exv10w1







EXHIBIT 10.1




PURCHASE AGREEMENT



BY AND BETWEEN



JOHN B. SANFILIPPO & SON, INC.



AND



ORCHARD VALLEY HARVEST, INC.



DATED AS OF MAY 5, 2010








 









 








TABLE
OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I — DEFINITIONS	 	 	5	 
	Section 1.1
	 	Definitions	 	 	5	 
	 
	 	 	 	 	 	 
	ARTICLE II — PURCHASE AND SALE	 	 	11	 
	Section 2.1
	 	Agreement to Purchase and Sell	 	 	11	 
	Section 2.2
	 	Excluded Assets	 	 	12	 
	Section 2.3
	 	Assumption of Assumed Liabilities	 	 	13	 
	Section 2.4
	 	Liabilities Not Assumed; Liabilities Retained by Seller	 	 	14	 
	Section 2.5
	 	Purchase Price	 	 	15	 
	Section 2.6
	 	Closing Transactions	 	 	15	 
	Section 2.7
	 	Statement of Net Working Capital and Review Procedures	 	 	16	 
	Section 2.8
	 	Purchase Price Adjustment	 	 	18	 
	Section 2.9
	 	Earn Out Payment	 	 	19	 
	Section 2.10
	 	Tax Allocation of Purchase Price	 	 	22	 
	Section 2.11
	 	Transfer Taxes	 	 	23	 
	 
	 	 	 	 	 	 
	ARTICLE III — CONDITIONS TO CLOSING	 	 	23	 
	Section 3.1
	 	Conditions to the Purchaser’s Obligations	 	 	23	 
	Section 3.2
	 	Conditions to the Seller’s Obligations	 	 	25	 
	 
	 	 	 	 	 	 
	ARTICLE IV — COVENANTS BEFORE CLOSING	 	 	26	 
	Section 4.1
	 	Affirmative Covenants of the Seller	 	 	26	 
	Section 4.2
	 	Negative Covenants of the Seller	 	 	27	 
	Section 4.3
	 	Exclusivity	 	 	28	 
	Section 4.4
	 	Covenants of the Purchaser	 	 	28	 
	 
	 	 	 	 	 	 
	ARTICLE V — REPRESENTATIONS AND WARRANTIES OF THE SELLER	 	 	29	 
	Section 5.1
	 	Organization and Power	 	 	29	 
	Section 5.2
	 	Authorization of Transactions	 	 	29	 
	Section 5.3
	 	Absence of Conflicts	 	 	30	 
	Section 5.4
	 	Intentionally Omitted	 	 	30	 
	Section 5.5
	 	Financial Statements and Related Matters	 	 	30	 
	Section 5.6
	 	Absence of Undisclosed Liabilities	 	 	30	 
	Section 5.7
	 	Absence of Certain Developments	 	 	30	 
	Section 5.8
	 	Real Property	 	 	31	 
	Section 5.9
	 	Proprietary Rights	 	 	33	 
	Section 5.10
	 	Assets; No Liens	 	 	34	 
	Section 5.11
	 	Taxes	 	 	34	 
	Section 5.12
	 	Contracts	 	 	35	 
	Section 5.13
	 	Litigation; Proceedings	 	 	37	 
	Section 5.14
	 	Brokerage	 	 	38	 
	Section 5.15
	 	Labor and Employment Matters	 	 	38	 
	Section 5.16
	 	Employee Benefit Plans	 	 	39	 
	Section 5.17
	 	Intentionally Omitted	 	 	40	 






 









 






	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 5.18
	 	Affiliate Transactions	 	 	40	 
	Section 5.19
	 	Governmental Licenses	 	 	40	 
	Section 5.20
	 	Compliance with Laws	 	 	40	 
	Section 5.21
	 	Location of Assets	 	 	41	 
	Section 5.22
	 	Environmental Matters	 	 	41	 
	Section 5.23
	 	Agreements With Customers and Suppliers	 	 	42	 
	Section 5.24
	 	Product Warranties; Warranty Claims	 	 	42	 
	Section 5.25
	 	Receivables and Notes Receivable	 	 	43	 
	Section 5.26
	 	Accounts and Notes Payable	 	 	43	 
	Section 5.27
	 	Inventories	 	 	43	 
	Section 5.28
	 	Disclosure	 	 	43	 
	Section 5.29
	 	Closing Date	 	 	44	 
	Section 5.30
	 	No Other Representations or Warranties	 	 	44	 
	 
	 	 	 	 	 	 
	ARTICLE VI — REPRESENTATIONS AND WARRANTIES OF THE PURCHASER	 	 	44	 
	Section 6.1
	 	Organization	 	 	45	 
	Section 6.2
	 	Authorization of Transactions	 	 	45	 
	Section 6.3
	 	Absence of Conflicts	 	 	45	 
	Section 6.4
	 	Litigation	 	 	45	 
	Section 6.5
	 	Brokerage	 	 	45	 
	Section 6.6
	 	Financing	 	 	45	 
	Section 6.7
	 	Closing Date	 	 	46	 
	Section 6.8
	 	Due Diligence	 	 	46	 
	 
	 	 	 	 	 	 
	ARTICLE VII — TERMINATION	 	 	46	 
	Section 7.1
	 	Termination	 	 	46	 
	Section 7.2
	 	Effect of Termination	 	 	47	 
	 
	 	 	 	 	 	 
	ARTICLE VIII — INDEMNIFICATION AND RELATED MATTERS	 	 	47	 
	Section 8.1
	 	Indemnification Generally	 	 	47	 
	Section 8.2
	 	Notice and Defense of Third Party Claims	 	 	48	 
	Section 8.3
	 	Survival	 	 	50	 
	Section 8.4
	 	Indemnification Limits	 	 	50	 
	 
	 	 	 	 	 	 
	ARTICLE IX — ADDITIONAL AGREEMENTS	 	 	52	 
	Section 9.1
	 	Press Releases and Announcements	 	 	52	 
	Section 9.2
	 	Further Assurances	 	 	52	 
	Section 9.3
	 	Expenses	 	 	52	 
	Section 9.4
	 	Bulk Sales Waiver	 	 	53	 
	Section 9.5
	 	Employee Matters	 	 	53	 
	Section 9.6
	 	Post-Closing Collection of Receivables	 	 	54	 
	Section 9.7
	 	Use of Seller; Name Change	 	 	54	 
	Section 9.8
	 	Certain Tax Matters	 	 	54	 
	Section 9.9
	 	Post-Closing Access to Records	 	 	54	 
	 
	 	 	 	 	 	 
	ARTICLE X — MISCELLANEOUS	 	 	55	 






ii 









 






	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 10.1
	 	Amendment and Waiver	 	 	55	 
	Section 10.2
	 	Notices	 	 	55	 
	Section 10.3
	 	Binding Agreement; Assignment	 	 	55	 
	Section 10.4
	 	Severability	 	 	55	 
	Section 10.5
	 	No Strict Construction	 	 	56	 
	Section 10.6
	 	Captions	 	 	56	 
	Section 10.7
	 	Entire Agreement	 	 	56	 
	Section 10.8
	 	Counterparts; Facsimile Transmission	 	 	56	 
	Section 10.9
	 	Governing Law	 	 	56	 
	Section 10.10
	 	Submission to Jurisdiction; Choice of Forum	 	 	56	 
	Section 10.11
	 	Parties in Interest	 	 	57	 
	Section 10.12
	 	Waiver of Jury	 	 	57	 











iii









 








INDEX OF EXHIBITS




	 	 	 

	Exhibit A

	 	Form of Escrow Agreement
	Exhibit B

	 	Estimated Net Working Capital Statement (including agreed aggregate Inventory
amounts and values)
	Exhibit C

	 	Form of Earn-Out Calculation

	
Exhibit D

	 	Form of Bill of Sale
	Exhibit E

	 	Form of Assignment and Assumption Agreement

	
Exhibit F

	 	
Form of Assignment and Assumption Agreement — Lease






INDEX OF SCHEDULES




	 	 	 	 	 

	Schedule 1.1(a)

	 	—
	 	Indebtedness Exclusions
	Schedule 2.1(a)

	 	—
	 	Acquired Tangible Personal Property, Owned or Leased
	Schedule 2.1(c)

	 	—
	 	Acquired Contracts
	Schedule 2.1(d)

	 	—
	 	Acquired Permits
	Schedule 2.2(d)

	 	—
	 	Excluded Contracts and Licenses
	Schedule 2.2(l)

	 	—
	 	Excluded Assets
	Schedule 2.3(e)

	 	—
	 	Certain Assumed Liabilities
	Schedule 2.9(a)(i)

	 	—
	 	Purchaser’s Produce Customers
	Schedule 2.9(a)(ii)

	 	—
	 	Seller’s Net Sales Statement
	Schedule 2.9(g)

	 	—
	 	Projected EBITDA
	Schedule 5.1(a)

	 	—
	 	Organization
	Schedule 5.3

	 	—
	 	Seller’s Conflicts
	Schedule 5.5

	 	—
	 	Financial Statements
	Schedule 5.7

	 	—
	 	Certain Developments
	Schedule 5.8(b)

	 	—
	 	Leased Real Property
	Schedule 5.8(c)

	 	—
	 	Purchase and Lease Options on Real Property
	Schedule 5.8(d)

	 	—
	 	Real Property Due Diligence
	Schedule 5.9

	 	—
	 	Proprietary Rights
	Schedule 5.10

	 	—
	 	Assets; No Liens
	Schedule 5.11

	 	—
	 	Taxes
	Schedule 5.12(a)

	 	—
	 	Contracts and Commitments
	Schedule 5.12(b)

	 	—
	 	Termination of Contracts
	Schedule 5.13

	 	—
	 	Litigation; Proceedings
	Schedule 5.14

	 	—
	 	Brokerage
	Schedule 5.15(a)

	 	—
	 	Labor and Employment Matters
	Schedule 5.15(b)

	 	—
	 	Employee Information
	Schedule 5.16(a)

	 	—
	 	Plans
	Schedule 5.16(c)

	 	—
	 	Multiemployer Plans
	Schedule 5.18

	 	—
	 	Affiliate Transactions
	Schedule 5.19

	 	—
	 	Governmental Licenses
	Schedule 5.20

	 	—
	 	Compliance with Laws
	Schedule 5.21

	 	—
	 	Locations
	Schedule 5.22

	 	—
	 	Environmental Matters
	Schedule 5.23(a)

	 	—
	 	Top Ten Customers
	Schedule 5.23(c)

	 	—
	 	Top Ten Suppliers
	Schedule 5.24

	 	—
	 	Product Warranties; Warranty Claims
	Schedule 5.25

	 	—
	 	Receivables and Notes Receivable
	Schedule 5.26

	 	—
	 	Accounts and Notes Payable
	Schedule 5.27

	 	—
	 	Inventories
	Schedule 9.5

	 	—
	 	Employee Matters







 











 





PURCHASE AGREEMENT




          THIS PURCHASE AGREEMENT, dated as of May 5, 2010, is made by and among John B. Sanfilippo &
Son, Inc., a Delaware corporation (the “Purchaser”), and Orchard Valley Harvest, Inc., a California
corporation (the “Seller”). The Seller and the Purchaser are sometimes referred to herein
individually as a “Party” and collectively as the “Parties.” Capitalized terms used herein are
defined in Article I below.




R E C I T A L S:




          Seller is a processor and supplier of a wide array of nuts and dried fruits and related
products (the “Business”).




          Purchaser desires to purchase from Seller, and Seller desires to sell to the Purchaser,
certain assets owned by Seller and used in the Business, and in connection therewith, Purchaser
shall assume certain obligations of Seller and shall enter into employment and/or consulting
agreements with certain shareholders of Seller, all upon the terms and subject to the conditions
contained herein, it being the intention of the Purchaser to employ the assets purchased from
Seller in conjunction with its own business and not as a successor to, or a continuation of,
Seller.




          NOW, THEREFORE, in consideration of the premises and of the mutual representations,
warranties, and covenants contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Parties hereby covenant and agree as
follows:




ARTICLE I — DEFINITIONS




          Section 1.1 Definitions. When used in this Agreement, the following terms have the
meanings set forth below:




          “Acquired Business” means the Business acquired under this Agreement, including the Acquired
Assets and the Assumed Liabilities.




          “Affiliate” means, with respect to any Person, (a) any director, officer, manager, managing
member or general partner of such Person, (b) a spouse, parent, sibling or descendant of such
Person and (c) any other Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with such Person. The term “control”
means the possession, directly or indirectly, of the power to direct the management and policies of
a Person whether through the ownership of voting securities, contract, or otherwise.




          “Agreement” means this Purchase Agreement, including all Exhibits and Schedules hereto, as it
may be amended from time to time in accordance with its terms.





5









 








          “Applicable Law” means any applicable decree, injunction, judgment, law, order, ordinance,
regulation, rule, statute, or writ of any federal, state, local, or foreign governmental entity (or
any agency, department, or political subdivision of any governmental entity).




          “Assumed Net Working Capital” means $10,000,000.




          “Business Day” means any day other than Saturday, Sunday or any federal holiday.




          “Capital Interests” means (a) in the case of a corporation, any and all shares (however
designated) of capital stock, (b) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however designated) of capital
stock, (c) in the case of a partnership or limited liability company, any and all partnership
interests (whether general or limited) or limited liability company membership interests, and (d)
in any case, any conversion, exchange or other right to acquire any of the foregoing.




          “Claim” means any claim, demand, assessment, action, suit, proceeding, formal investigation,
cause of action, litigation, judgment, order or decree.




          “Code” means the Internal Revenue Code of 1986, as amended.




          “Contract” means any written or oral contract, agreement, indenture, note, bond, loan,
license, instrument, lease, commitment, purchase order, plan or other legally binding arrangement
or undertaking of any nature.




          “Current Receivables” means all accounts receivable of Seller, which arose in the Ordinary
Course of Business, which, as of the Closing Date, are less than 90 days old and are not required
to be set forth on Schedule 5.25.




          “Environmental and Safety Requirements” means all federal, state, local and foreign statutes,
regulations, ordinances and similar provisions having the force or effect of law, and all judicial
and administrative orders and determinations concerning public health and safety, worker health and
safety and pollution or protection of the environment, including without limitation all such
standards of conduct and bases of obligations relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any Hazardous
Substances.




          “Escrow Agent” means U.S. Bank.




          “Escrow Agreement” means that certain Escrow Agreement, by and among the Purchaser, the Seller
and the Escrow Agent to be entered into in connection with the Closing, substantially in the form
of Exhibit A attached hereto.




          “Estimated NWC Statement” means a statement calculating the estimated Net Working Capital as
of the close of business on the day immediately





6









 







preceding the Closing Date, as estimated in good
faith by the Seller and the Purchaser, prepared in accordance with GAAP in the same manner and on a
consistent basis with the preparation of the Latest Balance Sheet (including the same accounting
methods, policies, practices and procedures with consistent classifications, judgments, valuation
and estimation methods, including with regard to the individual line items and the determination of
allowances and reserves); it being understood that Seller and the Purchaser may, for purposes of
the Estimated NWC Statement, agree to use the amount of aggregate Inventory as of a date which is
between the date of this Agreement and the Closing Date for purposes of such estimation, in which
case the amount of aggregate Inventory on the NWC Statement shall be the amounts shown on the
Estimated NWC Statement appropriately adjusted for subsequent shipments of Inventory as reflected
on Seller’s books and records (with a copy of the relevant portions thereof to be attached to the
NWC Statement); and the per unit values for such aggregate Inventory shall be the lower of cost or
market method.




          “Estimated Net Working Capital” means the Net Working Capital set forth in the Estimated NWC
Statement.




          “Fiscal 2009” shall mean Seller’s fiscal year ended December 31, 2009.




          “Fiscal 2010” shall mean Purchaser’s four consecutive fiscal quarters ending on December 24,
2010.




          “Fiscal 2011” shall mean Purchaser’s four consecutive fiscal quarters ending on December 23,
2011.




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




          “Hazardous Substances” means any hazardous materials, substances or wastes, chemical
substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products
or by-products, asbestos, polychlorinated biphenyls (or PCBs), noise or radiation, in each case,
defined, listed or regulated as hazardous or toxic under an Environmental and Safety Requirement.




          “Indebtedness” means (a) all funded indebtedness for borrowed money (expressly excluding trade
payables and accrued expenses constituting current liabilities), (b) all obligations for the
deferred purchase price of property or assets, (c) all obligations evidenced by notes, bonds,
debentures or other similar instruments and (d) all guarantees of any such obligations of any other
Person. Indebtedness shall include all accrued interest thereon and applicable prepayment premiums
and any other fees, costs or expenses payable in connection therewith. Notwithstanding the
foregoing, Indebtedness shall not include any item identified on Schedule 1.1(a).




