Document:

Exhibit
10.83

 

 

ASSET
PURCHASE AGREEMENT

 

By And
Between

 

BIO-KEY
INTERNATIONAL, INC.

 

And

 

INTERACT911
MOBILE SYSTEMS, INC.

 

August 13,
2009

 

 

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  I

  	
     DEFINITIONS

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  1.1

  	
  Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  1.2

  	
  Other
  Definitions

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  II

  	
     PURCHASE
  AND SALE OF ASSETS

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  2.1

  	
  Purchase
  of Assets

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  2.2

  	
  Excluded
  Assets

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  2.3

  	
  Assumed
  Liabilities

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  2.4

  	
  Excluded
  Liabilities

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  2.5

  	
  BIO-key
  License

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  2.6

  	
  Purchase
  Price

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  2.7

  	
  Closing
  Transactions

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  2.8

  	
  Adjustments
  to Purchase Price

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  2.9

  	
  Transfer
  Documents

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  2.10

  	
  Tax
  Allocations

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  2.11

  	
  Transition
  of Subject Business

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  2.12

  	
  Nonassignable
  Contracts

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  III

  	
     REPRESENTATIONS
  AND WARRANTIES OF SELLER

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  3.1

  	
  Organization
  and Corporate Power

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  3.2

  	
  Authorization
  of Transactions

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  3.3

  	
  Sufficiency
  of Assets

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  3.4

  	
  Absence
  of Conflicts

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  3.5

  	
  SEC
  Filings; Financial Statements

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  3.6

  	
  Capitalization

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  3.7

  	
  Absence
  of Undisclosed Liabilities

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  3.8

  	
  Absence
  of Certain Changes

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  3.9

  	
  Title
  to Properties

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  3.10

  	
  Payment
  of Taxes

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  3.11

  	
  Contracts
  and Commitments

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  3.12

  	
  Seller
  Intellectual Property Assets

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  3.13

  	
  Litigation; Proceedings

  	
   

  	
  26

  

 

i

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  3.14

  	
  Governmental
  Permits

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  3.15

  	
  Employees

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  3.16

  	
  Insurance

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  3.17

  	
  Affiliate
  Transactions

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  3.18

  	
  Compliance
  with Laws

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  3.19

  	
  Governmental
  Authorities and Consents

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  3.20

  	
  Product
  Warranties

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  3.21

  	
  Environmental
  Matters

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  3.22

  	
  Broker’s
  Fees

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  3.23

  	
  Disclosure

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  3.24

  	
  Accounts
  Receivable

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  3.25

  	
  Software
  and Information Systems

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  3.26

  	
  Customers
  and Suppliers

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  IV

  	
     REPRESENTATIONS
  AND WARRANTIES OF BUYER

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  4.1

  	
  Organization
  and Good Standing

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  4.2

  	
  Corporate
  Authorization

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  4.3

  	
  No
  Breach

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  4.4

  	
  Financial
  Information

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  4.5

  	
  Litigation;
  Proceedings

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  4.6

  	
  Availability
  of Funds

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  4.7

  	
  Broker’s
  Fees

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  4.8

  	
  Disclosure

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  V

  	
     COVENANTS

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  5.1

  	
  Conduct
  of Business

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  5.2

  	
  No
  Solicitation

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  5.3

  	
  Preparation
  of Proxy Statement; Seller Stockholders’ Meeting

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  5.4

  	
  Access
  to Information; Confidentiality

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  5.5

  	
  Reasonable
  Efforts

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  5.6

  	
  Notification
  of Certain Matters

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  5.7

  	
  Fees and Expenses

  	
   

  	
  40

  

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VI

  	
     CONDITIONS
  TO CLOSING

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  6.1

  	
  Conditions
  to Each Party’s Obligation to Closing

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  6.2

  	
  Conditions
  to Obligations of the Buyer

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  6.3

  	
  Conditions
  to Obligations of Seller

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VII

  	
     Closing
  Deliveries

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  7.1

  	
  Seller’s
  Deliveries at Closing

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  7.2

  	
  Buyer’s
  Deliveries at Closing

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII

  	
     TERMINATION,
  AMENDMENT AND WAIVER

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  8.1

  	
  Termination

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  8.2

  	
  Effect
  of Termination

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  8.3

  	
  Payments

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  IX

  	
     INDEMNIFICATION
  AND RELATED MATTERS

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  9.1

  	
  Survival;
  Risk Allocation

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  9.2

  	
  Indemnification

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  X

  	
     MISCELLANEOUS

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  10.1

  	
  Amendment

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  10.2

  	
  Waiver

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  10.3

  	
  Notices

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  10.4

  	
  Binding
  Agreement; Assignment

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  10.5

  	
  Severability

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  10.6

  	
  Construction

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  10.7

  	
  Captions

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  10.8

  	
  Entire
  Agreement

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  10.9

  	
  Counterparts

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  10.10

  	
  Governing
  Law

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  10.11

  	
  Parties
  in Interest

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  10.12

  	
  Consent to Jurisdiction

  	
   

  	
  53

  

 

iii

 

INDEX OF
EXHIBITS

 

	
  Exhibit A

  	
  Form of
  Buyer Note

  
	
  Exhibit B

  	
  Form of
  IP Security Agreement

  
	
  Exhibit C

  	
  Form of
  Warrant

  
	
  Exhibit D

  	
  Form of
  General Assignment

  
	
  Exhibit E

  	
  Form of
  Trademark Assignment

  
	
  Exhibit F

  	
  Form of
  Copyright Assignment

  
	
  Exhibit G

  	
  Form of
  Third Party IP Licensor Consent and Waiver

  
	
  Exhibit H

  	
  Form of
  Landlord Consent and Waiver

  
	
  Exhibit I

  	
  Form of
  Noncompetition Agreement

  
	
  Exhibit J

  	
  Form of
  Parent Guaranty

  
	
  Exhibit K

  	
  Form of
  SilkRoad Guaranty

  

 

 

ASSET
PURCHASE AGREEMENT

 

THIS ASSET PURCHASE
AGREEMENT (this “Agreement”) is made and entered into
as of August     , 2009, by and between BIO-key
International, Inc., a Delaware corporation (“Seller”), and
InterAct911 Mobile Systems, Inc., a Delaware corporation (“Buyer”).  Seller and Buyer are collectively referred to
herein as the “Parties” and each individually as a “Party.”

 

WHEREAS, Buyer desires to
acquire from Seller, and Seller desires to sell to Buyer, substantially all of
the assets of Seller relating to Seller’s Law Enforcement Division for the
consideration and upon the terms and conditions set forth in this Agreement;
and

 

WHEREAS, Seller desires to
issue, and Buyer desires to receive, a Warrant (as defined below) to purchase
capital stock of Seller; and

 

WHEREAS, the Board of
Directors of Seller has approved and declared advisable this Agreement and the
sale of assets contemplated hereby, has deemed it in the best interests of
stockholders of the Seller to consummate the sale and issue the Warrant, and
has determined to recommend to stockholders of the Seller the adoption of this
Agreement;

 

NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1          Definitions

 

For purposes of  this Agreement, the following terms shall
have the meanings set forth below:

 

“Affiliate”
means with respect to any Person, another Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first Person, where “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management policies of a Person, whether through the ownership of voting
securities, by contract, as trustee or executor, or otherwise.

 

“Alternative
Transaction” means with respect to Seller, any of the following
transactions (other than the transactions contemplated hereby): (A) any
acquisition or purchase from Seller by any Person or “group” (as defined under Section 13(d) of
the Exchange Act and the rules and regulations thereunder) of more than a
Twenty Percent (20%) interest in the total outstanding voting securities of
Seller or any tender offer or exchange offer that if consummated would result
in any Person or “group” (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) beneficially owning
securities representing Twenty Percent (20%) or more of the total outstanding
voting power of Seller or any merger, consolidation, business combination,
share exchange or similar transaction involving Seller pursuant to which the
stockholders of Seller immediately preceding such transaction hold securities
representing less than Eighty Percent (80%) of the total outstanding voting
power of the surviving or resulting 

 

 

entity
of such transaction (or Seller entity of such surviving or resulting entity); (B) any
sale, lease, exchange, mortgage, transfer, license or disposition of assets
(including capital stock or other ownership interests in Subsidiaries)
representing Twenty Percent (20%) or more of the aggregate fair market value of
the consolidated assets of Seller and its Subsidiaries taken as a whole; or (C) any
liquidation or dissolution of Seller.

 

“Alternative
Transaction Proposal” means any offer, inquiry, proposal or
indication of interest (whether binding or non-binding) to Seller or its stockholders,
relating to an Alternative Transaction.

 

“Applicable
Law” means all foreign, federal, state, local or municipal laws,
statutes, ordinances, regulations, and rules, and all orders, writs,
injunctions, awards, judgments and decrees of any Governmental Authority
applicable to Buyer or Seller, their respective Subsidiaries or any of their
respective assets, properties or businesses.

 

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

 

“Buyer Note”
means the guaranteed, secured promissory note in the principal amount of Four
Million Dollars ($4,000,000) issued by the Buyer in substantially the form
attached hereto as Exhibit A and guaranteed by InterAct911
Corporation, a Delaware corporation and sole stockholder of Buyer (“Parent”), and SilkRoad Equity, LLC, a Delaware limited
liability company (“SilkRoad” and
together with Parent, the “Guarantors”),
and secured by a pledge of the Seller Intellectual Property Assets pursuant to
an Intellectual Property Security Agreement in substantially the form attached
hereto as Exhibit B (the “IP Security Agreement”).

 

“Change of
Recommendation” means the withholding, withdrawal, adverse
amendment, qualification or modification of Seller’s Board of Directors’
recommendation in favor of approval of this Agreement and the transactions
contemplated hereby, and, in the case of a tender or exchange offer made by a
third party directly to Seller’s stockholders, a recommendation that Seller’s
stockholders accept the tender or exchange offer.

 

“Closing Cash
Payment” means the amount in cash to be paid to Seller at Closing
equal to Seven Million Dollars ($7,000,000), plus
the Net Amount of Working Capital Assets at Closing, all as set forth in the
Estimated Closing Statement. The Closing Cash Payment is subject to further
adjustment following the Closing in accordance with Section 2.8
hereof.

 

“Contract”
means any contract, license, sublicense, mortgage, purchase order, indenture,
loan agreement, lease, sublease, agreement, arrangement or understanding or
instrument or any binding commitment to enter into any of the foregoing (in
each case, whether written or oral).

 

“Copyrights”
means all United States and foreign copyrights (including Community designs),
including copyrights in both published and unpublished works, compilations,
databases and computer programs, Software, manuals and other documentation,
whether registered or unregistered, and, with respect to any and all of the
foregoing: (A) all registrations and applications therefor, including the
registrations and applications referred to in Schedule 3.12, (B) all
extensions and renewals thereof, (C) all derivatives, translations,
adaptations and combinations of any and all of the foregoing; (D) all
rights corresponding thereto throughout the 

 

2

 

world,
(E) all rights to sue for past, present and future infringements thereof,
and (F) all proceeds of the foregoing, including licenses, royalties,
income, payments, claims, damages and proceeds of suit.

 

“Environmental
Laws” means any and all federal, state, foreign, interstate, local
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decisions, injunctions, decrees, requirements of any Governmental Authority,
any and all common law requirements, rules and bases of liability
regulating, relating to, or imposing liability or standards of conduct
concerning pollution, Hazardous Materials or protection of human health, safety
or the environment, as currently in effect, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 10601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq., the Clean Water Act, 33 U.S.C. Section 1251
et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq., the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C., Section 136 et seq.,
Occupational Safety and Health Act 29 U.S.C. Section 651 et seq., the Oil
Pollution Act of 1990, 33 U.S.C. Section 2701 et seq., and the Endangered
Species Act (16 U.S.C. Section 1531 et seq.) as such laws have been
amended or supplemented, and the regulations promulgated pursuant thereto, and
all analogous state or local statutes.

 

“Environmental
Liabilities” means with respect to Seller, any and all Liabilities
of or relating to Seller or any of its Subsidiaries (including any entity which
is, in whole or in part, a predecessor of Seller or any of such Subsidiaries),
which (A) arise under or relate to matters covered by Environmental Laws
and (B) relate to actions occurring or conditions existing on or prior to
the Closing Date.

 

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

 

“GAAP”
means United States generally accepted accounting principles, consistently
applied throughout the periods involved.

 

“Governmental
Authority” means any foreign, federal, state, county, local,
municipal or foreign court or tribunal, governmental or regulatory body,
administrative board, bureau, agency, instrumentality, commission or any
department or political subdivision thereof.

 

“Governmental
Permit” means any consent, license, permit, grant, franchise,
certificate of authorization, registration or other authorization of a
Governmental Authority that is required for the operation of such entity’s
business or the holding of any assets or properties or exercising any rights or
claims.

 

“Hazardous
Materials” means any substance material or waste regulated by any
Governmental Authority, including those defined, listed, classified or
regulated as radioactive, hazardous, toxic or otherwise dangerous to health or
the environment in or under any Environmental Laws, such as petroleum,
petroleum products, friable asbestos, urea formaldehyde, radioactive materials
and polychlorinated biphenyls, but excluding office and janitorial supplies
safely stored and maintained.

 

3

 

“Hired
Employees” means the employees of Seller hired by Buyer at
the Closing, all of whom are identified on Schedule
3.15 hereto.

 

“Intellectual
Property Assets” means all worldwide intellectual property rights
owned or licensed by Seller and used in the Subject Business, including (A) Patents;
(B) Trademarks and all of the goodwill associated therewith; (C) Copyrights;
(D) Trade Secrets; (E) any rights in registered internet domain
names; (F) any and all other intellectual property rights relating to any
of the foregoing.

 

“Knowledge”
means the actual knowledge after reasonable inquiry of Seller’s Chairman of the
Board and Chief Financial Officer (Thomas Colatosti), Chief Executive Officer
(Michael DePasquale), Executive Vice President and General Manager of the
Subject Business (Kenneth S. Sousa), Vice President for Programs and Customer
Support (Roy A. Wickland), Controller (Cecilia Welch) or the Director of
Contracts (Karen Hicks).

 

“Letter of
Intent” means that certain letter agreement, dated June 15,
2009, between Parent and Seller.

 

“Liability”
means any liability, debt, obligation, deficiency, Tax, penalty, assessment,
fine, claim, cause of action or other loss, fee, cost or expense of any kind or
nature whatsoever, whether asserted or unasserted, absolute or contingent,
known or unknown, accrued or unaccrued, liquidated or unliquidated, and whether
due or to become due and regardless of when asserted.

 

“Lien”
means, with respect to any asset, any mortgage, pledge, security interest,
encumbrance, lien, charge, claim or encumbrance of any kind in respect of such
asset.

 

“Material
Adverse Effect” means a material adverse effect on the
business, assets, financial condition, or results of operations of the Subject
Business.

 

“Net Amount of
the Working Capital Assets” means the difference between (A) the
current assets of the Subject Business, excluding cash and cash equivalents,
and (B) the current liabilities of the Subject Business included in the
Assumed Liabilities, but excluding deferred revenue (other than the Service
Contracts Adjustment Amount) and including accrued and unused vacation pay and
sick pay for Hired Employees.  In
determining the Net Amount of the Working Capital Assets, all amounts will be
determined as of the Closing Date in accordance with GAAP applied in a manner
consistent with the calculation of the Net Amount of the Working Capital Assets
as of June 30, 2009 contained in Schedule 2.8 to this
Agreement.

 

“Ordinary
Course” means ordinary course of business consistent in
nature, scope and magnitude with past custom and practice of such Person.

 

“Patents”
means all United States and foreign patents and certificates of invention,
patent rights, inventions, discoveries, invention disclosures and similar
property rights, whether or not patented, and applications for any and all of
the foregoing, including: (A) each Patent and Patent application referred to in
Schedule 3.12 hereto (as such schedule may be amended or
supplemented from time to time), (B) all reissues, divisions,
continuations, continuations-in- part, extensions, renewals, and reexaminations
thereof, (C) all rights corresponding thereto 

 

4

 

throughout
the world, (D) all inventions and improvements described therein, (E) all
rights to sue for past, present and future infringements thereof, (F) all
licenses, claims, damages, and proceeds of suit arising therefrom, and (G) all
proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and proceeds of suit.

 

“Person”
means any individual, partnership, limited liability company, corporation,
cooperative, association, joint stock company, trust, estate, joint venture,
unincorporated organization or Governmental Authority.

 

“Prime Rate”
means, on any date, a variable rate per annum equal to the rate of interest
most recently published by The Wall Street Journal as the “prime
rate” at large U.S. banks.

 

“Proxy
Statement” means the proxy statement to be filed by Seller with the
SEC in connection with Seller’s Stockholders’ Meeting.

 

“Public
Software” means any software that is licensed pursuant to an “open
source” licensing agreement or similar agreement, including software licensed
under the GNU General Public License (GPL) or the GNU Lesser/Library GPL, the
Mozilla Public License, the Netscape Public License, the Sun Community Source
License, the Sun Industry Standards License, the BSD License, and the Apache
License.

 

“Real Estate
Lease” means that certain Office Lease Agreement, dated as of June 30,
2008, between Seller and Normandy Nickerson Road, LLC, as lessor, governing the
facilities occupied by Seller in Marlborough, Massachusetts.

 

“SEC”
means the Securities and Exchange Commission.

 

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

 

“Seller
Intellectual Property Assets” means all Intellectual Property
Assets, including the Patents, Trademarks, Copyrights, Software and Trade
Secrets, (A) owned by Seller or (B) for which Seller has a valid
right or license to use, develop, make, have made, offer for sale, sell,
modify, create derivative works from, license to third parties, and dispose of
in connection with the Subject Business.

