Exhibit 10.1


Execution Copy


 


STOCK PURCHASE AGREEMENT


 


by and between


 


AJUTA INTERNATIONAL PTY. LTD.


as Trustee of Hypatia Trust,
Seller


 


and


 


EPIQ SYSTEMS ACQUISITION, INC.,
Buyer


 


 


Dated as of November 15,
2005


 





















 


TABLE OF CONTENTS


 


	
  ARTICLE I. DEFINITIONS

  	
   

  
	
  1.1

  	
  Definitions

  	
   

  
	
  1.2

  	
  Certain Interpretation Matters

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II. PURCHASE
  AND SALE OF SHARES

  	
   

  
	
  2.1

  	
  Purchase
  and Sale of Shares

  	
   

  
	
  2.2

  	
  Closing

  	
   

  
	
  2.3

  	
  Deliveries
  at the Closing

  	
   

  
	
  2.4

  	
  Accounting
  Terms

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III. REPRESENTATIONS
  AND WARRANTIES REGARDING THE COMPANY

  	
   

  
	
  3.1

  	
  Organization
  and Qualification

  	
   

  
	
  3.2

  	
  Capitalization;
  Ownership

  	
   

  
	
  3.3

  	
  No
  Conflict or Violation

  	
   

  
	
  3.4

  	
  Consents
  and Approvals

  	
   

  
	
  3.5

  	
  Pre-Closing
  Financial Statements

  	
   

  
	
  3.6

  	
  Litigation

  	
   

  
	
  3.7

  	
  Compliance
  with Laws

  	
   

  
	
  3.8

  	
  Contracts

  	
   

  
	
  3.9

  	
  Real
  Property

  	
   

  
	
  3.10

  	
  Title
  to Assets

  	
   

  
	
  3.11

  	
  Intellectual
  Property

  	
   

  
	
  3.12

  	
  Taxes

  	
   

  
	
  3.13

  	
  Employee
  Benefit Plans

  	
   

  
	
  3.14

  	
  Contracts
  with Affiliates

  	
   

  
	
  3.15

  	
  No
  Brokers, Finders, etc.

  	
   

  
	
  3.16

  	
  Accounts
  Receivable

  	
   

  
	
  3.17

  	
  Licenses
  and Permits

  	
   

  
	
  3.18

  	
  Significant
  Customers and Suppliers

  	
   

  
	
  3.19

  	
  Insurance

  	
   

  
	
  3.20

  	
  Warranties

  	
   

  
	
  3.21

  	
  Absence of
  Changes

  	
   

  
	
  3.22

  	
  Bank
  Accounts; Powers of Attorney

  	
   

  
	
  3.23

  	
  Absence of
  Undisclosed Liabilities.

  	
   

  
	
  3.24

  	
  No Material
  Adverse Effect

  	
   

  
	
  3.25

  	
  Indebtedness

  	
   

  
	
  3.26

  	
  Cash
  Management

  	
   

  
	
  3.27

  	
  Environmental Matters.

  	
   

  
	
  3.28

  	
  Employees

  	
   

  
	
  3.29

  	
  Total
  Assets.

  	
   

  
	
  3.30

  	
  Representations
  Exclusive

  	
   

  



 


i





















 


	
  ARTICLE IV.
  REPRESENTATIONS AND WARRANTIES OF SELLER

  	
   

  
	
  4.1

  	
  Ownership

  	
   

  
	
  4.2

  	
  Authorization;
  Enforceability

  	
   

  
	
  4.3

  	
  No Conflict
  or Violation

  	
   

  
	
  4.4

  	
  Consents
  and Approvals

  	
   

  
	
  4.5

  	
  No Brokers, Finders,
  etc.

  	
   

  
	
  4.6

  	
  Investment Intent

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V.
  REPRESENTATIONS AND WARRANTIES OF BUYER

  	
   

  
	
  5.1

  	
  Organization

  	
   

  
	
  5.2

  	
  Authorization;
  Enforceability

  	
   

  
	
  5.3

  	
  No Conflict
  or Violation

  	
   

  
	
  5.4

  	
  Consents
  and Approvals

  	
   

  
	
  5.5

  	
  No Brokers, Finders,
  etc.

  	
   

  
	
  5.6

  	
  Investment
  Intent

  	
   

  
	
  5.7

  	
  Share
  Consideration

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI.
  ADDITIONAL COVENANTS

  	
   

  
	
  6.1

  	
  Confidentiality

  	
   

  
	
  6.2

  	
  Indemnification;
  Insurance; Release

  	
   

  
	
  6.3

  	
  Further
  Assurances

  	
   

  
	
  6.4

  	
  Post-Closing
  Audit

  	
   

  
	
  6.5

  	
  Allocation
  of Purchase Price

  	
   

  
	
  6.6

  	
  Transaction
  Payments

  	
   

  
	
  6.7

  	
  Cash Escrow Account.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII.
  CONDITIONS PRECEDENT

  	
   

  
	
  7.1

  	
  Company
  Closing Certificate

  	
   

  
	
  7.2

  	
  Seller
  Closing Certificate

  	
   

  
	
  7.3

  	
  Buyer
  Closing Certificate

  	
   

  
	
  7.4

  	
  FIRPTA Certificate.

  	
   

  
	
  7.5

  	
  Seller’s
  Opinion

  	
   

  
	
  7.6

  	
  Buyer’s
  Opinion

  	
   

  
	
  7.7

  	
  Escrow
  Agreement

  	
   

  
	
  7.8

  	
  Registration
  Rights Agreement

  	
   

  
	
  7.9

  	
  John Lord
  Employment Agreement

  	
   

  
	
  7.10

  	
  John Lord
  Non-Compete Agreement

  	
   

  
	
  7.11

  	
  Employment
  Agreements

  	
   

  
	
  7.12

  	
  Non-Compete
  Agreements

  	
   

  
	
  7.13

  	
  Commission
  Agreements

  	
   

  
	
  7.14

  	
  Resignation
  of Officers and Directors

  	
   

  
	
  7.15

  	
  Consents

  	
   

  
	
  7.16

  	
  Shareholder
  Consent

  	
   

  
	
  7.17

  	
  Closing
  Deliveries

  	
   

  



 


ii





















 


	
  ARTICLE VIII.
  [INTENTIONALLY OMITTED]

  	
   

  
	
   

  	
   

  
	
  ARTICLE IX.
  [INTENTIONALLY OMITTED]

  	
   

  
	
   

  	
   

  
	
  ARTICLE X.
  INDEMNIFICATION

  	
   

  
	
  10.1

  	
  Survival of
  Representations, Etc.

  	
   

  
	
  10.2

  	
  Indemnification
  by Seller

  	
   

  
	
  10.3

  	
  Indemnification
  by Buyer and the Company

  	
   

  
	
  10.4

  	
  Notice of
  Indemnity Claims

  	
   

  
	
  10.5

  	
  Indemnification
  Procedures

  	
   

  
	
  10.6

  	
  Settlement
  of Indemnity Claims

  	
   

  
	
  10.7

  	
  Materiality
  Qualifications

  	
   

  
	
  10.8

  	
  Exclusivity
  of Indemnification Remedy and Escrow

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI. TAX
  MATTERS

  	
   

  
	
  11.1

  	
  Tax
  Indemnification

  	
   

  
	
  11.2

  	
  Tax Return Filing.

  	
   

  
	
  11.3

  	
  Tax
  Indemnification Procedures; Contest Provisions.

  	
   

  
	
  11.4

  	
  Assistance
  and Cooperation.

  	
   

  
	
  11.5

  	
  Exclusivity.

  	
   

  
	
  11.6

  	
  Tax Sharing
  Agreements

  	
   

  
	
  11.7

  	
  Transfer
  Taxes and Fees

  	
   

  
	
  11.8

  	
  Benefit of
  Company Tax Deductions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII.
  GENERAL PROVISIONS

  	
   

  
	
  12.1

  	
  Expenses

  	
   

  
	
  12.2

  	
  Notices

  	
   

  
	
  12.3

  	
  Severability

  	
   

  
	
  12.4

  	
  Counterparts

  	
   

  
	
  12.5

  	
  Assignment;
  Successors and Assigns

  	
   

  
	
  12.6

  	
  No Third
  Party Beneficiaries

  	
   

  
	
  12.7

  	
  Descriptive
  Headings

  	
   

  
	
  12.8

  	
  Disclosure
  Schedule; Construction of Certain Provisions

  	
   

  
	
  12.9

  	
  Reasonable
  Consent Required

  	
   

  
	
  12.10

  	
  Waivers

  	
   

  
	
  12.11

  	
  Governing
  Law; Jurisdiction; Waiver of Jury Trial

  	
   

  
	
  12.12

  	
  Enforcement

  	
   

  
	
  12.13

  	
  Entire
  Agreement; Amendments

  	
   

  
	
  12.14

  	
  Construction;
  Joint Drafting

  	
   

  



 


iii





















 


STOCK PURCHASE AGREEMENT


 


THIS STOCK PURCHASE
AGREEMENT (this “Agreement”) is dated as of November 15, 2005, by
and among AJUTA INTERNATIONAL PTY. LTD. (ACN 062 230 648), an Australian
company, as Trustee of Hypatia Trust, a trust created under the laws of
Victoria, Australia (“Seller”) and EPIQ SYSTEMS ACQUISITION, INC., a
Delaware corporation (“Buyer”).


 


W I T N E S S E T H


 


WHEREAS, Seller is the
sole shareholder of nMatrix, Inc., a Delaware corporation (“nMatrix U.S.”)
and of nMatrix Australia Pty. Ltd. (ACN 104 027 410), an Australian company (“nMatrix
Australia”), and nMatrix Australia is in turn the sole shareholder of nMatrix
Ltd., a company registered in England and Wales (“nMatrix U.K.”; nMatrix U.S.,
nMatrix Australia and nMatrix U.K. are herein collectively called the “Company”);


 


WHEREAS, Seller desires
to sell to Buyer, and Buyer desires to purchase from Seller, all of the issued
and outstanding shares of capital stock of nMatrix U.S. and of nMatrix
Australia (collectively, the “Shares”), all on the terms and subject to the
conditions set forth in this Agreement.


 


NOW, THEREFORE, in
consideration of the premises and the representations, warranties, covenants
and agreements herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, intending to be
legally bound hereby, the parties hereby agree as follows:


 


ARTICLE I.



DEFINITIONS


 


1.1           Definitions.  In addition to the other words and terms
defined elsewhere in this Agreement, as used in this Agreement, the following
words and terms shall have the meanings specified or referred to below:


 


“Affiliate” means, with respect to any Person, any other Person
who directly or indirectly controls, is controlled by or is under common
control with such Person, through one or more intermediaries or otherwise.


 


“Affiliated Group” means an affiliated group as defined in Code
§1504 (or any analogous combined, consolidated or unitary group defined under
state, local or foreign income Tax law).


 


“Agreement” has the meaning specified in the preamble of this
Agreement.


 


“Benefit Arrangements” means any arrangement obligation, to
provide benefits (other than merely as salary or under a Benefit Plan), as
compensation for services rendered, to present or former directors, employees,
agents, or independent contractors,


 





















 


including, but not limited to, employment or
consulting agreements, severance agreements or pay policies, stay or retention
bonuses or compensation, executive or incentive compensation programs or
arrangements, indemnification, sick leave, vacation pay, plant closing
benefits, salary continuation for disability, workers’ compensation,
retirement, deferred compensation, bonus, stock option or purchase plans or
programs, tuition reimbursement or scholarship programs, employee discount
programs, meals, travel, or vehicle allowances, any plans subject to Code Section 125,
and any plans providing benefits or payments in the event of a change of
control, change in ownership or effective control or sale of a substantial
portion (including all or substantially all) of the assets of any business or
portion thereof, in each case with respect to any present or former employees,
directors, or agents.


 


“Benefit Plans” has the meaning given in ERISA Section 3(3),
together with plans or arrangements that would be so defined if they were
maintained inside the United States.


 


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


 


“Business Intellectual Property Rights” has the meaning
specified in Section 3.11(c).


 


“Buyer” has the meaning specified in the preamble of this
Agreement.


 


“Buyer Indemnified Parties” has the meaning specified in Section 10.2.


 


“Cash Consideration” has the meaning specified in Section 2.1(b).


 


“Cash Escrow Account” means the Escrow Account managed by Key
Bank pursuant to the Cash Escrow Agreement.


 


“Cash Escrow Agent” has the meaning given to the term “Escrow
Agent” under the Cash Escrow Agreement.


 


“Cash Escrow Agreement” means the Key Bank Escrow Agreement,
dated as of the date hereof, by and among Key Bank, Buyer and Seller.


 


“Cash Escrow Amount” means $4,000,000.


 


“Cash Escrow Fund” has the meaning given to the term “Escrow
Fund” in the Cash Escrow Agreement, as reduced by the Reserve Amount.


 


“Cash Escrow Period” means the 12 month period ending on and
including September 30, 2006.


 


“Claim” means any claim, demand, cause of action, chose in
action, right of recovery or right of set-off of whatever kind or description
against any Person.


 


2





















 


“Claim Notice” has the meaning specified in Section 10.4.


 


“Closing” has the meaning specified in Section 2.2.


 


“Closing Date” shall mean November 15, 2005.


 


“Closing Date Tax Accrual” has the meaning specified in Section 3.12(b).


 


“COBRA” has the meaning specified in Section 3.13(b)(vii).


 


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


 


“Company” has the meaning specified in the recitals to this
Agreement.


 


“Company Software” has the meaning specified in Section 3.11(b).


 


“Consents” shall mean those items listed on Sections 3.3,
3.4, 4.3 and 4.4 of the Disclosure Schedule.


 


“Consideration” has the meaning specified in Section 2.1(b).


 


“Contract” shall mean, with respect to any Person, any
agreement, commitment, contract, indenture, loan, note, mortgage, instrument,
lease or undertaking of any kind or character, oral or written, to which such
Person is a party or that is binding on such Person or its capital stock,
assets, properties or business.


 


“Control” (including its correlative meanings “controlled by”
and “under common control with”) means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
a Person, whether through the ownership of securities or partnership or other
interests, by contract or otherwise.


 


“Copyrights” has the meaning specified in Section 3.11(a).


 


“Designated Receivables” means the accounts receivables existing
as of September 30, 2005, identified on Schedule 6.7 under the
heading “Designated Receivables.”


 


“Disclosure Schedule” has the meaning specified in Section 3.1.


 


“Domain Names” has the meaning specified in Section 3.11(a).


 


Employment Agreement means the employment
agreement between nMatrix U.S. and John Lord to be entered into on the Closing
Date.


 


“Encumbrance” means any lien (statutory or otherwise), mortgage,
deed of trust, pledge, hypothecation, assignment, charge, security interest,
conditional sale or other title retention agreement.