          “Independent Accountant” means Grant Thornton, LLP provided that if such accounting firm is
unable or unwilling to serve as the Independent Accountant, then
the Purchaser and the Seller shall attempt to agree on a successor Independent Accountant
which shall be a nationally recognized firm of independent public





7









 








accountants. If the Purchaser
and the Seller are unable to mutually agree upon such a firm, then the American Arbitration
Association or any successor thereto shall select a firm of nationally recognized independent
public accountants that shall have no conflict of interest with respect to any Party to serve as
the Independent Accountant.




          “Indemnified Persons” means the Purchaser Indemnified Persons or the Seller Indemnified
Persons, as the case may be.




          “Indemnifying Person” means the Purchaser, in the case of any Seller Indemnification Event or
Shareholder Indemnification Event, or the Seller, in the case of any Purchaser Indemnification
Event, as the case may be.




          “IRS” means the Internal Revenue Service.




          “Knowledge of the Purchaser” and terms of similar import mean (i) the actual knowledge of
Jeffrey T. Sanfilippo, Michael J. Valentine, Robert J. Sarlls, and Frank S. Pellegrino, and (ii)
that knowledge which should have been acquired by such individual after making due inquiry of
employees of Purchaser who report directly to such individual.




          “Knowledge of Seller” and terms of similar import mean (i) the actual knowledge of any of
Stephen J. Kerr, John Potter, James Graham, or John Sniffen and (ii) that knowledge which should
have been acquired by either Stephen J. Kerr, John Potter, James Graham or John Sniffen after
making due inquiry of employees of Seller who report directly to such individual.




          “Leased Real Property” means the approximate 100,000 square foot property located at 736
Mariposa Road, Modesto, California, that is leased from the Cranbrook Realty Investment Fund, LP
all as more particularly described and set forth in the Real Property Lease.




          “Licenses” means all permits, licenses, franchises, certificates, approvals, and other
authorizations issued by foreign, federal, state, or local governments or other similar rights.




          “Liens” means any mortgage, pledge, security interest, encumbrance, lien (including any lien
for Taxes other than Taxes not yet due and payable (or Taxes being contested in good faith by
appropriate proceedings reserved for in accordance with GAAP)), or charge of any kind (including,
without limitation, any conditional sale or other title retention agreement or lease in the nature
thereof), any sale of receivables with recourse against Seller, any filing or agreement to file a
financing statement as debtor under the Uniform Commercial Code or any similar statute other than
to reflect ownership by a third party of property leased to Seller under a lease which is not in
the nature of a conditional sale or title retention agreement, or any subordination arrangement in
favor of another Person (other than any subordination arising in the Ordinary Course of Business).







8









 








          “Loss” means, with respect to any Person, any liability, cost, damage, diminution in value,
deficiency, Tax, penalty, fine or other loss or expense, whether or not arising out of a third
party claim, including all interest, penalties, reasonable attorneys’ fees and expenses and all
amounts paid or incurred in connection with any action, demand, proceeding, investigation or claim
by any third party (including any governmental entity or any department, agency or political
subdivision thereof) against or affecting such Person but only to the extent relating to a claim
for which indemnification is required to be made hereunder. “Losses” shall not include punitive
damages unless actually paid to a third party in respect of a claim for which indemnification is
required to be made hereunder.




          “Material Adverse Effect” means any material adverse effect on the business, assets, condition
(financial or otherwise), operations, operating results, or liabilities of the Seller, excluding
alone or in combination, any adverse effect resulting from or arising out of (A) the announcement
of the execution of this Agreement or the pendency of the transactions contemplated by this
Agreement (including any loss of or adverse change in the relationship of Seller with its
employees, customers, partners or suppliers), (B) general economic conditions to the extent that
such conditions do not disproportionately affect Seller, taken as a whole, as compared to other
companies participating in the same industry as Seller, (C) general conditions in the industry in
which Seller operates to the extent that such conditions do not disproportionately affect Seller as
compared to other companies participating in the same industry as Seller, (D) any changes (after
the date hereof) in GAAP or Applicable Law to the extent that such changes do not
disproportionately affect Seller as compared to other companies participating in the same industry
as Seller, (E) any failure of Seller to meet internal estimates or projections (it being understood
that any cause of any such failure may be taken into consideration when determining whether a
Material Adverse Effect has occurred), or (F) any action or failure to act required to be taken by
a Party pursuant to the terms of this Agreement.




          “Net Working Capital” has the meaning set forth in Section 2.7(b).




          “Non-Current Receivables” means all accounts receivable of Seller which, as of the Closing
Date, are 90 or more days old and reserved for on Seller’s Financial Statements or are required to
be set forth on Schedule 5.25.




          “Ordinary Course of Business” will be deemed from an action taken by a Person only if: (a)
such action is consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations on an arm’s length basis of such Person; and (b) such
action is similar in nature and magnitude to other actions customarily taken, without any
authorization by the board of directors (or by any Person or group of Persons exercising similar
authority), in the ordinary course of the normal day-to-day operations on an arm’s length basis of
such Person.




          “Permitted Liens” means (a) zoning, entitlement, building and other land use and similar laws
or regulations imposed by any governmental authority having jurisdiction over such parcel which are
not violated by the current use and operation






9









 







thereof; (b) materialmen’s, mechanics’, carriers’, workmen’s, repairmen’s or other like liens
arising in the Ordinary Course of Business for amounts not yet due or which are being contested in
good faith, in either event that have been disclosed in writing by Seller to Purchaser and which
are set forth on a schedule hereto; and (c) protective filings made regarding operating leases.




          “Person” means and includes an individual, a partnership, a joint venture, a limited liability
company, a corporation or trust, an unincorporated organization, a group, or a government or other
department or agency thereof, or any other entity.




          “Proprietary Rights” means any and all of the following in any jurisdiction throughout the
world (a) patents, patent applications, patent disclosures, as well as any reissues, continuations,
continuations-in-part, divisions, extensions or reexaminations thereof, (b) Seller’s name, brands,
and all trademarks, service marks, trade dress, trade names, logos, corporate names and
registrations and applications for registration thereof, together with all of the goodwill
associated therewith, (c) Internet domain names, (d) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof, (e) mask works and
registrations and applications for registration thereof, (f) computer software (including, without
limitation, source code and executable code), data, databases, and documentation thereof, (g) trade
secrets and other confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, manufacturing and production processes and techniques, if any, research and
development information, drawings, specifications, designs, plans, proposals, technical data,
financial and marketing plans, and customer and supplier lists and information), and (h) other
intellectual property rights.




          “Purchaser Indemnified Persons” means and includes the Purchaser and its officers, directors,
stockholders, members, employees, agents, Affiliates, successors and assigns.




          “Real Property Lease” means that certain Standard Industrial/Commercial Multi-Tenant-Gross
Lease dated as of January 26, 2005, between Cranbrook Realty Investment Fund, LP, as lessor, and
Seller and John Potter Specialty Foods, Inc., collectively as lessee, covering the Leased Real
Property, as amended by First Amendment to Lease dated July 8, 2005.




          “Receivables” means the Current Receivables and the Non-Current Receivables.




          “Seller Indemnified Persons” means and includes the Seller and its officers, directors,
shareholders, members, employees, agents, Affiliates, successors and assigns.




          “Seller Proprietary Rights” means Proprietary Rights owned by the Seller.







10









 








          “Tax” or “Taxes” means any federal, state, county, local, foreign, or other income, gross
receipts, ad valorem, franchise, profits, sales or use, transfer, registration, excise, utility,
environmental, communications, real or personal property, capital stock, license, payroll, wage or
other withholding, employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated, and other taxes of any kind whatsoever, whether computed on a separate or
combined, unitary or consolidated basis or in any other manner, and any deficiencies, penalties,
additions to tax, and interest attributable thereto.




          “Tax Return” means returns, declarations, reports, claims for refund or information returns
(including any related or supporting schedules, statements, or information) filed or required to be
filed with a governmental authority in connection with the determination, assessment or collection
of Taxes of any Party or the administration of any laws, regulations, or administrative
requirements relating to any Taxes.




          “Transaction Documents” means this Agreement and the Escrow Agreement.




          “Treasury Regulations” means the United States Treasury Regulations promulgated pursuant to
the Code.




          “WARN Act” means the Worker Adjustment and Retraining Notification Act, 29 U.S.C. Sections
2101-2109 and related regulations, as amended.




ARTICLE II — PURCHASE AND SALE




          Section 2.1 Agreement to Purchase and Sell. On the basis of the representations,
warranties, covenants, and agreements herein, and subject to the satisfaction or waiver of the
conditions set forth herein and the terms hereof, at the Closing, the Purchaser shall purchase and
accept from Seller, and Seller shall sell and transfer to the Purchaser, all right, title and
interest of Seller in and to all of the assets of Seller, other than the Excluded Assets (defined
below), wherever located (each and all of the foregoing items, the “Acquired Assets”), including
the following:





     (a) all the business, properties, assets, goodwill and rights of Seller of whatever
kind and nature, real or personal, tangible or intangible, owned, leased, licensed, used or
held for use or license by or on behalf of Seller in the operation of its Business,
including:




     (i) All tangible personal property owned or leased that is used or licensed,
intended to be used, licensed or sold, or held for use, license or sale, including,
without limitation, all machinery, equipment, tools, replacement and spare parts
and supplies, vehicles, computers, software, servers, furniture, appliances, the
name “Orchard Valley Harvest” and all abbreviations thereof, fixtures and all other
personal property, whether
such tangible personal property is then held, is in transit or is in the



11









 






possession of a subcontractor, licensee, consignee, agent or other person,
including the assets described on Schedule 2.1(a);




     (ii) The leasehold estate pursuant to the Real Property Lease; and




     (iii) All inventories, including raw materials, work in progress and finished
goods (collectively, the “Inventory”);




     (b) All of the Seller Proprietary Rights;




     (c) Each customer and customer relationship to the extent pertaining to the Business,
and Contract to which Seller is a party or otherwise subject or bound, or by which any
property or right of Seller is bound, including each Contract that is listed on
Schedule 2.1(c) but excluding any Contract that is listed on Schedule
2.2(d) (collectively, the “Acquired Contracts”);




     (d) To the extent transferable, all Licenses used or useful in connection with the
operation of Seller’s Business and any and all pending applications relating to any such
Licenses, including each License listed on Schedule 2.1(d) but excluding any
License that is listed on Schedule 2.2(d) (collectively, the “Acquired Permits”);




     (e) Other than as described in Section 2.2(e), all business and financial
records, books and ledgers, files, plans, documents, correspondence, lists (including all
customer, distributor, supplier and mailing lists), drawings, notebooks, specifications,
advertising and promotional materials, marketing materials, studies, reports, equipment
repair, maintenance and service records, whether written or electronically stored or
however otherwise recorded, maintained or stored (including in each case all copies thereof
and all rights in and to the information contained therein) pertaining to Seller’s
Business, the Acquired Assets or the Assumed Liabilities;




     (f) All deposits, prepayments, refunds, or pre-paid costs, fees, premiums and
expenses;




     (g) All rights of Seller to and in respect of any telephone and facsimile numbers used
in its Business; and




     (h) All Current Receivables of Seller.


Notwithstanding anything to the contrary in this Section 2.1, none of the foregoing
property or assets described in this Section 2.1 shall include any Excluded Assets.




          Section 2.2 Excluded Assets. Notwithstanding any provision herein to the contrary, there shall be excluded from the
Acquired Assets and there shall be retained by Seller, all right, title and interest of Seller in
and to the following (collectively, the “Excluded Assets”):




12









 









     (a) All rights of Seller under this Agreement or any other agreement entered into
pursuant hereto;




     (b) Any leased assets included within the definition of Acquired Assets if the
Purchaser does not assume a lease obligation of Seller with respect to such assets;
provided, however, that Purchaser shall assume Seller’s obligations under the Real Property
Lease;




     (c) Each employee benefit plan and the assets thereof;




     (d) All rights of Seller under any Contract or License listed on Schedule
2.2(d);




     (e) All corporate seals, minute books, charter documents, corporate stock record
books, registers of other Capital Interests, originals of tax and financial records (copies
of which will be delivered to the Purchaser), employee records, and such other books and
records as pertain only to the organization, existence or share capitalization of Seller;




     (f) All Non-Current Receivables;




     (g) All losses, loss carryforwards and rights to receive refunds, credits and loss
carryforwards with respect to any and all Taxes;




     (h) All cash and cash equivalents;




     (i) All insurance policies;




     (j) All claims and rights of recovery to extent arising from or related to the period
prior to Closing or to the extent related to any Retained Liability;




     (k) All bank accounts; and




     (l) All assets of Seller identified on Schedule 2.2(l).



          Section 2.3 Assumption of Assumed Liabilities. On the terms and subject to the
conditions set forth herein, effective as of the Closing Date, the Purchaser shall assume and
thereafter will pay, perform and discharge in accordance with their respective terms, as and when
due, the following (collectively, the “Assumed Liabilities”):





     (a) All obligations under the Acquired Contracts and Acquired Permits arising on or
after the Closing that are to be performed on or after the Closing, including any breach
thereof by Purchaser on or after the Closing Date;




     (b) All liability related to Taxes of the Acquired Business for any period from and
after the Closing Date;



13









 






     (c) All accounts payable and accrued expenses incurred in the Ordinary Course of
Business;




     (d) All liabilities reflected on or reserved against or otherwise provided for in the
Financial Statements and which have been factored into the calculation of Estimated Net
Working Capital as of Closing; and



     (e) All obligations of Seller identified on Schedule 2.3(e).



          Section 2.4 Liabilities Not Assumed; Liabilities Retained by Seller. Purchaser will
not assume or perform, and Seller hereby agrees to retain, pay, perform and discharge in accordance
with their respective terms, as and when due, any and all liabilities or obligations of Seller that
are not Assumed Liabilities, of whatever kind or nature (collectively, the “Retained Liabilities”),
including, without limitation:





     (a) Any liability or obligation, of whatever kind or nature, arising or relating to
the period prior to the Closing and relating to the operation of Seller’s Business or the
ownership of the Acquired Assets that is not an Assumed Liability;




     (b) All obligations of Seller under Acquired Permits and Acquired Contracts arising
prior to the Closing Date that are to be fully performed thereunder prior to the Closing
Date, including any breach thereof by Seller prior to the Closing Date;




     (c) Any liability or obligation of Seller under the Transaction Documents and any
agreement entered into pursuant hereto, including any expenses incurred in connection
therewith;




     (d) Except as otherwise provided in this Agreement, any liability or obligation for
any Taxes of Seller, including Taxes of Seller resulting from the contemplated transaction;




     (e) Any liability or obligation arising under or relating to (i) any current or former
employee benefit plan, program, arrangement or agreement with respect to which Seller or
any ERISA Affiliate is or was a party or with respect to which Seller has or could have any
obligation (whether primary or secondary) and (ii) any of the Seller’s employees, former
employees or other service providers;




     (f) Any liability or obligation of Seller arising out of or related to the Excluded
Assets or to any previously discontinued or divested operations or assets of Seller,
including environmental matters related thereto;




     (g) Any liability or obligation of Seller arising out of or related to the violation
by Seller of any Applicable Law on or prior to the Closing Date;




     (h) Any liability or obligation of Seller arising out of or related to any suit,
order, judgment or decree, action, proceedings or investigation against it,



14









 




relating to
periods on or prior to the Closing Date, whether or not disclosed on Schedule 5.13;





     (i) All claims, liabilities and obligations relating to the matters set forth on
Schedule 2.2(l); and




     (j) Any liability related to amounts due to the shareholders of Seller (each a
“Shareholder” and collectively, the “Shareholders”) for compensation, bonus, distributions,
consulting fees or loans payable by Seller.



          Section 2.5 Purchase Price. The aggregate consideration (the “Purchase Price”) to be
paid by the Purchaser to the Seller in respect of the purchase and sale of the Acquired Assets
hereunder shall be the sum of: (a) $29,500,000 in cash, plus the amount (if any) by which
the Estimated Net Working Capital is greater than Assumed Net Working Capital or minus the
amount (if any) by which the Estimated Net Working Capital is less than Assumed Net Working Capital
(the “Closing Payment”); (b) Purchaser’s assumption of the Assumed Liabilities; (c) plus or
minus the Adjustment Amount (as defined in Section 2.8); (d) plus the Earn Out Payments (as
described in Section 2.9), if any; and (e) plus any amount payable under
Section 2.10 hereof.




          Section 2.6 Closing Transactions.