 

“Service
Contract” means the Seller’s obligation to provide installation,
consulting maintenance and other services to purchasers of Software Products
pursuant to a written Contract.

 

“Service Contracts Adjustment
Amount” means
Fifteen Percent (15.0%) of Seller’s deferred revenue accounts attributable to
the Subject Business.  Deferred revenue
will be determined as of the Closing Date in accordance with GAAP applied in a
manner consistent with the determination of deferred revenue and the
calculation of the Service Contracts Adjustment Amount as of June 30, 2009
contained in Schedule 2.8 to this Agreement.

 

“Software”
means all computer software, including Source Code, object, executable or
binary code, objects, comments, compliers, routines, screens, user interfaces,
report formats, 

 

5

 

templates,
menus, buttons and icons and all files, data, materials, manuals, design notes
and other items and documentation related thereto or associated therewith.

 

“Software
Products” means all Software products which are designed, developed,
licensed, sold, distributed and/or otherwise made commercially available in the
operation of the Subject Business, consisting of the Software products and
interfaces listed on Schedule 3.25(a)(iii).

 

“Source Code”
means, collectively, any human readable software source code, or any material
portion or aspect of the software source code in Seller’s rightful possession
which comprise part of the Seller Intellectual Property Assets.  With regard to the Software Products, source
code includes:

 

(a)                                  any and all human readable
software source code, which comprises part of the Software Products;

 

(b)                                 the source code repository
for same (with history of revisions);

 

(c)                                  the previous bugs summary
report for same;

 

(d)                                 Build scripts/programs/unit
tests/configuration files and documentation on build process for same;

 

(e)                                  source code documentation of
QA procedures and test plans in digital format for same; and

 

(f)                                    specifications, programmers’
comments and notes, and all other materials (including assembly, linkage and
other utilities) and documents reasonably necessary to enable a reasonably
skilled programmer to understand and maintain the Software Products without
reference to any other person or documentation.

 

“Subject
Business” means Seller’s Law Enforcement Division, which is engaged
in the development, manufacture, distribution, sale, installation and service
of mobile data equipment, applications, access and authentications for law
enforcement and public safety officials.

 

“Subsidiary”
means, with respect to any Person, any corporation, partnership, limited
liability company, association or other business entity of which such Person
has a majority of the ownership interests therein or the contractual right to
control.

 

“Superior
Proposal” means with respect to Seller, an unsolicited, bona fide
written Alternative Transaction Proposal, which the Board of Directors of
Seller has in good faith determined (after consultation with its outside legal
counsel and its financial advisor), taking into account all legal, financial,
regulatory, timing and other aspects of the proposal, (A) is more
favorable, from a financial point of view, to Seller’s stockholders (in their
capacities as stockholders) than the terms of this Agreement (after giving
effect to any adjustments to the terms of this Agreement proposed by the other
party in response to such Alternative Transaction Proposal), (B) is fully
financed or reasonably capable of being fully financed, and (C) is 

 

6

 

reasonably
likely to be consummated on the terms proposed; provided, however,
that, for purposes of this definition of “Superior Proposal” each reference to “20%”
or “80%” in the definition of “Alternative Transaction” shall be deemed to be a
reference to “50%”.

 

“Tax”
or “Taxes”
means any federal, state, local or foreign income, gross receipts, capital
gains, franchise, alternative or add-on minimum, estimated, sales, use, goods
and services, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit, environmental, customs,
duties, real property, special assessment, personal property, capital stock,
social security, unemployment, employment, disability, payroll, license,
employee or other withholding, contributions or other tax, of any kind
whatsoever, including any interest, penalties or additions to tax or additional
amounts in respect of the foregoing.

 

“Tax Assets”
means any refund, abatement or credit of, and all other assets comprising
receivables or deferred assets or prepayments for, Taxes arising or resulting
from Seller’s conduct of the Subject Business or ownership of the Purchased
Assets for taxable periods ending on or before the Closing Date.

 

“Tax Returns”
means returns, declarations, reports, claims for refund, information returns or
other documents (including any related or supporting schedules, statements or
information) filed or required to be filed in connection with the
determination, assessment or collection of Taxes of any party or the
administration of any laws, regulations or administrative requirements relating
to any Taxes.

 

“Termination
Fee” means One Million Dollars ($1,000,000), payable in immediately
available funds.

 

“Trademarks”
means all United States and foreign trademarks, trade names, corporate names,
company names, business names, fictitious business names, slogans, service
marks, certification marks, collective marks, logos, other source or business
identifiers, trade dress, designs and general intangibles of a like nature,
whether registered or unregistered, and, with respect to any and all of the
foregoing: (A) all registrations and applications therefor including the
registrations and applications referred to in Schedule 3.12 (as
such schedule may be amended or supplemented from time to time), (B) all
extensions or renewals of any of the foregoing, (C) all of the goodwill of
the business connected with the use of and symbolized by the foregoing, (D) the
right to sue for past, present and future infringement or dilution of any of
the foregoing or for any injury to goodwill, and (E) all proceeds of the
foregoing, including licenses, royalties, income, payments, claims, damages and
proceeds of suit.

 

“Trade
Secrets” means all trade secrets and all other confidential or
proprietary information and know-how, including customer lists, research in
progress, algorithms, data, designs, processes, formulae, drawings, schematics,
blueprints, flow charts, models, strategies, prototypes, techniques, Beta
testing procedures and Beta testing results, whether or not such Trade Secret has
been reduced to a writing or other tangible form, and including all documents
and things embodying, incorporating, or referring in any way to such Trade
Secret, including (A) the right to sue for past, present and future
misappropriation or other violation of any Trade 

 

7

 

Secret,
and (B) all proceeds of the foregoing, including licenses, royalties,
income, payments, claims, damages and proceeds of suit.

 

“Transaction
Documents” means this Agreement, the Warrant and any other
Contract or instrument contemplated hereby to which Seller or Buyer is a party.

 

“Warrant”
means the warrant issued by Seller to SilkRoad to purchase up to Eight Million
(8,000,000) shares of Seller’s Common Stock at a purchase price of $0.30 per
share, expiring on the fifth anniversary of the Closing Date in the form
attached hereto as Exhibit C.

 

1.2          Other
Definitions

 

Each of the following
defined terms has the meaning given such term in the Section set forth
opposite such defined term:

 

	
  Section Reference

  	
   

  	
  Defined Term

  
	
   

  	
   

  	
   

  
	
  Preamble

  	
   

  	
  Agreement

  
	
  2.10

  	
   

  	
  Allocation

  
	
  9.1(a)

  	
   

  	
  Applicable
  Limitation Date

  
	
  2.3

  	
   

  	
  Assumed
  Liabilities

  
	
  3.5(b)

  	
   

  	
  Balance
  Sheet

  
	
  9.2(c)(ii)

  	
   

  	
  Basket

  
	
  Preamble

  	
   

  	
  Buyer

  
	
  9.2(a)

  	
   

  	
  Buyer
  Parties

  
	
  9.2(c)(ii)

  	
   

  	
  Cap

  
	
  2.7

  	
   

  	
  Closing

  
	
  2.7

  	
   

  	
  Closing
  Date

  
	
  2.8(b)

  	
   

  	
  Closing
  Statement

  
	
  3.6(a)

  	
   

  	
  Common
  Stock

  
	
  2.8(b)

  	
   

  	
  Dispute
  Notice

  
	
  2.8(a)

  	
   

  	
  Estimated
  Closing Statement

  
	
  2.2

  	
   

  	
  Excluded
  Assets

  
	
  2.4

  	
   

  	
  Excluded
  Liabilities

  
	
  2.4(a)

  	
   

  	
  Excluded
  Taxes

  
	
  2.8(c)

  	
   

  	
  Final
  Closing Cash Payment

  
	
  3.5(b)

  	
   

  	
  Financial
  Statements

  
	
  4.4(a)

  	
   

  	
  Guarantor
  Balance Sheet

  
	
  4.4(a)

  	
   

  	
  Guarantor
  Balance Sheet Date

  
	
  4.4(b)

  	
   

  	
  Guarantor
  Financial Statements

  
	
  9.2(d)

  	
   

  	
  Indemnified
  Party

  
	
  9.2(d)

  	
   

  	
  Indemnifying
  Party

  

 

8

 

	
  Section Reference

  	
   

  	
  Defined Term

  
	
   

  	
   

  	
   

  
	
  2.8(d)

  	
   

  	
  Independent
  Accounting Firm

  
	
  3.17

  	
   

  	
  Interested
  Person

  
	
  2.11

  	
   

  	
  In-Process
  Sales

  
	
  2.8(b)

  	
   

  	
  Item
  of Dispute

  
	
  3.12(a)

  	
   

  	
  Licenses
  In

  
	
  3.12(a)

  	
   

  	
  Licenses
  Out

  
	
  9.2(a)

  	
   

  	
  Loss

  
	
  Preamble

  	
   

  	
  Parties

  
	
  Preamble

  	
   

  	
  Party

  
	
  3.6(a)

  	
   

  	
  Preferred
  Stock

  
	
  3.24(p)

  	
   

  	
  Product
  Certifications

  
	
  2.6

  	
   

  	
  Purchase
  Price

  
	
  2.1

  	
   

  	
  Purchased
  Assets

  
	
  3.11

  	
   

  	
  Purchased
  Contracts

  
	
  Preamble

  	
   

  	
  Seller

  
	
  3.6(b)

  	
   

  	
  Seller
  Options

  
	
  9.2(b)

  	
   

  	
  Seller
  Parties

  
	
  3.5(a)

  	
   

  	
  Seller
  SEC Documents

  
	
  3.25

  	
   

  	
  Seller
  Software

  
	
  3.2(c)

  	
   

  	
  Seller
  Stockholder Approval

  
	
  3.6(b)

  	
   

  	
  Seller
  Warrants

  
	
  3.12(e)

  	
   

  	
  Third-Party
  Intellectual Property Assets

  
	
  2.9

  	
   

  	
  Transfer
  Documents

  
	
  3.12(a)

  	
   

  	
  Use

  
	
  2.4(j)

  	
   

  	
  Zoll

  

 

ARTICLE II

PURCHASE AND SALE OF ASSETS

 

2.1          Purchase
of Assets

 

At the Closing, Buyer shall
purchase, and Seller and each of its Subsidiaries shall sell, convey, assign,
transfer and deliver to Buyer, free and clear of any Liens by appropriate
instruments of conveyance reasonably satisfactory to Buyer, all assets,
properties, rights, claims, titles and interests of every kind or nature owned,
leased, licensed or otherwise held by Seller and each of its Subsidiaries
(including indirect and other forms of beneficial ownership) as of the Closing
Date held, used in the conduct of the Subject Business (the “Purchased
Assets”), including, without limitation, all of the
following assets, but excluding all Excluded Assets:

 

9

 

(a)           all
Seller Intellectual Property Assets, including all Software Products and
related Software and Source Code;

 

(b)           all
goodwill of Seller relating to the Subject Business or any Purchased Asset,
together with the right to represent to third-parties that Buyer is the
successor to Seller in the Subject Business;

 

(c)           all
billed and unbilled accounts receivable of the Subject Business and all
correspondence with respect thereto, including all trade accounts receivable,
notes receivable from customers, vendor credits and rebates, and all other
obligations or rights to receive payment from vendors or customers with respect
to purchases or sales of goods or services, and accounts receivable from Hired
Employees;

 

(d)           all
prepayments, prepaid expenses and similar assets used by Seller or held by, or
on behalf of, Seller for use in connection with the Subject Business;

 

(e)           all
inventories, including finished goods, work in process, raw materials,
packaging and supplies used by Seller or held by, or on behalf of, Seller for
use in connection with the Subject Business;

 

(f)            all
rights existing under the Purchased Contracts, including Service Contracts, the
License-In and License-Out Agreements, and the Real Estate Lease;

 

(g)           all
non-competition, non-disclosure, non-solicitation, assignment of designs and
inventions, and similar agreements, with respect to the Subject Business, the
Hired Employees and former employees of the Subject Business, including the
agreements listed on Schedule 3.15;

 

(h)           all
lists and records pertaining to customers, suppliers, distributors, sales
representatives, personnel and agents relating to the Subject Business, whether
past or current;

 

(i)            all
claims, deposits, prepayments, warranties, guarantees, refunds, rebates, causes
of action, rights of recovery, rights of set-off and rights of recoupment of
every kind and nature relating to the Subject Business, including the deposit
on the Real Estate Lease;

 

(j)            all
transferable licenses, permits or other governmental authorizations affecting
or relating in any way to the Subject Business, including the items listed on Schedule 3.3;

 

(k)           all
hardware, computer equipment and similar equipment owned or licensed by Seller
and used in the Subject Business, including the hardware listed on Schedule 3.3;

 

(l)            all
office equipment, furniture and furnishings, fixtures, display racks, shelves,
decorations, supplies and other personal property used in the Subject Business;

 

(m)          all
information and data processing systems, programs, software and documentation
thereof (including all electronic data processing systems, program
specifications, 

 

10

 

source codes, logs, input data and report layouts and
formats, record file layouts, diagrams, functional specifications and narrative
descriptions, flow charts and other related material) which are used or
intended to be used in the conduct of the Business;

 

(n)           all
signs and signage containing names, logos or slogans used in the Business,
whether or not current, except those that incorporate the name BIO-key in a way
which cannot be eradicated;

 

(o)           all
technical, engineering, design, processing, manufacturing, operations or
quality control information, whether or not current, including new
developments, research and development reports inventions, know-how, processes,
ideas and trade secrets and documentation thereof (including related papers,
blueprints, drawings, prototypes, formulae, diaries, notebooks, specifications,
designs, methods of manufacture and data processing Software), and all claims
and rights related thereto;

 

(p)           all
Software Product information, including sample products, catalogues, brochures,
videos, specifications and manuals, service and warranty records, creative
materials, sales, promotional and marketing materials, whether or not current,
including trade show booths, locations, equipment, signage and supplies, and all
samples and information on the products and history of the Subject Business;

 

(q)           all
SKUs, uniform product identification and bar codes and other product
designations and identifications;

 

(r)            all
technologies and communication systems used in the Subject Business, but
excluding Seller’s websites and domain names;

 

(s)           all
claims against third parties related to or arising from the Subject Business or
the Purchased Assets;

 

(t)            all
rights under confidentiality, standstill and other agreements with potential
acquirors of the Subject Business;

 

(u)           all
insurance benefits, including rights, claims and proceeds, related to or
arising from the Subject Business the Purchased Assets or the Assumed
Liabilities;

 

(v)           all
books, records, ledgers, files, documents, correspondence, lists, studies and
reports and other printed or written materials used by Seller or held by, or on
behalf of, Seller for use in connection with the Subject Business and all
rights related thereto; and including, without limitation, engineering
information; and

 

(w)          all
other assets of any kind or nature of Seller relating primarily to the Subject
Business, other than the Excluded Assets.

 

11

 

2.2          Excluded
Assets

 

Notwithstanding the
foregoing, the following assets are expressly excluded from the purchase and
sale contemplated hereby (the “Excluded Assets”) and, as such, are
not included in the Purchased Assets:

 

(a)           Seller’s
rights under or pursuant to this Agreement and the other Transaction Documents;

 

(b)           Seller’s
general ledger, accounting records, minute books, statutory books and corporate
seal;

 

(c)           Seller’s
personnel records and any other records that Seller is required by law to
retain in its possession;

 

(d)           any
right to receive mail and other communications addressed to Seller relating to
the Excluded Assets or the Excluded Liabilities;

 

(e)           the
capital stock of Seller or any Subsidiary of Seller;

 

(f)            all
cash, cash equivalents and bank accounts;

 

(g)           all
Trademarks or other indicia of origin of Seller in any of the following words,
logos, stylized lettering, other designs and variants thereof: “BIO-key” or “BIO-key
International”; and

 

(h)           Tax
Assets.

 

2.3          Assumed
Liabilities

 

At the Closing, Buyer shall assume
only the following Liabilities, solely to the extent such Liabilities were
incurred in the Ordinary Course of the Subject Business (the “Assumed Liabilities”):

 

(a)           those
accounts payable and accrued and unused vacation and sick time owed to the
Hired Employees included in the calculation of the Final Net Amount of the
Working Capital Assets which relate solely to the Ordinary Course of operations
of the Subject Business and which are (i) accrued on the June 30,
2009 Balance Sheet or (ii) incurred in the Ordinary Course of business
since June 30, 2009 and not discharged as of the Closing Date; and

 

(b)           all
Liabilities and obligations arising from and after the Closing Date under the
Purchased Contracts (other than Liabilities or obligations attributable to any
failure by Seller to comply with the terms thereof).

