Document:

exv10w5

 

Exhibit 10.5

PLEDGE, ASSIGNMENT, AND SECURITY AGREEMENT

     THIS PLEDGE, ASSIGNMENT, AND SECURITY AGREEMENT (this “Security Agreement”) is executed as of
November 9, 2007, by Panda Ethanol Holdings, LLC, a Delaware limited liability company (“Debtor”),
whose address is 4100 Spring Valley, Suite 1002, Dallas, Texas 75244, and Panda Energy
International, Inc., a Texas corporation (hereafter referred to as “Secured Party,”) whose address
is 4100 Spring Valley, Suite 1001, Dallas, Texas 75244.

RECITALS

     A. Panda Ethanol, Inc. and Secured Party have entered into a Loan Agreement dated as of the
date hereof (as amended, modified, supplemented, or restated from time to time, the “Credit
Agreement”).

     B. This Security Agreement is integral to the transactions contemplated by the Loan Documents,
and the execution and delivery thereof, is a condition precedent to Secured Party’s obligations to
extend credit under the Loan Documents.

     ACCORDINGLY, for valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor and Secured Party hereby agree as follows:

     1. REFERENCE TO CREDIT AGREEMENT. The terms, conditions, and provisions of the Credit
Agreement are incorporated herein by reference, the same as if set forth herein verbatim, which
terms, conditions, and provisions shall continue to be in full force and effect hereunder so long
as Secured Party is obligated to lend under the Credit Agreement and thereafter until the
Obligation is paid and performed in full.

     2. CERTAIN DEFINITIONS. Unless otherwise defined herein, or the context hereof otherwise
requires, each term defined in either of the Credit Agreement or in the UCC is used in this
Security Agreement with the same meaning; provided that, if the definition given to such term in
the Credit Agreement conflicts with the definition given to such term in the UCC, the Credit
Agreement definition shall control to the extent legally allowable; and if any definition given to
such term in Chapter 9 of the UCC conflicts with the definition given to such term in any other
chapter of the UCC, the Chapter 9 definition shall prevail. As used herein, the following terms
have the meanings indicated:

     Collateral has the meaning set forth in Paragraph 4 hereof; provided however that, the
Collateral shall expressly exclude each account of Debtor at UBS Financial Services Inc. or
UBS International Inc., (collectively “UBS”) as applicable, that is identified as a
Collateral Account by Debtor in writing, together with all successors to those identified
accounts, as set forth in that certain Credit Line Agreement by and between Debtor and UBS
Bank USA for only so long and only to the extent that as any such accounts or cash or assets
in such accounts are security for Debtor’s obligations to UBS pursuant to that certain
credit agreement by and between the Borrower UBS Financial Services, Inc. dated as of
October 3, 2007; and, otherwise such assets of Debtor shall by Collateral.

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     Control Agreement means, with respect to any Collateral consisting of investment
property, an agreement evidencing that Secured Party has “control” (as defined in the UCC)
of such Collateral.

     Obligation means, collectively, (a) the “Obligations” as defined in the Credit
Agreement, and (b) all indebtedness, liabilities, and obligations of Debtor arising under
this Security Agreement or any Guaranty assuring payment of the Obligation; it being the
intention and contemplation of Debtor and Secured Party that future advances will be made by
Secured Party to Debtor for a variety of purposes, that Debtor may guarantee (or otherwise
become directly or contingently obligated with respect to) the obligations of others to
Secured Party, and that Secured Party may from time to time acquire from others obligations
of Debtor to such others, and that payment and repayment of all of the foregoing are
intended to and shall be part of the Obligation secured hereby. The Obligation shall
include, without limitation, future, as well as existing, advances, indebtedness,
liabilities, and obligations owed by Debtor to Secured Party arising under the Loan
Documents or otherwise.

     Obligor means any Person obligated with respect to any of the Collateral, whether as an
account debtor, obligor on an instrument, issuer of securities, or otherwise.

     Partnerships shall mean (a) those partnerships and limited liability companies listed
on Annex B-1 attached hereto and incorporated herein by reference, as such partnerships or
limited liability companies exist or may hereinafter be restated, amended, or restructured,
(b) any partnership, joint venture, or limited liability company in which Debtor shall, at
any time, become a limited or general partner, venturer, or member, or (c) any partnership,
joint venture, or corporation formed as a result of the restructure, reorganization, or
amendment of the Partnerships.

     Partnership Agreements shall mean (a) those agreements listed on Annex B-1 attached
hereto and incorporated herein by reference (together with any modifications, amendments, or
restatements thereof), and (b) partnership agreements, joint venture agreements, or
organizational agreements for any of the partnerships, joint ventures, or limited liability
companies described in clause (b) of the definition of “Partnerships” above (together with
any modifications, amendments or restatements thereof), and “Partnership Agreement” means
any one of the Partnership Agreements.

     Partnership Interests shall mean all of Debtor’s right, title and interest now or
hereafter accruing under the Partnership Agreements with respect to all distributions,
allocations, proceeds, fees, preferences, payments, or other benefits, which Debtor now is
or may hereafter become entitled to receive with respect to such interests in the
Partnerships and with respect to the repayment of all loans now or hereafter made by Debtor
to the Partnerships.

     Pledged Securities means, collectively, the Pledged Shares and any other Collateral
constituting securities.

     Pledged Shares has the meaning set forth in Paragraph 4 hereof.

     Security Interest means the security interest granted and the pledge and assignment
made under Paragraph 3 hereof.

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     UCC means the Uniform Commercial Code, including each such provision as it may
subsequently be renumbered, as enacted in the State of Texas or other applicable
jurisdiction, as amended at the time in question.

     3. SECURITY INTEREST. In order to secure the full and complete payment and performance of the
Obligation when due, Debtor hereby grants to Secured Party a Security Interest in all of Debtor’s
rights, titles, and interests in and to the Collateral and pledges, collaterally transfers, and
assigns the Collateral to Secured Party, all upon and subject to the terms and conditions of this
Security Agreement. Such Security Interest is granted and pledge and assignment are made as
security only and shall not subject Secured Party to, or transfer or in any way affect or modify,
any obligation of Debtor with respect to any of the Collateral or any transaction involving or
giving rise thereto. If the grant, pledge, or collateral transfer or assignment of any specific
item of the Collateral is expressly prohibited by any contract, then the Security Interest created
hereby nonetheless remains effective to the extent allowed by the UCC or other applicable law, but
is otherwise limited by that prohibition.

     4. COLLATERAL. As used herein, the term “Collateral” means the following items and types of
property, wherever located, now owned or in the future existing or acquired by Debtor, and all
proceeds and products thereof, and any substitutes or replacements therefor:

     (a) All rights, titles, and interests of Debtor in and to all outstanding stock,
equity, or other investment securities owned by Debtor, including, without limitation, all
capital stock of any Subsidiary of the Debtor set forth on Annex B-1 (the “Pledged Shares”);

     (b) The Partnership Interests and all rights of Debtor with respect thereto, including,
without limitation, all Partnership Interests set forth on Annex B-1 and all of Debtor’s
distribution rights, income rights, liquidation interest, accounts, contract rights, general
intangibles, notes, instruments, drafts, and documents relating to the Partnership
Interests;

     (c) All present and future distributions, income, increases, profits, combinations,
reclassifications, improvements, and products of, accessions, attachments, and other
additions to, and substitutes and replacements for, all or part of the Collateral described
above;

     (d) All present and future accounts, contract rights, general intangibles, chattel
paper, documents, instruments, cash and noncash proceeds, and other rights arising from or
by virtue of, or from the voluntary or involuntary sale or other disposition of, or
collections with respect to, or claims against any other Person with respect to, all or any
part of the Collateral heretofore described in this clause or otherwise; and

     (e) All present and future security for the payment to Debtor of any of the Collateral
described above and goods which gave or will give rise to any such Collateral or are
evidenced, identified, or represented therein or thereby.

The description of the Collateral contained in this Paragraph 4 shall not be deemed to permit any
action prohibited by this Security Agreement or by the terms incorporated in this Security
Agreement.

     5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to Secured Party that:

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     (a) Binding Obligation/ Perfection. This Security Agreement creates a legal,
valid, and binding lien in and to the Collateral in favor of Secured Party and enforceable
against Debtor. For Collateral in which the Security Interest may be perfected by the
filing of financing statements, once those financing statements have been properly filed in
the jurisdictions described on Annex A hereto, the Security Interest in that Collateral will
be fully perfected and the Security Interest will constitute a first-priority Lien on such
Collateral, subject only to the liens permitted under Section 7(c) of the Credit Agreement
(“Permitted Liens”). With respect to Collateral consisting of investment property (other
than Pledged Securities covered by Paragraph 5(i)) and instruments, upon the delivery of
such Collateral to Secured Party or delivery of an executed Control Agreement with respect
to such Collateral, the Security Interest in that Collateral will be fully perfected and the
Security Interest will constitute a first-priority lien on such Collateral, subject only to
Permitted Liens. None of the Collateral has been delivered nor control with respect thereto
given to any other Person. Other than the financing statements and Control Agreements with
respect to this Security Agreement, there are no other financing statements or control
agreements covering any Collateral, other than those evidencing Permitted Liens. The
creation of the Security Interest does not require the consent of any Person that has not
been obtained.

     (b) Debtor Information. Debtor’s exact legal name, mailing address,
jurisdiction of organization, type of entity, and state issued organizational identification
number are as set forth on Annex A hereto.

     (c) Location. Debtor’s place of business and chief executive office is where
Debtor is entitled to receive notices hereunder; the present and foreseeable location of
Debtor’s books and records concerning any of the Collateral that is accounts is as set forth
on Annex A hereto, and the location of all other Collateral is as set forth on Annex A
hereto; and, except as noted on Annex A hereto, all such books, records, and Collateral are
in Debtor’s possession.

     (d) Governmental Authority. No Authorization, approval, or other action by,
and no notice to or filing with, any governmental authority is required either (i) for the
pledge by Debtor of the Collateral pursuant to this Security Agreement or for the execution,
delivery, or performance of this Security Agreement by Debtor, or (ii) for the exercise by
Secured Party of the voting or other rights provided for in this Security Agreement or the
remedies in respect of the Collateral pursuant to this Security Agreement (except as may be
required in connection with the disposition of the Pledged Securities by laws affecting the
offering and sale of securities generally).

     (e) Liens. Debtor owns all presently existing Collateral, and will acquire all
hereafter-acquired Collateral, free and clear of all liens, except the security interest
permitted hereby.

     (f) Collateral. Annex B-1 accurately lists all Pledged Shares and Partnership
Interests, in which Debtor has any rights, titles, or interest (but such failure of such
description to be accurate or complete shall not impair the Security Interest in such
Collateral).

     (g) Pledged Securities; Pledged Shares. All Collateral that is Pledged Shares
is duly authorized, validly issued, fully paid, and non-assessable, and the transfer thereof
is not subject to any restrictions, other than restrictions imposed by applicable securities
and corporate laws. Debtor has good title to the Pledged Securities, free and clear of all
liens and encumbrances

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thereon (except for the Security Interest created hereby), and has delivered to Secured
Party (i) all stock certificates, or other instruments or documents representing or
evidencing the Pledged Securities, together with corresponding assignment or transfer powers
duly executed in blank by Debtor, and such powers have been duly and validly executed and
are binding and enforceable against Debtor in accordance with their terms or (ii) to the
extent such Pledged Securities are uncertificated, an executed Control Agreement with
respect to such Pledged Securities. The pledge of the Pledged Securities in accordance with
the terms hereof creates a valid and perfected first priority security interest in the
Pledged Securities securing payment of the Obligation.

     (h) Partnership Interests. Each Partnership issuing a Partnership Interest, is
duly organized, currently existing, and in good standing under all applicable laws; there
have been no amendments, modifications, or supplements to any agreement or certificate
creating any Partnership or any material contract relating to the Partnerships, of which
Secured Party has not been advised in writing; no default or breach or potential default or
breach has occurred and is continuing under any Partnership Agreement, except as disclosed
on Annex C hereto; and no approval or consent of the partners of any Partnership is required
as a condition to the validity and enforceability of the Security Interest created hereby or
the consummation of the transactions contemplated hereby which has not been duly obtained by
Debtor. Debtor has good title to the Partnership Interests free and clear of all liens and
encumbrances (except for the Security Interest granted hereby). The Partnership Interests
are validly issued, fully paid, and nonassessable and are not subject to statutory,
contractual, or other restrictions governing their transfer, ownership, or control, except
as set forth in the applicable Partnership Agreements or applicable securities laws. All
capital contributions required to be made by the terms of the Partnership Agreements for
each Partnership have been made.

