Document:

Exhibit 10.1 Accurel Asset Purchase Sale Agreement

    Exhibit
      10.1
       

      Asset
        Purchase Agreement

       

      This
        Asset Purchase Agreement is entered into as of April 30, 2007 (the “Agreement
        Date”)
        among
        Accurel Systems International Corporation, a California corporation (the
        “Seller”);
        Implant Sciences Corporation, a Massachusetts corporation (the “Guarantor”)
        and
        Evans Analytical Group LLC, a Delaware limited liability company (the
“Buyer”).
        Capitalized terms used but not otherwise defined in the body of this Agreement
        are defined in Appendix A.

       

      Recitals

       

      The
        Seller desires to sell substantially all of the Assets of the Seller to the
        Buyer on the terms set forth in this Agreement.

       

      The
        Buyer
        desires to purchase substantially all of the Assets of the Seller on the
        terms
        set forth in this Agreement.

       

      Agreement

       

      The
        Seller, the Guarantor and the Buyer, intending to be legally bound, agree
        as
        follows:

       

      1.  Purchase
        and Sale of Assets.

       

      1.1  Purchased
        Assets.
        Subject
        to the terms and conditions set forth in this Agreement, and in reliance
        upon
        the representations, warranties, covenants and agreements of the Parties
        herein,
        at the Closing, the Seller will sell, assign, transfer, convey and deliver
        to
        the Buyer, and the Buyer shall purchase and acquire from the Seller, good
        and
        valid title to the following, free of any Encumbrances, except Permitted
        Encumbrances:

       

      (a)  Seller
        Intellectual Property.
        All the
        Seller Owned Intellectual Property and all Intellectual Property Rights related
        thereto, and the Seller’s Intellectual Property Rights in and to the
        Third-Person Intellectual Property, including the Intellectual Property listed
        in Schedule 1.1(a);

       

      (b)  Computer
        and Office Equipment.
        All of
        the Seller’s computer and office equipment, including the equipment listed in
Schedule 1.1(b);

       

      (c)  Laboratory
        Equipment.
        All of
        the Seller’s laboratory equipment, and all of Seller’s components and spare
        parts for laboratory equipment, including the equipment listed on Schedule
        1.1(c);

       

      (d)  General
        Equipment and Supplies.
        Any
        service equipment, telephones, pagers, computer peripherals, supplies, spare
        parts and other tangible personal property owned by the Seller;

       

      (e)  Assumed
        Contracts.
        All of
        the Seller’s rights, claims and obligations under the Seller Contracts listed in
Schedule
        1.1(e)),
        except
        as contemplated by Section 1.3(b)(xii) (the “Assumed
        Contracts”)
        and
        any cash deposits relating to the Assumed Contracts;

       

      (f)  Promotional
        Materials.
        All
        brochures, pamphlets, stationery, letterhead and other promotional or marketing
        materials (including all copies thereof) related to the Business or the
        Trademarks;

       

      (g)  Business
        Records.
        All
        Books and Records related to, necessary or useful for the conduct of the
        Business which shall not include the Corporate Documents; provided, that
        the
        Seller may retain copies of all such Books and Records;

       

      (h)  Goodwill.
        The
        goodwill related to, or arising out of, the Business;

       

      (i)  Governmental
        Authorizations.
        All
        rights of the Seller in or related to Governmental Authorizations necessary
        or
        useful for the conduct of the Business;

       

      (j)  Claims;
        Credits. All
        claims, causes of action, rights of recovery and rights of setoff against,
        and
        deposits, prepayments and credits with, third Persons (including insurance
        companies), and all rights under or pursuant to all warranties, representations
        and guarantees made by third Persons related to the ownership, development
        or
        Use of any Asset or the conduct of the Business, including those items listed
        on
Schedule 1.1(j);

       

      (k)  Accounts
        Receivable.
        The
        accounts
        receivable recorded on the books of the Seller as of the Closing
        Date;

       

      (l)  Inventory.
        All of
        the Seller’s raw materials, work in progress, finished products, supply and
        packaging items and similar items with respect to the Business, in each case
        wherever the same may be located;

       

      (m)  Fixtures
        and Leasehold Improvements.
        All of
        Seller’s fixtures and leasehold improvements and all of Seller’s right, title
        and interest in fixtures and leasehold improvements in Seller’s leased
        facilities; and

       

      (n)  Other
        Property. Except
        as
        provided in Section 1.2, all other Property of the Seller, whether or not
        described elsewhere in this Section 1.1 or similar thereto.

       

      Subject
        to the exclusion of the Excluded Assets, the Property set forth in
        Sections 1.1(a) through (l) is referred to in this Agreement as the
“Assets.”

       

      1.2  Excluded Assets.
        Notwithstanding anything in Section 1.1, the Assets shall not include any
        of the following:

       

      (a)  Tax
        Items.
        Any
        income tax deposits held as current assets on the balance sheet as of the
        Closing Date, prepayment, refund, claim, offset or other right of the Seller
        related to any Tax arising or resulting from or in connection with the ownership
        of the Assets or operation of the Business and attributable to any Taxable
        period ending on or prior to the Closing Date or, in the case of any Taxable
        period which includes but does not end on the Closing Date, the portion of
        such
        Taxable period up to and including the Closing Date;

       

      (b)  Nontransferable
        Governmental Authorizations.
        Any
        Governmental Authorization the transfer of which would violate applicable
        Legal
        Requirements; 

       

      (c)  Rights
        Under Certain Agreements. All
        rights of the Seller under this Agreement (including any rights of the Seller
        relating to the Excluded Assets and the right to receive the purchase price
        hereunder), all rights of the Seller under any agreement, certificate,
        instrument or other document executed and delivered by the Seller and the
        Buyer
        in connection with the transactions contemplated hereby, or any other agreement
        between the Seller and the Buyer entered into during the Pre-Closing
        Period;

       

      (d)  Corporate
        Documents.
        Corporate seals, certificates of incorporation, minute books, stock transfer
        books or other records related to the corporate organization of the Seller
        (the
“Corporate
        Documents”);
        and

       

      (e)  Correspondence.
        All
        rights to receive mail and other communications addressed to the Seller that
        are
        not related to any of the Assets or the Business or the Assumed
        Liabilities.

       

      (f)  Deposit
        Accounts; Cash; Accounts Receivable.
        Any
        balances in any deposit accounts, and any cash, cash equivalents, and marketable
        securities held by the Seller as of the Closing Date, excluding any cash
        deposits relating to the Assumed Contracts;

       

      The
        Property listed in this Section 1.2 is referred to in this Agreement as the
        “Excluded
        Assets.”

       

      1.3  Liabilities. 

       

      (a)  Assumed
        Liabilities.
        Subject
        to the terms and conditions set forth in this Agreement, at the Closing,
        the
        Buyer shall assume the following Liabilities of the Seller (collectively,
        the
“Assumed
        Liabilities”)
        by
        executing and delivering to the Seller the Assignment and Assumption
        Agreement:

       

      (i)  Assumed
        Contracts.
        The
        obligations of the Seller under the Assumed Contracts; and

       

      (ii)  Trade
        Accounts Payable.
        The
        obligations of the Seller for trade accounts payable incurred in the Ordinary
        Course of Business on or prior to the Closing Date that are set forth on
        Schedule
        2.7(b).

       

      (b)  Excluded
        Liabilities.
        Notwithstanding the foregoing, and notwithstanding anything to the contrary
        contained in this Agreement, the Buyer shall not assume any Liabilities other
        than the Assumed Liabilities (collectively, the “Excluded
        Liabilities”).
        Without limiting the generality of the foregoing, the Assumed Liabilities
        shall
        not include, and the Buyer shall not be required to assume or to otherwise
        perform or discharge, the following Excluded Liabilities whether arising
        prior
        to, at or after the Closing Date:

       

      (i)  any
        Liability of the Guarantor or any Person other than the Seller;

       

      (ii)  any
        Liability of the Seller arising out of or relating to the execution, delivery
        or
        performance of any of the Transaction Agreements;

       

      (iii)  any
        Liability of the Seller for any fees, costs or expenses of the type referred
        to
        in Section 8.2;

       

      (iv)  except
        for Assumed Liabilities under the Assumed Contracts, any Liability arising
        from
        or relating to any action taken by the Seller or its agents, or any failure
        on
        the part of the Seller or its agents to take any action, at any time, whether
        prior to, at or after the Closing Date;

       

      (v)  except
        for Assumed Liabilities under the Assumed Contracts, any Liability arising
        from
        or relating to the Business or any services performed for any Person by or
        on
        behalf of the Seller on or prior to the Closing Date;

       

      (vi)  except
        for Assumed Liabilities under the Assumed Contracts, any Liability as
        successor-in-interest to the Seller or under any rule or principle of successor
        liability, continuity of enterprise, de facto merger, mere continuation or
        similar rule or principle;

       

      (vii)  any
        Liability under the Sunnyvale Lease (including all associated payments,
        obligations and taxes related to the facility subject to the Sunnyvale Lease),
        and any Liability relating to or in connection with the Sunnyvale Lease,
        other
        than any Liability arising from or relating to the performance and obligations
        of Buyer under the Sunnyvale Sublease;

       

      (viii)  any
        Liability of the Seller related to any Proceeding against the
        Seller;

       

      (ix)  any
        Tax
        or Liability of the Seller for the payment of any Tax;

       

      (x)  any
        Liability of the Seller to or on account of any Employee or former employee
        of
        the Seller under or with respect to employment, including any Liability relating
        to any Benefit Plan, or wages or commissions, accrued vacation days or sick
        days
        or other paid time off, and any Liability for severance payments or other
        obligations to or on account of Employees;

       

      (xi)  any
        Liability of the Seller to the Guarantor or any other Related Party,
        Representative or Affiliate of the Seller, including any Intercompany
        Transactions and any payables due to the Guarantor, and including the
        Liabilities listed on Schedule
        1.3(b)(xi);

       

      (xii)  any
        Liability of the Seller under any Seller Contract, if (A) the Seller shall
        not
        have obtained, prior to the Closing, any Consent required to be obtained
        from
        any Person with respect to the assignment or delegation to the Buyer of any
        rights or obligations under such Seller Contract and (B) such Seller Contract
        would have been an Assumed Contract but for the Seller’s failure to obtain such
        Consent;

       

      (xiii)  any
        Liability of the Seller under any Assumed Contract to the extent such Liability
        (A) was required to be performed by the Seller before the Closing Date in
        accordance with the terms of any Assumed Contracts, unless there exist accounts
        payable collected by the Buyer, or (B) arises from or relates to any Breach
        by
        the Seller of any provision of any Assumed Contracts;

       

      (xiv)  any
        bank
        or other debt, loans or guarantee obligations of the Seller including, without
        limitation, any capitalized leases, loans from the Guarantor, bank lines
        of
        credit, equipment installment notes or other notes payable (other than those
        Assumed Liabilities under any Assumed Contracts listed in Schedule
        1.1(e));

       

      (xv)  any
        lease
        obligations, including vehicle, office and equipment leases (other than those
        Assumed Liabilities under any Assumed Contracts listed in Schedule
        1.1(e));

       

      (xvi)  any
        Liability of the Seller that arises or exists by virtue of any Breach of
        (A) any representation or warranty made by the Seller or the Guarantor in
        any of the Transaction Agreements, or (B) any covenant or obligation of the
        Seller or the Guarantor contained in any of the Transaction
        Agreements;

       

      (xvii)  any
        Liability of the Seller arising out of or relating to the Seller Intellectual
        Property and the Intellectual Property Rights thereto, other than obligations
        of
        the Seller arising after the Closing (A) under inbound and outbound licenses
        for
        Intellectual Property that are Assumed Contracts listed in Schedule
        1.1(e)
        or (B)
        described in Section 1.3(a)(ii);

       

      (xviii)  any
        Payable of the Seller that remains unpaid as of the Closing, except those
        described in Section 1.3(a)(ii);

       

      (xix)  any
        indemnity obligation of the Seller to any Person (other than indemnity
        obligations that are Assumed Liabilities under any Assumed Contracts listed
        in
Schedule
        1.1(e));
        

       

      (xx)  any
        Liability of the Seller or any Related Party that directly or indirectly
        arises
        from or relates to the presence of any Hazardous Material at any site owned,
        leased, occupied or controlled by the Seller on or at any time prior to the
        Closing or the generation, manufacture, production, transportation, importation,
        use, treatment, refinement, processing, handling, storage, discharge,
        Environmental Release or disposal of any Hazardous Material (whether lawfully
        or
        unlawfully) by or on behalf of the Seller prior to Closing; or

       

      (xxi)  any
        Liability of the Seller that is not referred to specifically in Section
        1.3(a).

       

      1.4  Purchase
        Price.
        The
        consideration to be paid by the Buyer to the Seller at the Closing in connection
        with the Transactions shall be equal to Twelve Million Eight Hundred Eighty
        Thousand Eight Hundred Ninety-Four Dollars ($12,880,894.00) minus
        Net Debt
        (the “Total
        Net Consideration”)
        payable as follows:

       

      (a)  The
        Buyer
        shall pay to the Seller on the Closing Date an amount equal to the Total
        Net
        Consideration minus
        One
        Million Dollars ($1,000,000.00) (the “Closing
        Payment”);

       

      (b)  The
        Buyer
        shall deposit One Million Dollars ($1,000,000.00) with the Escrow Agent pursuant
        to the terms of the Escrow Agreement, attached hereto as Exhibit
        E, to
        secure
        the indemnification obligations of the Seller and the Guarantor pursuant
        to this
        Agreement.

       

      1.5  Closing.
        The
        consummation of the purchase and sale of the Assets, the assignment of the
        rights under the Assumed Contracts and the assumption of the Assumed Liabilities
        contemplated by this Agreement (the “Closing”)
        shall
        occur on the Agreement Date or as soon as practicable thereafter, provided
        that
        all conditions to the Closing set forth in Sections 4 and 5 have been satisfied
        or waived in writing by the Party entitled to waive such conditions. The
        Closing
        shall be effected by: (a) the delivery of those signature pages,
        certificates, documents and opinions that are required to be delivered pursuant
        to Sections 4 and 5 to the respective recipients set forth in Sections 4
        and 5
        via personal delivery or facsimile or electronic image transmission; and
        (b) the transmission of a wire transfer to the accounts of the Seller in an
        aggregate amount equal to the Closing Payment.

       

      1.6  Sales
        and Other Taxes. 

       

      (a)  The
        Seller shall (i) bear and pay all Taxes (including without limitation any
        sales taxes, use taxes, transfer taxes, income or franchise taxes on capital
        gain or depreciation recapture, documentary charges, recording fees or similar
        taxes) and all charges, fees or expenses similar to or in the nature of taxes,
        that may become payable in connection with the sale of the Assets to the
        Buyer
        or in connection with any pre-Closing distributions to the Guarantor; and
        (ii) file all necessary Tax Returns and other documentation with respect to
        such taxes; provided,
        however,
        that, if required by any Legal Requirement, the Buyer shall join in the
        execution of any such Tax Returns and other documentation. No execution of
        any
        Tax Returns by the Buyer shall be deemed to create any Liability of the Buyer
        to
        the Seller or any other Person or shall affect the indemnification by the
        Seller
        and Guarantor under Section 6.2.

       

      (b)  Seller
        shall be responsible for and shall pay any and all Taxes arising or resulting
        from or in connection with the ownership of the Assets or operation of the
        Business attributable to any Taxable period ending on the Closing Date or,
        in
        the case of any Taxable period which includes but does not end on the Closing
        Date, the portion of such Taxable period up to and including the Closing
        Date.
        The Buyer shall be responsible for and shall pay any and all Taxes arising
        or
        resulting from or in connection with the ownership or use of the Assets or
        operation of the Business by the Buyer attributable to any Taxable period
        beginning after the Closing Date or, in the case of any Taxable period which
        includes but does not end on the Closing Date, the portion of such Taxable
        period beginning on the day after the Closing Date. Any and all other Taxes
        due
        pursuant to the Transaction contemplated hereby, including any and all transfer
        taxes, sales taxes, bulk transfer taxes, share transfer taxes, taxes related
        to
        excess depreciation re-capture, and/or taxes resulting from the structure
        of
        this Transaction shall be borne by Seller and any associated legal and other
        expenses incurred by Seller shall be borne by Seller.

       

      1.7  Allocation.

       

      (a)  
        The
        consideration referred to in Section 1.4 (and any other amount required for
        federal income Tax purposes to be included in the determination of the Purchase
        Price) is to be allocated among the Assets (the “Allocation”)
        in a
        manner consistent with Schedule
        1.7.
        All
        fixed assets shall be valued at fair market value, such value to be determined,
        if necessary, through an independent appraisal at the expense of the Buyer.
        Further, for the purpose of determining the value of the fixed assets, buyer
        and
        Seller will agree to a valuation based on a “free standing” versus a “transfer
        in place” value for similar used fixed assets, to the extent consistent with
        applicable income Tax regulations.

       

      (b)  The
        Seller and the Buyer will cooperate in preparing and filing with the Internal
        Revenue Service their respective IRS Forms 8594. No Party shall take a position
        on any Tax Return (including IRS Form 8594), before any Tax authority or
        in any
        Proceeding that is in any manner inconsistent with the allocation set forth
        in
Schedule
        1.7
        without
        the prior written consent of the Buyer or the Seller, as the case may be,
        or
        unless specifically required pursuant to a determination by an applicable
        Tax
        authority. Each Party shall promptly advise the Buyer or the Seller, as the
        case
        may be, of the existence of any Tax audit, controversy or Proceeding related
        to
        the allocation of the Purchase Price among the Assets.

