Document:

EX-10.5

 

Exhibit 10.5

SEVERANCE AGREEMENT

     This Severance Agreement (the “Agreement”) is made as of March 13, 2008 (the “Effective Date”)
by and between Layne Christensen Corporation, a Delaware corporation (“Company”), and Jeffrey J.
Reynolds, (“Employee”).

RECITALS

     Whereas, Employee currently serves as a key employee of Company and the services and
knowledge of Employee are valuable to Company in connection with the management of the Company’s
business;

     Whereas, Company’s Board of Directors (the “Board”) has determined that it is in the
best interest of Company and its stockholders to secure the Employee’s continued service and to
ensure Employee’s continued dedication and objectivity by providing Employee with certain severance
benefits if Company were to actually or constructively terminate Employee’s employment.

     Now, Therefore, in consideration of the premises and the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the adequacy of which
is hereby acknowledged, Company and Employee, each intending to be legally bound, agree as follows:

     1. Term. The term of this Agreement (the “Term”) shall commence on the Effective Date
and shall continue until the earlier of (i) the date on which Employee’s employment with Company
terminates pursuant to Section 3 or 4 of this Agreement or (ii) twelve (12) months following the
date of delivery to the Employee of written notice by the Company of its intent to terminate this
Agreement. Notwithstanding the foregoing, however, and regardless of whether written notice by the
Company of its intent to terminate this Agreement has already been provided, this Agreement may not
be terminated by the Company under clause (ii) above during the Three-Year Period (as defined in
Section 4(a) hereof). This Agreement shall, as of the Effective Date, supersede and replace in its
entirety any written or verbal employment agreement then in effect between Company and Employee.

     2. Restrictions on Employee’s Conduct.

          (a) Exclusive Services. During the Term, Employee shall at all times devote
Employee’s full-time attention, energies, efforts and skills to the business of Company (which term
shall hereinafter include each of Company’s subsidiaries) and shall not, directly or indirectly,
engage in any other business activity, whether or not for profit, gain or other pecuniary
advantages, without Company’s written consent, provided that such prior consent shall not be
required with respect to: (i) business interests that neither compete with Company nor interfere
with the performance of Employee’s duties and obligations under this Agreement; or (ii) Employee’s
charitable, philanthropic or professional association activities which do not interfere with the
performance of Employee’s duties and obligations under this Agreement.

          (b) Confidential Information. During the Term and after the termination of the Term,
Employee shall not disclose or use, directly or indirectly, any Confidential Information. For the
purposes of this Agreement, “Confidential Information” shall mean all information disclosed to
Employee, or known by him as a consequence of or through Employee’s employment with Company (under
this Agreement or prior to this Agreement) where such information is not generally known in the
trade or industry or was regarded or treated as confidential by Company, and where such information
refers or relates in any manner whatsoever to the business activities, processes, services or
products of Company. Confidential Information shall include business and development plans
(whether contemplated, initiated or completed), information with respect to the development of
technical and management services, business contacts, methods of operation, results of analysis,
business forecasts, financial data, costs, revenues, and similar information. Upon termination of
the Term, Employee shall immediately return to Company all property of Company and all Confidential
Information, which is in tangible form, including all copies, extracts, and summaries thereof and
any Confidential Information stored electronically on tapes computer disks or in any other manner.

 

 

          (c) Business Opportunities and Conflicts of Interests.

          (i) During the Term, Employee shall promptly disclose to Company each business
opportunity of a type which, based upon its prospects and relationship to the existing
businesses of Company, Company might reasonably consider pursuing. After termination of
this Agreement, regardless of the circumstances thereof, Company shall have the exclusive
right to participate in or undertake any such opportunity on its own behalf without any
involvement of Employee.

          (ii) During the Term, Employee shall refrain from engaging in any activity, practice or
act which conflicts with, or has the potential to conflict with, the interests of Company,
and he shall avoid any acts or omissions which are disloyal to, or competitive with Company.

          (d) Non-Solicitation. For a period of two years following any termination of this
Agreement, Employee shall not, except in the course of Employee’s duties under this Agreement,
directly or indirectly, induce or attempt to induce or otherwise counsel, advise, ask or encourage
any person to leave the employ of Company, or solicit or offer employment to any person who was
employed by Company at any time during the twelve-month period preceding the solicitation or offer.

          (e) Covenant Not to Compete.

          (i) During the Term, Employee shall not, without Company’s prior written consent,
directly or indirectly, either as an officer, director, employee, agent, advisor,
consultant, principal, stockholder, partner, owner or in any other capacity, on Employee’s
own behalf or otherwise, in any way engage in, represent, be connected with or have a
financial interest in, any business which is, or to Employee’s knowledge, is about to
become, engaged in any business with which Company is currently or has previously done
business or any subsequent line of business developed by Company or any business planned
during the Term to be established by Company. Notwithstanding the foregoing, Employee shall
be permitted to own passive investments in publicly held companies provided that such
investments do not exceed five percent (5%) of any such company’s outstanding equity.

          (ii) For a period of two years following any termination of this Agreement and without
regard to whether Company or Employee terminates this Agreement, Employee shall not, engage
in competition with Company, or solicit, from any person or entity who purchased any product
or service from Company during Employee’s employment hereunder, the purchase of any product
or service in competition with then existing products or services of Company.

          (iii) For purposes of this Agreement, Employee shall be deemed to engage in competition
with Company if he shall directly or indirectly, either individually or as a stockholder,
director, officer, partner, consultant, owner, employee, agent, or in any other capacity,
consult with or otherwise assist any person or entity engaged in services similar to those
provided by Company or any member of Company’s group of companies. The provisions of this
Section 2(e) shall apply in any location in which Company has established, or is in the
process of establishing, a business presence.

          (f) Employee Acknowledgment. Employee hereby agrees and acknowledges that the
restrictions imposed upon him by the provisions of this Section 2 are fair and reasonable
considering the nature of Company’s business, and are reasonably required for Company’s protection.

          (g) Invalidity. If a court of competent jurisdiction or an arbitrator shall declare
any provision or restriction contained in this Section 2 as unenforceable or void, the provisions
of this Section 2 shall remain in full force and effect to the extent not so declared to be
unenforceable or void, and the court may modify the invalid provision to make it enforceable to the
maximum extent permitted by law.

          (h) Specific Performance. Employee agrees that if he breaches any of the provisions
of this Section 2, the remedies available at law to Company would be inadequate and in lieu
thereof, or in addition thereto, Company shall be entitled to appropriate equitable remedies, including specific
performance

2

 

and injunctive relief. Employee agrees not to enter into any agreement, either written
or oral, which may conflict with this Agreement, and Employee authorizes Company to make known the
terms of this Section 2 to any person, including future employers of Employee.

          (i) Termination of Agreement by Company. Notwithstanding anything to the contrary,
the provisions of Sections 2(d) and (e) above shall not apply with respect to the Employee upon the
termination of this Agreement by the Company pursuant to clause (ii) of Section 1 hereof.

     3. Termination.

          (a) Termination by Company for Cause. Subject to the last sentence of this Section
3(a), at any time during the Term of this Agreement, Company may terminate Employee’s employment
for Cause, as defined below, upon at least fourteen (14) days written notice setting forth a
description of the conduct constituting Cause. If Employee’s employment is terminated for Cause,
he shall be entitled to:

          (i) payment of any earned but unpaid portion of Employee’s annual base salary as in
effect from time to time (“Base Salary”) through the effective date of such termination;

          (ii) reimbursement for any reasonable, unreimbursed and documented business expense he
has incurred in performing Employee’s duties hereunder;

          (iii) the right to elect continuation coverage of insurance benefits to the extent
required by law; and

          (iv) payment of any accrued but unpaid benefits (including without limitation, any
bonus due by virtue of having met all applicable performance targets prior to the effective
date of such termination), and any other rights, as required by the terms of any employee
benefit plan or program of Company.

For purposes of this Agreement, “Cause” shall mean: (1) conviction of Employee of, or the entry of
a plea of guilty or nolo contendere by Employee to, any felony, or any misdemeanor involving moral
turpitude; (2) fraud, misappropriation or embezzlement by Employee; (3) Employee’s wilful failure,
gross negligence or gross misconduct in the performance of Employee’s assigned duties for Company;
and (4) wilful failure by Employee to follow reasonable instructions of any officer to whom
Employee reports or the Board. Notwithstanding the provisions of this Section 3(a) defining
“Cause,” in the event of a Change of Control, as defined hereafter, a Termination for Cause shall
mean only a termination for an act of dishonesty by Employee constituting a felony which was
intended to or resulted in gain or personal enrichment of Employee at Company’s expense. For
purposes of this entire agreement and for the avoidance of doubt, the “termination” of Employee’s
employment is intended to be a “separation from service” under Code section 409A(a)(2)(A)(i) and is
to be interpreted in a manner consistent with such section and applicable Treasury regulations
issued thereunder.

          (b) Termination by Company Without Cause or Constructive Termination Not in Connection
with a Change of Control. At any time before a Change of Control, Company may terminate
Employee’s employment without Cause, by giving written notice of termination. If Employee’s
employment is terminated without Cause, or if there is a constructive termination without Cause, as
defined below, Employee shall be entitled to receive from Company the following:

                (i) severance benefits including:

          (A) subject to Section 3(h) below, payment of the then current Base Salary for
a severance Period of 24-months commencing on the effective date of Employee’s
termination (the “Severance Period”), in accordance with Company’s regular salary
payment practices;

3

 

          (B) continuation of the vesting of any outstanding stock options, restricted
stock awards and other equity incentive awards (“Equity-Based Awards”) and
continuation of the Employee’s rights to exercise any outstanding Equity-Based
Awards, through the full 24 month Severance Period. Employee shall be considered to
be an Employee of the Company during the entire Severance Period, and shall abide by
the Covenant Not to Compete of Section 3(e) of this Agreement;

          (C) for any outstanding stock options, restricted stock awards or other equity
incentive awards which are exercisable, payable or become vested only if one or more
pre-established performance criteria are satisfied (“Performance-Based Equity
Awards”), each Performance-Based Equity Award will become exercisable, payable or
become vested at the time of and only if the underlying performance criteria are
satisfied. In the case of any Performance-Based Equity Award that is a stock option
which becomes exercisable after the end of the Severance Period, such option will
remain exercisable until the earlier of the award’s original expiration date or 90
days after the end of the Severance Period; and

          (D) continued coverage for Employee (and, if applicable under the applicable
welfare benefit plan(s), his spouse and family) coverage under employee benefit
plans (such as medical, dental, disability and life) that covered him (or them)
immediately before Employee’s termination as if he had remained in employment until
the end of the Severance Period. If Employee’s participation in any plan is barred,
the Company shall either arrange to provide Employee (his spouse and family, if
applicable) substantially similar benefits or pay Employee the equivalent tax
affected value of the substantially similar benefits in cash, provided such cash
payment(s) are made in the tax years such that the payments are compliant with the
payment rules under Code section 409A.

          (ii) reimbursement for any reasonable, unreimbursed and documented business expense
Employee has incurred in performing his duties hereunder during the Term;

          (iii) payment of any accrued but unpaid benefits up to and including the effective date
of the termination of employment (including without limitation, any tax equalization
payments, bonus due up to the date on which the Severance Period commences), and any other
rights, as required by the terms of any employee benefit plan or program of Company;

          (iv) the right to elect continuation coverage of insurance benefits to the extent
required by law; and

          (v) payment of COBRA premiums.

For purposes of this Agreement, termination “without Cause” shall mean involuntary termination of
employment, at the direction of Company, in the absence of “Cause” as defined above. For purposes
of this Agreement, “constructive termination without Cause” shall mean a termination of Employee at
Employee’s own initiative within one year following the occurrence, without Employee’s prior
written consent, of one or more of the following events not on account of Cause (“Constructive
Termination Events”):

          (i) a significant and adverse diminution in the nature or scope of Employee’s
authority, title, responsibilities or duties, unless Employee is given new authority or
duties that are substantially comparable to Employee’s previous authority or duties;

          (ii) a reduction in Employee’s then-current Base Salary, or a significant reduction in
Employee’s opportunities for earnings under Employee’s incentive compensation plans (not
attributable to economic conditions or business performance at the time), or the termination
or significant reduction of any employee benefit or perquisite enjoyed by him (except as
part of a general reduction that applies to substantially all similarly situated employees
or participants);

4

 

          (iii) a change in Employee’s place of employment such that Employee is required to work
more than 50 miles from Employee’s then current place of employment; or

          (iv) the failure of Company to obtain an assumption in writing of its obligation to
perform this Agreement by any successor to all or substantially all of the assets of Company
within 45 days after a merger, consolidation, sale or similar transaction.

If Employee believes there exists a basis for a constructive termination without Cause, Employee
shall provide Company written notice within 30 days of the occurrence of the Constructive
Termination Event describing such event, and Company shall be provided the opportunity to cure the
cause of the constructive termination event within a 30-day period following Company’s receipt of
the written notice. If the cause of the constructive termination is cured, then no constructive
termination without Cause shall be found to have taken place.

          (c) Voluntary Termination by Employee. Employee may terminate this Agreement at any
time by giving 60 days’ written notice to Company. If Employee voluntarily terminates his
employment for reasons other than Employee’s death, disability, or constructive termination without
Cause, he shall be entitled to:

          (i) payment of any earned but unpaid portion of Employee’s then current Base Salary
through the effective date of such termination;

          (ii) reimbursement of any reasonable, unreimbursed and documented business expense
Employee has incurred in performing Employee’s duties hereunder.

          (iii) the right to elect continuation coverage of insurance benefits to the extent
required by law; and

          (iv) payment of any accrued but unpaid benefits, and any other rights, as required by
the terms of any employee benefit plan or program of Company.

Any payments made under this Section 3(c) shall be made within 30 days of Employee’s termination of
employment.

          (d) Termination Due to Death. Employee’s employment and this Agreement shall
terminate immediately upon Employee’s death. If Employee’s employment is terminated because of
Employee’s death, Employee’s estate or Employee’s beneficiaries, as the case may be, shall be
entitled to:

          (i) payment of any earned but unpaid portion of Employee’s then current Base Salary
through the effective date of such termination;

          (ii) reimbursement for any reasonable, unreimbursed and documented business expense
Employee incurred in performing Employee’s duties hereunder;

          (iii) the right to elect continuation coverage of insurance benefits to the extent
required by law;

          (iv) any pension survivor benefits that may become due pursuant to any employee benefit
plan or program of Company, and

          (v) immediate acceleration of the vesting of any Service-Based Equity Awards and
continuation of the Employee’s beneficiary’s rights to exercise any outstanding
Service-Based Equity-Based Awards until the earlier of the Award’s original expiration date
or 12 months following such death;

          (vi) for any Performance-Based Equity Awards, each Performance-Based Equity Award will
become exercisable, payable or become vested at the time of and only if the underlying
performance criteria are satisfied and in the case of any Performance-Based Equity Award
that is a stock option which becomes exercisable pursuant to this Section 3(d)(vi), such
option will remain exercisable until the earlier of the award’s original expiration
date or 12 months following such termination;

5

 

          (vii) payment of any accrued but unpaid benefits and any other rights as provided by
the terms of any employee benefit plan or program of Company.

Any payments made under this Section 3(d) shall be made within 30 days of Employee’s death.

     (e) Termination Due to Disability. Company may terminate Employee’s employment at any
time if Employee becomes disabled, upon written notice by Company to Employee. If Employee’s
employment is terminated because of Employee’s disability, he shall be entitled to:

          (i) payment of a lump-sum disability benefit equal to 12 months’ then current Base
Salary;

          (ii) immediate acceleration of the vesting of any Service-Based Equity Awards and
continuation of the Employee’s rights to exercise any outstanding Service-Based Equity-Based
Awards through the effective date of such termination and for a period of 12 months
following such termination;

          (iii) for any Performance-Based Equity Awards, each Performance-Based Equity Award will
become exercisable, payable or become vested if the underlying performance criteria are
satisfied and in the case of any Performance-Based Equity Award that is a stock option which
becomes exercisable pursuant to this Section 3(e)(iii), such option will remain exercisable
until the earlier of the award’s original expiration date or 12 months following such
termination;

          (iv) reimbursement for any reasonable, unreimbursed and documented business expense he
has incurred in performing Employee’s duties hereunder;

          (v) the right to elect continuation coverage of insurance benefits to the extent
required by law; and

          (vi) payment of any accrued but unpaid benefits and any other rights as provided by the
terms of any employee benefit plan or program of Company.

Any payments under this Section 3(e) shall be made within 30 days of Employee’s termination of
employment. “Disability,” as used in this paragraph, means a physical or mental illness, injury,
or condition that (a) prevents, or is likely to prevent, as certified by a physician, Employee from
performing one or more of the essential functions of Employee’s position, for at least 120
consecutive calendar days or for at least 150 calendar days, whether or not consecutive, in any 365
calendar day period, and (b) which cannot be accommodated with a reasonable accommodation, without
undue hardship on Company, as specified in the Americans with Disabilities Act.

          (f) Payments Terminated. If the Board of Company has determined in good faith that
the Employee has failed to comply with the requirements of the Confidentiality, Non-Solicitation
and Non-Competition provisions referenced in Section 2 hereof at any time following any
termination, then Company shall have no further obligation to pay any amounts or provide any
benefits under this Agreement.

          (g) No Obligation to Mitigate. Following any termination under this Section 3,
Employee shall not be required to mitigate the amount of any payment provided for in this Agreement
by seeking other employment or otherwise and except as expressly set forth herein no such other
employment, if obtained, or compensation or benefits payable in connection therewith shall reduce
any amounts or benefits to which Employee is entitled hereunder.

          (h) Payments to Specified Employee. If Employee is a “specified employee” (as defined in
section 409A(a)(2)(B)(i) of the Internal Revenue Code (the “Code”) (hereinafter a “Specified
Employee”)) at the time Employee is eligible to be paid any amounts under Section 3(b)(i)(A) and
(B), such payment(s) shall be made as follows:

          (i) That portion of the total amount to be paid to Employee which does not exceed two
times the lesser of (A) and (B), below, shall be paid in equal installments in accordance
with Company’s regular salary payment practices over the Severance Period —

6

 

          (A) The sum of Employee’s annualized compensation based upon the annual rate of
pay for services provided to Company for Company’s taxable year preceding Employee’s
taxable year in which Employee has a separation from service with Company (adjusted
for any increase during that year that was expected to continue indefinitely if
Employee had not terminated employment); or

          (B) The maximum amount that may be taken into account under a qualified plan
pursuant to section 401(a)(17) for the year of Employee’s termination of employment.

          (ii) That portion which exceeds the amount that may be paid under Section 3(h)(i) above
shall be paid in equal installments in accordance with Company’s regular salary payment
practices over the Severance Period except that no payments shall be made during the first
six months following Employee’s termination of employment and each such payment which
otherwise would have been made during such initial six-month time period shall be held in
arrears by Company until the first day after six months following Employee’s termination of
employment, at which time all amounts held in arrears shall be paid in a lump sum and the
remaining 18 months of severance pay shall be paid in equal installments in accordance with
Company’s regular salary payment practices over the remainder of the Severance Period.

     4. Continuation of Employment Upon Change of Control.

          (a) Continuation of Employment. Subject to the terms and conditions of this Section
4, in the event of a Change of Control of Company (as defined in Section 4(d)) at any time during
Employee’s employment hereunder, Employee will remain in the employ of Company for a period of an
additional three years from the date of such Change of Control (the “Change Control Date”).
Company shall, for the three year period (the “Three-Year Period”) immediately following the
Control Change Date, continue to employ Employee in a position without substantial adverse
alteration in the nature or status of Employee’s authority, duties or responsibility as compared
with the position Employee held immediately prior to the Change of Control. During the Three-Year
Period, Company shall continue to pay Employee salary on the same basis, at the same intervals and
at a rate not less than, that paid to Employee at the Control Change Date. Any termination of
employment by the Company following a Control Change Date and during the Three-Year Period (a
“Post-CoC Termination”) shall be governed by this Section 4 rather than the provisions of Section
3(a) or (b).

          (b) Benefits. During the Three Year Period, Employee shall be entitled to receive the
following benefits and participate, on the basis of his employment position, in each of the
following plans (collectively, the “Specified Benefits”) in existence, and in accordance with the
terms thereof, at the Control Change Date:

          (i) any incentive compensation plans including eligibility to receive grants under any
Company equity compensation plans;

          (ii) any benefit plan and trust fund associated therewith, related to life, health,
dental, disability, or accidental death and dismemberment insurance, and

          (iii) any other benefit plans hereafter made generally available to employees at
Employee’s level or to the employees of Company generally.