The foregoing representations and warranties will be true and correct in all respects with respect
to any additional Collateral or additional specific descriptions of certain Collateral delivered to
Secured Party in the future by Debtor. The failure of any of these representations or warranties
or any description of Collateral therein to be accurate or complete shall not impair the Security
Interest in any such Collateral.

     6. COVENANTS. So long as Secured Party is committed to extend credit to Debtor under the
Credit Agreement and thereafter until the Obligation is paid and performed in full, Debtor
covenants and agrees with Secured Party that Debtor will:

     (a) Information/Record of Collateral. Maintain, at the place where Debtor is
entitled to receive notices under the Loan Documents, a current record of where all
Collateral is located, permit representatives of Secured Party at any time during normal
business hours to inspect and make abstracts from such records, and furnish to Secured
Party, at such intervals as Secured Party may request, such documents, lists, descriptions,
certificates, and other information as may be necessary or proper to keep Secured Party
informed with respect to the identity, location, status, condition, and value of the
Collateral. In addition, from time to time at the request of Secured Party deliver to
Secured Party such information regarding Debtor as Secured Party may reasonably request.

     (b) Annexes. Immediately update all annexes hereto if any information therein
shall become inaccurate or incomplete. Notwithstanding any other provision herein, Debtor’s
failure to describe any Collateral required to be listed on any annex hereto shall not
impair Secured Party’s Security Interest in the Collateral.

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     (c) Perform Obligations. Fully perform all of Debtor’s duties under and in
connection with each transaction to which the Collateral, or any part thereof, relates, so
that the amounts thereof shall actually become payable in their entirety to Secured Party.
Furthermore, notwithstanding anything to the contrary contained herein, (i) Debtor shall
remain liable under the contracts, agreements, documents, and instruments included in the
Collateral to the extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Security Agreement had not been executed, (ii) the
exercise by Secured Party of any of its rights or remedies hereunder shall not release
Debtor from any of its duties or obligations under the contracts, agreements, documents, and
instruments included in the Collateral, and (iii) Secured Party shall not have any
indebtedness, liability, or obligation under any of the contracts, agreements, documents,
and instruments included in the Collateral by reason of this Security Agreement, and Secured
Party shall not be obligated to perform any of the obligations or duties of Debtor
thereunder or to take any action to collect or enforce any claim for payment assigned
hereunder.

     (d) Notices. (i) Except as may be otherwise expressly permitted under the
terms of the Credit Agreement, promptly notify Secured Party of (A) any change in any fact
or circumstances represented or warranted by Debtor with respect to any of the Collateral or
Obligation, (B) any claim, action, or proceeding affecting title to all or any of the
Collateral or the Security Interest and, at the request of Secured Party, appear in and
defend, at Debtor’s expense, any such action or proceeding, (C) any material change in the
nature of the Collateral, (D) any material damage to or loss of Collateral, and (E) the
occurrence of any other event or condition (including, without limitation, matters as to
lien priority) that could have a material adverse effect on the Collateral (taken as a
whole) or the Security Interest created hereunder; and (ii) give Secured Party thirty (30)
days written notice before any proposed (A) relocation of its principal place of business or
chief executive office, (B) change of its name, identity, or corporate structure, (C)
relocation of the place where its books and records concerning its accounts are kept, (D)
relocation of any Collateral to a location not described on the attached Annex A, and (E)
change of its jurisdiction of organization or organizational identification number, as
applicable. Prior to making any of the changes contemplated in clause (ii) preceding,
Debtor shall execute and deliver all such additional documents and perform all additional
acts as Secured Party, in its sole discretion, may request in order to continue or maintain
the existence and priority of the Security Interests in all of the Collateral.

     (e) Collateral in Trust. Hold in trust (and not commingle with other assets of
Debtor) for Secured Party all Collateral that Pledged Securities or documents at any time
received by Debtor, and promptly deliver same to Secured Party, unless Secured Party at its
option (which may be evidenced only by a writing signed by Secured Party stating that
Secured Party elects to permit Debtor to so retain) permits Debtor to retain the same, but
any Pledged Securities or documents so retained shall be marked to state that they are
assigned to Secured Party; each such instrument shall be endorsed to the order of Secured
Party (but the failure of same to be so marked or endorsed shall not impair the Security
Interest thereon).

     (f) Control. Execute all documents and take any action required by Secured
Party in order for Secured Party to obtain “control” (as defined in the UCC) with respect to
Collateral consisting of investment property and Pledged Securities.

     (g) Further Assurances. At Debtor’s expense and Secured Party’s request,
before or after an Event of Default or event or condition that, with the passage of time or
giving of notice

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would become an Event of Default, (i) file or cause to be filed such applications and
take such other actions as Secured Party may request to obtain the consent or approval of
any Governmental authority to Secured Party’s rights hereunder, including, without
limitation, the right to sell all the Collateral upon an Event of Default or event or
condition that, with the passage of time or giving of notice would become an Event of
Default, without additional consent or approval from such governmental authority (and,
because Debtor agrees that Secured Party’s remedies at law for failure of Debtor to comply
with this provision would be inadequate and that such failure would not be adequately
compensable in damages, Debtor agrees that its covenants in this provision may be
specifically enforced); (ii) from time to time promptly execute and deliver to Secured Party
all such other assignments, certificates, supplemental documents, and financing statements,
and do all other acts or things as Secured Party may reasonably request in order to more
fully create, evidence, perfect, continue, and preserve the priority of the Security
Interest and to carry out the provisions of this Security Agreement; and (iii) pay all
filing fees in connection with any financing, continuation, or termination statement or
other instrument with respect to the Security Interests.

     (h) Encumbrances. Not create, permit, or suffer to exist, and shall defend the
Collateral against, any lien or other encumbrance on the Collateral, and shall defend
Debtor’s rights in the Collateral and Secured Party’s Security Interest in, the Collateral
against the claims and demands of all Persons. Debtor shall do nothing to impair the rights
of Secured Party in the Collateral.

     (i) Securities. Except as permitted by the Credit Agreement, not sell,
exchange, or otherwise dispose of, or grant any option, warrant, or other right with respect
to, any of the Pledged Securities; to the extent any issuer of any Pledged Securities is
controlled by Debtor and/or its Affiliates, not permit such issuer to issue any additional
shares of stock or other securities in addition to or in substitution for the Pledged
Securities, except issuances to Debtor on terms acceptable to Secured Party; pledge
hereunder, immediately upon Debtor’s acquisition (directly or indirectly) thereof, any and
all additional shares of stock or other securities of each Subsidiary of Debtor; and take
any action necessary, required, or requested by Secured Party to allow Secured Party to
fully enforce its Security Interest in the Pledged Securities, including, without
limitation, the filing of any claims with any court, liquidator, trustee, custodian,
receiver, or other like person or party.

     (j) Partnerships and Partnership Interests. (i) Promptly perform, observe, and
otherwise comply with each and every covenant, agreement, requirement, and condition set
forth in the contracts and agreements creating or relating to any Partnership; (ii) do or
cause to be done all things necessary or appropriate to keep the Partnerships in full force
and effect and the rights of Debtor and Secured Party thereunder unimpaired; (iii) except as
expressly permitted by the Credit Agreement, not consent to any Partnership selling,
leasing, or disposing of substantially all of its assets in a single transaction or a series
of transactions; (iv) notify Secured Party of the occurrence of any default or breach or
potential default or breach under any contract or agreement creating or relating to the
Partnerships; (v) not consent to the amendment, modification, surrender, impairment,
forfeiture, cancellation, dissolution, or termination of any Partnership, or material
agreement relating thereto; (vi) except as permitted by the Credit Agreement, not transfer,
sell, or assign any of the Partnership Interests or any part thereof; (vii) to the extent
any Partnership is controlled by Debtor and/or its Affiliates, cause such Partnership to
refrain from granting any Partnership Interests in addition to or in substitution for the
Partnership Interests granted by the Partnerships, except to Debtor; (viii) pledge
hereunder, immediately upon Debtor’s

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acquisition (directly or indirectly) thereof, any and all additional Partnership
Interests of any Partnership granted to Debtor; (ix) deliver to Secured Party a
fully-executed Acknowledgment of Pledge, substantially in the form of Annex D, for each
Partnership Interest; and (x) take any action necessary, required, or requested by Secured
Party to allow Secured Party to fully enforce its Security Interest in the Partnership
Interests, including, without limitation, the filing of any claims with any court,
liquidator, trustee, custodian, receiver, or other like person or party.

     7. DEFAULT; REMEDIES. If an Event of Default exists, Secured Party may, at its election (but
subject to the terms and conditions of the Credit Agreement), exercise any and all rights available
to a secured party under the UCC, in addition to any and all other rights afforded by the Loan
Documents, at law, in equity, or otherwise, including, without limitation, (a) requiring Debtor to
assemble all or part of the Collateral and make it available to Secured Party at a place to be
designated by Secured Party which is reasonably convenient to Debtor and Secured Party, and (b)
applying by appropriate judicial proceedings for appointment of a receiver for all or part of the
Collateral (and Debtor hereby consents to any such appointment).

     (a) Notice. Reasonable notification of the time and place of any public sale
of the Collateral, or reasonable notification of the time after which any private sale or
other intended disposition of the Collateral is to be made, shall be sent to Debtor and to
any other Person entitled to notice under the UCC; provided that, if any of the Collateral
threatens to decline speedily in value or is of the type customarily sold on a recognized
market, Secured Party may sell or otherwise dispose of the Collateral without notification,
advertisement, or other notice of any kind. It is agreed that notice sent or given not less
than five Business Days prior to the taking of the action to which the notice relates is
reasonable notification and notice for the purposes of this subparagraph.

     (b) Condition of Collateral; Warranties. Secured Party has no obligation to
clean-up or otherwise prepare the Collateral for sale. Secured Party may sell the
Collateral without giving any warranties as to the Collateral. Secured Party may
specifically disclaim any warranties of title or the like. This procedure will not be
considered adversely to affect the commercial reasonableness of any sale of the Collateral.

     (c) Compliance with Other Laws. Secured Party may comply with any applicable
state or federal law requirements in connection with a disposition of the Collateral and
compliance will not be considered to adversely affect the commercial reasonableness of any
sale of the Collateral.

     (d) Sales of Pledged Securities.

     (i) Debtor agrees that, because of the Securities Act of 1933, as amended, or
the rules and regulations promulgated thereunder (collectively, the “Securities
Act”), or any other laws or regulations, and for other reasons, there may be legal
or practical restrictions or limitations affecting Secured Party in any attempts to
dispose of certain portions of the Pledged Securities and for the enforcement of its
rights. For these reasons, Secured Party is hereby authorized by Debtor, but not
obligated, upon the occurrence and during the continuation of an Event of Default,
to sell all or any part of the Pledged Securities at private sale, subject to
investment letter or in any other manner which will not require the Pledged
Securities, or any part thereof, to be registered in accordance with the Securities
Act or any other laws or regulations, at a reasonable price

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at such private sale or other distribution in the manner mentioned above.
Debtor understands that Secured Party may in its discretion approach a limited
number of potential purchasers and that a sale under such circumstances may yield a
lower price for the Pledged Securities, or any part thereof, than would otherwise be
obtainable if such Collateral were either afforded to a larger number or potential
purchasers, registered under the Securities Act, or sold in the open market. Debtor
agrees that any such private sale made under this Paragraph 7(d) shall be deemed to
have been made in a commercially reasonable manner, and that Secured Party has no
obligation to delay the sale of any Pledged Securities to permit the issuer thereof
to register it for public sale under any applicable federal or state securities
laws.

     (ii) Secured Party is authorized, in connection with any such sale, (A) to
restrict the prospective bidders on or purchasers of any of the Pledged Securities
to a limited number of sophisticated investors who will represent and agree that
they are purchasing for their own account for investment and not with a view to the
distribution or sale of any of such Pledged Securities, and (B) to impose such other
limitations or conditions in connection with any such sale as Secured Party
reasonably deems necessary in order to comply with applicable law. Debtor covenants
and agrees that it will execute and deliver such documents and take such other
action as Secured Party reasonably deems necessary in order that any such sale may
be made in compliance with applicable law. Upon any such sale Secured Party shall
have the right to deliver, assign, and transfer to the purchaser thereof the Pledged
Securities so sold. Each purchaser at any such sale shall hold the Pledged
Securities so sold absolutely free from any claim or right of Debtor of whatsoever
kind, including any equity or right of redemption of Debtor. Debtor, to the extent
permitted by applicable law, hereby specifically waives all rights of redemption,
stay, or appraisal which it has or may have under any law now existing or hereafter
enacted.

