Unassociated Document


    EXECUTION
      COPY

     

    Share
      Purchase Agreement

     

    between

    


    Aeroflex
      Incorporated

    


    and

    


    The
      Sellers named herein

     

    regarding
      the shares in 

    


    Gaisler
      Research AB

    

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    TABLE
      OF CONTENTS

     

    
      
        	
                Article
                  I

              	
                DEFINITIONS

              	
                3

              
	 	 	 
	
                Article
                  II

              	
                SALE
                  AND PURCHASE OF SHARES

              	
                9

              
	 	 	 
	
                Article
                  III

              	
                PURCHASE
                  PRICE

              	
                9

              
	 	 	 
	
                Article
                  IV

              	
                THE
                  CLOSING

              	
                13

              
	 	 	 
	
                Article
                  V

              	
                REPRESENTATIONS
                  AND WARRANTIES OF SELLERS

              	
                15

              
	 	 	 
	
                Article
                  VI

              	
                REPRESENTATIONS
                  AND WARRANTIES OF PURCHASER

              	
                32

              
	 	 	 
	
                Article
                  VII

              	
                COVENANTS

              	
                32

              
	 	 	 
	
                Article
                  VIII

              	
                NON-COMPETITION;
                  NON-SOLICITATION

              	
                33

              
	 	 	 
	
                Article
                  IX

              	
                SURVIVAL
                  OF REPRESENTATIONS & WARRANTIES; INDEMNIFICATION

              	
                35

              
	 	 	 
	
                Article
                  X

              	
                SETTLEMENT
                  OF CLAIMS AND ESCROW

              	
                39

              
	 	 	 
	
                Article
                  XI

              	
                MISCELLANEOUS

              	
                41

              


      

    

    

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

    

     

    SHARE
      PURCHASE AGREEMENT

     

    This
      SHARE
      PURCHASE AGREEMENT
      is made
      as of the 30th
      day of
      June, 2008 (the “Agreement”),
      among
      Aeroflex Incorporated, a Delaware corporation having its principal place of
      business at 35 South Service Road, PO Box 6022, Plainview, NY 11803 (the
“Purchaser”),
      and
      Jiri Gaisler residing at Molinsgatan 19, 41133 Gothenburg, Sweden (“Gaisler”),
      Per
      Danielsson, residing at Första Långgatan 6, 41303 Gothenburg, Sweden
      (“Danielsson”)
      and
      Sandi Habinc, residing at Bassåsv’gen 24, 43655 Hovås, Sweden (“Habinc”,
      and
      together with Aktiebolaget Grundstenen 121346 changing name to Habinc Invest
      AB,
      reg.nr. 556755-0628 (“Habinc
      AB”)
      to whom
      Habinc conveyed his shares of Gaisler Research AB prior to the date hereof,
      jointly and severally, the “Habinc
      Group”),
      as
      the actual or putative owners of all of the issued and outstanding shares of
      Gaisler Research AB, reg.nr. 556660-0994, having its registered office at
      Gothenburg, Sweden (the “Company”).
      Gaisler, Danielsson and the Habinc Group (or where the context otherwise
      requires, Habinc) are collectively referred to herein as the “Sellers.”
The
      Purchaser and the Sellers are sometimes referred to herein as the “Parties”,
      and
      each of the Purchaser and the Sellers, respectively, as a “Party”
where
      the context requires. 

    


    BACKGROUND

    


    A. The
      Sellers are the owners of all of the issued and outstanding shares of the
      Company (the “Shares”).
      The
      Company is engaged in the business of developing, designing, engineering,
      producing and selling and/or licensing software, programs, operational systems,
      processors and other electronic products for the European aerospace and other
      related markets (the “Business”).

    


    B.
       The
      Purchaser is desirous of acquiring the Shares from the Sellers and the Sellers
      are desirous of selling the Shares to the Purchaser upon the terms and
      conditions hereinafter set forth;

    


    NOW,
      THEREFORE,
      the
      Parties do hereby agree as follows:

    


    ARTICLE
      I

    DEFINITIONS

    


    1.1 Certain
      Definitions.
      The
      following terms, as used herein, have the following meanings:

    


    “Accounting
      Principles” shall mean the accounting policies, practices and methods consistent
      with those applied in preparation of the Financial Statements and the Balance
      Statement to the extent that they are consistent with applicable law and Swedish
      GAAP.

     

    
      
        
        

      

      
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    “Affiliate”
      means, in respect of any Person, a Person that, directly or indirectly, through
      one or more intermediaries controls, is controlled by or is under common control
      with the first-mentioned Person.

    


    “Business
      Day” means any day that is not a Saturday, Sunday or a day on which the banks in
      New York, New York are required or permitted to be closed.

    


    “Business
      Lease” means that certain lease agreement dated November 1, 2007 between the
      Company, as Lessee, and Elof Hansson Fastighets AB, org nr 556309-1289, as
      Lessor, by which the Company leased space located at Forsta Langgatan 19, 413,
      27 Gothenburg, for an initial term commencing on January 1, 2008 and ending
      on
      December 31, 2008, that is automatically renewable for successive one year
      periods thereafter in accordance with the terms of the lease agreement or as
      prescribed by applicable law.

    


    “Closing
      Date” shall mean such Business Day as the Parties may agree upon, but in no
      event later than June 30, 2008.

    


    “Confidential
      Information” means information not generally available to the public, including,
      without limitation, all computer software and database information, financial
      information, customer and supplier lists, trade secrets, proprietary
      information, information regarding operations, systems, services, Know How,
      computer and any other processed or collated data, computer programs, pricing,
      marketing data, methods, designs, products or processes.

    


    “Contracts”
      means all oral and written agreements, options, leases, licenses, orders,
      commitments, and other instruments of any kind. 

    


    “Copyrights”
      shall have the meaning set forth in the definition of Intellectual Property.
      

    


    “Domain
      Names” shall have the meaning set forth in the definition of Intellectual
      Property.

    


    “Due
      Diligence Information” shall mean (i) the documents and any other information
      made available by the Sellers for review by the Purchaser and its
      representatives prior to the Closing Date and described in Schedule 5.30, (ii)
      any information contained or referred to in this 

    Agreement
      and the Schedules hereto, and (iii) any information or documentation provided
      at
      any meetings held by Sellers with, or presentations by the Company’s management
      attended by, employees, consultants or other representatives of the Purchaser,
      but, with regard to (i), (ii) and (iii), only to the extent that such
      documentation and information was true, complete, accurate and otherwise not
      misleading. 

    


    “Earn
      Out
      Table” shall mean that table attached to this Agreement as Schedule 3.3
      (b).

     

    
      
        
        

      

      
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    “EBITDA”
      shall mean the income or earnings generated by the Company before interest,
      taxes, depreciation and amortization, calculated or adjusted in a manner
      consistent with the Past Practice of the Purchaser, i.e., exclusive of equity
      based compensation charges and management fee allocations.

    


    “EBITDA
      Profit Targets” shall have the meaning ascribed to it in the Earn Out
      Table.

    


    “Encumbrance”
      means any mortgage, title defect, pledge, security interest, restriction,
      encumbrance or charge of any kind in respect of any asset.

    


    “Environmental
      Laws” shall mean all applicable laws and regulations, statutes, directives,
      codes, ordinances, judgments, orders and any other measures imposed by a
      Governmental Authority in the country of operations of the Company concerning
      the pollution or the protection of the environment, human health or safety,
      and/or work environment and conditions in the workplace, or the generation,
      transportation, storage, treatment or disposal of hazardous
      substance.

    


    “Escrow
      Account” shall mean that portion of the Initial Purchase Price Payment deposited
      with the Escrow Agent at the Closing, together with all accrued interest
      thereon, as thereafter managed, administered and distributed by the Escrow
      Agent
      in accordance with the terms of the Escrow Agreement.

    


    “Escrow
      Agent” means Swedbank.

    


    “Escrow
      Agreement” means the Escrow Agreement, dated as of the date hereof, by and among
      the Sellers, Purchaser and the Escrow Agent. 

    


    “Fiscal
      Year” shall mean the yearly period ending on June 30.

    


    “Governmental
      Authority” means any foreign or domestic governmental authority, court,
      regulatory organization or commission, administrative or other agency, or any
      subdivision, department or branch of any of the foregoing.

    


    “Indebtedness”
      of any Person means all obligations of such Person (a) for borrowed money,
      (b) evidenced by notes, bonds, debentures or similar instruments and
      (c) in the nature of guarantees of the obligations described in
      clauses (a) and (b) above of any other Person.

    


    “Information
      Technology” means all computer hardware, software, networks, microprocessors,
      firmware and other information technology and communications equipment used
      in
      the operation of Information Technology systems of the Company.

     

    
      
        
        

      

      
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    “Intellectual
      Property” means all intellectual property owned, used or licensed (as licensor
      or licensee) by the Company that is used or has been used in the Business,
      or in
      any Products, service, technology or process currently or formerly offered
      by
      the Company or in the Business, or currently under development by the Company
      for use in connection with the Business, including: (i) all domestic and foreign
      copyright interests in any original work of authorship, whether registered
      or
      unregistered, all rights under the Swedish Copyright Act, together with all
      other copyright interests accruing by reason of international copyright
      convention (collectively, “Copyrights”),
      (ii)
      all domestic and foreign patents (including certificates of invention and other
      patent equivalents), patent applications and patents issuing therefrom as well
      as any division, continuation or continuation in part, reissue, extension,
      reexamination, certification, revival or renewal of any patent, all Inventions
      and subject matter related to such patents, in any and all forms (collectively,
      “Patents”);
      (iii)
      all domestic and foreign trademarks, service marks, trade names, icons, logos,
      slogans, and any other indicia of source or sponsorship of goods and services,
      designs and logotypes related to the above, in any and all forms, all trademark
      registrations and applications for registration related to such trademarks
      (including, but not limited to intent to use applications), and all goodwill
      related to the foregoing (collectively, “Trademarks”);
      (iv)
      all domain name registrations (collectively “Domain
      Names”);
      (v)
      any formula, design, device or compilation, or other information which is used
      or held for use by a business, which gives the holder thereof an advantage
      or
      opportunity for advantage over competitors which do not have or use the same,
      and which is protected from disclosure to the public (“Trade
      Secrets”)
      -
      Trade Secrets can include, by way of example, formulas, algorithms, market
      surveys, market research studies, information contained on drawings and other
      documents, and information relating to research, development or testing; (vi)
      novel devices, processes, compositions of matter, methods, techniques,
      observations, discoveries, apparatuses, machines, designs, expressions, theories
      and ideas, whether or not patentable; (vii) scientific, engineering, mechanical,
      electrical, financial, marketing or practical knowledge or experience useful
      in
      the operation of the Business (“Know-How”);
      (viii) (A) any and all computer programs and/or software programs (including
      all
      source code, object code, firmware, programming tools and/or documentation),
      (B)
      machine readable databases and compilations, including any and all data and
      collections of data, and (C) all content contained on Internet site(s)
      (collectively, “Software”);
      (ix)
      all documentation and media constituting, describing or relating to the above,
      including memoranda, manuals, technical specifications and other records
      wherever created throughout the world; and (x) the right to sue for past,
      present, or future infringement and to collect and retain all damages and
      profits related to the foregoing.

    


    “Key
      Employees” shall mean Gaisler, Danielsson and Habinc.

    


    “Know-How”
      shall have the meaning set forth in the definition of Intellectual
      Property.

    


    “Knowledge
      of Sellers” means the actual knowledge of any Seller as well as the actual
      knowledge of the collective group of Sellers, and shall be deemed to include
      a
      representation that each of such individuals has made all usual and reasonable
      inquiries and all inquiries that would be reasonable in light of such
      individual’s knowledge.

    


    “Latest
      Balance Statement Date” shall mean May 31, 2008.

     

    
      
        
        

      

      
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    “Liability”
      means, with respect to any Person, any liability or obligation of such Person
      of
      any kind, whether known or unknown, absolute or contingent, accrued or
      unaccrued, liquidated or unliquidated, secured or unsecured, joint or several,
      due or to become due, vested or unvested, executory, determined, determinable
      or
      otherwise.

    


    “Losses”
      means all demands, claims, actions, assessments, losses, damages, costs,
      expenses, liabilities, judgments, awards, fines, sanctions, penalties, charges
      and amounts paid in settlement, including reasonable costs and fees of attorneys
      and other agents incurred in investigating, preparing for and defending any
      thereof.

    


    “Material
      Adverse Effect” means any material adverse change in the business, properties,
      assets, Liabilities, results of operations, condition (financial or otherwise)
      or prospects of the Company or its Business taken as a whole.

    


    “Material
      Contracts” shall mean any Contract, agreement, obligation, commitment, promise
      or undertaking (whether written or oral, express or implied) that is legally
      binding between the Company and any other Person(s), or by which the assets
      and
      properties of the Company are bound, having a contract value of more than
      $50,000 or a remaining contract term of more than three (3) months or which
      otherwise has a material significance to the Business and/or the future business
      prospects of the Company, and all of which are listed on Schedule 5.18
      (a).

    


    “Net
      Working Capital” shall mean the amount by which the current assets exceed the
      current liabilities, as determined in accordance with the Accounting Principles,
      applied in a manner consistent with Past Practice.

    


    “New
      Business Lease” shall mean the certain lease agreement dated June 16, 2008
      between the Company as Lessee, and KB Inom Vallgraven 22:15, org nr 916445-7039,
      as Lessor, by which the Company leases space located at Kungsgatan 12,
      Gothenburg, for a term commencing on December 1, 2008 and ending on November
      30,
      2011, that is automatically renewable for successive three (3) year periods
      thereafter in accordance with the terms of the lease agreement or as prescribed
      by applicable law.

    


    “Ordinary
      Course of Business” shall mean the ordinary course of business consistent with
      Past Practice.

    


    “Past
      Practice” shall mean with respect to the Company or the Purchaser, as the case
      may be, the practice and procedures utilized consistently during the three
      years
      prior to the Latest Balance Statement Date.