In addition, all outstanding Service-Based Equity Awards and Performance-Based Equity Awards held
by Employee shall become immediately vested on the Control Change Date.

          (c) Definition of Change of Control. For purposes of this Section, a “Change of
Control” means the first to occur of the following events:

          (i) Any person is or becomes the Beneficial Owner (within the meaning set forth in Rule
13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates (as defined below)
representing

7

 

50% or more of the combined voting power of the Company’s then outstanding
securities, excluding any person who becomes such a Beneficial Owner in connection with a
transaction described in clause (x) of paragraph (iii) of this Section 4(c); or

          (ii) During any 12-month period, the following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals who, on the
Effective Date, constitute the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the election of directors
of the Company) whose appointment or election by the Board or nomination for election by the
Company’s stockholders was approved by a vote of at least two-thirds of the directors then
still in office who either were directors on the date hereof or whose appointment, election
or nomination for election was previously so approved or recommended; or

          (iii) There is consummated a merger or consolidation of the Company with any other
corporation, OTHER THAN (x) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination with the ownership
of any trustee or other fiduciary holding securities under an employee benefit plan of the
Company at least 50% of the combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after such merger or
consolidation, or (y) a merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the securities
beneficially owned by such person any securities acquired directly from the Company or any
person (an “Affiliate”) that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with the Company other than in
connection with the acquisition by the Company or its Affiliates of a business) representing
50% or more of the combined voting power of the Company’s then outstanding securities; or

          (iv) The stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement for the sale or disposition
by the Company of all or substantially all of the Company’s assets, other than a sale or
disposition by the Company of all or substantially all of the Company’s assets to an entity,
at least 50% of the combined voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions as their ownership of the
Company immediately prior to such sale.

     Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred by
virtue of the consummation of any transaction or series of integrated transactions immediately
following which the record holders of the Company’s common stock immediately prior to such
transaction or series of transactions continue to have substantially the same proportionate
ownership in an entity which owns all or substantially all of the Company’s assets immediately
following such transaction or series of transactions.

          (d) Termination Without Cause After Change of Control. Notwithstanding any other
provision of this Section 4, at any time after the Control Change Date, Company may terminate the
employment of Employee with or without Cause. To the extent Employee experiences a Post-CoC
Termination:

          (i) Company shall pay Employee any earned but unpaid portion of
Employee’s Base Salary through the effective date of such Post-CoC Termination;

          (ii) Company shall reimburse Employee for any reasonable, unreimbursed and documented
business expenses Employee incurred in performing Employee’s duties hereunder;

8

 

          (iii) Company shall pay Employee an amount (the “Special Severance Payment”) equal to
the present value (calculated using a discount rate equal to 7.5% per annum) of Employee’s
Base Salary that would have been paid to Employee had Employee remained an employee until
the later of (A) the end of the Three-Year Period or (B) 24 months following the effective
date of Employee’s Post-CoC Termination (such additional 24 month period in this Section
4(d)(iii)(B) hereinafter referred to as the “Extended Period”);

          (iv) Company shall provide Employee (and, if applicable under the applicable welfare
benefit plan(s), his spouse and family) coverage under employee benefit plans (such as
medical, dental, disability and life) that covered him (or them) immediately before
Employee’s termination as if he had remained in employment until the end of the Three-Year
Period, or, if longer, the end of the Extended Period. If Employee’s participation in any
plan is barred, the Company shall either arrange to provide Employee (his spouse and family,
if applicable) substantially similar benefits or pay Employee the equivalent tax affected
value of the substantially similar benefits in cash, provided such cash payment(s) are made
in the tax years such that the payments are compliant with the payment rules under Code
section 409A.

          Subject to Section 4(f) below, all payments required under paragraphs (i) through (iii) above
shall be made no later than the fifth business day following the effective date of Employee’s
termination of employment.

          (e) Resignation following a Change of Control. If, within the Three-Year Period
Employee experiences a Constructive Termination Event, and after providing written notice to
Company no later than 90 days of the date the Constructive Termination Event first arose or
occurred, Company fails to cure the event or condition giving rise to the Constructive Event within
the 30-day period following Company’s receipt of the written notice, Employee may, effective at the
end of such 30-day cure period, resign his employment with Company (the “Resignation”). In
connection with such Resignation, Company shall pay to Employee the same amounts and benefits
Employee would have been entitled to receive if he experienced a Post-CoC Termination under Section
4(d) above.

          (f) Timing of Payments. The time at which all payments due under Sections 4(d) or
4(e) above will commence and the form in which such payments will be made will depend upon the
following two factors: (1) whether Employee is a Specified Employee and (2) whether the Post-CoC
Termination occurs on or before, or after the second anniversary of the Control Change Date. Each
of the payment scenarios is set forth below.

          (i) If Employee is a Specified Employee at the time Employee is eligible to be paid any
amounts under Section 4(d) or 4(e), and Employee’s termination from employment is on or
before the second anniversary of the Control Change Date, such payment(s) shall be made as
follows:

          (A) That portion of the total amount to be paid to Employee which does not
exceed two times the lesser of (1) and (2) below shall be paid in a lump sum payment
within 5 business days of Employee’s termination of employment—

          (1) The sum of Employee’s annualized compensation based upon the annual
rate of pay for services provided to Company for Company’s taxable year
preceding Employee’s taxable year in which Employee has a separation from
service with such Company (adjusted for any increase during that year that
was expected to continue indefinitely if Employee had not terminated
employment); or

          (2) The maximum amount that may be taken into account under a qualified
plan pursuant to section 401(a)(17) for the year of Employee’s termination
of employment.

          (B) That portion which exceeds the amounts that may be paid under Section
4(f)(i)(A) above shall be paid, in a lump sum, on the first day after the six month

9

 

anniversary of the effective date of Employee’s termination of employment.

          (ii) If Employee is not a Specified Employee at the time Employee is eligible to be
paid any amounts under Section 4(d) or 4(e), and Employee’s termination from employment is
on or before the second anniversary of the Control Change Date, such payment(s) shall be
paid in a lump sum payment within 5 business days of Employee’s termination of employment.

          (iii) If Employee is a Specified Employee at the time Employee is eligible to be paid
any amounts under Section 4(d) or 4(e), and Employee’s termination from employment is after
the second anniversary of the Control Change Date, such payment(s) shall be made as follows:

          (A) That portion of the total amount to be paid to Employee which does not
exceed two times the lesser of (1) and (2) below shall be paid in a lump sum payment
within 5 business days of Employee’s termination of employment—

          (1) The sum of Employee’s annualized compensation based upon the annual
rate of pay for services provided to Company for Company’s taxable year
preceding Employee’s taxable year in which Employee has a separation from
service with such Company (adjusted for any increase during that year that
was expected to continue indefinitely if Employee had not terminated
employment); or

          (2) The maximum amount that may be taken into account under a qualified
plan pursuant to section 401(a)(17) for the year of Employee’s termination
of employment.

          (B) That portion which exceeds the amount that may be paid under Section
4(f)(iii)(A) above shall be paid in equal installments in accordance with Employee’s
regular salary payment practices over the Severance Period except that no payments
shall be made during the first six months following Employee’s termination of
employment and each such payment which otherwise would have been made during such
initial six-month time period shall be held in arrears by Company until the first
payment made six months and one day following Employee’s termination of employment
at which time all amounts held in arrears shall be paid in a lump sum and the
remaining 18 months of severance pay shall be paid in equal installments in
accordance with Company’s regular salary payment practices over the Severance
Period.

          (iv) If Employee is not a Specified Employee at the time Employee is eligible to be
paid any amounts under Section 4(d) or 4(e), and Employee’s termination from employment is
after the second anniversary of the Control Change Date, such payment(s) shall be made as
follows:

          (A) That portion of the total amount to be paid to Employee which does not
exceed two times the lesser of (1) and (2), below, shall be paid in a lump sum
payment within 5 business days of Employee’s termination of employment—

          (1) The sum of Employee’s annualized compensation based upon the annual
rate of pay for services provided to Company for Company’s taxable year
preceding Employee’s taxable year in which Employee has a separation from
service with such Company (adjusted for any increase during that year that
was expected to continue indefinitely if Employee had not
terminated employment); or

          (2) The maximum amount that may be taken into account under a qualified
plan pursuant to section 401(a)(17) for the year of Employee’s termination
of employment.

          (B) That portion which exceeds the amount that may be paid under

10

 

Section 4(f)(iv)(A), above, shall be paid in equal installments over the Severance Period in
accordance with Company’s regular salary payment practices.

          (g) Mitigation and Expenses.

          (i) Other Employment. After the Control Change Date, Employee shall not be
required to mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise and except as expressly set forth herein no such other
employment, if obtained, or compensation or benefits payable in connection therewith shall
reduce any amounts or benefits to which Employee is entitled hereunder.

          (ii) Expenses. If any dispute should arise under this Agreement after the
Control Change Date involving an effort by Employee to protect, enforce or secure rights or
benefits claimed by Employee hereunder, Company shall pay (promptly upon demand by Employee
accompanied by reasonable evidence of incurrence) all reasonable expenses (including
attorney’s fees) incurred by Employee in connection with such dispute, without regard to
whether Employee prevails in such dispute except that Employee shall repay Company any
amounts so received if a court having jurisdiction shall make a final, non-appealable
determination that Employee acted frivolously or in bad faith by such dispute

          (h) Successors in Interest. The rights and obligations of Company and Employee under
this Section 4 shall inure to the benefit of and be binding in each and every respect upon the
direct and indirect successors and assigns of Company and Employee, regardless of the manner in
which such successors or assigns shall succeed to the interest of Company or Employee hereunder and
this Section 8 shall not be terminated by the voluntary or involuntary dissolution of Company or
any merger or consolidation or acquisition involving Company, or upon any transfer of all or
substantially all of Company’s assets, or terminated otherwise than in accordance with its terms.
In the event of any such merger or consolidation or transfer of assets, the provision of this
Section 4 shall be binding upon and shall inure to the benefit of the surviving corporation or the
corporation or other person to which such assets shall be transferred.

     5. Deductions and Withholding. Employee agrees that Company may withhold from any and
all payments required to be made by Company to Employee under this Agreement all taxes or other
amounts that Company is required by law to withhold in accordance with applicable laws or
regulations from time to time in effect.

     6. Gross Up Payment. If at any time or from time to time, it shall be determined by
tax counsel mutually agreeable to Company and Employee that any payment or other benefit to
Employee pursuant to this Agreement or otherwise (“Potential Parachute Payment”) is or will become
subject to the excise tax imposed by Section 4999 of the Code or any similar tax (“Excise Taxes”),
then Company shall, subject to the limitations below, pay or cause to be paid a tax gross-up
payment (“Gross-Up Payment”) with respect to all such Excise Taxes and other taxes on the Gross-Up
Payment. The Gross-Up Payment shall be an amount equal to the product of (a) the amount of the
Excise Taxes multiplied by (b) a fraction (the “Gross-Up Multiple”), the numerator or which is one
(1.0), and the denominator of which is one (1.0) minus the lesser of (i) the sum, expressed as a
decimal fraction, of the effective marginal rates of any taxes and any Excise Taxes applicable to
the Gross-Up Payment or (ii) .80, it being intended that the Gross-Up Multiple shall in no event
exceed five (5.0). If different rates of tax are applicable to various portions of a Gross-Up
Payment, the weighted average of such rates shall be used. Excise Taxes and other penalties under
Section 409A of the Code shall not be “any similar tax” for purposes of this Agreement.

          (a) To the extent possible, any payments or other benefits to Employee pursuant to this
Agreement shall be allocated as consideration for Employee’s entry into the covenants made by him
in Paragraph 4(a).

          (b) Notwithstanding any other provisions of this Section 6, if the aggregate After-Tax Amount
(as defined below) of the Potential Parachute Payments and Gross-Up Payment that, but for this

11

 

limitation, would be payable to Employee, does not exceed 120% of After-Tax Floor Amount (as
defined below), then no Gross-Up Payment shall be made to Employee and the aggregate amount of
Potential Parachute Payments payable to Employee shall be reduced (but not below the Floor
Amount) to the largest amount which would both (i) not cause any Excise Tax to be payable by
Employee and (ii) not cause any Potential Parachute Payments to become nondeductible by Company by
reason of Section 280G of the Code (or any successor provision). For purposes of the preceding
sentence, Employee shall be deemed to be subject to the highest effective after-tax marginal rate
of taxes. For purposes of this Agreement:

          (i) “After-Tax Amount” means the portion of a specified amount that would remain after
payment of all taxes paid or payable by Employee in respect of such specified amount; and

          (ii) “Floor Amount” means the greatest pre-tax amount of Potential Parachute Payments
that could be paid to Employee without causing Employee to become liable for any
Excise Taxes in connection therewith; and

          (iii) “After-Tax Floor Amount” means the After-Tax Amount of the Floor Amount.

          (c) If for any reason tax counsel mutually agreeable to Company and Employee later determine
that the amount of Excise Taxes payable by Employee is greater than the amount initially determined
pursuant to the above provisions of this Section 6, then Company shall, subject to Sections 6(d)
and 6(e) pay Employee, within thirty (30) days of such determination, or pay to the IRS as required
by applicable law, an amount (which shall also be deemed a Gross-Up Payment) equal to the
product of (a) the sum of (i) such additional Excise Taxes and (ii) any interest, penalties,
expenses or other costs incurred by Employee as a result of having taken a position in accordance
with a determination made pursuant to Paragraph 6(d), multiplied by (b) the Gross-Up Multiple.

          (d) Employee shall immediately notify Company in writing (an “Employee’s Notice”) of any
claim by the IRS or other taxing authority (an “IRS Claim”) that, if successful, would
require the payment by Employee of Excise Taxes in respect of Potential Parachute Payments in an
amount in excess of the amount of such Excise Taxes determined in accordance with Section 6.
Employee’s Notice shall fully inform Company of all particulars of the IRS Claim and the date on
which such IRS Claim is due to be paid (the “IRS Claim Deadline”).

          Company shall direct the Employee as to whether to pay all or part of the IRS Claim or to
contest the IRS Claim or to pursue a claim for a refund (a “Refund Claim”) of all or any portion
of such Excise Taxes, other taxes, interest or penalties as may be specified by Company in a
written notice to Employee. If Company directs Employee to pay all or part of the IRS Claim, the
amount of such payment shall also be deemed a Gross-Up Payment, which Company shall pay to the
Employee or the IRS, as appropriate. The Employee shall cooperate fully with Company in good faith
to contest such IRS Claim or pursue such Refund Claim (including appeals) and shall permit Company
to participate in any proceedings relating to such IRS Claim or Refund Claim.

          Company shall control all proceedings in connection with such IRS Claim or Refund Claim (as
applicable) and in its discretion may cause Employee to pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the Internal Revenue Service or other taxing
authority.

          Company shall pay directly all legal, accounting and other costs and expenses (including
additional interest and penalties) incurred by Company or Employee in connection with any IRS Claim
or Refund Claim, as applicable, and shall indemnify Employee, on an after-tax basis, for any Excise
Tax or income tax, including related interest and penalties, imposed as a result of such payment
of costs or expenses.

          (e) If Employee receives any refund with respect to Excise Taxes, Employee shall (subject to
Company’s complying with any applicable requirements of Section 6(d)) promptly pay Company the
amount of such refund (together with any interest paid or credited thereon after taxes applicable
thereto). Any contest of a denial of refund shall be controlled by Section 6(d).

12

 

          (f) 409A Compliance. Any Gross-Up Payment made under this Agreement shall be made no
later than by the end of Employee’s taxable year next following Employee’s taxable year in which he
remits the Excise Taxes. In the event Employee has a right to a Gross-Up Payment due to a tax
audit or litigation addressing the existence or amount of a tax liability, whether Federal, state,
local, or foreign, any Gross-Up Payment relating thereto will be made by the end of Employee’s
taxable year following Employee’s taxable year in which the taxes that are the subject of the audit
or litigation are remitted to the taxing authority, or where as a result of such audit or
litigation no taxes are remitted, the end of Employee’s taxable year in which the audit is
completed or there is a final and nonappealable settlement or other resolution of the litigation.

     7. Arbitration. Whenever a dispute arises between the Parties concerning this
Agreement or any of the obligations hereunder, or Employee’s employment generally, Company and
Employee shall use their best efforts to resolve the dispute by mutual agreement. If any dispute
cannot be resolved by Company and Employee, it shall be submitted to arbitration to the exclusion
of all other avenues of relief and adjudicated pursuant to the American Arbitration Association’s
Rules for Employment Dispute Resolution then in effect. The decision of the arbitrator must be in
writing and shall be final and binding on the Parties, and judgment may be entered on the
arbitrator’s award in any court having jurisdiction thereof. The expenses of the arbitration will
be split equally between the parties and each party shall be responsible for paying his or its own
costs, including attorneys’ fees associated with such arbitration. Nothing in this Section 7 shall
be construed to derogate Company’s rights to seek legal and equitable relief in a court of
competent jurisdiction as contemplated by Section 2(h).

     8. Non-Waiver. It is understood and agreed that one party’s failure at any time to
require the performance by the other party of any of the terms, provisions, covenants or conditions
hereof shall in no way affect the first party’s right thereafter to enforce the same, nor shall the
waiver by either party of the breach of any term, provision, covenant or condition hereof be taken
or held to be a waiver of any succeeding breach.

     9. Severability. If any provision of this Agreement conflicts with the law under
which this Agreement is to be construed, or if any such provision is held invalid or unenforceable
by a court of competent jurisdiction or any arbitrator, such provision shall be deleted from this
Agreement and the Agreement shall be construed to give full effect to the remaining provisions
thereof.

     10. Survivability. Unless otherwise provided herein, upon termination or expiration
of the Term, the provisions of Sections 2 through 14 above shall nevertheless remain in full force
and effect but shall under no circumstance extend the Term of this Agreement (or the Executive’s
right to accrue additional benefits beyond the expiration of the Term as determined in accordance
with Section 1 but without regard to this Section).

     11. Governing Law. This Agreement shall be interpreted, construed and governed
according to the laws of the State of Delaware without regard to the conflict of law provisions
thereof.

     12. Construction. The Section headings and captions contained in this Agreement are
for convenience only and shall not be construed to define, limit or affect the scope or meaning of
the provisions hereof. All references herein to Sections shall be deemed to refer to numbered
sections of this Agreement.

     13. Entire Agreement. This Agreement contains and represents the entire agreement of
Company and Employee and supersedes all prior agreements, representations or understandings, oral
or written, express or implied with respect to the subject matter hereof. This Agreement may not
be modified or amended in any way unless in a writing signed by each of Company and Employee. No
representation, promise or inducement has been made by either Company or Employee that is not
embodied in this Agreement, and neither Company nor Employee shall be bound by or liable for any
alleged representation, promise or inducement not specifically set forth herein.

13

 

     14. Assignability. Neither this Agreement nor any rights or obligations of Company or
Employee hereunder may be assigned by Company or Employee without the other Party’s prior written
consent. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit
of Company and Employee and their heirs, successors and assigns.

     15. Code Section 409A. This Agreement is intended to meet the requirements of Section
409A of the Code and may be administered in a manner that is intended to meet those requirements
and shall be construed and interpreted in accordance with such intent. To the extent that any
payment or benefit provided hereunder is subject to Section 409A of the Code, such payment or
benefit shall be provided in a manner that will meet the requirements of Section 409A of the Code,
including regulations or other guidance issued with respect thereto, such that the payment or
benefit shall not be subject to the excise tax applicable under Section 409A of the Code. Any
provision of this Agreement that would cause any payment or benefit to fail to satisfy Section 409A
of the Code shall be amended (in a manner that as closely as practicable achieves the original
intent of this Agreement) to comply with Section 409A of the Code on a timely basis, which may be
made on a retroactive basis, in accordance with regulations and other guidance issued under Section
409A of the Code.

     16. Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed properly given if delivered personally or sent by certified or registered mail,
postage prepaid, return receipt requested, or sent by telegram, telex, telecopy or similar form of
telecommunication, and shall be deemed to have been given when received. Any such notice or
communication shall be addressed:

	 	 	 
	if to Company, to
	 	Layne Christensen Company

	 
	 	Attention:  General Counsel

	 
	 	1900 Shawnee Mission Parkway

	 
	 	Mission Woods, Kansas  66205
	 
	 	Fax: (913) 362-8823
	 
	 	 
	if to Employee, to
	 	Jeffrey J. Reynolds

or to such other address as Company or Employee shall have furnished to the other in writing.

