Document:

ex10-7

 

Exhibit 10.7

MANAGEMENT SERVICES AGREEMENT

     THIS MANAGEMENT SERVICES AGREEMENT (“Agreement”) is made and entered into
on March 21, 2002 and is effective as of the 30th day of April, 2002 (the
“Effective Date”), by and between JCM Partners, LLC, a Delaware limited
liability company (the “Company”), and Computer Management Corporation, a
California corporation (“CMC”).

     In consideration of the promises herein made and on the terms and subject
to the conditions herein contained, the Company and CMC hereby agree as
follows:

     1.     Engagement. The Company hereby retains CMC for the period commencing
on the Effective Date and continuing through April 30, 2004, subject to
termination as provided under Section 4 below. CMC accepts such engagement.

     2.     Duties.

          (a)  CMC will employ Gayle M. Ing (“Ing”) to act as the Chief Executive
Officer, President, Tax Matters Partner and Secretary of the Company and cause
Ing to report directly to the Company’s Board of Managers (“Board”).
Additionally, Ing will serve as the Company’s Chief Financial Officer until
such time as a successor is named. Ing will have the day-to-day responsibility
for the management and direction of the Company as well as such other duties
and responsibilities commensurate with her positions with the Company.

          (b)  Ing will perform her duties in conformity with the reasonable and
appropriate directions of the Board. Ing will devote all of her working time,
attention and energies to the business and affairs of the Company.

          (c)  Ing will, subject to reasonable travel requirements on behalf of the
Company, be based at the Company’s offices in Concord, California.

     3.     Compensation.

          (a)  Fee. The Company will pay to CMC a fee (the “Fee”) at the monthly
rate of twenty five thousand dollars ($25,000) per month, payable semi-monthly
on the 15th and last day of each month. The Company will not withhold any
taxes from the Fee.

          (b)  Benefits. CMC will be responsible for payment of Ing’s withholding
obligations and health benefits.

          (c)  Directors and Officers Insurance; Indemnity. The Company will
maintain at least $10,000,000 of directors and officers insurance coverage and
$10,000,000 of liability insurance. The Company will name CMC as an additional
insured. Subject to the exceptions specified in the Company’s form of
Indemnification Agreement, the Company will indemnify, defend and hold CMC and
Ing harmless

 

against any claims, costs (including legal fees) or liabilities
respecting CMC’s or Ing’s actions on behalf of the Company.

          (d)  Reimbursement. The Company will reimburse CMC for its reasonable
Company-related expenses.

     4.     Termination.

          (a)  Termination at Will by Either Party. The Company may terminate this
Agreement, for any reason or for no reason, upon 30 days’ written notice to
CMC; provided, however, that nothing in this Agreement shall limit or restrict
the ability of the Board to terminate Ing’s officer and other positions with
the Company at any time and without prior notice. CMC may terminate this
Agreement, for any reason or for no reason, upon 90 days’ written notice to the
Company.

          (b)  Death or Permanent Disability of Ing. This Agreement will terminate
automatically upon the death or permanent disability of Ing. Ing will be
deemed permanently disabled for the purpose of this Agreement if in the good
faith determination of the Board, Ing has become physically or mentally
incapable of performing her duties hereunder for a continuous period of 90
days, in which event Ing will be deemed permanently disabled upon the
expiration of such 90-day period. In the event of a termination of this
Agreement due to the death or permanent disability of Ing, CMC will be entitled
only to the Fee earned through the date of such death or permanent disability
in accordance with Section 3.

          (c)  Compensation Upon Termination. Upon termination of this Agreement,
CMC will be entitled to: (A) the compensation provided for in Section 3(a)
hereof for the period of time ending with the date of termination; and (B)
reimbursement for such expenses as CMC may have properly incurred on behalf of
the Company as provided in Section 3(d) above prior to the date of termination.

     5.     Assignment and Transfer.

          (a)  Company. This Agreement may not be assigned by the Company to any
purchaser of all or substantially all of the Company’s business or assets
without the written consent of CMC.

          (b)  CMC. CMC’s rights and obligations under this Agreement will not be
transferable by CMC by assignment or otherwise, except with the prior written
consent of the Company. Any purported assignment, transfer or delegation
thereof will be void.

     6.     Confidentiality. CMC agrees that all trade secrets, confidential or
proprietary information with respect to the activities and businesses of the
Company including, without limitation, personnel information, business plans,
marketing plans, forecasts, strategies and information which have been or are
learned by CMC in the course of its employment by the Company (collectively,
“Proprietary Information”) will be kept and held in confidence and trust by
CMC. CMC will not use or disclose

 

Proprietary Information except as necessary
in the normal course of the business of the Company for its sole and exclusive
benefit, unless CMC is compelled so to disclose under process of law, in which
case CMC will first notify the Company promptly after receipt of a demand to so
disclose. CMC agrees and acknowledges that it will cause Ing to comply with
the terms of Section 6 of this Agreement.

     7.     Arbitration. Any dispute hereunder will be submitted to binding
arbitration before a single arbitrator in accordance with the Employment
Dispute Resolution Rules of the American Arbitration Association, provided
that: (i) the arbitrator will be instructed and
empowered to take whatever steps to expedite the arbitration as he or she
deems reasonable; (ii) each party will pay fifty percent (50%) of the fees of
the arbitration; (iii) the arbitrator’s judgment will be final and binding upon
the parties, except that it may be challenged on the grounds of fraud or gross
misconduct; and (iv) the arbitration will be held in San Francisco, California.
Judgment upon any verdict in arbitration may be entered in any court of
competent jurisdiction. The parties hereby consent to the jurisdiction of, and
proper venue in, the federal and state courts located in San Francisco,
California. The procedures specified in this Section 7 will be the sole and
exclusive procedures for the resolution of disputes and controversies between
the parties arising out of or relating to this Agreement; provided, however,
that a party may seek a preliminary injunction or other provisional judicial
relief if in its judgment such action is necessary to avoid irreparable damage
or to preserve the status quo. Despite such action the parties will continue
to participate in good faith in the procedures specified in this Section 7.

     8.     Independent Contractor. It is the express intention of the parties
that CMC is an independent contractor and neither it nor Ing are employees of
the Company. CMC reserves the right to determine the method, manner and means
by which the services will be performed. CMC shall not be entitled to employ
anyone other than Ing to perform the services provided by this Agreement,
without the express written consent of the Company. Unless specifically
requested by the Company, CMC is not required to perform the services during a
fixed hourly or daily time.

     9.     Miscellaneous.

          (a)  Governing Law; Interpretation. This Agreement will be governed by the
substantive laws of the State of California applicable to contracts entered
into and fully performed in such jurisdiction. The headings and captions of
the Sections of this Agreement are for convenience only and in no way define,
limit or extend the scope or intent of this Agreement or any provision hereof.
This Agreement will be construed as a whole, according to its fair meaning, and
not in favor of or against any party, regardless of which party may have
initially drafted certain provisions set forth herein.

          (b)  Notices. Any notice, request, claim or other communication required
or permitted hereunder will be in writing and will be deemed to have been duly
given if delivered by hand or if sent by Federal Express to CMC at the address
set forth below its signature, or to the Company at its address as set forth
below its signature, or to 

 

such other address or addresses as either party may
have furnished to the other in writing in accordance herewith.

          (c)  Entire Agreement; Amendments. This Agreement constitutes the final
and complete expression of all of the terms of the understanding and agreement
between the parties hereto with respect to the subject matter hereof, and this
Agreement replaces and supersedes any and all prior or contemporaneous
negotiations, communications, understandings, obligations, commitments,
agreements or contracts, whether written or oral, between the parties
respecting the subject matter hereof. This Agreement may not be modified,
amended, altered or supplemented except by means of the execution and delivery
of a written instrument mutually executed by both parties.

          (d)  Attorneys’ Fees. In the event it becomes necessary for any party to
initiate arbitration or any other proceeding to enforce, defend or construe
such party’s rights or obligations under this Agreement, the prevailing party
(i.e., the party receiving substantially the benefits or relief sought by that
party), except as provided in clause (ii) of Section 7 of this Agreement, will
be entitled to its reasonable costs and expenses, including attorneys’ fees,
incurred in connection with such arbitration or proceeding whether or not
brought to final judgment.

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

	 	 	 
	JCM PARTNERS, LLC, a Delaware limited

liability company	 	
COMPUTER MANAGEMENT CORP., a

California corporation
	 
	By: _____________________________ 	 	
By: _____________________________ 
	Name: Marvin Helder

Its: Vice Chairman of the Board	 	
Name: Michael Vanni

Its: President
	 
	2151 Salvio Street, Suite 325

Concord, CA 94522-3000

Fax: (925) 676-1744	 	
614 Castro Street

San Francisco, CA 94114

Fax: (415) 431-8758EX-10.bn - Asset Purchase Agreement

 

EXHIBIT 10.bn

ASSET PURCHASE AGREEMENT

dated as of March 4, 2002

by and among

SBS TECHNOLOGIES, INC., CONNECTIVITY PRODUCTS,

SBS TECHNOLOGIES, INC.

and

INTRUSION INC.

 

with respect to certain assets of its Essential Communications Division

 

TABLE OF CONTENTS

               This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience only.

	 	 	 	 	 	 
	 	 	 	Page No.
	 	 	 	

	ARTICLE I SALE OF ASSETS AND CLOSING 
	 	 	1	 
	 	Section 1.1 Assets 
	 	 	1	 
	 	Section 1.2 Excluded Assets 
	 	 	3	 
	 	Section 1.3 Assumed Liabilities 
	 	 	4	 
	 	Section 1.4 Excluded Liabilities 
	 	 	5	 
	 	Section 1.5 Purchase Price 
	 	 	5	 
	 	Section 1.6 Allocation of Purchase Price 
	 	 	5	 
	 	Section 1.7 Closing 
	 	 	6	 
	 	Section 1.8 Further Assurances; Post-Closing Cooperation 
	 	 	6	 
	 	Section 1.9 Third-Party Consents 
	 	 	7	 
	 	Section 1.10 Insurance Proceeds 
	 	 	8	 
	 	Section 1.11 Bulk Sales Act 
	 	 	8	 
	 	Section 1.12 Sale and Transfer Taxes 
	 	 	8	 
	 	Section 1.13 Tax Returns 
	 	 	8	 
	 	Section 1.14 Reimbursement of Lease Obligations 
	 	 	9	 
	ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER 
	 	 	9	 
	 	Section 2.1 Corporate Existence of Seller 
	 	 	9	 
	 	Section 2.2 Authority 
	 	 	9	 
	 	Section 2.3 No Conflicts 
	 	 	10	 
	 	Section 2.4 Governmental Approvals and Filings 
	 	 	10	 
	 	Section 2.5 Financial Statements and Condition 
	 	 	10	 
	 	Section 2.6 Taxes 
	 	 	11	 
	 	Section 2.7 Legal Proceedings 
	 	 	11	 
	 	Section 2.8 Compliance With Laws and Orders 
	 	 	11	 
	 	Section 2.9 Title and Condition of Tangible Assets 
	 	 	12	 
	 	Section 2.10 Intellectual Property 
	 	 	12	 
	 	Section 2.11 Contracts 
	 	 	12	 
	 	Section 2.12 Licenses 
	 	 	12	 
	 	Section 2.13 Insurance 
	 	 	13	 
	 	Section 2.14 Affiliate Transactions 
	 	 	13	 
	 	Section 2.15 Brokers 
	 	 	13	 
	 	Section 2.16 No Fraudulent Conveyance 
	 	 	13	 
	 	Section 2.17 No Bankruptcy or Insolvency Filing 
	 	 	13	 
	 	Section 2.18 Inventory 
	 	 	14	 
	 	Section 2.19 Backlog 
	 	 	14	 
	 	Section 2.20 Division Lease Payments 
	 	 	14	 
	 	Section 2.21 Title Retention Agreements 
	 	 	14	 

i

 

TABLE OF CONTENTS (CONTINUED)

	 	 	 	 	 	 
	 	 	 	Page No.
	 	 	 	

	ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT 
	 	 	14	 
	 	Section 3.1 Corporate Existence 
	 	 	14	 
	 	Section 3.2 Authority 
	 	 	14	 
	 	Section 3.3 No Conflict 
	 	 	14	 
	 	Section 3.4 Governmental Approvals and Filings 
	 	 	15	 
	 	Section 3.5 Legal Proceeding 
	 	 	15	 
	 	Section 3.6 Brokers 
	 	 	15	 
	 	Section 3.7 Available Funds 
	 	 	16	 
	ARTICLE IV COVENANTS OF SELLER 
	 	 	16	 
	 	Section 4.1 Regulatory and Other Approvals 
	 	 	16	 
	 	Section 4.2 Investigation by Purchaser 
	 	 	16	 
	 	Section 4.3 No Solicitations 
	 	 	17	 
	 	Section 4.4 Conduct of Business 
	 	 	17	 
	 	Section 4.5 Certain Restrictions 
	 	 	17	 
	 	Section 4.6 Noncompetition 
	 	 	18	 
	 	Section 4.7 Payment of Division Lease Obligations 
	 	 	19	 
	 	Section 4.8 Consent to Employment 
	 	 	19	 
	 	Section 4.9 Fulfillment of Conditions 
	 	 	19	 
	ARTICLE V COVENANTS OF PURCHASER AND PARENT 
	 	 	19	 
	 	Section 5.1 Regulatory and Other Approvals 
	 	 	19	 
	 	Section 5.2 Retained Employees 
	 	 	20	 
	 	Section 5.3 Fulfillment of Conditions 
	 	 	20	 
	ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASER AND PARENT 
	 	 	20	 
	 	Section 6.1 Representations and Warranties 
	 	 	20	 
	 	Section 6.2 Performance 
	 	 	20	 
	 	Section 6.3 Officer’s Certificate 
	 	 	20	 
	 	Section 6.4 Orders and Laws 
	 	 	20	 
	 	Section 6.5 Regulatory Consents and Approvals 
	 	 	21	 
	 	Section 6.6 Third Party Consents 
	 	 	21	 
	 	Section 6.7 Estimate of Certain Obligations 
	 	 	21	 
	 	Section 6.8 Deliveries 
	 	 	21	 
	 	Section 6.9 Certified Resolutions 
	 	 	21	 
	 	Section 6.10 Transfers of Business Licenses 
	 	 	21	 
	 	Section 6.11 Release of Liens 
	 	 	21	 
	ARTICLE VII CONDITIONS TO OBLIGATIONS OF SELLER 
	 	 	21	 
	 	Section 7.1 Representations and Warranties 
	 	 	21	 

ii

 

TABLE OF CONTENTS (CONTINUED)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	Page No.
	 	 	 	 	 	 	 	