 

2.4          Excluded Liabilities

 

Notwithstanding any
provision in this Agreement or any other writing to the contrary, Buyer is
assuming only the Assumed Liabilities and is not assuming any other Liability
or obligation of Seller (or any predecessor owner of all or part of its
business and assets) of whatever nature, whether presently in existence or
arising or asserted hereafter. All such other 

 

12

 

Liabilities
and obligations shall be retained by and remain obligations and Liabilities of
Seller (all such Liabilities and obligations not being assumed being herein
referred to as the “Excluded Liabilities”). Without
limiting the foregoing, none of the following shall be Assumed Liabilities for
the purposes of this Agreement:

 

(a)           any
and all Liabilities and obligations for Taxes of Seller of any kind, including
Taxes relating to the Subject Business for any pre-closing tax period, and any
and all other Liabilities and obligations of Seller for Taxes that arise as a
result of the transactions contemplated by this Agreement;

 

(b)           any
Liabilities or obligations relating to employee pensions, benefits or
compensation arrangements incurred or accrued prior to the Closing Date;

 

(c)           any
Environmental Liabilities;

 

(d)           any
Liability, Lien or obligation relating to an Excluded Asset;

 

(e)           any
Liability or obligation not incurred in the Ordinary Course of the Subject
Business;

 

(f)            Seller’s
obligations to provide vacation time, sick time, personal days, vacation pay
and sick pay to any employees; provided, however, that Buyer will
assume and be responsible for any accrued and unused vacation time and sick
time owed to the Hired Employees to the extent included in the Net Amount of
the Working Capital Assets;

 

(g)           Any
Liabilities resulting from any action, suit, proceeding, order, judgment,
decree or investigation of Seller or the Subject Business, whether or not
arising out of or related to the conduct of the Subject Business, prior to the
Closing Date;

 

(h)           any
Liabilities of Seller which may be owed to any agent, broker, finder or
investment or commercial banker as a result of the transactions contemplated by
this Agreement;

 

(i)            any
Liabilities related to or arising from Seller’s Contract with Dataradio
Corporation or claims by Dataradio Corporation that Seller has breached and
defaulted under such Contract; and

 

(j)            any
Liabilities to Zoll Data Systems, Inc., a Delaware corporation (“Zoll”) or its Affiliates, including Liabilities and
obligations pursuant to the Asset Purchase Agreement, dated May 22, 2007,
between Seller and Zoll.

 

Except for the Assumed Liabilities expressly set forth in Section 2.3
hereof, Seller shall forever defend, indemnify and hold harmless Buyer from and
against any and all Liabilities or obligations, losses, claims, damages
(including incidental and consequential damages), costs and expenses (including
court costs and reasonable attorneys’ fees) related to or arising from the
Subject Business prior to the Closing Date.

 

13

 

2.5                               BIO-key
License

 

Seller hereby grants Buyer,
for a period of ninety (90) days from and after the Closing, a non-exclusive,
royalty-free right and license to use, in connection with Buyer’s ownership of
the Purchased Assets and operation of the Subject Business, the trademark “BIO-key”
on any and all packaging, brochures or other materials included within the
Purchased Assets on which such trademark appears as of the Closing, only in
the same style and manner in which the trademark was used by the Subject
Business prior to Closing and only to identify those unmodified products
offered by the Subject Business prior to Closing.  All goodwill resulting from the use of the “BIO-key”
trademark shall inure to the benefit of Seller. 
After such ninety (90) day period, Buyer shall, at its sole cost
and expense, remove, obliterate, cover or replace, as appropriate, all
packaging, brochures or other materials containing any Trademarks or other
indicia of origin of Seller or any of its Affiliates.  From and after the Closing, Buyer shall be
entitled to designate itself as the successor to Seller with respect to the
Software Products and the Subject Business.

 

2.6                               Purchase
Price

 

The consideration to be paid
by Buyer to Seller for the Purchased Assets, the Warrant and the license
granted pursuant to Section 2.5 (the “Purchase Price”)
shall be Eleven Million Dollars ($11,000,000), consisting of the Closing Cash
Payment, as adjusted in accordance with Section 2.8(a) hereof,
and the Buyer Note.  On the Closing Date,
Buyer shall (i) pay the Closing Cash Payment, as adjusted in accordance
with Section 2.8(a), to Seller by wire transfer, and (ii) deliver
the Buyer Note to Seller.  Buyer and
Seller shall execute and deliver a General Assignment, Bill of Sale and
Assumption of Liabilities, in substantially the form attached hereto as Exhibit D
(the “General  Assignment”,
as well as the other Transaction Documents and Closing deliveries contemplated
by Article VI of this Agreement.

 

2.7                               Closing
Transactions

 

Subject to the terms and
conditions of this Agreement, the closing of the transactions contemplated by
this Agreement (the “Closing”) shall take place at the
offices of Choate Hall & Stewart LLP, Two International Place, Boston,
Massachusetts, at 10:00 a.m. Eastern Time on the second Business Day
following the satisfaction or waiver of all conditions of the Parties to
consummate the transactions contemplated hereby (other than conditions with
respect to actions the respective Parties will take at the Closing itself) or
such other date as Buyer and Seller may mutually determine (the “Closing
Date”).  All
transactions contemplated herein to occur on and as of the Closing Date shall
be deemed to have occurred simultaneously and to be effective as of the close
of business on such date.

 

2.8                               Adjustments to Purchase
Price

 

(a)                                  Estimated Closing Statement. 
At least three (3) Business Days prior to the Closing Date, Seller
shall deliver to Buyer (i) Seller’s good faith written estimates in
reasonable detail of each of the components of the Net Amount of the Working
Capital Assets as of the close of business on the Closing Date, including an
estimate of the Service Contracts Adjustment Amount as of the close of business
on the Closing Date, the Closing Cash Payment and the Purchase Price (the “Estimated Closing Statement”) and (ii) supporting work
papers used in 

 

14

 

preparing such calculations.  The Estimated Closing Statement shall be
calculated in accordance with GAAP, and shall be reasonably acceptable to
Buyer.  The Estimated Closing Statement
shall be prepared in a manner consistent with the preparation of the sample
calculations of the Net Amount of the Working Capital Assets, the Service Contracts
Adjustment Amount, the Closing Cash Payment and the Purchase Price as of June 30,
2009, attached hereto as Schedule 2.8;

 

(b)                                 Closing Statement. 
Promptly, but in any event within thirty (30) days after the Closing,
Buyer shall furnish to Seller a written statement (the “Closing
Statement”) setting forth as of the Closing Date, the Assumed
Liabilities, the Net Amount of the Working Capital Assets, the Service
Contracts Adjustment Amount, the Closing Cash Payment and the Purchase
Price.  The Closing Statement shall
include the amount of each of the components of the Net Amount of the Working
Capital Assets.  Unless, within the
fifteen day period following Seller’s receipt of the Closing Statement, Seller
delivers written notice to Buyer (the “Dispute Notice”)
setting forth (in detail sufficient for Buyer to understand the nature of and
basis for Seller’s dispute) any and all items of disagreement related to the
Closing Statement, including the amount thereof (each, an “Item of
Dispute”), the Closing Statement shall be conclusive and binding upon
each of the Parties; provided, however, that the only basis on which Seller
shall be permitted to submit an Item of Dispute is that such Item of Dispute
was not prepared in accordance with the terms of this Agreement or the Closing
Statement contains a mathematical or clerical error or errors.  After the delivery of the Closing Statement,
Buyer shall cooperate with Seller in connection with its review of the Closing
Statement, including providing Seller and its accountants reasonable access
during business hours to materials used in the preparation of the Closing
Statement.  If, for whatever reason,
Buyer does not furnish the Closing Statement within thirty (30) days after the
Closing, the Estimated Closing Statement shall be conclusive and binding upon each
of the Parties.

 

(c)                                  Dispute Resolution by the Parties. 
If Seller delivers a Dispute Notice to Buyer within the required fifteen
day period, Buyer and Seller shall use reasonable efforts to resolve their
differences concerning the Items of Dispute, and if any Item of Dispute is so
resolved, the Closing Statement shall be modified as necessary to reflect such
resolution.  If all Items of Dispute are
so resolved, the Closing Statement (as so modified) shall be conclusive and
binding on all Parties.

 

(d)                                 Determination by Independent Accounting
Firm.  If any Item of Dispute remains unresolved for
a period of thirty (30) days after Buyer’s receipt of the Dispute Notice, Buyer
and Seller shall, within ten (10) days thereafter, submit the dispute to a
mutually acceptable independent public accounting firm (the “Independent Accounting Firm”).  If Buyer and Seller are unable to mutually
agree upon such an accounting firm within such 10-day period, then Buyer and
Seller shall, within five days thereafter, each select a nationally recognized
certified public accounting firm.  Within
five days after their selection, those two accounting firms shall select a
third nationally recognized certified public accounting firm, which third
accounting firm shall act as the Independent Accounting Firm. Such third
nationally recognized accounting firm shall not be an accounting firm that has
performed accounting or similar services for Buyer or Seller in the past five
years. Buyer and Seller shall each provide their respective calculations of the
Net Amount of the Working Capital Assets and the Items of Dispute in writing to
the Independent Accounting Firm and shall request that the Independent 

 

15

 

Accounting Firm render a written determination as to
each unresolved Item of Dispute, as soon as reasonably practicable, but in no
event later than thirty (30) days after its retention, which determination
shall be solely based on whether each such Item of Dispute was prepared in
accordance with the terms of this Agreement or whether each such Item of
Dispute contains a mathematical or clerical error or errors.  The Parties shall cooperate fully with the
Independent Accounting Firm so as to enable it to make such determination as
quickly and as accurately as practicable. 
The Independent Accounting Firm’s determination as to each Item of
Dispute submitted to it shall be in writing and shall be conclusive and binding
upon the Parties, absent manifest error or willful misconduct, and the Closing
Statement shall be modified to the extent necessary to reflect such
determination.  The fees and expenses of
the Independent Accounting Firm shall be paid by the Party whose calculation of
the Net Amount of the Working Capital Assets is furthest from the determination
rendered by the Independent Accounting Firm.

 

(e)                                  Adjustment.  Once all
Items of Dispute are resolved, the Net Amount of the Working Capital Assets set
forth on the final Closing Statement (the “Final Net Amount of the
Working Capital Assets”) shall be deemed final for the purposes of
this Section 2.8.

 

2.9                               Transfer
Documents

 

At Closing, Seller and Buyer
shall execute and deliver the General Assignment and Seller shall execute and
deliver such other instruments of assignment (collectively, the “Transfer
Documents”) documenting the purchase and sale of each
portion of the Purchased Assets and the Assumed Liabilities to be conveyed to
Buyer. The Transfer Documents shall include a Trademark Assignment (the “Trademark Assignment”) and Copyright Assignment (the “Copyright Assignment”), in substantially the forms attached
hereto as Exhibits E and F, respectively, as well as a Third
Party IP Licensor’s Consent and Waiver (“Third Party IP Licensor
Consent and Waiver”), and the Landlord’s Consent and Waiver (“Landlord Consent and Waiver in substantially the forms
attached hereto as Exhibits G and H, respectively.  Seller shall execute and deliver the Warrant
and the Noncompetition Agreement (the “Noncompetition Agreement”)
in the form attached hereto as Exhibit I.  Buyer shall cause the Parent Guaranty in
substantially the form attached hereto as Exhibit J (the “Parent Guaranty”) and the SilkRoad Guaranty in substantially
the form attached hereto as Exhibit K (the “SilkRoad
Guaranty”) to be executed and delivered by each respective
Guarantor.  In the event of any conflict
or inconsistency between the terms and conditions of this Agreement and any
Transfer Document, the terms and conditions of this Agreement shall prevail.

 

2.10                        Tax
Allocations

 

Within two hundred seventy
(270) days after the Closing Date, Buyer shall prepare and deliver to Seller a
schedule allocating the Purchase Price (and any other items or amounts that are
required for federal income tax purposes to be included in the Purchase Price),
among the Purchased Assets, the Warrant and the Noncompetition Agreement under
the principles of Code Section 1060 and regulations thereunder (and any
similar provision of state, local or foreign law, as appropriate) (such
schedule and the allocations it contains, the “Allocation”).
The Allocation shall be binding and conclusive and deemed accepted by Seller,
unless Seller shall have notified Buyer in writing of any objections thereto
within twenty (20) days after delivery of the Allocation, specifying in reasonable
detail each item on the Allocation that Buyer disputes. Upon 

 

16

 

receipt
of such objections, Buyer and Seller shall attempt in good faith to resolve
such differences.  If Seller and Buyer
are unable to resolve such differences, they shall submit their differences to
an independent accounting firm mutually acceptable to them whose determination
shall be final, binding and conclusive on the Parties. Seller and Buyer shall
report and file all Tax Returns (including amended Tax Returns and claims for
refund) consistent with the Allocation and shall not voluntarily take a
position contrary thereto or inconsistent therewith (including, without
limitation, in any audits or examinations by any governmental authority or any
other proceedings). Seller and Buyer shall cooperate in the filing of any forms
(including Form 8594 under Section 1060 of the Code) with respect to
such Allocation, including any amendments to such forms required with respect
to such Allocation.

 

2.11                        Transition
of Subject Business

 

(a)                                  Following the Closing, Seller will use
its commercially reasonable efforts to facilitate and assist in the transition
of the Subject Business to Buyer, including (i) directing phone, e-mail
and other inquiries and contacts concerning the Subject Business to Buyer, (ii) assisting
Buyer in obtaining maintenance agreements and necessary consents from customers
of the Subject Business (including if necessary by joining Buyer personnel in
calling on such customers), (iii) providing Buyer with a written list of
all on-going sales currently in process (“In-Process Sales”),
such list to detail the scope, terms and contact personnel for the In-Process
Sales, (iv) causing Seller’s sales personnel who are currently working on
any In-Process Sales to complete such effort and close such sales (subject to
Buyer reimbursing Seller for the Ordinary Course sales commissions due on such
sales); and (v) making available the services of Seller’s Controller.

 

(b)                                 From and after the Closing, if Seller or
any of its Subsidiaries or Affiliates receives or collects any funds relating
to any accounts receivable of the Subject Business or any other Purchased
Asset, such Person shall remit such funds to Buyer within five (5) Business
Days after its receipt thereof.

 

(c)                                  From and after the Closing, Seller will
post and maintain a link to Buyer’s website for the Subject Business on Seller’s
website.

 

2.12                        Nonassignable Contracts

 

(a)                                  To the extent that the assignment of any
Purchased Contract included in the Assumed Liabilities or Purchased Assets is
not permitted without (i) the consent of the other party to the Purchased
Contract, (ii) the approval of Buyer as a source of the products or
services called for by the Purchased Contract or (iii) the approval of
Buyer as a lessee, then this Agreement shall not be deemed to constitute an
assignment or an attempted assignment of the same, if such assignment or
attempted assignment would constitute a breach thereof.  However, unless otherwise agreed as to any
particular Purchased Contract, Seller shall use its best efforts to obtain any
and all such consents, approvals and novations before, if unable to do so prior
to Closing, and after Closing.

 

(b)                                 If any necessary consent, approval or
novation is not obtained, Seller shall cooperate with Buyer in any reasonable
arrangement designed to provide Buyer with all of the 

 

17

 

benefits and obligations under such Purchased
Contract, as if such consent, approval or novation had been obtained, including
subleases from Seller and, undertakings by Buyer of the work necessary to
complete contracts as the agent of Seller with the understanding that Seller
shall then invoice the customer for services rendered and promptly remit the
amount of the receivable to Buyer. 
Nothing herein shall excuse Seller from responsibility for any of its
representations and warranties or covenants hereunder.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

As
a material inducement to Buyer to enter into this Agreement, subject to the
exceptions and limitations set forth in this Article III and the
matters set forth on the Schedules, Seller hereby represents and warrants to
Buyer that:

 

3.1                               Organization
and Corporate Power

 

Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware. Seller is qualified to conduct the Subject Business in every
jurisdiction in which such qualification is necessary, except where the failure
to so qualify has not had or would not reasonably be expected to have a
Material Adverse Effect. All jurisdictions in which Seller conducts the Subject
Business and is qualified to do business are set forth on Schedule 3.1. Seller has full corporate power and
authority and all licenses, permits and authorizations necessary to own and
operate the Subject Business as now conducted.

 

3.2                               Authorization
of Transactions

 

(a)                                  Seller has full corporate power and
authority to execute and deliver this Agreement, the Warrant, the
Noncompetition Agreement and each of the other Transaction Documents to which
it is a party and, subject to receipt of the Seller Stockholder Approval, to
consummate the transactions contemplated hereunder and thereunder and to
perform each of its obligations hereunder and thereunder. The board of
directors of Seller has duly approved this Agreement, the Warrant, the
Noncompetition Agreement and each of the other Transaction Documents to which
it is a party and has duly authorized the execution and delivery of this
Agreement, the Warrant, the Noncompetition Agreement and each of the other
Transaction Documents to which Seller is a party and the consummation of the
transactions contemplated hereby and thereby. Except for the Seller Stockholder
Approval and as otherwise set forth on Schedule 3.2, no other corporate
proceedings on the part of Seller (including, without limitation, approval of
Seller’s stockholders) are necessary to approve and authorize the execution and
delivery of this Agreement, the Warrant, the Noncompetition Agreement and each
of the other Transaction Documents to which Seller is a party and the
consummation of the transactions contemplated hereby and thereby. This
Agreement has been and the Warrant, the Noncompetition Agreement and each of
the other Transaction Documents to which Seller is a party will be duly
executed and delivered by Seller and constitute the valid and binding
agreements of Seller, enforceable against Seller in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization, moratorium
and similar laws of general applicability relating to or affecting creditors’
rights and to general principles of equity.

 

18

 

(b)                                 Board  Approval.  The Board of Directors of Seller has (i) determined
that this Agreement, the Warrant and the other Transaction Documents are
advisable and fair to and in the best interests of Seller and its stockholders,
(ii) duly approved this Agreement, the Warrant and the other transactions
contemplated hereby, which approval has not been rescinded or modified, (iii) resolved
(subject to Section 6.2(d)) to recommend this Agreement, and the
Warrant to Seller’s stockholders for approval, and (iv) directed that this
Agreement and the Warrant be submitted to Seller’s stockholders for
consideration in accordance with this Agreement.

 

(c)                                  Stockholder  Approval.  Except as set forth on Schedule 3.2,
the affirmative vote of a majority of the votes cast by stockholders of Seller
entitled to vote thereon at the Seller’s Stockholders’ Meeting (as defined
below) (provided, however, that such affirmative vote also
represents over 50% in interest of all outstanding capital stock of Seller
entitled to vote thereon), is the only vote of the holders of any class or
series of capital stock of Seller necessary to approve this Agreement, the
Warrant and the Transactions contemplated hereby (the “Seller
Stockholder  Approval”).