     IN WITNESS WHEREOF, the Parties have duly executed this Agreement, to be effective as of the
date first above written.

	 	 	 	 	 
	 	 	 
	 	     /s/ Jeff Reynolds
 	 
	 	Jeffrey J. Reynolds 	 
	 
	 	Layne Christensen Company

 	 
	 	By:  	/s/ A. B. Schmitt
 	 
	 	 	Andrew B. Schmitt 	 
	 	 	President 	 
	 

14EX-10.48

 

Exhibit 10.48

STOCK PURCHASE AGREEMENT

AMONG

ULTRALIFE BATTERIES, INC.

AND

STATIONARY POWER SERVICES, INC.

AND

WILLIAM MAHER

OCTOBER 30, 2007

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	Section	 	Page
	SECTION 1. Definitions
	 	 	1	 
	 
	 	 	 	 
	SECTION 2. Purchase and Sale of Target Shares
	 	 	6	 
	 
	 	 	 	 
	(a) Basic Transaction
	 	 	6	 
	(b) Purchase Price; Payment
	 	 	6	 
	(c) Closing
	 	 	8	 
	(d) Deliveries at Closing
	 	 	8	 
	(e) Post-Closing Purchase Price Adjustment
	 	 	8	 
	 
	 	 	 	 
	SECTION 3. Transaction Representations and Warranties
	 	 	9	 
	 
	 	 	 	 
	(a) Seller’s Representations and Warranties
	 	 	9	 
	(b) Buyer’s Representations and Warranties
	 	 	12	 
	 
	 	 	 	 
	SECTION 4. Target Representations and Warranties
	 	 	14	 
	 
	 	 	 	 
	(a) Organization, Qualification, and Corporate Power
	 	 	14	 
	(b) Capitalization
	 	 	14	 
	(c) Non-contravention
	 	 	15	 
	(d) Brokers’ Fees
	 	 	15	 
	(e) Title to Assets
	 	 	15	 
	(f) Subsidiaries
	 	 	15	 
	(g) Financial Statements
	 	 	15	 
	(h) Events Subsequent to Most Recent Fiscal Year End
	 	 	15	 
	(i) Undisclosed Liabilities
	 	 	17	 
	(j) Legal Compliance
	 	 	18	 
	(k) Tax Matters
	 	 	18	 
	(l) Real Property
	 	 	20	 
	(m) Intellectual Property
	 	 	23	 
	(n) Tangible Assets
	 	 	26	 
	(o) Inventory
	 	 	26	 
	(p) Contracts
	 	 	26	 
	(q) Notes and Accounts Receivable
	 	 	28	 
	(r) Powers of Attorney
	 	 	28	 
	(s) Insurance
	 	 	28	 
	(t) Litigation
	 	 	29	 
	(u) Product Warranty
	 	 	29	 
	(v) Product Liability
	 	 	29	 
	(w) Employees
	 	 	29	 

-i-

 

	 	 	 	 	 
	Section	 	Page
	SECTION 4. Target Representations and Warranties (cont’d)
	 	 	 	 
	 
	 	 	 	 
	(x) Employee Benefits
	 	 	30	 
	(y) Guaranties
	 	 	33	 
	(z) Environmental, Health, and Safety Matters
	 	 	33	 
	(aa) Certain Business Relationships with Target
	 	 	34	 
	(bb) Customers and Suppliers
	 	 	35	 
	(cc) Disclosure
	 	 	35	 
	 
	 	 	 	 
	SECTION 5. Pre-Closing Covenants
	 	 	35	 
	 
	 	 	 	 
	(a) General
	 	 	35	 
	(b) Notices and Consents
	 	 	35	 
	(c) Operation of Business
	 	 	35	 
	(d) Preservation of Business
	 	 	36	 
	(e) Full Access
	 	 	36	 
	(f) Notice of Developments
	 	 	36	 
	(g) Exclusivity
	 	 	36	 
	(h) Maintenance of Real Property
	 	 	36	 
	(i) Leases
	 	 	36	 
	(j) Tax Matters
	 	 	36	 
	(k) S Corporation Status
	 	 	37	 
	(l) Employee Benefits and Welfare Matters
	 	 	37	 
	 
	SECTION 6. Post-Closing Covenants
	 	 	37	 
	 
	(a) General
	 	 	37	 
	(b) Litigation Support
	 	 	37	 
	(c) Transition
	 	 	38	 
	(d) Confidentiality
	 	 	38	 
	(e) Release of Target by Seller
	 	 	38	 
	 
	 	 	 	 
	SECTION 7. Conditions to Obligation to Close
	 	 	39	 
	 
	 	 	 	 
	(a) Conditions to Buyer’s Obligation
	 	 	39	 
	(b) Conditions to Seller’s Obligation
	 	 	41	 
	 
	 	 	 	 
	SECTION 8. Remedies for Breaches of This Agreement
	 	 	42	 
	 
	 	 	 	 
	(a) Survival of Representations and Warranties
	 	 	42	 
	(b) Indemnification Provisions for Buyer’s Benefit
	 	 	43	 
	(c) Indemnification Provisions for Seller’s Benefit
	 	 	44	 
	(d) Matters Involving Third Parties
	 	 	44	 
	(e) Determination of Adverse Consequences
	 	 	46	 
	(f) Setoff against Promissory Note Payments; Priority
	 	 	46	 
	(g) Other Indemnification Provisions
	 	 	46	 
	 
	 	 	 	 
	SECTION 9. Tax Matters
	 	 	47	 
	 
	 	 	 	 
	(a) Tax Indemnification
	 	 	47	 
	(b) Responsibility for Filing Tax Returns
	 	 	47	 
	(c) Cooperation on Tax Matters
	 	 	47	 

-ii-

 

	 	 	 	 	 
	Section	 	Page
	(d) Tax Sharing Agreements
	 	 	48	 
	(e) Certain Taxes and Fees
	 	 	48	 
	(f) Section 338(h)(10) Election
	 	 	48	 
	(g) Tax Adjustment
	 	 	49	 
	(h) Tax Refund
	 	 	50	 
	 
	 	 	 	 
	SECTION 10 Termination
	 	 	50	 
	 
	 	 	 	 
	(a) Termination of Agreement
	 	 	50	 
	(b) Effect of Termination
	 	 	50	 
	 
	 	 	 	 
	SECTION 11
	 	 	51	 
	 
	 	 	 	 
	(a) Press Releases and Public Announcements; Confidentiality
	 	 	51	 
	(b) No Third-Party Beneficiaries
	 	 	51	 
	(c) Entire Agreement
	 	 	51	 
	(d) Succession and Assignment
	 	 	52	 
	(e) Counterparts
	 	 	52	 
	(f) Headings
	 	 	52	 
	(g) Notices
	 	 	52	 
	(h) Governing Law
	 	 	53	 
	(i) Amendments and Waivers
	 	 	53	 
	(j) Severability
	 	 	53	 
	(k) Expenses
	 	 	53	 
	(l) Construction
	 	 	53	 
	(m)Incorporation of Exhibits, Annexes, and Schedules
	 	 	54	 
	(n) Specific Performance
	 	 	54	 
	(o) Submission to Jurisdiction
	 	 	54	 
	(p) Tax Disclosure Authorization
	 	 	54	 

-iii-

 

Attachments to Stock Purchase Agreement

	1.	 	Annex I: Exceptions to Seller’s Representations and Warranties
	 
	2.	 	Annex II: Exceptions to Buyer’s Representations and Warranties
	 
	3.	 	Disclosure Schedule for Target
	 
	4.	 	Exhibit A: Form of Promissory Note
	 
	5.	 	Exhibit B: Financial Statements of Target
	 
	6.	 	Exhibit C: Form of Lease Agreement
	 
	7.	 	Exhibit D-1: Form of Employment Agreement for William Maher
	 
	 	 	Exhibit D-2: Form of Employment Agreement for Edward Bellamy
	 
	8.	 	Exhibit E: Form of Registration Rights Agreement

-iv-

 

STOCK PURCHASE AGREEMENT

     This Stock Purchase Agreement (this “Agreement”) is entered into as of October 30, 2007, by
and among Ultralife Batteries, Inc., a Delaware corporation (“Buyer”), Stationary Power Services,
Inc., a Florida corporation (“Target”), and William Maher (“Seller”). Buyer, Target and Seller are
referred to collectively herein as the “Parties.”

RECITALS

     A. Seller owns all of the outstanding capital stock of Target.

     B. This Agreement contemplates a transaction in which Buyer will purchase from Seller, and
Seller will sell to Buyer, all of the outstanding capital stock of Target in return for certain
consideration described below.

     NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in
consideration of the representations, warranties, and covenants herein contained, the Parties agree
as follows.

SECTION 1. DEFINITIONS

     “Adjusted Net Worth” has the meaning set forth in Section 2(e) below.

     “Adverse Consequences” means all actions, suits, proceedings, hearings, investigations,
charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages,
dues, penalties, fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens,
actual losses, expenses, and fees, including court costs and attorneys’ fees and expenses.

     “Affiliate” means a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the person specified.

     “Affiliated Group” means any affiliated group within the meaning of Code Section 1504(a) or
any similar group defined under a similar provision of state, local or foreign law.

     “Auditor” has the meaning set forth in Section 2(e) below.

     “Basis” means any past or present fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or transaction that forms or
could form the basis for any specified consequence.

     “Buyer” has the meaning set forth in the preface above.

     “Closing” has the meaning set forth in Section 2(c) below.

     “Closing Balance Sheet” has the meaning set forth in Section 2(e) below.

     “Closing Date” has the meaning set forth in Section 2(c) below.

 

 

     “Closing Payment” has the meaning set forth in Section 2(b) below.

     “COBRA” means the requirements of Part 6 of Subtitle B of Title I of ERISA and Code Section
4980B and of any similar state law.

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

     “Confidential Information” means any information concerning the businesses and affairs of the
Target, Seller or Buyer, as the context requires, that is not already generally available to the
public.

     “Controlled Group” has the meaning set forth in Code Section 1563.

     “Disclosure Schedule” has the meaning set forth in Section 4 below.

     “Employee Benefit Plan” has the meaning set forth in Section 4(x) below.

     “Employee Pension Benefit Plan” has the meaning set forth in ERISA Section 3(2).

     “Employee Welfare Benefit Plan” has the meaning set forth in ERISA Section 3(1).

     “Employment Agreements” means the forms of employment agreement attached as Exhibits D-1
and D-2 to this Agreement.

     “Encumbrance Documents” has the meaning set forth in Section 4(l) below.

     “Environmental, Health, and Safety Requirements” shall mean all federal, state, local, and
foreign statutes, regulations, ordinances, and other provisions having the force or effect of law,
all judicial and administrative orders and determinations, all contractual obligations, and all
common law concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including, without limitation, all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage, disposal, distribution,
labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances, or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise, or radiation, each as amended and as now or hereafter in effect.

     “Equity Payments” has the meaning set forth in Section 2(b)(iii) below.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

     “ERISA Affiliate” means any Person that is a member of a “controlled group of corporations”
with, or is under “common control” with, or is a member of the same “affiliated service group” with
Target, as defined in Section 414 of the Code.

     “Estoppel Certificates” has the meaning set forth in Section 7(a) below.

     “Fiduciary” has the meaning set forth in ERISA Section 3(21).

-2-

 

     “Financial Statements” has the meaning set forth in Section 4(g) below.

     “GAAP” means United States generally accepted accounting principles as in effect from time to
time, consistently applied.

     “Improvements” has the meaning set forth in Section 4(l) below.

     “Indemnified Party” has the meaning set forth in Section 8(d) below.

     “Indemnifying Party” has the meaning set forth in Section 8(d) below.

     “Intellectual Property” means all of the following in any jurisdiction throughout the world:
(a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent disclosures, together with
all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade names, corporate
names, Internet domain names, and rights in telephone numbers, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill associated therewith,
and all applications, registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in connection therewith,
(d) all mask works and all applications, registrations, and renewals in connection therewith, (e)
all trade secrets and confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing and cost information,
and business and marketing plans and proposals), (f) all computer software (including source code,
executable code, data, databases, and related documentation), (g) all advertising and promotional
materials, (h) all other proprietary rights, and (i) all copies and tangible embodiments thereof
(in whatever form or medium).

     “Knowledge” means actual knowledge after reasonable investigation.

     “Lease Agreement” means the form of Lease Agreement attached as Exhibit C to this
Agreement.

     “Lease Consents” has the meaning set forth in Section 7(a) below.

     “Leased Real Property” means all leasehold or subleasehold estates and other rights to use or
occupy any land, buildings, structures, improvements, fixtures, or other interest in real property
held by Target.

     “Leases” means all leases, subleases, licenses, concessions and other agreements (written or
oral), including all amendments, extensions, renewals, guaranties, and other agreements with
respect thereto, pursuant to which Target holds any Leased Real Property, including the right to
all security deposits and other amounts and instruments deposited by or on behalf of Target
thereunder.

     “Liability” means any liability or obligation of whatever kind or nature (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or

-3-

 

unaccrued, whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.

     “Lien” means any mortgage, pledge, lien, encumbrance, charge, or other security interest,
other than (a) liens for Taxes not yet due and payable and (b) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.

     “Material Adverse Effect” or “Material Adverse Change” means any effect or change that would
be materially adverse to the business, assets, condition (financial or otherwise), operating
results, operations, or business prospects of Target, taken as a whole, or on the ability of Seller
to consummate timely the transactions contemplated hereby (regardless of whether or not such
adverse effect or change can be or has been cured at any time or whether Buyer has knowledge of
such effect or change on the date hereof).

     “Measuring Periods” means the following periods of time: (i) the period commencing on the
Closing Date and ending on December 31, 2008; (ii) the period commencing on January 1, 2009 and
ending on December 31, 2009; (iii) the period commencing on January 1, 2010 and ending on December
31, 2010; (iv) the period commencing on January 1, 2011 and ending on December 31, 2011; and (v)
the period commencing on January 1, 2012 and ending on December 31, 2012. Each of such Measuring
Periods may be referred to individually as a “Measuring Period.”

     “Most Recent Balance Sheet” means the balance sheet contained within the Most Recent Financial
Statements.

     “Most Recent Financial Statements” has the meaning set forth in Section 4(g) below.

     “Most Recent Fiscal Month End” has the meaning set forth in Section 4(g) below.

     “Most Recent Fiscal Year End” has the meaning set forth in Section 4(g) below.

     “Multiemployer Plan” has the meaning set forth in ERISA Section 3(37).

     “Non-Disturbance Agreements” has the meaning set forth in Section 7(a) below.

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

     “Party” has the meaning set forth in the preface above.

     “Permitted Encumbrances” means with respect to each parcel of Real Property: (a) real estate
taxes, assessments and other governmental levies, fees, or charges imposed with respect to such
Real Property that are (i) not due and payable as of the Closing Date or (ii) that are being
contested in good faith and for which appropriate reserves have been established in accordance with
GAAP; (b) mechanics’ liens and similar liens for labor, materials, or supplies provided with
respect to such Real Property incurred in the Ordinary Course of Business for amounts that are (i)
not due and payable as of the Closing Date or (ii) being contested in good faith and for which
appropriate reserves have been established in accordance with GAAP; (c) zoning, building codes

-4-

 

and other land use laws regulating the use or occupancy of such Real Property or the
activities conducted thereon which are imposed by any governmental authority having jurisdiction
over such Real Property and are not violated by the current use or occupancy of such Real Property
or the operation of Target’s business as currently conducted thereon; and (d) easements, covenants,
conditions, restrictions, and other similar matters of record affecting title to such Real Property
which do not or would not impair the use or occupancy of such Real Property in the operation of
Target’s business as currently conducted thereon.

     “Person” means an individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated organization, any
other business entity, or a governmental entity (or any department, agency, or political
subdivision thereof).

     “Prohibited Transaction” has the meaning set forth in ERISA Section 406 and Code Section 4975.

     “Promissory Note” has the meaning set forth in Section 2(b)(ii) below.

     “Purchase Price” has the meaning set forth in Section 2(b) below.

     “Real Property” has the meaning set forth in Section 4(l) below.

     “Real Property Laws” has the meaning set forth in Section 4(l) below.

     “Registrable Securities” means those Ultralife Shares issuable to Seller in accordance with
the provisions of Section 2(b)(iii).

     “Registration Rights Agreement” means the form of Registration Rights Agreement attached as
Exhibit E to this Agreement.

     “Reportable Event” has the meaning set forth in ERISA Section 4043.

     “Sales” means revenues, determined in accordance with GAAP, that are achieved by Target in the
ordinary course of business.

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

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

     “Seller” has the meaning set forth in the preface above.

     “Subsidiary” means, with respect to any Person, any corporation, limited liability company,
partnership, association, or other business entity of which (i) if a corporation, a majority of the
total voting power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers, or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation), a majority of

-5-

 

partnership or other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination
thereof and for this purpose, a Person or Persons own a majority ownership interest in such a
business entity (other than a corporation) if such Person or Persons shall be allocated a majority
of such business entity’s gains or losses or shall be or control any managing director or general
partner of such business entity (other than a corporation). The term “Subsidiary” shall include all
Subsidiaries of such Subsidiary.

     “Target” has the meaning set forth in the preface above.

     “Target Share” means any share of the common stock, par value $0.01 per share, of Target.

     “Tax” or “Taxes” means any federal, state, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not and including any obligations to indemnify or otherwise assume or
succeed to the Tax liability of any other Person.

     “Tax Return” means any return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment thereto, and including any
amendment thereof.

     “Third Party Claim” has the meaning set forth in Section 8(d) below.

     “Treasury Regulations” means the Treasury Regulations promulgated under the Code.

     “Ultralife Shares” means shares of common stock, par value $0.10 per share, of Ultralife
Batteries, Inc.

SECTION 2. PURCHASE AND SALE OF TARGET SHARES

     (a) Basic Transaction. On and subject to the terms and conditions of this Agreement, Buyer
agrees to purchase from Seller, and Seller agrees to sell to Buyer, all of his Target Shares for
the consideration specified below in this Section 2.

     (b) Purchase Price; Payment. The aggregate consideration for the Target Shares shall be up to
$10,000,000, subject to adjustment after Closing as provided by Section 2(e), plus up to 100,000
Ultralife Shares (together, as adjusted, the “Purchase Price”). On the terms and subject to the
conditions set forth herein, Buyer shall pay the Purchase Price to Seller as follows:

(i) At Closing, Buyer shall pay Seller the aggregate amount of $6,000,000 by wire
transfer of immediately available funds into an account designated by Seller prior
to the Closing Date (the “Closing Payment”). The Closing Payment shall be

-6-

 

made by a single wire transfer. The Closing Payment shall be subject to adjustment
after Closing as provided by Section 2(e).

(ii) At Closing, Buyer shall execute and deliver to Seller a subordinated
convertible promissory note with a principal amount of $4,000,000 and a term of
three years in the form attached hereto as Exhibit A (the “Promissory
Note”).

(iii) Following the Closing, during the Measuring Periods if Target achieves certain
Sales target, then Buyer shall issue up to an aggregate of 100,000 Ultralife Shares
to Seller on the following terms and conditions (the “Equity Payments”):

     (A) The first time Sales exceed $14,000,000 during any of the Measuring Periods, and
only the first time such threshold is exceeded, Buyer shall issue 20,000 Ultralife Shares to
Seller.

     (B) The first time Sales exceed $16,500,000 during any of the Measuring Periods, and
only the first time such threshold is exceeded, Buyer shall issue an additional 20,000
Ultralife Shares to Seller.

     (C) The first time Sales exceed $19,000,000 during any of the Measuring Periods, and
only the first time such threshold is exceeded, Buyer shall issue an additional 20,000
Ultralife Shares to Seller.

     (D) The first time Sales exceed $22,000,000 during any of the Measuring Periods, and
only the first time such threshold is exceeded, Buyer shall issue an additional 20,000
Ultralife Shares to Seller.

     (E) The first time Sales exceed $25,000,000 during any of the Measuring Periods, and
only the first time such threshold is exceeded, Buyer shall issue an additional 20,000
Ultralife Shares to Seller.

