Exhibit 10.1





Exhibit 10.1




Execution Copy




ASSET PURCHASE AGREEMENT




BY AND AMONG




HOMELAND SECURITY CAPITAL CORPORATION,




DEFAULT SERVICING USA, INC.,




DEFAULT SERVICING, LLC,




AND




DAL GROUP LLC




June 22, 2011




 


 









 







TABLE OF CONTENTS




	 	 	 	 	 
	ARTICLE I PURCHASE AND SALE OF ASSETS
	 	 	1	 
	 
	 	 	 	 
	1.1 Purchase and Sale of Assets
	 	 	1	 
	1.2 Excluded Assets
	 	 	3	 
	1.3 Assumption of Liabilities
	 	 	4	 
	1.4 Excluded Liabilities
	 	 	4	 
	1.5 Closing
	 	 	6	 
	1.6 Consent of Third Parties
	 	 	6	 
	1.7 Further Assurances
	 	 	7	 
	1.8 Withholding Rights
	 	 	7	 
	1.9 Transfer Taxes
	 	 	7	 
	 
	 	 	 	 
	ARTICLE II PURCHASE PRICE; CONTINGENT PAYMENTS
	 	 	7	 
	 
	 	 	 	 
	2.1 Purchase Price
	 	 	7	 
	2.2 Contingent Payments
	 	 	7	 
	2.3 Closing Prorations and Adjustments
	 	 	10	 
	2.4 Allocation of Purchase Price
	 	 	10	 
	 
	 	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MEMBER
	 	 	10	 
	 
	 	 	 	 
	3.1 Organization, Good Standing and Qualification
	 	 	11	 
	3.2 Subsidiaries and Investments
	 	 	11	 
	3.3 Ownership of the Company
	 	 	11	 
	3.4 Authorization; Binding Obligation
	 	 	12	 
	3.5 Consents and Approvals
	 	 	12	 
	3.6 No Violation
	 	 	12	 
	3.7 Business Licenses
	 	 	13	 
	3.8 Title to and Condition of Properties; Sufficiency of Assets; Ownership of Assets
	 	 	13	 
	3.9 Real Property
	 	 	14	 
	3.10 Personal Property Leases
	 	 	15	 
	3.11 Environmental Matters
	 	 	15	 
	3.12 Financial Statements; No Undisclosed Liabilities
	 	 	16	 
	3.13 Absence of Certain Events
	 	 	17	 
	3.14 Legal Proceedings
	 	 	18	 
	3.15 Compliance with Laws
	 	 	19	 
	3.16 Employment Matters
	 	 	19	 
	3.17 No Brokers
	 	 	21	 
	3.18 Taxes
	 	 	21	 
	3.19 Contracts
	 	 	21	 
	3.20 Transactions With Affiliates
	 	 	23	 
	3.21 Insurance
	 	 	24	 
	3.22 Intellectual Property
	 	 	24	 
	3.23 [Reserved.]
	 	 	27	 
	3.24 Absence of Restrictions on Business Activities
	 	 	27	 
	3.25 Certain Business Practices
	 	 	27	 
	3.26 Anti-Terrorism Laws; Trading with the Enemy
	 	 	27	 
	3.27 Books and Records
	 	 	28	 
	3.28 [Reserved.]
	 	 	28	 
	3.29 Relationships with Clients and Vendors
	 	 	28	 
	3.30 Solvency
	 	 	28	 
	3.31 Disclosure
	 	 	29	 





 


 









 





	 	 	 	 	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE MEMBER
	 	 	29	 
	 
	 	 	 	 
	4.1 Organization; Good Standing and Qualification
	 	 	29	 
	4.2 Authority; Execution; Enforceability
	 	 	29	 
	4.3 Title to Company Membership Percentages
	 	 	29	 
	4.4 Consents and Approvals
	 	 	29	 
	4.5 No Violation
	 	 	30	 
	4.6 Legal Proceedings
	 	 	30	 
	 
	 	 	 	 
	ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYER AND HSCC
	 	 	30	 
	 
	 	 	 	 
	5.1 Organization; Good Standing and Qualification
	 	 	30	 
	5.2 Authorization; Binding Obligation
	 	 	30	 
	5.3 Consents and Approvals
	 	 	31	 
	5.4 No Conflict
	 	 	31	 
	5.5 No Brokers
	 	 	31	 
	5.6 Legal Proceedings
	 	 	31	 
	 
	 	 	 	 
	ARTICLE VI PRE-CLOSING COVENANTS
	 	 	31	 
	 
	 	 	 	 
	6.1 Access and Investigation
	 	 	31	 
	6.2 Conduct of Business
	 	 	32	 
	6.3 Consents and Approvals; Regulatory Filings
	 	 	33	 
	6.4 Commercially Reasonable Efforts
	 	 	33	 
	6.5 Update Schedules
	 	 	33	 
	6.6 Exclusivity
	 	 	34	 
	6.7 Confidentiality
	 	 	34	 
	 
	 	 	 	 
	ARTICLE VII ADDITIONAL COVENANTS
	 	 	35	 
	 
	 	 	 	 
	7.1 Public Announcements
	 	 	35	 
	7.2 Retention of and Access to Books and Records
	 	 	35	 
	7.3 Litigation Cooperation
	 	 	35	 
	7.4 Use of Names
	 	 	35	 
	7.5 Transition Matters
	 	 	36	 
	7.6 Accounts Receivable/Collections
	 	 	36	 
	7.7 Employment Matters
	 	 	36	 
	 
	 	 	 	 
	ARTICLE VIII CONDITIONS TO CLOSING
	 	 	38	 
	 
	 	 	 	 
	8.1 Conditions to Obligation of Each Party
	 	 	38	 
	8.2 Conditions to Obligations of the Buyer
	 	 	39	 
	8.3 Conditions to Obligations of the Company and the Member
	 	 	40	 
	 
	 	 	 	 
	ARTICLE IX SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION
	 	 	41	 
	 
	 	 	 	 
	9.1 Survival of Representations, Warranties and Covenants
	 	 	41	 
	9.2 Indemnification by the Company and the Member
	 	 	42	 
	9.3 Indemnification by the Buyer and HSCC
	 	 	43	 
	9.4 Limitations on Indemnification
	 	 	43	 
	9.5 Indemnification Process
	 	 	44	 
	9.6 Other Claims
	 	 	46	 
	9.7 Fraud and Related Claims; Exclusive Remedy
	 	 	46	 
	9.8 Characterization of Payments
	 	 	46	 
	9.9 Calculation of Losses
	 	 	46	 





 


ii









 





	 	 	 	 	 
	ARTICLE X TERMINATION
	 	 	47	 
	 
	 	 	 	 
	10.1 Termination
	 	 	47	 
	10.2 Effect of Termination
	 	 	48	 
	 
	 	 	 	 
	ARTICLE XI MISCELLANEOUS
	 	 	48	 
	 
	 	 	 	 
	11.1 Entire Agreement
	 	 	48	 
	11.2 Successors and Assigns; No Third Party Beneficiaries
	 	 	48	 
	11.3 Amendment and Waiver
	 	 	49	 
	11.4 Expenses
	 	 	49	 
	11.5 Execution of Agreement
	 	 	49	 
	11.6 Governing Law; Venue
	 	 	49	 
	11.7 Specific Performance
	 	 	49	 
	11.8 Interpretation
	 	 	50	 
	11.9 Severability
	 	 	50	 
	11.10 Notices
	 	 	50	 
	11.11 Representation by Counsel
	 	 	51	 
	11.12 Construction
	 	 	52	 
	11.13 Waivers
	 	 	52	 
	11.14 Third Party Beneficiaries
	 	 	52	 
	11.15 Bulk Sales Law
	 	 	52	 
	11.16 Waiver of Jury Trial
	 	 	52	 





 


iii









 





EXHIBITS AND SCHEDULES



EXHIBITS:




	 	 	 
	Exhibit A

	 	Form of Non-Competition Agreement
	Exhibit B

	 	Form of Bill of Sale
	Exhibit C

	 	Form of Legal Opinion






SCHEDULES:




	 	 	 
	Schedule I

	 	Index of Defined Terms; Table of Definitions
	 
	 	 
	Schedule 1.1(a)

	 	Assigned Contracts
	Schedule 1.1(b)

	 	Tangible Personal Property
	Schedule 1.1(c)

	 	Approvals and Orders
	Schedule 1.1(d)

	 	Credits, Refunds, Prepaid Expenses Etc.
	Schedule 1.1(h)

	 	Telephone and Facsimile Numbers
	Schedule 1.1(i)

	 	Real and Personal Property
	Schedule 1.2(i)

	 	Certain Excluded Assets
	Schedule 1.3(b)

	 	Accrued Vacation
	Schedule 1.4(p)

	 	Certain Excluded Liabilities
	 
	 	 
	Company Disclosure Schedule


	Member Disclosure Schedule









 


iv









 







ASSET PURCHASE AGREEMENT 




THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of June 22, 2011, is made
by and among Homeland Security Capital Corporation, a Delaware corporation (“HSCC”),
Default Servicing USA, Inc., a Delaware corporation (“Buyer”), Default Servicing, LLC, a
Delaware limited liability company (the “Company”), DAL Group, LLC, a Delaware limited
liability company, and the sole member of the Company (the “Member”), and Timios, Inc.,
solely for purposes of Section 10.1(b) hereof.



WHEREAS, the Company is engaged in the business of providing real estate owned liquidation
related services, including property inspection, eviction, and broker assignment services (the
“Business”);



WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company wishes
to sell, assign and transfer to the Buyer, and the Buyer wishes to purchase from the Company, all
of the assets and properties owned, used or held for use by the Company, and the Buyer is willing
to assume from the Company certain Liabilities;




WHEREAS, the Member owns the entire membership percentage of the Company;



WHEREAS, as a condition and material inducement to the Buyer entering into this Agreement,
concurrently with the execution and delivery of this Agreement, Mrs. Jenny Johnson (the
“Designated Employee”) has entered into an employment agreement with the Company, dated as
of the date hereof, which agreement shall become effective as of the Closing Date (the
“Employment Agreement”);



WHEREAS, as a condition and material inducement to the Buyer consummating the transactions
contemplated by this Agreement, each of the Company and the Member shall enter into, prior to the
Closing, a non-competition, non-solicitation and confidentiality agreement with the Buyer in
substantially the form attached hereto as Exhibit A (each, a “Non-Competition
Agreement”); and



WHEREAS, capitalized terms used and not otherwise defined herein shall have the meanings set
forth in Schedule I attached hereto.



NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties,
covenants and agreements herein contained, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:



ARTICLE I




PURCHASE AND SALE OF ASSETS




1.1 Purchase and Sale of Assets. At the Closing, on the terms and subject to the
conditions set forth in this Agreement, the Company shall sell, assign, transfer and deliver to the
Buyer, and relinquish to the Buyer (together with its successors and assigns) in perpetuity, free
and clear of all Liens, all right, title and interest in and to all of the Acquired Assets. As
used in
this Agreement, the term “Acquired Assets” means all of the assets, properties, rights,
interests and goodwill of the Company of every kind and nature whatsoever, whether real, personal
or mixed, tangible or intangible, wherever located, owned, used or held for use by the Company,
including the following, but excluding the Excluded Assets:



(a) all sales Contracts pursuant to which the Company has agreed to provide services to
customers and (ii) all other Contracts listed on Schedule 1.1(a) attached hereto
(collectively, the “Assigned Contracts”);


 


1









 





(b) all tangible personal property of the Company, including, all equipment, machinery, tools,
molds, furniture, fixtures, office equipment, computers, communications equipment, supplies, spare
and replacement parts and other physical assets of the Company (including the tangible personal
property listed on Schedule 1.1(b) attached hereto);



(c) all rights of the Company, to the extent transferable, under all Approvals and Orders
relating to the operation of the Business, including those listed on Schedule 1.1(c)
attached hereto;



(d) all rights of the Company with respect to all credits, refunds, prepaid expenses, deferred
charges, advance payments, security deposits and prepaid items, including those listed on
Schedule 1.1(d) attached hereto;



(e) all accounts receivable, notes receivable, Indebtedness, and other rights to payment
payable or otherwise owed to the Company (collectively, the “Accounts Receivable”);



(f) all Company Intellectual Property, including the business name “Default Servicing, LLC”
and derivations thereof, and all goodwill associated therewith, licenses and sublicenses granted in
respect thereto and rights thereunder, together with all claims against third parties for profits
and all costs, losses, claims, liabilities, fines, penalties, damages and expenses (including
interest which may be imposed in connection therewith), court costs and reasonable fees and
disbursements of counsel, consultants and expert witnesses incurred by reason of the past
infringement, alleged infringement, unauthorized use or disclosure or alleged unauthorized use or
disclosure of any Company Intellectual Property, together with the right to sue for, and collect
the same, or to sue for injunctive relief, for the Buyer’s own use and benefit, and for the use and
benefit of its successors, assigns or other legal representatives;



(g) all Books and Records of the Company located in Louisville, Kentucky or accessible using
the Res.Net online real estate systems, access to all financial Books and Records located in
Plantation, Florida, and all human resources Books and Records for the Transferred Employees, to
the extent permissible by law (collectively, the “Transferred Books and Records”);



(h) all telephone numbers and facsimile numbers, including those listed on Schedule
1.1(h) attached hereto;



(i) all real and personal property interests and rights hereunder (including leasehold
interests, licenses, and occupancy rights, collocation rights, easements, servitudes and
access to rights-of-way) relating to real or personal property, including the real and
personal property listed on Schedule 1.1(i) attached hereto;


 


2









 





(j) all claims, demands, causes of action, rights of recovery, rights of set-off, rights of
recoupment, guarantees, warranties, indemnities and similar rights of the Company relating to the
Acquired Assets or the Business and all rights to proceeds under insurance policies and indemnity
agreements relating to the Acquired Assets or the Business, except to the extent related to the
Excluded Assets or the Excluded Liabilities;




(k) all improvements and fixtures to the real property leased by the Company; and




(l) all goodwill of the Company.



1.2 Excluded Assets. Notwithstanding anything to the contrary in Section 1.1
above, the following assets and property of the Company are to be retained by the Company and shall
not constitute Acquired Assets (collectively, the “Excluded Assets”):



(a) all Contracts to which the Company is a party or by which the Company or any of its assets
or properties are bound, other than the Assigned Contracts (the “Excluded Contracts”);




(b) all rights of the Company under this Agreement and the Related Agreements;




(c) all cash and bank accounts of the Company;




(d) all minute books and equity records of the Company;



(e) subject to the provisions of Section 1.1(j), all insurance policies of the
Company;



(f) all personnel records of all Company Employees other than Transferred Employees and all
medical records and other medical information of Transferred Employees that the Company is
prohibited by Law from transferring to the Buyer;




(g) all Employee Benefit Plans of the Company and all assets related thereto;



(h) all payments from closings on properties listed by the Company that occur prior to the
Closing Date; and




(i) those assets specifically set forth in Schedule 1.2(i) attached hereto.


 


3









 





1.3 Assumption of Liabilities. Upon the terms and subject to the conditions set forth
in this Agreement, at the Closing, the Buyer shall assume from the Company only the following
liabilities and obligations (the “Assumed Liabilities”):



(a) contractual obligations of the Company arising after the Closing under any of the Assigned
Contracts to the extent that the Company’s rights thereunder are actually (with consent where
required) assigned to the Buyer; provided, that, the Buyer shall not assume, and
does not hereby agree to pay, discharge or perform, (i) any Damages relating in any manner to or
arising from any breach or default of the Company of any Assigned Contract occurring on or prior to
the Closing Date regardless of whether the Company discloses such breach or default pursuant to
this Agreement, or (ii) any Liability to indemnify any Person under such Assigned Contract arising
from or relating to any act or omission occurring prior to the Closing



(b) the Accrued Vacation with respect to the Transferred Employees, as set forth on
Schedule 1.3(b).



1.4 Excluded Liabilities. Except as expressly assumed pursuant to Section
1.3, the Buyer is not assuming and shall not have any liability or obligation whatsoever for
any Liabilities of the Company or any of its predecessors or Affiliates whatsoever, whether or not
arising out of the ownership or operation of the Business or the Acquired Assets, all of which will
be retained and satisfied when due by the Company (the “Excluded Liabilities”). Without
limiting the generality of the foregoing, the Buyer shall not assume or be deemed to assume any of
the following Liabilities, all of which shall constitute Excluded Liabilities:



(a) any Liabilities arising under or relating to any written or oral Contract to which the
Company or its assets or properties are otherwise subject or bound, other than Liabilities arising
under the Assigned Contracts to the extent provided in Section 1.3(a);



(b) any Liabilities of the Company or any of its predecessors or Affiliates in respect of any
Indebtedness, trade payables, accrued expenses or Company Transaction Expenses, except to the
extent provided in Section 1.3(b);



(c) any Liabilities of the Company or any of its predecessors or Affiliates to any Affiliate
or current or former member, option holder or holder of other equity interests of the Company or
any of its predecessors or Affiliates;



(d) any Liabilities of the Company or any of its predecessors or Affiliates for or in respect
of Taxes, including any sales Taxes or Taxes resulting from or relating to the consummation of the
transactions contemplated hereby (including any Taxes that may become due as a result of any bulk
sales or similar tax that may be assessed against the Company following the Closing);



(e) any Liabilities of the Company to any present or former manager, member, officer,
employee, consultant or independent contractor of the Company or any of its predecessors or
Affiliates, or any of their respective spouses, children, other dependents or beneficiaries,
including any and all Liabilities arising under any federal, state, local or foreign Laws or Orders
(including those relating to employee health and safety);



(f) any Liabilities of the Company or any of its predecessors or Affiliates for any Actions
against the Company or any of its predecessors or Affiliates, including any Actions pending or
threatened against the Company or any of its predecessors or Affiliates as of the Closing Date;


 


4









 





(g) any Liabilities of the Company or any of its predecessors or Affiliates arising out of or
resulting from and violation of or non-compliance with any federal, state, local or foreign Laws or
Orders;



(h) any Liabilities of the Company or any of its predecessors or Affiliates arising out of,
relating to or resulting from any obligation to indemnify any Person (other than pursuant to an
Assigned Contract to the extent assumed pursuant to Section 1.3(a));



(i) any Liabilities of the Company arising under this Agreement or any of the Related
Agreements;



(j) any Liabilities resulting from or relating to products sold or services performed by the
Company or any of its predecessors or Affiliates, including any warranty Liabilities;



(k) any Liabilities relating to, based in whole or in substantial part on events or conditions
occurring or existing in connection with, or arising out of, the shutdown prior to the Closing of
any of the operations and facilities utilized by the Company in connection with the Business,
including any action prior to the Closing that could be construed as a “plant closing” or “mass
layoff,” as those terms are defined in WARN, or any “employment loss,” as defined in WARN, that any
Company Employee may suffer or may be deemed to suffer prior to the Closing;



(l) any Liabilities of the Company or any of its predecessors or Affiliates based upon such
Person’s acts or omissions occurring after the Closing;



(m) any Liabilities arising under or with respect to any Employee Benefit Plan or any benefit,
tax or compensation Liability of any ERISA Affiliate;



(n) any Liabilities of the Company arising in connection with or in any way relating to any
property now or previously owned, leased or operated by the Company, its predecessors or
Affiliates, or any activities or operations occurring or conducted at any real property now or
previously owned, operated or leased by the Company, its predecessors or Affiliates (including
offsite disposal), including any Liabilities which arise under or relate to any Environmental Laws;




(o) any other Liabilities attributable in any manner to the Excluded Assets; and




(p) any Liabilities set forth on Schedule 1.4(p) attached hereto.



The disclosure of any obligation or Liability on any schedule to this Agreement shall not create an
Assumed Liability or other Liability of the Buyer, except where such disclosed obligation has been
expressly assumed by the Buyer as an Assumed Liability in accordance with provisions of Section
1.3 hereof.


 


5









 





1.5 Closing. Subject to the terms and conditions hereof, the closing of the
transactions contemplated by this Agreement (the “Closing”) shall take place remotely via
the
exchange of documents and signatures commencing at 10:00 a.m. (EDT), on the third (3rd)
Business Day following the date on which all of the conditions set forth in Article VIII
have been satisfied or waived (other than any such conditions that by their terms cannot be
satisfied until the Closing Date, which conditions shall be required to be so satisfied or waived
on the Closing Date), unless another time and/or date is agreed to in writing by the Member and
Buyer (such time and date being herein called the “Closing Date”). For financial and
accounting purposes, the Closing shall be deemed to have occurred as of 12:01 a.m. (EDT) on the
Closing Date.