 


3





















 


“Environmental and Safety Requirements” means all federal,
state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law and
concerning occupational health and safety, pollution or protection of the
environment.


 


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


 


“ERISA Affiliate” means any person or entity that, together with
the entity referenced, would be or was at any time treated as a single employer
under Code Section 414 or ERISA Section 4001 and any general
partnership of which the entity is or has been a general partner.


 


“Final Claim” has the meaning specified in Section 10.4.


 


“Governmental Authority” means any court, government (federal,
state, local, foreign or multinational), department, commission, board, bureau,
agency, official or other regulatory, administrative or governmental authority.


 


“Governmental Order” means any order, writ, injunction, decree,
award, judgment or ruling entered by or with any Governmental Authority.


 


“Guaranty” shall mean any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is
contingently liable upon the debt, obligation or other liability of any other
Person (other than by endorsements of instruments in the ordinary course of
collection), or guarantees of the payment of dividends or other distributions
upon the shares of any other Person.


 


“Income Tax” or “Income Taxes” means all taxes (including
estimated income taxes and franchise taxes), charges, fees, levies or other
assessments imposed by any Taxing Authority and based on or measured with
respect to income or profits, including any interest, penalties or additions
attributable thereto.


 


“Indebtedness” shall mean, with respect to any Person at any
date, without duplication: (i) all obligations of such Person for borrowed
money or in respect of loans or advances; (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments; (iii) all
obligations in respect of letters of credit, whether or not drawn, and bankers’
acceptances issued for the account of such Person; (iv) all capitalized
lease liabilities of such Person; (v) all interest rate protection
agreements of such Person (valued on a market quotation basis); (vi) all
obligations of such Person secured by a contractual lien; (vii) all
Guarantees of such Person in connection with any of the foregoing; and (viii) any
accrued interest, prepayment premiums or penalties related to any of the
foregoing.  Solely for the purposes of
calculating the Cash Consideration pursuant to Section 2.1(b), “Indebtedness”
shall not include “capitalized lease liabilities” of the Company.


 


“Indemnification Cap” has the meaning specified in Section 10.2(b).


 


4





















 


“Indemnification Threshold” has the meaning specified in Section 10.2(b).


 


“Indemnified Party” has the meaning specified in Section 10.4.


 


“Indemnifying Party” has the meaning specified in Section 10.4.


 


“Indemnity Claim” has the meaning specified in Section 10.4.


 


“Intellectual Property” has the meaning specified in Section 3.11(a).


 


“Internet Sites” has the meaning specified in Section 3.11(a).


 


“Knowledge” means, with respect to the Company, the actual
knowledge of John Lord, Jeffrey Huttel and Kealani Tosh after reasonable
investigation; which shall not include searches of the records of U.S. and
foreign patent offices with respect to third party patents.


 


“Leases” has the meaning specified in Section 3.9(a).


 


“Losses” shall mean, in respect of any obligation of any party
hereto to indemnify any Person pursuant to the terms of this Agreement, any and
all losses, liabilities, obligations and damages and other reasonable
out-of-pocket costs, expenses and charges, including, without limitation,
reasonable attorneys’ fees and other amounts incurred in proceedings relating
to Losses, but all of which Losses shall be reduced by (a) any insurance
proceeds actually recovered with respect to the events or transactions giving
rise to such Losses (less any increase in annual premiums as a result of such
claims) or (b) any reserve set forth in, or provision made in, the
Pre-Closing Financial Statements specifically with respect to the events or
transactions giving rise to such Losses. 
For purposes of (b) in the prior sentence, the reserve set forth in
the Pre-Closing Financial Statements for accounts receivable will be deemed to
be specifically with respect to all of the Company’s accounts receivable as of September 30,
2005.


 


“Material Adverse Effect” means any change, event or effect that
is, or could reasonably be expected to be, material and adverse to the
operations, assets, liabilities, business, financial condition or results of
operations of the Company taken as a whole, other than arising from the
announcement or other disclosure of the identity of Buyer in connection with
the transactions contemplated pursuant to this Agreement.


 


“Material Permits” has the meaning specified in Section 3.17.


 


“Monthly Release Amount” means with respect to any month in the
Cash Escrow Period equal to the sum of the cash actually received by the
Company during such month with respect to the Designated Receivables; provided
that in no event shall the amount available for release to the Seller shall be
reduced by the Reserve Amount.


 


“Other Taxes” means all Taxes other than Income Taxes.


 


“Parent” means EPIQ Systems, Inc., a Missouri corporation.


 


5





















 


“Patents” has the meaning specified in Section 3.11(a).


 


“Pension Plan” means any Benefit Plan subject to Code Section 412
or ERISA Section 302 or Title IV (including any Multiemployer Plan) or any
comparable plan not covered by ERISA.


 


“Permitted Encumbrance” means, with respect to any Person and
its assets or properties, (a) deposits or pledges made in the ordinary
course of business consistent with past practice in connection with worker’s
compensation, unemployment insurance, old-age pensions and other social
security benefits; (b) Encumbrances securing the performance of bids,
tenders, leases, contracts (other than for the repayment of debt), statutory
obligations, surety, customs and appeal bonds and other obligations of like
nature, incurred as an incident to and in the ordinary course of business
consistent with past practice; (c) Encumbrances imposed by law, such as
carriers’, warehousemen’s, mechanics’, materialmen’s, landlords’, laborers’,
suppliers’ and vendors’ liens, incurred in the ordinary course of business
consistent with past practice and securing obligations which are not yet due or
which are being contested in good faith by appropriate proceedings; (d) Permitted
Tax Liens; (e) survey exceptions, use, zoning or planning restrictions,
easements, irregularities, licenses, rights of way, declarations, reservations,
provisions, covenants, conditions, waivers or other title matters or
Encumbrances (and with respect to leasehold interests, Encumbrances and other
obligations incurred, created, assumed or permitted to exist and arising by,
through or under a landlord or owner of the leased property, with or without
consent of the lessee) which do not, individually or in the aggregate,
materially impair the use or value of any parcel of property material to the
operation of the business of such Person; and (f) rights of setoff
reserved by customers, and (g) any extensions, renewals and replacements
of any of the foregoing.


 


“Permitted Tax Liens” means (a) liens securing the payment
of Taxes which are either not delinquent or being contested in good faith by
appropriate proceedings, and (b) liens for current Taxes not yet overdue.


 


“Person” means and includes an individual, a partnership, a
corporation, a limited liability company, a trust, a joint venture, an
unincorporated organization and any Governmental Authority.


 


“Post-Closing Financial Statements” means the
consolidated financial statements of the Company (such consolidation to include
nMatrix U.S., nMatrix Australia, and nMatrix U.K.), prepared in accordance with
U.S. GAAP, for the years ended December 31, 2003 and 2004, and the three
and nine month periods ended September 30, 2005.  Such financial statements shall include all
statements and notes thereto as required by U.S. GAAP, including, without
limitation, statements of income, financial position, cash flow, and
shareholders’ equity.  For the years
ended December 31, 2003 and 2004, the financial statements shall include a
the report of Hays & Company LLP, with such report expressing an
unqualified opinion as to all periods covered. 
The financial statements for the three and nine month periods ended September 30,
2005 shall have been reviewed by Hays & Company LLP, such review
encompassing all procedures as would normally be performed during the review of
the quarterly filing of a public company.


 


6





















 


“Pre-Closing Tax Period” has the meaning specified in Section 11.1.


 


“Qualified Losses” has the meaning specified in Section 10.2(b).


 


“Qualified Plan” means any Benefit Plan intended to meet the
requirements of Code Section 401(a).


 


“Receivable Confirmations” means the accounts receivable
confirmations sent to eight of the Company’s customer groups (including the
customers set forth on Schedule 6.7 under the heading “Receivable
Confirmations”) to determine whether any of the Company’s accounts receivable
from such customers, and if so how much, are in dispute.


 


“Registration Rights Agreement” means the Registration Rights
Agreement between Buyer and Seller to be entered into on the Closing Date.


 


“Reserve Amount” means the aggregate amount of any disputed and
uncollected accounts receivables in excess of $500,000 with respect to the
Company’s customer groups to which the Receivable Confirmations were sent,
which excess amount shall not exceed $250,000. 
The Reserve Amount shall be $250,000 at Closing, but shall be reduced
from time to time if, and to the extent that, accounts receivables included in
the excess amount are either confirmed or paid.


 


“Representative” means, with respect to any Person, any officer,
director, employee, principal, attorney, agent or other authorized
representative of such Person.


 


“Scheduled Contracts” has the meaning specified in Section 3.8(a).


 


“Securities Act” has the meaning specified in Section 5.6.


 


“Seller” has the meaning specified in the preamble of this
Agreement.


 


“Seller’s Account” has the meaning specified in the Cash Escrow
Agreement.


 


“Seller Expenses” has the meaning specified in Section 12.1.


 


“Seller Indemnified Parties” has the meaning specified in Section 10.3.


 


“Share Consideration” has the meaning specified in Section 2.1(b).


 


“Shares” has the meaning specified in the recitals to this
Agreement.


 


“Significant Customers” has the meaning specified by Section 3.18.


 


“Significant Suppliers” has the meaning specified in Section 3.18.


 


“Software” has the meaning specified in Section 3.11(a).


 


“Straddle Period” has the meaning specified in Section 11.1(b).


 


7





















 


“Stock Escrow Agent” has the meaning given to the term “Escrow
Agent” under the Stock Escrow Agreement.


 


“Stock Escrow Agreement” means the Escrow Agreement among Buyer,
Seller and the Stock Escrow Agent to be entered into on the Closing Date in the
form attached hereto as Exhibit A.


 


“Subsidiary” means, with respect to any Person, a corporation or
other entity of which 50% or more of the voting power of the equity securities
or equity interests is owned, directly or indirectly, by such Person.


 


“Tax” or “Taxes” means any assessment or charge of any
kind whatsoever imposed by any Taxing Authority, including without limitation (A) federal,
state, local or foreign income, gross receipts, franchise, estimated,
alternative minimum, add-on minimum, sales, use, transfer, registration, value
added, excise, natural resources, severance, stamp, occupation, premium,
windfall profit, environmental, customs, duties, real property, personal
property, capital stock, social security, unemployment, disability, payroll,
license, employee or other withholding, or other tax, of any kind whatsoever,
whether computed on a separate or consolidated, unitary or combined basis or in
any other manner, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing; (B) liability of the
Company for the payment of any amounts of the type described in clause (A) arising
as a result of being (or ceasing to be) a member of any Affiliated Group (or
being included (or required to be included) in any Tax Return relating
thereto); and (C) liability of the Company for the payment of any amounts
of the type described in clause (A) as a result of any express or implied
obligation to indemnify or otherwise assume or succeed to the liability of any
other person.


 


“Tax Return” means any return, report or similar statement or
form filed or required to be filed with respect to any Tax (including any
attached schedules and related or supporting information), including, without
limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.


 


“Taxing Authority” means any United States federal, state or
local or any foreign governmental, regulatory or administrative authority,
agency or commission exercising Tax regulatory authority.


 


“Third Party Claim” has the meaning specified in Section 10.5.


 


“Trademarks” has the meaning specified in Section 3.11(a).


 


“Transaction Payments” has the meaning specified in Section 3.15.


 


“US GAAP” means generally accepted accounting principles in the
United States, consistently applied throughout the periods covered by the
financial statements.


 


1.2           Certain Interpretation Matters.  Definitions contained in this Agreement apply
to singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.  Words in the singular shall be held to
include the


 


8





















 


plural and vice versa, and words of one gender shall
be held to include the other gender as the context requires.  The terms “hereof,” “herein”, “hereby”
and “herewith” and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole and not to any
particular provision of this Agreement. 
The terms “includes” and the word “including” and words of
similar import shall be deemed to be followed by the words “without limitation.”  Each Article, Section, paragraph and Schedule references
are to the Articles, Sections, paragraphs and Schedules to this Agreement
unless otherwise specified.


 


ARTICLE II.



PURCHASE AND SALE OF SHARES


 


2.1           Purchase and Sale of Shares.  At the Closing, upon the terms and subject to
the conditions set forth in this Agreement:


 


(a)       Seller shall sell, convey, transfer, assign and deliver
to Buyer, and Buyer shall purchase from Seller, all of the Shares, free and
clear of all Encumbrances.


 


(b)       In consideration of the transfer of the Shares pursuant
to Section 2.1(a), and as payment for such Shares, (i) Buyer shall
pay and deliver to Seller at the Closing the sum of One Hundred Million Dollars
($100,000,000) less (w) the aggregate amount of any Indebtedness of the
Company as of the Closing Date, less (x) the aggregate amount of the
Transaction Payments, less (y) the Cash Escrow Amount and less
(z) the aggregate amount of all Seller Expenses not paid in full prior to
Closing (the “Cash Consideration”) and (ii) Buyer shall deliver to
Seller at the Closing 1,228,501 shares of common stock, par value $0.01 per
share of Parent (the “Share Consideration”), having a value of Twenty
Five Million Dollars ($25,000,000) based on a per share valuation of $20.35,
the average NASDAQ closing price of Parent’s common stock for the 40 consecutive
trading days ending on the date ending four (4) trading days prior to the
Closing Date.  The Cash Consideration and
the Share Consideration are collectively called the “Consideration”.


 


(c)       The Consideration shall be payable by Buyer on the
Closing Date as follows: (i) the Cash Consideration shall be paid by Buyer
by wire transfer of immediately available funds to such account or accounts to
be designated by Seller in writing to Buyer at least one (1) Business Day
prior to the Closing Date, (ii) eighty percent (80%) of the Share
Consideration (the “Closing Shares”) shall be delivered to Seller at the
Closing, and (iii) twenty percent (20%) of the Share Consideration (the “Escrow
Shares”) shall be delivered to the Escrow Agent to be held and disbursed in
accordance with the terms and provisions of the Escrow Agreement.


 


2.2           Closing.  Subject to the terms and conditions set forth
herein, the consummation of the purchase and sale of the Shares provided for in
Section 2.1 and the other transactions contemplated hereby (the “Closing”)
shall take place on the Closing Date at 10:00 a.m., New York time, at the
offices of Wormser, Kiely, Galef & Jacobs LLP, 825 Third Avenue, New
York, New York 10022, unless another time and/or place is agreed to in writing
by the parties hereto.