     (F) The following illustrates how the Equity Payments are earned. If Sales were
$17,000,000 during the period commencing on the Closing Date and ending on December 31,
2008, $18,000,000 during the period commencing on January 1, 2009 and ending on December 31,
2009, and $26,000,000 during the period commencing on January 1, 2010 and ending on December
31, 2010, then (1) Buyer would issue to Seller 40,000 Ultralife Shares for the period
commencing on the Closing Date and ending on December 31, 2008 because both the $14,000,000
and the $16,500,000 Sales thresholds would have been satisfied in that Measuring Period; (2)
Buyer would not issue any Ultralife Shares to Seller for the period commencing on January 1,
2009 and ending on December 31, 2009 because the $14,000,000 and the $16,500,000 Sales
thresholds would have been already satisfied during the prior Measuring Period and none of
the three additional Sales thresholds (i.e., $19,000,000, $22,000,000 and $25,000,000) were
satisfied during such period; and (3) Buyer would issue to Seller 60,000 Ultralife Shares
for the period commencing on January 1, 2010 and ending on December 31, 2010 because each
of the $19,000,000, $22,000,000 and $25,000,000 Sales thresholds would have been satisfied
during such Measuring Period. Finally, because an aggregate of

-7-

 

100,000 Ultralife Shares would have been then issued to Seller, Seller would not be
entitled to any additional Ultralife Shares during the remaining Measuring Periods.

     (G) Notwithstanding anything herein to the contrary, in no event shall the aggregate
number of Ultralife Shares issuable as Equity Payments exceed 100,000 shares. In the event
of a stock split or other re-capitalization event affecting the Ultralife Shares, the number
of shares issuable as Equity Payments shall be adjusted accordingly.

     (H) Any Equity Payments due from Buyer to Seller hereunder shall be made within ten
days of the completion of the audit by Buyer’s independent public accountant of the books
and records of Buyer and its affiliates, including Target, for the applicable Measuring
Period and shall be made in accordance with Buyer’s customary practices for issuing
securities in transactions that are exempt from registration under Section 5 of the
Securities Act.

     (c) Closing. The closing of the transactions contemplated by this Agreement (the “Closing”)
shall take place at the offices of Harter Secrest & Emery LLP, in Rochester, New York, commencing
at 10:00 a.m. local time on the second business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take at the Closing
itself) or such other date as Buyer and Seller may mutually determine (the “Closing Date”);
provided, however, that the Closing Date shall be no later than November 30, 2007.

     (d) Deliveries at Closing. At the Closing, (i) Seller will deliver to Buyer the various
certificates, instruments, and documents referred to in Section 7(a) below, (ii) Buyer will deliver
to Seller the various certificates, instruments, and documents referred to in Section 7(b) below,
(iii) Seller will deliver to Buyer stock certificates representing all of his Target Shares,
endorsed in blank or accompanied by duly executed assignment documents, and (iv) Buyer will deliver
to Seller the consideration specified in Section 2(b) above.

     (e) Post-Closing Purchase Price Adjustment.

(i) A closing balance sheet will be prepared and finally determined as provided by
this Section 2(e), whereupon all references herein to the “Closing Balance Sheet”
will mean the same as so finally determined. Within 45 days following Closing, Buyer
will prepare the Closing Balance Sheet and deliver the same to Seller. Buyer will
cause the Closing Balance Sheet to be derived from the books and records of Target,
and to present fairly the assets and liabilities of Target as of the Closing Date.
The Closing Balance Sheet will be prepared from Target’s books and records and will
be true, correct and complete in all material respects, consistent with Target’s
books and records, and will fairly present the financial condition of Target as of
the Closing Date. Buyer agrees that the Seller shall participate in the preparation
of the Closing Balance Sheet.

(ii) Within 60 days after the delivery of the Closing Balance Sheet, Buyer and
Seller shall mutually agree on the contents of the Closing Balance Sheet, which

-8-

 

will then be final and binding upon the parties for all purposes. If the parties
fail such mutual agreement within such period, then either Buyer or Seller may
submit the Closing Balance Sheet, or the resolution of only such item or items
thereof as are in dispute, to BDO Seidman LLP (the “Auditor”) for computation,
verification or resolution in accordance with the provisions of this Agreement.
Buyer and Seller shall make readily available to the Auditor all relevant books and
records (including work papers of a party’s independent public accountants) as the
Auditor reasonably requests. The Auditor’s computation or verification of the
Closing Balance Sheet or resolution of such disputed item or items thereof (as the
case may be), which Buyer and Seller will instruct the Auditor to deliver to them
within 30 days after submission to the Auditor, will be final and binding upon the
parties for all purposes relating to this Section 2(e), and the Auditor’ fees and
expenses therefor will be borne by the non-prevailing party or, in the event that
each party prevails on some of the issues in dispute, will be shared
proportionately, as determined by the Auditor.

(iii) For all purposes relating to this Section 2(e), “Adjusted Net Worth” means the
net worth of Target, as defined by GAAP and as shown on the Closing Balance Sheet,
calculated and determined in accordance with the methodology set forth on Schedule
2(e), which Adjusted Net Worth shall include the adjusted book value of the Real
Property transferred to Seller prior to Closing as contemplated by Section 4(l)(i).

(iv) The amount of the Closing Payment, as finally determined pursuant to the
provisions hereof following the Closing, shall be $6,000,000 less the amount
(if any) by which the Adjusted Net Worth is less than $500,000.

(v) If the amount of the Adjusted Net Worth as so finally determined is less than
$500,000, then Seller shall, within ten days after such final determination, pay the
amount of such deficiency to Buyer by wire transfer of immediately available funds
to an account designated by Buyer. If the amount of the Adjusted Net Worth as so
finally determined is greater than $500,000, then Buyer shall, within ten days after
such final determination, pay the amount of such excess to Seller by wire transfer
of immediately available funds to an account designated by Seller.

(vi) If Seller does not satisfy any deficiency he owes under Section 2(e)(v) within
the prescribed time, then Buyer shall have the right to setoff the amount of such
deficiency against any amounts owed by Buyer to Seller under the Promissory Note.
The exercise by Buyer of such right of setoff shall not preclude Buyer from pursuing
other remedies available to Buyer against Seller.

SECTION 3. TRANSACTION REPRESENTATIONS AND WARRANTIES

     (a) Seller’s Representations and Warranties. Seller represents and warrants to Buyer that the
statements contained in this Section 3(a) are correct and complete as of the date of

-9-

 

this Agreement and will be correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement throughout this
Section 3(a)) with respect to himself, except as set forth in Annex I attached hereto.

(i) Authorization of Transaction. Seller has full power and authority to execute and
deliver this Agreement and to perform his obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Seller, enforceable in
accordance with its terms and conditions. Seller need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions contemplated by this
Agreement. The execution, delivery, and performance of this Agreement and all other
agreements contemplated hereby have been duly authorized by Seller.

(ii) Non-contravention. Neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (A) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Seller is subject or, if Seller is an entity, any provision of its
charter, bylaws, or other governing documents, (B) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other arrangement to which
Seller is a party or by which he is bound or to which any of his assets is subject,
or (C) result in the imposition or creation of a Lien upon or with respect to the
Target Shares.

(iii) Brokers’ Fees. Seller has no Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.

(iv) Target Shares. Seller holds of record and owns beneficially the number of
Target Shares set forth next to his or its name in Section 4(b) of the Disclosure
Schedule, which constitute all of the issued and outstanding Target Shares, free and
clear of any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Liens, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands. Seller is not a party
to any option, warrant, purchase right, or other contract or commitment that could
require Seller to sell, transfer, or otherwise dispose of any capital stock of
Target (other than this Agreement). Seller is not a party to any voting trust,
proxy, or other agreement or understanding with respect to the voting of any capital
stock of Target.

(v) Investment Representations for Ultralife Shares. Seller acknowledges that any
Ultralife Shares acquired by Seller pursuant to this Agreement shall be acquired by
Seller for his own account, for investment purposes only, and not with a view to or
for distributing or reselling such securities or any part thereof or

-10-

 

interest therein. Seller, either alone or together with his representatives, has
such knowledge, sophistication and experience in business and financial matters so
as to be capable of evaluating the merits and risks of any investment by him in
Ultralife Shares, and has so evaluated the merits and risks of any such investment
to his satisfaction. As of the Closing Date, Seller shall be able to bear the
economic risk of an investment in the Ultralife Shares offered pursuant to this
Agreement and shall be able to afford a complete loss of any such investment. Seller
acknowledges that at the time Seller was offered the Ultralife Shares pursuant to
this Agreement, Seller was and, at the date hereof, Seller is, and at the Closing
Date Seller will be, an “accredited investor” as defined in Rule 501 under the
Securities Act. Seller acknowledges that he has been afforded: (A) the opportunity
to ask such questions as he has deemed necessary of, and to receive answers from,
representatives of Buyer concerning the terms and conditions of the offer and sale
of any Ultralife Shares offered pursuant to this Agreement, and the merits and risks
of investing in such securities; (B) access to information about Buyer and Buyer’s
financial condition, results of operations, business, properties, management and
prospects sufficient to enable Seller to evaluate his investment; and (C) the
opportunity to obtain such additional information that Buyer possesses or can
acquire without unreasonable effort or expense that is reasonably necessary to
permit Seller to make an informed investment decision with respect to any Ultralife
Shares to be acquired by Seller pursuant to this Agreement. Seller understands and
acknowledges that any Ultralife Shares acquired by Seller pursuant to this Agreement
were offered and acquired by him without registration under the Securities Act in a
private transaction pursuant to the exemption from registration under Section 5 of
the Securities Act provided by Section 4(2) of the Securities Act and that such
securities are and shall be “restricted securities” as defined in Rule 144 under the
Securities Act and thus such securities shall not be freely transferable by Seller.
Seller understands and acknowledges that except as set forth in Section 3(a)(vi)
below, Buyer is not providing Seller with any registration rights in connection with
any Ultralife Shares offered pursuant to this Agreement. Seller understands and
acknowledges that Buyer shall rely on the accuracy and truthfulness of Seller’s
representations herein in order to avail of the exemption from registration under
Section 5 of the Securities Act provided by Section 4(2) of the Securities Act.

(vi) Registration Rights. Buyer hereby grants Seller piggyback registration rights
as it relates to any future Registration Statement and covenants to include to the
extent legally permissible and subject to any limitations imposed by the underwriter
or placement agent, if applicable, Registrable Securities in such Registration
Statement. If at any time prior to the removal of restrictive legends pursuant to
Rule 144(k)(a) Buyer proposes to register shares of Common Stock under the
Securities Act other than on Forms S-8, S-4 or any successor forms in connection
with a public offering of such shares for cash (a “ Proposed Registration”) and (b)
a Registration Statement covering the resale of all of the Registrable Securities is
not been effective and available for sales thereof by Seller, Buyer shall at such
time promptly give Seller written notice of such Proposed Registration. Buyer shall
use its best efforts to cause such Registration

-11-

 

Statement to cover the resale of the Registrable Securities, which have not
otherwise been registered or covered under a current effective Registration
Statement, which Registration Statement shall state that in accordance with Rule 416
promulgated under the Securities Act, such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon stock splits, stock dividends or similar transactions. The Seller and the
Buyer shall enter into a separate Registration Rights Agreement in substantially the
form attached to hereto as Exhibit E consistent with the provision of this
Section 3(a)(iv), which Registration Rights Agreement shall contain customary
representations and warranties and provisions regarding indemnification and
contribution.

     (b) Buyer’s Representations and Warranties. Buyer represents and warrants to Seller that the
statements contained in this Section 3(b) 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 then and as though the
Closing Date were substituted for the date of this Agreement throughout this Section 3(b)), except
as set forth in Annex II attached hereto.

(i) Organization of Buyer. Buyer is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware.

(ii) Authorization of Transaction. Buyer has full power and authority (including
full corporate or other entity power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement constitutes the
valid and legally binding obligation of Buyer, enforceable in accordance with its
terms and conditions. Buyer need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement. The
execution, delivery, and performance of this Agreement and all other agreements
contemplated hereby have been duly authorized by Buyer.

(iii) Non-contravention. Neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (A) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Buyer is subject or any provision of its charter, bylaws, or other
governing documents or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which Buyer is a party
or by which it is bound or to which any of its assets is subject.

(iv) Brokers’ Fees. Buyer has no Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which any Seller could become liable or
obligated.

-12-

 

(v) Investment. Buyer is not acquiring the Target Shares with a view to or for sale
in connection with any distribution thereof within the meaning of the Securities
Act.

(vi) Access to Information. Buyer has such knowledge of the business and financial
affairs of the Target and possesses a sufficient degree of sophistication, knowledge
and experience in financial and business matters such that Buyer is capable of
evaluating the information provided to Buyer by Seller and Target about Target’s
business, including Target’s assets and liabilities, and the economic risks of
acquiring the Target Shares. Buyer acknowledges and agrees that Target and Seller
make no further representations or warranties to Buyer regarding the Target or the
Target Shares, other than as set forth in this Agreement. Specifically, Buyer
acknowledges and agrees, that Target and Seller give no assurances, representations
or warranties as to the continued viability of the Target as a going concern or
otherwise or its future profitability after Buyer’s purchase.

(vii) Litigation; Judgments. There are no pending or threatened, suits, actions,
grievances or proceedings against or relating to Buyer, the business or any property
or asset of the business of Buyer that individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect on Buyer’s ability to
consummate the transactions contemplated by this Agreement. There is no unsatisfied
or outstanding judgment, decree, injunction, rule or order of any governmental
entity or arbitrator which (i) could reasonably be expected to have a Material
Adverse Effect on Buyer or the business of Buyer or (ii) seeks to enjoin or prohibit
the consummation of the transactions contemplated by this Agreement.

(viii) Equity Payments. The Equity, if and when issued pursuant to the Convertible
Note, will be duly authorized, validly issued, fully paid and non assessable shares
of common stock of Buyer. Upon delivery of such shares, Seller will receive good and
unencumbered title to such shares, free and clear of all liens, restrictions,
charges, encumbrances and other security interests of any kind or nature whatsoever,
except for any restrictions existing under applicable securities laws and the
restrictions imposed by this Agreement.

(ix) Reports and Financial Statements. As of their respective dates, the periodic
reports (the “Reports”) filed by Buyer with the Securities and Exchange Commission
(the “Commission”) under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) complied or will comply in all material respects with the then
applicable published rules and regulations of the Commission with respect thereto
(including, without limitation, rules related to the financial statements included
therein) at the date of their issuance and did not or will not contain any untrue
statement of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. Buyer has filed all reports and filings
with the SEC required pursuant to the Securities Act or 1933 or the Exchange Act on
a timely basis. Each such report or filing is true,

-13-

 

correct and complete in all material respects and does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading.

SECTION 4. TARGET REPRESENTATIONS AND WARRANTIES

     Seller represents and warrants to Buyer that the statements contained in this Section 4 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 then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 4), except as set forth in the disclosure schedule delivered
by Seller to Buyer on the date hereof and initialed by the Parties (the “Disclosure Schedule”).
Nothing in the Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the Disclosure Schedule identifies the
exception with particularity and describes the relevant facts in detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the document or other item
itself). The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 4.

     (a) Organization, Qualification, and Corporate Power. Target is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Florida. Target is duly
authorized to conduct business and is in good standing under the laws of each jurisdiction where
such qualification is required. Target has full corporate power and authority and all licenses,
permits, and authorizations necessary to carry on the businesses in which it is engaged and in
which it presently proposes to engage and to own and use the properties owned and used by it.
Section 4(a) of the Disclosure Schedule lists the directors and officers of Target. Seller has
delivered to Buyer correct and complete copies of the charter and bylaws of Target (as amended to
date). The minute books (containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock certificate books, and the
stock record books of Target are correct and complete. Target is not in default under or in
violation of any provision of its charter or bylaws.

     (b) Capitalization. The entire authorized capital stock of Target consists of Ten 10,000
Target Shares, of which 100 Target Shares are issued and outstanding and no Target Shares are held
in treasury. All of the issued and outstanding Target Shares have been duly authorized, are validly
issued, fully paid, and non-assessable, and are held of record by the respective Seller as set
forth in Section 4(b) of the Disclosure Schedule. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require Target to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to Target. There are no voting
trusts, proxies, or other agreements or understandings with respect to the voting of the capital
stock of Target.

-14-

 

     (c) Non-contravention. Except as set forth on Section 4(c) of the Disclosure Schedule, neither
the execution and the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which Target is subject or any provision of the charter or bylaws of Target or
(ii) conflict with, result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other arrangement to which
Target is a party or by which it is bound or to which any of its assets is subject (or result in
the imposition of any Lien upon any of its assets). Target does not need to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions contemplated by this
Agreement.

     (d) Brokers’ Fees. Target has no Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this Agreement.

     (e) Title to Assets. Except as set forth on Section 4(e) of the Disclosure Schedule, Target
has good and marketable title to, or a valid leasehold interest in, the properties and assets used
by Target, located on its premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Liens, except for properties and assets disposed of in the
Ordinary Course of Business since the date of the Most Recent Balance Sheet. The 2007 Lexus
GS450HU is currently leased by Target and used by Seller. All of Target’s rights in and to that
Lexus shall be distributed to Seller prior to closing and Seller shall assume all obligations with
respect to the lease of the Lexus.

     (f) Subsidiaries. Target has no Subsidiaries.

     (g) Financial Statements. Attached hereto as Exhibit B are the following financial
statements (collectively the “Financial Statements”): (i) an audited balance sheet and statements
of income, changes in stockholders’ equity, and cash flow as of and for the fiscal year ended
December 31, 2006 (the “Most Recent Fiscal Year End”) for Target; and (ii) an unaudited balance
sheet and statements of income, changes in stockholders’ equity, and cash flow (the “Most Recent
Financial Statements”) as of and for the six months ended June 30, 2007 (the “Most Recent Fiscal
Month End”) for Target. The Financial Statements have been prepared from Target’s books and
records, are true, correct and complete in all material respects, are consistent with Target’s
books and records applied on a consistent basis throughout the periods covered thereby, present
fairly the financial condition of Target as of such dates and the results of operations of Target
for such periods, are correct and complete, and are consistent with the books and records of Target
(which books and records are correct and complete);

     (h) Events Subsequent to Most Recent Fiscal Year End. Except as set forth on Section 4(h) of
the Disclosure Schedule, since the Most Recent Fiscal Year End, there has not been any Material
Adverse Change. Without limiting the generality of the foregoing, since that date:

-15-

 

(i) Target has not sold, leased, transferred, or assigned any of its assets,
tangible or intangible, other than for a fair consideration in the Ordinary Course
of Business;

(ii) Target has not entered into any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) either involving more
than $100,000 or outside the Ordinary Course of Business;

(iii) no party (including Target) has accelerated, terminated, modified, or
cancelled any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than $100,000 to which
Target is a party or by which Target is bound;

(iv) Target has not imposed any Liens upon any of its assets, tangible or
intangible;

(v) Except as set forth on Section 4(h)(v) of the Disclosure Schedule, Target has
not made any capital expenditure (or series of related capital expenditures) either
involving more than $100,000 or outside the Ordinary Course of Business;

(vi) Target has not made any capital investment in, any loan to, or any acquisition
of the securities or assets of, any other Person (or series of related capital
investments, loans, and acquisitions) either involving more than $100,000 or outside
the Ordinary Course of Business;

(vii) Except as set forth on Section 4(h)(vii) of the Disclosure Schedule, Target
has not issued any note, bond, or other debt security or created, incurred, assumed,
or guaranteed any indebtedness for borrowed money or capitalized lease obligation
either involving more than $100,000 in the aggregate;

(viii) Target has not delayed or postponed the payment of accounts payable and other
Liabilities outside the Ordinary Course of Business;

(ix) Target has not cancelled, compromised, waived, or released any right or claim
(or series of related rights and claims) either involving more than $10,000 or
outside the Ordinary Course of Business;

(x) Target has not transferred, assigned, or granted any license or sublicense of
any rights under or with respect to any Intellectual Property;

(xi) there has been no change made or authorized in the charter or bylaws of Target;

(xii) Except as set forth on Section 4(h)(xii) of the Disclosure Schedule, Target
has not issued, sold, or otherwise disposed of any of its capital stock, or granted
any options, warrants, or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital stock;

-16-

 

(xiii) Target has not declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its capital stock;

(xiv) Target has not experienced any damage, destruction, or loss (whether or not
covered by insurance) to its property;

(xv) Target has not made any loan to, or entered into any other transaction with,
any of its directors, officers, and employees outside the Ordinary Course of
Business;

(xvi) Target has not entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any existing such contract or
agreement;

(xvii) Target has not granted any increase in the base compensation of any of its
directors, officers, and employees outside the Ordinary Course of Business;

(xviii) Target has not adopted, amended, modified, or terminated any bonus, profit
sharing, incentive, severance, or other plan, contract, or commitment for the
benefit of any of its directors, officers, and employees (or taken any such action
with respect to any other Employee Benefit Plan);

(xix) Target has not made any other change in employment terms for any of its
directors, officers, and employees outside the Ordinary Course of Business;

(xx) Target has not made or pledged to make any charitable or other capital
contribution outside the Ordinary Course of Business;

(xxi) there has not been any other material occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business involving
Target;

(xxii) Target has not discharged a material Liability or Lien outside the Ordinary
Course of Business;

(xxiii) Target has not made any loans or advances of money;

(xxiv) Target has not disclosed any Confidential Information; and

(xxv) Target has not committed to any of the foregoing.