     (iii) Debtor agrees that five days’ written notice from Secured Party to Debtor
of Secured Party’s intention to make any such public or private sale or sale at a
broker’s board or on a securities exchange shall constitute reasonable notice under
the UCC. Such notice shall (A) in case of a public sale, state the time and place
fixed for such sale, (B) in case of sale at a broker’s board or on a securities
exchange, state the board or exchange at which such a sale is to be made and the day
on which the Pledged Securities, or the portion thereof so being sold, will first be
offered to sale at such board or exchange, and (C) in the case of a private sale,
state the day after which such sale may be consummated. Any such public sale shall
be held at such time or times within ordinary business hours and at such place or
places as Secured Party may fix in the notice of such sale. At any such sale, the
Pledged Securities may be sold in one lot as an entirety or in separate parcels, as
Secured Party may reasonably determine. Secured Party shall not be obligated to
make any such sale pursuant to any such notice. Secured Party may, without notice
or publication, adjourn any public or private sale or cause the same to be adjourned
from time to time by announcement at the time and place fixed for the sale, and such
sale may be made at any time or place to which the same may be so adjourned.

     (iv) In case of any sale of all or any part of the Pledged Securities on credit
or for future delivery, the Pledged Securities so sold may be retained by Secured
Party until the selling price is paid by the purchaser thereof, but Secured Party
shall not incur any liability in case of the failure of such purchaser to take up
and pay for the Pledged

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Securities so sold and in case of any such failure, such Pledged Securities may
again be sold upon like notice. Secured Party, instead of exercising the power of
sale herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Pledged Securities, or any portion
thereof, under a judgment or decree of a court or courts of competent jurisdiction.

     (v) Without limiting the foregoing, or imposing upon Secured Party any
obligations or duties not required by applicable law, Debtor acknowledges and agrees
that, in foreclosing upon any of the Pledged Securities, or exercising any other
rights or remedies provided Secured Party hereunder or under applicable law, Secured
Party may, but shall not be required to, (A) qualify or restrict prospective
purchasers of the Pledged Securities by requiring evidence of sophistication or
creditworthiness, and requiring the execution and delivery of confidentiality
agreements or other documents and agreements as a condition to such prospective
purchasers’ receipt of information regarding the Pledged Securities or participation
in any public or private foreclosure sale process, (B) provide to prospective
purchasers business and financial information regarding Debtor or the Companies
available in the files of Secured Party at the time of commencing the foreclosure
process, without the requirement that Secured Party obtain, or seek to obtain, any
updated business or financial information or verify, or certify to prospective
purchasers, the accuracy of any such business or financial information, or (C) offer
for sale and sell the Pledged Securities with, or without, first employing an
appraiser, investment banker, or broker with respect to the evaluation of the
Pledged Securities, the solicitation of purchasers for Pledged Securities, or the
manner of sale of Pledged Securities.

     (e) Application of Proceeds. Secured Party shall apply the proceeds of any
sale or other disposition of the Collateral under this Paragraph 7 in the following order:
first, to the payment of all expenses incurred in retaking, holding, and preparing any of
the Collateral for sale(s) or other disposition, in arranging for such sale(s) or other
disposition, and in actually selling or disposing of the same (all of which are part of the
Obligation); second, toward repayment of amounts expended by Secured Party under Paragraph
8; and third, toward payment of the balance of the Obligation in the order and manner
specified in the Credit Agreement. Any surplus remaining shall be delivered to Debtor or as
a court of competent jurisdiction may direct. If the proceeds are insufficient to pay the
Obligation in full, Debtor shall remain liable for any deficiency.

     (f) Sales on Credit. If Secured Party sells any of the Collateral upon credit,
Debtor will be credited only with payments actually made by the purchaser, received by the
Secured Party, and applied to the indebtedness of the purchaser. In the event the purchaser
fails to pay for the Collateral, Secured Party may resell the Collateral and Debtor shall be
credited with the proceeds of the sale.

     8. OTHER RIGHTS OF SECURED PARTY.

     (a) Collection. If an Event of Default exists and upon notice from Secured
Party, each Obligor with respect to any payments on any of the Collateral (including,
without limitation, dividends and other Distributions with respect to the Pledged Securities
and Partnership Interests) is hereby authorized and directed by Debtor to make payment
directly to Secured Party, regardless of whether Debtor was previously making collections
thereon. Subject to

10

 

Paragraph
8(d) hereof, until such notice is given, Debtor is authorized to retain and expend all
payments made on Collateral. If an Event of Default exists, Secured Party shall have the
right in its own name or in the name of Debtor to compromise or extend time of payment with
respect to all or any portion of the Collateral for such amounts and upon such terms as
Secured Party may determine; to demand, collect, receive, receipt for, sue for, compound,
and give acquittances for any and all amounts due or to become due with respect to
Collateral; to take control of cash and other proceeds of any Collateral; to endorse the
name of Debtor on any notes, acceptances, checks, drafts, money orders, or other evidences
of payment on Collateral that may come into the possession of Secured Party; to sign the
name of Debtor on any invoice or bill of lading relating to any Collateral, on any drafts
against Obligors or other Persons making payment with respect to Collateral, on assignments
and verifications of accounts or other Collateral and on notices to Obligors making payment
with respect to Collateral; to send requests for verification of obligations to any Obligor;
and to do all other acts and things necessary to carry out the intent of this Security
Agreement. If an Event of Default exists and any Obligor fails or refuses to make payment
on any Collateral when due, Secured Party is authorized, in its sole discretion, either in
its own name or in the name of Debtor, to take such action as Secured Party shall deem
appropriate for the collection of any amounts owed with respect to Collateral or upon which
a delinquency exists. Regardless of any other provision hereof, however, Secured Party
shall never be liable for its failure to collect, or for its failure to exercise diligence
in the collection of, any amounts owed with respect to Collateral, nor shall it be under any
duty whatsoever to anyone except Debtor to account for funds that it shall actually receive
hereunder. Without limiting the generality of the foregoing, Secured Party shall have no
responsibility for ascertaining any maturities, calls, conversions, exchanges, offers,
tenders, or similar matters relating to any Collateral, or for informing Debtor with respect
to any of such matters (irrespective of whether Secured Party actually has, or may be deemed
to have, knowledge thereof). The receipt of Secured Party to any Obligor shall be a full
and complete release, discharge, and acquittance to such Obligor, to the extent of any
amount so paid to Secured Party.

     (b) Record Ownership of Securities. If an Event of Default or event or
condition that, with the passage of time or giving of notice would become an Event of
Default exists, Secured Party at any time may have any Collateral that is Pledged Securities
and that is in the possession of Secured Party, or its nominee or nominees, registered in
its name, or in the name of its nominee or nominees, as Secured Party; and, as to any
Collateral that is Pledged Securities so registered, Secured Party shall execute and deliver
(or cause to be executed and delivered) to Debtor all such proxies, powers of attorney,
dividend coupons or orders, and other documents as Debtor may reasonably request for the
purpose of enabling Debtor to exercise the voting rights and powers which it is entitled to
exercise under this Security Agreement or to receive the dividends and other Distributions
and payments in respect of such Collateral that is Pledged Securities or proceeds thereof
which it is authorized to receive and retain under this Security Agreement.

     (c) Voting of Securities. As long as no Event of Default exists, Debtor is
entitled to exercise all voting rights pertaining to any Pledged Securities and Partnership
Interests; provided, however, that no vote shall be cast or consent, waiver, or ratification
given or action taken without the prior written consent of Secured Party which would (x) be
inconsistent with or violate any provision of this Security Agreement or any other Loan
Document or (y) amend, modify, or waive any term, provision or condition of the certificate
of incorporation, bylaws, certificate of formation, or other charter document, or other
agreement relating to, evidencing, providing for the issuance of, or securing any
Collateral; and provided further that Debtor shall

11

 

give Secured Party at least five (5) Business Days’ prior written notice in the form of
an officers’ certificate of the manner in which it intends to exercise, or the reasons for
refraining from exercising, any voting or other consensual rights pertaining to the
Collateral or any part thereof which might have a material adverse effect on the value of
the Collateral or any part thereof. If an Event of Default exists and if Secured Party
elects to exercise such right, the right to vote any Pledged Securities shall be vested
exclusively in Secured Party. To this end, Debtor hereby irrevocably constitutes and
appoints Secured Party the proxy and attorney-in-fact of Debtor, with full power of
substitution, to vote, and to act with respect to, any and all Collateral that is Pledged
Securities standing in the name of Debtor or with respect to which Debtor is entitled to
vote and act, subject to the understanding that such proxy may not be exercised unless an
Event of Default exists. The proxy herein granted is coupled with an interest, is
irrevocable, and shall continue until the Obligation has been paid and performed in full.

(d) Certain Proceeds. Notwithstanding any contrary provision herein, any and
all

     (i) dividends, interest, or other Distributions paid or payable other than in
cash in respect of, and instruments and other property received, receivable, or
otherwise distributed in respect of, or in exchange for, any Collateral;

     (ii) dividends, interest, or other Distributions paid or payable in violation
of the Loan Documents,

shall be part of the Collateral hereunder, and shall, if received by Debtor, be held in
trust for the benefit of Secured Party, and shall forthwith be delivered to Secured Party
(accompanied by proper instruments of assignment and/or stock and/or bond powers executed by
Debtor in accordance with Secured Party’s instructions) to be held subject to the terms of
this Security Agreement. Any cash proceeds of Collateral on and after the occurrence and
during the continuance of an Event of Default shall be held in trust for the benefit of
Secured Party, and shall forthwith be delivered to Secured Party, to be, at Secured Party’s
option, applied in whole or in part to the Obligation (to the extent then due), be released
in whole or in part to or on the written instructions of Debtor for any general or specific
purpose, or be retained in whole or in part by Secured Party as additional Collateral. Any
cash Collateral in the possession of Secured Party may be invested by Secured Party in
certificates of deposit issued by Secured Party (if Secured Party issues such certificates)
or by any state or national bank having combined capital and surplus greater than
$100,000,000 with a rating from Moody’s and S&P of P-1 and A-1+, respectively, or in
securities issued or guaranteed by the United States of America or any agency thereof.
Secured Party shall never be obligated to make any such investment and shall never have any
liability to Debtor for any loss which may result therefrom. All interest and other amounts
earned from any investment of Collateral may be dealt with by Secured Party in the same
manner as other cash Collateral. The provisions of this subparagraph are applicable whether
or not an Event of Default or event or condition that, with the passage of time or giving of
notice would become an Event of Default, exists.

     (e) Power of Attorney. Debtor hereby irrevocably constitutes and appoints
Secured Party and any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the name of Debtor
or in its own name, to take after the occurrence and during the continuance of an Event of
Default and from time to time thereafter, any and all action and to execute any and all
documents and instruments which Secured Party at any time and from time to time deems
necessary or desirable to

12

 

accomplish the purposes of this Security Agreement and, without limiting the generality
of the foregoing, Debtor hereby gives Secured Party the power and right on behalf of Debtor
and in its own name to do any of the following after the occurrence and during the
continuance of an Event of Default and from time to time thereafter, without notice to or
the consent of Debtor:

     (i) to receive, endorse, and collect any drafts or other instruments or
documents in connection with clause (a) above and this 

clause (e);

     (ii) to demand, sue for, collect, or receive, in the name of Debtor or in its
own name, any money or property at any time payable or receivable on account of or
in exchange for any of the Collateral and, in connection therewith, endorse checks,
notes, drafts, acceptances, money orders, documents of title or any other
instruments for the payment of money under the Collateral;

     (iii) to pay or discharge taxes, liens, or other encumbrances levied or placed
on or threatened against the Collateral;

     (iv) to notify post office authorities to change the address for delivery of
Debtor to an address designated by Secured Party and to receive, open, and dispose
of mail addressed to Debtor; and

     (v) (A) to direct account debtors and any other parties liable for any payment
under any of the Collateral to make payment of any and all monies due and to become
due thereunder directly to Secured Party or as Secured Party shall direct; (B) to
receive payment of and receipt for any and all monies, claims, and other amounts due
and to become due at any time in respect of or arising out of any Collateral; (C) to
sign and endorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, proxies, stock powers,
verifications, and notices in connection with accounts and other documents relating
to the Collateral; (D) to commence and prosecute any suit, action, or proceeding at
law or in equity in any court of competent jurisdiction to collect the Collateral or
any part thereof and to enforce any other right in respect of any Collateral; (E) to
defend any suit, action, or proceeding brought against Debtor with respect to any
Collateral; (F) to settle, compromise, or adjust any suit, action, or proceeding
described above and, in connection therewith, to give such discharges or releases as
Secured Party may deem appropriate; (G) to exchange any of the Collateral for other
property upon any merger, consolidation, reorganization, recapitalization, or other
readjustment of the issuer thereof and, in connection therewith, deposit any of the
Collateral with any committee, depositary, transfer agent, registrar, or other
designated agency upon such terms as Secured Party may determine; (H) to add or
release any guarantor, indorser, surety, or other party to any of the Collateral;
(I) to renew, extend, or otherwise change the terms and conditions of any of the
Collateral; (J) to make, settle, compromise or adjust any claims under or
pertaining to any of the Collateral; (K) to execute on behalf of Debtor any
financing statements or continuation statements with respect to the Security
Interests created hereby, and to do any and all acts and things to protect and
preserve the Collateral, including, without limitation, the protection and
prosecution of all rights included in the Collateral; and (L) to sell, transfer,
pledge, convey, make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though Secured Party were the absolute owner
thereof for all purposes, and to do, at Secured Party’s option and Debtor’s expense,
at any

13

 

time, or from time to time, all acts and things which Secured Party deems
necessary to protect, preserve, maintain, or realize upon the Collateral and Secured
Party’s security interest therein.