1.6 Consent of Third Parties.



(a) Notwithstanding anything in this Agreement or in any Related Agreement to the contrary,
neither this Agreement nor any such Related Agreement shall constitute an agreement to assign or
otherwise transfer, or require the Buyer to assume any obligations under, any Assigned Contract if
an attempted assignment or transfer thereof would, without the consent of a third party to such
assignment or transfer, constitute a breach thereof, would be ineffective, would affect adversely
the rights of the Buyer thereunder or would violate any applicable law. If any such consent has
not been obtained as of the Closing Date and the Buyer nevertheless determines to proceed with the
Closing, the Buyer may waive the closing condition that such consent be delivered at the Closing,
and the Company shall use its best efforts to obtain such consent following the Closing, and the
Buyer will provide reasonable cooperation to the Company in seeking to obtain any such consent.
The Company shall pay and discharge any and all out-of-pocket costs or expenses of seeking to
obtain or obtaining any such consent or approval whether before or after the Closing Date.



(b) If any Assigned Contract is not transferred to the Buyer at the Closing pursuant to this
Agreement, the Company shall cooperate with the Buyer in any reasonable arrangement designed to
provide for the Buyer all of the benefits of, and to have the Buyer assume the burdens,
liabilities, obligations and expenses expressly assumed by the Buyer hereunder with respect to,
such Assigned Contract. In such event, until such consent has been obtained, (i) the Buyer shall
use commercially reasonable efforts to perform in the Company’s name, and, in respect of the
incremental costs incurred by the Buyer in performing in the Company’s name, at the Company’s
expense, all of the Company’s obligations with respect to each Assigned Contract; provided,
however, that the Company shall not be required to take any action in performing such
obligations which, in the Buyer’s reasonable judgment, would subject the Buyer to any Liability or
an unreasonable risk of incurring any such Liability and (ii) the Company shall take all actions
reasonably requested by the Buyer to enforce for the benefit of the Buyer any and all rights of the
Company with respect to any such Assigned Contract.



(c) The Company hereby authorizes the Buyer to perform all of its obligations after the
Closing with respect to all Assigned Contracts that are not assigned to the Buyer at the Closing
and the Company hereby grants to the Buyer a power of attorney to act in the name of the Company
with respect thereto. Such power of attorney shall be coupled with an interest and shall be
irrevocable. The Company agrees to remit promptly to the Buyer all collections or payments
received by the Company in respect of all such Assigned Contracts, and shall hold all such
collections or payments in trust for the benefit of, and promptly pay the same over to, the
Buyer; provided, however, that nothing herein shall create or provide any
rights or benefits in or to third parties.


 


6









 





(d) Nothing in this Section 1.6 shall be deemed to modify in any respect any of the
Company’s representations or warranties set forth herein or be deemed to constitute an agreement to
exclude from the Acquired Assets any assets described under Section 1.1.



1.7 Further Assurances. At any time and from time to time after the Closing, at the
request of the Buyer and without further consideration, the Company will, and the Member will cause
the Company to, execute and deliver such other instruments of sale, transfer, conveyance,
assignment and confirmation, and will take such further action, as may be reasonably requested in
order to more effectively transfer, convey and assign to the Buyer, and to confirm the Buyer’s
title in and to, the Acquired Assets, and each of the parties shall execute such other documents
and take such further action as may be reasonably required or desirable to carry out the provisions
of this Agreement and the transactions contemplated hereby.



1.8 Withholding Rights. The Buyer shall be entitled to deduct and withhold from any
amounts otherwise payable pursuant to this Agreement such amounts as are required to be deducted
and withheld with respect to the making of such payments under the provisions of any applicable Tax
Laws. Any such withheld amounts shall be treated for all purposes of this Agreement as having been
paid to the Person in respect of which such deduction and withholding was made.



1.9 Transfer Taxes. All sales (including bulk sales), transfer and similar Taxes, if
any, payable in connection with the transactions contemplated hereby shall be paid, jointly and
severally, by the Company and the Member.



ARTICLE II




PURCHASE PRICE; CONTINGENT PAYMENTS




2.1 Purchase Price. The aggregate purchase price (the “Purchase Price”)
payable for the Acquired Assets shall be (i) Five Hundred Thousand Dollars ($500,000), reduced by
an amount that is equal to one half of the Accrued Vacation (the “Base Purchase Price”),
plus (ii) Contingent Payment Amount that becomes payable pursuant to Section 2.2. At the
Closing, the Buyer shall pay or cause to be paid to the Company the Base Purchase Price by wire
transfer of immediately available funds to a United States bank account designated by the Company
to the Buyer in writing.




2.2 Contingent Payments.



(a) The Company shall be eligible to earn an aggregate of up to an additional amount equal to
Three Million Two Hundred Fifty Thousand Dollars ($3,250,000) less an amount equal to (i) fifty
percent (50%) of the Pre-Closing Revenue from and including June 1, 2011 through June 17, 2011,
plus (ii) forty percent (40%) of the Pre-Closing Revenue from and including June 18, 2011 through
the day before the Closing Date (the “Maximum Contingent Payment Amount”) in contingent
payments depending upon Net Revenue during each Measurement Period, on the terms and conditions set
forth in this Section 2.2 (any amount
earned pursuant to this Section 2.2, a “Contingent Payment Amount”). For
purposes of this Section 2.2(a), “Pre-Closing Revenue” shall mean the aggregate dollar
amount of revenues (net of credits, discounts, refunds, rebates and returns) recognized by the
Company, calculated in accordance with GAAP and the Company’s accounting principles. Within ten
(10) Business Days following the Closing, the Company shall deliver to the Buyer a certificate
certified by the President of the Company setting forth the calculation of the Maximum Contingent
Payment Amount. If the Buyer objects to the calculation of the Maximum Contingent Payment Amount,
the Buyer shall deliver to the Company within ten (10) Business Days following the Buyer’s receipt
of the Company’s calculation of the Maximum Contingent Payment Amount a written notice setting
forth in reasonable detail such objections (a “Maximum Contingent Payment Amount Objection
Notice”), together with all supporting documentation.


 


7









 





(b) Within thirty (30) days following the end of each calendar month in each of the calendar
years 2011, 2012, 2013 and 2014 (each, a “Measurement Period”) commencing with the calendar
month in which the Closing Date occurs, the Buyer, in good faith, shall calculate the Net Revenue
(which Net Revenue shall be pro-rated, if necessary, for the calendar month in which the Closing
Date occurs) for such Measurement Period and shall deliver to the Member and the Company a
certificate setting forth such calculation in reasonable detail, which calculation shall be final
and binding on all parties unless the Member or the Company objects to such calculation as set
forth in Section 2.2(e) below. Subject to the provisions of Section 9.2(b), within
ten (10) days following the final determination of the Net Revenue for such Measurement Period, the
Buyer shall pay (or, if deposited with the Escrow Agent (as defined below) pursuant to Section
2.2(e), cause the Escrow Agent to pay) to the Company an amount equal to the applicable Agreed
Percentage of the Net Revenue for such Measurement Period; provided, however, that
the maximum aggregate payments to which the Company shall be entitled hereunder shall not exceed
the Maximum Contingent Payment Amount; provided further, however, that the
Buyer shall deposit on behalf of the Company into escrow with SunTrust Bank (the “Escrow
Agent”) Sixteen Thousand Six Hundred Sixty-Six Dollars and Sixty-Seven Cents ($16,666.67)
(“Escrow Deposit Amount”) out of the monthly Contingent Payment Amounts that are payable to
the Company pursuant to this Section 2.2 for each calendar month commencing with the
payment for the calendar month ending July 31, 2012 and ending once the aggregate amount deposited
with the Escrow Agent pursuant to this Section 2.2(b) equals Two Hundred Fifty Thousand
Dollars ($250,000) (the “Escrow Amount”); provided that if any such monthly Contingent
Payment Amount is less than the Escrow Deposit Amount, then such short fall in the Escrow Deposit
Amount for that month shall be payable into the escrow from future monthly Contingent Payment
Amounts not already required to be deposited into the escrow pursuant to this Section
2.2(b). The Escrow Amount shall be held by the Escrow Agent pursuant to the terms and
conditions of an escrow agreement in a form agreed to by the Parties prior to the Closing (the
“Escrow Agreement”) and to be available to satisfy claims by the Buyer Indemnified Persons
for indemnification pursuant to Section 9.2(a)(viii). Upon the third (3rd) anniversary of
the Closing Date, the Escrow Amount shall be released to the Company, less any amounts used or set
aside to satisfy final or unresolved claims by the Buyer Indemnified Persons for indemnification
pursuant to Section 9.2(a)(viii), and, upon the satisfaction of such claims, any remaining
amounts held in escrow shall be released to the Company.



(c) Upon payment of the aggregate Contingent Payment Amounts in the amount of the Maximum
Contingent Payment Amount (whether such payments are placed in
escrow as contemplated by Section 2.2(b) or Section 2.2(e), paid to the
Company or offset pursuant to the provisions of Section 9.2(b)), then, except with respect
to the Company’s right to any amounts placed in escrow pursuant to Section 2.2(b) or
Section 2.2(e), the respective rights and obligations of the Company and the Buyer pursuant
to this Section 2.2 shall terminate.


 


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(d) With respect to Section 2.2(b), the Buyer shall, upon the reasonable request of
the Company, provide the Company with reasonable evidence substantiating such calculations;
provided, however, that the Company shall hold all such information in strict
confidence and shall not use any such information for any purpose whatsoever other than to verify
the calculation of Net Revenue.



(e) If the Company objects to the calculation of the Net Revenue or any Contingent Payment,
the Company shall deliver to the Buyer within thirty (30) days following the Company’s receipt of
the Buyer’s calculation of the Net Revenue a written notice setting forth in reasonable detail such
objections (a “Net Revenue Objection Notice;” each Net Revenue Objection Notice or Maximum
Contingent Payment Amount Objection Notice is an “Objection Notice”), together with all
supporting documentation. If the Company delivers a Net Revenue Objection Notice to the Buyer, the
Buyer shall pay to the Company the amount of the applicable Contingent Payment Amount not in
dispute, and shall deposit any amount in dispute into escrow with the Escrow Agent to be held by
the Escrow Agent pursuant to the terms and conditions of the Escrow Agreement. If either the Buyer
or the Company delivers an Objection Notice to the other, the Buyer and the Company shall attempt
in good faith to resolve the matters set forth in the applicable Objection Notice within twenty
(20) days after receipt of the same by the Buyer or the Company, as applicable. If the Parties are
unable to do so, either the Buyer or the Company may refer all remaining disputes to a nationally
recognized accounting firm as mutually agreed upon by the Buyer and the Company (the “Dispute
Accounting Firm”) which shall be instructed to resolve such disputes within thirty (30) days of
the referral. The Buyer and the Company shall have the right to meet jointly with the Dispute
Accounting Firm during this period and to present their respective positions. The resolution of
disputes by the Dispute Accounting Firm will be set forth in writing and will be conclusive and
binding upon the parties, upon the date of such resolution, absent manifest error. In making its
determination, the Dispute Accounting Firm shall consider only those items that the Company and
Buyer are unable to resolve and the Dispute Accounting Firm shall be bound by the terms and
conditions of this Agreement, including the definition of Net Revenue and the terms of this
Section 2.2. The Company and the Buyer will each pay their own fees and expenses
(including any fees and expenses of their accountants and other representatives) in connection with
the resolution of any dispute under this Section 2.2 (excluding the fees and expenses of
the Dispute Accounting Firm). The fees and expenses of the Dispute Accounting Firm pursuant to
this Section 2.2(e) shall be borne by the Buyer and the Company, in inverse proportion as
they may prevail on matters resolved by the Dispute Accounting Firm, which proportionate
allocations shall also be determined by the Dispute Accounting Firm at the time the determination
of such firm is rendered on the merits of the matters submitted.



(f) For purposes hereof, the term “Net Revenue” shall mean the aggregate dollar amount
of revenues (net of credits, discounts, refunds, rebates and returns) recognized by the Acquired
Business during a Measurement Period, calculated in accordance with GAAP and the Buyer’s accounting
principles; the term “Agreed Percentage” shall mean, with respect to any
calendar month in the calendar year 2011, forty-five percent (45%); any calendar month in the
calendar year 2012, thirty-five percent (35%); any calendar month in the calendar year 2013,
thirty-five percent (35%); and any calendar month in the calendar year 2014, thirty percent (30%);
and the term “Acquired Business” shall mean the Business as operated through the Buyer or
its Affiliates, and all other business conducted by the Buyer following the Closing, which will
maintain separate financial statements through the end of the final 2014 Measurement Period. Net
Revenue payable in connection with the sale of properties listed by the Company shall be recognized
at the time of the closing of such sale, not the receipt of payment of such Net Revenue.


 


9









 





(g) Neither HSCC nor Buyer may sell the Acquired Business, or any substantial portion thereof,
unless the purchaser in such transaction agrees in writing enforceable by the Company and the
Member to be bound by the provisions of this Section 2.2 as though it is the Buyer. The
Buyer and HSCC shall remain liable to the Member under this Section 2.2, unless they are
released from such liability by the Member in writing.



2.3 Closing Prorations and Adjustments. The following shall be prorated (any amount
owed by the Buyer as a result of such proration to be referred to as the “Buyer Prorated
Amount”) between the Buyer and the Company as of 12:01 a.m. (EDT) on the Closing Date, on the
basis of the actual number of days elapsed during the month in which the Closing occurs, and the
Buyer shall deliver to the Company the Buyer Prorated Amount within ten (10) Business Days
following the Closing by a check payable to the Company:



(a) Initial Base Rent, as defined in the Lease, dated as of July 17, 2008, by and between
Commerce Crossings Business Centers, LLC and the Company (the “Office Lease”), paid on the
first day of the month in which the Closing occurs; and



(b) The portion of Annual Operating Costs, as defined in the Office Lease, paid on the first
day of the month in which the Closing occurs.



2.4 Allocation of Purchase Price. The Purchase Price shall be allocated among the
Acquired Assets as proposed by the Buyer in good faith, in accordance with Section 1060 of the Code
and the Treasury Regulations thereunder, and shall be as set forth in a schedule produced by the
Buyer and delivered to the Company within one hundred twenty (120) days following the Closing Date
(the “Allocation Schedule”). The parties shall, and shall cause their respective
Affiliates to, use the allocations set forth in the Allocation Schedule (as reasonably adjusted to
account for events occurring after the determination of the Allocation Schedule) for all Tax
purposes, file all Tax Returns in a manner consistent with such Allocation Schedule (as adjusted)
and take no tax position contrary thereto unless required to do so by a change in applicable Laws
or a good faith resolution of a Tax contest.



ARTICLE III




REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MEMBER




Except as disclosed by the Company in the disclosure schedule, dated as of the date of this
Agreement and attached hereto (the “Company Disclosure Schedule”), the Company and the
Member, jointly and severally, hereby represent and warrant to the Buyer as of the date hereof
and as of the Closing Date as follows. The Company Disclosure Schedule shall be arranged in
sections corresponding to the numbered and lettered sections and subsections contained in this
Article III, and the disclosures in any section or subsection of the Company Disclosure
Schedule shall qualify only the corresponding section or subsection of this Article III.


 


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3.1 Organization, Good Standing and Qualification.



(a) The Company is duly organized and validly existing and in good standing under the Laws of
the State of Delaware.



(b) The Company is duly qualified or licensed as a foreign limited liability company to do
business and is in corporate and tax good standing under the Laws of each jurisdiction where the
character of the Acquired Assets or the nature of the Business makes such qualification or
licensing necessary, other than in those jurisdictions where the failure to be so qualified would
not have a Business Material Adverse Effect. The Company has all requisite power and authority and
is in possession of all Approvals necessary, to own, lease and operate the Acquired Assets and to
carry on the Business as it is now being conducted. Set forth in Section 3.1(b) of the
Company Disclosure Schedule is a list of (i) the jurisdictions in which the Company is qualified or
licensed to transact business, (ii) every state or foreign jurisdiction in which the Company has
employees or facilities and (iii) the sole member and officers of the Company.



(c) The Company has delivered to the Buyer true and complete copies of the Company’s
Organizational Documents, as amended (if applicable) and in effect as of the date hereof.



3.2 Subsidiaries and Investments. The Company has not had, nor does it currently
have, any Subsidiaries, nor has it ever owned, nor does it currently own, any capital stock or
other proprietary interest, directly or indirectly, in any other Person.



3.3 Ownership of the Company. The entire membership percentage of the Company is
owned beneficially and of record by the Member, and, except as set forth in Section 3.3 of
the Company Disclosure Schedule, no other Person has at any time held any membership or other
equity interests of the Company. Except as represented in the preceding sentence, there are no
outstanding membership or other equity interests of the Company or any options, warrants, calls,
rights, agreements, arrangements or undertakings of any kind (contingent or otherwise) obligating
the Company to issue, deliver or sell, or cause to be issued, delivered or sold, any membership or
other equity interests or any other securities of the Company.


 


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3.4 Authorization; Binding Obligation. The Company has all necessary power and
authority to execute and deliver this Agreement, each Related Agreement to which it is a party and
each other instrument or document required to be executed and delivered by it pursuant to this
Agreement or any such Related Agreement, and to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. The execution and delivery by
the Company of this Agreement and the Related Agreement to which it is a party, the performance of
its obligations hereunder and thereunder and the consummation by the
Company of the transactions contemplated hereby and thereby have been duly and validly
authorized by all requisite action on the part of the Company and no other proceedings on the part
of the Company are necessary to authorize this Agreement or any Related Agreement to which it is a
party or to consummate the transactions so contemplated herein and therein. This Agreement has
been, and each of the Related Agreements to which the Company is a party, when executed and
delivered by the Company, will be, duly and validly executed and delivered by the Company and
constitute a legal, valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other Laws of general application affecting enforcement of
creditors’ rights generally and (ii) as limited by Laws relating to the availability of specific
performance, injunctive relief or other equitable remedies (together, the “Enforceability
Exceptions”).



3.5 Consents and Approvals. Except as set forth in Section 3.5 of the Company
Disclosure Schedule, the execution and delivery by the Company of this Agreement, the Related
Agreements to which the Company is a party or any other instrument or document required by this
Agreement or any Related Agreement to be executed and delivered by the Company do not, and the
performance of this Agreement, the Related Agreements to which the Company is a party and any other
instrument or document required by this Agreement or any Related Agreement to be executed and
delivered by the Company shall not, require the Company to obtain any Approval of any Person or
Approval of, observe any waiting period imposed by, or make any filing with or notification to, any
Governmental Authority.



3.6 No Violation. Except as set forth in Section 3.6 of the Company
Disclosure Schedule, the execution and delivery by the Company of this Agreement, the Related
Agreements to which the Company is a party or any other instrument or document required by this
Agreement or any Related Agreement to be executed by the Company do not, and the performance of
this Agreement, the Related Agreements to which the Company is a party or any other instrument or
document required by this Agreement or any Related Agreement to be executed and delivered by the
Company will not, (a) conflict with or violate the Organizational Documents of the Company, (b)
conflict with or violate any Law or Order applicable to the Company, or (c) result in any material
breach or violation of or constitute a material default (or an event that with notice or lapse of
time or both would become a breach, violation or default) under, or impair the Company’s rights or
alter the rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any
of the Acquired Assets pursuant to, any Assigned Contract or any other material Contract to which
the Company is a party or is otherwise bound, or any Approval to which the Company is a party or by
which the Company or the Acquired Assets are bound or affected.


 


12









 





3.7 Business Licenses. Section 3.7 of the Company Disclosure Schedule
contains a true and complete list of all Approvals and Orders which are necessary for the ownership
or operation of the Acquired Assets or the Business, or that have been issued, granted or otherwise
made available to the Company, including any Approvals from Governmental Authorities (the
“Business Licenses”). Each Business License is valid and in full force and effect, no
Business License is subject to any Lien, limitation, restriction, probation or other qualification
and there is no default under any Business License and, to the Knowledge of Company, no event has
occurred which constitutes or, after notice or lapse of time or both, would constitute a
breach or default under any of the Business Licenses or would permit revocation or termination of
any of the Business Licenses. Section 3.7 of the Company Disclosure Schedule specifies the
holder of each Business License. There is no Action pending or, to the Knowledge of the Company,
threatened that could result in the termination, revocation, limitation, suspension, restriction or
impairment of any Business License or the imposition of any fine, penalty or other sanctions for
violation of any legal or regulatory requirements relating to any Business License nor, to the
Knowledge of the Company, is there any event or set of circumstances which are reasonably likely to
result therein. The Company has all Approvals that are necessary in order to enable the Company to
own and operate the Acquired Assets and to conduct the Business as presently conducted. None of
the Business Licenses shall be affected by the consummation of the transactions contemplated
hereby. All Business Licenses are validly held by the Company and the Company has complied and is
in compliance, in each case in all material respects, with the terms and conditions of each
Business License held by it. The Company has not received notice of any Action, and no such Action
is pending, relating to the cancellation, suspension, revocation, modification or non-renewal of
any Business License.




