**EXHIBIT 10.2**

 

 

**ASSET PURCHASE AGREEMENT**

**by and among**

 

**Accellent Corp.,**

**as Parent,**

 

**CE Huntsville Holdings Corp.,**

**as Purchaser,**

 

**Campbell Engineering, Inc.,**

**as the Seller,**

 

**and**

 

**each of the Sharehoolders of the Seller**

**set forth on the signature page hereto,**

**constituting all of the Shareholders of theSeller**

 

**Dated as of September 12, 2005**

 

 

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**TABLE OF CONTENTS**

 
| **Title**                                                                          | ** **                                              | ** ** |
|------------------------------------------------------------------------------------|---------------------------------------------------------|------------|
| ARTICLE I DEFINITIONS AND TERMS                                               |                                                    |
| Section 1.1                                                                   | Defined Terms                                           |       |
| Section 1.2                                                                   | Terms Generally                                         |       |
|                                                                               |                                                    |       |
| ARTICLE II ACQUISITION AND DISPOSITION OF ASSETS                              |                                                    |
| Section 2.1                                                                   | Purchase and Sale of Assets                             |       |
| Section 2.2                                                                   | Excluded  Assets                                        |       |
| Section 2.3                                                                   | Assumption  and Exclusion of Liabilities                |       |
| Section 2.4                                                                   | Nondelivered  Assets                                    |       |
| Section 2.5                                                                   | Non-Assignment  if Breach                               |       |
|                                                                               |                                                    |       |
| ARTICLE III PAYMENT AND DELIVERY                                              |                                                    |
| Section 3.1                                                                   | Shareholder  Real Estate Purchase Price; Purchase Price |       |
| Section 3.2                                                                   | Adjustments  to Purchase Price                          |       |
| Section 3.3                                                                   | Payment of  Purchase Price                              |       |
| Section 3.4                                                                   | Earnout Payments                                        |       |
| Section 3.5                                                                   | Allocation  of Consideration                            |       |
| Section 3.6                                                                   | Closing                                                 |       |
| Section 3.7                                                                   | Deliveries  by the Seller                               |       |
| Section 3.8                                                                   | Deliveries  by the Shareholders                         |       |
| Section 3.9                                                                   | Deliveries  by Parent                                   |       |
| Section 3.10                                                                  | Deliveries  by Purchaser                                |       |
|                                                                               |                                                    |       |
| ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE  SHAREHOLDERS |                                                    |
| Section 4.1                                                                   | Authorization  and Validity                             |       |
| Section 4.2                                                                   | Equity;  Good Title                                     |       |
| Section 4.3                                                                   | Organization                                            |       |
| Section 4.4                                                                   | No Conflict                                             |       |
| Section 4.5                                                                   | Governmental  Consents                                  |       |
| Section 4.6                                                                   | Financial  Statements                                   |       |
| Section 4.7                                                                   | Absence of  Certain Changes or Events                   |       |
| Section 4.8                                                                   | Absence of  Undisclosed Liabilities                     |       |
| Section 4.9                                                                   | Property;  Assets                                       |       |
| Section 4.10                                                                  | Litigation  and Claims; Compliance with Laws            |       |
| Section 4.11                                                                  | Taxes                                                   |       |
| Section 4.12                                                                  | Insurance                                               |       |
| Section 4.13                                                                  | Environmental  Matters                                  |       |
| Section 4.14                                                                  | Material  Contracts                                     |       |
| Section 4.15                                                                  | Intellectual  Property                                  |       |
| Section 4.16                                                                  | Employee Benefits; ERISA                                |       |
| Section 4.17                                                                  | Labor Matters                                           |       |
| Section 4.18                                                                  | Records                                                 |       |
| Section 4.19                                                                  | Affiliate Transactions                                  |       |
| Section 4.20                                                                  | Indebtedness                                            |       |
| Section 4.21                                                                  | Brokers, Finders, Etc.                                  |       |
| Section 4.22                                                                  | Questionable Payments                                   |       |
| Section 4.23                                                                  | Competing Business                                      |       |
| Section 4.24                                                                  | Compliance With Bulk Sales Act; Uniform Commercial Code |       |

 

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| Section 4.25                                                      | Product Warranty and Liability                     |   |
|------------------------------------------------------------------------|----------------------------------------------------|--------|
| Section 4.26                                                      | Naturalization of the Employees                    |   |
| Section 4.27                                                      | Bank Accounts                                      |   |
| Section 4.28                                                      | Earnout Plan                                       |   |
|                                                                   |                                               |   |
| ARTICLE V REPRESENTATIONS AND  WARRANTIES OF PARENT AND PURCHASER |                                               |
| Section 5.1                                                       | Authorization and Validity                         |   |
| Section 5.2                                                       | Organization                                       |   |
| Section 5.3                                                       | No Conflict                                        |   |
| Section 5.4                                                       | Governmental Consents                              |   |
| Section 5.5                                                       | Payment of Purchase Price                          |   |
|                                                                   |                                               |   |
| ARTICLE VI COVENANTS                                              |                                               |
| Section 6.1                                                       | Assignment of 401(k) Sponsorship              |   |
| Section 6.2                                                       | Employees                                          |   |
| Section 6.3                                                       | Proration                                          |   |
| Section 6.4                                                       | Cooperation                                        |   |
| Section 6.5                                                       | Further Assurances                                 |   |
|                                                                   |                                               |   |
| ARTICLE VII SURVIVAL AND  INDEMNIFICATION                         |                                               |
| Section 7.1                                                       | Survival of Representations and Warranties         |   |
| Section 7.2                                                       | Indemnification by the Seller and the Shareholders |   |
| Section 7.3                                                       | Indemnification by Parent and Purchaser            |   |
| Section 7.4                                                       | Notice and Resolution of Claim                     |   |
| Section 7.5                                                       | Limitations                                        |   |
| Section 7.6                                                       | Exclusive Remedy                                   |   |
| Section 7.7                                                       | Mitigation of Damages                              |   |
|                                                                   |                                               |   |
| ARTICLE VIII MISCELLANEOUS                                        |                                               |
| Section 8.1                                                       | Notices                                            |   |
| Section 8.2                                                       | Amendment, Waiver                                  |   |
| Section 8.3                                                       | Assignment                                         |   |
| Section 8.4                                                       | Entire Agreement                                   |   |
| Section 8.5                                                       | Parties in Interest                                |   |
| Section 8.6                                                       | Expenses                                           |   |
| Section 8.7                                                       | Governing Law; Jurisdiction; Service of Process    |   |
| Section 8.8                                                       | Specific Performance                               |   |
| Section 8.9                                                       | Transfer and Similar Taxes                         |   |
| Section 8.10                                                      | Counterparts                                       |   |
| Section 8.11                                                      | Headings                                           |   |

 

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**ASSET PURCHASE AGREEMENT**

 

This ASSET PURCHASE AGREEMENT, dated as of September 12, 2005(this “Agreement”), is made and entered into by and among Accellent Corp., aColorado corporation (“Parent”), CE Huntsville Holdings Corp., a Delawarecorporation and wholly owned subsidiary of Parent (“Purchaser”), CampbellEngineering, Inc., an Alabama corporation (the “Seller”), and each of theshareholders of the Seller signatory hereto, constituting all of theshareholders of the Seller (each hereinafter individually referred to as a “Shareholder”and collectively referred to as the “Shareholders”).

 

**WITNESSETH**

 

WHEREAS, the Seller is engaged in the business of providing precisionmachining, assembly and engineering design for the aerospace and medicalindustries (the “Business”);

 

WHEREAS, the Seller intends to sell, transfer and assign to Purchaser,and Purchaser intends to purchase, acquire and assume from the Seller,substantially all of the assets and certain liabilities of the Seller relatingto the operation of the Business all upon the terms and subject to theconditions set forth in this Agreement;

 

WHEREAS, the Shareholders intend to sell, transfer and assign toPurchaser, and Purchaser intends to purchase, acquire and assume from theShareholders, the Shareholder Real Estate (as hereinafter defined) upon theterms and subject to the conditions set forth in this Agreement;

 

WHEREAS, the Shareholders, who collectively own all of the outstandingcapital stock of the Seller, have determined it to be in the Shareholders’ bestinterests that (A) the Shareholders sell, transfer and assign toPurchaser, and that Purchaser purchases, acquires and assumes from theShareholders, the Shareholder Real Estate and (B) the Seller sell, transferand assign to Purchaser, and that Purchaser purchases, acquires and assumesfrom the Seller, such assets and liabilities of the Seller as set forth in thisAgreement; and

 

WHEREAS, Parent has determined it to be in its and Purchaser’s bestinterests for Parent to be the sole party hereunder obligated to pay, and topay, to Seller any Earnout Amounts (as hereinafter defined) required to be paidpursuant to this Agreement.

 

NOW THEREFORE, in consideration of the mutual promises and covenantscontained herein and other good and valuable consideration, the receipt andsufficiency of which is hereby acknowledged, the parties hereto hereby agree asfollows:

 

**ARTICLE I**

**DEFINITIONS AND TERMS**

 

Section 1.1                                      *Defined Terms.*  Each capitalized term used and not otherwisedefined herein shall have the respective meaning ascribed to such term in *Schedule 1.1* attached hereto or inthe Section referenced in such *Schedule 1.1*.

 

Section 1.2                                      *Terms Generally.*  The definitions in *Schedule 1.1* shall apply equally to both the singularand plural forms of the terms defined. Whenever the context may require, anypronoun shall include the corresponding masculine, feminine and neuter forms.The words “include,” “includes” and “including” shall be deemed to be followedby the phrase “without limitation” even if not followed actually by such phraseunless the context expressly provides otherwise. Unless otherwise expresslydefined, terms defined in the Agreement shall have the same meanings when usedin any Exhibit or Schedule and terms defined in any Exhibit or Schedule shallhave the same meanings when used in the Agreement or in any other Exhibit orSchedule. Unless the context requires otherwise, references to Articles andSections refer to Articles and Sections of this Agreement, andreferences to Schedules or Exhibits refer to the Schedules and Exhibitsattached to this Agreement, each of which is made a part hereof for allpurposes. The words “herein,” “hereof,” “hereto” and “hereunder” and otherwords of similar import refer to this Agreement as a whole and not to anyparticular provision of this

 

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Agreement. The phrase “made available” in this Agreement shall meanthat the information referred to has been made available by the party inquestion. The phrases “the date of this Agreement,” “the date hereof” and termsof similar import, unless the context otherwise requires, shall be deemed torefer to the date set forth in the introductory paragraph of this Agreement.References to “dollars” or “$” in this Agreement shall be deemed to refer tothe applicable denomination of federal funds of the United States of America.

 

**ARTICLE II**

**ACQUISITION AND DISPOSITION OF ASSETS**

 

Section 2.1                                      *Purchase and Sale of Assets.*

 

(a)                                  Atthe Closing, upon the terms and subject to the conditions set forth in thisAgreement, the Shareholders shall transfer, assign, convey and deliver toPurchaser, and Purchaser shall receive from the Shareholders, all right, titleand interest in and to that certain real property listed in *Schedule 2.1(a) *and the improvementsthereon and the appurtenances thereto (the “Shareholder Real Estate”) free andclear of all Liens, except as otherwise contemplated herein and except foreasements and non-monetary Liens which do not adversely impact the use of theShareholder Real Estate by the Business as currently conducted. At the Closing,upon the terms and subject to the conditions set forth in this Agreement, theSeller shall transfer, assign, convey and deliver to Purchaser, and Purchasershall receive from the Seller, all right, title and interest in and to all ofthe Assets free and clear of all Liens, except as otherwise contemplatedherein. It is the intent of the parties hereto that the “Assets” shall mean allright, title and interest in and to substantially all of the assets useful to,used in or held for use in the Business as of the Closing Date wherever suchassets are located and whether real, personal or mixed, tangible or intangible,and whether or not any such assets have any value for accounting purposes orare carried or reflected on or specifically referred to in the Seller’s booksand records or financial statements, which assets shall exclude the ExcludedAssets but shall include the following:

 

(i)                                     all IntellectualProperty used in or useful to the conduct of the Business including those itemslisted but not exhaustively described in *Schedule 2.1(a)(i)*;

 

(ii)                                  all contracts,agreements, contract rights, license agreements, purchase and sales orders,quotations and other executory commitments of the Seller entered into inconnection with the conduct of the Business listed in *Schedule 2.1(a)(ii) *(the “Contracts”);

 

(iii)                               all accounts receivableand all notes or other securities and accounts (excluding the Seller’s bankaccounts) attributable to the Seller for operations of the Business on or afterthe Closing Date;

 

(iv)                              all computer equipmentand related software and software licenses, office equipment and other personalproperty listed in *Schedule 2.1(a)(iv)*;

 

(v)                                 all books of accountand customer and supplier lists including addresses, drawings, files, papersand records of the Seller;

 

(vi)                              all deposits, advancepayments, prepaid items and expenses, deferred charges, rights of offset andcredits and claims for refund relating to the Seller;

 

(vii)                           all claims, rights andcauses in action against third parties and all rights to insurance proceedsrelating to any damage, destruction or impairment of the tangible Assets priorto the Closing Date;

 

(viii)                        all licenses, permits, consentsand certificates of any regulatory, administrative or other governmental agencyor body issued to or held by the Seller and necessary or incidental to theconduct of the Business (to the extent the same are transferable);

 

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(ix)                                all of the Seller’sright, title and interest in, and benefits accruing to the Seller under, allreal property owned by the Seller and all leaseholds and subleaseholds relatingto real property (including all improvements thereon and appurtenancesthereto);

 

(x)                                   all fixed assets,manufacturing equipment, inventory and leasehold improvements;

 

(xi)                                all goodwill associatedwith the Assets, in particular, and the Seller, in general; and

 

(xii)                             all other miscellaneousitems set forth in *Schedule 2.1(a)(xii)*.

 

(b)                                 Thesale, conveyance, assignment, transfer and delivery of the Shareholder RealEstate and the Assets will be effected by delivery by the Seller andShareholders to Purchaser of (i) a Statutory Warranty Deed or the Bill ofSale and Assignment Agreement, as applicable, (ii) executed copies of thefilings, consents, approvals, notices or waivers, and copies of the instrumentstransferring, registering or issuing the consents, approvals, permits,licenses, permissions, registrations or other authorizations referred toherein, and (iii) such other instruments of conveyance, transfer andassignment (collectively, the “Instruments of Transfer”) as shall be necessaryto vest in Purchaser full right, title and interest in and to (A) theAssets, free and clear of all Claims and Liens, whether absolute, accrued,contingent or otherwise and (B) the Shareholder Real Estate, free andclear of all Claims and Liens, whether absolute, accrued, contingent orotherwise, other than as contemplated herein and except for easements andnon-monetary Liens which do not adversely impact the use of the ShareholderReal Estate by the Business as currently conducted.

 

Section 2.2                                      *Excluded Assets.*  The Assets shall not include (i) anyoriginal minute books, stockholder books, tax books and other similar recordsof the Seller (a true and complete copy of each of which has been provided toPurchaser) (ii) all cash on hand, cash equivalents and bank accountsof the Seller (which accounts contain sufficient funds to cover outstandingchecks drawn on the Seller’s bank accounts as of the Closing Date), (iii) theSeller’s rights in any insurance policies, other than rights to insuranceproceeds relating to any damage, destruction or impairment of the tangibleAssets prior to the Closing Date, and (iv) any assets of the Seller setforth in *Schedule 2.2*(collectively, the “Excluded Assets”); all of the Seller’s right, title andinterest in and to which, as the same exist as of the Closing Date, shall beretained by the Seller.

 

Section 2.3                                      *Assumption and Exclusion of Liabilities.*

 

(a)                                  Uponthe terms and subject to the conditions of this Agreement, at the Closing,Purchaser will assume and agree to pay, perform and discharge as and when dueonly the following liabilities and obligations of the Seller (collectively, the“Assumed Liabilities”): (i) those current liabilities and obligations(including those relating to accounts payable and accrued but unpaid employeepayroll) of the Seller listed in *Schedule 2.3(a)(i)*;(ii) the future obligations of the Seller as of the Closing Date under thecontracts and agreements described in *Schedule 2.1(a)(ii) *(exceptto the extent otherwise provided in such Schedule), together with such othercontractual obligations that relate solely to the Business that have been enteredinto in the ordinary course of business of the Seller consistent with pastpractices and have been disclosed to Purchaser prior to the Closing, includingwarranty obligations solely to retool or replace defective products sold in theordinary course of business in an amount not to exceed TWENTY-FIVE THOUSANDDOLLARS $25,000 in any trailing twelve (12) month period of the Business(it being acknowledged that Purchaser assumes no other express or impliedwarranty obligations of the Seller whatsoever, including any warrantyobligations with respect to products liability or monetary damages as a resultof the manufacture of defective products); and (iii) all accrued vacationand sick leave of the Seller’s employees who will be employed by Purchaserfollowing the Closing Date as set forth in *Schedule 2.3(a)(iii)*.The assumption of the Assumed Liabilities by Purchaser will be effected bydelivery by Purchaser to the Seller of the duly executed Instruments ofTransfer.

 

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(b)                                 Exceptas explicitly set for above in Section 2.3(a), the Seller shall retain,and Purchaser shall not assume, and nothing contained in this Agreement shallbe construed as an assumption by Purchaser of, any other liabilities,obligations or undertakings of the Seller (or any Subsidiary, division,associate or Affiliate of the Seller, or of any Person) of any naturewhatsoever, whether accrued, absolute, fixed or contingent, known or unknown,due or to become due, unliquidated or otherwise, including any liabilitiesrelating to (i) all Indebtedness of the Seller, (ii) Taxes withrespect to or attributable to the Assets for all taxable periods through theClosing Date, Taxes with respect to or attributable to the properties, Businessor operations of the Seller or any Subsidiary, division, associate or Affiliateof the Seller and Taxes of the Seller with respect to or attributable to thetransactions contemplated hereby or otherwise, (iii) any Liabilitiesassociated with the Excluded Assets and (iv) any Liabilities associatedwith the Assets that arise or relate to events that occurred prior to theClosing Date. The Seller shall remain responsible for all of the liabilities,obligations and undertakings of the Seller not expressly assumed by Purchaserin Section 2.3(a). Purchaser is not assuming any liabilities, obligationsor undertakings whatsoever of the Shareholders.

