder, to the extent applicable.    


5.6             
Acknowledgement.  Buyer acknowledges that, other than as
set forth in this Agreement, none of the Shareholders or any of their
Affiliates, agents or representatives makes or has made any representation or
warranty, either express or implied, including, but not limited to, (a) as to
the accuracy or completeness of any of the information provided or made
available to Buyer or its agents, representatives, lenders or Affiliates prior
to the execution of this Agreement, including, but not limited to, information
contained in the Confidential Information Memorandum provided by CW Downer, and
(b) with respect to any projections, forecasts, estimates, plans or
budgets of future revenues, expenses or expenditures, future results of
operations (or any component thereof), future cash flows (or any component
thereof) or future financial condition (or any component thereof) of the
Company heretofore or hereafter delivered to or made available to Buyer or its
agents, representatives, lenders or Affiliates, including, but not limited to,
those contained in the Confidential Information Memorandum provided by CW
Downer; provided, that such acknowledgement by Buyer shall not apply with respect
to fraud or intentional misrepresentation.  With respect to any such
projections, forecasts, estimates, plans or budgets delivered by or on behalf
of the Shareholders or the Company and the Subsidiary to Buyer or its
Affiliates, Buyer acknowledges that (i) there are uncertainties inherent in
attempting to make such projections, forecasts, estimates, plans or budgets,
(ii) it is familiar with such uncertainties, (iii) it is taking full
responsibility for making its own evaluation of the adequacy and accuracy of
all such projections, forecasts, estimates, plans or budgets so furnished to it
and its Affiliates, and (iv) except in the case of fraud or intentional
misrepresentation, it shall have no claim against the Shareholders or the
Company, or their respective Affiliates, agents or representatives solely with
respect to such projections, forecasts, estimates, plans or budgets.


5.7             
Buyer’s Knowledge of Breaches.  Except as set forth on Schedule
5.7 hereto, to Buyer’s Knowledge, as of the date hereof, neither the
Shareholders nor the Company is in breach of any representation or warranty
contained in this Agreement.


 







31










 








 








5.8             
Financial Viability.  The obligations of Buyer hereunder
are not subject to any conditions regarding the ability of Buyer to obtain
financing.  Buyer has immediately available funds for purposes of
(a) satisfying its obligations under this Agreement (including payment of
the Purchase Price), and (b) continuing to operate the Business following
the Closing.  Buyer has obtained or will obtain prior to the Closing all
approvals, consents, authorizations, guarantees, pledges, certificates and
other documents, and has completed or will complete prior to the Closing all
actions, necessary to enable Buyer to consummate the transactions contemplated
hereby, including the payment of the Purchase Price in accordance with this
Agreement.


5.9             
WARN Act.  Buyer understands and acknowledges that any
terminations or separations of the work force of the Company and the Subsidiary
by Buyer, the Company or the Subsidiary at or after the Effective Time which
triggers any requirement under the WARN Act shall be the sole responsibility
and liability of Buyer.












32










 








 








 


Article 6

SHAREHOLDER REPRESENTATIVE/LITIGATION SH REPRESENTATIVE


6.1             
Designation of the Shareholders’ Representative and Litigation
SH Representative.   


(a)               
Each of the Shareholders hereby designates Scott Dickes as the
Shareholders’ Representative with the exclusive authority to act on behalf of
such Shareholder for any action to be taken by such Shareholder pursuant to the
terms of this Agreement (the “Shareholders’ Representative”).  The
Shareholders’ Representative will have full power to act on behalf of each
Shareholder according to the terms of this Agreement and the Transaction
Documents, to give and receive notices on behalf of each Shareholder and in
general to do all things and to perform all acts on each Shareholder’s behalf
as may be contemplated by this Agreement and the Transaction Documents, all in
the absolute discretion of the Shareholders’ Representative.  Each Shareholder
shall be bound by all acts of the Shareholders’ Representative taken in connection
with this Agreement or the Transaction Documents.  No grant of authority
hereunder shall be considered as requiring the exercise of such authority by
the Shareholders’ Representative.  This power of attorney, and all authority
hereby conferred, is deemed coupled with an interest.  The Shareholders’
Representative is acting solely in an agency capacity and will have no personal
liability of any type for any action taken in the capacity of the Shareholders’
Representative in accordance with the terms of this Agreement, including the
compromise, settlement, payment or defense of any claim (including expenses and
costs associated therewith) under this Agreement, regardless of whether any
Shareholder is the claimant or the party against whom a claim is being made. 
Each Shareholder hereby agrees, jointly and severally, to indemnify, defend and
hold Buyer, the Company and the Subsidiary harmless from and against any and
all claims, losses, liabilities, damages and expenses (including reasonable
attorneys’ fees) which may be imposed upon, incurred by or asserted against the
Buyer, the Company or the Subsidiary by any Shareholder or any other Person in
reliance on the actions of the Shareholders’ Representative as the duly
appointed representative of the Shareholders pursuant to this Agreement or the
Transaction Documents. In the event that the Shareholders’ Representative has
resigned, died or been removed by the Shareholders holding at least two-thirds
of the Shares, on an as-converted basis, then Robert W.  Wilkins is hereby
designated as the replacement Shareholders’ Representative.  In the event that
Robert W. Wilkins has resigned, died or been removed by the Shareholders
holding at least two-thirds of the Shares, on an as-converted basis, then the
Shareholders holding a majority of the Shares, on an as-converted basis, shall
appoint a replacement Shareholders’ Representative.  The Shareholders’
Representative will promptly notify Buyer of any changes to the Shareholders’
Representative.


 







33










 








 