 


9





















 


2.3           Deliveries at the Closing.  At the Closing, subject to the terms and
conditions set forth herein, each party hereto shall deliver to the other party
each of the documents, instruments, agreements, certificates and other
evidences of satisfaction of conditions required to be delivered by such party
as a condition to Closing pursuant to Article VII hereof.  In addition to the foregoing, at the Closing (a) Seller
shall deliver to Buyer one or more certificates or other instruments evidencing
all of the Shares, duly endorsed in blank for transfer or accompanied by stock
powers duly executed in blank, and any other documents that are necessary to
transfer to Buyer or one of its Affiliates good, valid and marketable title to
the Shares free and clear of all Encumbrances, (b) Seller and the Company
shall deliver or cause to be delivered to Buyer satisfactory evidence of the
resignation of any directors or officers of the Company as may be requested by
Buyer, (c) Seller and the Company shall deliver to Buyer all minute books
and deliver or make available to Buyer certificates, corporate records and
documents of the Company, (d) Buyer shall pay to Seller the Cash
Consideration, (e) Buyer shall deliver to Seller one or more certificates
or other instruments issued by Parent in the name of Seller or its designee
evidencing the Closing Shares and (f) Buyer shall deliver one or more
certificates or other instruments issued by Parent in the name of Seller or its
designee to the Escrow Agent evidencing the Escrow Shares.  To the extent that a form of any document,
instrument, agreement or certificate to be delivered hereunder is not attached
as an exhibit hereto, such document, instrument, agreement or certificate shall
be in form and substance, and shall be executed and delivered in a manner,
reasonably satisfactory to the parties hereto.


 


2.4           Accounting Terms.  Except as otherwise expressly provided in
this Agreement, all accounting terms used herein shall be interpreted in
accordance with US GAAP consistently applied.


 


ARTICLE III.



REPRESENTATIONS AND 

WARRANTIES REGARDING THE COMPANY


 


Seller hereby represents
and warrants to Buyer that the statements contained in this Article III
are correct and complete as of the date of this Agreement (except to the extent
such representations and warranties speak expressly as of an earlier date):


 


3.1           Organization and Qualification.  (a)  Each of nMatrix U.S., nMatrix
Australia and nMatrix U.K. is duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization as set
forth in Schedule 3.1 of the disclosure schedule of even date
herewith being delivered by Seller to Buyer (the “Disclosure Schedule”).


 


(b)       Except as set forth in Schedule 3.1 of the
Disclosure Schedule, the Company (i) has all requisite power and authority
to own, lease and operate its properties and assets and to carry on its
business as it is presently being conducted, and (ii) is duly qualified to
do business as a foreign person, and is in good standing, in each jurisdiction
in which the nature of property owned or leased by it or the conduct of its
business requires it to be so qualified, except where the failure to have such
power or authority, or to be duly qualified to do business, would not have a
Material Adverse Effect.  Except as set
forth in Schedule 3.1 of the Disclosure Schedule, the Company is
not in violation of, in conflict with or in default under


 


10





















 


any of their respective certificates
of incorporation, bylaws or comparable charter documents, and there exists no
condition or event which, after notice or lapse of time or both, would result
in any such violation, conflict or default.


 


3.2           Capitalization; Ownership.  (a)  The equity capitalization of the
Company (including the identity of each equity holder and the number of issued
and outstanding shares of capital stock or other membership or ownership
interests held thereby) is set forth in Schedule 3.2(a) of the
Disclosure Schedule.  Except as set forth
as Schedule 3.2(a) of the Disclosure Schedule, no capital
stock, equity interests or other securities of the Company, and no securities
or other interests directly or indirectly convertible into any such stock,
equity interests or securities, are issued, allotted or outstanding, nor is the
Company under any contractual or other obligation to issue or allot such stock,
equity interests or securities.  All of
the Shares are held beneficially and of record by the Seller free and clear of
all Encumbrances (other than Permitted Encumbrances arising out of or in
connection with this Agreement).  The
Company does not own, of record or beneficially, control or hold the right to
acquire any shares of capital stock, securities convertible into capital stock,
or any other security or interest in any other Person.  All of the outstanding shares of the Company’s
capital stock or other membership or ownership interests held thereby have been
validly issued and allotted and are fully paid and nonassessable.


 


(b)       Except for this Agreement and the transactions
contemplated hereby or as set forth in Schedule 3.2(b) of the
Disclosure Schedule, there are no outstanding (i) agreements,
arrangements, warrants, options, puts, calls, rights, options, subscriptions or
other commitments to which the Company or Seller is a party or by which any of
them or any of their respective properties or assets are bound, relating to the
sale, purchase, issuance or voting of any shares of capital stock of, or other membership
or ownership interests in, or other securities of, the Company, or (ii) securities
or other instruments convertible into, exchangeable for or evidencing the right
to purchase any shares of capital stock of, or other membership or ownership
interests in, the Company.


 


3.3           No Conflict or Violation.  The transactions contemplated by this
Agreement, do not and will not, except as set forth on Schedule 3.3
and Schedule 3.4 of the Disclosure Schedule:  (a) conflict with, violate or breach any
provision of the Certificate of Incorporation or Bylaws of the Company or any
comparable charter documents; (b) violate, conflict with or constitute in
any respect or result in (in each case, with or without notice, lapse of time or
both) a default or a breach under, or result in the acceleration, termination,
modification or cancellation of (or entitle any Person or give any Person the
right to accelerate, terminate, modify or cancel) any obligation under, or
result in the loss of a material benefit under, or require any consent,
approval or authorization under, any Scheduled Contract to which the Company is
a party or by which any of their property or assets is bound; (c) contravene
or violate in any respect any law, statute, rule or regulation applicable
to the Company or any of their respective assets or properties, or any
Governmental Order to which the Company is a party or by which it or any of its
assets or properties is bound; (d) result in the creation or imposition of
any Encumbrance, other than Permitted Encumbrances, on any of the assets or
properties of the Company; (e) result in termination or any impairment of,
or require any consent, approval or authorization under, any Material Permit.


 


11





















 


3.4           Consents and Approvals.  The transactions contemplated by this
Agreement do not require any approval, consent, authorization or act of, or the
making by the Company of any declaration, filing or registration with, or
notification to, any Governmental Authority, other than as set forth on Schedule 3.4
of the Disclosure Schedule.


 


3.5           Pre-Closing Financial Statements.  The Company has delivered to Buyer true,
complete and correct copies of the unaudited statements of income, financial
position, and cash flow of the Companies, along with notes thereto, for the
year ended December 31, 2004 and for the nine months ended September 30,
2005, consolidated (such consolidation to include nMatrix U.S., nMatrix
Australia, and nMatrix U.K.) and individually for nMatrix U.S., nMatrix
Australia, and nMatrix U.K. (collectively, the “Pre-Closing Financial
Statements”).  Except as set forth on
Schedule 3.5 of the Disclosure Schedule, the Pre-Closing Financial
Statements have been prepared in accordance with U.S. GAAP.  The Pre-Closing Financial Statements are
accurate and complete in all material respects, are consistent with the books
and records of the Company (which, in turn, are accurate and complete in all material
respects) and fairly present in all material respects, the financial condition,
results of operations and cash flow of the Company as of the dates thereof or
for the periods referred to therein. 
Since September 30, 2005, except as disclosed in Schedule 3.5
of the Disclosure Schedule, there have been no material changes in the
accounting policies of the Company and no revaluation of any of the assets or
properties of the Company.


 


3.6           Litigation.  As of the date hereof (and during the three
years preceding the date hereof), except as set forth in Schedule 3.6
of the Disclosure Schedule, there are no claims asserted before a court or
administrative agency, lawsuits, actions, orders, arbitrations, arbitrations,
administrative or other proceedings pending or, to the knowledge of the
Company, threatened, against or affecting the Company or any of their
respective assets or properties and to the knowledge of the Company there are
no governmental investigations pending or threatened against or affecting the
Company.


 


3.7           Compliance with Laws.  The Company is, and during the past five
years has been, in material compliance with all applicable laws, ordinances,
codes, rules, requirements statutes, regulations and Governmental Orders of all
foreign, federal, state and local governments and all agencies thereof except
as set forth on Schedule 3.7 of the Disclosure Schedule.  During such period no written notices have
been received by, and to its knowledge no claims have been filed against, the
Company alleging a material violation of any such laws, ordinances, codes,
rules, requirements statutes, regulations and Governmental Orders.


 


3.8           Contracts.  (a)  Except as set forth in Schedule 3.8(a) of
the Disclosure Schedule, the Company is not a party to, or bound by, any of the
following (the Contracts referenced in Schedule 3.8(a) are
herein called the “Scheduled Contracts”):


 


(i)            any
Contract or group of related contracts with the same party or group of
affiliated parties with respect to the purchase of goods or services with a
value, or involving payments by or to the Company, reasonably expected by the
Company to be more than $250,000 in any twelve (12) month period;


 


12





















 


(ii)           any
note, mortgage, indenture, letter of credit, obligation, agreement, instrument
or other Contract for or relating to indebtedness for money borrowed, or any
guarantee by the Company of third-party obligations of $100,000 or more or any
Contract providing for the creation of any Encumbrance (other than Permitted
Encumbrances);


 


(iii)          any
collective bargaining agreement or other Contract with any labor union or
association representing employees of such Company;


 


(iv)          any
joint venture, partnership or limited liability company agreement or similar
Contract.


 


(v)           any
Contract to which a current or former officer, employee, director, stockholder,
manager or member of the Company, which involves an annual payment of more than
$100,000;


 


(vi)          any
Contract pursuant to which the Company sells, markets or distributes its
products or services which involves revenues in excess of $250,000;


 


(vii)         any
Contract which contains any non-solicitation, non-competition, confidentiality
or similar obligations or which otherwise prohibits the Company from freely
providing any services or supplying products to any customer or potential
customer anywhere in the world;


 


(viii)        any
Contract under which any real or personal property is licensed, leased or
subleased, including without limitation the Leases; except for any lease of
personal property under which the aggregate annual rental payments do not
exceed $50,000;


 


(ix)           any
Contract not entered into in the ordinary course of business consistent with
past practice and involving aggregate payments in excess of $100,000;


 


(x)            any
Contract with a term of more than six months or without a specified term which,
in either case, is not terminable by the Company upon less than 30 days’ notice
without penalty and which, in either case, involves aggregate annual
consideration in excess of $100,000;


 


(xi)           any
Contract relating to any outstanding commitment for capital expenditures in
excess of $100,000;


 


(xii)          any
Contract for the acquisition or disposition, directly or indirectly, of any
material assets, capital stock or equity of any Person; or


 


(xiii)         any
Contract pursuant to which any Business Intellectual Property Rights are
licensed to any Person, or pursuant to which a Person has licensed,
transferred, sold or distributed any Intellectual Property to the Company
(other than licenses of standard off-the-shelf software and other licenses and sales for an
aggregate purchase price of less than $10,000).


 


13





















 


(b)           Except
as set forth in Schedule 3.8(b) of the Disclosure Schedule,
each of the Scheduled Contracts is valid, binding and enforceable against the
Company and, to the Company’s Knowledge, against all other parties thereto, in
each case in accordance with their respective terms.  Except as set forth in Schedule 3.8(b) of
the Disclosure Schedule, with respect to each Scheduled Contract, the Company
has performed all material obligations required to be performed by it
thereunder and neither the Company nor, to the knowledge of the Company, any
other Person which is a party to any Scheduled Contract, is in material breach
of or default under, and no event has occurred which with or without notice or
lapse of time, or both, would become a material breach of or default under,
such Scheduled Contract.  The Company
does not have any present expectation or intention of not fully performing all
of its obligations under the Scheduled Contracts.  Prior to the date of this Agreement, the
Company has delivered to Buyer a true, complete and correct copy of each
Scheduled Contract.


 


3.9           Real Property.  (a)  The real estate leases described on
Schedule 3.9(a) attached hereto are in full force (the “Leases”).  The Leases constitute all of the leases
(including subleases) under which the Company leases, subleases, licenses or
otherwise occupies any real property and the Company has no actual or
contingent liabilities in relation to any real estate other than under the
Leases.  The Company has delivered to
Buyer complete and accurate copies of each of the Leases and none of the Leases
have been modified or amended in any material respect, except to the extent
that such modifications or amendments have been disclosed on Schedule 3.9(a) and
by the copies delivered to Buyer.  Each
of the Leases is valid, binding and enforceable against the Company and, to the
Company’s knowledge, against all other parties thereto in accordance with their
respective terms.  Neither the Company,
nor to the knowledge of the Company, any other party to any of the Leases, is
in material default, breach or violation and no event has occurred which
(including upon the giving of notice or the passage of time) would constitute
such a material default, breach or violation or would permit termination,
modification or acceleration under the Leases; no Person has so terminated or
accelerated performance or modified any of such Leases.  The Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the Leases
and the Company has not
subleased, licensed or otherwise granted any Person the right to use or occupy
any real property subject to such Leases or any portion thereof.


 


(b)       The Company does not own any real property.


 


3.10         Title to Assets.  Except as set forth on Schedule 3.10 of
the Disclosure Schedule, the Company has good and valid title to, or, in the
case of property held under lease, a valid leasehold interest in, or, in the
case of property held under contract or agreement, a valid right to use, all of
the real and personal property (a) owned by any of them, or (b) used
or held for use by any of them, or (c) located on any of their premises,
or (d) shown in the Pre-Closing Financial Statements, or (e) acquired
after the date thereof, in each case free and clear of all Encumbrances (other
than Permitted Encumbrances), and such property constitutes all the property
used by the Company for the operation of its business as it is being conducted
as of the date hereof.


 


3.11         Intellectual Property.  (a)  “Intellectual Property”
means all of the following in any jurisdiction throughout the world:  (i) all trademarks, trademark registrations,


 


14





















 


trademark rights and renewals thereof, trade names,
trade name rights, trade dress, corporate names, logos, slogans, all service
marks, service mark registrations and renewals thereof, service mark rights,
and all applications to register any of the foregoing, together with the
goodwill associated with each of the foregoing (the “Trademarks”); (ii) all
issued patents, patent rights, and patent applications (the “Patents”); (iii) all
registered and unregistered copyrights, copyrightable works, copyright
registrations, renewals thereof, and applications to register the same (the “Copyrights”);
(iv) all software (including source code, executable code and
documentation), computer programs, computer systems, modules and related data
(the “Software”); (v) all Internet domain names (“Domain Names”)
and Internet web-sites and the content thereof (“Internet Sites”); (vi) all
confidential and proprietary information, including trade secrets, know-how,
inventions, invention disclosures (whether or not patentable and whether or not
reduced to practice), inventor rights, reports, quality records, engineering
notebooks, models, processes, procedures, drawings, specifications, designs,
ingredient or component lists, formulae, plans, proposals, technical data,
financial, marketing, customer and business data, pricing and cost information,
business and marketing plans, and customer and supplier lists and information;
and (vii) all other intellectual property.


 


(b)       Schedule 3.11(b) of the Disclosure Schedule contains
a list of all of the following Intellectual Property which is held by the
Company:  (i) patented or registered
Intellectual Property; (ii) pending patent applications or applications
for registration of other Intellectual Property; (iii) material
unregistered Trademarks; and (iv) all Software currently marketed by the
Company, or used in the provision of services by the Company which result in
material revenue to it, and an indication as to which, if any, such Software
has been registered for copyright protection or for patent protection and by
whom such items have been registered (collectively, “Company Software”).