 

Section 2.4                                      *Nondelivered Assets.*  Notwithstanding anything else contained inthis Agreement to the contrary, in the event that an Asset is not delivered bythe Seller to Purchaser at Closing (a “Nondelivered Asset”), the Seller shalldeliver such Nondelivered Asset to Purchaser as soon as the Seller has actualknowledge of the existence of such Nondelivered Asset.

 

Section 2.5                                      *Non-Assignment if Breach.*  Notwithstanding anything contained in thisAgreement to the contrary, this Agreement shall not constitute an agreement toassign any of the Assets if the attempted assignment, as a result of theabsence of the consent or authorization of a third party, would constitute abreach or default under any lease, agreement, Liens or commitment or would inany way adversely affect the rights, or increase the obligations, of any partyor any Subsidiary with respect thereto or would otherwise affect the ability ofPurchaser to receive the benefit of the Assets. If any such consent orauthorization is not obtained, or if an attempted assignment or assumptionwould be ineffective or would adversely affect the rights or benefits orincrease the obligations of Purchaser with respect to any such Assets, then theparties shall enter into such reasonable cooperative arrangements (includingsublease, agency, partial closing, management, indemnity or paymentarrangements and enforcement at the cost and for the benefit of Purchaser ofany and all rights of the Seller against an involved third party) to providethe parties with such benefits and obligations as most closely approximatethose contemplated by this Agreement.

 

**ARTICLE III**

**PAYMENT AND DELIVERY**

 

Section 3.1                                      *Shareholder Real Estate Purchase Price; PurchasePrice.*  The total purchaseprice to be paid to the Shareholders in respect of the Shareholder Real Estate(the “Shareholder Real Estate Purchase Price”) under this Agreement shall be anamount equal to FIVE HUNDRED TWENTY-EIGHT THOUSAND DOLLARS ($528,000), whichamount shall be payable in the manner provided in Section 3.3 below. Thetotal purchase price to be paid to the Seller (the “Purchase Price”) under thisAgreement shall be an amount up to TWENTY-NINE MILLION SIX HUNDRED THOUSANDDOLLARS ($29,600,000), which amount shall be payable in the manner provided in Section 3.3and Section 3.4 below.

 

Section 3.2                                      *Adjustments to Purchase Price.*

 

(a)                                  ThePurchase Price will be subject to the following adjustments on the ClosingDate, based on the difference between the Net Working Capital Balance of theSeller as of the close of business on the day immediately prior to the ClosingDate as set forth in a schedule delivered by the Seller to Purchaser priorto the Closing Date (the “Closing Net Working Capital Balance”) and TWO

 

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MILLION FOUR HUNDRED TWENTY-TWO THOUSAND FIVE HUNDRED TWENTY-SEVENDOLLARS ($2,422,527) (the “Baseline Net Working Capital Balance”):

 

(i)                                     if the BaselineNet Working Capital Balance exceeds the Closing Net Working Capital Balance,the Purchase Price will be decreased by the amount by which the Baseline NetWorking Capital Balance exceeds the Closing Net Working Capital Balance; and

 

(ii)                                  if the Baseline NetWorking Capital Balance is equal to or less than the Closing Net WorkingCapital Balance, the Purchase Price will not be adjusted pursuant to this Section 3.2(a).

 

For purposes of this Agreement, the “Net Working Capital Balance” ofthe Seller shall mean all current assets of the Seller (including all amountsowed to the Seller by any of the Shareholders) less all current liabilities(excluding the current portion of any long-term Indebtedness and anyIndebtedness comprised of capital leases), calculated with respect to both theBaseline Net Working Capital Balance and the Closing Net Working CapitalBalance, in accordance with GAAP applied on a consistent basis throughout theperiods covered thereby.

 

(b)                                 Followingthe Closing, the adjustments to the Purchase Price pursuant to Section 3.2(a) willbe subject to review by Purchaser in accordance with the following procedure:

 

(i)                                     Purchaser shallhave until ninety (90) days after the Closing Date (the “VerificationPeriod”) to verify the Seller’s determinations of the Closing Net WorkingCapital Balance. Any adjustments to such determinations shall be made bywritten notice to the Seller within the Verification Period (an “AdjustmentNotice”) setting forth (A) Purchaser’s objections to the Seller’sdetermination of the Closing Net Working Capital Balance, (B) Purchaser’sdetermination of the Closing Net Working Capital Balance, and (C) theproposed adjustment to decrease the Purchase Price (the “Proposed PurchasePrice Adjustment”). If Purchaser does not deliver an Adjustment Notice to theSeller within the Verification Period, the Seller’s determination of theClosing Net Working Capital Balance shall be final and binding upon the partieshereto.

 

(ii)                                  To the extent thatthe Seller has any objection to the Proposed Purchase Price Adjustment, suchobjection shall be made by written notice to Purchaser (the “Objection Notice”)within fifteen (15) days after delivery of the Adjustment Notice (the “ObjectionPeriod”). If the Seller does not deliver an Objection Notice to the ProposedPurchase Price Adjustment within the Objection Period, the Purchase Price shallbe adjusted by an amount equal to such Proposed Purchase Price Adjustment andthe Seller shall pay Purchaser an amount equal to the Proposed Purchase PriceAdjustment or Purchaser may offset the Proposed Purchase Price Adjustmentagainst the Escrow Amount and the Earnout Amounts as set forth below.

 

(iii)                               If the Seller deliversan Objection Notice in response to any Adjustment Notice delivered byPurchaser, and Purchaser and the Seller are unable to agree upon the amount ofany Proposed Purchase Price Adjustment within fifteen (15) days afterdelivery of the Objection Notice, then a nationally recognized accounting firmto be mutually agreed upon based on good faith negotiations (the “Auditor”),shall be requested to conduct a review and determine the amount of the ClosingNet Working Capital Balance. The Auditor shall be instructed in performing suchreview that Purchaser and the Seller shall each be provided with copies of anyand all correspondence and drafts distributed by the Auditor to any party.Prior to issuing its final determination, Purchaser and the Seller shall eachhave the opportunity to provide the Auditor with any additional informationthat such party deems relevant, provided that the Auditor shall not be requiredto use any such information in connection with its review and determination ofthe Closing Net Working Capital Balance. Upon completion of its review anddetermination, the Auditor shall promptly deliver copies of its report toPurchaser and the Seller, setting forth the Auditor’s determination of theClosing Net Working Capital Balance (the “Auditor’s Report”). The Auditor’sReport will be conclusive and binding upon both Purchaser and the Seller, andPurchaser shall be entitled to a

 

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Purchase Price Adjustment by an amount equal to the excess, if any, ofthe Closing Net Working Capital Balance as determined by the Seller on orbefore the Closing Date over the Closing Net Working Capital Balance determinedby the Auditor and reported in the Auditor’s Report and, unless such excess ispaid in cash by the Seller as contemplated pursuant to Section 3.2(b)(ii),to offset such excess against the Escrow Amount and the Earnout Amount asdescribed below. Fifty percent (50%) of the costs and expenses of the Auditorand the Auditor’s Report contemplated by this Section 3.2(b)(iii) shallbe borne by Purchaser and the remainder of such costs shall be borne by theSeller and the Shareholders.

 

Section 3.3                                      *Payment of Purchase Price.*

 

(a)                                  FIVEHUNDRED TWENTY-EIGHT THOUSAND DOLLARS ($528,000) shall be paid in cash on theClosing Date by Purchaser for the benefit of the Shareholders in respect of theShareholder Real Estate by inter-bank wire transfers of immediately availablefederal funds payable in the amounts and to the Persons set forth in *Schedule 3.3(a)*.

 

(b)                                 SEVENTEENMILLION SIX HUNDRED THOUSAND DOLLARS ($17,600,000) of the Purchase Price, lessany adjustments to the Purchase Price made pursuant to Section 3.2, lessthe Escrow Amount, shall be paid in cash on the Closing Date by Purchaser (the “ClosingCash Payment”) for the benefit of the Seller by inter-bank wire transfers of immediatelyavailable federal funds payable in the amounts and to the Persons set forth in *Schedule 3.3(b)*.

 

(c)                                  TWELVEMILLION DOLLARS ($12,000,000) of the Purchase Price shall be paid after theClosing, if at all, by Parent for the benefit of the Seller pursuant to theterms of the earnout arrangement set forth in Section 3.4 hereof.

 

(d)                                 FOURHUNDRED THOUSAND DOLLARS ($400,000) (the “Escrow Amount”) of the Purchase Priceshall not be paid to the Seller at Closing and shall instead be deposited byPurchaser into an account to be managed and paid out by the Escrow Agent inaccordance with the terms of an Escrow Agreement, substantially in the formattached hereto as Exhibit A (the “Escrow Agreement”), to be entered intoamong Parent, Purchaser, the Seller and the Escrow Agent at the Closing.

 

(e)                                  Notwithstandingany other provision in this Agreement to the contrary, Seller herebyacknowledges and agrees that the payment of any Earnout Amounts hereunder shallbe the sole and exclusive obligation of Parent.

 

(f)                                    Notwithstandingany other provision in this Agreement to the contrary, in the event that either(i) the Purchase Price is adjusted pursuant to Section 3.2(b) or(ii) Parent or Purchaser becomes entitled to indemnification under Article VII,Purchaser may offset all or any portion of the Escrow Amount, on adollar-for-dollar basis, against the full amount of any such adjustment orright to indemnification.

 

Section 3.4                                      *Earnout Payments.*  The Seller shall be entitled to receive the2005 Earnout Amount and the 2006 Earnout Amount, or such applicable portionsthereof, if any, as deferred payment of the Purchase Price pursuant to theterms set forth below:

 

(a)                                  If,and only if, the EBITDA of the Business for the fiscal year ending December 31,2005 (the “2005 EBITDA”) is greater than THREE MILLION THREE HUNDRED FIFTYTHOUSAND DOLLARS ($3,350,000) (the “2005 Baseline EBITDA”), then Parent shallpay to the Seller an amount (the “2005 Earnout Amount”) in cash equal to theproduct of (i) TEN MILLION DOLLARS ($10,000,000) multiplied by (ii) afraction, the numerator of which shall be the difference between the 2005EBITDA and the 2005 Baseline EBITDA, and the denominator of which shall be thedifference between the 2005 Target EBITDA and the 2005 Baseline EBITDA, subjectto a maximum possible 2005 Earnout Amount in all circumstances of TEN MILLIONDOLLARS ($10,000,000).

 

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(b)                                 Parentshall pay to the Seller an amount (the “2006 Earnout Amount”) in cash equal tothe lesser of (i) the applicable 2006 Earnout Cap or (ii) five timesthe EBITDA of the Business for the fiscal year ending December 31, 2006(the “2006 EBITDA”), less EIGHTEEN MILLION DOLLARS ($18,000,000), less the 2005Earnout Amount. For purposes of this Section 3.4(b), the “2006 Earnout Cap”shall equal (i) FOUR MILLION DOLLARS ($4,000,000) if the 2005 EBITDA isgreater than FOUR MILLION FOUR HUNDRED THOUSAND DOLLARS ($4,400,000) or (ii) THREEMILLION DOLLARS ($3,000,000) if the 2005 EBITDA is less than or equal to FOURMILLION FOUR HUNDRED THOUSAND DOLLARS ($4,400,000).

 

(c)                                  Notwithstandinganything to the contrary contained herein, in the event that either (i) thePurchase Price is adjusted pursuant to Section 3.2(b) or (ii) Parentor Purchaser becomes entitled to indemnification under Article VII, Parentmay, upon five (5) days prior written notice to the Seller, offset all orany portion of the Earnout Amounts, on a dollar-for-dollar basis, against thefull amount of any such right to indemnification.

 

(d)                                 Onor before April 15, 2006, Parent shall provide to the Seller unauditedfinancial statements of the Business for the fiscal year ended December 31,2005, together with a detailed written statement of its calculation of the 2005EBITDA and the 2005 Earnout Amount, if any, related thereto (the “2006Statement”), and on or before April 15, 2007, Parent shall provide to theSeller unaudited financial statements of the Business for the fiscal year endedDecember 31, 2006, together with a detailed written statement of itscalculation of the 2006 EBITDA and the 2006 Earnout Amount, if any, relatedthereto (the “2007 Statement”). In each instance, Parent shall provide theSeller access to Purchaser’s books and records (including financial statements)during normal business hours for the sole purpose of verifying the EarnoutAmounts. The 2005 Earnout Amount and the 2006 Earnout Amount, to the extent notoffset in accordance with Section 3.4(c), shall be payable within thirty(30) days after (i) receipt by Parent of written notice from theSeller that it has accepted, in the case of the 2005 Earnout Amount, the 2006Statement and, in the case of the 2006 Earnout Amount, the 2007 Statement, or (ii) becomingconclusive and binding pursuant to Section 3.4(e) below. Each suchEarnout Amount, to the extent not offset in accordance with Section 3.4(c),shall be made by wire transfer of immediately available funds to an accountdesignated by the Seller. In addition to the 2006 Statement and the 2007Statement, for each completed fiscal quarter after the Closing Date other thanthe fourth fiscal quarter of any fiscal year, Parent shall provide to theSeller, on a quarterly basis, detailed written statements of its calculation ofthe EBITDA of the Business for each such quarter within fifty-five(55) days after the end of each such fiscal quarter through the periodended September 30, 2006. Purchaser covenants and agrees that it shall usecommercially reasonable efforts to market and sell products that make up theBusiness in a commercially prudent manner during the period between the ClosingDate and January 1, 2007.

 

(e)                                  TheSeller shall notify Parent in writing (the “Parent’s Notice”) within thirty(30) days after receipt of the 2006 Statement or the 2007 Statement, asthe case may be (a “Statement”), with respect to its acceptance or dispute ofsuch Statement. In the event that the Seller disputes such a Statement, theSeller shall set forth in such notice the facts of the dispute and, to the bestof its ability, its calculation of the Earnout Amount in question. Parent andthe Seller shall meet and use commercially reasonable efforts to resolve theitems or amounts in dispute. If the parties are unable to reach an agreementwithin thirty (30) days after Parent’s receipt of the Seller’sdisagreement notification, then a nationally recognized accounting firm to bemutually agreed upon based on good faith negotiations (the “Accounting Referee”)shall be requested to conduct a review of the disputed items or amounts andcompute the Earnout Amount in question. In making its calculation, theAccounting Referee shall consider only the items or amounts in dispute (and tothe extent required, any other amounts necessary to derive the disputed itemsor amounts). Such determination shall be made within thirty (30) daysafter the date on which the Accounting Referee begins its review and shall bebinding on the parties.

 

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The fees, costs and expenses of the Accounting Referee shall be sharedequally between the Seller and Parent.

 

(f)                                    Inconnection with this Section 3.4, upon reasonable notice and during Parent’sand Purchaser’s normal business hours, the Seller and its representatives(including accountants) shall have the right to inspect the books and recordsrelating to the Business as conducted by Purchaser after the Closing Date. Inthe event of a dispute under Section 3.4(e) above, Parent shallensure access of the Accounting Referee to Parent’s auditor.

 

(g)                                 Incalculating the 2005 EBITDA, the EBITDA of the Seller for the period beginningon January 1, 2005 and ending on the Closing Date as determined byreference to the financial statements of the Seller described in Section 4.6hereof, shall be added to, and included within, the 2005 EBITDA. In calculatingthe 2005 EBITDA and the 2006 EBITDA, such calculations (i) shall notinclude (A) any expenses allocated or incurred by the Seller or Purchaseras a result of the transactions contemplated by this Agreement, (B) anymanagement fees, overhead fees or similar fees or allocations paid by, orallocated to, the Business from any other business or Affiliate of Purchaser, (C) anyspecified non-recurring shareholder expenses and costs set forth on *Schedule 3.4(g)(i)(C)*, (D) any “extraordinaryitems” of gain or loss as that term is defined by GAAP, (E) for the periodthat the replacement employee of each Shareholder and such Shareholder aresimultaneously employed by Purchaser, such Shareholder’s employmentcompensation and benefits, or (F) excess benefits paid to the Shareholders(including life insurance premium contributions and payments associated withthe provision of automobiles to the Shareholders) and charitable contributionsmade by the Seller, in each instance prior to the Closing Date, in an aggregateamount up to FIFTY THOUSAND DOLLARS ($50,000), and (ii) shall include adeemed monthly rental expense of EIGHT THOUSAND DOLLARS ($8,000) associatedwith the Shareholder Real Estate.

 

(h)                                 Notwithstandinganything to the contrary contained in this Agreement, the maximum aggregateamount that may be paid to the Seller under this Agreement in all circumstancesshall be TWENTY-NINE MILLION SIX HUNDRED THOUSAND DOLLARS ($29,600,000).

 

Section 3.5                                      *Allocation of Consideration.*  The aggregate consideration paid by Purchaserto the Seller pursuant to this Article III shall be allocated among theAssets according to the determination of an independent appraisal to beconducted by an appraiser mutually agreed upon by Purchaser and the Seller. Theallocation of the Purchase Price as determined by such appraiser shall bebinding upon the parties and each party hereto shall file all Tax Returns(including Form 8594) in a manner consistent with such allocation.Notwithstanding anything to the contrary contained herein, the aggregate amountof consideration to be allocated to the Non-Competition Agreement for theSeller and the Shareholders shall be TWO HUNDRED THOUSAND DOLLARS ($200,000).The cost of such independent appraiser shall be borne by Purchaser.