3.8 Title to and Condition of Properties; Sufficiency of Assets; Ownership of Assets.



(a) Except as set forth in Section 3.8(a) of the Company Disclosure Schedule, the
Company is the sole and exclusive legal and equitable owner of all right, title and interest in,
and has good, valid and marketable title to, all of the Acquired Assets purported to be owned by
the Company, and the legal and valid right to use all other Acquired Assets used or held for use by
the Company, free and clear of all Liens. The Company has the power and the right to sell, assign
and transfer, the Company will sell and deliver to the Buyer, and upon consummation of the
transactions contemplated by this Agreement the Buyer will acquire, good, valid and marketable
title to all of the Acquired Assets purported to be owned by the Company and the valid, enforceable
and sufficient right to use all of the Acquired Assets, free and clear of all Liens.



(b) All tangible assets included in the Acquired Assets have been maintained in accordance
with normal industry practice and are in good operating condition and repair, subject to ordinary
wear and tear, and there has not been any interruption of the operations of the Business due to the
condition of any such assets or properties. The Acquired Assets comprise all assets, properties,
rights and Contracts used in connection with the operation of the Business, which are all of the
assets, properties, rights and Contracts necessary for the operation of the Business by the Buyer
following the Closing in the manner in which the Business is currently conducted. Except as set
forth in Section 3.8(b) of the Company Disclosure Schedule, no other Person, including the
Member or any Affiliate of the Company or the Member, owns or has the right to use any of the
assets or property used in connection with the operation of the Business.


 


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3.9 Real Property.



(a) The Company does not own and has never owned any real property. Section 3.9(a) of
the Company Disclosure Schedule sets forth a complete and accurate list of: (i) all real property
that is leased by the Company (the “Leased Real Property”) and (ii) all leases and
subleases to which the Company is a party or is otherwise bound pursuant to which the
Company leases or subleases real property (the “Real Property Leases”). All Real
Property Leases are in full force and effect and are the legal, valid and binding obligations of
the Company and, to the Knowledge of the Company, of each other party thereto enforceable in
accordance with their respective terms, and neither the Company nor, to the Knowledge of the
Company, the other party or parties thereto is or are in breach or default thereunder and there
exists no event, condition or occurrence which (with or without due notice or lapse of time, or
both) would constitute such a breach or default by the Company thereunder or, to the Knowledge of
the Company, by the other party or parties thereto of any of the foregoing. Except as set forth in
Section 3.9(a) of the Company Disclosure Schedule, no consent of, or notice to, any third
party is required under any Real Property Lease as a result of or in connection with, and the
enforceability of any such Real Property Lease will not be affected by, the execution, delivery and
performance of this Agreement or any Related Agreement, or the transactions contemplated hereby or
thereby. The Company has delivered to the Buyer true and complete copies of all Real Property
Leases, including all amendments thereto.



(b) Except as set forth in Section 3.9(b) of the Company Disclosure Schedule, the
Company holds all Leased Real Property free and clear of all Liens, claims or rights of any third
parties, and the possession of the Leased Real Property (collectively, the “Premises”) by
the Company has not been disturbed and no claim has been asserted against the Company adverse to
its rights in such Premises. All improvements, fixtures and structures on the Premises, and the
current uses of the Premises, conform in all material respects to all applicable Laws, including
building, zoning, health, safety and other Laws, and applicable zoning Laws permit the presently
existing improvements and the conduct and continuation of the Business as being conducted on the
Premises. All improvements, mechanical equipment, fixtures and operating systems included in the
Premises are in good operating condition and repair (ordinary wear and tear excepted) and there
does not exist any condition which materially interferes with the use of such property and
improvements.



(c) The Company has not granted any leases or licenses, nor created any tenancies, affecting
the Premises. There are no other parties in possession of any portion of the Premises as
trespassers or otherwise.



(d) The Company is not a party to or is not otherwise bound by, nor is any of the Premises
subject to, any Contract requiring it to pay any commissions or other compensation to any brokers
or agents in connection with any of the Premises, and has had no dealings with any broker or agent
with respect to the Premises upon which any such broker or agent would be entitled to a commission
or other compensation.



(e) To the Knowledge of the Company, (i) there are no Laws or Orders now in existence or, to
the Knowledge of the Company, under active consideration by any Governmental Authority which would
require the tenant of any Leased Real Property to make any expenditure in excess of $10,000 to
modify or improve such Leased Real Property to bring it into compliance therewith and (ii) the
Company is not required to expend more than $10,000 in the aggregate under all Real Property Leases
to restore the Leased Real Property at the end of the term of the Real Property Leases to the
condition required under the Real Property Leases (assuming the conditions existing in such Leased
Real Property as of the date hereof).


 


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3.10 Personal Property Leases. Section 3.10 of the Company Disclosure
Schedule sets forth a complete and accurate list of all personal property that is leased by the
Company (the “Leased Personal Property” and, the leases covering the Leased Personal
Property, collectively, the “Personal Property Leases”). The Company is the owner and
holder of the leasehold interests purported to be granted by each Personal Property Lease, and all
Personal Property Leases are in full force and effect in accordance with the terms thereof and are
the legal, valid and binding obligations of the Company and, to the Knowledge of the Company, of
each other party thereto enforceable in accordance with their respective terms, and neither the
Company nor, to the Knowledge of the Company, the other party or parties thereto is or are in
material breach or default thereunder and there exists no event, condition or occurrence which
(with or without due notice or lapse of time, or both) would constitute such a breach or default by
the Company thereunder or, to the Knowledge of the Company, by the other party or parties thereto
of any of the foregoing. Except as set forth in Section 3.10 of the Company Disclosure
Schedule, no consent of, or notice to, any third party is required under any Personal Property
Lease as a result of or in connection with, and the enforceability of any such Personal Property
Lease will not be affected by, the execution, delivery and performance of this Agreement or any
Related Agreement, or the transactions contemplated hereby or thereby. The Company has delivered
to the Buyer complete and accurate copies of all Personal Property Leases, including all amendments
thereto.




3.11 Environmental Matters.



(a) The Company has materially complied and is in material compliance with all Environmental
Laws, which compliance includes the possession by the Company of all Approvals required under
Environmental Laws and material compliance with the terms and conditions thereof. Section
3.11(a) of the Company Disclosure Schedule includes a list of all of the Approvals required
under Environmental Laws necessary to own and operate the Acquired Assets or the Business as
currently conducted and contemplated to be conducted. There are no past or present facts,
circumstances, conditions, activities or incidents, including release of any Materials of
Environmental Concern at any facilities owned or operated by the Company, which could give rise to
any material Liability or result in a claim against the Company or the Buyer under any
Environmental Law. There have been no releases by the Company or any of its predecessors or
Affiliates of any Materials of Environmental Concern into the environment at any real property or
facility formerly or currently owned or operated by the Company or any of its predecessors, or that
is or was ever used by the Company or any of its predecessors. The Company does not have Knowledge
of any release by any other Person of any Materials of Environmental Concern into the environment
at any parcel of real property or any facility formerly or currently operated or occupied by the
Company that is or was ever used by the Company. There is no Action pending or, to the Knowledge
of the Company, threatened or other notice of violation, formal administrative proceeding or
written information request by any Governmental Authority, nor has the Company received notice of
any investigation by any Governmental Authority relating to any Environmental Law nor any other
notice from a Governmental Authority or any other Person alleging that the Company is not in
compliance with any Environmental Law or Approval required under any Environmental Law or has any
Liability under any Environmental Law or for the remediation of any Materials of Environmental
Concern at any property.


 


15









 





(b) Set forth in Section 3.11(b) of the Company Disclosure Schedule is a complete and
accurate list of all environmental reports, investigations or audits (whether in hard copy or
electronic form) relating to premises currently or previously owned, operated or occupied by the
Company or any of its predecessors or Affiliates (whether conducted by or on behalf of the Company
or any of its predecessors or Affiliates or a third party, and whether done at the initiative of
the Company or a predecessor or an Affiliate or directed by a Governmental Authority or other third
party) of which the Company is aware. A complete and accurate copy of each such document has been
provided to the Buyer.




3.12 Financial Statements; No Undisclosed Liabilities.



(a) Section 3.12 of the Company Disclosure Schedule contains the following financial
statements (collectively, the “Financial Statements”):




(i) the unaudited balance sheet of the Company as of May 31, 2011 (the
“Interim Balance Sheet”) and the related statements of income for the
five-month period then ended; and




(ii) the unaudited balance sheet of the Company as of December 31, 2010
(including Default Servicing, Inc. from January 1, 2010 to January 15, 2010), and
the related statement of income for the respective twelve (12) month period then
ended.



(b) The Financial Statements were prepared in accordance with the books and records of the
Company, in accordance with GAAP, consistently applied, except for the absence of complete footnote
disclosure as required by GAAP. The Financial Statements present fairly in accordance with GAAP
the financial condition of the Company as of the dates indicated and the results of operations of
the Company for the respective periods indicated, subject to changes resulting from normal,
recurring period-end audit adjustments, which adjustments shall not be material. The Financial
Statements reflect the consistent application of GAAP throughout the periods involved.



(c) Except as and to the extent the amounts are specifically accrued or disclosed in the
Interim Balance Sheet, the Company does not have any Liabilities, whether or not required by GAAP
to be reflected in the Interim Balance Sheet, except for (a) Liabilities under an executory portion
of a Contract, (b) Liabilities for costs and expenses incurred in connection with the transactions
contemplated by this Agreement, and (c) Liabilities that were incurred in the ordinary course of
business consistent with past practice since the date of the Interim Balance Sheet.



(d) Except as set forth in Section 3.12(d) of the Company Disclosure Schedule, the
Company does not have any outstanding Indebtedness and as of the Closing, all Liens on the Acquired
Assets will be discharged.


 


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3.13 Absence of Certain Events. Except as set forth in Section 3.13 of the
Company Disclosure Schedule, since April 30, 2011, the Company has conducted the Business only in
the ordinary and usual course and in a manner consistent with past practice and there has not been
any change, event, loss, development, damage or circumstance affecting the Acquired Assets or
the Business which, individually or in the aggregate, has had or could reasonably be expected
to have a Business Material Adverse Effect (a “Business Material Adverse Change”). As
amplification and not in limitation of the foregoing, since April 30, 2011, the Company has not:




(a) incurred any material decrease in the value of any of the Acquired Assets;



(b) suffered any loss to its property or asset used in connection with or related to the
operation of the Business, or incurred any liability, damage, award or judgment for injury to the
property or business of others or for injury to any person (in each case, whether or not covered by
insurance) in excess of $10,000 in any one case or $25,000 in the aggregate;



(c) made any capital expenditure or commitment in excess of $10,000 or series of capital
expenditures or commitments in excess of $25,000 in the aggregate;



(d) made any assignment, termination, modification or amendment of any Contract to which the
Company was or is a party or which otherwise related to the Business, or any account receivable
relating thereto, whether as a security interest or otherwise;



(e) made any change in the rate of compensation, commission, bonus or other direct or indirect
remuneration payable or to become payable to any Company Employee, or agreed to pay any bonus or
extra compensation or other employee benefit to any Company Employee;



(f) paid, discharged or satisfied, in any amount in excess of $10,000 in any one case, or
$25,000 in the aggregate, any Liability arising from the operation of the Business, other than
payments made in the ordinary course of business of Liabilities reflected or reserved against in
the Interim Balance Sheet or Liabilities incurred since that date in the ordinary course of
business consistent with past practice;



(g) made any change in the accounting principles adopted by the Company, or any change in the
Company’s accounting policies, procedures, practices or methods with respect to applying such
principles, other than as required by GAAP;



(h) sold, assigned, leased or transferred any assets (tangible or intangible) or properties,
other than sales of inventory in the ordinary course of business;




(i) amended its Organizational Documents;



(j) made any Tax election, changed any annual Tax accounting period, amended any Tax Return,
settled any income Tax Liability, entered into any closing agreement, settled any Tax claim or
assessment, surrendered any right to claim a Tax refund or consented to any extension or waiver of
the limitations period applicable to any Tax claim or assessment;



(k) acquired or agreed to acquire by merging or consolidating with, or by purchasing a
substantial portion of the capital stock or assets of, or by any other manner, any business or any
corporation, partnership, limited liability entity, joint venture, association or other business
organization;


 


17









 





(l) terminated the employment (or other form of engagement) or expressed any intention to
terminate the employment (or other engagement) of any employee of the Company;



(m) incurred, assumed or created any Indebtedness or guaranteed any Indebtedness of any other
Person, or made, incurred, assumed, created or guaranteed any loan or made any advance or capital
contribution to or investment in any Person;



(n) cancelled or forfeited any debts or claims, waived or released any rights or claims of
material value to the Company or settled any Action;



(o) granted any license or sublicense of any rights under or with respect to, or sold,
transferred or permitted to lapse, any Intellectual Property;



(p) entered into, terminated or received notice of termination of (1) any distributorship,
sales or service representative, credit, or similar agreement to which the Company is a party, or
(2) any Contract or transaction, other than purchase orders in the ordinary course of business,
involving a total remaining commitment by or to the Company of at least $50,000;



(q) suffered a loss of (1) a client which has purchased at least $100,000 of products or
services from the Company, or (2) a vendor which has supplied at least $100,000 of products or
services to the Company;



(r) written-off any accounts receivable of the Company or any portion thereof in excess of
$10,000 individually or $25,000 in the aggregate, or any sale, assignment or disposition of any
account receivable;



(s) made any material change in the manner in which the Company extends or receives discounts
or credit from customers or suppliers; or



(t) entered into any agreement, understanding, authorization or proposal, whether in writing
or otherwise, for the Company to take any of the actions specified in this Section 3.13.




3.14 Legal Proceedings.



(a) Except as set forth in Section 3.14(a) of the Company Disclosure Schedule, there
is no Action pending or, to the Knowledge of the Company, threatened against the Company or any of
its officers (in their capacities as such), and the Company has not received any claim, complaint,
incident, report, threat or notice of any such Action, nor does the Company know of any event or
set of circumstances which are reasonably likely to result in an Action, the result of which could
materially adversely affect the Company or the Acquired Assets.



(b) Section 3.14(b) of the Company Disclosure Schedule sets forth all Actions that (i)
involved the Company at any time during the past three (3) years and (ii) are no longer pending
(the “Prior Actions”). All of the Prior Actions have been concluded in their entirety and
the Company does not have and will not have any Liability with respect to the Prior Actions.
The Company has provided to the Buyer all formal written communications relating to any Prior
Actions between the Company and a Governmental Authority and any Orders related thereto.


 


18









 





(c) There are no outstanding Orders against or involving or affecting the Company, the
Business or the Acquired Assets, and the Company is not in default with respect to any such Order
of which it has Knowledge or which has been served upon it.



(d) Except as set disclosed to the Buyer in connection with this Agreement, the Company has
not received any material, written communication or advice from outside legal counsel to the effect
that it is exposed, from a legal standpoint, to any Liability relating to the ownership or
operation of the Acquired Assets or the Business.



3.15 Compliance with Laws. Except as set forth in Section 3.15 of the Company
Disclosure Schedule, the Company has complied and is in compliance, in each case in all material
respects, with all Laws applicable to it, the Acquired Assets and the Company’s ownership, use or
operation thereof, and to the operation of the Business. The Company has not received any notice,
citation, summons or order to the effect that it is not in compliance with any such Laws. No
investigation or review by any Governmental Authority with respect to the Company or the Business,
or, to the Knowledge of the Company, the Company’s sales agents or other representatives is pending
or, to the Knowledge of the Company, threatened, nor has any Governmental Authority indicated to
the Company or its Affiliates an intention to conduct the same.




3.16 Employment Matters.



(a) Section 3.16(a) of the Company Disclosure Schedule sets forth a complete and
accurate list of all current Company Employees as of the date hereof and each such Company
Employee’s (i) rate of pay or annual compensation (including actual or potential bonus payments and
the terms of any commission payments or programs), (ii) title(s), and (iii) status and location of
employment or engagement. Section 3.16(a) of the Company Disclosure Schedule sets forth
all employment, consulting, independent contractor, severance pay, continuation pay, termination or
indemnification Contracts between the Company and any current or former Company Employee or under
which the Company may have any Liability (each, an “Employee Agreement”).



(b) The Company is not and, as of the Closing Date, will not be delinquent in payments to any
Company Employee for any wages, salaries, commissions, bonuses, benefits or other compensation for
any services performed by them to date or through the Closing Date. Section 3.16(b) of the
Company Disclosure Schedule sets forth a list of all outstanding loans or advances to Company
Employees.



(c) Neither the Company nor, to the Knowledge of the Company, any Company Employee, is in
violation of any term of any employment, consulting, independent contractor, non-disclosure,
non-competition, inventions assignment or any other Contract (or any other legal obligation such as
a trade secrets statute or common law duty of loyalty) relating to the relationship of such Company
Employee with the Company or any other Person or has been
notified that such Company Employee may be in violation of any such Contract or other legal
obligation.


 


19









 





(d) The Company is not, and has never been, party to any collective bargaining Contract or
other Contract with any labor unions or other representatives of the Company Employees nor is it
under any obligation to bargain with any bargaining agent on behalf of any Company Employees. To
the Knowledge of the Company, there have not been any organization campaigns, petitions or other
unionization activities seeking recognition of a collective bargaining unit which could affect the
Business.



(e) Section 3.16(e) of the Company Disclosure Schedule sets forth a complete and
accurate list of each Employee Benefit Plan under which current or former Company Employees (or
their beneficiaries) are eligible to participate or derive a benefit or for which the Acquired
Assets may be subject to any Liability. Neither the Company nor any ERISA Affiliate has any plan
or commitment to establish any new Employee Benefit Plan, to modify any Employee Benefit Plan
(except to the extent required by Law or to conform any such Employee Benefit Plan to the
requirements of any applicable Law, in each case as previously disclosed to the Buyer in writing,
or as required by this Agreement), or to adopt or enter into any Employee Benefit Plan. Neither
the Company nor any ERISA Affiliate has ever maintained, established, sponsored, participated in,
contributed to, or otherwise incurred any obligation or liability (including contingent liability)
under any “multiemployer plan” (as defined in Section 3(37) of ERISA) or an arrangement subject to
Section 501(c)(9), 419 or 419A of the Code, or a “pension plan” (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA or Section 412 of the Code, a self insured plan providing
medical benefits or a plan providing for medical or life insurance coverage beyond termination of
employment (other than COBRA coverage or under similar state Laws). Neither the Company nor any
ERISA Affiliate has at any time ever maintained, established, sponsored, participated in or
contributed to any multiple employer plan or to any plan described in Section 413 of the Code.
Neither the Company nor any ERISA Affiliate has any actual or potential withdrawal liability
(including any contingent liability) for any complete or partial withdrawal (as defined in Sections
4203 and 4205 of ERISA) from any multiemployer plan.



(f) The Company and its ERISA Affiliates have performed all material obligations required to
be performed by them under, are not in material breach, default or violation of, and have no
Knowledge of any breach, default or violation by any other party to each Employee Benefit Plan, and
all Employee Benefit Plans have been established and maintained in material compliance with the
terms thereof and requirements prescribed by any and all Laws (including ERISA and the Code) and
Orders currently in effect with respect thereto.



(g) The Company has complied in all material respects with all its obligations under Law with
respect to the employment or engagement of all Company Employees, including with respect to
employment practices, terms and conditions of employment, wage and hours, and the health and safety
at work of their employees, and there are no claims pending or, to the Knowledge of the Company,
threatened by any person in respect of employment or engagement or any accident or injury.


 


20









 





3.17 No Brokers. Except as set forth in Section 3.17 of the Company
Disclosure Schedule, neither the Company, or any of its employees, officers, managers or agents,
nor the Member, has employed or engaged, either directly or indirectly, or incurred or will incur
any Liability to, any broker, finder, investment banker or other agent in connection with the
transactions contemplated by this Agreement.




