**Exhibit10.83**

 

** **

**ASSETPURCHASE AGREEMENT**

** **

**By AndBetween**

** **

**BIO-KEYINTERNATIONAL, INC.**

** **

**And**

** **

**INTERACT911MOBILE SYSTEMS, INC.**

** **

**August 13,2009**

 

 

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**TABLE OF CONTENTS**

(continued)

 
| ** **   | ** **                                                  | ** ** | **Page** |
|--------------|-------------------------------------------------------------|------------|----------|
|         |                                                        |       |     |
| ARTICLE  I   |    DEFINITIONS                               |       | 1        |
|         |                                                        |       |     |
| 1.1          | Definitions                                                 |       | 1        |
|         |                                                        |       |     |
| 1.2          | Other  Definitions                                          |       | 8        |
|         |                                                        |       |     |
| ARTICLE  II  |    PURCHASE  AND SALE OF ASSETS              |       | 9        |
|         |                                                        |       |     |
| 2.1          | Purchase  of Assets                                         |       | 9        |
|         |                                                        |       |     |
| 2.2          | Excluded  Assets                                            |       | 12       |
|         |                                                        |       |     |
| 2.3          | Assumed  Liabilities                                        |       | 12       |
|         |                                                        |       |     |
| 2.4          | Excluded  Liabilities                                       |       | 12       |
|         |                                                        |       |     |
| 2.5          | BIO-key  License                                            |       | 14       |
|         |                                                        |       |     |
| 2.6          | Purchase  Price                                             |       | 14       |
|         |                                                        |       |     |
| 2.7          | Closing  Transactions                                       |       | 14       |
|         |                                                        |       |     |
| 2.8          | Adjustments  to Purchase Price                              |       | 14       |
|         |                                                        |       |     |
| 2.9          | Transfer  Documents                                         |       | 16       |
|         |                                                        |       |     |
| 2.10         | Tax  Allocations                                            |       | 16       |
|         |                                                        |       |     |
| 2.11         | Transition  of Subject Business                             |       | 17       |
|         |                                                        |       |     |
| 2.12         | Nonassignable  Contracts                                    |       | 17       |
|         |                                                        |       |     |
| ARTICLE  III |    REPRESENTATIONS  AND WARRANTIES OF SELLER |       | 18       |
|         |                                                        |       |     |
| 3.1          | Organization  and Corporate Power                           |       | 18       |
|         |                                                        |       |     |
| 3.2          | Authorization  of Transactions                              |       | 18       |
|         |                                                        |       |     |
| 3.3          | Sufficiency  of Assets                                      |       | 19       |
|         |                                                        |       |     |
| 3.4          | Absence  of Conflicts                                       |       | 19       |
|         |                                                        |       |     |
| 3.5          | SEC  Filings; Financial Statements                          |       | 19       |
|         |                                                        |       |     |
| 3.6          | Capitalization                                              |       | 21       |
|         |                                                        |       |     |
| 3.7          | Absence  of Undisclosed Liabilities                         |       | 22       |
|         |                                                        |       |     |
| 3.8          | Absence  of Certain Changes                                 |       | 22       |
|         |                                                        |       |     |
| 3.9          | Title  to Properties                                        |       | 22       |
|         |                                                        |       |     |
| 3.10         | Payment  of Taxes                                           |       | 23       |
|         |                                                        |       |     |
| 3.11         | Contracts  and Commitments                                  |       | 23       |
|         |                                                        |       |     |
| 3.12         | Seller  Intellectual Property Assets                        |       | 24       |
|         |                                                        |       |     |
| 3.13         | Litigation; Proceedings                                     |       | 26       |

 

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**TABLE OF CONTENTS**

(continued)

 
|        |                                                               |   | **Page** |
|-------------|--------------------------------------------------------------------|--------|----------|
|        |                                                               |   |     |
| 3.14        | Governmental  Permits                                              |   | 27       |
|        |                                                               |   |     |
| 3.15        | Employees                                                          |   | 27       |
|        |                                                               |   |     |
| 3.16        | Insurance                                                          |   | 27       |
|        |                                                               |   |     |
| 3.17        | Affiliate  Transactions                                            |   | 28       |
|        |                                                               |   |     |
| 3.18        | Compliance  with Laws                                              |   | 28       |
|        |                                                               |   |     |
| 3.19        | Governmental  Authorities and Consents                             |   | 28       |
|        |                                                               |   |     |
| 3.20        | Product  Warranties                                                |   | 28       |
|        |                                                               |   |     |
| 3.21        | Environmental  Matters                                             |   | 28       |
|        |                                                               |   |     |
| 3.22        | Broker’s  Fees                                                |   | 29       |
|        |                                                               |   |     |
| 3.23        | Disclosure                                                         |   | 29       |
|        |                                                               |   |     |
| 3.24        | Accounts  Receivable                                               |   | 29       |
|        |                                                               |   |     |
| 3.25        | Software  and Information Systems                                  |   | 30       |
|        |                                                               |   |     |
| 3.26        | Customers  and Suppliers                                           |   | 31       |
|        |                                                               |   |     |
| ARTICLE  IV |    REPRESENTATIONS  AND WARRANTIES OF BUYER         |   | 32       |
|        |                                                               |   |     |
| 4.1         | Organization  and Good Standing                                    |   | 32       |
|        |                                                               |   |     |
| 4.2         | Corporate  Authorization                                           |   | 32       |
|        |                                                               |   |     |
| 4.3         | No  Breach                                                         |   | 33       |
|        |                                                               |   |     |
| 4.4         | Financial  Information                                             |   | 33       |
|        |                                                               |   |     |
| 4.5         | Litigation;  Proceedings                                           |   | 33       |
|        |                                                               |   |     |
| 4.6         | Availability  of Funds                                             |   | 34       |
|        |                                                               |   |     |
| 4.7         | Broker’s  Fees                                                |   | 34       |
|        |                                                               |   |     |
| 4.8         | Disclosure                                                         |   | 34       |
|        |                                                               |   |     |
| ARTICLE  V  |    COVENANTS                                        |   | 35       |
|        |                                                               |   |     |
| 5.1         | Conduct  of Business                                               |   | 35       |
|        |                                                               |   |     |
| 5.2         | No  Solicitation                                                   |   | 36       |
|        |                                                               |   |     |
| 5.3         | Preparation  of Proxy Statement; Seller Stockholders’ Meeting |   | 38       |
|        |                                                               |   |     |
| 5.4         | Access  to Information; Confidentiality                            |   | 39       |
|        |                                                               |   |     |
| 5.5         | Reasonable  Efforts                                                |   | 39       |
|        |                                                               |   |     |
| 5.6         | Notification  of Certain Matters                                   |   | 40       |
|        |                                                               |   |     |
| 5.7         | Fees and Expenses                                                  |   | 40       |

 

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**TABLE OF CONTENTS**

(continued)

 
|          |                                                   |   | **Page** |
|---------------|--------------------------------------------------------|--------|----------|
|          |                                                   |   |     |
| ARTICLE  VI   |    CONDITIONS  TO CLOSING               |   | 41       |
|          |                                                   |   |     |
| 6.1           | Conditions  to Each Party’s Obligation to Closing |   | 41       |
|          |                                                   |   |     |
| 6.2           | Conditions  to Obligations of the Buyer                |   | 41       |
|          |                                                   |   |     |
| 6.3           | Conditions  to Obligations of Seller                   |   | 42       |
|          |                                                   |   |     |
| ARTICLE  VII  |    Closing  Deliveries                  |   | 42       |
|          |                                                   |   |     |
| 7.1           | Seller’s  Deliveries at Closing                   |   | 42       |
|          |                                                   |   |     |
| 7.2           | Buyer’s  Deliveries at Closing                    |   | 43       |
|          |                                                   |   |     |
| ARTICLE  VIII |    TERMINATION,  AMENDMENT AND WAIVER   |   | 44       |
|          |                                                   |   |     |
| 8.1           | Termination                                            |   | 44       |
|          |                                                   |   |     |
| 8.2           | Effect  of Termination                                 |   | 45       |
|          |                                                   |   |     |
| 8.3           | Payments                                               |   | 45       |
|          |                                                   |   |     |
| ARTICLE  IX   |    INDEMNIFICATION  AND RELATED MATTERS |   | 46       |
|          |                                                   |   |     |
| 9.1           | Survival;  Risk Allocation                             |   | 46       |
|          |                                                   |   |     |
| 9.2           | Indemnification                                        |   | 46       |
|          |                                                   |   |     |
| ARTICLE  X    |    MISCELLANEOUS                        |   | 50       |
|          |                                                   |   |     |
| 10.1          | Amendment                                              |   | 50       |
|          |                                                   |   |     |
| 10.2          | Waiver                                                 |   | 51       |
|          |                                                   |   |     |
| 10.3          | Notices                                                |   | 51       |
|          |                                                   |   |     |
| 10.4          | Binding  Agreement; Assignment                         |   | 51       |
|          |                                                   |   |     |
| 10.5          | Severability                                           |   | 52       |
|          |                                                   |   |     |
| 10.6          | Construction                                           |   | 52       |
|          |                                                   |   |     |
| 10.7          | Captions                                               |   | 52       |
|          |                                                   |   |     |
| 10.8          | Entire  Agreement                                      |   | 52       |
|          |                                                   |   |     |
| 10.9          | Counterparts                                           |   | 52       |
|          |                                                   |   |     |
| 10.10         | Governing  Law                                         |   | 52       |
|          |                                                   |   |     |
| 10.11         | Parties  in Interest                                   |   | 53       |
|          |                                                   |   |     |
| 10.12         | Consent to Jurisdiction                                |   | 53       |

 

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**INDEX OFEXHIBITS**

** **
| Exhibit A | Form of  Buyer Note                                 |
|----------------|----------------------------------------------------------|
| Exhibit B | Form of  IP Security Agreement                      |
| Exhibit C | Form of  Warrant                                    |
| Exhibit D | Form of  General Assignment                         |
| Exhibit E | Form of  Trademark Assignment                       |
| Exhibit F | Form of  Copyright Assignment                       |
| Exhibit G | Form of  Third Party IP Licensor Consent and Waiver |
| Exhibit H | Form of  Landlord Consent and Waiver                |
| Exhibit I | Form of  Noncompetition Agreement                   |
| Exhibit J | Form of  Parent Guaranty                            |
| Exhibit K | Form of  SilkRoad Guaranty                          |

 

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**ASSETPURCHASE AGREEMENT**

 

THIS ASSET PURCHASEAGREEMENT (this “****Agreement****”) is made and entered intoas of August     , 2009, by and between BIO-keyInternational, Inc., a Delaware corporation (“****Seller****”), andInterAct911 Mobile Systems, Inc., a Delaware corporation (“****Buyer****”).  Seller and Buyer are collectively referred toherein as the “****Parties****” and each individually as a “****Party****.”

 

WHEREAS, Buyer desires toacquire from Seller, and Seller desires to sell to Buyer, substantially all ofthe assets of Seller relating to Seller’s Law Enforcement Division for theconsideration and upon the terms and conditions set forth in this Agreement;and

 

WHEREAS, Seller desires toissue, and Buyer desires to receive, a Warrant (as defined below) to purchasecapital stock of Seller; and

 

WHEREAS, the Board ofDirectors of Seller has approved and declared advisable this Agreement and thesale of assets contemplated hereby, has deemed it in the best interests ofstockholders of the Seller to consummate the sale and issue the Warrant, andhas determined to recommend to stockholders of the Seller the adoption of thisAgreement;

 

NOW, THEREFORE, for good andvaluable consideration, the receipt and sufficiency of which are herebyacknowledged, the Parties agree as follows:

 

**ARTICLE I**

 

**DEFINITIONS**

 

**1.1         ****Definitions**

 

For purposes of****this Agreement, the following terms shallhave the meanings set forth below:

 

“**Affiliate**”means with respect to any Person, another Person that directly, or indirectlythrough one or more intermediaries, controls, is controlled by, or is undercommon control with, such first Person, where “control” means the possession,directly or indirectly, of the power to direct or cause the direction of themanagement policies of a Person, whether through the ownership of votingsecurities, by contract, as trustee or executor, or otherwise.

 

“**AlternativeTransaction**” means with respect to Seller, any of the followingtransactions (other than the transactions contemplated hereby): (A) anyacquisition or purchase from Seller by any Person or “group” (as defined under Section 13(d) ofthe Exchange Act and the rules and regulations thereunder) of more than aTwenty Percent (20%) interest in the total outstanding voting securities ofSeller or any tender offer or exchange offer that if consummated would resultin any Person or “group” (as defined under Section 13(d) of theExchange Act and the rules and regulations thereunder) beneficially owningsecurities representing Twenty Percent (20%) or more of the total outstandingvoting power of Seller or any merger, consolidation, business combination,share exchange or similar transaction involving Seller pursuant to which thestockholders of Seller immediately preceding such transaction hold securitiesrepresenting less than Eighty Percent (80%) of the total outstanding votingpower of the surviving or resulting 

 

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entityof such transaction (or Seller entity of such surviving or resulting entity); (B) anysale, lease, exchange, mortgage, transfer, license or disposition of assets(including capital stock or other ownership interests in Subsidiaries)representing Twenty Percent (20%) or more of the aggregate fair market value ofthe consolidated assets of Seller and its Subsidiaries taken as a whole; or (C) anyliquidation or dissolution of Seller.

 

“**AlternativeTransaction Proposal**” means any offer, inquiry, proposal orindication of interest (whether binding or non-binding) to Seller or its stockholders,relating to an Alternative Transaction.

 

“**ApplicableLaw**” means all foreign, federal, state, local or municipal laws,statutes, ordinances, regulations, and rules, and all orders, writs,injunctions, awards, judgments and decrees of any Governmental Authorityapplicable to Buyer or Seller, their respective Subsidiaries or any of theirrespective assets, properties or businesses.

 

“****Business Day****”means any day that is not a Saturday, Sunday or other day on which banks arerequired or authorized by law to be closed in Boston, Massachusetts.

 

“****Buyer Note****”means the guaranteed, secured promissory note in the principal amount of FourMillion Dollars ($4,000,000) issued by the Buyer in substantially the formattached hereto as Exhibit A and guaranteed by InterAct911Corporation, a Delaware corporation and sole stockholder of Buyer (“**Parent**”), and SilkRoad Equity, LLC, a Delaware limitedliability company (“**SilkRoad**” andtogether with Parent, the “**Guarantors**”),and secured by a pledge of the Seller Intellectual Property Assets pursuant toan Intellectual Property Security Agreement in substantially the form attachedhereto as Exhibit B (the “**IP Security Agreement**”).

 

“**Change ofRecommendation**” means the withholding, withdrawal, adverseamendment, qualification or modification of Seller’s Board of Directors’recommendation in favor of approval of this Agreement and the transactionscontemplated hereby, and, in the case of a tender or exchange offer made by athird party directly to Seller’s stockholders, a recommendation that Seller’sstockholders accept the tender or exchange offer.

 

“**Closing CashPayment**” means the amount in cash to be paid to Seller at Closingequal to Seven Million Dollars ($7,000,000), **plus**the Net Amount of Working Capital Assets at Closing, all as set forth in theEstimated Closing Statement. The Closing Cash Payment is subject to furtheradjustment following the Closing in accordance with Section 2.8hereof.

 

“****Contract****”means any contract, license, sublicense, mortgage, purchase order, indenture,loan agreement, lease, sublease, agreement, arrangement or understanding orinstrument or any binding commitment to enter into any of the foregoing (ineach case, whether written or oral).

 

“**Copyrights**”means all United States and foreign copyrights (including Community designs),including copyrights in both published and unpublished works, compilations,databases and computer programs, Software, manuals and other documentation,whether registered or unregistered, and, with respect to any and all of theforegoing: (A) all registrations and applications therefor, including theregistrations and applications referred to in Schedule 3.12, (B) allextensions and renewals thereof, (C) all derivatives, translations,adaptations and combinations of any and all of the foregoing; (D) allrights corresponding thereto throughout the 

 

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world,(E) all rights to sue for past, present and future infringements thereof,and (F) all proceeds of the foregoing, including licenses, royalties,income, payments, claims, damages and proceeds of suit.

 

“**EnvironmentalLaws**” means any and all federal, state, foreign, interstate, localor municipal laws, rules, orders, regulations, statutes, ordinances, codes,decisions, injunctions, decrees, requirements of any Governmental Authority,any and all common law requirements, rules and bases of liabilityregulating, relating to, or imposing liability or standards of conductconcerning pollution, Hazardous Materials or protection of human health, safetyor the environment, as currently in effect, including, but not limited to, theComprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.Section 10601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C.Section 1801 et seq., the Resource Conservation and Recovery Act, 42U.S.C. Section 6901 et seq., the Clean Water Act, 33 U.S.C. Section 1251et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the ToxicSubstances Control Act, 15 U.S.C. Section 2601 et seq., the FederalInsecticide, Fungicide and Rodenticide Act, 7 U.S.C., Section 136 et seq.,Occupational Safety and Health Act 29 U.S.C. Section 651 et seq., the OilPollution Act of 1990, 33 U.S.C. Section 2701 et seq., and the EndangeredSpecies Act (16 U.S.C. Section 1531 et seq.) as such laws have beenamended or supplemented, and the regulations promulgated pursuant thereto, andall analogous state or local statutes.

 

“**EnvironmentalLiabilities**” means with respect to Seller, any and all Liabilitiesof or relating to Seller or any of its Subsidiaries (including any entity whichis, in whole or in part, a predecessor of Seller or any of such Subsidiaries),which (A) arise under or relate to matters covered by Environmental Lawsand (B) relate to actions occurring or conditions existing on or prior tothe Closing Date.

 

“****Exchange Act****”means the Securities Exchange Act of 1934, as amended.

 

“****GAAP****”means United States generally accepted accounting principles, consistentlyapplied throughout the periods involved.

 

“**GovernmentalAuthority**” means any foreign, federal, state, county, local,municipal or foreign court or tribunal, governmental or regulatory body,administrative board, bureau, agency, instrumentality, commission or anydepartment or political subdivision thereof.

 

“**GovernmentalPermit**” means any consent, license, permit, grant, franchise,certificate of authorization, registration or other authorization of aGovernmental Authority that is required for the operation of such entity’sbusiness or the holding of any assets or properties or exercising any rights orclaims.

 

“**HazardousMaterials**” means any substance material or waste regulated by anyGovernmental Authority, including those defined, listed, classified orregulated as radioactive, hazardous, toxic or otherwise dangerous to health orthe environment in or under any Environmental Laws, such as petroleum,petroleum products, friable asbestos, urea formaldehyde, radioactive materialsand polychlorinated biphenyls, but excluding office and janitorial suppliessafely stored and maintained.

 

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“****HiredEmployees****” means the employees of Seller hired by Buyer atthe Closing, all of whom are identified on Schedule3.15 hereto.