	 	Section 7.2 Performance 
	 	 	 	 	 	 	 	 	 	 	22	 
	 	Section 7.3 Officer’s Certificate 
	 	 	 	 	 	 	 	 	 	 	22	 
	 	Section 7.4 Orders and Laws 
	 	 	 	 	 	 	 	 	 	 	22	 
	 	Section 7.5 Regulatory Consents and Approvals 
	 	 	 	 	 	 	 	 	 	 	22	 
	 	Section 7.6 Third Party Consents 
	 	 	 	 	 	 	 	 	 	 	22	 
	 	Section 7.7 Deliveries 
	 	 	 	 	 	 	 	 	 	 	22	 
	 	Section 7.8 Certified Resolutions 
	 	 	 	 	 	 	 	 	 	 	22	 
	ARTICLE VIII SURVIVAL; LIMITATION OF WARRANTIES 
	 	 	 	 	 	 	 	 	 	 	22	 
	 	Section 8.1 Survival of Representations, Warranties, Covenants and Agreements 
	 	 	 	 	 	 	 	 	 	 	22	 
	ARTICLE IX INDEMNIFICATION
	 	 		 	 	 	 	 	 	 	23	 
	 	Section 9.1 Indemnification 
	 	 	 	 	 	 		 	 	 	23	 
	 	Section 9.2 Method of Asserting Claims 
	 	 	 	 	 	 		 	 	 	25	 
	 	Section 9.3 Method of Calculating Losses 
	 	 	 	 	 	 		 	 	 	29	 
	 	Section 9.4 Exclusivity 
	 	 	 	 	 	 	 	 	 	 	29	 
	ARTICLE X TERMINATION
	 	 	 	 	 	 	 	 	 	 	29	 
	 	Section 10.1 Termination 
	 	 	 	 	 	 	 	 	 	 	29	 
	 	Section 10.2 Effect of Termination 
	 	 	 	 	 	 	 	 	 	 	29	 
	ARTICLE XI MISCELLANEOUS
	 	 	 	 	 	 	 	 	 	 	30	 
	 	Section 11.1 Notices 
	 	 	 	 	 	 	 	 	 	 	30	 
	 	Section 11.2 Entire Agreement 
	 	 	 	 	 	 	 	 	 	 	31	 
	 	Section 11.3 Expenses 
	 	 	 	 	 	 	 	 	 	 	31	 
	 	Section 11.4 Public Announcements 
	 	 	 	 	 	 	 	 	 	 	31	 
	 	Section 11.5 Confidentiality 
	 	 	 	 	 	 	 	 	 	 	31	 
	 	Section 11.6 Waiver 
	 	 	 	 	 	 	 	 	 	 	32	 
	 	Section 11.7 Amendment 
	 	 	 	 	 	 	 	 	 	 	33	 
	 	Section 11.8 No Third Party Beneficiary 
	 	 	 	 	 	 	 	 	 	 	33	 
	 	Section 11.9 No Assignment; Binding Effect 
	 	 	 	 	 	 	 	 	 	 	33	 
	 	Section 11.10 Headings 
	 	 	 	 	 	 	 	 	 	 	33	 
	 	Section 11.11 Invalid Provisions 
	 	 	 	 	 	 	 	 	 	 	33	 
	 	Section 11.12 Governing Law 
	 	 	 	 	 	 	 	 	 	 	33	 
	 	Section 11.13 Counterparts 
	 	 	 	 	 	 	 	 	 	 	33	 

iii

 

	 	 	 	 	 	 
	ANNEXES
	 	 	 	 
	 	Annex A
	 	Definitions and Rules of Incorporation   

	EXHIBITS
	 	 	 	 
	 	Exhibit A
	 	General Assignment and Bill of Sale    

	 	Exhibit B
	 	Intellectual Property Bill of Sale  

	 	Exhibit C
	 	Assumption Agreement   

	SELLER DISCLOSURE SCHEDULE
	 	 	 	 
	 	Schedule 1.1(a)
	 	Inventory   

	 	Schedule 1.1(b)
	 	Equipment   

	 	Schedule 1.1(c)
	 	Contracts   

	 	Schedule 1.1(e)
	 	Intellectual Property   

	 	Schedule 1.1(f)
	 	Business Licenses   

	 	Schedule 2.3
	 	No Conflicts   

	 	Schedule 2.4
	 	Governmental Approvals and Filings   

	 	Schedule 2.5(a)
	 	Division Financial Statements   

	 	Schedule 2.5(b)
	 	No Material Adverse Effect  

	 	Schedule 2.5(c)
	 	No Material Liabilities  

	 	Schedule 2.7
	 	Legal Proceedings  

	 	Schedule 2.8
	 	Compliance with Laws and Orders   

	 	Schedule 2.10
	 	Intellectual Property  

	 	Schedule 2.11
	 	Contracts  

	 	Schedule 2.12
	 	Licenses   

	 	Schedule 2.14
	 	Affiliate Transactions  

	 	Schedule 7.6
	 	Third Party Consents  

	PURCHASER DISCLOSURE SCHEDULES
	 	 	 	 
	 	Schedule 3.3
	 	No Conflicts  

	 	Schedule 3.4
	 	Governmental Approvals and Filings  

	 	Schedule 5.2
	 	Retained Employees  

	 	Schedule 6.6
	 	Third Party Consents  

iv

 

ASSET PURCHASE AGREEMENT

     THIS ASSET PURCHASE AGREEMENT (this “Agreement”) dated as of March 4, 2002
is made and entered into by and between SBS Technologies, Inc., Connectivity
Products, a Minnesota corporation (“Purchaser”), SBS Technologies, Inc., a New
Mexico corporation (“Parent”), and Intrusion Inc., a Delaware corporation
(“Seller”).

PRELIMINARY STATEMENTS

     A.     Seller, through its Essential Communications Division (the “Division”),
is engaged in the business of designing, developing, manufacturing, marketing
and distributing high-performance network solutions products and services (the
“Business”).

     B.     Seller desires to sell, transfer and assign to Purchaser, and Purchaser
desires to purchase and acquire from Seller, certain assets of Seller relating
to the operation of the Business, and in connection therewith, Purchaser has
agreed to assume certain specific liabilities of Seller relating to the
Business, all on the terms set forth herein.

     C.     Capitalized terms used in this Agreement are defined or indexed in
Annex A for the convenience of the reader and in order to eliminate the need
for cross reference. Annex A is incorporated herein by this reference.

STATEMENT OF AGREEMENT

     NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

ARTICLE I

SALE OF ASSETS AND CLOSING

     Section 1.1 Assets. On the terms and subject to the conditions set forth
in this Agreement, Seller hereby agrees to sell, transfer, convey, assign and
deliver (or cause to be sold, transferred, conveyed, assigned and delivered) to
Purchaser, and Purchaser hereby agrees to purchase free and clear of all Liens
other than Permitted Liens, all of Seller’s right, title and interest in, to
and under the following Assets and Properties owned, held or used by Seller
solely in connection with the Business, except to the extent such Assets and
Properties constitute Excluded Assets, as the same shall exist on the Closing
Date (collectively, the “Acquired Assets”):

     (a)  Inventory. All inventories of raw materials, work-in-process,
finished goods, supplies, parts and other accessories listed in Section 1.1(a)
of the Seller Disclosure Schedule (collectively, the “Inventory”);

     (b)  Equipment. All furniture, fixtures, equipment, machinery and other
tangible personal property (other than Inventory) listed in Section 1.1(b) of
the Seller Disclosure Schedule (collectively, the “Equipment”);

 

 

     (c)  Business Contracts. To the extent their transfer is permitted under
the terms thereof, all Contracts listed in Section 1.1(c) of the Seller
Disclosure Schedule (collectively, the “Business Contracts”);

     (d)  Prepaid Expenses. All prepaid expense deposits and retentions held by
third parties relating solely to the conduct of the Business, other than
security deposits deposited by Seller under real property leases;

     (e)  Proprietary Rights. All Intellectual Property listed in Section
1.1(e) of the Seller Disclosure Schedule, works of authorship, inventions
(whether patentable or not), invention disclosures, industrial models,
industrial designs, utility models and certificates of invention, designs
(including, without limitation, graphics and label and artistic designs), names
for the Business, trade secrets, technical information, franchises, franchise
rights, suppliers, subcontractors and customer lists together with the goodwill
associated therewith, pricing and cost information, business and marketing
plans and proposals, product designs, product packaging, business and product
names, logos, rights of publicity, improvements, processes, techniques,
formulae, compositions, specifications, technology, methodologies, computer
software (including all source code and object code), firmware, flow charts,
annotations, any other confidential and proprietary right or information,
whether or not subject to statutory registration, and all related technical,
manufacturing and engineering information, specifications, technical drawings,
research and development, know-how, the right to sue for past infringement, if
any, in connection with any of the foregoing, all documents, disks, records,
files and other media on which any of the foregoing is stored, and other
proprietary rights used solely in the conduct of the Business or allocated to
Purchaser pursuant to Section 1.1(f) (collectively, the “Proprietary Rights”);

     (f)  Licenses. To the extent their transfer is permitted under the terms
thereof or under applicable Laws, all Licenses utilized solely in the conduct
of the Business and listed in Section 1.1(f) of the Seller Disclosure Schedule
(the “Business Licenses”);

     (g)  Books and Records. All Books and Records used solely in the conduct
of the Business or otherwise relating solely to the Acquired Assets, other than
the minute books, stock transfer books and corporate seal of Seller (the
“Business Books and Records”); provided, that to the extent any of the Business
Books and Records are items susceptible to duplication and are either (x) used
in connection with any of Seller’s businesses other than the Business or (y)
are required by Law to be retained by Seller, Seller may deliver photostatic
copies or other reproductions from which, in the case of Business Books and
Records referred to in clause (x), information solely concerning Seller’s
businesses other than the Business has been deleted.

     (h)  All rights under express or implied warranties from suppliers or
manufacturers of the Inventory or Equipment.

     (i)  All of Seller’s causes of action, judgments, and claims or demands of
whatever kind or description arising out of or relating solely to the Acquired
Assets.

     (j) All goodwill associated solely with the Acquired Assets.

2

 

     (k)  All Nondisclosure Agreements related to the Business (including
without limitation those related to the proposed sale of the Business or its
Assets and Properties).

     Section 1.2 Excluded Assets. Notwithstanding anything in this Agreement
to the contrary, the following Assets and Properties of Seller (the “Excluded
Assets”) shall be excluded from and shall not constitute Acquired Assets:

     (a)  Cash and Cash Equivalents. Cash, commercial paper, securities,
investments, money market, savings and checking accounts, certificates of
deposit and other bank deposits or accounts with other financial institutions,
treasury bills and other cash equivalents;

     (b)  Insurance. All insurance policies relating to the operation of the
Business or the Acquired Assets, or the directors, officers or employees of
Seller;

     (c)  Employee Benefit Plans. All Benefit Plans and assets owned or held
thereby;

     (d)  Accounts Receivable. All trade accounts receivable and all notes,
bonds and other evidences of Indebtedness of and rights to receive payments
arising out of sales occurring in the conduct of Seller’s business, including
the Business, and any security agreements or collateral securing repayment or
other satisfaction of such accounts receivable, notes, bonds or other evidences
of Indebtedness, including any rights of Seller with respect to any third party
collection procedures or any other Actions or Proceedings which have been
commenced in connection therewith;

     (e)  Tax Refunds. All refunds or credits, if any, of Taxes due to or from
Seller;

     (f)  Real Property. Any real property owned, leased or used by Seller;

     (g)  Corporate Records. The minute books, stock transfer books and
corporate seal of Seller;

     (h)  Litigation Claims. Any rights (including indemnification), claims and
recoveries under litigation of Seller against third parties arising out of or
relating to events prior to the Closing Date;

     (i)  Excluded Obligations. The rights of Seller in, to and under all
Contracts of any nature, the obligations of Seller under which expressly are
not assumed by Purchaser pursuant to Section 1.3;

     (j)  Third Party Assets. Assets and Properties owned by third parties
(other than Assets and Properties underlying Business Licenses, subject to the
terms and conditions thereof);

     (k) VIEO Contract. Seller’s Contract dated August 7, 2000 with Power
Micro Research, Inc., d/b/a VIEO, and all of Seller’s rights and benefits
thereunder.

3

 

     (l)  Excluded Proprietary Rights. All Proprietary Rights of Seller not
used solely in connection with the conduct of the Business as currently
conducted by Seller, including, without limitation, any right to use or exploit
the names, trademarks (including any service marks) or trade names “Intrusion”,
“SecureCom,” “SecureNet PRO,” “KANE,” “ODS Networks,” “Perimeter Defense System
(PDS),” “SecurityAnalyst,” “SecureEnterprise,” “SecureNet Gig,” “SecureNet
Provider” or any derivation thereof or the Intrusion logo, any derivation
thereof, or any goodwill associated with any of the foregoing in any
jurisdiction of the world; provided that to the extent any Proprietary Rights
are used by or for the benefit of Seller’s business other than the Business,
the parties shall negotiate and promptly allocate such Proprietary Rights
between the Business and such other businesses in a fair and equitable manner
that is reasonably acceptable to the parties and (i) those allocated to the
Business shall be transferred to Purchaser as Acquired Assets and Seller shall
receive a perpetual, royalty—free, transferable, irrevocable, indefeasible and
non-exclusive license that is reasonably satisfactory to the parties allowing
Seller to continue to use such Proprietary Rights in the conduct of such other
businesses, and (ii) with respect to those allocated to Seller, Purchaser shall
receive a perpetual, royalty-free, transferable, irrevocable, indefeasible and
non-exclusive license that is reasonably satisfactory to the parties allowing
Purchaser to use such Proprietary Rights in the conduct of the Business;

     (m)  Other Seller Assets. All other Assets and Properties owned, held or
used by Seller not used solely in the conduct of the Business or not
specifically included in the definition of Acquired Assets, including, without
limitation, Assets and Properties (including Inventory, Equipment and
Proprietary Rights) used by Seller (whether in whole or in part) (i) for the
design, development, manufacture, marketing or distribution of its intrusion
detection and security products and services; (ii) to fulfil orders from
customers placed with Seller prior to the Closing Date; and (iii) to provide
maintenance and support to Seller’s maintenance customers to the extent the
agreements governing the same are not assumed by Purchaser; and

     (n)  Seller’s Rights. Seller’s rights under this Agreement.