3.18 Taxes.



(a) All Taxes payable by the Company have been timely paid, or, to the extent not required to
have been paid, have been accrued in the Interim Balance Sheet; all federal, state, local and
foreign Tax Returns required to be filed by or on behalf of the Company with respect to any such
Taxes have been timely filed, and all such Tax Returns are complete and correct and have been filed
in accordance with all applicable Law; all Taxes that the Company is or was required by Law to have
withheld or collected, have been duly withheld or collected and, to the extent required, have been
paid to the proper Governmental Authority; no unpaid Tax deficiency has been asserted against or
with respect to the Company and the Company has not received notice of any such assertion; there
are no Actions pending with respect to any Taxes for which the Company is liable; the Company has
not been informed by any jurisdiction that such jurisdiction believes that the Company is or was
required to file any Tax Return that was not filed. The Company has not executed or entered into
any ruling or agreement with any Governmental Authority regarding Taxes or has agreed to make any
adjustment to its income or deductions pursuant to a change in its method of accounting.



(b) The Company has not been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code, and no withholding pursuant to Section 1445 of the Code will be
required in connection with this Agreement or the transactions contemplated hereby.



(c) There are no Liens with respect to Taxes upon any of the Acquired Assets. There is no
basis for the assertion of any claims for Taxes which, if adversely determined, would result in the
imposition of any Lien on the Acquired Assets.



(d) The Company has not been audited by the IRS or relevant state tax authorities. No Tax
Return of the Company is currently being audited by any Governmental Authority and no examination
or audit of any such Tax Return is currently threatened in writing by any Governmental Authority.




3.19 Contracts.



(a) Section 3.19 of the Company Disclosure Schedule sets forth a complete and accurate
list of all of the following Contracts to which the Company is a party or is otherwise bound or to
which any of the Acquired Assets are subject (and with respect to any oral Contract provides a
complete description of the terms of such Contract) (the “Scheduled Contracts”):




(i) all notes, loans, credit agreements, mortgages, indentures, security
agreements, operating leases, capital leases and other Contracts relating to
Indebtedness and any Contract of suretyship or guaranty;


 


21









 






(ii) all employee agreements, Contracts with consultants and independent
contractors, and all bonus, commission, compensation, pension, insurance,
retirement, deferred compensation and other plans, Contracts and other arrangements
for the benefit of any Company Employee;




(iii) all Contracts involving an annual payment to or by the Company from or to
any Person in excess of $10,00 individually or $25,000 in the aggregate with respect
to all Contracts with such Person;




(iv) all Contracts for capital expenditures in excess of $10,000 individually
for any Person or $25,000 in the aggregate for all Contracts with such Person;




(v) all client Contracts for the purchase of products or services from the
Company;




(vi) all Contracts with sales agents or other representatives;




(vii) all Contracts for the purchase or sale of any asset or property of the
Company in excess of $10,000 individually for any Person or $25,000 in the aggregate
for all Contracts with such Person;




(viii) all joint venture, partnership or other Contracts involving a share of
profits or losses with another Person;




(ix) all Contracts with any Affiliate, officer or Member of the Company or any
family member or Affiliate of any officer or Member;




(x) all Contracts pursuant to which the Company has granted or received
manufacturing rights, most favored nation pricing provisions or exclusive marketing,
sales or other rights relating to any product, service, technology, asset or
territory;




(xi) all sales, agency, representative, distributor, franchise or similar
Contracts;




(xii) all Contracts that limit or purport to limit the ability of the Company
to compete in any line of business or with any Person or in any geographic area or
during any period of time;




(xiii) any material Contract which is terminable upon or prohibits a sale of
substantially all of the assets of the Company;




(xiv) all Contracts granting or permitting any Lien on any of the Acquired
Assets;




(xv) all Contracts with vendors, suppliers, manufacturers or contractors; and




(xvi) any other Contracts that are material to the Company and have not been
previously disclosed pursuant to this Section 3.19.


 


22









 





(b) The Company has delivered to the Buyer true and complete copies of all Assigned Contracts
and Scheduled Contracts, including all amendments thereto. The Company is not in material breach
or default under the terms of any Assigned Contract and there exists no event, condition or
occurrence which (with or without due notice or lapse of time, or both) would constitute such a
material breach or default by the Company, nor has the Company received any notice of any material
breach or default or alleged breach or default under any Assigned Contract. To the Knowledge of
the Company, no other party to any Assigned Contract is in material breach or default under the
terms thereof, and, to the Knowledge of the Company, there exists no event, condition or occurrence
which (with or without due notice or lapse of time, or both) would constitute such a material
breach or default by any such party, nor has the Company received any notice of any breach or
default by any such party.



(c) The Assigned Contracts are in full force and effect and are valid and binding obligations
of the Company and, to the Knowledge of the Company, the other parties thereto. The Company has
not received any notice from any other party to an Assigned Contract of the termination or
threatened or anticipated termination thereof, or of any claim, dispute or controversy with respect
thereto, nor does the Company Know of any event or set of circumstances which are reasonably likely
to result therein. No party to an Assigned Contract has (i) alleged any failure to perform on the
part of the Company or (ii) made any claims against, or sought indemnification from, the Company as
to any matter arising under or with respect to such Assigned Contract, and, to the Knowledge of the
Company, neither the Company nor the Member or any of the Company’s officers has been advised that
any such claims may be asserted or initiated.



(d) Except as set forth in Section 3.19(d) of the Company Disclosure Schedule, no
consent of, or notice to, any third party is required under any Assigned Contract as a result of or
in connection with, and neither the enforceability nor any of the terms or provisions of any
Assigned Contract will be affected in any manner by, the execution, delivery and performance of
this Agreement or any Related Agreement, or the transactions contemplated hereby or thereby.



(e) With respect to any Assigned Contract, (i) the acceptance of any deliverables has not been
contested; (ii) there are no outstanding requests for the removal of any of the Company’s personnel
from performing services under the Contract; (iii) no penalties of any type have been assessed; and
(iv) there are no pending or, to the Knowledge of the Company, threatened, contract suspension,
scope reduction or curtailment actions.



3.20 Transactions With Affiliates. Except as set forth in Section 3.20 of the
Company Disclosure Schedule, no current or former manager, officer, member or employee of the
Company or, to the Knowledge of the Company, any member of any such Person’s family, is a party to
any transaction with the Company (including any Contract providing for the employment of,
furnishing of goods or services by, rental of real or personal property from, borrowing money from
or lending money to, or otherwise requiring payments to, any such Person, but excluding payments
for normal salary and bonuses and reimbursement of expenses)
or, to the Knowledge of the Company, the direct or indirect owner of an interest in any Person
which is a present or potential competitor, supplier or client of the Company and, to the Knowledge
of the Company, no such Person receives income from any source other than the Company which relates
to the Business of, or should properly accrue to, the Company.


 


23









 





3.21 Insurance. The Company, the Business and the Acquired Assets are, and will
through the Closing Date be, insured with reputable insurers against risks normally insured against
by similar businesses under similar circumstances. Section 3.21 of the Company Disclosure
Schedule lists, by type, carrier, policy number, limits, premium and expiration date, all insurance
coverage carried by the Company, together with a history of all claims made by the Company
thereunder since January 15, 2010, which insurance, except as described on Section 3.21 of
the Company Disclosure Schedule, will remain in full force and effect in accordance with policy
terms, with respect to all events occurring prior to the Closing Date. Section 3.21 of the
Company Disclosure Schedule also states whether each such policy is carried on a “claims made” or
“occurrence” basis. All premiums with respect to such insurance required to be paid are currently
paid and will be paid through the Closing Date. The Company has not failed to give any notice of
any claim under any such policy in due and timely fashion, has not received notice of cancellation
or non-renewal of any such policy and has no Knowledge of any threatened or proposed cancellation
or non-renewal of any such policy, and the Company is otherwise in compliance with the terms of
such policies. The Company has never maintained, established, sponsored, participated in or
contributed to any self-insurance plan. There are no outstanding claims by the Company under any
such policy which have gone unpaid for more than thirty (30) days, or as to which the insurer has
disclaimed liability. The Company has not been denied or had revoked, cancelled, non-renewed or
rescinded any policy of insurance.




3.22 Intellectual Property.



(a) Section 3.22(a) of the Company Disclosure Schedule sets forth a complete and
accurate list of all United States and foreign Trademarks (including unregistered Trademarks), and
Internet domain names comprising Company Intellectual Property, indicating for each, the applicable
jurisdiction, registration number (or application number) and date issued (or date filed). The
Company has neither any registered or unregistered Patents or Copyrights, nor is in process of
applying for any Patents or Copyrights. All registered and applied for Trademarks included in the
Company Intellectual Property are currently pending, in material compliance with all legal
requirements (including the timely filing of responses, statements or affidavits of use and
incontestability and renewal applications and required fees with respect to Trademarks), are valid
and enforceable, and are not subject to any fees, responses or actions falling due within one
hundred eighty (180) days after the Closing Date. No such Trademark or Design has been or is now
involved in any cancellation proceeding before the United States Patent and Trademark Office (the
“USPTO”) and, to the Knowledge of the Company, no such Action is threatened with respect to
any of such Trademarks. All Trademarks included in the Company Intellectual Property have been in
continuous use by the Company since they were first used by the Company. To the Knowledge of the
Company, there has been no prior use of such Trademarks by any Person which would confer upon such
Person superior rights in such Trademarks, respectively; and the registered Trademarks have been
continuously used in the form appearing in, and in connection with the goods and services listed
in, their respective registration certificates or identified in their respective pending
applications. To the Knowledge
of the Company, there are no Trademarks of any third party potentially conflicting with the
Trademarks included in the Company Intellectual Property.


 


24









 





(b) Section 3.22(b) of the Company Disclosure Schedule sets forth a complete and
accurate list of all license agreements granting any right to use or practice any rights under any
Company Intellectual Property (“Licensed Intellectual Property”), whether the Company is
the licensee or licensor thereunder, and any assignments, consents, forbearances to sue, judgments,
orders, settlements, indemnification or similar obligations relating to any Licensed Intellectual
Property to which the Company is a party or otherwise bound (collectively, the “License
Agreements”), indicating for each the title, the parties, the date executed, whether or not it
is exclusive and the Licensed Intellectual Property covered thereby. The License Agreements are
valid and binding obligations of the Company and to the Company’s Knowledge, of each other party
thereto enforceable in accordance with their respective terms, and neither the Company nor, to the
Knowledge of the Company, the other party or parties thereto is or are in material breach or
default thereunder, and there exists no event, condition or occurrence which (with or without due
notice or lapse of time, or both) would constitute such a breach or default by the Company
thereunder or, to the Knowledge of the Company, by the other party or parties thereto of any of the
foregoing. Except as set forth in Section 3.22(b) of the Company Disclosure Schedule, no
consent of, or notice to, any Person is required under any License Agreement as a result of or in
connection with, and the terms or enforceability of any License Agreement will not be affected by,
the execution, delivery and performance of this Agreement or the Related Agreement, or the
transactions contemplated hereby or thereby. The Company has not received any notice of
termination or cancellation under any License Agreements.



(c) The Company Intellectual Property constitutes all of the Intellectual Property used in or
necessary for the conduct of the Business as currently conducted, including all Intellectual
Property necessary to use, manufacture, market and distribute the Company Services.



(d) No royalties, honoraria or other fees are payable to any third parties for the use of or
right to use any Company Intellectual Property except pursuant to the License Agreements set forth
in Section 3.22(d) of the Company Disclosure Schedule. All inventions, discoveries, Trade
Secrets, ideas and works, whether or not patented or patentable or otherwise protectable under Law,
created, prepared, developed or conceived by employees or independent contractors of the Company
are the exclusive property of the Company and were either created, prepared, developed or conceived
by (i) employees of the Company within the scope of their employment or (ii) by independent
contractors who have duly assigned their rights to the Company pursuant to enforceable written
agreements.



(e) Except as set forth in Section 3.22(e) of the Company Disclosure Schedule, the
Company (i) owns exclusively all Company Intellectual Property purported to be owned by the
Company, and (ii) has a valid, enforceable, freely transferable and sufficient right to use for the
purposes as the Company has previously used, all Licensed Intellectual Property, free and clear of
all Liens.


 


25









 





(f) The operation of the Business as currently conducted, the sale or use of the Company
Services, and the use of the Company Intellectual Property in connection therewith has not, does
not and will not, when conducted in substantially the same manner following the Closing, infringe
upon, violate, misappropriate or make unlawful use of any Intellectual Property or other rights of
any other Person or constitute unfair trade practices. The Company has not received notice of any
allegation that the use of any Company Intellectual Property or the conduct of the Business as
currently conducted would infringe upon, violate, misappropriate or make unlawful use of any
Intellectual Property or other rights of any other Person, nor is the Company aware of any basis
for such a claim. To the Knowledge of the Company, no Person is misappropriating, infringing,
violating or making unlawful use of any Company Intellectual Property, nor is the Company aware of
any basis for such a claim. There is no Action pending or, to the Knowledge of the Company,
threatened alleging that the conduct of the Business infringes upon, violates or constitutes the
unauthorized use of the Intellectual Property or other rights of any other Person, nor is the
Company aware of any basis for such a claim. The Company has not threatened to bring, and the
Company has not brought, any Action regarding the ownership, use, validity or enforceability of any
Company Intellectual Property.



(g) The consummation of the transactions contemplated hereby will not result in the loss or
impairment of any Company’s ownership or other rights in and to any of the Company Intellectual
Property or under any of the License Agreements, require the Company to grant to any third party
any right to any Company Intellectual Property or obligate the Company to pay any royalties or
other amounts to any third party in excess of any amounts payable to such third parties prior to
the Closing, nor will the consummation of the transactions contemplated hereby require the approval
or consent of any Governmental Authority or other Person in respect of any Company Intellectual
Property.



(h) Section 3.22(h) of the Company Disclosure Schedule lists all Software (other than
off-the-shelf or shrink wrap software) which is owned, licensed or otherwise used by the Company
and indicates whether such Software is subject to an escrow agreement and/or license agreement and,
if so, indicates where such Software is held in escrow and identifies such license agreement. No
rights in the Software have been transferred to any third party.



(i) Section 3.22(i) of the Company Disclosure Schedule lists all Software or other
material that is distributed as Open Source Software or “free software” in connection with the
operation of the Business (the “Open Source Materials”). All of the Open Source Materials
used by the Company in connection with the Acquired Assets or the Licensed Software have been used
in compliance with the terms of each respective license. The Company has not used Open Source
Materials that create, or purport to create, obligations for the Company with respect to the
Acquired Assets or the Business or grant, or purport to grant, to any third party, any rights or
immunities under any Company Intellectual Property (including, but not limited to, using any Open
Source Materials that require, as a condition of use, modification or distribution of the Open
Source Materials that other Software incorporated into, derived from or distributed with the Open
Source Materials be (x) disclosed or distributed in source code form, (y) be licensed for the
purpose of making derivative works or (z) be redistributable at no charge).


 


26









 





(j) The Company has taken all reasonable steps in accordance with normal industry practice to
protect the Company Intellectual Property, including all rights in confidential
information and Trade Secrets included in the Company Intellectual Property. Except pursuant
to enforceable confidentiality obligations in favor of the Company, there has been no disclosure to
any third party of any confidential information or Trade Secrets included in the Company
Intellectual Property. No current or former employee, consultant, contractor, partner or investor
of the Company is in unauthorized possession of any of the Trade Secrets or Software included in
the Company Intellectual Property.



(k) Section 3.22(k) of the Company Disclosure Schedule describes all databases used by
the Company (the “Databases”). Following the Closing, the Databases will have at least the
same information and functionality as exists prior to the Closing. No Person (other than the
Company) has any right, title or interest in or to any of the information contained in any of the
Databases and the Company has not sold, assigned, leased, transferred, permitted the use of or
otherwise disclosed to any Person any information contained in any of the Databases, including any
Personally Identifiable Information. The Company has complied and is in compliance with all
applicable privacy Laws, and all information contained in the Databases has been collected, used
and maintained in accordance with all applicable privacy Laws. Except as set forth in Section
3.22(k) of the Company Disclosure Schedule, the Company has the right to sell and assign all of
its rights in and to the Databases and all information contained therein, and any such sale and
assignment will not violate any privacy policy applicable to any Personally Identifiable
Information contained therein at the time it was collected.




3.23 [Reserved.]



3.24 Absence of Restrictions on Business Activities. There is no Contract or Order
binding upon the Company or any of the Acquired Assets which has had or could reasonably be
expected to have the effect of prohibiting or impairing any business practice of the Company or the
Buyer, any acquisition of property (tangible or intangible) by the Company or the Buyer, the
conduct of business by the Company or the Buyer, or otherwise limiting the freedom of the Company
to engage in any line of business or to compete with any Person. Without limiting the generality
of the foregoing, the Company has not entered into any Contract under which it is restricted, or
under which the Buyer would be restricted following the Closing, from selling, licensing,
manufacturing or otherwise distributing any Company Services or from providing services to
customers or potential customers or any class of customers, in any geographic area, during any
period of time, or in any segment of the market.



3.25 Certain Business Practices. Neither the Company nor any officer, employee or
agent of the Company on behalf of the Company, nor the Member, has: (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful payments relating to political activity, (b)
made any unlawful payment to any foreign or domestic government official or employee or to any
foreign or domestic political party or campaign or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or any similar applicable Law.




3.26 Anti-Terrorism Laws; Trading with the Enemy.



(a) The Company is not in violation of any Anti-Terrorism Law and has not engaged in or
conspired to engage in any transaction that evades or avoids, or has the purpose of
evading or avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law.



(b) The Company has not engaged, nor does it intend to engage, in any business or activity
prohibited by the Trading with the Enemy Act.


 


27









 





3.27 Books and Records. The books and records of the Company delivered or made
available to the Buyer are complete and accurate in all material respects and reflect the assets,
liabilities, prospects, business, financial condition and results of operations of the Business and
have been maintained in accordance with prudent business practices. The minute books of the
Company contain accurate and complete records, in all material respects, of all meetings held by,
and actions taken by, the sole Member of the Company, and no meeting of the Members has been held
where material matters were approved, voted upon or acted upon for which minutes have not been
prepared and are not contained in such minute books.




3.28 [Reserved.]




3.29 Relationships with Clients and Vendors.



(a) Section 3.29(a) of the Company Disclosure Schedule sets forth a list of each
client of the Company that has generated greater than $10,000 in revenue during the Company’s 2009
or 2010 fiscal year (each, a “Material Client”). There are not, and have not been, any
material disputes with any Material Client. Except as set forth in Section 3.29(a) of the
Company Disclosure Schedule, no Material Client has cancelled, terminated, or otherwise altered its
relationship with the Company nor has any current client of the Company notified the Company of any
intention to do so or otherwise threatened to cancel, terminate or materially alter its
relationship with the Company. There has been no material reduction in the rate or amount of
services provided to and paid by any current client of the Company.



(b) Section 3.29(b) of the Company Disclosure Schedule sets forth a list of the ten
(10) largest vendors, by dollar volume, of the Company that has supplied to the Company any product
or service relating to the Business during the Company’s 2009 or 2010 fiscal year (each, a
“Vendor”). There are not, and have not been, any material disputes with any Vendor.
Except as set forth in Section 3.29(b) of the Company Disclosure Schedule, no Vendor has
cancelled, terminated or otherwise altered its relationship with the Company nor has any current
vendor of the Company notified the Company of any intention to do so or otherwise threatened to
cancel, terminate or materially alter its relationship with the Company.



3.30 Solvency. Except as set forth in Section 3.30 of the Company Disclosure
Schedule, the Company (a) has sufficient capital to carry on the Business, (b) is able to pay its
debts as they mature, and (c) is solvent, and the value of its assets, at a fair valuation, is
greater than all of its debts. The Company has not (i) made a general assignment for the benefit
of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of an
involuntary petition by any creditor, (iii) suffered the appointment of a receiver to take
possession of all or any portion of its assets, (iv) suffered the attachment or judicial seizure of
all or any portion of its assets, (v) admitted in writing its inability to pay its debts as they
come due or (vi) made an offer of settlement, extension or composition to its creditors generally.


 


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3.31 Disclosure. Neither this Agreement (including the exhibits and schedules hereto)
nor any other agreement, document or certificate delivered or to be delivered to the Buyer by or on
behalf of the Company pursuant to the terms of this Agreement contains or will contain when made
any untrue statement of a material fact or omits or will omit when made to state a material fact
necessary in order to make the statements contained herein or therein not misleading in light of
the circumstances under which they were made. There is no fact within the Knowledge of the Company
that has not been disclosed in this Agreement and which could reasonably be expected to have a
Business Material Adverse Effect.



ARTICLE IV




REPRESENTATIONS AND WARRANTIES OF THE MEMBER




Except as disclosed by the Member in the disclosure schedule, dated as of the date of this
Agreement and attached hereto (the “Member Disclosure Schedule”), the Member hereby
represents and warrants to the Buyer as of the date hereof and as of the Closing Date as follows.
The Member Disclosure Schedule shall be arranged in sections corresponding to the numbered and
lettered sections and subsections contained in this Article IV, and the disclosures in any
section or subsection of the Member Disclosure Schedule shall qualify only the corresponding
section or subsection of this Article IV.