(b)              
Each of the Shareholders hereby designates Scott Dickes as the
Shareholders’ Representative with the exclusive authority to act on behalf of
such Shareholder for any action to be taken by such Shareholder with respect to
the Actions described on Schedule 3.8 hereto and any Third Party Claims arising
out of or related thereto (the “Litigation SH Representative”).  The
Litigation SH Representative will have full power to act on behalf of each
Shareholder according to the terms of this Agreement and the Transaction Documents,
to give and receive notices on behalf of each Shareholder and in general to do
all things and to perform all acts on each Shareholder’s behalf as may be
contemplated by this Agreement and the Transaction Documents, all in the
absolute discretion of the Litigation SH Representative.  Each Shareholder
shall be bound by all acts of the Litigation SH Representative taken in
connection with this Agreement or the Transaction Documents.  No grant of
authority hereunder shall be considered as requiring the exercise of such
authority by the Litigation SH Representative.  This power of attorney, and all
authority hereby conferred, is deemed coupled with an interest.  The Litigation
SH Representative is acting solely in an agency capacity and will have no personal
liability of any type for any action taken in the capacity of the Litigation SH
Representative in accordance with the terms of this Agreement, including the
compromise, settlement, payment or defense of any claim (including expenses and
costs associated therewith) under this Agreement, regardless of whether any
Shareholder is the claimant or the party against whom a claim is being made. 
Each Shareholder hereby agrees, jointly and severally, to indemnify, defend and
hold Buyer, the Company and the Subsidiary harmless from and against any and
all claims, losses, liabilities, damages and expenses (including reasonable
attorneys’ fees) which may be imposed upon, incurred by or asserted against the
Buyer, the Company or the Subsidiary by any Shareholder or any other Person in
reliance on the actions of the Litigation SH Representative as the duly
appointed representative of the Shareholders pursuant to this Agreement or the
Transaction Documents. In the event that the Litigation SH Representative has
resigned, died or been removed by the Shareholders holding at least two-thirds
of the Shares, on an as-converted basis, then the Shareholders holding a
majority of the Shares, on an as-converted basis, shall appoint a replacement
Litigation SH Representative, who shall be reasonably acceptable to Buyer.  The
Litigation SH Representative will promptly notify Buyer of any changes to the
Litigation SH Representative.












34










 








 








 


Article
7

ADDITIONAL COVENANTS


7.1             
Nondisclosure of Confidential Information.  For [****]  after the Closing Date, the Shareholders
shall not reveal Confidential Information to any Person (other than to such
Party’s attorneys, accountants, investment advisors and bankers on a need to
know basis only), or use the Confidential Information for any purpose other
than in connection with (a) the preparation of Tax Returns and investigations,
audits or disputes involving same, or (b) litigation or other disputes
involving a claim arising out of or relating to the operation of the Company
and the Subsidiary or the Business prior to the Closing, Buyer’s investigation
of the Company and the Subsidiary or the Business, this Agreement or any
Transaction Document, the negotiation and execution of this Agreement or any
Transaction Document, or the performance by the Parties of the terms thereof; provided,
however, that a Shareholder may disclose confidential information to its
attorneys, accountants, consultants, and other
professionals to the extent necessary to obtain their services only in the
event that those Persons have obligations to such Shareholder of
confidentiality, limited use and non-disclosure that cover the Confidential
Information and are at least as restrictive as those in this Agreement; or
(ii) as may otherwise be required by law.


7.2             
Restrictive Covenants. 


(a)               
Non-Competition.   


(i)                 
For [****]  after the
Closing Date, [****]  will not directly or
indirectly (through a subsidiary, director, officer, Affiliate, Person or
otherwise) anywhere in the world:  (i) own any interest in, manage, control,
participate in, consult with, render services for, or in any manner engage in
the Business; or (ii) solicit orders from or seek or propose to do business
with any customer or supplier of the Business for purposes of engaging in the
Business.


(ii)               
For [****]  after the
Closing Date, [****]  will not directly or
indirectly (through a subsidiary, director, officer, Affiliate, Person or
otherwise) anywhere in the world own any interest in, manage, control,
participate in, consult with, render services for, or in any manner engage in
the Business with or through any of the companies listed on Schedule
7.2(a)(ii) and/or any Affiliate thereof.  Notwithstanding anything herein
to the contrary, this Section 7.2(a)(ii) shall not be applicable to any
Affiliate of [****]  which such Person
does not own at least a majority of stock or membership interests, as
applicable, on an as-converted basis, of such Affiliate. 


 







35










 








 








(b)              
Non-Solicitation.  For [****] 
after the Closing Date, the Shareholders listed on Schedule 7.2(b) will
not directly or indirectly (through a subsidiary, director, officer, Affiliate,
Person or otherwise) solicit for employment or employ any then-current employee
of the Company or the Subsidiary, or any individual who was employed by the
Company or the Subsidiary within six (6) months prior to such solicitation,
other than such individual whose employment was voluntarily terminated by the
Company or the Subsidiary; provided  that the restriction contained in
this Section 7.2(b)  shall not apply to any general solicitation for
employees (including through the use of employment agencies) not specifically
directed at employees of the Company or the Subsidiary, or the employment of
any such individual who responds thereto.  For two (2) years following the
Closing Date, none of the Shareholders listed on Schedule 7.2(b) shall
directly or indirectly (through a subsidiary, director, officer, Affiliate,
Person or otherwise) (i) induce or attempt to induce any executive officer of
the Company or the Subsidiary to leave the employ of the Company or the
Subsidiary, hire, or in any way interfere with the relationship between the
Company or the Subsidiary and any executive thereof or (ii) induce or attempt
to induce any customer, supplier, licensee, licensor, franchisee or other
business relation of the Company or the Subsidiary to cease doing business with
the Company or the Subsidiary, or in any way interfere with the relationship
between any such customer, supplier, licensee or business relation and the
Company or the Subsidiary.  [****].    


(c)               
Equitable Relief.  The Shareholders acknowledge that any
breach of any provision of this Section 7.2 will result in irremediable
and/or incalculable damage to Buyer and the Company.  It is therefore agreed
that Buyer and the Company shall be entitled to obtain injunctive relief to
cause [****]  any of the Shareholders to
specifically perform its or his obligations under this Section 7.2, and
that any such breach or threatened breach may be brought in a court of equity,
in addition to whatever other remedies may be available at law or otherwise.


7.3             
Books and Records.  The Company shall, and cause its
Subsidiary to, (a) hold all of their respective books and records existing on
the Closing Date and not destroy or dispose of any thereof for a period of
seven (7) years from the Closing Date; provided, that the Company and
the Subsidiary shall have the right to destroy such books and records prior to
the expiration of such 7-year period, if prior to destroying such books and
records the Company or the Subsidiary (as applicable) offer to the Shareholder
Representative at least thirty (30) days prior to such destruction a reasonable
opportunity to make copies of such books and records, and (b) following the Closing
Date, afford the Shareholders and its accountants and representatives and legal
counsel, during normal business hours, upon reasonable request, reasonable
access to such books, records and other data and to the employees of the
Company and the Subsidiary to the extent that such access may be reasonably
required for any purpose related to the preparation of any Shareholder’s Tax
Return or the enforcement of any Shareholder’s rights hereunder at no cost to
any Shareholder (other than for reasonable out-of-pocket expenses). 
Notwithstanding the foregoing or anything to the contrary in this Agreement,
nothing in this Agreement shall limit any Shareholder’s right of discovery.


7.4             
Further Assurances.  Upon the reasonable request of any
Party, each other Party will:  (a) execute and deliver to the other such
other documents, releases, assignments and other instruments as may be required
to effectuate the Agreement; and (b) take all other actions to fulfill the
intent and purpose of this Agreement and the transactions contemplated herein.