       

      1.8  Confirmation
        of Net Debt. As
        soon
        as reasonably practicable after the Closing, but in any event not later than
        fifteen (15) business days thereafter, the Buyer and the Seller shall use
        commercially reasonable efforts to confirm the Net Debt set forth in
Schedule
        2.7(c)
        as of
        the Closing. If either the Buyer or the Seller determines that the Net Debt
        amounts set forth in Schedule
        2.7(c)
        were
        incorrect, such Party shall recalculate the Total Net Consideration using
        the
        corrected Net Debt and provide notice thereof to the other Party. If the
        Buyer
        and the Seller are unable to resolve any disputed amounts within ten (10)
        business days after delivery of such notice to the Seller, then the disputed
        amounts shall be submitted to arbitration in accordance with Section 6.2.
        Upon
        final determination of the Total Net Consideration, the Buyer shall promptly
        pay
        to the Seller any excess of the final Total Net Consideration over the Total
        Net
        Consideration determined as of the Closing, or the Seller shall promptly
        pay to
        the Buyer any excess of the Total Net Consideration determined as of the
        Closing
        over the final Total Net Consideration.

       

      2.  Representations
        and Warranties of the Seller. The
        Seller and Guarantor jointly and severally represent and warrant to and for
        the
        benefit of the Buyer Indemnitees, as follows, except as set forth in the
        Disclosure Schedule; provided, that a particular representation or warranty
        shall be deemed to be qualified by a particular item of disclosure only if,
        and
        to the extent that, the disclosure is set forth in the Schedule having the
        number corresponding to the particular Section in this Section 2 that contains
        the representation or warranty being qualified (all such Schedules having
        a
        number corresponding to any Section in this Section 2 shall be referred to
        collectively as the “Disclosure
        Schedule”
        and all
        references to Schedules in this Section 2 shall be deemed references to
        Schedules in the Disclosure Schedule).

       

      2.1  Due
        Organization; No Subsidiaries; Etc.
        The
        Seller is a corporation duly organized, validly existing and in good standing
        under the laws of the State of California and has full power and authority
        under
        applicable Legal Requirements to own, lease and operate its Property and
        to
        carry on the Business. The Seller is duly qualified and is authorized to
        do
        business and is in good standing as a foreign corporation under the laws
        of each
        of the jurisdictions listed in Schedule 2.1.

       

      2.2  Articles
        of Incorporation and Bylaws; Records.
        The
        Seller has delivered to the Buyer accurate and complete copies of the following,
        each as in effect as of the Agreement Date: (i) the Articles of
        Incorporation and Bylaws of the Seller, including all amendments thereto
        (collectively, the “Charter
        Documents”);
        and
        (ii) the portion of the minutes and other records of meetings and actions
        taken
        by written consent without a meeting, of the Guarantor, the Seller Board
        and all
        committees of the Seller Board (collectively, the “Seller Minutes”)
        directly relating to the Transaction.

       

      2.3  Authority;
        Binding Nature of Agreements.
        The
        Seller has the absolute and unrestricted right, power and authority to enter
        into and to perform its obligations under each of the Transaction Agreements
        to
        which it is or may become a party and the other agreements, certificates
        and
        instruments to be executed by Seller pursuant to this Agreement and to
        consummate the Transactions. The execution, delivery and performance by the
        Seller of the Transaction Agreements to which it is or may become a party
        have
        been duly authorized by all necessary action on behalf of the Seller, the
        Seller
        Board and the Guarantor. This Agreement has been, and each other Transaction
        Agreement to which the Seller is a party will be, duly executed and delivered
        by
        or on behalf of the Seller. This Agreement constitutes the legal, valid and
        binding obligation of the Seller, enforceable against the Seller in accordance
        with its terms, except as may be limited by (i) applicable bankruptcy,
        insolvency, reorganization, moratorium, and other laws of general application
        affecting enforcement of creditors’ rights generally, and (ii) laws
        relating to the availability of specific performance, injunctive relief,
        or
        other equitable remedies (collectively, the “Enforceability
        Limitations”).
        Upon
        the execution and delivery at the Closing of each of the Transaction Agreements
        to which the Seller will be a party, each of such Transaction Agreements
        to
        which the Seller will be a party will constitute the legal, valid and binding
        obligation of the Seller and will be enforceable against the Seller in
        accordance with its terms, except as may be limited by the Enforceability
        Limitations.

       

      2.4  Non-Contravention.
        Subject
        to the receipt of the consents and approvals set forth on Schedule
        2.5,
        the
        execution and delivery of any of the Transaction Agreements to which the
        Seller
        is or will be a party by the Seller, the consummation of the Transactions
        and
        the performance of any Transaction Agreement to which the Seller is or will
        be a
        party will not directly or indirectly, with or without notice or lapse of
        time:

       

      (a)  contravene,
        conflict with or result in a violation of, or give any Governmental Body
        or
        other Person the right to challenge any of the Transactions or to exercise
        any
        remedy or obtain any relief under, any Legal Requirement or any Order to
        which
        the Seller or any Property of the Seller is subject;

       

      (b)  contravene,
        conflict with or violate any provision of the Charter Documents;

       

      (c)  contravene,
        conflict with or violate any of the terms or requirements of, or give any
        Governmental Body the right to revoke, withdraw, suspend, cancel, terminate
        or
        modify, any Governmental Authorization that is held by the Seller or, to
        the
        Seller’s Knowledge, any Employee;

       

      (d)  contravene,
        conflict with or result in a Breach of any provision of any Seller Contract,
        except as set forth on Schedule
        2.4(d);

       

      (e)  give
        any
        Person the right to (i) declare a default or exercise any remedy under any
        Seller Contract, (ii) accelerate the maturity or performance of any Seller
        Contract, or (iii) cancel, terminate or modify any Seller Contract, except
        as
        set forth on Schedule
        2.4(e);

       

      (f)  result
        in
        the imposition or creation of any Encumbrance upon any of the assets of the
        Seller, except as set forth on Schedule
        2.4(f).

       

      2.5  Consents.
        Except
        as set forth in Schedule 2.5,
        the
        Seller was not, is not and will not be required to make any filing with or
        give
        any notice to, or to obtain any Consent from, any Person in connection with
        (a) the execution and delivery of any of the Transaction Agreements to
        which the Seller is or will be a party, (b) the consummation of any of the
        Transactions or (c) the performance of any of the Transactions. 

       

      2.6  Capitalization. All
        of
        the issued and outstanding Stock is held of record and owned by the Guarantor.
        No action has been taken by the Guarantor, the Seller or the Seller Board
        to
        authorize or issue any other Stock. No action has been taken by the Guarantor,
        the Seller or the Seller Board to authorize or issue any Stock
        Right.

       

      2.7  Financial
        Statements. 

       

      (a)  Financial
        Statements.
        The
        following financial statements are attached to this Agreement as Exhibit
        A
        (collectively, the “Financial
        Statements”):
        (a) the unaudited balance sheets of the Seller as of June 30, 2005 and June
        30, 2006, and the related statements of income for the years then ended,
        together with all the notes thereto, and (b) the unaudited balance sheet
        of the
        Seller as of March 31, 2007 (the “Most
        Recent Balance Sheet”),
        and
        the related statements of income for the period then ended, together with
        all
        notes thereto. The Financial Statements are accurate and complete in all
        material respects, have been prepared in accordance with GAAP consistently
        applied throughout the periods covered and present fairly the financial position
        of the Seller as of the respective dates thereof and the results of operations
        of the Seller for the periods covered thereby.

       

      (b)  Accounts
        Receivable and Accounts Payable.
        The
        accounts receivable and accounts payable of the Seller as of the Closing
        Date
        are listed on the attached Schedule
        2.7(b).
        All
        such accounts receivable and accounts payable are reflected properly on the
        Seller’s books and records and are bona fide, valid receivables or payables
        representing amounts due or payable with respect to actual transactions in
        the
        Ordinary Course of Business. To the Knowledge of the Seller none of such
        receivables are subject to valid counterclaims or setoffs, other than refunds,
        waivers, discounts or write-offs of customer receivables in the Ordinary
        Course
        of Business which have not exceeded $25,000 in the aggregate since July 1,
        2006.

       

      (c)  Net
        Debt. Schedule
        2.7(c) sets
        forth true, correct and complete statements of (a) all Seller accounts payable
        that, as of the Closing, are more than 30 days past their due dates, and
        (d) all
        Transaction expenses of the Seller or the Guarantor payable by the Buyer
        after
        the Closing.

       

      2.8  Liabilities.

       

      (a)  The
        Seller does not have any Liabilities of any nature and there is no Basis
        for any
        present or future action, suit, proceeding, hearing, investigation, charge,
        complaint, claim, or demand against the Company giving rise to a Liability,
        other than (i) Liabilities as and to the extent specifically set forth on
        the
        Most Recent Balance Sheet, (ii) Liabilities set forth in Schedule 2.8(a),
        and
        (iii) Liabilities that have been incurred by the Seller in bona fide
        transactions entered into in the Ordinary Course of Business after the date
        of
        the Most Recent Balance Sheet in amounts consistent with past practice none
        of
        which is in excess of $25,000 (individually, or collectively for any group
        of
        related transactions) and none of which result from, arise out of, relate
        to,
        are in the nature of, or were caused by any breach of contract, breach of
        warranty, tort, infringement or violation of any Legal Requirement.

       

      (b)  Schedule
        2.8(b)
        provides
        an accurate and complete breakdown of (i) the aging of the accounts payable
        of the Seller as of the Closing Date; (ii) any customer deposits or other
        deposits held by the Seller as of the Closing Date; (iii) all notes payable
        and other indebtedness of the Seller as of the Closing Date (the “Payables”).

       

      (c)  Since
        March 9, 2005, the Seller has not (i) made a general assignment for the
        benefit of creditors, (ii) filed, or had filed against it, any bankruptcy
        petition or similar filing, (iii) suffered the attachment or other judicial
        seizure of all or a substantial portion of its Property, (iv) admitted in
        writing its inability to pay its debts as they become due, (v) been
        convicted of, or pleaded guilty or no contest to, any felony, or (vi) taken
        or been the subject of any Proceeding that may have an adverse effect on
        its
        ability to comply with or perform any of its covenants or obligations under
        any
        of the Transaction Agreements to which the Seller is or will be a party,
        except
        as set forth on Schedule
        2.8(c).

       

      (d)  Except
        as
        set forth on Schedule
        2.8(d),
        since
        March 9, 2005, the Seller has not guaranteed or otherwise agreed to cause,
        insure or become liable for, and the Seller has never pledged any of its
        Property to secure, the performance or payment of any Liability of any other
        Person.

       

      (e)  There
        are
        no Encumbrances on any of the assets of the Seller, other than Permitted
        Encumbrances.

       

      2.9  Absence
        of Changes.
        Since
        the date of the Most Recent Balance Sheet:

       

      (a)  No
        Material Adverse Effect has occurred, and no Prior Event has occurred that
        could
        reasonably be expected to have a Material Adverse Effect; 

       

      (b)  There
        has
        been no damage, destruction or loss affecting the Property of the Seller,
        or any
        interruption in the use thereof, whether or not covered by
        insurance;

       

      (c)  The
        Seller has not entered into any lease of or license for any Property from
        any
        Person, other than in the Ordinary Course of Business or
        pursuant
        to Seller Contracts listed in Schedule
        2.13(a)(ii);

       

      (d)  The
        Seller has not sold or otherwise transferred, or entered into any lease of
        any
        Property to any Person, other than in the Ordinary Course of Business or
        pursuant to Seller Contracts listed in Schedule
        2.13(b);
        

       

      (e)  The
        Seller has not written off as uncollectible, or established any extraordinary
        reserve with respect to, any account receivable or other indebtedness to
        the
        Seller, except as set forth on Schedule
        2.9(e);

       

      (f)  The
        Seller has not (i) established or adopted any Benefit Plan, or
        (ii) paid any bonus or made any profit-sharing or similar payment to, or
        increased the amount of the wages, salary, commissions, fees, fringe benefits
        or
        other compensation or remuneration payable to, any of its directors, officers,
        Employees or independent contractors or any other Person;

       

      (g)  No
        Contract by which the Seller or any Property owned or used by the Seller
        is or
        was bound, or under which the Seller has or had any rights or interest, has
        been
        amended or terminated;

       

      (h)  The
        Seller has not incurred, assumed or otherwise become subject to, any Liability,
        other than accounts payable that are of the type that would be reflected
        as
        current Liabilities in a balance sheet prepared in accordance with GAAP and
        that
        were incurred by the Seller in bona fide transactions entered into in the
        Ordinary Course of Business in amounts consistent with past
        practices;

       

      (i)  The
        Seller has not discharged any Encumbrance or discharged or paid any indebtedness
        or other Liability, other than accounts payable that (i) are reflected as
        current Liabilities in the Most Recent Balance Sheet or have been incurred
        by
        the Seller in bona fide transactions entered into in the Ordinary Course
        of
        Business in amounts that are consistent with past practice and are not material,
        and (ii) have been discharged or paid in the Ordinary Course of
        Business;

       

      (j)  The
        Seller has not forgiven any debt or otherwise released or waived any right
        or
        claim;

       

      (k)  The
        Seller has not changed any of its methods of accounting or accounting practices
        in any respect;

       

      (l)  The
        Seller has not suffered any adverse change or any threat of an adverse change
        in
        its relations with, or any loss or threat of loss of, any of its material
        vendors, clients, customers or distributors;

       

      (m)  The
        Seller has not failed to pay or discharge when due any Liabilities;

       

      (n)  The
        Seller has not instituted, settled or agreed to settle any
        Proceeding;

       

      (o)  The
        Seller has not granted or suffered the imposition of any Encumbrances on
        any of
        its Property, other than Permitted Encumbrances;

       

      (p)  The
        Seller has not entered into any transaction outside the Ordinary Course of
        Business, except as set forth in the Transaction Agreements; and

       

      (q)  The
        Seller has not agreed, committed or offered, in writing or otherwise, to
        take
        any of the actions referred to in clauses (c) through (p) above. 

       

      2.10  Tangible
        Property. Schedule 2.10
        accurately identifies all equipment, materials, prototypes, tools, supplies,
        vehicles, furniture, fixtures, improvements and other tangible Property owned
        or
        leased by the Seller with
        an
        individual book value of greater than $5,000.
        Each
        item of Property identified or required to be identified in Schedule 2.10,
        other
        than equipment identified on Schedule
        2.10
        as being
        in storage or held on consignment for sale: (i) is free of defects and
        deficiencies and in good condition and repair, ordinary wear and tear excepted;
        and (ii) complies in all respects with, and is being operated and otherwise
        used in full compliance with, all applicable Legal Requirements. Other than
        equipment identified on Schedule
        2.10
        as being
        in storage or held on consignment for sale [or relating to third party
        servicing], each item of equipment listed on Schedule
        1.1(c)
        that is
        also identified on Schedule
        2.10
        is
        performing at or above the standards communicated to Seller’s customers for the
        tests for which such equipment is used.  Schedule 2.10
        identifies all Seller Contracts pursuant to which any tangible Property is
        leased to the Seller.

       

      2.11  Title
        to Assets. The
        Seller owns and has good and valid title to all of the Assets, free of any
        Encumbrance other than Encumbrances set forth on Schedule
        2.11,
        including all rights of the Seller under the Assumed Contracts. The Assets
        collectively constitute, as of the Closing, all of the Property necessary
        to
        enable the Buyer to conduct the Business.

       

      2.12  Real
        Property.
        Since
        March 9, 2005, the Seller has not owned any real property or any interest
        in
        real property, except for (a) the leaseholds created under real property
        leases
        that have expired or been terminated and (b) under the real property leases
        identified in Schedule 2.12.
        The
        Seller enjoys peaceful and undisturbed possession of the real property that
        it
        leases.

       

      2.13  Intellectual
        Property.

       

      (a)  As
        of
        Closing Date,
        Seller
        exclusively owns, or is authorized to Use, legally enforceable Intellectual
        Property Rights in and to all Seller Intellectual Property.

       

      (i)  Schedule
        2.13(a)(i)
        hereto
        sets forth all United States and foreign: (i) patents and patent
        applications, (ii) registered or applied for trademarks, trade names, brand
        names and corporate names, and service marks, (iii) Internet domain name
        registrations and applications and (iv) copyright registrations and
        applications owned or licensed by Seller in each case described in clauses
        (i)
        through (iv), that are material to the operations of the Business as presently
        conducted, specifying as to each item, as applicable: (A) the title of the
        item; (B) the jurisdictions in which the item is issued or registered or in
        which an application for issuance or registration has been filed; and
        (C) the issuance, registration or application numbers and
        dates.

       

      (ii)  Schedule
        2.13(a)(ii)
        hereto
        sets forth all material licenses, sublicenses and other agreements or
        permissions under which the Seller is a licensor or licensee or otherwise
        is
        authorized to use or practice any Intellectual Property. Seller has provided
        to
        Buyer a true and complete copy of all such licenses, sublicenses and other
        agreements or permissions listed on Schedule
        2.13(a)(ii).
        

       

      (iii)  Schedule
        2.13(a)(iii)
        hereto
        sets forth and describes the status of any material agreements involving
        Intellectual Property currently in negotiation or proposed by the
        Seller.

       

      (b)  Except
        as
        set forth on Schedule
        2.13(b)
        hereto,
        the Seller owns, free and clear of all Liens other than Permitted Encumbrances
        or has the right to use all Intellectual Property used in the Business or
        that
        is necessary for the operation of the Business.