     (i) Undisclosed Liabilities. Target has no Liability (and there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability), except for (i) Liabilities set forth on the face
of the Most Recent Balance Sheet (rather than in any notes thereto) and (ii) Liabilities which have
arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business (none of

-17-

 

which results from, arises out of, relates to, is in the nature of, or was caused by any
breach of contract, breach of warranty, tort, infringement, or violation of law).

     (j) Legal Compliance. Target and its predecessors and Affiliates, if any, have complied with
all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder and including the Foreign Corrupt Practices Act, 15 U.S.C.
78dd-1 et seq.) of federal, state, local, and foreign governments (and all agencies thereof), and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of them alleging any failure so to comply except where the
failure to comply would not have a Material Adverse Effect..

     (k) Tax Matters.

(i) Target (and any predecessor of Target) has been a validly electing S corporation
within the meaning of Code Section 1361 and Section 1362 at all times during its
existence and Target will be an S corporation up to and including the Closing Date.

(ii) Target has no potential liability for any Tax under Code Section 1374. Target
has not, in the past 10 years, (A) acquired assets from another corporation in a
transaction in which Target’s Tax basis for the acquired assets was determined, in
whole or in part, by reference to the Tax basis of the acquired assets (or any other
property) in the hands of the transferor or (B) acquired the stock of any
corporation that is a qualified subchapter S subsidiary.

(iii) Target has filed all Tax Returns that it was required to file under applicable
laws and regulations. All such Tax Returns were correct and complete in all respects
and have been prepared in substantial compliance with all applicable laws and
regulations. All Taxes due and owing by Target (whether or not shown on any Tax
Return) have been paid. Target currently is not the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where Target does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no Liens for Taxes (other
than Taxes not yet due and payable) upon any of the assets of Target.

(iv) Target has withheld and paid all Taxes required to have been withheld and paid
in connection with any amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.

(v) No Seller or director or officer (or employee responsible for Tax matters) of
Target expects any authority to assess any additional Taxes for any period for which
Tax Returns have been filed. No foreign, federal, state, or local tax audits or
administrative or judicial Tax proceedings are pending or being conducted with
respect to Target. Target has not received from any foreign, federal, state, or
local taxing authority (including jurisdictions where Target has not filed Tax
Returns) any (i) notice indicating an intent to open an audit or other review, (ii)
request for

-18-

 

information related to Tax matters, or (iii) notice of deficiency or proposed
adjustment for any amount of Tax proposed, asserted, or assessed by any taxing
authority against Target; Disclosure Schedule lists all federal, state, local, and
foreign income Tax Returns filed with respect to Target for taxable periods ended on
or after December 31, 2003, indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit. Seller have
delivered to Buyer correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed to by
Target filed or received since December 31, 2003.

(vi) Target 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.

(vii) Target 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 (i) any
“excess parachute payment” within the meaning of Code Section 280G (or any
corresponding provision of state, local or foreign Tax law) and (ii) any amount that
will not be fully deductible as a result of Code 162(m) (or any corresponding
provision of state, local or foreign Tax law). Target has not been a United States
real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii). Target 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 Section 6662. Target is not a party to or bound by any Tax allocation or
sharing agreement. Target (A) has not been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was Target) or (B) has no Liability for the Taxes of any Person (other than
Target) under Reg. Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.

(viii) The unpaid Taxes of Target (A) did not, as of the Most Recent Fiscal Month
End, exceed the reserve for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) set
forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) and (B) do not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of Target
in filing their Tax Returns. Since the date of the Most Recent Balance Sheet, Target
has not incurred any liability for Taxes arising from extraordinary gains or losses,
as that term is used in GAAP, outside the Ordinary Course of Business consistent
with past custom and practice.

(ix) Target 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 Section 7121 (or any corresponding or

-19-

 

similar provision of state, local or foreign income Tax law) executed on or prior to
the Closing Date; (C) intercompany transactions or any excess loss account described
in Treasury Regulations under Code Section 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.

(x) Target 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 Section 355 or Section 361.

(xi) Target has not, since October 3, 2004, (A) granted to any person an interest in
a nonqualified deferred compensation plan (as defined in Code Section 409A) which
interest has been or, upon the lapse of a substantial risk of forfeiture with
respect to such interest, will be subject to the Tax imposed by Code Section 409A,
or (B) modified the terms of any nonqualified deferred compensation plan in a manner
that could cause an interest previously granted under such plan to become subject to
the Tax imposed by Code Section 409A. No person has a right to be indemnified by
Target for any Tax imposed by Code Section 409A.

     (l) Real Property.

(i) Except as set forth on Section 4(l)(i) of the Disclosure Schedule, Target does
not own any Real Property. The Real Property owned by Target shall be distributed to
Seller prior to Closing together with all mortgages and other encumbrances related
to the Real Property, all of which shall be assumed by Seller or Seller’s affiliate
to whom the Real Property is transferred.

(ii) Section 4(l)(ii) of the Disclosure Schedule sets forth the address of each
parcel of Leased Real Property, and a true and complete list of all Leases for each
such Leased Real Property (including the date and name of the parties to such Lease
document). Target has delivered to Buyer a true and complete copy of each such Lease
document, and in the case of any oral Lease, a written summary of the material terms
of such Lease. Except as set forth in Section 4(l)(ii) of the Disclosure Schedule,
with respect to each of the Leases:

     (A) such Lease is legal, valid, binding, enforceable and in full force and effect;

     (B) the transaction contemplated by this Agreement does not require the consent of any
other party to such Lease (except for those Leases for which Lease Consents (as hereinafter
defined) are obtained), will not result in a breach of or default under such Lease, and will
not otherwise cause such Lease to cease to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the Closing;

     (C) Target’s possession and quiet enjoyment of the Leased Real Property under such
Lease has not been disturbed and there are no disputes with respect to such Lease;

-20-

 

     (D) neither Target nor any other party to the Lease is in breach or default under such
Lease, and no event has occurred or circumstance exists which, with the delivery of notice,
the passage of time or both, would constitute such a breach or default, or permit the
termination, modification or acceleration of rent under such Lease;

     (E) no security deposit or portion thereof deposited with respect to such Lease has
been applied in respect of a breach or default under such Lease which has not been
redeposited in full;

     (F) Target neither owes or will owe in the future any brokerage commissions or finder’s
fees with respect to such Lease;

     (G) the other party to such Lease is not an Affiliate of, and otherwise does not have
any economic interest in, Target;

     (H) Target has not subleased, licensed or otherwise granted any Person the right to use
or occupy such Leased Real Property or any portion thereof;

     (I) Target has not collaterally assigned or granted any other Lien in such Lease or any
interest therein; and

     (J) there are no Liens on the estate or interest created by such Lease.

(iii) The Real Property identified in Section 4(l)(i) and the Leased Real Property
identified in Section 4(l)(ii) of the Disclosure Schedule (collectively, the “Real
Property”), comprises all of the real property used or intended to be used in, or
otherwise related to, Target’s business; and Target is not a party to any agreement
or option to purchase any real property or interest therein.

(iv) All buildings, structures, fixtures, building systems and equipment, and all
components thereof, including the roof, foundation, load-bearing walls and other
structural elements thereof, heating, ventilation, air conditioning, mechanical,
electrical, plumbing and other building systems, environmental control, remediation
and abatement systems, sewer, storm and waste water systems, irrigation and other
water distribution systems, parking facilities, fire protection, security and
surveillance systems, and telecommunications, computer, wiring and cable
installations, included in the Real Property (the “Improvements”) are in good
condition and repair and sufficient for the operation of Target’s business. There
are no structural deficiencies or latent defects affecting any of the Improvements
and there are no facts or conditions affecting any of the Improvements which would,
individually or in the aggregate, interfere in any respect with the use or occupancy
of the Improvements or any portion thereof in the operation of Target’s business as
currently conducted thereon.

(v) There is no condemnation, expropriation or other proceeding in eminent domain,
pending or threatened, affecting any parcel of Real Property or any portion thereof
or interest therein. There is no injunction, decree, order, writ or judgment
outstanding, nor any claims, litigation, administrative actions or similar

-21-

 

proceedings, pending or threatened, relating to the ownership, lease, use or
occupancy of the Real Property or any portion thereof, or the operation of Target’s
business as currently conducted thereon.

(vi) Except as set forth in Section 4 (l) (vi) of the Disclosure Schedule, the Real
Property is in compliance with all applicable building, zoning, subdivision, health
and safety and other land use laws, including the Americans with Disabilities Act of
1990, as amended (“ADA”), and all insurance requirements affecting the Real Property
(collectively, the “Real Property Laws”), and the current use and occupancy of the
Real Property and operation of Target’s business thereon does not violate any Real
Property Laws. Target has not received any notice of violation of any Real Property
Law and there is no basis for the issuance of any such notice or the taking of any
action for such violation. There is no pending or anticipated change in any Real
Property Law that will materially impair the ownership, lease, use or occupancy of
any Real Property or any portion thereof in the continued operation of Target’s
business as currently conducted thereon.

(vii) Each parcel of Real Property has direct vehicular and pedestrian access to a
public street adjoining the Real Property, or has vehicular and pedestrian access to
a public street via an insurable, permanent, irrevocable and appurtenant easement
benefiting such parcel of Real Property, and such access is not dependent on any
land or other real property interest which is not included in the Real Property.
None of the Improvements or any portion thereof is dependent for its access, use or
operation on any land, building, improvement or other real property interest which
is not included in the Real Property.

(viii) All water, oil, gas, electrical, steam, compressed air, telecommunications,
sewer, storm and waste water systems and other utility services or systems for the
Real Property have been installed and are operational and sufficient for the
operation of Target’s business as currently conducted thereon. Each such utility
service enters the Real Property from an adjoining public street or valid private
easement in favor of the supplier of such utility service or appurtenant to such
Real Property, and is not dependent for its access, use or operation on any land,
building, improvement or other real property interest which is not included in the
Real Property.

(ix) All certificates of occupancy, permits, licenses, franchises, approvals and
authorizations (collectively, the “Real Property Permits”) of all governmental
authorities, boards of fire underwriters, associations or any other entity having
jurisdiction over the Real Property which are required or appropriate to use or
occupy the Real Property or operate Target’s business as currently conducted
thereon, have been issued and are in full force and effect. Section 4(l)(ix) of the
Disclosure Schedule lists all material Real Property Permits held by Target with
respect to each parcel of Real Property. Target has delivered to Buyer a true and
complete copy of all Real Property Permits. Target has not received any notice from
any governmental authority or other entity having jurisdiction over the Real

-22-

 

Property threatening a suspension, revocation, modification or cancellation of any
Real Property Permit and there is no basis for the issuance of any such notice or
the taking of any such action. The Real Property Permits are transferable to Buyer
without the consent or approval of the issuing governmental authority or entity, no
disclosure, filing or other action by Target is required in connection with such
transfer, and Buyer shall not be required to assume any additional liabilities or
obligations under the Real Property Permits as a result of such transfer.

(x) The classification of each parcel of Real Property under applicable zoning laws,
ordinances and regulations permits the use and occupancy of such parcel and the
operation of Target’s business as currently conducted thereon, and permits the
Improvements located thereon as currently constructed, used and occupied. There are
sufficient parking spaces, loading docks and other facilities at such parcel to
comply with such zoning laws, ordinances and regulations. Target’s use or occupancy
of the Real Property or any portion thereof or the operation of Target’s business as
currently conducted thereon is not dependent on a “permitted non-conforming use” or
“permitted non-conforming structure” or similar variance, exemption or approval from
any governmental authority.

(xi) The current use and occupancy of the Real Property and the operation of
Target’s business as currently conducted thereon does not violate any easement,
covenant, condition, restriction or similar provision in any instrument of record or
other unrecorded agreement affecting such Real Property (the “Encumbrance
Documents”). Neither Seller nor Target has received any notice of violation of any
Encumbrance Documents, and there is no basis for the issuance of any such notice or
the taking of any action for such violation.

(xii) None of the Improvements encroach on any land which is not included in the
Real Property or on any easement affecting such Real Property, or violate any
building lines or set-back lines, and there are no encroachments onto any of the
Real Property, or any portion thereof, which encroachment would interfere with the
use or occupancy of such Real Property or the continued operation of Target’s
business as currently conducted thereon.

(xiii) Each parcel of Real Property is a separate lot for real estate tax and
assessment purposes, and no other real property is included in such tax parcel.
There are no Taxes, assessments, fees, charges or similar costs or expenses imposed
by any governmental authority, association or other entity having jurisdiction over
the Real Property (collectively, the “Real Estate Impositions”) with respect to any
Real Property or portion thereof which are delinquent. There is no pending or
threatened increase or special assessment or reassessment of any Real Estate
Impositions for such parcel.

(xiv) None of the Real Property or any portion thereof is located in a flood hazard
area (as defined by the Federal Emergency Management Agency).

     (m) Intellectual Property.

-23-

 

(i) Target owns and possesses or has the right to use pursuant to a valid and
enforceable, written license, sublicense, agreement, or permission all Intellectual
Property necessary or desirable for the operation of the businesses of Target as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by Target immediately prior to the Closing
hereunder will be owned or available for use by Target on identical terms and
conditions immediately subsequent to the Closing hereunder. Target has taken all
necessary and desirable action to maintain and protect each item of Intellectual
Property that Target owns or uses.

(ii) Target has not interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of third parties, and none
of Seller and the directors and officers (and employees with responsibility for
Intellectual Property matters) of Target has ever received any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that Target must license or
refrain from using any Intellectual Property rights of any third party). To the
Knowledge of any of Seller and the directors and officers (and employees with
responsibility for Intellectual Property matters) of Target, no third party has
interfered with, infringed upon, misappropriated, or otherwise come into conflict
with any Intellectual Property rights of Target.

(iii) Section 4(m)(iii) of the Disclosure Schedule identifies each patent or
registration that has been issued to Target with respect to any of its Intellectual
Property, identifies each pending patent application or application for registration
which Target has made with respect to any of its Intellectual Property, and
identifies each license, sublicense, agreement, or other permission which Target has
granted to any third party with respect to any of its Intellectual Property
(together with any exceptions). Seller have delivered to Buyer correct and complete
copies of all such patents, registrations, applications, licenses, sublicenses,
agreements, and permissions (as amended to date). Section 4(m)(iii) of the
Disclosure Schedule also identifies each material unregistered trademark, service
mark, trade name, corporate name or Internet domain name, computer software item
(other than commercially available off-the-shelf software purchased or licensed for
less than a total cost of $1,000 in the aggregate) and each material unregistered
copyright used by Target in connection with any of its businesses. With respect to
each item of Intellectual Property required to be identified in Section 4(m)(iii) of
the Disclosure Schedule:

     (A) Target owns and possesses all right, title, and interest in and to the item, free
and clear of any Lien, license, or other restriction or limitation regarding use or
disclosure;

     (B) the item is not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;

-24-

 

     (C) no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand is pending or, to the Knowledge of any of Seller and the directors and officers (and
employees with responsibility for Intellectual Property matters) of Target, is threatened
which challenges the legality, validity, enforceability, use, or ownership of the item, and
there are no grounds for the same;

     (D) Target has never agreed to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to the item; and

     (E) no loss or expiration of the item is threatened, pending, or reasonably
foreseeable, except for patents expiring at the end of their statutory terms (and not as a
result of any act or omission by Seller or Target, including without limitation, a failure
by Seller or Target to pay any required maintenance fees).

(iv) Section 4(m)(iv) of the Disclosure Schedule identifies each item of
Intellectual Property that any third party owns and that Target uses pursuant to
license, sublicense, agreement, or permission. Seller has delivered to Buyer correct
and complete copies of all such licenses, sublicenses, agreements, and permissions
(as amended to date). With respect to each item of Intellectual Property required to
be identified in Section 4(m)(iv) of the Disclosure Schedule:

     (A) the license, sublicense, agreement, or permission covering the item is legal,
valid, binding, enforceable, and in full force and effect;

     (B) the license, sublicense, agreement, or permission will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following consummation
of the transactions contemplated hereby;

     (C) no party to the license, sublicense, agreement, or permission is in breach or
default, and no event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or acceleration thereunder;

     (D) no party to the license, sublicense, agreement, or permission has repudiated any
provision thereof;

     (E) with respect to each sublicense, the representations and warranties set forth in
subsections (A) through (D) above are true and correct with respect to the underlying
license;

     (F) the underlying item of Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;

     (G) no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand is pending or, to the Knowledge of any of Seller and the directors and officers (and
employees with responsibility for Intellectual Property matters) of Target, is threatened
that challenges the legality, validity, or enforceability of the underlying item of
Intellectual Property, and there are no grounds for the same; and

-25-

 

     (H) Target has not granted any sublicense or similar right with respect to the license,
sublicense, agreement, or permission.

(v) To the Knowledge of any of Seller and the directors and officers (and employees
with responsibility for Intellectual Property matters) of Target: (A) Target has not
in the past nor will interfere with, infringe upon, misappropriate, or otherwise
come into conflict with, any Intellectual Property rights of third parties as a
result of the continued operation of its businesses as presently conducted; (B)
there are no facts that indicate a likelihood of any of the foregoing; and (C) no
notices regarding any of the foregoing (including, without limitation, any demands
or offers to license any Intellectual Property from any third party) have been
received.

(vi) Seller have taken all necessary and desirable action to maintain and protect
all of the Intellectual Property of Target and will continue to maintain and protect
all of the Intellectual Property of Target prior to Closing so as not to adversely
affect the validity or enforceability thereof. To the Knowledge of any of Seller,
the owners of any of the Intellectual Property licensed to Target have taken all
necessary and desirable action to maintain and protect the Intellectual Property
covered by such license.

(vii) Seller have complied in all material respects with and are presently in
compliance in all material respects with all foreign, federal, state, local,
governmental (including, but not limited to, the Federal Trade Commission and State
Attorneys General), administrative or regulatory laws, regulations, guidelines and
rules applicable to any Intellectual Property and Seller shall take all steps
necessary to ensure such compliance until Closing.

     (n) Tangible Assets. Target owns or leases all buildings, machinery, equipment, and other
tangible assets necessary for the conduct of their businesses as presently conducted and as
presently proposed to be conducted. Each such tangible asset is free from defects (patent and
latent), has been maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), and is suitable for the purposes for which
it presently is used and presently is proposed to be used.

     (o) Inventory. The inventory of Target consists of raw materials and supplies, manufactured
and purchased parts, goods in process, and finished goods, all of which is merchantable and fit for
the purpose for which it was procured or manufactured, and none of which is slow-moving, obsolete,
damaged, or defective, subject only to the reserve for inventory writedown set forth on the face of
the Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of Target.

     (p) Contracts. Section 4(p) of the Disclosure Schedule lists the following contracts and other
agreements to which Target is a party:

-26-

 

(i) any agreement (or group of related agreements) for the lease of personal
property to or from any Person regardless of amount;

(ii) any agreement (or group of related agreements) for the purchase or sale of raw
materials, commodities, supplies, products, or other personal property, or for the
furnishing or receipt of services, the performance of which will extend over a
period of more than one year, result in a loss to Target, or involve consideration
in excess of $10,000;

(iii) any agreement concerning a partnership or joint venture;

(iv) any agreement (or group of related agreements) under which it has created,
incurred, assumed, or guaranteed any indebtedness for borrowed money, or any
capitalized lease obligation;

(v) any agreement concerning confidentiality or non-competition;

(vi) any agreement with any of Seller and their Affiliates (other than Target);

(vii) any profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance, or other plan or arrangement for the benefit of its current
or former directors, officers, and employees;

(viii) any collective bargaining agreement;

(ix) any agreement for the employment of any individual on a full-time, part-time,
consulting, or other basis providing annual compensation in excess of $10,000 or
providing severance benefits;

(x) any agreement under which it has advanced or loaned any amount to any of its
directors, officers, and employees outside the Ordinary Course of Business;

(xi) any agreement under which the consequences of a default or termination could
have a Material Adverse Effect;

(xii) any agreement under which it has granted any Person any registration rights
(including, without limitation, demand and piggyback registration rights);

(xiii) any agreement under which Target has advanced or loaned any other Person any
amounts; or

(xiv) any other agreement (or group of related agreements) the performance of which
involves consideration in excess of $10,000.