 

“**IntellectualProperty Assets**” means all worldwide intellectual property rightsowned or licensed by Seller and used in the Subject Business, including (A) Patents;(B) Trademarks and all of the goodwill associated therewith; (C) Copyrights;(D) Trade Secrets; (E) any rights in registered internet domainnames; (F) any and all other intellectual property rights relating to anyof the foregoing.

 

“****Knowledge****”means the actual knowledge after reasonable inquiry of Seller’s Chairman of theBoard and Chief Financial Officer (Thomas Colatosti), Chief Executive Officer(Michael DePasquale), Executive Vice President and General Manager of theSubject Business (Kenneth S. Sousa), Vice President for Programs and CustomerSupport (Roy A. Wickland), Controller (Cecilia Welch) or the Director ofContracts (Karen Hicks).

 

“****Letter ofIntent****” means that certain letter agreement, dated June 15,2009, between Parent and Seller.

 

“****Liability****”means any liability, debt, obligation, deficiency, Tax, penalty, assessment,fine, claim, cause of action or other loss, fee, cost or expense of any kind ornature whatsoever, whether asserted or unasserted, absolute or contingent,known or unknown, accrued or unaccrued, liquidated or unliquidated, and whetherdue or to become due and regardless of when asserted.

 

“****Lien****”means, with respect to any asset, any mortgage, pledge, security interest,encumbrance, lien, charge, claim or encumbrance of any kind in respect of suchasset.

 

“****MaterialAdverse Effect****” means a material adverse effect on thebusiness, assets, financial condition, or results of operations of the SubjectBusiness.

 

“****Net Amount ofthe Working Capital Assets****” means the difference between (A) thecurrent assets of the Subject Business, excluding cash and cash equivalents,and (B) the current liabilities of the Subject Business included in theAssumed Liabilities, but excluding deferred revenue (other than the ServiceContracts Adjustment Amount) and including accrued and unused vacation pay andsick pay for Hired Employees.  Indetermining the Net Amount of the Working Capital Assets, all amounts will bedetermined as of the Closing Date in accordance with GAAP applied in a mannerconsistent with the calculation of the Net Amount of the Working Capital Assetsas of June 30, 2009 contained in Schedule 2.8 to thisAgreement.

 

“****OrdinaryCourse****” means ordinary course of business consistent innature, scope and magnitude with past custom and practice of such Person.

 

“**Patents**”means all United States and foreign patents and certificates of invention,patent rights, inventions, discoveries, invention disclosures and similarproperty rights, whether or not patented, and applications for any and all ofthe foregoing, including: (A) each Patent and Patent application referred to inSchedule 3.12 hereto (as such schedule may be amended orsupplemented from time to time), (B) all reissues, divisions,continuations, continuations-in- part, extensions, renewals, and reexaminationsthereof, (C) all rights corresponding thereto 

 

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throughoutthe world, (D) all inventions and improvements described therein, (E) allrights to sue for past, present and future infringements thereof, (F) alllicenses, claims, damages, and proceeds of suit arising therefrom, and (G) allproceeds of the foregoing, including licenses, royalties, income, payments,claims, damages and proceeds of suit.

 

“****Person****”means any individual, partnership, limited liability company, corporation,cooperative, association, joint stock company, trust, estate, joint venture,unincorporated organization or Governmental Authority.

 

“****Prime Rate****”means, on any date, a variable rate per annum equal to the rate of interestmost recently published by **The Wall Street Journal** as the “primerate” at large U.S. banks.

 

“**ProxyStatement**” means the proxy statement to be filed by Seller with theSEC in connection with Seller’s Stockholders’ Meeting.

 

“**PublicSoftware**” means any software that is licensed pursuant to an “opensource” licensing agreement or similar agreement, including software licensedunder the GNU General Public License (GPL) or the GNU Lesser/Library GPL, theMozilla Public License, the Netscape Public License, the Sun Community SourceLicense, the Sun Industry Standards License, the BSD License, and the ApacheLicense.

 

“**Real EstateLease**” means that certain Office Lease Agreement, dated as of June 30,2008, between Seller and Normandy Nickerson Road, LLC, as lessor, governing thefacilities occupied by Seller in Marlborough, Massachusetts.

 

“****SEC****”means the Securities and Exchange Commission.

 

“****Securities Act****”means the Securities Act of 1933, as amended.

 

“**SellerIntellectual Property Assets**” means all Intellectual PropertyAssets, including the Patents, Trademarks, Copyrights, Software and TradeSecrets, (A) owned by Seller or (B) for which Seller has a validright or license to use, develop, make, have made, offer for sale, sell,modify, create derivative works from, license to third parties, and dispose ofin connection with the Subject Business.

 

“**ServiceContract**” means the Seller’s obligation to provide installation,consulting maintenance and other services to purchasers of Software Productspursuant to a written Contract.

 

“**Service Contracts AdjustmentAmount**” meansFifteen Percent (15.0%) of Seller’s deferred revenue accounts attributable tothe Subject Business.  Deferred revenuewill be determined as of the Closing Date in accordance with GAAP applied in amanner consistent with the determination of deferred revenue and thecalculation of the Service Contracts Adjustment Amount as of June 30, 2009contained in Schedule 2.8 to this Agreement.

 

“**Software**”means all computer software, including Source Code, object, executable orbinary code, objects, comments, compliers, routines, screens, user interfaces,report formats, 

 

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templates,menus, buttons and icons and all files, data, materials, manuals, design notesand other items and documentation related thereto or associated therewith.

 

“**SoftwareProducts**” means all Software products which are designed, developed,licensed, sold, distributed and/or otherwise made commercially available in theoperation of the Subject Business, consisting of the Software products andinterfaces listed on Schedule 3.25(a)(iii).

 

“**Source Code**”means, collectively, any human readable software source code, or any materialportion or aspect of the software source code in Seller’s rightful possessionwhich comprise part of the Seller Intellectual Property Assets.  With regard to the Software Products, sourcecode includes:

 

(a)                                  any and all human readablesoftware source code, which comprises part of the Software Products;

 

(b)                                 the source code repositoryfor same (with history of revisions);

 

(c)                                  the previous bugs summaryreport for same;

 

(d)                                 Build scripts/programs/unittests/configuration files and documentation on build process for same;

 

(e)                                  source code documentation ofQA procedures and test plans in digital format for same; and

 

(f)                                    specifications, programmers’comments and notes, and all other materials (including assembly, linkage andother utilities) and documents reasonably necessary to enable a reasonablyskilled programmer to understand and maintain the Software Products withoutreference to any other person or documentation.

 

“**SubjectBusiness**” means Seller’s Law Enforcement Division, which is engagedin the development, manufacture, distribution, sale, installation and serviceof mobile data equipment, applications, access and authentications for lawenforcement and public safety officials.

 

“****Subsidiary****”means, with respect to any Person, any corporation, partnership, limitedliability company, association or other business entity of which such Personhas a majority of the ownership interests therein or the contractual right tocontrol.

 

“**SuperiorProposal**” means with respect to Seller, an unsolicited, bona fidewritten Alternative Transaction Proposal, which the Board of Directors ofSeller has in good faith determined (after consultation with its outside legalcounsel and its financial advisor), taking into account all legal, financial,regulatory, timing and other aspects of the proposal, (A) is morefavorable, from a financial point of view, to Seller’s stockholders (in theircapacities as stockholders) than the terms of this Agreement (after givingeffect to any adjustments to the terms of this Agreement proposed by the otherparty in response to such Alternative Transaction Proposal), (B) is fullyfinanced or reasonably capable of being fully financed, and (C) is 

 

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reasonablylikely to be consummated on the terms proposed; provided, however,that, for purposes of this definition of “Superior Proposal” each reference to “20%”or “80%” in the definition of “Alternative Transaction” shall be deemed to be areference to “50%”.

 

“****Tax****”or “****Taxes****”means any federal, state, local or foreign income, gross receipts, capitalgains, franchise, alternative or add-on minimum, estimated, sales, use, goodsand services, transfer, registration, value added, excise, natural resources,severance, stamp, occupation, premium, windfall profit, environmental, customs,duties, real property, special assessment, personal property, capital stock,social security, unemployment, employment, disability, payroll, license,employee or other withholding, contributions or other tax, of any kindwhatsoever, including any interest, penalties or additions to tax or additionalamounts in respect of the foregoing.

 

“****Tax Assets****”means any refund, abatement or credit of, and all other assets comprisingreceivables or deferred assets or prepayments for, Taxes arising or resultingfrom Seller’s conduct of the Subject Business or ownership of the PurchasedAssets for taxable periods ending on or before the Closing Date.

 

“****Tax Returns****”means returns, declarations, reports, claims for refund, information returns orother documents (including any related or supporting schedules, statements orinformation) filed or required to be filed in connection with thedetermination, assessment or collection of Taxes of any party or theadministration of any laws, regulations or administrative requirements relatingto any Taxes.

 

“**TerminationFee**” means One Million Dollars ($1,000,000), payable in immediatelyavailable funds.

 

“**Trademarks**”means all United States and foreign trademarks, trade names, corporate names,company names, business names, fictitious business names, slogans, servicemarks, certification marks, collective marks, logos, other source or businessidentifiers, trade dress, designs and general intangibles of a like nature,whether registered or unregistered, and, with respect to any and all of theforegoing: (A) all registrations and applications therefor including theregistrations and applications referred to in Schedule 3.12 (assuch schedule may be amended or supplemented from time to time), (B) allextensions or renewals of any of the foregoing, (C) all of the goodwill ofthe business connected with the use of and symbolized by the foregoing, (D) theright to sue for past, present and future infringement or dilution of any ofthe foregoing or for any injury to goodwill, and (E) all proceeds of theforegoing, including licenses, royalties, income, payments, claims, damages andproceeds of suit.

 

“**TradeSecrets**” means all trade secrets and all other confidential orproprietary information and know-how, including customer lists, research inprogress, algorithms, data, designs, processes, formulae, drawings, schematics,blueprints, flow charts, models, strategies, prototypes, techniques, Betatesting procedures and Beta testing results, whether or not such Trade Secret hasbeen reduced to a writing or other tangible form, and including all documentsand things embodying, incorporating, or referring in any way to such TradeSecret, including (A) the right to sue for past, present and futuremisappropriation or other violation of any Trade 

 

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Secret,and (B) all proceeds of the foregoing, including licenses, royalties,income, payments, claims, damages and proceeds of suit.

 

“****TransactionDocuments****” means this Agreement, the Warrant and any otherContract or instrument contemplated hereby to which Seller or Buyer is a party.

 

“**Warrant**”means the warrant issued by Seller to SilkRoad to purchase up to Eight Million(8,000,000) shares of Seller’s Common Stock at a purchase price of $0.30 pershare, expiring on the fifth anniversary of the Closing Date in the formattached hereto as Exhibit C.

 

**1.2         ****OtherDefinitions**

 

Each of the followingdefined terms has the meaning given such term in the Section set forthopposite such defined term:

 
| **Section Reference** | ** ** | **Defined Term**                |
|----------------------------|------------|---------------------------------|
| ** **                 | ** ** | ** **                      |
| Preamble                   |       | Agreement                       |
| 2.10                       |       | Allocation                      |
| 9.1(a)                     |       | Applicable  Limitation Date     |
| 2.3                        |       | Assumed  Liabilities            |
| 3.5(b)                     |       | Balance  Sheet                  |
| 9.2(c)(ii)                 |       | Basket                          |
| Preamble                   |       | Buyer                           |
| 9.2(a)                     |       | Buyer  Parties                  |
| 9.2(c)(ii)                 |       | Cap                             |
| 2.7                        |       | Closing                         |
| 2.7                        |       | Closing  Date                   |
| 2.8(b)                     |       | Closing  Statement              |
| 3.6(a)                     |       | Common  Stock                   |
| 2.8(b)                     |       | Dispute  Notice                 |
| 2.8(a)                     |       | Estimated  Closing Statement    |
| 2.2                        |       | Excluded  Assets                |
| 2.4                        |       | Excluded  Liabilities           |
| 2.4(a)                     |       | Excluded  Taxes                 |
| 2.8(c)                     |       | Final  Closing Cash Payment     |
| 3.5(b)                     |       | Financial  Statements           |
| 4.4(a)                     |       | Guarantor  Balance Sheet        |
| 4.4(a)                     |       | Guarantor  Balance Sheet Date   |
| 4.4(b)                     |       | Guarantor  Financial Statements |
| 9.2(d)                     |       | Indemnified  Party              |
| 9.2(d)                     |       | Indemnifying  Party             |

 

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| **Section Reference** | ** ** | **Defined Term**                          |
|----------------------------|------------|-------------------------------------------|
| ** **                 | ** ** | ** **                                |
| 2.8(d)                     |       | Independent  Accounting Firm              |
| 3.17                       |       | Interested  Person                        |
| 2.11                       |       | In-Process  Sales                         |
| 2.8(b)                     |       | Item  of Dispute                          |
| 3.12(a)                    |       | Licenses  In                              |
| 3.12(a)                    |       | Licenses  Out                             |
| 9.2(a)                     |       | Loss                                      |
| Preamble                   |       | Parties                                   |
| Preamble                   |       | Party                                     |
| 3.6(a)                     |       | Preferred  Stock                          |
| 3.24(p)                    |       | Product  Certifications                   |
| 2.6                        |       | Purchase  Price                           |
| 2.1                        |       | Purchased  Assets                         |
| 3.11                       |       | Purchased  Contracts                      |
| Preamble                   |       | Seller                                    |
| 3.6(b)                     |       | Seller  Options                           |
| 9.2(b)                     |       | Seller  Parties                           |
| 3.5(a)                     |       | Seller  SEC Documents                     |
| 3.25                       |       | Seller  Software                          |
| 3.2(c)                     |       | Seller  Stockholder Approval              |
| 3.6(b)                     |       | Seller  Warrants                          |
| 3.12(e)                    |       | Third-Party  Intellectual Property Assets |
| 2.9                        |       | Transfer  Documents                       |
| 3.12(a)                    |       | Use                                       |
| 2.4(j)                     |       | Zoll                                      |

 

**ARTICLE II******

**PURCHASE AND SALE OF ASSETS**

 

**2.1         ****Purchaseof Assets**

 

At the Closing, Buyer shallpurchase, and Seller and each of its Subsidiaries shall sell, convey, assign,transfer and deliver to Buyer, free and clear of any Liens by appropriateinstruments of conveyance reasonably satisfactory to Buyer, all assets,properties, rights, claims, titles and interests of every kind or nature owned,leased, licensed or otherwise held by Seller and each of its Subsidiaries(including indirect and other forms of beneficial ownership) as of the ClosingDate held, used in the conduct of the Subject Business (the “****PurchasedAssets****”), including, without limitation, all of thefollowing assets, but excluding all Excluded Assets:

 

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(a)           allSeller Intellectual Property Assets, including all Software Products andrelated Software and Source Code;

 

(b)           allgoodwill of Seller relating to the Subject Business or any Purchased Asset,together with the right to represent to third-parties that Buyer is thesuccessor to Seller in the Subject Business;

 

(c)           allbilled and unbilled accounts receivable of the Subject Business and allcorrespondence with respect thereto, including all trade accounts receivable,notes receivable from customers, vendor credits and rebates, and all otherobligations or rights to receive payment from vendors or customers with respectto purchases or sales of goods or services, and accounts receivable from HiredEmployees;

 

(d)           allprepayments, prepaid expenses and similar assets used by Seller or held by, oron behalf of, Seller for use in connection with the Subject Business;

 

(e)           allinventories, including finished goods, work in process, raw materials,packaging and supplies used by Seller or held by, or on behalf of, Seller foruse in connection with the Subject Business;

 

(f)            allrights existing under the Purchased Contracts, including Service Contracts, theLicense-In and License-Out Agreements, and the Real Estate Lease;

 

(g)           allnon-competition, non-disclosure, non-solicitation, assignment of designs andinventions, and similar agreements, with respect to the Subject Business, theHired Employees and former employees of the Subject Business, including theagreements listed on Schedule 3.15;

 

(h)           alllists and records pertaining to customers, suppliers, distributors, salesrepresentatives, personnel and agents relating to the Subject Business, whetherpast or current;

 

(i)            allclaims, deposits, prepayments, warranties, guarantees, refunds, rebates, causesof action, rights of recovery, rights of set-off and rights of recoupment ofevery kind and nature relating to the Subject Business, including the depositon the Real Estate Lease;

 

(j)            alltransferable licenses, permits or other governmental authorizations affectingor relating in any way to the Subject Business, including the items listed on Schedule 3.3;

 

(k)           allhardware, computer equipment and similar equipment owned or licensed by Sellerand used in the Subject Business, including the hardware listed on Schedule 3.3;

 

(l)            alloffice equipment, furniture and furnishings, fixtures, display racks, shelves,decorations, supplies and other personal property used in the Subject Business;

 

(m)          allinformation and data processing systems, programs, software and documentationthereof (including all electronic data processing systems, programspecifications, 

 

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source codes, logs, input data and report layouts andformats, record file layouts, diagrams, functional specifications and narrativedescriptions, flow charts and other related material) which are used orintended to be used in the conduct of the Business;

 

(n)           allsigns and signage containing names, logos or slogans used in the Business,whether or not current, except those that incorporate the name BIO-key in a waywhich cannot be eradicated;

 

(o)           alltechnical, engineering, design, processing, manufacturing, operations orquality control information, whether or not current, including newdevelopments, research and development reports inventions, know-how, processes,ideas and trade secrets and documentation thereof (including related papers,blueprints, drawings, prototypes, formulae, diaries, notebooks, specifications,designs, methods of manufacture and data processing Software), and all claimsand rights related thereto;

 

(p)           allSoftware Product information, including sample products, catalogues, brochures,videos, specifications and manuals, service and warranty records, creativematerials, sales, promotional and marketing materials, whether or not current,including trade show booths, locations, equipment, signage and supplies, and allsamples and information on the products and history of the Subject Business;

 

(q)           allSKUs, uniform product identification and bar codes and other productdesignations and identifications;

 

(r)            alltechnologies and communication systems used in the Subject Business, butexcluding Seller’s websites and domain names;

 

(s)           allclaims against third parties related to or arising from the Subject Business orthe Purchased Assets;

 

(t)            allrights under confidentiality, standstill and other agreements with potentialacquirors of the Subject Business;

 

(u)           allinsurance benefits, including rights, claims and proceeds, related to orarising from the Subject Business the Purchased Assets or the AssumedLiabilities;

 

(v)           allbooks, records, ledgers, files, documents, correspondence, lists, studies andreports and other printed or written materials used by Seller or held by, or onbehalf of, Seller for use in connection with the Subject Business and allrights related thereto; and including, without limitation, engineeringinformation; and

 

(w)          allother assets of any kind or nature of Seller relating primarily to the SubjectBusiness, other than the Excluded Assets.