       

      (c)  Except
        as
        set forth on Schedule
        2.13(c)
        hereto,
        the Seller has not been, during the three years preceding the date of this
        Agreement, a party to any Claim, nor, to the Knowledge of the Seller, is
        any
        Claim threatened in writing, that challenges the validity, enforceability,
        ownership or right to use, sell or license any Intellectual Property, except
        for
        Claims that, individually or in the aggregate, could not reasonably be expected
        to have a Material Adverse Effect. To the Knowledge of the Seller, no third
        party is infringing upon any Intellectual Property except for infringements
        that, individually or in the aggregate, and could not reasonably be expected
        to
        have a Material Adverse Effect.

       

      (d)  Since
        March 9, 2005, the Seller has taken all reasonable precautions to protect
        the
        secrecy, confidentiality, and value of its trade secrets and the proprietary
        nature and value of the technology included in the Intellectual Property,
        except
        for failures to take such precautions that, individually or in the aggregate,
        have not resulted and could not reasonably be expected to have a Material
        Adverse Effect. To the Seller’s Knowledge, prior to March 9, 2005 the Seller has
        taken all reasonable precautions to protect the secrecy, confidentiality,
        and
        value of its trade secrets and the proprietary nature and value of the
        technology included in the Intellectual Property, except for failures to
        take
        such precautions that, individually or in the aggregate, have not resulted
        and
        could not reasonably be expected to have a Material Adverse Effect.

       

      (e)  The
        Seller is not, and, as a result of the execution and delivery of this Agreement
        or its performance of its obligations hereunder, will not be, in violation
        of
        any agreement relating to any Intellectual Property used in the Business,
        except
        for violation that, individually or in the aggregate, could not reasonably
        be
        expected to result in a Material Adverse Effect. After the completion of
        the
        transactions contemplated by this Agreement, the Buyer will own all right,
        title
        and interest in and to or have a license to use all Intellectual Property
        used
        in the Business, except for failures to own or have available for use that,
        individually or in the aggregate, have not resulted and could not reasonably
        be
        expected to result in a Material Adverse Effect.

       

      2.14  Contracts.

       

      (a)  Schedule 2.14
        identifies, with reasonable specificity, each material Seller Contract. Each
        Seller Contract is valid and in full force and effect. Schedule
        2.14
        also
        identifies and provides an accurate description of each proposed Contract
        as to
        which any current bid, offer, written proposal, term sheet or similar document
        has been submitted or received by the Seller in writing.

       

      (b)  The
        Seller has not Breached any Seller Contract, other than a Breach that could
        not
        reasonably be expected to have a Material Adverse Effect on Buyer or such
        Seller
        Contract. To the Seller’s Knowledge, no other Person has Breached any Seller
        Contract. The Seller has not waived any Breach of any Seller Contract by
        another
        party thereto, and no other party to any Seller Contract has waived any Breach
        of any Seller Contract by the Seller. Since March 9, 2005, no Prior Event
        has
        occurred that might, with or without notice or lapse of time, (i) result in
        a Breach of any Seller Contract by the Seller or, to the Seller’s Knowledge, any
        other Person, or (ii) give the Seller or, to the Seller’s Knowledge, any
        other Person the right to (A) exercise any remedy under any Seller Contract,
        (B) claim or receive a material refund, rebate, chargeback or penalty under
        any Seller Contract, (C) accelerate the maturity or performance of any
        Seller Contract, or (D) cancel, terminate or modify any Seller Contract.
        The Seller has not received any notice or other communication, in writing
        or
        otherwise, regarding any actual, alleged, possible or potential material
        Breach
        of any Seller Contract by the Seller or any other Person, other than a Breach
        that could not reasonably be expected to have a Material Adverse Effect on
        Buyer
        or such Seller Contract.

       

      (c)  The
        performance of the Seller Contracts by the Seller in accordance with the
        express
        terms thereof does not and will not result in any violation of or failure
        to
        comply with any Legal Requirement.

       

      (d)  Neither
        the Seller nor any other Person is currently renegotiating any amount paid
        or
        payable to or by the Seller under any Seller Contract or any other term or
        provision of any Seller Contract.

       

      (e)  The
        Seller has no Knowledge of any objection by any party to any Seller Contract,
        or
        any reasonable basis therefor, to the performance of such Seller Contract
        by the
        Buyer or any Affiliate thereof or the assignment to the Buyer or any Affiliate
        thereof of any right under such Seller Contract.

       

      2.15  Customers. Schedule 2.15
        accurately identifies, and provides an accurate and complete breakdown of
        the
        revenues received from, each customer of the Seller for the fiscal year
        beginning July 1, 2005 and ending June 30, 2006 and for the first nine (9)
        months of the fiscal year ending June 30, 2007, in excess of $5,000. Except
        as
        set forth on Schedule
        2.15,
        the
        Seller has not received any notice or other communication, in writing or
        otherwise, or other information, indicating that any customer may cease dealing
        with the Seller or might otherwise reduce the volume of business transacted
        by
        such customer with the Seller.

       

      2.16  Compliance
        with Legal Requirements.

       

      (a)  The
        Seller is and at all times has been in full compliance with each Legal
        Requirement that is applicable to it or to the conduct of its Business or
        the
        ownership or use of any of its Property and for which the consequences of
        noncompliance could reasonably be expected to have a Material Adverse
        Effect.

       

      (b)  No
        event
        has occurred, and no condition or circumstance exists, that might, with or
        without notice or lapse of time, constitute or result directly or indirectly
        in
        a violation by the Seller of, or a failure on the part of the Seller to comply
        with, any applicable Legal Requirement,
        the
        consequences of which could reasonably be expected to have a Material Adverse
        Effect. 

       

      (c)  The
        Seller has not received any notice from any Governmental Body or any other
        Person regarding any actual, alleged, possible or potential violation of,
        or
        failure to comply with, any Legal Requirement. To the Seller’s Knowledge, no
        Governmental Body has proposed or is considering any Legal Requirement that
        does
        not apply similarly to the business of the Buyer that, if adopted or otherwise
        put into effect, (i) could reasonably be expected to have a Material
        Adverse Effect or adversely affect the ability of the Seller to comply with
        or
        perform any covenant or obligation under any of the Transaction Agreements
        to
        which it is or will be a party, or (ii) could reasonably be expected to
        prevent, delay, make illegal or interfere with any of the
        Transactions. 

       

      2.17  Governmental
        Authorizations. Schedule 2.17
        identifies each Governmental Authorization that is held by the Seller and
        each
        currently pending application by Seller for a Governmental Authorization
        other
        than those the lack of which could not be reasonably expected to have a Material
        Adverse Effect. The Seller has delivered to the Buyer accurate and complete
        copies of all of the Governmental Authorizations identified in Schedules 2.17,
        including all renewals thereof and all amendments thereto. Other than pending
        applications, each Governmental Authorization identified or required to be
        identified in Schedules 2.17
        (each a
“Seller
        Governmental Authorization”)
        is
        valid and in full force and effect. 

       

      (a)  Since
        March 9, 2005, the Seller is and has been in full compliance with all of
        the
        terms and requirements of each Seller Governmental Authorization, and to
        the
        Seller’s Knowledge the Seller has been in full compliance with all of the terms
        and requirements of each Seller Governmental Authorization prior to March
        9,
        2005, except to the extent that noncompliance could not be reasonably expected
        to have a Material Adverse Effect. To the Seller’s Knowledge, no event has
        occurred, and no condition or circumstance exists, that might, with or without
        notice or lapse of time, (i) constitute or result directly or indirectly in
        a violation
        of or a failure to comply
        with any term or requirement of any Seller Governmental Authorization, or
        (ii) result directly or indirectly in the revocation, withdrawal,
        suspension, cancellation, termination or modification of any Seller Governmental
        Authorization.

       

      (b)  Since
        March 9, 2005, the Seller has not received any notice or other communication,
        in
        writing or otherwise, from any Governmental Body or any other Person regarding
        (i) any actual, alleged, possible or potential violation of or failure to
        comply with any term or requirement of any Seller Governmental Authorization,
        (ii) any actual, proposed, possible or potential revocation, withdrawal,
        suspension, cancellation, termination or modification of any Seller Governmental
        Authorization, or (iii) the Seller’s failure to obtain any necessary
        Governmental Authorization, and to the Seller’s Knowledge the Seller has not
        received any such notice or other communication prior to March 9,
        2005.

       

      (c)  All
        applications required to have been filed for the renewal of the Seller
        Governmental Authorizations have been duly filed on a timely basis with the
        appropriate Governmental Bodies, and each other notice or filing required
        to
        have been given or made with respect to such Seller Governmental Authorizations
        has been duly given or made on a timely basis with the appropriate Governmental
        Body. 

       

      (d)  The
        Seller Governmental Authorizations constitute all of the Governmental
        Authorizations necessary (i) to enable the Seller to conduct the Business
        as it is currently conducted, and (ii) to permit the Seller to own and use
        its Property in the manner in which they are currently owned and used, in
        each
        case other than those the lack of which could not be reasonably expected
        to have
        a Material Adverse Effect.

       

      2.18  Tax
        Matters.

       

      (a)  Since
        March 9, 2005, each Tax required to have been paid, or claimed by any
        Governmental Body to be payable, by the Seller has been duly paid in full
        on a
        timely basis. Since March 9, 2005, any Tax required to have been withheld
        or
        collected by the Seller has been duly withheld and collected, and each such
        Tax
        has been duly and timely paid to the appropriate Governmental Body or the
        amount
        of each such Tax has been properly set aside in accounts for such purpose
        and
        will be duly and timely paid to the appropriate Governmental Body. Other
        than
        Taxes incurred in the ordinary course of business, the Seller has no liability
        for unpaid Taxes accruing after the date of the Most Recent Balance
        Sheet.

       

      (b)  Schedule 2.18(b)
        accurately identifies each examination or audit of any Tax Return of the
        Seller
        since March 9, 2005 that has been conducted or is currently being conducted
        by a
        Governmental Body. The Seller has delivered to the Buyer accurate and complete
        copies of all audit reports and similar documents relating to such Tax Returns.
        

       

      (c)  The
        Seller has not requested nor granted any currently effective waiver or extension
        of any statute of limitations with respect to the assessment or filing of
        any
        Tax or Tax Return with respect thereto.

       

      (d)  No
        claim
        or other Proceeding is pending or, to the Seller’s Knowledge, has been
        Threatened against the Seller in respect of any Tax. The Seller has no
        unsatisfied Liabilities for Taxes. The Seller has not received any notice
        of
        deficiency or similar document, other than deficiencies that have been fully
        paid and satisfied.

       

      (e)  The
        Seller has no Liability for the Taxes of any other Person (i) under
        Treasury Regulation Section 1.1502-6 (or any similar Legal Requirement),
        except
        with respect to the Seller Group, (ii) as a transferee or successor,
        (iii) by Contract or (iv) otherwise.

       

      (f)  None
        of
        the Assets are subject to any Liens for Taxes.

       

      (g)  No
        Taxing
        authority has raised any issue with respect to Taxes which, by application
        of
        similar principles, could result in the issuance of a notice of deficiency
        or
        similar notice of intention to assess Taxes by any taxing authority to
        Seller.

       

      2.19  Employee
        and Labor Matters.

       

      (a)  Schedule
        2.19(a)
        accurately sets forth, with respect to each current employee of the Seller,
        including any employee who is on a leave of absence (each an “Employee”):
        (i)
        the name and title of such Employee; (ii) the annualized salary and the bonus
        received by such Employee from the Seller with respect to services performed
        in
        the calendar year 2006; (iii) the nation(s) of which such Employee is a citizen;
        and (iv) if such Employee is not a US citizen, such Employee’s immigration or
        residency status and to the Knowledge of the Seller the status of any pending
        applications for any visa, residency permit or similar Governmental
        Authorization for such Employee.

       

      (b)  Schedule 2.19(b)
        accurately identifies each former employee of the Seller or spouse or other
        dependent of such former employee who is receiving or is scheduled to receive
        any benefits from the Seller relating to such former employee’s employment with
        the Seller, and accurately describes such benefits.

       

      (c)  Except
        as
        set forth on Schedule
        2.19(c),
        the
        employment of each Employee is terminable by the Seller at will, and no Employee
        is entitled to severance pay or other benefits following termination or
        resignation or upon the execution and delivery of this Agreement or the
        consummation of any of the Transactions.

       

      (d)  Seller
        has not received any notice that an Employee intends to terminate his employment
        prior to the Closing, or that an Employee has received an offer to join a
        business other than Buyer that competes with the Business. To the Knowledge
        of
        Seller, no Employee is a party to or is bound by any confidentiality
        agreement, non-competition agreement or other Contract that may have an adverse
        effect on (A) the performance by such Employee of any of his duties or
        responsibilities as an Employee of the Seller or (B) the
        Business.

       

      (e)  Since
        March 9, 2005, the Seller is not engaged in any unfair labor practice of
        any
        nature, and to the Seller’s Knowledge the Seller has not engaged in any unfair
        labor practice or any nature prior to March 9, 2005. Since March 9, 2005,
        there
        has not been any slowdown, work stoppage, labor dispute or union organizing
        activity, or any similar activity or dispute, affecting the Seller or any
        of its
        Employees, and, to the Seller’s Knowledge, no Person has threatened to commence
        any such slowdown, work stoppage, labor dispute or union organizing activity
        or
        any similar activity or dispute. The Seller is not a party to or bound by,
        and
        has not been a party to or bound by, any union Contract, collective bargaining
        agreement or similar Contract.

       

      (f)  Schedule 2.19(f)
        sets
        forth the name of each independent contractor or consultant to whom the Seller
        has made or owes any payment of any nature in fiscal years 2005 and 2006
        and the
        first nine (9) months of fiscal year 2007, and in the case of payments owed,
        shows detail regarding such payment including due date, basis for payment,
        recurrence and necessary withholdings, if any.

       

      (g)  None
        of
        the current officers, directors or, to the Seller’s Knowledge, Employees of the
        Seller have been convicted of, or pleaded guilty or no contest to, any
        felony.

       

      2.20  Benefit
        Plans; ERISA.

       

      (a)  Schedule 2.20
        lists
        all Benefit Plans currently maintained by the Seller. The Seller has, with
        respect to each such plan, delivered to the Buyer true and complete copies
        of
        all plan texts and agreements and related trust agreements, insurance policies
        and service provider agreements.

       

      (b)  With
        respect to each Benefit Plan, to the Seller’s Knowledge, no event has occurred,
        and there exists no condition or set of circumstances in connection with
        which
        the Seller could, directly or indirectly, be subject to any Liability under
        ERISA, the Code or any other applicable law, except Liability for benefits
        claims and funding obligations payable in the Ordinary Course of
        Business.

       

      (c)  No
        prohibited transaction within the meaning of Section 406 of ERISA or Section
        4975 of the Code, or breach of fiduciary duty under Title I of ERISA has
        occurred with respect to any Benefit Plan or with respect to the
        Seller.

       

      (d)  The
        Seller and each Affiliate of the Seller have made all payments due from them
        to
        date with respect to each Benefit Plan.

       

      (e)  Since
        March 9, 2005, the Seller has not effectuated (i) a “plant closing” or
        partial “plant closing” (as defined in the federal Worker Adjustment and
        Retraining Notification Act (the “WARN
        Act”)
        or any
        similar Legal Requirement) affecting any site of employment or one or more
        facilities or operating units within any site of employment or facility of
        the
        Seller, (ii) a “mass layoff” (as defined in the WARN Act or any similar
        Legal Requirement) affecting any site of employment or facility of the Seller,
        or (iii) a “mass layoff” or “relocation” or “termination” at any “covered
        establishment” (as defined in California Labor Code Sections 1400 through 1408)
        of the Seller.

       

      2.21  Environmental
        Matters. The
        Seller’s operation of the Business is, and has been at all times since March 9,
        2005, in compliance with all Environmental Laws, Environmental Permit
        requirements, Use restrictions, and waste control requirements. The Seller
        has
        obtained all Environmental Permits necessary to conduct the Business, and
        all
        such Environmental Permits are currently in effect. Schedule
        2.21
        sets
        forth a list of all Hazardous Materials used by the Seller in the Business.
        During the Seller’s occupancy of the Seller Real Property since March 9, 2005,
        no Environmental Release of any Hazardous Materials has occurred on any Seller
        Real Property, and, to the Seller’s Knowledge, no such Environmental Release
        occurred prior to the Seller’s occupancy. There is no Environmental Claim
        pending or, to the Seller’s Knowledge, Threatened against the Seller, and no
        Governmental Body has served upon the Seller any notice claiming any outstanding
        violation of any Environmental Law or Environmental Claim or otherwise
        requesting data or access, requiring testing or other investigation relating
        to
        the Environment, or requiring any change in the Seller’s means or methods of
        conducting the Business. To the Seller’s Knowledge, there is no reasonable basis
        for any Environmental Claim against the Seller or arising out of or relating
        to
        the Business except as set forth on Schedule
        2.21.

       

      2.22  Conduct
        of the Business.
        Since
        April 30, 2004, the Business was conducted properly and in full conformity
        with
        the terms and requirements of all applicable warranties and other Contracts
        and
        with all applicable Legal Requirements. The Seller has not incurred or otherwise
        become subject to any Liability arising directly or indirectly from the Business
        or any services performed with respect thereto. There is no claim pending or, to
        the Seller’s Knowledge, Threatened against the Seller relating to the Business
        and, to the Seller’s Knowledge, there is no basis for the assertion of any such
        claim.

       

      2.23  Insurance.

       

      (a)  Schedule 2.23(a)
        identifies each insurance policy covering comprehensive liability and other
        risks that the Seller currently has in force (each, an “Insurance
        Policy”)
        and
        identifies coverage limits for each such Insurance Policy. Each Insurance
        Policy
        is of the type and in such amounts that are sufficient for compliance with
        all
        Seller Contracts. Each Insurance Policy is valid, enforceable and in full
        force
        and effect, and has been issued by an insurance carrier that, to the Seller’s
        Knowledge, is solvent, financially sound and reputable.