     (a) The closing of the transactions contemplated by this Agreement (the “Closing”)
shall take place at the offices of Stahl Cowen Crowley Addis LLC, 55 W. Monroe St.,
12th Floor, Chicago, Illinois 60603, commencing at 10:00 a.m. on the second
Business Day following the satisfaction or waiver of the conditions set forth in Article
III (other than conditions with respect to actions the respective Parties will take at the
Closing itself), or at such other place or on such other date as may be mutually agreeable
to the Purchaser and the Seller. The date on which the Closing occurs is referred to as
the “Closing Date.”




     (b) At the Closing:




     (i) Seller shall deliver to the Purchaser, free and clear of any Liens other
than Permitted Liens, title to the Acquired Assets, and the Purchaser shall assume
the Assumed Liabilities;




     (ii) the Purchaser shall deliver to the Seller the Closing Payment
minus (A) the Escrow Amount, minus (B) the Aggregate Payoff Amount
(defined below), by wire transfer of immediately available funds to such bank
account of the Seller as the Sellers shall designate in writing;




     (iii) the Purchaser shall deliver to the Escrow Agent $5,500,000 of the
Purchase Price (the “Escrow Amount”) in cash by wire transfer of immediately
available funds to the account (the “Escrow Account”) designated by the Escrow
Agent, to be held and disbursed in accordance with the Escrow Agreement;



15









 






     (iv) at the direction of the Seller, the Purchaser shall deliver to the
applicable bank, financial institution or other third party to whom Seller owes any
Indebtedness the amounts indicated in the Payoff Letters, which shall be as of the
Closing Date, to fully satisfy such Indebtedness and to cause a full release of any
Liens securing such Indebtedness (with respect to each Payoff Letter, the “Payoff
Amount”). The sum of all Payoff Amounts as of the Closing Date shall be referred to
herein as the “Aggregate Payoff Amount”; and




     (v) each Party shall deliver the certificates and other documents and
instruments required to be delivered by or on behalf of such Party under
Article III.



          Section 2.7 Statement of Net Working Capital and Review Procedures.





     (a) As soon as practicable, but in no event later than 60 days after the Closing Date,
the Seller shall prepare and deliver, or cause to be prepared and delivered, to Purchaser a
statement calculating the Net Working Capital as of the close of business on the day
immediately preceding the Closing Date (the “NWC Statement”). The NWC Statement shall be
prepared in accordance with GAAP in the same manner and on a consistent basis with the
preparation of the Latest Balance Sheet (including the same accounting methods, policies,
practices and procedures with consistent classifications, judgments, valuation and
estimation methods, including with regard to the individual line items and the
determination of allowances and reserves).




     (b) For the purposes of this Agreement, “Net Working Capital” shall mean the net
working capital of Seller as of 12:00 a.m. Pacific Time on the Closing Date, consisting of
the excess of current assets over current liabilities included in the Acquired Assets and
Assumed Liabilities respectively, taken as a
whole, prepared in accordance with GAAP in the same manner and on a consistent basis
with the preparation of the Latest Balance Sheet (including the same accounting methods,
policies, practices, principles and procedures with consistent classifications, judgments
and valuation and estimation methodologies, including with regard to the individual line
items and the determination of allowances and reserves) and Exhibit B hereto.
Notwithstanding the foregoing, in calculating Net Working Capital, Seller’s current
liabilities shall not include any portion of the Seller’s Promissory Note payable to Wells
Fargo Equipment Finance Inc., dated March 29, 2009.




     (c) Upon receipt of the NWC Statement, the Purchaser shall have 15 days (the “Review
Period”) to review such statement and related computations of Net Working Capital. During
the Review Period, the Parties shall grant one another reasonable access at all reasonable
times to their financial records (as they relate to the Acquired Business), and the
personnel of, and work papers prepared by or for, Seller’s accountants, and all information
necessary to prepare the NWC



16









 






Statement, including such historical financial information
relating to the Seller as the Purchaser shall reasonably request in order to permit the
timely review of the NWC Statement (and related computation of Net Working Capital), and to
prepare any Statement of Objections.




     (d) On or prior to the last day of the Review Period, the Purchaser may object to the
NWC Statement and the computation of Net Working Capital, by delivering to the Seller a
written statement from the Purchaser setting forth in reasonable detail the Purchaser’s
objections thereto (the “Statement of Objections”). If the Purchaser fails to deliver a
Statement of Objections in accordance with this Section 2.3(d) within the Review
Period, (i) the NWC Statement (and related computation of Net Working Capital) shall be
deemed to have been accepted by the Purchaser and shall be final and binding on the
Parties, and (ii) such computations of Net Working Capital shall be used in computing the
Adjustment Amount. If the Purchaser delivers the Statement of Objections to the Seller
within the Review Period, the Purchaser and the Seller shall negotiate in good faith to
resolve such objections, and any objections that are resolved by a written agreement
between the Purchaser and the Seller shall be final and binding on the Parties.




     (e) If the Seller and the Purchaser fail to reach an agreement with respect to all of
the matters set forth in the Statement of Objections, then the matters still in dispute
shall, not later than ten Business Days after the delivery of the Statement of Objections
(or, if earlier, the date on which either the Seller or the Purchaser affirmatively
terminate discussions in writing with respect to the Statement of Objections) be submitted
for resolution to the Independent Accountant who, acting as an arbitrator as described in
Section 2.7(f) hereof, shall resolve the matters still in dispute and adjust the
NWC Statement and Net Working Capital to reflect such resolution. The Independent
Accountant shall make a determination in writing as soon as practicable and in any event
within 30 days (or such other time as the Purchaser and the Seller shall agree in writing)
after its engagement.




     (f) In resolving a disputed item, the Independent Accountant may not assign a value to
any particular item greater than the greatest value for such item claimed by either Party
or less than the smallest value for such item claimed by either Party, in each case as
presented to the Independent Accountant. Within 15 days after the engagement of the
Independent Accountant, the Purchaser and the Seller shall present their respective
positions with respect to the items set forth in the Statement of Objections in the form of
a written binder of supporting materials (the “Supporting Binder”) and no ex parte
conferences, oral examinations, testimony, depositions, discovery or other form of evidence
gathering or hearings shall be conducted or allowed; provided, that, at the Independent
Accountant’s request, or as mutually agreed by the Purchaser and the Seller, the Purchaser
and the Seller may meet with the Independent Accountant so long as representatives of both
the Purchaser and the Seller are present. The Supporting Binder shall set forth the
arguments supporting a Party’s position,



17









 






along with such supporting materials and other
information (including facts and figures) as such Party shall desire. The Independent
Accountant’s decision with respect to the matters in dispute shall be final and binding on
the Parties and either Party may seek to enforce such decision in a court of competent
jurisdiction.




     (g) The fees and expenses of the Independent Accountant shall be borne equally by the
Purchaser, on the one hand, and the Seller, on the other hand.




     (h) The Purchaser and the Seller shall each make readily available to the Independent
Accountant all relevant work papers and books and records relating to the Acquired
Business, the NWC Statement and the computation of Net Working Capital as are requested by
the Independent Accountant and shall use commercially reasonable efforts to cooperate with
the Independent Accountant in resolving any disputed matters.




     (i) Notwithstanding any provision in this Section 2.7 to the contrary, the
following principles shall be applied when determining Net Working Capital and in
preparation of both the Estimated NWC Statement and the NWC Statement:




     (i) all outstanding, uncollectible or uncollected checks as of 12:00 a.m.
Pacific Time on the Closing Date shall not be included as accounts payable or
included in Assumed Liabilities;




     (ii) checks that are received by Seller up to 12:00 a.m. Pacific Time on the
Closing Date, shall belong to Seller and shall not be included as an Acquired Asset
or be part of Working Capital;




     (iii) checks for accounts receivable that are received by Seller or Purchaser
at 12:01 a.m. or later on the date of Closing (other than
checks to be applied to Non-Current Receivables) shall belong to Purchaser and
shall be included as an Acquired Asset and be part of Working Capital; and




     (iv) any cash or cash equivalent that is distributed by Seller to its
shareholders or other parties shall not be part of Working Capital.



          Section 2.8 Purchase Price Adjustment.





     (a) The “Adjustment Amount” shall be the positive or negative amount equal to the
difference between (i) Net Working Capital as finally determined in accordance with
Section 2.7 hereof minus (ii) the Estimated Net Working Capital.




     (b) Within five Business Days after the NWC Statement (and the computation of Net
Working Capital) becomes final and binding, the Purchaser shall pay to the Seller (if the
Adjustment Amount is positive) or the Seller shall



18









 






pay to the Purchaser (if the Adjustment
Amount is negative), as the case may be, the Adjustment Amount, together with an amount
equal to the equivalent of interest thereon at the Applicable Federal Rate published by the
U.S. Treasury for short-term obligations in effect during the period from the Closing Date
to the date of the payment required by this Section 2.8 calculated on the basis of
a 365-day year and the actual number of days elapsed. Any such payment shall be made by
wire transfer of immediately available funds to a bank account or accounts as shall be
designated in writing by the Seller or the Purchaser, as the case may be, no later than two
Business Days prior to the payment date. If the Seller does not pay the Purchaser within
the time provided in this Section, the Purchaser shall be entitled, at its sole option, to
recover the amount due hereunder from the Escrow Amount (it being understood that any such
payment from the Escrow Amount shall not reduce the Cap Amount for purposes of Section
8.4(b)).



          Section 2.9 Earn Out Payment.





     (a) Earn out payments of the following amounts shall be payable by Purchaser to Seller
under the following conditions (each such payment, an “Earn Out Payment”):




     (i) If Total Retail Sales in Fiscal 2010 are equal to or greater than
$25,500,000, Purchaser shall pay to Seller an Earn Out Payment of $500,000; and




     (ii) If (A) Total Net Sales in Fiscal 2010 are equal to or greater than
$41,500,000 and (B) Total Retail Sales in Fiscal 2010 are equal to or
greater than $36,500,000, Purchaser shall pay to Seller an additional Earn Out
Payment of $5,000,000; and




     (iii) If (A) Total Net Sales in Fiscal 2011 are equal to or greater than
$49,000,000 and (B) Total Retail Sales in Fiscal 2011 are equal to or greater than
$43,000,000, Purchaser shall pay to Seller an additional Earn Out Payment of
$2,500,000; and




     (iv) If Total Retail Sales in Fiscal 2010 and Fiscal 2011 collectively are
equal to or greater than $105,000,000, Purchaser shall pay to Seller an additional
Earn Out Payment of $2,500,000.




For purposes hereof, “Total Net Sales” shall mean (i) all bona fide sales of all products
of the Business and the Acquired Business and (ii) all bona fide sales of Purchaser’s
produce products to any customer of the Business or the Acquired Business (other than any
customer of Purchaser identified on Schedule 2.9(a)(i) except sales in excess of
the amounts listed thereon, it being the Parties’ intention that sales in excess of such
listed amounts to such Purchaser customers be included as part of Total Net Sales), in each
case calculated in accordance with GAAP in the same manner and on a consistent basis with
Seller’s net sales statement as shown in Schedule 2.9(a)(ii), less
discounts, returns, shortages,




19











 






recalls of products packed prior to the Closing Date, and marketing expenses related
to promotions and exhibits, all marketing development funds (MDF) and sample expenses;
provided, however, that “Total Net Sales” shall exclude brokerage
commissions, and co-packing transactions. Further, “Total Retail Sales” shall mean Total
Net Sales excluding bulk sales. For purposes hereof, “bulk sales” shall mean products
not sold for retail distribution for individual consumer purchases, except for all
products sold for Safeway’s Nut Hut business.




     (b) Calculation. As soon as reasonably practicable following the internally
prepared calculation of the Acquired Business done in a manner consistent with prior years
for each of Fiscal 2010 and Fiscal 2011 (each such calculation, an “Audit”), but in no
event later than 15 days following the conclusion of the applicable fiscal year, the
Purchaser shall deliver a statement in the form of Exhibit C showing the
Purchaser’s calculation of Total Net Sales and Total Retail Sales for the Acquired Business
for the applicable fiscal year (each such calculation, the “Yearly Sales Statement”),
accompanied by reasonably detailed supporting documentation. In addition, within 10
Business Days after the conclusion of each calendar month during Fiscal 2010 and Fiscal
2011, the Purchaser shall provide the Seller with a good faith estimate of such amounts for
the Acquired Business for the immediately preceding quarter and for the year-to-date.




     (c) The Seller shall have reasonable access during normal business hours to all of the
books and records and accounting work papers of the Purchaser and its subsidiaries in order
to verify the accuracy of the Yearly Sales Statement. The calculation of Total Net Sales
and Total Retail Sales shall be determined based on the applicable Audit. Purchaser shall
complete each Audit within 10 days following Fiscal 2010 or Fiscal 2011, as applicable.




     (d) Dispute Resolution. This Section 2.9(d) sets forth the exclusive
procedures for resolving disputes among the Parties with respect to the determination of
the earn out payments under Section 2.9 (the “Earn Out Payments”):




     (i) Notice of Disagreement. Within 30 days following receipt by
Seller of the Yearly Sales Statement, accompanied by reasonably detailed supporting
documentation, Seller shall deliver written notice (the “Notice of Disagreement”)
to Purchaser of any dispute Seller has with respect to the preparation or content
of the Yearly Sales Statement and the Total Net Sales and Net Retail Sales
reflected therein. The Notice of Disagreement shall describe in reasonable detail
the items contained in the Yearly Sales Statement that Seller disputes and the
basis for any such disputes. If Seller does not notify Purchaser of a dispute with
respect to the Yearly Sales Statement within such 30 day period, such Yearly Sales



20









 







Statement and the Total Net Sales and Net Retail Sales reflected therein shall
be final, conclusive and binding on the Parties.




     (ii) Dispute Resolution. In the event a Notice of Disagreement is
delivered to Purchaser, Purchaser and Seller shall negotiate in good faith to
resolve such dispute. If Purchaser and Seller, notwithstanding such good faith
effort, fail to resolve such dispute within 14 days after Seller delivers the
Notice of Disagreement, or such other period of time as Purchaser and Seller may
agree in writing, then such dispute shall be referred to the Independent
Accountant, and the determination of the Independent Accountant shall be final and
shall not be subject to further review, challenge, or adjustment. The Independent
Accountant shall use its best efforts to reach a determination within not more than
30 days after such referral. The costs and expenses of the services of the
Independent Accountant rendered pursuant to this Section 2.9(d) shall be
paid 50% by Seller and 50% by Purchaser.




     (e) Earn Out Payments. Each Earn Out Payment shall be paid by Purchaser to
Seller no later than seven Business Days after the final determination (after resolution of
any dispute) of the applicable Yearly Sales Statement by wire transfer of immediately
available funds; provided, however, that Purchaser shall withhold 18.6% of the Earn Out
Payments payable under Section 2.9(a)(i) and (ii) (the “Holdback”) to
secure any indemnity obligation of Seller under Section 8.1(a). Purchaser shall release
the Holdback to the Seller on the 18-month anniversary of the Closing Date, less the amount
of any claims for indemnification under Section 8.1(a) against the Holdback agreed to by
the Seller and less the amount required to satisfy any good-faith claims for
indemnification under Section 8.1(a) against the Holdback pending on the 18-month
anniversary of the Closing Date. Upon the resolution of any claims pending on the 18-month
anniversary of the Closing Date, any amounts then remaining shall be released to the
Seller. The release of any portion of the Holdback Amount shall be promptly made by wire
transfer of immediately available funds.




     (f) Notwithstanding any provision in this Section 2.9 to the contrary, in the
event of the occurrence of any Acceleration Event (as defined below), Purchaser shall
promptly pay by wire transfer of immediately available funds the Acceleration Payment (as
defined below) to the Seller.




     (i) “Acceleration Payment” shall mean (1) $10,500,000 (less any adjustment
provided for in Section 2.9(g)) if an Acceleration Event shall occur at any time
during Fiscal 2010 and (2) $5,000,000 if an Acceleration Event shall occur at any
time during Fiscal 2011; provided, however, that if an Acceleration Payment is made
pursuant to clause 2.9(f)(i)(1), no other Acceleration Payment shall become due
under this Agreement.



21









 






     (ii) An “Acceleration Event” shall mean the consummation, at any time during
Fiscal 2010 or Fiscal 2011, of any transaction or series of related transactions
resulting in the sale by Purchaser, directly or indirectly, of all or substantially
all of the Acquired Business.




     (g) Notwithstanding any provision in Article II to the contrary, in the event that
Closing shall occur on May 1, 2010 or thereafter, the Earn-Out Payment for Fiscal 2010
payable to Seller shall be reduced by the amount specified on Schedule 2.9(g) under
the column headed “Cumulative” for the date that corresponds to the Closing Date.




     Section 2.10 Tax Allocation of Purchase Price.