 

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**2.2          ExcludedAssets**

 

Notwithstanding theforegoing, the following assets are expressly excluded from the purchase andsale contemplated hereby (the “****Excluded Assets****”) and, as such, arenot included in the Purchased Assets:

 

(a)           Seller’srights under or pursuant to this Agreement and the other Transaction Documents;

 

(b)           Seller’sgeneral ledger, accounting records, minute books, statutory books and corporateseal;

 

(c)           Seller’spersonnel records and any other records that Seller is required by law toretain in its possession;

 

(d)           anyright to receive mail and other communications addressed to Seller relating tothe Excluded Assets or the Excluded Liabilities;

 

(e)           thecapital stock of Seller or any Subsidiary of Seller;

 

(f)            allcash, cash equivalents and bank accounts;

 

(g)           allTrademarks or other indicia of origin of Seller in any of the following words,logos, stylized lettering, other designs and variants thereof: “BIO-key” or “BIO-keyInternational”; and

 

(h)           TaxAssets.

 

**2.3         ****AssumedLiabilities**

 

At the Closing, Buyer shall assumeonly the following Liabilities, solely to the extent such Liabilities wereincurred in the Ordinary Course of the Subject Business (the “****Assumed Liabilities****”):

 

(a)           thoseaccounts payable and accrued and unused vacation and sick time owed to theHired Employees included in the calculation of the Final Net Amount of theWorking Capital Assets which relate solely to the Ordinary Course of operationsof the Subject Business and which are (i) accrued on the June 30,2009 Balance Sheet or (ii) incurred in the Ordinary Course of businesssince June 30, 2009 and not discharged as of the Closing Date; and

 

(b)           allLiabilities and obligations arising from and after the Closing Date under thePurchased Contracts (other than Liabilities or obligations attributable to anyfailure by Seller to comply with the terms thereof).

 

**2.4          Excluded Liabilities**

 

Notwithstanding anyprovision in this Agreement or any other writing to the contrary, Buyer isassuming only the Assumed Liabilities and is not assuming any other Liabilityor obligation of Seller (or any predecessor owner of all or part of itsbusiness and assets) of whatever nature, whether presently in existence orarising or asserted hereafter. All such other 

 

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Liabilitiesand obligations shall be retained by and remain obligations and Liabilities ofSeller (all such Liabilities and obligations not being assumed being hereinreferred to as the “****Excluded Liabilities****”). Withoutlimiting the foregoing, none of the following shall be Assumed Liabilities forthe purposes of this Agreement:

 

(a)           anyand all Liabilities and obligations for Taxes of Seller of any kind, includingTaxes relating to the Subject Business for any pre-closing tax period, and anyand all other Liabilities and obligations of Seller for Taxes that arise as aresult of the transactions contemplated by this Agreement;

 

(b)           anyLiabilities or obligations relating to employee pensions, benefits orcompensation arrangements incurred or accrued prior to the Closing Date;

 

(c)           anyEnvironmental Liabilities;

 

(d)           anyLiability, Lien or obligation relating to an Excluded Asset;

 

(e)           anyLiability or obligation not incurred in the Ordinary Course of the SubjectBusiness;

 

(f)            Seller’sobligations to provide vacation time, sick time, personal days, vacation payand sick pay to any employees; provided, however, that Buyer willassume and be responsible for any accrued and unused vacation time and sicktime owed to the Hired Employees to the extent included in the Net Amount ofthe Working Capital Assets;

 

(g)           AnyLiabilities resulting from any action, suit, proceeding, order, judgment,decree or investigation of Seller or the Subject Business, whether or notarising out of or related to the conduct of the Subject Business, prior to theClosing Date;

 

(h)           anyLiabilities of Seller which may be owed to any agent, broker, finder orinvestment or commercial banker as a result of the transactions contemplated bythis Agreement;

 

(i)            anyLiabilities related to or arising from Seller’s Contract with DataradioCorporation or claims by Dataradio Corporation that Seller has breached anddefaulted under such Contract; and

 

(j)            anyLiabilities to Zoll Data Systems, Inc., a Delaware corporation (“**Zoll**”) or its Affiliates, including Liabilities andobligations pursuant to the Asset Purchase Agreement, dated May 22, 2007,between Seller and Zoll.

 

Except for the Assumed Liabilities expressly set forth in Section 2.3hereof, Seller shall forever defend, indemnify and hold harmless Buyer from andagainst any and all Liabilities or obligations, losses, claims, damages(including incidental and consequential damages), costs and expenses (includingcourt costs and reasonable attorneys’ fees) related to or arising from theSubject Business prior to the Closing Date.

 

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**2.5****                              ****BIO-keyLicense**

 

Seller hereby grants Buyer,for a period of ninety (90) days from and after the Closing, a non-exclusive,royalty-free right and license to use, in connection with Buyer’s ownership ofthe Purchased Assets and operation of the Subject Business, the trademark “BIO-key”on any and all packaging, brochures or other materials included within thePurchased Assets on which such trademark appears as of the Closing, only inthe same style and manner in which the trademark was used by the SubjectBusiness prior to Closing and only to identify those unmodified productsoffered by the Subject Business prior to Closing.  All goodwill resulting from the use of the “BIO-key”trademark shall inure to the benefit of Seller. After such ninety (90) day period, Buyer shall, at its sole costand expense, remove, obliterate, cover or replace, as appropriate, allpackaging, brochures or other materials containing any Trademarks or otherindicia of origin of Seller or any of its Affiliates.  From and after the Closing, Buyer shall beentitled to designate itself as the successor to Seller with respect to theSoftware Products and the Subject Business.

 

**2.6****                              ****PurchasePrice**

 

The consideration to be paidby Buyer to Seller for the Purchased Assets, the Warrant and the licensegranted pursuant to Section 2.5 (the “**Purchase Price**”)shall be Eleven Million Dollars ($11,000,000), consisting of the Closing CashPayment, as adjusted in accordance with Section 2.8(a) hereof,and the Buyer Note.  On the Closing Date,Buyer shall (i) pay the Closing Cash Payment, as adjusted in accordancewith Section 2.8(a), to Seller by wire transfer, and (ii) deliverthe Buyer Note to Seller.  Buyer andSeller shall execute and deliver a General Assignment, Bill of Sale andAssumption of Liabilities, in substantially the form attached hereto as Exhibit D(the “**General****Assignment**”,as well as the other Transaction Documents and Closing deliveries contemplatedby Article VI of this Agreement.

 

**2.7****                              ****ClosingTransactions**

 

Subject to the terms andconditions of this Agreement, the closing of the transactions contemplated bythis Agreement (the “****Closing****”) shall take place at theoffices of Choate Hall & Stewart LLP, Two International Place, Boston,Massachusetts, at 10:00 a.m. Eastern Time on the second Business Dayfollowing the satisfaction or waiver of all conditions of the Parties toconsummate the transactions contemplated hereby (other than conditions withrespect to actions the respective Parties will take at the Closing itself) orsuch other date as Buyer and Seller may mutually determine (the “**ClosingDate**”).  Alltransactions contemplated herein to occur on and as of the Closing Date shallbe deemed to have occurred simultaneously and to be effective as of the closeof business on such date.

 

**2.8****                              ****Adjustments to PurchasePrice**

 

(a)                                  Estimated Closing Statement. At least three (3) Business Days prior to the Closing Date, Sellershall deliver to Buyer (i) Seller’s good faith written estimates inreasonable detail of each of the components of the Net Amount of the WorkingCapital Assets as of the close of business on the Closing Date, including anestimate of the Service Contracts Adjustment Amount as of the close of businesson the Closing Date, the Closing Cash Payment and the Purchase Price (the “**Estimated Closing Statement**”) and (ii) supporting workpapers used in 

 

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preparing such calculations.  The Estimated Closing Statement shall becalculated in accordance with GAAP, and shall be reasonably acceptable toBuyer.  The Estimated Closing Statementshall be prepared in a manner consistent with the preparation of the samplecalculations of the Net Amount of the Working Capital Assets, the Service ContractsAdjustment Amount, the Closing Cash Payment and the Purchase Price as of June 30,2009, attached hereto as Schedule 2.8;

 

(b)                                 Closing Statement. Promptly, but in any event within thirty (30) days after the Closing,Buyer shall furnish to Seller a written statement (the “**ClosingStatement**”) setting forth as of the Closing Date, the AssumedLiabilities, the Net Amount of the Working Capital Assets, the ServiceContracts Adjustment Amount, the Closing Cash Payment and the PurchasePrice.  The Closing Statement shallinclude the amount of each of the components of the Net Amount of the WorkingCapital Assets.  Unless, within thefifteen day period following Seller’s receipt of the Closing Statement, Sellerdelivers written notice to Buyer (the “**Dispute Notice**”)setting forth (in detail sufficient for Buyer to understand the nature of andbasis for Seller’s dispute) any and all items of disagreement related to theClosing Statement, including the amount thereof (each, an “**Item ofDispute**”), the Closing Statement shall be conclusive and binding uponeach of the Parties; provided, however, that the only basis on which Sellershall be permitted to submit an Item of Dispute is that such Item of Disputewas not prepared in accordance with the terms of this Agreement or the ClosingStatement contains a mathematical or clerical error or errors.  After the delivery of the Closing Statement,Buyer shall cooperate with Seller in connection with its review of the ClosingStatement, including providing Seller and its accountants reasonable accessduring business hours to materials used in the preparation of the ClosingStatement.  If, for whatever reason,Buyer does not furnish the Closing Statement within thirty (30) days after theClosing, the Estimated Closing Statement shall be conclusive and binding upon eachof the Parties.

 

(c)                                  Dispute Resolution by the Parties. If Seller delivers a Dispute Notice to Buyer within the required fifteenday period, Buyer and Seller shall use reasonable efforts to resolve theirdifferences concerning the Items of Dispute, and if any Item of Dispute is soresolved, the Closing Statement shall be modified as necessary to reflect suchresolution.  If all Items of Dispute areso resolved, the Closing Statement (as so modified) shall be conclusive andbinding on all Parties.

 

(d)                                 Determination by Independent AccountingFirm.  If any Item of Dispute remains unresolved fora period of thirty (30) days after Buyer’s receipt of the Dispute Notice, Buyerand Seller shall, within ten (10) days thereafter, submit the dispute to amutually acceptable independent public accounting firm (the “**Independent Accounting Firm**”).  If Buyer and Seller are unable to mutuallyagree upon such an accounting firm within such 10-day period, then Buyer andSeller shall, within five days thereafter, each select a nationally recognizedcertified public accounting firm.  Withinfive days after their selection, those two accounting firms shall select athird nationally recognized certified public accounting firm, which thirdaccounting firm shall act as the Independent Accounting Firm. Such thirdnationally recognized accounting firm shall not be an accounting firm that hasperformed accounting or similar services for Buyer or Seller in the past fiveyears. Buyer and Seller shall each provide their respective calculations of theNet Amount of the Working Capital Assets and the Items of Dispute in writing tothe Independent Accounting Firm and shall request that the Independent 

 

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Accounting Firm render a written determination as toeach unresolved Item of Dispute, as soon as reasonably practicable, but in noevent later than thirty (30) days after its retention, which determinationshall be solely based on whether each such Item of Dispute was prepared inaccordance with the terms of this Agreement or whether each such Item ofDispute contains a mathematical or clerical error or errors.  The Parties shall cooperate fully with theIndependent Accounting Firm so as to enable it to make such determination asquickly and as accurately as practicable. The Independent Accounting Firm’s determination as to each Item ofDispute submitted to it shall be in writing and shall be conclusive and bindingupon the Parties, absent manifest error or willful misconduct, and the ClosingStatement shall be modified to the extent necessary to reflect suchdetermination.  The fees and expenses ofthe Independent Accounting Firm shall be paid by the Party whose calculation ofthe Net Amount of the Working Capital Assets is furthest from the determinationrendered by the Independent Accounting Firm.

 

(e)                                  Adjustment.  Once allItems of Dispute are resolved, the Net Amount of the Working Capital Assets setforth on the final Closing Statement (the “**Final Net Amount of theWorking Capital Assets**”) shall be deemed final for the purposes ofthis Section 2.8.

 

**2.9****                              ****TransferDocuments**

 

At Closing, Seller and Buyershall execute and deliver the General Assignment and Seller shall execute anddeliver such other instruments of assignment (collectively, the “****TransferDocuments****”) documenting the purchase and sale of eachportion of the Purchased Assets and the Assumed Liabilities to be conveyed toBuyer. The Transfer Documents shall include a Trademark Assignment (the “**Trademark Assignment**”) and Copyright Assignment (the “**Copyright Assignment**”), in substantially the forms attachedhereto as Exhibits E and F, respectively, as well as a ThirdParty IP Licensor’s Consent and Waiver (“**Third Party IP LicensorConsent and Waiver**”), and the Landlord’s Consent and Waiver (“**Landlord Consent and Waiver** in substantially the formsattached hereto as Exhibits G and H, respectively.  Seller shall execute and deliver the Warrantand the Noncompetition Agreement (the “**Noncompetition Agreement**”)in the form attached hereto as Exhibit I.  Buyer shall cause the Parent Guaranty insubstantially the form attached hereto as Exhibit J (the “**Parent Guaranty**”) and the SilkRoad Guaranty in substantiallythe form attached hereto as Exhibit K (the “**SilkRoadGuaranty**”) to be executed and delivered by each respectiveGuarantor.  In the event of any conflictor inconsistency between the terms and conditions of this Agreement and anyTransfer Document, the terms and conditions of this Agreement shall prevail.

 

**2.10****                       ****TaxAllocations**

 

Within two hundred seventy(270) days after the Closing Date, Buyer shall prepare and deliver to Seller aschedule allocating the Purchase Price (and any other items or amounts that arerequired for federal income tax purposes to be included in the Purchase Price),among the Purchased Assets, the Warrant and the Noncompetition Agreement underthe principles of Code Section 1060 and regulations thereunder (and anysimilar provision of state, local or foreign law, as appropriate) (suchschedule and the allocations it contains, the “**Allocation**”).The Allocation shall be binding and conclusive and deemed accepted by Seller,unless Seller shall have notified Buyer in writing of any objections theretowithin twenty (20) days after delivery of the Allocation, specifying in reasonabledetail each item on the Allocation that Buyer disputes. Upon 

 

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receiptof such objections, Buyer and Seller shall attempt in good faith to resolvesuch differences.  If Seller and Buyerare unable to resolve such differences, they shall submit their differences toan independent accounting firm mutually acceptable to them whose determinationshall be final, binding and conclusive on the Parties. Seller and Buyer shallreport and file all Tax Returns (including amended Tax Returns and claims forrefund) consistent with the Allocation and shall not voluntarily take aposition contrary thereto or inconsistent therewith (including, withoutlimitation, in any audits or examinations by any governmental authority or anyother proceedings). Seller and Buyer shall cooperate in the filing of any forms(including Form 8594 under Section 1060 of the Code) with respect tosuch Allocation, including any amendments to such forms required with respectto such Allocation.

 

**2.11****                       ****Transitionof Subject Business**

 

(a)                                  Following the Closing, Seller will useits commercially reasonable efforts to facilitate and assist in the transitionof the Subject Business to Buyer, including (i) directing phone, e-mailand other inquiries and contacts concerning the Subject Business to Buyer, (ii) assistingBuyer in obtaining maintenance agreements and necessary consents from customersof the Subject Business (including if necessary by joining Buyer personnel incalling on such customers), (iii) providing Buyer with a written list ofall on-going sales currently in process (“****In-Process Sales****”),such list to detail the scope, terms and contact personnel for the In-ProcessSales, (iv) causing Seller’s sales personnel who are currently working onany In-Process Sales to complete such effort and close such sales (subject toBuyer reimbursing Seller for the Ordinary Course sales commissions due on suchsales); and (v) making available the services of Seller’s Controller.

 

(b)                                 From and after the Closing, if Seller orany of its Subsidiaries or Affiliates receives or collects any funds relatingto any accounts receivable of the Subject Business or any other PurchasedAsset, such Person shall remit such funds to Buyer within five (5) BusinessDays after its receipt thereof.

 

(c)                                  From and after the Closing, Seller willpost and maintain a link to Buyer’s website for the Subject Business on Seller’swebsite.

 

**2.12****                       ****Nonassignable Contracts**

 

(a)                                  To the extent that the assignment of anyPurchased Contract included in the Assumed Liabilities or Purchased Assets isnot permitted without (i) the consent of the other party to the PurchasedContract, (ii) the approval of Buyer as a source of the products orservices called for by the Purchased Contract or (iii) the approval ofBuyer as a lessee, then this Agreement shall not be deemed to constitute anassignment or an attempted assignment of the same, if such assignment orattempted assignment would constitute a breach thereof.  However, unless otherwise agreed as to anyparticular Purchased Contract, Seller shall use its best efforts to obtain anyand all such consents, approvals and novations before, if unable to do so priorto Closing, and after Closing.

 

(b)                                 If any necessary consent, approval ornovation is not obtained, Seller shall cooperate with Buyer in any reasonablearrangement designed to provide Buyer with all of the 

 

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benefits and obligations under such PurchasedContract, as if such consent, approval or novation had been obtained, includingsubleases from Seller and, undertakings by Buyer of the work necessary tocomplete contracts as the agent of Seller with the understanding that Sellershall then invoice the customer for services rendered and promptly remit theamount of the receivable to Buyer. Nothing herein shall excuse Seller from responsibility for any of itsrepresentations and warranties or covenants hereunder.

 

**ARTICLE III**

 

**REPRESENTATIONS AND WARRANTIES OF SELLER**

 

Asa material inducement to Buyer to enter into this Agreement, subject to theexceptions and limitations set forth in this Article III and thematters set forth on the Schedules, Seller hereby represents and warrants toBuyer that:

 

**3.1****                              ****Organizationand Corporate Power**

 

Seller is a corporation dulyorganized, validly existing and in good standing under the laws of the state ofDelaware. Seller is qualified to conduct the Subject Business in everyjurisdiction in which such qualification is necessary, except where the failureto so qualify has not had or would not reasonably be expected to have aMaterial Adverse Effect. All jurisdictions in which Seller conducts the SubjectBusiness and is qualified to do business are set forth on Schedule 3.1. Seller has full corporate power andauthority and all licenses, permits and authorizations necessary to own andoperate the Subject Business as now conducted.