 

Section 3.6                                      *Closing.* The sale, conveyance, assignment, transfer and delivery of the Assets bythe Seller and payment of the Closing Cash Payment by Purchaser (hereinaftercalled the “Closing”) shall take place at the Huntsville, Alabama offices ofBradley Arant Rose & White LLP on the date of the execution of thisAgreement, or on such other date or at such other time and place (includingremotely or by facsimile) as may be mutually agreed upon by the parties hereto.The date on which the Closing occurs is referred to herein as the “ClosingDate.” Notwithstanding the foregoing or any other provision of this Agreementto the contrary, the parties hereto agree that the Closing shall be deemed totake effect at 12:01 A.M. (Eastern Standard Time) on the Closing Date.

 

Section 3.7                                      *Deliveries by the Seller.*  At the Closing, the Seller shall deliver toPurchaser, and in the case of subsections (g) and (h) below, Parent:

 

(a)                                  Aduly executed Bill of Sale and Assignment Agreement;

 

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(b)                                 Aduly executed Statutory Warranty Deed for the owned Real Property of the Sellerand Title Policies or unconditional commitments therefore paid for by theSeller;

 

(c)                                  Suchother Instruments of Transfer as shall be necessary to vest in Purchaser all ofthe Seller’s right, title and interest in and to the Assets, free and clear ofall Liens;

 

(d)                                 Theresolutions duly adopted by the Seller’s board of directors and theShareholders authorizing (i) the execution and delivery of, andperformance by the Seller of its obligations under, this Agreement and theother agreements contemplated hereby and (ii) the assignment of thesponsorship of the Seller’s 401(k) plan to Purchaser;

 

(e)                                  Aduly executed certificate of the secretary or an assistant secretary of theSeller, dated the Closing Date, in form and substance reasonably satisfactoryto Purchaser, as to (i) the currency and authenticity of the articles ofincorporation and the bylaws of the Seller, (ii) the currency andauthenticity of the resolutions duly adopted by the Seller’s board of directorsand Shareholders authorizing (A) the execution and delivery of, andperformance by the Seller of its obligations under, this Agreement and theother agreements contemplated hereby and (B) the assignment of thesponsorship of the Seller’s 401(k) plan to Purchaser and (iii) theincumbency and signatures of the officers of the Seller executing thisAgreement or any other agreement contemplated hereby.

 

(e)                                  Copiesof all consents, approvals, authorizations, agreements and other documentationrequired to be obtained by the Seller to consummate the transactionscontemplated by this Agreement without breaching any of the Seller’srepresentations or warranties;

 

(f)                                    Payoffletters stating the payoff amounts for the Seller’s Indebtedness relating tothe Assets;

 

(g)                                 Aduly executed Escrow Agreement;

 

(h)                                 Aduly executed Non-Competition Agreement (the “Non-Competition Agreement”)substantially in the form attached hereto as *Exhibit B*;and

 

(i)                                     Suchother documents, instruments and writings reasonably requested by Parent orPurchaser at or prior to the Closing.

 

Purchaser will thereupon take actual possession of the Assets.

 

Section 3.8                                      *Deliveries by the Shareholders.*  At the Closing, the Shareholders shalldeliver to Purchaser, and in the case of subsections (b) and (c) below,Parent:

 

(a)                                  Aduly executed Statutory Warranty Deed for the Shareholder Real Estate andTitle Policies or unconditional commitments therefore paid for by theShareholders;

 

(b)                                 Aduly executed Escrow Agreement;

 

(c)                                  Aduly executed Non-Competition Agreement;

 

(d)                                 Aduly executed Transition Services and Consulting Agreement substantially in theform attached hereto as *Exhibit C*(the “Transition Services and Consulting Agreement”) executed by Dr. RichardCampbell;

 

(e)                                  Aduly executed Transition Services Agreement substantially in the form attachedhereto as *Exhibit D* (the “TransitionServices Agreement”) executed by Mrs. [Sue] Campbell; and

 

(f)                                    Suchother documents, instruments and writings reasonably requested by Parent orPurchaser at or prior to the Closing.

 

Section 3.9                                      *Deliveries by Parent.*  At the Closing, Parent shall deliver to theSeller, and in the case of subsections (c) and (d) below, theShareholders:

 

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(a)                                  Theresolutions duly adopted by Parent’s board of directors authorizing theexecution and delivery of, and performance by Parent of its obligations under,this Agreement and the other agreements contemplated hereby;

 

(b)                                 Aduly executed certificate of the secretary or an assistant secretary of Parent,dated the Closing Date, in form and substance reasonably satisfactory to theSeller, as to (i) the currency and authenticity of the articles ofincorporation and the bylaws of Parent, (ii) the currency and authenticityof the resolutions duly adopted by Parent’s board of directors authorizing theexecution and delivery of, and performance by Parent of its obligations under,this Agreement and the other agreements contemplated hereby and (iii) theincumbency and signatures of the officers of Parent executing this Agreement orany other agreement contemplated hereby;

 

(c)                                  Aduly executed Escrow Agreement;

 

(d)                                 Aduly executed Non-Competition Agreement; and

 

(e)                                  Suchother documents, instruments and writings reasonably requested by the Seller ator prior to the Closing.

 

Section 3.10                                *Deliveries by Purchaser.*  At the Closing, Purchaser shall deliver tothe Seller all of the following deliverables other than those contemplated bysubsections (b), (h) and (i) below, and to the Shareholders thedeliverables contemplated by subsections (b), (h), (i) (f) and (g) below:

 

(a)                                  TheClosing Cash Payment by inter-bank wire transfer of immediately availablefederal funds of the United States of America, which amount shall be paid anddelivered to or for the benefit of the Seller in the amounts and to the Personsset forth on *Schedule 3.3(b)*;

 

(b)                                 TheShareholder Real Estate Purchase Price by inter-bank wire transfer ofimmediately available federal funds of the United States of America, whichamount shall be paid and delivered to or for the benefit of the Shareholders inthe amounts and to the Persons set forth on *Schedule 3.3(a)*;

 

(c)                                  Aduly executed Bill of Sale and Assignment Agreement;

 

(d)                                 Theresolutions duly adopted by Purchaser’s board of directors authorizing theexecution and delivery of, and performance by Purchaser of its obligationsunder, this Agreement and the other agreements contemplated hereby;

 

(e)                                  Aduly executed certificate of the secretary or an assistant secretary ofPurchaser, dated the Closing Date, in form and substance reasonablysatisfactory to the Seller, as to (i) the currency and authenticity of thearticles of incorporation and the bylaws of Purchaser, (ii) the currencyand authenticity of the resolutions duly adopted by Purchaser’s board ofdirectors authorizing the execution and delivery of, and performance byPurchaser of its obligations under, this Agreement and the other agreementscontemplated hereby and (iii) the incumbency and signatures of theofficers of Purchaser executing this Agreement or any other agreementcontemplated hereby;

 

(f)                                    Aduly executed Escrow Agreement;

 

(g)                                 Aduly executed Non-Competition Agreement;

 

(h)                                 Aduly executed Transition Services and Consulting Agreement;

 

(i)                                     Aduly executed Transition Services Agreement; and

 

(j)                                     Suchother documents, instruments and writings reasonably requested by the Seller ator prior to the Closing.

 

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**ARTICLE IV**

**REPRESENTATIONS AND WARRANTIES OF THE SELLERAND THE SHAREHOLDERS**

 

Seller and each of the Shareholders hereby jointly and severallyrepresent and warrant to Parent and Purchaser that the statements contained inthis Article IV are accurate and complete as of the date hereof, except asset forth in the disclosure schedules accompanying this Agreement. Thedisclosure schedules are arranged in numbered and lettered paragraphscorresponding to the numbered and lettered Sections contained in this Article IV.

 

Section 4.1                                      *Authorization and Validity.*  The Seller has full corporate power andauthority to enter into this Agreement and the other documents and instrumentsto be executed and delivered by the Seller pursuant hereto and to carry out itsobligations hereunder and thereunder. The Shareholders have full individualpower and the legal capacity to enter into this Agreement and the otherdocuments and instruments to be executed and delivered by the Shareholderspursuant hereto (to the extent that such Person is a party hereto or thereto)and to carry out the Shareholders’ obligations hereunder and thereunder. Theexecution, delivery and performance of this Agreement by the Seller and theother documents and instruments to be executed and delivered by the Sellerpursuant hereto, and the consummation by the Seller of the transactionscontemplated hereby and thereby, have been duly and validly authorized by theboard of directors of the Seller and the Shareholders and no other corporateact or proceeding on the part of the Seller or the Shareholders, as applicable,is necessary to authorize the execution and delivery by the Seller of thisAgreement or the other documents or instruments to be executed and delivered bythe Seller pursuant hereto, or the consummation by the Seller of thetransactions contemplated hereby or thereby. This Agreement and the otherdocuments and instruments to be executed and delivered by the Seller or theShareholders pursuant hereto (to the extent that such Person is a party heretoor thereto) have been duly and validly executed and delivered by the Seller andthe Shareholders (to the extent that such Person is a party hereto or thereto)and, assuming this Agreement and the other documents and instruments to beexecuted and delivered by the Seller or the Shareholders pursuant hereto (tothe extent that such Person is a party hereto or thereto) are the valid andbinding obligation of any other parties hereto or thereto, constitutes a validand binding obligation of the Seller and the Shareholders (to the extent thatsuch Person is a party hereto or thereto) enforceable against the Seller andthe Shareholders (to the extent that such Person is a party hereto or thereto)in accordance with its terms, except that (i) such enforcement may besubject to applicable bankruptcy, insolvency or other similar laws, now orhereafter in effect, affecting creditors’ rights generally, and (ii) theremedy of specific performance and injunctive and other forms of equitablerelief may be subject to equitable defenses and to the discretion of the courtbefore which any proceeding therefor may be brought.

 

Section 4.2                                      *Equity; Good Title.*

 

(a)                                  Asof the date hereof, the authorized capital stock of the Seller consists of onethousand (1,000) shares of common stock, par value $1.00 per share (the “CommonStock”). As of the date hereof, one thousand (1,000) shares of the Common Stockare issued and outstanding, all of which, when issued, were duly authorized,validly issued, fully paid and nonassessable and free of any preemptive or othersimilar rights. No other shares of the Capital Stock of the Seller are issuedand outstanding.

 

(b)                                 Allof the outstanding shares of Capital Stock of the Seller are owned beneficiallyand of record by the Shareholders, free and clear of all Liens and theShareholders are bound by the terms of this Agreement.

 

(c)                                  Thereare no outstanding subscriptions, options, warrants, calls, rights, contracts,commitments, understandings, restrictions or arrangements relating to theissuance, sale, transfer or voting of any shares of Capital Stock of theSeller, including any rights of conversion or exchange under any outstandingsecurities or other instruments.

 

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(d)                                 TheSeller has no Subsidiaries. The Seller does not own any equity or otherownership interests in any other Person.

 

Section 4.3                                      *Organization.*  The Seller (a) is a corporation, dulyincorporated, validly existing and in good standing under the laws of the Stateof Alabama, and (b) has full power and authority to own all of itsproperties and assets, including the Assets, and to carry on the Business as itis now being conducted. The Seller is duly licensed or qualified to do businessand is in good standing as a foreign corporation in each jurisdiction where theownership, lease or operation of its assets and properties or the conduct ofthe Business requires such license or qualification, except where the failureto be so licensed or qualified would not have a Material Adverse Effect. TheSeller has delivered to Purchaser a complete and correct copy of the articlesof incorporation, bylaws and other organizational documents of the Seller. Sucharticles of incorporation, bylaws and other organizational documents are infull force and effect and the Seller is not in violation of any provision ofsuch articles of incorporation, bylaws or organizational documents.

 

Section 4.4                                      *No Conflict.*  Neither the execution, delivery orperformance of this Agreement or the other documents and instruments to beexecuted and delivered by the Seller or the Shareholders pursuant hereto, northe consummation by the Seller or the Shareholders of the transactionscontemplated hereby or thereby, nor compliance by the Seller or theShareholders with any of the provisions hereof or thereof will (a) conflictwith or result in any breach of any provision of the articles of incorporationor bylaws of the Seller, (b) except as set forth in *Schedule 4.4(b)*, constitute a changein control under, or require the consent from or the giving of notice to athird party, result in a violation or breach of, or constitute (with or withoutdue notice or lapse of time or both) a default (or give rise to any right oftermination, amendment, cancellation or acceleration) under, or result in thecreation of any Lien upon or affecting any of the Assets or the ShareholderReal Estate, including the Contracts, pursuant to, any of the terms, conditionsor provisions of any contractual obligation of the Seller or the Shareholders, (c) violateany order, writ, injunction, decree, statute, rule or regulation of anyGovernmental Authority applicable to the Seller or the Shareholders or to whichany of their properties or assets (including the Assets and the ShareholderReal Estate) may be bound, or (d) result in triggering of any right offirst refusal or other right under any joint venture or other agreement towhich the Seller or the Shareholders are a party.

 

Section 4.5                                      *Governmental Consents.*  No consent, order or authorization of, orregistration, declaration or filing with, any Governmental Authority isrequired on the part of the Seller or the Shareholders in connection with theexecution, delivery and performance of this Agreement or the consummation ofthe transactions contemplated hereby by the Seller or the Shareholders.

 

Section 4.6                                      *Financial Statements.*  The Seller has previously furnished toPurchaser the Financial Statements and the unaudited consolidated balancesheets and statements of income, changes in shareholders’ equity and cash flowas of and for the three months ended March 31, 2005 for the Seller(the “First Quarter Financial Statements”) and the unaudited consolidatedbalance sheets and statements of income, changes in shareholders’ equity andcash flow as of and for the three and six months ended June 30, 2005for the Seller (the “Second Quarter Financial Statements”). Except as set forthin *Schedule 4.6*, theFinancial Statements (including the notes thereto), the First Quarter FinancialStatements and the Second Quarter Financial Statements have been prepared inaccordance with GAAP applied on a consistent basis during the periods involved,fairly present the financial position of the Seller on the dates thereof,fairly present the results of operations of the Seller for the periods involved,and are in accordance with the books and records of the Seller (which books andrecords are accurate). Reserves are reflected on the balance sheets in theFinancial Statements, the First Quarter Financial Statements and the SecondQuarter Financial Statements against assets in amounts that have beenestablished on a basis consistent with the past practice.

 

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Section 4.7                                      *Absence of Certain Changes or Events.*  Except as set forth in *Schedule 4.7*, since June 30,2005 (a) the Seller has conducted the Business only in the ordinary courseand consistent with past practice, (b) there have not been anydevelopments or events with respect to the Business which have had or wouldreasonably be likely to have, individually or in the aggregate, a MaterialAdverse Effect and (c) except as contemplated in this Agreement, theSeller has not:

 

(i)                                     adopted anyamendment to its articles of incorporation or bylaws;

 

(ii)                                  (A) sold,leased, transferred or disposed of any assets or rights, other than assets orrights that individually or in the aggregate would not be material, in eithercase, and other than in the ordinary course of business consistent with pastpractice, (B) incurred any Lien upon any assets or rights, except forLiens incurred in the ordinary course of business consistent with pastpractice, (C) acquired or leased any assets or rights other than in theordinary course of business consistent with past practice, or (D) enteredinto any commitment or transaction with respect to (A), (B) or (C) above;

 

(iii)                               (A) incurred,assumed or refinanced any Indebtedness or (B) made any loans, advances orcapital contributions to, or investments in, any Person;

 

(iv)                              paid, discharged orsatisfied any liability, obligation, or Lien other than payment, discharge orsatisfaction of (A) Indebtedness as it matures and becomes due and payableor (B) liabilities, obligations or Liens in the ordinary course ofbusiness consistent with past practice;

 

(v)                                 except as required inconnection with the preparation of the Financial Statements, First QuarterFinancial Statements and Second Quarter Financial Statements pursuant to Section 4.6,(A) changed any of the accounting or tax principles, practices or methodsused by the Seller, except as required by changes in applicable Tax Laws, or (B) changedreserve amounts or policies;

 

(vi)                              entered into anyemployment contract or other arrangement or made any change in the compensationpayable or to become payable to any Shareholder or any of its officers,employees, agents, consultants or Persons acting in a similar capacity (otherthan general increases in wages to employees who are not officers or Personsacting in a similar capacity or Affiliates, in the ordinary course consistentwith past practice), or to Persons providing management services, entered intoor amended any employment, severance, consulting, termination or otheragreement or employee benefit plan or made any loans to any of its Affiliates,officers, employees, agents or consultants or Persons acting in a similarcapacity or made any change in its existing borrowing or lending arrangementsfor or on behalf of any of such Persons pursuant to an employee benefit plan orotherwise;

 

(vii)                           paid or made any accrual orarrangement for payment of any pension, retirement allowance or other employeebenefit pursuant to any existing plan, agreement or arrangement to anyAffiliate, officer, employee or Person acting in a similar capacity; or paid oragreed to pay or made any accrual or arrangement for payment to any Affiliate,officers, employees or Persons acting in a similar capacity of any amountrelating to unused vacation days, except payments and accruals made in theordinary course consistent with past practice; grant, issue, accelerate or accruesalary or other payments or benefits pursuant to any pension, profit-sharing,bonus, extra compensation, incentive, deferred compensation, stock purchase,stock option, stock appreciation right, group insurance, severance pay,retirement or other employee benefit plan, agreement or arrangement, or anyemployment or consulting agreement with or for the benefit of any Affiliate,officer, employee, agent or consultant or Person acting in a similar capacity,whether past or present; or amend in any material respect any such existingplan, agreement or arrangement in a manner consistent with the foregoing;

 

(viii)                        entered into any collectivebargaining agreement;

 

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(ix)                                made any payments(other than regular compensation payable to officers and employees or Personsacting in a similar capacity of the Seller in the ordinary course consistentwith past practice), loans, advances or other distributions to, or enter intoany transaction, agreement or arrangement with, the Seller’s Affiliates,officers, employees, agents, consultants or Persons acting in a similarcapacity, shareholders of their Affiliates, associates or family members;