       

      (b)  Schedule 2.23(b)
        identifies each insurance claim made by the Seller since March 9, 2005. No
        Prior
        Event has occurred since March 9, 2005, or prior to such date to Seller’s
        Knowledge, that might, with or without notice or lapse of time, directly
        or
        indirectly give rise to or serve as a basis for any insurance claim. The
        Seller
        has not received any written notice regarding (i) the actual or Threatened
        cancellation or invalidation of any Insurance Policy; (ii) any actual or
        Threatened refusal of coverage under, or any actual or Threatened rejection
        of
        any claim under, any Insurance Policy; or (iii) any indication that the
        issuer of any Insurance Policy may be unwilling or unable to perform any
        of its
        obligations thereunder.

       

      2.24  Related
        Party Transactions.
        No
        Related Party: (a) has any direct or, to the Seller’s Knowledge, indirect
        interest of any nature in any of the assets of the Seller, including any
        Seller
        Intellectual Property; (b) has any direct or, to the Seller’s Knowledge,
        indirect financial interest in, any Seller Contract, transaction or business
        dealing of any nature involving the Seller; (d) is competing, or has at any
        time
        competed, directly or, to the Seller’s Knowledge, indirectly, with the Seller;
        or (e) to the Seller’s Knowledge, has any claim or right against the Seller. No
        Prior Event has occurred that might, with or without notice or lapse of time,
        directly or indirectly give rise to or serve as a basis for any claim or
        right
        in favor of any Related Party against the Seller.

       

      2.25  Proceedings;
        Orders.

       

      (a)  There
        is
        no pending Proceeding or, to the Seller’s Knowledge, any Threatened Proceeding:
        (i) that involves the Seller or relates to or might affect the Business or
        any Property of the Seller; or (ii) that challenges, or that may have the
        effect of preventing, delaying, making illegal or otherwise interfering with,
        any of the Transactions. To the Seller’s Knowledge, there is no pending or
        Threatened Proceeding to which the Seller is not a party that relates to
        or
        might affect the Business or any Property of the Seller. To the Seller’s
        Knowledge, no event has occurred, and no claim, dispute or other condition
        or
        circumstance exists, that might directly or indirectly give rise to or serve
        as
        a basis for the commencement of any such Proceeding.

       

      (b)  Schedule 2.25(b)
        lists
        each Proceeding that has been commenced by or against the Seller since march
        9,
        2005 and includes a brief background of each such Proceeding and the status
        or
        outcome of each such Proceeding.

       

      (c)  Schedule 2.25(c)
        lists
        (i) each instance since March 9, 2005, in which a Proceeding was Threatened
        by or, to the Seller’s Knowledge, against the Seller and (ii) each current
        or former dispute between the Seller and any other Person (other than those
        settled prior to March 9, 2005) which reasonably could be or could have been
        the
        basis for a Proceeding which could be or could have resulted in a Material
        Adverse Effect (each, a “Dispute”).
        Schedule 2.25(c)
        includes
        a brief background of each Dispute and each Threatened Proceeding and the
        status
        or outcome of each such Dispute and each Threatened Proceeding.

       

      (d)  There
        is
        no Order to which the Seller or any of its Property is subject; and, to the
        Seller’s Knowledge, none of the Seller or any other Related Party is subject to
        any Order that relates to the Business or to any of the Seller’s Property. To
        the Seller’s Knowledge, no Employee is subject to any Order that may prohibit
        the Employee from engaging in or continuing any conduct, activity or practice
        relating to the Business. To the Seller’s Knowledge, there is no proposed Order
        that, if issued or otherwise put into effect, (i) could have a Material
        Adverse Effect or an adverse effect on the ability of the Seller to comply
        with
        or perform any covenant or obligation under any of the Transaction Agreements,
        or (ii) could have the effect of preventing, delaying, making illegal or
        otherwise interfering with any of the Transactions.

       

      2.26  Brokers.
        The
        Seller has not agreed or become obligated to pay, or has taken any action
        that
        might result in any Person claiming to be entitled to receive, any brokerage
        commission, finder’s fee or similar commission or fee in connection with any of
        the Transactions other than the fee payable to Legend Merchant Group, and
        Buyer
        shall have no liability for payment of the fee payable to Legend Merchant
        Group.

       

      2.27  No
        Other Agreement to Sell Assets or Stock of the Seller.
        Except
        as set forth in the Transaction Agreements, the Seller does not have, and
        has
        not authorized any Representative of the Seller to enter into on behalf of
        the
        Seller, and, to the Seller’s Knowledge, no one has, any agreement, commitment or
        legal obligation, absolute or contingent, with any Person (a) to sell,
        exclusively license, assign, transfer or effect a sale of any portion of
        the
        assets of the Seller (other than inventory and products in the Ordinary Course
        of Business), (b) to sell or effect a sale of any Stock, (c) to effect
        any merger, acquisition, consolidation, liquidation, dissolution or other
        reorganization of the Seller or (d) to enter into any Contract or cause the
        entering into of a Contract with respect to the foregoing.

       

      2.28  Provision
        of Documents.
        The
        Seller has provided to the Buyer true, correct and complete copies of all
        Contracts, documents and other material referred to in the Disclosure
        Schedule.

       

      2.29  Import
        and Export Control Laws.
        The
        Seller has at all times as to which the applicable statute of limitations
        has
        not yet expired, conducted its Business in accordance with (i) all applicable
        U.S. import, export and re-export controls, including without limitation
        (A) the
        United States Export Administration Act (50
        USC §§
2401-2420)
        and the
        Export Administration Regulations promulgated thereunder, (B) the Arms Export
        Control Act (22
        U.S.C.
§§2778 et seq.) and International
        Traffic in Arms Regulations (22 CFR Chapter I, Subchapter M, Part 120 et
        seq.),
        (C) the Trading with the Enemy Act of the United States of America (50 U.S.C.
        App. §§ 1 et seq.), (D) the Foreign Assets Control Regulations of the United
        States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended), and
        any
        enabling legislation, regulation or executive order relating to any of the
        foregoing, and (ii) all other applicable import/export controls in other
        countries in which the Seller conducts material business (collectively,
“Import
        and Export Control Laws”).
        Without limiting the foregoing:

       

      (a)  The
        Seller has obtained, and is in material compliance with, all material export
        licenses, license exceptions and other consents, notices, waivers, approvals,
        orders, authorizations, registrations, declarations, classifications and
        filings
        with any Governmental Body required for (i) the export and re-export of
        products, services, software and technologies and (ii) releases of technologies
        and software to foreign nationals located in the United States and abroad
        (“Export
        Approvals”);

       

      (b)  There
        are
        no pending or, to the knowledge of the Seller, threatened claims against
        the
        Seller with respect to such Export Approvals;

       

      (c)  To
        the
        Seller’s Knowledge, there are no actions, conditions or circumstances pertaining
        to the Seller’s import or export transactions that may give rise to any future
        claims;

       

      (d)  No
        Export
        Approvals for the transfer of export licenses to Buyer are required, or such
        Export Approvals can be obtained expeditiously without material
        cost;

       

      (e)  None
        of
        the Seller or any of its Affiliates is a party to any Contract or bid with,
        or
        has conducted business with (directly or, to the Knowledge of the Seller,
        indirectly), a third party located in, or otherwise has any operations in,
        or
        sales to, Cuba, Iran, Syria, Sudan, Burma (Myanmar), or North
        Korea.

       

      (f)  Since
        March 9, 2005, the Seller has not received written notice to the effect that
        a
        Governmental Body claimed or alleged that the Seller was not in compliance
        in a
        material respect with any applicable Legal Requirements relating to the export
        of goods and services to any foreign jurisdiction against which the United
        States or the United Nations maintains sanctions or export controls, including
        applicable regulations of the United States Department of Commerce and the
        United States Department of State; and

       

      (g)  Since
        March 9, 2005, none of the Seller or any of its Affiliates has made any
        voluntary disclosures to, or has been subject to any fines, penalties or
        sanctions from, any Governmental Body regarding any past import or export
        control violations.

       

      (h)  The
        Seller has trained relevant Seller personnel on compliance with Import and
        Export Control Laws.

       

      2.30  Foreign
        Corrupt Practices Act.
        To the
        Knowledge of the Seller, neither the Seller nor any of its officers, directors,
        agents, distributors, employees or other Person associated with or acting
        on its
        behalf has, directly or indirectly, taken any action which would cause it
        to be
        in material violation of the Foreign Corrupt Practices Act of 1977, as amended,
        or any rules or regulations thereunder or any similar anti-corruption or
        anti-bribery Laws applicable to the Seller in any jurisdiction other than
        the
        United States (collectively, the “FCPA”),
        or,
        to the Knowledge of the Seller, used any corporate funds for unlawful
        contributions, gifts, entertainment or other unlawful expenses relating to
        political activity, made, offered or authorized any unlawful payment to foreign
        or domestic government officials or employees, whether directly or indirectly,
        or made, offered or authorized any bribe, rebate, payoff, influence payment,
        kickback or other similar unlawful payment, whether directly or indirectly,
        except for any of the foregoing which is no longer subject to potential claims
        of violation as a result of the expiration of the applicable statute of
        limitations. The Seller has trained relevant Seller personnel on FCPA
        compliance.

       

      2.31 Full
        Disclosure.
        None of
        the Transaction Agreements to which the Seller is or becomes a party contains
        or
        will contain any untrue statement of fact with respect to the
        Seller.

       

      3.  Representations
        and Warranties of the Buyer. The
        Buyer
        hereby represents and warrants, to and for the benefit of the Seller, as
        follows:

       

      3.1  Authority;
        Binding Nature of Agreements.
        The
        Buyer has the absolute and unrestricted corporate right, power and authority
        to
        enter into and perform its obligations under each of the Transaction Agreements
        to which it is or may become a party (the “Buyer
        Agreements”)
        and the
        other agreements, certificates and instruments to be executed by Buyer pursuant
        to this Agreement and and to consummate the Transactions. The execution,
        delivery and performance by the Buyer of the Buyer Agreements have been duly
        authorized by all necessary action on the part of the Buyer. This Agreement
        has
        been duly executed and delivered by the Buyer and constitutes the legal,
        valid
        and binding obligation of each of the Buyer, enforceable against it in
        accordance with its terms, except as may be limited by the Enforceability
        Limitations. Upon the execution and delivery of the other Transaction Agreements
        at the Closing, each Buyer Agreement will constitute the legal, valid and
        binding obligation of the Buyer, enforceable against it, as applicable, in
        accordance with its terms, except as may be limited by the Enforceability
        Limitations.

       

      3.2  No
        Conflicts.
        The
        execution and delivery of the Buyer Agreements by the Buyer and the consummation
        by the Buyer of the transactions contemplated thereby do not and will not
        (i)
        require any filing with, or Consent of, any Governmental Body, (ii) violate
        any
        Legal Requirement or Order applicable to the Buyer or any Property of the
        Buyer,
        or (iii) conflict with or result in the breach of any term or provision of,
        or
        violate or constitute a default under, any charter provision or bylaw or
        under
        any material agreement to which the Buyer is a party.

       

      3.3  Brokers.
        The
        Buyer has not become obligated to pay or has taken any action that might
        result
        in any Person claiming to be entitled to receive, any brokerage commission,
        finder’s fee or similar commission or fee in connection with any of the
        Transactions. 

       

      3.4  Organization
        and Good Standing.
        The
        Buyer is a limited liability company duly organized, validly existing and
        in
        good standing under the laws of the State of Delaware.

       

      3.5  Full
        Disclosure.
        None of
        the Transaction Agreements to which the Buyer is or becomes a party contains
        or
        will contain any untrue statement of fact with respect to the
        Buyer.

       

      4.  Conditions
        Precedent to the Buyer’s Obligation to Close. The
        obligation of the Buyer to purchase the Assets and assume the Assumed
        Liabilities at the Closing is subject to the fulfillment, on or prior to
        the
        Closing, of each of the following conditions, any of which may be waived
        by the
        Buyer, in whole or in part, in writing:

       

      4.1  Accuracy
        of Representations.
        All of
        the representations and warranties made by the Guarantor and the Seller in
        this
        Agreement, considered collectively, and each of such representations and
        warranties, considered individually, shall be true and correct in all respects
        as of the Closing Date, with the same effect as though such representations
        and
        warranties were made at and as of the Closing.

       

      4.2  Consents.
        Each of
        the Consents and assignment instrument identified in Schedule 2.5
        shall
        have been obtained and shall be in full force and effect.

       

      4.3  Compliance.
        Seller
        has performed and complied with all the covenants and agreements required
        by
        this Agreement to be performed or complied with by it at or prior to the
        Closing, including without limitation the delivery of all items required
        to be
        delivered by it pursuant to this Agreement.

       

      4.4  Authorization.
        The
        authorization of the Transactions by the requisite vote of the shareholders
        and
        directors of Seller shall have been duly obtained in accordance with the
        Charter
        Documents.

       

      4.5  Release
        of Liens.
        The
        Seller shall have delivered to the Buyer evidence reasonably satisfactory
        to the
        Buyer of the release of all Liens on the Assets.

       

      4.6  No
        Material Change.
        No event
        shall have occurred and no condition or circumstance shall exist that could
        be
        expected to give rise to any Material Adverse Effect. There shall not be
        any
        material problem or Liability with respect to the Seller or the
        Business.

       

      4.7  No
        Proceedings.
        No (a)
        Order, stay or injunction shall have been entered, issued or enforced by
        any
        court of competent jurisdiction prohibiting the Transactions, (b) action
        shall
        have been commenced or Threatened by any Governmental Body, or (c) Legal
        Requirement enacted, entered, enforced or deemed applicable to the Transactions
        that, in any such event, (i) makes the consummation of any of the
        Transactions illegal, (ii) could reasonably deprive the Buyer of any of the
        material anticipated benefits of the Transactions, taken as a whole, or
        (iii) could have the effect of preventing, delaying or otherwise
        interfering with any of the Transactions.

       

      4.8  Secretary’s
        Certificate.
        The
        Seller and the Guarantor each shall have delivered to the Buyer a certificate
        executed by its Secretary, dated as of the Closing Date, certifying:
        (a) the resolutions of its Board authorizing and approving the execution,
        delivery and performance of this Agreement and each of the other Transaction
        Agreements to which the Seller or the Guarantor will be a party and the
        consummation of the Transactions, (b) the Charter Documents and
        (d) the name, title, incumbency and signatures of the officers authorized
        to execute this Agreement and the Transaction Agreements to which the Seller
        or
        the Guarantor is a party.

       

      4.9  Opinion
        of Seller’s Counsel.
        The
        Buyer shall have received an opinion letter from Ellenoff Grossman & Schole
        LLP, counsel to the Seller, dated the Closing Date, in form attached hereto
        as
Exhibit
        F.
        

       

      4.10  Documents.

       

      (a)  Assignment
        and Assumption Agreement.
        The
        Seller shall have executed and delivered to the Buyer the Assignment and
        Assumption Agreement in the form of Exhibit
        B
        (the
“Assignment
        and Assumption Agreement”).

       

      (b)  Seller
        Non-Competition Agreement.
        The
        Seller and the Guarantor shall have executed and delivered to the Buyer a
        Non-Competition Agreement in the form of Exhibit
        C
        (the
“Seller
        Non-Competition Agreement”).
        Seller, Guarantor and Buyer shall agree that the Seller Non-Competition
        Agreement is an integral part of the bargain and consideration for the
        transactions contemplated by this Agreement.

       

      (c)  Sunnyvale
        Sublease.
        The
        Seller shall have executed and delivered to the Buyer the Sublease in the
        form
        of Exhibit
        D
        (the
“Sunnyvale
        Sublease”).

       

      5.  Conditions
        Precedent to the Seller’s Obligation to Close. The
        Seller’s obligation to sell the Assets and to take the other actions required to
        be taken by the Seller at the Closing is subject to the satisfaction, at
        or
        prior to the Closing, of each of the following conditions, any of which may
        be
        waived by the Seller, in whole or in part, in writing:

       

      5.1  Accuracy
        of Representations.
        All of
        the representations and warranties made by the Buyer in this Agreement,
        considered collectively, and each of such representations and warranties,
        considered individually, shall be true and correct in all respects as of
        the
        Closing Date with the same effect as though such representations and warranties
        were made at and as of the Closing.

       

      5.2  No
        Proceedings.
        No (a)
        Order, stay or injunction shall have been entered, issued or enforced by
        any
        court of competent jurisdiction prohibiting the Transactions, (b) action
        shall
        have been commenced or Threatened by any Governmental Body, or (c) Legal
        Requirement enacted, entered, enforced or deemed applicable to the Transactions
        that, in any such event, (i) makes the consummation of any of the Transactions
        illegal, or (ii) could have the effect of preventing, delaying or otherwise
        interfering with any of the Transactions.

       

      5.3  Documents.
        

       

      (a)  Assignment
        and Assumption Agreement.
        The
        Buyer shall have executed and delivered to the Seller the Assignment and
        Assumption Agreement in the form of Exhibit
        B.

       

      (b)  Sunnyvale
        Sublease.
        The
        Seller shall have executed and delivered to the Buyer the Sunnyvale Sublease
        in
        the form of Exhibit
        D.

       

      (c)  List
        of Employees. The
        Buyer
        shall have delivered to Seller a list of employees to be offered employment
        by
        the Buyer immediately after the Closing. Buyer shall promptly after Closing
        offer employment to such designated employees under standard terms and
        conditions of employment. All such hired employees shall be given credit
        for
        time employed by Seller prior to Closing in any calculations of seniority
        or
        longevity with the Buyer.