    


    “Patents”
      shall have the meaning set forth in the definition of Intellectual Property.
      

     

    
      
        
        

      

      
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    “Person”
      shall mean an individual, corporation, partnership, limited liability company,
      association or other legal entity.

    


    “Related
      Documents” shall mean the Escrow Agreement and the Sellers Employment
      Agreements. 

    


    “Sellers’
      Allocations” shall mean Gaisler (56.65%), Danielsson (31.95%) and the Habinc
      Group (11.4%).

    


    “Software”
      shall have the meaning set forth in the definition of Intellectual
      Property.

    


    “Subsidiary”
      shall mean, with respect to any Person, (i) any corporation as to which
      more than 10% of the outstanding shares having ordinary voting rights or power
      is owned or controlled, directly or indirectly, by such Person and/or by one
      or
      more of such Person’s Subsidiaries and (ii) any partnership, joint venture
      or other similar relationship between such Person (or any Subsidiary thereof)
      and any other Person (whether pursuant to a written agreement or
      otherwise).

    


    “STIBOR”
      shall mean the Stockholm Interbank Offered Rate.

    


    “Swedish
      GAAP” shall mean generally accepted accounting principles in Sweden as in effect
      from time to time and applied consistently throughout the periods
      involved.

    


    “Taxes”
      shall mean all taxes, duties, charges and levies or other assessments,
      including, without limitation, income taxes, corporation tax, capital gain
      tax,
      transfer tax, social security fees, duties, sales tax, value added tax,
      withholding tax and any other taxes which may be payable to or imposed by any
      tax authority together with any interest, penalties or additions to such
      taxes.

    


    “Tax
      Return” shall mean all declarations, returns, reports, forms or other
      information required to be filed with respect to any Tax.

    


    “Three
      Year Total EBITDA Profit Target” shall have the meaning ascribed to such term in
      the Earn Out Table.

    


    “Three
      Year Total of Earn Out Payments” shall have the meaning ascribed to such term in
      the Earn Out Table.

    


    “Trade
      Secret” shall have the meaning set forth in the definition of Intellectual
      Property.

    


    “Trademark”
      shall have the meaning set forth in the definition of Intellectual
      Property.

     

    
      
        
        

      

      
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    ARTICLE
      II

    SALE
      AND PURCHASE OF SHARES

    


    2.1 In
      reliance on the representations and warranties contained herein and subject
      to
      all of the terms and conditions hereof, the Sellers hereby agree to sell and
      transfer to the Purchaser, and the Purchaser hereby agrees to purchase from
      the
      Sellers on the Closing Date, all of the Shares free from all Encumbrances and
      together with all accrued benefits and rights attaching thereto, including,
      but
      not limited to, accumulated but not distributed profits.

     

    2.2 Each
      of
      the Sellers, if applicable, hereby waives any rights of pre-emption or right
      of
      first refusal which it might have under the articles of association of the
      Company or conferred by any shareholders agreement.

    


    2.3 Title
      of
      ownership to the Shares shall transfer to the Purchaser on the Closing
      Date.

    


    ARTICLE
      III

    PURCHASE
      PRICE

     

    3.1 Purchase
      Price.
      In
      consideration of the sale of the Shares to the Purchaser, and subject to the
      terms and conditions hereinafter set forth, at Closing, the Purchaser shall
      deliver to the Sellers the sum of Fifteen Million ($15,000,000) USD (the
“Initial Purchase
      Price Payment”)
      (less
      Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000 USD)), which
      shall be delivered to, and administered by, the Escrow Agent as provided in
      the
      Escrow Agreement), by wiring to the separate accounts of each of the Sellers,
      pursuant to a letter of instruction signed by the Sellers and provided to the
      Purchaser prior to the Closing, the pro rata portion of the same to which each
      Seller is entitled based on Sellers’ Allocations.

    


    
      
        3.2
          Purchase
          Price Adjustment.

      

    

     

    (a) A
      post-Closing adjustment to the Initial Purchase Price Payment shall be made
      as
      follows: (i) any decrease to the Net Working Capital (as finally determined
      below), and/or (ii) any decrease in the amount of cash (as finally determined
      below), shall be subtracted from the Initial Purchase Price
      Payment.

    


    (b) Within
      sixty (60) days following the Closing, the Purchaser shall prepare and deliver
      to Sellers an unaudited balance statement of the Company as of the Closing
      Date
      immediately prior to Closing (the “Proposed
      Closing Balance Statement”),
      which
      shall (A) indicate the amount of cash available as of the Closing Date
      immediately prior to the Closing, and (B) include a statement of Net Working
      Capital as of the Closing Date immediately prior to Closing (the “Closing
      Working Capital Statement”)
      prepared in a manner consistent with (i) the balance statement of the
      Company as of May 31, 2008, attached as Exhibit
      A
      hereto
      (the “Balance
      Statement”),
      and
      (ii) the computation of the Net Working Capital as of May 31, 2008,
      attached as Exhibit
      B
      hereto.
      The Proposed Closing Balance Statement and the Closing Working Capital Statement
      shall be prepared in accordance with the Accounting Principles, subject to
      the
      exceptions thereto taken as provided in Schedule 3.2(b), and shall be consistent
      with Past Practice as employed in the preparation of the Company’s audited
      Financial Statements. The Proposed Closing Balance Statement shall present
      fairly in all material respects the financial condition of the Company as of
      that date. 

     

    
      
        
        

      

      
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    (c) Sellers
      and their auditors shall have the right to examine and make copies of the work
      papers and other documents generated or reviewed in connection with the
      preparation of the Proposed Closing Balance Statement and the Closing Working
      Capital Statement and to access the books and records of the Company relative
      to
      the preparation of the Proposed Closing Balance Statement and the Closing
      Working Capital Statement (the “Post-Closing
      Adjustment Documents”).

    


    (d) 
      (i)  Sellers
      shall have thirty (30) days after the receipt of the Proposed Closing Balance
      Statement and the Closing Working Capital Statement (the “Sellers’
      Review Period”)
      to
      review the Proposed Closing Balance Statement, the Closing Working Capital
      Statement, and the Post Closing Adjustment Documents. 

    


    (ii) 
      If
      the
      Sellers dispute any item(s) on the Proposed Closing Balance Statement or the
      Closing Working Capital Statement, Sellers shall give the Purchaser written
      notice of such disagreement prior to the expiration of the Sellers’ Review
      Period specifically identifying the item(s) and amount(s) in dispute and the
      basis for such dispute (the “Sellers’
      Notice”).
      The
      Parties shall use commercially reasonable efforts to reach agreement with
      respect to such disputed items within thirty (30) days following the delivery
      of
      the Sellers’ Notice, or such longer period as may be agreed upon by the Parties
      (the “Resolution
      Period”).

    


      (iii)
      If
      the
      Parties mutually agree upon the Proposed Closing Balance Statement and the
      Closing Working Capital Statement within the Resolution Period, such agreement
      shall be binding upon the Parties. Any item(s) on the Proposed Closing Balance
      Statement or the Closing Working Capital Statement not specifically identified
      in writing as a disputed item before the end of Sellers’ Review Period shall be
      deemed to have been accepted by Sellers and shall not be subject to any further
      dispute, review or change.

    


    (e) If
      the
      Parties fail to resolve any disputes with respect to the Proposed Closing
      Balance Statement and/or the Closing Working Capital Statement within the
      Resolution Period, the dispute(s) shall be submitted for resolution within
      ten
      (10) days after the expiration of the Resolution Period to, and definitely
      and
      finally determined by, the Arbitration Institute of the Stockholm Chamber of
      Commerce (the “Arbitration
      Tribunal”)
      in
      accordance with Section 11.5 hereof. The Arbitration Tribunal’s determination of
      such dispute(s) shall be made in a manner consistent with the principles set
      forth in this Section 3.2 in a written opinion delivered not later than thirty
      (30) days after the submission of the same to such Arbitration Tribunal. Any
      such determination shall be final and binding. The Proposed Closing Balance
      Statement and the Closing Working Capital Statement as mutually agreed to by
      the
      Parties or otherwise finally determined in the manner provided shall be referred
      to, respectively, as the “Closing
      Balance Statement”
and
      the
“Working
      Capital Determination”.

     

    
      
        
        

      

      
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    (f) If
      (i)
      the amount of Net Working Capital determined pursuant to the Working Capital
      Determination is less than Two Million Three Hundred Thousand USD ($2,300,000)
      and/or (ii) the cash on the Closing Balance Statement is less than Two Million
      USD ($2,000,000), then the Initial Purchase Price Payment shall be reduced
      accordingly on a dollar for dollar basis by the aggregate amount of such
      deficiency. Such amount, with interest thereon calculated as indicated below
      (together, the “Reduction
      Amount”),
      shall
      be paid to Purchaser by wire transfer of immediately available funds to an
      account designated in writing by Purchaser, within five (5) business days
      following the date on which the Closing Balance Statement and the Working
      Capital Determination are finally determined (the “Determination
      Date”).
      The
      interest shall be calculated at an annual rate of STIBOR (30 days) plus two
      (2%)
      percent, as the same may change from time to time from the Closing Date through
      the payment date (the “Applicable
      Rate”).
      The
      Reduction Amount shall be treated for income tax purposes as an adjustment
      to
      the Initial Purchase Price Payment, and the Initial Purchase Price Payment,
      as
      adjusted, shall be referred to as the “Adjusted
      Initial Purchase Price Payment”.

    


    
      
        3.3
          Additional
          Purchase Price Payments.

      

    

    


    (a) Subject
      to whatever changes or modifications to the EBITDA Profit Targets or
      corresponding Earn Out Payments that the Parties, in the exercise of their
      reasonable business judgment, agree mutually it is appropriate to make from
      time
      to time to reflect or adjust for changed circumstances, i. e., acquisitions,
      added product lines, etc., or otherwise, the Sellers shall be afforded the
      opportunity to earn and be paid additionally for their Shares as hereinafter
      provided for each of Fiscal Years (“FY”)
      2009,
      2010 and 2011, respectively, an “Earn
      Out Payment”
based
      on the EBITDA of the Company for 2009 and the cumulative EBITDA for FY 2010
      and
      FY 2011.

    


    (b) More
      particularly, in accordance with the Earn Out Table attached as Schedule 3.3(b),
      for FY 2009, based on the Level 1 EBITDA Profit Target and the percentage of
      that EBITDA Profit Target achieved by the Company for that Fiscal Year (i.e.
      Levels 1 through 5 reflecting the percentage of the EBITDA Profit Target
      achieved from 100% to 80%) the Sellers will be entitled to be paid an Earn
      Out
      Payment for that Fiscal Year that corresponds on the Earn Out Table to the
      percentage of the EBITDA Profit Target achieved by the Company. Accordingly,
      if
      the Company were to achieve the Level 1 EBITDA Profit Target of $2,800,000
      USD
      for FY 2009, the Sellers would be entitled to be paid the Level 1 Earn Out
      Payment for that Fiscal Year in the amount of $4,000,000 USD, whereas, for
      example, if the Company were to achieve an EBITDA of 88% of the Level 1 EBITDA
      Profit Target for that Fiscal Year, the Sellers would only be entitled to
      receive 88% of the Level 1 Earn Out Payment, or $3,520,000 USD. On the other
      hand, if the EBITDA of the Company for FY 2009 is less than 80% of the Level
      1
      EBITDA Profit Target, Sellers would not be entitled to be paid any Earn Out
      Payment for that Fiscal Year.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (c) In
      accordance with the Earn Out Table, the Earn Out Payment which the Sellers
      are
      entitled to be paid for FY 2010, if any, shall be equal to the greater of:
      (A)
      the
      percentage of the Level 1 Earn Out Payment on the Earn Out Table that
      corresponds to the percentage of the Level 1 EBITDA Profit Target actually
      achieved by the Company by reason of (x) its operations in FY 2010 plus
      (y)
      the
      amount, if any, by which the Company exceeded the Level 1 EBITDA Profit Target
      for 2009 (the “2009
      EBITDA Excess”)
      or
      (B)
      provided that the EBITDA for FY 2009 was not less than the Level 5 EBITDA Profit
      Target for such Fiscal Year on the Earn Out Table and
      that the
      EBITDA for FY 2010 was more than the Level 1 EBITDA Profit Target for such
      Fiscal Year on the Earn Out Table, (x) the percentage of the cumulative Earn
      Out
      Payment on the Earn Out Table that corresponds to the percentage of the Level
      1
      cumulative EBITDA Profit Target actually achieved by the Company by reason
      of
      its cumulative operations in FY 2009 and FY 2010 less
      (y) the
      aggregate amount of the Earn Out Payment, if any, which the Sellers were
      entitled to be paid (prior to any offsets pursuant to Section 3.3(f)) for FY
      2009. If the EBITDA of the Company for FY 2010 (after giving effect to the
      2009
      EBITDA Excess) is less than 80% of the Level 1 EBITDA Profit Target for FY
      2010,
      Sellers would not be entitled to be paid any Earn Out Payment for that Fiscal
      Year. 