 

(x)                                   made or authorizedany capital expenditures, except in the ordinary course consistent with pastpractice not in excess of $100,000 individually or $250,000 in the aggregate;

 

(xi)                                incurred any Taxes,except in the ordinary course of business consistent with past practice;

 

(xii)                             settled or compromised anyTax liability or agreed to any adjustment of any Tax attribute or made anyelection with respect to Taxes;

 

(xiii)                          failed to duly and timelyfile any Tax Return with the appropriate Governmental Authorities required tobe filed by it in a true and complete and correct form and to timely pay allTaxes shown to be due thereon;

 

(xiv)                         (A) entered into,amended, renewed or permitted the automatic renewal of, terminated or waivedany right under, any Material Contract, or, except in the ordinary course ofbusiness consistent with past practice, any other agreement, or (B) tookany action or failed to take any action that, with or without either notice orlapse of time, would constitute a default under any Material Contract;

 

(xv)                            (A) made any change inits working capital practices generally, including accelerating any collectionsof cash or accounts receivable or deferring payments or (B) failed to maketimely accruals, including with respect to accounts payable and liabilitiesincurred in the ordinary course of business consistent with past practice;

 

(xvi)                         failed to renew (at levelsconsistent with presently existing levels), and has not terminated or amendedor failed to perform, any of its obligations or permitted any material defaultto exist or caused any material breach under, or entered into (except forrenewals in the ordinary course of business consistent with past practice), anymaterial policy of insurance;

 

(xvii)                      experienced any damage,destruction, or loss to its property not covered by insurance;

 

(xviii)                   disposed of or permitted to lapseany material Intellectual Property or granted any license or sublicense of anyrights with respect to Intellectual Property;

 

(xix)                           experienced significantfailure on the part of the Seller to operate the Business in the ordinarycourse and consistent with past practice so as to preserve its businessoperations intact or to preserve the goodwill of suppliers, customers andothers having business relations with the Seller;

 

(xx)                              received, and the Sellerhas no Knowledge of, any notice or other indication that any key supplier,vendor or customer of the Seller will cease doing business with the Seller(whether as a result of the consummation of the transactions contemplatedhereby or otherwise) in the same manner and at the same level as previouslyconducted with the Seller, other than changes which occur from time to time inthe ordinary course of business or as a result of the expiration or completionof any contracts (for purposes of this Article IV, “key suppliers, vendorsand customers” of the Seller refers to those suppliers, vendors and customersof the Seller whose business failure would be reasonably likely to result in aMaterial Adverse Affect on the Business or the Seller);

 

(xxi)                           except in the ordinarycourse of business consistent with past practice, and except as required by anyLaw, provided any confidential information to any Person other than Purchaser;

 

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(xxii)                        changed the compensation levels(including any bonus or formula for the calculation of any bonus) applicable toany class of the Seller’s employees;

 

(xxiii)                     declared, set aside or paid anydividend or made any distribution with respect to the Capital Stock; or

 

(xxiv)                    by action on the part of theSeller, cancelled, compromised, waived or released any rights or claims.

 

Section 4.8                                      *Absence of Undisclosed Liabilities.*  Except as set forth on *Schedule 4.8*, the Seller has noLiabilities that would be required to be reserved against or disclosed in afinancial statement prepared in accordance with GAAP, except for (i) Liabilitiesset forth on the face of the balance sheet, or otherwise reserved against, inthe Second Quarter Financial Statements (rather than in the notes thereto), and(ii) Liabilities which have arisen after the date of the balance sheet inthe Second Quarter Financial Statements in the ordinary course of businessconsistent with past practice (none of which, to Seller’s Knowledge, resultsfrom, arises out of, related to, is in the nature of, or was caused by anybreach of contract, breach of warranty, tort, infringement, or violation oflaw), which in either case have not had and could not reasonably be expected tohave a Material Adverse Effect.

 

Section 4.9                                      *Property; Assets.*

 

(a)                                  TheSeller owns, or otherwise has a valid leasehold interest providing sufficientand legally enforceable rights to use, all of the property and assets necessaryor otherwise material to the conduct of the Business. The Shareholders jointlyown the Shareholder Real Estate in fee simple. Except as set forth in *Schedule 4.9(a)*, the Seller has goodand marketable title to all assets reflected on the Second Quarter BalanceSheet, free and clear of all Liens; provided, however, that any Real Propertymay be subject to easements and non-monetary Liens which do not adverselyimpact the use of the Shareholder Real Estate by the Business as currentlyconducted. Except as set forth in *Schedule 4.9(a)*,all such assets which have a value in excess of $1,000, singly, are in goodoperating condition and repair (ordinary wear and tear excepted), have beenreasonably maintained consistent with standards generally followed in theindustry, are suitable for their present uses and, in the case of owned orleased structures, are structurally sound.

 

(b)*                                 Schedule 4.9(b) *containsa list of all real property owned, leased or used by the Seller including theShareholder Real Estate (the “Real Property”), indicating whether such propertyis owned, leased or used. Except as set forth in *Schedule 4.9(b)*, the current use of the Real Propertyby the Seller and the Shareholder Real Estate by the Shareholders does notviolate the certificate of occupancy thereof or any local zoning or similarland use or other Laws and none of the structures on the Real Property encroachesupon real property of another Person, and no structure of any other Personencroaches upon any Real Property. The Seller and the Shareholders have notreceived notice of any pending or threatened condemnation proceeding, or of anysale or other disposition in lieu of condemnation, affecting any of the RealProperty. Each parcel of Real Property abuts on or has direct vehicular accessto a public road. The Seller does not own, lease or use any Real Property otherthan the Real Property listed in *Schedule 4.9(b)*.Except as set forth in *Schedule 4.9(b)*,the Seller has not assigned, transferred, conveyed, mortgaged, deeded in trustor encumbered any interest in the Real Property and the Shareholders have notassigned, transferred, conveyed, mortgaged, deeded in trust or encumbered anyinterest in the Shareholder Real Estate.

 

(c)*                                  Schedule 4.9(c) *setsforth as of June 30, 2005, a complete and accurate list of all furniture,equipment, fixed assets, leasehold improvements, manufacturing equipment,automobiles and all other tangible personal property (including its net bookvalue) owned by, in the possession of, or used by the Seller in connection withthe Business. Except as set forth in *Schedule 4.9(c)*,such personal property is not held under any lease, security agreement,conditional sales contract, or other title retention or

 

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security arrangement or subject to any Liens or encumbrances, and isnot located other than in the possession of the Seller.

 

(d)                                 Allreceivables of the Seller reflected on the balance sheet in the Second QuarterFinancial Statements or created after the date of the balance sheet in theSecond Quarter Financial Statements arose from valid transactions in theordinary course of business consistent with past practice.

 

Section 4.10                                *Litigation and Claims; Compliance with Laws.*

 

(a)*                                  Schedule 4.10(a) *setsforth all Litigation as of the date hereof, including the name of the claimant,the date of the alleged act or omission, a detailed narrative as to the natureof the alleged act or omission, the date the matter was referred to aninsurance carrier of the Seller (if referred), the estimated amount ofexposure, the amount the Seller has reserved, or the amount of the Seller’sclaim and estimated expenses of the Seller in connection with such matters.Except as set forth in *Schedule 4.10(a)*,there is no Litigation which is not fully covered (other than applicabledeductibles) by the insurance policies referenced in Section 4.12. Neitherthe Seller nor any of the Assets is subject to any order, consent decree,settlement or similar agreement with any Governmental Authority. There is nojudgment, injunction, decree, order or other determination of an arbitrator orGovernmental Authority specifically applicable to the Seller or theShareholders or any of the Seller’s properties or assets. There is noLitigation relating to alleged unlawful discrimination or sexual harassment. Asof the date hereof, there is no Litigation which seeks to prevent consummationof the transactions contemplated hereby or which seeks material damages inconnection with the transactions contemplated hereby.

 

(b)                                 Exceptas set forth in *Schedule 4.10(b)*,the Seller has complied and is in compliance with all Laws applicable to theSeller and the Business except where the failure to be in compliance would notreasonably be expected to have a Material Adverse Effect. Except as set forthin *Schedule 4.10(b)*, theSeller holds all material licenses, permits and other authorizations of GovernmentalAuthorities necessary to conduct the Business as now being conducted or, undercurrently applicable Laws, to continue to conduct the Business as now beingconducted. Except as set forth in *Schedule 4.10(b)*,to the Knowledge of the Seller there is no intent to make any changes in theconduct of the Business that will result in or cause the Seller to be innoncompliance with applicable Laws or that will require changes in or a loss ofany such licenses, permits or other authorizations or an increase in anyexpenses related thereto except where such noncompliance, change, loss orincrease would not reasonably be expected to have a Material Adverse Effect.Such licenses, permits and other authorizations as aforesaid held by the Sellerare valid and in full force and effect, and there are no (i) actionspending, or to the Knowledge of the Seller, threatened or (ii) to theKnowledge of the Seller, investigations pending or threatened that could resultin the termination, impairment or nonrenewal thereof.

 

Section 4.11                                *Taxes.*

 

(a)                                  AllUnited States federal Tax Returns and all other Tax Returns required to befiled with any taxing authority by the Seller have been timely filed inaccordance in all respects with all applicable Laws and are true, correct andcomplete in all material respects. The Seller has timely paid all Taxes due andpayable and the Seller has withheld and paid all Taxes required to have beenwithheld and paid by the Seller in connection with amounts paid or owing to anyemployee, Independent Contractor, creditor, shareholder or other third party.Except as set forth in *Schedule 4.11*,there is no action, suit, proceeding, audit or claim pending against the Sellerin respect of any Taxes, nor has any such action, suit, proceeding, audit or claimbeen threatened in writing. The Seller is not a party to or bound by any Taxsharing or allocation agreement or similar contract or assignment or anyagreement that obligates the Seller to make any payment computed by referencesto the Taxes, taxable income or taxable losses of any other Person. There areno Liens with respect to Taxes on any of the assets or properties of theSeller. The Seller is not, and has never been, a member of an affiliated,consolidated, combined or unitary group, other than one of which the Seller wasthe common parent and has no liability for the

 

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Taxes of any Person (other than itself) under Treasury Regulation§1.1502-6 (or any similar provision of state, local or foreign law), or as atransferee or successor, by contract or otherwise.

 

(b)                                 Alldeficiencies asserted or assessments made as a result of any examinations ofthe Seller have been fully paid, or are fully reflected as a liability in theSecond Quarter Balance Sheet, or are being contested and an adequate reservetherefor has been established and is fully reflected in the Second QuarterBalance Sheet. The Seller has not received written notice from any GovernmentalAuthority in a jurisdiction in which such entity does not file a TaxReturn stating that such entity is or may be subject to taxation by thatjurisdiction.

 

(c)                                  Noneof the assets of the Seller is property required to be treated as being ownedby any other Person pursuant to the “safe harbor lease” provisions of former Section 168(f)(8) ofthe Code. Neither the Seller nor any predecessors thereof by merger orconsolidation has within the past three (3) years been a party to atransaction intended to qualify under Section 355 of the Code or under somuch of Section 356 of the Code as relates to Section 355 of theCode. The Seller has not made any payments, is not obligated to make anypayments, and is not a party to any agreement (other than this Agreement) orother arrangement that would obligate it to make any payments that would not bedeductible under Section 280G of the Code. The Seller is not a party toany joint venture, partnership or other written arrangement or contract whichwould be treated as a partnership for United States federal income tax purposesfor any period for which the statute of limitations for any Tax on the incometherefrom has not expired. The due but unpaid Taxes of the Seller did not, asof the date hereof, exceed the reserve for Tax liability (rather than anyreserve for deferred Taxes, established to reflect timing differences betweenbook and Tax income) set forth on the face of the Second Quarter Balance Sheet(rather than in any notes thereto).

 

(d)                                 TheSeller has been an S corporation as defined in Section 1361(a)(ii) ofthe Code for all applicable periods since 1988. The Seller has never had anyshareholder that was not an individual and who was not either a U.S. citizen orresident alien or a domestic trust as described in Section 1361(c)(2) ofthe Code. The Seller has never had more than thirty-five(35) shareholders. The Seller has had, since its inception, only one (1) classof stock outstanding, its common stock. No creditor of the Seller has ever hadthe right, as a result of any financing to the Seller, to acquire any equityinterest in the Seller or otherwise participate in the equity of the Seller.The Seller has never had any subsidiaries. Any trust that has been ashareholder of the Seller since the Seller’s inception has met the requirementsof Section 1361(c)(2) of the Code for the entire period that it wasor has been a shareholder of the Seller.

 

Section 4.12                                *Insurance.* *Schedule 4.12* setsforth a complete and accurate list as of the date hereof of all primary, excessand umbrella policies, bonds and other forms of insurance owned or held by oron behalf of or providing insurance coverage to the Seller and the Business andAssets (or, to the extent purchased by Seller, its officers, salespersons,agents or employees or Persons acting in a similar capacity) and the extent, ifany, to which the limits of liability under such policies have been exhausted.True and complete copies of such policies are attached to *Schedule 4.12*. All such policies arein full force and effect and all such policies in such amounts will be outstandingand in full force and effect at the Closing. The Seller has not received noticeof default under any such policy, nor has it received written notice of anypending or threatened termination of cancellation, coverage limitation orreduction, or material premium increase with respect to any such policy, otherthan renewal requirements in the ordinary course of business consistent withpast practice. *Schedule 4.12*sets forth a complete and accurate summary of all of the self-insurancecoverage provided by the Seller. No letters of credit have been posted and nocash has been restricted to support any reserves for insurance on the balancesheet in the Second Quarter Financial Statements.

 

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Section 4.13                                *Environmental Matters.*  Except as otherwise described on *Schedule 4.13*:

 

(a)                                  TheSeller has complied and is in compliance with, and the Real Property and allimprovements thereon are in compliance with, all Environmental Laws.

 

(b)                                 TheSeller has no liability, known or unknown, contingent or absolute, under anyEnvironmental Law, nor is the Seller responsible for any such liability of anyother Person under any Environmental Law, whether by contract, by operation oflaw or otherwise. There are no facts, circumstances, or conditions existing,initiated or occurring prior to the Closing Date, which have or will result inliability to the Seller under Environmental Laws. There are no pending or tothe Knowledge of the Seller, threatened Environmental Claims.

 

(c)                                  TheSeller has been duly issued, and maintains all Environmental Permits necessaryto operate the Business or Assets as currently operated. A true and completelist of all such Environmental Permits, all of which are valid and in fullforce and effect, is set forth in *Schedule 4.13(c)*.Seller has timely filed applications for all Environmental Permits. All of theEnvironmental Permits set forth in *Schedule 4.13(c)*aretransferable and none require consent, notification, or other action to remainin full force and effect following consummation of the transactionscontemplated hereby.

 

(d)                                 TheReal Property contains no underground improvements, including but not limitedto treatment or storage tanks, or underground piping associated with suchtanks, used currently or in the past for the management of Hazardous Materials,and no portion of the Real Property is or has been used as a dump or landfillor consists of or contains filled in land or wetlands. With respect to any realproperty formerly owned, operated, or leased by the Seller, during the periodof such ownership, operation or tenancy, no portion of such property was usedas a dump or landfill, and the Seller is not aware of any such use at any timeprior to its ownership, operation, or tenancy of such real property. NeitherPCBs, “toxic mold,” nor asbestos-containing materials are present on or in theReal Property or the improvements thereon. There has been no Release ofHazardous Materials at, on, under, or from the Real Property, nor was theresuch a Release at any real property formerly owned, operated or leased by theSeller, in each case during the period of such ownership, operation, ortenancy, such that the Seller is or could be liable for Remediation withrespect to such Hazardous Materials. No water body into which HazardousMaterials are Released in connection with the Seller’s business is currentlylisted or proposed for listing under 33 U.S.C. §1313(d), nor are suchproperties adjacent to any such water body.

 

(e)                                  TheSeller has furnished to Purchaser accurate and complete copies of allenvironmental assessments, reports, audits and other documents in itspossession or under its control that relate to the Real Property, compliancewith Environmental Laws, or any other real property that the Seller formerlyowned, operated, leased or used. To the Seller’s Knowledge, any information theSeller has furnished to Purchaser concerning the environmental conditions ofthe Real Property, prior uses of the Real Property, and the operations of theSeller related to compliance with Environmental Laws is accurate and complete.

 

(f)                                    NoReal Property, and to the Knowledge of the Seller, without inquiry, no propertyto which Hazardous Materials originating on or from such properties or theBusiness or Assets has been sent for treatment or disposal, is listed orproposed to be listed on the National Priorities List or CERCLIS or on anyother governmental database or list of properties that may or do requireRemediation under Environmental Laws. The Seller has not arranged, by contract,agreement, or otherwise, for the transportation, disposal or treatment ofHazardous Materials at any location such that it is or could be liable forRemediation of such location pursuant to Environmental Laws.

 

(g)                                 NoEncumbrance in favor of any person relating to or in connection with anyEnvironmental Claim has been filed or has attached to the Real Property.

 

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(h)                                 Noauthorization, notification, recording, filing, consent, waiting period,Remediation, or approval is required under any Environmental Law in order toconsummate the transactions contemplated hereby.

 

(i)                                     Tothe Knowledge of the Seller, without inquiry, no proposed or final regulationpublished pursuant to Environmental Laws and no Environmental Permit for whichthe Seller has or should have applied, could reasonably be expected to resultin a capital expenditure in excess of $10,000.