       

      5.4  Consents.
        All
        necessary Governmental Authorizations for the Transactions have been obtained
        and all necessary governmental notices have been given.

       

      5.5  Compliance.
        Buyer
        has performed and complied with all the covenants and agreements required
        by
        this Agreement to be performed or complied with by it at or prior to the
        Closing, including without limitation the delivery of all items required
        to be
        delivered by it pursuant to this Agreement.

       

      5.6  Authorization.
        The
        authorization of the Transactions by the requisite vote of members or managers
        of the Buyer shall have been duly obtained in accordance with the Certificate
        of
        Formation and Operating Agreement of the Buyer.

       

      5.7  Secretary’s
        Certificate.
        The
        Buyer shall have executed and delivered to Seller a certificate of the Secretary
        of Buyer certifying, as complete and accurate as of the Closing, attached
        copies
        of the Buyer Agreements, certifying and attaching all requisite resolutions
        or
        actions of Buyer’s board of directors and shareholders approving the execution
        and delivery of this Agreement, the Transaction Agreements and the consummation
        of the Transactions and certifying to the incumbency and signatures of the
        officers of Buyer executing this Agreement, the Transaction Agreements and
        any
        other document relating to the Transactions.

       

      5.8  Opinion
        of Buyer’s Counsel.
        The
        Seller shall have received an opinion letter from Stephen Miller, counsel
        to the
        Buyer, dated the Closing Date, in form attached hereto as Exhibit
        G.

       

      6.  Indemnification,
        Defense of Claims.

       

      6.1  Survival
        of Representations and Warranties.

       

      (a)  The
        representations and warranties of the Buyer and the Seller set forth in or
        pursuant to this Agreement, including any representations and warranties
        in the
        Disclosure Schedule, or any other Transaction Agreement (each, a “Representation”),
        shall
        survive (i) the Closing; (ii) any sale or other disposition of any or
        all of the Assets by the Buyer; and (iii) the death or dissolution of any
        Party, and shall remain in full force and effect and survive for a period
        of
        thirty-six (36) months after the Closing Date. Notwithstanding the preceding
        sentence, (x) the Representations set forth in Section 2.18 (Tax Matters),
        and
        Section 2.21 (Environmental Matters) shall survive until the date that is
        thirty
        (30) days after the expiration of the applicable statute of limitations,
        including any extensions thereof, and (y) the Representations set forth in
        Section 2.11 (Title to Assets) shall survive for a period of forty-eight
        (48)
        months (each such period, the “Survival
        Period”).

       

      (b)  If
        notice
        of an indemnification claim under Section 6.3 relating to any Representation
        is
        given to the Seller Representative on or prior to the end of the applicable
        Survival Period, then, notwithstanding anything to the contrary contained
        in
        this Section 6.1, that Representation shall not expire, but rather shall
        remain
        in full force and effect solely with respect to such pending indemnification
        claim (and not for any other claim or purpose) until such time as each such
        pending indemnification claim has been fully and finally resolved, either
        by
        means of a written settlement agreement executed on behalf of the Seller
        Representative and the Buyer or by means of a final, non-appealable judgment
        issued by a court of competent jurisdiction.

       

      6.2  Dispute
        Resolution.
        Notwithstanding anything in this Agreement to the contrary, absent fraud,
        any
        Post-Closing economic disputes between the Parties, not including disputes
        related to the Seller Non-Competition Agreements, shall be decided by
        negotiation, and, if necessary, binding arbitration under the expedited
        procedures of the Judicial Arbitration and Mediation Service in Santa Clara,
        California. In the event the Parties enter into binding arbitration, the
        Buyer
        (one the one hand) and the Seller and Guarantor (on the other hand) shall
        present in writing a final offer of settlement to the other and the arbitrator.
        The arbitrator, in rendering his judgment, shall be limited to choosing between
        such two final offers, selecting the one which he judges to be the most fair.
        In
        the event of any post-closing arbitration or litigation between the Parties,
        the
        loser (i.e. the party whose final offer was not selected) of such action
        will
        indemnify the prevailing party against the reasonable costs of such
        action.

       

      6.3  Indemnification
        by the Seller and the Guarantor.
        Subject
        to the limitations set forth in Sections 6.1 and 6.7, the Seller and the
        Guarantor (each, an “Indemnifying
        Party”)
        jointly and severally shall hold harmless and indemnify each of the Buyer
        Indemnitees from and against, and shall compensate and reimburse each of
        the
        Buyer Indemnitees for, any Damages that are directly or indirectly suffered
        or
        incurred by any of the Buyer Indemnitees or to which any of the Buyer
        Indemnitees otherwise becomes subject at any time, and that arise directly
        or
        indirectly from or as a direct or indirect result of, or are directly or
        indirectly connected with:

       

      (a)  any
        Breach of any Representation;

       

      (b)  any
        Breach of any covenant or obligation made by the Seller in this Agreement
        or any
        of the other Transaction Agreements;

       

      (c)  any
        Excluded Liability;

       

      (d)  any
        failure of Seller’s operation of the Business to comply with all Environmental
        Laws, Environmental Permit requirements, Use restrictions, and waste control
        requirements, or any Environmental Release of any Hazardous Materials on
        any
        Seller Real Property during Seller’s occupancy of the Seller Real
        Property;

       

      (e)  any
        fees
        and expenses of the Seller described in Section 8.3; and

       

      (f)  any
        Proceeding alleging facts or circumstances that, if true, would constitute
        a
        Breach of any Representation or any covenant or obligation of the Seller
        under
        any Transaction Agreement.

       

      6.4  Indemnification
        by the Buyer.
        Subject
        to the limitations set forth in Sections 6.1 and 6.7, the Buyer shall hold
        harmless and indemnify each of the Seller and the Guarantor from and against,
        and shall compensate and reimburse each of the Seller and the Guarantor for,
        any
        Damages that are directly or indirectly suffered or incurred by any of the
        Seller or the Guarantor or to which the Seller or the Guarantor otherwise
        becomes subject at any time, and that arise directly or indirectly from or
        as a
        direct or indirect result of, or are directly or indirectly connected
        with:

       

      (a)  any
        Breach of any representation or warranty of the Buyer;

       

      (b)  any
        Breach of any covenant or obligation made by the Buyer in this Agreement
        or any
        of the other Transaction Agreements;

       

      (c)  any
        fees
        and expenses of the Buyer described in Section 8.3; or

       

      (d)  any
        Assumed
        Liabilities.

       

      6.5  Defense
        of Third Party Claims. 

       

      (a)  The
        Buyer
        shall have the right to assume the defense of any claim or Proceeding, whether
        against any Party, any Indemnitee or any other Person, with respect to which
        any
        Indemnifying Party may become obligated to indemnify, hold harmless, compensate
        or reimburse any Person pursuant to this Section 6; provided, however, that
        the
        Seller shall have the right to assume the defense of any claim or Proceeding
        if
        the sole remedy claimed is monetary Damages and the Seller assumes the
        obligation to pay all monetary Damages resulting from such claim or Proceeding.
        The Buyer shall also have the right, at its election, to designate the Seller
        to
        assume the defense of any such claim or Proceeding.

       

      (b)  If
        the
        Buyer assumes the defense of any such claim or Proceeding:

       

      (i)  The
        Buyer
        shall proceed to defend such claim or Proceeding in a diligent manner and
        in
        good faith;

       

      (ii)  The
        Seller and the Guarantor shall make available to the Buyer any documents
        and
        materials in the possession or control of the Seller and the Guarantor that
        may
        reasonably be necessary to the defense of such claim or Proceeding and related
        thereto, subject to a court’s determination regarding privilege;

       

      (iii)  The
        Buyer
        shall keep the Seller informed of all material developments and events relating
        to such claim or Proceeding;

       

      (iv)  The
        Seller shall have the right to participate in the defense of such claim or
        Proceeding at its own expense; and

       

      (v)  The
        Buyer
        shall have the right to settle, adjust or compromise such claim or Proceeding
        with the consent of the Seller; provided,
        however,
        that the Seller shall not unreasonably withhold such consent.

       

      (c)  If
        the
        Seller assumes the defense of any such claim or Proceeding:

       

      (i)  The
        Seller
        shall
        proceed to defend such claim or Proceeding in a diligent manner and in good
        faith with counsel reasonably satisfactory to the Buyer;

       

      (ii)  The
        Buyer
        shall make available to the Seller any documents and materials in the possession
        of the Buyer that may reasonably be necessary to the defense of such claim
        or
        Proceeding and related thereto, subject to a court’s determination regarding
        privilege;

       

      (iii)  The
        Seller shall keep the Buyer and its Representatives informed of all material
        developments and events relating to such claim or Proceeding;

       

      (iv)  The
        Buyer
        shall have the right to participate in the defense of such claim or Proceeding
        at its own expense;

       

      (v)  The
        Seller shall not settle, adjust or compromise such claim or Proceeding without
        the prior written consent of the Buyer, which consent shall not be unreasonably
        withheld; and

       

      (vi)  Notwithstanding
        the prior designation of the Seller to assume the defense of such claim or
        Proceeding, the Buyer may at any time, in its reasonable discretion, assume
        the
        defense of such claim or Proceeding unless the sole remedy claimed is monetary
        Damages and the Seller has assumed the obligation to pay all monetary Damages
        resulting from such claim or Proceeding.

       

      (d)  Subject
        to the limitations set forth in Section 6.7, (i) all fees, expenses, charges
        or
        costs of any nature, including any reasonable legal fee, expert fee, accounting
        fee or advisory fee, relating to the defense of a claim or Proceeding for
        which
        indemnification pursuant to Section 6.3 is claimed, whether or not incurred
        by
        the Seller and whether or not the Buyer shall assume the defense of any such
        claim or Proceeding, shall be borne and paid exclusively by the Seller and
        the
        Guarantor, and (ii) all fees, expenses, charges or costs of any nature,
        including any reasonable legal fee, expert fee, accounting fee or advisory
        fee,
        relating to the defense of a claim or Proceeding for which indemnification
        pursuant to Section 6.4 is claimed, whether or not incurred by the Seller
        and
        whether or not the Buyer shall assume the defense of any such claim or
        Proceeding, shall be borne and paid exclusively by the Buyer.

       

      6.6  Right
        to Indemnification Not Affected by Knowledge.
        The
        Representations, covenants and obligations of the Seller and the Guarantor,
        and
        the rights and remedies that may be exercised by the Buyer Indemnitees based
        on
        such Representations, covenants and obligations, will not be limited or affected
        by any investigation conducted with respect to, or any knowledge acquired
        (or
        capable of being acquired) by the Buyer Indemnitees at any time, whether
        before
        or after the execution and delivery of this Agreement or the Closing, with
        respect to the accuracy or inaccuracy of or compliance with any such
        Representation, warranty, covenant or obligation.

       

      6.7  Limitations
        on Indemnification. 

       

      (a)  The
        Seller and Guarantor shall not be required to indemnify any Buyer Indemnitee
        pursuant to Section 6.3(a) until such time as the aggregate amount of Damages
        for which Buyer Indemnitees are otherwise entitled to indemnification pursuant
        to this Agreement exceeds $150,000, at which time the Seller and Guarantor
        shall
        be obligated to indemnify the Buyer Indemnitees for the full amount of such
        Damages including such $150,000 amount, subject to the limitations of this
        Section 6. The standard of what is “material” for purposes of determining
        whether a Representation that is qualified by the words “material” or
“materially” or “Material Adverse Effect” is breached shall be $50,000 per item
        or group of related items; provided, however, that if such a Representation
        is
        breached then Damages for such breach shall nonetheless include all Damages
        below the threshold of materiality. Notwithstanding anything to the contrary
        in
        this Section 6.6(a), the threshold limits imposed by this Section 6.6(a)
        shall
        not apply to any Damages arising out of or in connection with indemnification
        regarding (i) the Representations set forth in Section 2.18 (Tax Matters),
        Section 2.21 (Environmental Matters), or Section 2.7(c) (Net Debt), (ii)
        any
        Excluded Liability, or (iii) acts of fraud, deceit, or intentional
        misrepresentation by the Seller or the Guarantor or any of their
        Representatives.

       

      (b)  All
        or
        any portion of any amounts paid to the Buyer Indemnitees by the Seller or
        the
        Guarantor shall reduce, on a dollar-for-dollar basis, the maximum aggregate
        Liability of the Seller and Guarantor set forth in this Section 6.7, where
        applicable.

       

      (c)  The
        aggregate maximum amount payable by the Seller and Guarantor with respect
        to any
        and all claims for indemnification under this Agreement shall not exceed
        Four
        Million Dollars ($4,000,000.00); provided, however, that such $4,000,000
        limit
        shall not apply to Damages arising from (i) a breach of the Representations
        set
        forth in Section 2.8(a) (Liabilities), Section 2.11 (Title to Assets), Section
        2.18 (Tax Matters), or Section 2.21 (Environmental Matters), (ii) any Excluded
        Liability, or
        (iii)
        acts of fraud, deceit, or intentional misrepresentation by the Seller or
        the
        Guarantor or any of their Representatives.

       

      (d)  Notwithstanding
        anything to the contrary herein, the Seller and the Guarantor shall not be
        obligated to indemnify against any Damages to the extent such Damages are
        taken
        into account in determining the Net Debt of the Seller as of the Closing
        Date.

       

      (e)  For
        the
        avoidance of doubt, notwithstanding the fact that Seller’s Liability for any
        breach of the Representations set forth in this Agreement is an “Excluded
        Liability” pursuant to Section 1.3(b), the exclusion of Excluded Liabilities
        from the limitations in Section 6.7(a) and 6.7(c) shall not affect the
        application of such limitations to Seller’s obligations to indemnify Buyer
        Indemnitees for Damages arising under a claim for breach of Section 2 of
        this
        Agreement, but Seller shall be obligated nonetheless to indemnify Buyer
        Indemnitees under Section 6.3(c) without regard for the limitations under
        Section 6.7(a) and Section 6.7(c) to the extent that Buyer Indemnitees suffer
        Damages that arise directly or indirectly from or as a direct or indirect
        result
        of, or are directly or indirectly connected with any Excluded Liabilities
        other
        than Damages under a claim for breach of Section 2 of this
        Agreement.

       

      (f)  The
        Buyer
        shall not be required to indemnify any Seller Indemnitee pursuant to Section
        6.4(a) until such time as the aggregate amount of Damages for which Seller
        Indemnitees are otherwise entitled to indemnification pursuant to this Agreement
        exceeds $150,000, at which time the Buyer shall be obligated to indemnify
        the
        Seller Indemnitees for the full amount of such Damages including such $150,000
        amount, subject to the limitations of this Section 6. The standard of what
        is
“material” for purposes of determining whether a Representation that is
        qualified by the words “material” or “materially” or “Material Adverse Effect”
is breached shall be $50,000 per item or group of related items; provided,
        however, that if such a Representation is breached then Damages for such
        breach
        shall nonetheless include all Damages below the threshold of materiality.
        The
        aggregate maximum amount payable by the Buyer with respect to any and all
        claims
        for indemnification under this Agreement shall not exceed Four Million Dollars
        ($4,000,000.00); provided, however, that such $4,000,000 limit shall not
        apply
        to claims for Damages arising from acts of fraud, deceit, or intentional
        misrepresentation by the Buyer or any of its Representatives. All or any
        portion
        of any amounts paid by Buyer to the Seller Indemnitees shall reduce, on a
        dollar-for-dollar basis, the maximum aggregate Liability of the Buyer set
        forth
        in this Section 6.7(f).

       

      6.8  Purchase
        Price Adjustment.
        The
        Parties agree to treat any indemnity payments under this Agreement as an
        adjustment to the Purchase Price for all Tax purposes and shall take no position
        contrary thereto unless required to do so by applicable Tax law pursuant
        to a
        determination as defined in Section 1313(a) of the Code.

       

      7.  Post-Closing
        Covenants.

       

      7.1  Further
        Actions. From
        and
        after the Closing, each of the Buyer, Seller and Guarantor shall cooperate
        with
        the each other and their respective Affiliates and Representatives, and shall
        execute and deliver such documents and take such other actions as such parties
        may reasonably request, for the purpose of evidencing the Transactions and
        putting the Buyer in possession and control of the Assets.

       

      7.2  Use
        of Name. As
        soon
        as reasonably practicable after the Closing, the Seller shall change its
        corporate name to a name that does not include “Accurel” and shall change the
        corporate name of any entity over which it has control to a name that does
        not
        include “Accurel”. 

       

      7.3  Public
        Announcements. The
        parties hereto have agreed upon the text of their respective press releases
        announcing, among other things, the execution of this Agreement, which press
        releases may be disseminated promptly following the execution
        hereof. For
        a
        period of thirty (30) days following the Closing Date, the Seller, the Guarantor
        and the Buyer shall consult with each other before issuing any additional
        press
        releases or otherwise making any additional public statements with respect
        to
        this Agreement and the transactions contemplated hereby and shall not issue
        any
        such press release or may any such public statement prior to such consultation
        or as to which the other party promptly and reasonably objects, except as
        may be
        required by any Legal Requirement based on the advice of such party’s counsel or
        by obligations pursuant to any listing agreement with any securities exchange
        or
        inter-dealer quotation system, in which case the party proposing to issue
        such
        press release or make such public announcement shall use its best efforts
        to
        consult in good faith with the other party before issuing such press release
        or
        making any such public announcements.