This power of attorney is a power coupled with an interest and shall be irrevocable.
Secured Party shall be under no duty to exercise or withhold the exercise of any of the
rights, powers, privileges, and options expressly or implicitly granted to Secured Party in
this Security Agreement, and shall not be liable for any failure to do so or any delay in
doing so. Neither Secured Party nor any Person designated by Secured Party shall be liable
for any act or omission or for any error of judgment or any mistake of fact or law. This
power of attorney is conferred on Secured Party solely to protect, preserve, maintain, and
realize upon its Security Interest in the Collateral. Secured Party shall not be
responsible for any decline in the value of the Collateral and shall not be required to take
any steps to preserve rights against prior parties or to protect, preserve, or maintain any
lien given to secure the Collateral.

     (f) Subrogation. If any of the Obligation is given in renewal or extension or
applied toward the payment of indebtedness secured by any lien, Secured Party shall be, and
is hereby, subrogated to all of the rights, titles, interests, and liens securing the
indebtedness so renewed, extended, or paid.

     (g) Indemnification. Debtor hereby assumes all liability for the Collateral,
for the Security Interest, and for any use, possession, maintenance, and management of, all
or any of the Collateral, including, without limitation, any Taxes arising as a result of,
or in connection with, the transactions contemplated herein, and agrees to assume liability
for, and to indemnify and hold Secured Party harmless from and against, any and all claims,
causes of action, or liability, for injuries to or deaths of Persons and damage to property,
howsoever arising from or incident to such use, possession, maintenance, and management,
whether such Persons be agents or employees of Debtor or of third parties, or such damage be
to property of Debtor or of others. Debtor agrees to indemnify, save, and hold Secured
Party harmless from and against, and covenants to defend Secured Party against, any and all
losses, damages, claims, costs, penalties, liabilities, and expenses (collectively,
“Claims”), including, without limitation, court costs and attorneys’ fees, and any of the
foregoing arising from the negligence of Secured Party or any of its officers, employees,
agents, advisors, employees, or representatives, howsoever arising or incurred because of,
incident to, or with respect to Collateral or any use, possession, maintenance, or
management thereof; provided, however, that the indemnity set forth in this Paragraph 8(g)
will not apply to Claims caused by the gross negligence or willful misconduct of Secured
Party.

     9. MISCELLANEOUS.

     (a) Continuing Security Interest. This Security Agreement creates a continuing
security interest in the Collateral and shall (i) remain in full force and effect until the
termination of the obligations of Secured Party to advance Advances under the Loan
Documents, the payment in full of the Obligation; and (ii) inure to the benefit of and be
enforceable by Secured Party and its successors, transferees, and assigns. Without limiting
the generality of the foregoing clause (ii), Secured Party may assign or otherwise transfer
any of their respective rights under this Security Agreement to any other Person in
accordance with the terms and provisions of Section 10.06 of the Credit Agreement, and to
the extent of such assignment or transfer such Person shall thereupon become vested with all
the rights and benefits in respect thereof granted

14

 

herein or otherwise to Secured Party. Upon payment in full of the Obligation, the termination of
the commitment of Secured Party to extend credit under the Loan Documents, Debtor shall be
entitled to the return, upon its request and at its expense, of such of the Collateral as
shall not have been sold or otherwise applied pursuant to the terms hereof.

     (b) Reference to Miscellaneous Provisions. This Security Agreement is one of
the “Loan Documents” referred to in the Credit Agreement, and all provisions relating to
Loan Documents set forth in Section 10 of the Credit Agreement are incorporated herein by
reference, the same as if set forth herein verbatim.

     (c) Term. Upon the later of (i) the termination of Secured Party’s commitments
to fund Advances under the Credit Agreement and (ii) the full and final payment and
performance of the Obligation, this Security Agreement shall thereafter terminate upon
receipt by Secured Party of Debtor’s written notice of such termination; provided that no
Obligor, if any, on any of the Collateral shall ever be obligated to make inquiry as to the
termination of this Security Agreement, but shall be fully protected in making payment
directly to Secured Party until actual notice of such total payment of the Obligation is
received by such Obligor.

     (d) Actions Not Releases. The Security Interest and Debtor’s obligations and
Secured Party’s rights hereunder shall not be released, diminished, impaired, or adversely
affected by the occurrence of any one or more of the following events: (i) the taking or
accepting of any other security or assurance for any or all of the Obligation; (ii) any
release, surrender, exchange, subordination, or loss of any security or assurance at any
time existing in connection with any or all of the Obligation; (iii) the modification of,
amendment to, or waiver of compliance with any terms of any of the other Loan Documents
without the notification or consent of Debtor, except as required therein (the right to such
notification or consent being herein specifically waived by Debtor); (iv) the insolvency,
bankruptcy, or lack of corporate or trust power of any party at any time liable for the
payment of any or all of the Obligation, whether now existing or hereafter occurring; (v)
any renewal, extension, or rearrangement of the payment of any or all of the Obligation,
either with or without notice to or consent of Debtor, or any adjustment, indulgence,
forbearance, or compromise that may be granted or given by Secured Party to Debtor; (vi) any
neglect, delay, omission, failure, or refusal of Secured Party to take or prosecute any
action in connection with any other agreement, document, guaranty, or instrument evidencing,
securing, or assuring the payment of all or any of the Obligation; (vii) any failure of
Secured Party to notify Debtor of any renewal, extension, or assignment of the Obligation or
any part thereof, or the release of any Collateral or other security, or of any other action
taken or refrained from being taken by Secured Party against Debtor or any new agreement
between or among Secured Party and Debtor, it being understood that except as expressly
provided herein, neither Secured Party shall be required to give Debtor any notice of any
kind under any circumstances whatsoever with respect to or in connection with the
Obligation, including, without limitation, notice of acceptance of this Security Agreement
or any Collateral ever delivered to or for the account of Secured Party hereunder; (viii)
the illegality, invalidity, or unenforceability of all or any part of the Obligation against
any party obligated with respect thereto by reason of the fact that the Obligation, or the
interest paid or payable with respect thereto, exceeds the amount permitted by law, the act
of creating the Obligation, or any part thereof, is ultra vires, or the officers, partners,
or trustees creating same acted in excess of their authority, or for any other reason; or
(ix) if any payment by any party obligated with respect thereto is held to constitute a
preference under applicable laws or for any other reason Secured Party is required to refund
such payment or pay the amount thereof to someone else.

15

 

     (e) Waivers. Except to the extent expressly otherwise provided herein or in
other Loan Documents and to the fullest extent permitted by applicable law, Debtor waives
(i) any right to require Secured Party to proceed against any other Person, to exhaust its
rights in Collateral, or to pursue any other right which Secured Party may have; (ii) with
respect to the Obligation, presentment and demand for payment, protest, notice of protest
and nonpayment, and notice of the intention to accelerate; and (iii) all rights of
marshaling in respect of any and all of the Collateral.

     (f) Financing Statement; Authorization. Secured Party shall be entitled at any
time to file this Security Agreement or a carbon, photographic, or other reproduction of
this Security Agreement, as a financing statement, but the failure of Secured Party to do so
shall not impair the validity or enforceability of this Security Agreement. Debtor hereby
irrevocably authorizes Secured Party at any time and from time to time to file in any UCC
jurisdiction any initial financing statements and amendments thereto (without the
requirement for Debtor’s signature thereon) that (i) indicate the Collateral, and (ii)
contain any other information required by Article 9 of the UCC of the state or such
jurisdiction for the sufficiency or filing office acceptance of any financing statement or
amendment, including whether the Debtor is an organization, the type of organization, and
any organization identification number issued to Debtor. Debtor agrees to furnish any such
information to Secured Party promptly upon request.

     (g) Amendments. This Security Agreement may be amended only by an instrument
in writing executed jointly by Debtor and Secured Party, and supplemented only by documents
delivered or to be delivered in accordance with the express terms hereof.

     (h) Multiple Counterparts. This Security Agreement has been executed in a
number of identical counterparts, each of which shall be deemed an original for all purposes
and all of which constitute, collectively, one agreement; but, in making proof of this
Security Agreement, it shall not be necessary to produce or account for more than one such
counterpart.

     (i) Parties Bound; Assignment. This Security Agreement shall be binding on
Debtor and Debtor’s heirs, legal representatives, successors, and assigns and shall inure to
the benefit of Secured Party and Secured Party’s successors and assigns. Debtor may not,
without the prior written consent of Secured Party, assign any rights, duties, or
obligations hereunder

     (j) Governing Law.  the substantive laws of the State of
New York applicable to agreements made and to be performed entirely within such state,
except to the extent the laws of another jurisdiction govern the creation, perfection,
validity, or enforcement of liens under this Security Agreement, and the applicable federal
laws of the United States of America, shall govern the validity, construction, enforcement
and interpretation of this Security Agreement and all of the other Loan Documents.

Remainder of Page Intentionally Blank.

Signature Page to Follow.

16

 

     EXECUTED as of the date first stated in this Pledge, Assignment, and Security Agreement.

DEBTOR:

PANDA ETHANOL HOLDINGS, LLC, a Delaware limited liability company

	 	 	 	 	 
	By:

	 	/s/ Darol Lindloff	 	 
	 

	 	 	 	 
	 

	 	Name: Darol Lindloff
 

	 	 
	 

	 	Title: CEO	 	 
	 

	 	 	 	 

 

 

ANNEX B-1 TO SECURITY AGREEMENT

COLLATERAL DESCRIPTIONS

(TO BE PROVIDED BY BORROWER)

A. Pledged Shares

B. Partnership Interests

C. Entities:

1. PGS Ethanol Holdings, LLC

2. Panda Hereford Holdings, LLC

3. Panda Yuma Holdings, LLCexv10w18

 

Exhibit 10.18

ASSET PURCHASE AGREEMENT

between

PHOENIX TECHNOLOGIES LTD.

and

XTOOL MOBILE SECURITY, INC.

Dated as of August 2, 2007

 

 

ASSET PURCHASE AGREEMENT

     This Asset Purchase Agreement (the “Agreement”) is entered into as of August 2, 2007,
by and between Phoenix Technologies Ltd., a Delaware corporation (“Buyer”) and XTool Mobile
Security, Inc., a Nevada corporation (“Seller”).

RECITALS

     A. Buyer is in the business of developing and selling core system software and platform
software products for connected digital devices;

     B. Seller is in the business of developing and selling laptop computer software security
products, including products for anti-theft tracking recovery, data encryption and back-up, asset
audits and remote delete (all Seller products hereinafter referred to as the “Business
Products”); and

     C. Buyer desires to acquire from Seller, and Seller desires to sell to Buyer, intellectual
property and technology assets relating to the Business Products on the terms and subject to the
conditions set forth in this Agreement (the “Purchase Transaction”).

AGREEMENT

     NOW, THEREFORE, in consideration of the mutual agreements, representations, warranties and
covenants set forth below, Buyer and Seller agree as follows:

1. Definitions.

     1.1 Definitions. As used in this Agreement, the following terms shall have the
following meanings:

          (a) “Absolute Litigation Matters” means (i) the patent infringement litigation between
Absolute Software, Inc. and Absolute Software Corp. (together, “Absolute”) on the one hand
and Seller on the other hand (Absolute Software, Inc. et al v. Stealth Signal, Inc., U.S. District
Court Southern District of Texas – Case No. H-05-1416) and (ii) any other current or future dispute
between Seller and Absolute:

          (b) “Affiliate” means with respect to any Person, a Person directly or indirectly
controlling or controlled by or under common control with such Person.