 

Section 4.14                                *Material Contracts.*

 

(a)*                                  Schedule 4.14*lists (without duplication) each of the following contracts and otheragreements (or, in the case of oral contracts, summaries thereof) to which theSeller is a party or by or to which the Seller or any of its assets orproperties is bound or subject (such contracts and agreements being “MaterialContracts”):

 

(i)                                     any advertising,market research or other marketing agreements;

 

(ii)                                  any employment,severance, non-competition, consulting or other agreements of any nature withany current or former shareholder, officer or employee of the Seller or anyAffiliate of any of such Persons;

 

(iii)                               any agreements relatingto the making of any loan, guarantee or advance by the Seller;

 

(iv)                              any agreements providingfor the indemnification by the Seller of any Person;

 

(v)                                 any agreements withany Governmental Authority except those entered into in the ordinary course ofbusiness and consistent with past practice which are not material to theSeller;

 

(vi)                              any contracts, agreementsand other arrangements for the sale of assets or for the furnishing ofservices, goods or products by or to the Seller (A) with firm commitmentshaving a value in excess of $10,000 or (B) having a term which is greaterthan six months and which is not terminable by the Seller on less than90 days’ notice without the payment of any termination fee or similarpayment;

 

(vii)                           any broker, distributor,dealer, representative or agency agreements;

 

(viii)                        any agreements (includingsettlement agreements) currently in effect pursuant to which the Sellerlicenses the right to use any Intellectual Property to any Person or from anyPerson, and any research and development agreements;

 

(ix)                                any confidentialityagreements entered into by the Seller during the period commencingfive years prior to the date hereof pursuant to which confidentialinformation has been provided to a third party or by which the Seller wasrestricted from providing information to third parties;

 

(x)                                   any voting trust orsimilar agreements relating to the Capital Stock to which either a Shareholderor the Seller is a party;

 

(xi)                                any leases of RealProperty;

 

(xii)                             any joint venture,partnership or similar documents or agreements;

 

(xiii)                          any agreements that limit orpurport to limit the ability of the Seller or the Shareholders to own, operate,sell, transfer, pledge or otherwise dispose of any assets or to compete withany business;

 

(xiv)                         any agreement (or group ofrelated agreements) under which the Seller has incurred, assumed, or guaranteedany indebtedness or borrowed money or any capitalized lease obligation inexcess of $25,000 in the aggregate or under which it has imposed a securityinterest on any of its assets (including the Assets), tangible or intangible;

 

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(xv)                            any other agreement (orgroup of related agreements) under which the consequences of a default ortermination could reasonably be expected to have a Material Adverse Effect;

 

(xvi)                         any other agreement (or groupof related agreements) the performance of which involves the payment ofconsideration in excess of $50,000 in the aggregate during any twelve (12)-monthperiod; or

 

(xvii)                      all other agreements, contractsor commitments not made in the ordinary course of business and consistent withpast practice which are material to the Seller.

 

(b)                                 EachMaterial Contract is legal, valid and binding on and enforceable against theSeller, and, to the Knowledge of the Seller, the other parties thereto, and isin full force and effect. Except as set forth in *Schedule 4.14(b)*, upon consummation of the transactionscontemplated by this Agreement, each Material Contract shall remain in fullforce and effect without any loss of benefits thereunder and without the needto obtain the consent of any party thereto to the transactions contemplated bythis Agreement. The Seller is not (and with the giving of notice or lapse oftime would not be) in material breach of, or material default under, anyMaterial Contract and, to the Knowledge of the Seller, no other party theretois in material breach of, or material default under, any Material Contract.Neither the Seller nor the Shareholders have received any written notice thatany Material Contract is not enforceable against any party thereto, that anyMaterial Contract has been terminated or repudiated before the expiration ofits term or that any party to a Material Contract intends to terminate orrepudiate such Material Contract prior to the termination date specifiedtherein, or that any other party is in breach of, or default under, anyMaterial Contract. True and complete copies of all Material Contracts or, inthe case of oral agreements, if any, written summaries thereof, have beendelivered to Purchaser.

 

Section 4.15                                *Intellectual Property.*

 

(a)                                  TheSeller is the sole and exclusive owner of, or has the valid right to use, selland license, all Intellectual Property necessary or otherwise material to theconduct of the Business as currently conducted and as currently proposed to beconducted free and clear of all Liens, but, in the case of any licensedIntellectual Property, subject to the terms of the applicable licenses thereof.Other than Excluded Assets and the Intellectual Property of any customer whichhas been provided solely pursuant to any contracts with such customer withrespect to the manufacture of the products for such customer, *Schedule 2.1(a)(i) *sets forth acomplete and accurate list (including whether the Seller is the owner orlicensee thereof) of all (i) patents and patent applications, (ii) trademarkor service mark registrations and applications, (iii) copyrightregistrations and applications and (iv) material unregistered copyrights,service marks, trademarks and trade names, each as owned or licensed by theSeller. The Seller is currently listed in the records of the appropriatefederal, state or other governmental agency as the sole owner of record foreach owned application and registration listed in *Schedule 2.1(a)(i)*.

 

(b)                                 Eachitem of Intellectual Property listed in *Schedule 2.1(a)(i) *isvalid and subsisting, in full force and effect in all material respects, andhas not been canceled, expired or abandoned. The Seller possesses all right,title and interest in and to each such item free and clear of all Liens,provided, however, in the case of any licensed Intellectual Property, subjectto the terms of the applicable licenses thereof. True and correct copies of allsuch Intellectual Property licenses have been previously delivered toPurchaser. There is no pending, existing, or to the Knowledge of Seller,threatened, opposition, interference, cancellation proceeding or other legal orgovernmental proceeding before any court or registration authority in anyjurisdiction against the items listed in *Schedule 2.1(a)(i) *orthe Intellectual Property, which could reasonably be expected to have aMaterial Adverse Effect. Except as set forth on *Schedule 4.15(b)*, no Intellectual Property registrationor application is subject to any maintenance fees or taxes or actions fallingdue, including without limitation the filing of an affidavit of use, renewal orresponse to an official action, within six (6) months after the ClosingDate.

 

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(c)*                                  Schedule 2.1(a)(i) *listsall of the Computer Programs, other than non-material off-the-shelf softwarelicensed pursuant to shrink-wrap licenses, which are owned, licensed, leased orotherwise used by the Seller in connection with the operation of the Businessas currently conducted, and identifies which is owned, licensed, leased orotherwise used, as the case may be. Each Computer Program listed on *Schedule 2.1(a)(i) *is either (i) ownedby the Seller, (ii) currently in the public domain or otherwise availableto the Seller without the license, lease or consent of any third party or (iii) usedunder rights granted to the Seller pursuant to a written agreement, license orlease from a third party, which written agreement, license or lease is setforth in *Schedule 2.1(a)(i)*.The Seller uses the Computer Programs set forth in *Schedule 2.1(a)(i) *in connection with theoperation of the Business as currently conducted and such use does not violatethe rights of any third party. All Computer Programs identified in *Schedule 2.1(a)(i) *as owned bythe Seller were developed for the Seller by (A) employees of the Sellerwithin the scope of their employment, (B) third parties as “work-made-for-hire,”as that term is defined under Section 101 of the United States CopyrightAct (or under analogous laws of foreign jurisdictions, as applicable) pursuantto written agreements or (C) independent contractors who have assigned theentire right, title, and interest in and to such Computer Programs to theSeller pursuant to written agreements. None of the Computer Programs identifiedon *Schedule 2.1(a)(i) *asowned by the Seller contains any shareware, open source code, or other softwarewhose use may require disclosure or licensing of intellectual property orproprietary rights embedded therein.

 

(d)*                                 Schedule 2.1(a)(i) *setsforth a complete and accurate list of all agreements, other than non-materialoff-the-shelf software licensed pursuant to shrink-wrap licenses, pertaining tothe use of or granting any right to use or practice any rights under anyIntellectual Property, whether the Seller is the licensee or licensorthereunder (the “Licenses”) and any written settlements or assignments relatingto any Intellectual Property. The Seller has delivered to Purchaser completeand correct copies of all material Licenses (as amended to date), as well ascopies of all registrations and applications identified on *Schedule 2.1(a)(i)*, including allother material written documentation evidencing ownership and prosecution (ifapplicable) of each such item. The Licenses are valid and binding obligationsof each party thereto, enforceable against each such party in accordance withtheir terms, and there are no breaches or defaults under any Licenses, nor hasany event occurred which with notice or lapse of time would constitute a breachor default, or permit termination, modification or acceleration, of anyLicenses. No party to any License has given the Seller notice of its intentionto cancel, terminate, change the scope of rights under, or fail to renew anyLicense. Each License will continue to be valid, binding and enforceable, andin full force and effect on identical terms following the consummation of thetransactions contemplated hereby upon obtaining the Required IntellectualProperty Consents (as hereinafter defined), if any. The Seller has not grantedany sublicense or similar right with respect to any License.

 

(e)                                  Notrade secret or confidential know-how either of which is material to theBusiness as currently operated has been disclosed or authorized to be disclosedto any third party, other than pursuant to a non-disclosure agreement thatprotects the Seller’s proprietary interests in and to such trade secrets andconfidential know-how. The Seller has taken all reasonable precautions toprotect the secrecy, confidentiality and value of its trade secrets andconfidential know-how. The Seller has at all times complied with and is incompliance with all applicable laws relating to privacy, data protection or thecollection, retention, use and disclosure of personal information. The Sellerhas at all times complied in all material respects with and is in compliancewith all rules, policies and procedures established by the Seller from time totime with respect to privacy, publicity, data protection and the collection,retention, use and disclosure of personal information.

 

(f)                                    Tothe Knowledge of the Seller, the conduct of the Business as currently conductedand as conducted for the three (3) year period immediately preceding theClosing Date does not and did not interfere with, infringe upon ormisappropriate any intellectual property right owned or controlled by any thirdparty, nor to the Knowledge of the Seller will Purchaser interfere with,infringe upon or

 

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misappropriate any intellectual property right owned or controlled byany third party as a result of the continued operation of the Business ascurrently conducted and as currently proposed to be conducted. To the Knowledgeof Seller, no third party is interfering with, infringing upon ormisappropriating, or has at any time during the three (3) year periodimmediately preceding the Closing Date interfered with, infringed upon ormisappropriated, any Intellectual Property owned by the Seller and no suchclaims have been made against a third party by the Seller. There are no claimsor suits pending or, to the Knowledge of the Seller, threatened, and the Sellerhas not received any written notice of a third party demand, Claim or suit (i) allegingthat the Seller’s activities or the conduct of the Business infringes orinfringed upon or constitutes or constituted the unauthorized use of theproprietary rights of any third party or (ii) to the Knowledge of theSeller, challenging ownership, use, validity or enforceability of theIntellectual Property.

 

(g)                                 Thereare no settlements, consents, judgments or orders or other agreements with theSeller which restrict the rights of the Seller to use any IntellectualProperty, or other agreements by the Seller which restrict the Seller’s rightsto use any Intellectual Property owned by the Seller.

 

(h)                                 Exceptas set forth in Schedule 4.15(h), each item of Intellectual Propertyowned, licensed or available for use by the Seller immediately prior to theconsummation of the transactions contemplated hereby will be owned, licensed oravailable for use by Purchaser on identical terms and conditions immediatelysubsequent to such consummation free and clear of all Liens. The consummationof the transactions contemplated hereby will not require the consent of anyGovernmental Authority or third party in respect of any such IntellectualProperty except for such consents set forth in *Schedule 4.15(h) *(the“Required Intellectual Property Consents”).

 

(i)                                     Exceptas set forth on *Schedule 4.15(i)*,no current or former officer, director, employee or consultant of the Sellerhas any right, title or interest, directly or indirectly, in whole or in part,in or to any Intellectual Property.

 

Section 4.16                                *Employee Benefits; ERISA.*

 

(a)*                                  Schedule 4.16(a) *containsa true and complete list of each employment, bonus, deferred compensation,incentive compensation, stock purchase, stock option, restricted stock, stockappreciation right or other stock-based incentive, severance,change-in-control, or termination pay, hospitalization or other medical,disability, life or other insurance, supplemental unemployment benefits, profit-sharing,pension, or retirement plan, program, agreement or arrangement, and each otheremployee benefit plan, program, agreement or arrangement, whether written orunwritten, which is or was within the last three years sponsored by, maintainedby, participated in or contributed to or required to be contributed to by theSeller or by any trade or business, whether or not incorporated (an “ERISAAffiliate”), that together with the Seller would be deemed a “single employer”within the meaning of Section 4001(b)(1) of ERISA, for the benefit ofany current or former employee of the Seller or any ERISA Affiliate (the “Plans”).*Schedule 4.16(a) *identifieseach of the Plans that is an “employee welfare benefit plan,” or “employeepension benefit plan” as such terms are defined in Sections 3(1) and3(2) of ERISA (such plans being hereinafter referred to collectively asthe “ERISA Plans”). Neither the Seller nor any ERISA Affiliate has any formalplan or commitment, whether legally binding or not, to create any additionalPlan or modify or change any existing Plan that would affect any current orformer employee of the Seller or any ERISA Affiliate.

 

(b)                                 Withrespect to each of the Plans, the Seller has heretofore delivered to Purchasertrue and complete copies of each of the following documents, as applicable:

 

(i)                                     a copy of the Plandocuments (including all amendments thereto) for each written Plan or a writtendescription of any Plan that is not otherwise in writing;

 

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(ii)                                  a copy of the annualreport or Internal Revenue Service Form 5500 Series, if required underERISA, with respect to each ERISA Plan for the last three Plan yearsending prior to the date of this Agreement for which such a report was filed;

 

(iii)                               a copy of the mostrecent Summary Plan Description (“SPD”), together with all Summaries ofMaterial Modification issued with respect to such SPD, if required under ERISA,with respect to each ERISA Plan, and all other material employee communicationsrelating to each ERISA Plan;

 

(iv)                              if the Plan is fundedthrough a trust or any other funding vehicle, a copy of the trust or otherfunding agreement (including all amendments thereto) and the latest financialstatements thereof, if any;

 

(v)                                 all contracts relatingto the Plans with respect to which the Seller or any ERISA Affiliate may haveany liability, including insurance contracts, investment management agreements,subscription and participation agreements and record keeping agreements;

 

(vi)                              the most recentdetermination letter received from the IRS with respect to each Plan that isintended to be qualified under Section 401(a) of the Code.; and

 

(vii)                           a copy of all correspondencewith respect to the Plans with the Internal Revenue Service or the U.S.Department of Labor.

 

(c)                                  NoPlan is (i) a defined benefit plan within the meaning of ERISA Section 3(35),(ii) a multiemployer plan within the meaning of ERISA Section 3(37),or (iii) a voluntary employees’ beneficiary association within the meaningof Code Section 501(c)(9). No liability under Title IV of ERISA hasbeen incurred by the Seller or any ERISA Affiliate that has not been satisfiedin full, and no condition exists that presents a material risk.

 

(d)                                 Neitherthe Seller, nor any ERISA Affiliate, any of the ERISA Plans, any trust createdthereunder, nor to the Knowledge of the Seller, any trustee or administratorthereof has engaged in a transaction or has taken or failed to take any actionin connection with which the Seller or any ERISA Affiliate could be subject toany material liability for either a civil penalty assessed pursuant to Section 409or 502(i) of ERISA or a tax imposed pursuant to Section 4975(a) or(b), 4976 or 4980B of the Code.

 

(e)                                  Allcontributions and premiums which the Seller or any ERISA Affiliate is requiredto pay under the terms of each of the ERISA Plans and Section 412 of theCode, have, to the extent due, been paid in full or properly recorded on thefinancial statements or records of the Seller.

 

(f)                                    Eachof the Plans has been operated and administered in all material respects inaccordance with its terms and with applicable Laws, including but not limitedto ERISA and the Code.

 

(g)                                 Eachof the ERISA Plans that is intended to be “qualified” within the meaning of Section 401(a) ofthe Code is so qualified. The Seller has finally applied for and received acurrently effective determination letter from the IRS stating that it is soqualified, and no event has occurred with would affect such qualified status.

 

(h)                                 Noamounts payable under any of the Plans or any other contract, agreement orarrangement with respect to which the Seller may have any liability could failto be deductible for federal income tax purposes by virtue of Section 280Gof the Code.

 

(i)                                     NoPlan provides benefits, including death or medical benefits (whether or notinsured) with respect to current or former employees of the Seller or any ERISAAffiliate after retirement or other termination of service (other than (i) coveragemandated by applicable Laws, (ii) death benefits or retirements benefitsunder any “employee pension plan,” as that term is defined in Section 3(2) ofERISA, (iii) deferred compensation benefits accrued as liabilities on thebooks of the Seller or an ERISA Affiliate, or (iv) benefits, the fulldirect cost of which is borne by the current or former employee (or beneficiarythereof)).

 

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(j)                                     Theconsummation of the transactions contemplated by this Agreement will not (i) entitleany current or former employee or officer of the Seller or any ERISA Affiliateto severance pay, unemployment compensation or any other similar terminationpayment or (ii) accelerate the time of payment or vesting or increase theamount of or otherwise enhance any benefit due any such employee, officer ordirector.

 

(k)                                  Thereare no pending or, to the Knowledge of the Seller, threatened or anticipated,claims by or on behalf of any Plan, by an employee or beneficiary under anysuch Plan, or otherwise involving any such Plan (other than routine claims forbenefits).

 

(l)                                     Onand after the Closing, Purchaser and its Affiliates shall assume no liabilityor obligation and shall have no liability or obligation with respect to anySeller Plan or any benefits or other amounts payable and provided under anySeller Plan or any contract relating to employment or termination of employmentbetween the Seller or any of its Affiliates and any of their employees orformer employees.