 

3.3                               Sufficiency
of Assets

 

The Purchased Assets are
sufficient to enable Buyer to conduct the Subject Business following the
Closing in substantially the same manner as operated by Seller prior to the
Closing.  Schedule 3.3
contains a complete and correct list of the depreciable assets of the Subject
Business.

 

3.4                               Absence
of Conflicts

 

Except
as set forth on Schedule 3.4 or Schedule 3.11(e) attached
hereto, the execution, delivery and performance of this Agreement, the Warrant,
the Noncompetition Agreement and the other Transaction Documents to which it is
a party and the consummation of the transactions contemplated hereby and
thereby by Seller do not and shall not (a) conflict with or result in any
breach of any of the terms, conditions or provisions of, (b) constitute a
default under, (c) result in a violation of, (d) give any third-party
the right to modify, terminate or accelerate or cause the modification,
termination or acceleration of, any obligation under, (e) result in the
creation of any Lien upon any of the Purchased Assets, or (f) require any
authorization, consent, approval, exemption or other action by, or notice or
declaration to or filing with, any third-parties, including any court or
administrative or other governmental body or agency, under (i) the
provisions of the certificate of incorporation or bylaws of Seller, (ii) any
Purchased Contract, (iii) any law, statute, rule or regulation to
which Seller is subject, (iv) any judgment, order or decree to which
Seller is subject, or (v) any other contract, license, instrument or
agreement to which Seller is a party or to which it, the Subject Business or
the Purchased Assets are subject.

 

3.5                               SEC
Filings; Financial Statements

 

(a)                                  Seller has timely filed with the SEC all
forms, reports, schedules, statements and other documents required to be filed
by it since January 1, 2007 under the Exchange Act or the Securities Act,
including all such documents filed after the date hereof and prior to the
Closing Date (as such documents have been amended since the time of their
filing 

 

19

 

and all documents incorporated by reference therein,
collectively, the “Seller SEC Documents”). None of
Seller’s Subsidiaries is required to file any form, report, schedule, statement
or other document with the SEC. As of their respective dates and if amended
prior to the date hereof, as of the date of the last such amendment, the Seller
SEC Documents (i) did not, and all documents filed by Seller with the SEC
under the Exchange Act or the Securities Act between the date of this Agreement
and the Closing Date will not, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were or will be made, not misleading, and (ii) complied, and all
documents filed by Seller with the SEC under the Exchange Act or the Securities
Act between the date of this Agreement and the Closing Date will comply, in all
material respects with the applicable requirements of the Exchange Act and the
Securities Act, as the case may be, at such time of filing. As used in this Section 3.5,
the term “file” shall be construed to include any manner in which a document or
information is furnished, supplied or otherwise made available to the SEC.

 

(b)                                 The balance sheet of the Subject
Business, dated June 30, 2009, attached hereto as Schedule 3.5 (the
“Balance Sheet”) and each of the
financial statements (including in each case, any related notes thereto),
contained or reflected in Seller SEC Documents, (the “Financial
Statements”) (i) was, and all financial statements
contained or reflected in documents filed by Seller with the SEC under the
Exchange Act or the Securities Act between the date of this Agreement and the
Closing Date will be, prepared from the books and records of Seller and its
Subsidiaries; (ii) was, and all financial statements contained or
reflected in documents filed by Seller with the SEC under the Exchange Act or
the Securities Act between the date of this Agreement and the Closing Date will
be, prepared in accordance with GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated therein or in the notes
thereto or, in the case of unaudited statements, except that such unaudited
statements do not contain footnotes as permitted by Form 10-Q under the
Exchange Act); (iii) complied in all material respects with all applicable
accounting requirements and with the published rules and regulations of
the SEC with respect thereto as in effect on the date of filing; (iv) except
with respect to the unaudited financial statements contained in Seller SEC
Documents filed on Form 10-Q under the Exchange Act, was accompanied by
reports (qualified to the extent set forth therein) from the independent auditor
opining on the same as to the financial statements contained therein; and (v) fairly
presents, and all financial statements contained or reflected in documents
filed by Seller with the SEC under the Exchange Act or the Securities Act
between the date of this Agreement and the Closing Date will fairly present, in
all material respects, the consolidated financial position of Seller and its
Subsidiaries as of their respective dates and the consolidated results of their
respective operations and cash flows for the periods indicated therein, except
that the unaudited interim financial statements were or will be subject to
normal year end audit adjustments which were not and will not be expected to be
material in the aggregate.

 

(c)                                  Neither Seller nor, to the Knowledge of
Seller, any of its auditors, accountants or representatives, has received or
otherwise obtained knowledge of any material complaint, allegation, assertion
or claim, whether written or, to the Knowledge of Seller, oral, regarding the
accounting or auditing practices, procedures, methodologies or methods of
Seller or its internal accounting controls, including any material complaint,
allegation, assertion or claim that Seller has engaged in questionable
accounting or auditing practices.

 

20

 

3.6                               Capitalization.

 

(a)                                  Capital Stock.  The
authorized capital stock of Seller consists solely of 170,000,000 shares of
Common Stock, par value $.0001 per share (the “Common
Stock”), and 5,000,000 shares of Preferred
Stock, par value $.0001 per share (the “Preferred Stock”),
of which (i) 100,000 shares have been designated Series A Convertible
Preferred Stock (the “Series A  Preferred Stock”), (ii) 1,000,000 shares have been
designated Series B Convertible Preferred Stock (the “Series B
Preferred Stock”), and (iii) 600,000
shares have been designated Series C Convertible Preferred Stock (the “Series C  Preferred Stock”).  As of the date of this Agreement,
[                        ]
shares of Common Stock are issued and outstanding, 30,557 shares of Series A
Preferred Stock are issued and outstanding, 970,612 shares
of Series B Preferred Stock are issued and outstanding, and 592,032 shares
of Series C Preferred Stock are issued and outstanding.  No shares of
Common Stock or Preferred Stock are held in treasury by Seller and its
Subsidiaries.  All issued and outstanding
shares of Common Stock and Preferred Stock have been, and all shares of Common
Stock issued pursuant to the Warrant will be, duly authorized and validly
issued, fully paid and nonassessable, and are not subject to preemptive rights
created by Applicable Law, Seller’s certificate of incorporation or any
Contract to which Seller is a party or by which it is bound.

 

(b)                                 Stock Options, Purchase Plans, Restricted
Stock Units and Convertible Securities.  As of the
date of this Agreement, [                    ]
shares of Common Stock are subject to issuance pursuant to outstanding options
under the Seller’s stock incentive plans (the “Seller
Options”), and [                  ]
shares of Common Stock are subject to issuance pursuant to outstanding options
outside of the Seller’s stock incentive plans. 
[                  ]
shares of Common Stock are reserved for future issuance under the Seller’s
stock incentive plans (excluding shares subject to issuance pursuant to Seller
Options). 
[                    ]
shares of Common Stock are subject to issuance pursuant to outstanding warrants
of Seller (the “Seller  Warrants”),
and
[                        ]  shares are reserved for issuance upon
conversion of the outstanding Preferred Stock. 
As of the Closing Date, Eight Million (8,000,000) shares of Common Stock
will be reserved for issuance under the Warrant.  All shares of Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. 
There are no outstanding or authorized stock appreciation, profit
participation (other than Seller bonus plans), “phantom stock”, or other
similar plans or Contracts with respect to Seller or any of its Subsidiaries.

 

(c)                                  No Other Rights.  Except for
the Preferred Stock, the Seller Options, the Seller Warrants and as otherwise set
forth in Section 3.6(b) or Schedule 3.6(c), there are no options, warrants, convertible or
exchangeable, securities, calls, rights, commitments, conversion privileges or
preemptive or other rights or Contracts (to which Seller or any of its
Subsidiaries is a party or by which Seller or any of its Subsidiaries is bound)
outstanding to purchase or otherwise acquire any shares of capital stock of
Seller or any of its Subsidiaries or any securities or debt exercisable for,
convertible into or exchangeable for capital stock of Seller or any of its
Subsidiaries, or obligating Seller or any of its Subsidiaries to issue, grant,
extend or enter into any such option, warrant, convertible or exchangeable,
securities, call, right, commitment, conversion privilege or preemptive or
other right or Contract.  Except as set
forth on Schedule 3.6(c), the Seller’s certificate of incorporation does not
provide, and neither Seller nor any of its 

 

21

 

Subsidiaries
is a party to or otherwise bound by any Contract providing, for registration
rights, rights of first refusal in favor of a third party, preemptive rights,
co-sale rights, antidilution rights, redemption rights or other similar rights
or other restrictions applicable to any outstanding securities of Seller or its
Subsidiaries.  Neither Seller nor any of
its Subsidiaries is a party to or otherwise bound by any Contract (including
any voting agreement), voting trust or proxy, other than proxies to be
submitted in connection with the Seller Stockholders’ Meeting) regarding the
voting of any outstanding securities of Seller or its Subsidiaries.

 

3.7                               Absence
of Undisclosed Liabilities

 

There
are no Liabilities of the Subject Business of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and there
is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a Liability, other than (i) Liabilities
reflected on the Balance Sheet, (ii) incurred in the Ordinary Course of
business since the date of the Balance Sheet, (iii) express warranty
obligations and maintenance obligations specifically set forth in the Service
Contracts or (iv) obligations set forth in the Purchased Contracts (excluding
for purposes of this Subsection (iv), the Service Contracts).

 

3.8                               Absence
of Certain Changes

 

(a)                                  Seller does not have any Knowledge of any
development or threatened action that may have a Material Adverse Effect on the
continued operation of the Subject Business or the Purchased Assets.

 

(b)                                 Since January 1, 2009, with respect
to the Subject Business or the Purchased Assets, there has not been:

 

(i)                                     any operation of Seller out of the
Ordinary Course of business or any change in the financial condition of the
Subject Business or the Purchased Assets, which change, by itself or in
conjunction with all other such changes, whether or not arising in the Ordinary
Course of business, is likely to have a Material Adverse Effect with respect to
the Subject Business or the Purchased Assets;

 

(ii)                                  any purchase, sale, license or other
disposition, or, except for the Letter of Intent, any agreement or other
arrangement for the purchase, sale, license or other disposition, of any part
of the Subject Business or the Purchased Assets, other than purchases in the
Ordinary Course of business;

 

(iii)                               any increase in the salary, bonus, or other
compensation payable to any Hired Employee, except as set forth on Schedule
3.15; and

 

(iv)                              any agreement, arrangement or understanding,
whether in writing or otherwise, for Seller to take any of the actions
specified in paragraphs (i) through (iii) above.

 

3.9                               Title to
Properties

 

Seller owns good and
marketable title, free and clear of all Liens, to all of the Purchased Assets.

 

22

 

3.10                        Payment
of Taxes

 

Within the times and in the
manner prescribed by law, Seller has filed all Tax Returns required to be filed
by it and has paid all Taxes due and payable by it, except such as are being
contested in good faith. No Tax due and owing by Seller on account of business
transacted by Seller prior to the Closing Date will become a Lien on the
Purchased Assets nor shall Buyer have any Liability therefor.

 

3.11                        Contracts
and Commitments

 

(a)                                  Schedule 3.11(a) attached hereto contains an accurate
and complete list of all Contracts related to the Subject Business and meeting
any of the descriptions set forth below to which Seller or any Subsidiary is a
party or bound or by which any of the Purchased Assets are subject or bound, or
pursuant to which Seller or any Subsidiary is a beneficiary (the “Purchased Contracts”):

 

(i)                                     Contracts obligating Seller to pay, as
guarantor or otherwise, any indebtedness or in any way creating any Lien on any
of the Purchased Assets;

 

(ii)                                  Licenses In, Licenses Out or royalty
Contracts;

 

(iii)                               Management, consulting or advisory Contracts;

 

(iv)                              Contracts for the purchase or sale of
supplies or products or for the furnishing or receipt of services which has a
minimum duration of one year or more or involves a sum in excess of $25,000, in
each case to the extent any such Contract is not terminable by Seller without
the payment of any fee or other amount on no more than thirty (30) days notice;

 

(v)                                 Contracts limiting the freedom of Seller,
or that would limit the freedom of Buyer after the Closing Date, to freely
engage in any line of business or with any Person anywhere in the world;

 

(vi)                              Contracts relating to the distribution,
marketing, advertising or sales of the Software Products, including Contracts
with sales representatives or agents;

 

(vii)                           Contracts pursuant to which Seller subcontracts work
to third-parties;

 

(viii)                        power of attorney;

 

(ix)                                Contracts relating to the acquisition or
sale of any portion of the Subject Business or the Software Products;

 

(x)                                   any employment Contract or severance
agreement with any Hired Employee;

 

(xi)                                any Service Contract with an aggregate
amount payable in excess of $10,000;

 

23

 

(xii)                             the Real Estate Lease; or

 

(xiii)                          other Contracts material to the Subject Business.

 

(b)                                 Seller has made available to Buyer
complete and correct copies of each Purchased Contract, together with all
amendments, waivers and other changes thereto, and a complete and correct
description of all material terms of all oral Purchased Contracts. No Purchased
Contract has been canceled or, to Seller’s Knowledge, breached by the other
party, and Seller has no Knowledge of any planned breach by any other party to
any Purchased Contract.  Since December 31,
2008, to Seller’s Knowledge, except as set forth on Schedule 3.11(b),
no customer, supplier or distributor of the Subject Business has indicated in
writing or orally to Seller that it intends to stop or materially decrease the
rate of business done with Seller or that it desires to renegotiate its
Contract with Seller or that it would not do business with Buyer.  Seller has performed all obligations required
to be performed by it in connection with the Purchased Contracts and is not in
default under or in breach of any Purchased Contract, and no event or condition
has occurred or arisen which with the passage of time or the giving of notice
or both would result in a default or breach thereunder.  Each Purchased Contract is legal, valid,
binding, enforceable subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors’ rights and to general principles of equity and in full force and
effect and, subject to Section 2.12, will continue as such
following the consummation of the transactions contemplated hereby.

 

(c)                                  All Software Products have been sold
pursuant to Seller’s standard End User License Agreement in the form attached
to Schedule 3.11(c), with no material modification to the terms thereof,
including terms relating to Seller’s right to assign such End User License
Agreement.

 

(d)                                 To Seller’s Knowledge, there is no reason
to believe that Buyer will be unable (i) to obtain, on monetary terms
consistent with those currently in effect with Seller, a written maintenance
agreement with any customer of the Subject Business who is not currently a
party to a written Service Contract, and (ii) to the extent necessary, to
obtain, without the payment or provision by Buyer of any sums or inducements,
written consents to any transfer of the customer relationship as contemplated
hereby.

 

(e)                                  Schedule 3.11(e) sets forth a complete and correct
list of each Purchased Contract that requires a consent or other action by any
Person as a result of the execution, delivery and performance of this
Agreement.

 

3.12                        Seller
Intellectual Property Assets

 

(a)                                  Schedule 3.12(a) contains a complete and correct
list of all material Seller Intellectual Property Assets, including a list of
all (i) registered or applied for Patents, registered and material
unregistered Trademarks and registered and material unregistered Copyrights, (ii) licenses,
sublicenses or other agreements under which Seller is granted rights by others
in Seller Intellectual Property Assets (“Licenses In”)
(other than commercial off-the-shelf software that is made generally available
for a total cost of less than $5,000), and (iii) licenses, sublicenses or 

 

24

 

other agreements under which Seller has granted rights
to others in Seller Intellectual Property Assets (“Licenses
Out”), all of which have been made
available for review by the Buyer prior to the date hereof.  Except as set forth on Schedule 3.12(a),
all Licenses Out have been made on the terms and conditions of Seller’s End
User License Agreement.

 

(b)                                 Seller exclusively owns the Seller
Intellectual Property Assets free and clear of all Liens, claims, encumbrances
or licenses, or has the valid right to use the Seller Intellectual Property
Assets pursuant to the Licenses In set forth in Schedule 3.12(a).

 

(c)                                  All Seller Intellectual Property Assets
are valid and enforceable.  All Seller
Intellectual Property Assets owned by Seller that have been issued by, or
registered, or are the subject of an application filed with, as applicable, the
U.S. Patent and Trademark Office, the U.S. Copyright Office or any similar
office or agency anywhere in the world, are currently in compliance with formal
legal requirements (including, as applicable, payment of filing, examination
and maintenance fees, inventor declarations, proofs of working or use, timely
post-registration filing of affidavits of use and incontestability, and renewal
applications).

 

(d)                                 No Seller Intellectual Property Assets
owned by Seller that have been issued by, or registered or the subject of an
application filed with, as applicable, the U.S. Patent and Trademark Office,
the U.S. Copyright Office or in any similar office or agency anywhere in the
world is subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Closing Date.

 

(e)                                  To the Knowledge of Seller, there are no
pending or, threatened claims against Seller or any of its employees alleging
that any of the operation of the Subject Business or any activity by Seller, or
use of any Intellectual Property Asset or Software Product infringes or
violates (or in the past infringed or violated) the rights of others in or to
any Intellectual Property Asset (“Third-Party Intellectual
Property Assets”) or constitutes a misappropriation of (or in the
past constituted a misappropriation of) any subject matter of any Intellectual
Property Assets of any Person or entity or that any of Seller Intellectual
Property Assets is invalid or unenforceable.

 

(f)                                    Neither the Seller Intellectual Property
Assets, nor the operation of the Subject Business, nor any activity by Seller,
nor manufacture, use, importation, offer for sale and/or sale of any Software
Product (i) infringes or violates (or in the past infringed or violated) any
third-party Copyright or (ii) constitutes a misappropriation of (or in the
past constituted a misappropriation of) any subject matter of any third-party
Trade Secret; or (iii) to the Knowledge of Seller, infringes or violates
any third-party Patent.