       

    (d) In
      accordance with the Earn Out Table, the Earn Out Payment which the Sellers
      are
      entitled to be paid for FY 2011, if any, shall be equal to the greater of:
      (A)
      the
      percentage of the Level 1 Earn Out Payment on the Earn Out Table that
      corresponds to the percentage of the Level 1 EBITDA Profit Target actually
      achieved by the Company by reason of (x) its operations in FY 2011 plus
      (y)
      the
      amount, if any, by which the Company exceeded the Level 1 EBITDA Profit Target
      for 2010 after taking into effect the 2009 EBITDA Excess, if any (the
“2010
      EBITDA Excess”);
      or
      (B)
      provided that the EBITDA for each of FY 2009 and FY 2010 (after adding the
      2009
      EBITDA Excess, if any) was not less than the Level 5 EBITDA Profit Target for
      each such Fiscal Year on the Earn Out Table and
      that the
      EBITDA for FY 2011 was more than the Level 1 EBITDA Profit Target for such
      Fiscal Year on the Earn Out Table, (x) the percentage of the Three Year Total
      of
      Earn Out Payments on the Earn Out Table that corresponds to the percentage
      of
      the Level 1 Three Year Total EBITDA Profit Target actually achieved by the
      Company by reason of its cumulative operations in FY 2009, FY 2010 and FY 2011,
      less
      (y) the
      aggregate amount of the Earn Out Payments, if any, which the Sellers were
      entitled to be paid for FY 2009 and FY 2010 (prior to any offsets pursuant
      to
      Section 3.3(f)). If the total of the EBITDA actually achieved by the Company
      for
      FY 2009, FY 2010 and FY 2011 is less than 80% of the Three Year Total EBITDA
      Profit Target, and the EBITDA for FY 2011 (after giving effect to the 2010
      EBITDA Excess) is less than 80% of the Level 1 EBITDA Profit Target for FY
      2011,
      the Sellers would not be entitled to be paid any Earn Out Payment for that
      year.

    


    (e) In
      no
      event will the Sellers be entitled to be paid more than (i) the corresponding
      Level 1 Earn Out Payment on the Earn Out Table for FY 2009 or (ii) the
      corresponding Level 1 cumulative EBITDA Profit Target for FY 2010 or (iii)
      under
      this Section 3.3, Earn Out Payments aggregating more than $15,000,000
      USD.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (f) Any
      Earn
      Out Payment that is payable pursuant to this Section 3.3 shall be paid to each
      of the Sellers, commensurate with the Sellers’ Allocations, within 120 days
      after the end of the Fiscal Year for which such Earn Out Payment is payable.
      The
      Purchaser shall issue a statement to the Sellers setting forth the calculation
      of the EBITDA for that Fiscal Year and the amount of the Earn Out Payment,
      if
      any, to which the Sellers are entitled in accordance with the provisions of
      this
      Section 3.3 (the “Earn
      Out Payment Statement”).
      Notwithstanding anything herein to the contrary, any Earn Out Payment to be
      paid
      by the Purchaser hereunder shall in all events be subject to an offset for
      any
      outstanding claims for indemnification by the Purchaser pursuant to Article
      IX.

    


    (g) Absent
      manifest error, the determination of the Earn Out Payment for any Fiscal Year
      shall be final, conclusive and binding on the Parties unless within thirty
      (30)
      days after the receipt of the Earn Out Payment Statement, the Sellers shall
      notify the Purchaser in writing of any disagreement therewith, specifically
      identifying the item(s) and amount(s) in dispute and the basis for such dispute
      (the “Earn
      Out Dispute Notice”).
      The
      Parties shall use commercially reasonable efforts to reach agreement with
      respect to such disputed items within thirty (30) days following the delivery
      of
      the Earn Out Dispute Notice, or such longer period as may be agreed upon by
      the
      Parties (the “Earn
      Out Resolution
      Period”).

    


    (h)
       If
      the
      Parties fail to resolve any disputes with respect to the Earn Out Payment as
      identified in the Earn Out Dispute Notice within the Earn Out Resolution Period,
      the dispute(s) shall be submitted for resolution within ten (10) days after
      the
      expiration of the Earn Out Resolution Period to, and finally determined by,
      the
      Arbitration Tribunal in accordance with Section 11.5 hereof. The Arbitration
      Tribunal’s determination of such dispute(s) shall be made in a manner consistent
      with the principles set forth in this Section 3.3 in a written opinion delivered
      not later than thirty (30) days after submission to such Arbitration Tribunal.
      Any such determination shall be final, conclusive and binding on the
      Parties.

     

    ARTICLE
      IV

    THE
      CLOSING

    


    4.1. Place
      and Date.
      The
      closing of the transactions provided for in this Agreement (the “Closing”)
      shall
      take place on the Closing Date at the offices of Mannheimer Swartling
      Advokatbyrå AB, Gothenburg, Sweden (or at such other place or manner as the
      Parties may agree upon in writing) concurrently with the execution of this
      Agreement. 

    


    4.2 Documents
      to be Delivered and Actions to be Performed by the Sellers.

    


    At
      the
      Closing, the Sellers shall execute and deliver or cause the Company to execute
      and deliver to the Purchaser the following:

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (i) duly
      issued certificates representing all of the Shares duly endorsed to the
      Purchaser together with any and all dividend coupons; 

    


    (ii) the
      entry
      of the Purchaser as a shareholder of the Shares into the shareholders’ register
      of the Company by the board of directors of the Company; 

    


    (iii) Employment
      Agreements (or amendments to the existing Employment Agreements) between Gaisler
      and the Company, Danielsson and the Company and Habinc and the Company, each
      effective as of the Closing Date (the “Sellers
      Employment Agreements”);
      

    


    (iv) the
      Escrow Agreement, dated effectively as of the Closing Date, among the Escrow
      Agent, Purchaser and the Sellers; 

    


    (v) waivers
      in relation to any and all preemption rights the Sellers may have as to purchase
      of the Shares prescribed in the articles of association of the Company or
      otherwise. 

    


    (vi) written
      resignations, effective as of the Closing Date, of such board members and/or
      auditors of the Company as the Purchaser may request prior to the Closing Date,
      and powers of attorney empowering the new board members to represent the Company
      for the period until such rights have been duly registered;

    


    (vii) a
      certificate dated the Closing Date executed by the Sellers confirming that,
      individually and collectively, they have duly performed and complied with all
      covenants, agreements and conditions required by this Agreement to be performed
      or complied with by them prior to or on the Closing Date; 

    


    (viii) all
      consents required under any of the Scheduled Contracts as a result of the
      transactions contemplated herein; 

     

    (ix) confirmations
      from each of the Sellers and, by way of an amendment to the employment
      agreements of each of the Company’s employees, confirmations from each of such
      employees, that for good and valuable consideration and compensation, each
      of
      them do not now have or otherwise have waived or effectively transferred to
      the
      Company any and all rights (including moral rights) each of them has or may
      have
      in or pertaining to the Intellectual Property currently or formerly used in
      the
      Business, including, but not limited to, used in or relating to the Company’s
      products. 

    


    (x) such
      other documents and instruments as may be reasonably requested by the Purchaser
      to vest in Purchaser title to the Shares and place Purchaser in possession
      and
      control of the Company and its assets.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    4.3 Documents
      to be Delivered and Actions to be Performed by the Purchaser.

    


    At
      the
      Closing, the Purchaser shall execute and deliver to the Sellers the
      following:

    


    (i) a
      copy of
      resolutions of the Board of Directors of Purchaser authorizing the execution,
      delivery and performance of this Agreement by Purchaser, and a certificate
      of
      its secretary or assistant secretary, dated the Closing Date, to the effect
      that
      such resolutions were duly adopted and are in full force and
      effect;

    


    (ii)
      the
      Escrow Agreement;

    


    
      
        (iii)
          the
          Sellers Employment Agreements;

      

    

    


    
      
        (iv)
          payment
          of the Initial Purchase Price Payment pursuant to Section 3.1; and


      

    

    


    (v) the
      Purchaser shall hold an extraordinary general shareholders meeting immediately
      following the Closing in order to appoint new members of the board of directors
      and auditors, if applicable, and shall make the required filings with the
      Swedish Company Registration Office accordingly. 

    


    4.4 Chronology
      of Closing Events.
      All of
      the above actions shall be deemed to have occurred simultaneously and the
      Closing shall not be deemed to have occurred until all such actions have been
      finalized.

     

    ARTICLE
      V

    REPRESENTATIONS
      AND WARRANTIES OF SELLERS

    


    The
      Sellers jointly and severally represent and warrant to the Purchaser as of
      the
      Closing Date, unless otherwise indicated, as follows:

    


    5.1. Organization
      and Qualification.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of Sweden and has all corporate power and authority to own,
      lease
      and operate its properties and assets and to carry on the Business as now being
      conducted. The Company is duly qualified or licensed and in good standing in
      each country or jurisdiction where the activities conducted by it or the
      property or assets it owns, leases or operates, makes such qualification or
      licensing necessary. 

    


    5.2. Authorization
      of Agreements.
      The
      Sellers have the legal capacity and authority to execute and enter into this
      Agreement and the Related Documents and to perform their respective obligations.
      This Agreement and each of the Related Documents, respectively, (i) have been
      duly executed and delivered by the Sellers and (ii) constitute binding
      obligations of the Sellers enforceable against them in accordance with their
      respective terms.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    5.3. Subsidiaries.
      The
      Company has no Subsidiaries. The Company owns no interest, directly or
      indirectly, and has no commitment to purchase any interest, direct or indirect,
      in any other company or association.

    


    5.4. The
      Shares.
      The
      Shares constitute all of the issued capital stock of the Company. There are
      no
      other equity interests in the Company. There has not been any change in the
      share capital of the Company since the Latest Balance Statement Date. All of
      the
      outstanding shares of the Company have been duly authorized and are validly
      issued, fully paid and are owned by the Sellers. The Sellers have and on the
      Closing Date will convey to the Purchaser, valid title to the Shares, free
      and
      clear of any Encumbrances. There are no rights, subscriptions, options or
      agreements of any kind authorized or outstanding to purchase or otherwise
      acquire from the any of the Sellers, the Company or any other Person, any
      shares, or other securities of any kind convertible into shares or any other
      equity interest in the Company. There is no agreement or arrangement of any
      kind
      authorized or outstanding which restricts limits or otherwise affects the
      ability to transfer or the right to vote any of the Shares. True and complete
      copies of the registration certificate, articles of association and share
      register of the Company are attached as Schedule 5.4.

    


    5.5 No
      Conflicts.
      The
      execution by the Sellers of this Agreement, the Related Documents or any other
      documents in connection with it, and the performance by the Sellers of its
      obligations under this Agreement and the consummation of the transaction
      contemplated by this Agreement, do not and will not result in the breach of
      any
      term or provision of, constitute a default or result in the imposition of any
      financial penalties or other sanctions, under any applicable law, order,
      judgment, mortgage or any other agreement, to which any of the Sellers or the
      Company is a party or by which the Sellers or the Company or any of the
      Company’s assets is bound.

    


    5.6 Financial
      Statements.
      

    


    (a) Attached
      hereto as Schedule 5.6(a) are copies of (i) the Balance Statement and (ii)
      the
      audited balance statement and income statements for the Company for the years
      ended June 30, 2005, June 30, 2006, and June 30, 2007, which have been provided
      to Purchaser (together with the Balance Statement, the “Financial
      Statements”).
      

    


    (b) The
      Financial Statements (i) are complete, true and correct in all material
      respects; (ii) present fairly the financial position and results of operations
      of the Company as of the dates thereof and for the periods then ended; and
      (iii)
      have been prepared or derived from the financial books and records of the
      Company, and, except where specifically indicated, have been prepared in
      accordance with the Accounting Principles applied on a basis consistent with
      Past Practice. 

    


    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    


    (c) Other
      than to the extent disclosed or reserved for in the Balance Statement, or
      otherwise disclosed in the Schedules to this Agreement, the Company has no
      Liabilities, commitments or obligations whatsoever except Liabilities,
      commitments and obligations incurred in the Ordinary Course of Business since
      the Latest Balance Statement Date which do not exceed, in the aggregate,
      $50,000.

    


    (d) The
      books
      of account and other financial records of the Company are complete and accurate
      in all material respects and have been properly maintained in all material
      respects in accordance with applicable law.

    


    5.7 Taxes.
      

    


    (a) True
      and
      correct copies of the Company’s Tax Returns for the income tax years 2005
      through 2007 have been delivered to, or made available for inspection by, the
      Purchaser. All Tax Returns of the Company have been timely filed, and each
      such
      Tax Return is true, correct and complete in all material respects.

    


    (b) All
      Liabilities of the Company to any jurisdiction for Taxes, fees or assessments
      payable to a Governmental Authority, including interest thereon and penalties
      with respect thereto and Taxes payable thereunder under applicable laws and
      regulations, have been timely paid by the Company or are accrued and provided
      for in accordance with the Accounting Principles in the Financial Statements
      for
      the period ended May 31, 2008. The Company has timely paid all Taxes due during
      the period from the Latest Balance Statement Date through the Closing
      Date.

    


    (c) The
      Tax
      Returns of the Company have not been audited by any Governmental Authority
      during the past three years. No Governmental Authority has proposed any
      additional Taxes with respect to the Company or for which the Company may be
      liable or with respect to the Business. There are no pending or, to the
      Knowledge of the Sellers, threatened, claims or assessment for Taxes,
      examinations or audits with respect to Taxes by any Governmental
      Authority.

    


    (d) The
      Company has not granted any waivers of any statutes of limitation with respect
      to any Taxes for any Fiscal Year. The Company has not requested any extension
      of
      time within which to file any currently unfiled Tax Returns or declarations.
       

    


    (e) There
      are
      no Encumbrances for Taxes (other than for current Taxes not yet due and payable)
      upon the properties or assets of the Company.

    


    (f) The
      Company is not liable for Taxes of any other Person and is neither currently
      under any contractual obligation nor a party to any tax sharing agreement or
      other agreement providing for payments by the Company with respect to
      Taxes.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (g) The
      Company, as of the Closing Date, has not agreed, and will not, to the Knowledge
      of the Sellers, be required, as a result of a change in method of accounting
      or
      otherwise, to include under applicable laws or regulations any adjustment in
      taxable income for any period after the Closing Date.

    


    (h) To
      the
      Knowledge of Sellers, Schedule 5.7(h) lists all of the jurisdictions where
      the
      Company has been required to file Tax Returns, and for the past three years,
      no
      written claim has been made by a Governmental Authority in a jurisdiction where
      the Company does not currently file Tax Returns that the Company may be subject
      to taxation by that jurisdiction.