     Section 1.3 Assumed Liabilities. In connection with the sale, transfer,
conveyance, assignment and delivery of the Acquired Assets pursuant to this
Agreement, on the terms and subject to the conditions set forth in this
Agreement, Purchaser hereby agrees to assume, pay, perform and discharge, and
Parent hereby agrees to guarantee such assumption, payment, performance and
discharge by Purchaser, when due those Liabilities of Seller arising out of,
related to, or in connection with the ownership, operation, utilization or
maintenance of the Acquired Assets (the “Assumed Liabilities”), listed below:

     (a)  Obligations under Contracts and Licenses. All Liabilities of Seller
under the Business Contracts and Business Licenses arising and to be performed
on or after the Closing Date, but excluding any such Liabilities arising or to
be performed prior to the Closing Date;

     (b)  Returned Goods. (i) Up to an aggregate of $50,000 of Seller’s
Liabilities for replacement of, or refund for, damaged, defective or returned
goods incurred within 12 months of the date any such good was sold by Seller,
and (ii) all of such Liabilities

4

 

thereafter, in each case to the extent such
goods are subject to full return privileges from the supplier thereof;

     (c)  Product Liabilities. All Liabilities arising out of claims of third
parties for damage or injury suffered as the result of defective products sold
by Purchaser after the Closing Date, except that the Purchaser assumes no
liability for claims arising out of the negligent or intentional acts of Seller
or its employees or agents or for products that do not relate to the Acquired
Assets;

     (d)  Taxes. All Taxes relating to the ownership, operation, utilization or
maintenance of the Acquired Assets accruing from and after the Closing Date;

     (e)  Deferred Revenue Obligations. All of Seller’s deferred revenue
obligations associated with the Business Contracts (the “Deferred Revenue
Obligations”); and

     (f)  Trade Payables. All trade payables arising out of or related to the
operation of the Business or the ownership, operation, utilization or
maintenance of the Acquired Assets which accrue on or after the Closing Date,
but excluding such trade payables that were otherwise due and payable or
accrued by Seller prior to the Closing Date.

     Section 1.4 Excluded Liabilities. Except for the Assumed Liabilities,
Purchaser shall not assume, Parent shall not guarantee, and neither Purchaser
nor any Affiliate of Purchaser shall be deemed to have assumed or guaranteed,
any other Liabilities of Seller or any of its Affiliates, including, without
limitation, any Liabilities arising out of or related to the ownership,
operation, utilization or maintenance of the Acquired Assets prior to the
Closing Date and any liabilities of Seller under, associated with or arising
out of the Contract specified in Section 1.2(k), any refunds due to customers
who do not agree to assignment of Business Contracts and terminate such
Business Contracts, and any Liabilities for employment compensation, claims, or
benefits for employees or contractors of the Division before Closing other than
the Accrued Vacation Obligations of the Retained Employees (collectively the
“Excluded Liabilities”).

     Section 1.5 Purchase Price. The aggregate purchase price for the Acquired
Assets and the covenant of Seller contained in Section 4.6 is $1,000,000 (the
“Purchase Price”), payable in immediately available United States funds at the
Closing in the manner provided in Section 1.7, and the assumption of the
Assumed Liabilities.

     Section 1.6 Allocation of Purchase Price. As soon as practicable after
the Closing Date, Purchaser or Parent shall determine the allocation of the
Purchase Price and the Assumed Liabilities among the Acquired Assets and the
covenants of Seller set forth in Section 4.6, which such allocation shall be
reasonably acceptable to Seller. Each party hereto agrees (i) that any
such allocation shall be consistent with the requirements of Section 1060 of
the Code and the regulations thereunder, (ii) to prepare and file Form 8594
with its Federal income Tax Return, if any, consistent with such allocation for
the tax year in which the Closing Date occurs and (iii) that no party will take
a position on any income, transfer or gains Tax Return, before any Governmental
or Regulatory Authority charged with the collection of any such Tax or in any
Action or Proceeding, that is in any manner inconsistent with the terms of any
such allocation without the consent of the other party.

5

 

     Section 1.7 Closing. The Closing will take place at the offices of Parent
at 2400 Louisiana Boulevard NE, AFC Building 5, Albuquerque, New Mexico 87110
or at such other place as the parties mutually agree, at 10:00 A.M. local time,
on the Closing Date. At the Closing, Purchaser or Parent will pay the Purchase
Price by wire transfer of immediately available funds in United States dollars
to the account(s) designated by Seller. Simultaneously, (a) Seller will assign
and transfer to Purchaser good and valid title in and to the Acquired Assets
(free and clear of all Liens, other than Permitted Liens) as evidenced by the
delivery of (i) a General Assignment and Bill of Sale substantially in the form
attached hereto as Exhibit A (the “Bill of Sale”), (ii) an Intellectual
Property Bill of Sale substantially in the form attached hereto as Exhibit B
(the “IP Bill of Sale”), together with executed forms and applications as
required by the U.S. Patent and Trademark Office, to effect and document the
transfer of title to the Intellectual Property described in Section 1.1(e) of
the Seller Disclosure Schedule to Purchaser (except to the extent identified as
“abandoned” on such schedule), and (iii) such other good and sufficient
instruments of conveyance, assignment and transfer, in form and substance
reasonably acceptable to Purchaser’s counsel, as shall be effective to vest in
Purchaser good title to the Acquired Assets; and (b) Purchaser will assume from
Seller the due payment, performance and discharge of the Assumed Liabilities,
and Parent shall guarantee such payment, performance and discharge, as
evidenced by delivery of (i) an Assumption Agreement substantially in the form
attached hereto as Exhibit C (the “Assumption Agreement,” and together with the
Bill of Sale and IP Bill of Sale, the “Operative Documents”) and (ii) such
other good and sufficient instruments of assumption or guarantee, in form and
substance reasonably acceptable to Seller’s counsel, as shall be effective to
cause Purchaser to assume the Assumed Liabilities and Parent to guarantee such
assumption. At the Closing, there shall also be delivered to Seller and
Purchaser the certificates and other contracts, documents and instruments
required to be delivered under Articles VI and VII.

     Section 1.8 Further Assurances; Post-Closing Cooperation.

     (a)  Subject to the terms and conditions of this Agreement, at any time and
from time to time after the Closing, at Purchaser’s or Parent’s request and
without further consideration, Seller shall execute and deliver to Purchaser or
Parent, as applicable, such other instruments of sale, transfer, conveyance,
assignment and confirmation, provide such materials and information and take
such other actions as Purchaser or Parent, as applicable, may reasonably deem
necessary or desirable in order more effectively to transfer, convey and assign
to Purchaser, and to confirm Purchaser’s title to, all of the Acquired Assets,
and, to the full extent permitted by Law, to put Purchaser in actual possession
and operating control of the
Acquired Assets and to assist Purchaser or Parent, as applicable, in
exercising all rights with respect thereto, and otherwise to cause Seller to
fulfill its obligations under this Agreement.

     (b)  Subject to the terms and conditions of this Agreement, at any time and
from time to time after the Closing, at Seller’s request and without further
consideration, Purchaser and Parent shall execute and deliver to Seller such
other instruments of transfer, assumption, guarantee and confirmation, provide
such materials and information and take such other action as Seller may
reasonably deem necessary or desirable for Purchaser to assume all of the
Assumed Liabilities from the Seller and Parent to guarantee such assumption and
otherwise to cause Purchaser and Parent to fulfill their respective obligations
under this Agreement.

6

 

     (c)  Following the Closing, each party will afford the other party, its
counsel and its accountants, during normal business hours, reasonable access to
the Books and Records relating to the Acquired Assets and the Business in its
possession with respect to periods prior to the Closing Date and the right to
make copies and extracts therefrom, to the extent that such access may be
reasonably required by the requesting party in connection with (i) the
preparation of Tax Returns; (ii) the determination or enforcement of rights and
obligations under this Agreement; (iii) compliance with the requirements of any
Governmental or Regulatory Authority; (iv) the determination or enforcement of
the rights and obligations of any Indemnified Party; or (v) in connection with
any actual or threatened Action or Proceeding. Further, each party agrees for
a period extending six (6) years after the Closing Date not to destroy or
otherwise dispose of any such Books and Records unless such party shall first
offer in writing to surrender such Books and Records to the other party and
such other party shall not agree in writing to take possession thereof during
the thirty (30) day period after such offer is made.

     (d)  If, in order properly to prepare its Tax Returns, other documents or
reports required to be filed with Governmental or Regulatory Authorities or its
financial statements or to fulfill its obligations hereunder, it is necessary
that a party be furnished with additional information, documents or records
relating to the Acquired Assets not referred to in paragraph (c) above, and
such information, documents or records are in the possession or control of the
other party, such other party shall use commercially reasonable efforts to
furnish or make available such information, documents or records (or copies
thereof) at the recipient’s request, cost and expense. Any information
obtained by such party in accordance with this paragraph shall be held
confidential by such party in accordance with Section 11.5.

     (e)  Notwithstanding anything to the contrary contained in this Section
1.8, if the parties are in an adversarial relationship in any Action or
Proceeding, the furnishing of information, documents or records in accordance
paragraph (c) of this Section shall be subject to applicable rules relating to
discovery.

     (f)  Purchaser and Seller shall cooperate in convincing each of the
Retained Employees to accept employment with Purchaser effective as of the
Closing.

     (g)  Purchaser shall deliver or pay over to Seller any monies or payments
Purchaser receives from customers in payment of invoices or maintenance
contracts that are reflected in the accounts receivable of Seller retained by
Seller pursuant to Section 1.2(d) on the Closing Date and any other deposits or
monies relating to the Excluded Assets, within 15
business days after receipt of such payments by Purchaser, and Parent
hereby guarantees such payment and delivery by Purchaser. Seller shall deliver
or pay over to Purchaser any other monies or payments received by Seller
relating to the ownership, operation, utilization, maintenance or management of
the Business or the Acquired Assets not covered by the foregoing sentence,
within 15 business days after receipt of such payments by Seller.

     Section 1.9 Third-Party Consents. To the extent that any Business
Contract or Business License is not assignable without the consent of another
party, this Agreement shall not constitute an assignment or an attempted
assignment thereof if such assignment or attempted assignment would constitute
a breach thereof. Seller, Purchaser and Parent shall use commercially
reasonable efforts to obtain the consent of such other party to the assignment
of

7

 

any such Business Contract or Business License to Purchaser in all cases in
which such consent is or may be required for such assignment. If any such
consent shall not be obtained, Seller shall cooperate with Purchaser and Parent
in any reasonable arrangement designed to provide to Purchaser the benefits
intended to be assigned to Purchaser under the relevant Business Contract or
Business License, including enforcement at the cost and for the account of
Purchaser and Parent of any and all rights of Seller against the other party
thereto arising out of the breach or cancellation thereof by such other party
or otherwise. If and to the extent that such arrangement cannot be made,
Purchaser shall have no obligation pursuant to Section 1.3 or otherwise with
respect to any such Business Contract or Business License. The provisions of
this Section 1.9 shall not affect the right of Purchaser not to consummate the
transactions contemplated by this Agreement if the condition to its obligations
hereunder contained in Section 6 has not been fulfilled.

     Section 1.10 Insurance Proceeds. If any of the Acquired Assets is
destroyed or damaged or taken in condemnation, the insurance proceeds or
condemnation award with respect thereto shall be an Acquired Asset. At the
Closing, Seller shall pay or credit to Purchaser any such insurance proceeds or
condemnation awards received by it on or prior to the Closing and shall assign
to or assert for the benefit of Purchaser all of its rights against any
insurance companies, Governmental or Regulatory Authorities and others with
respect to such damage, destruction or condemnation. As and to the extent that
there is available insurance under policies maintained by Seller and its
Affiliates, predecessors and successors in respect of any Assumed Liabilities,
except for any such insurance proceeds with respect to which the insured is
directly or indirectly self-insured or has agreed to indemnify the insurer,
Seller shall cause such insurance to be applied toward the payment of such
Assumed Liabilities. The provisions of this Section 1.10 shall not affect the
right of Purchaser and Parent not to consummate the transactions contemplated
by this Agreement if the condition to its obligations hereunder contained in
Section 6 has not been fulfilled or if Purchaser deems, in its sole discretion,
that the destroyed or damaged Acquired Asset was significant to its benefit of
the bargain under this Agreement.

     Section 1.11 Bulk Sales Act. The parties agree not to comply with the
bulk transfer provisions of any jurisdiction in which any of the Acquired
Assets are located.

     Section 1.12 Sale and Transfer Taxes. Except for the Assumed Liabilities
or as provided in Section 1.13, neither Purchaser nor Parent shall have any
liability or obligation to Seller or Seller’s creditors or to others, growing
out of or arising from the sale by Seller of the Acquired Assets to Purchaser
under the provisions of this Agreement or any Tax liabilities (including title
transfer fees) attributable to the sale of the Acquired Assets. Any Taxes and
any transfer, recording or similar fees and charges arising out of or in
connection with the transfer of the Acquired Assets shall be borne by Seller.
Notwithstanding the foregoing, Purchaser and Parent (if applicable) shall be
liable for the payment of any sales Taxes attributable to the resale of the
Acquired Assets by Purchaser or Parent and any income or franchise taxes owed
by Purchaser or Parent.

     Section 1.13 Tax Returns. Seller shall properly file Tax Returns that
Seller is required by any applicable Law of the United States to file with
respect to Taxes relating to the Acquired Assets arising in or related to
periods through the Closing and shall pay all such Taxes when due. Purchaser
and Parent shall properly file Tax Returns that Purchaser and Parent are
required to

8

 

file under any applicable Law with respect to Taxes relating to the
Acquired Assets accruing in periods after the Closing Date and shall pay all
such Taxes when due.

     Section 1.14 Reimbursement of Lease Obligations. In addition to the
payment of the Purchase Price, and notwithstanding Section 1.2(f), within
fifteen (15) days after receiving an invoice from Seller for such amounts,
Purchaser will pay Seller the fixed sum of $700 per day as reimbursement for
Seller’s rental payments and payments for utilities, maintenance, taxes or
other expenses (other than expenses due to Seller’s default thereunder)
incurred by Seller under or in connection with its real property lease relating
to the real property (and its occupation thereof) commonly referred to as 1551
Mercantile Avenue N.E., Suite A, Albuquerque, New Mexico 87107 where Seller
currently conducts the Business (the “Division Lease”) and maintains the
Acquired Assets, for a period ending on the earlier to occur of (i) the date
two (2) months following the Closing Date and (ii) the date Purchaser vacates
such facility (the “Transition Lease Period”), and Parent hereby guarantees
such payments by Purchaser. Subject to applicable Laws and the terms and
conditions of the Division Lease, Seller shall give Purchaser and its
representatives access to such facilities to operate the Business during the
Transition Lease Period.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER

     Seller hereby represents and warrants to Purchaser and Parent that the
following are true at the date of this Agreement, except if and solely to the
extent disclosed on the Seller Disclosure Schedule, as follows:

     Section 2.1 Corporate Existence of Seller. Seller is a corporation validly existing and in good standing under the
Laws of the State of Delaware and has full corporate power and authority to
conduct the Business as and to the extent now conducted and to own, use and
lease the Acquired Assets.