 

(g)                                 All former and current employees,
consultants and contractors of Seller involved in the development of any
Software Product or other Seller Intellectual Property Assets purported to be
owned by Seller have executed written instruments with Seller that assign to
Seller all rights, title and interest in and to any and all Intellectual
Property Assets relating thereto possessed by such employees, consultants or
contractors during the tenure of their employment or contract with Seller,
except as may have been specifically identified in writing and disclaimed in
such agreements.

 

25

 

(h)                                 To the Knowledge of Seller, No third
party is infringing upon or otherwise materially violating any rights in any
Seller Intellectual Property Assets or any Seller’s Licenses In.

 

(i)                                     Seller has taken reasonable security
measures to protect the secrecy, confidentiality and value of all Trade Secrets
that are part of the Seller Intellectual Property Assets, including requiring
each Seller employee and consultant and any other Person with access to such
Trade Secrets to execute a binding confidentiality agreement, correct and
complete copies of which have been made available for review by the Buyer.  To the Knowledge of Seller, there has not
been any breach by any party of such confidentiality agreements.

 

(j)                                     Neither Seller’s entry into this
Agreement nor the performance of its obligations contemplated hereby shall (1) cause
the forfeiture or termination of, or give rise to a right of forfeiture or
termination of, any License In, (2) materially impair the right to Use any
Seller Intellectual Property Asset or portion thereof as currently Used in the
conduct of the Subject Business, or (3) cause any royalties fees or other
payments to become payable to any third person as a result of the Use of any
Seller Intellectual Property Asset which would not have been due and payable
had the transaction not occurred or cause any existing obligations to pay such
royalties, fees or other payments to increase, where such increase would not
have been due had the transaction not occurred.

 

(k)                                  Schedule 3.12(k) contains a complete and correct
list of all Contracts expressly granting any third party rights to any Seller
Intellectual Property Assets.

 

(l)                                     No event has occurred, and no
circumstance or condition exists, that has resulted in or would reasonably be
expected to result in the release by Seller or any escrow agent to any third
party of any Source Code.

 

(m)                               Schedule 3.12(m) contains a complete and correct
list of Contracts with any Governmental Authority, pursuant to which Source
Code, computer software programs or applications owned or co-owned by Seller
were developed or co-developed and licensed and/or assigned to Seller.

 

(n)                                 Seller is in compliance with all material
obligations pursuant to any License In.

 

3.13                        Litigation;
Proceedings

 

Except as set forth on Schedule
3.13, there are no actions, suits, proceedings, orders, judgments, decrees
or investigations pending or, to Seller’s Knowledge, threatened against or
affecting the Subject Business or any Purchased Asset at law or in equity, or
before or by any Governmental Authority and to the Knowledge of Seller there is
no basis known for any of the foregoing. Neither the Subject Business nor any
Purchased Asset is subject to any arbitration proceedings under collective
bargaining agreements or otherwise or, to Seller’s Knowledge, any governmental
investigations or inquiries; and, to Seller’s Knowledge, there is no valid
basis for any of the foregoing. Neither the Subject Business nor any of the
Purchased Assets are subject to any outstanding order, judgment or decree
issued by any Governmental Authority.

 

26

 

3.14                        Governmental
Permits

 

Schedule 3.14 sets forth a
complete and correct list of all Governmental Permits owned, held or used by
Seller or a Subsidiary in connection with the Subject Business.  Seller owns or possesses all right, title and
interest in and to all Governmental Permits or other similar rights which are
necessary to conduct the Subject Business as presently conducted. Seller is in
compliance with the terms and conditions of all Governmental Permits. No loss
or expiration of any Governmental Permit is pending or, to Seller’s Knowledge,
threatened (including as a result of the transactions contemplated hereby). The
consummation of the transactions contemplated by this Agreement will not
require any consent, renewal or notice with respect to any Governmental Permit.

 

3.15                        Employees

 

(a)                                  Schedule 3.15 contains a complete and correct list of
all Hired Employees, describing for each such employee the position or title,
whether classified as exempt or non-exempt for wage and hour purposes and, if
exempt, the type of exemption relied upon, annual base salary, whether paid on
a salary, hourly or commission basis and the average scheduled hours per week,
bonus potential, date of hire, business location, status (i.e., active or inactive and, if
inactive, the type of leave and estimated duration) and the total amount of
bonus, severance and other amounts to be paid to such employee at the Closing
or otherwise in connection with the transactions contemplated hereby. To the
Knowledge of Seller, no Hired Employee has expressed any plans to terminate his
or her employment or service arrangement with Seller.

 

(b)                                 None of the Hired Employees are
represented by any union or subject to any collective bargaining agreement and
no such employees have engaged in any such organizational activities. Seller
has experienced no labor trouble and no Hired Employee has brought or asserted
any claim of unfair labor practices involving Seller.

 

(c)                                  No representative of Seller has made any
representation, promise or guarantee, express or implied, to any of its
employees regarding (i) whether Buyer intends to retain or offer to retain
such individual, or (ii) the terms and conditions on which Buyer may
retain or offer to retain such individual.

 

(d)                                 Seller has either paid in full all
expense reimbursement claims of all Hired Employees as of the date hereof or
obtained releases from all Hired Employees with respect to any claims therefor.

 

3.16                        Insurance

 

The Purchased Assets are
insured to the extent disclosed on Schedule 3.16
and all other material insurance policies and arrangements of Seller are
disclosed in said Schedule. Seller’s worker’s compensation insurance complies
with applicable statutory requirements as to the amount of such coverage.  Schedule 3.16 sets forth, with respect
to the Subject Business, a list of all pending claims and the claims history
for Seller and its Subsidiaries during the current year and the preceding three
(3) years (including with respect to insurance obtained but not currently
maintained).

 

27

 

3.17                        Affiliate
Transactions

 

None of the Purchased
Contracts are between Seller and any officer, director, stockholder, family
member or Affiliate of any such Person (“Interested Person”).
No Interested Person has any material direct or indirect interest in any entity
that does business with Seller relating to the Subject Business or has any
direct or indirect interest in any Purchased Asset or in any property, asset or
right that is used in the conduct of the Subject Business.

 

3.18                        Compliance
with Laws

 

Neither Seller nor any of
its Affiliates has received notice regarding any violation of, conflict with or
failure to conduct the subject Business in compliance with any Applicable
Law.  To Seller’s Knowledge, no
investigation or review of Seller or the Subject Business by any Governmental
Authority is pending or threatened.

 

3.19                        Governmental
Authorities and Consents

 

Seller is not required to
submit any notice, report or other filing with any Governmental Authority in
connection with the execution or delivery by it of this Agreement and the other
Transaction Documents to which it is a party or the consummation of the
transactions contemplated hereby or thereby, except such filings and notices as
may be required under applicable securities laws.  Except as set forth on Schedule 3.19,
no consent, approval or authorization of any Governmental Authority is required
to be obtained by Seller in connection with its execution, delivery and
performance of this Agreement, the Warrant or the other Transaction Documents
to which it is a party or the transactions contemplated hereby or thereby.

 

3.20                        Product
Warranties

 

Each Software Product sold,
licensed or delivered by Seller has conformed with and satisfied all applicable
contractual commitments that were scheduled or required to be performed prior
to the Closing Date and all applicable express warranties as of the Closing
Date. Except for Ordinary Course express warranty claims under the Purchased
Contracts and Ordinary Course obligation to provide maintenance under maintenance
agreements constituting a portion of the Purchased Contracts, Seller does not
have any Liability or obligation (and, to Seller’s Knowledge, there is no basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand against Seller giving rise to any Liability
or obligation) for replacement, modification or repair of any Software Products
or other damages in connection therewith. No Software Product is subject to any
guaranty, warranty, or other indemnity other than expressly set forth under the
Purchased Contracts.

 

3.21                        Environmental  Matters. 
The operations of the Subject Business are, and at all times have been,
in material compliance with all applicable Environmental Laws, including
possession of and compliance with the terms of all Governmental Permits
required by Environmental Laws.  There
are no pending or, to the Knowledge of Seller, threatened, suits, actions,
investigations or proceedings under or pursuant to Environmental Laws against
Seller or involving any real property currently or, to the Knowledge of Seller,
formerly owned, operated or leased or other sites at which Hazardous Materials
were disposed of, or allegedly disposed of, by Seller. To Seller’s Knowledge,
Seller has received no written allegations of any Liabilities 

 

28

 

under any Environment Law, Seller has no Knowledge of
any pending or threatened such allegations, and Seller has not generated,
transported, treated, stored, installed, disposed of or released any Hazardous
Materials in violation of, or in a manner that would reasonably be expected to
give rise to liability to Seller under, any Environmental Laws.

 

3.22                        Broker’s
Fees

 

No broker, investment
banker, financial advisor or other Person, other than Kaufman Bros., L.P.,
whose fees and expenses shall be paid by Seller, is entitled to any broker’s,
finder’s, financial advisor’s or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Seller.  Seller
has received the opinion of its financial advisor, Kaufman Bros., L.P., to the
effect that, as of such date and based on and subject to the matters set forth
in the opinion, the Purchase Price is fair, from a financial point of view, to
Seller.

 

3.23                        Disclosure

 

None of this Agreement, the
Warrant or the other Transaction Documents to which Seller is a party contains
any untrue statement of a material fact or omits a material fact necessary to
make each statement contained herein or therein, not misleading in light of the
circumstances in which they were made.

 

NOTWITHSTANDING ANYTHING TO
THE CONTRARY CONTAINED IN THIS AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH OF
THE PARTIES HERETO THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE III,
SELLER DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE,
EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, WITH RESPECT TO ITSELF, THE SUBJECT
BUSINESS, THE PURCHASED ASSETS OR THE ASSUMED LIABILITIES TRANSFERRED TO BUYER
PURSUANT TO THE TERMS OF THIS AGREEMENT, AND SELLER EXPRESSLY DISCLAIMS ANY
IMPLIED WARRANTIES, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY,
CONDITION OR FITNESS FOR A PARTICULAR PURPOSE OR ORDINARY PURPOSE, OR ANY REPRESENTATION
OR WARRANTY AS TO VALUE.

 

3.24                        Accounts Receivable. 
All outstanding accounts and notes receivable with respect to the
Subject Business reflected on the Financial Statements are, and in the Final
Net Amount of the Working Capital Assets will be, due and valid claims against
account debtors for goods or services delivered or rendered subject to no
defenses, offsets or counterclaims, except as reserved against on the Financial
Statements or the Final Net Amount of the Working Capital Assets, as the case
may be.  All such receivables arose in
the Ordinary Course of business.  No such
receivables are subject to prior assignment, claim, lien or security interest.  Seller has not incurred any liabilities to
customers for discounts, returns, promotional allowances or otherwise, except
to the extent of the reserves therefor reflected on the Financial Statements or
the Final Net Amount of the Working Capital Assets.  Neither Seller nor any Subsidiary has any
liability for any refunds, allowances or returns in respect of products
manufactured, processed, distributed, shipped or sold by or for the account of
Seller or any Subsidiary on or prior to the Closing Date, except to the extent
of the reserves therefor reflected on the Financial Statement or the Final Net 

 

29

 

Amount of the Working Capital Assets.  Schedule 3.24 contains a complete
and correct list of the names and addresses of all banks and financial
institutions in which Seller has an account, lock box or other arrangement for
the collection of accounts receivable with the names of all persons authorized
to draw thereon or with access thereto.

 

3.25                        Software and Information
Systems.

 

(a)                                  Schedule 3.25(a) sets forth a complete and correct
list of all (i) material Software that is owned by Seller and used or
distributed in the operation of the Subject Business (the “Seller
Software”); (ii) Software that is
licensed to Seller and used in the operation of the Subject Business, the
licensor of such Software, (iii) the Software Products, and (iv) any
material pending Software development projects currently in planning by the
Subject Business, together with a description of such projects and the stage of
their development.

 

(b)                                 Except as set forth in Schedule 3.25(b),
(i) the Seller Software is not subject to any transfer, assignment, source
code escrow agreement, or license reversion,; (ii) Seller has not granted
any other current future or conditional rights, licenses or interests in or to
the Source Code used or included in any Software Product; (iii) Seller has
not provided or disclosed the Source Code of any Software Product to any Person
or entity, except where such Source Code is, by its nature, not normally
obfuscated or compiled prior to the distribution of the Software Product; (iv) Seller
has maintained and protected the Seller Software with appropriate proprietary
notices (including notice of ownership), confidentiality and non-disclosure
agreements and such other measures as are normally used in the industry; (v) the
Software is protectable under applicable copyright law and has not been
forfeited to the public domain and has been registered with the United States
Copyright Office or is eligible for registration.

 

(c)                                  Seller’s rights in the Seller Software
are free and clear of any liens, encumbrances, restrictions, or legal or
equitable claims of others and there are no agreements or arrangements in
effect with respect to the marketing, distribution, licensing, sale, resale or
promotion of the Software between Seller and any other person.

 

(d)                                 Seller has received no notice of any
violation of patent, trade secret rights, copyrights or other proprietary
rights with respect to any Seller Software and knows of no basis therefor.

 

(e)                                  Seller has taken commercially reasonably
steps to assure that the Software contains no timer, virus, copy protection
device, disabling code, clock, counter or other limiting design or routine that
causes the Software (or any operation thereof) or become erased, inoperable, impaired,
or otherwise incapable of being used in the full manner for which it was
contemplated for use.

 

(f)                                    Except as set forth in Schedule 3.25,
none of the Software Products contain or are derived from any Public
Software.  Except as set forth in Schedule
3.25, none of the Software Products contain any third-party software.

 

(g)                                 The incorporation, linking, calling or
other use in or by any such Software Product of any third-party software does
not obligate Seller to disclose, make available, offer or deliver any portion
of the source code of any Software Product or component thereof to any 

 

30

 

third-party.  To
Seller’s Knowledge, no third party has any claim to the Source Code by virtue
of the incorporation, linking, calling or other use in or by any such Software
Product of any third-party Software.

 

(h)                                 Seller has not collected or used any
personally identifiable information in violation of any applicable statute or
regulation in any United States jurisdiction or in violation of its privacy
policy (if any) relating to the collection, storage, use and onward transfer of
all personally identifiable information.

 

(i)                                     Seller holds all material product
(including Software Product) registrations, accreditations and other
certifications required for the conduct of the Subject Business (all of such
registrations, accreditations and certifications being referred to herein as “Product Certifications”). Seller is in compliance in all
material respects with the terms and conditions of all such Product
Certifications and, to Seller’s Knowledge, no written notices have been
received by Seller since January 1, 2008, alleging the failure to hold any
Product Certification.  To Seller’s
Knowledge, there is no reasonable basis for any present or future action
rescinding any such Product Certifications and no loss or expiration of any
such Product Certifications is reasonably foreseeable or has had or would
reasonably be expected to have a Material Adverse Effect. All of the Product
Certifications are transferable to Buyer and will be transferred by Seller to
Buyer on the Closing Date.

 

(j)                                     As used by Seller in the Business, the
Software Product comply with all applicable requirements relating to the export
or re-export to those countries in which the Subject Business currently sells
the Software Products.

 

(k)                                  Copies of all Seller Software and copies
of all licenses and other agreements which are maintained by Seller with
respect to Software, Source Code or Software Products shall be delivered to
Buyer at or prior to Closing.

 

(l)                                     To Seller’s Knowledge, the Software
Products perform as Seller has warranted to its customers and substantially in
accordance with the Software Products’ documented specifications.

 

3.26                        Customers and Suppliers. 
All sales contracts and orders with customers and suppliers were entered
into by or on behalf of Seller in the Ordinary Course of business.  Schedule 3.26 sets forth an accurate
and complete list of the 25 largest customers of the Business, determined on
the basis of revenues from items sold for each of the fiscal years ended December 31,
2007 and 2008 and the six-month period ended June 30, 2009.  To the Knowledge of Seller, no customer or
supplier will cease to do business with Buyer after, or as a result of, the
consummation of any transactions contemplated hereby.  Seller has no Knowledge of any fact,
condition or event (other than possible terminations in the Ordinary Course of
business) which would adversely affect its relationship with any customer or
supplier.  Since December 31, 2008,
there has been no cancellation of backlogged orders in excess of the average
rate of cancellation prior to such date.

 

Neither Seller, nor any of
its officers or employees, has, directly or indirectly, given or agreed to give
any rebate, gift or similar benefit to any supplier, customer, distributor,
broker, 

 

31

 

governmental employee or
other person, who was, is or may be in a position to help or hinder the business
(or assist in connection with any actual or proposed transaction) which could
reasonably be expected to subject Seller or Buyer to any damage or penalty in
any civil, criminal or governmental litigation or proceeding or which would
have a Material Adverse Effect on the Business.

 

ARTICLE
IV

 

REPRESENTATIONS AND WARRANTIES OF BUYER

 

As a material inducement to Seller to enter into this
Agreement, subject to the exceptions and limitations set forth in this Article IV
and the matters set forth on the Schedules, Buyer hereby represents and
warrants to Seller that:

 

4.1                               Organization
and Good Standing

 

Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority and all licenses, permits
and authorization necessary to own and operate its business. Buyer is duly
qualified in each jurisdiction in which the ownership of property or the
conduct of its business requires such qualification, except where the failure
to do so would not, individually or in the aggregate, have a material adverse
effect on the business, assets, operations or financial condition of Buyer that
adversely affects Buyer’s ability to consummate the transactions contemplated
by this Agreement.