     (a) The Purchaser shall prepare an initial draft of an agreement (the “Allocation
Agreement”) allocating the Purchase Price (plus Assumed Liabilities to the extent properly
taken into account under the Code) among the Acquired Assets in accordance with Section
1060 of the Code, the Treasury Regulations promulgated thereunder and Revenue Procedure
2003-51 and other appropriate authorities. In preparing such draft Allocation Agreement,
Purchaser shall use the fair market value of Seller’s uncommitted raw materials, committed
raw materials and retail packaged inventory (collectively, the “FMV Inventory”). A copy of
such draft Allocation Agreement shall be delivered to the Seller within 30 days after the
Closing Date, and the Seller and the Purchaser shall consult in good faith with respect to
the terms of the Allocation Agreement. To the extent disputed items remain after a 15-day
period of consultation, any disputed items shall be referred to the Independent Accountant
or a firm mutually agreed upon by the Purchaser and the Seller for final determination, and
the fees of such accounting firm shall be borne 50% by Purchaser and 50% by the Seller.
The Seller and the Purchaser agree to file all Tax Returns in accordance with the
allocations contained in the Allocation Agreement as finally determined pursuant to this
Section 2.10. Any indemnification payments pursuant to Article VIII shall be treated as an
adjustment to the Purchase Price. The Seller and Purchaser further agree that none of the
Escrow Amount, the Additional Purchase Price Amount and any Earn Out Payment (if made) is
allocable to the FMV Inventory.




     (b) As an addition to the Purchase Price, if any, within two days following the final
determination of the Allocation Agreement pursuant to this Section 2.10, the Purchaser
shall pay the Seller the Additional Purchase Price Amount, if any. The “Additional
Purchase Price Amount” shall mean an amount, if any, equal to the lesser of (i) $200,000
and (ii) the product of (A) the aggregate amount allocated to the FMV Inventory pursuant to
the Allocation Agreement, minus the aggregate book value (as shown on the Seller’s
books) of the FMV Inventory, and (B) 10%.



22









 





          Section 2.11 Transfer Taxes. Sales, use, value added, transaction privilege, transfer, registration, stamp, deed and
similar fees and Taxes (“Transfer Taxes”) resulting from the consummation of the transactions
contemplated under this Agreement and payable to a government authority, shall be paid by the
Purchaser, and the Purchaser shall complete and file all returns associated therewith. Such
obligations shall survive the Closing. The Parties shall cooperate in obtaining any available
exemptions from such Transfer Taxes.




ARTICLE III -CONDITIONS TO CLOSING




          Section 3.1 Conditions to the Purchaser’s Obligations. The obligation of the Purchaser to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following conditions as of the Closing Date:





     (a) The representations and warranties set forth in Article V hereof shall be true and
correct in all material respects at and as of the Closing Date as though then made and as
though the Closing Date were substituted for the date of this Agreement throughout such
representations and warranties (other than such representations and warranties that
specifically relate to an earlier date, which need only be true and correct in all material
respects as of such date);




     (b) Seller shall have performed and complied in all material respects with all of the
covenants and agreements required to be performed by it under this Agreement on or before
the Closing Date;




     (c) All third party consents referred to in Schedule 5.3 (other than consent
under the Westamerica Equipment Leases referred to therein) shall have been obtained on
terms reasonably satisfactory to the Purchaser;




     (d) All governmental filings, authorizations, and approvals that are required for the
consummation of the transactions contemplated hereby shall have been duly made and obtained
on terms reasonably satisfactory to the Purchaser;




     (e) All arrangements described on Schedule 5.18 shall have been terminated or
amended and revised on terms and conditions reasonably satisfactory to the Purchaser;




     (f) There shall be no action, proceeding, order, judgment, decree, writ, or injunction
of any governmental entity of competent jurisdiction that is pending or in effect that
prohibits or restrains the consummation of the transactions contemplated hereby; provided,
however, that in the event of any such action, proceeding, order, judgment, decree, writ,
or injunction, the Seller shall use its commercially reasonable efforts to cause such
action, proceeding, order, judgment, decree, writ, or injunction to be complied with,
lifted or vacated, as the case may be;



23









 






     (g) On or before the Closing Date, the Purchaser shall have received all of the
following:




     (i) a Bill of Sale duly executed by Seller in substantially the form attached
to this Agreement as Exhibit D;




     (ii) an Assignment and Assumption Agreement duly executed by Seller in
substantially the form attached to this Agreement as Exhibit E;




     (iii) an Assignment and Assumption of the Real Property Lease duly executed by
Seller in substantially the form attached to this Agreement as Exhibit F;




     (iv) title to each titled vehicle comprising part of the Acquired Assets duly
executed by Seller;




     (v) a certificate from an authorized officer of Seller in a form reasonably
satisfactory to the Purchaser, dated the Closing Date, stating that the conditions
specified in Sections 3.1(a) through (d) have been satisfied;




     (vi) certificates from appropriate authorities, dated as of or about the
Closing Date, as to the good standing and qualification to do business of Seller in
each jurisdiction where it is so qualified;




     (vii) copies of the consents, filings, authorizations and approvals described
in Sections 3.1(c) and (d);




     (viii) an estoppel certificate in a form reasonably satisfactory to Purchaser
from the lessor of the Leased Real Property; and




     (ix) signature pages to the Escrow Agreement duly executed by the Seller and
the Escrow Agent;




     (h) Seller shall have delivered to the Purchaser a non-foreign status affidavit dated
as of the Closing Date, sworn under penalty of perjury and satisfying the requirements
under Treasury Regulations Section 1.1445-2(b), in a form reasonably acceptable to the
Purchaser;




     (i) No event or occurrence resulting in a Material Adverse Effect shall have occurred
between the date hereof and the Closing Date;




     (j) Payoff letters (the “Payoff Letters”) in form and substance reasonably
satisfactory to the Purchaser from all banks, financial institutions or other parties to
whom Seller owes any Indebtedness, which Payoff Letters shall authorize the release of any
Liens securing such Indebtedness upon payment thereof (together with UCC 3 or other
appropriate termination statements in form and substance reasonably satisfactory to the
Purchaser);



24









 






     (k) Substantial completion by Purchaser’s independent accountants of an audit of
Seller’s financial statements for the years ended December 31, 2008 and December 31, 2009,
and a review of Seller’s financial statements for the fiscal quarter ended March 31, 2010,
with reasonably satisfactory results that do not contain a materially adverse deviation
from the Seller’s financial statements previously delivered to the Purchaser; and




     (l) None of Stephen J. Kerr, John Sniffen or Sean O’Leary shall have terminated his
employment agreement with Purchaser, each entered into on the date hereof and to be
effective as of the Closing Date.


Any condition specified in this Section 3.1may be waived by the Purchaser in its sole
discretion; provided that no such waiver shall be effective unless it is set forth in a writing
executed by the Purchaser.




          Section 3.2 Conditions to the Seller’s Obligations. The obligation of the Seller to consummate the transactions contemplated by this Agreement
is subject to the satisfaction of the following conditions as of the Closing Date:





     (a) The representations and warranties set forth in Article VI hereof shall be true
and correct in all respects at and as of the Closing Date as though then made and as though
the Closing Date were substituted for the date of this Agreement throughout such
representations and warranties (other than such representations and warranties that
specifically relate to an earlier date, which need only be true and correct in all respects
as of such date);




     (b) The Purchaser shall have performed and complied in all material respects with all
of the covenants and agreements required to be performed by it under this Agreement on or
before the Closing;




     (c) All third party consents referred to in Schedule 5.3 (other than consent under the
Westamerica Equipment Leases referred to therein) shall have been obtained on terms
reasonably satisfactory to Seller;




     (d) All governmental filings, authorizations, and approvals that are required for the
consummation of the transactions contemplated hereby shall have been duly made and obtained
on terms reasonably satisfactory to the Seller;




     (e) There shall be no action, proceeding, order, judgment, decree, writ, or injunction
of any governmental entity of competent jurisdiction that is pending or in effect that
prohibits or restrains the consummation of the transactions contemplated hereby; provided,
however, that in the event of any such action, proceeding, order, judgment, decree, writ,
or injunction, the Purchaser shall use its commercially reasonable efforts to cause such
action, proceeding, order, judgment, decree, writ, or injunction to be complied with,
lifted or vacated, as the case may be;



25









 






     (f) On or before the Closing Date, the Seller shall have received all of the
following:




     (i) an Assignment and Assumption Agreement duly executed by Purchaser in
substantially the form attached to this Agreement as Exhibit E;




     (ii) an Assignment and Assumption of the Real Property Lease duly executed by
Purchaser in substantially the form attached to this Agreement as Exhibit
F;




     (iii) a certificate from an authorized officer of the Purchaser in a form
reasonably satisfactory to the Seller, dated the Closing Date, stating that the
conditions specified in Sections 3.2(a), (b) and (c) have
been satisfied; and




     (iv) such other affidavits, documents or instruments as the Sellers may
reasonably request to effect the transactions contemplated hereby;




     (v) signature pages to the Escrow Agreement duly executed by the Purchaser and
the Escrow Agent;




     (g) The Seller and each guarantor who is a Shareholder or Affiliate of Seller shall
have been released from all obligations under the Contracts set forth on Schedule
2.3(e) (other than the Westamerica Equipment Leases), upon terms reasonably
satisfactory to the Seller.


Any condition specified in this Section 3.2 may be waived by the Seller in its sole
discretion; provided that no such waiver shall be effective unless it is set forth in a writing
executed by the Seller.




ARTICLE IV — COVENANTS BEFORE CLOSING




          Section 4.1 Affirmative Covenants of the Seller. Except as otherwise contemplated by this Agreement, between the date hereof and the
Closing, unless the Purchaser otherwise agree in writing (which agreement shall not be unreasonably
conditioned, withheld or delayed), the Seller shall:




     (a) except with respect to (i) distributions to the Shareholders of cash on hand and
(ii) the elimination of certain intercompany or Affiliate accounts as provided elsewhere
herein, use commercially reasonable efforts to (x) conduct its Business and operations only
in the Ordinary Course of Business, (y) keep its Business and properties intact, including
its present business operations, physical facilities, Inventory levels (consistent with
seasonal fluctuations), and (z) maintain the ordinary and customary relationships of the
Business with its lessors,
licensors, suppliers, vendors, customers, and others having business relations with
it;



26









 






     (b) maintain the Leased Real Property and other assets in their current state of
repair, order, and condition (normal wear and tear excepted and consistent with age)
consistent with current needs and replace in the Ordinary Course of Business its
inoperable, worn out, or obsolete assets with assets consistent with past practice, and
notify the Purchaser promptly of any notice received from the landlord under the Real
Property Lease or;




     (c) promptly upon obtaining knowledge thereof, inform the Purchaser in writing of any
material breach from the representations and warranties contained in Article V or
any material breach of any covenant hereunder by the Seller;




     (d) use commercially reasonable efforts to cause the conditions to the Parties’
obligations to consummate the transactions contemplated hereby to be satisfied (including,
without limitation, the execution and delivery of all agreements contemplated hereunder to
be so executed and delivered and the making and obtaining of all third party and
governmental notices, filings, authorizations, approvals, consents, releases, and
terminations);




     (e) cooperate with the Purchaser to permit the Purchaser and its employees, agents,
accounting, legal, and other authorized representatives, at the Purchaser’s expense and
upon 24 hours prior notice, to (i) have reasonable access to the premises, books, and
records during normal business hours, (ii) visit and inspect any of the properties, and
(iii) discuss its affairs, finances, and accounts with its directors and officers,
managers, key employees, customers, sales representatives, suppliers and independent
accountants, provided that such access does not unreasonably interfere with the operations
of the Seller; and




     (f) provide such information on the names of Seller’s customers, vendors and
contractors, with dollar amounts of sales and purchases, and terms of business and
contracts, as reasonably requested by Purchaser.



          Section 4.2 Negative Covenants of the Seller. Except as expressly contemplated by this Agreement, between the date hereof and the
Closing, unless the Purchaser otherwise agrees in writing (which agreement shall not be
unreasonably conditioned, withheld or delayed), the Seller shall not:





     (a) except with respect to the repayment of Indebtedness and distributions to the
Shareholders of cash on hand or as otherwise contemplated by this Agreement, take any
action that would require disclosure of any of the matters listed in Section 5.7(b) —
(h);




     (b) except as contemplated by Section 3.1(e), terminate (other than due to
expiration), enter into any new, modify or amend to the detriment of Seller the Real
Property Lease or any existing material Licenses to which Seller is bound;



27









 






     (c) organize any subsidiary or acquire any equity securities of any Person or any
equity or ownership interest in any business (other than investments in marketable
securities);




     (d) except with respect to the Retained Liabilities or the Excluded Assets, and other
than transactions to acquire product on the supply side that are at market rates as of the
date the Contract is entered into, enter into any Contract with any Shareholder, or any
Affiliate, or any Affiliate of any Shareholder;




     (e) in any other manner, materially modify, change or otherwise alter the fundamental
nature of its Business as presently conducted; or




     (f) agree or otherwise consent, whether in writing or otherwise, to do any of the
foregoing.



          Section 4.3 Exclusivity. Between the date hereof and the Closing or the earlier termination of the Agreement, the
Seller shall not and shall not permit any of its representatives, officers, employees, directors,
agents, members, partners or subsidiaries to initiate, solicit, entertain or accept any other
proposal, indication of interest, offer related to an Alternative Transaction (as defined below) or
provide any non-public information to any third party in connection with an Alternative
Transaction. “Alternative Transaction” means any (i) merger, consolidation, or acquisition of the
Seller, (ii) reorganization, dissolution, liquidation, or recapitalization involving the Seller,
(iii) sale of any material amount of assets of the Seller (other than inventory in the Ordinary
Course of Business), (iv) direct or indirect acquisition or sale of any membership interests or
other equity interests of the Seller that if consummated would result in any Person other than the
Shareholders beneficially owning a majority of the Seller’s outstanding capital stock, and (v) any
similar transaction or business combination involving the Seller that, in each of the cases
outlined in items (i) through (iv) above, does not involve Purchaser.




          Section 4.4 Covenants of the Purchaser. Between the date hereof and the Closing, the Purchaser shall:





     (a) keep in full force and effect the Purchaser’s corporate existence;




     (b) promptly upon obtaining knowledge thereof, inform the Seller in writing of any
material breaches from the representations and warranties contained in Article VI or any
material breach of any covenant hereunder by Purchaser; and




     (c) use its commercially reasonable efforts to cause the conditions to the Parties’
obligations to consummate the transactions contemplated hereby to be satisfied (including,
without limitation, the execution and delivery of all agreements contemplated hereunder to
be so executed and delivered and the making and obtaining of all third party and
governmental filings, authorizations, approvals, consents, releases, and terminations).



28









 





ARTICLE V —REPRESENTATIONS AND WARRANTIES OF THE SELLER




          As a material inducement to the Purchaser to enter into this Agreement, the Seller hereby
represents and warrants to the Purchaser that, as of the date hereof (other than representations
and warranties that specifically relate to an earlier date, which representations and warranties
are hereby made as of such date):





     Section 5.1 Organization and Power.




     (a) Schedule 5.1(a) attached hereto contains a complete and accurate list of
Seller’s name, its jurisdiction of organization and other jurisdictions in which it is
authorized to do business. Except as set forth on Schedule 5.1(a), Seller does not
(i) own or (ii) hold the right to acquire any Capital Interests in any other Person.




     (b) The Seller is a corporation duly organized, validly existing, and in good standing
under the Applicable Laws of its jurisdiction of organization, with full organizational
power and authority to conduct its Business as it is now being conducted, to own or use the
properties and assets that it purports to own or use, and to perform all its obligations
under the Contracts to which it is party. Seller is duly qualified to do business as a
foreign organization and is in good standing under the Applicable Laws of each state or
other jurisdiction in which either the ownership or use of the properties owned or used by
it, or the nature of the activities conducted by it, requires such qualification, except
where the failure to be so duly qualified or licensed and in good standing would not
individually or in the aggregate have a Material Adverse Effect.




     (c) The Seller has made available to the Purchaser correct and complete copies of the
articles of incorporation and by-laws (or equivalent governing documents), of the Seller,
which documents reflect all amendments made thereto at any time on or before the date
hereof. Correct and complete copies of the minute books containing the records of meetings
of the shareholders and board of directors (or equivalent parties), the stock certificate
books (if applicable), and the stock record books (if applicable) of the Seller also have
been made available to the Purchaser. Seller is not in default under or in violation of
any provision of its articles of incorporation or by-laws (or equivalent governing
documents).



          Section 5.2 Authorization of Transactions. The Seller has all requisite organizational power and authority to execute and deliver the
Transaction Documents and to consummate the transactions contemplated hereby and thereby. No
proceedings (other than those duly taken) on the part of Seller or its subsidiaries are necessary
to approve and authorize the execution and delivery of the Transaction Documents and the
consummation of the transactions contemplated thereby. As of the Closing, all Transaction
Documents will have been duly executed and delivered by the Seller and will constitute the valid
and binding agreements of the Seller, enforceable against them in accordance with their terms.