 


(c)       Except as set forth on Schedule 3.11(c),
the Company owns and possesses all right, title and interest in and to the
Intellectual Property set forth on Schedule 3.11(b) and owns
and possesses good, valid and marketable title or valid and enforceable written
licenses or other rights to use as set forth on Schedule 3.8(a) or
pursuant to shrink-wrap or click-wrap licenses for commercially available
off-the-shelf software, all other Intellectual Property used in the operation
of the Company’s business which results in material revenue to it, (including
performing the Scheduled Contracts), as currently being conducted
(collectively, the “Business Intellectual Property Rights”), free and
clear of all encumbrances (except Permitted Encumbrances).  Except as set forth in Schedule 3.11(c),
all Persons who have participated in the creation or development of any
Business Intellectual Property Rights have executed and delivered to the
Company agreements providing for the non-disclosure by such Person of any
confidential information of the Company. 
Except as set forth in Schedule 3.11(c), all Business
Intellectual Property Rights were created or developed by (i) employees of
the Company working within the scope of their duties as employees or (ii) Persons
with whom the Company has a valid and enforceable written agreement that
assigns all Business Intellectual Property Rights to the Company.


 


(d)       To the Company’s Knowledge, the Business Intellectual
Property Rights are valid, in full force and effect and are enforceable.  No claim is pending or to the Company’s
Knowledge threatened, and no notice or invitation to license has been received
that questions the Company’s title to, claims any ownership of or any rights to
any Business


 


15





















 


Intellectual
Property Rights, or claims or at all indicates that the Company or its business
infringes upon or conflicts with the Intellectual Property of any other Person,
except as set forth on Schedule 3.11(d).  Except as set forth on Schedule 3.11(d),
no claim is pending, or to the Company’s knowledge, threatened, to the effect
that any Business Intellectual Property Right is invalid or unenforceable.  There are no pending, or, to the Company’s
knowledge threatened, interferences, re-examinations, oppositions, cancellation
proceedings, or the foreign equivalent thereof involving any Patents or
registered Trademarks, if any, of the Company. 
None of the operations of the Company (including any and all products
and services of the Company) or its business, as it has been, or as now being
conducted, or performance of any Contract as it has been, or as now being,
conducted infringes, upon any (i) Intellectual Property (excluding
Patents) of any other Person or (ii) to the Company’s Knowledge, any
Patents of any other Person.  To the
Company’s Knowledge, no Person has infringed, misappropriated or otherwise
conflicted with any of the Business Intellectual Property Rights.


 


(e)       Except as disclosed in Schedule 3.11(e),
the Company Software, including any embedded or integrated third party
Software, does not contain any open source or freeware and the sale or
licensing of the Company Software in the ordinary course of business is not
governed, in whole or in part, by the terms of the GNU General Public License
or any other license requiring the Company to disclose source code to any of
the Company Software and any other software for which a reasonably prudent
Person would hold in confidence.  Except
as set forth on Schedule 3.11(e), (i) only the object code
relating to any Company Software has been disclosed to any Person (except to a
source code escrow agent for the benefit of customers in the ordinary course of
business); and (ii) no Person has asserted any right to access any source
code for any Company Software, including pursuant to any source code escrow
agreement.  To the Company’s Knowledge,
there are no viruses, worms, Trojan horses or similar programs in any of the
Company Software.


 


3.12         Taxes.  Except as set forth in Schedule 3.12
of the Disclosure Schedule:


 


(a)       The Company has timely filed all Tax Returns required
to be filed through the date hereof and will timely file any such Tax Returns
required to be filed for periods ending on or prior to the Closing Date, in
each case, subject to any applicable extensions and all such Tax Returns are or
will be complete and accurate in all material respects.  The Company has timely paid all Taxes due and
owing, whether or not shown or required to be shown on any tax return, through
the date hereof and will timely pay all Taxes required to be paid on or prior
to the Closing Date.


 


(b)       The amount of the Company’s liability for unpaid Taxes (1) as
of September 30, 2005 did not exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes) shown on the
Pre-Closing Financial Statements and (2) do not exceed that accrual, after
that accrual is reduced by taking into account all Transaction Payments, as
adjusted for the passage of time through the Closing Date (the “Closing Date
Tax Accrual”).  Since September 30,
2005, the Company has not incurred any liability for Taxes outside the ordinary
course of business.


 


16





















 


(c)       The Company has not received any written notice of
deficiency or assessment from any Taxing Authority with respect to any
liability for Taxes with respect to the Company which has not been fully paid
or finally settled.


 


(d)       The Company 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, Affiliate, creditor, licensor, stockholder or
other third party, and all Forms W-2 and 1099 required with respect thereto
have been properly completed and timely filed.


 


(e)       Neither the Seller nor any director or officer (or
employee or independent accountant responsible for Tax matters) of the Company
expects any authority to assess any additional Taxes for any taxable
period.  No foreign, federal, state, or
local tax audits or administrative or judicial Tax proceedings are pending or
being conducted with respect to the Company. 
Schedule 3.12 of the Disclosure Schedule attached
hereto lists all federal, state, local, and foreign income Tax Returns that
have been audited, and indicates those Tax Returns that currently are the
subject of audit.  The Seller has made
available to the Buyer correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed against
or agreed to by the Company filed or received since December 31, 2000.


 


(f)        The Company 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.  The Company
has disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within
the meaning of Code §6662.  The Company
is not a party to or bound by any Tax allocation, sharing, or similar
agreement.  The Company (A) has not
been a member of an Affiliated Group filing a combined, consolidated, or
unitary Tax Return (other than a group the common parent of which was nMatrix
U.K. or nMatrix U.S.) or (B) has no liability for the Taxes of any Person
(other than the Company) under Treasury Regulation §1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.  The Company has
never been, nor will it be at the Closing, a United States Real Property
Holding Corporation within the meaning of Code §897(c)(2) during the
applicable period specified in Code §897(c)(1)(A)(ii).


 


(g)       The Company will not be required to include any item of
income in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a result
of any: (A) change in method of accounting for a taxable period ending on
or prior to the Closing Date; (B) “closing agreement” as described in Code
§7121 (or any corresponding or similar provision of state, local or foreign
income Tax law) executed on or prior to the Closing Date; (C) intercompany
transactions occurring at or prior to the Closing or any excess loss account in
existence at Closing, in each case as described in Treasury Regulations under
Code §1502 (or any corresponding or similar provision of state, local or
foreign income Tax law); (D) installment sale or open transaction
disposition made on or prior to the Closing Date; or (E) prepaid amount
received on or prior to the Closing Date.


 


17





















 


(h)       The Company has not distributed stock of another
Person, or has had its stock distributed by another Person, in a transaction
that was purported or intended to be governed in whole or in part by Code §355
or §361.


 


(i)        The Company is not, nor at any time has been, subject
to (i) the dual consolidated loss provisions of Section 1503(d) of
the Code, (ii) the overall foreign loss provisions of Section 904(f) of
the Code or (iii) the recharacterization provisions of Section 952(c)(2) of
the Code.  The Company is not a
party to any agreement, contract, arrangement or plan that has resulted or
would result, separately or in the aggregate, in the payment of any “excess
parachute payment” within the meaning of Code §280G (or any corresponding
provision of state, local or foreign Tax law).


 


(j)        The Company is resident for Tax purposes only in its
country of incorporation and has never carried on any trade, business or other
activity outside its country of incorporation which trade, business or activity
qualified as a taxable presence in any other country than its country of
incorporation on the basis of local tax legislation of the other country and
the applicable tax treaty for the avoidance of double taxation between the
country of incorporation and the other country.


 


(k)       There are no circumstances in existence prior to
Closing which could cause any Tax authority to deny or defer relief for
payments of interest paid by the Company, and no such relief has been denied in
fact.


 


(l)        The Company has complied with all statutory provisions,
rules, regulations, orders and directions in respect of any value added or
similar tax on consumption, has promptly submitted accurate returns, maintains
full and accurate records, and has never been subject to any interest,
forfeiture, surcharge or penalty.


 


3.13         Employee
Benefit Plans.


 


(a)       Schedule 3.13(a) contains a complete
and accurate list of all material Benefit Plans and Benefit Arrangements.


 


(b)       With respect, as applicable, to Benefit Plans and
Benefit Arrangements:


 


(i)            The
Company has delivered true, correct, and complete copies of the plan documents
and summary plan descriptions, the most recent determination letter received
from the IRS, the most recent annual report (Form 5500, with all
applicable attachments), and all related trust agreements, insurance contracts,
and other funding arrangements that implement each Benefit Plan and Benefit
Arrangement;


 


(ii)           Except as set forth on Section 3.13(b)(ii) of
the Disclosure Schedule, each Benefit Plan and Benefit Arrangement (and each related
trust, insurance contract or fund) has been maintained, funded and administered
in all material respects in accordance with its terms and


 


18





















 


complies
in form and in operation with all applicable requirements of ERISA, the Code
and other applicable Laws.


 


(iii)          Each Qualified Plan identified in Schedule 3.13(a) has
received a determination or opinion letter from the IRS that such Qualified
Plan is so qualified, and, to the Company’s Knowledge, nothing has occurred
since the date of such determination that could adversely affect the
qualification of such Qualified Plan or cause the imposition of any liability,
lien, penalty or tax under ERISA or the Code.


 


(iv)          The Company has no material liability with respect
to any Benefit Plan other than the Benefit Plans disclosed on Schedule 3.13(a);


 


(v)           There
are no pending, or to the Company’s Knowledge threatened, claims (other than
routine benefit claims) or lawsuits that have been asserted or instituted by,
against, or relating to, any Benefit Plans or Benefit Arrangements.  No Benefit Plans or Benefit Arrangements are
or have been under audit or examination (nor has notice been received of a
potential audit or examination) by any domestic or foreign governmental agency
or entity (including the IRS and Department of Labor); and no matters are
pending under the IRS’s Employee Plans Compliance Resolutions System or any
successor or predecessor program;


 


(vi)          The Company has paid all
amounts they are required to pay as contributions to the Benefit Plans; all
benefits accrued under any unfunded Benefit Plan or Benefit Arrangement will
have been paid, accrued, or otherwise adequately reserved in accordance with US
GAAP as of the Balance Sheet Date; all monies withheld from employee paychecks
for Benefit Plans have been transferred to the relevant plan within the time
period prescribed under applicable law;


 


(vii)         All group health plans of the Company materially
comply with the requirements of Part 6 of Title I of ERISA (“COBRA”), Code
Section 5000, the Health Insurance Portability and Accountability Act, and
any other comparable domestic or foreign laws; the Company has no liability
under or with respect to COBRA for its own actions or omissions or those of any
predecessor; no employee or former employee (or beneficiary of either) of the
Company is entitled to receive any benefits, including, without limitation,
death or medical benefits (whether or not insured) beyond retirement or other
termination of employment, other than as applicable law requires.


 


(viii)        Schedule 3.13(b)(vii) sets forth an
accurate list, as of the date hereof, of all employees of the Company who
earned more than $50,000 in 2004, all officers and all directors, and all
employment agreements with such employees, officers, and directors and the
current


 


19





















 


rate
of compensation (and the portions thereof attributable to salary, bonus, and
other compensation respectively) of each such person.


 


(ix)           Neither the Company nor any ERISA Affiliate
maintains, sponsors, contributes to, has any obligation to contribute to, or
has any liability or potential liability under or with respect to (i) 
Pension Plan, (ii)  any “multiemployer plan” as defined in Section 3(37)
or 4001(a)(3) of ERISA, or (iii) any employee benefit plan, program
or arrangement that provides for post-retirement medical, life insurance or
other welfare-type benefits (other than health continuation coverage required
by COBRA).  Neither the Company nor any
ERISA Affiliate has any liability or potential liability to the Pension Benefit
Guaranty Corporation or otherwise under Title IV of ERISA.


 


3.14         Contracts with Affiliates.  Except as set forth in Schedule 3.14
of the Disclosure Schedule, none of Seller or any of its Affiliates, and no
officer, director or Affiliate of the Company or, to the Company’s Knowledge,
any individual related by blood, marriage or adoption to any such individual or
any employee or any Person in which any such Person owns any beneficial
interest, is currently, or since December 31, 2004 has been, a party to
any Contract or transaction with the Company (other than any employment
agreement between such Company and its officers or employees made in the
ordinary course of business consistent with past practice) involving, individually or in the
aggregate, an annual payment of more than $100,000.


 


3.15         No
Brokers, Finders, etc.  Except with
respect to the services of Marks Baughan & Co., as financial advisor
to the Company, neither the Seller nor the Company has paid or will become
obligated to pay any fee or commission to any broker, finder or other
intermediary for or on account of the transactions contemplated by this
Agreement based on arrangements made by the Company.  Except as set forth on Schedule 3.15
of the Disclosure Schedule, neither the Seller nor the Company has any
obligation or intention to make any payments as a result of the Closing of the
Transaction (such payments, collectively, the “Transaction Payments”).


 


3.16         Accounts Receivable.  Except as set forth in Schedule 3.16
of the Disclosure Schedule, the accounts and notes receivable reflected in the
Pre-Closing Financial Statements represent obligations arising from sales
actually made or services performed in the ordinary course of business
consistent with industry practice, and the Company has not received any notice
of any material contest, claim, or right of set-off under any Scheduled
Contract or otherwise with any maker of any such accounts or notes receivable relating
to the amount or validity of such accounts and notes receivable.


 


3.17         Licenses and Permits.  The Company owns or holds and is in material
compliance with all material permits, licenses, bonds, certificates,
accreditations, variances, exemptions, Government Orders, approvals and other
authorizations necessary or proper for the conduct of its business as currently
conducted and the ownership of its properties (collectively, “Material Permits”).  Each of the Material Permits is set forth on Schedule 3.17.  The Material Permits are valid, and to the
knowledge of the Company, no Governmental Authority intends to modify, cancel,
terminate or not renew any of the Material Permits, whether as a result of the


 


20























 


transactions contemplated hereby or otherwise, and as
such, all Material Permits will be available for use by the Company immediately
after the Closing.


 


3.18         Significant Customers and Suppliers.  Schedule 3.18 of the Disclosure Schedule is
a true and correct list showing (i) the ten largest customers of the
Company by gross revenue during each of the calendar year 2004 and the first
nine months of 2005 (collectively, the “Significant Customers”) and (ii) the
ten largest vendors and suppliers of the Company by gross expenditures during
each of the calendar year 2004 and the first nine months of 2005 (collectively,
the “Significant Suppliers”).  Within the
60 days prior to this Agreement, none of John Lord, Lisa Schofield or Paul
Brabant has received written or oral communication from any employee or agent
of the Significant Customers whom John Lord, Lisa Schofield or Paul Brabant
believe have authority on behalf of any Significant Customer to reduce or
eliminate such Significant Customer’s relationship with the Company to the
effect that (a) such customer will or desires to materially change the
terms of its relationship with the Company, other than expanding its volume of
business; or (b) it is dissatisfied with the Company’s products or
services to the extent that it is actively considering reducing or eliminating
its relationship with the Company.