 

Section 4.17                                *Labor Matters.*  Except as set forth in *Schedule 4.17*, (i) there is nolabor strike, dispute, slowdown, stoppage or lockout actually pending, orto the Knowledge of the Seller, threatened against or affecting the Seller andduring the past five years there has not been any such action, (ii) theSeller is not a party to or bound by any collective bargaining or similaragreement with any labor organization, or work rules or practices agreedto with any labor organization or employee association applicable to employeesof the Seller, (iii) none of the employees of the Seller is represented byany labor organization and the Seller has no Knowledge of any union organizingactivities among the employees of the Seller within the past five years,nor does any question concerning representation exist concerning suchemployees, (iv) there are no written personnel policies, rules orprocedures applicable to employees of the Seller, other than those set forth in*Schedule 4.17*, true andcorrect copies of which have been delivered to Purchaser prior to the ClosingDate, (v) the Seller is, and has at all times been, in compliance, in allmaterial respects, with all applicable Laws respecting employment andemployment practices, terms and conditions of employment, wages, hours ofwork and occupational safety and health, and is not engaged in any unfair laborpractices as defined in the National Labor Relations Act or other applicableLaws, (vi) there is no unfair labor practice charge or complaint againstthe Seller pending or, to the Knowledge of the Seller, threatened before theNational Labor Relations Board or any similar state or foreign agency, (vii) thereis no grievance arising out of any collective bargaining agreement or othergrievance procedure, (viii) to the Knowledge of the Seller, no chargeswith respect to or relating to the Seller are pending before the EqualEmployment Opportunity Commission or any other agency responsible for theprevention of unlawful employment practices, (ix) the Seller has notreceived a notice of the intent of any federal, state, local or foreign agencyresponsible for the enforcement of labor or employment Laws to conduct an investigationwith respect to or relating to the Seller and no such investigation is inprogress, and (x) there are no complaints, lawsuits or other proceedingspending or, to the Knowledge of the Seller, threatened in any forum by or onbehalf of any present or former employee of the Seller, any applicant foremployment or classes of the foregoing alleging breach of any express orimplied contract or employment, any Laws governing employment or thetermination thereof or other discriminatory, wrongful or tortious conduct inconnection with the employment relationship. To the Seller’s Knowledge, noexecutive, key employee, or group of employees has any plans to reject anyemployment opportunity associated with the Business that may be offered byPurchaser other than the Shareholders. Prior to the Closing, the Seller hasterminated the employment of all of the employees of the Seller who have nottendered their resignation to the Seller on or prior to the Closing Date.

 

Section 4.18                                *Records.* Complete copies of all minute books of the board of directors and theShareholders of the Seller have been made available by the Seller to Purchaser.The minute books do not contain any omissions that would have a MaterialAdverse Effect.

 

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Section 4.19                                *Affiliate Transactions.*  *Schedule 4.19*lists all agreements, arrangements and currently proposed agreements andarrangements, by or between the Seller, on the one hand, with or for thebenefit of any current or former partner, officer or other Affiliate of theSeller or any of such Person’s Affiliates, or any entity in which any suchPerson has a direct or indirect material interest. *Schedule 4.19* lists all payments of any kind since January 1,2005, from the Seller, to or for the benefit of any current or former partner,officer or other Affiliate of the Seller or any of such Person’s Affiliates, orany entity in which any such Person has a direct or indirect material interest.To the extent being assumed by Purchaser, all outstanding debts and otherobligations of the Seller to the Shareholders were incurred in return for fairand adequate consideration paid or delivered by them in cash or other property.All debts of the Shareholders or the Seller’s officers or the respectiveAffiliates of the Seller to the Seller are reflected on the Second QuarterBalance Sheet.

 

Section 4.20                                *Indebtedness.*  The Seller has no Indebtedness outstandingother than as reflected in the balance sheet in the Second Quarter FinancialStatements and, with respect to Indebtedness incurred after the date thereof,as set forth in *Schedule 4.20*.

 

Section 4.21                                *Brokers, Finders, Etc.*  Except as set forth in *Schedule 4.21*, neither the Seller northe Shareholders have employed or are subject to the valid claim of, nor havethe Seller or the Shareholders incurred any Liability that would be payable bythe Seller for any brokerage, finder’s or other fees or commissions of, anybroker, finder or other financial intermediary in connection with thetransactions contemplated by this Agreement.

 

Section 4.22                                *Questionable Payments.*  Neither the Seller, any officer thereof, northe Shareholders have used any funds of the Seller for unlawful contributions,gifts, entertainment or other unlawful expenses relating to political activity,made any direct or indirect unlawful payments to government officials oremployees from corporate funds, established or maintained any unlawful orunrecorded fund or corporate moneys or other assets, made any false orfictitious entries on the books or records of any such corporations, made anybribe, payoff, kickback or other unlawful payment.

 

Section 4.23                                *Competing Business.*  Neither the Shareholders nor the Shareholders’Relatives have any direct or indirect interest of any nature whatever in anyPerson which competes with, conducts any business similar to, has anyarrangement or agreement with, or is involved in any way with, any businesssimilar to the Business.

 

Section 4.24                                *Compliance With Bulk Sales Act; Uniform CommercialCode.*  There are not, and willnot be, any creditors who can legally object to the transfer of the Assetsunder any applicable Bulk Sales Act or the Uniform Commercial Code, or statutesof similar import, if applicable.

 

Section 4.25                                *Product Warranty and Liability.*  It is the Seller’s standard practice to selleach product sold by the Seller in conformity with all applicable contractualcommitments, if any, and all express and implied warranties of themanufacturer. All products sold by the Seller have been sold in conformity withsuch practice, except for such deviations therefrom that have not had, andwould not reasonably be expected to have, a Material Adverse Effect. Except asset forth in *Schedule 4.25*,no product sold by the Seller is subject to any other guaranty, warranty orother indemnity beyond the applicable standard terms and conditions of sale. Nothird party has advised the Seller that it has any liability, and to the Seller’sKnowledge, it has no liability, arising out of any injury to individuals or propertyas a result of the ownership, possession or use of any product sold by theSeller prior to the Closing.

 

Section 4.26                                *Naturalization of the Employees.*  The Seller has not received a notice of anyviolation of any immigration and naturalization laws relating to employment andemployees and has properly completed and maintained all applicable forms(including I-9 forms) and the Seller is in compliance with all such immigrationand naturalization laws and there are no citations, investigations, administrativeproceedings or formal complaints of violations of the immigration ornaturalization laws

 

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pending or, to the Knowledge of the Seller, threatened before theImmigration and Naturalization Service of any federal, state or administrativeagency or court against or involving the Seller.

 

Section 4.27                                *Bank Accounts.*  Attached hereto as *Schedule 4.27* is a list of all banks or other financialinstitutions (collectively, “Banks”) with which the Seller has an account ormaintains a safe deposit box, showing the type and account number of each suchaccount and safe deposit box and the names of the Persons authorized assignatories thereon or to act or deal in connection therewith. Each of theSeller’s accounts at the Banks contains sufficient funds to pay all outstandingchecks that have been drawn on such accounts and sufficient funds to pay alloutstanding checks shall remain in such accounts until the outstanding checksare cashed.

 

Section 4.28                                *Earnout Plan.*  To the extent that the Seller has determinedto implement any plan pursuant to which employees of the Seller may obtain aportion of the Earnout Amounts (the “Earnout Plan”), the Seller has (i) providedthe Earnout Plan to Purchaser for approval, (ii) obtained approval of theEarnout Plan from Purchaser and (iii) not amended, revised or changed theEarnout Plan in any manner after obtaining Purchaser’s approval of the EarnoutPlan. The rights of the employees of Seller pursuant to the Earnout Plan arenon-transferable, non-forfeitable and are not conditioned upon any futureemployment with, or service to, the Seller or Purchaser. The employees eligibleto participate in the Earnout Plan are only those employees who were employedwith the Seller prior to the Closing.

 

**ARTICLE V**

**REPRESENTATIONS AND WARRANTIES OF PARENT ANDPURCHASER**

 

Parent and Purchaser hereby jointly and severally represent and warrantto the Seller and the Shareholders that the statements contained in this Article Vare accurate and complete as of the date hereof, except as set forth in thedisclosure schedules accompanying this Agreement. The disclosure schedules arearranged in numbered and lettered paragraphs corresponding to the numbered andlettered Sections contained in this Article V.

 

Section 5.1                                      *Authorization and Validity.*  Each of Parent and Purchaser has fullcorporate power and authority to execute and deliver this Agreement and toconsummate the transactions contemplated hereby. The execution, delivery andperformance of this Agreement by Parent and Purchaser and the consummation byParent and Purchaser of the transactions contemplated hereby have been dulyauthorized by all necessary corporate action on the part of Parent andPurchaser, and no other corporate proceedings on the part of Parent orPurchaser are necessary to authorize this Agreement or the consummation of thetransactions contemplated hereby. This Agreement has been duly executed anddelivered by Parent and Purchaser, and, assuming due execution and delivery bythe Seller and the Shareholders, constitutes a valid and binding obligation ofParent and Purchaser enforceable against Parent and Purchaser in accordancewith its terms, except that (i) such enforcement may be subject toapplicable bankruptcy, insolvency or other similar laws, now or hereafter ineffect, affecting creditors’ rights generally, and (ii) the remedy ofspecific performance and injunctive and other forms of equitable relief may besubject to equitable defenses and to the discretion of the court before whichany proceeding therefor may be brought.

 

Section 5.2                                      *Organization.*  Parent is a corporation organized under thelaws of the state of Colorado. Purchaser is a corporation organized under thelaws of the State of Delaware. Each of Parent and Purchaser is duly organized,validly existing and in good standing and has full power and authority to carryon its business as presently conducted. Each of Parent and Purchaser is dulylicensed or qualified to do business and is in good standing as a foreign corporationin each jurisdiction where the ownership, lease or operation of its assets andproperties or the conduct of its business requires such license orqualification. Each of Parent and Purchaser has delivered to the Seller acomplete and correct copy of its certificate of incorporation and bylaws, eachas amended to date. Such organizational documents are in full force and effect.

 

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Section 5.3                                      *No Conflict.*  Neither the execution, delivery or performanceof this Agreement or the other documents and instruments to be executed anddelivered by Parent or Purchaser pursuant hereto, nor the consummation byParent or Purchaser of the transactions contemplated hereby or thereby, norcompliance by Parent or Purchaser with any of the provisions hereof or thereofwill (a) conflict with or result in any breach of any provision of thearticles of incorporation or bylaws of Parent or Purchaser, (b) except asset forth in *Schedule 5.3(b)*,constitute a change in control under, or require the consent from or the givingof notice to a third party, result in a violation or breach of, or constitute(with or without due notice or lapse of time or both) a default (or give riseto any right of termination, amendment, cancellation or acceleration) under, orresult in the creation of any Lien upon or affecting any of the assets ofParent or Purchaser pursuant to, any of the terms, conditions or provisions ofany contractual obligation of Parent or Purchaser or (c) violate any order,writ, injunction, decree, statute, rule or regulation of any GovernmentalAuthority applicable to Parent or Purchaser or to which any of its propertiesor assets may be bound.

 

Section 5.4                                      *Governmental Consents.*  No consent, order or authorization of, orregistration, declaration or filing with, any Governmental Authority isrequired on the part of Parent or Purchaser in connection with the execution,delivery and performance of this Agreement or the consummation of thetransactions contemplated hereby by Parent or Purchaser.

 

Section 5.5                                      *Payment of Purchase Price.*  Purchaser has the ability to pay the ClosingCash Payment and Parent has the ability to pay the Earnout Amounts and suchpayments do not require the consent or approval of any third party or constituteor cause any breach of any agreement to which Parent or Purchaser is a party.

 

**ARTICLE VI**

**COVENANTS**

 

Section 6.1                                      *Assignment of 401(k) Sponsorship.*  The Seller and the Shareholders shall takeany and all actions necessary and shall deliver any documents reasonablyrequested by Purchaser to effect on Closing the assignment of the plansponsorship and the plan administration to Purchaser with respect to the Seller’s401(k) plan.

 

Section 6.2                                      *Employees.* At the Closing, Purchaser shall offer employment to all of the employeesof the Seller who have not tendered their resignation to the Seller on or priorto the date hereof at substantially their current annual salary or hourly ratesof compensation listed on *Schedule 6.2*hereto and shall offer such employees benefits substantially similar to thebenefits offered to such employees by the Seller as of the date hereof.

 

Section 6.3                                      *Proration.* The Shareholders and Purchaser shall prorate all real property taxeswith respect to the Shareholder Real Estate that are incurred, accrued orpayable as of the Closing Date based upon the most recent tax bills andinformation available. On the Closing Date, the proration shall be calculatedand paid to Purchaser in cash or other immediately available funds, but not asan adjustment to the Purchase Price.

 

Section 6.4                                      *Cooperation.*  From and after the Closing Date, the Sellerand the Shareholders shall cooperate with Purchaser and any accounting firmengaged by Purchaser to provide any opinion on the Financial Statements and/orany review of the other financial statements of the Business prior to theClosing Date that may be required to be included from time to time by Purchaseror Parent in registration statements or periodic or other reports filed byPurchaser or Parent from time to time with the Securities and ExchangeCommission, which cooperation shall include the giving of representation orother letters of reliance to such accounting firm in connection therewith, andto furnish to the officers, employees, authorized agents, accountants, counsel,financing sources and representatives of Purchaser and its Affiliates suchadditional financial information and operating data and other informationregarding the Business prior to the Closing and the assets, properties andgoodwill of the

 

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Seller related to the Business prior to the Closing as the Purchaserand its Affiliates may from time to time reasonably request.

 

Section 6.5                                      *Further Assurances.*  From and after the Closing Date, the Sellerand the Shareholders shall promptly execute, acknowledge and deliver any otherassurances or documents reasonably requested by Purchaser to permit Purchaserto satisfy its obligations hereunder or to evidence title, or to provide Purchaserwith the benefits enumerated in this Agreement.

 

**ARTICLE VII**

**SURVIVAL AND INDEMNIFICATION**

 

Section 7.1                                      *Survival of Representations and Warranties.*  Each of the representations and warrantiesmade by Parent and Purchaser in this Agreement shall terminate on the secondanniversary date of the Closing. Each of the representations and warrantiesmade by the Shareholders or the Seller in this Agreement shall terminate on thesecond anniversary of the Closing Date; *provided*,*however*, that (i) therepresentations and warranties contained in Sections 4.11, 4.13, 4.16 and4.26 shall survive the Closing until 90 days following the expiration ofthe applicable statute of limitations; (ii) the representations andwarranties contained in Sections 4.1, 4.2 and 4.3 shall survive theClosing and remain in full force and effect without termination. In the eventnotice of any claim for indemnification under Section 7.4(a) hereofshall have been given within the applicable survival period, therepresentations and warranties that are the subject of such indemnificationclaim shall survive until such time as such claim is finally resolved. Thecovenants and agreements of the parties set forth in this Agreement and theindemnification obligations of the parties hereunder shall survive indefinitelyexcept as expressly provided herein. This Section 7.1 shall not limit anyclaim for willful fraud or willful misrepresentation or any covenant oragreement by the parties which contemplates performance after the Closing.

 

Section 7.2                                      *Indemnification by the Seller and the Shareholders.*

 

(a)                                  Subjectto the other provisions of this Article VII, the Seller and each of theShareholders shall, jointly and severally, indemnify, defend and hold harmlessthe Purchaser Indemnified Parties from and against any and all expenses,losses, damages, liabilities and out-of-pocket costs (including attorneys’ feesand expenses), in each case, net of insurance proceeds if and when actuallyreceived (“Damages”) suffered by any of the Purchaser Indemnified Parties tothe extent resulting from, arising out of, or incurred with respect to:

 

(i)                                     any breach of orinaccuracy in any representation or warranty (other than the Seller andShareholder Non-Basket Representations) as of the Closing Date of the Seller orthe Shareholders contained in this Agreement;

 

(ii)                                  any breach of anycovenant of the Seller or the Shareholders contained in this Agreement;

 

(iii)                               any breach of orinaccuracy in any representation or warranty as of the Closing Date of theSeller or the Shareholders contained in Sections 4.1 and 4.3 of thisAgreement (collectively, the “Seller and Shareholder Non-Basket Representations”);

 

(iii)                               all Litigation arisingfor any period up to and including the Closing Date;

 

(iv)                              all Liabilities relatingto Environmental Claims arising from any facts, circumstances or conditionsexisting, initiated or occurring up to and including the Closing Date; and

 

(v)                                 all Liabilities ofSeller other than the Assumed Liabilities.

 

(b)                                 ThePurchaser Indemnified Parties may bring a claim seeking indemnification forDamages under Section 7.2(a)(i) under the terms and provisions ofthis Article VII only if the Damages

 

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therefrom exceed on an individual basis an amount equal to TEN THOUSANDDOLLARS ($10,000), or on an aggregate basis, an amount equal to SEVENTY-FIVETHOUSAND DOLLARS ($75,000) (the “Seller’s Indemnification Threshold”), at whichtime all Damages under such Section may be claimed in full; *provided*, *however*,that the Seller’s Indemnification Threshold shall not apply to claims forwillful fraud or willful misrepresentation. Notwithstanding anything to thecontrary contained herein and solely for purposes of determining whether theSeller’s Indemnification Threshold has been exceeded, all qualifications andexceptions contained in Article IV relating to materiality or words ofsimilar import (including Material Adverse Effect) shall be disregarded forpurposes of determining whether there has been a breach or inaccuracy of anysuch representation or warranty pursuant to Section 7.2(a)(i) and theSeller’s Indemnification Threshold exceeded.

 

Section 7.3                                      *Indemnification by Parent and Purchaser.*

 

(a)                                  Subjectto the other provisions of this Article VII, Parent and Purchaser shallindemnify, defend and hold harmless the Seller Indemnified Parties from andagainst any and all Damages suffered by any of the Seller Indemnified Partiesto the extent resulting from, arising out of, or incurred with respect to:

 

(i)                                     any breach of orinaccuracy in any representation or warranty (other than the Parent andPurchaser Non-Basket Representations) as of the Closing Date of Parent orPurchaser contained in this Agreement;

 

(ii)                                  any breach of anycovenant of Parent or Purchaser contained in this Agreement;

 

(iii)                               any breach of orinaccuracy in any representation or warranty as of the Closing Date of Parentor Purchaser contained in Sections 5.1 and 5.2 of this Agreement(collectively, the “Parent and Purchaser Non-Basket Representations”);

 

(iv)                              all Litigation arisingfor any period after the Closing Date; and

 

(v)                                 Liabilities arisingafter the Closing Date from the Assumed Liabilities to the extent notresulting, directly or indirectly, from any breach of this Agreement by theSeller or the Shareholders.