4.1 Organization; Good Standing and Qualification. The Member is a limited liability
company duly formed, validly existing and in good standing under the laws of the State of Delaware.



4.2 Authority; Execution; Enforceability. The Member has all necessary power and
authority to execute, deliver and perform its obligations under this Agreement and each Related
Agreement to which it is a party and to perform all of its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The execution and delivery by the
Member of this Agreement, the performance of its obligations hereunder, and the consummation by it
of the transactions contemplated hereby have been duly and validly authorized by all action on the
part of the Member and, no other proceedings on the part of the Member are necessary to authorize
this Agreement or to consummate the transactions so contemplated herein. This Agreement and each
Related Agreement to which such Member is, or will become, a party has been duly executed and
delivered by the Member and constitutes a legal, valid and binding obligation of such Member,
enforceable against the Member in accordance with its respective terms, subject to Enforceability
Exceptions.



4.3 Title to Company Membership Percentages. The Member is the record and beneficial
owner of, and has good and marketable title to, the entire membership percentage of the Company.



4.4 Consents and Approvals. Except as set forth in Section 4.4 of the Member
Disclosure Schedule, the execution and delivery by the Member of this Agreement, the Related
Agreements to which it is a party or any instrument required by this Agreement to be executed and
delivered by the Member do not, and the performance of this Agreement, the Related Agreements to
which it is a party and any instrument required by this Agreement to be executed
and delivered by the Member at the Closing, shall not, require the Member to obtain any
Approval of any Person or Approval of, observe any waiting period imposed by, or make any filing
with or notification to, any Governmental Authority, domestic or foreign.


 


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4.5 No Violation. Except as set forth in Section 4.5 of the Member Disclosure
Schedule, the execution and delivery by the Member of this Agreement, the Related Agreements to
which the Member is a party or any other instrument or document required by this Agreement to be
executed and delivered by the Member do not, and the performance of this Agreement, the Related
Agreements to which the Member is a party or any other instrument or document required by this
Agreement to be executed and delivered by the Member, will not (a) conflict with or violate the
Organizational Documents of the Member, (b) conflict with or violate any Law or Order, in each
case, applicable to the Member or by which any of the Acquired Assets are bound, or (c) result in
any breach or violation of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under any Contract or Approval to which the Member is a party or by
which the Member or the Member’s properties are bound or affected.



4.6 Legal Proceedings. Except as set forth in Section 4.6 of the Member
Disclosure Schedule, there is no Action pending or, to the Knowledge of the Member, threatened
against or materially affecting the Member that would (a) give any Person the right to enjoin or
rescind the transactions contemplated by this Agreement or (b) otherwise prevent the Member from
(i) executing and delivering this Agreement or the Related Agreements to which the Member is a
party or (ii) performing the Member’s obligations pursuant to, or observing any of the terms and
provisions of, this Agreement or the Related Agreements to which the Member is a party.



ARTICLE V




REPRESENTATIONS AND WARRANTIES OF THE BUYER AND HSCC




The Buyer and HSCC, jointly and severally, hereby represent and warrant to the Company and the
Member:



5.1 Organization; Good Standing and Qualification. Each of the Buyer and HSCC is a
corporation duly organized, validly existing and in good standing under the laws of the State of
Delaware.



5.2 Authorization; Binding Obligation. Each of the Buyer and HSCC has all necessary
corporate power and authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution and delivery by
the Buyer of this Agreement, the performance of its obligations hereunder, and the consummation by
it of the transactions contemplated hereby have been duly and validly authorized by all action on
the part of each of the Buyer and HSCC, and no other corporate proceedings on the part of the Buyer
or HSCC are necessary to authorize this Agreement or to consummate the transactions so contemplated
herein. This Agreement has been duly and validly executed and delivered by each of the Buyer and
HSCC, and this Agreement constitutes a legal, valid, and binding obligation of each of the Buyer
and HSCC, enforceable
against each of the Buyer and HSCC in accordance with its terms, except as limited by the
Enforceability Exceptions.


 


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5.3 Consents and Approvals. The execution and delivery by each of the Buyer and HSCC
of this Agreement does not, and the performance of this Agreement by each of the Buyer and HSCC
shall not, require the Buyer or HSCC to obtain any Approval of any Person or Approval of, observe
any waiting period imposed by, or make any filing with or notification to, any Governmental
Authority.



5.4 No Conflict. The execution and delivery by each of the Buyer and HSCC of this
Agreement, the Related Agreements to which the Buyer or HSCC, as applicable, is a party or any
other instrument or document required by this Agreement to be executed and delivered by the Buyer
or HSCC do not, and the performance of this Agreement, the Related Agreements to which the Buyer or
HSCC, as applicable, is a party or any other instrument or document required by this Agreement to
be executed and delivered by the Buyer or HSCC will not (a) conflict with or violate the respective
Organizational Documents of the Buyer or HSCC, (b) conflict with or violate any Law or Order
applicable to the Buyer or HSCC, or any of their respective properties or assets or (c) result in a
breach or violation of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under any material Contract to which the Buyer or HSCC is a party, in
any case, except where such conflict or breach would not have a material adverse effect on the
Buyer’s or HSCC’s ability to consummate the transactions contemplated hereby.



5.5 No Brokers. Neither the Buyer nor HSCC has employed, either directly or
indirectly, nor incurred or will incur any Liability to, any broker, finder, investment banker or
other agent in connection with the transactions contemplated by this Agreement.



5.6 Legal Proceedings. There is no Action pending or, to the knowledge of the Buyer
or HSCC, threatened by or against or affecting the Buyer or HSCC that would (a) give any Person the
right to enjoin or rescind the transactions contemplated by this Agreement, or (b) otherwise
prevent the Buyer or HSCC from (i) executing and delivering this Agreement or (ii) performing the
Buyer’s or HSCC’s obligations pursuant to, or observing any of the terms and provisions of, this
Agreement.



ARTICLE
VI


PRE-CLOSING COVENANTS





6.1 Access and Investigation. 



(a) Between the date of this Agreement and the Closing Date, and upon reasonable notice, the
Company will, and the Member will cause the Company to, (a) afford the Buyer and HSCC reasonable
access, during regular business hours, to the Company’s personnel, properties (including subsurface
testing), Contracts, Business Licenses, Books and Records and other documents and data, such rights
of access to be exercised in a manner that does not unreasonably interfere with the operations of
the Company; (b) furnish the Buyer with copies of all such Contracts, Business Licenses, Books and
Records and other documents and data as the Buyer may reasonably request; (c) furnish the Buyer
with such additional financial, operating
and other relevant data and information as the Buyer may reasonably request; (d) make
available (i) the officers and employees of the Company for discussion of the Company’s businesses,
properties or personnel and (ii) all Company Employees for discussion of the post-Closing
employment arrangements with the Buyer as the Buyer may reasonably request; and (e) otherwise
cooperate and assist, to the extent reasonably requested by the Buyer, with the Buyer’s
investigation of the properties, assets and financial condition related to the Company. No
investigation pursuant to this Section 6.1 or otherwise shall affect any representations,
warranties, covenants or agreements of the Company or the Member set forth herein.


 


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6.2 Conduct of Business. 



(a) Except as otherwise contemplated by this Agreement, during the period from the date of
this Agreement and continuing until the Closing Date, the Company shall, and the Member agrees to
cause the Company to, operate the Business in the Ordinary Course of Business, and to use all
commercially reasonable efforts to:




(i) preserve the Business intact and conserve the goodwill related thereto;




(ii) preserve intact the present business organization of the Company and keep
available the services of the Company’s officers, agents and Company Employees;




(iii) to maintain in effect the Assigned Contracts; and




(iv) preserve present relationships with suppliers, customers, lenders and
others having business dealings with them.



(b) In connection with the foregoing, and without limiting the generality of this Section
6.2, between the date hereof and the Closing Date, the Company shall, and the Member shall
cause the Company to:




(i) maintain the Acquired Assets in the Ordinary Course of Business in good
operating order and condition, reasonable wear and tear excepted;




(ii) continue to extend customers credit, collect receivables and pay accounts
payable and similar obligations and otherwise handle short-term assets and
liabilities in the Ordinary Course of Business;




(iii) maintain in full force and effect and in the same amounts policies of
insurance comparable in amount and scope of coverage to that now maintained by or on
behalf of the Company;




(iv) continue to maintain the Books and Records in accordance with GAAP;




(v) maintain its Business Licenses and continue to actively pursue Business
Licenses in process;


 


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(vi) continue its cash management practices in the Ordinary Course of Business;




(vii) confer with Buyer prior to implementing operational decisions of a
material nature; and




(viii) otherwise report periodically to the Buyer concerning the status of its
Business, operations and finances.



(c) Without the prior written consent of the Buyer, from the date of this Agreement and
continuing until the Closing Date, the Company shall not fail to maintain in full force and effect
all insurance currently in effect, hire or terminate any employee, consultant or independent
contractor, change the compensation (including bonus or commission payments) payable or to become
payable to its Company Employees, or grant any severance or termination pay or stock options to, or
enter into or amend any Contract with any director, officer or employee of the Company, or
establish, adopt, enter into or amend any bonus, compensation, stock or other equity option,
deferred compensation, employment, termination, severance or other plan, agreement or arrangement
for the benefit of any current or former Company Employee, or adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization.



(d) Without the prior written consent of the Buyer, from the date of this Agreement and
continuing until the Closing Date, and without limiting the generality of any other provision of
this Agreement, the Company shall not, and the Member shall cause the Company not to (i) create,
incur, suffer to exist or assume any Lien on any of the Acquired Assets, (ii) pay, discharge,
satisfy, or settle any Action or waive, assign or release any material rights or claims relating to
any of the Acquired Assets or the Business, or commence any Action against a customer of the
Business or (c) take any affirmative action, or fail to take any reasonable action within its
control, as a result of which any of the changes or events listed in Section 3.13 would be
likely to occur.



6.3 Consents and Approvals; Regulatory Filings. The Company will, and the Member will
cause the Company to, use all commercially reasonable efforts and make every good faith attempt to
obtain, prior to the Closing Date, all Approvals specified in Section 3.5 of the Company
Disclosure Schedule.



6.4 Commercially Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the Parties shall use all commercially reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary or advisable to
consummate the transactions provided for in this Agreement and to satisfy or cause to be satisfied
all of the conditions precedent that are set forth in Article VIII, as applicable to each
of them.




6.5 Update Schedules.



(a) Each of the Member and the Company shall, and the Member shall cause the Company to,
promptly disclose to the Buyer any information contained in its representations and warranties or
the Schedules which, because of an event occurring after the date hereof, is
incomplete or is no longer correct as of all times after the date hereof until the Closing
Date; provided, however, that none of such disclosures shall be deemed to modify,
amend or supplement the applicable Disclosure Schedule for the purpose of determining the accuracy
of any of the representations and warranties made by the Company or the Member in this Agreement,
including for purposes of Article III, Article IV or Article IX hereof,
unless the Buyer shall have consented thereto in writing.


 


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(b) Without limiting the provisions of Section 6.5(a), prior to the Closing Date, the
Company shall, and the Member shall cause the Company to, give prompt written notice to the Buyer
of (i) any written notice or other communication from any Person alleging that the consent of such
Person is or may be required in connection with the consummation of the transactions contemplated
by this Agreement, (ii) any written notice or other written communication from any Governmental
Authority in connection with any Approval regarding the transactions contemplated by this
Agreement, (iii) any Action commenced or threatened in writing relating to or involving or
otherwise affecting the Business or the transactions contemplated by this Agreement, (iv) the
occurrence of a material breach or default or event that, with notice or lapse of time or both,
would or would reasonably be expected to constitute a material breach or default under any Assigned
Contract, (v) any material written notice or other material communication from any Person pursuant
to any Assigned Contract, and (vi) any change, event or circumstance which would reasonably be
expected to delay or impede the ability of the Company or the Member to consummate the transactions
contemplated by this Agreement or to fulfill its obligations set forth herein or that could
reasonably be expected to have, individually or in the aggregate, a Business Material Adverse
Effect.



6.6 Exclusivity. The Company and the Member grant to the Buyer the exclusive right to
acquire the Acquired Business until the Final Termination Date. The Company shall not, and the
Member shall cause the Company not to, directly or indirectly (a) solicit, initiate or encourage
the submission of any proposal or offer from any Person relating to the acquisition of the Acquired
Business, or any substantial portion of the assets of, the Company (including any acquisition
structured as a merger, consolidation or share exchange) or (b) participate in any discussions or
negotiations regarding, furnishing any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek any of the
foregoing. The Member will notify the Buyer immediately if any Person makes any proposal, offer,
inquiry or contact with respect to any of the foregoing and the Member shall provide copies and
disclose the terms thereof to the Buyer, and shall immediately cease and cause to be terminated and
shall use its reasonable best efforts to cause all the Company or the Member to immediately
terminate and cause to be terminated all existing discussions or negotiations with any such
Persons. Without limiting the foregoing, it is agreed that any violation of the restrictions set
forth above by any Affiliate of the Company or the Member, whether or not such Person is purporting
to act on behalf of the Company or the Member, shall be deemed to be a breach of this Section
6.6 by the Company or the Member, as applicable.




6.7 Confidentiality.



(a) The confidentiality agreement between DJSP Enterprises, Inc. and all of its Affiliates, on
the one hand, and HSCC and all of its Affiliates, on the other hand, dated April 12, 2011 shall
continue in effect until the Closing occurs.



(b) From and after the Closing Date, the Member shall hold in confidence all confidential data
or information with respect to the Company and its Business and all terms and conditions of this
Agreement using the same standard of care to protect such confidential data or information or terms
and conditions as it used to protect such confidential information prior to the Closing Date.


 


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ARTICLE VII




ADDITIONAL COVENANTS




7.1 Public Announcements. Neither the Company nor the Member shall, nor shall any of
their respective Affiliates or agents (including accountants, lenders, counsel or investment
bankers), without the prior written consent of the Buyer, issue any press release announcing the
execution of this Agreement or the transactions contemplated hereby, or the Closing hereunder,
otherwise make any public statements regarding the transactions contemplated hereby or otherwise
publicly disclose any of the contents of this Agreement, except as may be determined in good faith
by a party to be required by applicable Law and in such case, such party shall provide the other
party with reasonable advance notice thereof.  



7.2 Retention of and Access to Books and Records. After the Closing Date, Buyer shall
retain for a period consistent with Buyer’s record-retention policies and practices the books and
records relating to the Business. Buyer shall provide the Member and its Representatives
reasonable access to the Transferred Books and Records, during normal business hours and on at
least three days’ prior written notice, for any reasonable business purpose specified by the Member
in such notice, including, but not limited to, verification of Contingent Payment amounts,
preparation of SEC filings or response to SEC requests, preparation of financial statements or tax
returns, or dealing with tax audits. After the Closing Date, the Member and the Company shall
provide Buyer and its Representatives reasonable access to such books and records of the Member
relating to the Business, and all Books and Records not included in the Transferred Books and
Records, during normal business hours and on at least three days’ prior written notice, for any
reasonable business purpose specified by the Buyer in such notice.



7.3 Litigation Cooperation. If the Buyer or any of its Affiliates shall become
engaged or participate in any Action relating in any way to the Acquired Assets, the Excluded
Assets, the Assumed Liabilities or the Excluded Liabilities, the Company and the Member shall
cooperate in all reasonable respects with such party in connection therewith, including, without
limitation, making available to such parties, without cost, all relevant records and using its
commercially reasonable efforts to make available the employees of such party or its Affiliates who
are reasonably expected to be helpful with respect to such Action, provided that, to the extent
practicable, such employees shall be made available in a manner so as not to interfere with their
employment duties in any material respect.



7.4 Use of Names. From and after the Closing, neither the Company nor the Member
shall use or permit to be used any names or other Trademarks included in the Acquired Assets or any
derivations thereof. Without limiting the foregoing, promptly following the Closing, the Company
shall, and the Member shall cause the Company to, change the name of the Company to eliminate
therefrom any name acquired by the Buyer hereunder.


 


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7.5 Transition Matters. The Company and the Member shall, at no cost to the Buyer or
HSCC, take all action reasonably requested by the Buyer or HSCC to effectively transition the
Business, including the Acquired Assets, from the Company to the Buyer. Without limiting the
generality of the foregoing, at no cost to the Buyer or HSCC, (a) the Company or Member, as the
case may be, shall forward all telephone calls, emails, correspondence, inquiries and other
information relating to the Business to the Buyer in a timely and professional manner, and (b) for
a period of thirty (30) days following the Closing or such longer period as the Member and HSCC
mutually agree, the Member shall provide (i) assistance and support with respect to accounting and
accounts payable of the Business and (ii) access to and use of the Member’s email systems as
necessary for the uninterrupted operation of the Business by the Buyer following the Closing.



7.6 Accounts Receivable/Collections. After the Closing, the Company shall permit the
Buyer to collect, in the name of the Company, all Accounts Receivable and to endorse with the name
of the Company for deposit in the Buyer’s account any checks or drafts received in payment thereof.
The Company shall promptly deliver to the Buyer any cash, checks or other property that the
Company may receive after the Closing in respect of any Accounts Receivable or other assets
constituting part of the Acquired Assets.




7.7 Employment Matters.



(a) On or before the Closing Date, the Buyer may offer employment to any employee of the
Company as of the Closing Date as the Buyer may elect on terms acceptable to the Buyer. The
Company shall cooperate with and assist the Buyer in its efforts to secure satisfactory employment
arrangements with such employees, including providing access to such employees as requested by the
Buyer. Any such employee accepting a position with the Buyer hereunder, as well as the Designated
Employee, shall be referred to as a “Transferred Employee” and such Transferred Employee’s
employment with the Company shall terminate effective as of the commencement date of employment
with the Buyer or any of its Affiliates (with respect to each Transferred Employee, the
“Transition Date”). The Company consents to the hiring of the Transferred Employees by the
Buyer or any of its Affiliates and waives in perpetuity any claims or rights arising under any
non-competition, confidentiality, employment, assignment of inventions or similar Contract to which
any Transferred Employee is a party after the Closing Date (other than such rights that are
assigned to the Buyer pursuant to this Agreement). Notwithstanding the foregoing, the Designated
Employee shall be required to continue to maintain the confidentiality of any information of the
Company or its Affiliates not related to the Business as required by the terms of any such
agreement. All Transferred Employees shall be employees at-will of the Buyer, subject to the
Buyer’s employment policies, and nothing herein shall obligate the Buyer to employ any Transferred
Employee for any specific time period.



(b) From and after the Closing Date, Buyer shall provide the Transferred Employees with the
same or mirror employee benefit plans, programs, and fringe benefit arrangements or policies that
the Buyer or its Affiliates provide to their employees. Buyer shall give each Transferred Employee
full credit in respect of his or her service with the Company (including service with previous
employers which is credited by the Company) prior to the Closing Date for purposes of eligibility,
vesting, level of benefits and service under any benefit plans, benefit programs, fringe benefit
plans, fringe benefit programs, and fringe benefit
arrangements maintained by the Buyer or its Affiliates in which the Transferred Employee is
otherwise eligible to participate (“Buyer Plans”) (to the extent that the corresponding
Employee Benefit Plan currently provided to Company employees gave such credit).


 


36









 





(c) From and after the Closing Date, Buyer will (i) cause any pre-existing conditions or
limitations and eligibility waiting periods (only to the extent such limitations or waiting periods
did not apply to the Transferred Employees under the Company’s Employee Benefit Plans) under any
group health plans of the Buyer or its Affiliates, in which Transferred Employees are otherwise
eligible to participate, to be waived with respect to the Transferred Employees and their eligible
dependents and (ii) give each Transferred Employee credit for the plan year in which the Closing
Date occurs toward applicable deductibles and annual out-of-pocket limits under group health plans
of the Buyer or its Affiliates, in which Transferred Employees are eligible to participate, for
expenses incurred prior to the Closing Date under the Company’s Employee Benefit Plans.



(d) As promptly as practicable, but in no event later than such date as is required by Law,
the Company shall (i) pay to each Transferred Employee all wages and other compensation earned
through the Closing Date, (ii) reimburse each Transferred Employee for all reimbursable expenses
incurred by him or her through the Closing Date in accordance with Company policy, (iii) make all
required contributions to any Employee Benefit Plans (if permissible, or if not, pay any amounts
directly to each Transferred Employee) if such Transferred Employee is a participant in such plan
and would otherwise be eligible for such contribution on or before the Closing Date, and (iv) make
all other payments as may be owed to any employee either under any Contract, in accordance with any
Company policy or practice or required by applicable Law.