          (c) “Baran Amendment” means the Amendment to Patent License Agreement between Seller
and David Baran in the form attached hereto as Exhibit E.

          (d) “Baran Consent” means the amendment request letter from Seller to David Baran in
the form attached hereto as Exhibit A.

          (e) “Baran License Agreement” means the Patent License Agreement dated August 3, 2005
between Seller and David Baran as the same may be amended from time to time.

          (f) “Bill of Sale and Assignment” means the Bill of Sale and Assignment of Purchased
Assets between Seller and Buyer in the form attached hereto as Exhibit G, assigning to
Buyer all of Seller’s right, title and interest in and to the Purchased Assets

 

 

          (g) “Change of Control” means the occurrence of any of the following: (i) the sale,
lease, conveyance or other disposition of all or substantially all of Buyer’s assets to any
“person” (as such term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended
(the “Act”)), entity or group of persons acting in concert; (ii) any person or group of
persons becoming the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of Buyer representing 50% or more of the total voting power represented
by Buyer’s then outstanding voting securities; (iii) a merger or consolidation of Buyer with any
other corporation, other than a merger or consolidation that would result in the voting securities
of Buyer outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity or its controlling
entity) more than 50% of the total voting power represented by the voting securities of Buyer or
such surviving entity (or its controlling entity) outstanding immediately after such merger or
consolidation; or (iv) a contest for the election or removal of members of the board of directors
of Buyer that results in the removal from the board of at least 50% of the incumbent members of the
board.

          (h) “Closing” means the consummation of the transactions contemplated hereby.

          (i) “Closing Date” has the meaning set forth in Section 3.1.

          (j) “Consulting Services” means the consulting services to be provided by Seller to
Buyer following the Closing as set forth in the Exhibit A (Statement of Work or “SOW”) to the
Consulting Services Agreement.

          (k) “Consulting Services Agreement” means the Consulting Services Agreement between
Buyer and Seller in the form attached hereto as Exhibit B.

          (l) “Governmental Authorizations” means the permits, authorizations, consents or
approvals of any Governmental Entity which are a condition to the lawful consummation of the
transactions contemplated hereby listed on Schedule 1.1(m) to this Agreement.

          (m) “Governmental Entity” means any court, or any federal, state, provincial,
territory, municipal or other governmental authority, department, commission, board, agency or
other instrumentality (domestic or foreign).

          (n) “Intellectual Property Assets” means all intellectual property owned or licensed
(as licensor or licensee) by Seller in which Seller has a proprietary interest, including:

                 (i) Seller’s domain names, trade names, registered and unregistered trademarks, service marks
and applications;

                 (ii) all patents, patent applications and inventions and discoveries that may be patentable;

                 (iii) all registered and unregistered copyrights in both published works and unpublished
works;

                 (iv) all technology, ideas, inventions, designs, proprietary information, license rights,
specifications, know-how, formulae, routines, trade secrets, technical data and manuals, product
information and data, software, source code, design and code documentation, design information,
methodologies, testing procedures, processes, engineering work papers, and notes, development
work-in-process, and other proprietary information and materials of any kind;

-2-

 

                 (v) all other intangible assets, properties and rights (whether or not appropriate steps have
been taken to protect, under applicable law, such other intangible assets, properties or rights);
and

                 (vi) all goodwill associated with each and all of the foregoing.

          (o) “Lien” means any mortgage, pledge, lien, security interest, option, covenant,
condition, restriction, encumbrance, charge or other third-party claim of any kind, but excluding
all obligations, restrictions and limitations contained in contracts or licenses disclosed in this
Agreement or the Seller Disclosure Schedules.

          (p) “New Product Contract” means a customer contract between Buyer and a third party
Buyer customer for the license of a New Product from Buyer to such
customer. [**]

          (q) “New Products” means any product sold, licensed or distributed by the Buyer after
Closing that contains, utilizes or incorporates the Purchased Assets, in whole or in part.

          (r) “Non-Competition Agreement” means the Non-Competition Agreement between Buyer on
the one hand and each of the Principals on the other hand in the form attached hereto as
Exhibit C.

          (s) “Person” means an individual, corporation, partnership, association, trust,
government or political subdivision or agent or instrumentality thereof, or other entity or
organization.

          (t) “Principals” refers to Pedro Camargo and Victoria Correa Camargo.

          (u) “Seller Disclosure Schedules” or “Schedules” means the Disclosure
Schedules delivered by the Seller simultaneously with the execution and delivery of this Agreement.

          (v) “Sub-License Agreement” means the Sub-License Agreement between Seller and Buyer
in the form attached hereto as Exhibit D.

          (w) “Taxes” means all taxes, however denominated, including any interest, penalties or
other additions to tax that may become payable in respect thereof, (i) imposed by any federal,
territorial, state, local, province or foreign government or any agency or political subdivision of
any such government, for which Buyer could become liable as successor to or transferee of the
Purchased Assets or which could become a charge against or lien on any of the Purchased Assets,
which taxes shall include, without limiting the generality of the foregoing, all sales and use
taxes, ad valorem taxes, excise taxes, business license taxes, occupation taxes, real and personal
property taxes, stamp taxes, environmental taxes, real property gains taxes, transfer taxes,
payroll and employee withholding taxes, unemployment insurance contributions, social security
taxes, and other governmental charges, and other obligations of the same or of a similar nature to
any of the foregoing, which are required to be paid, withheld or collected, or (ii) any liability
for amounts referred to in (i) as a result of any obligations to indemnify another person.

2. Sale and Purchase

     2.1 Transfer of Assets. Subject to the terms and conditions of this Agreement, except
as set forth on Schedule 2.2, Seller shall sell, assign, grant, transfer, and deliver (or
cause to be sold, assigned, granted, transferred and delivered) to Buyer, or to any Affiliate of
Buyer designated by Buyer (so long as such Affiliate joins in this Agreement as a signatory and is
bound by its terms and conditions), and Buyer shall purchase and accept from Seller as of the
Closing Date, free and clear of all Liens, all of Seller’s

[THE SYMBOL [**] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SEC. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTION.]

-3-

 

rights, title and interest in and to all
of the Intellectual Property Assets of Seller that are necessary for the use of the Business
Products or relate to, are used in, or are derived from the Business Products as of the date of
this Agreement (the “Purchased Assets”).

     2.2 Excluded Assets. Buyer agrees that any Intellectual Property Assets listed in
Schedule 2.2 shall be excluded from the Purchased Assets (the “Excluded Assets”),
including, but not limited to, the Baran License Agreement and Seller’s rights thereunder and (b)
the domain names, web-pages, e-mail addresses and trademarks of the Seller listed therein. For
purposes of clarification, any cause of action or claim of right that Seller has or may have
against Absolute in connection with any Absolute Litigation Matters, and any resulting judgment,
settlement or award in Seller’s favor, shall be deemed an Excluded Asset.

     2.3 Excluded Liabilities. Buyer shall not assume and shall not be liable for, and
Seller and its direct or indirect subsidiaries shall retain and remain solely liable for and
obligated to discharge, all of the debts, contracts, agreements, royalty and license fees,
commitments, obligations and other liabilities of any nature whatsoever of Seller and its direct
and indirect subsidiaries, whether known or unknown, accrued or not accrued, fixed or contingent,
including, but not limited to (i) any fees or amounts relating to the Excluded Assets; (ii) any
fees or amounts owed or due on any of the Purchased Assets as of the Closing Date; and (iii) any
costs, expenses, judgment, settlement, award or other liabilities relating to any Absolute
Litigation Matters.

     2.4 Purchase Price. Subject to the performance by Seller and Buyer of all of their
obligations under this Agreement, in consideration of the acquisition of the Purchased Assets under
Section 2.1, Buyer agrees to pay to an account or accounts designated by Seller, from time to time,
up to an aggregate amount equal to $5,000,000 (such aggregate amount, the “Total Purchase
Price”) in immediately available funds in accordance with the following payment schedule,
subject to the conditions, terms and adjustments set forth in this Agreement:

          (a) On the Closing Date, Buyer will pay Seller $3,500,000 (the “Initial Purchase
Price”);

          (b) Buyer will pay Seller $750,000 following [**] (the “First Earn-out”), [**] (the
“First Earn-out Date”); and

          (c) Buyer will pay Seller $750,000 upon [**] (the “Second Earn-out”), [**] (the
“Second Earn-out Date”).

Each earn-out shall be subject to complete forfeiture if achievement of the applicable metric does
not occur by the stated date. Any such forfeiture will be deemed an adjustment to the Total
Purchase Price in an amount equal to the forfeited earn-out. [**]

     2.5 Purchase Price Allocation. The Total Purchase Price shall, for purposes of
complying with the requirements of Section 1060 of the Internal Revenue Code of 1986, as amended,
and the regulations thereunder, be allocated in accordance with the allocation statement attached
hereto as Exhibit F (the “Allocation Statement”). If the Total Purchase Price is
adjusted as a result of the forfeiture of the First Earn-out and/or the Second Earn-out pursuant to Section 2.4, or as a result
of any indemnification claims pursuant to Section 10, then the parties agree that such adjusted
Total Purchase Price (the “Adjusted Purchase Price”) shall be allocated in the same
proportion as set forth on the attached Allocation Statement. Buyer and Seller agree to each
prepare and file on a timely basis with the Internal Revenue Service (and applicable state tax
authorities) substantially identical Internal Revenue Service Forms 8594 (and corresponding state
tax forms) consistent with such allocation of the Total Purchase

[THE SYMBOL [**] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SEC. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTION.]

-4-

 

Price (or, if applicable, the
Adjusted Purchase Price). If any Tax authority challenges such allocation, the party receiving
notice of such challenge shall give the other prompt written notice thereof and the parties shall
cooperate in order to preserve the effectiveness of such allocation.

3. Closing

     3.1 Closing. Subject to the terms and conditions of this Agreement, the Closing shall
take place on the date that is three (3) business days after all conditions precedent in Sections 8
and 9 have been satisfied or waived or as the parties may otherwise agree, but in any case no later
than thirty (30) days from the date hereof (the “Closing Date”).

     3.2 Actions at the Closing. At the Closing, Seller shall deliver the Purchased Assets
to Buyer, Buyer shall deliver the Initial Purchase Price to Seller, and Buyer and Seller shall take
such actions and execute and deliver such agreements, bills of sale and other instruments and
documents as necessary or appropriate to effect the transactions contemplated by this Agreement in
accordance with its terms, including without limitation the following:

          (a) Purchase Price. Buyer shall deliver the Initial Purchase Price to Seller.

          (b) Title. Seller shall provide reasonable evidence of valid title to such of the
Purchased Assets as Buyer may reasonably request in writing prior to the Closing, in form and
substance reasonably satisfactory to Buyer.

          (c) Seller Documents. At the Closing, Seller shall deliver to Buyer any and all
documents required to satisfy the conditions set forth in Section 8 of this Agreement and any other
closing documents reasonably requested by Buyer.

          (d) Buyer Documents. At the Closing, Buyer shall deliver to Seller any and all
documents required to satisfy the conditions set forth in Section 9 of this Agreement and any other
closing documents reasonably requested by Seller.

          (e) Non-Competition Agreements. At the Closing, the Seller shall deliver to the Buyer
the duly executed Non-Competition Agreements.

          (f) Consulting Services Agreement. At the Closing, the Seller shall deliver to the
Buyer a duly executed Consulting Services Agreement.

          (g) Sub-License Agreement. At the Closing, the Seller shall deliver to the Buyer a
duly executed Sub-License Agreement.

          (h) Bill of Sale and Assignment. At the Closing, the Seller shall deliver to Buyer a
duly executed Bill of Sale and Assignment.

          (i) Post-Closing Actions. Subsequent to the Closing Date, Seller shall, and shall
cause any Affiliate of Seller to, from time to time execute and deliver, upon the request of Buyer,
all such other and further materials and documents and instruments of conveyance, transfer or
assignment as may reasonably be requested by Buyer to effect, record or verify the transfer to and
vesting in Buyer of Seller’s and any of Seller’s Affiliates’ right, title and interest in and to
the Purchased Assets, free and clear of all Liens in accordance with the terms of this Agreement.

4. Representations and Warranties of Seller

-5-

 

     Except as may be set forth in a Seller Disclosure Schedule and any limiting or qualifying
language contained in the representation and warranty, each representation and warranty set out in
this Section 4 is not qualified in any way whatsoever; will not merge on Closing or by reason of
the execution and delivery of any agreement, document or instrument at the Closing; and will remain
in force on and after the Closing Date until the one (1) year anniversary of the Closing Date
Seller represents and warrants to Buyer as follows:

     4.1 Organization. Seller is a company duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has full corporate power and
authority and the legal right to execute and deliver this Agreement and all of the other agreements
and instruments to be executed and delivered by Seller pursuant hereto, and to consummate the
transactions contemplated hereby and thereby.