Seller have delivered to Buyer a correct and complete copy of each written agreement (as amended to
date) listed in Section 4(p) of the Disclosure Schedule and a written summary setting forth the
terms and conditions of each oral agreement referred to in Section 4(p) of the Disclosure Schedule.
With respect to each such agreement: (A) the agreement is legal, valid,

-27-

 

binding, enforceable, and in full force and effect; (B) the agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach or default, or
permit termination, modification, or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement.

     (q) Notes and Accounts Receivable. All notes and accounts receivable of Target are reflected
properly on their books and records, are valid receivables subject to no setoffs or counterclaims,
are current and collectible, and will be collected in accordance with their terms at their recorded
amounts, subject only to the reserve for bad debts set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of Target. All accounts receivable collected
by Buyer shall be applied on a first in, first out basis. Buyer shall continue Target’s customary
collection practices following Closing and shall provide Seller with all normal and customary
information relating to the accounts receivable that were in existence on the Closing Date,
including all normal aging reports, following the Closing. Any accounts receivable determined by
Buyer to be uncollectible shall be reassigned to Seller, subject, however, to buyer’s
indemnification rights hereunder.

     (r) Powers of Attorney. There are no outstanding powers of attorney executed on behalf of
Target.

     (s) Insurance. Section 4(s) of the Disclosure Schedule sets forth the following information
with respect to each insurance policy (including policies providing property, casualty, liability,
and workers’ compensation coverage and bond and surety arrangements) to which Target has been a
party, a named insured, or otherwise the beneficiary of coverage at any time within the past 10
years:

(i) the name, address, and telephone number of the agent;

(ii) the name of the insurer, the name of the policyholder, and the name of each
covered insured;

(iii) the policy number and the period of coverage;

(iv) the scope (including an indication of whether the coverage was on a claims
made, occurrence, or other basis) and amount (including a description of how
deductibles and ceilings are calculated and operate) of coverage; and

(v) a description of any retroactive premium adjustments or other loss-sharing
arrangements.

With respect to each such insurance policy: (A) the policy is legal, valid, binding, enforceable,
and in full force and effect; (B) the policy will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the consummation of the
transaction contemplated hereby; (C) neither Target nor any other party to the policy is in breach
or default (including with respect to the payment of premiums or the giving of notices), and no
event has

-28-

 

occurred which, with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; and (D) no party to the policy
has repudiated any provision thereof. Target has been covered during the past 10 years by insurance
in scope and amount customary and reasonable for the businesses in which they have engaged during
the aforementioned period. Section 4(s) of the Disclosure Schedule describes any self-insurance
arrangements affecting Target.

     (t) Litigation. Section 4(t) of the Disclosure Schedule sets forth each instance in which
Target (i) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge or
(ii) is a party or , to the Knowledge of any of Seller and the directors and officers (and
employees with responsibility for litigation matters) of Target, is threatened to be made a party
to any action, suit, proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the actions, suits, proceedings, hearings, and investigations set
forth in Section 4(t) of the Disclosure Schedule could result in any Material Adverse Change. None
of Seller and the directors and officers (and employees with responsibility for litigation matters)
of Target has any reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against Target or that there is any Basis for the
foregoing.

     (u) Product Warranty. Each product manufactured, sold, leased, or delivered by Target has been
in conformity with all applicable contractual commitments and all express and implied warranties,
and Target has no Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) for replacement or repair thereof or other damages in connection therewith,
subject only to the reserve for product warranty claims set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of Target. Section 4(u) of the
Disclosure Schedule includes copies of the standard terms and conditions of sale or lease for
Target (containing applicable guaranty, warranty, and indemnity provisions). No product
manufactured, sold, leased, or delivered by Target is subject to any guaranty, warranty, or other
indemnity beyond the applicable standard terms and conditions of sale or lease set forth in Section
4(u) of the Disclosure Schedule.

     (v) Product Liability. Target has no Liability (and there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product manufactured, sold,
leased, or delivered by Target.

     (w) Employees. Except as set forth on Section 4(w) of the Disclosure Schedule, to the
Knowledge of Seller and the directors and officers (and employees with responsibility for
employment matters) of Target, no executive, key employee, or group of employees has any plans to
terminate employment with Target. Target is not a party to or bound by any collective bargaining
agreement, nor has Target experienced any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. Target has not committed any unfair labor practice. None of
Seller and the directors and officers (and employees with responsibility for

-29-

 

employment matters) of Target has any Knowledge of any organizational effort presently being
made or threatened by or on behalf of any labor union with respect to employees of Target.

     (x) Employee Benefits.

(i) Section 4(x) of the Disclosure Schedule lists all employee benefit plans and
collective bargaining, employment or severance agreements or other similar
arrangements which Target, or any ERISA Affiliate, has ever sponsored, maintained,
or to which contributions are made or have ever been made, or for which obligations
have been incurred, for the benefit of employees or former employees of Target or an
ERISA Affiliate, including, without limitation, (1) any “employee benefit plan”
(within the meaning of Section 3(3) of ERISA), (2) any profit-sharing, deferred
compensation, bonus, stock option, stock purchase, pension, retainer, consulting,
retirement, severance, welfare or incentive plan, agreement or arrangement, (3) any
plan, agreement or arrangement providing for “fringe benefits” or perquisites to
employees, officers, directors or agents, including but not limited to benefits
relating to automobiles, clubs, vacation, child care, parenting, sabbatical, sick
leave, tuition reimbursement, medical, dental, hospitalization, life insurance,
disability insurance and other types of insurance, and (4) any employment agreement.
The plans, agreements and arrangements described in this Section 4(x) are referred
to herein as “Employee Benefit Plans.”

(ii) None of the Employee Benefit Plans is, and neither Target nor any other ERISA
Affiliate has ever contributed to or had any obligation to contribute to, (i) a plan
subject to Title IV of ERISA or Section 412 of the Code, (ii) a “multiemployer plan”
(within the meaning of Section 3(37) of ERISA), (iii) or a “multiple employer plan”
(within the meaning of Section 413(c) of the Code), any “voluntary employees’
beneficiary association” (within the meaning of Section 501(c)(9) of the Code), or
any “multiple employer welfare arrangement” (within the meaning of Section 3(40) of
ERISA).

(iii) None of the Employee Benefit Plans, nor any trust created thereunder, now
holds or has heretofore held as assets any stock or securities issued by Target or
any ERISA Affiliate.

(iv) Target has delivered to Buyer true and complete copies of all documents
(including plan documents, trust agreements and insurance contracts) and summary
plan descriptions of the Employee Benefit Plans or summary descriptions of any such
Employee Benefit Plan not otherwise in writing. Target has delivered to Buyer true
and complete copies of the most recent determination letters and the Forms 5500
filed in the most recent three plan years with respect to any Employee Benefit Plan,
including all schedules thereto and financial statements with attached opinions of
independent accountants. Target has delivered to Buyer summaries of material
modifications and material communications distributed within the last year to the
participants of each Employee Benefit Plan. Target has delivered to Buyer all
communications received from or sent to the Internal Revenue Service, Pension
Benefit Guaranty

-30-

 

Corporation or the Department of Labor within the last three years and any Forms
5330 required to be filed by Target or any ERISA Affiliate, whether related to a
Employee Benefit Plan or otherwise. Target and any ERISA Affiliate, as applicable,
have maintained all employee data necessary to administer each Employee Plan,
including all data required to be maintained under Sections 107 and 209 of ERISA,
and such data is true and correct and is maintained in usable form.

(v) Each Employee Benefit Plan (and any related trust agreement) has been
maintained, funded and administered in accordance with its terms and the terms of
any applicable collective bargaining agreement, and Target, and each ERISA
Affiliate, is in compliance with the applicable provisions of ERISA, the Code and
all laws applicable thereto. Without limitation of the foregoing:

     (A) None of Target, any ERISA Affiliate, nor any Employee Benefit Plan fiduciary has,
with respect to the Employee Benefit Plans, engaged in a non-exempt Prohibited Transaction,
and no event or condition exists with respect to any Employee Benefit Plan which constitutes
a reportable event within the meaning of Section 4043 of ERISA, as to which a waiver is not
applicable. No event has occurred and no condition exists with respect to any Employee
Benefit Plan which would give rise to any Liability under the Code or ERISA, including but
not limited to Sections 511, 4971, 4972, 4975, 4976, 4977, 4979, 4980B, 4980D, 4980E, 4980F
or 6652 of the Code, or to any fine or civil penalty under Sections 502, 4069 or 4071 of
ERISA.

     (B) Target and each ERISA Affiliate have complied in all respects with COBRA, the
Health Insurance Portability & Accountability Act of 1996, and Medicare Part D with respect
to any events occurring prior to and including the Closing Date. Each Employee Benefit Plan
that is subject to Section 1862(b)(1) of the Social Security Act has been operated in
compliance with the secondary payor requirements of Section 1862 of such Act.

     (C) Each Employee Benefit Plan that constitutes a “welfare benefit plan,” within the
meaning of Section 3(1) of ERISA, and for which contributions are claimed by Target or any
ERISA Affiliate as deductions under any provision of the Code, is in compliance with all
applicable requirements pertaining to such deduction. §4(x) of the Disclosure Schedule
discloses whether each welfare plan is (i) unfunded, (ii) with respect to welfare plans
subject to the provisions of the Code, funded through a “welfare benefit fund”, as such term
is defined in Section 419(e) of the Code, or other funding mechanism or (iii) insured.

     (D) Arrangements which constitute “nonqualified deferred compensation plans” as defined
by §409A of the Code have been administered in compliance with §409A or an exemption
therefrom since January 1, 2005.

     (E) All reports, returns and similar documents with respect to each Employee Benefit
Plan required to be filed with any Governmental Authority or distributed to any participant
of each Employee Benefit Plan have been duly and timely filed or distributed.

-31-

 

All contributions, fees, interest, penalties and assessments that are payable by or for
Target or any ERISA Affiliate have been timely reported, fully paid and discharged. There
are no unpaid contributions, fees, penalties, interest or assessments due from Target or any
ERISA Affiliate or from any other person that are or could become a Lien on any asset of
Target or any ERISA Affiliate or could otherwise adversely affect the business or assets of
Target or any ERISA Affiliate, and no assets of Target or any ERISA Affiliate are subject to
(or expected to be subject to) any such Lien. Target and each ERISA Affiliate have collected
or withheld all amounts that are required to be collected or withheld by them to discharge
their obligations, and all of those amounts have been paid to the appropriate Employee
Benefit Plans or governmental agencies or set aside in appropriate accounts for future
payment when due.

(vi) No actions, suits, disputes or claims (other than routine claims for benefits
in the ordinary course) are pending or threatened with respect to any Employee
Benefit Plan. No audits, inquiries, reviews, proceedings, claims, or demands are
pending with any governmental authority with respect to any Employee Benefit Plan.
There are no facts which could give rise to any Liability in the event of any such
investigation, claim, action, suit, audit, review, or other proceeding (including,
without limitation, any claim for breach of fiduciary duty).

(vii) Each Employee Benefit Plan that is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the Internal
Revenue Service that such Employee Benefit Plan is qualified under Section 401(a) of
the Code, and such determination letter considers the Uruguay Round Agreements Act,
the Small Business Job Protection Act of 1996, the Uniformed Services Employment and
Reemployment Rights Act of 1994, the Taxpayer Relief Act of 1997, the Internal
Revenue Service Restructuring and Reform Act of 1998, and the Community Renewal Tax
Relief Act of 2000. Each Employee Benefit Plan that is intended to be qualified
under Section 401(a) of the Code has been timely amended to reflect the provisions
of the Economic Growth & Tax Relief Reconciliation Act of 2001 and any other
statutory or regulatory changes requiring amendments, and has been timely submitted
for a determination letter regarding the provisions of the Economic Growth & Tax
Relief Reconciliation Act of 2001 if the deadline for such submission has passed. No
event has occurred that will or could give rise to the revocation of any applicable
determination letter, or the disqualification or loss of tax-exempt status of any
such Employee Benefit Plan or trust under Sections 401(a) or 501(a) of the Code.

(viii) Each of the Employee Benefit Plans can be terminated within a period of
thirty (30) days following the Closing Date, without any additional contribution to
such Employee Benefit Plan or the payment of any additional compensation or amount
or acceleration of any benefits.

(ix) No Employee Benefit Plan provides for or continues medical or health benefits,
or life insurance or other benefits (through insurance or otherwise) for any Person
or any dependent or beneficiary of any Person after such employee’s retirement or
other termination of employment except as may be required by

-32-

 

COBRA or applicable state law, and there has been no communication to any Person
that could reasonably be expected to promise or guarantee any such benefits.

(x) No condition exists as a result of which Target or any ERISA Affiliate would
have any Liability, whether absolute or contingent, including any obligations under
the Employee Benefit Plans, with respect to any misclassification of a Person
performing services for Target or an ERISA Affiliate as an independent contractor
rather than as an employee.

(xi) All contributions (including all employer contributions and employee salary
reduction contributions) and premium payments which are or have been due have been
paid to or with respect to each Employee Benefit Plan within the time required by
law. All required or discretionary (in accordance with historical practices)
payments, premiums, contributions, reimbursements, or accruals for all periods
ending prior to or as of the Closing Date shall have been made or properly accrued
on the Closing Balance Sheets or will be properly accrued on the books and records
of Target and each ERISA Affiliate as of the Closing Date. None of the Employee
Benefit Plans has any unfunded liabilities which are not reflected on the Closing
Balance Sheet or the books and records of Target and each ERISA Affiliate.

(xii) The consummation of the transactions contemplated by this Agreement will not
entitle any individual to severance pay, and will not accelerate the time of payment
or vesting, or increase the amount of compensation due to any individual. None of
the Employee Benefit Plans obligates Target or any ERISA Affiliate to pay
separation, severance, termination or similar benefits solely as a result of any
transaction contemplated by this Agreement or solely as a result of “change of
control” (as such term is defined in Section 280G of the Code).

     (y) Guaranties. Target is not a guarantor or otherwise is liable for any Liability or
obligation (including indebtedness) of any other Person.

     (z) Environmental, Health, and Safety Matters.

(i) Target and its predecessors and Affiliates have complied and are in compliance
with all Environmental, Health, and Safety Requirements.

(ii) Without limiting the generality of the foregoing, Target and its Affiliates
have obtained and complied with, and are in compliance with, all permits, licenses
and other authorizations that are required pursuant to Environmental, Health, and
Safety Requirements for the occupation of their facilities and the operation of
their business; a list of all such permits, licenses and other authorizations is set
forth on Section 4(z) of the Disclosure Schedule.

(iii) Neither Target nor, to its Knowledge, its predecessors or Affiliates has
received any written or oral notice, report or other information regarding any
actual or alleged violation of Environmental, Health, and Safety Requirements, or

-33-

 

any Liabilities or potential Liabilities, including any investigatory, remedial or
corrective obligations, relating to any of them or its facilities arising under
Environmental, Health, and Safety Requirements.

(iv) To knowledge of Target, none of the following exists at any property or
facility owned or operated by Target: (1) underground storage tanks, (2)
asbestos-containing material in any form or condition, (3) materials or equipment
containing polychlorinated biphenyls, or (4) landfills, surface impoundments, or
disposal areas.

(v) Neither Target nor, to its Knowledge, its predecessors or Affiliates have
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including without limitation any
hazardous substance, or owned or operated any property or facility (and no such
property or facility is contaminated by any such substance) in a manner that has
given or would give rise to Liabilities, including any Liability for response costs,
corrective action costs, personal injury, property damage, natural resources damages
or attorney fees, pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended (“CERCLA”), the Solid Waste Disposal Act, as
amended (“SWDA”) or any other Environmental, Health, and Safety Requirements.

(vi) Neither this Agreement nor the consummation of the transaction that is the
subject of this Agreement will result in any obligations for site investigation or
cleanup, or notification to or consent of government agencies or third parties,
pursuant to any of the so-called “transaction-triggered” or “responsible property
transfer” Environmental, Health, and Safety Requirements.

(vii) Neither Target nor, to its Knowledge, its predecessors or Affiliates has,
either expressly or by operation of law, assumed or undertaken any Liability,
including without limitation any obligation for corrective or remedial action, of
any other Person relating to Environmental, Health, and Safety Requirements.

(viii) No facts, events or conditions relating to the past or present facilities,
properties or operations of Target or, to its Knowledge, its predecessors or
Affiliates will prevent, hinder or limit continued compliance with Environmental,
Health, and Safety Requirements, give rise to any investigatory, remedial or
corrective obligations pursuant to Environmental, Health, and Safety Requirements,
or give rise to any other Liabilities pursuant to Environmental, Health, and Safety
Requirements, including without limitation any relating to onsite or offsite
releases or threatened releases of hazardous materials, substances or wastes,
personal injury, property damage or natural resources damage.

     (aa) Certain Business Relationships with Target. None of Seller, their Affiliates, Seller’
directors, officers, employees and stockholders and Target’s directors, officers, employees, and
stockholders has been involved in any business arrangement or relationship with Target within the
past 12 months, and none of Seller, their Affiliates, Seller’s directors, officers,

-34-

 

employees and stockholders and Target’s directors, officers, employees, and stockholders owns
any asset, tangible or intangible, which is used in the business of Target.

     (bb) Customers and Suppliers.

(i) Section 4(bb) of the Disclosure Schedule lists the 10 largest customers of
Target for each of the two most recent fiscal years and sets forth opposite the name
of each such customer the percentage of consolidated net sales attributable to such
customer. Section 4(bb) of the Disclosure Schedule also lists any additional current
customers that Target anticipates shall be among the 10 largest customers for the
current fiscal year.

(ii) Since the date of the Most Recent Balance Sheet, no supplier of Target has
indicated that it shall stop, or decrease the rate of, supplying materials, products
or services to Target, and no customer listed on Section 4(bb) of the Disclosure
Schedule has indicated that it shall stop, or decrease the rate of, buying
materials, products or services from Target.

     (cc) Disclosure. The representations and warranties contained in this Section 4 do not contain
any untrue statement of a material fact or omit to state any material fact necessary in order to
make the statements and information contained in this Section 4 not misleading.

SECTION 5. PRE-CLOSING COVENANTS

     The Parties agree as follows with respect to the period between the execution of this
Agreement and the Closing.

     (a) General. Each of the Parties will use his, her, or its best efforts to take all action and
to do all things necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but not waiver, of the Closing
conditions set forth in Section 7 below).

     (b) Notices and Consents. Seller will cause Target to give any notices to third parties, and
will cause Target to use its best efforts to obtain any third party consents referred to in Section
4(c) above, the Lease Consents, and the items set forth on Section 5(b) of the Disclosure Schedule.
Each of the Parties will (and Seller will cause Target to) give any notices to, make any filings
with, and use its best efforts to obtain any authorizations, consents, and approvals of governments
and governmental agencies in connection with the matters referred to in Section 3(a)(ii), Section
3(b)(ii), and Section 4(c) above.

     (c) Operation of Business. Seller will not cause or permit Target to engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, Seller will not cause or permit Target to (i) declare,
set aside, or pay any dividend or make any distribution whatsoever with respect to its capital
stock (whether in cash or in kind) or redeem, purchase, or otherwise acquire any of its capital
stock or (ii) otherwise engage in any practice, take any action, or enter into any transaction of
the sort described in Section 4(h) above; provided, however, that nothing herein

-35-

 

contained shall prohibit Target from making cash distributions to the Seller (whether in the
form of dividends or compensation) so long as such distributions do not cause the Adjusted Net
Worth to be materially less than $500,000.

     (d) Preservation of Business. Seller will cause Target to keep its business and properties
substantially intact, including its present operations, physical facilities, working conditions,
insurance policies, and relationships with lessors, licensors, suppliers, customers, and employees.