 

(b)                                 TheSeller Indemnified Parties may bring a claim seeking indemnification forDamages under Sections 7.3(a)(i) under the terms and provisions of this Article VIIonly if the Damages therefrom exceed on an individual basis an amount equal toTEN THOUSAND DOLLARS ($10,000), or on an aggregate basis, an amount equal toSEVENTY-FIVE THOUSAND DOLLARS ($75,000) (the “Purchaser’s IndemnificationThreshold”), at which time all Damages under such Section may be claimedin full; *provided*, *however*, that the Purchaser’sIndemnification Threshold shall not apply to claims for willful fraud orwillful misrepresentation or to claims arising out of the failure of Parent orPurchaser to pay the Purchase Price. Notwithstanding anything to the contrarycontained herein and solely for purposes of determining whether the Purchaser’sIndemnification Threshold has been exceeded, all qualifications and exceptionscontained in Article V relating to materiality or words of similar import(including shall be disregarded for purposes of determining whether there hasbeen a breach or inaccuracy of any such representation or warranty pursuant to Section 7.3(a)(i) andthe Purchaser’s Indemnification Threshold exceeded.

 

Section 7.4                                      *Notice and Resolution of Claim.*

 

(a)                                  Anindemnified party under this Agreement shall promptly give written notice tothe indemnifying party after obtaining knowledge of any third party claim orlitigation against the indemnified party as to which recovery may be soughtagainst the indemnifying party because of the indemnity set forth inSections 7.2 or 7.3, specifying in reasonable detail the claim orlitigation and the basis for indemnification; *provided*,*however*, that the failure of theindemnified party promptly to notify the indemnifying party of any such mattershall not release the indemnifying party, in whole or in part,

 

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from its obligations under this Article VII except to the extentthe indemnified party’s failure to so notify in breach of this subsection (a) materiallyprejudices the indemnifying party’s ability to defend against such third partyclaim or litigation. The indemnified party shall permit the indemnifying partyto assume the defense of any such claim, litigation or any litigation resultingfrom such third party claim.

 

(b)                                 Ifthe indemnifying party assumes the defense of any such third party claim orlitigation, the obligations of the indemnifying party under this Agreementshall consist of actively and diligently conducting the investigation, defenseor settlement of such claim or litigation (including the retention of legalcounsel) and, to the extent the indemnified party is entitled toindemnification, holding the indemnified party harmless from and against anyand all losses caused by or arising out of any settlement approved by theindemnifying party or any judgment in connection with such claim or litigation,to the extent of such indemnification obligation. The indemnifying party shallnot, in the defense of such claim or litigation, consent to entry of anyjudgment (except with the written consent of the indemnified party) or enterinto any settlement (except with the written consent of the indemnified party):(i) that does not include as an unconditional term thereof the giving bythe claimant or the plaintiff to the indemnified party a complete release from,all liability in respect of such claim or litigation, or (ii) in the goodfaith judgment of the indemnified party, the effect of which is to permit anyinjunction, declaratory judgment, other order or other equitable relief to beentered, directly or indirectly, against any indemnified party which wouldlikely be adverse to the continuing business interests of such indemnifiedparty. The indemnifying party shall permit the indemnified party to participatein such defense or settlement through counsel chosen by the indemnified party,with the fees and expenses of such counsel borne by the indemnified party.

 

(c)                                  Failureby the indemnifying party to notify the indemnified party of its election toassume the defense of any such claim or litigation by a third party withinthirty (30) days after notice thereof has been given to the indemnifyingparty shall be deemed a waiver by the indemnifying party of its right to assumethe defense of such claim or litigation. If the indemnifying party does notassume the defense of such claim or litigation by a third party, theindemnified party may defend or settle such claim or litigation in such matteras the indemnified party may deem appropriate and may settle such claim orlitigation on such terms as it may deem appropriate.

 

(d)                                 Ifany matter as to which a Purchaser Indemnified Party may be able to assert aclaim for Damages under this Article VII is pending or unresolved, or anyother matter as to which such Purchaser Indemnified Party actually orpotentially may suffer Damages exists, at the time any payment of the EscrowAmount or the Earnout Amounts, as applicable, is due from Parent or Purchaserto the Seller or the Shareholders, whether pursuant to Section 3.4(a), Section 3.4(b) orotherwise, Parent or Purchaser shall have the right, in addition to otherrights and remedies and methods of recovery (whether under this Agreement orpursuant to applicable law), to withhold, or instruct and cause the EscrowAgent to withhold, from such payment an amount equal to the claim until suchmatters are resolved. If it is finally determined that such claims are coveredby this Article VII, the amount of such claims, to the extent indemnificationapplies, may be obtained from the Seller or Shareholders or offset against theEscrow Amount or the Earnout Amounts, as applicable, and the remainder of theEscrow Amount or the Earnout Amounts, if any, shall be delivered to theShareholders pursuant to the Escrow Agreement, Section 3.3(d) or Section 3.4,as applicable. If any matter as to which a Purchaser Indemnified Party hasasserted a claim for Damages under this Article VII that is resolved insuch Purchaser Indemnified Party’s favor, Parent or Purchaser shall have theright, in addition to other rights and remedies and methods of recovery(whether under this Agreement or pursuant to applicable law), to instruct andcause the Escrow Agent to release and pay to Parent or Purchaser, the amount ofsuch claim, to the extent indemnification applies with respect thereto, inaccordance with the Escrow Agreement.

 

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Section 7.5                                      *Limitations.*  Notwithstanding anything to the contrarycontained herein, under no circumstances shall the Seller’s or the Shareholders’aggregate indemnification obligations under this Article VII exceed anamount equal to EIGHTEEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($18,500,000),and under no circumstances shall Parent’s or Purchaser’s indemnificationobligations under this Article VII exceed an amount equal to EIGHTEENMILLION FIVE HUNDRED THOUSAND DOLLARS ($18,500,000); provided, however, thatthe obligations of Parent and Purchaser under Sections 3.3 and 3.4 shallnot be subject to such cap.

 

Section 7.6                                      *Exclusive Remedy.*  Subject to Section 8.8, (a) theindemnities provided in this Article VII are intended to be and shall bethe sole and exclusive remedies of the Seller Indemnified Parties and thePurchaser Indemnified Parties regarding any matter touching upon or relating tothe negotiation, entry of, consummation and closing of this Agreement and theperformance of the Business; (b) the purpose of this exclusive and soleremedy provision is that the total amount recoverable from the Shareholders andthe Seller on the one hand, or Purchaser on the other, as described in Section 7.5hereof, represents the total amount recoverable from them for any and allcauses of action against them whether under this Agreement or otherwise; and (c) eachparty is relying upon the other’s agreement and representation that theremedies provided for in this Article VII shall be the sole and exclusiveremedies of (i) the Purchaser Indemnified Parties against Seller and theShareholders and (ii) the Seller Indemnified Parties against Purchaser.Notwithstanding anything to the contrary contained in this Agreement, thelimitations contained in Section 7.5 and Section 7.6 shall not applyto claims for willful fraud or willful misrepresentation.

 

Section 7.7                                      *Mitigation of Damages.*  Each of Purchaser, the Seller and theShareholders agree to use commercially reasonable efforts to mitigate anyDamages which are subject to indemnification hereunder.

 

**ARTICLE VIII**

**MISCELLANEOUS**

 

Section 8.1                                      *Notices.* All notices or other communications hereunder shall be deemed to havebeen duly given and made if in writing and if served by personal delivery uponthe party for whom it is intended, if delivered by registered or certifiedmail, return receipt requested, or by a national courier service, or if sent byfacsimile, *provided*, *however* that the facsimile is promptlyfollowed by telephone confirmation thereof to the appropriate person at theaddress set forth below, or at such other address as may be designated inwriting hereafter, in the same manner, by such person.

 

To the Seller or the Shareholders:

 

Campbell Engineering, Inc.

2719 Trevor Drive

Huntsville, Alabama 35802

Telephone: (256) 882-2745

Attention: Richard A. Campbell

 

with a copy to:

 

Bradley Arant Rose & White LLP

One Federal Place

1819 - 5th Avenue North

Birmingham, Alabama 35203-2119

Telephone: (205) 521-8246

Facsimile: (205) 488-6246

Attention: Denson N. Franklin, III

 

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To Parent or Purchaser:

 

Accellent Corp.

200 West 7th Avenue

Collegeville, Pennsylvania 19426

Telephone: (610) 489-0300

Facsimile: (610) 489-1150

Attention: Stewart Fisher

 

with a copy to:

 

Hogan & Hartson L.L.P.

One Tabor Center

1200 17th Street, Suite 1500

Denver, Colorado 80202

Telephone: (303) 899-7300

Facsimile: (303) 899-7333

Attention: Christopher J. Walsh

 

Any such notice shall be deemed delivered (a) on the datedelivered if by personal delivery, (b) on the date upon which the returnreceipt is signed or delivery is refused or the notice is designed by thepostal authorities as a not deliverable, as the case may be, if mailed byregistered or certified mail, (c) on the next succeeding Business Day ifsent by national courier service, or (d) on the date telecommunicated ifby telecopier if confirmed by telephone confirmation.

 

Section 8.2                                      *Amendment, Waiver.*  Any provision of this Agreement may beamended or waived if, and only if such amendment or waiver is in writing andsigned, in the case of an amendment, by Parent, Purchaser, the Seller and theShareholders, or in the case of a waiver, by the party against whom the waiveris to be effective. No failure or delay by any party in exercising any right,power or privilege hereunder shall operate as a waiver thereof, nor shall anysingle or partial exercise thereof preclude any other or further exercisethereof or the exercise of any other right, power or privilege.

 

Section 8.3                                      *Assignment.*  No party to this Agreement may assign any ofits rights or obligations under this Agreement without the prior writtenconsent of the other parties hereto; *provided*,*however*, that each of Parent andPurchaser may assign any of its rights and obligations hereunder in whole or inpart to any of its Affiliates without obtaining the consent of the other partieshereto, but shall remain liable for its obligations hereunder.

 

Section 8.4                                      *Entire Agreement.*  This Agreement (including all Schedules andExhibits hereto) contains the entire agreement between the parties hereto withrespect to the subject matter hereof and supersedes all prior agreements andunderstandings, oral or written, with respect to such matters.

 

Section 8.5                                      *Parties in Interest.*  This Agreement shall inure to the benefit ofand be binding upon the parties hereto and their respective successors andpermitted assigns. Nothing in this Agreement, express or implied, is intendedto confer upon any Person other than Parent, Purchaser, the Seller, theShareholders or their successors or permitted assigns, any rights or remediesunder or by reason of this Agreement.

 

Section 8.6                                      *Expenses.* All costs and expenses incurred by Parent and Purchaser in connectionwith this Agreement and the transactions contemplated hereby shall be borne byParent and Purchaser, and all costs and expenses incurred by the Shareholdersand all costs and expenses related to the transactions contemplated herebyincurred by the Seller in connection with this Agreement and the transactionscontemplated hereby shall be borne by the Shareholders and the Sellers as theymay mutually agree.

 

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Section 8.7                                      *Governing Law; Jurisdiction; Service of Process.*  This Agreement shall be governed by andconstrued in accordance with the Laws of the State of Delaware without regardto its rules of conflict of laws. Each of Parent, Purchaser, theShareholders and the Seller hereby irrevocably and unconditionally consents tosubmit to the exclusive jurisdiction of the Court of Chancery of the State ofDelaware, County of New Castle or, if under applicable Law, exclusivejurisdiction is vested in federal courts, then of the United States of Americalocated in the District of Delaware (collectively, the “Delaware Courts”) forany litigation arising out of or relating to this Agreement and thetransactions contemplated hereby (and agrees not to commence any litigationrelating thereto except in such courts), waives any objection to the laying ofvenue of any such litigation in the Delaware Courts and agrees not to plead orclaim in any Delaware Court that such litigation brought therein has beenbrought in an inconvenient forum. Any party hereto may make service on anotherparty by sending or delivering a copy of the process to the party to be servedat the address and in the manner provided for the giving of notices in Section 8.1.Nothing in this Section, however, shall affect the right of any party to servelegal process in any other manner permitted by law.

 

Section 8.8                                      *Specific Performance.*  The parties hereto agree that if any of theprovisions of this Agreement are not performed in accordance with theirspecific terms or are otherwise breached, irreparable damage would occur, noadequate remedy at law would exist and damages would be difficult to determine,and that the parties shall be entitled to specific performance of the termshereof, in addition to any other remedy at law or equity.

 

Section 8.9                                      *Transfer and Similar Taxes.*  Notwithstanding any other provision of thisAgreement to the contrary, the Seller shall assume and promptly pay when dueall sales, property, use, privilege, transfer, documentary, gains, stamp,duties, and similar Taxes and fees (including any penalties, interest oradditions) imposed upon any party incurred in connection with the transactionscontemplated by this Agreement; *provided*,*however*, any recording fees ordeed taxes shall be payable by Purchaser.

 

Section 8.10                                *Counterparts.*  This Agreement may be executed in two or morecounterparts, each of which shall be deemed an original and all of whichtogether shall constitute one instrument. In the event that any signature isdelivered by facsimile transmission, such signature shall create a valid andbinding obligation of the party executing (or on whose behalf such signature isexecuted) the same with the same force and effect as if such facsimilesignature page were an original itself.

 

Section 8.11                                *Headings.* The heading references herein and in the table of contents hereto arefor convenience purposes only, do not constitute a part of this Agreement, andshall not be deemed to limit or affect any of the provisions hereof.

 

[SIGNATURE PAGE FOLLOWS]

 

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**SIGNATURES**

 

IN WITNESS WHEREOF, the parties have executed or caused this Agreementto be executed as of the date first above written.

 

 
| ** ** | **ACCELLENT CORP.**                 |
|------------|-------------------------------------|
| ** ** | ** **                          |
|       | By:                                 | /s/ STEWART A. FISHER |
|       |                                | Name: Stewart A. Fisher

Title: Chief Financial Officer, Vice President, Secretary and  Treasurer |
|       |                                |   |
| ** ** | **CE HUNTSVILLE HOLDINGS CORP.**    |
| ** ** | ** **                          |
|       | By:                                 | /s/ STEWART A. FISHER |
|       |                                | Name: Stewart A. Fisher

Title: Chief Financial Officer, Vice President, Secretary and  Treasurer |
|       |                                |   |
| ** ** | **CAMPBELL ENGINEERING, INC.** |
| ** ** | ** **                          |
|       | By:                                 | /s/ RICHARD A. CAMPBELL |
|       |                                | Name: Richard A. Campbell

Title: President |
|       |                                |   |
| ** ** | **SHAREHOLDERS**                    |
| ** ** | ** **                          |
|       | By:                                 | /s/ RICHARD A. CAMPBELL |
|       |                                | Name: Richard A. Campbell

Title: Shareholder |
|       |                                |   |
|       | By:                                 | /s/ SUE CAMPBELL |
|       |                                | Name: Sue Campbell

Title: Shareholder |

 

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***Schedule 1.1***

 

**DEFINITIONS**

 

*“Accounting Referee”*shall have the meaning set forth in Section 3.4(e) hereof.

 

*“Adjustment Notice”*shall have the meaning set forth in Section 3.2(b)(i) hereof.

 

*“Affiliate”* shallmean, as to any Person (i) any other Person which, directly or indirectly,is in control of, is controlled by, or is under common control with, suchPerson, (ii) any corporation or organization (other than a Subsidiary ofsuch Person) of which such Person is an officer or partner or is, directly orindirectly, the beneficial owner of 10% or more of any class of equitysecurities, (iii) any trust or other estate in which such Person has asubstantial beneficial interest or as to which such Person serves as trustee orin a similar fiduciary capacity, (iv) any relative or spouse of suchPerson, or (v) any relative of such spouse who has the same home as suchPerson, relative or spouse or who is a director or officer of such Person orany of its parents or Subsidiaries. The term “control” (including, withcorrelative meanings, the terms “controlled by” and “under common control with”),as applied to any Person, means the possession, direct or indirect, of thepower to elect a majority of the board of directors of such Person or to director cause the direction of the management and policies of such Person, whetherthrough the ownership of voting securities or other ownership interest, bycontract or otherwise.

 

*“Agreement”* shallhave the meaning set forth in the preamble hereof.

 

*“Assets”* shall havethe meaning set forth in Section 2.1(a) hereof.

 

*“Assumed Liabilities”*shall have the meaning set forth in Section 2.3(a) hereof.

 

*“Auditor”* shall havethe meaning set forth in Section 3.2(b)(iii) hereof.

 

*“Auditor’s Report”*shall have the meaning set forth in Section 3.2(b)(iii) hereof.

 

*“Banks”* shall havethe meaning set forth in Section 4.29 hereof.

 

*“Baseline Net Working Capital Balance”*shall have the meaning set forth in Section 3.2(a) hereof.

 

*“Bill of Sale and Assignment Agreement”*shall mean such bills of sale, assignment and assumption agreements to beentered into by and between Purchaser and the Seller on the date of thisAgreement, in form and substance reasonably satisfactory in each case toPurchaser and the Seller, pursuant to which the Seller will transfer the Assetsheld by it, and assign the liabilities to be assigned by it, to Purchaser andPurchaser will acquire such Assets and assume such liabilities from the Seller,as contemplated by Sections 2.1 and 2.3 of this Agreement.

 

*“Business”* shallhave the meaning set forth in the first recital of this Agreement.