     4.2 Authority. The execution and delivery of this Agreement (and all other agreements
and instruments contemplated under this Agreement) by Seller, the performance by Seller of its
obligations hereunder and thereunder, and the consummation by Seller of the transactions
contemplated hereby and thereby have been duly authorized by all necessary action, if any, by the
Board of Directors and shareholders of Seller, and no other act or proceeding on the part of or on
behalf of Seller or its shareholders is necessary to approve the execution and delivery of this
Agreement and such other agreements and instruments, the performance by Seller of its obligations
hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby.
The signatory officers of Seller have the power and authority to execute and deliver this Agreement
and all of the other agreements and instruments to be executed and delivered by Seller pursuant
hereto, to consummate the transactions hereby and thereby contemplated and to take all other
actions required to be taken by Seller pursuant to the provisions hereof and thereof.

     4.3 Execution and Binding Effect. This Agreement has been duly and validly executed
and delivered by Seller and constitutes, and the other agreements and instruments to be executed
and delivered by Seller pursuant hereto, upon their execution and delivery by Seller, will
constitute (assuming, in each case, the due and valid authorization, execution and delivery thereof
by Buyer), legal, valid and binding agreements of Seller, enforceable against Seller in accordance
with their respective terms except as enforceability may be limited by bankruptcy, insolvency,
moratorium, or other laws affecting the enforcement of creditors’ rights generally or provisions
limiting competition, and by equitable principles.

     4.4 Consents and Approvals of Governmental Entities. Other than the Governmental
Authorizations, there is no requirement applicable to Seller to make any filing, declaration or
registration with, or to obtain any permit, authorization, consent or approval of, any Governmental
Entity as a condition to the lawful consummation by Seller of the transactions contemplated by this
Agreement and the other agreements and instruments to be executed and delivered by Seller pursuant
hereto or the consummation by Seller of the transactions contemplated herein or therein.

     4.5 No Violation. Neither the execution, delivery and performance of this Agreement
and all of the other agreements and instruments to be executed and delivered pursuant hereto, nor
the consummation of the transactions contemplated hereby or thereby, will, with or without the
passage of time or the delivery of notice or both, (a) conflict with, violate or result in any
breach of the terms, conditions or provisions of the organizational documents of Seller, (b) 
result in a violation or breach of, or constitute a default or require the consent of any Person
(or give rise to any right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any contract, notice, bond, mortgage, indenture, license, franchise,
permit, agreement, lease or other instrument or obligation to which Seller is a party or by which
Seller or any of the Purchased Assets may be bound, (c) to Seller’s

-6-

 

knowledge, violate any statute,
ordinance or law or any rule, regulation, order, writ, injunction or decree of any Governmental
Entity applicable to Seller or by which any properties or assets of Seller may be bound, or (d)
result in any cancellation of, or obligation to repay, any grant, loan or other financial
assistance received by Seller from any Governmental Entity.

     4.6 Intellectual Property.

          (a) Other than the Excluded Assets set forth on Schedule 2.2, the Purchased Assets include all
of Seller’s rights, title and interest in and to all of the Intellectual Property Assets of Seller
that relate to, are used in, or are derived from the Business Products as of the date of this
Agreement.

          (b) Seller holds good and conveyable title or license to the Purchased Assets and has the
complete and unrestricted power and the unqualified right to sell, assign, transfer and deliver the
Purchased Assets.

          (c) Upon consummation of the transactions contemplated by this Agreement, Buyer will acquire
good and conveyable title or license to the Purchased Assets, free and clear of any Liens.

          (d) There exists no restriction (contractual, governmental or otherwise) on the use or
transfer of the Purchased Assets.

          (e) Except for the licensor under any license, no Person other than Seller has any right or
interest in any of the Purchased Assets, including the right to grant interests in any of the
Purchased Assets to third parties.

          (f) No notice of any violation of any law relating to any of the Purchased Assets has been
received by Seller.

          (g) Except as set forth in the Schedule 4.6(g), the execution, delivery and
performance of this Agreement and the consummation of the transactions contemplated hereby
(including without limitation the incorporation of any of the Purchased Assets in any product of
Buyer or an affiliate of Buyer) will not (i) breach or violate any instrument or agreement relating
to any of the Purchased Assets, (ii) to Seller’s knowledge, cause the forfeiture or termination or
give rise to a right of forfeiture or termination of any of the Purchased Assets or (iii) to
Seller’s knowledge, in any way impair the right of Buyer or any of its affiliates to display, make,
use, sell, offer for sale, license or dispose of, or to bring any action for the infringement of,
any of the Purchased Assets or portion thereof.

          (h) None of the Purchased Assets violate any license or agreement to which Seller is a party
or, to Seller’s knowledge, infringes any copyright, patent, trademark, service mark, trade secret
or other intellectual property or other proprietary right of any other party.

          (i) There is, to Seller’s knowledge, no unauthorized use, infringement or misappropriation on
the part of any third party of any of the Purchased Assets.

          (j) Seller has taken commercially reasonable steps to maintain the secrecy and confidentiality
of, and its proprietary rights in, the Purchased Assets, including, without limitation, entering
into confidentiality and invention assignment agreements (“CIAA”) with all current and
former officers and employees of and consultants to Seller with access to or knowledge of the
Purchased Assets. To Seller’s knowledge, none of such current or former officers, employees or
consultants is in breach of their CIAA with Seller.

-7-

 

          (k) Schedule 4.6(k) sets forth a complete and accurate list of all applications,
filings, publications and other formal actions made or taken pursuant to federal, state, local and
foreign laws by Seller to perfect or protect its interest in the Purchased Assets, including,
without limitation, all patents, patent applications, trademarks, trademark applications, service
marks and copyright or mask work registrations.

          (l) All fees payable by the Seller to maintain Seller’s rights in the Purchased Assets,
including, without limitation, royalties and license fees in connection therewith due and payable
on or before the Closing Date, have been paid by Seller or will be paid by Seller within a
reasonable period after the Closing and are listed on Schedule 4.6(l).

          (m) Schedule 4.6(m) sets forth a complete and accurate list of all intellectual
property licensed by Seller that are a part of, incorporated into or are otherwise used in the
Business Products as of the date of this Agreement including, but not limited to, any off-the-shelf
software and any source code developed by and licensed from any third parties. The Purchased
Assets do not contain, use or otherwise link to any GNU Public License Code or other open source
code or libraries. Seller has provided Buyer copies of all licenses and license agreements (or
links thereto) for the intellectual property listed on Schedule 4.6(m).

          (n) Neither Seller nor any other Person authorized to act on its behalf has disclosed or
delivered to any Person, or permitted the disclosure or delivery to any escrow agent or other
Person of, any Seller source code included in the Purchased Assets. No event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time, or both) shall, or
would reasonably be expected to, result in the disclosure or delivery by Seller or any other Person
authorized to act on its behalf to any Person of any such source code.

     4.7 Tools. Schedule 4.7 sets forth a complete and accurate list of all
software and hardware tools necessary for the development, debugging, building, testing,
maintenance and use of the Business Products as of the date of this Agreement.

     4.8 Litigation; Other Claims.

          (a) Other than the Absolute Litigation Matters and the matters disclosed on Schedule
4.8, there is no pending or, to Seller’s knowledge, threatened claim or litigation contesting
the validity, ownership or right to display, make, use, sell, offer for sale, import, license or
dispose of any of the Purchased Assets, nor is there, to Seller’s knowledge, any basis for any such
claim, nor has Seller received any notice asserting that any of the Purchased Assets or the
proposed use, sale, license or disposition thereof conflicts or will conflict with the rights of
any other party, nor is there any basis for any such assertion.

          (b) There are no claims, actions, suits, inquiries, proceedings, or investigations against
Seller, or any of its officers, directors or shareholders, relating to the Purchased Assets which
challenges or seeks to prevent, enjoin, alter or materially delay any of the transactions
contemplated hereby, nor is Seller aware of any basis for such claims, actions, suits, inquiries,
proceedings, or investigations.

     4.9 Defaults. Seller is not in default under or with respect to any judgment, order,
writ, injunction or decree of any court or any Governmental Entity which could reasonably be
expected to have an adverse effect on any of the Purchased Assets. There does not exist any
default by Seller or, to Seller’s knowledge, by any other Person, or event that, with notice or
lapse of time, or both, would constitute a default under any agreement entered into by Seller which
could reasonably be expected to

-8-

 

have an adverse effect on the Purchased Assets, and no notices of
breach thereof have been received by Seller.

     4.10 Schedules. The Seller Disclosure Schedules are complete and accurate.

     4.11 Brokers and Finders; Other Parties.

          (a) Neither Seller nor any of its officers, directors or employees has employed any broker or
finder or incurred any liability for any brokerage fee, commission or finder’s fee in connection
with the Purchase Transaction contemplated by this Agreement.

          (b) Schedule 4.11 lists all of the contingent fee agreements or any other agreements
or arrangements between Seller and David Baran or any Person whereby such Person may have a right
to receive any payments from Seller or Buyer upon the consummation of the Purchase Transaction or a
portion of the consideration to be paid to Seller in connection with the Purchase Transaction (the
amounts payable under any such agreements or arrangements, the “Transaction Fees”). Buyer
has provided copies of all agreements set forth on Schedule 4.11.

     4.12 Fair Consideration; No Fraudulent Conveyance. The sale of the Purchased Assets
pursuant to this Agreement is made in exchange for fair and equivalent consideration. Seller is
not entering into this Agreement or any of the other agreements referenced in this Agreement with
the intent to defraud, delay or hinder its creditors and the consummation of the transactions
contemplated by this Agreement, and the other agreements referenced in this Agreement, will not
have any such effect. The transactions contemplated in this Agreement or any agreements referenced
in this Agreement will not constitute a fraudulent conveyance, or otherwise give rise to any right
of any creditor of Seller to any of the Purchased Assets after the Closing.

     4.13 Tax Matters. Seller has paid, or will pay, all Taxes for any Tax period (or
portion thereof) ending before the close of business on the date preceding the Closing Date.

5. Representations and Warranties of Buyer

     Buyer represents and warrants to Seller as follows:

     5.1 Organization. Buyer is a corporation duly formed and validly existing under the
laws of Delaware, and has full corporate power and authority and the legal right to execute and
deliver this Agreement and all of the other agreements and instruments to be executed and delivered
by Buyer pursuant hereto, and to consummate the transactions contemplated hereby and thereby.

     5.2 Authority. The execution and delivery of this Agreement (and all other agreements
and instruments contemplated hereunder) by Buyer, the performance by Buyer of its obligations
hereunder and thereunder, and the consummation by Buyer of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action, if any, by the Board of Directors of
Buyer, and no other act or proceeding on the part of Buyer or its shareholders is necessary to
approve the execution and delivery of this Agreement and such other agreements and instruments, the
performance by Buyer of its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby. The signatory officers of Buyer have the power and
authority to execute and deliver this Agreement and all of the other agreements and instruments to
be executed and delivered by Buyer pursuant hereto, to consummate the transactions hereby and
thereby contemplated and to take all other actions required to be taken by Buyer pursuant to the
provisions hereof and thereof.

-9-

 

     5.3 Execution and Binding Effect. This Agreement has been duly and validly executed
and delivered by Buyer and constitutes, and the other agreements and instruments to be executed and
delivered by Buyer pursuant hereto, upon their execution and delivery by Buyer, will constitute
(assuming, in each case, the due and valid authorization, execution and delivery thereof by
Seller), legal, valid and binding agreements of Buyer, enforceable against Buyer in accordance with
their respective terms, except as enforceability may be limited by bankruptcy, insolvency,
moratorium, or other laws affecting the enforcement of creditors’ rights generally or provisions
limiting competition, and by equitable principles.

     5.4 Consent and Approvals. There is no requirement applicable to Buyer to make any
filing, declaration or registration with, or to obtain any permit, authorization, consent or
approval of, any Governmental Entity as a condition to the lawful consummation by Buyer of the
transactions contemplated by this Agreement and the other agreements and instruments to be executed
and delivered by Buyer pursuant hereto, except for filings (a) which are referred to in the Seller
Disclosure Schedule or (b) the failure of making which would not have a material adverse effect on
the transactions contemplated hereby.