     Section 2.2 Authority. Seller has full corporate power and authority to
execute and deliver this Agreement and each of the Operative Documents to which
it is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby, including without
limitation to sell and transfer the Acquired Assets pursuant to this Agreement
and the Operative Documents. The execution and delivery by Seller of this
Agreement and each of the Operative Documents to which it is a party, and the
performance by Seller of its obligations hereunder and thereunder, have been
duly and validly authorized by the Board of Directors of Seller, no other
corporate action on the part of Seller or its stockholders being necessary.
This Agreement has been duly and validly executed and delivered by Seller and
constitutes, and upon the execution and delivery by Seller of the Operative
Documents to which it is a party, such Operative Documents will constitute,
legal, valid and binding obligations of Seller enforceable against Seller in
accordance with their respective terms, except as may be limited by (a)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors rights
generally or (b) the effect of rules of law governing the availability of
equitable remedies.

9

 

     Section 2.3 No Conflicts. The execution and delivery by Seller of this
Agreement and the Operative Documents to which it is a party do not, and the
performance by Seller of its obligations hereunder and thereunder and the
consummation of the transactions contemplated hereby and thereby will not:

     (a)  conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or bylaws of
Seller;

     (b)  subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in Section 2.3 of the Seller
Disclosure Schedule, conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to Seller or any of its Assets
and Properties (other than such conflicts, violations or breaches (i) which
could not in the aggregate reasonably be expected to adversely affect the
validity or enforceability of this Agreement or any of such Operative Documents
or to have a Material Adverse Effect on the Condition of the Business or (ii)
as would occur solely as a result of the legal or regulatory status of
Purchaser or any of its Affiliates); or

     (c)  except as disclosed in Section 2.3 of the Seller Disclosure Schedule
or as could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Condition of the Business or to adversely
affect the ability of Seller to consummate the transactions contemplated hereby
or by any such Operative Documents or to perform its obligations hereunder or
thereunder, (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require Seller to obtain any consent, approval or action of, make
any filing with or give any notice to any Person as a result or under the terms
of, or (iv) result in the creation or imposition of any Lien upon, any of the
Acquired Assets, any Business Contract or Business License or any Contract by
which any of the Acquired Assets is bound.

     Section 2.4 Governmental Approvals and Filings. Except as disclosed in
Section 2.4 of the Seller Disclosure Schedule, no consent, approval or action
of, filing with or notice to any Governmental or Regulatory Authority in the
United States on the part of Seller is required in connection with the
execution, delivery and performance of this Agreement or any of the Operative
Documents to which it is a party or the consummation of the transactions
contemplated hereby or thereby, except (i) where the failure to obtain any such
consent, approval or action, to make any such filing or to give any such notice
could not reasonably be expected to adversely affect the ability of Seller to
consummate the transactions contemplated by this Agreement or any of such
Operative Documents or to perform its obligations hereunder or thereunder, or
to have a Material Adverse Effect on the Condition of the Business, and (ii)
those as would be required solely as a result of the identity or the legal or
regulatory status of Purchaser or any of its Affiliates.

     Section 2.5 Financial Statements and Condition.

     (a)  The audited consolidated financial statements and unaudited
consolidated financial statements of Seller (including any related notes or
schedules thereto) included (or incorporated by reference) in any registration
statement, report, schedule, definitive proxy statement or other document which
Seller was required to file with the SEC since

10

 

January 1, 2000 (the “Seller
Financial Statements”) were complete and correct in all material respects as of
their respective dates, complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto as of the respective dates, and have been
prepared in accordance with GAAP (except as may be indicated in the notes
thereto or, in the case of unaudited statements included in Quarterly Reports
on Form 10-Qs, as permitted by Form 10-Q of the SEC). The Seller Financial
Statements fairly present in all material respects the consolidated financial
condition and operating results of Seller and its subsidiaries at the dates and
during the periods indicated therein (subject, in the case of unaudited
statements, to normal, recurring year-end adjustments). The unaudited balance
sheets and statements of income and cash flows of the Division for the
immediately past two calendar years, attached as Section 2.5(a) of the Seller
Disclosure Schedule (the “Division Financial Statements”), were prepared in
accordance with GAAP, other than the absence of footnotes, applied on a
consistent basis throughout the periods covered thereby, and present fairly, in
all material respects, the financial condition of the Division as of their
respective dates and the results of operations for those respective periods.

     (b)  Except for the execution and delivery of this Agreement and the
transactions to take place pursuant hereto on or prior to the Closing Date,
since September 30, 2001, there has not been any Material Adverse Effect on the
Condition of the Business, other than those disclosed in Section 2.5(b) of the
Seller Disclosure Schedule.

     (c)  Since September 30, 2001, except as disclosed in Section 2.5(c) of the
Seller Disclosure Schedule or any other Section of the Seller Disclosure
Schedule, Seller has not incurred any Liabilities which in the aggregate are
material to the Condition of the Business, other than Liabilities incurred in
the ordinary course of business.

     Section 2.6 Taxes. The Acquired Assets are not subject to any Liens for
Taxes, except Liens for current Taxes not yet due and payable.

     Section 2.7 Legal Proceedings. Except as disclosed in Section 2.7 of the
Seller Disclosure Schedule (with paragraph references corresponding to those
set forth below):

     (a)  there are no Actions or Proceedings pending or, to the Knowledge of
Seller, threatened against, relating to or affecting Seller with respect to the
Business or any of the Acquired Assets which could reasonably be expected (i)
to result in the issuance of an Order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative Documents or (ii)
individually or in the aggregate with other such Actions or Proceedings, to
have a Material Adverse Effect on the Condition of the Business; and

     (b)  there are no Orders outstanding against Seller which, individually or
in the aggregate with other such Orders, could reasonably be expected to have a
Material Adverse Effect on the Condition of the Business.

     Section 2.8 Compliance With Laws and Orders. To the Knowledge of Seller,
except as disclosed in Section 2.8 of the Seller Disclosure Schedule, Seller is
not in violation of or in default under any Law or Order applicable to the
Business or the Acquired Assets the effect of

11

 

which, individually or in the
aggregate with other such violations and defaults, could reasonably be expected
to have a Material Adverse Effect on the Condition of the Business.

     Section 2.9 Title and Condition of Tangible Assets. Seller is in
possession of and has good title to, or has valid leasehold interests in or
valid rights under Contract to use, all the Acquired Assets free and clear of
all Liens, other than Permitted Liens. To the Knowledge of Seller, all of the
tangible Acquired Assets are, in all material respects, in good working order
and condition, ordinary wear and tear excepted.

     Section 2.10 Intellectual Property. To the knowledge of Seller, Seller
owns, or is validly licensed or otherwise has the right to use (or in the case
of applications pertaining to the Intellectual Property, has applied for the
right to use) any and all Proprietary Rights. To the knowledge of Seller
(without any special investigation or patent search), except as disclosed in
Section 2.10 of the Seller
Disclosure Schedule, (i) there are no restrictions on the direct or
indirect transfer of any Business Contract, or any interest therein, held by
Seller in respect of such Proprietary Rights, (ii) Seller is not, nor (without
regard to the foregoing “Knowledge of Seller” qualifier) has it received any
written notice that it is, in default (or with the giving of notice or lapse of
time or both, would be in default) in any material respect under any Contract
to use such Proprietary Rights and (iii) such Proprietary Rights are not being
infringed by any other Person. Seller has not received written notice that
Seller is infringing any Proprietary Rights of any other Person in connection
with the conduct of the Business, and, to the Knowledge of Seller, no claim is
pending or has been made to such effect that has not been resolved and no basis
exists for any such claim. Other than “off-the-shelf” or “shrink wrap”
licenses, the software licenses listed on Schedule 2.10 of the Seller
Disclosure Schedule are the only software licenses material to the operation of
the Business as currently conducted by Seller.

     Section 2.11 Contracts. Each Business Contract is in full force and
effect and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, of the Seller and, to the Knowledge of Seller, of
each other party thereto. Except as disclosed in Section 2.11 of the Seller
Disclosure Schedule, neither Seller nor, to the Knowledge of Seller, any other
party to such Contract is in violation or breach of or default under any such
Contract (or with notice or lapse of time or both, would be in violation or
breach of or default under any such Contract).

     Section 2.12 Licenses. Section 1.1(f) of the Seller Disclosure Schedule
contains a true and complete list of all of the Business Licenses, setting
forth the grantor, the grantee, the function and the expiration and renewal
date of each. Prior to the execution of this Agreement, Seller has made
available to Purchaser true and complete copies of all such Business Licenses.
Except as disclosed in Section 2.12 of the Seller Disclosure Schedule:

	 	(i)	 	Seller owns or validly holds all such
Business Licenses;
	 
	 	(ii)	 	each such Business License is valid,
binding and in full force and effect; and

12

 

	 	(iii)	 	to the Knowledge of Seller, Seller
is not in default (or with the giving of notice or lapse
of time or both, would be in default) under any such
Business License.

     Section 2.13 Insurance. Seller has policies of insurance and bonds
insuring the Acquired Assets against the risks involved in the conduct of the
Business and the ownership of the Acquired Assets which, to the Knowledge of
Seller, are of the types and in the amounts customarily carried by Persons
similar in size to Seller conducting the Business or owning assets similar to
the Acquired Assets. There is no material claim pending under any such
policies or bonds relating to the Business or the Acquired Assets as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds. Each such insurance policy is valid and binding
and in full force and effect, no premiums due thereunder have not been
paid and Seller has not received any written notice of cancellation or
termination in respect of any such policy and is not in default thereunder in
any material respect; provided, that nothing in this Section 2.13 shall require
Seller to maintain any insurance with respect to the Business or the Acquired
Assets after the Closing.

     Section 2.14 Affiliate Transactions. Except as disclosed in Section 2.14
of the Seller Disclosure Schedule, no officer, director, Affiliate or Associate
of Seller or any Associate of any such officer, director or Affiliate provides
or causes to be provided any assets, services or facilities used in connection
with the Business which are individually or in the aggregate material to the
Condition of the Business. Except as disclosed in Section 2.14 of the Seller
Disclosure Schedule, each of the transactions listed in Section 2.14 of the
Seller Disclosure Schedule is engaged in on an arm’s-length basis.

     Section 2.15 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Seller directly with
Purchaser without the intervention of any Person on behalf of Seller in such
manner as to give rise to any valid claim by any Person against Purchaser for a
finder’s fee, brokerage commission or similar payment.

     Section 2.16 No Fraudulent Conveyance. The making by Seller of the
transfers and the incurring by Seller of the obligations contemplated by this
Agreement (i) are not being made or incurred with the intent to hinder, delay
or defraud any creditor of Seller, (ii) are not being made or incurred without
receiving from Purchaser a reasonably equivalent value in exchange for the sale
of the Acquired Assets, (iii) are not being made or incurred while Seller is
engaged in or about to engage in a business or transaction for which its
remaining assets are unreasonably small in relation to the business or
transaction, (iv) are not being made or incurred while Seller intends to incur,
or believes that it may incur, debts beyond its ability to pay as they become
due, (v) will not result in the debts of Seller becoming greater than all of
its respective assets at fair valuation, and (vi) will not result in Seller
becoming unable to pay its respective debts as they become due.

     Section 2.17 No Bankruptcy or Insolvency Filing. Seller has not filed or
brought, and does not contemplate bringing or filing, any petition or action
seeking relief from creditors, or its own reorganization, dissolution,
bankruptcy or insolvency, and no other person or entity has filed, or to the
Knowledge of Seller, threatened to file or bring any such petition or action
against Seller.

13

 

     Section 2.18 Inventory. The Inventory as carried on the Division’s
Financial Statements (net of the reserves for obsolescence) is current and in
good and merchantable condition.

     Section 2.19 Backlog. At Closing, the Business will have a backlog of
orders of not less than $100,000 and, during the immediately preceding two
months, no orders have been accelerated or shipped except as required by the
applicable purchase order.

     Section 2.20 Division Lease Payments. Seller is current in its payment of
rent and all other obligations due or payable under the Division Lease.

     Section 2.21 Title Retention Agreements. To the Knowledge of Seller,
Seller is not in default under any retention of title agreements with suppliers
of the Division.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT

     Purchaser and Parent, jointly and severally, hereby represents and
warrants to Seller that the following are true at the date of this Agreement,
except if and solely to the extent disclosed on the Purchaser Disclosure
Schedule, as follows:

     Section 3.1 Corporate Existence. Purchaser is a corporation validly
existing and in good standing under the State of Minnesota and has full
corporate power and authority and to conduct its business as and to the extent
now conducted and to own, use and lease its Assets and Properties. Parent is a
corporation validly existing and in good standing under the State of New Mexico
and has full corporate power and authority and to conduct its business as and
to the extent now conducted and to own, use and lease its Assets and
Properties.

     Section 3.2 Authority. Each of Purchaser and Parent has full corporate
power and authority to enter into this Agreement and each of the Operative
Documents to which it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby,
including, without limitation, to purchase the Acquired Assets and assume or
guarantee, as applicable, the Assumed Liabilities pursuant to this Agreement
and the Operative Documents. The execution and delivery by Purchaser and
Parent of this Agreement and each of the Operative Documents to which each is a
party and the performance by Purchaser and Parent of their respective
obligations hereunder and thereunder have been duly and validly authorized by
their respective Board of Directors, no other corporate action on the part of
Purchaser, Parent or their respective stockholders being necessary. This
Agreement has been duly and validly executed and delivered by Purchaser and
Parent and constitutes, and upon execution and delivery of the Operative
Documents to which each is a party, such Operative Documents will constitute,
legal, valid and binding obligations of Purchaser and Parent enforceable
against Purchaser and Parent in accordance with their respective terms, except
as may be limited by (a) applicable
bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors rights
generally or (b) the effect of rules of law governing the availability of
equitable remedies.