 

4.2                               Corporate
Authorization

 

Buyer has full corporate
power and authority to execute and deliver this Agreement, the Buyer Note and
each of the other Transaction Documents to which it is a party, to consummate
the transactions contemplated hereunder and thereunder and to perform each of
its obligations hereunder and thereunder. The board of directors of Buyer has
duly approved this Agreement, the Buyer Note and all other Transaction
Documents to which it is a party and has duly authorized the execution and delivery
of this Agreement, the Buyer Note and all other Transaction Documents to which
it is a party and the consummation of the transactions contemplated hereby and
thereby. No other corporate proceedings on the part of Buyer (including,
without limitation, approval of Buyer’s stockholders) are necessary to approve
and authorize the execution and delivery of this Agreement, the Buyer Note and
the other Transaction Documents to which Buyer is a party and the consummation
of the transactions contemplated hereby and thereby. This Agreement, the Buyer
Note and all other Transaction Documents to which Buyer is a party have been
duly executed and delivered by Buyer and constitute the valid and binding
agreements of Buyer, enforceable against Buyer in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization, moratorium
and similar laws of general applicability relating to or affecting creditors’
rights and to general principles of equity.

 

32

 

4.3          No Breach

 

The execution, delivery and
performance by Buyer of this Agreement, the Buyer Note and all other
Transaction Documents to which it is a party and the consummation by Buyer of
the transactions contemplated hereby and thereby do not and will not (a) conflict
with or result in any breach of any of the terms, conditions or provisions of, (b) constitute
a default under, (c) result in a violation of, (d) give any
third-party the right to modify, terminate or accelerate or cause the
modification, termination or acceleration of, any obligation under, (e) result
in the creation of any Lien upon any of the assets of Buyer, or (f) require
any authorization, consent, approval, exemption or other action by, or notice
or declaration to or filing with, any third-parties, including any court or
administrative or other governmental body or agency, under (i) the
provisions of the certificate of incorporation or bylaws of Buyer, (ii) any
law, statute, rule or regulation to which Buyer is subject, (iii) any
judgment, order or decree to which Buyer is subject, or (iv) any other
contract, license, instrument or agreement to which Buyer is a party or to
which it is subject.

 

4.4          Financial Information.  Buyer has delivered to Seller (a) the
unaudited, consolidated balance sheet of Parent and its Subsidiaries as at December 31,
2007 and 2008, and the unaudited, consolidated statements of cash flows, income
and stockholders’ equity for the fiscal years then ended and (b) the
unaudited, consolidated balance sheet of Parent and its Subsidiaries as at June 30,
2009 and the unaudited, consolidated statements of cash flows, income and
stockholders’ equity of Parent and its Subsidiaries for the six-month period
then ended (collectively, the “Parent Financial Statements”).  Buyer has also delivered to Seller (a) the
unaudited, consolidated balance sheet of SilkRoad as at December 31, 2007
and 2008, and the unaudited, consolidated statements of cash flows, income and
stockholders’ equity for the fiscal years then ended and (b) the
unaudited, consolidated balance sheet of SilkRoad as at June 30, 2009 and
the unaudited, consolidated statements of cash flows, income and stockholders’
equity of SilkRoad for the six-month period then ended (collectively, the “SilkRoad Financial
Statements,” and
together with the Parent Financial Statements, the “Guarantor
Financial Statements”).  The
Guarantor Financial Statements and the notes thereto, if any, (i) are
complete and accurate in all material respects and fairly present the financial
condition of each respective Guarantor (and, in the case of Parent, its
Subsidiaries) at the respective dates thereof and the results of operations for
the periods then ended, and (ii) were prepared in accordance with the
books and records of each respective Guarantor (and, in the case of Parent, its
Subsidiaries) in conformity with GAAP, except for the omission of footnotes and
normal year-end adjustments which are not, individually and in the aggregate,
material.  None of the Guarantor
Financial Statements contains any material, non-recurring items, except as
expressly set forth therein.

 

4.5          Litigation;
Proceedings

 

There are no actions, suits,
proceedings, orders, judgments, decrees or investigations pending or, to Buyer’s
knowledge, threatened against or affecting Buyer at law or in equity, or before
or by any Governmental Authority and to the knowledge of Buyer there is no
basis known for any of the foregoing. 
Buyer is not subject to any arbitration proceedings under collective
bargaining agreements or otherwise or, to Buyer’s knowledge, any governmental
investigations or inquiries; and, to Buyer’s knowledge, there is no valid basis
for any of the foregoing.  The 

 

33

 

Buyer
is not subject to any outstanding order, judgment or decree issued by any
Governmental Authority.

 

4.6          Availability
of Funds

 

Buyer has sufficient cash
available to enable it to consummate the transactions contemplated by this
Agreement (including performing its obligations under the Buyer Note), to
operate the Subject Business for the reasonably foreseeable future, to satisfy
the Assumed Liabilities and to meet the financial obligations under the
Purchased Contracts that Buyer is assuming as such obligations are presently
known or reasonably anticipated.

 

4.7          Broker’s
Fees

 

Any liability or obligation
on the part of the Buyer to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement shall
be paid by Buyer.

 

4.8          Disclosure

 

None of this Agreement, the
Buyer Note or the other Transaction Documents to which Buyer is a party
contains any untrue statement of a material fact or omits a material fact
necessary to make each statement contained herein or therein, not misleading in
light of the circumstances in which they were made.

 

4.9          Inspections; No Other
Representations

 

Buyer is an informed and
sophisticated purchaser experienced in the evaluation and purchase of assets
such as the Subject Business.  Buyer has
undertaken such investigation and has been provided with and has evaluated such
documents and information as it has deemed necessary to enable it to make an
informed and intelligent decision with respect to the execution, delivery and
performance of this Agreement.  Buyer agrees,
subject to the express terms hereof, to accept the Purchased Assets and assume
the Assumed Liabilities in the condition they are in on the Closing Date based
upon its own inspection, examination and determination with respect thereto as
to all matters and without reliance upon any express or implied representations
or warranties of any nature made by or on behalf of or imputed to Seller, other
than those expressly set forth in this Agreement.  Without limiting the generality of the
foregoing, except as expressly set forth in this Agreement, Buyer acknowledges
that Seller makes no representation or warranty with respect to any
projections, estimates or budgets delivered to or made available to Buyer of
future revenues, future results of operations (or any component thereof),
future cash flows or future financial condition (or any component thereof) of
the Business or Purchased Assets or the future business and operations thereof
or any other information or documents made available to Buyer or its counsel,
accountants or advisors with respect to the Business or the Purchased Assets or
the businesses or operations thereof.

 

34

 

ARTICLE V

 

COVENANTS

 

5.1          Conduct
of Business

 

Seller agrees that, between
the date hereof and the Closing, except as set forth in Schedule 5.1 or
as expressly provided by any other provision of this Agreement, or unless Buyer
shall otherwise agree in advance in writing (which agreement shall not be
unreasonably withheld, delayed or conditioned), Seller shall, and shall cause
each of its Subsidiaries to, (i) conduct its operations in all material
respects only in the Ordinary Course of the Subject Business, (ii) pay or
perform the Liabilities of the Subject Business when due, (iii) use its
reasonable best efforts to keep available the services of the key employees and
key consultants of Seller and each of its Subsidiaries and to preserve the
current relationships with customers, suppliers and other Persons as are
reasonably necessary in order to preserve substantially intact the Subject
Business.  In addition, without limiting
the foregoing, except (x) as set forth in Schedule 5.1, or (y) as
expressly provided by any other provision of this Agreement, Seller shall not
and shall not permit any of its Subsidiaries, nor any of its or its
Subsidiaries’ officers, directors or employees, Affiliates or any investment
banker, financial advisor, attorney, accountant or other representative
retained by it or any of its respective Subsidiaries, to (unless required by
Applicable Law), between the date of this Agreement and the Closing, directly
or indirectly, do, or agree to do, any of the following without the prior
written consent of the Buyer (which consent shall not be unreasonably withheld,
delayed or conditioned):

 

(a)           sell,
pledge, dispose of, transfer, lease, license, or encumber, or authorize the
sale, pledge, disposition, transfer, lease, license, or encumbrance of, any of
the Purchased Assets, except in the Ordinary Course of business;

 

(b)           enter
into any agreement with respect to the voting of the capital stock of Seller;

 

(c)           increase
the compensation, severance benefits or perquisites payable or to become
payable to any Hired Employee;

 

(d)           modify,
amend or terminate, or waive, release or assign any material rights or claims
with respect to any confidentiality or standstill agreement to which Seller is
a party and which relates to a business combination involving the Subject
Business;

 

(e)           take
any action that is intended to result in any of the conditions to the
transactions contemplated hereby set forth in Sections 6.1 and 6.2
not being satisfied;

 

(f)            take
any action that is reasonably likely to cause a delay in the convening of the
Seller Stockholder Meeting; or

 

(g)           authorize
or enter into any agreement or otherwise make any commitment to do any of the
foregoing.

 

35

 

5.2          No
Solicitation

 

(a)           Alternative
Transaction.  Seller shall not and
shall not permit any of its Subsidiaries to, nor authorize or permit any of its
or its Subsidiaries’ officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative retained by it
or any of its respective Subsidiaries to, directly, or indirectly, (i) solicit,
initiate or encourage, or take any other action to knowingly facilitate, induce
or encourage any inquiries with respect to, or the making, submission or
announcement of, any Alternative Transaction Proposal, (ii) participate in
any discussions or negotiations regarding, furnish to any Person any
information with respect to, or otherwise cooperate in any way with or
knowingly facilitate any effort or attempt to make or implement any Alternative
Transaction Proposal (except to disclose the existence of this Agreement and
the terms hereof or as specifically permitted by Section 5.2(c)), (iii) approve,
endorse or recommend any Alternative Transaction (except as specifically
permitted by Section 5.2(d)), or (iv) enter into any letter of
intent or similar document or any contract, agreement or commitment (whether
binding or not) contemplating or otherwise relating to any Alternative
Transaction Proposal (except a confidentiality agreement contemplated by Section 5.2(c)(i)).  Seller will immediately cease, and will cause
its officers, directors and employees and instruct any investment banker,
financial adviser, attorney, accountant or other representative retained by it
to cease, any and all existing activities, discussions or negotiations with any
third parties conducted heretofore with respect to any Alternative Transaction
Proposal, and will use its commercially reasonable efforts to enforce, and will
not waive any provisions of, any confidentiality or standstill agreement (or
any similar agreement) to which Seller is a party relating to an Alternative
Transaction Proposal.

 

(b)           Notification.  As promptly as practicable (and in any event
within twenty-four (24) hours) after receipt of any Alternative Transaction
Proposal or any request for nonpublic information or any inquiry relating in
any way to any Alternative Transaction Proposal, the Seller shall provide Buyer
with oral and written notice of the material terms and conditions of
Alternative Transaction Proposal, request or inquiry, and the identity of the
Person or group making any such Alternative Transaction Proposal, request or
inquiry and a copy of all written materials provided to it in connection with
such Alternative Transaction Proposal, request or inquiry.  In addition, Seller shall provide Buyer as
promptly as possible with all information as is reasonably necessary to keep
the Buyer informed in all material respects of all oral or written
communications regarding, and the status and material terms of, any Alternative
Transaction Proposal, request or inquiry, and, without limitation of the other
provisions of this Section 5.2, shall promptly provide to Buyer a
copy of all written materials (including written materials provided by email or
otherwise in electronic format) subsequently provided by or to Seller in
connection with any Alternative Transaction Proposal, request or inquiry.

 

(c)           Superior
Proposal.  Notwithstanding anything
to the contrary contained in Section 5.2(a), in the event of an
unsolicited, bona fide written Alternative Transaction Proposal which Seller
determines to be, or to be reasonably likely to result in, a Superior Proposal,
the Seller may then take the following actions (but only if and to the extent
that (x) its Board of Directors concludes in good faith, after consultation
with its outside legal counsel, that the failure to do so would be inconsistent
with its fiduciary duties under Applicable Law, (y) the Seller has given
the Buyer at least two Business Days prior written notice of its intention to
take any of the following actions and of the identity of the Person or group
making such Alternative Transaction 

 

36

 

Proposal and the material terms and conditions of the
Alternative Transaction Proposal, and (z) Seller shall not have breached
in any material respect any of the provisions of this Section 5.2):

 

(i)            Furnish
nonpublic information to the Person or group making such Alternative
Transaction Proposal; provided, however, that (A) prior to
furnishing any nonpublic information, it receives from such Person or group an
executed confidentiality agreement containing terms at least as restrictive as
the terms contained in the Confidentiality Agreement, dated as of
[                  ],
between the Buyer and Seller (the “Confidentiality Agreement”)
and (B) contemporaneously with furnishing any nonpublic information to
such Person or group, it furnishes such nonpublic information to Buyer (to the
extent such nonpublic information has not been previously so furnished to
Buyer); and

 

(ii)           Engage
in discussions or negotiations with such Person or group with respect to
Alternative Transaction Proposal.

 

(d)           Changes
of Recommendation.  Solely in
response to the receipt of an unsolicited, bona fide written Alternative
Transaction Proposal which is determined to be a Superior Proposal, the Board
of Directors of the Seller may make a Change of Recommendation, if all of the
following conditions in clauses (i) through (v) are met:

 

(i)            the
Superior Proposal has been made and has not been withdrawn and continues to be
a Superior Proposal;

 

(ii)           the
stockholder vote at the Seller Stockholders’ Meeting has not occurred;

 

(iii)          the
Seller has (A) provided to Buyer three (3) Business Days’ prior
written notice which shall state expressly (i) that it has received a
Superior Proposal, (ii) the material terms and conditions of the Superior
Proposal and the identity of the Person or group of Persons making the Superior
Proposal, and (iii) that Seller intends to effect a Change of
Recommendation and the manner in which it intends to do so, and (B) during
the aforementioned period, if requested by Buyer, engaged in good faith
negotiations to amend this Agreement in such a manner that the Alternative
Transaction Proposal which was determined to be a Superior Proposal no longer
is a Superior Proposal;

 

(iv)          the
Board of Directors of the Seller has determined in good faith, after
consultation with its outside legal counsel, that, in light of such Superior
Proposal, the failure of the Board of Directors to effect a Change of
Recommendation would be inconsistent with its fiduciary duties under Applicable
Law; and

 

(v)           the
Seller shall have complied in all material respects with Section 5.2(c) and
shall not have breached in any material respect any of the other provisions set
forth in this Section 5.2.

 

(e)           Tender
Offer Rules.  Nothing contained in
this Agreement shall prohibit the Seller or its Board of Directors from taking
and disclosing to their stockholders a position contemplated by Rules 14d-9
and 14e-2(a) promulgated under the Exchange Act; provided, however,
that Seller shall not effect, or disclose pursuant to such rules or
otherwise a position 

 

37

 

which constitutes, a Change of Recommendation unless
specifically permitted pursuant to the terms of Section 5.2(d).

 

5.3          Preparation
of Proxy Statement; Seller Stockholders’ Meeting

 

(a)           Proxy
Statement.  As soon as reasonably
practicable following the Date hereof, Seller, with cooperation by the Buyer,
shall prepare and file with the SEC the Proxy Statement.  Seller shall use its commercially reasonable
efforts to respond to any comments of the SEC and to cause the Proxy Statement
to be mailed to its stockholders as promptly as practicable after the Proxy
Statement is filed with the SEC, subject to compliance with the Exchange Act,
including Rule 14a-6 promulgated thereunder.  Seller shall also take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified or filing a general consent to service of process) required to be
taken under any applicable state securities laws in connection with the
issuance and reservation of shares of Seller Common Stock pursuant to the
Warrant, and the Buyer shall furnish all information concerning the Buyer as
may be reasonably requested in connection with any such action.  If at any time prior to the Closing any
information (including any Change of Recommendation) relating to Seller or the
Buyer, or any of their respective Affiliates, officers or directors, should be
discovered by Seller or the Buyer which should be set forth in an amendment or
supplement to the Proxy Statement, so that any of such documents would not
include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading, the party which
discovers such information shall promptly notify the other parties hereto and
an appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of Seller.

 

(b)           Stockholders’
Meeting.  The Seller shall, as
promptly as practicable after the Proxy Statement is filed with the SEC,
subject to compliance with the Exchange Act, including Rule 14a-6
promulgated thereunder, take all action necessary in accordance with Applicable
Law and the Seller Charter Documents, to duly give notice of, convene and hold
the Seller Stockholders’ Meeting. 
Subject to Section 5.2(d), the Seller will use commercially
reasonable efforts to solicit from its stockholders proxies in favor of the
approval of the transactions contemplated by this Agreement, and will take all
other action necessary or advisable to secure the vote or consent of its
stockholders required by Applicable Law to obtain such approvals.  Notwithstanding anything to the contrary
contained in this Agreement, the Seller may adjourn or postpone the Seller
Stockholders’ Meeting to the extent necessary to ensure that any necessary
supplement or amendment to the Proxy Statement is provided to its stockholders
in advance of a vote on and the approval of the transactions contemplated by
this Agreement, or, if, as of the time for which the Seller Stockholders’
Meeting is originally scheduled, there are insufficient shares of Seller Common
Stock represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of such meeting.  The Seller shall ensure that the Seller
Stockholders’ Meeting is called, noticed, convened, held and conducted, and
that all proxies solicited in connection with the Seller Stockholders’ Meeting
are solicited in compliance with Applicable Law.  Notwithstanding any Change of Recommendation
by the Board of Directors of Seller, approval of the transactions contemplated
by this Agreement shall be submitted to the Seller Stockholders at the Seller
Stockholders’ Meeting, and nothing contained herein shall be deemed to relieve
the Buyer or Seller of such obligations.