29









 








          Section 5.3 Absence of Conflicts. Except as set forth in Schedule 5.3, the execution, delivery, and performance of
the Transaction Documents and the consummation of the transactions contemplated thereby by the
Seller do not and shall not (a) conflict with or result in any breach of any of the terms,
conditions, or provisions of, (b) constitute a default under, (c) result in a violation of, (d)
give any third party the right to modify, terminate, or accelerate any obligation under, (e) result
in the creation of any Lien upon the Acquired Assets under, or (f) require any authorization,
consent, approval, exemption, or other action by or notice or declaration to, or filing with, any
third party, court or administrative or other governmental body or agency under, the provisions of
the articles of incorporation, by-laws or similar organizational document, or any indenture,
mortgage, lease, loan agreement, or other material agreement or instrument to which the Seller is
bound or affected, or any Applicable Law to which Seller or any of its respective assets is subject
or any judgment, order, or decree to which Seller is subject, except as would not individually or
in the aggregate reasonably be expected to result in a Material Adverse Effect.




          Section 5.4 Intentionally Omitted.




          Section 5.5 Financial Statements and Related Matters. Attached hereto as Schedule 5.5 is the unaudited balance sheet of Seller as of
December 31, 2009 (the “Latest Balance Sheet”). Except as set forth on Schedule 5.5, the
Latest Balance Sheet along with the related unaudited income statement for the same period
(collectively, the “Financial Statements”) present fairly in all material respects Seller’s
financial condition and results of operations to which the statement relates, as of the times and
for the periods referred to therein. The Financial Statements have been prepared in accordance
with GAAP, consistent with past practice.




          Section 5.6 Absence of Undisclosed Liabilities. Seller has no obligations or liabilities required by GAAP to be recorded on a balance sheet
(whether accrued, absolute, contingent, unliquidated, or otherwise, whether or not known, whether
due or to become due, and regardless of when asserted) arising out of or relating to the operation
of its Business or the ownership of any assets, at or before the Closing, except (a) obligations
under Contracts described on Schedule
5.12(a) or under Contracts which are not required to be disclosed thereon (but not
liabilities for breaches thereof), (b) liabilities reflected on the Latest Balance Sheet, (c)
liabilities which have arisen after the date of the Latest Balance Sheet in the Ordinary Course of
Business or otherwise pursuant to the terms and conditions of this Agreement (none of which is a
liability for breach of contract, breach of warranty, tort, or infringement or a written claim or
lawsuit, an environmental liability or violation of Applicable Law), and (d) contingent liabilities
for matters set forth on Schedule 5.13.




          Section 5.7 Absence of Certain Developments. Except as set forth on Schedule 5.7 and except as expressly contemplated by this
Agreement, since January 1, 2010, Seller has not:





     (a) suffered (i) any change or occurrence that has had or could reasonably be expected
to have, individually or in the aggregate, a Material



30









 






Adverse Effect or (ii) any theft,
damage, destruction, or casualty loss in excess of $25,000 to its assets, whether or not
covered by insurance, or suffered any substantial destruction of books and records;




     (b) mortgaged, pledged or subjected any portion of its properties or assets to any
Lien (other than Permitted Liens);




     (c) sold, leased, assigned, or transferred (including, without limitation, transfers
to any Affiliate of the Seller) a portion of its tangible assets outside the Ordinary
Course of Business, or canceled without fair consideration any material debts or written
claims owing to or held by them;




     (d) (i) sold, assigned, licensed, or transferred (including, without limitation,
transfers to any Affiliate of the Seller) any material Proprietary Rights owned by, issued
to, or licensed to any party or (ii) other than in the Ordinary Course of Business,
licensed any material Proprietary Rights owned by, issued to, or licensed to the Seller or
disclosed any material confidential information (other than in connection with the
Purchaser’s or its representatives’ due diligence review or pursuant to agreements
requiring the recipient to maintain the confidentiality of and preserving all rights of
Seller in such confidential information);




     (e) entered into, assumed any obligations under, amended, or terminated any material
Contract (including the Real Property Lease), or entered into any other material
transaction other than in the Ordinary Course of Business;




     (f) made any loans or advances to, or guarantees for the benefit of, any Persons
(other than endorsement, in the Ordinary Course of Business, of checks received from
customers);




     (g) made a material change in its accounting methods;




     (h) terminated (other than due to expiration), entered into any new, modified or
amended to its detriment any existing material Licenses to which it is bound; or




     (i) made any capital expenditure or commitment for a capital expenditure.




     Section 5.8 Real Property.




     (a) Seller owns no real property.




     (b) Seller leases no real property other than the Leased Real Property, pursuant to
the Real Property Lease. The Seller has made available to the Purchaser a true and
complete copy of the Real Property Lease. Except as set forth in Schedule 5.8(b):



31









 






     (i) the Real Property Lease is legal, valid, binding and enforceable against
Seller in accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors’ rights and as limited by general principles of
equity that restrict the availability of equitable remedies;




     (ii) Seller and, to the Knowledge of the Seller the landlord under the Real
Property Lease, are not in breach or default under the Real Property Lease nor has
Seller received any notice alleging such breach or default, and, to the Knowledge
of the Seller with respect to a breach or default by any other party, no event has
occurred or circumstance exists which, with the delivery of notice, the passage of
time or both, would constitute such a breach or default, or permit the termination,
modification or acceleration of rent under such Real Property Lease;




     (iii) Seller has not assigned or otherwise transferred its interest as tenant
under the Real Property Lease;




     (iv) no security deposit or portion thereof deposited with respect to the Real
Property Lease has been applied in respect of a breach or default under the Real
Property Lease which has not been redeposited in full (in each case, to the extent
required by and pursuant to the terms of the Real Property Lease);




     (v) the landlord under the Real Property Lease is not an Affiliate of the
Seller or any of the Seller’s officers or directors and otherwise does not have any
equity or voting interest in Seller;




     (vi) Seller has not subleased, licensed or otherwise granted any Person the
right to use or occupy the Leased Real Property or any portion thereof, except in
the Ordinary Course of Business or as disclosed on Schedule 5.8(b); and




     (vii) Seller has not collaterally assigned or granted any other Lien in the
Real Property Lease or any interest therein, except for Permitted Liens.




     (c) The Leased Real Property comprises all of the real property used or currently
intended to be used in the Seller’s Business; and, other than the Real Property Lease or as
set forth on Schedule 5.8(c), Seller is not a party to any agreement or option to
purchase or lease any real property or interest therein.




     (d) With respect to the Leased Real Property, except as set forth on Schedule
5.8(d):




     (i) to the Knowledge of the Seller, the physical condition of the Leased Real
Property is sufficient to permit the continued conduct of



32









 






Seller’s business in the
Ordinary Course of Business subject to the provision of usual and customary
maintenance and repair performed in the Ordinary Course of Business;




     (ii) there are no parties in possession of the Leased Real Property other than
Seller, except pursuant to Permitted Liens;




     (iii) Seller has not granted any option, right of first refusal or right of
first offer to any Person to purchase or otherwise acquire an interest in the Real
Property Lease.




     (iv) to Seller’s Knowledge, there are no special assessments or planned public
improvements with respect to the Real Property, and no notice has been received
concerning an increase in the assessed value of the Real Property;




     (v) the use, operation and maintenance of the Real Property is in compliance
with Applicable Laws (including those relating to zoning, permitting, land
division, building, fire, health and safety); and




     (vi) ordinary wear and tear excepted, and to Seller’s Knowledge, the Real
Property is free of material defects.




     Section 5.9 Proprietary Rights.




     (a) Schedule 5.9 attached hereto contains a complete and accurate list of all
registered Proprietary Rights owned or used by Seller and all applications
for the registration of other Proprietary Rights filed by Seller (in each case,
directing whether the item listed is licensed from a third party or owned by Seller, and
identifying such third party). Schedule 5.9 also contains a complete and accurate
list of all material unregistered (i) trade names, trademarks and service marks owned by
Seller (collectively, the “Unregistered Proprietary Rights”); and (ii) computer software
owned and/or used by Seller, other than commercially available “off-the-shelf” software or
third party software used to control, monitor or assist the operation of machinery or
equipment (“Embedded Software”).




     (b) Except as set forth on Schedule 5.9, (i) Seller owns and possesses free
and clear of all Liens (except Permitted Liens), all right, title, and interest in and to,
or has the right to use all the Seller Proprietary Rights used in or necessary for the
operation of its business as currently conducted; (ii) to the Knowledge of Seller, Seller
possesses all rights in the Proprietary Rights owned by third parties that are used in or
necessary for the operation of its business as currently conducted; (iii) Seller has not
received any written notice of invalidity, infringement, or misappropriation from any third
party with respect to any of its Proprietary Rights or of any third party; (iv) to the
Knowledge of Seller, Seller has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Proprietary Rights of any third parties, provided
that no representation is made in this clause as to Proprietary Rights consisting of any



33









 






“off-the-shelf” software or Embedded Software; (v) to the Knowledge of the Seller, no third
party has interfered with, infringed upon, misappropriated, or otherwise come into conflict
with any Proprietary Rights of Seller, provided that no representation is made in this
clause as to Proprietary Rights consisting of any “off-the-shelf” software or Embedded
Software and (vi) following the Closing Date, the Purchaser will be entitled to exercise
all of its rights with respect to Proprietary Rights used in the Acquired Assets, and with
respect to any licenses or other agreements relating to Proprietary Rights owned by third
parties and licensed to Seller under the Acquired Contracts, to the same extent that the
Seller would have been able to under such licenses or other agreements had the transactions
contemplated by this Agreement not occurred, and without the payment of any additional
amounts or consideration other than ongoing fees, royalties or payments that the Seller
would otherwise be required to pay.




     Section 5.10 Assets; No Liens.




     (a) Except as set forth on Schedule 5.10, Seller has title to, or a valid
leasehold interest in, or license of, or right to use free and clear of all Liens other
than Permitted Liens and contract rights of third party lessors and/or licensors, all of
the Acquired Assets.




     (b) Except as set forth on Schedule 5.10, the machinery, equipment, personal
properties, vehicles, and other tangible assets included in the Acquired Assets are and
have been operated in all material respects in conformity with all
Applicable Laws, are in good operating condition and repair, reasonable wear and tear
excepted, consistent with age, and there are no material physical, structural or mechanical
defects on such tangible assets. Except for the Excluded Assets, the Acquired Assets to be
purchased by the Purchaser shall include all assets, properties and interests in properties
(real, personal and mixed, tangible and intangible) and all Contracts necessary to enable
the Purchaser to carry on the Business and operations presently conducted by the Seller.




     Section 5.11 Taxes. Except as set forth on Schedule 5.11,




     (a) Seller has timely filed (taking into account any applicable extensions of time to
file) all Tax Returns (including any estimated Tax Returns) that it was required to file
under Applicable Laws relating to Taxes imposed on the Acquired Assets or the Business.
All such Tax Returns were correct and complete in all material respects. All Taxes imposed
on the Acquired Assets due and owing by Seller for periods covered by a Tax Return (whether
or not shown or required to be shown on any Tax Return) have been paid. Seller currently
is not the beneficiary of any extension of time within which to file any Tax Return with
respect to Taxes imposed on the Acquired Assets or the Business. There are no Liens for
Taxes (other than Taxes not yet due and payable) upon any of the Acquired Assets.



34









 






     (b) No foreign, federal, state or local Tax audits or administrative or judicial Tax
proceedings are pending or being conducted with respect to Taxes of Seller (or threatened
in writing) which audits or other proceedings would, if adversely determined, result in any
liability of Purchaser for such Taxes or give rise to a Lien on any Acquired Asset. To the
extent relating to Taxes for which Purchaser would be liable or the non-payment of which
would give rise to a Lien on any Acquired Asset, Seller has not received from any foreign,
federal, state or local Tax authority any (i) written notice indicating an intent to open
an audit, (ii) written request for information related to Tax matters, or (iii) written
notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted or
assessed by any Tax Authority against Seller.




     (c) To the extent relating to Taxes for which Purchaser would be liable or the
non-payment of which would give rise to a Lien on any Acquired Asset, Seller has not waived
any statute of limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency, or is presently contesting any Tax liability
with respect to positions taken by Seller before any court, tribunal or agency.




     (d) To the extent relating to Taxes for which Purchaser would be liable or the
non-payment of which would give rise to a Lien on any Acquired Asset, Seller has withheld
and paid all Taxes required to have been withheld and paid in connection with any amounts
paid or owing to any employee, independent
contractor, creditor, stockholder or other third party, and all Forms W-2 and 1099
required with respect thereto have been properly completed and timely filed.




     Section 5.12 Contracts.




     (a) Except as expressly contemplated by this Agreement or as set forth on Schedule
5.12(a), Seller is not a party to or bound by any written or oral:




     (i) Contract with any Affiliate, any officer or director of any Seller or any
Affiliate of any such officer or director;




     (ii) Contract to loan money or extend credit to any Person, other than trade
credit extended in the Ordinary Course of Business;




     (iii) agreement or indenture relating to borrowed money or the mortgaging,
pledging or otherwise placing a Lien on any asset of Seller;




     (iv) guaranty of any obligation;




     (v) lease or agreement, including capitalized leases, under which Seller is
the lessee of or holds or operates any real or personal property owned by any other
party, except for the Real Property Lease and any lease or agreement for personal
property under which the aggregate annual payments do not exceed $10,000;



35









 






     (vi) lease or agreement under which Seller is the lessor of or permits any
third party to hold or operate any property, real or personal, owned or controlled
by Seller;




     (vii) Contract or group of related Contracts (excluding purchase orders and
supply arrangements issued or received in the Ordinary Course of Business) with the
same party or group of affiliated parties the performance of which involves
consideration in excess of $10,000 annually;




     (viii) licenses to software assignment, license, indemnification, joint
ownership or other agreement with respect to the intangible property (including,
without limitation, any Proprietary Rights) of Seller or of any third party, other
than (A) Contracts in the Ordinary Course of Business granting non-exclusive
licenses, and (B) off-the-shelf commercial software available on standard terms;




     (ix) distribution, vendor, dealership franchise, or service Contract relating
to the distribution, marketing or sale of Seller’s products or services (excluding
purchase orders);




     (x) agreement with a remaining term of more than six months, which is not
terminable by Seller upon less than 60 days notice without
penalty or which involves more than $10,000 annually (except as contemplated
by other items in this Section 5.12(a));




     (xi) Contract prohibiting Seller from freely engaging in any business or
competing anywhere in the world;




     (xii) warranty agreement with respect to products sold or services rendered
(excluding purchase orders);




     (xiii) agreements relating to ownership of or investments in capital interests
in any business or enterprise (including investments in joint ventures and minority
equity investments);




     (xiv) Contracts under which Seller is obligated to indemnify any Person other
than agreements entered into in the Ordinary Course of Business;




     (xv) Contracts relating to the settlement or compromise of any actions,
proceedings or investigations disclosed on Schedule 5.13;




     (xvi) Contracts relating to the acquisition, sale, disposition or transfer of
all or any substantial portion of the assets, stock or membership interests of
Seller or any other Person (whether by way of merger or otherwise) other than in
the Ordinary Course of Business; or



36









 






     (xvii) agreements relating to the subcontracting to another Person of Seller’s
obligations under any agreement listed on Schedule 5.12(a).




     (b) All of the Contracts set forth on or required to be set forth on Schedule
5.12(a) are valid, binding and enforceable against the Seller and, to the knowledge of
the Seller, the other parties thereto, in accordance with their respective terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors’ rights and as limited by general
principles of equity that restrict the availability of equitable remedies. Seller has
performed in all material respects all obligations required to be performed by it and is
not in default under or in breach of nor in receipt of any written claim of default or
breach under any such Contract. To the Knowledge of Seller, no event has occurred which
with the passage of time or the giving of notice or both would result in a default, breach
or event of noncompliance by Seller or, to the knowledge of the Seller, any other party
under any such Contract. Except as set forth on Schedule 5.12(b), with respect to
each Contract required to be set forth on Schedule 5.12(a), Seller has not received
written notice of the intention of any party to such Contract to cancel, terminate or
renegotiate any such Contract.




     (c) The Seller has made available to the Purchaser a true and correct copy of all
written Contracts which are required to be disclosed on Schedule 5.12(a), in each
case together with all amendments, waivers, or other changes
thereto. Schedule 5.12(a) contains an accurate description of all material
terms of all oral Contracts referred to therein.