     5.5 No Violation. Neither the execution, delivery and performance of this Agreement
and of all the other agreements and instruments to be executed and delivered pursuant hereto, nor
the consummation of the transactions contemplated hereby or thereby, will, with or without the
passage of time or the delivery of notice or both, (a) conflict with, violate or result in any
breach of the terms, conditions or provisions of the organizational documents of Buyer,
(b) conflict with or result in a violation or breach of, or constitute a default or require consent
of any Person (or give rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any notice, bond, mortgage, indenture, license,
franchise, permit, agreement, lease or other instrument or obligation to which Buyer is a party or
by which Buyer or any of its properties or assets may be bound, or (c) to Buyer’s knowledge,
violate any statute, ordinance or law or any rule, regulation, order, writ, injunction or decree of
any Governmental Entity applicable to Buyer or by which any of its properties or assets may be
bound.

[**]

6. Covenants.

     6.1 Third Party Consents. Seller and Buyer shall use commercially reasonable efforts
to obtain, within the applicable time periods required, all waivers, permits, consents (including
the Baran Consent and Baran Amendment), Governmental Authorizations and approvals and to effect all
registrations, filings and notices with or to third parties or Governmental Entities which are
necessary to consummate the transactions contemplated by this Agreement so as to preserve all
rights of, and benefits to, the Buyer in the Purchased Assets.

     6.2 No Other Bids. Until the earlier to occur of (a) the Closing or (b) the
termination of this Agreement pursuant to its terms, Seller shall not, and Seller shall not
authorize any of its officers, directors, employees or other representatives to, directly or
indirectly, (i) initiate, solicit or encourage (including by way of furnishing information
regarding the Seller’s business or the Purchased Assets) any inquiries, or make any statements to
third parties which may reasonably be expected to lead to any proposal concerning the sale of the
Purchased Assets (or any proposal for a transaction that would include the disposition of any or
all of the Purchase Assets, including a sale of any of Seller’s outstanding capital stock or a
merger of Seller with another Person) or (ii) negotiate, engage in any substantive discussions, or
enter into any agreement, with any Person concerning the sale of the Purchased Assets (or any
transaction that would include the disposition of any or all of the Purchase Assets, including a
sale of any of Seller’s outstanding capital stock or a merger of Seller with another Person).

[THE SYMBOL [**] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SEC. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTION.]

-10-

 

     6.3 Post-Closing Access to Information. If, after the Closing Date, it is necessary
for a party hereto to obtain additional information within the other party’s possession relating to
the Purchased Assets or any other transaction contemplated herein, such other party will furnish or
cause its representatives to furnish such information to the requesting party.

     6.4 Post-Closing Cooperation. Seller agrees that, if reasonably requested by Buyer,
it will cooperate with Buyer, at Buyer’s expense, in enforcing the terms of any agreements between
Seller and any third party involving the Purchased Assets, including without limitation terms
relating to confidentiality and the protection of intellectual property rights (but, for purposes
of clarity, excluding any claim or enforcement action relating to the Baran License Agreement). In
the event that Buyer is unable to enforce its intellectual property rights against a third party as
a result of a rule or law barring enforcement of such rights by a transferee of such rights, Seller
agrees to reasonably cooperate with Buyer by assigning to Buyer such rights as may be required by
Buyer to enforce its intellectual property rights in its own name. If such assignment still does
not permit Buyer to enforce its intellectual property rights against the third party, Seller agrees
to initiate proceedings against such third party in Seller’s name, provided that Buyer shall be
entitled to participate in such proceedings and provided further that Buyer shall be responsible
for the expenses of such proceedings. If the Seller or its representatives participate in any
proceedings pursuant to this Section 6.4, the Seller shall be reimbursed for all costs associated
with such participation including, but not limited to, the Seller’s legal fees, travel costs and
reasonable compensation as agreed to by the parties for time spent by the Seller or its
representatives in participating in the proceedings.

     6.5 Public Announcements. Seller shall not make any public disclosure regarding this
Agreement and the transactions contemplated herein without the prior written consent of Buyer;
provided, however, that nothing contained herein shall prevent Seller from furnishing any
information required by a Governmental Entity. Buyer will provide prior notice to and consult with
Seller prior to making any public disclosure regarding this Agreement and the transactions
contemplated herein.

     6.6 Confidentiality. This Agreement and the transactions and other agreements
contemplated herein are subject to the Mutual Non-Disclosure Agreement dated July 6, 2007 between
Buyer and Seller (the “Mutual NDA”).

     6.6 Post-Closing Actions. Subsequent to the Closing Date, the Seller and the Buyer
shall each deliver or cause to be delivered to the other following the Closing Date such additional
instruments as the other may reasonably request for the purpose of fully carrying out this
Agreement. Without limiting the foregoing, Seller shall, from time to time, execute and deliver,
upon the request of Buyer, all such other and further materials and documents and instruments of
conveyance, transfer or assignment as may reasonably be requested by Buyer to effect, record or verify the transfer to, and vesting
in Buyer, of Seller’s right, title and interest in and to the Purchased Assets, free and clear of
all Liens, in accordance with the terms of this Agreement.

     6.7 Taxes. Seller shall be responsible for paying, shall promptly discharge when due,
and shall reimburse, indemnify and hold harmless Buyer from, any sales or use, transfer, real
property gains, excise, stamp, or other similar Taxes arising from, imposed on or attributable to
the transactions contemplated by this Agreement.

     6.8 Seller’s Conduct of the Business Prior to Closing. During the period from the
date of this Agreement to the Closing Date, Seller shall promptly notify Buyer of any material,
adverse event, occurrence or emergency not in the ordinary course of business involving the
Purchased Assets. Except as approved in writing by Buyer in advance, prior to the Closing, Seller
will not (a) create, incur or assume any obligation which would in any material way affect the
Purchased Assets; (b) sell, dispose of

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or encumber any of the Purchased Assets or license any
Purchased Assets to any third party; or (c) make any material changes to any of the Purchased
Assets without Buyer’s prior written consent or at Buyer’s request.

     6.9 Seller’s Customers. Seller shall be responsible for all of its commitments and
obligations under any license, service, consulting or other agreement with any customer, vendor or
other third party and shall indemnify Buyer against any Damages relating to or arising from such
commitments and obligations in accordance with Section 10. Pursuant to the Non-Competition
Agreements, Seller shall not, and shall cause its resellers and distributors and other partners not
to, license or sell any Business Products from and after the three (3) month anniversary of the
Closing Date.

     6.10 Payments to Third Parties. Seller shall be responsible for the payment of all
Transaction Fees and shall indemnify Buyer against any Damages relating to or arising from any
Transaction Fees in accordance with Section 10.

[**]

7. License to Seller.

     7.1 License. Subject to the terms and conditions of this Agreement, upon the Closing
of the Purchase Transaction, Buyer shall grant to Seller a non-exclusive, non-transferable,
worldwide and royalty-free license to utilize the Purchased Assets (the “Seller License”)
for the sole purpose of supporting Business Products sold and licensed by Seller prior to, and for
a period of up to three (3) months following, the Closing Date. The Seller License does not give
Seller any right to sub-license the Purchased Assets to any third party.

     7.2 Term. The Seller License shall be effective on the Closing Date and shall expire
on the [**]. Buyer may terminate the Seller License for any material failure by Seller to perform
Seller’s obligations under this Section 7 or the Agreement that is not remedied within thirty (30)
days of written notice from Buyer. At the expiration or termination of the Seller License Term,
Seller shall return or destroy all copies of the Purchased Assets and related materials, and an
authorized officer shall certify such return or destruction to Buyer in writing.

     7.3 Confidential Information. The Purchased Assets shall be and remain the
confidential and proprietary information of Buyer during and following the Seller License Term and
shall be subject to the Mutual NDA.

     7.4 Disclaimer of Warranty. THE PURCHASED ASSETS SHALL BE LICENSED “AS IS” TO SELLER.
BUYER MAKES NO REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION ANY REPRESENTATIONS OR WARRANTIES AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, OR NON-INFRINGEMENT. IN NO EVENT WILL BUYER BE LIABLE TO THE SELLER FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL PENALTIES OR DAMAGES, INCLUDING LOST PROFITS, ARISING FROM THE
SELLER LICENSE OR SELLER’S USE OF THE PURCHASED ASSETS, EVEN IF BUYER HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.

8. Conditions to Buyer’s Obligations.

     The obligations of Buyer under this Agreement are subject to the fulfillment, prior to or on
the Closing Date, of each of the following conditions, all or any of which may be waived by Buyer
in writing, except as otherwise provided by law:

[THE SYMBOL [**] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SEC. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTION.]

-12-

 

     8.1 Representations and Warranties True; Performance; Certificate.

          (a) The representations and warranties of Seller contained in this Agreement shall be true and
correct in all material respects as of the Closing Date with the same effect as though such
representations and warranties had been made or given again at and as of the Closing Date;

          (b) Seller shall have performed and complied with all of its agreements, covenants and
conditions required by this Agreement to be performed or complied with by them prior to or on the
Closing Date; and

          (c) The conditions set forth in this Section 8 have been fulfilled or satisfied, unless
otherwise waived in writing by Buyer.

     8.2 Consents. All Governmental Authorizations and required third-party consents,
including the Baran Consent and Baran Amendment, shall have been obtained.

     8.3 No Proceedings or Litigation.

          (a) No preliminary or permanent injunction or other order shall have been issued by any
Governmental Entity, nor shall any statute, rule, regulation or executive order be promulgated or
enacted by any Governmental Entity which prevents the consummation of the transactions contemplated
by this Agreement.

          (b) No suit, action, claim, proceeding or investigation before any Governmental Entity shall
have been commenced and be pending against any of the parties, or any of their respective
Affiliates, associates, officers or directors, seeking to prevent transactions contemplated by this
Agreement, including, without limitation, the sale of the Purchased Assets or asserting that the
sale of the Purchased Assets would be illegal or create liability for damages or which may have a
Material Adverse Effect on the Purchased Assets.

     8.4 Documents. This Agreement, the exhibits and schedules attached hereto, and any
other instruments of conveyance and transfer and all other documents to be delivered by Seller at
the Closing and all actions of Seller required by this Agreement and the exhibit agreements, or
incidental thereto, and all related matters, shall be in form and substance reasonably satisfactory
to Buyer and Buyer’s counsel and shall be in full force and effect.

     8.5 Governmental Filings. The parties shall have made any required filing with
Governmental Entities in connection with this Agreement and the exhibit agreements, and any
approvals related thereto shall have been obtained or any applicable waiting periods shall have
expired. If a proceeding or review process by a Governmental Entity is pending in which a decision
is expected, Buyer shall not be required to consummate the transactions contemplated by this
Agreement until such decision is reached or rendered, notwithstanding Buyer’s legal ability to
consummate the transactions contemplated by this Agreement prior to such decision being reached or
rendered. Buyer shall be liable for any fees and expenses relating to filings with any
Governmental Entities.

     8.6 Material Adverse Change. There has not been a material adverse change to the
Purchased Assets.

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9. Conditions to Seller’s Obligations

     The obligations of Seller under this Agreement are subject to the fulfillment, prior to or on
the Closing Date, of each of the following conditions, all or any of which may be waived in writing
by Seller, except as otherwise provided by law:

     9.1 Representations and Warranties True; Performance.

          (a) The representations and warranties of Buyer contained in this Agreement shall be true and
correct in all material respects as of the Closing Date with the same effect as though such
representations and warranties had been made or given again at and as of the Closing Date;

          (b) Buyer shall have performed and complied with all of its agreements, covenants and
conditions required by this Agreement to be performed or complied with by them prior to or on the
Closing Date; and

          (c) The conditions set forth in this Section 9 have been fulfilled or satisfied, unless
otherwise waived in writing by Seller.

     9.2 No Proceeding or Litigation. No preliminary or permanent injunction or other
order shall have been issued by any Governmental Entity, nor shall any statute, rule, regulation or
executive order be promulgated or enacted by any Governmental Entity which prevents the
consummation of the transactions contemplated by this Agreement.

     9.3 Documents. This Agreement, any other instruments of conveyance and transfer and
all other documents to be delivered by Buyer to Seller at the Closing and all actions of Buyer
required by this Agreement or incidental thereto, and all related matters, shall be in form and
substance reasonably satisfactory to Seller and Seller’s counsel.

     9.4 Consents. All Governmental Authorizations and required third-party consents,
including the Baran Consent and Baran Amendment, shall have been obtained.