 

38

 

(c)           Board
Recommendations.  Except to the
extent expressly permitted by Section 5.2(d):  (i) the Board of Directors of the Seller
shall recommend that its stockholders vote in favor of, the approval of the
transactions contemplated by this Agreement at the Seller Stockholders’
Meeting, and (ii) the Proxy Statement shall include a statement to the
effect that the Board of Directors of Seller has recommended that all holders
of capital stock of Seller entitled to vote thereon vote in favor of approval
of the transactions contemplated by this Agreement at the Seller Stockholders’
Meeting.

 

5.4          Access
to Information; Confidentiality

 

(a)           Access
to Information.  Subject to the
Confidentiality Agreement and Applicable Law, Seller shall, and shall cause
each of its Subsidiaries to, afford Buyer and its officers, employees,
accountants, counsel, financial advisors and other representatives of such
other party, reasonable access at all reasonable times on reasonable notice
during the period prior to the Closing to all properties, books, contracts,
commitments, personnel and records related to the Subject Business (provided,
that such access shall not unreasonably interfere with the business or
operations of Seller).  During such
period, Seller shall, and shall cause each of its Subsidiaries to, furnish
promptly to the Buyer (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (ii) all other
information concerning the Subject Business, its properties and personnel as
Buyer may reasonably request.  No review
pursuant to this Section 5.4 shall affect or be deemed to modify
any representation or warranty contained herein, the covenants or agreements of
the parties hereto or the conditions to the obligations of the parties hereto
under this Agreement.

 

(b)           Confidentiality.  Except as otherwise provided in this
Agreement, Buyer will hold and keep confidential, and will cause its respective
officers and employees and will direct its accountants, counsel, financial
advisors and other representatives and Affiliates to hold and keep
confidential, any nonpublic information in accordance with the terms of the
Confidentiality Agreement, which Confidentiality Agreement will remain in full
force and effect and shall survive termination of this Agreement as provided
therein.

 

5.5          Reasonable
Efforts

 

(a)           Governmental
and Third Party Approvals.  Each of
the parties agrees to use their commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable under Applicable Law to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement, including (1) the obtaining of all necessary actions or
non-actions, waivers, consents and approvals from Governmental Authorities and
the making of all necessary registrations and filings and the taking of all
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Authority, (2) the obtaining of
all necessary consents, approvals or waivers from third parties, (3) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated by this Agreement, including promptly seeking to have
any stay or temporary restraining order entered by any court or other
Governmental 

 

39

 

Authority vacated or reversed, and (4) the
execution and delivery of any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of, this
Agreement.  Subject to Applicable Law
relating to the exchange of information, the Buyer and Seller shall have the
right to review in advance, and to the extent reasonably practicable each will
consult the other on, all the information relating to the Buyer or Seller, as
the case may be, that appears in any filing made with, or written materials
submitted to, any Governmental Authority or third party in connection with the
transactions contemplated by this Agreement.

 

(b)           Notification.  Each of the Buyer and Seller shall keep the
other reasonably apprised of the status of matters relating to the completion
of the transactions contemplated hereby and work cooperatively in connection
with obtaining all required approvals or consents of any Governmental
Authority.  In that regard, each party
shall without limitation use its commercially reasonable efforts to: (1) promptly
notify the other of, and if in writing, furnish the other with copies of (or, in
the case of material oral communications, advise the other orally of) any
communications from or with any Governmental Authority (whether domestic,
foreign or supranational) with respect to the other transactions contemplated
by this Agreement, (2) permit the other to review and discuss in advance,
and consider in good faith the views of the other in connection with, any
proposed written (or any material proposed oral) communication with any such
Governmental Authority with respect to the transactions contemplated by this
Agreement, (3) to the extent practical, not participate in any meeting
with any such Governmental Authority with respect to the transactions
contemplated by this Agreement unless it consults with the other in advance and
to the extent permitted by such Governmental Authority gives the other the
opportunity to attend and participate thereat, and (4) furnish the other
with such necessary information and reasonable assistance as the Buyer or
Seller, as applicable, may reasonably request in connection with its
preparation of necessary filings or submissions of information to any such
Governmental Authority.

 

5.6          Notification. 
Seller shall give prompt notice to Buyer and Buyer shall give prompt
notice to the Seller, as the case may be, if it determines that any change,
event, circumstance or effect has had a Material Adverse Effect or would result
in the failure of any of the conditions set forth in Article VI to
be satisfied.  Notwithstanding the above,
the delivery of any notice pursuant to this Section 5.6 will not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice or the conditions to such party’s obligation to
consummate the transactions contemplated hereby.

 

5.7          Fees
and Expenses.  Except as set forth in this Section 5.7,
all fees and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be paid by the party
incurring such fees or expenses.  For the
avoidance of doubt, Seller shall bear the costs and expenses incurred in
connection with the filing, printing and mailing of the Proxy Statement
(including any SEC filing fees) and any preliminary materials related thereto.

 

40

 

ARTICLE VI

 

CONDITIONS TO CLOSING

 

6.1          Conditions
to Each Party’s Obligation to Closing

 

(a)           Stockholder
Approval.  The Seller Stockholder
Approval shall have been obtained.

 

(b)           No
Injunctions or Restraints.  No
judgment, order, decree, statute, law, ordinance, rule or regulation, or
other legal restraint or prohibition, entered, enacted, promulgated, enforced
or issued by any court or other Governmental Authority of competent
jurisdiction (collectively, “Restraints”),
shall be in effect or be pending which prohibits, makes illegal or enjoins, or
threatens to prohibit, make illegal or enjoin, the consummation of the
transactions contemplated by this Agreement.

 

6.2          Conditions
to Obligations of the Buyer

 

(a)           Representations
and Warranties.  (i) The representations
and warranties of Seller (except for the representations and warranties set
forth in Article III) set forth herein  (A) that are qualified as to Material
Adverse Effect shall be true and correct and (B) that are not so qualified
as to Material Adverse Effect shall be true and correct, in each case both when
made and at and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such date), except to the extent where the failure of any such representations
and warranties referred to in clause (B) to be so true and correct does
not have, and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Seller or the Subject Business, and (ii) the
representations and warranties of Seller set forth in Article III
shall be true and correct in all material respects, in each case both when made
and at and as of the Closing Date, as if made at and as of such time (except to
the extent expressly made as of an earlier date, in which case as of such
date).

 

(b)           Performance
of Obligations of Seller.  Seller
shall have performed, or complied with, in all material respects, all
obligations required to be performed or complied with by it under this
Agreement at or prior to the Closing Date.

 

(c)           Officer’s
Certificate.  The Buyer shall have
received an officer’s certificate duly executed by the Chief Executive Officer
of Seller to the effect that the conditions set forth in Section 6.2(a) and
Section 6.2(b) have been satisfied.

 

(d)           Consents
Obtained.  The Buyer shall have
received evidence, in form and substance reasonably satisfactory to it, that
the consents, waivers, approvals, authorizations or orders required to be
obtained, and all filings to be made, by Seller shall have been obtained and
made by Seller.

 

(e)           Material
Adverse Change.  Since the date
hereof, there shall have been no change, occurrence or circumstance in the
business, results of operations or financial condition 

 

41

 

of Seller or the Subject Business having or reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Seller or the Subject Business.

 

(f)            Other
Deliveries.  The Buyer shall have
received such other certificates and instruments (including certificates of
good standing of Seller in its jurisdiction of organization and the various
foreign jurisdictions in which it is qualified, certified charter documents,
certificates as to the incumbency of officers and the adoption of authorizing
resolutions) as it shall reasonably request in connection with the Closing.

 

6.3          Conditions
to Obligations of Seller

 

(a)           Representations
and Warranties.  (i) The
representations and warranties of the Buyer (except for the representations and
warranties set forth in Article IV) set forth herein (A) that
are qualified as to Material Adverse Effect shall be true and correct and (B) that
are not so qualified as to Material Adverse Effect shall be true and correct,
in each case both when made and at and as of the Closing Date, as if made at
and as of such time (except to the extent expressly made as of an earlier date,
in which case as of such date), except to the extent where the failure of any
such representations and warranties referred to in clause (B) to be so
true and correct does not have, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Buyer, and (ii) the
representations and warranties of the Buyer set forth in Article IV
shall be true and correct in all material respects, in each case both when made
and at and as of the Closing Date, as if made at and as of such time (except to
the extent expressly made as of an earlier date, in which case as of such
date).

 

(b)           Performance
of Obligations of the Buyer.  The
Buyer shall have performed, or complied with, in all material respects, all
obligations required to be performed or complied with by it under this
Agreement at or prior to the Closing Date.

 

(c)           Compliance
Certificate.  Seller shall have
received an officer’s certificate duly executed by the Chief Executive Officer
of the Buyer to the effect that each of the condition set forth in Section 6.3(a) and
Section 6.3(b) have been satisfied.

 

(d)           Other Deliveries. 
Seller
shall have received such other certificates and instruments (including
certificates of good standing of Buyer in its jurisdiction of organization,
certificates as to the incumbency of officers and the adoption of authorizing
resolutions) as it shall reasonably request in connection with the Closing.

 

ARTICLE
VII

 

Closing Deliveries

 

7.1          Seller’s
Deliveries at Closing

 

At
the Closing, Seller shall deliver to Buyer the following:

 

(a)           The
Warrant;

 

(b)           The
General Assignment;

 

42

 

(c)           The
Patent Assignment;

 

(d)           The
Trademark Assignment;

 

(e)           The
Copyright Assignment;

 

(f)            The
Third Party IP Licensor Consent and Waiver;

 

(g)           The
Landlord Consent and Waiver;

 

(h)           The
Noncompetition Agreement;

 

(i)            All
material consents and approvals by third-parties to the assignment of the
applicable Purchased Contracts, including those set forth on Schedule 3.19, all on terms and conditions no
less favorable to Seller than those in existence as of the date hereof;

 

(j)            All
material authorizations and approvals received and other Governmental Permits
received in connection with the transfer of the Subject Business and the
Purchased Assets to Buyer and the consummation of the transactions contemplated
hereby;

 

(k)           Releases
of all Liens affecting or applicable to the Subject Business or any of the
Purchased Assets;

 

(l)            Possession
of all of the Purchased Assets;

 

(m)          Certified
copies of the Certificate of Incorporation and By-laws of Seller and the
resolutions of Seller’s board of directors authorizing the execution, delivery
and performance of this Agreement, the Warrant and the other Transaction
Documents and approving the consummation of the transactions contemplated
hereby and thereby;

 

(n)           Certificate
of the Secretary of State of Delaware stating that Seller is in good standing;
and

 

(o)           Such
other documents or instruments as Buyer may reasonably request to effect the
transactions contemplated hereby.

 

7.2          Buyer’s
Deliveries at Closing

 

At the Closing, Buyer shall
deliver to Seller the following:

 

(a)           The
Closing Cash Payment as set forth in Section 2.4 hereof;

 

(b)           The
Buyer Note;

 

(c)           The
Parent Guaranty;

 

(d)           The
SilkRoad Guaranty;

 

(e)           The
General Assignment;

 

43

 

(f)            Certified
resolutions of Buyer’s board of directors authorizing the execution, delivery
and performance of this Agreement, the Warrant and the other Transaction
Documents and approving the consummation of the transactions contemplated
hereby and thereby;

 

(g)           The
Landlord Consent and Waiver; and

 

(h)           Such
other documents or instruments as Seller may reasonably request to effect the
transactions contemplated hereby.

 

ARTICLE
VIII

 

TERMINATION, AMENDMENT AND WAIVER

 

8.1          Termination

 

(a)           by
mutual written consent of the Buyer and Seller, if the Board of Directors of
each so determines;

 

(b)           by
written notice of either the Buyer or Seller (as authorized by the Board of
Directors of the Buyer or Seller, as applicable):

 

(i)            if
the Closing shall not have been consummated by January 31, 2010 (the “Outside Date”); provided, however, that the
right to terminate this Agreement under this Section 8.1(b)(i) shall
not be available to any party whose failure to comply with any provision of
this Agreement has been the cause of, or resulted in, the failure of the
transactions contemplated hereby to be consummated by such date; or

 

(ii)           if
a Governmental Authority of competent jurisdiction shall have issued an order,
decree or ruling or taken any other action (including the failure to have taken
an action), in any case having the effect of permanently restraining, enjoining
or otherwise prohibiting the Closing, which order, decree, ruling or other
action is final and nonappealable; provided, however, that the
right to terminate this Agreement under this Section 8.1(b)(ii) shall
not be available to any party whose failure to comply with any provision of
this Agreement has been the cause of, or resulted in, such action;

 

(c)           by
the Buyer (as authorized by its Board of Directors) upon a material breach of
any representation, warranty, covenant or agreement of Seller set forth in this
Agreement, if such breach shall be incapable of being cured or shall not have
been cured in all material respects within 20 Business Days after written
notice thereof shall have been received by Seller;

 

(d)           by
Seller (as authorized by its Board of Directors) upon a material breach of any
representation, warranty, covenant or agreement of the Buyer set forth in this
Agreement, if such breach shall be incapable of being cured or shall not have
been cured in all material respects within 20 Business Days after written
notice thereof shall have been received by the Buyer;

 

44

 

(e)           by
the Buyer (as authorized by its Board of Directors), at any time prior to
Seller Stockholder Approval, if Seller, the Seller Board of Directors or any
committee thereof, for any reason, shall have (i) failed to include in the
Proxy Statement distributed to the Seller Stockholders its recommendation in
favor of approval of the transaction contemplated by this Agreement, (ii) effected
a Change of Recommendation, or (iii) approved or recommended any
Alternative Transaction; or

 

(f)            by
the Buyer, if the Seller Stockholder Approval shall not have been obtained at
the Seller Stockholders’ Meeting, or at any adjournment or postponement thereof
on or prior to the Outside Date.

 

8.2          Effect
of Termination.  In the event of termination of this Agreement
as provided in Section 8.1 hereof, this Agreement shall forthwith
become void and there shall be no liability on the part of any of the parties,
except (i) as set forth in Section 5.4(b), Section 5.6,
this Section 8.2 and Section 8.3, as well as Article IX
to the extent applicable to such surviving sections, each of which shall
survive termination of this Agreement, and (ii) that nothing herein shall
relieve any party from any further liability for any willful breach of this
Agreement.  No termination of this
Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination
of this Agreement in accordance with their terms.

 

8.3          Payments

 

(a)           Payment
by the Buyer.  In the event that this
Agreement is terminated by Seller pursuant to Section 8.1(b)(i) or
Section 8.1(d), the Buyer shall promptly, but in no event later
than five (5) Business Days after the date of such termination, pay Seller
the Termination Fee.

 

(b)           Payment
by Seller.  In the event that this
Agreement is terminated by the Buyer pursuant to Section 8.1(b)(i),
Section 8.1(c), Section 8.1(e) or Section 8.1(f),
Seller shall promptly, but in no event later than ten Business Days after the
date of such termination, pay the Buyer the Termination Fee.

 

(c)           Interest
and Costs; Other Remedies.  All
payments under this Section 8.3 shall be made by wire transfer of
immediately available funds to an account designated by the party to receive
payment.  Each of the Buyer and Seller
acknowledges that the agreements contained in this Section 8.3 are
an integral part of the transactions contemplated by this Agreement and that,
without these agreements, the other party hereto would not enter into this
Agreement.  Accordingly, if the Buyer or
Seller, as the case may be, fails to pay in a timely manner the amounts due
pursuant to this Section 8.3 and, in order to obtain such payment,
the other party hereto makes a claim that results in a judgment against the
party failing to pay for the amounts set forth in this Section 8.3,
the party so failing to pay shall pay to the other party its reasonable costs
and expenses (including reasonable attorneys’ fees and expenses) in connection
with such suit, together with interest on the amounts set forth in this Section 8.3
at the Prime Rate on the date such payment was required to be made.  Payment of the fees described in this Section 8.3
shall be in lieu of damages incurred under this Agreement.

 

45

 

ARTICLE IX

 

INDEMNIFICATION AND RELATED MATTERS

 

9.1          Survival;
Risk Allocation

 

(a)           All
representations, warranties, covenants and agreements set forth in this
Agreement, the other Transaction Documents or in any writing or certificate
delivered in connection with this Agreement or the transactions contemplated by
this Agreement shall survive the Closing Date. Notwithstanding the foregoing,
no Party shall be entitled to recover for any Loss pursuant to Section 9.2(a)(i) or
Section 9.2(b)(i), unless written notice of a claim thereof is delivered
to the other Party prior to the Applicable Limitation Date. For purposes of
this Agreement, the term “Applicable Limitation Date” shall
mean the eighteen month anniversary of the Closing Date; provided, however,
that the Applicable Limitation Date with respect to the following Losses shall
be as follows: (i) with respect to any Loss arising from or related to a
breach of the representations and warranties of Seller set forth in Section 3.9
(Taxes), the Applicable Limitation Date shall be the 60th day after expiration
of the applicable statute of limitations (including any extensions thereto to
the extent that such statute of limitations may be tolled), (ii) with
respect to any Loss arising from or related to a breach of the representations
and warranties of Seller set forth in Section 3.1 (Organization and
Corporate Power), Section 3.2 (Authorization of Transactions), and Section 3.8
(Title to Properties), there shall be no Applicable Limitation Date (i.e., such
representations and warranties shall survive forever). Following the Closing,
the exclusive remedy pursuant to this Agreement and the transactions
contemplated hereby based upon the survival of such representations and
warranties will be the rights to indemnification, payment of Losses and other
remedies provided under this Article IX.

 

(b)           Notwithstanding
anything in this Article IX to the contrary, in the event any Party
to this Agreement perpetrates a fraud on another Party hereto, any Party that
suffers any Loss by reason thereof shall be entitled to seek recovery therefor
against the Person or Persons who perpetrated such fraud without regard to any
limitation set forth in this Agreement (whether a temporal limitation, a dollar
limitation or otherwise).