     (e) Full Access. Each of Seller will permit, and Seller will cause Target to permit,
representatives of Buyer (including legal counsel and accountants) to have full access at all
reasonable times, and in a manner so as not to interfere with the normal business operations of
Target, to all premises, properties, personnel, books, records (including Tax records), contracts,
and documents of or pertaining to Target.

     (f) Notice of Developments. Seller will give prompt written notice to Buyer of any material
adverse development causing a breach of any of the representations and warranties in Section 4
above. Each Party will give prompt written notice to the others of any material adverse development
causing a breach of any of his or its own representations and warranties in Section 3 above. No
disclosure by any Party pursuant to this Section 5(f), however, shall be deemed to amend or
supplement Annex I, Annex II, or the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.

     (g) Exclusivity. Seller will not (and Seller will not cause or permit Target to) (i) solicit,
initiate, or encourage the submission of any proposal or offer from any Person relating to the
acquisition of any capital stock or other voting securities, or any substantial portion of the
assets, of Target (including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussions or negotiations regarding, furnish any information
with respect to, assist or participate in, or facilitate in any other manner any effort or attempt
by any Person to do or seek any of the foregoing. Seller will not vote its Target Shares in favor
of any such acquisition. Seller will notify Buyer immediately if any Person makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.

     (h) Maintenance of Real Property. Seller will cause Target to maintain the Real Property,
including all of the Improvements, in substantially the same condition as of the date of this
Agreement, ordinary wear and tear excepted, and shall not demolish or remove any of the existing
Improvements, or erect new improvements on the Real Property or any portion thereof, without the
prior written consent of Buyer.

     (i) Leases. Except to the extent necessary to satisfy the Closing conditions set forth in
Section 7 below, Seller will not cause or permit any of Target’s Leases to be amended, modified,
extended, renewed or terminated, nor shall Target enter into any new lease, sublease, license or
other agreement for the use or occupancy of any real property, without the prior written consent of
Buyer.

     (j) Tax Matters. Without the prior written consent of Buyer, Target shall not make or change
any election, change an annual accounting period, adopt or change any accounting

-36-

 

method, file any amended Tax Return, enter into any closing agreement, settle any Tax claim or
assessment relating to Target, surrender any right to claim a refund of Taxes, consent to any
extension or waiver of the limitation period applicable to any Tax claim or assessment relating to
Target, or take any other similar action relating to the filing of any Tax Return or the payment of
any Tax, if such election, adoption, change, amendment, agreement, settlement, surrender, consent
or other action would have the effect of increasing the Tax liability of Target for any period
ending after the Closing Date or decreasing any Tax attribute of Target existing on the Closing
Date.

     (k) S Corporation Status. Target and Seller shall not revoke Target’s election to be taxed as
an S corporation within the meaning of Code Section 1361 and Section 1362. Target and Seller shall
not take or allow any action, other than the sale of Target’s stock pursuant to this Agreement,
which would result in the termination of Target’s status as a validly electing S corporation within
the meaning of Code Section 1361 and Section 1362.

     (l) Employee Benefits and Welfare Matters. Notwithstanding anything in this Agreement to the
contrary, prior to Closing, Seller shall cause the Target to terminate the Stationary Power
Services, Inc. 401(k) Plan (the “401(k) Plan”) and any other Target Plan intended to be qualified
under Code Section 401(a) or 403(a). In addition, (a) Sellers shall cause the Target to remove, or
Seller shall cause to resign, as a trustee under the 401(k) Plan, Seller and each other trustee, if
any, of the 401(k) Plan, effective as of the Closing Date; and (b) Seller shall cause the Target to
appoint, effective as of the Closing Date, successor trustees designated by Buyer.

SECTION 6. POST-CLOSING COVENANTS

     The Parties agree as follows with respect to the period following the Closing.

     (a) General. In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, each of the Parties will take such further
action (including the execution and delivery of such further instruments and documents) as any
other Party reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under Section 8 below). Seller
acknowledge and agree that from and after the Closing Buyer will be entitled to possession of all
documents, books, records (including Tax records), agreements, and financial data of any sort
relating to Target.

     (b) Litigation Support. In the event and for so long as any Party actively is contesting or
defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any
fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date involving Target,
each of the other Parties will cooperate with him or it and his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at the

-37-

 

sole cost and expense of the contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under Section 8 below).

     (c) Transition. Seller will not take any action that is designed or intended to have the
effect of discouraging any lessor, licensor, customer, supplier, or other business associate of
Target from maintaining the same business relationships with Target after the Closing as it
maintained with Target prior to the Closing. Seller shall refer all customer inquiries relating to
the businesses of Target to Buyer from and after the Closing.

     (d) Confidentiality. Each of the parties hereto will treat and hold as such all of the
Confidential Information of the other parties, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to such other party or
destroy, at the request and option of disclosing party, all tangible embodiments (and all copies)
of the Confidential Information which are in his, her, or its possession. In the event that any
party is requested or required pursuant to written or 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, such party will notify the disclosing party
promptly of the request or requirement so that the disclosing party may seek an appropriate
protective order or waive compliance with the provisions of this Section 6(d). If, in the absence
of a protective order or the receipt of a waiver hereunder, any of receiving parties is, on the
advice of counsel, compelled to disclose any Confidential Information to any tribunal or party in a
proceeding therein or else stand liable for contempt, such party may disclose the Confidential
Information to the tribunal or such person involved in such action; provided, however, that the
disclosing party shall use his, her, or its best efforts to obtain, at the reasonable request of
the disclosing party, an order or other assurance that confidential treatment will be accorded to
such portion of the Confidential Information required to be disclosed as the disclosing party shall
designate. The foregoing provisions shall not apply to any Confidential Information that is
generally available to the public immediately prior to the time of disclosure unless such
Confidential Information is so available due to the actions of a party, nor shall the foregoing
provisions apply to Buyer to the extent Buyer is required to disclose such information in order to
comply with its disclosure obligations as a publicly-traded company under applicable federal
securities laws and stock exchange rules and listing standards.

     (e) Release of Target by Seller. Effective at and (only) upon Closing, Seller (the “Releasing
Party”) hereby irrevocably and unconditionally releases and forever discharges the Target and its
respective successors and assigns (the “Released Parties”) from any and all claims, charges,
complaints, causes of action, damages, agreements and liabilities of any kind or nature whatsoever,
including any claim by Seller against the Target for indemnification or for advances with respect
to actions or omissions (or claims or allegations thereof) of Seller prior to the Closing in their
capacities as shareholders, officers, directors or employees of the Target (“Released Claims”),
whether known or unknown and whether at law or in equity, arising from conduct occurring on or
prior to the Closing Date, including without limitation any Released Claims relating to or arising
out of Seller’s ownership of securities of Target; provided that (i) nothing contained herein shall
release Released Parties from any of their post-Closing obligations and liabilities to Releasing
Party created under this Agreement or constitute a waiver of any claims that Releasing Party may
bring or have for indemnification by the Released Parties

-38-

 

under Section 8, and (ii) this release shall only relate to those claims arising from conduct
or omissions occurring on or before the Closing.

SECTION 7. CONDITIONS TO OBLIGATION TO CLOSE

     (a) Conditions to Buyer’s Obligation. Buyer’s obligation to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of the following
conditions:

(i) the representations and warranties set forth in Section 3(a) and Section 4 above
shall be true and correct in all material respects at and as of the Closing Date,
except to the extent that such representations and warranties are qualified by terms
such as “material” and “Material Adverse Effect,” in which case such representations
and warranties shall be true and correct in all respects at and as of the Closing
Date;

(ii) Seller shall have performed and complied with all of his covenants hereunder in
all material respects through the Closing, except to the extent that such covenants
are qualified by terms such as “material” and “Material Adverse Effect,” in which
case Seller shall have performed and complied with all of such covenants in all
respects through the Closing;

(iii) Target shall have procured all of the third party consents specified in
Section 5(b) above;

(iv) no action, suit, or proceeding shall be pending or threatened before any court
or quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, (C) affect
adversely the right of Buyer to own the Target Shares and to control Target, or (D)
affect adversely the right of Target to own its assets and to operate its businesses
(and no such injunction, judgment, order, decree, ruling, or charge shall be in
effect);

(v) Seller shall have delivered to Buyer a certificate to the effect that each of
the conditions specified above in Section 7(a)(i)-(iv) is satisfied in all respects;

(vi) the Parties shall have received all other authorizations, consents, and
approvals of governments and governmental agencies referred to in Section 3(a)(ii),
Section 3(b)(ii), and Section 4(c) above;

(vii) Buyer shall have received the resignations, effective as of the Closing, of
each director and officer of Target other than those whom Buyer shall have specified
in writing at least five business days prior to the Closing;

-39-

 

(viii) Buyer shall have obtained on terms and conditions satisfactory to it any debt
or equity financing it needs in order to consummate the transactions contemplated
hereby and fund the working capital requirements of Target after the Closing;

(ix) all actions to be taken by the Seller in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments, and
other documents required to effect the transactions contemplated hereby shall be
satisfactory in form and substance to Buyer;

(x) Target shall have obtained and delivered to Buyer a written consent for the
assignment of each of the Leases, and, if requested by Buyer’s lender, a waiver of
landlord liens, collateral assignment of lease or leasehold mortgage from the
landlord or other party whose consent thereto is required under such Lease (the
“Lease Consents”), in form and substance satisfactory to Buyer and Buyer’s lender;

(xi) [INTENTIONALLY OMITTED]

(xii) [INTENTIONALLY OMITTED]

(xiii) no damage or destruction or other change has occurred with respect to any of
the Real Property or any portion thereof that, individually or in the aggregate,
would materially impair the use or occupancy of the Real Property or the operation
of Target’s business as currently conducted thereon;

(xiv) William Maher and Edward Bellamy shall have entered into the Employment
Agreements with Buyer (or an Affiliate of Buyer) in the forms attached hereto as
Exhibits D-1 and D-2, respectively, and such agreements shall be in full force and
effect as of the Closing;

(xv) Seller shall have delivered to Buyer copies of the certificate of incorporation
of Target certified on or soon before the Closing Date by the Secretary of State (or
comparable officer) of the jurisdiction of Target’s incorporation;

(xvi) Seller shall have delivered to Buyer copies of the certificate of good
standing of Target issued on or soon before the Closing Date by the Secretary of
State (or comparable officer) of the jurisdiction of Target’s organization and of
each jurisdiction in which Target is qualified to do business;

(xvii) Seller shall have delivered to Buyer a certificate of the secretary or an
assistant secretary of Target, dated the Closing Date, in form and substance
reasonably satisfactory to Buyer, as to (i) no amendments to the Certificate of
Incorporation of Target since the date specified in clause (xxii) above; (ii) the
bylaws of Target; and (iii) any resolutions of the board of directors of Target
relating to this Agreement and the transactions contemplated hereby;

-40-

 

(xviii) Seller shall have entered into a confidentiality, non-solicitation,
non-compete and non-disparagement agreement with Target on terms satisfactory to
Buyer, and such agreement shall be in full force and effect as of the Closing.

(xix) Any amounts owed by Target to Seller shall have been paid in full and, at the
request of Buyer, Seller shall deliver to Target a release to such effect in form
and substance satisfactory to Buyer.

(xx) Buyer shall have obtained the approval of its lenders of this Agreement and the
transactions contemplated thereby and consent for payment of the Promissory Note and
Equity Payments and there shall be no payment default under Buyer’s loan agreements
with its lenders unless waived by Buyer’s lenders.

(xxi) Buyer shall have obtained the approval of its board of directors of this
Agreement and the transactions contemplated thereby.

(xxii) Target and Seller shall have delivered to Buyer signed copies of the
applicable forms and attachments thereto required in connection with the Section
338(h)(10) Election pursuant to Section 9(f) below.

(xxiii) Target and Seller or an affiliate of Seller shall have entered into the
Lease Agreement and such agreement shall be in full force and effect as of the
Closing.

(xxiv) Buyer shall have received from Bonadio and Company, LLP audited Financial
Statements of Target for the year ended December 31, 2006.

(xxv) Seller and Buyer shall have entered into the Registration Rights Agreement.

(xxvi) Buyer’s acquisition of Reserve Power Systems, Inc. shall have been completed
as of the Closing Date.

Buyer may waive any condition specified in this Section 7(a) if it executes a writing so stating at
or prior to the Closing.

     (b) Conditions to Seller’s Obligation. The obligation of Seller to consummate the transactions
to be performed by them in connection with the Closing is subject to satisfaction of the following
conditions:

(i) the representations and warranties set forth in Section 3(b) above shall be true
and correct in all material respects at and as of the Closing Date, except to the
extent that such representations and warranties are qualified by terms such as
“material” and “Material Adverse Effect,” in which case such representations and
warranties shall be true and correct in all respects at and as of the Closing Date;

(ii) Buyer shall have performed and complied with all of its covenants hereunder in
all material respects through the Closing, except to the extent that such covenants
are qualified by terms such as “material” and “Material Adverse

-41-

 

Effect,” in which case Buyer shall have performed and complied with all of such
covenants in all respects through the Closing;

(iii) no action, suit, or proceeding shall be pending or threatened before any court
or quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);

(iv) Buyer shall have delivered to Seller a certificate to the effect that each of
the conditions specified above in Section 7(b)(i)-(iii) is satisfied in all
respects;

(v) the Parties shall have received all authorizations, consents, and approvals of
governments and governmental agencies referred to in Section 3(a)(ii), Section
3(b)(ii), and Section 4(c) above;

(vi) all actions to be taken by Buyer in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments, and
other documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Seller;

(vii) William Maher and Edward Bellamy shall have entered into the Employment
Agreements with Buyer (or an Affiliate of Buyer) in the forms attached hereto as
Exhibits D-1 and D-2, respectively, and such agreements shall be in full force and
effect as of the Closing;

(viii) Buyer and Seller shall have entered into the Registration Rights Agreement;
and

(ix) Buyer shall have paid in full, or caused Target to pay in full at Closing,
those obligations of Target set forth on Schedule 7(b)(ix).

Seller may waive any condition specified in this Section 7(b) if it executes a writing so stating
at or prior to closing.

SECTION 8. REMEDIES FOR BREACHES OF THIS AGREEMENT

     (a) Survival of Representations and Warranties.

(i) All of the representations and warranties of the Parties contained in Section 3
of this Agreement shall survive the Closing hereunder (even if the damaged Party
knew or had reason to know of any misrepresentation or breach of warranty or
covenant at the time of Closing) and continue in full force and effect forever
thereafter (subject to any applicable statutes of limitations).

-42-

 

(ii) Except for those representations and warranties of the Parties contained in
Sections 4(a)-(f) (inclusive), (j), (k) and (z) of this Agreement, all of the
representations and warranties of the Parties contained in Section 4 of this
Agreement, shall survive the Closing hereunder (even if the damaged Party knew or
had reason to know of any misrepresentation or breach of warranty or covenant at the
time of Closing) and continue in full force and effect for a period of two years
from the Closing Date. This provision shall not extinguish claims that are made
within two years of the Closing Date but that remain unresolved on or after the date
that is two years after the Closing Date.

(iii) All of the representations and warranties of the Parties contained in Sections
4(a)-(f) (inclusive), (j), (k) and (z) of this Agreement shall survive the Closing
hereunder (even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty or covenant at the time of Closing) and
continue in full force and effect until the expiration of any applicable statutes of
limitations (after giving effect to any extensions or waivers) plus 60 days.

     (b) Indemnification Provisions for Buyer’s Benefit.

(i) In the event Seller breaches (or in the event any third party alleges facts
that, if true, would mean Seller has breached) any of his representations,
warranties, and covenants contained herein (other than the covenants in Section 2(a)
above and the representations and warranties in Section 3(a) above) and, provided
that Buyer makes a written claim for indemnification against Seller pursuant to
Section 11(h) below within the survival period (if there is an applicable survival
period pursuant to Section 8(a) above), then Seller shall be obligated to indemnify
Buyer from and against the entirety of any Adverse Consequences Buyer may suffer
(including any Adverse Consequences Buyer may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach); provided, however,
that Seller shall not have any obligation to indemnify Buyer from and against any
Adverse Consequences resulting from, arising out of, relating to, in the nature of,
or caused by the breach (or alleged breach) of any representation or warranty of
Sellers contained in Sections 4(g)-(i) inclusive, Sections 4(l)-(y) inclusive and
Sections 4(aa)-(cc) inclusive above until Buyer has suffered Adverse Consequences by
reason of all such breaches (or alleged breaches) in excess of a $30,000 aggregate
threshold, at which point Seller will be obligated to indemnify Buyer from and
against only such Adverse Consequences above such $30,000 aggregate threshold.
Notwithstanding the other provisions of this Section 8(b)(i) to the contrary, Seller
will be obligated to indemnify Buyer from and against any and all Adverse
Consequences resulting from, arising out of, or relating to (a) the failure of the
Real Property to be in compliance with ADA standards; (b) the Urban America, Inc.
warranty matter described in Disclosure Schedule 4(i); (c) the Global Crossing
preferential payment matter described in Disclosure Schedule 4(j); and (d) the Ohio,
West Virginia and Louisiana Department of Revenue matters described in Disclosure
Schedule 4(j).

-43-

 

(ii) In the event Seller breaches (or in the event any third party alleges facts
that, if true, would mean Seller breached) any of his covenants in Section 2(a)
above or any of his representations and warranties in Section 3(a) above, and
provided that Buyer makes a written claim for indemnification against Seller
pursuant to Section 11(h) below within the survival period (if there is an
applicable survival period pursuant to Section 8(a) above), then Seller shall
indemnify Buyer from and against the entirety of any Adverse Consequences Buyer may
suffer (including any Adverse Consequences Buyer may suffer after the end of any
applicable survival period) resulting from arising out of, relating to, in the
nature of, or caused by the breach (or the alleged breach).

(iii) Seller shall indemnify Buyer from and against the entirety of any Adverse
Consequences Buyer may suffer resulting from, arising out of, relating to, in the
nature of, or caused by any occurrence or circumstance related to Target or its
business that first arose, in whole or in part, on or before the Closing Date.

(iv) Notwithstanding anything in this Agreement to the contrary, in no event shall
the aggregate liability of Seller to Buyer under this Section 8(b) exceed THE
PURCHASE PRICE.

     (c) Indemnification Provisions for Seller’s Benefit.

(i) In the event Buyer breaches (or in the event any third party alleges facts that,
if true, would mean Buyer has breached) any of its representations, warranties, and
covenants contained herein and, provided that Seller makes a written claim for
indemnification against Buyer pursuant to Section 11(h) below within such survival
period (if there is an applicable survival period pursuant to Section 8(a) above),
then Buyer shall indemnify Seller from and against the entirety of any Adverse
Consequences suffered (including any Adverse Consequences suffered after the end of
any applicable survival period) resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or the alleged breach).

(ii) Buyer shall indemnify Seller from and against the entirety of any Adverse
Consequences Seller may suffer resulting from, arising out of, relating to, in the
nature of, or caused by any occurrence or circumstance related to Target or its
business that first arose, in whole or in part, after the Closing Date.

     (d) Matters Involving Third Parties.

(i) If any third party shall notify any Party (the “Indemnified Party”) with respect
to any matter (a “Third Party Claim”) which may give rise to a claim for
indemnification against any other Party (the “Indemnifying Party”) under this
Section 8, then the Indemnified Party shall promptly notify each Indemnifying Party
thereof in writing; provided, however, that no delay on the part of the Indemnified
Party in notifying any Indemnifying Party shall relieve the

-44-

 

Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.

(ii) Any Indemnifying Party will have the right to defend the Indemnified Party
against the Third Party Claim with counsel of its choice reasonably satisfactory to
the Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified
Party in writing within 15 days after the Indemnified Party has given notice of the
Third Party Claim that the Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or caused by
the Third Party Claim, (B) the Indemnifying Party provides the Indemnified Party
with evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (C) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (D) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the continuing
business interests or the reputation of the Indemnified Party, and (E) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently.

(iii) So long as the Indemnifying Party is conducting the defense of the Third Party
Claim in accordance with Section 8(d)(ii) above, (A) the Indemnified Party may
retain separate co-counsel at its sole cost and expense and participate in the
defense of the Third Party Claim, (B) the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not to be
withheld unreasonably), and (C) the Indemnifying Party will not consent to the entry
of any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to be withheld
unreasonably).