       

      7.4  Payment
        of Creditors; Dissolution, Liquidation and Winding Up.
        From and
        after the Agreement Date, the Seller shall not authorize or make any
        distribution to the Guarantor without paying or providing for all amounts
        due
        the creditors of the Seller in accordance with all Legal Requirements. As
        soon
        as practicable following the Closing, the Seller shall pay all amounts owed
        by
        the Seller to its creditors, and, if reasonably requested by the Buyer, shall
        furnish to the Buyer reasonable documentation or confirmation of such payments;
        provided, however, that such immediate payment obligation shall not apply
        with
        respect to any debt disputed in good faith by the Seller as long as the Seller
        sets aside, and does not distribute to its Guarantor, the full amount in
        dispute. From and after the Closing Date, the Buyer shall provide the Seller
        with copies of or reasonable access to Books and Records included in the
        Assets
        if and to the extent reasonably necessary in connection with the liquidation
        and
        winding up of the Seller and its business; provided, however, that the Buyer
        shall not be obligated to provide any access to Books and Records if such
        access
        would materially interfere with the Business.

       

      8.  Miscellaneous
        Provisions.

       

      8.1  Further
        Assurances.
        Each
        Party shall execute or cause to be delivered to each other Party hereto such
        instruments and other documents, and shall take such other actions, as such
        other Party may reasonably request, prior to, at or after the Closing, for
        the
        purpose of carrying out or evidencing any of the Transactions.

       

      8.2  Fees
        and Expenses.
        Each
        Party shall pay its own fees and expenses incident to the negotiation,
        preparation and execution of this Agreement, including the fees and expenses
        of
        counsel, accountants, investment bankers and other experts. None of the Parties
        shall have any obligation to pay any of the fees or expenses of any other
        Party.

       

      8.3  Attorneys’
        Fees.
        If any
        Proceeding relating to any of the Transaction Agreements or the enforcement
        of
        any provision of any of the Transaction Agreements is brought against any
        Party
        to this Agreement, the prevailing party shall be entitled to recover reasonable
        attorneys’ fees, costs and disbursements, in addition to any other relief to
        which the prevailing party may be entitled.

       

      8.4  Notices.
        Any
        notice or other communication required or permitted to be delivered to any
        Party
        shall be in writing and shall be deemed properly delivered, given and received
        when delivered, by hand, by registered mail, by courier or express delivery
        service, by facsimile, or by e-mail to the address or facsimile number set
        forth
        beneath the name of such Party below, or to such other address or facsimile
        number as such Party shall have specified in a written notice given to the
        other
        Parties:

       

      if
        to the
        Seller or the Guarantor:

      

      Implant
        Sciences Corporation

      107
        Audubon Road, #5

      Wakefield,
        MA 01880-1246

      Attention:
        Diane Ryan

      Facsimile:
        (781) 246-3561

      Email: dryan@implantsciences.com

       

      with
        a
        copy to: 

      

      Ellenoff
        Grossman & Schole LLP

      370
        Lexington Avenue

      New
        York,
        NY 10017-6503

      Attention:
        Barry I. Grossman

      Facsimile:
        (212) 370-7889

      Email: bigrossman@egsllp.com

       

      if
        to the
        Buyer: Evans
        Analytical Group LLC

      810
        Kifer
        Road

      Sunnyvale,
        CA 94086

      Attention:
        Thomas B. Pfeil

      Facsimile:
        (408) 530-3899

      E-mail:
        tpfeil@eaglabs.com

      

      8.5  Headings.
        The
        headings contained in this Agreement are for convenience of reference only,
        shall not be deemed to be a part of this Agreement and shall not be referred
        to
        in connection with the construction or interpretation of this
        Agreement.

       

      8.6  Execution;
        Counterparts; Delivery.
        This
        Agreement may be executed in two or more counterparts, each of which shall
        be
        deemed an original, but all of which together shall constitute one and the
        same
        instrument. Any signature page delivered by facsimile or electronic image
        transmission shall be binding to the same extent as an original signature
        page.
        Any Party that delivers a signature page by facsimile or electronic image
        transmission shall deliver an original counterpart to any other party that
        requests such original counterpart.

       

      8.7  Governing
        Law; Venue.

       

      (a)  This
        Agreement shall be construed in accordance with, and governed in all respects
        by, the internal laws of the State of Massachusetts, without giving effect
        to
        principles of conflicts of laws. 

       

      (b)  Other
        than with respect to any arbitration under Section 6.2, any Proceeding relating
        to this Agreement or the enforcement of any provision of this Agreement may
        be
        brought or otherwise commenced in any state or federal court located in the
        County of Middlesex, Massachusetts. Each Party:

       

      (i)  expressly
        and irrevocably consents and submits to the jurisdiction of each state and
        federal court located in the County of Middlesex, Massachusetts and each
        appellate court located in the State of Massachusetts, in connection with
        any
        such Proceeding; 

       

      (ii)  agrees
        that each state and federal court located in the County of Middlesex,
        Massachusetts shall be deemed to be a convenient forum;

       

      (iii)  agrees
        not to assert, by way of motion, as a defense or otherwise, in any such
        Proceeding commenced in any state or federal court located in the County
        of
        Middlesex, Massachusetts any claim that such Party is not subject personally
        to
        the jurisdiction of such court, that such Proceeding has been brought in
        an
        inconvenient forum, that the venue of such Proceeding is improper or that
        this
        Agreement or the subject matter of this Agreement may not be enforced in
        or by
        such court; and

       

      (iv)  agrees
        that service in any action may be made by giving notice in accordance with
        Section 8.4.

       

      8.8  Successors
        and Assigns; Parties in Interest; No Third-Party
        Beneficiaries.

       

      (a)  This
        Agreement shall be binding upon: the Seller and such Seller’s personal
        representatives, executors, administrators, estate, heirs, successors and
        assigns, if any; and the Buyer and its successors and assigns, if any. This
        Agreement shall inure to the benefit of: the Seller; the Buyer; the other
        Indemnitees; and the respective successors and assigns (if any) of the
        foregoing. 

       

      (b)  The
        Buyer
        shall not be permitted to assign any of its rights or delegate any of its
        obligations under this Agreement without the Seller’s prior written consent;
        provided, however, that the Buyer may freely assign any or all of its rights
        under this Agreement, including its indemnification rights under Section 6,
        in whole or in part, to any Affiliate of Buyer without obtaining the consent
        or
        approval of the Seller. The Seller shall not be permitted to assign any of
        its
        rights or delegate any of its obligations under this Agreement without the
        Buyer’s prior written consent (which consent shall not be unreasonably
        withheld).

       

      (c)  None
        of
        the provisions of this Agreement is intended to provide any rights or remedies
        to any Person other than the Parties and their respective successors and
        assigns, if any. 

       

      8.9  Equitable
        Remedies.
        Notwithstanding anything to the contrary contained in this Agreement, the
        Parties agree that: (a) in the event of any Breach or Threatened Breach by
        a Party of any covenant, obligation or other provision set forth in this
        Agreement, the other Party shall be entitled, in addition to any other remedy
        that may be available to it, to (i) an Order of specific performance or
        mandamus against the Party in Breach or Threatened Breach to enforce the
        observance and performance of such covenant, obligation or other provision,
        and
        (ii) an injunction or other equitable remedy restraining such Breach or
        Threatened Breach; and (b) neither the Buyer, Seller nor any other
        Indemnitee shall be required to provide any bond or other security in connection
        with any such Order or injunction or in connection with any related Proceeding.
        The Parties acknowledge and agree 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 the
        other
        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. The Parties acknowledge that the Seller’s
        Business is unique and recognize and affirm that in the event a Party breaches
        this Agreement, money damages would be inadequate and the other Party would
        have
        no adequate remedy at law, so that the other Party shall have the right,
        in
        addition to any other rights and remedies existing in its favor, to enforce
        its
        rights and the first Party’s obligations hereunder not only by action for
        damages but also by action for specific performance, injunctive, and/or other
        equitable relief.

       

      8.10  Waiver.

       

      (a)  No
        failure on the part of any Person to exercise any power, right, privilege
        or
        remedy under this Agreement, and no delay on the part of any Person in
        exercising any power, right, privilege or remedy under this Agreement, shall
        operate as a waiver of such power, right, privilege or remedy; and no single
        or
        partial exercise of any such power, right, privilege or remedy shall preclude
        any other or further exercise thereof or of any other power, right, privilege
        or
        remedy. 

       

      (b)  No
        Person
        shall be deemed to have waived any claim arising out of this Agreement, or
        any
        claim, power, right, privilege, condition or remedy under this Agreement,
        unless
        the waiver of such claim, power, right, privilege, condition or remedy is
        expressly set forth in a written instrument duly executed and delivered on
        behalf of such Person; and any such waiver shall not be applicable or have
        any
        effect except in the specific instance in which it is given.

       

      8.11  Amendments.
        This
        Agreement may not be amended, modified, altered or supplemented other than
        by
        means of a written instrument duly executed and delivered on behalf of the
        Buyer
        and the Seller.

       

      8.12  Severability.
        In the
        event that any provision of this Agreement, or the application of any such
        provision to any Person or set of circumstances, shall be determined to be
        invalid, unlawful, void or unenforceable to any extent, the remainder of
        this
        Agreement, and the application of such provision to Persons or circumstances
        other than those as to which it is determined to be invalid, unlawful, void
        or
        unenforceable, shall not be impaired or otherwise affected and shall continue
        to
        be valid and enforceable to the fullest extent permitted by law.

       

      8.13  Entire
        Agreement.
        The
        Transaction Agreements set forth the entire understanding of the Parties
        relating to the subject matter thereof and supersede all prior agreements
        and
        understandings among or between any of the parties relating to the subject
        matter thereof.

       

      8.14  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.
        The Parties intend that each representation, warranty, and covenant contained
        herein 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) that
        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.

       

      8.15  Terms
        and Usage.
        Whenever required by the context, any pronoun shall include the corresponding
        masculine, feminine and neuter forms, and the singular shall include the
        plural,
        and vice versa. The word “dollar” and the symbol “$” shall refer to United
        States dollars. All references in this Agreement to Sections or Schedules
        or
        Exhibits shall be deemed to refer to Sections of or Schedules or Exhibits
        to
        this Agreement unless the context shall otherwise require. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
        limitation” and are intended by the Parties to be by way of example rather than
        limitation. All accounting terms not defined herein shall have the meaning
        provided by United States generally accepted accounting principles, as
        established by the Financial Accounting Standards Board. The words “hereof”,
“herein” and “hereunder” and words of similar import shall refer to this
        Agreement as a whole and not to any particular provision of this Agreement.
        References to a Person are also to its successors and permitted assigns.
        Unless
        otherwise expressly provided, any agreement, instrument or Legal Requirement
        defined or referred to herein means such agreement, instrument or Legal
        Requirement as from time to time amended, modified or supplemented, including
        (in the case of agreements or instruments) by waiver or consent and (in the
        case
        of Legal Requirements) by succession of comparable successor Legal Requirements.
        Any reference to any law shall be deemed also to refer to all rules and
        regulations promulgated thereunder, unless the context requires
        otherwise.

       

      8.16  Incorporation
        of Exhibits and Schedules.
        The
        Exhibits and Schedules identified in this Agreement are incorporated herein
        by
        reference and made a part hereof as if set forth in full herein.

       

      [Remainder
        of this page intentionally left blank; signature page
        follows]

       

      The
        Parties have caused this Agreement to be executed and delivered by their
        duly
        authorized representatives as of the date first written above.

       

      
        	
                ACCUREL
                  SYSTEMS INTERNATIONAL CORPORATION 

                 

                 

                By: 

                 

                Name:
                   

                 

                Title:
                   

              	
                EVANS
                  ANALYTICAL GROUP LLC

                 

                 

                 

                By:
                   

                 

                Name:
                   

                 

                Title:
                   

              
	 	 
	
                IMPLANT
                  SCIENCES CORPORATION 

                 

                 

                By:
                   

                 

                Name:
                   

                 

                Title:
                   

              	 
	 	 

      

      

       

       

      
        
          
            Signature
              Page to the Asset Purchase Agreement

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      

      Appendix
        A

       

      Certain
        Definitions

       

      For
        purposes of the Agreement (including this Appendix A)
        the
        terms listed below have the respective meanings set forth below or in the
        indicated part of the Agreement:

       

      Affiliate.
        Any
        Person controlling, controlled by or under common control with any other
        Person,
        such control being exercised through the ownership or control, directly or
        indirectly, of more than 40% of the voting power of the shares entitled to
        vote
        for the election of directors or other governing authority, as of the Agreement
        Date or hereafter, provided that such Person shall be considered an Affiliate
        of
        that Person only during the time such ownership or control exists.

       

      Agreement.
        The
        Asset Purchase Agreement to which this Appendix
        A is
        attached, including the Disclosure Schedule and this Appendix
        A,
        as it
        may be amended from time to time.

       

      Agreement
        Date.
        Shall
        have the meaning given to it in the Preamble.

       

      Allocation.
        Section
        1.7

       

      Assets.
        Section
        1.1.

       

      Assignment
        and Assumption Agreement.
        Section
        4.8(a).

       

      Assumed
        Contracts.
        Section
        1.1(e).

       

      Assumed
        Liabilities.
        Section
        1.3(a).

       

      Benefit
        Plan. Any
        employee benefit plan, arrangement, policy or commitment, whether or not
        an
        employee benefit plan within the meaning of Section 3(3) of ERISA, including
        any
        employment, consulting or deferred compensation agreement, executive
        compensation, bonus, incentive, pension, profit-sharing, savings, retirement,
        Stock, Stock Right, Stock purchase or severance pay plan, any life, health,
        dental, disability or accident insurance plan or any holiday or vacation
        practice, as to which the Seller has or in the future could have any direct
        or
        indirect, actual or contingent Liability.

       

      Best
        Efforts.
        The
        efforts that a reasonable Person desiring to achieve a particular result
        would
        use in order to ensure that such result is achieved as expeditiously as
        possible.

       

      Books
        and Records.
        All
        business records, tangible data, documents, management information systems,
        files, customer lists, supplier lists, blueprints, specifications, designs,
        drawings, plans, operation or maintenance manuals, bids, personnel records,
        invoices, and all other books and records maintained by the Seller.

       

      Breach.
        Any
        (a) inaccuracy in or breach, including any inadvertent or innocent breach,
        of, or any failure, including any inadvertent failure, to comply with or
        perform, any representation, warranty, covenant, obligation or other provision,
        or (b) default or violation of or under any covenant, obligation or other
        provision. When used as a verb in the Agreement, the term “Breach” means to
        cause or suffer a Breach.

       

      Business.
        The
        business of the Seller as conducted before or as of the Agreement Date or
        the
        Closing Date, as applicable, or as intended to be conducted.

       

      Buyer
        Agreements.
        Section
        3.1.

       

      Buyer.
        Preamble.

       

      Buyer
        Indemnitees.
        The
        following Persons: (a) the Buyer; (b) the Buyer’s current and future
        Affiliates; (c) the respective officers, directors and employees of the
        Persons referred to in clauses (a) and (b) above; and (d) the respective
        successors and assigns of the Persons referred to in clauses (a), (b) and
        (c)
        above; provided, however, that in no event shall an Indemnitee be the
        Seller.

       

      CERCLA.
        The
        Comprehensive Environmental Response, Compensation, and Liability Act of
        1980,
        42 U.S.C. §§ 9601 et seq.

       

      Charter
        Documents. Section
        2.2.

       

      Closing.
        Section
        1.5.

       

      Closing
        Date.
        The date
        on which the Closing occurs.

       

      Closing
        Payment.
        Section
        1.4(a).

       

      Code.
        The
        Internal Revenue Code of 1986, as amended.

       

      Consent.
        Any
        approval, consent, ratification, permission, waiver or authorization, including
        any Governmental Authorization.

       

      Contract.
        Any
        written, oral, implied or other agreement, contract, lease, license,
        understanding, arrangement, instrument, note, guaranty, indemnity,
        representation, warranty, deed, assignment, power of attorney, certificate,
        purchase order, work order, insurance policy, benefit plan, commitment,
        covenant, assurance or undertaking of any nature.

       

      Copyrights.
        All
        copyright rights, and all other literary property and author rights, whether
        or
        not registered, and all rights, title and interests in all copyrights, whether
        or not registered, copyright registrations, certificates of copyright and
        copyrighted interests throughout the world.

       

      Corporate
        Documents.
        Section
        1.2(g).

       

      Damages.
        Any
        loss, damage, injury, Liability, claim, demand, settlement, judgment, award,
        fine, penalty, Tax, fee, including any reasonable legal fee, expert fee,
        accounting fee or advisory fee, charge, cost, including any cost of
        investigation, or expense of any nature, whether or not arising or incurred
        as a
        result of any claim by a third party, and
        including but not limited to the fees, costs and expenses of any related
        Proceeding.

       

      Disclosure
        Schedule.
        Section
        2.

       

      Dispute.
        Section
        2.26(c).

       

      Employee.
        Section
        2.19(a).

       

      Encumbrance.
        Any
        lien, pledge, hypothecation, mortgage, security interest, encumbrance, trust,
        equitable interest, claim, preference, right of possession, lease, tenancy,
        license, encroachment, covenant, infringement, Order, proxy, option, right
        of
        first refusal, preemptive right, community property interest, legend,
        impediment, exception, reservation, limitation, imperfection of title, condition
        or restriction of any nature, including any restriction on the transfer of
        any
        asset, any restriction on the receipt of any income derived from any asset,
        any
        restriction on the use of any asset and any restriction on the possession,
        exercise or transfer of any other attribute of ownership of any
        asset.

       

      Enforceability
        Limitations.
        Section
        2.3.

       

      Entity.
        Any
        corporation, including any non-profit corporation, general partnership, limited
        partnership, limited liability partnership, joint venture, estate, trust,
        cooperative, foundation, society, political party, union, company, including
        any
        limited liability company or joint stock company, firm or other enterprise,
        association, organization, Governmental Body or entity. 