10. Indemnification. 

     10.1 Survival of Representations and Warranties. All representations and warranties
in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the
consummation of the transactions contemplated hereby and continue
until the [**] anniversary of the
Closing Date (the “Indemnity Termination Date”); provided that if any claims for
indemnification have been asserted with respect to any such representations and warranties prior to
the Indemnity Termination Date, the representations and warranties on which any such claims are
based shall continue in effect until final resolution of any claims, and provided,
further, that (a) the representations in Sections 4.1 [Organization], 4.2 [Authority], 4.3
[Execution and Binding Effect] and 4.5 [No Violation] shall continue indefinitely; (b) the
representations and warranties set forth in Section 4.6
[Intellectual Property] shall survive [**]; and
(c) representations and warranties relating to Taxes shall survive until thirty (30) days after
expiration of all applicable statutes of limitations relating to such Taxes. All covenants and
agreements set forth in the Agreement shall continue indefinitely.

     10.2 Indemnification by Seller. Subject to the limitations set forth in this Section
10, from and after the Closing Date, Seller shall protect, defend, indemnify and hold harmless
Buyer and Buyer’s Affiliates, officers, directors, employees, representatives and agents (each of
the foregoing Persons is hereinafter referred to individually as a
“Buyer Indemnified
Person” and collectively as “Buyer Indemnified Persons”)

[THE SYMBOL [**] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SEC. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTION.]

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from and against any and all
losses, costs, damages, liabilities, fees (including without limitation attorneys’ fees) and
expenses (collectively, the “Damages”), that any of the Buyer Indemnified Persons incurs or
reasonably anticipates incurring by reason of or in connection with (a) any claim, demand, action
or cause of action alleging misrepresentation, breach of, or default in connection with, any of the
representations, warranties, covenants or agreements of the Seller contained in this Agreement,
including any exhibits or schedules attached hereto (b) any Excluded Asset; (c) any Excluded
Liability; or (d) Seller’s utilization of the Purchased Assets prior to Closing and from and after
the Closing pursuant to Section 7. Damages in each case shall be net of the amount of any
insurance proceeds and indemnity and contribution actually recovered by Buyer.

     10.3 Indemnification by the Buyer. Subject to the limitations set forth in this
Section 10, from and after the Closing Date, Buyer shall protect, defend, indemnify and hold
harmless Seller and Seller’s Affiliates, officers, directors, employees, representatives and agents
(each of the foregoing Persons is hereinafter referred to individually as a “Seller Indemnified
Person” and collectively as “Seller Indemnified Persons”) from and against any and all
Damages, that any of the Seller Indemnified Persons incurs or reasonably anticipates incurring by reason of or in connection with (a) any claim,
demand, action or cause of action alleging misrepresentation, breach of, or default in connection
with, any of the representations, warranties, covenants or agreements of the Buyer contained in
this Agreement, including any exhibits or schedules attached hereto or (b) Buyer’s utilization of
the Purchased Assets from and after the Closing. Damages in each case shall be net of the amount
of any insurance proceeds and indemnity and contribution actually recovered by Seller.

     10.4 Procedures Relating to Indemnification.

          (a) Upon incurring or reasonably anticipating the incurrence of Damages, a Seller Indemnified
Person or Buyer Indemnified Person (an “Indemnified Person”) will deliver to the Buyer or
the Seller, as applicable ( an “Indemnifying Person”), a letter signed by an authorized
representative of Indemnified Person (a “Claim Notice”) which describes in reasonable
detail the claimed Damages. If the Indemnifying Person does not object to such Claim Notice within
ten (10) business days, the Indemnifying Person shall be deemed to have accepted the claim or
claims set forth in the Claim Notice and shall waive and forfeit any right to dispute such claims.
The Indemnifying Person shall then promptly pay the claimed amount to an account designated by the
Indemnified Person. If Seller is the Indemnifying Person and Seller does not promptly pay the
claimed amount to the Buyer Indemnified Person or Seller disputes the claimed amount, Buyer shall
be entitled to offset the claimed amount from any earn-out Seller may be entitled to received under
Section 2.4 or, in the case of a dispute, delay payment of any earn-out until such dispute is
resolved.

          (b) If the Indemnifying Person objects to any or all claims set forth in a Claim Notice, the
Indemnifying Person shall deliver a letter signed by an officer or duly authorized representative
of the Indemnifying Person (an “Objection Notice”) which describes in reasonable detail the
Indemnifying Person’s objections. The parties will then negotiate in good faith to resolve any
outstanding issues.

          (c) In order for an Indemnified Person to be entitled to any indemnification provided for
under this Agreement in respect of, arising out of or involving a claim made by any third party
against the Indemnified Person (a “Third-Party Claim”), such Indemnified Person must
provide the Indemnifying Person with a Claim Notice regarding the Third-Party Claim promptly and in
any event within ten (10) days after receipt by such Indemnified Person of written notice of the
Third-Party Claim; provided, however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the Indemnifying Person shall have been
actually and materially prejudiced as a result of such failure. Thereafter, the Indemnified Person
shall deliver to the Indemnifying Person, promptly

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after the Indemnified Person’s receipt thereof,
copies of all notices and documents (including court papers) received by the Indemnified Person
relating to the Third-Party Claim.

          (d) If a Third-Party Claim is made against an Indemnified Person, the Indemnified Person shall
have the right to participate in the defense thereof and, at its own expense, to employ counsel
reasonably acceptable to the Indemnifying Person, separate from the counsel employed by the
Indemnifying Person, it being understood that the Indemnifying Person shall control such defense.
the Indemnifying Person shall be liable for the fees and expenses of counsel employed by the
Indemnified Person for any period during which the Indemnifying Person has not assumed the defense
thereof. All the parties hereto shall cooperate in the defense or prosecution thereof. Such
cooperation shall include the retention and (upon the Indemnifying Person’s request) the provision
to the Indemnifying Person of records and information which are reasonably relevant to such
Third-Party Claim, and making officers, directors, employees and agents of the Indemnified Person
available on a mutually convenient basis to provide information, testimony at depositions, hearings
or trials, and such other assistance as may be reasonably requested by the Indemnifying Person. Notwithstanding the foregoing, in the event
a Third-Party Claim is made against an Indemnified Person as to which such Indemnified Person is
entitled to seek indemnification hereunder and such Indemnified Person reasonably concludes that
the Indemnifying Person lacks the financial and personnel resources to vigorously defend such
Indemnified Person, that the Indemnifying Person has failed to assume the defense of the
Indemnified Person, or that the Indemnifying Person is not diligently defending such Indemnified
Person, then in each such case the Indemnified Person may elect to retain the defense of such
Third-Party Claim and will be entitled to be reimbursed by the Indemnifying Person for its Losses
incurred in such defense (including, without limitation, reasonable attorneys fees), such
expenditures to be reimbursed promptly after submission of invoices therefor. Whether or not the
Indemnifying Person shall have assumed the defense of a Third-Party Claim, the Indemnified Person
shall not admit any liability with respect to, or settle, compromise or discharge, such Third-Party
Claim without the Indemnifying Person’s prior written consent (which consent shall not be
unreasonably withheld or delayed). the Indemnifying Person shall not admit any liability with
respect to, or settle, compromise or discharge any Third-Party Claim without the Indemnified
Person’s prior written consent (which consent shall not be unreasonably withheld or delayed);
provided, however, that such consent shall not be required for any settlement, compromise or
discharge of a Third-Party Claim that by its terms obligates the Indemnifying Person to pay the
full amount of the liability in connection with such Third-Party Claim, which releases the
Indemnified Person completely in connection with such Third-Party Claim, and which does not
otherwise have any material adverse effect on the Indemnified Person.

     10.5 Threshold and Cap. Notwithstanding any other provision of this Section 10 to the
contrary:

          (a) Except for claims relating to or arising from Section 10.2(b), (c) and (d) and Sections
6.9 and 6.10, a Buyer Indemnified Person shall be entitled to indemnification under Section 10.2
only when the aggregate of Damages incurred by the Buyer Indemnified
Persons exceeds $[**] (the
“Threshold Amount”), at which time the Buyer Indemnified Person shall be entitled to be
indemnified against and compensated and reimbursed for all Damages, including the Threshold Amount;

          (b) Except for claims relating to or arising from Section 10.2(b), (c) and (d) and Sections
6.9 and 6.10, or arising from Seller fraud or willful misconduct, the Seller shall not be required
to make any indemnification payment pursuant to Section 10.2 after the Seller has paid to all Buyer
Indemnified Persons an amount in the aggregate equal to
[**] (such sum, the “Indemnity
Cap”);

          (c) Except for claims relating to Section 10.3(b), a Seller Indemnified Person shall be
entitled to indemnification under Section 10.3 only when the aggregate of Damages incurred by the

[THE SYMBOL [**] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SEC. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTION.]

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Seller Indemnified Persons exceeds the Threshold Amount, at which time the Seller Indemnified
Person shall be entitled to be indemnified against and compensated and reimbursed for all Damages,
including the Threshold Amount; and

          (d) Except for claims relating to Section 10.3(b) or arising from Buyer fraud or willful
misconduct, the Buyer shall not be required to make any indemnification payment pursuant to Section
10.3 after the Buyer has paid to all Seller Indemnified Persons an amount in the aggregate equal to
the Indemnity Cap.

     10.6 Treatment of Indemnification Claims.  All indemnification payments made under this
Agreement shall be treated by all parties as an adjustment to the Total Purchase Price.

11. Termination.

     11.1 Termination of Agreement. This Agreement may be terminated at any time prior to
the Closing:

          (a) By mutual written consent of Buyer and Seller;

          (b) By Buyer or Seller if any Governmental Entity shall have issued an order, decree or ruling
or taken any other action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement; or

          (c) By either party if the Closing does not occur on or before the thirty (30) day anniversary
of the date hereof.

     11.2 Procedure and Effect of Termination. In the event of termination of this
Agreement by any or all of the parties pursuant to Section 11.1, written notice shall be given to
each other party specifying the provision of Section 11.1, pursuant to which such termination is
made and shall become void and there shall be no liability on the part of Buyer or Seller (or their
respective officers, directors, partners or Affiliates), except as a result of any breach of this
Agreement by such party or to the extent such a party is entitled to indemnification under Section
10 of this Agreement.

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12. Miscellaneous.

     12.1 Amendments and Waivers. Any term of this Agreement may be amended or waived with
the written consent of the parties or their respective successors and assigns. Any amendment or
waiver effected in accordance with this Section 12.1 shall be binding upon the parties and their
respective successors and assigns.

     12.2 Successors and Assigns. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective successors and permitted assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as expressly provided in
this Agreement.

     12.3 Governing Law; Juridiction. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed
and interpreted in accordance with the laws of the State of California, without giving effect to
principles of conflicts of law. The parties agree to submit to the non-exclusive jurisdiction of
the Superior Court of Santa Clara County, California and/or to the jurisdiction of the United
States District Court for the Northern District of California with respect to any legal action
related to this Agreement.

     12.4 Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original and all of which together shall constitute one instrument.

     12.5 Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.

     12.6 Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight
delivery service or confirmed facsimile, or forty-eight (48) hours after being deposited in the
regular mail as certified or registered mail (airmail if sent internationally) with postage
prepaid, if such notice is addressed to the party to be notified at such party’s address or
facsimile number as set forth below, or as subsequently modified by written notice:

If to Buyer:

Phoenix Technologies Ltd.

915 Murphy Ranch Rd.

Milpitas, CA 95035

Attn: General Counsel

Fax: (408) 570-1044

If to Seller:

XTool Mobile Security, Inc.

1849 Kingwood Dr., Ste. 104

Houston, Texas 77339

Attn: Pedro Camargo, President

Fax: (888) 671-1293

     12.7 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, the parties agree to renegotiate such provision in good faith,
in order to maintain the

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economic position enjoyed by each party as close as possible to that under
the provision rendered unenforceable. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded
from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision
were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its
terms.

     12.8 Entire Agreement. This Agreement and the documents referred to herein are the
product of both of the parties hereto, and constitute the entire agreement between such parties
pertaining to the subject matter hereof and thereof, and merge all prior negotiations and drafts of
the parties with regard to the transactions contemplated herein and therein. Any and all other
written or oral agreements existing between the parties hereto regarding such transactions are
expressly canceled.

     12.9 Advice of Legal Counsel. Each party acknowledges and represents that, in
executing this Agreement, it has had the opportunity to seek advice as to its legal rights from
legal counsel and that the person signing on its behalf has read and understood all of the terms
and provisions of this Agreement. This Agreement shall not be construed against any party by
reason of the drafting or preparation thereof.

[Signature pages follow]

-19-

 

     This Agreement has been duly executed and delivered by the duly authorized officers of Seller
and Buyer as of the date first above written.

	 	 	 	 	 	 	 
	 	 	PHOENIX TECHNOLOGIES LTD.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	XTOOL MOBILE SECURITY, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

-20-

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