 







36










 








 








7.5             
Affiliate Transactions.  Other than with respect to this
Agreement and the Transaction Documents, at or prior to Closing, the Company
shall terminate, discharge and release all contracts, obligations, liabilities,
accrued and unaccrued expenses, advances or other payments with respect to the
Affiliate Transactions set forth on Schedule 7.5.  Other than with
respect to this Agreement or the agreements and transactions contemplated
hereby, the termination of all such agreements, liabilities and obligations
shall be without any continuing obligation or liability of (a) the Company to
the Shareholders or any Affiliates, or (b) the Shareholders or any Affiliates
to the Company or its Affiliates, except as specified herein.


7.6             
Environmental Matters.  Following the Closing, Buyer, the
Company and the Subsidiary, and their respective Affiliates will not (a)
voluntarily conduct any environmental studies or tests with respect to the
Owned Real Property unless such studies or tests are required in response to
any inquiry by a Governmental Authority, or (b) intentionally or willfully act
(or fail to act) in any matter that encourages any Governmental Authority to
expand the nature or scope of any environmental inquiry, investigation, or
remediation requested by such Governmental Authority; provided that Buyer, the
Company and the Subsidiary, and their respective Affiliates may conduct any
environmental studies or tests with respect to the Leased Real Property or
Owned Real Property in the ordinary course of business or in accordance with
applicable Law, including a Phase II environmental assessment within a
reasonable period following Closing (unless completed before Closing) and any
environmental compliance audits permitted under applicable Law. 


7.7             
Transfer Taxes.  All federal, state, or local and other
transfer, sales, use, or similar Taxes applicable to or imposed upon or arising
out of the transfer of the Shares or other transactions contemplated by this
Agreement shall be paid by the Shareholders.


7.8             
Release by the Shareholders.  To the fullest extent
permitted by Law, each of the Shareholders hereby waives and releases, on
behalf of itself and its Affiliates, officers, directors, employees, advisors
and agents (collectively, the “Releasors”), all rights, claims, debts,
actions or causes of action, known or unknown, including under any Law against
discrimination, and any claims arising out of tort, contract, or common law,
existing on or prior to the Closing Date that the Releasors, collectively or
individually, have or might have against the Company or the Subsidiary, or
their successors or assigns (collectively, the “Releasees”) for any and
all claims arising from, out of, or relating to each of the Releasors'
relationship with the Company as stockholder, director, officer, employee, or
agent; provided, however, that no Releasor waives or releases any claims
relating to this Agreement or any claims such Releasor shall have for (i)
customary accruals of employee benefits, (ii) payment of accrued salary
and commissions, (iii) other compensation for services performed, or
(iv) indemnification provided by Law or written agreement (including,
without limitation, the corporate charter or bylaws of the Company or any
Subsidiary) for acts or omissions by the Releasor in the course and scope of,
as applicable, his/its employment, duties as an officer, director, agent, or
consultant, except that no Releasor shall be entitled to obtain indemnification
from the Company or any Subsidiary with respect to any claim, fact,
circumstance or matter for which any Releasor is required to indemnify any
Buyer Indemnified Party pursuant to this Agreement or any other Transaction
Document.  It is the clear and unequivocal intention of each of the Releasors
in executing this Agreement that it shall be effective as a full and final
accord and satisfaction, release, and discharge of each and every claim
specifically or generally referred to in the preceding sentence.  Each Releasor
understands 







37










 








 








and agrees that it is expressly waiving
all claims against the Releasees, including those claims that it may not know
or suspect to exist, which if known may have materially affected its decision
to provide this release, and such Releasor expressly waives any rights under
applicable Law that provide to the contrary.  Each Releasor hereby irrevocably
covenants to refrain from, directly or indirectly, asserting any claim or
claims against or otherwise seeking recovery from any Releasee based upon any
matter purported to be so released pursuant to this Section 7.8. 


7.9             
Shareholders’ Personal Property.  Within one (1) day following the Closing Date, the
Shareholders will remove (at their sole expense and after consulting with
Buyer) all of the Shareholders’ Personal Property from the Owned Real Property
and the Leased Real Property.


 


Article 8

CLOSING 


8.1             
The Closing.  The consummation of the transactions
contemplated by this Agreement (the “Closing”) shall occur
simultaneously with the execution of this Agreement (the “Closing Date”),
at the offices of HMB located at 500 W. Madison, Suite 3700, Chicago, Illinois
60661.  


8.2             
Company’s and Shareholders’ Closing Deliveries.  At the
Closing, the Company and the Shareholders shall deliver the following:


(a)               
certificates representing the Shares, duly and validly endorsed
in favor of Buyer or accompanied by a separate stock power duly and validly
executed by each Shareholder and otherwise sufficient to vest in Buyer good and
marketable title to the Shares;


(b)              
the Escrow Agreement, duly executed by the Shareholders’
Representative and the Litigation SH Representative;


(c)               
a certificate of the secretary of the Company certifying (i) the
validity of the resolutions of the board of directors and, if required by
applicable Law, the Shareholders of the Company approving and authorizing the
execution, delivery and performance of this Agreement and the Transaction
Documents to which it is a party, (ii) the Company’s Certificate of
Incorporation, and (iii) the Company’s by-laws;


(d)              
Closing and disbursement statement for the payment of the
Purchase Price, duly executed by the Shareholders (the “Allocation Schedule”); 


(e)               
a letter of resignation from each member of the board of
directors of the Company and any officer of the Company whose resignation the
Buyer requests effective as of the Closing; 


(f)                
all minute books of the Company; 


(g)               
evidence, in form and substance reasonably acceptable to Buyer,
of the termination of the Affiliate Transactions set forth on Schedule 7.5; 


 







38










 








 








(h)               
executed employment agreements or other agreements which are
acceptable to Buyer in its reasonable discretion with key employees or
contractors of the Company or the Subsidiary set forth on Schedule 8.2(h)
which provide such key employees with a compensation package no less than they
are currently being offered by the Company;


(i)                 
the lease amendment in the form attached hereto as Exhibit
8.2(i), which is fully executed by the Company and all of the owners of the
Leased Real Property; 


(j)                
evidence that all Stock-Based Awards have been redeemed and/or
cancelled; 


(k)              
evidence of payment of the retention bonuses listed on Schedule
3.6(f) hereto, and all other payments or amounts owed to any employees,
officers and board members of the Company or the Subsidiary who were terminated
or who resigned their positions prior to Closing, including any severance
payments owed to such officers or employees pursuant to an employment agreement
or otherwise; 


(l)                 
the consents and payoff letters with respect to the Indebtedness
to be repaid at Closing pursuant to Section 2.3(b) (the “Payoff
Letters”), and those additional consents and approvals listed in Schedules
3.4 and 4.2, in each case, in form and substance reasonably satisfactory to
Buyer; 


(m)             
evidence, in form and substance reasonably acceptable to Buyer,
of the termination of the contracts set forth on Schedule 8.2(m) without
further liability or obligation of the Company, its Subsidiary or Buyer; and


(n)               
such further Transaction Documents, certificates, instruments and
other documents as shall be reasonably requested by Buyer or Buyer’s counsel.