 

**3.2****                              ****Authorizationof Transactions**

 

(a)                                  Seller has full corporate power andauthority to execute and deliver this Agreement, the Warrant, theNoncompetition Agreement and each of the other Transaction Documents to whichit is a party and, subject to receipt of the Seller Stockholder Approval, toconsummate the transactions contemplated hereunder and thereunder and toperform each of its obligations hereunder and thereunder. The board ofdirectors of Seller has duly approved this Agreement, the Warrant, theNoncompetition Agreement and each of the other Transaction Documents to whichit is a party and has duly authorized the execution and delivery of thisAgreement, the Warrant, the Noncompetition Agreement and each of the otherTransaction Documents to which Seller is a party and the consummation of thetransactions contemplated hereby and thereby. Except for the Seller StockholderApproval and as otherwise set forth on Schedule 3.2, no other corporateproceedings on the part of Seller (including, without limitation, approval ofSeller’s stockholders) are necessary to approve and authorize the execution anddelivery of this Agreement, the Warrant, the Noncompetition Agreement and eachof the other Transaction Documents to which Seller is a party and theconsummation of the transactions contemplated hereby and thereby. ThisAgreement has been and the Warrant, the Noncompetition Agreement and each ofthe other Transaction Documents to which Seller is a party will be dulyexecuted and delivered by Seller and constitute the valid and bindingagreements of Seller, enforceable against Seller in accordance with theirrespective terms, subject to bankruptcy, insolvency, reorganization, moratoriumand similar laws of general applicability relating to or affecting creditors’rights and to general principles of equity.

 

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(b)                                 **Board****Approval**.  The Board of Directors of Seller has (i) determinedthat this Agreement, the Warrant and the other Transaction Documents areadvisable and fair to and in the best interests of Seller and its stockholders,(ii) duly approved this Agreement, the Warrant and the other transactionscontemplated hereby, which approval has not been rescinded or modified, (iii) resolved(subject to Section 6.2(d)) to recommend this Agreement, and theWarrant to Seller’s stockholders for approval, and (iv) directed that thisAgreement and the Warrant be submitted to Seller’s stockholders forconsideration in accordance with this Agreement.

 

(c)                                  **Stockholder****Approval**.  Except as set forth on Schedule 3.2,the affirmative vote of a majority of the votes cast by stockholders of Sellerentitled to vote thereon at the Seller’s Stockholders’ Meeting (as definedbelow) (provided, however, that such affirmative vote alsorepresents over 50% in interest of all outstanding capital stock of Sellerentitled to vote thereon), is the only vote of the holders of any class orseries of capital stock of Seller necessary to approve this Agreement, theWarrant and the Transactions contemplated hereby (the “**Seller****Stockholder****Approval**”).

 

**3.3****                              ****Sufficiencyof Assets**

 

The Purchased Assets aresufficient to enable Buyer to conduct the Subject Business following theClosing in substantially the same manner as operated by Seller prior to theClosing.  Schedule 3.3contains a complete and correct list of the depreciable assets of the SubjectBusiness.

 

**3.4****                              ****Absenceof Conflicts**

 

Exceptas set forth on Schedule 3.4 or Schedule 3.11(e) attachedhereto, the execution, delivery and performance of this Agreement, the Warrant,the Noncompetition Agreement and the other Transaction Documents to which it isa party and the consummation of the transactions contemplated hereby andthereby by Seller do not and shall not (a) conflict with or result in anybreach of any of the terms, conditions or provisions of, (b) constitute adefault under, (c) result in a violation of, (d) give any third-partythe right to modify, terminate or accelerate or cause the modification,termination or acceleration of, any obligation under, (e) result in thecreation of any Lien upon any of the Purchased Assets, or (f) require anyauthorization, consent, approval, exemption or other action by, or notice ordeclaration to or filing with, any third-parties, including any court oradministrative or other governmental body or agency, under (i) theprovisions of the certificate of incorporation or bylaws of Seller, (ii) anyPurchased Contract, (iii) any law, statute, rule or regulation towhich Seller is subject, (iv) any judgment, order or decree to whichSeller is subject, or (v) any other contract, license, instrument oragreement to which Seller is a party or to which it, the Subject Business orthe Purchased Assets are subject.

 

**3.5****                              ****SECFilings; Financial Statements**

 

(a)                                  Seller has timely filed with the SEC allforms, reports, schedules, statements and other documents required to be filedby it since January 1, 2007 under the Exchange Act or the Securities Act,including all such documents filed after the date hereof and prior to theClosing Date (as such documents have been amended since the time of theirfiling 

 

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and all documents incorporated by reference therein,collectively, the “****Seller SEC Documents****”). None ofSeller’s Subsidiaries is required to file any form, report, schedule, statementor other document with the SEC. As of their respective dates and if amendedprior to the date hereof, as of the date of the last such amendment, the SellerSEC Documents (i) did not, and all documents filed by Seller with the SECunder the Exchange Act or the Securities Act between the date of this Agreementand the Closing Date will not, contain any untrue statement of a material factor omit to state a material fact required to be stated therein or necessary inorder to make the statements therein, in light of the circumstances under whichthey were or will be made, not misleading, and (ii) complied, and alldocuments filed by Seller with the SEC under the Exchange Act or the SecuritiesAct between the date of this Agreement and the Closing Date will comply, in allmaterial respects with the applicable requirements of the Exchange Act and theSecurities Act, as the case may be, at such time of filing. As used in this Section 3.5,the term “file” shall be construed to include any manner in which a document orinformation is furnished, supplied or otherwise made available to the SEC.

 

(b)                                 The balance sheet of the SubjectBusiness, dated June 30, 2009, attached hereto as Schedule 3.5 (the“**Balance Sheet**”) and each of thefinancial statements (including in each case, any related notes thereto),contained or reflected in Seller SEC Documents, (the “****FinancialStatements****”) (i) was, and all financial statementscontained or reflected in documents filed by Seller with the SEC under theExchange Act or the Securities Act between the date of this Agreement and theClosing Date will be, prepared from the books and records of Seller and itsSubsidiaries; (ii) was, and all financial statements contained orreflected in documents filed by Seller with the SEC under the Exchange Act orthe Securities Act between the date of this Agreement and the Closing Date willbe, prepared in accordance with GAAP applied on a consistent basis throughoutthe periods involved (except as may be indicated therein or in the notesthereto or, in the case of unaudited statements, except that such unauditedstatements do not contain footnotes as permitted by Form 10-Q under theExchange Act); (iii) complied in all material respects with all applicableaccounting requirements and with the published rules and regulations ofthe SEC with respect thereto as in effect on the date of filing; (iv) exceptwith respect to the unaudited financial statements contained in Seller SECDocuments filed on Form 10-Q under the Exchange Act, was accompanied byreports (qualified to the extent set forth therein) from the independent auditoropining on the same as to the financial statements contained therein; and (v) fairlypresents, and all financial statements contained or reflected in documentsfiled by Seller with the SEC under the Exchange Act or the Securities Actbetween the date of this Agreement and the Closing Date will fairly present, inall material respects, the consolidated financial position of Seller and itsSubsidiaries as of their respective dates and the consolidated results of theirrespective operations and cash flows for the periods indicated therein, exceptthat the unaudited interim financial statements were or will be subject tonormal year end audit adjustments which were not and will not be expected to bematerial in the aggregate.

 

(c)                                  Neither Seller nor, to the Knowledge ofSeller, any of its auditors, accountants or representatives, has received orotherwise obtained knowledge of any material complaint, allegation, assertionor claim, whether written or, to the Knowledge of Seller, oral, regarding theaccounting or auditing practices, procedures, methodologies or methods ofSeller or its internal accounting controls, including any material complaint,allegation, assertion or claim that Seller has engaged in questionableaccounting or auditing practices.

 

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**3.6****                              ****Capitalization.**

 

(a)                                  **Capital Stock**.  Theauthorized capital stock of Seller consists solely of 170,000,000 shares ofCommon Stock, par value $.0001 per share (the “**Common****Stock**”), and 5,000,000 shares of PreferredStock, par value $.0001 per share (the “**Preferred Stock**”),of which (i) 100,000 shares have been designated Series A ConvertiblePreferred Stock (the “**Series A****Preferred Stock**”), (ii) 1,000,000 shares have beendesignated Series B Convertible Preferred Stock (the “**Series B****Preferred Stock**”), and (iii) 600,000shares have been designated Series C Convertible Preferred Stock (the “**Series C****Preferred Stock**”).  As of the date of this Agreement,[                        ]shares of Common Stock are issued and outstanding, 30,557 shares of Series APreferred Stock are issued and outstanding, 970,612 sharesof Series B Preferred Stock are issued and outstanding, and 592,032 sharesof Series C Preferred Stock are issued and outstanding.  No shares ofCommon Stock or Preferred Stock are held in treasury by Seller and itsSubsidiaries.  All issued and outstandingshares of Common Stock and Preferred Stock have been, and all shares of CommonStock issued pursuant to the Warrant will be, duly authorized and validlyissued, fully paid and nonassessable, and are not subject to preemptive rightscreated by Applicable Law, Seller’s certificate of incorporation or anyContract to which Seller is a party or by which it is bound.

 

(b)                                 **Stock Options, Purchase Plans, RestrictedStock Units and Convertible Securities**.  As of thedate of this Agreement, [                    ]shares of Common Stock are subject to issuance pursuant to outstanding optionsunder the Seller’s stock incentive plans (the “**Seller****Options**”), and [                  ]shares of Common Stock are subject to issuance pursuant to outstanding optionsoutside of the Seller’s stock incentive plans. [                  ]shares of Common Stock are reserved for future issuance under the Seller’sstock incentive plans (excluding shares subject to issuance pursuant to SellerOptions). [                    ]shares of Common Stock are subject to issuance pursuant to outstanding warrantsof Seller (the “**Seller****Warrants**”),and[                        ]  shares are reserved for issuance uponconversion of the outstanding Preferred Stock. As of the Closing Date, Eight Million (8,000,000) shares of Common Stockwill be reserved for issuance under the Warrant.  All shares of Common Stock subject toissuance as aforesaid, upon issuance on the terms and conditions specified inthe instruments pursuant to which they are issuable, will be duly authorized,validly issued, fully paid and nonassessable. There are no outstanding or authorized stock appreciation, profitparticipation (other than Seller bonus plans), “phantom stock”, or othersimilar plans or Contracts with respect to Seller or any of its Subsidiaries.

 

(c)                                  **No Other Rights**.  Except forthe Preferred Stock, the Seller Options, the Seller Warrants and as otherwise setforth in Section 3.6(b) or Schedule 3.6(c), there are no options, warrants, convertible orexchangeable, securities, calls, rights, commitments, conversion privileges orpreemptive or other rights or Contracts (to which Seller or any of itsSubsidiaries is a party or by which Seller or any of its Subsidiaries is bound)outstanding to purchase or otherwise acquire any shares of capital stock ofSeller or any of its Subsidiaries or any securities or debt exercisable for,convertible into or exchangeable for capital stock of Seller or any of itsSubsidiaries, or obligating Seller or any of its Subsidiaries to issue, grant,extend or enter into any such option, warrant, convertible or exchangeable,securities, call, right, commitment, conversion privilege or preemptive orother right or Contract.  Except as setforth on Schedule 3.6(c), the Seller’s certificate of incorporation does notprovide, and neither Seller nor any of its 

 

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Subsidiariesis a party to or otherwise bound by any Contract providing, for registrationrights, rights of first refusal in favor of a third party, preemptive rights,co-sale rights, antidilution rights, redemption rights or other similar rightsor other restrictions applicable to any outstanding securities of Seller or itsSubsidiaries.  Neither Seller nor any ofits Subsidiaries is a party to or otherwise bound by any Contract (includingany voting agreement), voting trust or proxy, other than proxies to besubmitted in connection with the Seller Stockholders’ Meeting) regarding thevoting of any outstanding securities of Seller or its Subsidiaries.

 

**3.7****                              ****Absenceof Undisclosed Liabilities**

 

Thereare no Liabilities of the Subject Business of any kind whatsoever, whetheraccrued, contingent, absolute, determined, determinable or otherwise, and thereis no existing condition, situation or set of circumstances which couldreasonably be expected to result in such a Liability, other than (i) Liabilitiesreflected on the Balance Sheet, (ii) incurred in the Ordinary Course ofbusiness since the date of the Balance Sheet, (iii) express warrantyobligations and maintenance obligations specifically set forth in the ServiceContracts or (iv) obligations set forth in the Purchased Contracts (excludingfor purposes of this Subsection (iv), the Service Contracts).

 

**3.8****                              ****Absenceof Certain Changes**

 

(a)                                  Seller does not have any Knowledge of anydevelopment or threatened action that may have a Material Adverse Effect on thecontinued operation of the Subject Business or the Purchased Assets.

 

(b)                                 Since January 1, 2009, with respectto the Subject Business or the Purchased Assets, there has not been:

 

(i)                                     any operation of Seller out of theOrdinary Course of business or any change in the financial condition of theSubject Business or the Purchased Assets, which change, by itself or inconjunction with all other such changes, whether or not arising in the OrdinaryCourse of business, is likely to have a Material Adverse Effect with respect tothe Subject Business or the Purchased Assets;

 

(ii)                                  any purchase, sale, license or otherdisposition, or, except for the Letter of Intent, any agreement or otherarrangement for the purchase, sale, license or other disposition, of any partof the Subject Business or the Purchased Assets, other than purchases in theOrdinary Course of business;

 

(iii)                               any increase in the salary, bonus, or othercompensation payable to any Hired Employee, except as set forth on Schedule3.15; and

 

(iv)                              any agreement, arrangement or understanding,whether in writing or otherwise, for Seller to take any of the actionsspecified in paragraphs (i) through (iii) above.

 

**3.9****                              ****Title toProperties**

 

Seller owns good andmarketable title, free and clear of all Liens, to all of the Purchased Assets.

 

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**3.10****                       ****Paymentof Taxes**

 

Within the times and in themanner prescribed by law, Seller has filed all Tax Returns required to be filedby it and has paid all Taxes due and payable by it, except such as are beingcontested in good faith. No Tax due and owing by Seller on account of businesstransacted by Seller prior to the Closing Date will become a Lien on thePurchased Assets nor shall Buyer have any Liability therefor.

 

**3.11****                       ****Contractsand Commitments**

 

(a)                                  Schedule 3.11(a) attached hereto contains an accurateand complete list of all Contracts related to the Subject Business and meetingany of the descriptions set forth below to which Seller or any Subsidiary is aparty or bound or by which any of the Purchased Assets are subject or bound, orpursuant to which Seller or any Subsidiary is a beneficiary (the “**Purchased Contracts**”):

 

(i)                                     Contracts obligating Seller to pay, asguarantor or otherwise, any indebtedness or in any way creating any Lien on anyof the Purchased Assets;

 

(ii)                                  Licenses In, Licenses Out or royaltyContracts;

 

(iii)                               Management, consulting or advisory Contracts;

 

(iv)                              Contracts for the purchase or sale ofsupplies or products or for the furnishing or receipt of services which has aminimum duration of one year or more or involves a sum in excess of $25,000, ineach case to the extent any such Contract is not terminable by Seller withoutthe payment of any fee or other amount on no more than thirty (30) days notice;

 

(v)                                 Contracts limiting the freedom of Seller,or that would limit the freedom of Buyer after the Closing Date, to freelyengage in any line of business or with any Person anywhere in the world;

 

(vi)                              Contracts relating to the distribution,marketing, advertising or sales of the Software Products, including Contractswith sales representatives or agents;

 

(vii)                           Contracts pursuant to which Seller subcontracts workto third-parties;

 

(viii)                        power of attorney;

 

(ix)                                Contracts relating to the acquisition orsale of any portion of the Subject Business or the Software Products;

 

(x)                                   any employment Contract or severanceagreement with any Hired Employee;

 

(xi)                                any Service Contract with an aggregateamount payable in excess of $10,000;

 

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(xii)                             the Real Estate Lease; or

 

(xiii)                          other Contracts material to the Subject Business.

 

(b)                                 Seller has made available to Buyercomplete and correct copies of each Purchased Contract, together with allamendments, waivers and other changes thereto, and a complete and correctdescription of all material terms of all oral Purchased Contracts. No PurchasedContract has been canceled or, to Seller’s Knowledge, breached by the otherparty, and Seller has no Knowledge of any planned breach by any other party toany Purchased Contract.  Since December 31,2008, to Seller’s Knowledge, except as set forth on Schedule 3.11(b),no customer, supplier or distributor of the Subject Business has indicated inwriting or orally to Seller that it intends to stop or materially decrease therate of business done with Seller or that it desires to renegotiate itsContract with Seller or that it would not do business with Buyer.  Seller has performed all obligations requiredto be performed by it in connection with the Purchased Contracts and is not indefault under or in breach of any Purchased Contract, and no event or conditionhas occurred or arisen which with the passage of time or the giving of noticeor both would result in a default or breach thereunder.  Each Purchased Contract is legal, valid,binding, enforceable subject to bankruptcy, insolvency, reorganization,moratorium and similar laws of general applicability relating to or affectingcreditors’ rights and to general principles of equity and in full force andeffect and, subject to Section 2.12, will continue as suchfollowing the consummation of the transactions contemplated hereby.

 

(c)                                  All Software Products have been soldpursuant to Seller’s standard End User License Agreement in the form attachedto Schedule 3.11(c), with no material modification to the terms thereof,including terms relating to Seller’s right to assign such End User LicenseAgreement.

 

(d)                                 To Seller’s Knowledge, there is no reasonto believe that Buyer will be unable (i) to obtain, on monetary termsconsistent with those currently in effect with Seller, a written maintenanceagreement with any customer of the Subject Business who is not currently aparty to a written Service Contract, and (ii) to the extent necessary, toobtain, without the payment or provision by Buyer of any sums or inducements,written consents to any transfer of the customer relationship as contemplatedhereby.

 

(e)                                  Schedule 3.11(e) sets forth a complete and correctlist of each Purchased Contract that requires a consent or other action by anyPerson as a result of the execution, delivery and performance of thisAgreement.

 

**3.12****                       ****SellerIntellectual Property Assets**

 

(a)                                  Schedule 3.12(a) contains a complete and correctlist of all material Seller Intellectual Property Assets, including a list ofall (i) registered or applied for Patents, registered and materialunregistered Trademarks and registered and material unregistered Copyrights, (ii) licenses,sublicenses or other agreements under which Seller is granted rights by othersin Seller Intellectual Property Assets (“**Licenses In**”)(other than commercial off-the-shelf software that is made generally availablefor a total cost of less than $5,000), and (iii) licenses, sublicenses or 

 

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other agreements under which Seller has granted rightsto others in Seller Intellectual Property Assets (“**Licenses****Out**”), all of which have been madeavailable for review by the Buyer prior to the date hereof.  Except as set forth on Schedule 3.12(a),all Licenses Out have been made on the terms and conditions of Seller’s EndUser License Agreement.

 

(b)                                 Seller exclusively owns the SellerIntellectual Property Assets free and clear of all Liens, claims, encumbrancesor licenses, or has the valid right to use the Seller Intellectual PropertyAssets pursuant to the Licenses In set forth in Schedule 3.12(a).