    


    (i) The
      Company has collected and withheld on a timely basis all Taxes, social security
      fees and other like costs which the Company has been required to collect and
      withhold with respect to the Company and the employees of the Company under
      applicable laws and regulations and there is no dispute or any issue with regard
      to any of the foregoing. All Tax Returns and declarations, as required by
      applicable laws and regulations, have been filed by the Company for all periods
      for which returns were due with respect to employee Tax withholding and social
      security fees and charges, and all amounts shown thereon to be due and payable
      have been paid, together with any interest and penalties that are due as a
      result of the Company’s failure to file such returns when due, and pay, when
      due, the amounts shown thereon to be due.

    


    (j) The
      Company has not been involved in any transaction which was intended to evade
      Taxes or could reasonably be considered to be Tax evasion under applicable
      laws.


    


    5.8. Litigation.
      Except
      for normal debt collecting procedures, the Company is not a party to or
      otherwise engaged in any material litigation or arbitration, administrative
      or
      other legal proceedings or investigations and, to the Sellers’ Knowledge, no
      such material litigation, arbitration, administrative or other legal proceedings
      or investigations are pending or threatened against the Company and, to the
      Sellers’ Knowledge, there are no such material suits or proceedings pending or
      threatened by the Company against any other Person. For the purpose of this
      Section 5.8 “material” shall mean a disputed amount in excess of SEK 200,000 or
      which, if adversely determined, could reasonably be expected to have a Material
      Adverse Effect.

    


    5.9 Compliance
      with applicable laws and regulations.
      

    


    (a) The
      Company holds all permits, licenses, orders and authorizations of all
      Governmental Authorities necessary for the lawful conduct of the Business in
      the
      same manner and extent to which it is currently conducted. Within the last
      three
      (3) years, the Company has not been charged with, or received notice of, any
      material violation of any applicable laws or regulations, nor, to the Knowledge
      of the Sellers, is there any threatened claim of such violation or any basis
      therefore. Within the last three (3) years, the Company has conducted the
      Business in compliance in all material respects with applicable laws and
      regulations.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (b) The
      Company does not now, and has not during the past three (3) years, manufactured,
      supplied or exported “military equipment” as that term is defined under the
      Swedish Military Equipment Act and the Swedish Military Equipment Ordinance.
      Except as set forth on Schedule 5.9(b), the Company does not now, and has not
      during the past three years, manufactured, supplied or exported any “dual use”
items as that term is defined or understood pursuant to the Council Regulation
      (EC) No. 1334/2000, as supplemented by the Swedish Act on the Control of Dual
      Use Items and Technical Assistance. The Company has complied in all material
      respects during the past three (3) years with all applicable law and regulations
      governing or regulating the manufacture, sale, distribution and export of the
      Company’s products, and the Company has not received notice of any violation (or
      any investigation or proceeding involving an allegation of violation) of such
      laws or regulations by any Governmental Authority. To the Knowledge of Sellers,
      there are no facts or circumstances that could reasonably be deemed to
      constitute such a violation or which would require the Company to make a
      voluntary disclosure to any Governmental Authority regarding any past or current
      violation of such laws and regulations.

    


    5.10
       Employees
      and Pension Matters.
      

    


    (a) There
      are
      no pending or, to the Knowledge of the Sellers, threatened, charges or
      complaints before any Governmental Authority relating to a violation of
      applicable laws or regulation by the Company regarding employment and terms
      and
      conditions of employment with respect to any of the Company’s employees, nor to
      the Knowledge of the Sellers, is there any basis for any such charges or
      complaints. The Company is not a party to any collective bargaining agreement
      or
      other labor union contract applicable to the Company’s employees. To the
      Knowledge of the Sellers, no activities or proceedings of any labor union to
      organize any of the Company’s employees have occurred or are
      occurring.

    


    (b) No
      Key
      Employee or group of employees of the Company (A) has given written notice
      of
      resignation within 12 months after the Closing Date or, to the Knowledge of
      the
      Sellers, is intending to do so; or (B) would become entitled to any rights
      as a
      result of the Company entering into or the consummation of any of the
      transactions contemplated by this Agreement.

    


    (c) There
      are
      no outstanding orders or charges against the Company under any applicable laws
      and regulations and, to the Knowledge of the Sellers, none has been threatened.
      All material assessments and penalties made against the Company pursuant to
      any
      applicable laws and regulations as of the date hereof have been paid by the
      Company.

     

    (d)  All
      employees of the Company have been and are employed on terms and conditions
      which in all material respects are consistent with normal practices.
      Schedule
      5.10(d) lists all of the citizenships of each of the employees employed by
      the
      Company.

     

    (e)  To
      the
      extent required by applicable law and regulations and the Accounting Principles,
      full provisions have been made in the Financial Statements for the pension
      undertakings to be paid to current or former directors and employees of the
      Company. Except for a pension payment made to Habinc by the Company, there
      have
      been no pension payments, undertakings, or reservations in favor of any of
      its
      employees, and, under applicable law, none have been required.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    
 

    (f)
       Each
      employee of the Company is employed pursuant to an employment agreement, true,
      complete and correct copies of which, including all amendments to date, have
      been provided to the Purchaser. Except for the Sellers Employment Agreements
      to
      be entered into effectively as of the Closing Date, the Company has not at
      any
      time otherwise promised or represented to any of the current or former
      directors, employees, consultants, agents or representatives of the Company
      that
      any of such Persons will be employed or engaged by or receive any particular
      benefits from (i) the Company or (ii) the Purchaser or any of its Affiliates,
      in
      each case that will become or remain effective on or after the Closing Date.
      To
      the Knowledge of the Sellers, no Key Employee and no group of employees of
      the
      Company has any plan to terminate or modify their employment at the Company
      after the Closing Date.

    


    (g) Schedule
      5.10 (g) sets forth a true, complete and correct list of all independent
      contractors and consultants of the Company as of the Closing Date. 

    


    (h) Except
      as
      set forth on Schedule 5.10 (h), to the extent required by applicable law or
      otherwise, all payments and other obligations to individuals who are or have
      been directors, employees, independent contractors, consultants, agents or
      representatives of the Company for compensations or benefits of any kind have
      been fulfilled, and all contributions required to be made in connection with
      any
      medical insurance or pension plans, have been paid, in the Ordinary Course
      of
      Business, through the Closing Date.

    


    (i) Schedule
      5.10 (i) sets forth a true, complete and correct list of all outstanding loans
      to the Sellers or any current or former employees of the Company as well as
      all
      dividends paid by the Company to the Sellers and any other shareholder of the
      Company for the three year period prior to the Balance Statement.

    


    (j) Each
      and
      every benefit plan or similar that the Company has established, maintains or
      otherwise contributes to in which its current and former directors and employees
      participate is fully and accurately described in detail on Schedule 5.10(j)
      (the
“Company Benefit Plans”). The Company does not have any policies or benefit
      plans for its current and former directors and employees other than the Company
      Benefit Plans. 

    


    (k) Each
      of
      the Company Benefit Plans complies with applicable laws, and for the past three
      (3) years the Company has materially complied, and is in material compliance
      currently, with all of the requirements of each of such Company Benefit Plans
      and there are no actions pending or, to the Knowledge of the Sellers,
      threatened, against the Company in connection with, or against, the Company
      Benefit Plans.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (l) N-either
      the execution and delivery of this Agreement nor the consummation of the
      transactions contemplated hereby will result in (a) any payment or other
      consideration of what ever kind becoming due to any former or current director
      or employee of the Company; (b) any increase in the amount of compensation,
      benefits or fees payable to any such individual; (c) the acceleration or
      creation of any other additional rights under any of the Company Benefit
      Plans.

    


    5.11. No
      Adverse Changes.
      Since
      the Latest Balance Statement Date (i) the Business has been conducted only
      in
      the Ordinary Course of Business; (ii) there has been no change in the condition,
      assets, liabilities, operations or prospects of the Company other than changes
      in the Ordinary Course of Business; and (iii) there has been no damage, loss
      or
      other occurrence or development, which, either singly or in the aggregate,
      has
      had a Material Adverse Effect, and, to the Knowledge of the Sellers, there
      is no
      threatened occurrence or development which could reasonably have a Material
      Adverse Effect.

    


    5.12. Conduct
      of Business.
      Since
      the Latest Balance Statement Date, except as set forth on Schedule 5.12, the
      Company has not: (i) created or incurred any Liability outside of the Ordinary
      Course of Business; (ii) mortgaged or pledged or subjected to any Encumbrances
      any of its properties or assets; (iii) discharged or satisfied any Encumbrance
      or paid any obligation or Liability other than current Liabilities shown on
      the
      Balance Statement that were paid in the Ordinary Course of Business, and Taxes
      and current Liabilities incurred since the Latest Balance Statement Date in
      the
      Ordinary Course of Business or under Contracts entered into in the Ordinary
      Course of Business; (iv) waived or released any claims or rights of material
      value under, or terminated or materially modified, any Material Contract; (v)
      entered into any settlement of any kind with respect to any claim, proceeding
      or
      investigation; (vi) sold, transferred, leased or otherwise disposed of any
      of
      its assets, or canceled any debts or claims except, in each case, for fair
      consideration in the Ordinary Course of Business; (vii) declared or paid any
      dividends, or made any other distribution, or directly or indirectly, purchased,
      or otherwise acquired any shares, or paid any amount or transferred any asset
      to
      any of the Sellers; (viii) made or become a party to any Contract or renewed,
      amended, modified or terminated any Contract which individually involved an
      amount in excess of $10,000 (or in the aggregate an amount in excess of $50,000,
      but excluding therefrom the amount of Material Contracts entered into in the
      Ordinary Course of Business); (ix) except as otherwise required by applicable
      laws or regulation, agreed to pay or paid, or entered into or modified any
      Contract requiring it to pay, other than pursuant to an existing written
      agreement, any bonus, extra compensation, pension or severance pay to any of
      its
      employees, or increased or altered the form of compensation of whatever kind,
      from that being paid during the calendar year ended December 31, 2007 to any
      of
      its directors or employees; (x) increased the compensation, fees or other
      remuneration payable or to become payable to any of its independent contractors,
      consultants or agents; (xi) issued or sold any shares or securities convertible
      into shares; (xii) announced or effected any material change of any of its
      products or services; (xiii) made deliveries or provided performance of services
      in connection with its backlog of orders other than in the Ordinary Course
      of
      Business; (xiv) made or effected any material change in the Company’s practice
      of pricing or invoicing customers and collecting receivables; (xv) materially
      changed any of its accounting methods or principles used in recording
      transactions on its books or records or in preparing the Financial Statements;
      (xvi) took or failed to take any action that could reasonably be expected to
      have a Material Adverse Effect except as may have been warranted in the Ordinary
      Course of Business; (xvii) incurred any Indebtedness for money borrowed; (xviii)
      entered into any Contract or commitment to do any of the foregoing; or (xix)
      entered into any other transaction or taken any other action not in the Ordinary
      Course of Business.

     

    
      
        
        

      

      
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    5.13. Title
      to and Condition of Assets.
      The
      Company has good, valid and marketable title to all of the material assets
      owned
      by it and valid leasehold interests in all of the assets and all of the property
      leased by it, free and clear of all Encumbrances. None of the Company’s assets
      is subject to any sublease, sublicense or other agreement granting any other
      Person any right to the use such assets. Other than those of the Company’s
      assets which are leased or licensed as set forth on Schedule 5.13, there are
      no
      assets used by the Company which are owned by any third party. All of the
      assets, properties and specialized operating systems owned, leased or licensed
      by the Company (i) are sufficient and adequate to carry on the Business as
      conducted prior to the Closing Date, including the performance of all of the
      Material Contracts in effect on the Closing Date, (ii) have been maintained
      in
      accordance with applicable industry standards or as otherwise required by any
      lease of other agreement and currently are in a good operating condition as
      required for the operation and use thereof in the Ordinary Course of the
      Business; and (iii) to the knowledge of the Sellers, comply in all material
      respects with applicable laws and regulations and with the terms and conditions
      of all leases and other agreements affecting or relating to any such
      property.

    


    5.14 . Real
      Property.

     

    (a) The
      Company currently does not own any real property. As set forth on Schedule
      5.14(a), the premises used currently by the Company for the operation of the
      Business (the “Business
      Premises”)
      are
      leased by the Company pursuant to the Business Lease. The Company has recently
      entered into the New Business Lease for other Business Premises as set forth
      on
      Schedule 5.14(a). Under the Business Lease until 31 December 2008, and, as
      of 1
      December 2008, the New Business Lease, the Business Premises are and will be
      the
      only premises leased by the Company. 

    


    (b) The
      Sellers have delivered to Purchaser true, correct and complete copies of the
      Business Lease and the New Business Lease.

    


    (i) the
      Business Lease and the New Business Lease will continue to be legal, valid,
      binding, enforceable, and in full force and effect on identical terms following
      the consummation of the transactions contemplated hereby;

    


    (ii) all
      of
      the terms and conditions of the Business Lease have been observed or performed
      in all material respects and, to the Knowledge of the Sellers, no party to
      any
      such lease is in breach or default, and to the Knowledge of the Sellers, no
      event has occurred which would constitute a breach or default or permit
      termination or modification hereunder;

     

    
      
        
        

      

      
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    (iii) the
      Company has maintained and operated the Business Premises in all material
      respects in accordance with applicable laws and regulations and the terms of
      the
      Business Lease and has all material approvals of Governmental Authorities that
      are required; and

    


    (iv) all
      improvements or alterations on the Business Premises have been made in
      accordance with the terms of the Business Lease and applicable laws and
      regulations and there is no obligation on the part of the Company to remove
      any
      of such alterations or improvements at the conclusion of the term of the
      Business Lease or otherwise.

    


    (c) The
      Business Premises is occupied solely by the Company and is being used
      exclusively for, and in connection with, the Business.

    


    (d) Upon
      the
      termination of the Business Lease on 31 December 2008, the Company will have
      no
      further Liabilities thereunder.