8.3             
Buyer’s Closing Deliveries.  At the Closing, Buyer shall
deliver the following:


(a)               
the Closing Cash Payment payable by wire transfer;


(b)              
the Escrow Amount by wire transfer pursuant to the Escrow
Agreement;


(c)               
the Escrow Agreement, duly executed by Buyer;


(d)              
a certificate of the Secretary of Buyer certifying the validity
of the resolutions of the board of directors of Buyer approving and authorizing
the execution, delivery and performance of this Agreement and the consummation
of this Agreement; and


(e)               
executed employment agreements or other agreements which are
acceptable to Buyer in its reasonable discretion with key employees or
contractors of the Company or the Subsidiary set forth on Schedule 8.2(h);
and


(f)                
such further Transaction Documents, certificates, instruments,
and other documents as shall be reasonably requested by Company’s and
Shareholder’s counsel.


 







39










 








 








Article
9

INDEMNIFICATION 


9.1             
Survival.  All representations and warranties of the
parties contained in Articles 3, 4 or 5 of this Agreement or in any
schedule hereto, or in any certificate, document or other instrument delivered
in connection herewith shall terminate and cease to be of further force and
effect on the [****]  anniversary of the
Closing Date (the “Indemnity Escrow Release Date”), except that (a) the
representations and warranties contained in Sections 3.1 (Organization
and Capitalization), 3.2  (Subsidiary Organization and Capitalization), 3.3 
(Authority), 3.7(a)  (Title to Assets), 3.20  (Affiliate
Transactions), 3.21  (Absence of Questionable Payments), 3.23 
(Brokers), 4.1  (Authority), 4.3  (Title to Shares), 5.2 
(Authority), 5.5  (Acquisition of Shares for Investment) and 5.6 
(Acknowledgement) shall survive the Closing and continue indefinitely, (b) the
representations and warranties contained in Sections 3.14 (Taxes), 3.15 
(Labor Matters),  3.16  (Employee Benefit Plans), and 3.18 
(Environmental Matters), shall survive the Closing until the expiration of the
applicable statute of limitations (giving effect to any waiver, mitigation or
extension thereof) and (c) the representations and warranties contained in Section
3.12(c) (Product Warranties) shall survive the Closing and continue for [****]  following the Closing.  The covenants
and agreements of the parties contained in this Agreement or in any schedule
hereto, or in any certificate, document or other instrument delivered in
connection herewith shall survive in accordance with their respective terms.


9.2             
Indemnification Generally; Etc.


(a)               
By the Shareholders Severally in Favor of the Buyer
Indemnified Parties.  Each Shareholder, for itself for only its own actions
related to the following, and not for any other Shareholder, shall indemnify
and hold harmless Buyer and its officers, directors, control persons,
employees, stockholders, representatives, assigns, successors and Affiliates
(including, after the Closing, the Company and the Subsidiary) (collectively,
the “Buyer Indemnified Parties”) from any and all Losses that any Buyer
Indemnified Party may suffer, sustain or incur as a result of or arising out of
or in connection with the inaccuracy or breach of any representation or warranty
made by such Shareholder contained in Article 4 of this Agreement or any
Transaction Document.


(b)              
By the Shareholders Severally in Favor of the Buyer
Indemnified Parties.  The Shareholders, on a several (and not joint and
several basis), pro rata, based on the portion of the Closing Cash Payment
received by them, shall indemnify and hold harmless the Buyer Indemnified
Parties from any and all Losses that any Buyer Indemnified Party may suffer,
sustain or incur as a result of or arising out of or in connection with:


(i)                 
the inaccuracy or breach of any representation or warranty made
by the Shareholders contained in Article 3 of this Agreement; or 


(ii)               
the breach or non-performance of any agreement or covenant made
by the Company contained in this Agreement or any Transaction Document to be
performed or complied with by the Company prior to or as of the Closing; or


 







40










 








 








(iii)              
the breach or non-performance by any Shareholder of any agreement
or covenant made by such Shareholder contained in this Agreement or any Transaction
Document; or


(iv)             
the Actions described on Schedule 3.8 hereto and/or any
other Third Party Claims arising out of or related thereto.


(c)               
By Buyer and the Company in Favor of the Shareholders. 
Buyer and the Company, jointly and severally, shall indemnify and hold harmless
each Shareholder and its officers, directors, control persons, employees,
stockholders, representatives, assigns, successors and Affiliates
(collectively, the “Shareholder Indemnified Parties”) for any and all
Losses that such Shareholder Indemnified Party may suffer, sustain or incur as
a result of or arising out of:


(i)                 
the inaccuracy or breach of any representation or warranty made
by Buyer contained in Article 5 of this Agreement or any Transaction
Document;


(ii)               
the breach or non-performance by Buyer of any agreement or
covenant made by Buyer contained in this Agreement or any Transaction Document;


(iii)              
the breach of any agreement or covenant made by the Company
contained in this Agreement or any Transaction Document to be performed or
complied with by the Company following the Closing; or


(iv)             
all liabilities or obligations of the Company following the
Closing, provided that pursuant to this Agreement or the Transaction Documents
such liabilities or obligations (A) are not required to be paid by the
Shareholders, (B) were not required to be paid by the Company prior to Closing
or (C) are not eligible for indemnification from the Shareholders pursuant to Sections 9.2(a) 
or (b)  above.