 


3.19         Insurance.  Schedule 3.19 of the
Disclosure Schedule sets forth an accurate list of all insurance policies
carried by the Company. The Company has not received any written notice that
any provider intends to terminate any such policy and has not had any claims
denied by a provider in the prior three years.


 


3.20         Warranties.  The Company has not undertaken or assumed any
warranties or guarantees to its Significant Customers with respect to its
products and services except as set forth in the Scheduled Contracts.  The
Company has not received any material written claims under such warranties and
guaranties except as disclosed in Schedule 3.20 of the Disclosure Schedule.


 


3.21         Absence of Changes.  Except as disclosed in Schedule 3.21
of the Disclosure Schedule, since September 30, 2005, the Company has
conducted its business and owned and operated its assets and properties in the
ordinary course consistent with past practice and the Company has not:


 


(a)       declared, set aside or made any payment or distribution
of cash or other property to any of its shareholders with respect to such
shareholder’s capital stock, or purchased, redeemed or otherwise acquired any
shares of its capital stock or other equity securities;


 


(b)       made or granted any bonus or any wage or salary
increase to any employee or group of employees (except as required by
pre-existing contracts described on the attached Contracts Schedule and
except for any bonus or wage increases granted to employees in the ordinary
course of business consistent with past practice);


 


(c)       made any commitments for capital expenditures that
aggregate in excess of $100,000;


 


(d)       amended its articles of incorporation or by-laws (or
similar governing documents);


 


21





















 


(e)       entered into any material contract other than in the
ordinary course of business consistent with past practice, entered into any
other material transaction, whether or not in the ordinary course of business
or consistent with past practice, or materially changed any business or
accounting practice; or agreed, whether orally or in writing, to do any of the
foregoing.


 


3.22         Bank Accounts; Powers of Attorney.  Schedule 3.22 of the Disclosure Schedule sets
forth a true and complete list of all bank accounts, safe deposit boxes and
lock boxes of the Company, including the names in which such accounts or boxes
are held and identification of all Persons authorized to draw thereon or have
access thereto.


 


3.23         Absence of Undisclosed Liabilities..  Except as disclosed in Schedule 3.23
of the Disclosure Schedule, the Company does not have and will not have any
obligation or liability arising out of any transaction entered into at or prior
to the date hereof, or any action or inaction at or prior to the date hereof,
or any state of facts existing at or prior to the date hereof, other than: (a) liabilities
reflected in the Pre-Closing Financial Statements and not previously paid or
discharged, (b) liabilities and obligations which have arisen after September 30,
2005 in the ordinary course of business (none of which is a liability resulting
from breach of contract, breach of warranty, tort, infringement, violation of
law, claim or lawsuit), (c) liabilities and obligations that are the
subject of any other representation or warranty under Article III or IV of
this Agreement, to the extent each such liability is disclosed in the relevant
Disclosure Schedule, and (d) liabilities and obligations which could have
a Material Adverse Effect.


 


3.24         No Material Adverse Effect.  Except as disclosed in Schedule 3.24
of the Disclosure Schedule, since September 30, 2005, there has occurred
no fact, event or circumstance which has had or could reasonably be expected to
have a Material Adverse Effect.


 


3.25         Indebtedness.  Except as disclosed in Schedule 3.25
of the Disclosure Schedule, the Company does not have any Indebtedness.


 


3.26         Cash Management.  Except as disclosed in Schedule 3.26
of the Disclosure Schedule, since December 31, 2004, the Company has
conducted its cash management customs and practices (including, without
limitation, the collection of receivables, payment of payables and pricing and
credit practices (including, without limitation, extension of credit terms or
sales discount programs)) in the usual and ordinary course of business
consistent with past practice and has not made any expended any cash outside of
the ordinary course of business consistent with past practice.


 


3.27         Environmental
Matters.  The Company is, and during
the past five years has been, in material compliance with all applicable
Environmental and Safety Requirements. 
During such period, no written notices have been received by, and to the
Company’s Knowledge no claims have been filed against, the Company alleging a
material violation of or material liability under any Environmental and Safety
Requirements.  The Company is not
required to holds any permits, licenses or other authorizations under
Environmental and Safety Requirements for the conduct of its business or the
operation of its properties.  Neither the
Company nor any of its predecessors has treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled, manufactured, released
or exposed any person to, any


 


22





















 


hazardous substance or petroleum, or owned or operated any property or
facility contaminated by any hazardous substance or petroleum, so as would give
rise to liabilities or obligations under Environmental and Safety
Requirements.  There is no
asbestos-containing material, mold, or airborne contaminants at any real
property that is the subject of the Leases so as would give rise to liabilities
or obligations of the Company under Environmental and Safety Requirements.


 


3.28         Employees.  The
attached Section 3.28 of the Disclosure Schedule sets forth the name and current annual salary
of each of the Company’s employees.  To
John Lord’s knowledge, no executive or
key employee of the Company or any group of employees of the Company have any
plans to terminate their employment with the Company.  Except as set forth in Section 3.28 of
the Disclosure Schedule, (a) there are no agreements or arrangements
regarding salary, bonus, commission, housing reimbursement, automobile and/or
fuel allowance, tuition reimbursement, leisure travel, extra vacation time,
special medical benefits, cash substitutes for medical benefits, visa or
immigration related fees or benefits, clubs, memberships, subscriptions, loans
to employees, cash advances to employees, severance or other benefits with any
employees of the Company, and (b) there are no written personnel policies,
rules or procedures applicable to employees of the Company.


 


3.29         Total Assets.  Seller, together with the persons within
which it is included for purposes of 16 C.F.R. Section 801.1(a), do not
have $10.7 million or more of total assets on the most recent regularly
prepared balance sheet as of the Closing Date, as determined in accordance with
16 C.F.R. Section 801.11(c)(2).


 


3.30         Representations Exclusive.  Buyer acknowledges and agrees that the
representations and warranties in Article III and IV are Seller’s
sole representations and warranties in connection with the transactions
contemplated by this Agreement, and that Seller shall not be bound by any other
representations or warranties, whether express or implied, written or oral,
including without limitation any warranty of MERCHANTIBILITY or FITNESS FOR A
PARTICULAR PURPOSE.


 


ARTICLE IV.



REPRESENTATIONS AND WARRANTIES OF SELLER


 


Seller hereby represents
and warrants to Buyer that the statements contained in this Article IV are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date as though made at such time (except to the
extent such representations and warranties speak expressly as of an earlier
date):


 


4.1           Ownership.  All of the issued and outstanding Shares are
owned beneficially and of record by Seller, free and clear of all
Encumbrances.  Except for this Agreement
and the transactions contemplated hereby or as set forth in Schedule 4.1
of the Disclosure Schedule, there are no outstanding agreements, arrangements,
warrants, options, puts, calls, rights, options, subscriptions or other
commitments to which Seller is a party, or by which Seller or any of its
rights, properties or assets are bound, relating to the sale, issuance or
voting of any shares of capital stock of, or other membership or ownership
interests in, or other securities of, the Company.


 


23





















 


4.2           Authorization; Enforceability.  Seller has all requisite power and authority
under the Hypatia Trust to execute and deliver this Agreement and the other
instruments contemplated hereby and to perform its obligations hereunder and
thereunder and, subject to the conditions set forth herein, to consummate the
transactions contemplated hereby and thereby and no other act or proceeding is
necessary to authorize the execution, delivery or performance of this Agreement
or the consummation of the transactions contemplated hereby.  This Agreement has been duly executed and
delivered by Seller and, assuming the due authorization, execution and delivery
of this Agreement by Buyer, constitutes the valid and binding obligation of
Seller, enforceable against Seller, in accordance with its terms subject to (a) the
effect of any applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors’ rights and remedies
generally, and (b) the effect of general equitable principles, regardless
of whether asserted in a proceeding in equity or at law.


 


4.3           No Conflict or Violation.  The execution, delivery and performance by
Seller of this Agreement and the other instruments contemplated hereby and the
consummation of the transactions contemplated hereby and thereby, do not and
will not, except as set forth on Schedule 4.3 of the Disclosure
Schedule:  (a) conflict with,
violate or breach any provision of the Certificate of Incorporation or Bylaws
of the Seller or any comparable charter documents or violate, conflict with or
constitute in any respect or result in (in each case, with or without notice,
lapse of time or both) a default or breach under, or result in the
acceleration, termination or cancellation of (or entitle any Person or give any
Person the right to accelerate, terminate or cancel) any obligation under, or
result in the loss of a benefit under, or require any consent, approval or authorization
under, any Contract to which Seller is a party or by which any of his property
or assets is bound; (b) contravene or violate in any respect any law,
statute, rule or regulation applicable to Seller or any of his assets or
properties, or any Governmental Order to which Seller is a party or by which
Seller or any of his assets or properties is bound; (c) result in the
creation or imposition of (i) any Encumbrance, other than Permitted
Encumbrances, on any of the assets or properties of the Company or (ii) any
Encumbrance on the Shares; (d) result in termination or any impairment of,
or require any consent, approval or authorization under, any Material Permit;
or (e) constitute an event which, after notice or lapse of time or both,
would result in any event described in Section 4.3(a)-(d).


 


4.4           Consents and Approvals.  The execution, delivery and performance by
Seller of this Agreement and the other instruments contemplated hereby and the
consummation of the transactions contemplated hereby and thereby, do not and
will not require any approval, consent, authorization or act of, or the making
by Seller of any declaration, filing or registration with, or notification to,
any Governmental Authority, other than as set forth on Schedule 4.4
of the Disclosure Schedule.


 


4.5           No
Brokers, Finders, etc.  Seller has
not paid nor will Seller become obligated to pay any fee or commission to any
broker, finder or other intermediary for or on account of the transactions
contemplated by this Agreement based on arrangements made by Seller.  Seller is solely responsible for any payment,
fee or commission that may be due to Marks Baughan & Co. in connection
with the transactions contemplated hereby.


 


4.6           Investment
Intent  Seller is an “accredited
investor,” as that term is used in the Securities Act of 1933, as amended (the “Securities
Act”), and is capable of evaluating the


 


24





















 


merits and risks of acquiring the Share Consideration.  Seller has received and carefully reviewed
copies of Buyer’s (i) Annual Report on Form 10-K for the year ended December 31,
2004, (ii) quarterly reports on Form 10-Q for the quarters ended March 31,
June 30 and September 30, 2005, (iii) 2005 Proxy Statement, and (iv) Current
Reports on Form 8-K and all other periodic reports filed pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), filed since January 1, 2005. 
Seller has received all information from Buyer that Seller has
requested, has had all questions relative to the above documents or Buyer
generally answered by appropriate officers of Buyer, and, to the knowledge of
Seller, has received all information necessary for Seller to evaluate the
merits and risks of acquiring and holding the Share Consideration. Seller is
acquiring the Share Consideration for investment and not with a view toward, or
for sale in connection with, any distribution thereof, or with any present
intention of distributing or selling the Share Consideration, other than pursuant
to the Registration Rights Agreement. 
Seller acknowledges that the Share Consideration has not been registered
under the Securities Act or the securities or “blue sky” laws of any state, and
agrees that the Share Consideration may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of without registration under
the Securities Act, except pursuant to registration of the reoffer and resale
of the Share Consideration pursuant to the Securities Act, or pursuant to an
exemption from such registration available under the Securities Act, and
without compliance with state and foreign securities laws in each case, to the
extent applicable.


 


ARTICLE V.



REPRESENTATIONS AND WARRANTIES OF BUYER


 


Buyer hereby represents
and warrants to Seller that the statements contained in this Article V are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date as though made at such time (except to the
extent such representations and warranties speak expressly as of an earlier
date):


 


5.1           Organization.  Buyer is duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation and has
all requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as it is now being
conducted.


 


5.2           Authorization; Enforceability.  Buyer has all requisite corporate power and
authority to execute and deliver this Agreement and the other instruments
contemplated hereby and to perform its obligations hereunder and thereunder
and, subject to the conditions set forth herein, to consummate the transactions
contemplated hereby and thereby.  The
execution, delivery and performance of this Agreement and the other instruments
contemplated hereby by Buyer have been duly authorized by all requisite
corporate action on behalf of Buyer. 
This Agreement has been duly executed and delivered by Buyer and,
assuming the due authorization, execution and delivery of this Agreement by the
Company and Seller, constitutes a valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms subject to (a) the
effect of any applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws relating to or affecting creditors’ rights and remedies generally
and (b) the effect of general equitable principles, regardless of whether
asserted in a proceeding in equity or at law.


 


25





















 


5.3           No Conflict or Violation.  The execution, delivery and performance by
Buyer of this Agreement and the other instruments contemplated hereby and the
consummation by Buyer of any of the transactions contemplated hereby and
thereby, do not and will not:  (a) violate
any provision of the Certificate of Incorporation, Bylaws or other
organizational documents of Buyer; (b) violate, conflict with or
constitute or result in (or with notice, lapse of time or both become) a
default or a breach under, or result in the acceleration, termination or
cancellation of (or entitle any Person or give any Person the right to
accelerate, terminate or cancel) any obligation under, any Contract to which
Buyer is a party or by which any of the assets or property of Buyer is bound,
except for any of such matters or consequences which would not materially
adversely affect the ability of Buyer to consummate the transactions
contemplated by this Agreement; or (c) contravene or violate any law,
statute, rule or regulation applicable to Buyer or any of its assets or
properties, or any Governmental Order to which Buyer is a party or by which
Buyer or any of its assets or properties is bound, for any of such matters or
consequences which would not materially adversely affect the ability of Buyer
to consummate the transactions contemplated by this Agreement.


 


5.4           Consents and Approvals.  The execution, delivery and performance by
Buyer of this Agreement or any of the other instruments contemplated hereby,
the consummation by Buyer of the transactions contemplated hereby and thereby
and compliance by Buyer with, or fulfillment by Buyer of, the terms, conditions
and provisions hereof and thereof do not and will not require the approval,
consent, authorization or act of, or the making by Buyer of any declaration, filing
or registration with, any Person or Governmental Authority, except to the
extent the failure to obtain or make any of the foregoing would not have a
material adverse effect on Buyer’s ability to consummate the transactions
contemplated hereby.


 


5.5           No
Brokers, Finders, etc.  Except with
respect to the services of Covington Associates, Buyer has not paid nor will
Buyer become obligated to pay any fee or commission to any broker, finder or
other intermediary for or on account of the transactions contemplated by this
Agreement.