     

    5.15. Environmental
      Compliance.

    


    (a) To
      the
      Sellers’ Knowledge, the Company has obtained or, to the extent not yet obtained,
      filed applications for all permits necessary to be obtained from or filed with
      the Governmental Authorities under applicable laws relating to the Business.
      The
      Company has not been informed by any Governmental Authority that any such
      permits may be revoked or otherwise changed in a way adversely affecting the
      Company. 

    


    (b) The
      Company is not subject of any litigation or proceedings in any form involving
      a
      demand for damages, penalties, removal, remediation or other liability with
      respect to violation of any applicable Environmental Laws and, to the Seller’s
      Knowledge, no such litigation or proceedings may be expected.

    


    (c) To
      the
      Sellers’ Knowledge, the Business has not resulted in any unlawful emission of
      any hazardous substance capable of causing harm to any living organism or
      capable of damaging the environment in contravention of any Environmental
      Laws.

     

    5.16. Intellectual
      Property and Information Technology.

    


    Intellectual
      Property:

    


    (a) Schedule
      5.16(a) lists all of the following Intellectual Property (and the expiration
      dates thereof) owned by the Company: (i) all issued Patents, if any, and all
      pending applications for Patents; (ii) all registered Trademarks, if any, and
      all pending applications for Trademarks; and (iii) all registered Domain Names,
      if any. Except for the foregoing and other Intellectual Property identified
      on
      Schedule 5.16(a), the Company does not own any other Intellectual Property.
      

     

    
      
        
        

      

      
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    (b) Other
      than Material Contracts and Government Contracts entered into in the Ordinary
      Course of Business, Schedule 5.16(b) lists all licenses, sublicenses or
      agreements involving the Intellectual Property which are material to the
      Company’s business, including (i) licenses by the Company to any Person of any
      Intellectual Property other than licenses granted to customers in the Ordinary
      Course of Business, and (ii) all licenses by any other Person to the Company
      of
      any Intellectual Property which are necessary for the conduct of the Business
      (each, a “License”).
      Each
      License identified on Schedule 5.16(b) is a valid and binding agreement, in
      full
      force and effect and enforceable in accordance with its terms. With respect
      to
      each License, there is no default (or event that would constitute a default)
      by
      the Company, or, to the Knowledge of the Sellers, any other party thereto.
      There
      are no pending, or, to the Knowledge of the Sellers, threatened claims with
      respect to any License. True and complete copies of all Licenses have been
      made
      available to Purchaser.

     

    (c) The
      Company has good and valid title and full and unrestricted ownership rights
      to,
      or possesses by a written License or otherwise, the right and entitlement to
      lawfully use, exploit, sublicense and make changes to all Intellectual Property
      necessary for the conduct of the Business, as it is currently conducted,
      including, but not limited to, those Intellectual Property rights pertaining
      to
      the Company’s products. Except for (i) Intellectual Property owned by third
      parties and (ii) licenses granted to customers in the Ordinary Course of
      Business, to the Knowledge of the Sellers, no Person other than the Company
      has
      any right or interest of any kind in the Intellectual Property, or any portion
      thereof, or any rights to sell, license, lease, transfer or use or otherwise
      exploit the Intellectual Property or any portion thereof. The Company owns
      all
      Intellectual Property created by its current or former employees, including
      the
      Sellers, and/or any monies payable or other consideration due to any such
      employees or the Sellers for the creation by such employees or the Sellers.
      There is no money payable or other consideration due to any employee (or any
      of
      the Sellers) pursuant to applicable laws or regulations or otherwise, for the
      creation by such employee of any Intellectual Property. All independent
      contractors of the Company who have created Intellectual Property for the
      Company have executed an agreement under which all rights, title, interest
      and
      ownership in and to such Intellectual Property have been assigned to the
      Company. To the extent necessary under applicable laws and regulations, each
      of
      the consultants to, and each of the employees of, the Company, including the
      Sellers, who contributed to the design or development of the Intellectual
      Property has fully and finally (without any compensation remaining to be paid)
      assigned all rights to such Intellectual Property to the Company, and the
      Company has made all such agreements available to the Purchaser.

     

    (d) The
      Company has not received written notice that it has, or, to the Knowledge of
      the
      Sellers, has the Company infringed upon or misused any intellectual property
      or
      proprietary information of another Person. There are no pending or, to the
      Knowledge of the Sellers, threatened claims or proceedings challenging the
      Intellectual Property, or the Company’s use of the Intellectual Property owned
      by another Person. To the Knowledge of the Sellers, no Person is infringing
      upon
      or otherwise violating the Company’s rights in and to the Intellectual Property.


     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    (e) Schedule
      5.16(e) contains a true and complete list of all of the Software included,
      embedded or incorporated in or developed for inclusion in the Company’s products
      or in websites of the Company, or used in the delivery of services or otherwise
      by the Company. The Company owns and has unrestricted ownership rights to,
      or
      has, by valid licenses, the right and entitlement to lawfully use, exploit,
      sublicense and make changes to, all Software identified on Schedule 5.16(e).
      No
      open source or GNU General Public License software is, in whole or in part,
      embodied or incorporated in the Software. The Company has not incorporated
      any
      Intellectual Property owned by another Person into the Company’s Software. The
      Company employs reasonable measures to ensure that the Company’s Software
      contain no “viruses” which, for the purposes of this Agreement, means any
      computer code intentionally designed to disrupt, disable or harm in any manner
      the operation of any Software or hardware, but does not include any of the
      Company’s intended features which limit a customer’s use of Software to the
      scope of the customer’s license.

     

    (f) The
      Company has taken reasonable measures under applicable laws and regulations
      or
      otherwise to protect the proprietary nature of, and all of its vested rights
      in
      and to, the Intellectual Property as the same may be incorporated in its
      products and systems and otherwise, and to maintain in confidence all Trade
      Secrets and other confidential Intellectual Property and information owned
      or
      used by the Company in connection with the Business. To the Knowledge of the
      Sellers, no material Trade Secret or other material confidential Intellectual
      Property or information of the Company owned or used in connection with the
      Business has been disclosed to any third party, other than pursuant to a
      confidentiality agreement or other conditional obligation intended to protect
      the Company’s proprietary interests in and to such Trade Secrets or confidential
      Intellectual Property. 

     

    (g) (i)
      Any
      registered Trademarks, and pending applications for Trademarks, are currently
      in
      compliance with all applicable laws and regulations; (ii) No Trademark has
      been
      or is now involved in any opposition, infringement, unfair competition or
      cancellation proceeding and, to the Knowledge of the Sellers, no such action
      is
      threatened with respect to any of the Trademarks; (iii) No Trademark is alleged
      to infringe any trade name, trademark or service mark of any other Person and,
      to the Knowledge of the Sellers, no Trademark is infringed; and (iv) Each of
      the
      Company’s products displaying a Trademark which has been registered with the
      appropriate Governmental Authority bears the proper registration
      notice.

     

    (h) The
      Intellectual Property is free and clear of any and all
      Encumbrances.

     

    (i) The
      Company uses reasonable practices to ensure the physical and electronic
      protection of its information assets from unauthorized disclosure or use. To
      the
      Knowledge of the Sellers, there has been no breach of security involving any
      websites or information assets of the Company. All data which has been
      collected, stored, maintained or otherwise used by the Company has been done
      so
      in accordance with applicable laws and regulations. The Company has not been
      notified of noncompliance with applicable laws or any pertinent guidelines
      or
      industry standards pertaining to information security.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    (j) 
      Schedule
      5.16 (j) is a complete and accurate list of each and every license agreement
      that the Company has entered into since its inception in 2004 for or in
      connection with its IP core library, and otherwise provides, truly and
      accurately, the following information with regard to each such license listed:
      (i) the name of the licensee; (ii) the specific type of IP covered by the
      license; (iii) the date of the license agreement; (iv) the specific type of
      integrated circuit or device into which the IP can be instantiated under the
      license; (v) whether or not there has been a buyout of the royalty fee
      obligation and, if not, the license fee paid and royalty fees payable under
      the
      license; (vi) the format of the IP provided; and (vii) such other pertinent
      information regarding the terms of the license as would be relevant for the
      Purchaser to consider in evaluating the Company’s outstanding license agreements
      in connection with the acquisition of the Sellers’ stock pursuant to the terms
      of this Agreement.

    


    Information
      Technology:

    


    (k) All
      Information Technology used by the Company in the conduct of the Business and
      all material agreements or arrangements relating to the maintenance and support,
      security, disaster recovery management and utilization (including facilities
      management and computer bureau services agreements) of the Information
      Technology are described on Schedule 5.16(k).

    


    (l) The
      Company owns and has unrestricted ownership rights to, or otherwise, by valid
      lease or license, has the lawful right to use, all Information Technology
      currently used by the Company or required by it to conduct the Business in
      the
      Ordinary Course and fulfill the Material Contracts, and the Company has access
      to all of the source codes for all of such Information Technology owned by
      it.

    


    (m) The
      Information Technology owned or used by the Company in the conduct of the
      Business has the capacity and performance capability to fulfill the requirements
      of the Business as conducted currently. 

     

    (n) None
      of
      the records, systems, controls, and/or data used by the Company to conduct
      the
      Business is recorded, stored, maintained, operated or otherwise wholly or partly
      dependent on or held by any means whatsoever which are not under the exclusive
      ownership and control of the Company.

     

    General:

     

    (o) The
      consummation of the transactions contemplated by this Agreement and the change
      in control of the Company engendered thereby will not, by virtue of any
      contractual right or other contractual term or condition or otherwise under
      applicable law, result in the diminution, license, transfer, renegotiation,
      termination or forfeiture of the Company’s rights, title or interest in and to
      any of the Intellectual Property or the Information Technology currently used
      by
      the Company in the conduct of the Business.

     

    
      
        
        

      

      
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    5.17. Brokers.
      No
      broker, finder or investment banker is entitled to any fee or commission in
      connection with the transactions contemplated by this Agreement. 

    


    5.18. Material
      Contracts.

    


    (a) Schedule
      5.18(a) lists all Material Contracts of the Company. A true, correct and
      complete copy of each such written Material Contract (or written summary of
      oral
      Material Contracts) has been made available to Purchaser. To the Knowledge
      of
      the Sellers, all of such Material Contracts are fully performable by the Company
      in accordance with their terms.

    


    (b) Except
      for the Material Contracts disclosed on Schedule 5.18(a), the Government
      Contracts listed on Schedule 5.19(a), the Licenses, leases and other Contracts
      identified in this Agreement and the Schedules hereto, there are no Contracts
      or
      other agreements that are material to or for the Company, the Business or the
      Company’s assets other than those disclosed on Schedule 5.18(b). 

    


    (c) Except
      as
      specifically set forth with regard to the Material Contracts listed on Schedule
      5.18(a) and those other Contracts and agreements listed on Schedule 5.18(b)
      (collectively with the Material Contracts, the “Scheduled
      Contracts”),
      the
      sale of the Shares to the Purchaser and the consummation of the other
      transactions contemplated by this Agreement will not violate, or constitute
      grounds for, the modification, renegotiation or cancellation of any of the
      Scheduled Contracts or for the imposition of any penalty or the default of
      any
      security interests thereunder.

    


    (d) To
      the
      Knowledge of the Sellers, all Scheduled Contracts are valid and binding
      agreements, in full force and effect and enforceable in accordance with their
      respective terms. There is not, under any Scheduled Contract, any existing
      default or breach by the Company, or, to the Knowledge of the Sellers, by any
      other Person, or any event, condition or act (including the consummation of
      the
      transactions contemplated by this Agreement and the change in control of the
      Company engendered thereby) which (i) would constitute a default under, or
      a
      breach of, any provision of any Scheduled Contract or (ii) would allow for
      the
      termination of any Scheduled Contract, or permit the acceleration of any
      obligation of any party to any Scheduled Contract or the creation of an
      Encumbrance upon any of the Company’s assets. The Company has not assigned or
      otherwise transferred any of its rights or obligations with respect to any
      Scheduled Contract except in the Ordinary Course of Business. No party thereto
      has notified the Company of its intention to terminate or cancel any Scheduled
      Contract.

    


    
      
        
        

      

      
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    5.19. Government
      Contracts.
      

    


    (a) Schedule
      5.19(a) sets forth a complete and accurate list of the Government Contracts,
      true, complete and correct copies of which have been made available to the
      Purchaser. “Government
      Contracts”
      shall
      mean all current Contracts, having a valuation of $50,000 or more (i) between
      the Company and any Governmental Authority; and (ii) between the Company and
      an
      entity which is a party to a Contract or other agreement with a Governmental
      Authority. 

     

    (b) The
      Company is not a party to any current material dispute relating to a Government
      Contract. The Company has not received notice that the Company has breached
      or
      violated any applicable laws, certification, clearance, authorization,
      representation, provision or requirement with respect to any Government
      Contract. There are no current or, to the Knowledge of the Sellers, threatened
      actions against the Company arising out of or relating to any Government
      Contract. The Company has not received any notice of any kind or a stop work
      order with respect to any Government Contract.

     

    (c) No
      Governmental Authority or any other Person has notified the Company that any
      of
      the Company’s directors, agents or employees have breached or violated any
      applicable laws, certification, clearance, authorization, representation,
      provision or requirement relating to any Government Contract.

     

    (d) With
      respect to each Government Contract, the Company has not been challenged by
      the
      Governmental Authority as to any cost incurred by the Company or has any cost
      incurred by the Company been disallowed by the Governmental Authority. No
      payment due to the Company relating to any Government Contract has been withheld
      or set off, nor has any claim been made by the Governmental Authority to
      withhold or set off money due to the Company under a Government
      Contract.