          Section 5.13 Litigation; Proceedings. Except as set forth on Schedule 5.13, there are no suits, orders, judgments or
decrees, actions, proceedings or investigations, pending or, to the Knowledge of the Seller,
threatened against Seller (or against any of its officers, directors, agents, or employees (in each
case, in their capacity as such)) at law or in equity, or before or by any federal, state,
municipal, or other governmental department, commission, board, bureau, agency, or instrumentality,
domestic or foreign involving an amount in excess of $10,000 or seeking injunctive relief. Except
as set forth on Schedule 5.13, Seller is not subject to any outstanding order, judgment, or
decree issued by any court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or any arbitrator. Schedule 5.13 sets forth accurately and
completely the following information with respect to each matter listed thereon: the name of and
parties to the proceeding, the date of the commencement of the proceeding, the status of the
proceeding (e.g., in settlement talks, discovery, trial, appeal, etc.), a brief statement of the
nature of the claim, the amount being claimed and/or the nature of other relief sought, the amount
of reserves taken, if any, on the Latest Balance Sheets in respect of such proceeding, and any
other material information related to such proceeding. There is no written claim, suit, action,
proceeding or governmental investigation, pending or, to the Knowledge of the Seller, threatened
against Seller, by or before any court, governmental or regulatory authority or by any third party
which challenges the validity of this Agreement or which would be reasonably likely to materially
and adversely affect or restrict the Seller’s ability to consummate the




37









 








          transactions contemplated
hereby.




          Section 5.14 Brokerage. Except as set forth on Schedule 5.14, there are no brokerage commissions, finders’
fees, or similar compensation due in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of Seller.




          Section 5.15 Labor and Employment Matters. Except as set forth on Schedule 5.15(a): (a) to the Knowledge of the Seller, no
current employee or independent contractor of Seller that received compensation in excess of
$25,000 from Seller during 2009 and was or should have been issued a Form W-2 or 1099 has any plans
to terminate his, her or their employment or relationship with Seller; (b) Seller has materially
complied, and is in material compliance, with all Applicable Laws (including the common law)
relating to employment and employment practices, terms and conditions of employment, labor
relations, wages, hours of work and overtime, worker classification, employment-related immigration
and authorization to work in the United States, occupational safety and health, and privacy of
health information, and Seller has not received notice from a court or governmental or arbitral
board, agency, or authority within the past three years alleging or making a
finding of non-compliance; (c) there are no pending or, to the Knowledge of the Seller,
threatened controversies, cases, grievances, claims, charges, investigations or proceedings of any
kind and in any forum by or on behalf of any present or former employee of Seller, applicant,
person claiming to be an employee, any classes of the foregoing, or by a governmental or arbitral
board, agency, or authority, alleging or concerning Seller’s violation of, or compliance with, any
Applicable Laws (including the common law) relating to employment and employment practices, terms
and conditions of employment, labor relations, wages, hours of work and overtime, worker
classification, employment-related immigration and authorization to work in the United States,
occupational safety and health, or privacy of health information, and there have been no such
controversies, cases, grievances, claims, charges, investigations or proceedings within the past
three years; (d) Seller is not a party to, bound by, or negotiating any collective bargaining
agreement or any other contract or agreement with any labor organization; (e) to the Knowledge of
the Seller, there is no current, pending or threatened strikes, slowdowns, work stoppages,
lockouts, walkouts or other labor controversy involving Seller or its employees of Seller and there
have no such actions within the past three years; (f) Seller has timely paid or made provision for
payment of, and has properly accrued for in the Financial Statements, all accrued salaries, wages,
commissions, bonuses, severance pay, vacation, sick, and other paid leave with respect to any
current or former employee or on account of employment; (g) no severance payment, stay on or
incentive payment, change in control payment, vacation, sick or other paid leave payment, or
similar payment or obligation will be owed by Seller to any director, officer, employee or other
persons upon consummation of, or as a result of, the transactions contemplated by this Agreement,
nor will any such director, officer, employee or other person be entitled to any such payments a
result of the transactions contemplated by this Agreement in the event of the subsequent
termination of this or her employment or relationship; (h) Seller has not, and is not required by
applicable law to, have an affirmative action plan; (i) there is no current or, to the knowledge of
Seller, threatened action or proceeding in any forum in which any current or former director,




38









 







officer, employee or agent of Seller is or may be entitled to indemnification; (j) Seller has not
breached and is not in breach of any contract for the employment of any individual on a full time,
part time, consulting, or other basis; (k) all persons employed in connection with the Seller’s
business are employed by Seller and no services are received from any independent contractors to
whom Seller issued or was required to issue a Form 1099, except as set forth on Schedule
5.15(b); and Schedule 5.15(b) identifies all employees by name; position or title;
whether or not represented by a union and, if so, identification of the union; initial date of
hire; seniority or service credit date if different from initial date of hire; status (whether
active or on leave absence, and if on leave, the type of leave); compensation by type (base salary,
commission, bonus, and the like); and accrued but unused vacation, sick or other paid leave and the
rate at which such paid leave is accrued.





     Section 5.16 Employee Benefit Plans.




     (a) Schedule 5.16(a) identifies each “employee benefit plan” (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”))
and each employment bonus, deferred or incentive compensation, profit sharing, retirement,
stock option, stock purchase or other
equity compensation, vacation, health, life or other employee insurance, Section 125
cafeteria plan or flexible benefit arrangement, disability, sick leave, hospitalization,
unemployment, change in control or severance plan, arrangement, agreement or program,
material fringe benefit and other benefit plan, arrangement, agreement or program, that (i)
provides compensation or benefits in any form to any current or former employee,
independent contractor, officer or director of Seller (or any beneficiary or dependent
thereof) and (ii) is sponsored, maintained, contributed to or required to be contributed to
by Seller or any entity which together with Seller would be deemed a single employer within
the meaning of Sections 414(b), (c) or (m) of the Code or Section 4001 of ERISA (“ERISA
Affiliate”) or with respect to which Seller has any material liability (collectively, the
“Plans”). The Seller has furnished or made available to the Purchaser, with respect to
each Plan maintained by Seller a true, correct and complete copy of, as applicable: all
plan documents (including amendments thereto); the most recent summary plan descriptions
and any subsequent summaries of material modifications; Forms series 5500 as filed with the
IRS for the three most recent plan years with any required audited financial statements;
all trust agreements with respect to employee benefit plans, plan contracts with service
providers or with insurers providing benefits for participants or liability insurance for
fiduciaries and other parties in interest or bonding; the most recent IRS determination
letter for all plans qualified under Code Section 401(a) or if an application for a
determination letter is pending, the application with all attachments; and any
communications with the United States Department of Labor, the Internal Revenue Service,
the PBGC or any other governmental agency with respect to a Plan.




     (b) No Plan maintained by Seller or current or former ERISA Affiliate during the past
six years is or was subject to Title IV of ERISA. No Plan maintained by Seller or ERISA
Affiliate provides for medical or life insurance



39









 






benefits to retired or former employees of
Seller or their family members (other than as required under Section 4980B of the Code or
similar state law) and neither Seller nor any ERISA Affiliate of Seller has offered to
provide such benefits. No Plan maintained by Seller is a multiple employer welfare
arrangement as defined in Section 3(40) of ERISA.




     (c) Except as set forth on Schedule 5.16(c), during the past six years,
neither Seller nor any of its respective ERISA Affiliates has made or been required to
make contributions to any “multiemployer plan” (as defined in Section 3(37) of ERISA)
subject to Title IV of ERISA.




     (d) Each Plan maintained by Seller is in all material respects in compliance, and has
been administered in all material respects in accordance, with its terms and the applicable
provisions of ERISA and the Code and all other Applicable Laws.




     (e) All contributions (including all employer contributions and employee salary
reduction contributions), premiums and other payments required
by and due from Seller under the terms of each Plan for any period ending on or before
the Closing Date which are not yet due from Seller have been made to each such Plan or the
contribution obligation is reflected in Seller financial statements.



          Section 5.17 Intentionally Omitted.




          Section 5.18 Affiliate Transactions. Except as disclosed on Schedule 5.18(which discloses all material terms of any
such oral arrangement), no Affiliate of the Seller or any officer, director or manager of Seller is
a party to any Contract with Seller or which is pertaining to the Business of Seller or has any
interest in any property, real or personal or mixed, tangible or intangible, used in or pertaining
to the business of Seller. Except as set forth on Schedule 5.18, as of the Closing Date,
all of such Affiliate agreements and understandings shall be properly terminated, and Seller shall
have no liability thereunder.




          Section 5.19 Governmental Licenses. Schedule 5.19 contains a complete listing and summary description of all material
Licenses owned or possessed by Seller or used by Seller in the conduct of its Business. Except as
indicated on Schedule 5.19, Seller owns or possesses such right in and to all material
Licenses which are necessary to conduct Seller’s Business as presently conducted. No loss of any
material License is pending or, to the Knowledge of the Seller, threatened (including, without
limitation, as a result of the transactions contemplated hereby), other than expiration in
accordance with the terms thereof. Seller has not received any written notice of any alleged
violation of any material License.




          Section 5.20 Compliance with Laws. Except as set forth on Schedule 5.20, since January 1, 2007, Seller and each of its
officers, directors, and employees (in their capacity as such) have complied in all material
respects with and are in material compliance with all Applicable Laws which are applicable to the
Business, business





40









 







practices, or the Acquired Assets and to which Seller may be subject, and, to
the Knowledge of the Seller, no written claims have been filed against Seller alleging a violation
of any such Applicable Law, and Seller has not received written notice of any such violations.




          Section 5.21 Location of Assets. Except for assets in transit, all of the tangible assets of Seller are located at the
facilities listed on either Schedule 5.8(b) or Schedule 5.21.




          Section 5.22 Environmental Matters. Except as set forth on Schedule 5.22:





     (a) Seller has complied in all material respects with and is currently in compliance
in all material respects with all Environmental and Safety Requirements, and Seller has not
received any written notice regarding any liabilities or any corrective, investigatory, or
remedial obligations arising under Environmental and Safety Requirements related to the
Acquired Assets.




     (b) Without limiting the generality of the foregoing, Seller has obtained and complied
in all material respects with, and is currently in compliance in material all respects
with, all Licenses that may be required pursuant to any Environmental and Safety
Requirements for the occupancy or the operation of the Acquired Assets. A list of all such
Licenses is set forth on Schedule 5.22.




     (c) Neither this Agreement, nor the other Transaction Documents, nor the consummation
of the transactions contemplated hereby and thereby shall impose any obligations on Seller
for site investigation or cleanup, or notification to or consent of any government agencies
or third parties, under any Environmental and Safety Requirements (including, without
limitation, any so called “transaction-triggered” or “responsible property transfer” laws
and regulations).




     (d) To Seller’s Knowledge, except as in material compliance with Environmental and
Safety Requirements, none of the following exists at any of the Acquired Assets: (i)
underground storage tanks or surface impoundments as defined in or regulated under the
Resource Conservation and Recovery Act; (ii) asbestos-containing material that is friable
or otherwise capable of becoming airborne; (iii) unpermitted landfills; or (iv) materials
or equipment containing polychlorinated biphenyls.




     (e) Seller has never treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled, or Released (as defined in CERCLA) any substance
(including, without limitation, any Hazardous Substance) or owned, occupied, or operated
any facility or property, so as to give rise to material liabilities of Seller, regarding
any of the Acquired Assets, for response costs, natural resource damages, or attorneys’
fees pursuant to the




41











 





Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended (“CERCLA”) or any analogous Environmental and Safety
Requirements.



     (f) This Section 5.22 contains the sole and exclusive representations and warranties
regarding environmental matters and any Environmental and Safety Requirements.




     Section 5.23 Agreements With Customers and Suppliers.




     (a) Schedule 5.23(a) sets forth the top ten customer accounts of the Seller,
based on aggregate revenue attributable to each such account during the calendar year ended
December 31, 2009 and the interim period from January 1, 2010 through March 31, 2010
(collectively, the “Latest Calendar Year”), together with the aggregate amount of revenues
attributable to such customer account for such period.




     (b) With respect to the customers listed on Schedule 5.23(a) for the Latest
Calendar Year, to the Knowledge of the Seller, Seller has not received any verbal or
written notice that such customer (i) intends to terminate or materially reduce its
purchases from Seller, or materially alter the terms of such purchases, whether by reason
of the consummation of the transactions contemplated hereby or otherwise, or (ii) will
imminently (A) be subject to the initiation of any bankruptcy, insolvency, moratorium,
receivership or reorganization by or against such customer, or (B) generally assign its
assets for the benefit of its creditors.




     (c) With respect to the ten largest suppliers of Seller for the Latest Calendar Year
(based upon aggregate payments by Seller to such suppliers and as listed on Schedule
5.23(c)), to the Knowledge of the Seller, Seller has not received any verbal or written
notice that such supplier intends to discontinue or materially diminish its relationship as
a supplier to Seller, or materially alter the terms of such relationship, whether by reason
of the consummation of the transactions contemplated hereby or otherwise.



          Section 5.24 Product Warranties; Warranty Claims. Attached hereto as Schedule
5.24 are true, complete and accurate copies of the standard forms of product warranty or
guaranty issued directly by Seller during each of the past two years with respect to the products
and services of Seller. During the past two years, no other product warranty or guaranty has been
expressly issued by Seller. Except as set forth on Schedule 5.24 hereto, there are no
existing or, to the Knowledge of the Seller, threatened claims against Seller that any of its goods
are defective, or that the goods or services manufactured, sold or provided by Seller fail to
meet any product or service warranties of any applicable standard or the specifications of any
foreign, federal, state, or local authority which involve or, to the Knowledge of the Seller, could
reasonably be expected to involve a cost to Seller which in the aggregate for all such claims
exceeds or could reasonably be expected to exceed $25,000. Except as provided in Schedule 5.24,
Seller has not issued any recalls of products sold by it during the past five years.





42









 








          Section 5.25 Receivables and Notes Receivable. Schedule 5.25 sets forth an
aging schedule for all Receivables and notes receivable owing to Seller as of April 15, 2010,
listed in alphabetical order and then by days outstanding. Except as set forth on Schedule
5.25 and after taking into account the allowance for uncollectible Receivables and notes
receivable, to the extent set forth on the NWC Statement, all the Current Receivables and notes
receivable owing to Seller as of the date hereof constitute, and as of the Closing will constitute,
valid and enforceable claims arising from bona fide transactions in the Ordinary Course of
Business, and, to the Knowledge of Seller, there are no asserted claims, refusals to pay or other
rights of set-off against any thereof. Except as set forth on Schedule 5.25, as of the
date hereof, there is (i) to the Knowledge of Seller, no account debtor or note debtor that has
refused or, to the Knowledge of the Seller, threatened to refuse to pay its obligations under any
Receivable for any reason, (ii) no account debtor or note debtor in respect of any Current
Receivable that is insolvent or bankrupt, and (iii) no Current Receivable or note receivable
pledged to any third party by Seller.




          Section 5.26 Accounts and Notes Payable. Schedule 5.26 sets forth an aging
schedule for all accounts payable and notes payable by Seller as of April 15, 2010, listed in
alphabetical order and identified as aged by less than 30 days, less than 60 days, less than 90
days and 90 days and over for the accounts payable and listed by note for the notes payable.
Except as set forth on Schedule 5.26, all accounts payable and notes payable by Seller to
third parties as of the date hereof arose, and as of the Closing Date have arisen, in the Ordinary
Course of Business.




          Section 5.27 Inventories. Schedule 5.27(a) sets forth a schedule for all
Inventories of Seller as of April 15, 2010. All of such Inventories are usable and of merchantable
quality. The aggregate Inventory specifically identified by Seller as satisfying a specific State
of California or other governmental product specification does not include any items which are
below such specification, and the aggregate Inventory specifically identified by Seller as
satisfying any customary quality control standards does not include any items which are below such
standards. Except as set forth in Schedule 5.17(b) and 5.27(c), the aggregate
Inventory includes no items which are of a quality or quantity not usable or, in the case of
finished goods, salable in the normal course of business (it being understood that all Inventory
shall have remaining shelf life of at least 120 days, which is the shelf life required by Seller’s
customers; and no such Inventory is (a) adulterated or
misbranded within the meaning of the Federal Food, Drug and Cosmetic Act, (b) an item that may
not, under such Act, be introduced into interstate commerce, and (c) adulterated or misbranded
within the meaning of or in violation of any disclosure or warning required under the pure food and
drug or health, safety or environmental laws, regulations or ordinances of any state or other
government authority which are applicable to such shipment or delivery). The value of Inventory of
Seller is reported consistent with Seller’s past practice.




          Section 5.28 Disclosure. Neither this Agreement, any of the schedules, attachments or
exhibits hereto, nor any other written material delivered to the Purchaser or any of its respective
directors, officers, employees, representatives or agents contains any untrue statement of a
material fact or omits a material fact necessary to make the





43









 







statements contained herein or
therein, taken as a whole, in light of the circumstances in which they were made, not misleading.
There is no fact that has not been disclosed to the parties referred to above of which Seller is
aware and which constitutes or could reasonably be anticipated to result in a Material Adverse
Effect with respect to Seller.