(iv) In the event any of the conditions in Section 8(d)(ii) above is or becomes
unsatisfied, however, (A) the Indemnified Party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to, the Third
Party Claim in any manner it reasonably may deem appropriate (and the Indemnified
Party need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith), (B) the Indemnifying Parties will reimburse the Indemnified
Party promptly and periodically for the costs of defending against the Third Party
Claim (including reasonable attorneys’ fees and expenses), and (C) the Indemnifying
Parties will remain responsible for any Adverse Consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature of, or caused
by the Third Party Claim to the fullest extent provided in this Section 8.

-45-

 

     (e) Determination of Adverse Consequences. All indemnification payments under this Section 8
and Section 9(a) shall be deemed adjustments to the Purchase Price.

     (f) Setoff against Promissory Note Payments; Priority; Escrow.

(i) Any indemnification to which Buyer is entitled under this Agreement as a result
of any Adverse Consequences Buyer may suffer may, at Buyer’s election, be satisfied
by Buyer setting-off such indemnification amounts against any amounts due to Seller
under the Promissory Note, and Buyer shall seek to satisfy such indemnification
amounts against such amounts due to Seller under the Promissory Note prior to and
before seeking to satisfy such indemnification amounts against other assets of
Sellers. The exercise by Buyer of such right of setoff shall not preclude Buyer from
pursuing other remedies available to Buyer against Seller.

(ii) In the event the Global Crossing preferential payment matter described in
Disclosure Schedule 4(j) has not been resolved by the date the Promissory Note is
converted in accordance with its terms or by the maturity date of the Promissory
Note if not so converted, the principal amount of the Promissory Note shall be
reduced by $500,000 and Buyer shall put $500,000 in escrow with a commercial bank
selected by Buyer to act as escrow agent, which amount shall be held solely for
purposes of satisfying any claims arising out of the Global Crossing preferential
payment matter. Sellers and Buyer agree to enter into an escrow agreement with the
escrow agent containing customary terms and terms consistent with this Section
8(f)(ii).

     (g) Other Indemnification Provisions. Buyer and Seller acknowledge and agree that the
foregoing indemnification provisions in this Section 8 shall be the exclusive remedy of Buyer and
Seller with respect to Target, Seller, and the transactions contemplated by this Agreement. The
party entitled to indemnification hereunder shall take all reasonable steps to mitigate all
damages, upon and after becoming aware of any event that could reasonably be expected to give rise
to any such losses that are indemnifiable hereunder. No party shall be entitled to indemnification
to the extent of any insurance, of any tax deduction or benefit actually realized, refund or
credit, or any other benefits actually realized resulting from or which may be claimed as a result
of the facts and circumstance relating to any indemnifiable claim. If any damages are covered by
insurance, the party seeking indemnity hereunder shall use all reasonable efforts to recover the
amount of such losses from the insurer of such insurance, which such recovery shall reduce the
amount of losses to be indemnified. To the extent either party discharges any claims for
indemnification hereunder, that party shall be segregated to all rights of the other parties
against third parties. Seller hereby agrees that he will not make any claim for indemnification
against Target by reason of the fact that he was a director, officer, employee, or agent of any
such entity or was serving at the request of any such entity as a partner, trustee, director,
officer, employee, or agent of another entity (whether such claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses, or otherwise and whether
such claim is pursuant to any statute, charter document, bylaw, agreement, or otherwise) with
respect to any action, suit, proceeding, complaint, claim, or demand brought by Buyer against
Seller (whether

-46-

 

such action, suit, proceeding, complaint, claim, or demand is pursuant to this Agreement,
applicable law, or otherwise).

SECTION 9. TAX MATTERS

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

     (a) Tax Indemnification. Seller shall indemnify Target, Buyer, and each Buyer Affiliate and
hold them harmless from and against without duplication, any loss, claim, liability, expense, or
other damage attributable to (i) all Taxes (or the non-payment thereof) of Target 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, consolidated, combined or unitary group of
which Target (or any predecessor of Target) is or was a member on or prior to the Closing Date,
including pursuant to Treasury Regulation Section 1.1502-6 or any analogous or similar state,
local, or foreign law or regulation, and (iii) any and all Taxes of any person (other than Target)
imposed on Target 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.

     (b) Responsibility for Filing Tax Returns. Buyer acknowledges that the Target will no longer
be eligible for S corporation status after the Closing Date. Accordingly, a final Form 1120S for
the Target will be required to be prepared for the period January 1, 2007 through the end of the
Closing Date. Such income tax return will be provided by the Seller allocating income and expenses
to this period according to the closing of the books method, in accordance with Section 1377(a)(2)
of the Code. At his expense, Seller shall prepare or caused to be prepared and file or caused to be
filed all Tax Returns for Target for periods ending on or before the Closing Date. Seller shall
permit Buyer to review and comment on each such Tax Return described in the preceding sentence
prior to filing. Buyer shall have the right to contest the contents of all such Tax Returns, and
any conflict between Seller and Buyer with respect thereto shall be resolved in accordance with the
provisions of Section 2(e)(ii), except that the parties shall have 20 days in which to attempt to
reach mutual agreement before referring the calculation to the Auditor.

     (c) Cooperation on Tax Matters.

(i) Buyer, Target, and Seller shall cooperate fully, as and to the extent reasonably
requested by the other Party, in connection with the filing of Tax Returns pursuant
to Section 9(c) and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other Party’s request)
the provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any material
provided hereunder. Target and Seller agree (A) to retain all books and records with
respect to Tax matters pertinent to Target

-47-

 

relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by Buyer or
Seller, any extensions thereof) of the respective taxable periods, and to abide by
all record retention agreements entered into with any taxing authority, and (B) to
give the other Party reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other Party so requests, Target or
Seller, as the case may be, shall allow the other Party to take possession of such
books and records.

(ii) Buyer and Seller further agree, upon request, to use their best efforts to
obtain any certificate or other document from any governmental authority or any
other Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including, but not limited to, with respect to the transactions
contemplated hereby).

(iii) Buyer and Seller further agree, upon request, to provide the other party with
all information that either party may be required to report pursuant to Code Section
6043 and all Treasury Regulations promulgated thereunder.

(iv) Buyer shall not with out the prior written consent of the Seller file, or cause
to be filed, any amended Tax Return or claim for Tax Refund, with respect to the
Target for pre-Closing Tax Period, to the extent any such filing may adversely
effect the liability of the Seller, unless advised in writing that such filing is
required by law.

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

     (e) Certain 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 by Seller when due, and Seller will, at his 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.

     (f) Section 338(h)(10) Election.

(i) At Buyer’s request, Target and Seller shall join with Buyer in making an
election under Sections 338(h)(10) of the Code and the Treasury Regulations,
including Treasury Regulation Section 1.338(h)(10)-1T(c)(1), and any corresponding
or similar elections under state, local or foreign Tax Law (collectively, a “Section
338(h)(10) Election”) with respect to the purchase and sale of the Target Shares. In
such case, Target and Seller shall include any income, gain, loss, deduction, or
other Tax item resulting from the Section 338(h)(10) Election on their Tax Returns
to the extent required by applicable law.

-48-

 

(ii) Buyer shall be responsible for the preparation and filing of all forms and
documents required in connection with the Section 338(h)(10) Election. Seller shall
execute and deliver to Buyer such documents or forms as are reasonably requested and
are required by any law, rule or regulation to complete properly the Section
338(h)(10) Election no later than 60 days after the Closing. For the purposes of
executing the Section 338 Election, on or prior to the Closing Date, Seller and
Buyer will execute two copies of the applicable Internal Revenue Service form and
all attachments required to be filed therewith pursuant to applicable Treasury
Regulations.

(iii) Buyer, not less than 30 days prior to the date the forms required under
Section 338(h)(10) of the Code are required to be filed, will provide Seller with a
valuation statement reflecting, as of the Closing Date, the fair market values of
all of the assets and the liabilities and obligations of the Target. Buyer and
Seller will file, and will cause their Affiliates to file, all Tax Returns and
statements, forms and schedules in connection therewith in a manner consistent with
such valuation and will take no position contrary thereto unless required to do so
by applicable Tax laws.

(iv) To the extent permitted by state and local law, the principles and procedures
of this section will also apply with respect to Section 338(h)(10) Election or
equivalent or comparable provision under state or local law. Seller will make any
election similar to a Section 338(h)(10) Election which is optional under any state
or local law, and will cooperate and join in any election made by Target, Buyer or
its Affiliates to effect such an election so as to treat the transaction as a sale
of assets for state and local income Tax purposes.

   (g) Tax Adjustment. If Buyer makes a Section 338(h)(10) Election, and if such Section
338(h)(10) Election causes Seller’s after-Tax net proceeds from the sale of Target’s stock to be
less than the after-Tax net proceeds that Seller would have received had the Section 338(h)(10)
Election not been made, taking into account all appropriate state, federal and local Tax
implications (the “Section 338(h)(10) Election Liability”), then Buyer shall pay to Seller, in
cash, an aggregate amount determined pursuant to the following (the “Tax Adjustment”):

(i) If the aggregate amount of the Section 338(h)(10) Election Liability is less
than or equal to $125,000, then Buyer shall pay Seller the aggregate amount of the
Section 338(h)(10) Election Liability.

The amount of the Tax Adjustment shall be paid to Seller prior to the date that any Tax return is
required to be filed in which the Section 338(h)(10) Election would have an impact on a Seller’s
Tax liability. If a Tax impact would occur in multiple years, only the amount necessary to pay a
Tax Adjustment for each year shall be paid in that year. In order to be entitled to a Tax
Adjustment, Seller shall provide Buyer with a schedule, not later than 30 days before the due date
of the Tax return with respect to which the Tax Adjustment is requested, computing the amount of
the Tax Adjustment. The Tax Adjustment shall reflect the actual calculation of Seller’s tax and
shall not be based on assumed or hypothetical Tax rates. Buyer shall have the right to contest the
calculation of any requested Tax Adjustment, and any conflict with respect to the calculation of a
Tax Adjustment shall be resolved in accordance with the provisions

-49-

 

of Section 2(e)(ii), except that the parties shall have 20 days in which to attempt to reach mutual
agreement before referring the calculation to the Auditor.

     (h) Tax Refund. Any Tax Refund pertaining to the pre-Closing Period (reduced by any Taxes
imposed on the Target as a result of 

  such refund) shall be for the account of, and paid over to the
Seller.

SECTION 10. TERMINATION

     (a) Termination of Agreement. Certain of the Parties may terminate this Agreement as provided
below:

(i) Buyer and Seller may terminate this Agreement by mutual written consent at any
time prior to the Closing;

(ii) Buyer may terminate this Agreement by giving written notice to Seller on or
before the 25th day following the date of this Agreement if Buyer is not
satisfied with the results of its continuing business, legal, environmental, and
accounting due diligence regarding Target;

(iii) Buyer may terminate this Agreement by giving written notice to Seller at any
time prior to the Closing (A) in the event Seller has breached any material
representation, warranty, or covenant contained in this Agreement in any material
respect, Buyer has notified Seller of the breach, and the breach has continued
without cure for a period of 10 days after the notice of breach or (B) if the
Closing shall not have occurred on or before November 30, 2007, by reason of the
failure of any condition precedent under Section 7(a) hereof (unless the failure
results primarily from Buyer itself breaching any representation, warranty, or
covenant contained in this Agreement); and

(iv) Seller may terminate this Agreement by giving written notice to Buyer at any
time prior to the Closing (A) in the event Buyer has breached any material
representation, warranty, or covenant contained in this Agreement in any material
respect, any Seller has notified Buyer of the breach, and the breach has continued
without cure for a period of 10 days after the notice of breach or (B) if the
Closing shall not have occurred on or before November 30, 2007, by reason of the
failure of any condition precedent under Section 7(b) hereof (unless the failure
results primarily from Seller breaching any representation, warranty, or covenant
contained in this Agreement).

     (b) Effect of Termination. If any Party terminates this Agreement pursuant to Section 10(a)
above, all rights and obligations of the

  Parties hereunder shall terminate without any Liability of
any Party to any other Party (except for any Liability of any Party
then in

   breach).

-50-

 

SECTION 11. MISCELLANEOUS

     (a) Press Releases and Public Announcements; Confidentiality.

(i) No Party shall issue any press release or make any public announcement relating
to the subject matter of this Agreement without the prior written approval of Buyer
and Seller; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other Parties
prior to making the disclosure).

(ii) Each of the parties hereto will treat and hold as such all of the Confidential
Information of the other parties, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to such
other party or destroy, at the request and option of disclosing party, all tangible
embodiments (and all copies) of the Confidential Information which are in his, her,
or its possession. In the event that any party is requested or required pursuant to
written or 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, such party will notify the disclosing
party promptly of the request or requirement so that the disclosing party may seek
an appropriate protective order or waive compliance with the provisions of this
Section 11(a)(ii). If, in the absence of a protective order or the receipt of a
waiver hereunder, any of receiving parties is, on the advice of counsel, compelled
to disclose any Confidential Information to any tribunal or party in a proceeding
therein or else stand liable for contempt, such party may disclose the Confidential
Information to the tribunal or such person involved in such action; provided,
however, that the disclosing party shall use his, her, or its best efforts to
obtain, at the reasonable request of the disclosing party, an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as the disclosing party shall
designate. The foregoing provisions shall not apply to any Confidential Information
that is generally available to the public immediately prior to the time of
disclosure unless such Confidential Information is so available due to the actions
of a party, nor shall the foregoing provisions apply to Buyer to the extent Buyer is
required to disclose such information in order to comply with its disclosure
obligations as a publicly-traded company under applicable federal securities laws
and stock exchange rules and listing standards.

     (b) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon
any Person other than the Parties and their respective successors and permitted assigns.

     (c) Entire Agreement. This Agreement (including the documents referred to herein) constitutes
the entire agreement among the Parties and supersedes any prior understandings, agreements, or
representations by or among the Parties, written or oral, to the extent they relate

-51-

 

in any way to the subject matter hereof, including, but not limited to that certain letter of
intent and term sheet dated as of July 16, 2007, as amended or extended, which letter of intent and
term sheet are hereby terminated.

     (d) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit
of the Parties named herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of his, her, or its rights, interests, or obligations hereunder
without the prior written approval of Buyer and Seller; provided, however, that
Buyer may (i) assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its obligations hereunder
(in any or all of which cases Buyer nonetheless shall remain responsible for the performance of all
of its obligations hereunder).

     (e) Counterparts. This Agreement may be executed in one or more counterparts (including by
means of facsimile), each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.

     (f) Headings. The section headings contained in this Agreement are inserted for convenience
only and shall not affect in any way the meaning or interpretation of this Agreement.

     (g) Notices. All notices, requests, demands, claims, and other communications hereunder will
be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed
duly given (i) when delivered personally to the recipient, (ii) one business day after being sent
to the recipient by reputable overnight courier service (charges prepaid), (iii) one business day
after being sent to the recipient by facsimile transmission or electronic mail, or (iv) four
business days after being mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid, and addressed to the intended recipient as set forth below:

	 	 	 	 	 
	 

	 	If to Buyer:
	 	Ultralife Batteries, Inc.
	 

	 	 	 	2000 Technology Parkway
	 

	 	 	 	Newark, NY 14513
	 

	 	 	 	Attention: General Counsel
	 

	 	 	 	Facsimile: (315) 331-7048
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Harter Secrest & Emery LLP
	 

	 	 	 	1600 Bausch & Lomb Place
	 

	 	 	 	Rochester, NY 14604
	 

	 	 	 	Attention: Jeffrey H. Bowen
	 

	 	 	 	Facsimile: (585) 232-2152
	 
	 	 	 	 
	 

	 	If to Seller:
	 	William Maher
	 

	 	 	 	525 Tallahassee Drive
	 

	 	 	 	St. Petersburg, FL 33702
	 

	 	 	 	Facsimile:                                        

-52-

 

	 	 	 	 	 
	 

	 	With a copy to:
	 	Johnson, Pope, Bokor, Ruppel & Burns, LLP
	 

	 	 	 	911 Chestnut Street
	 

	 	 	 	Clearwater, FL 33756
	 

	 	 	 	Attention: Michael G. Little
	 

	 	 	 	Facsimile: 727-462-0365

Any Party may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice in the manner
herein set forth.

     (h) Governing Law. This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of New York without giving effect to any choice or conflict of law
provision or rule (whether of the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.

     (i) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by Buyer and Seller. No waiver by any Party of any
provision of this Agreement or any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver nor shall such waiver be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such default, misrepresentation, or
breach of warranty or covenant.

     (j) Severability. Any term or provision of this Agreement that is invalid or unenforceable in
any situation in any jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.

     (k) Expenses. Each of Buyer, Seller and Target will bear his or its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby; provided, however, that Seller shall also bear the costs and
expenses of Target (including all of their legal fees and expenses) in connection with this
Agreement and the transactions contemplated hereby in the event that the transactions contemplated
by this Agreement are consummated.

     (l) Construction. The Parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly 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. Any reference to any federal, state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word “including” shall mean including without limitation. The
Parties intend that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation, warranty, or covenant
contained herein in any respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels of specificity)

-53-

 

which the Party has not breached shall not detract from or mitigate the fact that the Party is
in breach of the first representation, warranty, or covenant.

     (m) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits, Annexes, and Schedules
identified in this Agreement are incorporated herein by reference and made a part hereof.

     (n) Specific Performance. Each Party acknowledges and agrees that the other Parties would be
damaged irreparably in the event any provision of this Agreement is not performed in accordance
with its specific terms or otherwise is breached, so that a Party shall be entitled to injunctive
relief to prevent breaches of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in addition to any other remedy to which such Party may be entitled, at
law or in equity. In particular, the Parties acknowledge that the business of Target is unique and
recognize and affirm that in the event Seller breaches this Agreement, money damages would be
inadequate and Buyer would have no adequate remedy at law, so that Buyer shall have the right, in
addition to any other rights and remedies existing in its favor, to enforce its rights and the
other Parties’ obligations hereunder not only by action for damages but also by action for specific
performance, injunctive, and/or other equitable relief.

     (o) Submission to Jurisdiction. Each of the Parties submits to the jurisdiction of any state
or federal court having jurisdiction in Wayne County, New York, in any action or proceeding arising
out of or relating to this Agreement and agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court. Each Party also agrees not to bring any
action or proceeding arising out of or relating to this Agreement in any other court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of any other Party
with respect thereto. Each Party agrees that a final judgment in any action or proceeding so
brought shall be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.

     (p) Tax Disclosure Authorization. Notwithstanding anything herein to the contrary, the Parties
(and each Affiliate and Person acting on behalf of any Party) agree that each Party (and each
employee, representative, and other agent of such Party) may disclose to any and all Persons,
without limitation of any kind, the transaction’s tax treatment and tax structure (as such terms
are used in Code Sections 6011 and 6112 and regulations thereunder) contemplated by this agreement
and all materials of any kind (including opinions or other tax analyses) provided to such Party or
such Person relating to such tax treatment and tax structure, except to the extent necessary to
comply with any applicable federal or state securities laws; provided, however,
that such disclosure many not be made until the earlier of date of (A) public announcement of
discussions relating to the transaction, (B) public announcement of the transaction, or (C)
execution of an agreement to enter into the transaction. This authorization is not intended to
permit disclosure of any other information including (without limitation) (A) any portion of any
materials to the extent not related to the transaction’s tax treatment or tax structure, (B) the
identities of participants or potential participants, (C) the existence or status of any
negotiations, (D) any pricing or financial information (except to the extent such pricing or
financial information is related to the transaction’s tax treatment or tax structure), or (E) any
other term or detail not relevant to the transaction’s tax treatment or the tax structure.

-54-

 

* * * * *

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

	 	 	 	 	 
	 

	 	BUYER:	 	 
	 
	 	 	 	 
	 

	 	Ultralife Batteries, Inc.	 	 
	 
	 	 	 	 
	 

	 	By: /s/ John D. Kavazanjian
 

	 	 
	 

	 	John D. Kavazanjian	 	 
	 

	 	Chief Executive Officer	 	 
	 
	 	 	 	 
	 

	 	 SELLER:	 	 
	 
	 	 	 	 
	 

	 	By: /s/ William Maher	 	 
	 

	 	 	 	 
	 

	 	William Maher, Individually	 	 
	 
	 	 	 	 
	 

	 	TARGET:	 	 
	 
	 	 	 	 
	 

	 	Stationary Power Services, Inc.	 	 
	 
	 	 	 	 
	 

	 	/s/ William Maher	 	 
	 

	 	 	 	 
	 

	 	William Maher	 	 
	 

	 	President	 	 

-55-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}]]