     

    (e) The
      Company has complied in all material respects with the terms and conditions
      of
      each Government Contract, including all provisions and requirements incorporated
      expressly, by reference or by law. The Company has, with respect to all
      Government Contracts, (x) complied in all material respects with all
      certifications and representations it has executed, acknowledged or set forth
      with respect to each such contract; and (y) submitted certifications and
      representations with respect to each such contract that were in all material
      respects accurate, current and complete when submitted, and were properly
      updated in all material respects to the extent required by applicable laws
      and
      regulations or the particular contract.

     

    (f) The
      Company has not been notified of any warranty claims relating to any Government
      Contract other than in the Ordinary Course of Business. 

     

    (g) 
      The
      Company has not received notice of any unfavorable past performance assessments,
      evaluations, or ratings relating to any Government Contract and the Company
      has
      not received any written notice that monies due under any Government Contract
      are or may be subject to withholding or set off.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    (h) During
      the past three (3) years, the Company has not been or is not now being audited
      or investigated by any Governmental Authority in respect of any Government
      Contract for any reason.

     

    (i) To
      the
      Knowledge of the Sellers, neither the Company nor any of its directors or
      employees, has knowingly or recklessly provided materially false or misleading
      information with respect to the Company, or with respect to any of any of its
      directors, shareholders or employees, in connection with the procurement of,
      performance under, or renewal of, any Government Contract or security clearance.
      

    


    (j) No
      Government Contract has been totally or partially terminated for default or
      for
      the convenience of any Governmental Authority.

    


    (k) During
      the past three (3) years, the Company has not been suspended from doing business
      with any Governmental Authority, nor has any such suspension been threatened
      or
      commenced. The Sellers are not aware of any circumstances that could reasonably
      constitute the basis for such suspension.

    


    (l) To
      the
      Knowledge of the Sellers, no director, employee, agent, consultant or
      representative of the Company is in receipt or possession of any competitor’s or
      Governmental Authority’s confidential or proprietary information under
      circumstances where the Company would have reason to believe that such receipt
      or possession is unlawful or unauthorized. 

    


    (m)
       There
      is
      not, under any Government Contract, any existing default or breach by the
      Company, or any event, condition or act (including the consummation of the
      transactions contemplated by this Agreement and the change in control of the
      Company engendered thereby) which (i) would constitute a default under, or
      a
      breach of, any provision of such Government Contract or (ii) would permit the
      acceleration of the obligations of the Company, the creation of an Encumbrance
      upon any of the Company’s assets, or the suspension or termination of the whole
      or a portion of the Government Contract by the Governmental
      Authority.

    


    (n) To
      the
      Knowledge of the Sellers, the consummation of the transactions contemplated
      by
      this Agreement, including the change of control engendered thereby, will not
      have a Material Adverse Effect on the Company’s ability to procure new
      Government Contracts. 

    


    5.20. Inventory.
      All
      material inventories that are reflected in the books of the Company are in
      good
      and merchantable condition in all material respects and are suitable and usable
      in the Ordinary Course of the Business for the purposes for which they are
      intended.

     

    5.21. Accounts
      and Notes Receivable/Payable.
      All
      receivables reflected in the Financial Statements or arising from the date
      thereof until the Closing Date have been or will have been, generated by the
      Company in the Ordinary Course of Business consistent with Past Practice, and
      reflect or, on the Closing Date, will reflect, a bona fide obligation for the
      payment of goods or services provided by the Company.

     

    
      
        
        

      

      
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    5.22. Insurance.
      Immediately prior to the Closing, the assets, properties and operations of
      the
      Company were insured under various policies of insurance. The Sellers have
      delivered or otherwise made available to Purchaser previously complete and
      correct copies of such insurance policies. All such policies are in full force
      and effect, no notice of cancellation has been received, and there is no
      existing material default or event which would constitute a material default,
      by
      any insured hereunder. To the Knowledge of the Sellers, there currently is
      no
      basis for an insurance claim by the Company under any of such
      policies.

    


    5.23. Product
      Warranties, Defects and Liabilities.
      There
      exists no pending or, to the Knowledge of the Sellers, threatened, action or
      investigation by any Governmental Authority, relating to any product developed,
      designed, distributed, sold or licensed by the Company and alleged to have
      been
      defective or produced in breach of any express or implied product warranty,
      and,
      to the Knowledge of the Sellers, there exists no latent defect in the design
      or
      manufacture of any of the products of the Business. There exists no pending
      or,
      to the Knowledge of the Sellers, threatened, product liability or warranty
      claims against the Company, except to the extent reserved for specifically
      on
      the Balance Statement, and to the Knowledge of the Sellers, there is no
      reasonable basis for any such inquiry, action, proceeding, investigation or
      claim. Except as set forth in Schedule 5.23, with regard to the Company’s IP
      Cores, operational systems and miscellaneous Software, there are no express
      product or service warranties relating to the Company’s products or
      services.

    


    5.24. Affiliate
      Transactions.
      Except
      for the Sellers’ Employment Agreements, the Company is not a party to, or bound
      by, any Contract with any Affiliate, including the Sellers, other than on
      arms-length terms which are no less favorable to the Company than those which
      could be obtained with a third party which is not an Affiliate. No Affiliate
      of
      the Company owns or otherwise has any rights to or interests in any of the
      Company’s properties and assets, including, without limitation, the Intellectual
      Property.

    


    5.25. Customers
      and Suppliers.
      Except
      as described in Schedule 5.25, there are no Contracts to which the Company
      is a
      party under the terms of which (i) the Company is obligated to purchase any
      product or services from, or sell any product or services to, any other Person
      on an exclusive basis with respect to any geographic area or group of potential
      customers; or (ii) any other Person is similarly obligated to the
      Company.

     

    5.26. Illegal
      Payments.
      Neither
      the Company nor any of its directors, or to the Knowledge of the Sellers, any
      of
      the Company’s employees or agents has (a) directly or indirectly given or agreed
      to give any illegal gift, payment or similar benefit to any supplier, customer,
      governmental official or employee or other Person to assist in connection with
      any actual or proposed transaction or made or agreed to make any illegal
      benefit, or reimbursed any illegal political benefit made by any other Person,
      to any candidate for public office (i) which violates any applicable laws,
      or
      reasonably could be expected to subject the Purchaser to any Losses or penalties
      for any reasons, or (ii) the non-continuation of which has had or might have
      a
      Material Adverse Effect (b) established or maintained any unrecorded fund or
      asset or made any false entries on any books or records for any
      purpose.

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    5.27. Company
      Documents and Financial Records.
      The
      shareholder register, minutes from the shareholders’ meetings and board meetings
      of the Company and all financial records of the Company are complete and correct
      in all material respects and have been maintained by the Company in accordance
      with sound business practices, applicable laws and the Accounting Principles
      and
      requirements, and no notice has been received or allegation made that the
      shareholder register, minutes from the shareholders’ meetings and board meetings
      of the Company or financial records are incorrect or should be rectified.


    


    5.28. Backlog.
      Schedule 5.28 sets forth, truly and accurately, the backlog of orders for the
      products and services of the Company as of June 1, 2008. The backlog is based
      on
      valid and existing orders received from customers of the Company. None of the
      orders included in the backlog have been cancelled, and, to the Knowledge of
      the
      Sellers, no customer is intending to cancel any of such orders. 

    


    5.29. Disclosure.
      The
      representations and warranties contained in this Article V (including the
      Schedules and exhibits hereto) do not contain any untrue statement of a material
      fact or omit to state any material fact necessary,
      in light of the circumstances in which they were made and taking into account
      the express limitations set forth in each such representation and warranty,
      to
      make such representations and warranties not misleading.

    


    
      
        5.30
          Due
          Diligence Information.
          

      

    

    


    (a) The
      Due Diligence Information described in Schedule 5.30 has been compiled in good
      faith with a view to create a true, accurate and fair portrait of the Company
      and its prospects and to reflect the Sellers’ Knowledge that there are no facts
      and circumstances relating to the affairs of the Company that have not been
      disclosed to the Purchaser and which, if disclosed, would reasonably be expected
      to influence the decision of a prudent purchaser to purchase the Shares on
      the
      terms or for the purchase price set forth in this Agreement.

    


    (b) The
      Purchaser and its representatives and advisors have conducted a due diligence
      review of the Company and have been provided with, and have had the opportunity
      to review, the Due Diligence Information. The Purchaser shall not be entitled
      to
      bring an indemnification claim against the Sellers based on a breach of any
      of
      the Sellers’ representations in this Article V, and the Sellers shall not be
      obliged to be liable for such a claim, if, on the basis of the Due Diligence
      Information, the Purchaser, at the time of Closing, had knowledge that the
      representation on which such claim is based, was untrue or inaccurate in the
      manner and to the extent claimed by the Purchaser in its claim for
      indemnification. 

     

    
      
        
        

      

      
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    ARTICLE VI

    REPRESENTATIONS
      AND WARRANTIES OF
      PURCHASER

    


    Purchaser
      hereby represents and warrants to Sellers as follows:

     

    6.1. Organization
      and Qualification.
      Purchaser is duly organized and validly existing under the laws of its
      jurisdiction of incorporation and has all requisite power and authority to
      own
      and operate its properties and to carry on its businesses as now being
      conducted. Purchaser is duly qualified or licensed to do business in those
      jurisdictions in which the property owned or operated by it makes such
      qualification or licensing necessary. 

    


    6.2. Authority
      Relative to this Agreement.
      Purchaser has
      the
      necessary corporate power and authority to execute and deliver this Agreement
      and the Related Documents and to consummate the transactions contemplated hereby
      and thereby. The execution and delivery of this Agreement and the Related
      Documents and the consummation of the transactions contemplated hereby have
      been
      duly and validly authorized by the Board of Directors of Purchaser and no other
      corporate proceedings on the part of Purchaser are necessary to authorize this
      Agreement or to consummate the transactions contemplated hereby. This Agreement
      has been duly and validly executed and delivered by Purchaser and constitutes
      a
      valid, legal and binding agreement of Purchaser enforceable against Purchaser
      in
      accordance with its terms.

     

    6.3. Consents
      and Approvals; No Violations.
      Neither
      the execution and performance of this Agreement by Purchaser nor the
      consummation by Purchaser of the transactions contemplated hereby will
      (i) conflict with or result in any breach of any provision of the
      Certificate of Incorporation or Bylaws of Purchaser or any of the terms or
      provisions of any Contract to which Purchaser is a party or (ii) violate
      any applicable laws binding on Purchaser except for breaches or defaults which
      would not have a material adverse effect on Purchaser or an adverse effect
      on
      the ability of Purchaser to enter into its obligations under this Agreement
      or
      any of the Related Documents.

     

    ARTICLE VII

    COVENANTS

     

    7.1. Reasonable
      Best Efforts.
      Subject
      to the terms and conditions herein provided, each of the Parties hereto agrees
      to use its commercially reasonable best efforts to take or cause to be taken
      all
      actions reasonably necessary under applicable laws to consummate and make
      effective the transactions contemplated by this Agreement. If at any time after
      the Closing Date any further action is necessary to carry out the purpose of
      this Agreement then the Sellers and proper representatives of the Purchaser,
      as
      the case may be, shall take all such necessary action.

     

    7.2 Tax
      Matters.
      The
      Purchaser shall have control over the Audit of any Tax Return of the Company
      for
      any period (or portion thereof) ending on or before the Closing Date at the
      Sellers’ expense; provided,
      however,
      that
      the Purchaser shall not compromise, settle or otherwise resolve any such Audit
      without the prior written consent of the Sellers (which consent shall not be
      unreasonably withheld). The Sellers shall cooperate with the Purchaser with
      respect of any such Audit. For purposes of this Section 7.2, “Audit”
shall
      mean any audit, examination or investigation of a Tax Return or with respect
      to
      Taxes, including any appeal therefrom and any litigation before any Governmental
      Authority relating thereto. 

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    7.3. Access
      to Books and Records of the Company.
      After
      the Closing Date, the Purchaser shall permit the Sellers and their
      representatives reasonable access, during normal business hours without
      unreasonably interfering with the operations of the Company, to relevant books,
      records, contracts and documents of or pertaining to the Company and shall
      cooperate with the Sellers in connection with tax audits and investigations
      of
      the Sellers conducted by any Governmental Authority, and the preparation of
      Tax
      Returns by the Sellers relating to periods of time prior to the Closing Date.
      The Sellers will keep strictly confidential all such material and information
      that it receives from the Company and will not use such information except
      in
      connection with Audits, investigations and other tax related
      matters.

    


    
      
        7.4.
          Confidentiality.
          

      

    

    


    (a)
       For
      the duration of seven (7) years from the Closing Date or such longer period
      as
      may be prescribed in the Sellers Employment Agreements, the Sellers will keep
      secret and not otherwise use for their own benefit or the benefit of any Person
      all confidential information of the Company and its Businesses (to the extent
      the relevant circumstances are not publicly known or no statutory obligation
      for
      publication exists).

    


    (b)
       The
      Parties will keep strictly confidential all knowledge received in the context
      of
      the negotiation and the conclusion of this Agreement about each other and the
      respective related companies and will not disclose such knowledge to any third
      Person, except if such disclosure is absolutely required by law. 

    


    7.5 Company
      Documents.
      The
      share register shall be delivered to the Purchaser on or before the Closing,
      and
      the complete and correct minutes from shareholders’ meetings and meetings of the
      board of directors, financial and other corporate records of the Company shall
      be transferred to the Purchaser by the Sellers on or before the Closing Date.
      