 

*“Business Day”* shallmean any day other than a Saturday, a Sunday or a day on which banks in theState of Alabama are authorized or obligated by law or executive order toclose.

 

*“Capital Stock”*shall mean, as to the Seller, all of the shares of the Seller’s Common Stockand all other shares, regardless of class or series, of the Seller’s capitalstock authorized to be issued in accordance with the Seller’s articles ofincorporation, as the same may be amended as of the Closing Date.

 

*“CERCLIS”* shall meanthe Comprehensive Environmental Response, Compensation, Liability InformationSystem.

 

*“Claims”* shall meanall demands, claims, actions or causes of action, assessments, complaints,directives, citations, information requests issued by a Governmental Authority,legal proceedings, orders, notices of potential responsibility, losses, damages(including, without limitation, diminution in value), Liabilities, sanctions,costs and expenses, including interest, penalties and attorneys’ and experts’fees and disbursements.

 

*“Closing”* shall havethe meaning set forth in Section 3.6 hereof.

 

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*“Closing Cash Payment”*shall have the meaning set forth in Section 3.3(b) hereof.

 

*“Closing Date”* shallhave the meaning set forth in Section 3.6 hereof.

 

*“Code”* shall meanthe Internal Revenue Code of 1986, as amended.

 

*“Common Stock”* shallhave the meaning set forth in Section 4.2(a) hereof.

 

*“Computer Programs”*shall mean any and all (i) computer software programs and softwaredevelopment tools, including all source and object code, (ii) databasesand compilations, including any and all data and collections of data, whethermachine readable or otherwise, (iii) descriptions, flow-charts and otherwork product used to design, plan, organize and develop any of the foregoing,and (iv) documentation, including user manuals and training materials,relating to any of the foregoing.

 

*“Contracts”* shallhave the meaning set forth in Section 2.1(a)(ii).

 

*“Damages”* shall havethe meaning set forth in Section 7.2 hereof.

 

*“Delaware Courts”*shall have the meaning set forth in Section 8.7 hereof.

 

*“Earnout Amounts”*shall mean, collectively, the 2005 Earnout Amount and the 2006 Earnout Amount.

 

*“Earnout Plan”* shallhave the meaning set forth in Section 4.28 hereof.

 

*“EBITDA”* shall meanearnings before interest expense, income tax expense, depreciation andamortization of the Business for the period in question, as determined by thefinancial statements of the Seller or Purchaser, as applicable, prepared inaccordance with GAAP applied on a consistent basis throughout the periodscovered thereby.

 

*“Environmental Claims”*shall mean all Claims pursuant to Environmental Laws, including those based on,arising out of or otherwise relating to: (i) the Remediation, presence orRelease of, or exposure to, Hazardous Materials or other environmental conditionsinitiated, existing or occurring prior to the Closing Date at, on, under,above, from, or about any Real Property or any real properties formerly owned,leased or operated by the Seller or any of its predecessors or Affiliates; (ii) theoff-site Release, treatment, transportation, storage or disposal prior to theClosing Date of Hazardous Materials originating from the Seller’s Assets orBusiness; (iii) any violations of Environmental Laws by the Seller priorto the Closing Date, including reasonable expenditures necessary to cause theSeller to be in compliance with or resolve violations of Environmental Laws.

 

*“Environmental Laws”*shall mean any Laws (including the Comprehensive Environmental Response,Compensation, and Liability Act), including any plans, other criteria, orguidelines promulgated pursuant to such Laws, now or hereafter in effectrelating to the Remediation, generation, production, installation, use,storage, treatment, transportation, Release, threatened Release, or disposal ofHazardous Materials, or noise control, or the protection of human health,safety, natural resources, animal health or welfare, or the environment.

 

*“Environmental Permits”*shall mean any Permits, licenses, certificates and approvals required under anyEnvironmental Law.

 

*“ERISA”* shall meanthe Employee Retirement Income Security Act of 1974, as amended.

 

*“ERISA Affiliate”*shall have the meaning set forth in Section 4.16(a) hereof.

 

*“ERISA Plans”* shallhave the meaning set forth in Section 4.16(a) hereof.

 

*“Escrow Agent”* shallmean Wells Fargo Bank, N.A. or such other Person as determined in accordancewith the Escrow Agreement.

 

*“Escrow Agreement”*shall have the meaning set forth in Section 3.3(d) hereof.

 

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*“Escrow Amount”*shall have the meaning set forth in Section 3.3(d) hereof.

 

*“Excluded Assets”*shall have the meaning set forth in Section 2.2 hereof.

 

*“Exhibit”* shall havethe meaning set forth in Section 1.2 hereof.

 

*“Financial Statements”*shall mean the audited consolidated balance sheets and statements of income,changes in shareholders’ equity and cash flow as of and for thefiscal years ended December 31, 2003 and December 31, 2004 forthe Seller.

 

*“First Quarter Financial Statements”*shall have the meaning set forth in Section 4.6 hereof.

 

*“GAAP”* shall meanUnited States generally accepted accounting principles and practices (includingsales being recognized at the time of shipment).

 

*“Governmental Authority”*shall mean any national, federal, state, local or foreign judicial,legislative, executive or governmental regulatory authority.

 

*“Hazardous Materials”*shall mean any wastes, substances, radiation, or materials (whether solids,liquids or gases): (i) which are hazardous, toxic, infectious, explosive,radioactive, carcinogenic, or mutagenic; (ii) which are or become definedas “pollutants,” “contaminants,” “hazardous materials,” “hazardous wastes,” “hazardoussubstances,” “toxic substances,” “radioactive materials,” “solid wastes,” orother similar designations in, or otherwise subject to regulation under, anyEnvironmental Laws; (iii) the presence of which on the Real Property causeor threaten to cause a nuisance pursuant to applicable statutory or common lawupon the Real Property or to adjacent properties; (iv) which containwithout limitation polychlorinated biphenyls (PCBs), mold, methyl-tertiarybutyl ether (MTBE), asbestos or asbestos-containing materials, lead-basedpaints, urea-formaldehyde foam insulation, or petroleum or petroleum products (includingcrude oil or any fraction thereof); or (v) which pose a hazard to humanhealth, safety, natural resources, employees, or the environment.

 

*“Indebtedness”* ofany Person at any date shall mean (a) all indebtedness of such Person forborrowed money or for the deferred purchase price of property or services(other than current trade liabilities incurred in the ordinary course ofbusiness consistent with past practice and payable in accordance with customarypractices) and including earn-out or similar contingent purchase amounts, (b) anyother indebtedness of such Person which is evidenced by a note, bond, debentureor similar instrument, (c) all obligations of such Person under anycapitalized lease, (d) all obligations of such Person in respect of acceptancesissued or created for the account of such Person, (e) all liabilitiessecured by any Lien on any property owned by such Person even though suchPerson has not assumed or otherwise become liable for the payment thereof, and (f) allguarantees by such Person of obligations of others.

 

*“Independent Contractor”*shall mean those third parties other than attorneys, accountants and financialadvisors, providing services to or on behalf of the Seller, that were paid bythe Seller at least ten thousand dollars ($10,000) for any applicable year.

 

*“Instruments of Transfer”*shall have the meaning set forth in Section 2.1(b) hereof.

 

*“Intellectual Property”*shall mean all intellectual property rights used or available for use in theBusiness as currently conducted or as currently contemplated by the Seller tobe conducted, or in or to which the Seller has any right, title or interest,including all patents and patent applications, together with all reissuances,continuations, continuations-in-part, revisions, extensions and reexaminationsthereof; trademarks, trademark registrations and applications, service marks,service mark registrations and applications, trade names, trade dress, logos,designs, proprietary rights, slogans and general intangibles of like nature,together with all goodwill symbolized by or related to the foregoing;copyrights, copyright registrations and applications; mask works and allapplications, registrations and renewals in connection therewith; ComputerPrograms; all domain names and the content contained on

 

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the Seller’s Internet web site(s); product plans, technology, processengineering, drawings, schematic drawings, secret processes, proprietaryknowledge, including without limitation, trade secrets, know-how, confidentialinformation and formulae.

 

*“IRS”* shall mean theInternal Revenue Service of the United States of America.

 

*“Key Suppliers, Vendors and Customers”*shall have the meaning set forth in Section 4.7 hereof.

 

*“Knowledge”* withrespect to any particular representation or warranty contained in thisAgreement, when used to apply to the “Knowledge” of a Shareholder, shall bedeemed to be followed by the phrase “after reasonable inquiry of suchShareholders” and, when otherwise used, shall mean the actual knowledge orconscious awareness after due inquiry of the senior officers or individualsperforming similar functions of the Person.

 

*“Laws”* shall meanany federal, state, foreign or local law, statute, ordinance, rule, regulation,order, determination, writ, judgment or decree, administrative order, andadministrative or judicial decision.

 

*“Liabilities”* shallmean debts, liabilities, commitments, obligations, duties and responsibilitiesof any kind and description, whether absolute, accrued, contingent, monetary ornonmonetary, direct or indirect, known or unknown or matured or unmatured or ofany other nature.

 

*“Licenses”* shallhave the meaning set forth in Section 4.15(d) hereof.

 

*“Liens”* shall meanany lien, pledge, mortgage, deed of trust, security interest, lease, charge,option, right of first refusal, easement, encroachment, reservation, servitude,transfer restriction under any shareholder or similar agreement, order, decree,judgment, condition or any other encumbrance of any nature whatsoever.

 

*“Litigation”* shallmean any litigation, legal action, arbitration, proceeding, material demand,material claim or investigation pending, or, to the Knowledge of the Seller,threatened, planned or reasonably probable, against, affecting or brought by oragainst the Shareholders, the Seller, the Seller’s present or former employeesor agents affiliated at any time with the Seller relating to the Business orany of the Assets.

 

*“Material Adverse Effect”*shall mean, with respect to the same or any similar events, acts, conditions oroccurrences, whether individually or in the aggregate resulting in, a materialadverse effect on or a material adverse change in (a) the Assets, (b) anyof the Business, condition (financial or otherwise), operations or liabilitiesof the Seller, (c) the legality or enforceability against the Seller orthe Shareholders of this Agreement or (d) the ability of the Seller andeach of the Shareholders to perform its, her or his (as the case may be)obligations and to consummate the transactions under this Agreement. Forpurposes of clauses (a) and (b) of this definition and withoutlimiting the generality of the foregoing, an effect or change with respect tothe same or any similar event(s), act(s), condition(s) or occurrence(s)individually or in the aggregate with respect to which the Seller wouldreasonably be expected to have $50,000 in the aggregate or more in Damagesbeing asserted against, imposed upon or sustained by the Assets or the Selleror its Business, taken as a whole, shall constitute a “material adverse” effector change.

 

“*Material Contracts”*shall have the meaning set forth in Section 4.14(a) hereof.

 

“*Net Working Capital Balance”*shall have the meaning set forth in Section 3.2(a) hereof.

 

“*Non-Competition Agreement”*shall have the meaning set forth in Section 3.7(h) hereof.

 

*“Nondelivered Assets”*shall have the meaning set forth in Section 2.4 hereof.

 

“*Objection Notice”* shallhave the meaning set forth in Section 3.2(b)(ii) hereof.

 

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“*Objection Period”* shallhave the meaning set forth in Section 3.2(b)(ii) hereof.

 

*“Parent”* shall havethe meaning set forth in the preamble hereof.

 

*“Parent and Purchaser Non-BasketRepresentations”* shall have the meaning set forth in Section 7.3(a)(iii) hereof.

 

*“Parent’s Notice”*shall have the meaning set forth in Section 3.4(e) hereof.

 

*“PBGC”* shall havethe meaning set forth in Section 4.16(d) hereof.

 

*“Permits”* shall meanas to any Person, all licenses, permits, franchises, orders, approvals,concessions, registrations, authorizations and qualifications under anyfederal, state, local or foreign laws with any and all Governmental Authoritiesor with any and all industry or other nongovernmental self-regulatoryorganizations that are issued to such Person.

 

*“Person”* shall meanan individual, a corporation, a partnership, limited liability company, anassociation, a trust or other entity or organization.

 

*“Plans”* shall havethe meaning set forth in Section 4.16(a) hereof.

 

“*Proposed Purchase Price Adjustment”*shall have the meaning set forth in Section 3.2(b)(i) hereof.

 

*“Purchase Price”*shall have the meaning set forth in Section 3.1 hereof.

 

*“Purchaser”* shallhave the meaning set forth in the preamble hereof.

 

*“Purchaser Indemnified Parties”*shall mean Parent, Purchaser and their respective successors, assigns,Affiliates, agents and employees.

 

*“Purchaser’s Indemnification Threshold”*shall have the meaning set forth in Section 7.3(b) hereof.

 

*“Real Property”* shallhave the meaning set forth in Section 4.9(b) hereof.

 

*“Relatives”* shallmean such person’s spouse, lineal ancestor or descendant, brother or sister.

 

*“Release”* shall meanany presence, emission, spill, seepage, leak, escape, leaching, discharge, injection,pumping, pouring, emptying, dumping, disposal, migration, or release ofHazardous Materials from any source into or upon the environment, including theair, soil, improvements, surface water, groundwater, sewer, septic system,storm drain, publicly owned treatment works, or waste treatment, storage, ordisposal systems.

 

*“Remediation”* shallmean any investigation, clean-up, removal action, remedial action, restoration,repair, response action, corrective action, monitoring, sampling and analysis,installation, reclamation, closure, or post-closure in connection with thesuspected, threatened or actual Release of Hazardous Materials.

 

*“Required Intellectual Property Consents”*shall have the meaning set forth in Section 4.15(h).

 

*“Schedule”* and anyreferences to specific items therein shall mean the disclosure schedule deliveredby the Shareholders and the Seller to Purchaser contemporaneously with theexecution of this Agreement or the disclosure schedule delivered byPurchaser to the Seller contemporaneously with the execution of this Agreement,as the case may be.

 

*“Seller”* shall havethe meaning set forth in the preamble hereof.

 

*“Seller and Shareholder Non-BasketRepresentations”* shall have the meaning set forth in Section 7.2(a)(iii) hereof.

 

*“Seller Indemnified Parties”*shall mean the Shareholders, the Seller and their respective successors,assigns, Affiliates, agents and employees.

 

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*“Seller’s Indemnification Threshold”*shall have the meaning set forth in Section 7.2(b) hereof.

 

*“Shareholder(s)”*shall have the meaning(s) set forth in the preamble hereof.

 

*“Shareholder Real Estate”*shall have the meaning set forth in Section 2.1(a).

 

*“Shareholder Real Estate Purchase Price”*shall have the meaning set forth in Section 3.1 hereof.

 

*“SPD”* shall have themeaning set forth in Section 4.16(b)(iv) hereof.

 

*“Statement”* shallhave the meaning set forth in Section 3.4(e) hereof.

 

*“Statutory Warranty Deed”*shall mean a statutory warranty deed from the Shareholders or the Seller, asapplicable, to Purchaser conveying fee title to the Shareholder Real Estate andto the Real Property owned by the Seller, as contemplated by Section 2.1of this Agreement, in each case in form and substance reasonably satisfactory toPurchaser.

 

*“Subsidiary”* shallmean, with respect to any Person, any corporation or other organization,whether incorporated or unincorporated, of which such Person or any othersubsidiary of such person beneficially owns a majority of the voting or equityinterests.

 

*“Tax Law”* shall meanany Law relating to Taxes.

 

*“Tax Return”* shallmean any return (including any information return), report, statement,schedule, notice, form, or other document or information filed with orsubmitted to, or required to be filed with or submitted to, any GovernmentalAuthority in connection with the determination, assessment, collection, orpayment of any Taxes or in connection with the administration, implementation,or enforcement of or compliance with any Law relating to any Tax.

 

*“Taxes”* shall meanall taxes (including any income taxes, payroll taxes, capital gains taxes,value-added taxes, excise taxes, sales taxes, property taxes, gift taxes,transfer taxes or estate taxes), levies, assessments, tariffs, duties (includingany customs duties), deficiencies, or other fees, and any related charges oramounts (including any fines, penalties, interest, or additions to tax),imposed, assessed, or collected by or under the authority of any GovernmentalAuthority or payable pursuant to any tax-sharing agreement or any othercontract relating to the sharing or payment of any such tax, levy, assessment,tariff, duty, deficiency, or fee.

 

*“Title Policy”*shall mean an ALTA title insurance policy on each parcel of the Shareholders RealEstate and of the owned Real Property of the Seller, each issued to Purchaserby a title company reasonably acceptable to Purchaser, in an amount not lessthan the fair market value of the applicable parcel, and, in each case,containing such endorsements as Purchaser may reasonably request and issuedpursuant to a title commitment or title report reasonably approved and acceptedby Purchaser.

 

*“Transition Services Agreement”*shall have the meaning set forth in Section 3.8(d) hereof.

 

*“Transition Services and Consulting Agreement”*shall have the meaning set forth in Section 3.8(c) hereof.

 

*“2005 Baseline EBITDA”*shall have the meaning set forth in Section 3.4(a) hereof.

 

*“2005 Earnout Amount”*shall have the meaning set forth in Section 3.4(a) hereof.

 

*“2005 EBITDA”* shallhave the meaning set forth in Section 3.4(a) hereof.

 

*“2005 Target EBITDA”*shall mean FIVE MILLION ONE HUNDRED THOUSAND DOLLARS ($5,100,000).

 

*“2006 Earnout Amount”*shall have the meaning set forth in Section 3.4(b) hereof.

 

*“2006 Earnout Cap”*shall have the meaning set forth in Section 3.4(b) hereof.

 

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*“2006 EBITDA”* shallhave the meaning set forth in Section 3.4(b) hereof.

 

*“2006 Statement”*shall have the meaning set forth in Section 3.4(d) hereof

 

*“2007 Statement”*shall have the meaning set forth in Section 3.4(d) hereof.

 

“*Verification Period”*shall have the meaning set forth in Section 3.2(b)(i) hereof.

 

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