     Section 3.3 No Conflict. The execution and delivery by Purchaser and
Parent of this Agreement and each of the Operative Documents to which each is a
party do not, the

14

 

performance by Purchaser and Parent of their respective
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby will not:

     (a)  conflict with or result in a violation or breach of any of the terms,
conditions or provisions of their respective certificate of incorporation or
bylaws;

     (b)  subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in Section 3.3 to the Purchaser
Disclosure Schedule, conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to Purchaser or Parent or any
of their respective Assets and Properties (other than such conflicts,
violations or breaches which could not in the aggregate reasonably be expected
to adversely affect the validity or enforceability of this Agreement or any of
such Operative Documents); or

     (c)  except as disclosed in Section 3.3 to the Purchaser Disclosure
Schedule, or as could not, individually or in the aggregate, reasonably be
expected to adversely affect the ability of Purchaser or Parent to consummate
the transactions contemplated hereby or by any of such Operative Documents or
to perform their respective obligations hereunder or thereunder, (i) conflict
with or result in a violation or breach of, (ii) constitute (with or without
notice or lapse of time or both) a default under, or (iii) require Purchaser or
Parent to obtain any consent, approval or action of, make any filing with or
give any notice to any Person as a result or under the terms of, any Contract
or License to which Purchaser is a party or by which any of its Assets and
Properties is bound.

     Section 3.4 Governmental Approvals and Filings Except as disclosed in
Section 3.4 of the Purchaser Disclosure Schedule, no consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of Purchaser or Parent is required in connection with the execution,
delivery and performance of this Agreement or any of the Operative Documents to
which it is a party or the consummation of the transactions contemplated hereby
or thereby, except where the failure to obtain any such consent, approval or
action, to make any such filing or to give any such notice could not reasonably
be expected to adversely affect the ability of Purchaser or Parent to
consummate the transactions contemplated by this Agreement or any of such
Operative Documents or to perform its obligations hereunder or thereunder.

     Section 3.5 Legal Proceeding. There are no Actions or Proceedings pending
or, to the knowledge of Purchaser or Parent, threatened against, relating to or
affecting Purchaser or Parent or any of their
respective Assets and Properties which could reasonably be expected to
result in the issuance of an Order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative Documents.

     Section 3.6 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Purchaser and Parent
directly with Seller without the intervention of any Person on behalf of
Purchaser or Parent in such manner as to give rise to any valid claim by any
Person against Seller for a finder’s fee, brokerage commission or similar
payment.

15

 

     Section 3.7 Available Funds. Purchaser and/or Parent has sufficient cash
and/or credit facilities (and has provided Seller with evidence thereof), to
pay the Purchase Price and to make all other necessary payments of fees and
expenses in connection with the transactions contemplated by this Agreement and
the Operative Documents.

ARTICLE IV

COVENANTS OF SELLER

     Seller covenants and agrees with Purchaser and Parent that, at all times
from and after the date hereof until the Closing and in the case of Section 4.6
for the period specified therein, Seller will comply with all covenants and
provisions of this Article IV, except to the extent Purchaser or Parent may
otherwise consent in writing.

     Section 4.1 Regulatory and Other Approvals. Seller will (a) take all
commercially reasonable steps necessary or desirable, and proceed diligently
and in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents, approvals or actions of, to make all
filings with and to give all notices to Governmental or Regulatory Authorities
or any other Person required of Seller to consummate the transactions
contemplated hereby, including without limitation those described in Sections
2.3 and 2.4 of the Seller Disclosure Schedule, (b) provide such other
information and communications to such Governmental or Regulatory Authorities
or other Persons as such Governmental or Regulatory Authorities or other
Persons may reasonably request in connection therewith and (c) provide
reasonable cooperation to Purchaser and Parent in obtaining all consents,
approvals or actions of, making all filings with and giving all notices to
Governmental or Regulatory Authorities or other Persons required of Purchaser
or Parent to consummate the transactions contemplated hereby. Seller will
provide prompt notification to Purchaser and Parent when any such consent,
approval, action, filing or notice referred to in clause (a) above is obtained,
taken, made or given, as applicable, and will advise Purchaser of any
communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by
this Agreement.

     Section 4.2 Investigation by Purchaser. Seller will (a) provide Purchaser, Parent and their respective
officers, employees, counsel, accountants, financial advisors, consultants and
other representatives with full access, upon reasonable prior notice and during
normal business hours, to the officers and employees of Seller who have any
responsibility for the conduct of the Business, to Seller’s accountants and to
the Acquired Assets, but only to the extent that such access does not
unreasonably interfere with the Business or any other business conducted by
Seller and (b) furnish Purchaser, Parent and such other Persons with all such
information and data (including without limitation copies of the Business
Contracts, Business Licenses and other Business Books and Records) concerning
the Business, the Acquired Assets and the Assumed Liabilities as Purchaser,
Parent or any of such other Persons reasonably may request in connection with
such investigation, except to the extent that furnishing any such information
or data would violate any Law, Order, Contract or License applicable to Seller
or by which any of its Assets and Properties is bound (in which case Seller
will use commercially reasonable efforts to obtain permission for disclosure to
Purchaser or Parent, as applicable).

16

 

     Section 4.3 No Solicitations. Subject to the duties imposed by applicable
Law, Seller will not take, nor will it permit any Affiliate of Seller (or
authorize or permit any investment banker, financial advisor, attorney,
accountant or other Person retained by or acting for or on behalf of Seller or
any such Affiliate) to take, directly or indirectly, any action to solicit,
encourage, receive, negotiate, assist or otherwise facilitate (including by
furnishing confidential information with respect to the Business or permitting
access to the Acquired Assets or Business Books and Records) any offer or
inquiry from any Person concerning the direct or indirect acquisition of the
Acquired Assets other than (i) Purchaser or its Affiliates or (ii) any other
Person who has proposed any Business Combination to which Seller or any
Affiliate of Seller is a party and which indirectly involves the Acquired
Assets, provided that the Person making the proposal expressly recognizes the
rights of Purchaser hereunder in a written instrument reasonably satisfactory
to Purchaser.

     Section 4.4 Conduct of Business. Seller will operate the Business only in
the ordinary course consistent with past practice. Without limiting the
generality of the foregoing, Seller will use commercially reasonable efforts,
to the extent the officers of Seller believe such action to be in Seller’s best
interest or the best interest of the Business, to (a) maintain the Acquired
Assets in their current condition, ordinary wear and tear excepted and (b)
maintain their relationships with key suppliers, customers, distributors,
licensors, licensees and other Persons in connection with the Business.
Notwithstanding the foregoing, Seller may inform its suppliers, customers,
distributors, licensors, licensees and other Persons that it is no longer
actively engaged in the Business.

     Section 4.5 Certain Restrictions. Seller will refrain from:

     (a)  other than transfers (including, acquisitions and dispositions of
Inventory and Equipment and nonexclusive licenses of Proprietary Rights
included in Inventory
and Equipment) on commercially reasonable terms in the ordinary course of
business, acquiring or disposing of, or incurring any Lien (other than a
Permitted Lien) on, any Acquired Assets;

     (b)  entering into, amending, modifying, terminating (partially or
completely), granting any waiver under or giving any consent with respect to
any Business Contract or any Business License;

     (c)  engaging with any Person in any Business Combination which directly
involves the Acquired Assets, unless such Person agrees in a written instrument
to adopt and comply with the terms and conditions of this Agreement as though
such Person was an original signatory hereto;

     (d)  engaging in any transaction individually or in the aggregate with
other such transactions material to the Condition of the Business with any
officer, director, Affiliate or Associate of Seller, or any Associate of any
such officer, director or Affiliate, outside the ordinary course of business
other than on an arm’s-length basis;

     (e)  except as contemplated by Section 4.8, hiring or terminating any
Retained Employees or entering into or revising any employment agreements with
Retained Employees;

17

 

     (f)  shipping product before the usual and ordinary time; and

     (g)  entering into any Contract to do or engage in any of the foregoing.

     Section 4.6 Noncompetition.

     (a)  Seller will, for a period of three (3) years from the Closing Date,
refrain from, either alone or in conjunction with any other Person, or directly
or indirectly through its present or future Affiliates:

	 	(i)	 	causing or attempting to cause (A)
any client, customer or supplier of the Business to
terminate, discontinue or reduce its business with
Purchaser or any of its Affiliates (provided that
nothing in this clause (i)(A) shall expand Seller’s
obligations in Section 4.4) or (B) any officer, employee
or consultant of Purchaser or any of its Affiliates
engaged in the Business to resign or sever a
relationship with Purchaser or any of its Affiliates,
other than actions taken by Seller as a result of such
Person’s (1) affirmative response to a general
recruitment effort carried out through public
solicitation or a general solicitation or (2) own
initiative;
	 
	 	(ii)	 	disclosing (unless compelled by
judicial or administrative process) or using any
confidential or secret information relating to the
Business or any client, customer or supplier of the
Business; or
	 
	 	(iii)	 	participating or engaging in, or
otherwise lending assistance (financial or otherwise) to
any Person participating or engaged in, a business
substantially similar to or directly competing with the
Business other than Seller’s (A) design, development,
manufacture, marketing and distribution of products and
services involving (directly or indirectly) Excluded
Assets (B) ownership of five percent (5%) or less of any
class of securities of a Person engaged in the Business
which are registered under the Securities Act of 1933,
as amended; (C) design, development, manufacture,
marketing and distribution of intrusion detection and
other security products and services; and (D) sales of
Excluded Assets.

     (b)  The parties hereto recognize that the Laws and public policies of the
various states of the United States may differ as to the validity and
enforceability of covenants similar to those set forth in this Section. It is
the intention of the parties that the provisions of this Section be enforced to
the fullest extent permissible under the Laws and policies of each jurisdiction
in which enforcement may be sought, and that the unenforceability (or the
modification to conform to such Laws or policies) of any provisions of this
Section shall not render unenforceable, or impair, the remainder of the
provisions of this Section. Accordingly, if any provision of this Section
shall be determined to be invalid or unenforceable, such invalidity or
unenforceability shall be deemed to apply only with respect to the operation of

18

 

such provision in the particular jurisdiction in which such determination is
made and not with respect to any other provision or jurisdiction.

     (c)  The parties hereto acknowledge and agree that any remedy at Law for
any breach of the provisions of this Section would be inadequate, and Seller
hereby consents to the granting by any court of an injunction or other
equitable relief, without the necessity of actual monetary loss being proved,
in order that the breach or threatened breach of such provisions may be
effectively restrained.

     Section 4.7 Payment of Division Lease Obligations. Seller shall pay when
due all rental payments and other payment obligations under the Division Lease
during the Transition Lease Period.

     Section 4.8 Consent to Employment. As and to the extent necessary to
permit the Retained Employees and Henry Casias and each of them to accept
employment with Parent, to engage in the Business and to exploit the Acquired
Assets for commercial purposes, Seller, for itself and its Affiliates, hereby
waives such rights as it may have under or by virtue of any employment
agreement, offer letter or other arrangement with such Persons.

     Section 4.9 Fulfillment of Conditions. Seller will execute and deliver at
the Closing each Operative Document that Seller is required hereby to execute
and deliver as a condition to the Closing, will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good
faith to
satisfy each other condition to the obligations of Purchaser contained in
this Agreement and will not take or fail to take any action that could
reasonably be expected to result in the nonfulfillment of any such condition.

ARTICLE V

COVENANTS OF PURCHASER AND PARENT

     Purchaser and Parent, jointly and severally, covenant and agree with
Seller that, at all times from and after the date hereof until the Closing,
Purchaser and Parent (if applicable) will comply with all covenants and
provisions of this Article V, except to the extent Seller may otherwise consent
in writing.

     Section 5.1 Regulatory and Other Approvals. Purchaser and Parent will (a)
take all commercially reasonable steps necessary or desirable, and proceed
diligently and in good faith and use all commercially reasonable efforts, as
promptly as practicable to obtain all consents, approvals or actions of, to
make all filings with and to give all notices to Governmental or Regulatory
Authorities or any other Person required of Purchaser or Parent to consummate
the transactions contemplated hereby, including without limitation those
described in Sections 3.3 and 3.4 to the Purchase Disclosure Schedule, (b)
provide such other information and communications to such Governmental or
Regulatory Authorities or other Persons as such Governmental or Regulatory
Authorities or other Persons may reasonably request in connection therewith and
(c) provide reasonable cooperation to Seller in obtaining all consents,
approvals or actions of, making all filings with and giving all notices to
Governmental or Regulatory Authorities or other Persons required of Seller to
consummate the transactions contemplated hereby. Purchaser or Parent, as
applicable, will provide prompt notification to Seller when any

19

 

such consent,
approval, action, filing or notice referred to in clause (a) above is obtained,
taken, made or given, as applicable, and will advise Seller of any
communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by
this Agreement.

     Section 5.2 Retained Employees. Effective as of the Closing Date, Parent
shall offer those employees of the Seller engaged in the Business identified on
Section 5.2 of the Purchaser Disclosure Schedule (collectively, the “Retained
Employees”) employment with Parent on such terms, including position and
salary, as Parent may deem acceptable; provided, however, that nothing in this
Section 5.2 or elsewhere in this Agreement shall obligate Parent to hire any
employees of Seller. Parent shall offer Retained Employees vacation time
approximately equal to the Accrued Vacation Obligations.

     Section 5.3 Fulfillment of Conditions. Purchaser and Parent will execute
and deliver at the Closing each Operative Document that each is hereby required
to execute and deliver as a condition to the Closing, will take all
commercially reasonable steps necessary or desirable and proceed diligently and
in good
faith to satisfy each other condition to the obligations of Seller
contained in this Agreement and will not take or fail to take any action that
could reasonably be expected to result in the nonfulfillment of any such
condition.

ARTICLE VI

CONDITIONS TO OBLIGATIONS OF PURCHASER AND PARENT

     The obligations of Purchaser and Parent hereunder to purchase the Acquired
Assets and to assume and pay, perform and discharge the Assumed Liabilities (or
guarantee such payment, performance and discharge, as applicable) are subject
to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by Parent in
its sole discretion):

     Section 6.1 Representations and Warranties. The representations and
warranties made by Seller in this Agreement, taken as a whole, shall be true
and correct, in all respects material to the validity and enforceability of
this Agreement and to the Condition of the Business, on and as of the Closing
Date as though made on and as of the Closing Date or, in the case of
representations and warranties made as of a specified date earlier than the
Closing Date, on and as of such earlier date.

     Section 6.2 Performance. Seller shall have performed and complied with,
in all material respects, the agreements, covenants and obligations required by
this Agreement to be so performed or complied with by Seller at or before the
Closing.

     Section 6.3 Officer’s Certificate. Seller shall have delivered to Parent
a certificate, dated the Closing Date and executed by the Chairman of the
Board, the President or any Vice President of Seller confirming the
satisfaction of the conditions in Sections 6.1, 6.2 and 6.6.

     Section 6.4 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Documents.

20

 

     Section 6.5 Regulatory Consents and Approvals. All consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit Purchaser, Parent and Seller to perform their
obligations under this Agreement and the Operative Documents and to consummate
the transactions contemplated hereby and thereby shall have been duly obtained,
made or given and shall be in full force and effect, and all terminations or
expirations of waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation
of the transactions contemplated by this Agreement and the Operative
Documents shall have occurred.