          Section 5.29 Closing Date. All of the representations and warranties contained in
this Article V, including the Schedules hereto, are true and correct on the date of this
Agreement and shall be true and correct on the Closing Date (other than such representations and
warranties that specifically relate to an earlier date, which need only be true and correct as of
such date). For informational purposes only, and at a minimum of three Business Days prior to the
Closing Date, the Seller may advise the Purchaser in writing of changes to the Seller’s disclosure
schedules (each, a “Schedule Update”); provided that the delivery of any notice pursuant to this
Section 5.29 shall not limit or otherwise affect the remedies available hereunder to the
Purchaser, or the representations or warranties of the Seller, or the conditions to the obligations
of the Purchaser; provided, that, for the purposes of the indemnification provisions set forth in
Article VIII, the Purchaser Indemnified Persons’ right to indemnification with respect to
the matters set forth in such notice, as set forth in Article VIII, shall be waived if (a)
any such notice identifies a fact that arises after the date of this Agreement, (b) the Seller
expressly acknowledges in writing that the Purchaser has the right to terminate this Agreement
pursuant to Section 7.1(c) by reason of such notice, and (c) the Purchaser elects not to
terminate this Agreement and proceeds with the Closing.




          Section 5.30 No Other Representations or Warranties. Except for the representations
and warranties contained in this Article V, neither the Seller nor any other Person makes any other
express or implied representation or warranty with respect to the Seller or the transactions
contemplated by this Agreement, and the Seller disclaims any other representations or warranties,
whether made by any of its Affiliates, officers, directors, employees, agents or representatives.
Except for the representations and warranties contained in this Article V, the Seller hereby
disclaims all
liability and responsibility for any representation, warranty, statement, or information made,
communicated, or furnished (orally or in writing) to Purchaser or its Affiliates or representatives
(including any opinion, information, projection, or advice that may have been or may be provided to
the Purchaser by any director, officer, employee, agent, consultant, or representative of the
Seller). The Seller makes no representations or warranties to the Purchaser regarding any
projection or forecast regarding future results or activities or the probable success or
profitability of the Seller.




ARTICLE VI — REPRESENTATIONS AND WARRANTIES OF THE PURCHASER




     As a material inducement to the Seller to enter into this Agreement, the Purchaser hereby
represents and warrants to the Seller that, as of the date hereof (other than representations and
warranties that specifically relate to an earlier date, which representations and warranties are
hereby made as of such date):



44









 





          Section 6.1 Organization. The Purchaser is a corporation duly organized, validly
existing, and in good standing under the Applicable Laws of the State of Delaware.




          Section 6.2 Authorization of Transactions. The Purchaser has all requisite
organizational power and authority to execute and deliver the Transaction Documents and to
consummate the transactions contemplated hereby and thereby. The board of directors of the
Purchaser has duly approved and authorized the Transaction Documents and has duly approved and
authorized the execution and delivery of the Transaction Documents and the consummation of the
transactions contemplated thereby. No other corporate or other proceedings on the part of the
Purchaser are necessary to approve and authorize the execution and delivery of the Transaction
Documents and the consummation of the transactions contemplated thereby. As of the Closing, all
Transaction Documents will have been duly executed and delivered by the Purchaser and will
constitute the valid and binding agreements of the Purchaser, enforceable against the Purchaser in
accordance with their terms.




          Section 6.3 Absence of Conflicts. The execution, delivery, and performance of the
Transaction Documents and the consummation of the transactions contemplated thereby by the
Purchaser do not and shall not (a) conflict with or result in any breach of any of the terms,
conditions, or provisions of, (b) constitute a material default under, (c) result in a material
violation of, (d) give any third party the right to modify, terminate, or accelerate any obligation
under, or (e) require any authorization, consent, approval, exemption, or other action by or notice
or declaration to, or filing with, any third party, court or administrative or other governmental
body or agency under, the provisions of the articles of incorporation or bylaws or similar
organizational documents, as applicable, of the Purchaser or any material Contract to which the
Purchaser is bound or affected, or any Applicable Law to
which the Purchaser is subject or any material judgment, order, or decree to which the
Purchaser is subject.




          Section 6.4 Litigation. There is no written claim, suit, action, proceeding or
governmental investigation, pending or, to the Knowledge of the Purchaser, threatened against the
Purchaser, by or before any court, governmental or regulatory authority or by any third party which
challenges the validity of this Agreement or which would be reasonably likely to materially and
adversely affect or restrict the Purchaser’s ability to consummate the transactions contemplated
hereby.




          Section 6.5 Brokerage. There are no brokerage commissions, finders’ fees, or similar
compensation due in connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of the Purchaser.




          Section 6.6 Financing. Purchaser has sufficient cash, available lines of credit or
other sources of immediately available funds to enable it to pay the Purchase Price.





45









 








          Section 6.7 Closing Date. All of the representations and warranties contained in this
Article VI, including the Schedules hereto, are true and correct on the date of this Agreement and
shall be true and correct on the Closing Date (other than such representations and warranties that
specifically relate to an earlier date, which need only be true and correct as of such date).




          Section 6.8 Due Diligence. The Purchaser has been afforded the opportunity prior to
executing and delivering this Agreement to conduct a due diligence investigation of Seller. To the
knowledge of the Purchaser, based solely on (a) information provided to it by the Seller during the
course of its due diligence investigation (and without acknowledging the completeness or
sufficiency of any such information) and (b) other information obtained by the Purchaser during
such investigation, there has been no breach by the Seller of any of their representations or
warranties under this Agreement.




ARTICLE VII — TERMINATION




          Section 7.1 Termination. This Agreement may be terminated at any time before the
Closing:





     (a) by mutual written consent of the Seller and the Purchaser;




     (b) by the Seller (i) if there has been a material breach by the Purchaser of any of
the representations, warranties, or covenants set forth in this Agreement which the
Purchaser fails to cure within 10 Business Days after written notice is given by the Seller
(except no cure period shall be provided for a breach which by its nature cannot be cured)
or (ii) if events have occurred which have made it impossible to satisfy a condition
precedent to the Seller’s obligations to consummate the transactions contemplated hereby,
unless the Seller’s willful or knowing breach of this Agreement has caused the condition to
be incapable of being satisfied;




     (c) by the Purchaser (i) if there has been a material breach by the Seller of any of
the representations, warranties, or covenants set forth in this Agreement which the Seller
fails to cure within 10 Business Days after written notice thereof is given by the
Purchaser (except no cure period shall be provided for a breach which by its nature cannot
be cured) or (ii) if events have occurred which have made it impossible to satisfy a
condition precedent to the Purchaser’s obligations to consummate the transactions
contemplated hereby, unless the Purchaser’s willful or knowing breach of this Agreement has
caused the condition to be incapable of being satisfied;




     (d) by the Seller or the Purchaser if the Closing has not occurred on or before June
24, 2010; provided, however, that neither the Seller nor the Purchaser shall be entitled to
terminate this Agreement pursuant to this Section 7.1(d) if any such Party’s willful or
knowing breach of this Agreement has



46









 






prevented the consummation of the transactions
contemplated hereby at or before such time; or




     (e) by the Purchaser or the Seller by notice to the other if a final nonappealable
order, writ, judgment, injunction, decree, stipulation, ruling, determination, or award
permanently enjoining, restraining, or otherwise prohibiting the Closing shall have been
issued by a governmental body of competent jurisdiction.



          Section 7.2 Effect of Termination. The rights of termination under Section
7.1 are in addition to any other rights the Purchaser or the Seller may have under this
Agreement and the exercise of a right of termination will not be an election of remedies. If this
Agreement is terminated pursuant to Section 7.1, all further obligations of the Purchaser
and the Seller under this Agreement will terminate, except that the obligations in this Section
7.2, Section 9.1, Section 9.3, Section 10.9, Section 10.10 and
Section 10.12 shall survive; provided, however, (a) if this Agreement is terminated by the
Purchaser because of a breach of this Agreement by the Seller or because one or more of the
conditions to the Purchaser’s obligations under this Agreement is not satisfied as a result of any
of the Seller’s failure to comply with their respective obligations under this Agreement, the
Purchaser’s right to pursue remedies (consistent with this Agreement) will survive such termination
unimpaired; and (b) if this Agreement is terminated by the Seller because of a breach of
this Agreement by the Purchaser or because one or more of the conditions to the Seller’s
obligations under this Agreement is not satisfied as a result of the Purchaser’s failure to comply
with its obligations under this Agreement, Seller’s right to pursue remedies (consistent with this
Agreement) will survive such termination unimpaired.







ARTICLE VIII — INDEMNIFICATION AND RELATED MATTERS




          Section 8.1 Indemnification Generally.





     (a) From and after Closing, Seller agrees to indemnify the Purchaser Indemnified
Persons for, and hold each of them harmless from and against, any and all Losses resulting
from, arising out of, or caused by, any of the following (each, a “Purchaser
Indemnification Event”):




     (i) the inaccuracy or breach of any representation or warranty of the Seller
contained in this Agreement, the Escrow Agreement, or any certificate delivered by
the Seller in connection herewith or therewith at the Closing;




     (ii) the breach by the Seller of any agreement or covenant of the Seller
contained in this Agreement or the Escrow Agreement;




     (iii) the failure of the Seller to timely pay, perform or discharge any
Retained Liability;




     (iv) any Excluded Asset;



47









 






     (v) any failure to comply with the terms and conditions of any applicable bulk
sales or bulk transfer or similar laws that may be applicable to the sale or
transfer of the Acquired Assets; or




     (vi) any Loss arising out of or due to a breach of the Westamerica Equipment
Leases resulting from the assignment of such leases to Purchaser without the
consent of the lessor thereunder.




     (b) From and after the Closing, the Purchaser shall indemnify the Seller (and with
respect to clause (v) below, the Shareholders) for, and hold them harmless from and
against, any and all Losses resulting from any of the following (each, a “Seller
Indemnification Event”):




     (i) the inaccuracy or breach of any representation or warranty of the
Purchaser contained in this Agreement, the Escrow Agreement or any certificate
delivered by the Purchaser in connection herewith or therewith at the Closing;




     (ii) the breach by the Purchaser of any agreement or covenant of the Purchaser
contained in this Agreement or the Escrow Agreement;




     (iii) the failure of the Purchaser to timely pay, perform or discharge any
Assumed Liability;




     (iv) ownership of the Acquired Assets or the operation by the Purchaser of its
business subsequent to the Closing; or




     (v) other than Losses covered by Section 8.1(a)(vi), any Loss arising
out of or due to a breach after Closing of the Westamerica Equipment Leases of any
covenant applicable to the lessee thereunder.




     (c) From and after the Closing, Stephen J. Kerr, John Potter and Matthew I. Friedrich,
solely as Trustee of the Payton Potter 2007 Irrevocable Trust, agree to jointly and
severally indemnify and defend the Purchaser Indemnified Persons for, and hold each of them
harmless from and against, any and all Losses resulting from, arising out of, or caused by
intentional fraud related to this Agreement or the transactions contemplated hereby
committed by any of the Shareholders (a “Shareholder Indemnification Event”).



          Section 8.2 Notice and Defense of Third Party Claims. The obligations and liabilities
of the Indemnifying Persons with respect to Claims resulting from the assertion of liability by
third parties (each, a “Third Party Claim”) shall be subject to the following terms and conditions:





     (a) The Indemnified Persons shall give prompt written notice to the Indemnifying
Persons of any Third Party Claim which might give rise to a Claim by the Indemnified
Persons against the Indemnifying Persons based on the



48









 






agreements contained in Section
8.1, stating the nature and basis of said Third Party Claim, and the amount thereof to
the extent known.




     (b) Except to the extent such Third Party Claim relates to the audit and/or litigation
of any Tax Return, or the determination of a Shareholder Indemnification Event, the
Indemnifying Persons will have the right to participate in or, if the Indemnifying Persons
shall acknowledge in a writing delivered to the Indemnified Persons that the Indemnifying
Persons shall be obligated under the terms of their indemnity hereunder in connection with
such Third Party Claim (the “Acknowledgement”), then the Indemnifying Persons shall have
the right to assume the defense of any Third Party Claim at their own expense and by their
own counsel (reasonably satisfactory to the Indemnified Persons); provided, however, that
the Indemnifying Persons shall not have the right to assume the defense of any Third Party
Claim if (i) such Third Party Claim seeks damages in an amount in excess of the Cap Amount,
or (ii) the named parties to any such action or proceeding (including any impleaded
parties) include both the Indemnified Persons and the Indemnifying Persons and the former
shall have been advised in writing by counsel (with a copy to the Indemnifying Persons)
that
there are one or more legal or equitable defenses available to them which are
different from or addition to those available to Indemnifying Persons.




     (c) Except to the extent such Third Party Claim relates to the audit and/or litigation
of any Tax Return, or the determination of a Shareholder Indemnification Event, if the
Indemnifying Persons make an Acknowledgment, but decline to assume any such defense, they
shall be liable for all reasonable and documented costs and expenses of investigating and
defending such Third Party Claim, including reasonable fees and disbursements of counsel;
provided, that the Indemnified Persons shall not consent to settle, compromise or offer to
settle or compromise any such Third Party Claim without the written prior consent of the
Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed.




     (d) Except to the extent such Third Party Claim relates to the audit and/or litigation
of any Tax Returns, or the determination of a Shareholder Indemnification Event, if the
Indemnifying Persons exercise their right to assume the defense of a Third Party Claim,
they shall not make any settlement of any claims without the prior written consent of the
Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed.




     (e) The Indemnifying Persons and the Indemnified Persons shall use commercially
reasonable efforts to minimize losses from Third Party Claims and shall act in good faith
in responding to, defending against, settling or otherwise dealing with such Third Party
Claims. Each Party agrees that it shall cooperate with the other Party in the defense of
any Third Party Claim and shall furnish any documents and endeavor to make available any
witnesses under its control (subject to any applicable confidentiality agreements or claims
of attorney-client privilege and with out-of-pocket expenses to be paid by the party so
requesting).



49









 






     (f) To the extent such Third Party Claim relates to the audit and/or litigation of any
Tax Returns, or the determination of a Shareholder Indemnification Event, the Indemnified
Persons shall not consent to settle, compromise or offer to settle or compromise any such
Third Party Claim without the written prior consent of the Indemnifying Persons, which
consent shall not be unreasonably withheld, conditioned or delayed.




     Section 8.3 Survival.




     (a) Subject to the further provisions of this Section 8.3, the representations
and warranties of the Seller contained in Article V and the representations and
warranties of the Purchaser contained in Article VI shall survive the Closing Date
for a period of 18 months after the Closing Date; provided, however, that the
representations and warranties of the Seller contained in Sections 5.1,
5.2, 5.11, 5.14, 5.16 and 5.27 and the
representations and
warranties of the Purchaser contained in Sections 6.1, 6.2,
and 6.5 shall survive the Closing Date until the final day of Fiscal 2011.




     (b) The indemnification contained in clause (iii), (iv) and (v) of Section
8.1(a) and clause (iii) and (iv) of Section 8.1(b) shall survive the Closing
Date and continue in full force and effect until the final day of Fiscal 2011.




     (c) The covenants and other agreements of the parties contained in this Agreement
shall survive the Closing Date until they are otherwise terminated, whether by their terms
or as a matter of Applicable Law; provided, however, that no claim shall be made under
Section 8.1(a)(ii) more than 18 months after the Closing Date. For convenience of
reference, the date upon which any representation, warranty, covenant or other agreement
contained herein shall terminate, if any, is referred to herein as the “Survival Date.” No
claim shall be made under Section 8.1 after the applicable Survival Date.
Notwithstanding the foregoing, any claims based on intentional fraud shall survive the
Closing Date without any time limit. No claim shall be brought under Section 8.1
unless the Indemnified Persons, or any of them, at any time prior to the applicable
Survival Date, give the Indemnifying Persons (i) written notice of the existence of any
such claim, specifying the nature and basis of such claim and the amount thereof, to the
extent known or (ii) written notice pursuant to Section 8.2 of any Third Party
Claim, the existence of which might give rise to such a claim. Upon the giving of such
written notice as aforesaid, the Indemnified Persons, or any of them, shall have the right
to pursue such claims subsequent to the Survival Date for the enforcement of their rights
under Section 8.1.




     Section 8.4 Indemnification Limits.