       

      Environment.
        Soil,
        land surface or subsurface strata, surface waters (including navigable waters,
        ocean waters, streams, ponds, drainage basins and wetlands), groundwaters,
        drinking water supply, stream sediments, ambient air (including indoor air),
        plant and animal life, and any other environmental medium or natural
        resource.

       

      Environmental
        Law.
        Any
        Legal Requirement, in effect and in each case as amended as of the Closing,
        and
        any judicial or administrative interpretation thereof as of the Closing,
        including any judicial or administrative Order relating to:

       

      (a)
        advising appropriate authorities, employees, and the public of intended or
        actual releases of pollutants or hazardous substances or materials, violations
        of discharge limits, or other prohibitions and of the commencements of
        activities, such as resource extraction or construction, that could have
        significant impact on the Environment;

       

      (b)
        preventing or reducing to acceptable levels the release of pollutants or
        hazardous substances or materials into the Environment;

       

      (c)
        reducing the quantities, preventing the release, or minimizing the hazardous
        characteristics of wastes that are generated;

       

      (d)
        assuring that products are designed, formulated, packaged, and used so that
        they
        do not present unreasonable risks to human health or the Environment when
        used
        or disposed of;

       

      (e)
        protecting resources, species, or ecological amenities;

       

      (f)
        reducing to acceptable levels the risks inherent in the transportation of
        hazardous substances, pollutants, oil, or other potentially harmful
        substances;

       

      (g)
        cleaning up pollutants that have been released, preventing the threat of
        release, or paying the costs of such clean up or prevention; or

       

      (h)
        making responsible parties pay private parties, or groups of them, for damages
        done to their health or the Environment, or permitting self-appointed
        representatives of the public interest to recover for injuries done to public
        assets;

       

      including
        CERCLA; RCRA; the Hazardous Materials Transportation Act, 49 U.S.C. §§ 6901
et seq.;
        the
        Clean Water Act, 33 U.S.C. §§ 1251 et seq.;
        the
        Clean Air Act, 42 U.S.C. §§ 7401 et seq.;
        the
        Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq.;
        the
        Atomic Energy Act, 42 U.S.C. §§ 2011 et seq.;
        the
        Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et seq.;
        the
        Occupational Safety and Health Act, 29 U.S.C. §§ 651 et seq.

       

      Environmental
        Permits.
        All
        permits, approvals, identification numbers, licenses and other authorizations
        required under any applicable Environmental Law.

       

      Environmental
        Release. Any
        spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
        escaping, leaching, dumping or disposing into the Environment or as otherwise
        defined in or pursuant to any Environmental Law.

       

      ERISA.
        The
        Employee Retirement Income Security Act of 1974. 

       

      ERISA
        Affiliate.
        Any
        Person that is, was or could be treated as a single employer with any of
        the
        Specified Entities under Section 414 of the Code.

       

      Escrow
        Agent.
        Zions
        First National Bank.

       

      Escrow
        Agreement. The
        Agreement dated as of the Agreement Date by and among Seller, Guarantor,
        Buyer
        and Zions First National Bank providing for the Escrow Account.

       

      Excluded
        Liabilities.
        Section
        1.3(b).

       

      Financial
        Statements.
        Section
        2.7.

       

      Free
        Intellectual Property.
        Licensed
        Intellectual Property, including any open source software that is Licensed
        Intellectual Property, that is licensed by the Seller without charge for
        Use,
        modification or distribution.

       

      GAAP.
        United
        States generally accepted accounting principles, consistently
        applied.

       

      Governmental
        Authorization.
        Any:
        (a) permit, license, certificate, franchise, concession, approval, consent,
        ratification, permission, clearance, confirmation, endorsement, waiver,
        certification, designation, rating, registration, qualification or authorization
        issued, granted, given or otherwise made available by or under the authority
        of
        any Governmental Body or pursuant to any Legal Requirement; or (b) right
        under any Contract with any Governmental Body.

       

      Governmental
        Body.
        Any:
        (a) nation, principality, state, commonwealth, province, territory, county,
        municipality, district or other jurisdiction of any nature; (b) federal,
        state, local, municipal, foreign or other government; (c) governmental or
        quasi-governmental authority of any nature (including any governmental division,
        subdivision, department, agency, bureau, branch, office, commission, council,
        board, instrumentality, officer, official, representative, organization,
        unit,
        body or Entity and any court or other tribunal); (d) multi-national
        organization or body; or (e) individual, Entity or body exercising, or
        entitled to exercise, any executive, legislative, judicial, administrative,
        regulatory, police, military or Taxing authority or power of any
        nature.

       

      Hazardous
        Material.
        Any:
        (i) chemicals, materials, waste or other substance that is listed, defined,
        designated or classified as, or otherwise determined to be, hazardous,
        radioactive or toxic or a pollutant or a contaminant under or pursuant to
        any
        Environmental Law, including any admixture or solution thereof;
        (ii) petroleum or petroleum products and all derivatives thereof or
        synthetic substitutes therefor, friable asbestos, urea formaldehyde, foam
        insulation, radon gas and transformers or other equipment that contains
        dielectric fluid containing polychlorinated biphenyls, and (iii) other
        chemical, material or substance, exposure to which is prohibited, limited
        or
        regulated by any Governmental Body.

       

      Indemnifying
        Party.
        Section
        6.2.

       

      Indemnitees.
        The
        Buyer Indemnitees and the Seller Indemnitees. 

       

      Insurance
        Policy.
        Section
        2.24.

       

      Intellectual
        Property. 
        Means
        all of the following as they exist in all jurisdictions throughout the world,
        in
        each case, to the extent owned by, licensed to or otherwise used by the Seller:
        (A) patents, patent applications, and other patent rights (including any
        divisions, continuations, continuations-in-part, substitutions, or reissues
        thereof, whether or not patents are issued on any such applications and whether
        or not any such applications are modified, withdrawn, or resubmitted); (B)
        trademarks, service marks, trade dress, trade names, brand names, Internet
        domain names, websites, designs, logos, or corporate names, whether registered
        or unregistered, and all registrations and applications for registration
        thereof; (C) copyrights, including all renewals and extensions, copyright
        registrations and applications for registration, and non-registered copyrights;
        (D) trade secrets or any confidential and proprietary concepts, ideas, designs,
        research, processes, procedures, techniques, methods, know-how, data,
        discoveries, inventions, improvements, and other proprietary rights (whether
        or
        not patentable or subject to copyright or trade secret protection); and (E)
        computer software programs, including all source code, object code, and
        documentation related thereto.

       

      Intellectual
        Property Rights.
        All
        rights to any Intellectual Property including claims against third Persons
        for
        infringement whether or not heretofore asserted, rights of priority, rights
        to
        Use and any other similar tangible or intangible proprietary rights, including
        all rights in any other Intellectual Property existing under judicial or
        statutory law of any country in the world, or under any treaty.

       

      IRS.
        The U.S.
        Internal Revenue Service.

       

      Knowledge.
        The
        knowledge, awareness or belief of John Traub, Aram Sarkissian, Diane Ryan,
        Khosro Dariani, or Sandra Delgado following his or her due inquiry with respect
        to the subject matter of the representation or warranty being given. As used
        herein, “due
        inquiry”
        means
        that the person has diligently reviewed the Seller’s relevant books, records and
        files with respect to the representation or warranty being given and has
        made
        inquiry of the relevant employees primarily responsible for the subject matter
        of the representation or warranty being given.

       

      Legal
        Requirement.
        Any (i)
        federal, state, local, municipal, foreign or other law, statute, legislation,
        constitution, rule or principle of common law, resolution, ordinance, code,
        edict, decree, proclamation, treaty, convention, rule, regulation, ruling,
        directive, pronouncement, policy, requirement, specification, determination,
        decision, opinion or interpretation issued, enacted, adopted, passed, approved,
        promulgated, made, implemented or otherwise put into effect by or under the
        authority of any Governmental Body or (ii) law, principle, duty or other
        obligation arising at common law or in equity.

       

      Liability.
        Any
        debt, obligation, duty or liability of any nature, including any unknown,
        undisclosed, unmatured, unaccrued, unasserted, contingent, indirect,
        conditional, implied, vicarious, derivative, joint, several or secondary
        liability, regardless of whether such debt, obligation, duty or liability
        would
        be required to be reflected, disclosed or reserved against in a balance sheet
        prepared in accordance with GAAP and regardless of whether such debt,
        obligation, duty or liability is immediately due and payable.

       

      Licensed
        Intellectual Property.
        Intellectual Property of Persons other than the Seller that the Seller is
        authorized to Use pursuant to licenses, sublicenses and other
        Contracts.

       

      Liens.
        Any
        claim, lien, mortgage, security interest, pledge, deposit, option, easement,
        encroachment or encumbrance of any kind.

       

      Material
        Adverse Effect.
        Any
        event, change, condition or other matter that has a material adverse effect
        on
        the Seller, the Business or the Seller’s condition (financial or other), assets,
        Property, Liabilities, affairs, operations or prospects taken as a whole
        or any
        material impairment of the right or ability of the Seller to carry on the
        Business.

       

      Net
        Debt.
        The sum
        of (a) any of the Seller’s accounts payable that, as of the Closing, are more
        than 30 days past their due dates; plus
        (b) any
        fees or other charges payable by the Buyer necessary to assume the Assumed
        Contracts; plus
        (c) any
        transaction expenses of the Seller or the Guarantor payable by the Buyer
        after
        the Closing.

       

      Order.
        Any:
        (a) order, judgment, injunction, edict, decree, ruling, pronouncement,
        determination, decision, opinion, verdict, sentence, subpoena, writ or award
        issued, made, entered, rendered or otherwise put into effect by or under
        the
        authority of any court, administrative agency or other Governmental Body
        or any
        arbitrator or arbitration panel; or (b) Contract with any Governmental Body
        entered into in connection with any Proceeding. 

       

      Parties.
        The
        Seller, the Buyer, the Seller and the Seller Representative.

       

      Patents.
        All
        patent rights and all rights, title and interest in all letters patent or
        equivalent rights and applications for letters patent or rights, industrial
        and
        utility models, industrial designs, petty patents, patents of importation,
        patents of addition, certificates of invention and other government issued
        or
        granted indicia of invention ownership including any reissue, extension,
        division, continuation or continuation-in-part applications throughout the
        world.

       

      Payables.
        Section
        2.8(b).

       

      PBGC.
        The
        Pension Benefit Guaranty Corporation.

       

      Pension
        Plan. Any
        Benefit Plan which is a pension plan within the meaning of Section 3(2) of
        ERISA, regardless of whether the plan is covered by ERISA.

       

      Permitted
        Encumbrances.
        (a)
        Statutory liens for Taxes that are not yet due and payable or liens for Taxes
        being contested in good faith by any appropriate proceedings for which adequate
        reserves have been established; (b) statutory liens to secure obligations
        to
        landlords, lessors or renters under leases or rental agreements; (c) deposits
        or
        pledges made in connection with, or to secure payment of, workers’ compensation,
        unemployment insurance or similar programs mandated by applicable law; (d)
        statutory liens in favor of carriers, warehousemen, mechanics and materialmen
        to
        secure claims for labor, materials or supplies and other like liens arising
        in
        the Ordinary Course of Business that are not material to the business,
        operations and/or financial condition of the Property so encumbered or to
        the
        Business; and (e) liens in favor of customs and revenue authorities arising
        as a
        matter of Legal Requirements to secure payments of customs duties in connection
        with the importation of goods.

       

      Person.
        Any
        individual, Entity or Governmental Body.

       

      Pre-Closing
        Period.
        The
        period prior to the Closing.

       

      Prior
        Event. Any
        event, condition or circumstance or series of events, conditions or
        circumstances, taken as a whole, that (i) has occurred prior to the Closing
        Date, (ii) is the primary cause of the effect referred to in the specific
        representation, and (iii) could reasonably be expected to have such an effect,
        absent the post-Closing adoption or amendment of any Legal Requirement or
        any
        post-Closing Use by the Seller of any asset that differs materially from
        the
        Seller’s Use of such asset prior to the Closing.

       

      Proceeding.
        Any
        action, suit, litigation, arbitration, mediation, proceeding, including any
        civil, criminal, administrative, investigative or appellate proceeding and
        any
        informal proceeding, prosecution, contest, hearing, inquiry, inquest, audit,
        examination or investigation commenced, brought, conducted or heard by or
        before, or otherwise involving, any Governmental Body or any arbitrator or
        arbitration panel.

       

      Profit
        Sharing.
        Section
        1.10.

       

      Property.
        Any
        kind
        of property, asset or right, whether real, personal or mixed, tangible or
        intangible, wherever located (including money), and any interest
        therein.

       

      Proprietary
        Information Agreement.
        Section
        2.13(d)(i).

       

      Purchase
        Price.
        Section
        1.4.

       

      RCRA.
        Resource
        Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq.

       

      Related
        Party.
        (a) Each natural Person who is, or who has at any time been, an officer,
        director or stockholder of the Seller; (b) each member of the family of
        each of the natural Persons referred to in clause (a) above; and
        (c) any Entity (other than the Seller) in which any one of the natural
        Persons referred to in clauses (a) and (b) above holds or held (or in which
        more
        than one of such individuals collectively hold or held), beneficially or
        otherwise, a material voting, equity or other interest.

       

      Representation.
        Section
        6.1(a).

       

      Representatives.
        The
        officers, directors, employees, agents, attorneys, accountants, advisors
        and
        representatives of a Person.

       

      Seller
        Board.
        The
        board of directors of the Seller.

       

      Seller
        Contract.
        Any
        Contract: (a) to which the Seller is a party; (b) by which the Seller
        or any of its Property is or may become bound or under which the Seller has,
        or
        may become subject to, any obligation; or (c) under which the Seller has or
        may acquire any right or interest.

       

      Seller
        Governmental Authorization.
        Section
        2.17.

       

      Seller
        Group. The
        “affiliated group” of corporations (as defined in Code Section 1504(a)(1)) of
        which Guarantor is the parent.

       

      Seller
        Indemnitees. The
        following Persons: (a) the Seller; (b) the Seller’s current and future
        Affiliates; (c) the respective officers, directors and employees of the
        Persons referred to in clauses (a) and (b) above; and (d) the respective
        successors and assigns of the Persons referred to in clauses (a), (b) and
        (c)
        above.

       

      Seller
        Intellectual Property.
        Any
        Intellectual Property owned by, licensed to, Used by, incorporated in Products
        or Services of or being developed by the Seller, but excluding any Excluded
        Assets.

       

      Seller
        Minutes.
        Section
        2.2.

       

      Seller
        Non-Competition Agreement.
        Section
        4.8(b).

       

      Seller
        Owned Intellectual Property. The
        Seller Intellectual Property that is owned by the Seller.

       

      Seller
        Patents.
        All
        Patents owned by or exclusively licensed to the Seller.

       

      Seller
        Real Property.
        Any real
        property that is, or that has at any time been, owned by, leased to, controlled
        by or used by the Seller or any predecessor.

       

      Seller
        Representative.
        Any
        officer, director, employee, agent, attorney, accountant, advisor or
        representatives of Seller.

       

      Stock.
        Common
        stock, preferred stock and any and all other outstanding capital stock of
        the
        Seller.

       

      Guarantor.
        Preamble.

       

      Stock
        Right.
        All:
        (i) outstanding subscriptions, options, calls, warrants or any other
        rights, whether or not currently exercisable, to acquire any shares of Stock,
        other securities or another Stock Right of the Seller; (ii) outstanding
        securities, instruments or obligations that are or may become convertible
        into
        or exchangeable or exercisable for any shares of Stock, other securities
        or
        another Stock Right of the Seller; and (iii) Contracts under which the
        Seller is or may become obligated to sell or otherwise issue any shares of
        Stock, other securities or another Stock Right. Without limiting the foregoing,
        the term Stock Right includes each option to purchase Common Stock issued
        under
        the Plan.

       

      Sunnyvale
        Lease.
        Section
        4.8(c).

       

      Survival
        Period.
        Section
        6.1(a).

       

      Tax.
        Any tax,
        including any income tax, franchise tax, capital gains tax, estimated tax,
        gross
        receipts tax, value-added tax, surtax, excise tax, ad
        valorem
        tax,
        transfer tax, stamp tax, sales tax, use tax, property tax, business tax,
        occupation tax, inventory tax, occupancy tax, withholding tax or payroll
        tax,
        levy, assessment, tariff, impost, imposition, toll, duty, including any customs
        duty, deficiency or fee, and any related charge or amount, including any
        fine,
        penalty or interest, that is, has been or may in the future be (a) imposed,
        assessed or collected by or under the authority of any Governmental Body,
        or
        (b) payable pursuant to any tax-sharing agreement or similar
        Contract.

       

      Tax
        Return.
        Any
        return, including any information return, report, statement, declaration,
        estimate, schedule, notice, notification, form, election, certificate or
        other
        document or information that is, has been or may in the future be filed with
        or
        submitted to, or required to be filed with or submitted to, any Governmental
        Body in connection with the determination, assessment, collection or payment
        of
        any Tax or in connection with the administration, implementation or enforcement
        of or compliance with any Legal Requirement relating to any Tax.

       

      Threatened.
        Any
        claim, Proceeding or other matter will be deemed to have been “Threatened” if
        any demand or statement has been made (orally or in writing) or any notice
        has
        been given (orally or in writing), or if any other event has occurred or
        any
        other circumstances exist, that would lead a prudent Person to conclude that
        such a claim, Proceeding, dispute, action or other matter is likely to be
        asserted, commenced, taken or otherwise pursued in the future.

       

      Trademarks. All
        trademark and service mark rights arising under the common law, state law,
        federal law and laws of foreign countries and all rights, title and interest
        in
        all trademarks, service marks, trademark and service mark applications and
        registrations and trademark and service mark interests throughout the
        world.