 

(c)                                  All Seller Intellectual Property Assetsare valid and enforceable.  All SellerIntellectual Property Assets owned by Seller that have been issued by, orregistered, or are the subject of an application filed with, as applicable, theU.S. Patent and Trademark Office, the U.S. Copyright Office or any similaroffice or agency anywhere in the world, are currently in compliance with formallegal requirements (including, as applicable, payment of filing, examinationand maintenance fees, inventor declarations, proofs of working or use, timelypost-registration filing of affidavits of use and incontestability, and renewalapplications).

 

(d)                                 No Seller Intellectual Property Assetsowned by Seller that have been issued by, or registered or the subject of anapplication filed with, as applicable, the U.S. Patent and Trademark Office,the U.S. Copyright Office or in any similar office or agency anywhere in theworld is subject to any maintenance fees or taxes or actions falling due withinninety (90) days after the Closing Date.

 

(e)                                  To the Knowledge of Seller, there are nopending or, threatened claims against Seller or any of its employees allegingthat any of the operation of the Subject Business or any activity by Seller, oruse of any Intellectual Property Asset or Software Product infringes orviolates (or in the past infringed or violated) the rights of others in or toany Intellectual Property Asset (“**Third-Party IntellectualProperty Assets**”) or constitutes a misappropriation of (or in thepast constituted a misappropriation of) any subject matter of any IntellectualProperty Assets of any Person or entity or that any of Seller IntellectualProperty Assets is invalid or unenforceable.

 

(f)                                    Neither the Seller Intellectual PropertyAssets, nor the operation of the Subject Business, nor any activity by Seller,nor manufacture, use, importation, offer for sale and/or sale of any SoftwareProduct (i) infringes or violates (or in the past infringed or violated) anythird-party Copyright or (ii) constitutes a misappropriation of (or in thepast constituted a misappropriation of) any subject matter of any third-partyTrade Secret; or (iii) to the Knowledge of Seller, infringes or violatesany third-party Patent.

 

(g)                                 All former and current employees,consultants and contractors of Seller involved in the development of anySoftware Product or other Seller Intellectual Property Assets purported to beowned by Seller have executed written instruments with Seller that assign toSeller all rights, title and interest in and to any and all IntellectualProperty Assets relating thereto possessed by such employees, consultants orcontractors during the tenure of their employment or contract with Seller,except as may have been specifically identified in writing and disclaimed insuch agreements.

 

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(h)                                 To the Knowledge of Seller, No thirdparty is infringing upon or otherwise materially violating any rights in anySeller Intellectual Property Assets or any Seller’s Licenses In.

 

(i)                                     Seller has taken reasonable securitymeasures to protect the secrecy, confidentiality and value of all Trade Secretsthat are part of the Seller Intellectual Property Assets, including requiringeach Seller employee and consultant and any other Person with access to suchTrade Secrets to execute a binding confidentiality agreement, correct andcomplete copies of which have been made available for review by the Buyer.  To the Knowledge of Seller, there has notbeen any breach by any party of such confidentiality agreements.

 

(j)                                     Neither Seller’s entry into thisAgreement nor the performance of its obligations contemplated hereby shall (1) causethe forfeiture or termination of, or give rise to a right of forfeiture ortermination of, any License In, (2) materially impair the right to Use anySeller Intellectual Property Asset or portion thereof as currently Used in theconduct of the Subject Business, or (3) cause any royalties fees or otherpayments to become payable to any third person as a result of the Use of anySeller Intellectual Property Asset which would not have been due and payablehad the transaction not occurred or cause any existing obligations to pay suchroyalties, fees or other payments to increase, where such increase would nothave been due had the transaction not occurred.

 

(k)                                  Schedule 3.12(k) contains a complete and correctlist of all Contracts expressly granting any third party rights to any SellerIntellectual Property Assets.

 

(l)                                     No event has occurred, and nocircumstance or condition exists, that has resulted in or would reasonably beexpected to result in the release by Seller or any escrow agent to any thirdparty of any Source Code.

 

(m)                               Schedule 3.12(m) contains a complete and correctlist of Contracts with any Governmental Authority, pursuant to which SourceCode, computer software programs or applications owned or co-owned by Sellerwere developed or co-developed and licensed and/or assigned to Seller.

 

(n)                                 Seller is in compliance with all materialobligations pursuant to any License In.

 

**3.13****                       ****Litigation;Proceedings**

 

Except as set forth on Schedule3.13, there are no actions, suits, proceedings, orders, judgments, decreesor investigations pending or, to Seller’s Knowledge, threatened against oraffecting the Subject Business or any Purchased Asset at law or in equity, orbefore or by any Governmental Authority and to the Knowledge of Seller there isno basis known for any of the foregoing. Neither the Subject Business nor anyPurchased Asset is subject to any arbitration proceedings under collectivebargaining agreements or otherwise or, to Seller’s Knowledge, any governmentalinvestigations or inquiries; and, to Seller’s Knowledge, there is no validbasis for any of the foregoing. Neither the Subject Business nor any of thePurchased Assets are subject to any outstanding order, judgment or decreeissued by any Governmental Authority.

 

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**3.14****                       ****GovernmentalPermits**

 

Schedule 3.14 sets forth acomplete and correct list of all Governmental Permits owned, held or used bySeller or a Subsidiary in connection with the Subject Business.  Seller owns or possesses all right, title andinterest in and to all Governmental Permits or other similar rights which arenecessary to conduct the Subject Business as presently conducted. Seller is incompliance with the terms and conditions of all Governmental Permits. No lossor expiration of any Governmental Permit is pending or, to Seller’s Knowledge,threatened (including as a result of the transactions contemplated hereby). Theconsummation of the transactions contemplated by this Agreement will notrequire any consent, renewal or notice with respect to any Governmental Permit.

 

**3.15****                       ****Employees**

 

(a)                                  Schedule 3.15 contains a complete and correct list ofall Hired Employees, describing for each such employee the position or title,whether classified as exempt or non-exempt for wage and hour purposes and, ifexempt, the type of exemption relied upon, annual base salary, whether paid ona salary, hourly or commission basis and the average scheduled hours per week,bonus potential, date of hire, business location, status (i.e., active or inactive and, ifinactive, the type of leave and estimated duration) and the total amount ofbonus, severance and other amounts to be paid to such employee at the Closingor otherwise in connection with the transactions contemplated hereby. To theKnowledge of Seller, no Hired Employee has expressed any plans to terminate hisor her employment or service arrangement with Seller.

 

(b)                                 None of the Hired Employees arerepresented by any union or subject to any collective bargaining agreement andno such employees have engaged in any such organizational activities. Sellerhas experienced no labor trouble and no Hired Employee has brought or assertedany claim of unfair labor practices involving Seller.

 

(c)                                  No representative of Seller has made anyrepresentation, promise or guarantee, express or implied, to any of itsemployees regarding (i) whether Buyer intends to retain or offer to retainsuch individual, or (ii) the terms and conditions on which Buyer mayretain or offer to retain such individual.

 

(d)                                 Seller has either paid in full allexpense reimbursement claims of all Hired Employees as of the date hereof orobtained releases from all Hired Employees with respect to any claims therefor.

 

**3.16****                       ****Insurance**

 

The Purchased Assets areinsured to the extent disclosed on Schedule 3.16and all other material insurance policies and arrangements of Seller aredisclosed in said Schedule. Seller’s worker’s compensation insurance complieswith applicable statutory requirements as to the amount of such coverage.  Schedule 3.16 sets forth, with respectto the Subject Business, a list of all pending claims and the claims historyfor Seller and its Subsidiaries during the current year and the preceding three(3) years (including with respect to insurance obtained but not currentlymaintained).

 

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**3.17****                       ****AffiliateTransactions**

 

None of the PurchasedContracts are between Seller and any officer, director, stockholder, familymember or Affiliate of any such Person (“****Interested Person****”).No Interested Person has any material direct or indirect interest in any entitythat does business with Seller relating to the Subject Business or has anydirect or indirect interest in any Purchased Asset or in any property, asset orright that is used in the conduct of the Subject Business.

 

**3.18****                       ****Compliancewith Laws**

 

Neither Seller nor any ofits Affiliates has received notice regarding any violation of, conflict with orfailure to conduct the subject Business in compliance with any ApplicableLaw.  To Seller’s Knowledge, noinvestigation or review of Seller or the Subject Business by any GovernmentalAuthority is pending or threatened.

 

**3.19****                       ****GovernmentalAuthorities and Consents**

 

Seller is not required tosubmit any notice, report or other filing with any Governmental Authority inconnection with the execution or delivery by it of this Agreement and the otherTransaction Documents to which it is a party or the consummation of thetransactions contemplated hereby or thereby, except such filings and notices asmay be required under applicable securities laws.  Except as set forth on Schedule 3.19,no consent, approval or authorization of any Governmental Authority is requiredto be obtained by Seller in connection with its execution, delivery andperformance of this Agreement, the Warrant or the other Transaction Documentsto which it is a party or the transactions contemplated hereby or thereby.

 

**3.20****                       ****ProductWarranties**

 

Each Software Product sold,licensed or delivered by Seller has conformed with and satisfied all applicablecontractual commitments that were scheduled or required to be performed priorto the Closing Date and all applicable express warranties as of the ClosingDate. Except for Ordinary Course express warranty claims under the PurchasedContracts and Ordinary Course obligation to provide maintenance under maintenanceagreements constituting a portion of the Purchased Contracts, Seller does nothave any Liability or obligation (and, to Seller’s Knowledge, there is no basisfor any present or future action, suit, proceeding, hearing, investigation,charge, complaint, claim or demand against Seller giving rise to any Liabilityor obligation) for replacement, modification or repair of any Software Productsor other damages in connection therewith. No Software Product is subject to anyguaranty, warranty, or other indemnity other than expressly set forth under thePurchased Contracts.

 

**3.21****                       ****Environmental****Matters**. The operations of the Subject Business are, and at all times have been,in material compliance with all applicable Environmental Laws, includingpossession of and compliance with the terms of all Governmental Permitsrequired by Environmental Laws.  Thereare no pending or, to the Knowledge of Seller, threatened, suits, actions,investigations or proceedings under or pursuant to Environmental Laws againstSeller or involving any real property currently or, to the Knowledge of Seller,formerly owned, operated or leased or other sites at which Hazardous Materialswere disposed of, or allegedly disposed of, by Seller. To Seller’s Knowledge,Seller has received no written allegations of any Liabilities 

 

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under any Environment Law, Seller has no Knowledge ofany pending or threatened such allegations, and Seller has not generated,transported, treated, stored, installed, disposed of or released any HazardousMaterials in violation of, or in a manner that would reasonably be expected togive rise to liability to Seller under, any Environmental Laws.

 

**3.22****                       ****Broker’sFees**

 

No broker, investmentbanker, financial advisor or other Person, other than Kaufman Bros., L.P.,whose fees and expenses shall be paid by Seller, is entitled to any broker’s,finder’s, financial advisor’s or other similar fee or commission in connectionwith the transactions contemplated by this Agreement based upon arrangementsmade by or on behalf of Seller.  Sellerhas received the opinion of its financial advisor, Kaufman Bros., L.P., to theeffect that, as of such date and based on and subject to the matters set forthin the opinion, the Purchase Price is fair, from a financial point of view, toSeller.

 

**3.23****                       ****Disclosure**

 

None of this Agreement, theWarrant or the other Transaction Documents to which Seller is a party containsany untrue statement of a material fact or omits a material fact necessary tomake each statement contained herein or therein, not misleading in light of thecircumstances in which they were made.

 

NOTWITHSTANDING ANYTHING TOTHE CONTRARY CONTAINED IN THIS AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH OFTHE PARTIES HERETO THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE III,SELLER DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE,EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, WITH RESPECT TO ITSELF, THE SUBJECTBUSINESS, THE PURCHASED ASSETS OR THE ASSUMED LIABILITIES TRANSFERRED TO BUYERPURSUANT TO THE TERMS OF THIS AGREEMENT, AND SELLER EXPRESSLY DISCLAIMS ANYIMPLIED WARRANTIES, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY,CONDITION OR FITNESS FOR A PARTICULAR PURPOSE OR ORDINARY PURPOSE, OR ANY REPRESENTATIONOR WARRANTY AS TO VALUE.

 

**3.24****                       ****Accounts Receivable**. All outstanding accounts and notes receivable with respect to theSubject Business reflected on the Financial Statements are, and in the FinalNet Amount of the Working Capital Assets will be, due and valid claims againstaccount debtors for goods or services delivered or rendered subject to nodefenses, offsets or counterclaims, except as reserved against on the FinancialStatements or the Final Net Amount of the Working Capital Assets, as the casemay be.  All such receivables arose inthe Ordinary Course of business.  No suchreceivables are subject to prior assignment, claim, lien or security interest.  Seller has not incurred any liabilities tocustomers for discounts, returns, promotional allowances or otherwise, exceptto the extent of the reserves therefor reflected on the Financial Statements orthe Final Net Amount of the Working Capital Assets.  Neither Seller nor any Subsidiary has anyliability for any refunds, allowances or returns in respect of productsmanufactured, processed, distributed, shipped or sold by or for the account ofSeller or any Subsidiary on or prior to the Closing Date, except to the extentof the reserves therefor reflected on the Financial Statement or the Final Net 

 

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Amount of the Working Capital Assets.  Schedule 3.24 contains a completeand correct list of the names and addresses of all banks and financialinstitutions in which Seller has an account, lock box or other arrangement forthe collection of accounts receivable with the names of all persons authorizedto draw thereon or with access thereto.

 

**3.25****                       ****Software and InformationSystems**.

 

(a)                                  Schedule 3.25(a) sets forth a complete and correctlist of all (i) material Software that is owned by Seller and used ordistributed in the operation of the Subject Business (the “**Seller****Software**”); (ii) Software that islicensed to Seller and used in the operation of the Subject Business, thelicensor of such Software, (iii) the Software Products, and (iv) anymaterial pending Software development projects currently in planning by theSubject Business, together with a description of such projects and the stage oftheir development.

 

(b)                                 Except as set forth in Schedule 3.25(b),(i) the Seller Software is not subject to any transfer, assignment, sourcecode escrow agreement, or license reversion,; (ii) Seller has not grantedany other current future or conditional rights, licenses or interests in or tothe Source Code used or included in any Software Product; (iii) Seller hasnot provided or disclosed the Source Code of any Software Product to any Personor entity, except where such Source Code is, by its nature, not normallyobfuscated or compiled prior to the distribution of the Software Product; (iv) Sellerhas maintained and protected the Seller Software with appropriate proprietarynotices (including notice of ownership), confidentiality and non-disclosureagreements and such other measures as are normally used in the industry; (v) theSoftware is protectable under applicable copyright law and has not beenforfeited to the public domain and has been registered with the United StatesCopyright Office or is eligible for registration.

 

(c)                                  Seller’s rights in the Seller Softwareare free and clear of any liens, encumbrances, restrictions, or legal orequitable claims of others and there are no agreements or arrangements ineffect with respect to the marketing, distribution, licensing, sale, resale orpromotion of the Software between Seller and any other person.

 

(d)                                 Seller has received no notice of anyviolation of patent, trade secret rights, copyrights or other proprietaryrights with respect to any Seller Software and knows of no basis therefor.

 

(e)                                  Seller has taken commercially reasonablysteps to assure that the Software contains no timer, virus, copy protectiondevice, disabling code, clock, counter or other limiting design or routine thatcauses the Software (or any operation thereof) or become erased, inoperable, impaired,or otherwise incapable of being used in the full manner for which it wascontemplated for use.

 

(f)                                    Except as set forth in Schedule 3.25,none of the Software Products contain or are derived from any PublicSoftware.  Except as set forth in Schedule3.25, none of the Software Products contain any third-party software.

 

(g)                                 The incorporation, linking, calling orother use in or by any such Software Product of any third-party software doesnot obligate Seller to disclose, make available, offer or deliver any portionof the source code of any Software Product or component thereof to any 

 

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third-party.  ToSeller’s Knowledge, no third party has any claim to the Source Code by virtueof the incorporation, linking, calling or other use in or by any such SoftwareProduct of any third-party Software.

 

(h)                                 Seller has not collected or used anypersonally identifiable information in violation of any applicable statute orregulation in any United States jurisdiction or in violation of its privacypolicy (if any) relating to the collection, storage, use and onward transfer ofall personally identifiable information.

 

(i)                                     Seller holds all material product(including Software Product) registrations, accreditations and othercertifications required for the conduct of the Subject Business (all of suchregistrations, accreditations and certifications being referred to herein as “**Product Certifications**”). Seller is in compliance in allmaterial respects with the terms and conditions of all such ProductCertifications and, to Seller’s Knowledge, no written notices have beenreceived by Seller since January 1, 2008, alleging the failure to hold anyProduct Certification.  To Seller’sKnowledge, there is no reasonable basis for any present or future actionrescinding any such Product Certifications and no loss or expiration of anysuch Product Certifications is reasonably foreseeable or has had or wouldreasonably be expected to have a Material Adverse Effect. All of the ProductCertifications are transferable to Buyer and will be transferred by Seller toBuyer on the Closing Date.

 

(j)                                     As used by Seller in the Business, theSoftware Product comply with all applicable requirements relating to the exportor re-export to those countries in which the Subject Business currently sellsthe Software Products.

 

(k)                                  Copies of all Seller Software and copiesof all licenses and other agreements which are maintained by Seller withrespect to Software, Source Code or Software Products shall be delivered toBuyer at or prior to Closing.

 

(l)                                     To Seller’s Knowledge, the SoftwareProducts perform as Seller has warranted to its customers and substantially inaccordance with the Software Products’ documented specifications.

 

**3.26****                       ****Customers and Suppliers**. All sales contracts and orders with customers and suppliers were enteredinto by or on behalf of Seller in the Ordinary Course of business.  Schedule 3.26 sets forth an accurateand complete list of the 25 largest customers of the Business, determined onthe basis of revenues from items sold for each of the fiscal years ended December 31,2007 and 2008 and the six-month period ended June 30, 2009.  To the Knowledge of Seller, no customer orsupplier will cease to do business with Buyer after, or as a result of, theconsummation of any transactions contemplated hereby.  Seller has no Knowledge of any fact,condition or event (other than possible terminations in the Ordinary Course ofbusiness) which would adversely affect its relationship with any customer orsupplier.  Since December 31, 2008,there has been no cancellation of backlogged orders in excess of the averagerate of cancellation prior to such date.

 

Neither Seller, nor any ofits officers or employees, has, directly or indirectly, given or agreed to giveany rebate, gift or similar benefit to any supplier, customer, distributor,broker, 

 

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governmental employee orother person, who was, is or may be in a position to help or hinder the business(or assist in connection with any actual or proposed transaction) which couldreasonably be expected to subject Seller or Buyer to any damage or penalty inany civil, criminal or governmental litigation or proceeding or which wouldhave a Material Adverse Effect on the Business.