(d)              
Exclusive Remedies.  After Closing, the indemnification
provisions of this Article 9 shall be the sole and exclusive remedy with
respect to any and all claims arising out of or relating to Buyer’s
investigation of the Company or the Business, this Agreement, the negotiation
and execution of this Agreement and the Transaction Documents (except to the
extent otherwise expressly set forth therein) and the performance by the
Parties of its or their terms, and no other remedy shall be had pursuant to any
contract or other tort theory or otherwise by the Shareholders, the Company,
Buyer and their respective trustees, officers, directors, employees, agents,
affiliates, attorneys, consultants, insurers, successors and assigns, all such
remedies being hereby expressly waived to the fullest extent permitted under
applicable Law.  In furtherance of the foregoing, from and after the Closing,
Buyer waives, to the fullest extent permitted under applicable Law, any and all
rights, claims and causes of action that it may have against the Shareholders
or their Affiliates relating to Buyer’s investigation of the Company and the
Business, this Agreement, the negotiation and execution of this Agreement and
the Transaction Documents, and any contract entered into pursuant hereto
(except to the extent otherwise expressly set forth therein) or the performance
by the Parties of its or their terms arising under or based upon any Law or
otherwise, other than as expressly set forth in this Article 9.  After
the Closing, Buyer shall not be entitled to a rescission of this Agreement or
any Transaction Document (or any related agreements) or any further
indemnification rights or 







41










 








 








claims of any nature
whatsoever, all of which are hereby expressly waived by Buyer to the fullest
extent permitted under applicable Law.  Notwithstanding anything to contrary
herein, Buyer shall retain, with respect to any and all claims arising out of
or relating to Buyer’s investigation of the Company or the Business, this
Agreement, the negotiation and execution of this Agreement and the Transaction
Documents and the performance by the Parties of its or their terms: (i) all
available remedies under applicable Law in the case of fraud, willful
misconduct or intentional misrepresentation, and (ii) remedies of specific
performance, injunction and other equitable relief.  


9.3             
Limitation on Indemnification.  Notwithstanding anything
to the contrary contained herein:


(a)               
Indemnity Basket.  No Buyer Indemnified Party or
Shareholder Indemnified Party shall have any right to indemnification pursuant
to Section 9.2(a), 9.2(b)(i)  or 9.2(c)(i), unless and
until the Buyer Indemnified Parties or the Shareholder Indemnified Parties
shall have incurred on a cumulative basis aggregate Losses in an amount
exceeding [****]  (the “Basket”),
in which event the right of Buyer, its Affiliates or such other Person to
indemnification shall apply to all Losses in excess of such amount; provided,
that the Basket will not apply to indemnification claims for breaches of the
representations and warranties set forth in [****]. 


(b)              
Indemnity Cap.  The sum of all Losses which the Buyer
Indemnified Parties shall have any right to indemnification by the Shareholders
pursuant to Section 9.2(a) or 9.2(b)(i)  shall not exceed [****]  (the “Cap”); provided,
that the Cap shall not apply to Losses as a result of or arising out of or in
connection with the inaccuracy or breach of any representation or warranty
contained [****]. 


(c)               
Mitigation of Losses.  Notwithstanding anything to the
contrary set forth in this Agreement, the Parties shall take commercially
reasonable steps (to the extent then available or possible) to mitigate all
Losses upon and after becoming aware of any event that could reasonably be
expected to give rise to such Losses (provided that the costs of such
mitigation shall be indemnifiable Losses hereunder).


(d)              
Limitation on Damages.  In no event shall any Party be
liable for loss of profits or incidental, special, punitive or consequential
damages for any reason whatsoever or for any multiple of damages or any
multiple of earnings or EBITDA, including, but not limited to, any inaccuracy
or breach of any representation or warranty made by any Party in this Agreement
or any Transaction Document; provided, however that the foregoing will not
preclude a Party from recovering direct damages for diminution of value.  The
Parties will be entitled to indirect, punitive, etc. damages in the event that
the indemnified party is required to pay such damages to a third party.


(e)               
Losses.  The amount of any Losses for which
indemnification is provided under this Article 9 shall be net of (i) any
accruals or reserves on the Final Closing Statement with respect to such
matter, (ii) any corresponding tax benefits or tax detriments (including, but
not limited to, any refund or reduction in taxes otherwise payable) realizable
by an Indemnified Person or its Affiliates with respect to such matter; and
(iii) any insurance proceeds payable to 







42










 








 








Buyer or the
Company or any other Indemnified Person with respect to such matter.  In the
event that any such insurance proceeds or recovery are received by an Indemnified
Person or Affiliate thereof after payment of an indemnity claim by an
Indemnifying Person hereunder, the Indemnified Person shall promptly pay the
amount of such proceeds or other recovery to the Indemnifying Person to the
extent of the Indemnifying Person’s prior payment.  Any insurance proceeds or
recovery received by the Buyer or the Company with respect to any Action listed
on Schedule 3.8 or a Third Party Claim arising out of or related thereto
shall be deposited with the Escrow Agent and added to the Litigation Escrow
with respect to any Action listed on Schedule 3.8 or to the Indemnity Escrow
with respect to any such Third Party Claim; provided that all proceeds  shall
be disbursed in accordance with the Escrow Agreement; and provided further that
any such insurance proceeds or recovery attributable to costs or expenses
incurred by the Company prior to the Closing Date shall be dispersed to the
Shareholders as directed by the Litigation SH Representative.  


(f)                
No Offset.  An Indemnified Person shall not satisfy, in
whole or in part, any amounts owning to the Indemnified Person under this Article
9 by setting off any amounts owed to any Indemnifying Person by any
Indemnified Person.


(g)               
Treatment of Buyer, the Company and Affiliates.  Buyer,
its Affiliates and the Company following the Closing, and each of their
respective successors and assigns, shall be deemed the same entity for purposes
of the receipt of payments of indemnified Losses, such that receipt of such
funds by the Company (and its successors and assigns) shall be deemed receipt
of the same funds by Buyer and its Affiliates (and their respective successors
and assigns), and vice versa. 


9.4             
Direct Claims.  As soon as possible after the Indemnified
Person’s discovery of any facts or conditions that may give rise to a Loss or
Losses for which indemnification under this Article 9  can be
obtained, the Indemnified Person shall, no later than thirty (30) days after
such discovery, give written notice thereof to the Indemnifying Persons.  Such
notice shall state the nature and basis of such claim in reasonable detail, and
the amount of such Losses (a reasonable estimate thereof if the actual amount
is not known or a brief explanation of the possible losses if the amount is not
capable of reasonable calculation at such time), and shall be accompanied by
copies of all relevant documentation with respect to such claim.
Notwithstanding the foregoing, no delay on the part of the Indemnified Person
in notifying any Indemnifying Person shall relieve the Indemnifying Person from
any liability or obligations hereunder unless the Indemnifying Person thereby
is actually and materially prejudiced by the delay.


9.5             
Third-Party Claims.  For any Indemnified Person to be
entitled to any indemnification provided for under this Agreement with respect
to Losses resulting from the assertion of any liability by third parties (each
a “Third-Party Claim”), the Indemnified Person must comply with and
shall be subject to the terms and conditions of this Section 9.5.   