     

    ARTICLE
      VIII

    NON-COMPETITION;
      NON-SOLICITATION

     

    8.1. Non-Competition
      and Non-Solicitation

    


    (a) Each
      of
      the Sellers agrees that in consideration of the payments made to him (or the
      Habinc Group) in connection with the sale of the Shares pursuant to this
      Agreement, for a period commencing on the Closing Date and continuing, at a
      minimum, until the longer of (A) four (4) years from the Closing Date or (B)
      twenty-four (24) months from the termination of his employment with the Company
      (the “Sellers’
      Restricted Period”),
      he
      shall not, directly or indirectly, without the prior written consent of the
      Purchaser (A) offer or sell any products or services, or participate in any
      business which offers or sells any products or services, which compete in any
      geographic area of the Territory (as defined in Section 8.1(c) below) with
      the
      products or services offered or sold by the Company now or in the future, or
      (B)
      induce or attempt to induce, directly or indirectly, any customer of the Company
      to cease doing business, in whole or in part, with the Company or solicit the
      business of any such customer for any products or services which compete with
      any of the products or services offered or sold by the Company. Participation
      in
      a business shall include, but not be limited to, serving as a director, officer,
      employee, consultant, advisor, agent or representative or having a direct or
      indirect interest in the business as a shareholder, partner, joint venturer
      or
      any other financial interest. 

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    Nothing
      herein shall preclude the Company at any time after the Closing Date from
      electing, in its sole discretion, to reduce or eliminate the restriction in
      this
      Section 8.1(a) with respect to any one or more of the Sellers who are then
      currently employed by the Company. 

    


    (b) Each
      of
      the Sellers agrees that, in consideration of the payments to him (or the Habinc
      Group) in connection with the sale of his Shares pursuant to this Agreement,
      for
      the Seller’s Restricted Period he shall not, either on his own account or for
      any Person, solicit, interfere with, or endeavor to cause any employee of the
      Company to leave his employment or induce or attempt to induce any such employee
      to breach his employment agreement with the Company.

    


    (c) For
      purposes of this Article VIII, a “Territory”
shall
      mean Europe, the United States and any other country or place where the Company
      is engaging or has engaged in business in any material respect at any time
      during the Sellers’ Restricted Period.

    


    (d) Each
      of
      the Sellers acknowledges that both the geographic scope and length of the
      restrictions imposed on him hereunder are fair and reasonable in the
      circumstances and are necessary and fundamental to the protection of the
      Business of the Company.

    


    8.2 Remedies.
      Each of
      the Sellers agrees that if he contravenes the prohibitions contained in Sections
      8.1(a) or 8.1(b), he shall pay as a penalty for each such violation an amount
      equal to the sum of $250,000 USD, and that if, as a consequence of the violation
      of such prohibitions, the Losses suffered by the Company exceed such penalty,
      the Purchaser and the Company shall be entitled, pursuant to the provisions
      of
      Article IX hereof, to recover additional compensation from the Sellers involved
      equal to such excess amount. 

    


    8.3. Injunctive
      Reliefs.
      Each of
      the Sellers acknowledges that the covenants contained in this Article VIII
      are a
      material and necessary inducement for the Purchaser to agree to the transactions
      contemplated hereby, that the Sellers have realized significant monetary benefit
      from these transactions, that violation of any of the covenants contained in
      this Article VIII will cause irreparable and continuing damage to the Purchaser,
      that the Purchaser shall be entitled to seek injunctive reliefs from any court
      of competent jurisdiction restraining any further violation of such covenants,
      and that such injunctive reliefs shall be cumulative and in addition to any
      other rights or remedies to which the Purchaser may be entitled as set forth
      in
      Section 8.2 or otherwise. 

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    8.4. Severability.
      In case
      any of the terms or provisions contained in this Article VIII shall for any
      reason be held invalid, illegal or unenforceable, it shall not affect any other
      terms or provisions hereof, but such term or provision shall be deemed modified
      or deleted to the extent required by applicable laws, and such modification
      or
      deletion shall not affect the validity of the other terms or provisions of
      this
      Article VIII. In addition, if any of the restrictions contained in this Article
      VIII shall for any reason be held to be unreasonable with regard to time,
      duration, geographic scope or activity, the Parties contemplate and agree that
      such restrictions shall be modified and shall be enforced to the full extent
      compatible with applicable laws.

    


    ARTICLE
      IX

    SURVIVAL
      OF REPRESENTATIONS & WARRANTIES;

    INDEMNIFICATION

    


    
      
        9.
          Survival
          of Representations and Warranties; Indemnification.

      

    

    


    9.1. Survival
      of Representations and Warranties.
      Except as otherwise expressly provided in this Agreement, all representations
      and warranties made hereunder or in connection with the transactions
      contemplated hereby shall not terminate, but shall survive the Closing and
      continue in effect until two (2) years following the Closing Date, except that
      the representations and warranties contained in: (a) Section 5.4 shall continue
      indefinitely; (b) Section 5.7 shall continue until three months after the date
      such Tax has been finally and irrevocably determined; (c) Section 5.16 shall
      continue for a period of four (4) years from the Closing Date; and (d) Section
      5.15 shall continue for a period of six (6) years from the Closing Date;
provided,
      however,
      that, in each case, any such representation or warranty as to which a claim
      shall have been asserted during such survival period shall continue in effect
      until such time as such claim shall have been resolved or settled. 

     

    9.2. Survival
      of Covenants and Agreements.
      Except as expressly provided in this Agreement, all covenants and agreements
      made hereunder or in connection with the transactions contemplated hereby shall
      not terminate but shall survive the Closing indefinitely, limited only by the
      applicable statutes of limitation governing the assertion of a claim for a
      breach thereof.

    


    9.3.
      General
      Indemnification by Sellers.
      Subject to Section 9.9 hereof, the Sellers, jointly and severally, agree to
      indemnify and hold harmless the Company and the Purchaser, and their respective
      successors and assigns from and against any Losses, including, where applicable,
      interest thereon determined at the Applicable Rate calculated from the earliest
      date permitted under applicable law until the date of payment, which are caused
      by or arise out of: (a) any breach or default in the performance by the
      Sellers of any covenant or agreement of the Sellers contained herein or in
      any
      document delivered pursuant hereto; (b) any breach of warranty or
      representation made by the Sellers contained herein, or in any document
      delivered pursuant hereto, without regard to materiality other than under
      Section 5.11, and (c) any and all actions, suits, proceedings, claims, demands,
      judgments, reasonable costs and expenses (including reasonable legal fees)
      incident to any of the foregoing. To the extent that the Company or the
      Purchaser receives an indemnification under any insurance policy, any amount
      to
      which the Purchaser or the Company otherwise would be entitled hereunder shall
      be reduced accordingly by the amount of such insurance indemnification payment.
      

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

    9.4 General
      Indemnification by Purchaser.
      Subject to Section 9.9, Purchaser agrees to indemnify and hold harmless the
      Sellers and their respective heirs, successors and assigns from and against
      any
      Losses including, where applicable, interest thereon determined at the
      Applicable Rate calculated from the earliest date permitted under Applicable
      Law
      until the date of payment, which are caused by or arise out of: (a) any
      breach or default in the performance by Purchaser or the Company of any covenant
      or agreement of the Purchaser contained herein or in any certificate or
      instrument delivered pursuant hereto; (b) any breach of warranty or
      representation made by Purchaser contained herein or in any certificate or
      instrument delivered pursuant hereto; and (c) any and all actions, suits,
      proceedings, claims, demands, judgments, costs and expenses (including
      reasonable legal fees) incident to any of the foregoing. To the extent that
      the
      Sellers receive an indemnification under any insurance policy, any amount to
      which the Sellers otherwise would be entitled hereunder shall be reduced
      accordingly by the amount of such insurance indemnification payment


    


    9.5. Specific
      Indemnification by Sellers.
      Subject to Section 9.9 to the extent applicable, the Sellers shall indemnify
      and
      hold harmless the Purchaser and the Company from and against any and all Losses
      incurred or suffered by the Purchaser or the Company as a result of, or which
      relate to, or arise from, any of the following:

     

    (a) any
      Liabilities arising out of, or relating to, the resignation of Edwin Catovic
      and
      the sale of his equity interest in the Company in connection therewith;
      and

    


    (b) any
      Tax or other Liabilities arising out of, or relating to, any transfers of the
      Shares by any of the Sellers to Persons owned or controlled by
      them.

    


    
      
        9.6.
          Procedure;
          Notice of Claims.

      

    

    


    (a) Any
      indemnified party (the “Indemnified
      Party”)
      seeking indemnification hereunder shall, within the relevant limitation period
      provided for in Section 9.1, give to the party obligated to provide
      indemnification to such Indemnified Party (the “Indemnifying
      Party”)
      a notice (a “Claim
      Notice”)
      describing in reasonable detail the facts giving rise to any claims for
      indemnification hereunder and shall include in such Claim Notice (if then known)
      the amount or the method of computation of the amount of such claim, and a
      reference to the provision of this Agreement or any agreement or document
      executed in connection herewith upon which such claim is based; provided
      that
      a Claim Notice in respect of any legal action by or against a third party as
      to
      which indemnification will be sought shall be given promptly after the action
      is
      commenced; and provided
      further
      that failure to give such notice promptly shall not relieve the Indemnifying
      Party of its obligations hereunder except to the extent it shall have been
      prejudiced by such failure. 

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    (b) The
      Indemnifying Party shall have thirty (30) days after the giving of any Claim
      Notice pursuant hereto (the “Waiting
      Period”)
      to (i) agree to the amount or method of determination of the claim set forth
      in
      the Claim Notice and to the payment of such amount to the Indemnified Party
      in
      immediately available funds or (ii) provide such Indemnified Party with written
      notice that it disagrees (and the reasons therefor) with the amount or method
      of
      determination set forth in the Claim Notice (the “Dispute
      Notice”).
      If the Indemnifying Party and the Indemnified Party are unable to reach an
      accord regarding all of the claims asserted in the Claim Notice within thirty
      (30) days after the Indemnified Party’s receipt of the Dispute Notice (the
“Negotiation
      Period”),
      the Indemnified Party may commence such action as it deems appropriate to
      enforce the indemnification obligation of the Indemnifying Party pursuant to
      the
      provisions of this Article IX subject to Section 11.5 of this Agreement. The
      failure to file a Dispute Notice within the time permitted shall be deemed
      to
      constitute an acknowledgement by the Indemnifying Party of its acquiescence
      to
      the amount and method of determination of the claim in the Claim Notice.


    


    9.7. Procedure
      - Third Party Claims.

    


    (a) Promptly
      after receipt by an Indemnified Party of notice of the commencement of any
      proceeding against it by a third party (“Third
      Party Claim”),
      such
      Indemnified Party will, if a claim for indemnification is to be made against
      an
      Indemnifying Party, provide to the Indemnifying Party written notice of the
      commencement of such claim (together with copies of any legal papers served),
      provided,
      however,
      that the
      failure to promptly notify the Indemnifying Party will not relieve the
      Indemnifying Party of any liability that it may have to any Indemnified Party,
      except to the extent that the rights of the Indemnifying Party are actually
      prejudiced by such failure.

    


    (b) The
      Indemnified Party shall take such action, at the Indemnifying Party’s expense,
      as the Indemnifying Party may reasonably request to avoid dispute, or appeal,
      settle or defend such Third Party Claim; provided,
      however,
      that the Indemnified Party shall not, and shall use commercially reasonable
      efforts to procure that the Company shall not, accept or pay or settle or make
      any submission in respect of such claims, without the Indemnifying Party’s prior
      consent thereto, which shall not be unreasonably withheld.

    


    (c) Provided
      that it acknowledges in writing its obligation to indemnify the Indemnified
      Party, the
      Indemnifying Party shall have the right to assume the defense of any
Third
      Party
      Claim at
      its expense, provided that (x) in the reasonable judgment of the Indemnified
      Party, the Indemnifying Party has adequate resources to undertake such defense
      and satisfy any indemnifiable Losses arising from such Third
      Party
      Claim
      and (y) the selection of counsel is approved by the Indemnified Party, which
      approval will not be unreasonably withheld. If the Indemnified Party determines
      that the Indemnifying Party does not have adequate resources or the Indemnifying
      Party fails to make such an election within twenty (20) days after it receives
      notice pursuant to Section 9.7(a), the Indemnified Party shall have the right
      to
      defend such Third
      Party
      Claim at
      the expense of the Indemnifying Party. The Indemnified Party, at its own
      expense, shall have the right to retain its own counsel and participate in
      the
      defense of a Third
      Party
      Claim
      defended by the Indemnifying Party. 

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    (d) If
      the
      Indemnifying Party assumes the defense of a Third Party Claim, (A) no compromise
      or settlement of such Third Party Claim may be effected by the Indemnifying
      Party without the Indemnified Party’s consent which will not be unreasonably
      withheld, unless (i) the sole relief provided is monetary damages that are
      paid
      in full by the Indemnifying Party, (ii) the compromise or settlement includes
      a
      complete release of the Indemnified Party, and (iii) there is no finding or
      admission of any violation of law or any violation of the rights of any Person
      by the Indemnified Party. 

     

    (e)
       Notwithstanding
      the foregoing, if a remedy sought under a Third Party Claim is for injunctive
      or
      other non-monetary relief for which an Indemnified Party may be liable, the
      Indemnified Party may, by notice to the Indemnifying Party, assume the exclusive
      right to defend or settle such proceeding at the Indemnifying Party’s cost and
      expense; provided, however,
      such
      Third Party Claim may not be settled without the Indemnifying Party’s consent,
      which will not be unreasonably withheld. 

    


    (f)
       With
      respect to any obligations of an Indemnifying Party and an Indemnified Party
      which arise pursuant to the provisions of this Article IX, the Indemnifying
      Party and the Indemnified Party agree to cooperate with each other as reasonably
      requested by the other.

    


    9.8
        Remedies.
      Except as otherwise may be provided in this Agreement, the sole and exclusive
      remedy of the parties for breach of representations and warranties contained
      in
      Articles V and VI of this Agreement shall be restricted to the indemnification
      rights set forth in this Article IX. Accordingly, the parties agree that the
      Swedish Sale of Goods Act (1990.931) shall not apply to this Agreement, and,
      except as otherwise provided in this Agreement, a deduction of the Purchase
      Price is the only consequence that can be claimed by the Purchaser due to the
      Sellers’ breach of the representations and warranties in Article V of this
      Agreement.