 

**ARTICLEIV**

** **

**REPRESENTATIONS AND WARRANTIES OF BUYER**

 

As a material inducement to Seller to enter into thisAgreement, subject to the exceptions and limitations set forth in this Article IVand the matters set forth on the Schedules, Buyer hereby represents andwarrants to Seller that:

 

**4.1****                              ****Organizationand Good Standing**

 

Buyer is a corporation dulyorganized, validly existing and in good standing under the laws of the State ofDelaware and has full corporate power and authority and all licenses, permitsand authorization necessary to own and operate its business. Buyer is dulyqualified in each jurisdiction in which the ownership of property or theconduct of its business requires such qualification, except where the failureto do so would not, individually or in the aggregate, have a material adverseeffect on the business, assets, operations or financial condition of Buyer thatadversely affects Buyer’s ability to consummate the transactions contemplatedby this Agreement.

 

**4.2****                              ****CorporateAuthorization**

 

Buyer has full corporatepower and authority to execute and deliver this Agreement, the Buyer Note andeach of the other Transaction Documents to which it is a party, to consummatethe transactions contemplated hereunder and thereunder and to perform each ofits obligations hereunder and thereunder. The board of directors of Buyer hasduly approved this Agreement, the Buyer Note and all other TransactionDocuments to which it is a party and has duly authorized the execution and deliveryof this Agreement, the Buyer Note and all other Transaction Documents to whichit is a party and the consummation of the transactions contemplated hereby andthereby. No other corporate proceedings on the part of Buyer (including,without limitation, approval of Buyer’s stockholders) are necessary to approveand authorize the execution and delivery of this Agreement, the Buyer Note andthe other Transaction Documents to which Buyer is a party and the consummationof the transactions contemplated hereby and thereby. This Agreement, the BuyerNote and all other Transaction Documents to which Buyer is a party have beenduly executed and delivered by Buyer and constitute the valid and bindingagreements of Buyer, enforceable against Buyer in accordance with theirrespective terms, subject to bankruptcy, insolvency, reorganization, moratoriumand similar laws of general applicability relating to or affecting creditors’rights and to general principles of equity.

 

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** **

**4.3         ****No Breach**

 

The execution, delivery andperformance by Buyer of this Agreement, the Buyer Note and all otherTransaction Documents to which it is a party and the consummation by Buyer ofthe transactions contemplated hereby and thereby do not and will not (a) conflictwith or result in any breach of any of the terms, conditions or provisions of, (b) constitutea default under, (c) result in a violation of, (d) give anythird-party the right to modify, terminate or accelerate or cause themodification, termination or acceleration of, any obligation under, (e) resultin the creation of any Lien upon any of the assets of Buyer, or (f) requireany authorization, consent, approval, exemption or other action by, or noticeor declaration to or filing with, any third-parties, including any court oradministrative or other governmental body or agency, under (i) theprovisions of the certificate of incorporation or bylaws of Buyer, (ii) anylaw, statute, rule or regulation to which Buyer is subject, (iii) anyjudgment, order or decree to which Buyer is subject, or (iv) any othercontract, license, instrument or agreement to which Buyer is a party or towhich it is subject.

 

**4.4          Financial Information**.  Buyer has delivered to Seller (a) theunaudited, consolidated balance sheet of Parent and its Subsidiaries as at December 31,2007 and 2008, and the unaudited, consolidated statements of cash flows, incomeand stockholders’ equity for the fiscal years then ended and (b) theunaudited, consolidated balance sheet of Parent and its Subsidiaries as at June 30,2009 and the unaudited, consolidated statements of cash flows, income andstockholders’ equity of Parent and its Subsidiaries for the six-month periodthen ended (collectively, the “**Parent Financial Statements**”).  Buyer has also delivered to Seller (a) theunaudited, consolidated balance sheet of SilkRoad as at December 31, 2007and 2008, and the unaudited, consolidated statements of cash flows, income andstockholders’ equity for the fiscal years then ended and (b) theunaudited, consolidated balance sheet of SilkRoad as at June 30, 2009 andthe unaudited, consolidated statements of cash flows, income and stockholders’equity of SilkRoad for the six-month period then ended (collectively, the “**SilkRoad FinancialStatements**,” andtogether with the Parent Financial Statements, the “**GuarantorFinancial Statements**”).  TheGuarantor Financial Statements and the notes thereto, if any, (i) arecomplete and accurate in all material respects and fairly present the financialcondition of each respective Guarantor (and, in the case of Parent, itsSubsidiaries) at the respective dates thereof and the results of operations forthe periods then ended, and (ii) were prepared in accordance with thebooks and records of each respective Guarantor (and, in the case of Parent, itsSubsidiaries) in conformity with GAAP, except for the omission of footnotes andnormal year-end adjustments which are not, individually and in the aggregate,material.  None of the GuarantorFinancial Statements contains any material, non-recurring items, except asexpressly set forth therein.

 

**4.5         ****Litigation;Proceedings**

 

There are no actions, suits,proceedings, orders, judgments, decrees or investigations pending or, to Buyer’sknowledge, threatened against or affecting Buyer at law or in equity, or beforeor by any Governmental Authority and to the knowledge of Buyer there is nobasis known for any of the foregoing. Buyer is not subject to any arbitration proceedings under collectivebargaining agreements or otherwise or, to Buyer’s knowledge, any governmentalinvestigations or inquiries; and, to Buyer’s knowledge, there is no valid basisfor any of the foregoing.  The 

 

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Buyeris not subject to any outstanding order, judgment or decree issued by anyGovernmental Authority.

 

**4.6          Availabilityof Funds**

 

Buyer has sufficient cashavailable to enable it to consummate the transactions contemplated by thisAgreement (including performing its obligations under the Buyer Note), tooperate the Subject Business for the reasonably foreseeable future, to satisfythe Assumed Liabilities and to meet the financial obligations under thePurchased Contracts that Buyer is assuming as such obligations are presentlyknown or reasonably anticipated.

 

**4.7         ****Broker’sFees**

 

Any liability or obligationon the part of the Buyer to pay any fees or commissions to any broker, finderor agent with respect to the transactions contemplated by this Agreement shallbe paid by Buyer.

 

**4.8         ****Disclosure**

 

None of this Agreement, theBuyer Note or the other Transaction Documents to which Buyer is a partycontains any untrue statement of a material fact or omits a material factnecessary to make each statement contained herein or therein, not misleading inlight of the circumstances in which they were made.

 

**4.9          Inspections; No OtherRepresentations**

 

Buyer is an informed andsophisticated purchaser experienced in the evaluation and purchase of assetssuch as the Subject Business.  Buyer hasundertaken such investigation and has been provided with and has evaluated suchdocuments and information as it has deemed necessary to enable it to make aninformed and intelligent decision with respect to the execution, delivery andperformance of this Agreement.  Buyer agrees,subject to the express terms hereof, to accept the Purchased Assets and assumethe Assumed Liabilities in the condition they are in on the Closing Date basedupon its own inspection, examination and determination with respect thereto asto all matters and without reliance upon any express or implied representationsor warranties of any nature made by or on behalf of or imputed to Seller, otherthan those expressly set forth in this Agreement.  Without limiting the generality of theforegoing, except as expressly set forth in this Agreement, Buyer acknowledgesthat Seller makes no representation or warranty with respect to anyprojections, estimates or budgets delivered to or made available to Buyer offuture revenues, future results of operations (or any component thereof),future cash flows or future financial condition (or any component thereof) ofthe Business or Purchased Assets or the future business and operations thereofor any other information or documents made available to Buyer or its counsel,accountants or advisors with respect to the Business or the Purchased Assets orthe businesses or operations thereof.

 

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**ARTICLE V**

** **

**COVENANTS**

 

**5.1          Conductof Business**

 

Seller agrees that, betweenthe date hereof and the Closing, except as set forth in Schedule 5.1 oras expressly provided by any other provision of this Agreement, or unless Buyershall otherwise agree in advance in writing (which agreement shall not beunreasonably withheld, delayed or conditioned), Seller shall, and shall causeeach of its Subsidiaries to, (i) conduct its operations in all materialrespects only in the Ordinary Course of the Subject Business, (ii) pay orperform the Liabilities of the Subject Business when due, (iii) use itsreasonable best efforts to keep available the services of the key employees andkey consultants of Seller and each of its Subsidiaries and to preserve thecurrent relationships with customers, suppliers and other Persons as arereasonably necessary in order to preserve substantially intact the SubjectBusiness.  In addition, without limitingthe foregoing, except (x) as set forth in Schedule 5.1, or (y) asexpressly provided by any other provision of this Agreement, Seller shall notand shall not permit any of its Subsidiaries, nor any of its or itsSubsidiaries’ officers, directors or employees, Affiliates or any investmentbanker, financial advisor, attorney, accountant or other representativeretained by it or any of its respective Subsidiaries, to (unless required byApplicable Law), between the date of this Agreement and the Closing, directlyor indirectly, do, or agree to do, any of the following without the priorwritten consent of the Buyer (which consent shall not be unreasonably withheld,delayed or conditioned):

 

(a)           sell,pledge, dispose of, transfer, lease, license, or encumber, or authorize thesale, pledge, disposition, transfer, lease, license, or encumbrance of, any ofthe Purchased Assets, except in the Ordinary Course of business;

 

(b)           enterinto any agreement with respect to the voting of the capital stock of Seller;

 

(c)           increasethe compensation, severance benefits or perquisites payable or to becomepayable to any Hired Employee;

 

(d)           modify,amend or terminate, or waive, release or assign any material rights or claimswith respect to any confidentiality or standstill agreement to which Seller isa party and which relates to a business combination involving the SubjectBusiness;

 

(e)           takeany action that is intended to result in any of the conditions to thetransactions contemplated hereby set forth in Sections 6.1 and 6.2not being satisfied;

 

(f)            takeany action that is reasonably likely to cause a delay in the convening of theSeller Stockholder Meeting; or

 

(g)           authorizeor enter into any agreement or otherwise make any commitment to do any of theforegoing.

 

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**5.2          NoSolicitation**

 

(a)           AlternativeTransaction.  Seller shall not andshall not permit any of its Subsidiaries to, nor authorize or permit any of itsor its Subsidiaries’ officers, directors or employees or any investment banker,financial advisor, attorney, accountant or other representative retained by itor any of its respective Subsidiaries to, directly, or indirectly, (i) solicit,initiate or encourage, or take any other action to knowingly facilitate, induceor encourage any inquiries with respect to, or the making, submission orannouncement of, any Alternative Transaction Proposal, (ii) participate inany discussions or negotiations regarding, furnish to any Person anyinformation with respect to, or otherwise cooperate in any way with orknowingly facilitate any effort or attempt to make or implement any AlternativeTransaction Proposal (except to disclose the existence of this Agreement andthe terms hereof or as specifically permitted by Section 5.2(c)), (iii) approve,endorse or recommend any Alternative Transaction (except as specificallypermitted by Section 5.2(d)), or (iv) enter into any letter ofintent or similar document or any contract, agreement or commitment (whetherbinding or not) contemplating or otherwise relating to any AlternativeTransaction Proposal (except a confidentiality agreement contemplated by Section 5.2(c)(i)).  Seller will immediately cease, and will causeits officers, directors and employees and instruct any investment banker,financial adviser, attorney, accountant or other representative retained by itto cease, any and all existing activities, discussions or negotiations with anythird parties conducted heretofore with respect to any Alternative TransactionProposal, and will use its commercially reasonable efforts to enforce, and willnot waive any provisions of, any confidentiality or standstill agreement (orany similar agreement) to which Seller is a party relating to an AlternativeTransaction Proposal.

 

(b)           Notification.  As promptly as practicable (and in any eventwithin twenty-four (24) hours) after receipt of any Alternative TransactionProposal or any request for nonpublic information or any inquiry relating inany way to any Alternative Transaction Proposal, the Seller shall provide Buyerwith oral and written notice of the material terms and conditions ofAlternative Transaction Proposal, request or inquiry, and the identity of thePerson or group making any such Alternative Transaction Proposal, request orinquiry and a copy of all written materials provided to it in connection withsuch Alternative Transaction Proposal, request or inquiry.  In addition, Seller shall provide Buyer aspromptly as possible with all information as is reasonably necessary to keepthe Buyer informed in all material respects of all oral or writtencommunications regarding, and the status and material terms of, any AlternativeTransaction Proposal, request or inquiry, and, without limitation of the otherprovisions of this Section 5.2, shall promptly provide to Buyer acopy of all written materials (including written materials provided by email orotherwise in electronic format) subsequently provided by or to Seller inconnection with any Alternative Transaction Proposal, request or inquiry.

 

(c)           SuperiorProposal.  Notwithstanding anythingto the contrary contained in Section 5.2(a), in the event of anunsolicited, bona fide written Alternative Transaction Proposal which Sellerdetermines to be, or to be reasonably likely to result in, a Superior Proposal,the Seller may then take the following actions (but only if and to the extentthat (x) its Board of Directors concludes in good faith, after consultationwith its outside legal counsel, that the failure to do so would be inconsistentwith its fiduciary duties under Applicable Law, (y) the Seller has giventhe Buyer at least two Business Days prior written notice of its intention totake any of the following actions and of the identity of the Person or groupmaking such Alternative Transaction 

 

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Proposal and the material terms and conditions of theAlternative Transaction Proposal, and (z) Seller shall not have breachedin any material respect any of the provisions of this Section 5.2):

 

(i)            Furnishnonpublic information to the Person or group making such AlternativeTransaction Proposal; provided, however, that (A) prior tofurnishing any nonpublic information, it receives from such Person or group anexecuted confidentiality agreement containing terms at least as restrictive asthe terms contained in the Confidentiality Agreement, dated as of[                  ],between the Buyer and Seller (the “**Confidentiality Agreement**”)and (B) contemporaneously with furnishing any nonpublic information tosuch Person or group, it furnishes such nonpublic information to Buyer (to theextent such nonpublic information has not been previously so furnished toBuyer); and

 

(ii)           Engagein discussions or negotiations with such Person or group with respect toAlternative Transaction Proposal.

 

(d)           Changesof Recommendation.  Solely inresponse to the receipt of an unsolicited, bona fide written AlternativeTransaction Proposal which is determined to be a Superior Proposal, the Boardof Directors of the Seller may make a Change of Recommendation, if all of thefollowing conditions in clauses (i) through (v) are met:

 

(i)            theSuperior Proposal has been made and has not been withdrawn and continues to bea Superior Proposal;

 

(ii)           thestockholder vote at the Seller Stockholders’ Meeting has not occurred;

 

(iii)          theSeller has (A) provided to Buyer three (3) Business Days’ priorwritten notice which shall state expressly (i) that it has received aSuperior Proposal, (ii) the material terms and conditions of the SuperiorProposal and the identity of the Person or group of Persons making the SuperiorProposal, and (iii) that Seller intends to effect a Change ofRecommendation and the manner in which it intends to do so, and (B) duringthe aforementioned period, if requested by Buyer, engaged in good faithnegotiations to amend this Agreement in such a manner that the AlternativeTransaction Proposal which was determined to be a Superior Proposal no longeris a Superior Proposal;

 

(iv)          theBoard of Directors of the Seller has determined in good faith, afterconsultation with its outside legal counsel, that, in light of such SuperiorProposal, the failure of the Board of Directors to effect a Change ofRecommendation would be inconsistent with its fiduciary duties under ApplicableLaw; and

 

(v)           theSeller shall have complied in all material respects with Section 5.2(c) andshall not have breached in any material respect any of the other provisions setforth in this Section 5.2.

 

(e)           TenderOffer Rules.  Nothing contained inthis Agreement shall prohibit the Seller or its Board of Directors from takingand disclosing to their stockholders a position contemplated by Rules 14d-9and 14e-2(a) promulgated under the Exchange Act; provided, however,that Seller shall not effect, or disclose pursuant to such rules orotherwise a position 

 

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which constitutes, a Change of Recommendation unlessspecifically permitted pursuant to the terms of Section 5.2(d).

 

**5.3          Preparationof Proxy Statement; Seller Stockholders’ Meeting**

 

(a)           ProxyStatement.  As soon as reasonablypracticable following the Date hereof, Seller, with cooperation by the Buyer,shall prepare and file with the SEC the Proxy Statement.  Seller shall use its commercially reasonableefforts to respond to any comments of the SEC and to cause the Proxy Statementto be mailed to its stockholders as promptly as practicable after the ProxyStatement is filed with the SEC, subject to compliance with the Exchange Act,including Rule 14a-6 promulgated thereunder.  Seller shall also take any action (other thanqualifying to do business in any jurisdiction in which it is not now soqualified or filing a general consent to service of process) required to betaken under any applicable state securities laws in connection with theissuance and reservation of shares of Seller Common Stock pursuant to theWarrant, and the Buyer shall furnish all information concerning the Buyer asmay be reasonably requested in connection with any such action.  If at any time prior to the Closing anyinformation (including any Change of Recommendation) relating to Seller or theBuyer, or any of their respective Affiliates, officers or directors, should bediscovered by Seller or the Buyer which should be set forth in an amendment orsupplement to the Proxy Statement, so that any of such documents would notinclude any misstatement of a material fact or omit to state any material factnecessary to make the statements therein not misleading, the party whichdiscovers such information shall promptly notify the other parties hereto andan appropriate amendment or supplement describing such information shall bepromptly filed with the SEC and, to the extent required by law, disseminated tothe stockholders of Seller.

 

(b)           Stockholders’Meeting.  The Seller shall, aspromptly as practicable after the Proxy Statement is filed with the SEC,subject to compliance with the Exchange Act, including Rule 14a-6promulgated thereunder, take all action necessary in accordance with ApplicableLaw and the Seller Charter Documents, to duly give notice of, convene and holdthe Seller Stockholders’ Meeting. Subject to Section 5.2(d), the Seller will use commerciallyreasonable efforts to solicit from its stockholders proxies in favor of theapproval of the transactions contemplated by this Agreement, and will take allother action necessary or advisable to secure the vote or consent of itsstockholders required by Applicable Law to obtain such approvals.  Notwithstanding anything to the contrarycontained in this Agreement, the Seller may adjourn or postpone the SellerStockholders’ Meeting to the extent necessary to ensure that any necessarysupplement or amendment to the Proxy Statement is provided to its stockholdersin advance of a vote on and the approval of the transactions contemplated bythis Agreement, or, if, as of the time for which the Seller Stockholders’Meeting is originally scheduled, there are insufficient shares of Seller CommonStock represented (either in person or by proxy) to constitute a quorumnecessary to conduct the business of such meeting.  The Seller shall ensure that the SellerStockholders’ Meeting is called, noticed, convened, held and conducted, andthat all proxies solicited in connection with the Seller Stockholders’ Meetingare solicited in compliance with Applicable Law.  Notwithstanding any Change of Recommendationby the Board of Directors of Seller, approval of the transactions contemplatedby this Agreement shall be submitted to the Seller Stockholders at the SellerStockholders’ Meeting, and nothing contained herein shall be deemed to relievethe Buyer or Seller of such obligations.