 







43










 








 








(a)               
Notice of Loss.  The Indemnified Person shall give written
notice to the Indemnifying Persons of any Third-Party Claim as soon as possible
after the Indemnified Person’s receipt of notice of the Third-Party Claim, but
in no event later than thirty (30) days thereafter, and in no event more than
five (5) Business Days after being served with any summons, complaint or
similar legal process unless such legal process requires an immediate response,
in which case the Indemnified Person shall give immediate notice to the
Indemnifying Person.  Such notice shall state the nature and basis of such
Third-Party Claim and the amount thereof (or a reasonable estimate if the
actual amount is not known or not capable of reasonable calculation at such
time), and shall be accompanied by copies of all relevant documentation with
respect to such Third-Party Claim, including, but not limited to, any summons,
complaint or other pleading which may have been served, any written demand or
any other document or instrument.  Notwithstanding the foregoing, no delay on
the part of the Indemnified Person in notifying any Indemnifying Person shall
relieve the Indemnifying Person from any liability or obligations hereunder
unless the Indemnifying Person thereby is actually and materially prejudiced by
the delay.


(b)              
Procedures.   


(i)                 
Except as otherwise provided in Section 9.5(b)(ii) hereof, if the
Indemnifying Persons shall acknowledge in a writing delivered to the
Indemnified Person that the Indemnifying Persons shall be obligated under the
terms of their indemnification obligations hereunder in connection with all or
any portion of such Third-Party Claim, then the Indemnifying Persons shall have
the right to assume the defense of such Third-Party Claim or such portion of
such Third-Party Claim acknowledged in writing and delivered to the Indemnified
Persons within thirty (30) days of receipt of the notice from the Indemnified
Persons, at their own expense and by their own counsel which shall be
reasonably satisfactory to the Indemnified Persons; provided, that the
Indemnifying Persons shall not have the right to assume (or continue to assume)
the defense of any Third-Party Claim, notwithstanding the giving of such
written acknowledgement, if (i) the Indemnified Persons shall have one or more
legal or equitable defenses available to them which are different from or in
addition to those available to the Indemnifying Persons, (ii) such third
party claim relates to or arises in connection with any criminal proceeding,
action, indictment, allegation or investigation or seeks any remedy other than
the payment of money damages, (iii) the Indemnified Person and
Indemnifying Person are both named parties to the applicable proceedings and
the Indemnified Person shall have reasonably concluded based on the advice of
counsel that representation of both parties by the same counsel, or the conduct
of such defense by the Indemnifying Person, would be inappropriate due to
actual or potential differing interests between them, (iv) it is
reasonably likely that the Losses arising from such third party claim (if
determined in any manner) will exceed the amount such Indemnified Person will
be entitled to recover as a result of the limitations set forth in this Article
9 or (v) [****].  No acknowledgement
of an Indemnifying Person of its obligation to indemnify any Indemnified Person
shall be construed as an admission of liability with respect to the Person
making the Third-Party Claim.  If the Indemnifying Persons shall assume the
defense of a Third-Party Claim, the Indemnifying Persons shall not be
responsible for any legal or other defense costs subsequently incurred by the
Indemnified Persons in connection with the defense thereof, provided that the
Indemnified Persons shall be permitted to participate in the defense of such
claim.  If any of the Indemnifying Persons do not exercise their right to
assume the defense of a Third-Party Claim by giving the written 







44










 








 








acknowledgement referred to in this Section 9.5,
or are otherwise restricted from so assuming by the provisions of this Section
9.5(b)(i), the Indemnifying Persons shall nevertheless be entitled to
participate in such defense with their own counsel and at their own expense;
and in any such case, the Indemnified Persons may assume the defense of the
Third-Party Claim, with counsel which shall be reasonably satisfactory to the
Indemnifying Persons, and shall act reasonably and in accordance with their
good faith business judgment and shall not effect any settlement without the
consent of the Indemnifying Persons, which consent shall not unreasonably be
withheld or delayed.  Notwithstanding anything to the contrary herein, in the
event that there are multiple Indemnifying Persons with respect to a
Third-Party Claim and all of those Indemnifying Persons do not exercise their
right to assume the defense of a Third-Party Claim by giving the written
acknowledgement referred to in this Section 9.5, and they are not
otherwise restricted from so assuming by the provisions of this Section 9.5,
Buyer may designate that the Shareholders’ Representative assume the defense of
any such Third-Party Claims as provided in this Section 9.5.  If the
Indemnifying Persons exercise their right to assume the defense of a
Third-Party Claim, the Indemnifying Persons may enter into any settlement of
any Third-Party Claim; provided, the Indemnifying Person may not enter
into any settlement of any Third-Party Claim without the prior written consent
of the Indemnified Person (which consent shall not be unreasonably withheld or
delayed) if pursuant to or as a result of such settlement, (i) injunctive or
other equitable relief would be imposed against the Indemnified Person, (ii)
criminal allegations may be brought against the Indemnified Person in
connection with such Third-Party Claim, (iii) contains an admission of wrongdoing
or liability on behalf of any Indemnified Person, (iv) includes a finding or
admission that would have an adverse effect on other claims made or threatened
against any Parent Indemnified Party, (v) does not include as an unconditional
term thereof the delivery by the claimant or plaintiff to the Indemnified
Person of a written release from all liability in respect of such action, suit
or proceeding, or (vi) such settlement would or could reasonably be expected to
lead to any liability or create any financial or other obligation on the part
of the Indemnified Person for which the Indemnified Person is not entitled to
indemnification hereunder.  In such an event, the Indemnified Person will not
settle the subject claim at the expense of the Indemnifying Persons without the
prior written consent of the Indemnifying Person (which consent shall not be
unreasonably withheld or delayed).  If the Indemnified Person refuses to
consent to an offer of settlement for a Third-Party Claim involving only civil
money damages, the Indemnified Person shall be solely responsible for all
Losses incurred by such Indemnified Person from and after the date of such
refusal to the extent that the eventual resolution of such Third-Party Claim is
more costly than the amount which would have been expenses had the Indemnified
Person accepted such settlement offer.  If an Indemnified Person controls the
defense of a Third-Party Claim pursuant to this Section 9.5, it shall
keep the Indemnifying Persons informed of all material developments regarding
such Third-Party Claim. 