     Section 6.6 Third Party Consents. The consents (or in lieu thereof
waivers) listed in Section 6.6 of the Purchaser Disclosure Schedule and Section
7.6 of the Seller Disclosure Schedule shall have been obtained and shall be in
full force and effect.

     Section 6.7 Estimate of Certain Obligations. Seller shall have delivered
to Parent a certificate dated the Closing Date and executed by the Chief
Financial Officer, Treasurer, Controller or other appropriate officer of the
Corporation of Seller certifying Seller’s estimates of the Accrued Vacation
Obligations and Deferred Revenue Obligations.

     Section 6.8 Deliveries. Seller shall have delivered to Parent the
Operative Documents to which it is a party and any other instruments or
documents required to be delivered by it on or prior to the Closing.

     Section 6.9 Certified Resolutions. Seller shall have furnished to Parent
a certified copy of resolutions duly adopted by its Board of Directors,
authorizing and approving the execution and delivery of this Agreement and
authorizing the consummation of the transactions contemplated by it.

     Section 6.10 Transfers of Business Licenses. Subject to Section 1.9,
Seller shall have executed and delivered to Parent, in forms acceptable to
Parent, assignments, consents or other instruments reasonably necessary and
sufficient to transfer to Purchaser all Business Licenses reasonably necessary
and sufficient to permit Purchaser, in its own name and for its own benefit, to
make immediate use of the Acquired Assets in the manner that each has been used
in the Business.

     Section 6.11 Release of Liens. Each Person holding a Lien (other than
Permitted Liens) on the Acquired Assets or any of them shall have delivered to
Purchaser a release of that Lien, in form and substance acceptable to Parent.

ARTICLE VII

CONDITIONS TO OBLIGATIONS OF SELLER

     The obligations of Seller hereunder to sell the Acquired Assets are
subject to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by Seller in
its sole discretion):

     Section 7.1 Representations and Warranties. The representations and
warranties made by Purchaser and Parent in this Agreement, taken as a whole,
shall be true and correct in all material respects on and as of the Closing
Date as though made on and as of the Closing Date.

21

 

     Section 7.2 Performance. Purchaser and Parent shall have performed and
complied with, in all material respects, the agreements, covenants and
obligations required by this Agreement to be so performed or complied with by
each of them at or before the Closing.

     Section 7.3 Officer’s Certificate. Each of Purchaser and Parent shall
have delivered to Seller a certificate, dated the Closing Date and executed by
the Chairman of the Board, the President or any Vice President or any other
authorized officer of Purchaser or Parent, as applicable, confirming the
satisfaction of the conditions in Sections 7.1, 7.2 and 7.6.

     Section 7.4 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Documents.

     Section 7.5 Regulatory Consents and Approvals. All consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit Seller, Purchaser and Parent to perform their
obligations under this Agreement and the Operative Documents and to consummate
the transactions contemplated hereby and thereby shall have been duly obtained,
made or given and shall be in full force and effect, and all terminations or
expirations of waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions contemplated by
this Agreement and the Operative Documents shall have occurred.

     Section 7.6 Third Party Consents. The consents (or in lieu thereof
waivers) listed in Section 7.6 of the Seller Disclosure Schedule and Section
6.6 of the Purchaser Disclosure Schedule shall have been obtained and shall be
in full force and effect.

     Section 7.7 Deliveries. Purchaser and Parent shall have delivered to
Seller the Operative Documents to which each is a party and any other
instruments or documents required to be delivered by it on or prior to the
Closing.

     Section 7.8 Certified Resolutions. Purchaser and Parent each shall have
furnished to Seller a certified copy of resolutions duly adopted by its Board
of Directors, authorizing and approving the execution and delivery of this
Agreement and authorizing the consummation of the transactions contemplated by
it.

ARTICLE VIII

SURVIVAL; LIMITATION OF WARRANTIES

     Section 8.1 Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements of
Seller, Purchaser and Parent contained in this Agreement will survive the
Closing until the date eighteen months following the Closing Date, except that
(a) the representations and warranties in Sections 2.2, 2.9, 2.15, 3.2 and 3.6
and the covenants and agreements contained in Sections 1.8, 11.3 and 11.5 will
survive indefinitely, and (b) the representations and warranties in Sections
2.6, 2.17 and 2.18 and the covenants and agreements in Sections 1.12 and 1.13
(to the extent such covenants and agreements relate to the payment of Taxes or
other expenses or the filing of Tax Returns) will survive until the expiration
of all applicable statutes of limitation (including all periods of extension,
whether automatic or

22

 

permissive); provided, however, that any representation,
warranty, covenant or agreement that would otherwise terminate in accordance
with this Section 11.1 will continue to survive if a Claim Notice or Indemnity
Notice (as applicable) shall have been timely given in good faith based on
facts reasonably expected to establish a valid claim under Article IX on or
prior to such termination date, until the related claim for indemnification has
been satisfied or otherwise resolved as provided in Article IX. Nothing in the
foregoing sentence shall preclude either party from bringin t involving the
entire transaction provided for in this Agreement. Furthermore, this Section
shall not limit in any way the survival and enforceability of any covenant or
agreement of the parties hereto which by its terms contemplates performance
after the Closing Date, which shall survive for the respective periods set
forth herein.

ARTICLE IX

INDEMNIFICATION

     Section 9.1 Indemnification.

     (a)  Subject to paragraph (c) of this Section and the other Sections of
this Article IX, Seller shall indemnify the Purchaser Indemnified Parties in
respect of, and hold each of them harmless from and against, any and all Losses
suffered, incurred or sustained by any of them or to which any of them becomes
subject, resulting from, arising out of or relating to (i) any
misrepresentation, breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement on the part of Seller contained in this
Agreement or any of the Operative Documents; (ii) the ownership, operation,
utilization, maintenance or management of, or interest in the Acquired Assets
prior to the Closing Date; or (iii) any Excluded Liabilities.

     (b)  Subject to paragraph (c) of this Section and the other Sections of
this Article IX, Purchaser and Parent, jointly and severally, shall indemnify
the Seller Indemnified Parties in respect of, and hold each of them harmless
from and against, any and all Losses suffered, incurred or sustained by any of
them or to which any of them becomes subject, resulting from, arising out of or
relating to (i) any misrepresentation, breach of warranty or nonfulfillment of
or failure to perform any covenant or agreement on the part of Purchaser or
Parent contained in this Agreement or any of the Operative Documents; (ii) the
ownership, operation, utilization, maintenance or management of, or interest
in, the Acquired Assets from and after the Closing Date; or (iii) any Assumed
Liabilities.

     (c)  Notwithstanding anything to the contrary contained in this Agreement,
no amounts of indemnity shall be payable as a result of any claim in respect of
a Loss arising under paragraph (a) or (b) of this Section 9.1:

	 	(i)	 	in the case of a claim by a Purchaser
Indemnified Party, unless, until and then only to the
extent that the Purchaser Indemnified Parties have
suffered, incurred, sustained or become subject to
Losses referred to in such paragraphs in excess of
$50,000 in the aggregate;

23

 

	 	(ii)	 	in the case of a claim by a Purchaser
Indemnified Party, for any Losses to the extent that the
Purchaser Indemnified Parties have received aggregate
payments in respect of claims made under such paragraphs
equal to or in excess of the Purchase Price;
	 
	 	(iii)	 	with respect to any claim for
indemnification thereunder, unless the Indemnified Party
has given the Indemnifying Party a Claim Notice or
Indemnity Notice, as applicable, with respect to such
claim, setting forth in reasonable detail the specific
facts and circumstances pertaining thereto, (A) as soon
as practical following the time at which the Indemnified
Party discovered or reasonably should have discovered
such claim (except to the extent the Indemnifying Party
is not prejudiced by any delay in the delivery of such
notice) and (B) in any event prior to the applicable
Cut-off Date;
	 
	 	(iv)	 	with respect to any Loss resulting
from a misrepresentation, breach of warranty or
nonfulfillment or failure to be performed of a covenant
or agreement that is either (A) disclosed in a written
notice, setting forth in reasonable detail the specific
facts and circumstances pertaining thereto, delivered by
the Indemnifying Party to the Indemnified Party after
the date of this Agreement and at or prior to the
Closing or (B) otherwise actually known to the
Indemnified Party prior to the Closing, if the
Indemnified Party nevertheless elects to close
(regardless of whether the Indemnified Party waives such
misrepresentation, breach, nonfulfillment or failure in
writing or otherwise);
	 
	 	(v)	 	with respect to any Loss, to the
extent that the Indemnified Party had a reasonable
opportunity, but failed, in good faith to mitigate the
Loss, including but not limited to the failure to use
commercially reasonable efforts to recover under a
policy of insurance or under a contractual right of
set-off or indemnity; or
	 
	 	(vi)	 	with respect to any Loss suffered,
incurred or sustained by any Purchaser Indemnified Party
or to which any of them becomes subject to the extent
such loss arises from or was caused by actions taken or
failed to be taken by Purchaser or any of its Affiliates
after the Closing;

provided that the limitations contained in clauses (i) and (ii) shall not apply
to Losses arising from breach of (x) the representations contained in Sections
2.2, 2.6, 2.9, 2.15, 2.16, 2.17 and 3.6 or the agreements contained in Sections
1.8(g), 1.12, 1.13, 1.14, 4.6, or 11.5 or the payment of expenses under
Sections 9.2 and 11.3 and (y) Purchaser’s and Seller’s respective obligations
hereunder with respect to Assumed Liabilities and Excluded Liabilities or
Losses incurred as a result of fraud.

24

 

     Section 9.2 Method of Asserting Claims. All claims for indemnification by
any Indemnified Party under Section 9.1 will be asserted and resolved as
follows:

     (a)  In the event any claim or demand in respect of which an Indemnified
Party might seek indemnity under Section 9.1 is asserted against or sought to
be collected from such Indemnified Party by a Person other than Seller,
Purchaser or any Affiliate of Seller or Purchaser (a “Third Party Claim”), the
Indemnified Party shall deliver a Claim Notice with reasonable promptness to
the Indemnifying Party. The Indemnifying Party will notify the Indemnified
Party as soon as practicable within the Dispute Period whether the Indemnifying
Party disputes its liability to the Indemnified Party under Section 9.1 and
whether the Indemnifying Party desires, at its sole cost and expense, to defend
the Indemnified Party against such Third Party Claim.

	 	(i)	 	If the Indemnifying Party notifies
the Indemnified Party within the Dispute Period that the
Indemnifying Party desires to defend the Indemnified
Party with respect to the Third Party Claim pursuant to
this Section 9.2(a), then the Indemnifying Party will
have the right to defend, at the sole cost and expense
of the Indemnifying Party, such Third Party Claim by all
appropriate proceedings, which proceedings will be
vigorously and diligently prosecuted by the Indemnifying
Party or will be settled at the discretion of the
Indemnifying Party with the consent of the Indemnified
Party (which shall not be unreasonably withheld) in the
event of a settlement by Seller in excess of the
limitation set forth in Section 9.1(c)(ii) or as to
which the Indemnified Party must make any admission or
as to which any equitable or injunctive relief is
agreed to. The Indemnifying Party will have full
control of such defense and proceedings, including
(except as provided in the immediately preceding
sentence) any settlement thereof; provided, however,
that the Indemnified Party may, at the sole cost and
expense of the Indemnified Party, at any time prior to
the Indemnifying Party’s delivery of the notice
referred to in the first sentence of this Section
9.2(a)(i), file any motion, answer or other pleadings
or take any other action that the Indemnified Party
reasonably believes to be necessary or appropriate to
protect its interests and not prejudicial to the
Indemnifying Party (it being understood and agreed
that, except as provided in clause (ii) below, if an
Indemnified Party takes any such action that is
prejudicial and causes a final adjudication that is
adverse to the Indemnifying Party, the Indemnifying
Party will be relieved of its obligations hereunder
with respect to the portion of such Third Party Claim
prejudiced by the Indemnified Party’s action); and
provided further, that if requested by the Indemnifying
Party, the Indemnified Party will, at the sole cost and
expense of the Indemnifying Party, cooperate with the
Indemnifying Party and its counsel in contesting any
Third Party Claim that the Indemnifying Party elects to
contest, or, if appropriate and related to the Third

25

 

	 	 	 	Party Claim in question, in making any counterclaim
against the Person asserting the Third Party Claim, or
any cross-complaint against any Person (other than the
Indemnified Party or any of its Affiliates). The
Indemnified Party may participate in, but not control,
any defense or settlement of any Third Party Claim
controlled by the Indemnifying Party pursuant to this
Section 9.2(a)(i), and except as provided in the
preceding sentence, the Indemnified Party will bear its
own costs and expenses with respect to such
participation. Notwithstanding the foregoing, the
Indemnified Party may take over the control of the
defense or settlement of a Third Party Claim at any
time if it irrevocably waives its right to indemnity
under Section 9.1 with respect to such Third Party
Claim.
	 
	 	(ii)	 	If the Indemnifying Party fails to
notify the Indemnified Party within the Dispute Period
that the Indemnifying Party desires to defend the Third
Party Claim pursuant to Section 9.2(a), or if the
Indemnifying Party gives such notice but fails to
prosecute vigorously and diligently or settle the Third
Party Claim, or if the Indemnifying Party fails to give
any notice whatsoever within the Dispute Period, then
the Indemnified Party will have the right to defend, at
the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which
proceedings will be vigorously and diligently prosecuted
by the Indemnified Party to a final conclusion or will
be settled at the discretion of the Indemnified Party
with the consent of the
Indemnifying Party (which consent will not be
unreasonably withheld). The Indemnified Party will
have full control of such defense and proceedings,
including (except as provided in the immediately
preceding sentence) any settlement thereof; provided,
however, that if requested by the Indemnified Party,
the Indemnifying Party will, at the sole cost and
expense of the Indemnifying Party, cooperate with the
Indemnified Party and its counsel in contesting any
Third Party Claim which the Indemnified Party is
contesting, or, if appropriate and related to the Third
Party Claim in question, in making any counterclaim
against the Person asserting the Third Party Claim, or
any cross-complaint against any Person (other than the
Indemnified Party or any of its Affiliates).
Notwithstanding the foregoing provisions of this
Section 9.2(a)(ii), if the Indemnifying Party has
notified the Indemnified Party within the Dispute
Period that the Indemnifying Party disputes its
liability hereunder to the Indemnified Party with
respect to such Third Party Claim and if such dispute
is resolved in favor of the Indemnifying Party in the
manner provided in clause (iii) below, the Indemnifying
Party will not be required to bear the costs and
expenses of the Indemnified Party’s defense pursuant to
this Section 9.2(a)(ii) or of the Indemnifying Party’s
participation

26

 

	 	 	 	therein at the Indemnified Party’s
request, and the Indemnified Party will reimburse the
Indemnifying Party in full for all reasonable costs and
expenses incurred by the Indemnifying Party in
connection with such litigation. The Indemnifying
Party may participate in, but not control, any defense
or settlement controlled by the Indemnified Party
pursuant to this Section 9.2(a)(ii), and the
Indemnifying Party will bear its own costs and expenses
with respect to such participation.
	 