       

      Transaction
        Agreements.
        All of:
        (a) this Agreement, (b) the Seller Non-Competition Agreement, (c) the
        Assignment and Assumption Agreement, and (d) the Sunnyvale
        Sublease.

       

      Transactions.
        All of
        the transactions contemplated by the respective Transaction Agreements,
        including: (a) the sale of the Assets by the Seller to the Buyer in
        accordance with the Agreement and (b) the performance by the Seller, the
        Seller and the Buyer of their respective obligations under each Transaction
        Agreement, and the exercise by the Seller, the Seller and the Buyer of their
        respective rights under each Transaction Agreement.

       

      Use.
        To make,
        have made, run, use, test, import, copy, reproduce, practice, distribute,
        display, perform, adapt, modify, sell, offer for sale, license or prepare
        derivatives of.

       

      WARN
        Act.
        Section
        2.20(m).

       

      Welfare
        Plan.  Any
        Benefit Plan which is a welfare plan within the meaning of Section 3(l) of
        ERISA, regardless of whether the plan is covered by ERISA.

       

      

       

      List
        of Exhibits

       

      Exhibit
        A
        - Financial Statements

      Exhibit
        B
        - Assignment and Assumption Agreement

      Exhibit
        C
        - Seller Non-Competition Agreement

      Exhibit
        D
        - Sunnyvale Sublease

      Exhibit
        E
        - Escrow Agreement

      Exhibit
        F
        - Seller Counsel Opinion

      Exhibit
        G
        - Buyer Counsel Opinion

       

      List
        of Schedules

       

      Schedule
        1.1(a) - Intellectual Property

      Schedule
        1.1(b) - Computer and Office Equipment

      Schedule
        1.1(c) - Laboratory Equipment

      Schedule
        1.1(e) - Assumed Contracts

      Schedule
        1.1 (j) - Third Party Claims

      Schedule
        1.3(b)(xi) - Related Party Liabilities

      Schedule
        1.6(a) - Tax Documents

      Schedule
        1.7 - Allocation

      Schedule
        2.1 - Jurisdictions In Which Doing Business

      Schedule
        2.4(d) - Non-contravention 

      Schedule
        2.4(e) - Non-contravention 

      Schedule
        2.4(f) - Non-contravention 

      Schedule
        2.5 - Consents

      Schedule
        2.7(b) - Accounts Receivable and Accounts Payable

      Schedule
        2.7(c) - Net Debt

      Schedule
        2.8(a) - Liabilities

      Schedule
        2.8(b) - Payables

      Schedule
        2.8(c) - Proceedings

      Schedule
        2.8(d) - Guarantees

      Schedule
        2.9(e) - Write-Offs

      Schedule
        2.10 - Tangible Property

      Schedule
        2.11 Encumbrances

      Schedule
        2.12 - Real Property Leases

      Schedule
        2.13(a)(i) - Seller Owned Intellectual Property

      Schedule
        2.13(a)(ii) - Seller-Licensed Intellectual Property

      Schedule
        2.13(a)(iii) - Proposed Intellectual Property Agreements

      Schedule
        2.13(b) - Intellectual Property Encumbrances

      Schedule
        2.13(c) - Intellectual Property Claims

      Schedule
        2.14 - Seller Contracts

      Schedule
        2.15 - Revenue Breakdown By Customer

      Schedule
        2.17 -Governmental Authorizations Held By Seller

      Schedule
        2.18(b) - Tax Audits

      Schedule
        2.19(a) - Employees

      Schedule
        2.19(b) - Former Employees Receiving Benefits

      Schedule
        2.19(c) - Employment Contracts

      Schedule
        2.19(f) - Independent Contractors

      Schedule
        2.20 - Benefit Plans

      Schedule
        2.21 - Hazardous Materials

      Schedule
        2.23(a) - Insurance Policies

      Schedule
        2.23(b) - Insurance Claims

      Schedule
        2.25(b) - Proceedings Against Seller

      Schedule
        2.25(c) - Threatened ProceedingsExhibit 10.2 Accurel Non-compete and NDA

    Exhibit
      10.2

    
 

    NON-COMPETITION
      AND NONDISCLOSURE AGREEMENT

     

    This
      Non-Competition and Nondisclosure Agreement is entered into as of April 30,
      2007
      (the “Agreement
      Date”)
      among
      Accurel Systems International Corporation, a California corporation (the
“Seller”),
      Implant Sciences Corporation, a Massachusetts corporation (the “Guarantor”)
      and
      Evans Analytical Group LLC, a Delaware limited liability company (the
“Buyer”).
      

     

    WITNESSETH:

     

    WHEREAS,
      the Buyer, Seller and Guarantor have entered into an Asset Purchase Agreement,
      dated as of the Agreement Date, pursuant to which, among other things, the
      Buyer
      is acquiring substantially all of the assets of Seller (the “Purchase
      Agreement”);
      

     

    WHEREAS,
      in order to protect the value of the business of the Seller being acquired
      by
      the Buyer pursuant to the Purchase Agreement (the “Purchased
      Business”),
      Seller and Guarantor shall not compete with the Buyer and its respective
      Affiliates (as defined in the Purchase Agreement) in accordance with the terms
      and conditions hereof; and 

     

    WHEREAS,
      the agreement of Seller and Guarantor not to compete with the Buyer and its
      Affiliates as provided herein is an integral part of the transactions
      contemplated by the Purchase Agreement, and without such agreements, Buyer
      would
      not have entered into the Purchase Agreement. 

     

    NOW,
      THEREFORE, in consideration of the covenants and agreements contained herein,
      the payment of the purchase price under the Purchase Agreement and for other
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the parties hereto, intending to be legally bound hereby, agree
      as
      follows: 

     

    1.
      Certain Definitions.
      Capitalized terms used herein and not otherwise defined shall have the meanings
      ascribed to them in the Purchase Agreement; provided, however, that the
      following terms shall have the meanings set forth below irrespective of the
      meanings such terms may have in the Purchase Agreement: 

     

    (a)
      "Confidential
      Information"
      means
      all information heretofore developed or used by the Seller or any of its
      Affiliates relating to the Restricted Business (as defined below) operations,
      employees, customers and clients of the Seller, including, but not limited
      to,
      customer and client lists, customer or client orders, financial data, pricing
      information and price lists, business plans and market strategies and
      arrangements, all books, records, manuals, advertising materials, catalogues,
      correspondence, mailing lists, production data, sales materials and records,
      purchasing materials and records, personnel records, quality control records
      and
      procedures included in or relating to the Restricted Business or any of the
      assets of the Seller, and all trademarks, copyrights and patents and
      applications therefor, all trade secrets, inventions, processes, procedures,
      research records, market surveys and marketing know-how and other technical
      papers. The term "Confidential Information" also includes any other information
      heretofore or hereafter acquired by the Seller and deemed by it to be
      confidential. 

     

    (b)
      The
      term "control",
      with
      respect to any person, means the power to direct the management and policies
      of
      such person, directly or indirectly, by or through stock ownership, agency
      or
      otherwise, or pursuant to or in connection with an agreement, arrangement or
      understanding (written or oral) with one or more other persons by or through
      stock ownership, agency or otherwise; and the terms "controlling" and
      "controlled" have meanings correlative to the foregoing. 

     

    (c)
      The
      term "person"
      means
      an individual, corporation, partnership, joint venture, limited liability
      company, association, trust, unincorporated organization or other entity,
      including a government or political subdivision or an agency or instrumentality
      thereof. 

     

    (d)
      "Restricted
      Business"
      means
      the Business of the Seller, including all services performed by or on behalf
      of
      the Seller for its customers.

     

    (e)
      "Restricted
      Period"
      means
      the period commencing on the date of this Agreement and ending on the date
      which
      is five (5) years from the date hereof. 

     

    2.
      Non-competition.
      At all
      times from and after the date of this Agreement and until the expiration of
      the
      Restricted Period, Seller and Guarantor shall not: 

     

    (a)
      directly or indirectly engage in, be employed by, own, manage, operate, provide
      financing to, control or participate in the ownership, management or control
      of,
      or otherwise have an interest (whether, subject to Section 5, as a stockholder,
      director, officer, employee, representative, subcontractor, partner, consultant,
      proprietor, agent or otherwise) in, or cause, authorize, aid or assist any
      other
      person to own, manage, operate, provide financing to, control or otherwise
      have
      an interest in, any business or any person who is engaged in any business that
      directly or indirectly competes or intends to compete with the Restricted
      Business anywhere in the world, unless Seller or Guarantor purchase or own
      less
      than five percent (5%) of capital stock in a publicly held company;
      or

     

    (b)
      directly, indirectly or otherwise by letters, circulars or advertisements,
      and
      whether for itself or on behalf of any other person, canvass or solicit or,
      directly or indirectly, cause or authorize to be solicited, or enter into or
      effect, or, directly or indirectly, cause or authorize to be entered into or
      effected, any business or orders for businesses competing with the Restricted
      Business from any person who (i) at the time of the Agreement or within two
      years prior to the date of the Agreement, has been, a customer or client, or
      (ii) is an active prospect to be a customer or client, in each case, of the
      Seller at the time of the Agreement.

     

    3.
      Non-Disclosure of Confidential Information. Seller
      and Guarantor acknowledge that it is the policy of the Buyer to maintain as
      secret and confidential all Confidential Information, and the parties hereto
      recognize that Seller and Guarantor have acquired Confidential Information.
      Seller and Guarantor recognize that all such Confidential Information is and
      shall remain the sole property of the Buyer, free of any rights of Seller or
      Guarantor, and acknowledges that the Buyer and its Affiliates have a vested
      interest in assuring that all such Confidential Information remains secret
      and
      confidential. Therefore, the Seller and Guarantor agree that at all times from
      after the date hereof, they will not, directly or indirectly, without the prior
      written consent of the Buyer, disclose to any person, firm, company or other
      entity (other than the Buyer or any of its Affiliates) any Confidential
      Information, except to the extent that (i) any such Confidential Information
      becomes generally available to the public or trade, other than as a result
      of a
      breach by the Seller or Guarantor of this Section 3, or (ii) any such
      Confidential Information becomes available to the Seller or Guarantor on a
      non-confidential basis from a source other than the Seller, Guarantor, Buyer
      or
      any of their Affiliates or advisors; provided, that such source is not known
      by
      the Seller or Guarantor to be bound by a confidentiality agreement with, or
      other obligation of secrecy to, the Seller, Guarantor, Buyer or another party.
      In addition, it shall not be a breach of the confidentiality obligations hereof
      if the Seller or Guarantor is required by law or legal process to disclose
      any
      Confidential Information; provided, that in such case, the Seller or Guarantor
      shall (a) give the Buyer prompt notice that such disclosure is or may be
      required, and (b) cooperate with the Buyer, at the Buyer's expense, in
      protecting, to the maximum extent legally permitted, the confidential or
      proprietary nature of the Confidential Information which must be so disclosed.
      The obligations of the Seller and Guarantor under this Section 3 shall survive
      any termination of this Agreement. 

     

    4.
      Non-Solicitation.
      At all
      times from and after the date of this Agreement and until the expiration of
      the
      Restricted Period, Seller and Guarantor shall not, directly, indirectly or
      otherwise by letters, circulars or advertisements, and whether for themselves
      or
      on behalf of any other person: 

     

    (a)
      solicit or, directly or indirectly, cause to be solicited for employment, any
      persons who (i) are, at the time of solicitation of employment, employees of
      the
      Seller, Buyer or any of their respective Affiliates, or (ii) are, at the time
      of
      solicitation of employment, sales representatives or employees thereof, retained
      by the Buyer or any of its Affiliates; or 

     

    (b)
      employ or, directly or indirectly, cause to be employed, any persons who (i)
      are, at the time of such action, employees of the Buyer or any of its
      Affiliates, or (ii) are, at the time of such action, sales representatives
      or
      employees thereof, retained by the Buyer or any of its Affiliates;

     

    provided,
      however, that this Section 4 shall not prohibit Seller or Guarantor from
      employing or soliciting the employment any person who (A) is an employee of
      Seller as of the Agreement Date and (B) is not offered employment by Buyer
      as of
      the Agreement Date.

     

    5.
      Right to Injunctive Relief.
      Seller
      and Guarantor acknowledge that any breach or threatened breach by it of any
      of
      the covenants or provisions contained herein will result in irreparable and
      continuing harm to the Buyer for which the Buyer would not have adequate remedy
      at law. Therefore, Seller and Guarantor acknowledges and agrees that, in
      addition to any other remedy which the Buyer may have at law or in equity,
      the
      Buyer shall be entitled to injunctive relief or other equitable remedies in
      the
      event of any such breach or threatened breach. Seller and Guarantor further
      acknowledges and agrees that monetary damages would be insufficient to
      compensate the Buyer in the event of a breach by Seller or Guarantor of any
      of
      the covenants or provisions contained herein, and that in the event of a breach
      thereof, the Buyer shall be entitled to specific performance of the obligations
      hereunder. 

     

    6.
      Enforceability; Severability.
      If any
      provision of this Agreement shall be adjudicated to be invalid or unenforceable,
      then such provision shall be deemed modified, as to duration, territory or
      otherwise, so as to be enforceable as similar as possible to the provision
      at
      issue, in order to render the remainder of this Agreement valid and enforceable.
      The invalidity or unenforceability of any provision of this Agreement shall
      not
      affect the other provisions hereof, and this Agreement shall be construed in
      all
      respects as if such invalid or unenforceable provision were
      omitted.

     

    7.
      Successors and Assigns.
      This
      Agreement shall be binding upon and shall inure to the benefit of Seller and
      its
      successors and assigns, and shall be binding and inure to the benefit of the
      Buyer and its successors and assigns. 

     

    8.
      Entire Agreement.
      This
      Agreement, together with the Purchase Agreement and the Transaction Documents,
      contains the entire understanding among the parties hereto with respect to
      the
      subject matter hereof and supersedes all prior negotiations and understandings
      among the Buyer and Seller with respect hereto. This Agreement may not be
      amended or modified except by a written instrument signed by the parties hereto.
      

     

    9.
      Governing Law; Venue.

     

    (a)
      This
      Agreement shall be construed in accordance with, and governed in all respects
      by, the internal laws of the State of Massachusetts, without giving effect
      to
      principles of conflicts of laws. 

     

    (b)
      Unless otherwise explicitly provided in this Agreement, any Proceeding relating
      to this Agreement or the enforcement of any provision of this Agreement may
      be
      brought or otherwise commenced in any state or federal court located in the
      County of Middlesex, Massachusetts. Each of Seller, Guarantor and
      Buyer:

     

    (i)
      expressly and irrevocably consents and submits to the jurisdiction of each
      state
      and federal court located in the County of Middlesex, Massachusetts and each
      appellate court located in the State of Massachusetts, in connection with any
      such Proceeding; 

     

    (ii)
      agrees that each state and federal court located in the County of Santa Clara,
      California or Massachusetts shall be deemed to be a convenient
      forum;

     

    (iii)
      agrees not to assert, by way of motion, as a defense or otherwise, in any such
      Proceeding commenced in any state or federal court located in the County of
      Santa Clara, California or Massachusetts any claim that such Party is not
      subject personally to the jurisdiction of such court, that such Proceeding
      has
      been brought in an inconvenient forum, that the venue of such Proceeding is
      improper or that this Agreement or the subject matter of this Agreement may
      not
      be enforced in or by such court; and

     

    (iv)
      agrees that service in any action may be made by giving notice in accordance
      with Section 10.

     

    10.
      Notices.
      Any
      notice or other communication required or permitted to be delivered to any
      party
      shall be in writing and shall be deemed properly delivered, given and received
      when delivered, by hand, by registered mail, by courier or express delivery
      service, by facsimile, or by e-mail to the address or facsimile number set
      forth
      beneath the name of such party below, or to such other address or facsimile
      number as such party shall have specified in a written notice given to the
      other
      parties:

     

    if
      to the
      Seller or the Guarantor:

                                                   
      Implant Sciences Corporation

    107
      Audubon Road, #5

    Wakefield,
      MA 01880-1246

    
      	 	
              Attention:
                

            	 	 	 

    

    Facsimile:
      (781) 246-3561

    
      	 	 	
              Email:

            	 	
              @implantsciences.com

            

    

    
 

    with
      a
      copy to: 

    

    Ellenoff
      Grossman & Schole LLP

    370
      Lexington Avenue

    New
      York,
      NY 10017-6503

    Attention:
      Barry I. Grossman

                                  
      Facsimile: (212) 370-7889

                                  
      Email: bigrossman@egsllp.com

    

    if
      to the
      Buyer: 

                                      
      Evans
      Analytical Group
      LLC

    810
      Kifer
      Road

    Sunnyvale,
      CA 94086

    Attention:
      Thomas B. Pfeil

    Facsimile:
      (408) 530-3899

    E-mail:
      tpfeil@eaglabs.com

    

     

    11.
      Headings.
      The
      headings of sections and subsections of this Agreement are for convenience
      of
      reference only and are not to be considered in construing this Agreement.

     

    12.
      Execution in Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed to be an original, but all of which, when taken together, shall
      constitute one and the same instrument. 

     

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

     

    
      	
              ACCUREL
                SYSTEMS INTERNATIONAL CORPORATION 

               

               

               

              By:
                 

               

              Name:
                 

               

              Title:
                 

            	
              EVANS
                ANALYTICAL GROUP LLC

               

               

               

              By:
                 

               

              Name:
                 

               

              Title:
                 

            
	 	 
	 	 
	
              IMPLANT
                SCIENCES CORPORATION 

               

               

               

              By:
                 

               

              Name:
                 

               

              Title:

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