 







45










 








 








(ii)               
The Litigation SH Representative, on behalf of the Shareholders,
will assume the defense of the Actions described in Schedule 3.8 hereto. 
Within sixty (60) days after the Closing Date, the Litigation SH Representative
and the Buyer shall agree on legal counsel approved or certified by Admiral
Insurance.  In managing the defense of such Actions, the Litigation SH
Representative shall act reasonably and in accordance with his good faith
business judgment and shall not effect any settlement without the consent of
the Buyer, which consent shall not unreasonably be withheld or delayed; provided,
however, that the Litigation SH Representative may enter into a
settlement of an Action listed on Schedule 3.8 without the prior written
consent of the Buyer if such settlement, [****]. 
Notwithstanding the foregoing, the Buyer shall nevertheless be entitled to
participate in such defense with its own counsel and at its own expense.  If
the Litigation SH Representative fails to assume the defense, or having assumed
same, is grossly negligent in defending such Actions, then the Buyer and/or any
other Buyer Indemnified Party shall be entitled to assume such defense at the
Shareholders’ expense.


9.6             
Manner of Payment; Termination of Escrow.  Any payment
that that Shareholders are obligated to make to any Buyer Indemnified Parties
pursuant to this Article 9 shall be paid first, to the extent there are
sufficient funds in the Escrow Account, by release of funds to the Buyer
Indemnified Parties from the Escrow Account in accordance with the terms of the
Escrow Agreement and, second to the extent the Escrow Amount is insufficient to
pay any remaining sums due, then the Shareholders shall be required to pay a
pro rata portion (based on the portion of the Closing Cash Payment received by
each of them) of all additional sums due and owing to the Buyer Indemnified
Parties by wire transfer of immediately available funds within thirty (30)
Business Days after the determination of the amount of Losses thereof.   Any
payment that that Buyer is obligated to make to any Shareholder Indemnified
Parties pursuant to this Article 9 shall be paid by wire transfer of
immediately available funds within thirty (30) Business Days after the
determination of the amount of Losses thereof.  


9.7             
Additional Indemnification Terms.  For purposes of
determining the Loss resulting from or in connection with a breach requiring
the Shareholders to indemnify the Buyer Indemnified Parties pursuant to this Article 9,
(i) each representation, warranty, covenant and agreement made by the Company
or any Shareholder, whether made herein or in any other Transaction Document,
is made without any qualifications or limitations as to materiality (including
any qualifications or limitations made by reference to a Material Adverse
Effect) and (ii) without limiting the foregoing, the words “material” and
“Material Adverse Effect” and words of similar import shall be deemed deleted
from any such representation, warranty, covenant or agreement.












46










 








 








 


Article 10

MISCELLANEOUS 


10.1         
Counterparts; Delivery.  This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall be deemed to be one Agreement.  This Agreement and any
amendment hereto, to the extent signed and delivered by means of a facsimile
machine or via electronic mail of a .pdf or .tif or similar file format, shall
be treated in all manner and respects as an original agreement or instrument
and shall be considered to have the same binding legal effect as if it were the
original signed version thereof delivered in person.  At the request of any Party,
each Party shall re-execute original forms thereof and deliver them to all
parties.  No Party shall raise the use of a facsimile machine or electronic
mail of a .pdf or .tif or similar file format to deliver a signature, or the
fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine or via electronic mail of a
..pdf or .tif or similar file format, as a defense to the formation or
enforceability of this Agreement, and each Party forever waives any such
defense.  Each of the Parties acknowledges receipt of a fully-executed copy of
this Agreement.


10.2         
Governing Law; Jurisdiction; Waiver; Service. 


(a)               
Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without
reference to the conflicts of law principles thereof.


(b)              
JURISDICTION.  THE PARTIES HERETO IRREVOCABLY SUBMIT TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE STATE
OF DELAWARE IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION MAY AND
SHALL BE HEARD AND DETERMINED IN SUCH STATE OR FEDERAL COURT.  THE PARTIES HERETO
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING AND ANY RIGHTS THEY MAY HAVE TO TRANSFER OR CHANGE VENUE OF SUCH
ACTION OR PROCEEDING.  THE PARTIES FURTHER AGREE, TO THE EXTENT PERMITTED BY
LAW, THAT FINAL AND UNAPPEALABLE JUDGMENT AGAINST ANY OF THEM IN ANY ACTION OR
PROCEEDING CONTEMPLATED ABOVE SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY
OTHER JURISDICTION WITHIN OR OUTSIDE THE UNITED STATES BY SUIT ON THE JUDGMENT,
A CERTIFIED COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND AMOUNT
OF SUCH JUDGMENT.


 







47










 








 








(c)               
WAIVER OF IMMUNITY.  TO THE EXTENT THAT ANY PARTY HERETO
HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR
FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT
TO ITSELF OR ITS PROPERTY, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT.


10.3         
Service of Process.  Each Party hereby (i) consents to
service of process in any action between the Parties arising in whole or in
part under or in connection with this Agreement in any manner permitted by
Delaware Law, (ii) agrees that service of process made in accordance with
clause (i) or made by registered or certified mail, return receipt
requested, at its address specified pursuant to Section 10.7, will
constitute good and valid service of process in any such action, and (iii)
waives and agrees not to assert (by way of motion, as a defense, or otherwise)
in any such action any claim that service of process made in accordance with
clause (i) or (ii) does not constitute good and valid service of process.


10.4         
MUTUAL WAIVER OF JURY TRIAL.  EACH OF THE PARTIES
HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE
EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (a) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, (b) EACH PARTY UNDERSTANDS AND HAS CONSIDERED
THE IMPLICATIONS OF THIS WAIVER, (c) EACH PARTY MAKES THIS WAIVER VOLUNTARILY
AND (d) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.4. 


10.5         
Entire Agreement; Third-Party Beneficiaries.  This
Agreement (including agreements and exhibits incorporated herein), the
Disclosure Schedules hereto, and the Transaction Documents contain the entire
agreement between the parties with respect to the subject matter hereof, and
there are no agreements, understandings, representations or warranties between
the parties with respect to the subject matter hereof other than those set
forth or referred to herein.  This Agreement is not intended to confer upon any
Person not a party hereto (and their successors and assigns permitted by Section
10.8 hereof) any rights or remedies hereunder.


 







48










 








 








10.6         
Expenses and Payments.  Except as set forth in this
Agreement, all legal and other costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses.  Notwithstanding the foregoing, the
Transaction Expenses shall be paid in accordance with Section 2.3(e).
All payments of money to be made pursuant to this Agreement shall be made in
U.S. Dollars.


10.7         
Notices.  All notices, consents, elections and other
communications hereunder shall be sufficiently given for any purpose hereunder
only if in writing and delivered personally or sent pre-paid by
nationally-recognized overnight delivery service for next Business Day
delivery, to the appropriate address or number as set forth below.  Each such
notice, consent, election or other communication shall be effective when
received by the addressee thereof in the case of personal service, or, if sent
by overnight delivery service as described herein, the next Business Day after
deposit with such service.