 


5.6           Investment Intent.  Buyer has such knowledge and experience in
financial matters that it is capable of evaluating the merits and risks of its
purchase of the Shares.  Buyer confirms
that Seller and the Company have made available to Buyer the opportunity to ask
questions of the officers and management employees of the Company and to
acquire additional information about the business and financial condition of
the Company.  Buyer is acquiring the
Shares for investment and not with a view toward, or for sale in connection
with, any distribution thereof, or with any present intention of distributing
or selling the Shares.  Buyer
acknowledges that the Shares have not been registered under the Securities Act
of 1933, as amended (the “Securities Act”), or the securities or “blue sky”
laws of any state, and agrees that the Shares may not be sold, transferred,
offered for sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act, except pursuant to an exemption from
such registration available under the Securities Act, and without compliance
with state and foreign securities laws in each case, to the extent applicable.


 


5.7           Share Consideration.  The issuance to Seller of the Share
Consideration has been duly authorized by Parent and when issued the Share
Consideration will be validly issued, fully paid and nonassessable.


 


26





















 


ARTICLE VI.



ADDITIONAL COVENANTS


 


The parties hereto
covenant and agree to take, and, to the extent applicable pursuant to this Article VI,
to cause the Company from and after the Closing to take, the following actions:


 


6.1           Confidentiality.  Seller shall treat and hold as confidential
any information concerning the business and affairs of the Company that is not
already or becomes generally available to the public (through no fault of
Seller) or which is or becomes known to Seller independently of the Company
(the “Confidential Information”), refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
Buyer, at the request and option of Buyer, all tangible embodiments (and all
copies) of the Confidential Information which are in its possession or under
its control.  In the event that Seller is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand,
or similar process) to disclose any Confidential Information, Seller shall notify
Buyer promptly of the request or requirement so that Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
Section.  If, in the absence of a
protective order or the receipt of a waiver hereunder, Seller is, on the advice
of counsel, compelled to disclose any Confidential Information to any tribunal
or else stand liable for contempt, Seller may disclose the Confidential
Information to the tribunal; provided that Seller shall use its best efforts to
obtain, at the request of Buyer, an order or other assurance that confidential
treatment shall be accorded to such portion of the Confidential Information
required to be disclosed as Buyer shall designate.


 


6.2           Indemnification; Insurance;
Release.  For a period of six (6) years
after the Closing, the Companies will maintain customary directors and officers
indemnification provisions in its organizational documents consistent with the
current provisions and shall not discriminate between past or present directors
and officers in its application of such provisions.


 


6.3           Further Assurances.  At any time or from time to time after the
Closing, Seller shall, at the request of Buyer and at no additional cost or
expense, execute and deliver any further instruments or documents and take all
such further action as Buyer may reasonably request in order to evidence or
effect the consummation of the transactions contemplated hereby.  At any time or from time to time after the
Closing, Buyer shall, at the request of Seller and at no additional cost or
expense, execute and deliver any further instruments or documents and take all
such further action as Seller may reasonably request in order to evidence or
effect the consummation of the transactions contemplated hereby.


 


6.4           Post-Closing Audit.  Seller shall cooperate, and shall cause its
Affiliates to cooperate, with and provide, and cause its Affiliates to provide,
all requested information and assistance to Buyer, the Company and Hays &
Company LLP, including without limitation, engaging in client communications
regarding collection of accounts receivable confirmation documents for Hays and
Company LLP, providing background knowledge on transactions previously recorded
in the Pre-Closing Financial Statements and providing explanations regarding
accounting methods for the Pre-Closing Financial Statements, in order to assist


 


27





















 


Hays & Company
LLP in delivering to Buyer, at the Buyer’s expense, the Post-Closing Financial
Statements within 60 days of Closing.


 


6.5           Allocation of
Purchase Price.  The Buyer shall
allocate the Consideration after the Closing (the “Allocation”) and
shall provide the Seller with a schedule setting forth such
Allocation.  Seller and Buyer shall (i) be
bound by the Allocation for all Tax purposes; (ii) prepare and file all
Tax Returns in a manner consistent with the Allocation; and (iii) take no
position inconsistent with the Allocation in any Tax Return, any proceeding
before any taxing authority or otherwise. 
In the event that the Allocation is disputed by any taxing authority,
the party receiving notice of such dispute shall promptly notify and consult
with the other party and keep the other party apprised of material developments
concerning resolution of such dispute.


 


6.6           Transaction
Payments.  The Company will make,
subject to applicable withholding and pursuant to Company’s general payroll
practices, the Transaction Payments to the recipients set forth on Schedule 3.15.


 


6.7           Cash
Escrow Account.


 


(a)       Within 20 business
days after the end of each month during the Cash Escrow Period, Buyer shall
deliver to Seller and the Cash Escrow Agent a written instruction (a “Cash
Escrow Release Instruction”) setting forth the Monthly Release Amount with
respect to that month, along with a schedule showing the amount and date
of all Designated Receivables collected during that month, subject to the
limitation set forth in (b) below.  
Within 5 business days after it receives a Cash Escrow Release
Instruction and subject to the limitations in (b) below, the Cash Escrow
Agent shall release the amount set forth thereon from the Cash Escrow Fund and
wire transfer such amount in immediately available funds to the Seller’s
Account.  The total amount disbursed with
respect to collections for Designated Receivables with respect to each customer
set forth on Schedule 6.7 shall not exceed the dollar amount of Designated
Receivables for such customer.


 


(b)       The amount of the Cash Escrow Fund available for distribution
pursuant to (a) above shall be reduced by the Reserve Amount, as such may
be adjusted from time to time.  In no
event shall the Cash Escrow Release Instruction direct the Cash Escrow Agent to
make a release, and in no event shall the Cash Escrow Agent release any funds
from the Cash Escrow Account, to the extent a release would cause the Cash
Escrow Fund to be reduced to an amount less than the Reserve Amount.  Within 5 business days after the date on
which Buyer determines that the Reserve Amount has changed, Buyer shall deliver
a written notice to Seller and the Escrow Agent setting forth the revised
Reserve Amount.


 


(c)       Promptly after Buyer delivers the Cash Release Instruction
with respect to September 2006, and the Escrow Agent releases the amounts
set forth therein (subject to (b) above), any amounts remaining in the
Cash Escrow Account, including the Reserve Amount (if any), shall be released
by the Escrow Agent to the Buyer.


 


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ARTICLE VII.



CONDITIONS PRECEDENT


 


The obligations of Buyer
and Seller to consummate the transactions contemplated by this Agreement are
subject to the satisfaction (or waiver by the other party), on or prior to the
Closing Date, of each of the following conditions:


 


7.1           Company Closing Certificate.  At the Closing each Company shall deliver to
Buyer a certificate, dated the Closing Date and executed by such Company,
attaching good standing (or substantially equivalent) certificates for such
Company from their respective jurisdictions of incorporation and each
jurisdiction in which such Company is qualified to do business as a foreign
corporation, in each case dated as of a recent date prior to the Closing Date.


 


7.2           Seller Closing Certificate.  At the Closing, Seller shall deliver to Buyer
a certificate, dated the Closing Date and executed by Seller, attaching
certified copies of the resolutions duly adopted by the Seller authorizing the
execution, delivery and performance of this Agreement and the other agreements
contemplated hereby and the consummation of the transactions contemplated
hereby and thereby.


 


7.3           Buyer Closing Certificate.  At the Closing, Buyer shall deliver to Seller
a certificate, dated the Closing Date and executed by Buyer, attaching
certified copies of the resolutions duly adopted by the Buyer authorizing the
execution, delivery and performance of this Agreement and the other agreements
contemplated hereby and the consummation of the transactions contemplated
hereby and thereby.


 


7.4           FIRPTA Certificate.  At the Closing, the Company shall deliver to
Buyer an affidavit, under penalties of perjury, stating that the Company is not
and has not been a United States real property holding corporation, dated as of
the Closing Date and in form and substance satisfactory to the Buyer.


 


7.5           Seller’s Opinion.  At the Closing, Buyer shall have received a
legal opinion from counsel to the Company and the Seller in form and substance
reasonably satisfactory to Buyer and its counsel relating to the transactions
contemplated hereby.


 


7.6           Buyer’s Opinion.  At the Closing, Seller shall have received a
legal opinion from counsel to the Buyer in form and substance reasonably
satisfactory to Buyer and its counsel relating to the issuance of the Share
Consideration.


 


7.7           Escrow Agreement.  Buyer, Seller and the Escrow Agent shall have
entered into the Escrow Agreement.


 


7.8           Registration Rights Agreement.  Parent and Seller shall have entered into the
Registration Rights Agreement.


 


7.9           John Lord Employment Agreement.  nMatrix UK and John Lord shall have entered
into the Employment Agreement in form and substance satisfactory to the Buyer.


 


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7.10         John Lord Non-Compete Agreement.  The Buyer and John Lord shall have entered
into a Confidentiality, Intellectual Property and Non-Compete Agreement in form
and substance satisfactory to the Buyer.


 


7.11         Employment Agreements.  nMatrix US and each of the individuals set
forth on Schedule 7.11 shall have entered into an Employment and
Non-Competition Agreement in form and substance satisfactory to the Buyer.


 


7.12         Non-Compete Agreements.  The Buyer and each of the individuals set
forth on Schedule 7.12 shall have entered into a Confidentiality,
Intellectual Property and Non-Compete Agreement in form and substance
satisfactory to the Buyer.


 


7.13         Commission Agreements.  nMatrix US and each of the individuals set
forth on Schedule 7.13 shall have entered into a Commission
Agreement in form and substance satisfactory to the Buyer.


 


7.14         Undertaking.  Seller and Parent shall have entered into the
EPIQ Share Delivery Undertaking dated as of the date hereof.


 


7.15         Releases.  The Company shall have received releases from
the recipients of Transaction Payments set forth on Schedule 3.15 in a
form reasonably satisfactory to Buyer and Seller.


 


7.16         Resignation of Officers and
Directors.  The Buyer shall have
received resignations in a form reasonably satisfactory to it from each of the
officers and directors of the Companies effective as of the Closing.


 


7.17         Consents.  Seller and the Company shall have obtained or
made (as applicable) the Consents.


 


7.18         Shareholder Consent. nMatrix US shall have (a) procured
waivers of any amounts that constitute “parachute payments” within the meaning
of Code §280G for each Person who is “disqualified individual” and may receive
any parachute payments in connection with the transactions contemplated by this
Agreement and (b) held a vote of the nMatrix US’s shareholders satisfying
the requirements of Code Section 280G(b)(5)(B) and the Treasury
Regulations promulgated with respect thereto seeking approval for such
parachute payments, in each case, in a manner reasonably satisfactory to the
Buyer.


 


7.19         Closing Deliveries.  Seller shall have delivered such other
documents or instruments as Buyer may reasonably request to effect the
transactions contemplated hereby.


 


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ARTICLE VIII.



[INTENTIONALLY OMITTED]


 


ARTICLE IX.



[INTENTIONALLY OMITTED]


 


ARTICLE X.



INDEMNIFICATION


 


10.1         Survival of Representations, Etc. The representations, warranties,
covenants and indemnities set forth in this Agreement or in any certificate,
document or other instrument delivered in connection herewith or contemplated
hereby shall survive the Closing as follows:


 


(a)       the representations and warranties in Section 3.1
(Organization and Qualification), Section 3.2 (Capitalization;
Ownership), and Section 3.15 (No Brokers, Finders, etc.); the
representations and warranties in Section 4.1 (Ownership), Section 4.2
(Authorization; Enforceability) and Section 4.5 (No Brokers,
Finders, etc.); and the representations and warranties in Section 5.1
(Organization), Section 5.2 (Authorization; Enforceability) and Section 5.5
(No Brokers, Finders, etc.) shall survive indefinitely;


 


(b)       the representations and warranties in Section 3.12
(Taxes) and Section 3.27 (Environmental Matters) shall survive for
a period ending when the applicable statutes of limitation with respect to the
liabilities in question expire (after giving effect to any extensions or waivers
thereof), plus ninety (90) days; and


 


(c)       all other representations and warranties in this
Agreement or in any certificate, document or other instrument delivered in
connection herewith or contemplated hereby shall survive for a period of
eighteen (18) months following the Closing. 
The expiration of any representation or warranty as provided in this Section 10.1
shall preclude any indemnity with respect thereof under this Article X
from and after the time such representation or warranty shall have expired;
provided, however, that the expiration of any such representation or warranty
shall not affect the rights of any party in respect of any such indemnity claim
therefor as to which notice thereof has been given under this Article X
prior to the expiration of the applicable survival period provided in this Section 10.1.


 


10.2         Indemnification by Seller.  (a)  From and after the Closing, Seller
shall indemnify, defend, save and hold harmless Buyer, its Affiliates and their
respective Representatives, successor and assigns (collectively, the “Buyer
Indemnified Parties”), from and against any and all Losses incurred by any
Buyer Indemnified Party and arising out of or resulting from (i) any
breach of any representation or warranty given or made by Seller or the Company
in this Agreement or other instrument or agreements delivered pursuant to Article VII;
and (ii) any nonfullfilment or breach of any covenant or agreement made by
Seller in this Agreement or other instrument or agreement delivered pursuant to
Article VII.


 


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(b)       Notwithstanding anything to the contrary contained in
this Agreement, (i) no claim may be made against the Seller for
indemnification pursuant to Section 10.2(a)(i) for any individual item
(or group of integrally related items) unless the Losses relating to such item
(or group of integrally related items) exceeds $50,000 (“Qualified Losses”),
(ii) no indemnification under Section 10.2(a)(i) shall be made
by Seller, and Seller shall not have any liability therefor, unless and until
the aggregate amount of Qualified Losses subject to indemnification by Seller
pursuant thereto shall exceed $750,000 (“Indemnification Threshold”), and once
such threshold amount is exceeded, Seller shall indemnify the Buyer Indemnified
Parties, and shall be liable, for the amount of all Qualified Losses incurred
by the Buyer Indemnified Parties relating back to the first dollar thereof, and
(iii) the aggregate amount required to be paid by Seller pursuant to Section 10.2(a)(i) shall
not exceed the value of the Share Consideration held by the Escrow Agent (“Indemnification
Cap”), and Seller shall not indemnify the Buyer Indemnified Parties pursuant to
Section 10.2(a) and shall not have any liability to any Buyer Indemnified
Party for, and the Buyer Indemnified Parties shall have no right to recover
from Seller pursuant to Section 10.2(a)(i), any amount of Qualified Losses
which exceeds the Indemnification Cap. 
Notwithstanding anything to the contrary contained in this Agreement,
none of the restrictions set forth in this Section 10.2(b) shall
apply to claims arising out of or resulting from any breach of Section 3.1
(Organization and Qualification), Section 3.2 (Capitalization;
Ownership); Section 3.12 (Taxes); Section 3.15 (No
Brokers, Finders, etc.); Section 3.25 (Indebtedness), Section 3.26
(Cash Management); Section 3.27 (Environmental Matters); Section 4.1
(Ownership); Section 4.2 (Authorization; Enforceability); Section 4.5
(No Brokers, Finders, etc.); or in connection with any action or claim based
upon fraud.