	 	(iii)	 	If the Indemnifying Party notifies
the Indemnified Party that it does not dispute its
liability to the Indemnified Party with respect to the
Third Party Claim under Section 9.1 or fails to notify
the Indemnified Party within the Dispute Period whether
the Indemnifying Party disputes its liability to the
Indemnified Party with respect to such Third Party
Claim, the Loss in the amount specified in the Claim
Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 9.1 and the
Indemnifying Party shall pay the amount of such Loss
(subject to the limitations herein) to the Indemnified
Party on demand. If the Indemnifying Party has timely
disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will
proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through negotiations within
the Resolution Period, such dispute shall be resolved by
arbitration in accordance with Section 9.2(d).

     (b)  In the event any Indemnified Party should have a claim under Section
9.1 against any Indemnifying Party that does not involve a Third Party Claim,
the Indemnified Party shall deliver an Indemnity Notice with reasonable
promptness to the Indemnifying Party. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such
Indemnity Notice or fails to notify the Indemnified Party within the Dispute
Period whether the Indemnifying Party disputes the claim described in such
Indemnity Notice, the Loss in the amount specified in the Indemnity Notice will
be conclusively deemed a liability of the Indemnifying Party under Section 9.1
and the Indemnifying Party shall pay the amount of such Loss (subject to the
limitations herein) to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be resolved by
arbitration in accordance with Section 9.2(d).

     (c)  In the event of any Loss resulting from a misrepresentation, breach of
warranty or nonfulfillment or failure to be performed of any covenant or
agreement contained in this Agreement as to which an Indemnified Party would be
entitled to claim indemnity under Section 9.1 but for the provisions of Section
9.1(c)(i), such Indemnified Party may nevertheless deliver a written notice to
the Indemnifying Party containing the information that would be required in a
Claim Notice or an Indemnity Notice, as applicable, with respect to such Loss.
In the case of a Claim Notice, the provisions of Section 9.2(a)(i) will be
applicable. If the

27

 

Indemnifying Party notifies the Indemnified Party that it
does not dispute the claim described therein or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes the
claim described in such Claim Notice or Indemnity Notice, as the case may be,
the Loss specified in the notice will be conclusively deemed to have been
incurred by the Indemnified Party for purposes of making the determination set
forth in Section 9.1(c)(i). If the Indemnifying Party has timely disputed the
claim described in such Claim Notice or Indemnity Notice, as the case may be,
the Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be resolved by
arbitration in accordance with Section 9.2(d).

     (d)  Any dispute submitted to arbitration pursuant to this Section 9.2
shall be finally and conclusively determined by the decision of a board of
arbitration consisting of three (3) members (hereinafter sometimes called the
“Board of Arbitration”) selected as hereinafter provided. Each of the
Indemnified Party and the Indemnifying Party shall select one (1) member and
the third member shall be selected by mutual agreement of the other members, or
if the other members fail to reach agreement on a third member within twenty
(20) days after their selection, such third member shall thereafter be selected
by the American Arbitration Association upon application made to it for such
purpose by the Indemnified Party. The Board of Arbitration shall meet at the
offices of the American Arbitration Association in Albuquerque, New Mexico or
such other place as may be mutually agreed by the parties, and shall reach and
render a decision in writing (concurred in by a majority of the members of the
Board of Arbitration) with respect to the amount, if any, which the
Indemnifying Party is required to pay to the Indemnified Party in respect of a
claim filed by the Indemnified Party. In connection with rendering its
decisions, the Board of Arbitration shall adopt and follow the commercial rules
of the American Arbitration Association as then in effect and such other rules
and procedures as a majority of the members of the Board of Arbitration
deems necessary or appropriate. To the extent practical, decisions of the
Board of Arbitration shall be rendered no more than thirty (30) days following
commencement of proceedings with respect thereto. The Board of Arbitration
shall cause its written decision to be delivered to the Indemnified Party and
the Indemnifying Party. Any decision made by the Board of Arbitration (either
prior to or after the expiration of such thirty (30) day period) shall be
final, binding and conclusive on the Indemnified Party and the Indemnifying
Party and entitled to be enforced to the fullest extent permitted by law and
entered in any court of competent jurisdiction. Each party to any arbitration
shall bear its own expense in relation thereto, including but not limited to
such party’s attorneys’ fees, if any, and the expenses and fees of the Board of
Arbitration shall be divided between the Indemnifying Party and the Indemnified
Party in the same proportion as the portion of the related claim determined by
the Board of Arbitration to be payable to the Indemnified Party bears to the
portion of such claim determined not to be so payable.

     (e)  In the event of any claim for indemnity under Section 9.1(a),
Purchaser agrees to give Seller and its officers, employees, counsel,
accountants, financial advisors, consultants and other representatives
reasonable access to the Business Books and Records and its officers and
employees engaged in the Business in connection with the matters for which
indemnification is sought to the extent Seller reasonably deems necessary in
connection with its rights and obligations under this Article IX and Seller
agrees that all such information will be Confidential Information subject to
Section 11.5.

28

 

     Section 9.3 Method of Calculating Losses. For purposes of this Article
IX,

     (a)  Losses shall not include any consequential, incidental, punitive,
exemplary or special damages (including, without limitation, lost profits or
loss of business) unless such Losses arise as a result of fraud or willful
misconduct.

     (b)  The amount of any Losses or indemnification payable pursuant to this
Article IX will be net of any insurance proceeds actually received by the
Indemnified Party in connection with the circumstances giving rise to the
claim. The calculation of net insurance proceeds will give effect to all costs
incurred by the Indemnified Party for such insurance recovery, including all
costs associated with retrospective premium adjustments, experienced-based
premium adjustments, and indemnification obligations. Nothing in this Section
will be construed or interpreted as a guaranty of any level or amount of
insurance recovery with respect to any Loss hereunder.

     Section 9.4 Exclusivity. After the Closing, to the extent permitted by
Law and except as provided in Section 4.6 and 11.5 and except for injunctive
action, the indemnities set forth in this Article IX shall be the exclusive
remedies of Purchaser and Seller and their respective officers, directors,
employees, agents and Affiliates for any misrepresentation, breach of warranty
or nonfulfillment or failure to be performed of any covenant or agreement
contained in this Agreement, and the parties shall not be entitled to a
rescission of this Agreement or to any further indemnification
rights or claims of any nature whatsoever in respect thereof, all of which
the parties hereto hereby waive.

ARTICLE X

TERMINATION

     Section 10.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:

     (a)  at any time before the Closing, by mutual written agreement of Seller
and Parent;

     (b)  at any time before the Closing, by Seller or Parent, in the event that
any Order or Law becomes effective restraining, enjoining, or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative Documents, upon
notification of the non-terminating party by the terminating party; or

     (c)  at any time after March 31, 2002 by Seller or Parent upon notification
of the non-terminating party by the terminating party if the Closing shall not
have occurred on or before such date and such failure to consummate is not
caused by a breach of this Agreement by the terminating party.

     Section 10.2 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 10.1, this Agreement will forthwith become null
and void, and there will be no liability or obligation on the part of Seller or
Purchaser (or any of their respective officers, directors, employees, agents or
other representatives or Affiliates), except as provided in the next

29

 

succeeding
sentence and except that the provisions with respect to expenses in Sections
1.14, 9.2(d) and 11.3 and confidentiality in Section 11.5 will continue to
apply following any such termination. Notwithstanding any other provision in
this Agreement to the contrary, upon termination of this Agreement pursuant to
Section 10.1(b) or (c), Seller will remain liable to Purchaser for any breach
of Section 4.9 of this Agreement by Seller existing at the time of such
termination, and Purchaser will remain liable to Seller for any breach of
Section 5.3 of this Agreement by Purchaser existing at the time of such
termination, and Seller or Purchaser may seek such remedies, including damages
and fees of attorneys, against the other with respect to any such breach as are
provided in this Agreement or as are otherwise available at Law or in equity.

ARTICLE XI

MISCELLANEOUS

     Section 11.1 Notices. All notices, requests and other communications
hereunder will be deemed to have been duly given only if delivered personally
or by facsimile transmission or by an
established express delivery company such as UPS or Federal Express or
mailed (U.S. certified mail postage prepaid) to the parties at the following
addresses or facsimile numbers:

	 
	If to Purchaser or Parent, to:
	 
	SBS Technologies, Inc.
	2400 Louisiana Blvd. NE
	AFC Building 5, Suite 600
	Albuquerque, New Mexico 87110
	Facsimile No.: 505-875-0404
	Attn: James E. Dixon, Jr., Vice President
	 
	with a copy to:
	 
	Schuler, Messersmith, Daly & Lansdowne
	P. O. Box 90640
	Albuquerque, NM 87199
	Facsimile No.: 505-872-0900
	Attn: Alison K. Schuler, Esq
	 
	If to Seller, to:
	 
	Intrusion Inc.
	1101 E. Arapaho Road
	Richardson, Texas 75081
	Facsimile No.: (972) 301-3892
	Attn: Jay Widdig

30

 

	 
	with a copy to:
	 
	Brobeck, Phleger & Harrison LLP
	300 Crescent Court, Suite 1400
	Dallas, Texas 75201
	Facsimile No.: (214) 468-3704
	Attn: Thomas R. Nelson, P.C

All such notices, requests and other communications will (i) if delivered
personally or by express delivery to the address as provided in this Section,
be deemed given upon delivery, (ii) if delivered by facsimile transmission to
the facsimile number as provided in this Section, be deemed given upon written
confirmation of receipt of such transmittal, and (iii) if delivered by mail in
the manner described above to the address as provided in this Section, be
deemed given upon actual receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom
a copy of such notice, request or other communication is to be delivered
pursuant to this Section). Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that party
by giving notice specifying such change to the other party hereto.

     Section 11.2 Entire Agreement. This Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof and thereof and contains the sole and entire agreement between
the parties hereto with respect to the subject matter hereof and thereof.

     Section 11.3 Expenses. Except as otherwise expressly provided in this
Agreement (including without limitation as provided in Sections 1.12, 1.13,
1.14, 9.2(d) and 10.2), whether or not the transactions contemplated hereby are
consummated, each party will pay its own costs and expenses incurred in
connection with the negotiation, execution and closing of this Agreement and
the transactions contemplated hereby.

     Section 11.4 Public Announcements. At all times at or before the Closing,
no party will issue or make any reports, statements or releases to the public
with respect to this Agreement or the transactions contemplated hereby without
the consent of the other parties, which consent shall not be unreasonably
withheld, except as may be required by Law or by obligation pursuant to any
listing agreement with any national securities exchange or Nasdaq or with the
National Association of Securities Dealers. If any party is unable to obtain
the approval of its public report, statement or release from the other party
and such report, statement or release is, in the opinion of legal counsel to
such party, required by Law in order to discharge such party’s disclosure
obligations, then such party may make or issue the legally required report,
statement or release and promptly furnish the other party with a copy thereof.
Each party will also obtain the other parties’ prior approval of any press
release to be issued immediately following the Closing announcing the
consummation of the transactions contemplated by this Agreement.

     Section 11.5 Confidentiality. In connection with this Agreement, each of
the parties has disclosed and may continue to disclose to the other party
information that relates to the disclosing party’s business operations,
financial condition, customers, products, services or

31

 

technical knowledge.
Except as otherwise specifically agreed in writing by the parties,
“Confidential Information” means all information concerning a party which is
furnished by such party or an Affiliate or any of its respective directors,
officers, employees or agents, in oral, written, visual, magnetic, electronic
or other format to the other party or any of the receiving party’s Affiliates
or any of its respective directors, officers, employees or agents, and which is
clearly identified by the disclosing party at the time of disclosure as
confidential or proprietary information, or which would reasonably be deemed to
be of a confidential or proprietary nature. The terms and conditions of this
Agreement and all correspondence, information and other materials disclosed
during the negotiation of this Agreement will be deemed Confidential
Information. Each party’s Confidential Information will remain the property of
that party except as otherwise expressly provided in this Agreement, and
nothing in this Agreement will be construed as granting to or conferring on a
party, any rights or license to the Confidential Information of the other
party. Each of the parties shall use at least the same degree of care to
safeguard and to prevent
disclosing to third parties the Confidential Information of the other as
it employs to avoid unauthorized disclosure or publication of its own
information of a similar nature, but in no event using less than reasonable
care. Each party may disclose relevant aspects of the other party’s
Confidential Information to its employees, Affiliates, subcontractors and
agents to the extent such disclosure is reasonably necessary for the
performance of its obligations under this Agreement; provided, however, that
such party shall use reasonable efforts to ensure that such employees,
Affiliates, subcontractors or agents comply with these confidentiality
provisions. Each party wil1 be responsible for any improper disclosure of
Confidential Information by such party’s employees, Affiliates, subcontractors
or agents. Neither party shall (i) make any use of the Confidential
Information of the other except as contemplated by this Agreement; (ii) acquire
any right in or assert any lien against the Confidential Information of the
other; (iii) copy the Confidential Information of the other except as
contemplated by this Agreement; or (iv) sell, assign, lease or otherwise
commercially exploit the Confidential Information (or any derivative works
thereof) of the other party except as contemplated by this Agreement. This
Section 11.5 will not apply to any particular information that (i) was, at the
time of disclosure to it, in the public domain; (ii) after disclosure to it, is
published or otherwise becomes part of the public domain through no fault of
the receiving party; (iii) was in the possession of the receiving party at the
time of disclosure to it and was not the subject of a pre-existing
confidentiality obligation; (iv) was received after disclosure to it from a
third-party who had a lawful right to disclose such information to it; or (v)
was independently developed by the receiving party without use of the
Confidential Information of the disclosing party. In addition, a party will
not be considered to have breached its obligations under this Section 11.5 for
disclosing Confidential Information of the other party to the extent required
to satisfy any legal requirement of a competent governmental authority. The
parties agree that in the event of a breach or threatened breach of
confidentiality, the disclosing party shall be entitled to specific performance
and injunctive or other equitable relief as a remedy for any such breach or
anticipated breach without the necessity of posting a bond. Any such relief
shall be in addition to and not in lieu of any appropriate relief in the way of
monetary damages.