(e) The Buyer shall not have any Liability with respect to any current or former Company
Employee, including, without limitation, any Transferred Employee, arising from such Company
Employee’s employment or engagement with the Company or the termination of such Company Employee’s
employment or engagement with the Company; provided, however, that the Buyer shall
be liable for its decision to hire or not hire any Company Employee and Buyer’s violation of any
state or federal law in connection with the hiring and selection of Company Employees. Without
limiting the generality of the foregoing, from and after the Closing Date, the Company shall remain
solely responsible for any and all Liabilities in respect of the Company Employees and their
beneficiaries and dependents, relating to or arising in connection with or as a result of (i) the
employment or engagement or the actual or constructive termination of employment or engagement of
any such Company Employee by the Company (including, without limitation, in connection with the
consummation of the transactions contemplated by this Agreement), (ii) the participation in or
accrual of benefits or compensation under, or the failure to participate in or to accrue
compensation or benefits under, or the operation and administration of, any Employee Benefits Plan
or other employee or retiree benefit or compensation plan, program, practice, policy, agreement or
arrangement of the Company in which Transferred Employees participated prior to the Closing Date
and (iii) accrued but unpaid salaries, wages, bonuses, incentive compensation, or other
compensation or payroll items (including, without limitation, deferred compensation), other than
vacation or sick pay, earned prior to the Closing Date. Further, the Company shall remain
responsible for the payment of any and all retention, change in control, severance or other similar
compensation or
benefits which are or may become payable in connection with the consummation of the
transactions contemplated by this Agreement. The Company shall be responsible for timely
compliance with all federal, state and local Laws with respect to the effect to any of its
employees of the transactions contemplated by this Agreement or by any Related Agreement. The
Buyer shall, to the extent required by Law, provide COBRA coverage (and perform all obligations in
connection with the provision of COBRA coverage) to the Transferred Employees and the Transferred
Employees’ spouses and dependent children who have a “qualifying event” under Section 4980B of the
Code on or after the Closing Date.


 


37









 





(f) Buyer shall grant the Transferred Employees credit for and shall assume and be
responsible for (only as contemplated by Section 1.3(b)) any Company liabilities with
respect to personal time off and vacation time accrued but unused or unpaid immediately prior to
the Closing Date (the “Accrued Vacation”).



(g) Effective as of the Closing Date, the Buyer shall provide workers’ compensation coverage
for the Transferred Employees for periods after the Closing Date.



(h) To the extent allowed by applicable Law, the Company shall provide the Buyer access to
examine all personnel records for all Transferred Employees to the extent reasonably requested by
the Buyer.



(i) It is expressly agreed that the provisions of this Section 7.7 are not intended
to be for the benefit of, or otherwise enforceable by, any third party, including any Company
Employee, and no Company Employee (or any dependents of such employees) will be treated as third
party beneficiaries in or under this Agreement.



ARTICLE
VIII


CONDITIONS TO CLOSING




8.1 Conditions to Obligation of Each Party. The respective obligations of each party
to effect the Closing shall be subject to the satisfaction at or prior to the Closing of the
following conditions:



(a) No Injunctions or Restraints; Illegality. No temporary restraining order,
preliminary or permanent injunction or other similar Order (whether temporary, preliminary or
permanent) issued by any Court of competent jurisdiction or other legal restraint or prohibition
shall be in effect which prevents the consummation of the transactions contemplated hereby, nor
shall any Action brought by any Governmental Authority seeking any of the foregoing be pending, and
there shall not be any action taken, or any Law enacted, entered, enforced or deemed applicable to
the transactions contemplated hereby, which makes the consummation of such transactions, as
contemplated herein, illegal.



(b) Governmental Approvals. All approvals of, or declarations or filings with, any
Governmental Authority necessary for the consummation of the transactions contemplated hereby, if
any, shall have been obtained or made.


 


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8.2 Conditions to Obligations of the Buyer. The obligations of the Buyer to
consummate the transactions provided for by this Agreement are subject, at the discretion of the
Buyer, to the satisfaction at or prior to the Closing of each of the following conditions, unless
waived by the Buyer in writing:



(a) The representations and warranties contained in Article III and Article IV
of this Agreement that are qualified by “materiality,” “Business Material Adverse Effect” or a
similar qualifier shall be true and correct in all respects, and each of such representations and
warranties that is not so qualified shall be true and correct in all material respects, in each
case, as of the date hereof and as of the Closing Date as if originally made on and as of the
Closing Date, except that those representations and warranties that are made as of a specific date
shall be determined as of such date, and Buyer shall have received a certificate to such effect
signed by the Member and the Company.



(b) All of the agreements and covenants that Member and the Company are required to perform or
comply with pursuant to this Agreement at or prior to the Closing Date shall have been performed or
complied with in all material respects, and Buyer shall have received a certificate to such effect
signed by the Member and the Company.



(c) Since the date of this Agreement, there shall not have occurred a Business Material
Adverse Effect, or any events, changes, developments or effects which, individually or in the
aggregate, could reasonably be expected to have a Business Material Adverse Effect, and Buyer shall
have received a certificate to such effect signed by the Member and the Company.



(d) Each of the Approvals specified in Schedule 8.2(d) shall have been received in
form and substance reasonably satisfactory to the Buyer and shall be in full force and effect.



(e) All loans or advances made to Company Employees or the Member shall be repaid to the
Company in full prior to the Closing;



(f) All Liens on the Acquired Assets shall have been discharged to the satisfaction of the
Buyer;



(g) Any accrued bonus liability with respect to the Transferred Employees shall have been paid
in full prior to the Closing;



(h) The Company shall have delivered to the Buyer a certificate of the Company’s President,
dated as of the Closing Date, in form and substance reasonably satisfactory to the Buyer,
certifying as to and attaching (if applicable): (i) complete and accurate copies of the
Organizational Documents of the Company, (ii) the incumbency of the officers executing this
Agreement and (iii) complete and accurate copies of resolutions of the sole Member authorizing and
approving the execution, delivery and performance of this Agreement and the transactions
contemplated hereby, and the acts of the officers of the Company in carrying out the terms and
provisions hereof and thereof;


 


39









 





(i) The Company shall have executed and delivered to the Buyer a bill of sale, assignment and
assumption agreement in substantially the form of Exhibit B attached hereto (the “Bill
of Sale”);



(j) Each of the Company and the Member shall have executed and delivered to the Buyer the
Non-Competition Agreement;



(k) As of the Closing, the Employment Agreement delivered by the Designated Employee on the
date hereof shall be in full force and effect and the Designated Employee shall have performed or
complied with each obligation, agreement, and covenant to be performed or complied with by such
Designated Employee thereunder on or prior to the Closing Date.



(l) The Company shall have delivered to the Buyer a certificate of legal existence and good
standing from the Secretary of State of its jurisdiction of organization and any jurisdiction where
the Company is qualified to do business, which certificates shall be dated no more than five (5)
Business Days prior to the Closing Date;



(m) Dykema Gossett PLLC, counsel to the Company, shall have delivered to the Buyer a legal
opinion in the form attached hereto as Exhibit C;



(n) The Company shall have delivered to the Buyer a certificate, indicating that it is not a
foreign person, that complies with Treasury Regulation Section 1.1445-2(b);



(o) No action, suit or proceeding shall have been instituted by any Person which seeks to
prohibit, restrict or delay consummation of the transactions contemplated herein or any of the
conditions material to consummation of the transactions contemplated herein; and



(p) The Company and the Member shall have delivered to the Buyer such other instruments,
certificates, documents or materials as may be reasonably requested by the Buyer in connection with
the consummation of the transactions contemplated hereby.



8.3 Conditions to Obligations of the Company and the Member. The obligations of the
Member to consummate the transactions provided for by this Agreement are subject, in the discretion
of the Member, to the satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by the Member in writing:



(a) The representations and warranties of the Buyer and HSCC contained in this Agreement shall
have been true and correct in all material respects on and as of the date hereof and shall be true
and correct on and as of the Closing Date as if originally made on and as of the Closing Date,
except that those representations and warranties that are made as of a specific date shall be
determined as of such date, and the Member shall have received a certificate to such effect signed
by the Buyer and HSCC.



(b) All of the agreements and covenants that the Buyer or HSCC is required to perform or
comply with pursuant to this Agreement at or prior to the Closing Date shall have been performed or
complied with in all material respects, and the Member shall have received a certificate to such
effect signed by the Buyer and HSCC.


 


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(c) The Buyer shall have executed and delivered to the Company the Bill of Sale;



(d) Each of HSCC and the Buyer shall have delivered to the Company a certificate of its
respective Secretary, dated as of the Closing Date, in form and substance reasonably satisfactory
to the Company, certifying as to and attaching (if applicable): (i) complete and accurate copies of
its respective Organizational Documents, (ii) the incumbency of the officers executing this
Agreement and (iii) complete and accurate copies of resolutions of its respective Board of
Directors authorizing and approving the execution, delivery and performance of this Agreement and
the transactions contemplated hereby, and the acts of the directors and officers of HSCC and the
Buyer in carrying out the terms and provisions hereof and thereof;



(e) HSCC and Buyer shall have delivered to the Member a certificate of legal existence and
corporate good standing from the Secretary of State of its jurisdiction of incorporation and any
jurisdiction where it is qualified to do business, which certificates shall be dated no more than
three (3) Business Days prior to the Closing Date;



(f) No action, suit or proceeding shall have been instituted by any Person which seeks to
prohibit, restrict or delay consummation of the transactions contemplated herein or any of the
conditions material to consummation of the transactions contemplated herein; and



(g) HSCC and the Buyer shall have delivered to the Company and the Member such other
instruments, certificates, documents or materials as may be reasonably requested by the Company or
the Member in connection with the consummation of the transactions contemplated hereby.



ARTICLE IX




SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION




9.1 Survival of Representations, Warranties and Covenants. Subject to the provisions
of this Article IX, each of the representations and warranties contained in this Agreement
or in any other agreement, exhibit, schedule, certificate, instrument or other writing delivered by
or on behalf of the Buyer, HSCC, the Company or the Member pursuant to this Agreement shall survive
the Closing and shall terminate at 11:59 p.m. (EST) time on the date that is one (1) year after the
Closing Date; provided, however, that the Excepted Representations shall survive
the Closing and shall terminate at 11:59 p.m. (EST) time on the date that is sixty (60) days
following the date of the expiration of the applicable statute of limitations (including any
extension thereof) for the matter giving rise to the claim. For convenience of reference, the date
upon which any representation or warranty shall terminate is referred to herein as the
“Survival Date.” Unless otherwise expressly set forth in this Agreement, the covenants and
agreements set forth in this Agreement shall survive the Closing and remain in effect indefinitely
(it being understood, for the avoidance of doubt, that the phrase “covenants and agreements” does
not include representations and warranties, the survival and termination of which are addressed in
the first sentence of this Section 9.1). The parties hereto hereby acknowledge and agree
that the time periods set forth in this Section 9.1 for the assertion of claims under this
Agreement are the result
of arms’-length negotiation among the parties hereto and that they intend for the time periods
to be enforced as agreed by the parties hereto.


 


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9.2 Indemnification by the Company and the Member.



(a) The Company and the Member, jointly and severally, shall indemnify, defend and hold
harmless HSCC, the Buyer and their respective Affiliates, their respective successors and assigns,
and the respective officers, directors, employees and agents of each of the foregoing (the
“Buyer Indemnified Persons”) from and against any and all Losses of every kind, nature or
description asserted against, or sustained, incurred or accrued directly or indirectly by, any
Buyer Indemnified Person which arise out of or result from or as a consequence of any of the
following:




(i) the breach or inaccuracy of any representation or warranty of the Company
or the Member contained in Articles III or IV of this Agreement or
in any Related Agreement or any certificate delivered by the Company or the Member
pursuant to this Agreement, provided that, such representations and warranties shall
be interpreted without giving effect to any limitations or qualifications as to
“materiality” (including the word “material”), “Business Material Adverse Effect”,
or any similar limitations or qualifications;




(ii) the breach of or non-compliance with any agreement or covenant of the
Company or the Member contained in this Agreement or in any Related Agreement;




(iii) any of the Excluded Liabilities, including the failure of the Company or
other Person to honor, pay, discharge or perform any Excluded Liability;




(iv) any Taxes of any kind relating to or arising in connection with the
transfer of the Acquired Assets to the Buyer, including any sales Taxes, any bulk
sales or similar statute applicable to the transactions contemplated by this
Agreement or the failure of any Person to comply with the provisions thereof;




(v) the ownership of the Acquired Assets prior to the Closing and the ownership
of the Excluded Assets at any time;




(vi) the operation of the Business prior to the Closing;




(vii) any Company Indebtedness or Company Transaction Expenses not satisfied at
or prior to the Closing;




(viii) any failure by the Company to comply with Laws applicable to it, to the
Acquired Assets and to the Company’s ownership, use or operation thereof, or
applicable to the operation of the Business, including, without limitation, the
matters described in Section 3.15 of the Company Disclosure Schedule; or




(ix) enforcement of this Section 9.2.


 


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(b) Subject to the right of the Buyer or HSCC to seek specific performance and injunctive
relief to enforce the terms of this Agreement, (i) any Losses which a Buyer Indemnified Person is
entitled to recover pursuant to Section 9.2(a) shall be satisfied solely by reducing any
Contingent Payment Amount that is payable or that becomes payable to the Company pursuant to
Section 2.2 (including, any Contingent Payment Amount placed with the Escrow Agent as
contemplated by Section 2.2(e) (but not Section 2.2(b)) or deposited by the Escrow
Agent with a court or other party in connection with the resolution of any dispute relating to
those payments) (the “Remaining Payments”) and (ii) with respect to the Losses which a
Buyer Indemnified Person is entitled to recover pursuant to Section 9.2(a)(viii), such
Losses shall be satisfied out of the Escrow Amount placed with the Escrow Agent as contemplated by
Section 2.2(b).



9.3 Indemnification by the Buyer and HSCC. Buyer and HSCC, jointly and severally,
shall indemnify and hold harmless the Company and the Member (“Company Indemnified
Persons”) from and against, and shall reimburse the Company and the Member for, any and all
Losses arising out of, based upon or in any way relating to:



(a) the breach or inaccuracy of any representation or warranty of the Buyer or HSCC contained
in Article V of this Agreement or in any Related Agreement or any certificate delivered by
the Buyer or HSCC pursuant to this Agreement, provided that, such representations and warranties
shall be interpreted without giving effect to any limitations or qualifications as to “materiality”
(including the word “material”), “material adverse effect”, or any similar limitations or
qualifications;



(b) the breach of or non-compliance with any agreement or covenant of the Buyer or HSCC
contained in this Agreement or in any Related Agreement;



(c) any of the Assumed Liabilities, including the failure of the Company or other Person to
honor, pay, discharge or perform any Assumed Liability;



(d) the Buyer’s operation of the Business after the Closing Date, or ownership of the Acquired
Assets after the Closing Date; provided, however that Buyer shall not have any
liability under this Section 9.3(d) to the extent that any action or omission giving rise
to any such Loss commenced prior to the Closing and continued following the Closing; and




(e) enforcement of this Section 9.3.




9.4 Limitations on Indemnification. Subject to the provisions of Section 9.7:



(a) no indemnification shall be payable to a Buyer Indemnified Person as a result of any
Losses arising under Section 9.2(a)(i) or to a Company Indemnified Person as a result of
any Losses arising under Section 9.3(a) until the aggregate amount of all Losses incurred
by all Buyer Indemnified Persons or Company Indemnified Persons, as applicable, exceeds $25,000
(the “Basket”), whereupon (in each case subject to Sections 9.4(b)(i) and
9.4(c)(i), as applicable, below) the Buyer Indemnified Persons or the Company Indemnified
Persons, as applicable, shall be entitled to receive the amount of all Losses, including the
Basket; provided, however, that the foregoing shall not apply to any Losses
resulting from or arising out of any breach or inaccuracy of any of the Excepted Representations;


 


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(b) the maximum aggregate Losses payable to the Buyer Indemnified Persons pursuant to (i)
Section 9.2(a)(i) shall be an amount equal to $250,000 (the “Mini Cap”);
provided, however, that the foregoing shall not apply to any Losses resulting from
or arising out of any breach or inaccuracy of any of the Excepted Representations; (ii) Section
9.2(a)(ii) through 9.2(a)(ix) shall be an amount equal to the Remaining Payments; and
(iii) Section 9.2(a)(viii) shall be an amount equal to the Escrow Amount; and



(c) the maximum aggregate Losses payable to the Company Indemnified Persons pursuant to (i)
Section 9.3(a) shall be an amount equal to the Mini Cap; provided, however,
that the foregoing shall not apply to any Losses resulting from or arising out of any breach or
inaccuracy of any of the Excepted Representations; and (ii) Section 9.3(b) through
9.3(e) shall be an amount equal to $1,000,000 plus the Remaining Payments (except that the
Buyer’s and HSCC’s aggregate liability for claims for Losses under Section 9.3 shall be
reduced by the Mini Cap on the first anniversary of the Closing Date, except with respect to claims
made by Company Indemnified Persons under Section 9.3(a) on or before the first anniversary
of the Closing Date in accordance with this Agreement, which shall survive and be subject to the
Mini Cap until such time as such claim(s) have been resolved).




9.5 Indemnification Process.  



(a) If any legal proceedings shall be instituted or any claim is asserted by any third party
in respect of which any party hereto may have an obligation to indemnify another party, the party
asserting such right to indemnity (the “Indemnified Party”) shall give the party from whom
indemnity is sought (the “Indemnifying Party”) written notice thereof, but any failure to
so notify the Indemnifying Party shall not relieve it from any liability that it may have to the
Indemnified Party other than to the extent the Indemnifying Party is actually prejudiced thereby.



(b) The Indemnified Party may defend any third party claim with counsel of its own choosing,
and shall act in a commercially reasonable manner and in accordance with its good faith business
judgment in handling such third party claim. All costs (including attorneys’ fees) incurred by the
Indemnified Party in defending such third party claim shall be at the cost and expense of the
Indemnifying Party, and the Indemnifying Party will promptly reimburse the Indemnified Party
therefor in accordance with this Section 9.5. The Indemnifying Party shall have the right,
at its option and expense, to participate in the defense of such proceeding or claim, but not to
control the defense, negotiation or settlement thereof, which control shall at all times rest with
the Indemnified Party. Notwithstanding the two preceding sentences, if the Indemnifying Party (i)
admits in writing its liability to the Indemnified Party hereunder with respect to such proceeding
or claim; and (ii) furnishes evidence of its financial ability to indemnify the Indemnified Party
reasonably satisfactory to the Indemnified Party, the Indemnifying Party may assume control of the
defense at its expense through counsel reasonably satisfactory to such Indemnified Party;
provided, however, that:




(i) the Indemnified Party shall be entitled to participate in the defense of such claim
and to employ counsel at its own expense to assist in the handling of such claim; provided,
however, that the employment of such counsel shall be at the expense of the Indemnifying
Party if the Indemnified Party determines in good faith that such
participation is appropriate in light of defenses not available to the Indemnifying
Party, conflicts of interest or other similar circumstances;


 


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




(iii) the Indemnifying Party shall not be entitled to control (but shall be entitled to
participate at its own expense in the defense of), and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement of (A) any claim to the extent
the claim seeks an order, injunction, non-monetary or other equitable relief against the
Indemnified Party which, if successful, could materially interfere with the business,
operations, assets, condition (financial or otherwise) or prospects of the Indemnified Party
or (B) any claim relating to Taxes.



(c) If the Indemnified Party elects not to defend such third party claim, the Indemnified
Party shall promptly provide notice to the Indemnifying Party. After written notice by the
Indemnifying Party to the Indemnified Party of its assumption of control of the defense of any such
action pursuant to this Section 9.5, the Indemnifying Party shall not be liable to such
Indemnified Party hereunder for any Legal Expenses subsequently incurred by such Indemnified Party
in connection with the defense thereof other than reasonable costs of investigation and of liaison
counsel for the Indemnified Party; provided, however, that the Indemnifying Party shall be liable
for such Legal Expenses if the Indemnified Party determines in good faith that the incurrence of
the same is appropriate in light of defenses not available to the Indemnifying Party, conflicts of
interest or other similar circumstances. If the Indemnifying Party does not assume control of the
defense of such claim as provided in this Section 9.5, the Indemnified Party shall have the
right to defend such claim in such manner as it may deem appropriate at the cost and expense of the
Indemnifying Party, and the Indemnifying Party will promptly reimburse the Indemnified Party
therefor in accordance with this Section 9.5. The reimbursement of fees, costs and
expenses required by this Section 9.5 shall be made by periodic payments during the course
of the investigations or defense, as and when bills are received or expenses incurred.