 

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(c)           BoardRecommendations.  Except to theextent expressly permitted by Section 5.2(d):  (i) the Board of Directors of the Sellershall recommend that its stockholders vote in favor of, the approval of thetransactions contemplated by this Agreement at the Seller Stockholders’Meeting, and (ii) the Proxy Statement shall include a statement to theeffect that the Board of Directors of Seller has recommended that all holdersof capital stock of Seller entitled to vote thereon vote in favor of approvalof the transactions contemplated by this Agreement at the Seller Stockholders’Meeting.

 

**5.4          Accessto Information; Confidentiality**

 

(a)           Accessto Information.  Subject to theConfidentiality Agreement and Applicable Law, Seller shall, and shall causeeach of its Subsidiaries to, afford Buyer and its officers, employees,accountants, counsel, financial advisors and other representatives of suchother party, reasonable access at all reasonable times on reasonable noticeduring the period prior to the Closing to all properties, books, contracts,commitments, personnel and records related to the Subject Business (provided,that such access shall not unreasonably interfere with the business oroperations of Seller).  During suchperiod, Seller shall, and shall cause each of its Subsidiaries to, furnishpromptly to the Buyer (i) a copy of each report, schedule, registrationstatement and other document filed by it during such period pursuant to therequirements of federal or state securities laws and (ii) all otherinformation concerning the Subject Business, its properties and personnel asBuyer may reasonably request.  No reviewpursuant to this Section 5.4 shall affect or be deemed to modifyany representation or warranty contained herein, the covenants or agreements ofthe parties hereto or the conditions to the obligations of the parties heretounder this Agreement.

 

(b)           Confidentiality.  Except as otherwise provided in thisAgreement, Buyer will hold and keep confidential, and will cause its respectiveofficers and employees and will direct its accountants, counsel, financialadvisors and other representatives and Affiliates to hold and keepconfidential, any nonpublic information in accordance with the terms of theConfidentiality Agreement, which Confidentiality Agreement will remain in fullforce and effect and shall survive termination of this Agreement as providedtherein.

 

**5.5          ReasonableEfforts**

 

(a)           Governmentaland Third Party Approvals.  Each ofthe parties agrees to use their commercially reasonable efforts to take, orcause to be taken, all actions, and to do, or cause to be done, and to assistand cooperate with the other parties in doing, all things necessary, proper oradvisable under Applicable Law to consummate and make effective, in the mostexpeditious manner practicable, the transactions contemplated by thisAgreement, including (1) the obtaining of all necessary actions ornon-actions, waivers, consents and approvals from Governmental Authorities andthe making of all necessary registrations and filings and the taking of allsteps as may be necessary to obtain an approval or waiver from, or to avoid anaction or proceeding by, any Governmental Authority, (2) the obtaining ofall necessary consents, approvals or waivers from third parties, (3) thedefending of any lawsuits or other legal proceedings, whether judicial oradministrative, challenging this Agreement or the consummation of thetransactions contemplated by this Agreement, including promptly seeking to haveany stay or temporary restraining order entered by any court or otherGovernmental 

 

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Authority vacated or reversed, and (4) theexecution and delivery of any additional instruments necessary to consummatethe transactions contemplated by, and to fully carry out the purposes of, thisAgreement.  Subject to Applicable Lawrelating to the exchange of information, the Buyer and Seller shall have theright to review in advance, and to the extent reasonably practicable each willconsult the other on, all the information relating to the Buyer or Seller, asthe case may be, that appears in any filing made with, or written materialssubmitted to, any Governmental Authority or third party in connection with thetransactions contemplated by this Agreement.

 

(b)           Notification.  Each of the Buyer and Seller shall keep theother reasonably apprised of the status of matters relating to the completionof the transactions contemplated hereby and work cooperatively in connectionwith obtaining all required approvals or consents of any GovernmentalAuthority.  In that regard, each partyshall without limitation use its commercially reasonable efforts to: (1) promptlynotify the other of, and if in writing, furnish the other with copies of (or, inthe case of material oral communications, advise the other orally of) anycommunications from or with any Governmental Authority (whether domestic,foreign or supranational) with respect to the other transactions contemplatedby this Agreement, (2) permit the other to review and discuss in advance,and consider in good faith the views of the other in connection with, anyproposed written (or any material proposed oral) communication with any suchGovernmental Authority with respect to the transactions contemplated by thisAgreement, (3) to the extent practical, not participate in any meetingwith any such Governmental Authority with respect to the transactionscontemplated by this Agreement unless it consults with the other in advance andto the extent permitted by such Governmental Authority gives the other theopportunity to attend and participate thereat, and (4) furnish the otherwith such necessary information and reasonable assistance as the Buyer orSeller, as applicable, may reasonably request in connection with itspreparation of necessary filings or submissions of information to any suchGovernmental Authority.

 

**5.6          Notification**. Seller shall give prompt notice to Buyer and Buyer shall give promptnotice to the Seller, as the case may be, if it determines that any change,event, circumstance or effect has had a Material Adverse Effect or would resultin the failure of any of the conditions set forth in Article VI tobe satisfied.  Notwithstanding the above,the delivery of any notice pursuant to this Section 5.6 will notlimit or otherwise affect the remedies available hereunder to the partyreceiving such notice or the conditions to such party’s obligation toconsummate the transactions contemplated hereby.

 

**5.7          Feesand Expenses. **Except as set forth in this Section 5.7,all fees and expenses incurred in connection with this Agreement and thetransactions contemplated by this Agreement shall be paid by the partyincurring such fees or expenses.  For theavoidance of doubt, Seller shall bear the costs and expenses incurred inconnection with the filing, printing and mailing of the Proxy Statement(including any SEC filing fees) and any preliminary materials related thereto.

 

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**ARTICLE VI**

 

**CONDITIONS TO CLOSING**

 

**6.1          Conditionsto Each Party’s Obligation to Closing**

 

(a)           StockholderApproval.  The Seller StockholderApproval shall have been obtained.

 

(b)           NoInjunctions or Restraints.  Nojudgment, order, decree, statute, law, ordinance, rule or regulation, orother legal restraint or prohibition, entered, enacted, promulgated, enforcedor issued by any court or other Governmental Authority of competentjurisdiction (collectively, “**Restraints**”),shall be in effect or be pending which prohibits, makes illegal or enjoins, orthreatens to prohibit, make illegal or enjoin, the consummation of thetransactions contemplated by this Agreement.

 

**6.2          Conditionsto Obligations of the Buyer**

 

(a)           Representationsand Warranties.  (i) The representationsand warranties of Seller (except for the representations and warranties setforth in Article III) set forth herein  (A) that are qualified as to MaterialAdverse Effect shall be true and correct and (B) that are not so qualifiedas to Material Adverse Effect shall be true and correct, in each case both whenmade and at and as of the Closing Date, as if made at and as of such time(except to the extent expressly made as of an earlier date, in which case as ofsuch date), except to the extent where the failure of any such representationsand warranties referred to in clause (B) to be so true and correct doesnot have, and would not reasonably be expected to have, individually or in theaggregate, a Material Adverse Effect on Seller or the Subject Business, and (ii) therepresentations and warranties of Seller set forth in Article IIIshall be true and correct in all material respects, in each case both when madeand at and as of the Closing Date, as if made at and as of such time (except tothe extent expressly made as of an earlier date, in which case as of suchdate).

 

(b)           Performanceof Obligations of Seller.  Sellershall have performed, or complied with, in all material respects, allobligations required to be performed or complied with by it under thisAgreement at or prior to the Closing Date.

 

(c)           Officer’sCertificate.  The Buyer shall havereceived an officer’s certificate duly executed by the Chief Executive Officerof Seller to the effect that the conditions set forth in Section 6.2(a) andSection 6.2(b) have been satisfied.

 

(d)           ConsentsObtained.  The Buyer shall havereceived evidence, in form and substance reasonably satisfactory to it, thatthe consents, waivers, approvals, authorizations or orders required to beobtained, and all filings to be made, by Seller shall have been obtained andmade by Seller.

 

(e)           MaterialAdverse Change.  Since the datehereof, there shall have been no change, occurrence or circumstance in thebusiness, results of operations or financial condition 

 

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of Seller or the Subject Business having or reasonablylikely to have, individually or in the aggregate, a Material Adverse Effect onSeller or the Subject Business.

 

(f)            OtherDeliveries.  The Buyer shall havereceived such other certificates and instruments (including certificates ofgood standing of Seller in its jurisdiction of organization and the variousforeign jurisdictions in which it is qualified, certified charter documents,certificates as to the incumbency of officers and the adoption of authorizingresolutions) as it shall reasonably request in connection with the Closing.

 

**6.3          Conditionsto Obligations of Seller**

 

(a)           Representationsand Warranties.  (i) Therepresentations and warranties of the Buyer (except for the representations andwarranties set forth in Article IV) set forth herein (A) thatare qualified as to Material Adverse Effect shall be true and correct and (B) thatare not so qualified as to Material Adverse Effect shall be true and correct,in each case both when made and at and as of the Closing Date, as if made atand as of such time (except to the extent expressly made as of an earlier date,in which case as of such date), except to the extent where the failure of anysuch representations and warranties referred to in clause (B) to be sotrue and correct does not have, and would not reasonably be expected to have,individually or in the aggregate, a Material Adverse Effect on the Buyer, and (ii) therepresentations and warranties of the Buyer set forth in Article IVshall be true and correct in all material respects, in each case both when madeand at and as of the Closing Date, as if made at and as of such time (except tothe extent expressly made as of an earlier date, in which case as of suchdate).

 

(b)           Performanceof Obligations of the Buyer.  TheBuyer shall have performed, or complied with, in all material respects, allobligations required to be performed or complied with by it under thisAgreement at or prior to the Closing Date.

 

(c)           ComplianceCertificate.  Seller shall havereceived an officer’s certificate duly executed by the Chief Executive Officerof the Buyer to the effect that each of the condition set forth in Section 6.3(a) andSection 6.3(b) have been satisfied.

 

(d)           Other Deliveries**. **Sellershall have received such other certificates and instruments (includingcertificates of good standing of Buyer in its jurisdiction of organization,certificates as to the incumbency of officers and the adoption of authorizingresolutions) as it shall reasonably request in connection with the Closing.

 

**ARTICLEVII**

** **

**Closing Deliveries**

 

**7.1         ****Seller’sDeliveries at Closing**

 

Atthe Closing, Seller shall deliver to Buyer the following:

 

(a)           TheWarrant;

 

(b)           TheGeneral Assignment;

 

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(c)           ThePatent Assignment;

 

(d)           TheTrademark Assignment;

 

(e)           TheCopyright Assignment;

 

(f)            TheThird Party IP Licensor Consent and Waiver;

 

(g)           TheLandlord Consent and Waiver;

 

(h)           TheNoncompetition Agreement;

 

(i)            Allmaterial consents and approvals by third-parties to the assignment of theapplicable Purchased Contracts, including those set forth on Schedule 3.19, all on terms and conditions noless favorable to Seller than those in existence as of the date hereof;

 

(j)            Allmaterial authorizations and approvals received and other Governmental Permitsreceived in connection with the transfer of the Subject Business and thePurchased Assets to Buyer and the consummation of the transactions contemplatedhereby;

 

(k)           Releasesof all Liens affecting or applicable to the Subject Business or any of thePurchased Assets;

 

(l)            Possessionof all of the Purchased Assets;

 

(m)          Certifiedcopies of the Certificate of Incorporation and By-laws of Seller and theresolutions of Seller’s board of directors authorizing the execution, deliveryand performance of this Agreement, the Warrant and the other TransactionDocuments and approving the consummation of the transactions contemplatedhereby and thereby;

 

(n)           Certificateof the Secretary of State of Delaware stating that Seller is in good standing;and

 

(o)           Suchother documents or instruments as Buyer may reasonably request to effect thetransactions contemplated hereby.

 

**7.2         ****Buyer’sDeliveries at Closing**

 

At the Closing, Buyer shalldeliver to Seller the following:

 

(a)           TheClosing Cash Payment as set forth in Section 2.4 hereof;

 

(b)           TheBuyer Note;

 

(c)           TheParent Guaranty;

 

(d)           TheSilkRoad Guaranty;

 

(e)           TheGeneral Assignment;

 

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(f)            Certifiedresolutions of Buyer’s board of directors authorizing the execution, deliveryand performance of this Agreement, the Warrant and the other TransactionDocuments and approving the consummation of the transactions contemplatedhereby and thereby;

 

(g)           TheLandlord Consent and Waiver; and

 

(h)           Suchother documents or instruments as Seller may reasonably request to effect thetransactions contemplated hereby.

 

**ARTICLEVIII**

** **

**TERMINATION, AMENDMENT AND WAIVER**

 

**8.1          Termination**

 

(a)           bymutual written consent of the Buyer and Seller, if the Board of Directors ofeach so determines;

 

(b)           bywritten notice of either the Buyer or Seller (as authorized by the Board ofDirectors of the Buyer or Seller, as applicable):

 

(i)            ifthe Closing shall not have been consummated by January 31, 2010 (the “**Outside Date**”); provided, however, that theright to terminate this Agreement under this Section 8.1(b)(i) shallnot be available to any party whose failure to comply with any provision ofthis Agreement has been the cause of, or resulted in, the failure of thetransactions contemplated hereby to be consummated by such date; or

 

(ii)           ifa Governmental Authority of competent jurisdiction shall have issued an order,decree or ruling or taken any other action (including the failure to have takenan action), in any case having the effect of permanently restraining, enjoiningor otherwise prohibiting the Closing, which order, decree, ruling or otheraction is final and nonappealable; provided, however, that theright to terminate this Agreement under this Section 8.1(b)(ii) shallnot be available to any party whose failure to comply with any provision ofthis Agreement has been the cause of, or resulted in, such action;

 

(c)           bythe Buyer (as authorized by its Board of Directors) upon a material breach ofany representation, warranty, covenant or agreement of Seller set forth in thisAgreement, if such breach shall be incapable of being cured or shall not havebeen cured in all material respects within 20 Business Days after writtennotice thereof shall have been received by Seller;

 

(d)           bySeller (as authorized by its Board of Directors) upon a material breach of anyrepresentation, warranty, covenant or agreement of the Buyer set forth in thisAgreement, if such breach shall be incapable of being cured or shall not havebeen cured in all material respects within 20 Business Days after writtennotice thereof shall have been received by the Buyer;

 

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(e)           bythe Buyer (as authorized by its Board of Directors), at any time prior toSeller Stockholder Approval, if Seller, the Seller Board of Directors or anycommittee thereof, for any reason, shall have (i) failed to include in theProxy Statement distributed to the Seller Stockholders its recommendation infavor of approval of the transaction contemplated by this Agreement, (ii) effecteda Change of Recommendation, or (iii) approved or recommended anyAlternative Transaction; or

 

(f)            bythe Buyer, if the Seller Stockholder Approval shall not have been obtained atthe Seller Stockholders’ Meeting, or at any adjournment or postponement thereofon or prior to the Outside Date.

 

**8.2          Effectof Termination**.  In the event of termination of this Agreementas provided in Section 8.1 hereof, this Agreement shall forthwithbecome void and there shall be no liability on the part of any of the parties,except (i) as set forth in Section 5.4(b), Section 5.6,this Section 8.2 and Section 8.3, as well as Article IXto the extent applicable to such surviving sections, each of which shallsurvive termination of this Agreement, and (ii) that nothing herein shallrelieve any party from any further liability for any willful breach of thisAgreement.  No termination of thisAgreement shall affect the obligations of the parties contained in theConfidentiality Agreement, all of which obligations shall survive terminationof this Agreement in accordance with their terms.

 

**8.3          Payments**

 

(a)           Paymentby the Buyer.  In the event that thisAgreement is terminated by Seller pursuant to Section 8.1(b)(i) orSection 8.1(d), the Buyer shall promptly, but in no event laterthan five (5) Business Days after the date of such termination, pay Sellerthe Termination Fee.

 

(b)           Paymentby Seller.  In the event that thisAgreement is terminated by the Buyer pursuant to Section 8.1(b)(i),Section 8.1(c), Section 8.1(e) or Section 8.1(f),Seller shall promptly, but in no event later than ten Business Days after thedate of such termination, pay the Buyer the Termination Fee.

 

(c)           Interestand Costs; Other Remedies.  Allpayments under this Section 8.3 shall be made by wire transfer ofimmediately available funds to an account designated by the party to receivepayment.  Each of the Buyer and Selleracknowledges that the agreements contained in this Section 8.3 arean integral part of the transactions contemplated by this Agreement and that,without these agreements, the other party hereto would not enter into thisAgreement.  Accordingly, if the Buyer orSeller, as the case may be, fails to pay in a timely manner the amounts duepursuant to this Section 8.3 and, in order to obtain such payment,the other party hereto makes a claim that results in a judgment against theparty failing to pay for the amounts set forth in this Section 8.3,the party so failing to pay shall pay to the other party its reasonable costsand expenses (including reasonable attorneys’ fees and expenses) in connectionwith such suit, together with interest on the amounts set forth in this Section 8.3at the Prime Rate on the date such payment was required to be made.  Payment of the fees described in this Section 8.3shall be in lieu of damages incurred under this Agreement.

 

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**ARTICLE IX**

** **

**INDEMNIFICATION AND RELATED MATTERS**

 

**9.1         ****Survival;Risk Allocation**

 

(a)           Allrepresentations, warranties, covenants and agreements set forth in thisAgreement, the other Transaction Documents or in any writing or certificatedelivered in connection with this Agreement or the transactions contemplated bythis Agreement shall survive the Closing Date. Notwithstanding the foregoing,no Party shall be entitled to recover for any Loss pursuant to Section 9.2(a)(i) orSection 9.2(b)(i), unless written notice of a claim thereof is deliveredto the other Party prior to the Applicable Limitation Date. For purposes ofthis Agreement, the term “****Applicable Limitation Date****” shallmean the eighteen month anniversary of the Closing Date; provided, however,that the Applicable Limitation Date with respect to the following Losses shallbe as follows: (i) with respect to any Loss arising from or related to abreach of the representations and warranties of Seller set forth in Section 3.9(Taxes), the Applicable Limitation Date shall be the 60th day after expirationof the applicable statute of limitations (including any extensions thereto tothe extent that such statute of limitations may be tolled), (ii) withrespect to any Loss arising from or related to a breach of the representationsand warranties of Seller set forth in Section 3.1 (Organization andCorporate Power), Section 3.2 (Authorization of Transactions), and Section 3.8(Title to Properties), there shall be no Applicable Limitation Date (i.e., suchrepresentations and warranties shall survive forever). Following the Closing,the exclusive remedy pursuant to this Agreement and the transactionscontemplated hereby based upon the survival of such representations andwarranties will be the rights to indemnification, payment of Losses and otherremedies provided under this Article IX.