     Section 11.6 Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition; provided
that a waiver executed by Parent shall be effective against Purchaser. No
waiver by any party of any term or condition of this Agreement, in any one or
more

32

 

instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion. All
remedies, either under this Agreement or by Law or otherwise afforded, will be
cumulative and not alternative.

     Section 11.7 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.

     Section 11.8 No Third Party Beneficiary. The terms and provisions of this Agreement are intended solely for the
benefit of each party hereto and their respective successors or permitted
assigns, and it is not the intention of the parties to confer third-party
beneficiary rights upon any other Person other than any Person entitled to
indemnity under Article IX.

     Section 11.9 No Assignment; Binding Effect. Neither this Agreement nor
any right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except (a) for assignments and transfers by operation of
Law and (b) that Purchaser may assign any or all of its rights, interests and
obligations hereunder to a wholly-owned subsidiary of itself or Parent,
provided that any such subsidiary agrees in writing to be bound by all of the
terms, conditions and provisions contained herein, but no such assignment
referred to in clause (b) shall relieve Purchaser of its obligations hereunder.
Subject to the preceding sentence, this Agreement is binding upon, inures to
the benefit of and is enforceable by the parties hereto and their respective
successors and assigns.

     Section 11.10 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.

     Section 11.11 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance here from and (d) in lieu of such illegal,
invalid or unenforceable provision, there will be added automatically as a part
of this Agreement a legal, valid and enforceable provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible.

     Section 11.12 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the United States and the State of New
Mexico applicable to a contract executed and performed in the State of New
Mexico, without giving effect to the conflicts of laws principles of such
State.

     Section 11.13 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.

33

 

     IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officer of each party as of the date first above written.

	 	 	 	 
	 	
SBS TECHNOLOGIES, INC., CONNECTIVITY PRODUCTS
	 
	 	By:	
/s/ James E. Dixon

	 	 	Name:	James E. Dixon

	 	 	Title:	Secretary

	 	 	 	 
	 	
SBS TECHNOLOGIES, INC.
	 
	 	By:	
/s/ James E. Dixon

	 	 	Name:	James E. Dixon

	 	 	Title:	CFO

	 	 	 	 
	 	
INTRUSION INC.
	 
	 	By:	
/s/ Jay R. Widdig

	 	 	
Jay Widdig

Vice President and Chief Financial Officer

[Signature Page to Asset Purchase Agreement]

 

ANNEX A

DEFINITIONS AND RULES OF INTERPRETATION

     Definitions. Unless the context otherwise requires, the terms defined in
this Annex A have the meanings specified below for all purposes of this
Agreement.

     (a)  "Accrued Vacation Obligations” means Seller’s accrued vacation
obligations to the Retained Employees.

     (b)  "Acquired Assets” has the meaning ascribed to it in Section 1.1.

     (c)  "Actions or Proceedings” means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation.

     (d)  "Affiliate” means any Person that directly, or indirectly through one
of more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a
Person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such Person whether by Contract or otherwise
and, in any event and without limitation of the previous sentence, any Person
owning ten percent (10%) or more of the voting securities of another Person
shall be deemed to control that Person, including, with respect to Purchaser,
Parent.

     (e)  "Agreement” has the meaning ascribed to it in the introductory
paragraph of this Agreement.

     (f)  "Assets and Properties” of any Person means all assets and properties
of every kind, nature, character and description (whether real, personal or
mixed, whether tangible or intangible and wherever situated), including the
goodwill related thereto, operated, owned or leased by such Person.

     (g)  "Associate” means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or indirectly, of ten percent (10%) or more of
any class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person.

     (h)  "Assumed Liabilities” has the meaning ascribed to it in Section 1.3.

     (i)  "Benefit Plan” means any Plan established by Seller, or any
predecessor or Affiliate of Seller, existing at the Closing Date or at any time
within the five (5) year period prior thereto, to which Seller contributes or
has contributed on behalf of any current or former employee or director, or
under which any employee, former employee or director of Seller or any
beneficiary thereof is covered, is eligible for coverage or has benefit rights.

     (j) “Board of Arbitration” has the meaning ascribed to it in Section
9.2(d).

 

 

     (k)  "Books and Records” of any Person means all files, documents,
instruments, papers, books and records relating to the business, operations,
condition of (financial or other), results of operations and Assets and
Properties of such Person, including without limitation financial statements,
Tax Returns and related work papers and letters from accountants, budgets,
pricing guidelines, ledgers, journals, deeds, title policies, minute books,
stock certificates and books, stock transfer ledgers, Contracts, Licenses,
customer lists, computer files and programs, retrieval programs, operating data
and plans and environmental studies and plans.

     (l)  "Business” has the meaning ascribed to it in Preliminary Statement A.

     (m)  "Business Books and Records” has the meaning ascribed to it in Section
1.1(g).

     (n)  "Business Combination” means with respect to any Person, any merger,
consolidation or combination to which such Person is a party, any sale,
dividend, split or other disposition of capital stock or other equity interests
of such Person or any sale, dividend or other disposition of all or
substantially all of the Assets and Properties of such Person.

     (o)  "Business Contracts” has the meaning ascribed to it in Section 1.1(c).

     (p)  "Business Day” means a day other than Saturday, Sunday or any day on
which banks located in Dallas, Texas are authorized or obligated to close.

     (q)  "Business Licenses” has the meaning ascribed to it in Section 1.1(f).

     (r)  "Claim Notice” means written notification pursuant to Section 9.2(a)
of a Third Party Claim as to which indemnity under Section 9.1 is sought by an
Indemnified Party, enclosing a copy of all papers served, if any, and
specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party’s claim against the Indemnifying Party under Section 9.1,
together with the amount or, if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such Third Party Claim.

     (s)  "Closing” means the closing of the transactions contemplated by
Section 1.7.

     (t)  "Closing Date” means (a) the day on which all of the conditions set
forth in Articles VI and VII have been satisfied or waived, or (b) such other
date as the parties mutually agree upon in writing.

     (u)  "Code” means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.

     (v) “Condition of the Business” means the business, financial condition,
results of operations and Assets and Properties (to the extent such Assets and
Properties constitute Acquired Assets) of the Business.

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     (w)  "Contract” means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement, purchaser order or other
contract.

     (x)  "Cut-off Date” means, with respect to any representation, warranty,
covenant or agreement contained in this Agreement, the date on which such
representation, warranty, covenant or agreement ceases to survive as provided
Section 9.1.

     (y)  "Deferred Revenue Obligations” has the meaning ascribed to it in
Section 1.1(e).

     (z)  "Dispute Period” means the period ending thirty (30) days following
receipt by an Indemnifying Party of either a Claim Notice or an Indemnity
Notice.

     (aa)  "Division” has the meaning ascribed to it in Preliminary Statement A.

     (bb)  "Division Financial Statements” has the meaning ascribed to it in
Section 2.5(a).

     (cc)  "Division Lease” has the meaning ascribed to it in Section 1.14.

     (dd)  "Equipment” has the meaning ascribed to it in Section 1.1(b).

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

     (ff)  "Excluded Assets” has the meaning ascribed to it in Section 1.2.

     (gg)  "Excluded Liabilities” has the meaning ascribed to it in Section 1.4.

     (hh)  "GAAP” means generally accepted accounting principles as adopted in
the United States, consistently applied throughout the specified period and in
the immediately prior comparable period.

     (ii)  "Governmental or Regulatory Authority” means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state,
county, city or other political subdivision.

     (jj)  "Indebtedness” of any Person means all obligations of such Person (i)
for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the
obligations described in clauses (i) through (iv) above of any other Person.

     (kk) “Indemnified Party” means any Person claiming indemnification under
any provision of Article IX, including without limitation a Person asserting a
claim pursuant to Section 9.2(c).

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     (ll)  "Indemnifying Party” means any Person against whom a claim for
indemnification is being asserted under any provision of Article IX, including
without limitation a Person against whom a claim is asserted pursuant to
Section 9.2(c).

     (mm)  "Indemnity Notice” means written notification pursuant to Section
9.2(b) of a claim for indemnity under Article IX by an Indemnified Party,
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim.

     (nn)  "Intellectual Property” means all patents and patent rights,
trademarks and trademark rights, together with all reissuances, continuations,
continuations in part, revisions, extensions, and examinations thereof, trade
names and trade name rights, service marks and service mark rights, service
names and service name rights, and copyrights and copyright rights and all
related renewals, all mask works and related renewals, and all pending
applications for and registrations of patents, trademarks, service marks, mask
works, and copyrights.

     (oo)  "Inventory” has the meaning ascribed to it in Section 1.1(a).

     (pp)  "Key Employees” means Joseph Bradley, David Gaskill and Bradley
Allen.

     (qq)  "Knowledge of Seller” means (i) the actual knowledge of any officer
or director of Seller, Key Employees or other individual having control over or
significant operational responsibilities of the Division; or (ii) the knowledge
that should have come to the attention of any of the Key Employees in the
course of discharging his duties in a reasonable and prudent manner consistent
with sound business practice.

     (rr)  "Laws” means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.

     (ss)  "Liabilities” means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).

     (tt)  "Licenses” means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.

     (uu)  "Liens” means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing.

     (vv) “Loss” means any and all damages, fines, penalties, deficiencies,
fees. losses and expenses (including without limitation interest, court costs,
reasonable fees of attorneys, accountants and other experts or other reasonable
expenses of litigation or other proceedings or of any claim, default or
assessment).

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     (ww)  "Material Adverse Effect” with respect to any person means a material
adverse effect on the business, financial condition or results of operations of
such person and any subsidiaries of such person taken as a whole, and with
respect to the Condition of the Business means a material adverse effect on the
Condition of the Business, but shall not include any of the following, either
alone or in combination: (i) any effect or change occurring as a result of (A)
general economic or financial conditions or (B) other developments which are
not unique to the Business but also affect other persons who participate or are
engaged in similar lines of business; (ii) any change or effect on the
Condition of the Business following the date of this Agreement resulting from a
delay of, reduction in or cancellation or change in the terms of purchases from
or other transactions with the Business attributable to the announcement of
this Agreement or the transactions contemplated hereby; and (iii) failure of
the results of operations of the Business to meet any internal or external
predictions, projections, estimates or expectations.

     (xx)  "Operative Documents” has the meaning ascribed to it in Section 1.7.

     (yy)  "Order” means any writ, judgment, decree, injunction or similar order
of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).

     (zz)  "Parent” has the meaning ascribed to it in the introductory paragraph
of this Agreement.

     (aaa) “Permitted Lien” means (i) any Lien for Taxes not yet due; (ii) any
statutory Lien or contractual landlord’s Lien or other Lien created by
operation of Law arising in the ordinary course of business with respect to a
Liability that is not yet due; and (iii) retention of title agreements with
suppliers entered into in the ordinary course of business.

     (bbb) “Person” means any natural person, corporation, general partnership,
limited partnership, joint venture, limited liability company proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.

     (ccc)  "Plan” means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services, cafeteria,
life, health, accident, disability, workmen’s compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including, but not limited
to, any “employee benefit plan” within the meaning of Section 3(3) of ERISA.

     (ddd) “Proprietary Rights” has the meaning ascribed to it in Section
1.1(e).

     (eee) “Purchase Price” has the meaning ascribed to it in Section 1.5.

     (fff) “Purchaser” has the meaning ascribed to it in the introductory
paragraph of this Agreement.

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     (ggg) “Purchaser Disclosure Schedule” means the record delivered to Seller
by Purchaser herewith and dated as of the date hereof, containing all lists,
descriptions, exceptions and other information and materials as are required to
be included therein by Purchaser pursuant to this Agreement.

     (hhh) “Purchaser Indemnified Parties” means Purchaser and its officers,
directors, employees, agents and Affiliates.

     (iii)  "Resolution Period” means the period ending thirty (30) days
following receipt by an Indemnified Party of a written notice from an
Indemnifying Party stating that it disputes all or any portion of a claim set
forth in a Claim Notice or an Indemnity Notice.

     (jjj) “Retained Employees” has the meaning ascribed to it in Section 5.2.

     (kkk) “SEC” means the U.S. Securities and Exchange Commission.

     (lll) “Seller” has the meaning ascribed to it in the introductory
paragraph of this Agreement.

     (mmm) “Seller Disclosure Schedule” means the record delivered to Purchaser
by Seller herewith and dated as of the date hereof, containing all lists,
descriptions, exceptions and other information and materials as are required to
be included therein by Seller pursuant to this Agreement.

     (nnn) “Seller Financial Statements” has the meaning ascribed to it in
Section 2.5(a).

     (ooo) “Seller Indemnified Parties” means Seller and its officers,
directors, employees, agents and Affiliates.

     (ppp) “Tax Return” shall mean any return, statement, report or form,
including, without limitation, estimated Tax Returns and reports, withholding
Tax Returns and reports and information reports and returns required to be
filed with respect to Taxes.

     (qqq) “Taxes” (and, with correlative meaning “Taxes” and “Taxable”) means
(i) any net income, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom, duty or other
tax governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental or Regulatory Authority responsible for the
imposition of any such tax (domestic or foreign); (ii) any liability for the
payment of any amounts of the type described in clause (i) of this sentence as
a result of being a member of an affiliated, consolidated, combined or unitary
group for any Taxable period; and (iii) any liability for the payment of any
amounts of the type described in clauses (i) or (ii) of this sentence as a
result of any express or implied obligation to indemnify any other Person or as
a result of being a successor in interest to any Person.

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     (rrr) “Third Party Claim” has the meaning ascribed to it in Section
9.2(a).

     (sss) “Transition Lease Period” has the meaning ascribed to it in Section
1.14.

     Construction of Certain Terms and Phrases. Unless the context of this
Agreement otherwise requires, (i) words of any gender include each other
gender; (ii) words using the singular or plural number also include the plural
or singular number, respectively; (iii) the terms “hereof,” “herein,” “hereby”
and derivative or similar words refer to this entire Agreement; (iv) the terms
“Article” or “Section” refer to the specified Article or Section of this
Agreement; (v) the phrase “ordinary course of business” refers to the business
of Seller in connection with the Business; and (vi) the term “party” refers to
Seller, on the one hand, and, collectively, Purchaser and Parent, on the other
hand. Whenever this Agreement refers to a number of days, such number shall
refer to calendar days unless Business Days are specified. All accounting
terms used herein and not expressly defined herein shall have the meanings
given to them under GAAP. Any representation or warranty contained herein as
to the enforceability of a Contract shall be subject to the effect of any
bankruptcy, insolvency, reorganization, moratorium or other similar law
affecting the enforcement of creditors’ rights generally and to general
equitable principles (regardless of whether such enforceability is considered
in a proceeding in equity or at Law).

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