 


10.3         Indemnification by Buyer and the
Company.  (a)  From and after
the Closing, Buyer shall indemnify, defend, save and hold harmless Seller, its
Affiliates, heirs and personal representatives and their respective
Representatives (collectively, the “Seller Indemnified Parties”) from and
against any and all Losses incurred by any Seller Indemnified Party and arising
out of or resulting from (i) any breach of any representation or warranty
given or made by Buyer in this Agreement or other instrument or agreement
delivered pursuant to Article VII or (ii) any breach of any covenant
or agreement made by the Buyer in this Agreement or any breach of any covenant
or agreement to be performed from and after the Closing made by the Company in
this Agreement or other instrument or agreement delivered pursuant to Article VII.


 


(b)       Notwithstanding anything to the contrary contained in
this Agreement, (i) no claim may be made against the Seller for
indemnification pursuant to Section 10.3(a)(i) for any individual
item (or group of integrally related items) unless the Losses relating to such
item (or group of integrally related items) are Qualified Losses, (ii) no
indemnification under Section 10.3(a)(i) shall be made by Buyer, and
Buyer shall not have any liability therefor, unless and until the aggregate
amount of Qualified Losses subject to indemnification by Buyer pursuant thereto
shall exceed the Indemnification Threshold, and once such threshold amount is
exceeded, Buyer shall indemnify the Seller Indemnified Parties, and shall be
liable, for the amount of all Qualified Losses incurred by the Buyer
Indemnified Parties relating back to the first dollar thereof, and (iii) the
aggregate amount required to be paid by Buyer pursuant to Section 10.3(a)(i) shall
not exceed $5,000,000 , and Buyer shall not indemnify the Seller Indemnified
Parties pursuant to Section 10.3(a)(i) and shall not have any


 


32





















 


liability to any Seller Indemnified Party for, and the Seller
Indemnified Parties shall have no right to recover from Buyer pursuant to Section 10.3(a)(i),
any amount of Qualified Losses which exceeds $5,000,000.


 


10.4         Notice of Indemnity Claims.  If any Buyer Indemnified Party or Seller
Indemnified Party entitled to or seeking indemnification hereunder (an “Indemnified
Party”) (a) determines that any event, occurrence, fact, condition or
Claim has given or could give rise to Losses for which such Indemnified Party
is or may be entitled to, or may seek, indemnification under this Agreement, (b) otherwise
identifies an event, occurrence, fact, condition or Claim giving rise (or which
may give rise) to a right of indemnification hereunder in favor of such
Indemnified Party, or (c) with respect to any Third Party Claim, becomes
aware of the assertion of any Claim or of the commencement of any action, suit
or proceeding at law or in equity (any of the foregoing, an “Indemnity Claim”),
such Indemnified Party shall promptly notify the party or parties obligated to
provide indemnification or from whom indemnification is being or will be sought
(the “Indemnifying Party”) in writing of such Indemnity Claim (a “Claim Notice”)
describing in reasonable detail the facts giving rise to the claim for
indemnification hereunder and shall include in such Claim Notice (if then
known) the amount or the method of computation of the amount of such claim, and
a reference to the provision of this Agreement or any other agreement, document
or instrument executed hereunder or in connection herewith upon which such
claim is based; provided, however, the failure of any Indemnified Party to give
timely notice thereof shall not affect any of its rights to indemnification
hereunder nor relieve the Indemnifying Party from any of its indemnification
obligations hereunder, except to the extent the Indemnifying Party is
materially prejudiced by such failure. 
Any Claim Notice not relating to a Third Party Claim shall specify the
nature of the Loss and the estimated amount thereof.  If the Indemnifying Party does not notify the
Indemnified Party within thirty (30) days following the delivery of the Claim
Notice that the Indemnifying Party disputes the referenced Claim, the amount of
such Claim shall be conclusively deemed a liability of the Indemnifying Party
hereunder (a “Final Claim”).


 


10.5         Indemnification Procedures.  Any obligation to provide indemnification
hereunder with respect to any action, suit or proceeding at law or in equity by
or against any third party, including any Governmental Authority (a “Third
Party Claim”), shall be subject to the following terms and conditions:


 


(a)       Upon receipt of a Claim Notice in respect of any such
Third Party Claim, the Indemnifying Party shall be entitled, at its option and
its cost and expense and upon notice to the Indemnified Party at any time, to
assume and control the defense, compromise, settlement and investigation of
such Indemnity Claim, including the management of any proceeding relating thereto,
and to employ and engage counsel reasonably acceptable to the Indemnified
Party; provided that, prior to the Indemnifying Party assuming control of such
defense it shall first (i) verify to the Indemnified Party in writing that
such Indemnifying Party shall be responsible (with no reservation of any
rights) for all liabilities and obligations relating to such claim for
indemnification and that it shall provide indemnification to the Indemnified
Party with respect to such action, lawsuit, proceeding, investigation or other
claim giving rise to such claim for indemnification hereunder and (ii) provide
the Indemnified Party with evidence (which evidence may include the Stock
Escrow Account) reasonably acceptable to the Indemnified Party that such
Indemnifying Party will have the financial resources to defend


 


33





















 


against
such claim and fulfill its indemnification obligations hereunder.  The Indemnifying Party shall not be entitled
to assume control of such defense and shall pay the reasonable fees and
expenses of counsel retained by the Indemnified Party if (1) the claim for
indemnification relates to or arises in connection with any criminal or
quasi-criminal proceeding, action, indictment, allegation or investigation; (2) the
claim primarily seeks an injunction or equitable relief against the Indemnified
Party; (3) the Indemnified Party has been reasonably advised by its
counsel in writing that a reasonable likelihood exists of a conflict of
interest between the Indemnifying Party and the Indemnified Party; or (4) upon
petition by the Indemnified Party, the appropriate court rules that the
Indemnifying Party failed or is failing to vigorously prosecute or defend such
claim; provided that, with respect to each of the foregoing, Buyer will consult
with Seller regarding such claims, including with respect to the selection and
retention of counsel, strategy regarding defending and resolving such claim and
implementation of such strategy.


 


(b)       In the event the Indemnifying Party (i) exercises
the right to undertake the defense and investigation of any such Indemnity
Claim as provided in this Section 10.5, (A) the Indemnified Party
may, at its own cost and expense (other than any reasonable fees and expenses
of such separate counsel that are incurred prior to the date the Indemnifying
Party effectively assumes control of such defense which, notwithstanding the
foregoing, shall be borne by the Indemnifying Party, and except that the
Indemnifying Party shall pay all of the reasonable fees and expenses of such
separate counsel in writing if the Indemnified Party has been reasonably
advised by its counsel that a reasonable likelihood exists of a conflict of
interest between the Indemnifying Party and the Indemnified Party ),
participate in the defense of such Indemnity Claim and (B) the Indemnified
Party agrees to cooperate with the Indemnifying Party in such efforts and make
available to the Indemnifying Party all witnesses, records, materials and
information in the Indemnified Party’s possession, under its control or to
which it may have access as may be reasonably required by the Indemnifying
Party or (ii) fails to so assume the defense and investigation of any such
Indemnity Claim as provided in this Section 10.5, (A) the Indemnified
Party against which such Indemnity Claim has been asserted shall have the right
to undertake the defense and investigation of such Indemnity Claim on behalf
of, and at the cost and expense of and for the account and risk of the
Indemnifying Party; provided that no compromise or settlement of such
Indemnity Claim by such Indemnified Party shall be binding on the Indemnifying
Party unless the Indemnifying Party shall consent thereto, which consent shall
not be unreasonably withheld or delayed and (B) the Indemnifying Party agrees
to cooperate with the Indemnified Party in such efforts.


 


10.6         Settlement of Indemnity Claims.
The Indemnifying Party shall not, without the written consent of the
Indemnified Party, settle or compromise any Indemnity Claim or consent to the
entry of any final judgment which (a) provides that any injunctive or
other equitable relief be imposed against the Indemnified Party or (ii) does
not include as an unconditional term thereof the delivery by the claimant or
plaintiff of an express, unconditional written release or releases from all
liability and obligations in respect of such Indemnity Claim of all Indemnified
Parties affected by such Indemnity Claim with out prejudice.  No Indemnity Claim that is being defended in
good faith by the Indemnifying Party shall be settled or compromised by the
Indemnified Party without the written consent of the Indemnifying Party.


 


34





















 


10.7         Materiality Qualifications.  Notwithstanding anything to the contrary in
this Agreement other than Section 3.23, for purposes of the
indemnification provisions in this Article X, the determination of (i) whether
any representation or warranty has been breached, and (ii) the amount of
any Losses with respect to any such breach, shall be made without giving effect
to any “Material Adverse Effect” qualification or any materiality qualification
contained in the representations or warranties herein.


 


10.8         Exclusivity of Indemnification
Remedy and Escrow.  After the Closing
has occurred, the indemnification provided in this Article X, shall be the
sole and exclusive remedy of any party with respect to this Agreement or the
transactions contemplated hereby (except with respect to claims of fraud or
indemnities provided in Article XI), whether pursuant to the
indemnification provisions hereunder, the state or federal securities laws or
otherwise, to the extent permitted by applicable law.  Notwithstanding the foregoing provisions of
this Article X, an Indemnifying Party shall have no responsibility or
obligation with respect to any claim for indemnification asserted pursuant to
this Article X unless such claim is asserted in writing by the Indemnified
Party prior to expiration of the applicable indemnification obligation.  Furthermore, the sole remedy of the Buyer
Indemnified Parties with respect to claims pursuant to Section 10.2(a) which
are subject to the Indemnification Cap shall be to claim payment under the
Escrow Agreement.  Notwithstanding anything in this
Agreement to the contrary, nothing in this Article X shall be construed to
(i) impair the right of Buyer to seek injunctive or other equitable relief
for any breach or threatened breach of any covenant contained in this
Agreement, or (ii) impair any claims based on fraud.


 


ARTICLE XI.



TAX MATTERS


 


The following provisions shall govern the allocation of
responsibility as between Buyer and Seller for certain Tax matters following
the Closing Date:


 


11.1         Tax
Indemnification.  (a)  Seller
shall indemnify the Company, the Buyer and its Affiliates and hold them
harmless from and against any loss, claim, liability, expense, or other damage
attributable to:  (i) all Taxes (or
the non-payment thereof) of the Company for all Taxable periods ending on or
before the Closing Date and the portion through the end of the Closing Date for
any Taxable period that includes (but does not end on) the Closing Date (“Pre-Closing Tax Period”), (ii) all Taxes of any
member of an Affiliated Group of which the Company (or any predecessor of the
foregoing) is or was a member on or prior to the Closing Date, including
pursuant to Treasury Regulation §1.1502-6 (or any analogous or similar state,
local, or foreign law or regulation), and (iii) any and all Taxes of any
Person imposed on the Company as a transferee or successor, by contract or
pursuant to any law, rule, or regulation, which Taxes relate to an event or
transaction occurring before the Closing; provided that, in the case of
clause (i), (1) solely with respect to any Taxable period ending on the
Closing Date or the portion through the end of the Closing Date for any Taxable
period that includes (but does not end on) the Closing Date, Seller shall only
be liable for Income Taxes to the extent such Income Taxes exceed the Closing
Date Tax Accrual (it being
understood that, to the extent the Company is not able to properly deduct
Transaction Payments (other than as a result of the application of Code §280G
to such Transaction Payments) in computing taxable income,  Seller shall not be


 


35





















 


liable for any increase in Income Taxes of the
Company in such Taxable period resulting therefrom but only up to an amount
equal to the reduction in the Closing Date Tax Accrual under Section 3.12(b) above
resulting from taking into account such Transaction Payments) and (2) Seller
shall not be liable for the matters set forth on Schedule 11.1(a).  The indemnification under this Section 11.1
shall not be subject to the indemnification deductible and limit set forth in Section 10
or elsewhere in this Agreement.  Seller’s
indemnification obligation with respect to any Pre-Closing Tax Period shall end
when the applicable statutes of limitation with respect to the liabilities in
question expire (after giving effect to any extensions or waivers thereof ),
plus ninety (90) days.  Seller shall reimburse Buyer for
any Taxes which are the responsibility of Seller pursuant to this Section 11.1
at least 5 days prior to payment of such Taxes by Buyer or the Company.


 


(b)       In the case of any Taxable period that includes (but
does not end on) the Closing Date (a “Straddle Period”), the amount of
any Taxes based on or measured by income or receipts for the Pre-Closing Tax
Period shall be determined based on an interim closing of the books as of the
close of business on the Closing Date (and for such purpose, the Taxable period
of any partnership or other pass-through entity in which the Company holds a
beneficial interest shall be deemed to terminate at such time) and the amount
of other Taxes for a Straddle Period which relates to the Pre-Closing Tax
Period shall be deemed to be the amount of such Tax for the entire Taxable
period multiplied by a fraction the numerator of which is the number of days in
the Taxable period ending on the Closing Date and the denominator of which is
the number of days in such Straddle Period. 
For the avoidance of doubt, neither the short taxable period of nMatrix
Inc. for federal income tax purposes ending on the Closing Date nor the short taxable
period of nMatrix Inc. beginning on the day following the Closing Date shall be
considered a Straddle Period.


 


(c)       If, as a result of any action, suit, investigation,
audit, claim, assessment or amended Tax Return, there is any change after the
Closing Date in an item of income, gain, loss, deduction or credit that results
in an increase in a Tax liability for which Seller is otherwise liable pursuant
to Section 11.1(a), and such change results in an actual decrease in the
cash Tax liability of the Buyer for the then current tax period of the Buyer,
the Company or any Affiliate or successor thereof, Seller shall not be liable
pursuant to Section 11.1(a) with respect to such increase to the
extent of such cash decrease (and, to the extent such increase in Tax liability
is paid to a Taxing Authority by Seller or any Affiliate thereof, Buyer shall
pay Seller an amount equal to such cash decrease.


 


(d)       Buyer shall not file an actual election or take any
action that could result in a deemed election under Section 338 of the
Code (or any comparable provision of state or local law or regulation) relating
to the purchase of stock of nMatrix U.S.


 


11.2         Tax
Return Filing.


 


(a)       Buyer shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for Income Taxes with respect to the Company
for Straddle Periods and for periods ending on or prior to the Closing Date the
due date of which is after the Closing Date. 
Buyer shall prepare or cause to be prepared and file or cause to be
filed all Tax Returns for Other Taxes the due date of which is after the
Closing Date.  Buyer shall provide Seller
for


 


36





















 


Seller’s
review of such Tax Returns as soon as practicable, and in no event less than 10
days prior to the due date of such Tax Returns.  Buyer and Seller shall discuss such Tax
Return, consider any Seller comments with respect thereto and negotiate any
disagreement thereto in good faith. 
Seller shall remit to the Company within 5 days following agreement with
respect to such items any and all Taxes for which Sellers are otherwise liable
under Section 11.1(a).