(d) The Indemnified Party shall obtain the prior written approval of the Indemnifying Party
before entering into any settlement of a third party claim or ceasing to defend against such claim
(with such approval not to be unreasonably withheld or conditioned).



(e) The Indemnifying Party and the Indemnified Party shall make available to each other and
their counsel and accountants all books and records and information relating to any third party
claims, keep each other apprised as to the details and progress of all proceedings relating thereto
and render to each other such assistance as may be reasonably required to ensure the proper and
adequate defense of any and all third party claims.


 


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9.6 Other Claims. A claim for indemnification for any matter not involving a
third-party claim shall be asserted by the Indemnified Party to the Indemnifying Party (or to the
Indemnifying Party and the Escrow Agent in the case of a claim pursuant to Section
9.2(a)(viii)) in writing (“Notice of Claim”), setting forth specifically the obligation
with respect to which the
claim is made, the facts giving rise to and the alleged basis for such claim and, if known or
reasonably ascertainable, the amount of the liability asserted or which may be asserted by reason
thereof (the amount of liability so claimed being hereinafter referred to as the “Indemnity
Claim Amount”), but any failure to so notify the Indemnifying Party shall not relieve it from
any liability that it may have to the Indemnified Party other than to the extent the Indemnifying
Party is actually prejudiced thereby. Any Notice of Claim sent to the Escrow Agent in connection
with a claim pursuant to Section 9.2(a)(viii) shall be sent simultaneously to the Company
and the Member and shall specify the date that such notice is deemed received by the Escrow Agent
under the terms of the Escrow Agreement. In addition, the Escrow Agent will be authorized in
respect of such Notice of Claim to disburse within twenty (20) days after receipt of such notice
(unless the Company or the Member object within fifteen (15) days of the receipt of the Notice of
Claim by a written notice to the Buyer and the Escrow Agent) to the Buyer the escrow funds in an
amount equal to the portion, if any, of the Indemnity Claim Amount specified in such Notice of
Claim which is not objected to by the Company or the Member and will not be authorized to disburse
the escrow funds in respect to such portion of the Indemnity Claim Amount which is objected to by
the Company or the Member unless it has received either a joint notice of release signed by the
Buyer and the Member directing the Escrow Agent to deliver all or any portion of the Escrow Amount
and setting forth instructions as to payment, which joint notice the Buyer and the Member agree to
deliver to the Escrow Agent promptly following resolution of any dispute with respect to the
matters set forth in the Notice of Claim, or a final order by a court of competent jurisdiction,
which order is not subject to appeal, directing the Escrow Agent to disburse to the Buyer all or
any portion of the Escrow Amount as set forth in such final order.



9.7 Fraud and Related Claims; Exclusive Remedy. Notwithstanding any provision of this
Agreement to the contrary, nothing contained in this Agreement shall in any way limit, impair,
modify or otherwise affect the rights of an Indemnified Party to bring any claim, demand, suit or
cause of action otherwise available to such Indemnified Party based upon, or to seek or recover any
Losses arising from or related to, nor shall any of the limitations set forth in Section
9.4 apply with respect to, an allegation or allegations of fraud, willful breach, or willful or
intentional misrepresentation or omission of a material fact in connection with this Agreement or
any of the Related Agreements, or criminal liability. Except for claims of fraud, willful breach,
willful or intentional misrepresentation or omission of a material fact in connection with this
Agreement, or criminal liability, the parties hereby acknowledge and agree that from and after the
Closing, subject to the right of the Buyer to seek specific performance and injunctive relief to
enforce the terms of any covenants herein, the exclusive remedy of the parties hereto with respect
to any and all claims arising in connection with or relating to the transactions contemplated under
this Agreement shall be pursuant to the provisions set forth in this Article IX.



9.8 Characterization of Payments. The Parties agree that any payment pursuant to an
indemnification obligation under this Article IX shall be treated for Tax purposes as an
adjustment to the Purchase Price. 



9.9 Calculation of Losses. Subject to the other provisions of this Article
IX, each Indemnified Party shall use commercially reasonable efforts to mitigate Losses,
including seeking recovery under insurance policies and from third parties. Any insurance proceeds
or
recoveries from third parties received by an indemnified party with respect to any Losses
shall reduce, on a dollar-for-dollar basis, the amount payable to such Indemnified Party under the
indemnification provisions of this Article IX.


 


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ARTICLE X




TERMINATION





10.1 Termination.



(a) This Agreement may be terminated, in which case the transactions contemplated hereby shall
be abandoned, at any time prior to the Closing:




(i) by mutual written consent of the Buyer or HSCC, on the one hand, and the
Member, on the other hand;




(ii) by either the Buyer or HSCC, on the one hand, or the Member, on the other
hand, upon written notice to the other Parties, if there has been a material breach
of any representation or warranty, or breach or non-performance in any material
respect of a covenant or agreement on the part of the other party set forth in this
Agreement, which breach or failure to perform would render unsatisfied any condition
contained in Section 8.2 or 8.3, as applicable, and is incapable of
being cured, or, if capable of being cured, has not been cured by the breaching
party within ten days after the non-breaching party has notified the breaching
party;




(iii) by either the Buyer or HSCC, on the one hand, or the Member, on the other
hand, upon written notice to the other Parties, at any time after June 30, 2011 (the
“Final Termination Date”), provided that if the Closing shall not have
occurred by the Final Termination Date as the result of a breach of this Agreement,
then any party responsible for such breach may not avail itself of the right under
this Section 10.1, and provided further, that in any such event, the
non-breaching party(ies) shall not be deprived of any remedy hereunder or at law
against the breaching party, and provided further, that if the only condition
precedent not met as of the Final Termination Date is that the Parties have not
received all of the approvals of Governmental Authorities set forth in Section
3.5 of the Company Disclosure Schedule, then either Buyer or the Member may
extend the Final Termination Date to up to one (1) month after the date of this
Agreement;




(iv) by either the Buyer or HSCC, on the one hand, or the Member, on the other
hand, upon written notice to the other Parties, if a court of competent jurisdiction
or Governmental Authority shall have issued an Order or taken any other Action, in
each case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such Order or other Action shall
have become final and non-appealable; or


 


47









 






(v) by the Buyer or HSCC, upon written notice to the other Parties, if there
shall have been a Business Material Adverse Change.



(b) In addition, in the event the transactions contemplated by this Agreement are not
consummated on or prior to the Final Termination Date and this Agreement is terminated pursuant to
this Section 10.1, upon written notice by HSCC or Timios Acquisition Corp. to the Member
and Timios, Inc., the Stock Purchase Agreement by and among HSCC, Timios Acquisition Corp., the
Member and Timios, Inc. dated as of May 27, 2011 shall be terminated as provided in Article IX of
such agreement.



10.2 Effect of Termination. In the event of termination of this Agreement pursuant to
Section 10.1, this Agreement shall forthwith terminate and become void, and there shall be
no liability on the part of any party hereto to any other and all rights and obligations of any
party hereto will cease, except that (a) this Section 10.2 and Article XI shall
survive any such termination and (b) nothing herein shall relieve any party from liability for any
breach of this Agreement prior to the termination hereof.



ARTICLE XI




MISCELLANEOUS




11.1 Entire Agreement. This Agreement, together with the schedules and exhibits
attached hereto, the Related Agreements and all other ancillary agreements, documents and
instruments to be delivered in connection herewith contain the entire understanding of the parties
hereto with respect to the subject matter hereof and supersede all prior agreements, either oral or
written; provided, however, that the Confidentiality Agreement shall survive the
execution of this Agreement until the consummation of the transactions contemplated hereby, at
which time it shall terminate. Without limiting the generality of the foregoing and
notwithstanding anything in this Agreement to the contrary, no party is making any representation
or warranty whatsoever, oral or written, express or implied, in connection with the transactions
contemplated by this Agreement and the Related Agreements other than those set forth in this
Agreement or in the Related Agreements and no party is relying on any statement, representation or
warranty, oral or written, express or implied, made by any other party except for the
representations and warranties set forth in this Agreement or in the Related Agreements. The
parties hereto agree that, notwithstanding any access to information by any party or any right of
any party to this Agreement to investigate the affairs of any other party to this Agreement, the
party having such access and right to investigate shall have the right to rely fully upon the
representations and warranties of the other party expressly contained in this Agreement and on the
accuracy of any schedule, exhibit or other document attached hereto or referred to herein or
delivered by such other party or pursuant to this Agreement.



11.2 Successors and Assigns; No Third Party Beneficiaries. No party may assign any of
its rights or delegate any of its obligations under this Agreement without the prior written
consent of the other parties, except that Buyer may assign any of its rights and delegate any of
its obligations under this Agreement to any Subsidiary of the Buyer; provided,
however, that HSCC and the Buyer shall remain liable to the Member for any payments due
under this Agreement. Subject to the preceding sentence, this Agreement will apply to, be binding
in all respects upon
and inure to the benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person other than the
parties to this Agreement any legal or equitable right, remedy or claim under or with respect to
this Agreement or any provision of this Agreement, except such rights as shall inure to a successor
or permitted assignee pursuant to this Section 11.2. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement
and their successors and assigns.


 


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11.3 Amendment and Waiver. This Agreement may be amended only by an instrument in
writing specifically amending this Agreement signed by the Buyer, the Company and the Member.



11.4 Expenses. Each of the parties shall bear its own fees, costs and expenses
incurred in connection with this Agreement (including the preparation, negotiation and performance
hereof) and the transactions contemplated hereby (including fees and disbursements of attorneys,
accountants, agents, representatives and financial and other advisors) (collectively, the
“Transaction Expenses”). The Company and the Member shall pay any filing fee, if any, that
is required to be paid to any Governmental Authority as a result of the transactions contemplated
by this Agreement, except with respect to any filing fee for the Real Estate Corporation license or
any similar license required to be obtained by the Buyer. Notwithstanding the foregoing, in the
event that a party institutes an Action to enforce its rights under this Agreement or any Related
Agreement, the prevailing party in such Action shall be entitled to recover its reasonable costs
and expenses (including reasonable attorneys’ fees) incurred in connection with such Action from
the losing party.



11.5 Execution of Agreement. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Copies (whether photostatic, facsimile or otherwise) of this
Agreement may be made and relied upon to the same extent as an original. The exchange of copies of
this Agreement and of signature pages by facsimile transmission or e-mail shall constitute
effective execution and delivery of this Agreement as to the parties and may be used in lieu of the
original Agreement for all purposes. Signatures of the parties transmitted by facsimile or e-mail
shall be deemed to be their original signatures for all purposes.



11.6 Governing Law; Venue. This Agreement shall be governed by the Laws of the State
of Delaware without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdictions) that would cause application of the
Laws of any jurisdiction other than the State of Delaware.



11.7 Specific Performance. The rights and remedies of the parties hereto shall be
cumulative. The transactions contemplated by this Agreement are unique transactions and any
failure on the part of any party to complete the transactions contemplated by this Agreement on the
terms of this Agreement will not be fully compensable in damages and the breach or threatened
breach of the provisions of this Agreement would cause the other parties hereto irreparable harm.
Accordingly, in addition to and not in limitation of any other remedies available to the parties
hereto for a breach or threatened breach of this Agreement, the parties
shall be entitled to seek specific performance of this Agreement and seek an injunction
restraining any such party from such breach or threatened breach.


 


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11.8 Interpretation. The schedules and exhibits attached hereto are an integral part
of this Agreement. All schedules and exhibits attached to this Agreement are incorporated herein
by this reference and all references herein to this “Agreement” shall mean this Agreement together
with all such schedules and exhibits. When a reference is made in this Agreement to Sections,
subsections, schedules or exhibits, such reference shall be to a Section, subsection, schedule or
exhibit to this Agreement unless otherwise indicated. The words “include,” “includes” and
“including” when used herein shall be deemed in each case to be followed by the words “without
limitation.” The word “herein” and similar references mean, except where a specific Section or
Article reference is expressly indicated, the entire Agreement rather than any specific Section or
Article. The table of contents and the headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The
term $ shall mean dollars of the United States of America. As used herein, all pronouns shall
include the masculine, feminine, neuter, singular and plural thereof whenever the context and facts
require such construction.



11.9 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law, or public policy, all other conditions
and provisions of this Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision is invalid, illegal
or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent
possible.



11.10 Notices. All notices and other communications hereunder shall be in writing and
shall be deemed given (a) on the day of service if served personally on the party to whom notice is
given, (b) on the date of receipt if delivered by telecopy or nationally recognized overnight
courier, or (c) on the third (3rd) Business Day after deposit in the U.S. mail if mailed to the
party to whom notice is given by registered or certified mail, postage prepaid, return receipt
requested and properly addressed as follows:




If to HSCC or the Buyer:




Homeland Security Capital Corporation

1005 North Glebe Road, Suite 550

Arlington, VA 22201

Attention: C. Thomas McMillen

Facsimile: (703) 528-0956




and




Default Servicing USA, Inc.

5111 Commerce Crossings Drive

Suite 210

Louisville, KY 40229

Attention: C. Thomas McMillen

Facsimile: (502) 968-1122


 


50









 






with a copy (which will not constitute notice) to:




Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

666 Third Avenue

New York, NY 10017

Attention: Kenneth R. Koch

Facsimile: (212) 983-9115




If to the Company or the Member, addressed to:




DAL Group, LLC

950 South Pine Island Road

Plantation, Florida 33324

Attention: Stephen J. Bernstein, President and CEO

Facsimile: (786) 999-0260




with a copy (which will not constitute notice) to:




Dykema Gossett PLLC

400 Renaissance Center

Detroit, Michigan 48243

Attention: Thomas S. Vaughn

Facsimile: (313) 568-6594



or to such other address as the party to whom notice is to be given may have furnished to the other
party in writing in accordance herewith. All such notices or communications shall be deemed to be
received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next Business Day after the date when sent, (c) in
the case of facsimile transmission, upon confirmed receipt, and (d) in the case of mailing, on the
second Business Day following the date on which the piece of mail containing such communication was
posted.



11.11 Representation by Counsel. Each party hereto acknowledges that it has been or
has had an opportunity to be advised by legal counsel retained by such party in its sole
discretion. Each party acknowledges that such party has had a full opportunity to review this
Agreement and all related exhibits, schedules and ancillary agreements and to negotiate any and all
such documents in its sole discretion, without any undue influence by any other party hereto or any
third party.


 


51









 





11.12 Construction. The parties have participated jointly in the negotiations and
drafting of this Agreement and in the event of any ambiguity or question of intent or
interpretation, no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this Agreement.



11.13 Waivers. No waiver by any party, whether express or implied, of its rights
under any provision of this Agreement shall constitute a waiver of the party’s rights under such
provisions at any other time or a waiver of the party’s rights under any other provision of this
Agreement. No failure by any party to take any action against any breach of this Agreement or
default by another party shall constitute a waiver of the former party’s right to enforce any
provision of this Agreement or to take action against such breach or default or any subsequent
breach or default by the other party. To be effective any waiver must be in writing and signed by
the waiving party.



11.14 Third Party Beneficiaries. Nothing express or implied in this Agreement is
intended to confer, nor shall anything herein confer, upon any Person other than the parties hereto
and their respective successors and permitted assigns, any rights, remedies, obligations or
liabilities whatsoever, except to the extent that such third person is an indemnified person in
respect of the indemnification provided in accordance with Article IX of this Agreement.
The representations and warranties contained in this Agreement are for the sole benefit of the
parties hereto and no other Person may rely on such representations and warranties for any purpose
whatsoever.



11.15 Bulk Sales Law. Each party hereby waives compliance by each other with the
so-called “bulk sales law” and other similar Law in any jurisdiction in respect of the transactions
contemplated by this Agreement.



11.16 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUR OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.



[Signature Page to Follow]



 


52









 





NOW THEREFORE, the parties hereto have executed, or caused this Asset Purchase Agreement to be
executed by their duly authorized representatives, as of the date first written above.



	 	 	 	 	 
	 	BUYER:



DEFAULT SERVICING USA, INC.

 	 
	 	By:  	/s/ C. Thomas McMillen
 	 
	 	 	Name:  	C. Thomas McMillen 	 
	 	 	Title:  	Chief Executive Officer 	 



	 	 	 	 	 
	 	HSCC:



HOMELAND SECURITY CAPITAL CORPORATION

 	 
	 	By:  	/s/ C. Thomas McMillen
 	 
	 	 	Name:  	C. Thomas McMillen 	 
	 	 	Title:  	Chief Executive Officer 	 



	 	 	 	 	 
	 	COMPANY:



DEFAULT SERVICING, LLC

 	 
	 	By:  	/s/ Stephen J. Bernstein	 
	 	 	Name:  	Stephen J. Bernstein	 
	 	 	Title:  	Vice President	 



	 	 	 	 	 
	 	MEMBER:



DAL GROUP, LLC

 	 
	 	By:  	/s/ Stephen J. Bernstein	 
	 	 	Name:  	Stephen J. Bernstein	 
	 	 	Title:  	President and Chief Executive Officer	 



Signature Page to Default Servicing Purchase Agreement




 


 









 





	 	 	 	 	 
	 	SOLELY FOR PURPOSES OF SECTION 10.1(B):



TIMIOS, INC.

 	 
	 	By:  	/s/ Stephen J. Bernstein	 
	 	 	Name:  	Stephen J. Bernstein	 
	 	 	Title:  	Vice President	 



Signature Page to Default Servicing Purchase Agreement



 


 









 







Schedule I




INDEX OF DEFINED TERMS




			
	 	 	 
	Accounts Receivable
	 	Section 1.1(e)
	Accrued Vacation
	 	Section 7.7(f)
	Acquired Business
	 	Section 2.2(f)
	Action
	 	Schedule I
	Affiliate
	 	Schedule I
	Agreed Percentage
	 	Section 2.2(f)
	Agreement
	 	Preamble
	Allocation Schedule
	 	Section 2.6
	Anti-Terrorism Laws
	 	Schedule I
	Approval
	 	Schedule I
	Assigned Contracts
	 	Section 1.1(a)
	Assumed Liabilities
	 	Section 1.3
	Base Purchase Price
	 	Section 2.1
	Basket
	 	Section 9.4(a)
	Bill of Sale
	 	Section 8.2(i)
	Books and Records
	 	Schedule I
	Business
	 	Recitals
	Business Day
	 	Schedule I
	Business Licenses
	 	Section 3.7(a)
	Business Material Adverse Change
	 	Section 3.13
	Business Material Adverse Effect
	 	Schedule I
	Buyer
	 	Preamble
	Buyer Indemnified Persons
	 	Section 9.2(a)
	Buyer Plans
	 	Section 7.7(b)
	Buyer Prorated Amount
	 	Section 2.3(a)
	CERCLA
	 	Schedule I
	Closing Date
	 	Section 1.5
	Closing
	 	Section 1.5
	COBRA
	 	Schedule I
	Code
	 	Schedule I
	Company
	 	Preamble
	Company Employee
	 	Schedule I
	Company Indebtedness
	 	Schedule I
	Company Indemnified Persons
	 	Section 9.3
	Company Intellectual Property
	 	Schedule I
	Company Services
	 	Schedule I
	Company Transaction Expenses
	 	Schedule I
	Contingent Payment Amount
	 	Section 2.2(a)
	Contracts
	 	Schedule I
	Control
	 	Schedule I





 


 









 





			
	 	 	 
	Copyrights
	 	Schedule I
	Court
	 	Schedule I
	Databases
	 	Section 3.22(l)
	Designated Employee
	 	Recitals
	Company Disclosure Schedule
	 	Article III
	Dispute Accounting Firm
	 	2.2(e)
	Employee Agreement
	 	Section 3.16(a)
	Employee Benefit Plan
	 	Schedule I
	Employment Agreement
	 	Recitals
	Enforceability Exceptions
	 	Section 3.4
	Environmental Laws
	 	Schedule I
	ERISA
	 	Schedule I
	ERISA Affiliate
	 	Schedule I
	Escrow Agent
	 	Section 2.2(b)
	Escrow Agreement
	 	Section 2.2(b)
	Escrow Amount
	 	Section 2.2(b)
	Escrow Deposit Amount
	 	Section 2.2(b)
	Excepted Representations
	 	Schedule I
	Excluded Assets
	 	Section 1.2
	Excluded Contracts
	 	Section 1.2(a)
	Excluded Liabilities
	 	Section 1.4
	Financial Statements
	 	Section 3.12(a)
	GAAP
	 	Schedule I
	Governmental Authority
	 	Schedule I
	Government Bid
	 	Schedule I
	Indebtedness
	 	Schedule I
	Indemnified Party
	 	Section 9.5(a)
	Indemnifying Party
	 	Section 9.5(a)
	Indemnity Claim Amount
	 	Section 9.6
	Intellectual Property
	 	Schedule I
	Interim Balance Sheet
	 	Section 3.12(a)
	IRS
	 	Schedule I
	Knowledge
	 	Schedule I
	Laws
	 	Schedule I
	Leased Personal Property
	 	Section 3.10
	Leased Real Property
	 	Section 3.9(a)
	Legal Expenses
	 	Schedule I
	Liabilities
	 	Schedule I
	License Agreements
	 	Section 3.22(b)
	Licensed Intellectual Property
	 	Section 3.22(b)
	Lien
	 	Schedule I
	Loss Estimate
	 	Section 9.4(a)
	Losses
	 	Schedule I
	Material Client
	 	Section 3.29(a)
	Materials of Environmental Concern
	 	Schedule I
	Maximum Contingent Payment Amount
	 	Section 2.2(a)