Notices to the Shareholders shall
be addressed to addresses for the Shareholders set forth on Schedule 1, with a
copy (which shall not constitute notice) to:


 


Horwood Marcus & Berk Chartered


500 West Madison, Suite 3700


Chicago, Illinois 60661


Attn: Jeffrey A. Hechtman


 


or at such other address and to the attention of such other
person as a Shareholder may designate by written notice to Buyer.  


 


Notices to Buyer shall be addressed
to:


 


Innophos, Inc. 


259 Prospect Plains Road, P.O. Box
8000 


Cranbury, NJ 08512


Attn:  Chief Executive Officer


Facsimile: (609) 860-0357  


 


with copies
(which shall not constitute notice) to:


 


Innophos,
Inc. 


259 Prospect
Plains Road, P.O. Box 8000 


Cranbury, NJ
08512


Attn: 
General Counsel


Facsimile: 
(928) 832-3116


 


or at such other address and to the attention of such other
person as Buyer may designate by written notice to the Shareholders.


 


 







49










 








 








10.8         
Successors and Assigns.  This Agreement shall be binding
upon and inure to the benefit of the Parties hereto and their respective
successors and assigns; provided, however, that no Party shall assign its
rights or delegate its obligations under this Agreement without the express
prior written consent of each other Party, except that (a) each Shareholder may
transfer or assign any or all of its rights hereunder to any Affiliate of such
Shareholder, to any trust or other estate planning entity, or to any charitable
trust, organization, group or other charitable organization without the consent
of any other Party, in which case, such assignee shall be deemed the
“Shareholder” for all purposes hereunder; provided, however, that the assigning
Shareholder shall continue to be liable for all of his/her/its obligations
hereunder (including without limitation the covenants in Articles 7 and 9
hereof); (b) Buyer, so long as Buyer remains liable for its obligations
hereunder, may transfer any of its rights or obligations hereunder to any of
its Affiliates; or (c) the Company or Buyer may assign as collateral security
its rights hereunder to any of its lenders providing financing for the
transactions contemplated hereby, in each case without the consent of any
Party.


10.9         
Amendments and Waivers.  This Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
Buyer and the Shareholder Representative.  The Shareholders may waive
compliance by Buyer, and Buyer may waive compliance by the Shareholders, with
any term or provision of this Agreement on the part of such Party to be
performed or complied with, but only by an instrument in writing.  The waiver
by any Party of a breach of any term or provision of this Agreement shall not
be construed as a waiver of any subsequent breach.


10.10      Time
of Essence.  With regards to all dates and time periods set forth in this
Agreement, time is of the essence.


10.11      Severability. 
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect.  Any provision of this Agreement held invalid
or unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.


10.12      Interpretation. 


(a)               
The section and article headings contained in this Agreement are
inserted for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.


(b)              
When a reference is made to an article, section, exhibit or
schedule, such reference shall be to an article, section, exhibit or schedule
of this Agreement, unless clearly indicated otherwise.


(c)               
The preamble, recitals, Disclosure Schedules and Exhibits
contained, identified or referenced in, or attached to, this Agreement are
incorporated herein by reference and made a part hereof.


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


 







50










 








 








(e)               
The words “hereof”, “herein” and “herewith” and words of similar
import shall be construed to refer to this Agreement as a whole and not to any
particular provision of this Agreement, unless clearly indicated otherwise.


(f)                
The meaning assigned to each term defined herein shall be equally
applicable to both the singular and the 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 shall have a corresponding
meaning.


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


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


(i)                 
Matters disclosed on any Disclosure Schedule shall be deemed to
be disclosed in all other Disclosure Schedules to which such fact or item may
reasonably apply so long as such disclosure is in sufficient detail to enable a
reasonable party to identify the facts or items to which it applies.


(j)                
It is understood and agreed that the specification of any dollar
amount in the representations and warranties contained in this Agreement or the
inclusion of any specific item in the Disclosure Schedules is not intended to
imply that such amounts, or higher or lower amounts, or the items so included,
or other items, are or are not material, and no Party shall use the fact of the
setting of such amounts or the fact of the inclusion of any such item in the
Disclosure Schedules in any dispute or controversy between the parties as to
whether any obligation, item or matter not described herein or included in a
Disclosure Schedule is or is not material for purposes of this Agreement, or as
a point of reference in determining any standard of materiality under this
Agreement.


(k)              
The language used in this Agreement will be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction will be applied against any Party.


10.13      Public
Announcement.  Any public announcements or similar publicity with respect
to this Agreement and the transactions contemplated hereunder shall be subject
to the mutual agreement of Buyer and the Shareholders’ Representative, except
to the extent required by applicable Law or the rules or regulation of any
applicable stock exchange and provided, that such release shall not
disclose any competitive information specifically redacted or excluded by Buyer
in any disclosure made pursuant to applicable Law or regulation of any
applicable stock exchange; and provided, further, that the Party issuing
such release shall allow the other Party reasonable time to review and comment
on such release in advance of its issuance.


 







51










 








 








10.14     
Specific Performance.   Each Party acknowledges that
the other Parties will be irreparably harmed and that there may not be an
adequate remedy at Law for any violation by any Party of any of the covenants
or agreements contained in this Agreement.  It is accordingly agreed that, in
addition to any other remedies which may be available upon the breach of any
such covenants or agreements, each Party hereto shall have the right to
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other parties’ covenants and agreements
contained in this Agreement (without the need to post a bond) in addition to
any other remedy to which it may be entitled, at Law or in equity.  


[Signature page
follows on next page]


 
















52










 








 








IN WITNESS
WHEREOF, this Stock Purchase Agreement has been signed by or on behalf of each
of the parties as of the day first above written.


 


                                                                                    BUYER:


 


                                                                                    INNOPHOS,
INC.


 


 


                                                                                    By:    /s/Randolph
Gress                       


                                                                                     


                                                                                    Name:
Randolph Gress


                                                                                     


                                                                                    Title: 
President and Chief Executive Officer


 


 


 


[Signature
Page Follows]








Signature Page to Stock Purchase Agreement










 








 










 


 


                                                                                    COMPANY:


 


                                                                                    KI
ACQUISITION INC.


 


 


                                                                                    By:
      /s/ Scott Dickes            


                                                                                         
Scott Dickes, President


 


                                                                                     


 


 


 


                                                                                    SHAREHOLDERS
SIGNATURE PAGE


                                                                                    ATTACHED
AS EXHIBIT A


 











Signature Page to Stock Purchase Agreement