 


11.3         Tax Indemnification Procedures;
Contest Provisions.


 


(a)       Each party shall promptly notify the other party in
writing upon receipt by such party or any of their respective Affiliates or
Representatives of notice of any pending or threatened federal, state, local or
foreign Tax audits, examinations, Claims or assessments (a “Tax Claim”)
for which such party is entitled to seek, or is seeking or intends to seek,
indemnification pursuant to Section 11.1; provided, however,
that the failure to give such notice shall not affect the indemnification
provided hereunder except to the extent that the failure to give such notice
materially prejudices the indemnifying party.


 


(b)       (i)            Seller
shall have the right, at its own expense, to control and to represent the
interests of the Company in and with respect to any Tax Claim for any
Pre-Closing Tax Period for which it is solely liability under Section 11.1(a),
and to employ counsel of its own choice for such purpose; provided that, Seller
shall have the sole right to control and conduct the Tax Claim only if (i) the
Seller notifies the Buyer in writing within fifteen (15) days after the Buyer
has given notice of the Tax Claim or Seller is otherwise notified of such Tax
Claim that the Seller will indemnify the Buyer and the Company from and against
any loss, claim, liability, expense, other damages, and Taxes in accordance Section 11.1(a) such
party may suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Tax Claim (whether or not otherwise required hereunder and
with no reservation of rights), (ii) the Seller provides the Buyer with
evidence reasonably acceptable to the Buyer that the Seller will have the
financial resources to defend against the Tax Claim and fulfill its
indemnification obligations hereunder, (iii) the Tax Claim involves only
money damages, and does not relate to or arise in connection with any criminal
proceeding, action, indictment, allegation or investigation and (iv) such
Tax Claim could not materially affect Buyer or the Company with respect to
taxable years or periods or portions thereof beginning or ending after the
Closing Date; provided, however, that Seller shall keep Buyer
informed of any material developments in such Tax Claim, shall consult in good
faith with Buyer with respect to such Tax Claim, shall permit Buyer to review
all material written submissions with respect to such Tax Claim and afford
Buyer and counsel of its own choosing the right to participate at Buyer’s
expense in the prosecution or defense of such Tax Claim.  Seller shall have the sole right to settle,
either administratively or after the commencement of litigation, any proceeding
relating to such Tax Claims which it is in sole control of; provided, however,
that Seller shall not settle any Tax Claim described in this Section 11.3(b) without
prior written consent of Buyer.


 


(ii)           Except as otherwise provided by Section 11.3(b),
Buyer shall have the sole right to control all Tax Claims relating to the
Company; provided, however, that Buyer shall consult in good
faith with Seller with respect to the contest of a Straddle Period Tax Claim
for which Seller is liable under Section 11.1(a), shall permit
Seller to review all material written submissions with respect to such Straddle
Period Tax Claim, and shall afford Seller or counsel of its own choosing the
right to participate, at Seller’s expense, in the prosecution or defense of
such


 


37





















 


Straddle Period Tax Claim; and provided further, that Buyer
shall not settle any such Straddle Period Tax Claim without prior written
consent of Seller, which consent shall not be unreasonably withheld or delayed.


 


11.4         Assistance and Cooperation.  After the Closing Date, Seller, on the one
hand, and Buyer and the Company, on the other hand, shall (and shall cause
their respective Affiliates to):


 


(b)       timely assist the other in preparing any Tax Returns of
the Company which the other is responsible for preparing and filing in
accordance with Section 11.2, including, but not limited to, providing
full access to relevant personnel and documentation;


 


(c)       timely cooperate fully in preparing for any audits of,
or disputes with Taxing Authorities regarding, any Tax Returns of the Company,
including, but not limited to, providing full access to relevant personnel and
documentation;


 


(d)       timely cooperate in “closing the books” of nMatrix, Inc.
and allocating items of income, loss, deduction or credit of nMatrix, Inc.
between Seller and Buyer;


 


(e)       make available to the other and to any Taxing Authority
in a timely manner as reasonably requested all information, records, and
documents relating to Taxes of the Company or their assets or properties or
business;


 


(f)        within thirty (30) days of the receipt of a written
request therefor, furnish the other with copies of all correspondence received
from any Taxing Authority in connection with any Tax audit or information
request with respect to any such taxable period of the Company;


 


(g)       timely sign and deliver such certificates or forms as
may be necessary or appropriate to establish an exemption from (or otherwise
reduce), or file Tax Returns or other reports with respect to Taxes described
in Section 11.7;


 


(h)       timely provide to the other powers of attorney or
similar authorizations necessary to carry out the purposes of this Article XI;
and


 


(i)        use reasonable best efforts to properly retain and
maintain accounting and Tax records and information, in a timely manner
consistent with Taxing Authority guidelines, to the extent such records and
information relate to the Company or any of their assets and properties or
business until ninety (90) days following the expiration of the applicable
statute of limitations period, and promptly notify the other prior to the
destruction of any such Tax records or information and provide the other party
a reasonable opportunity to make and retain copies of any such Tax records or
information.


 


11.5         Exclusivity.  In the event that any provisions of this Article XI
and the provisions of Article X conflict or otherwise each apply by their
terms, this Article XI shall govern such matters concerning Taxes and Tax
Claims.


 


38





















 


11.6         Tax Sharing Agreements. 
All Tax sharing agreements or similar agreements with respect to or
involving the Company shall be terminated as of the Closing Date and, after the
Closing Date, the Buyer and the Company shall not be bound thereby or have any
liability thereunder.


 


11.7         Transfer Taxes and Fees.  All
transfer, documentary, sales, use, stamp, registration and other such Taxes,
and all conveyance fees, recording charges and other fees and charges
(including any penalties and interest) incurred in connection with consummation
of the transactions contemplated by this Agreement shall be paid equally by
Buyer and Seller when due, and Seller will, at their own expense, file all
necessary Tax Returns and other documentation with respect to all such Taxes,
fees and charges, and, if required by applicable law, Buyer will, and will
cause its Affiliates to, join in the execution of any such Tax Returns and
other documentation.


 


11.8         Benefit of Company Tax Deductions.  Notwithstanding anything else in this
Agreement, the Buyer shall be entitled to any refunds, credits and/or reduction
of Taxes attributable (1) to Estimated Tax Payments made by the Company, (2) to
the carryback of any item of loss, deduction, or credit resulting from any of
the Transaction Payments or otherwise, and (3) to the carryforward of any
item of loss, deduction, or credit resulting from any of the Transaction
Payments or otherwise.  Buyer, in its
sole discretion, may cause the Company to waive any carryback of any items of loss,
deduction or credit.


 


ARTICLE XII.



GENERAL PROVISIONS


 


12.1         Expenses.  Except as otherwise provided herein, the
Seller, for the Seller and the Company on the one hand, and the Buyer, for the
Buyer on the other hand, shall pay all of their own costs and expenses incident
to their negotiation and preparation of this Agreement and to their performance
and compliance with all terms, agreements, covenants and conditions contained
herein on their part to be performed or complied with, including the fees,
expenses and disbursements of their counsel and accountants, whether or not the
Closing shall have occurred; and all such costs and expenses incurred prior to
the Closing by Seller, the Company or any other Affiliates of Seller (“Seller
Expenses”) shall be paid at or prior to the Closing or shall be deducted
from the Cash Consideration as set forth in Section 2.1(b).  Any Seller expenses which for any reason are
not paid at or prior to the Closing or are not deducted from the Cash
Consideration pursuant to Section 2.1(b) shall be the obligation of
the Seller and the Buyer and the Company shall have no obligation or liability
with respect thereto.


 


12.2         Notices.  All notices and other communications given or
made pursuant to this Agreement shall be in writing and shall be deemed to have
been duly given or made (i) five Business Days after being sent by
registered or certified mail, return receipt requested, (ii) upon
delivery, if hand delivered, (iii) one Business Day after being sent by
prepaid overnight courier with guaranteed delivery, with a record of receipt,
or (iv) upon transmission with confirmed delivery if sent by cable,
telegram, facsimile or telecopy, to the parties at the following addresses (or
at such other addresses as shall be specified by the parties by like notice):


 


39





















 


(a)               if to Buyer:


 


EPIQ
Systems Acquisition, Inc.


501
Kansas Avenue


Kansas
City, KS 66105

Attention: General Counsel

Telephone:            (913) 621-9500

Telecopy:              (913) 621-7281


 


with a
copy to:


 


Kirkland &
Ellis LLP


200
East Randolph Drive

Chicago, Illinois 60601

Attn:  Richard W. Porter, P.C.

Telephone:   (312) 861-2000

Telecopy:     (312) 861-2200


 


(b)               if to Seller:


 


Ajuta
International Pty. Ltd., as Trustee of Hypatia Trust


 c/o Wedlake Bell

52 Bedford Road

London WC1R 4LR


Attention:  Barry Wetherill


Facsimile
No.:  (44)(207) 395-3100


 


with a copy to:


 


Wormser,
Kiely, Galef & Jacobs LLP


825
Third Avenue


New
York, NY 10022


Attention:  Keith
M. Pinter, Esq.


Facsimile
No.:  (212) 687-5703


 


12.3         Severability.  Wherever possible, each provision hereof
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed as if
such invalid, illegal or unenforceable provision or provisions had never been
contained herein unless the deletion of such provisions or provisions would
result in such a material change as to cause completion of the transactions
contemplated hereby to be unreasonable.


 


12.4         Counterparts.  The Agreement may be executed in two or more
counterparts, each of which shall be considered an original instrument, but all
of which shall be


 


40





















 


considered one and
the same agreement, and shall become binding when one or more counterparts have
been executed and delivered by each of the parties.


 


12.5         Assignment; Successors and Assigns.  Neither this Agreement nor any of the rights,
interest or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties.  Notwithstanding anything to the contrary in
the immediately preceding sentence, each of Buyer and the Company may assign
its rights and obligations hereunder, in whole or in part, to any of its
Affiliates without the consent of any of the other parties hereto.  In addition, each of Buyer and the Company
may assign its rights and obligations pursuant to this Agreement in whole or in
part, in connection with any disposition or transfer of all or any portion of
Buyer’s, the Company’s or any of their respective subsidiaries’ or their
respective businesses in any form of transaction without the consent of any of
the other parties hereto.  Each of Buyer,
the Company and their subsidiaries may assign any or all of its rights pursuant
to this Agreement, including its rights to indemnification, to any of their
lenders as collateral security.  Any
purported assignment not in compliance with this Section 12.5 shall be
null and void.  Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors or assigns, heirs, legatees,
distributees, executors, administrators and guardians.


 


12.6         No Third Party Beneficiaries.  Nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.


 


12.7         Descriptive Headings.  Titles and headings to Articles and Sections
herein are inserted for convenience of reference only and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.


 


12.8         Disclosure Schedule; Construction of
Certain Provisions.  The Disclosure Schedule referred
to in this Agreement shall be construed with and as an integral part of this
Agreement to the same extent as if the same had been set forth in their
entirety herein.  Buyer acknowledges that
the disclosure or inclusion of any specific agreement, document, instrument,
report, item, fact or event by Seller or the Company in the Disclosure Schedule shall
not create any implication or constitute any admission by Seller, the Company
or its Affiliates or their respective Representatives that such agreement,
document, instrument, report, item, fact or event is material to the Seller,
the business or to the Company or their financial condition, businesses,
operations, liabilities, assets or properties or would constitute a Material
Adverse Effect.  Buyer shall not use the
fact of any disclosure or inclusion of any such agreement, document,
instrument, report, item, fact or event in the Disclosure Schedule or the
setting of such amounts in any dispute or controversy between the parties as to
whether any obligation, item or matter not described herein or included in the
Disclosure Schedule is or is not material for purposes of this Agreement.


 


12.9         Reasonable Consent Required.  Where any provision of this Agreement
requires a party to obtain the consent, approval or other acquiescence of any
other party, such consent, approval or other acquiescence shall not be
unreasonably conditioned, withheld or delayed by such other party, except as
otherwise provided in this Agreement.


 


41





















 


12.10       Waivers. 
Any term or provision of this Agreement may be waived, or the time for
its performance may be extended, by the party or parties entitled to the
benefit thereof.  The failure of any
party hereto to enforce at any time any provision of this Agreement shall not
be construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision.  No waiver of any breach of this Agreement
shall be held to constitute a waiver of any other or subsequent breach.


 


12.11       Governing Law; Jurisdiction; Waiver of
Jury Trial.  (a)  THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO THE LAWS THAT MIGHT BE APPLICABLE UNDER CONFLICTS
OF LAWS PRINCIPLES.


 


(b)       Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of any New York state court, or Federal court of the United States
of America, sitting in New York, New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or the agreements delivered in connection herewith or the
transactions contemplated hereby or thereby or for recognition or enforcement
of any judgment relating thereto, and each of the parties hereby irrevocably
and unconditionally (i) agrees not to commence any such action or
proceeding except in such courts, (ii) agrees that any claim in respect of
any such action or proceeding may be heard and determined in such New York
state court or, to the extent permitted by law, in such Federal court, (iii) waives,
to the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any such action or
proceeding in any such New York state or Federal court, and (iv) waives,
to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such New York state or Federal
court.  Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.  Each party to
this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 12.2. 
Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.


 


12.12       Enforcement.  The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached.  It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to specifically enforce the terms and provisions
of this Agreement, in addition to any other remedy to which any party is
entitled at law or in equity.


 


12.13       Entire Agreement; Amendments.  This Agreement, including the
Schedules and Exhibits, and the Confidentiality Agreement contains the
entire understanding of the parties hereto with regard to the subject matter
contained herein.  This Agreement may
only be amended, modified or supplemented by written agreement of the parties.


 


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12.14       Construction; Joint Drafting.  The parties acknowledge that they have
participated jointly in the negotiation and drafting of this Agreement and, in
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed consistent with the joint drafting hereof by the
parties 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.


 


[Signature page follows]


 


43





















 


IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed as of the day and year
first above written.


 


	
   

  	
  AJUTA INTERNATIONAL PTY. LTD.,

  
	
   

  	
  as Trustee of Hypatia Trust

  
	
   

  	
  “Seller”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ira B.
  Stechel

  	
   

  
	
   

  	
   

  	
  Title: Attorney In Fact

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EPIQ SYSTEMS ACQUISITION, INC.

  
	
   

  	
  “Buyer”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christopher
  E. Olofson

  	
   

  
	
   

  	
  Name: Christopher E. Olofson

  
	
   

  	
  Title: President and Chief Operating Officer

  
						



 


44