 


 









 





			
	 	 	 
	Maximum Contingent Payment Amount Objection Notice
	 	Section 2.2(a)
	Measurement Period
	 	Section 2.2(b)
	Member
	 	Recitals
	Mini Cap
	 	Section 9.4(b)
	Net Revenue
	 	Section 2.2(f)
	Net Revenue Objection Notice
	 	Section 2.2(e)
	Non-Competition Agreement
	 	Recitals
	Notice of Claim
	 	Section 9.6
	Objection Notice
	 	Section 2.2(e)
	Office Lease
	 	Section 2.3(a)
	Open Source Materials
	 	Section 3.22(i)
	Order
	 	Schedule I
	Ordinary Course of Business
	 	Schedule I
	Organizational Documents
	 	Schedule I
	Patents
	 	Schedule I
	Person
	 	Schedule I
	Personal Property Leases
	 	Section 3.10
	Personally Identifiable Information
	 	Schedule I
	Premises
	 	Section 3.9(b)
	Pre-Closing Revenues
	 	Section 2.2(a)
	Prior Actions
	 	Section 3.14(b)
	Purchase Price
	 	Section 2.1
	Real Property Leases
	 	Section 3.9(a)
	Regulation
	 	Schedule I
	Related Agreements
	 	Schedule I
	Remaining Payments
	 	Section 9.2(b)
	Scheduled Contracts
	 	Section 3.19(a)
	Software
	 	Schedule I
	Subsidiary
	 	Schedule I
	Survival Date
	 	Section 9.1
	Tax or Taxes
	 	Schedule I
	Tax Return
	 	Schedule I
	Third Party Claim
	 	Section 9.4(b)
	Trade Secrets
	 	Schedule I
	Trademarks
	 	Schedule I
	Trading with the Enemy Act
	 	Schedule I
	Transaction Expenses
	 	Section 11.4
	Transferred Books and Records
	 	Section 1.1(g)
	Transferred Employee
	 	Section 7.6(a)
	Transition Date
	 	Section 7.6(a)
	USPTO
	 	Section 3.22(a)
	Vendor
	 	Section 3.29(b)
	WARN
	 	Schedule I






 


 









 







TABLE OF DEFINITIONS




“Action” means any suit, action, arbitration, cause of action, claim, complaint,
prosecution, audit, inquiry, investigation, governmental or other proceeding, whether civil,
criminal, administrative, investigative or informal, at law or at equity, before or by any
Governmental Authority, arbitrator or other tribunal.



“Affiliate” means, with respect to any Person, any other Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned Person; including any partnership or joint venture in which the
Company (either alone, or through or together with any other Subsidiary) has, directly or
indirectly, an interest of 10% or more; and “control” (including the terms “controlled
by” and “under common control with”) means the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of a Person, whether
through the ownership of stock or other securities, as trustee or executor, by contract or credit
arrangement or otherwise.



“Anti-Terrorism Laws” means any applicable Laws relating to terrorism or money
laundering, including Executive Order No. 13224, the USA PATRIOT Act, applicable Laws comprising or
implementing the Bank Secrecy Act and applicable Laws administered by the United States Treasury
Department’s Office of Foreign Asset Control (as any of the foregoing Laws may from time to time be
amended, renewed, extended, or replaced).



“Approval” means any license, permit, consent, approval, authorization, registration,
filing, waiver, exemption, clearance, qualification or certification, including all pending
applications therefor or renewals thereof, issued by, made available by or filed with any
Government Authority.



“Books and Records” means all books, records, information, files, manuals, databases
and other materials maintained by or on behalf of the Company in any medium (including, where
available, digital media), including all customer, vendor and mailing lists and databases,
advertising materials, files and correspondence, market research studies and surveys, operating
data and plans, production data, technical documentation (design specifications, functional
requirements, operating instructions, logic manuals, flow charts, etc.), user documentation
(installation guides, user manuals, training materials, release notes, working papers, etc.),
equipment repair, maintenance and service records, sales and promotional materials and records,
purchasing and billing records, research and development files, data, intellectual property
disclosures, media materials, accounting files and records, sales order files, personnel records
and all lists of and all rights in and to the information contained therein.



“Business Day” means any day other than a Saturday, Sunday or day on which banks are
permitted to close in the State of Virginia.


 


 









 





“Business Material Adverse Effect” means any fact, event, change, development or
effect that, individually or together with any one or more other facts, events, changes,
developments or effects, is materially adverse to (a) the assets, operations, capitalization,
reasonably likely business prospects, results of operations or financial condition of the Business,
or (b) the ability of the Member and the Company to consummate the transactions contemplated by
this
Agreement, except to the extent resulting from (u) changes in general local, domestic,
foreign, or international economic conditions, (v) changes affecting generally the industries or
markets in which the Company operates the Business, (w) acts of war, sabotage or terrorism,
military actions or the escalation thereof, (x) any changes in applicable laws or accounting rules
or principles, including changes in GAAP, (y) any other action required by this Agreement, or (z)
the announcement of the transactions contemplated by this Agreement (provided,
however, with respect to each of clauses (u) through (x) above, that such general
conditions do not affect the Business in a disproportionate manner).



“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended.



“COBRA” means the group health plan continuation coverage requirements of Section
4980B of the Code, Sections 601 through 608 of ERISA and the applicable provisions of the American
Recovery and Reinvestment Act of 2009.



“Code” means the Internal Revenue Code of 1986, as amended, and all Regulations
promulgated thereunder.



“Company Employee” means any individual who is employed or engaged as a consultant or
independent contractor by the Company on the Transition Date.



“Company Indebtedness” means any Indebtedness of the Company outstanding as of
immediately prior to the Closing plus any costs or expenses arising or resulting from the payment
of any such Indebtedness prior to the Closing (including any pre-payment fees or penalties).



“Company Intellectual Property” means all Intellectual Property owned, licensed, used
or held by the Company.



“Company Services” means the services that the Company offers or provides or has
previously offered or provided.



“Company Transaction Expenses” means all Transaction Expenses of the Company
outstanding as of immediately prior to the Closing.



“Contract” means any loan agreement, indenture, letter of credit (including related
letter of credit applications and reimbursement obligations), mortgage, security agreement, pledge
agreement, deed of trust, bond, note, guarantee, surety obligation, warranty, license, franchise,
permit, power of attorney, invoice, purchase order, sales order, lease, endorsement agreement, and
any other agreement, contract, instrument, obligation, offer, commitment, plan, arrangement,
understanding or undertaking, written or oral, express or implied, to which a Person is a party or
by which any of its properties, assets or Intellectual Property are bound, in each case as amended,
supplemented, waived or otherwise modified.



“Court” means any court or arbitration tribunal of any country or territory, or any
state, province or other subdivision thereof.


 


 









 





“Employee Benefit Plans” means each plan, program, policy, practice, contract,
agreement or other arrangement providing for compensation, pension, retirement, cash balance, money
purchase, savings, profit sharing, annuity, deferred compensation, bonus, incentive (including
cash, equity option, equity bonus, equity appreciation, phantom equity, restricted equity and
equity purchase), medical, dental, vision, hospitalization, long-term care, prescription drug and
other health, employee assistance, cafeteria, flexible benefits, life insurance, short and long
term disability, vacation pay, severance or other termination pay, other welfare and fringe benefit
or remuneration of any kind, whether written or unwritten or otherwise funded or unfunded,
including all employee benefit plans within the meaning of Section 3(3) of ERISA which is
sponsored, maintained, contributed to or required to be contributed to, by the Company or any ERISA
Affiliate for the benefit of any employee, officer or Member of the Company or under which the
Company or any ERISA Affiliate has or may have any current or future liability or obligation.



“Environmental Law” means any Law or Order relating to the environment or occupational
health and safety, including any Law or Order pertaining to (i) treatment, storage, disposal,
generation and transportation of Materials of Environmental Concern; (ii) air, water and noise
pollution; (iii) the protection of groundwater, surface water or soil; (iv) the release or
threatened release into the environment of Materials of Environmental Concern, including emissions,
discharges, injections, spills, escapes or dumping; or (v) storage tanks, vessels, containers,
abandoned or discarded barrels, and other closed receptacles used for Materials of Environmental
Concern. As used above, the terms “release” and “environment” shall have the
meaning set forth in CERCLA.



“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and all
Regulations promulgated thereunder.



“ERISA Affiliate” means any person, trade, business or other entity treated as a
single employer with the Company under Sections 414(b), (c) or (m) of the Code or Section
4001(a)(14) of ERISA.



“Excepted Representations” means the representations and warranties set forth in
Sections 3.1 (Organization, Good Standing and Qualification), 3.2 (Subsidiaries and Investments),
3.3 (Ownership of the Company), 3.4 (Authorization; Binding Obligation), 3.7 (Business Licenses),
3.8(a) (Title to and Condition of Properties; Sufficiency of Assets; Ownership of Assets), 3.15
(Compliance with Laws) 3.16(e)-(f) (Employment Matters), 3.17 (No Brokers), 3.18 (Taxes), 3.20
(Transactions with Affiliates); Sections 4.1 (Organization; Good Standing and Qualification), 4.2
(Authority; Execution; Enforceability), and 4.3 (Title to Company Membership Percentages); and
Sections 5.1 (Organization; Good Standing and Qualification), 5.2 (Authorization; Binding
Obligation), and 5.3 (Consents and Approvals) hereof.




“GAAP” means generally accepted accounting principles in the United States.


 


 









 





“Governmental Authority” means: (a) any nation, state, county, city, town,
municipality, or other jurisdiction of any nature; (b) any federal, state, municipal or local
governmental or quasi-governmental entity or authority of any nature; (c) any Court or tribunal
exercising or
entitled to exercise judicial authority or power of any nature; (d) any multinational
organization or body exercising any administrative, executive, judicial, legislative, police,
regulatory or taxing authority or power of any nature; and (e) any department or subdivision of any
of the foregoing, including any commission, branch, board, bureau, agency, official or other
instrumentality exercising or entitled to exercise any administrative, executive, judicial,
legislative, police, regulatory or taxing authority or power of any nature.



“Government Bid” means any offer, proposal or quote made by the Company prior to the
Closing Date which is outstanding and which, if accepted, would result in a Government Contract.



“Government Contract” means any contract, subcontract, teaming agreement or
arrangement, joint venture, basic ordering agreement, blanket purchasing agreement, Federal Supply
Schedule contract, pricing agreement, CRADA, letter agreement, grant or other similar Contract of
any kind, between the Company, on the one hand, and (a) any Governmental Authority, (b) any prime
contractor of a Governmental Authority in its capacity as a prime contractor, or (c) any
subcontractor with respect to any Contract of a type described in clauses (a) or (b) of this
definition, on the other hand. A task, purchase or delivery order under a Government Contract
shall not constitute a separate Government Contract, for purposes of this definition, but shall be
part of the Government Contract to which it relates.



“Indebtedness” means Liabilities (including Liabilities for principal, accrued
interest, penalties, fees and premiums) (i) for borrowed money, (ii) evidenced by bonds,
debentures, notes or similar instruments, (iii) upon which interest charges are customarily paid
(other than obligations accepted in connection with the purchase of products or services in the
ordinary course of business), (iv) under conditional sale or other title retention agreements, (v)
issued or assumed as the deferred purchase price of property or services (other than accounts
payable to suppliers incurred in the ordinary course of business and paid when due), (vi) of
others secured by (or for which the holder of such Liabilities has an existing right, contingent or
otherwise, to be secured by) any Lien or security interest on property owned or acquired by the
Person in question whether or not the obligations secured thereby have been assumed and (vii) under
leases required to be accounted for as capital leases under GAAP.



“Intellectual Property” means worldwide trademarks, service marks, trade names, trade
dress, designs, logos, slogans and general intangibles of like nature, together with all goodwill
related to the foregoing (whether registered or not, but including any registrations and
applications for any of the foregoing) (collectively, “Trademarks”); patents (including the
ideas, inventions and discoveries described therein, any pending applications, any registrations,
patents or patent applications based on applications that are continuations,
continuations-in-part, divisional, reexamination, reissues, renewals of any of the foregoing and
applications and patents granted on applications that claim the benefit of priority to any of the
foregoing) (collectively, “Patents”); works of authorship or copyrights (including any
registrations, applications and renewals for any of the foregoing) and other rights of authorship
(collectively, “Copyrights”); trade secrets and other confidential or proprietary
information, know-how, confidential or proprietary technology, processes, work flows, formulae,
algorithms, models, user interfaces, customer, supplier and user lists, databases, pricing and
marketing information, inventions, marketing materials, inventions and discoveries (whether
patentable or not) (collectively, “Trade 
Secrets”); computer programs and other Software, macros, scripts, source code, object
code, binary code, methodologies, processes, work flows, architecture, structure, display screens,
layouts, development tools, instructions and templates; published and unpublished works of
authorship, including audiovisual works, databases and literary works; rights in, or associated
with a person’s name, voice, signature, photograph or likeness, including rights of personality,
privacy and publicity; rights of attribution and integrity and other moral rights; Uniform Resource
Locators (URLs) and Internet domain names and applications therefor (and all interest therein), IP
addresses, adwords, key word associations and related rights; all other proprietary, intellectual
property and other rights relating to any or all of the foregoing; all copies and tangible
embodiments of any or all of the foregoing (in whatever form or medium, including electronic
media); and all rights to sue for and any and all remedies for past, present and future
infringements of any or all of the foregoing and rights of priority and protection of interests
therein under the Laws of any jurisdiction.


 


 









 





“IRS” means the United States Internal Revenue Service and, to the extent relevant,
the United States Department of Treasury.



“Knowledge of the Company” (and similar terms and phrases) means the actual knowledge
of any of Jenny Johnson, Stephen J. Bernstein and Jay A. Turtora, and any knowledge which was or
could reasonably have been obtained by such Persons in the prudent exercise of their duties or upon
due inquiry of those employees reporting thereto, whose duties would, in the normal course of
business affairs, result in such employees having knowledge concerning the subject in question.



“Knowledge of the Member” (and similar terms and phrases) means the actual knowledge
of Stephen J. Bernstein and Jay A. Turtora, and any knowledge which was or could reasonably have
been obtained by such Persons in the prudent exercise of their duties or upon due inquiry of those
employees reporting thereto, whose duties would, in the normal course of business affairs, result
in such employees having knowledge concerning the subject in question.



“Laws” means all laws, statutes, codes, written policies, licensing requirements,
ordinances and Regulations of any Governmental Authority, including all Orders, having the effect
of law in each such jurisdiction.



“Legal Expenses” means reasonable attorney’s, accountants’, investigators’, and
experts’ fees, and expenses reasonably sustained or incurred in connection with the defense or
investigation of any Losses.



“Liabilities” means any debts, liabilities, obligations, claims, charges, damages,
demands and assessments of any kind, including those with respect to any Governmental Authority,
whether accrued or not, known or unknown, disclosed or undisclosed, fixed or contingent, asserted
or unasserted, liquidated or unliquidated, whenever or however arising (including, those arising
out of any contract or tort based on negligence or strict liability) and whether or not the same
would be required by GAAP to be reflected in financial statements or disclosed in the notes
thereto.


 


 









 





“Lien” means any mortgage, easement, right of way, charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction or adverse claim of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership, or any other
encumbrance or exception to title of any kind.



“Losses” means losses, damages, liabilities, demands, taxes, sanctions, deficiencies,
assessments, judgments, costs, interest, penalties and expenses (including reasonable attorneys’
fees).



“Materials of Environmental Concern” means any substances, chemicals, compounds,
solids, liquids, gases, materials, pollutants or contaminants, hazardous substances (including as
such term is defined under CERCLA), solid wastes and hazardous wastes (including as such terms are
defined under the Resource Conservation and Recovery Act), toxic materials, oil or petroleum and
petroleum products, asbestos or substances containing asbestos, polychlorinated biphenyls or any
other material subject to regulation under any Environmental Law.



“Open Source Software” means (i) any software that requires as a condition of use,
modification and/or distribution of such software, that such software: (a) be disclosed or
distributed in source code, (b) be licensed for the purpose of making derivative works, and/or (c)
can be redistributed only free of enforceable Intellectual Property rights, and/or (ii) any
software that contains, is derived in any manner (in whole or in part) from, or statically or
dynamically links against any software specified in (i). For exemplary purposes only, and without
limitation, any software modules or packages licensed or distributed under any of the following
licenses or distribution models shall qualify as Open Source Software: (a) the GNU General Public
License or Lesser/Library GPL, (b) the Artistic License, (c) the Mozilla Public License, (d) the
Common Public License, (e) the Sun Community Source License, and (f) the Sun Industry Standards
Source License.



“Order” means any judgment, order, writ, injunction, ruling, decision or decree of, or
any settlement under the jurisdiction of any Governmental Authority.



“Ordinary Course of Business” means the usual and ordinary course of business
consistent with past custom and practice (including with respect to quantity and frequency) of the
Company.



“Organizational Documents” means, with respect to any corporation, those instruments
that at the time constitute its corporate charter as filed or recorded under the Laws of the
jurisdiction of its incorporation, including the articles or certificate of incorporation,
organization or association, and its by-laws or memorandum of association, and with respect to any
limited liability company, those instruments that at the time constitute its certificate of
formation as filed or recorded under the Laws of the jurisdiction of its organization, and its
operating agreement or limited liability company agreement, in each case including all amendments
thereto, as the same may have been restated and, with respect to any other entity, the equivalent
organizational or governing documents of such entity.


 


 









 





“Person” means an individual, corporation, partnership, association, trust,
unincorporated organization, limited liability company or other legal entity.



“Personally Identifiable Information” means information that can be used to identify
or contact Persons, which may include their first and last name, physical address, e-mail address
and telephone number.




“Regulation” means any rule or regulation of any Governmental Authority.



“Related Agreements” means the Bill of Sale, the Non-competition Agreements and the
Employment Agreement.



“Software” means computer programs, known by any name, including all versions thereof,
and all related documentation, training manuals and materials, user manuals, technical and support
documentation, source code and object code, code libraries, debugging files, linking files, program
files, data files, computer and related data, field and date definitions and relationships, data
definition specifications, data models, program and system logic, interfaces, program modules,
routines, sub-routines, algorithms, macros, scripts, compiler directives, program architecture,
design concepts, system designs, program structure, sequence and organizations, screen displays and
report layouts and all other material related to any such computer programs.



“Subsidiary” means, with respect to any Person, any corporation, partnership, joint
venture, limited liability company, trust or other legal entity of which such Person (either alone
or through or together with any other Subsidiary) owns, directly or indirectly, more than fifty
percent (50%) of the stock or other equity interests in such entity.



“Tax Returns” means any and all returns, declarations, reports, claims for refunds and
information returns or statements relating to Taxes, including all schedules or attachments thereto
and including any amendment thereof, required to be filed with any Governmental Authority,
including consolidated, combined and unitary tax returns.



“Taxes” means all taxes and governmental impositions of any kind in the nature of (or
similar to) taxes, payable to any Governmental Authority, including those on or measured by or
referred to as income, franchise, profits, gross receipts, capital, ad valorem, custom duties,
alternative or add-on minimum taxes, estimated, environmental, disability, registration, value
added, sales, use, service, real or personal property, capital stock, license, payroll,
withholding, employment, social security, workers’ compensation, unemployment compensation, health
insurance, utility, severance, production, excise, stamp, occupation, premiums, windfall profits,
transfer and gains taxes, and interest, penalties and additions to tax imposed with respect
thereto.



“Trading with the Enemy Act” means the Trading with the Enemy Act of 1917, 50 U.S.C.
§1, et. seq., and any Regulations thereunder, as the same may be amended from time to time.



“WARN” means the Worker Adjustment and Retraining Notification Act, as amended, and
the Regulations promulgated thereunder.