 

(b)           Notwithstandinganything in this Article IX to the contrary, in the event any Partyto this Agreement perpetrates a fraud on another Party hereto, any Party thatsuffers any Loss by reason thereof shall be entitled to seek recovery thereforagainst the Person or Persons who perpetrated such fraud without regard to anylimitation set forth in this Agreement (whether a temporal limitation, a dollarlimitation or otherwise).

 

(c)           Therepresentations, warranties, covenants and agreements made herein, as modifiedby the Schedules, together with the indemnification provisions herein, areintended among other things to allocate the economic cost and the risksinherent in the transactions contemplated hereby between the Parties and,accordingly, a Party shall be entitled to the indemnification or other remediesprovided in this Agreement by reason of any breach of any such representation,warranty, covenant or agreement, as modified by the Schedules, by another Party,notwithstanding whether any employee, representative or agent of the Partyseeking to enforce a remedy knew or had reason to know of such breach andregardless of any investigation by such Party.

 

**9.2         ****Indemnification**

 

(a)           Subjectto each of the limitations set forth in this Article IX, Sellershall indemnify Buyer and its officers, directors, employees, agents,representatives, successors and permitted assigns (collectively, the “****Buyer Parties****”)and hold each of them harmless from and 

 

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against and pay on behalf of or reimburse such BuyerParties in respect of any loss (including diminution in value), Liability,demand, claim, action, cause of action, cost, damage, deficiency, Tax, penalty,fine or expense, whether or not arising out of third-party claims (including,without limitation, interest, penalties, reasonable attorneys’, accountants’and other professionals’ fees and expenses, court costs and all amounts paid ininvestigation, defense or settlement of any of the foregoing) but specificallyexcluding any consequential or punitive damages (other than consequential orpunitive damages assessed in connection with claims brought by third-parties)(collectively, “****Losses****” and individually, a “****Loss****”)which any such Buyer Party may suffer, sustain or become subject to, as aresult of, in connection with, relating or incidental to or by virtue of:

 

(i)            anybreach of any representation or warranty made by Seller contained in thisAgreement or the Transaction Documents;

 

(ii)           thebreach of any covenant or agreement made by Seller contained in the TransactionDocuments;

 

(iii)          anyclaim for payment of fees or expenses as a broker or finder in connection withthe origin, negotiation or execution of this Agreement or the other TransactionDocuments or the consummation of the transactions contemplated hereby basedupon any alleged agreement, arrangement or understanding between the claimantand Seller or any of its stockholders, agents or representatives;

 

(iv)          theassertion against any Buyer Party of any Liability relating to any ExcludedLiability; or

 

(v)           Seller’sownership, operation or use of the Purchased Assets and the Subject Businessprior to the Closing Date (except for any Assumed Liabilities).

 

(b)           Subjectto each of the limitations set forth in this Article IX, Buyershall indemnify Seller and its officers, directors, employees, agents,representatives, successors and permitted assigns (collectively, the “****Seller Parties****”)and hold each of them harmless from and against and pay on behalf of orreimburse Seller Parties in respect of any Loss which any such Seller Party maysuffer, sustain or become subject to, as the result of, in connection with,relating or incidental to or by virtue of:

 

(i)            anybreach of any representation or warranty made by Buyer contained in thisAgreement or the Transaction Documents;

 

(ii)           thebreach of any covenant or agreement made by Buyer contained in this Agreementor the Transaction Documents;

 

(iii)          anyclaim for payment of fees or expenses as a broker or finder in connection withthe origin, negotiation or execution of this Agreement or the other TransactionDocuments or the consummation of the transactions contemplated hereby basedupon any alleged agreement, arrangement or understanding between the claimantand Buyer, or any of its agents or representatives;

 

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(iv)          theassertion against any Seller Party of any Liability relating to an AssumedLiability; or

 

(v)           Buyer’sownership, operation or use of the Purchased Assets and the Subject Businessfrom and after the Closing Date.

 

(c)           Theindemnification provided for in Sections 9.2(a) and 9.2(b) aboveis subject to the following limitations:

 

(i)            NoParty shall be liable hereunder with respect to claims referred to in Section 9.2(a)(i) orSection 9.2(b)(i) above, unless the other Party gives writtennotice thereof within the Applicable Limitation Date. Notwithstanding anyimplication to the contrary contained in this Agreement, so long as a Partydelivers written notice of a claim no later than the Applicable LimitationDate, the other Party shall be required to indemnify hereunder for all Lossesthat such Parties may incur (subject to the Basket and the Cap, if applicable)in respect of the matters that are the subject of such claim, regardless ofwhen incurred.

 

(ii)           Notwithstandinganything contained in this Agreement to the contrary (but subject to theremainder of this Section 9.2(c)(ii)), no Indemnifying Party shallbe liable to the Buyer Parties or Seller Parties, as the case may be, (A) forany Loss arising under Section 9.2(a)(i) or Section 9.2(b)(i) above,unless the aggregate amount of all Losses incurred by the Buyer Parties orSeller Parties, as applicable, exceeds $75,000 (the “**Basket**”),in which case, subject to the Cap (as defined below), such Indemnifying Partyshall be liable for all such Losses in excess of such amount, (B) for anyLoss arising under Section 9.2(a)(i) or Section 9.2(b)(i) tothe extent that the aggregate amount of all such Losses exceeds $2,200,000 (the“**Cap**”), or (C) for consequentialdamages, punitive or exemplary damages, special damages, lost profits orincidental damages.  Notwithstandinganything contained in this Agreement to the contrary, (x) the Basket andthe Cap shall not apply with respect to any Loss arising from or related to abreach of (a) any covenants of any Party or (b) the representationsand warranties set forth in Section 3.1 (Organization and CorporatePower), Section 3.2 (Authorization of Transactions), Section 3.9(Taxes), and Section 3.8 (Title to Properties).

 

(iii)          Indetermining the amount of the Basket and any Losses for which a Party isentitled to assert a claim for indemnification hereunder, such amounts shall bedetermined after deducting therefrom the amount of any insurance proceeds(after giving effect to any applicable deductible or retention) and other thirdparty recoveries in respect of such Losses. The Parties shall use reasonable efforts to mitigate the amount ofLosses for which it may be entitled to indemnification hereunder.

 

(d)           Ifa Party seeks indemnification under this Article IX, such Party(the “****Indemnified Party****”) shall givewritten notice to the other Party (the “****Indemnifying Party****”)promptly after receiving written notice of any action, lawsuit, proceeding,investigation or other claim against it (if by a third-party) or discoveringthe Liability, obligation or facts giving rise to such claim forindemnification, describing the claim, the amount thereof (if known andquantifiable), and the basis thereof; provided, however, that thefailure to so notify the Indemnifying Party promptly shall not relieve theIndemnifying Party of its Liabilities hereunder except to the extent suchfailure shall have materially prejudiced the Indemnifying Party. In that 

 

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regard, if any action, lawsuit, proceeding,investigation or other claim shall be brought or asserted by any third-partythat, if adversely determined, would entitle the Indemnified Party to indemnitypursuant to Article IX, the Indemnifying Party shall be entitled tocontrol the defense of such action, lawsuit, proceeding, investigation or otherclaim giving rise to the Indemnified Party’s claim for indemnification at theIndemnifying Party’s expense, and at the Indemnifying Party’s option (subjectto the limitations set forth below) shall be entitled to appoint lead counselof such defense with a reputable counsel reasonably acceptable to theIndemnified Party; provided, however, that, in the event that theIndemnifying Party elects to control such defense, such Party shall be deemedto have agreed to be fully responsible (with no reservation of rights) for allLosses relating to such claims, subject to the limitations set forth in Section 9.2(c)(ii).

 

Notwithstanding anyprovision contained herein to the contrary, the Indemnifying Party shall nothave the right to assume control of such defense and shall pay the reasonablefees and expenses of counsel retained by the Indemnified Party, if the claimover which the Indemnifying Party seeks to assume control (i) seeksnon-monetary relief, (ii) involves criminal or quasi-criminal allegations,(iii) involves a claim to which the Indemnified Party reasonably believesan adverse determination would have a material and adverse effect on theIndemnified Party’s reputation or future business prospects, (iv) involvesa claim that, upon petition by the Indemnified Party, the appropriate court rules thatthe Indemnifying Party failed or is failing to vigorously prosecute or defendor (v) involves a claim that is reasonably expected to result in Liabilityto the Indemnified Party in excess of the Cap.

 

The foregoing paragraphshall not apply to any third-party claim that relates to any ExcludedLiabilities or Excluded Assets, over which Seller shall have exclusive control,including the right to control the defense or settlement of any such claim; provided,however, that the Buyer Parties shall be entitled to participate in thedefense of any such third-party claim to the extent reasonably required toprotect such Buyer Parties’ interests.

 

If the Indemnifying Partyexercises the right to control the defense of any third-party claim as providedabove, then the Indemnified Party shall have the right to employ its owncounsel in any such action and to participate in the defense thereof at its ownexpense, unless the Indemnifying Party has specifically authorized theemployment of such counsel in writing, in which case the fees and expenses ofsuch counsel shall be borne by the Indemnifying Party. Similarly, if theIndemnified Party controls the defense of any such claim, then the IndemnifyingParty shall have the right to employ its own counsel in any such action and toparticipate in the defense thereof at its own expense. If the Indemnified Partydetermines in its reasonable discretion that there exists or is reasonablylikely to exist a conflict of interest that would make it inappropriate for thesame counsel to represent both the Indemnified Party and the IndemnifyingParty, then the Indemnified Party shall be entitled to retain its own counselin each jurisdiction for which the Indemnified Party determines counsel isrequired, at the expense of the Indemnifying Party.

 

In the event that theIndemnifying Party exercises the right to control the defense of anythird-party claim as provided above, then the Indemnified Party shall cooperatewith the Indemnifying Party in such defense. Similarly, in the event that theIndemnified Party is, directly or indirectly, controlling the defense of anysuch claim, then the Indemnifying Party shall cooperate with the IndemnifiedParty in such defense. The Indemnifying Party shall obtain the prior writtenconsent of the Indemnified Party before entering into any settlement of a claimor ceasing to defend such

 

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claim, if such settlement orcessation (i) involves the imposition of an injunction or other equitablerelief on the Indemnified Party, (ii) does not expressly unconditionallyrelease the Indemnified Party from all Liabilities with respect to such claim andall other claims arising out of the same or similar facts and circumstances,with prejudice, or (iii) could adversely affect any Tax or other Liabilityof Buyer or any Buyer Parties.

 

(e)           Amountspaid to or on behalf of any Party as indemnification under this Agreement shallbe treated as adjustments to the Purchase Price.

 

(f)            Ifand to the extent any provision of this Article IX is unenforceablefor any reason, the Indemnifying Party hereby agrees to make the maximumcontribution to the payment and satisfaction of any Loss for whichindemnification is provided for in this Section 9.2 that ispermissible under applicable legal requirements.

 

(g)           Subjectto Section 9.1(b), from and after the Closing, the indemnificationprovided pursuant to this Article IX shall be the sole andexclusive remedy hereto for any Loss resulting from, with respect to or arisingout of any breach or claim in connection with this Agreement, any Exhibit orSchedule hereto or any certificate or writing delivered in connection with thisAgreement, regardless of the cause of action. Notwithstanding the foregoing,nothing contained in this Agreement shall limit a Party’s right to pursueequitable remedies, including, without limitation, injunctive relief andspecific performance.

 

(h)           NoIndemnifying Party shall in any event be liable to the Buyer Parties or SellerParties, as applicable, on account of any indemnification obligation set forthin this Article IX for any such Person’s own punitive or exemplarydamages; provided, however, that nothing herein shall relieve anyIndemnifying Party of its obligation to provide indemnification under this Article IXfor all components of awards against the Buyer Parties or Seller Parties, asapplicable, in third-party claims, including punitive or exemplary damages.

 

(i)            Notwithstandingthe fact that any Party may have the right to assert claims for indemnificationunder or in respect of more than one provision of this Agreement or anotheragreement entered into in connection herewith in respect of any fact, event,condition or circumstance, no Party shall be entitled to recover the amount ofany Losses suffered by such Party more than once under all such agreements inrespect of such fact, event, condition or circumstance.

 

**ARTICLE X**

 

****MISCELLANEOUS****

 

**10.1       ****Amendment**

 

This Agreement may not beamended or modified, except (a) by an instrument in writing signed by oron behalf of Buyer and Seller or (b) by a waiver in accordance with Section 10.2.

 

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**10.2       ****Waiver**

 

Any Party to this Agreementmay (a) extend the time for the performance of any of the obligations orother acts of the other Parties, (b) waive any inaccuracy in therepresentations and warranties of another Party contained herein or in any documentdelivered by such Party pursuant hereto or (c) waive compliance with anyagreement of another Party or condition to another Party’s obligationscontained herein. Any such extension or waiver shall be valid only if set forthin a writing executed by the Party to be bound thereby. Any waiver of any termor condition shall not be construed as a wavier of any subsequent breach orwaiver of the same term or condition or as a waiver of any other term orcondition of this Agreement. The failure of any Party to assert any of itsrights under this Section 10.2 shall not constitute a waiver of anyof such rights. No course of dealing between or among any Persons having anyinterest in this Agreement shall be deemed effective to modify, amend ordischarge any part of this Agreement or any rights or obligations of any Partyunder or by reason of this Agreement. All rights and remedies existing underthis Agreement are cumulative to, and not exclusive of, any rights or remediesotherwise available.

 

**10.3       ****Notices**

 

All notices, claims, demandsand other communications given or delivered under this Agreement shall be inwriting and shall be deemed to have been duly made or given when personallydelivered, delivered by receipted express courier service, or via facsimilewith a copy delivered by receipted express courier service to the respectiveParties at the following addresses (or such other address for a Party as shallbe specified in a notice given in accordance with this Section 10.3):

 
| If  to Seller:                                                                                                                |   | with  a copy to:                                                                                                                                                    |
|-------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                          |   |                                                                                                                                                                |
| BIO-key  International, Inc.  300 Nickerson Road  Marlborough, MA 01752  Facsimile: (308) 801-1819  Attention: President |   | Choate  Hall & Stewart LLP  Two International Place  Boston, MA 02110  Facsimile: (617) 248-4000  Attention: Charles J. Johnson, Esq.                 |
|                                                                                                                          |   |                                                                                                                                                                |
| If  to Buyer:                                                                                                                 |   | with  copies to:                                                                                                                                                    |
|                                                                                                                          |   |                                                                                                                                                                |
| InterAct911  Systems  102 W 3rd St., Ste 750  Winston-Salem, NC 27101  Facsimile:  Attention: President                       |   | McDermott  Will & Emery LLP  227 West Monroe Street  Chicago, Illinois 60606-5096  Facsimile: (312) 984-7700  Attention: Robert A. Schreck, Jr., P.C. |

 

**10.4       ****BindingAgreement; Assignment**

 

This Agreement and all ofthe provisions hereof shall be binding upon and inure to the benefit of theParties and their respective successors and permitted assigns; provided,however, that neither this Agreement nor any of the rights, interests orobligations hereunder may be assigned by operation of law or otherwise withoutthe prior written consent of Seller and Buyer. 

 

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Notwithstandinganything to the contrary in this Section 10.4, without the consentof any Party, Buyer and its permitted assigns may at any time, in their solediscretion, assign, in whole or in part, their rights hereunder to one or morethird-parties (provided that no such assignment shall release Buyer from itsobligations hereunder).

 

**10.5       ****Severability**

 

Whenever possible, eachprovision of this Agreement shall be interpreted in such manner as to beeffective and valid under applicable law, but if any provision of this Agreementis held to be prohibited by or invalid under applicable law or public policy,such provision shall be ineffective only to the extent of such prohibition orinvalidity, and all other terms of this Agreement shall remain in full forceand effect for so long as the economic or legal substance of the transactionscontemplated hereby is not affected in any manner materially adverse to anyParty.

 

**10.6       ****Construction**

 

The language used in thisAgreement shall be deemed to be the language chosen by the Parties to expresstheir mutual intent, and no rule of strict construction shall be appliedagainst any Person.  The word “**including**” shall mean including, without limitation,regardless of whether such words are included in some contexts but not others.

 

**10.7       ****Captions**

 

The captions used in thisAgreement are for convenience of reference only and do not constitute a part ofthis Agreement and shall not be deemed to limit, characterize or in any wayaffect any provision of this Agreement, and all provisions of this Agreementshall be enforced and construed as if no caption had been used in thisAgreement.

 

**10.8       ****EntireAgreement**

 

The Schedules identified inthis Agreement are incorporated herein by reference.  This Agreement and the documents referred toherein contain the entire agreement between the Parties and supersede any priorunderstandings, agreements or representations by or between the Parties,written or oral, which may have related to the subject matter hereof in anyway, including the Letter of Intent.

 

**10.9       ****Counterparts**

 

This Agreement may beexecuted in multiple counterparts, each of which shall be deemed an originalbut all of which taken together shall constitute one and the same instrument.

 

**10.10     ****GoverningLaw**

 

All question concerning theconstruction, validity and interpretation of this Agreement shall be governedby and construed in accordance with the laws of the Commonwealth ofMassachusetts applicable to contracts executed in and to be performed in thatState.

 

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**10.11     ****Partiesin Interest**

 

Nothing in this Agreement,express or implied, is intended to confer on any Person other than the Partiesand their respective successors and assigns any rights or remedies under or byvirtue of this Agreement.

 

**10.12     ****Consentto Jurisdiction**

 

THE PARTIES AGREE THATJURISDICTION AND VENUE IN ANY ACTION BROUGHT BY ANY PARTY PURSUANT TO THISAGREEMENT SHALL PROPERLY AND EXCLUSIVELY LIE IN ANY FEDERAL OR STATE COURTLOCATED IN SUFFOLK COUNTY, BOSTON, MASSACHUSETTS. BY EXECUTION AND DELIVERY OFTHIS AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OFSUCH COURTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY WITH RESPECT TO SUCHACTION. THE PARTIES IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT,AND HEREBY WAIVE ANY OBJECTION THAT SUCH COURT IS AN IMPROPER OR INCONVENIENTFORUM FOR THE RESOLUTION OF SUCH ACTION.

 

* *  * *

 

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IN WITNESS WHEREOF, each ofthe parties hereto has caused this Agreement to be executed by an officerthereunto duly authorized, all as of the day and year first above written.

 
| BUYER:                                 |                 | SELLER:                           |
|----------------------------------------|----------------------|-----------------------------------|
|                                   |                 |                              |
| InterAct911  Mobile Systems, Inc. |                 | BIO-key  International, Inc. |
|                                   |                 |                              |
|                                   |                 |                              |
| By:                                    |                 |                              | By: |   |
|                                   | Andrew J. Filipowski |                              |   | Thomas J. Colatosti |
|                                   | Chairman             |                              |   | Chairman |

 

[Signature Page to Asset Purchase Agreement]

 

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