    


    
      
        9.9.
          Certain
          Limitations.
          

      

    

    


    (a) Each
      Party’s aggregate liability for indemnification for the breach of any
      representation or warranty made in this Agreement or in any Related Document
      shall not exceed an amount equal to fifty (50%) percent of the Purchase Price
      paid by the Purchaser including the amount of Earn Out Payments which the
      Sellers have earned and otherwise would be entitled to be paid (the
“Liability
      Cap”),
      with
      the exception of Section 5.7 (Taxes) where the Sellers’ liability is limited to
      the total Purchase Price.

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    (b) The
      Sellers shall not be liable for Losses under Section 9.3 (b) unless and until
      such Losses exceed $200,000 USD, in the aggregate, without taking into account
      materiality other than under Section 5.11 (the “Sellers
      Basket Amount”),
      it
      being understood that once the amount of the Loss (or Losses) equals or exceeds
      the Seller Basket Amount, the Purchaser shall be entitled to be indemnified
      on a
      dollar for dollar basis for the full amount of the Loss including the Sellers
      Basket Amount. For the avoidance of doubt, the Sellers Basket Amount shall
      not
      apply to any claims for indemnification other than those pursuant to Section
      9.3(b), including the breach or non-fulfillment of any covenant in this
      Agreement or any other breach of this Agreement that is not a breach of the
      representations and warranties in Article V, and any claims for indemnification
      pursuant to Section 9.5. No individual claim for indemnification under Section
      9.3 (b) shall be valid and assertable unless it is for an amount in excess
      of
      $20,000 USD; provided,
      however,
      that to
      the extent that individual claims are related to one another, they may be
      aggregated for the purposes of meeting such $20,000 threshold.

    


    (c) The
      Purchaser shall not be liable for Losses under Section 9.4(b) unless and until
      such Losses exceed $200,000 in the aggregate (the “Purchaser
      Basket Amount”),
      it
      being understood that once the amount of the Loss (or Losses) equals or exceeds
      the Purchaser Basket Amount, the Sellers Indemnified Parties shall be entitled
      to be indemnified on a dollar for dollar basis for the full amount of the Loss,
      including the Purchaser Basket Amount. For the avoidance of doubt, the Purchaser
      Basket Amount shall not apply to any claims for indemnification other than
      those
      pursuant to Section 9.4(b), including the breach or non-fulfillment of any
      covenant in this Agreement or any other breach of this Agreement that is not
      a
      breach of the representations and warranties in Article VI.

    


    (d)
       It
      is agreed that for the purpose of making a claim for indemnification, the
      expiration of any one survival period, as set forth in Section 9.1, of certain
      representations and warranties, shall not affect the ability to make any claim
      for indemnification hereunder under any other representations and warranties
      still surviving; provided,
      however,
      that no Party shall be entitled to make a claim for indemnification more than
      once on account of the same facts and circumstances.

     

    ARTICLE
      X

    SETTLEMENT
      OF CLAIMS AND ESCROW

    


    10.1.
       Priorities
      of Payment.
      Compensation for a claim by the Purchaser or the Company for breach of any
      of
      the warranties, covenants or agreements made or to be performed by the Sellers
      under this Agreement, shall be paid as follows: first, from the Escrow Account
      in accordance with the Escrow Agreement; second, should the amount available
      in
      the Escrow Account not be sufficient to settle the entire Loss due by the
      Sellers to the Purchaser Indemnified Parties, then by way of offset against
      any
      Earn Out Payments that the Sellers already have earned and are then actually
      entitled to but are not yet paid; and third, if there is still a deficiency,
      the
      Sellers shall pay the remainder of such Loss directly to the Purchaser upon
      demand. 

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

     

    10.2. Escrow
      Claim Payments.

    


    (a) If
      the
      Purchaser has asserted a claim in accordance with Section 9.6 above that is
      agreed to or not timely disputed by the Sellers, the Purchaser and the Sellers
      shall upon the sooner of such agreement or within five (5) Business Days
      following the elapse of the Waiting Period, jointly instruct the Escrow Agent
      to
      pay the amount of such claim to the Purchaser (together with the interest that
      has accrued on such amount during the period it has been deposited on the Escrow
      Account) to the extent requisite funds are available in the Escrow Account
      to
      cover such claim and interest.

    


    (b)
       The
      Escrow Agent shall be entitled to act in accordance with any award made and
      entered by the Arbitration Tribunal which determines those of the Purchaser’s
      claims that have been disputed by the Sellers, and to authorize the making
      or
      withholding of the Escrow Account in accordance therewith. If Purchaser and
      Sellers should settle or resolve, in whole or in part, the dispute with respect
      to such claim or claims, a memorandum setting forth such accord shall be
      prepared and signed by each of the Parties and furnished to the Escrow Agent.
      The Escrow Agent shall be entitled to rely on any such memorandum and to
      distribute or deliver the Escrow Account in accordance with the terms
      thereof.

     

    10.3 Outstanding
      Claims.
      Once
      asserted, a claim shall be deemed to be an “Outstanding
      Claim”
until
      finally resolved in accordance with the terms of this Agreement.

    


    10.4 Distributions
      Out of the Escrow Account.

    


    (a) Upon
      the
      first anniversary of the Closing Date (the“First
      Distribution Date”),
      the
      Purchaser and the Sellers shall jointly instruct the Escrow Agent to release
      and
      return promptly to the Sellers in accordance with the Sellers’ Allocations, that
      amount of the Escrow Account which reduces the Escrow Account then to be held
      by
      the Escrow Agent to $2,500,000 USD plus such additional amounts as may be
      reasonably required to satisfy all of the Sellers’ liability in respect of any
      Outstanding Claims. If, on the First Distribution Date, the balance of the
      Escrow Account is less than the amount calculated pursuant to the preceding
      sentence, no distribution to Sellers shall be made.

    


    (b) After
      the
      elapse of eighteen (18) months from the Closing Date, (the
      “Second
      Distribution Date”),
      the
      Purchaser and the Sellers shall jointly instruct the Escrow Agent to release
      and
      return promptly to Sellers in accordance with the Sellers’ Allocations, that
      amount of the Escrow Account which reduces the Escrow Account then to be held
      by
      the Escrow Agent to $1,250,000 USD plus such additional amounts as may be
      reasonably required to satisfy all of the Sellers=
      liability in respect of any Outstanding Claims. If, on the Second Distribution
      Date, the balance of the Escrow Account is less than the amount calculated
      pursuant to the preceding sentence, no distribution to Sellers shall be
      made.

     

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

     

    (c) Upon
      the
      elapse of twenty-four (24) months from the Closing Date, the Purchaser and
      the
      Sellers shall jointly instruct the Escrow Agent to pay to the Sellers that
      amount of the remaining portion of the Escrow Account in excess of such amount
      as may be required
      to
      satisfy all of the Sellers=
      liability with respect to any Outstanding Claims. As soon as all Outstanding
      Claims have been resolved, the Purchaser and the Sellers shall jointly instruct
      the Escrow Agent to pay to the Sellers according to the Sellers’ Allocations,
      the remaining portion of the Escrow Account not required to satisfy the
      Sellers=
      liability under Article IX.

     

    10.5. Purchaser’s
      Right of Offset.
      The
      Purchaser always shall have the right to withhold and then set-off against
      any
      Earn Out Payments payable or to be paid to Sellers, the amount of any valid
      claim for indemnification asserted by the Purchaser to the extent that such
      claim exceeds the amount of the balance in the Escrow Account.

     

    ARTICLE XI

    MISCELLANEOUS

     

    11.1. Entire
      Agreement; Assignment; Amendments and Waivers. 

    


    (a) This
      Agreement and the Related Documents (together with all documents referencing
      to
      or referred to in it or otherwise executed at the Closing Date in relation
      hereto) constitute the entire agreement between the Parties in relation to
      its
      subject matter and replaces and extinguishes all prior agreements between the
      Parties with respect to such subject matter.

    


    (b) Neither
      Party shall have the right to assign this Agreement without the prior written
      consent of the other Party.

    


    (c) This
      Agreement may not be amended or modified, and any of the terms, covenants,
      representations, warranties, or conditions hereof may not be waived, except
      by a
      written instrument executed by all of the Parties hereto, or in the case of
      a
      waiver, by the Party waiving compliance. Any waiver by any Party of any
      condition, or of the breach of any provision, term, covenant, representation,
      or
      warranty contained in this Agreement, in any one or more instances, shall not
      be
      deemed to be nor construed as further or continuing waiver of any such
      condition, or of the breach of any other provision, term, covenant,
      representation, or warranty of this Agreement.

     

    11.2. Validity. If
      any
      provision of this Agreement or the application thereof to any Person or
      circumstance is held invalid or unenforceable by a Governmental Authority,
      then
      the remainder of this Agreement and the application of such provision to other
      Persons or circumstances shall not be affected thereby and to such end the
      provisions of this Agreement are agreed to be severable.

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

     

    11.3. Notices.
      All
      notices and other communications hereunder shall be in writing and shall be
      given (and shall be deemed to have been duly given upon receipt) by delivery
      in
      person, by facsimile or by registered or certified mail (postage prepaid, return
      receipt requested) to each other party as follows:

     

    
      
        	
                if
                  to Purchaser:

              	
                Aeroflex
                  Incorporated

              
	 	
                Att:
                  Leonard Borow, President and CEO

              
	 	
                35
                  South Service Road

              
	 	
                PO
                  Box 6022

              
	 	
                Plainview,
                  New York 11803

              
	 	
                Telecopier:
                  (516) 694-0658

              
	 	 
	
                with
                  copies to:

              	
                Moomjian,
                  Waite, Wactlar & Coleman, LLP 

              
	 	
                Attn:
                  Edward S. Wactlar, Esq.

              
	 	
                100
                  Jericho Quadrangle

              
	 	
                Jericho,
                  York, NY 11753

              
	 	
                Telecopier:
                  (516) 937-5050

              
	 	 
	 	
                Mannheimer
                  Swartling Advokatbyrå AB

              
	 	
                Attn:
                  Johan Ljungberg

              
	 	
                Box
                  2235, 

              
	 	
                SE-403
                  14 Göteborg

              
	 	
                Sweden

              
	 	
                Telecopier:
                  +46 31-355 16 01

              
	 	 
	
                if
                  to Sellers:

              	
                Jiri
                  Gaisler

              
	 	
                Molinsgatan
                  19

              
	 	
                41133
                  Gothenburg

              
	 	
                Sweden

              
	 	 
	 	
                Per
                  Danielsson

              
	 	
                Första
                  Långgatan 6

              
	 	
                41303
                  Gothenburg

              
	 	
                Sweden

              
	 	 
	 	
                Aktiebolaget
                  Grundstenen 121346 changing name

              
	 	
                to
                  Habinc Invest AB

              
	 	
                Bassåsv’gen
                  24

              
	 	
                43655
                  Hovås

              
	 	
                Sweden
                  

              


      

       

    

    or
      to
      such other address as the person to whom notice is given may have previously
      furnished to the others in writing in the manner set forth above.

     

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    

     

    11.4.
       Governing
      Law.
      This
      Agreement shall be governed by, and construed in accordance with, the laws
      of
      Sweden, without regard or giving effect to the principles of conflicts of law
      thereof.

    


    11.5.
       Disputes.
      Any
      dispute arising out of or in connection with this Agreement shall be finally
      settled by arbitration in accordance with the Rules of the Arbitration Institute
      of the Stockholm Chamber of Commerce (the “Rules”)
      by
      three (3) arbitrators appointed in accordance with the said Rules; provided,
      however,
      that
      any disputes arising under Sections 3.2 or 3.3 shall be settled by only one
      (1)
      arbitrator pursuant to, and using, the Simplified Procedure of such Rules.
      The
      place of arbitration shall be Stockholm, Sweden, and the language of the
      proceedings shall be in English. Nothing herein shall prevent either Party
      from
      seeking injunctive relief or specific performance from any court of competent
      jurisdiction as contemplated by the terms of this Agreement, and/or otherwise
      as
      necessary to obtain execution of any arbitration decision or award.

     

    11.6. Expenses.
      All
      fees and expenses, including but not limited to legal fees and expenses,
      incurred by a Party in connection with the negotiations, preparation, execution
      and implementation of any documents necessary to give effect to the matters
      which are intended to take place under the terms of this Agreement and the
      Related Documents shall, unless otherwise agreed in writing, be borne by the
      incurring Party.

     

    11.7. Specific
      Performance. The
      Parties hereby acknowledge and agree that the failure of any Party to perform
      its agreements and covenants hereunder, including its failure to take all
      actions as are necessary on its part to the consummation of the transactions
      contemplated hereby, will cause irreparable injury to the other Parties, for
      which damages, even if available, will not be an adequate remedy. Accordingly,
      each Party hereby consents to the right of any other to seek the issuance of
      injunctive relief by any Governmental Authority having competent jurisdiction
      to
      compel performance of such Party’s obligations and to the granting by any such
      Governmental Authority of the remedy of specific performance of its obligations
      hereunder.

    


    _________________

     

    [Signature
      page follows]


    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, each of the Parties has caused this Agreement to be duly
      executed on its behalf as of the day and year first above written.

    


    


    
      	
              AEROFLEX
                INCORPORATED

            	 	
              Aktiebolaget
                Grundstenen 121346 changing name to Habinc Invest
                AB

            


    

     

    
      	
              By:
                

            	
              /s/
                Charles Badlato

            	 	
              /s/
                Sandi Habinc

            
	
              Name:
                

            	
              Charles
                Badlato

            	 	
              By:
                

            	
              Sandi
                Habinc

            
	
              Title:
                

            	
              VP-Treasurer

            	 	 	 


    

    


    
      	/s/
              Per Danielsson 	 	
              /s/
                Sandi Habinc

            
	Per
              Danielsson	 	
              Sandi
                Habinc

            


    

     

    
      	
              /s/
                Jiri Gaisler

            	 
	
              Jiri
                Gaisler

            	 


    

     

    
      
        
        

      

      
        44