     (a) The Seller or the Shareholders shall not be liable to the Purchaser Indemnified
Persons in respect of any indemnification pursuant to Sections 8.1(a)(i) or
Section 8.1(a)(ii) until the aggregate Losses of the Purchaser Indemnified Persons
pursuant to such Sections exceeds an amount equal to



50









 






$200,000 (the “Basket Amount”) and
then only to the extent of the amount of Losses in excess of the Basket Amount; provided,
however, that the Basket Amount shall not apply to claims for indemnification based on (i)
breaches of the representations and warranties set forth in Sections 5.1,
5.2, 5.11 or 5.14, (ii) intentional fraud, (iii) Losses related to
Retained Liabilities; or (iv) any claim under Section 9.8.




     (b) The Parties acknowledge and agree that the maximum aggregate liability of the
Seller pursuant to Sections 8.1(a) (inclusive of the Escrow Amount) shall not
exceed $5,500,000 plus 18.6% of any Earn Out Payment that may become due (the “Cap
Amount”); provided, however, that the Cap Amount shall not apply to claims for
indemnification based on intentional fraud or claims under Section 8.1(a)(vi).




     (c) Notwithstanding any provision to the contrary contained in this Agreement, the
Seller shall be under no liability to indemnify any Purchaser Indemnified Person under this
Article VIII and no claim under Article VIII of this Agreement shall be made to the extent,
but only to the extent, that (x) a reserve was made for the matter giving rise to the claim
in, or noted in, or taken account of in, the NWC Statement and (y) such reserve or other
amount was taken into account in determining the Net Working Capital.




     (d) For purposes of this Section 8.4, once a determination has been made that
a specific breach of a representation, warranty, covenant or agreement has occurred for
purposes of the indemnification obligations hereunder, the calculation of Losses with
respect to such specific breach shall be made without regard to any limitation or
qualification as to materiality set forth in such representation warranty, covenant or
agreement.




     (e) Any payment made pursuant to the indemnification obligations arising under this
Agreement shall be treated as an adjustment to the Purchase Price to the extent allowable
under Applicable Law. Any indemnity payment under this Agreement shall be decreased by (i)
any Tax benefit to the Indemnified Persons resulting from the Loss giving rise to the
indemnification obligation and (ii) any amounts actually received by the Indemnified
Persons under third party insurance policies with respect to such Loss prior to the time
payment by the Indemnifying Person is due and payable under this Agreement, net of any
deductibles or co-payments paid by such Indemnified Person under the relevant insurance
policy, any “retro-premium” obligations in connection with such Loss and any costs incurred
by such Indemnified Person in procuring such payment under such policy (the “Net Insurance
Proceeds”), each Party agreeing (i) to use commercially reasonable efforts to recover all
available insurance proceeds and (ii) to the extent that any indemnity payment under this
Agreement has been paid by the Indemnifying Person to or on behalf of the Indemnified
Person prior to the receipt, directly or indirectly, by the Indemnified Person of any Net
Insurance Proceeds under third party insurance policies on account of such Loss which
duplicate, in whole or in part, the payment made by the Indemnifying Person to or



51









 






on behalf
of the Indemnified Person, the Indemnified Person shall remit to the Indemnifying Person an
amount equal to the amount of the Net Insurance Proceeds actually received by the
Indemnified Person on account of such Loss which duplicate, in whole or in part, the
payment made by the Indemnifying Person to or on behalf of the Indemnified Person.




     (f) From and after the Closing, resort to indemnification pursuant to this Article
VIII and the Escrow Agreement shall be the exclusive right and remedy of Purchaser
Indemnified Persons for any Loss arising out of or related to any breach of, or dispute or
claim relating to, this Agreement or to the transactions contemplated by this Agreement or
any matter that is otherwise indemnifiable hereunder if the transactions contemplated
hereby are consummated or that constitutes a claim or cause of action against Seller.
Except for claims for equitable relief and claims with respect to intentional fraud solely
against the Person or Persons committing or alleged to have committed such intentional
fraud, recovery from the Escrow Fund and 18.6% of any Earn Out Payment that may become due
to Seller shall be the sole and exclusive remedy of the Purchaser Indemnified Persons for
any breach of, or dispute or claim relating to, any provision of this Agreement or any
matter that is otherwise indemnifiable hereunder if the transactions contemplated hereby
are consummated or that constitutes a claim or cause of action against Seller; it being
understood that once any Escrow Funds or Earn Out Payments are distributed to the Seller or
the Shareholders such amounts shall no longer be available to indemnify the Purchaser
Indemnified Persons.



ARTICLE IX — ADDITIONAL AGREEMENTS




          Section 9.1 Press Releases and Announcements. Prior to the Closing Date, no press
releases or public statements related to this Agreement and the transactions contemplated hereby,
or other announcements to the employees, customers, or suppliers of Seller shall be issued by the
Seller or the Purchaser or their respective Affiliates without the mutual approval of the other
Parties, except for any public disclosure which any Party in good faith believes is required by
Applicable Law. Notwithstanding to above, Purchaser shall specifically be authorized to
independently make any and all necessary filings with the Securities and Exchange Commission.




          Section 9.2 Further Assurances. The Parties shall execute and deliver such further
instruments of conveyance and transfer and take such additional action as any other Party may
reasonably request to effect, consummate, confirm, or evidence the consummation of the transactions
contemplated hereby.




          Section 9.3 Expenses. The Seller and the Purchaser shall pay all of their or its own
fees, costs, and expenses (including, without limitation, fees, costs and expenses of legal
counsel, accountants, investment bankers, brokers, or other representatives and consultants and
appraisal fees, costs, and expenses) incurred in connection with the negotiation of this Agreement
and the other agreements





52









 







contemplated hereby, the performance of their or its obligations hereunder
and thereunder, and the consummation of the transactions contemplated hereby and thereby.




          Section 9.4 Bulk Sales Waiver. The Purchaser and the Seller hereby waive compliance
with the terms and conditions of any applicable bulk sales or bulk transfer law or similar laws
that may be applicable to the sale or transfer of the Acquired Assets.




          Section 9.5 Employee Matters





     (a) Except for the employees listed on Schedule 9.5(a), Purchaser will offer
at-will employment to all individuals employed by Seller as of the Closing Date. For all
such employment offers that are accepted, employment will commence effective on the day
following the Closing Date. The terms and conditions of Purchaser’s offers of employment
to the employees of Seller will provide that each employee will be eligible to receive
salary (and benefits under Purchaser’s employee compensation and benefits plans) which are
comparable to those provided by Purchaser as of immediately prior to the Closing to
Purchaser’s similarly-situated employees. All such employees who accept Purchaser’s offer
of employment (“Transferred Employees”) will be eligible to participate in Purchaser’s
standard, existing employee benefit plans and shall receive credit for their years of
service to Seller as provided for in Section 9.5(b). Seller shall terminate the employment
of all Transferred Employees effective immediately prior to the Closing, in accordance with
all Applicable Laws and applicable agreements with such employees.




     (b) With respect to Transferred Employees, (i) each such Transferred Employee will
receive credit for purposes of eligibility to participate and vesting under Purchaser’s
employee benefit plans for years of service with Seller (or any ERISA Affiliate of Seller)
prior to the Closing Date, and (ii) Purchaser will make all commercially reasonable efforts
to cause any and all pre-existing condition limitations, eligibility waiting periods and
evidence of insurability requirements under any group pension, health, life, accident or
disability plans of Purchaser or its subsidiaries in which such Transferred Employees and
their eligible dependents will participate to be waived and will provide credit for any
co-payments and deductibles prior to the Closing Date for purposes of satisfying any
applicable deductible, out-of-pocket or similar requirements under any such plans that may
apply after the Closing Date.




     (c) Seller and its Affiliates shall be responsible for complying with the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, with respect to any qualifying event
that occurs prior to or on the Closing Date affecting its employees (including the
Transferred Employees) and their qualified beneficiaries by reason of any such employees’
termination of employment with Seller or any of its Affiliates during any period on or
prior to the Closing (including as a result of the consummation of the transactions
contemplated by this Agreement.



53









 






     (d) The provisions contained in this Section 9.5 with respect to employees of
Seller are included for the sole benefit of the respective parties to this Agreement and
shall not create any right in any other Person, including any such employees, former
employees, any participant in any Plan or any beneficiary thereof or any right to continued
employment with Seller or Purchaser, nor require Purchaser or any Affiliate of Purchaser to
continue or amend any particular benefit plan after the Closing Date for Transferred
Employees, and any
such plan may be amended or terminated in accordance with its terms and Applicable
Law.



          Section 9.6 Post-Closing Collection of Receivables. If, following the Closing, any
amounts are received by the Purchaser from an account debtor in respect of any Non-Current
Receivable, the Purchaser shall remit promptly to the Seller all amounts so collected. Any amounts
received after the Closing by the Seller from an account debtor in respect of a Current Receivable
shall be remitted promptly to the Purchaser. Any payment received by either the Seller or the
Purchaser by an account debtor with respect to a receivable shall be applied to Non-Current
Receivables or Current Receivables as directed by such account debtor.




          Section 9.7 Use of Seller; Name Change. Within ten days after the Closing, the Seller
shall cause the corporate name of Seller to be changed from Orchard Valley Harvest, Inc.




          Section 9.8 Certain Tax Matters. All real property, personal property and other ad
valorem Taxes (“Property Taxes”) levied with respect to the Acquired Assets for a Tax period that
begins before or on and ends after the Closing Date (a “Straddle Period”) shall be apportioned
between Seller and Purchaser ratably based on the number of days in such Straddle Period prior to
and including the Closing Date and the number of days in such Straddle Period after the Closing
Date. Upon receipt of any bill for such Property Taxes, Purchaser or Seller, as applicable, shall
present a statement to the other setting forth the amount of reimbursement to which each is
entitled under this Section 3.5 together with such supporting evidence as is reasonably necessary
to calculate the proration amount. The proration amount shall be paid by the party owing it to the
other within 10 days after delivery of such statement. In the event that Purchaser or Seller makes
any payment for which it is entitled to reimbursement under this Section 9.8, the applicable party
shall make such reimbursement promptly but in no event later than 10 days after the presentation of
a statement setting forth the amount of reimbursement to which the presenting party is entitled
along with such supporting evidence as is reasonably necessary to calculate the amount of
reimbursement.




          Section 9.9 Post-Closing Access to Records. For a period of five years following the
Closing, the Purchaser shall maintain intact the business records transferred to it by Seller and,
upon reasonable prior notice, shall give the Seller and its representatives reasonable access to
such records during normal business hours if and to the extent necessary for the prosecution or
defense of any matter, preparation and amendment of tax returns, tax audits, and the preparation
and filing of any other documents required by any governmental body.




54









 








ARTICLE X — MISCELLANEOUS




          Section 10.1 Amendment and Waiver. This Agreement may be amended and any provision of
this Agreement may be waived, provided that any such amendment or waiver shall be binding upon a
Party only if such amendment or waiver is set forth in a writing executed by the Purchaser and the
Seller. No course of dealing between or among any Persons having any interest in this Agreement
shall be deemed effective to modify, amend, or discharge any part of this Agreement or any rights
or obligations of any Party under or by reason of this Agreement.




          Section 10.2 Notices. All notices, demands, and other communications given or
delivered under this Agreement shall be in writing and shall be deemed to have been given, (i) when
received if given in person, (ii) on the date of electronic confirmation of receipt if sent by
facsimile or other wire transmission, (iii) three days after being deposited in the U.S. mail,
certified or registered mail, postage prepaid, or (iv) one day after being deposited with a
reputable overnight courier. Notices, demands, and communications to the Parties shall, unless
another address is specified in writing pursuant hereto, be sent to the address or telecopy number
indicated below:




	 	 	 

	Notices to the Seller

	 	with copies to:
	 
	 	 
	James Graham

	 	Matthew I. Friedrich
	Orchard Valley Harvest, Inc.

	 	Petrulakis Jensen & Friedrich, LLP
	2909 Coffee Road, Suite 12

	 	1130 12th Street, Suite B
	Modesto, California 95350

	 	Modesto, California 95354
	Facsimile:

	 	Facsimile: (209) 522-0700
	 
	 	 
	Notices to the Purchaser

	 	with copies to:
	 
	 	 
	Michael Valentine

	 	Robert M. Mintz
	John B. Sanfilippo & Son, Inc.

	 	Stahl Cowen Crowley Addis LLC
	1703 N. Randall Road

	 	55 West Monroe St., 12th Floor
	Elgin, Illinois 60123

	 	Chicago, Illinois 60603
	Facsimile (866) 610-1299

	 	Facsimile (312) 253-3451






          Section 10.3 Binding Agreement; Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the Parties and their respective
successors and permitted assigns; provided that neither this Agreement nor any of the rights,
interests, or obligations hereunder may be assigned by any Party without the prior written consent
of the other Parties; provided, however, that the Purchaser may assign, in whole or in part, its
rights and obligations under this Agreement to one or more of its Affiliates; provided, however,
that no such assignment shall relieve Purchaser of any of its obligations under this Agreement.




          Section 10.4 Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such a manner as to be effective and valid under Applicable Law, but if any
provision of this Agreement is held to be prohibited by or





55









 







invalid under Applicable Law, such
provision shall be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of this Agreement.




          Section 10.5 No Strict Construction. The language used in this Agreement shall be
deemed to be the language chosen by the Parties to express their mutual intent, and no rule of
strict construction shall be applied against any Person. The Parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event of an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties hereto, and 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.




          Section 10.6 Captions. The captions used in this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and shall not be deemed to limit,
characterize, or in any way affect any provision of this Agreement, and all provisions of this
Agreement shall be enforced and construed as if no caption had been used in this Agreement.




          Section 10.7 Entire Agreement. This Agreement and the other Transaction Document and
each agreement executed contemporaneously with the execution of this Agreement contain the entire
agreement between the Parties and supersede any prior understandings, agreements, or
representations by or between the Parties, written or oral, which may have related to the subject
matter hereof in any way.




          Section 10.8 Counterparts; Facsimile Transmission. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original but both of which taken together
shall constitute one and the same instrument. Signatures of a Party to this Agreement or other
documents executed in connection herewith which are sent to the other Parties by facsimile
transmission or by electronic mail in “portable document format” (“pdf.”) form or by any other
electronic means intended to preserve the original graphic and pictorial appearance of a document
shall be binding as evidence of acceptance of the terms hereof or thereof by such signatory Party.




          Section 10.9 Governing Law.
All questions concerning the construction, validity, and interpretation of this Agreement
shall be governed by and construed in accordance with the domestic laws of the State of Illinois,
without giving effect to any choice of law or conflict of law provision (whether of the State of
Illinois or any other jurisdiction) that would cause the application of the Applicable Laws of any
jurisdiction other than the State of Illinois.




          Section 10.10 Submission to Jurisdiction; Choice of Forum. Each of the Parties
submits to the exclusive jurisdiction of the United States District Court for the Northern District
of Illinois and of any Illinois state court sitting in the City of Chicago, in any action or
proceeding arising out of or relating to this Agreement or the transactions contemplated herein and
agrees that all claims in respect of such action or proceeding may be heard and determined in any
such court. Each of the Parties waives any defense





56









 







of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety or other security that might be
required of any other Party with respect thereto. Nothing in this Section 10.10 however shall
affect the right of any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment (after giving effect to any timely appeals) in any action or
proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any
other manner provided by law.




          Section 10.11 Parties in Interest. Nothing in this Agreement, express or implied, is
intended to confer on any Person, other than the Parties and the Indemnified Persons and their
respective successors and permitted assigns, any rights or remedies under or by virtue of this
Agreement.




          Section 10.12 Waiver of Jury. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.




* * * * *






57









 








          IN WITNESS WHEREOF, the Parties have executed this Purchase Agreement as of the date first
written above.




	 	 	 	 	 
	 	SELLER:



ORCHARD VALLEY HARVEST, INC.

 	 
	 	By:  	/s/ Stephen J. Kerr
 	 
	 	 	Stephen J. Kerr, President 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	                                 /s/ John Potter
 	 
	 	 	John Potter, Vice President 	 
	 	 	 	 
	 
	 	PURCHASER:



JOHN B. SANFILIPPO & SON, INC.,

 	 
	 	By:  	/s/ Jeffrey T. Sanfilippo
 	 
	 	 	Jeffrey T. Sanfilippo, Chairman and 	 
	 	 	Chief Executive Officer 	 
	 



	 	 	 

	ACCOMMODATION PARTIES
	 	 
	AS TO ARTICLE VIII:
	 	 
	 
	 	 
	/s/ Stephen J. Kerr
 


	 	 
	Stephen J. Kerr
	 	 
	 
	 	 
	/s/ John Potter
	 	 
	 

John Potter

	 	 
	 
	 	 
	/s/ Matthew I. Friedrich
	 	 
	 

Matthew I. Freidrich, solely as

	 	 
	Trustee of the
	 	 
	Payton Potter 2007
	 	 
	Irrevocable Trust
	 	 







58