 

(c)           The
representations, warranties, covenants and agreements made herein, as modified
by the Schedules, together with the indemnification provisions herein, are
intended among other things to allocate the economic cost and the risks
inherent in the transactions contemplated hereby between the Parties and,
accordingly, a Party shall be entitled to the indemnification or other remedies
provided in this Agreement by reason of any breach of any such representation,
warranty, covenant or agreement, as modified by the Schedules, by another Party,
notwithstanding whether any employee, representative or agent of the Party
seeking to enforce a remedy knew or had reason to know of such breach and
regardless of any investigation by such Party.

 

9.2          Indemnification

 

(a)           Subject
to each of the limitations set forth in this Article IX, Seller
shall indemnify Buyer and its officers, directors, employees, agents,
representatives, successors and permitted assigns (collectively, the “Buyer Parties”)
and hold each of them harmless from and 

 

46

 

against and pay on behalf of or reimburse such Buyer
Parties in respect of any loss (including diminution in value), Liability,
demand, claim, action, cause of action, cost, damage, deficiency, Tax, penalty,
fine or expense, whether or not arising out of third-party claims (including,
without limitation, interest, penalties, reasonable attorneys’, accountants’
and other professionals’ fees and expenses, court costs and all amounts paid in
investigation, defense or settlement of any of the foregoing) but specifically
excluding any consequential or punitive damages (other than consequential or
punitive damages assessed in connection with claims brought by third-parties)
(collectively, “Losses” and individually, a “Loss”)
which any such Buyer Party may suffer, sustain or become subject to, as a
result of, in connection with, relating or incidental to or by virtue of:

 

(i)            any
breach of any representation or warranty made by Seller contained in this
Agreement or the Transaction Documents;

 

(ii)           the
breach of any covenant or agreement made by Seller contained in the Transaction
Documents;

 

(iii)          any
claim for payment of fees or expenses as a broker or finder in connection with
the origin, negotiation or execution of this Agreement or the other Transaction
Documents or the consummation of the transactions contemplated hereby based
upon any alleged agreement, arrangement or understanding between the claimant
and Seller or any of its stockholders, agents or representatives;

 

(iv)          the
assertion against any Buyer Party of any Liability relating to any Excluded
Liability; or

 

(v)           Seller’s
ownership, operation or use of the Purchased Assets and the Subject Business
prior to the Closing Date (except for any Assumed Liabilities).

 

(b)           Subject
to each of the limitations set forth in this Article IX, Buyer
shall indemnify Seller and its officers, directors, employees, agents,
representatives, successors and permitted assigns (collectively, the “Seller Parties”)
and hold each of them harmless from and against and pay on behalf of or
reimburse Seller Parties in respect of any Loss which any such Seller Party may
suffer, sustain or become subject to, as the result of, in connection with,
relating or incidental to or by virtue of:

 

(i)            any
breach of any representation or warranty made by Buyer contained in this
Agreement or the Transaction Documents;

 

(ii)           the
breach of any covenant or agreement made by Buyer contained in this Agreement
or the Transaction Documents;

 

(iii)          any
claim for payment of fees or expenses as a broker or finder in connection with
the origin, negotiation or execution of this Agreement or the other Transaction
Documents or the consummation of the transactions contemplated hereby based
upon any alleged agreement, arrangement or understanding between the claimant
and Buyer, or any of its agents or representatives;

 

47

 

(iv)          the
assertion against any Seller Party of any Liability relating to an Assumed
Liability; or

 

(v)           Buyer’s
ownership, operation or use of the Purchased Assets and the Subject Business
from and after the Closing Date.

 

(c)           The
indemnification provided for in Sections 9.2(a) and 9.2(b) above
is subject to the following limitations:

 

(i)            No
Party shall be liable hereunder with respect to claims referred to in Section 9.2(a)(i) or
Section 9.2(b)(i) above, unless the other Party gives written
notice thereof within the Applicable Limitation Date. Notwithstanding any
implication to the contrary contained in this Agreement, so long as a Party
delivers written notice of a claim no later than the Applicable Limitation
Date, the other Party shall be required to indemnify hereunder for all Losses
that such Parties may incur (subject to the Basket and the Cap, if applicable)
in respect of the matters that are the subject of such claim, regardless of
when incurred.

 

(ii)           Notwithstanding
anything contained in this Agreement to the contrary (but subject to the
remainder of this Section 9.2(c)(ii)), no Indemnifying Party shall
be liable to the Buyer Parties or Seller Parties, as the case may be, (A) for
any Loss arising under Section 9.2(a)(i) or Section 9.2(b)(i) above,
unless the aggregate amount of all Losses incurred by the Buyer Parties or
Seller Parties, as applicable, exceeds $75,000 (the “Basket”),
in which case, subject to the Cap (as defined below), such Indemnifying Party
shall be liable for all such Losses in excess of such amount, (B) for any
Loss arising under Section 9.2(a)(i) or Section 9.2(b)(i) to
the extent that the aggregate amount of all such Losses exceeds $2,200,000 (the
“Cap”), or (C) for consequential
damages, punitive or exemplary damages, special damages, lost profits or
incidental damages.  Notwithstanding
anything contained in this Agreement to the contrary, (x) the Basket and
the Cap shall not apply with respect to any Loss arising from or related to a
breach of (a) any covenants of any Party or (b) the representations
and warranties set forth in Section 3.1 (Organization and Corporate
Power), Section 3.2 (Authorization of Transactions), Section 3.9
(Taxes), and Section 3.8 (Title to Properties).

 

(iii)          In
determining the amount of the Basket and any Losses for which a Party is
entitled to assert a claim for indemnification hereunder, such amounts shall be
determined after deducting therefrom the amount of any insurance proceeds
(after giving effect to any applicable deductible or retention) and other third
party recoveries in respect of such Losses. 
The Parties shall use reasonable efforts to mitigate the amount of
Losses for which it may be entitled to indemnification hereunder.

 

(d)           If
a Party seeks indemnification under this Article IX, such Party
(the “Indemnified Party”) shall give
written notice to the other Party (the “Indemnifying Party”)
promptly after receiving written notice of any action, lawsuit, proceeding,
investigation or other claim against it (if by a third-party) or discovering
the Liability, obligation or facts giving rise to such claim for
indemnification, describing the claim, the amount thereof (if known and
quantifiable), and the basis thereof; provided, however, that the
failure to so notify the Indemnifying Party promptly shall not relieve the
Indemnifying Party of its Liabilities hereunder except to the extent such
failure shall have materially prejudiced the Indemnifying Party. In that 

 

48

 

regard, if any action, lawsuit, proceeding,
investigation or other claim shall be brought or asserted by any third-party
that, if adversely determined, would entitle the Indemnified Party to indemnity
pursuant to Article IX, the Indemnifying Party shall be entitled to
control the defense of such action, lawsuit, proceeding, investigation or other
claim giving rise to the Indemnified Party’s claim for indemnification at the
Indemnifying Party’s expense, and at the Indemnifying Party’s option (subject
to the limitations set forth below) shall be entitled to appoint lead counsel
of such defense with a reputable counsel reasonably acceptable to the
Indemnified Party; provided, however, that, in the event that the
Indemnifying Party elects to control such defense, such Party shall be deemed
to have agreed to be fully responsible (with no reservation of rights) for all
Losses relating to such claims, subject to the limitations set forth in Section 9.2(c)(ii).

 

Notwithstanding any
provision contained herein to the contrary, the Indemnifying Party shall not
have the right to assume control of such defense and shall pay the reasonable
fees and expenses of counsel retained by the Indemnified Party, if the claim
over which the Indemnifying Party seeks to assume control (i) seeks
non-monetary relief, (ii) involves criminal or quasi-criminal allegations,
(iii) involves a claim to which the Indemnified Party reasonably believes
an adverse determination would have a material and adverse effect on the
Indemnified Party’s reputation or future business prospects, (iv) involves
a claim that, upon petition by the Indemnified Party, the appropriate court rules that
the Indemnifying Party failed or is failing to vigorously prosecute or defend
or (v) involves a claim that is reasonably expected to result in Liability
to the Indemnified Party in excess of the Cap.

 

The foregoing paragraph
shall not apply to any third-party claim that relates to any Excluded
Liabilities or Excluded Assets, over which Seller shall have exclusive control,
including the right to control the defense or settlement of any such claim; provided,
however, that the Buyer Parties shall be entitled to participate in the
defense of any such third-party claim to the extent reasonably required to
protect such Buyer Parties’ interests.

 

If the Indemnifying Party
exercises the right to control the defense of any third-party claim as provided
above, then the Indemnified Party shall have the right to employ its own
counsel in any such action and to participate in the defense thereof at its own
expense, unless the Indemnifying Party has specifically authorized the
employment of such counsel in writing, in which case the fees and expenses of
such counsel shall be borne by the Indemnifying Party. Similarly, if the
Indemnified Party controls the defense of any such claim, then the Indemnifying
Party shall have the right to employ its own counsel in any such action and to
participate in the defense thereof at its own expense. If the Indemnified Party
determines in its reasonable discretion that there exists or is reasonably
likely to exist a conflict of interest that would make it inappropriate for the
same counsel to represent both the Indemnified Party and the Indemnifying
Party, then the Indemnified Party shall be entitled to retain its own counsel
in each jurisdiction for which the Indemnified Party determines counsel is
required, at the expense of the Indemnifying Party.

 

In the event that the
Indemnifying Party exercises the right to control the defense of any
third-party claim as provided above, then the Indemnified Party shall cooperate
with the Indemnifying Party in such defense. Similarly, in the event that the
Indemnified Party is, directly or indirectly, controlling the defense of any
such claim, then the Indemnifying Party shall cooperate with the Indemnified
Party in such defense. The Indemnifying Party shall obtain the prior written
consent of the Indemnified Party before entering into any settlement of a claim
or ceasing to defend such

 

49

 

claim, if such settlement or
cessation (i) involves the imposition of an injunction or other equitable
relief on the Indemnified Party, (ii) does not expressly unconditionally
release the Indemnified Party from all Liabilities with respect to such claim and
all other claims arising out of the same or similar facts and circumstances,
with prejudice, or (iii) could adversely affect any Tax or other Liability
of Buyer or any Buyer Parties.

 

(e)           Amounts
paid to or on behalf of any Party as indemnification under this Agreement shall
be treated as adjustments to the Purchase Price.

 

(f)            If
and to the extent any provision of this Article IX is unenforceable
for any reason, the Indemnifying Party hereby agrees to make the maximum
contribution to the payment and satisfaction of any Loss for which
indemnification is provided for in this Section 9.2 that is
permissible under applicable legal requirements.

 

(g)           Subject
to Section 9.1(b), from and after the Closing, the indemnification
provided pursuant to this Article IX shall be the sole and
exclusive remedy hereto for any Loss resulting from, with respect to or arising
out of any breach or claim in connection with this Agreement, any Exhibit or
Schedule hereto or any certificate or writing delivered in connection with this
Agreement, regardless of the cause of action. Notwithstanding the foregoing,
nothing contained in this Agreement shall limit a Party’s right to pursue
equitable remedies, including, without limitation, injunctive relief and
specific performance.

 

(h)           No
Indemnifying Party shall in any event be liable to the Buyer Parties or Seller
Parties, as applicable, on account of any indemnification obligation set forth
in this Article IX for any such Person’s own punitive or exemplary
damages; provided, however, that nothing herein shall relieve any
Indemnifying Party of its obligation to provide indemnification under this Article IX
for all components of awards against the Buyer Parties or Seller Parties, as
applicable, in third-party claims, including punitive or exemplary damages.

 

(i)            Notwithstanding
the fact that any Party may have the right to assert claims for indemnification
under or in respect of more than one provision of this Agreement or another
agreement entered into in connection herewith in respect of any fact, event,
condition or circumstance, no Party shall be entitled to recover the amount of
any Losses suffered by such Party more than once under all such agreements in
respect of such fact, event, condition or circumstance.

 

ARTICLE X

 

MISCELLANEOUS

 

10.1        Amendment

 

This Agreement may not be
amended or modified, except (a) by an instrument in writing signed by or
on behalf of Buyer and Seller or (b) by a waiver in accordance with Section 10.2.

 

50

 

10.2        Waiver

 

Any Party to this Agreement
may (a) extend the time for the performance of any of the obligations or
other acts of the other Parties, (b) waive any inaccuracy in the
representations and warranties of another Party contained herein or in any document
delivered by such Party pursuant hereto or (c) waive compliance with any
agreement of another Party or condition to another Party’s obligations
contained herein. Any such extension or waiver shall be valid only if set forth
in a writing executed by the Party to be bound thereby. Any waiver of any term
or condition shall not be construed as a wavier of any subsequent breach or
waiver of the same term or condition or as a waiver of any other term or
condition of this Agreement. The failure of any Party to assert any of its
rights under this Section 10.2 shall not constitute a waiver of any
of such rights. No course of dealing between or among any Persons having any
interest in this Agreement shall be deemed effective to modify, amend or
discharge any part of this Agreement or any rights or obligations of any Party
under or by reason of this Agreement. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

 

10.3        Notices

 

All notices, claims, demands
and other communications given or delivered under this Agreement shall be in
writing and shall be deemed to have been duly made or given when personally
delivered, delivered by receipted express courier service, or via facsimile
with a copy delivered by receipted express courier service to the respective
Parties at the following addresses (or such other address for a Party as shall
be specified in a notice given in accordance with this Section 10.3):

 

	
  If
  to Seller:

  	
   

  	
  with
  a copy to:

  
	
   

  	
   

  	
   

  
	
  BIO-key
  International, Inc.

  300 Nickerson Road

  Marlborough, MA 01752

  Facsimile: (308) 801-1819

  Attention: President

  	
   

  	
  Choate
  Hall & Stewart LLP

  Two International Place

  Boston, MA 02110

  Facsimile: (617) 248-4000

  Attention: Charles J. Johnson, Esq.

  
	
   

  	
   

  	
   

  
	
  If
  to Buyer:

  	
   

  	
  with
  copies to:

  
	
   

  	
   

  	
   

  
	
  InterAct911
  Systems

  102 W 3rd St., Ste 750

  Winston-Salem, NC 27101

  Facsimile:

  Attention: President

  	
   

  	
  McDermott
  Will & Emery LLP

  227 West Monroe Street

  Chicago, Illinois 60606-5096

  Facsimile: (312) 984-7700

  Attention: Robert A. Schreck, Jr., P.C.

  

 

10.4        Binding
Agreement; Assignment

 

This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns; provided,
however, that neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by operation of law or otherwise without
the prior written consent of Seller and Buyer. 

 

51

 

Notwithstanding
anything to the contrary in this Section 10.4, without the consent
of any Party, Buyer and its permitted assigns may at any time, in their sole
discretion, assign, in whole or in part, their rights hereunder to one or more
third-parties (provided that no such assignment shall release Buyer from its
obligations hereunder).

 

10.5        Severability

 

Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
is held to be prohibited by or invalid under applicable law or public policy,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, and all other terms of this Agreement shall remain in full force
and effect for so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
Party.

 

10.6        Construction

 

The language used in this
Agreement shall be deemed to be the language chosen by the Parties to express
their mutual intent, and no rule of strict construction shall be applied
against any Person.  The word “including” shall mean including, without limitation,
regardless of whether such words are included in some contexts but not others.

 

10.7        Captions

 

The captions used in this
Agreement are for convenience of reference only and do not constitute a part of
this Agreement and shall not be deemed to limit, characterize or in any way
affect any provision of this Agreement, and all provisions of this Agreement
shall be enforced and construed as if no caption had been used in this
Agreement.

 

10.8        Entire
Agreement

 

The Schedules identified in
this Agreement are incorporated herein by reference.  This Agreement and the documents referred to
herein contain the entire agreement between the Parties and supersede any prior
understandings, agreements or representations by or between the Parties,
written or oral, which may have related to the subject matter hereof in any
way, including the Letter of Intent.

 

10.9        Counterparts

 

This Agreement may be
executed in multiple counterparts, each of which shall be deemed an original
but all of which taken together shall constitute one and the same instrument.

 

10.10      Governing
Law

 

All question concerning the
construction, validity and interpretation of this Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts executed in and to be performed in that
State.

 

52

 

10.11      Parties
in Interest

 

Nothing in this Agreement,
express or implied, is intended to confer on any Person other than the Parties
and their respective successors and assigns any rights or remedies under or by
virtue of this Agreement.

 

10.12      Consent
to Jurisdiction

 

THE PARTIES AGREE THAT
JURISDICTION AND VENUE IN ANY ACTION BROUGHT BY ANY PARTY PURSUANT TO THIS
AGREEMENT SHALL PROPERLY AND EXCLUSIVELY LIE IN ANY FEDERAL OR STATE COURT
LOCATED IN SUFFOLK COUNTY, BOSTON, MASSACHUSETTS. BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF
SUCH COURTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY WITH RESPECT TO SUCH
ACTION. THE PARTIES IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT,
AND HEREBY WAIVE ANY OBJECTION THAT SUCH COURT IS AN IMPROPER OR INCONVENIENT
FORUM FOR THE RESOLUTION OF SUCH ACTION.

 

* *  * *

 

53

 

IN WITNESS WHEREOF, each of
the parties hereto has caused this Agreement to be executed by an officer
thereunto duly authorized, all as of the day and year first above written.

 

	
  BUYER:

  	
   

  	
  SELLER:

  
	
   

  	
   

  	
   

  
	
  InterAct911
  Mobile Systems, Inc.

  	
   

  	
  BIO-key
  International, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
  Andrew J. Filipowski

  	
   

  	
   

  	
  Thomas J. Colatosti

  
	
   

  	
  Chairman

  	
   

  	
   

  	
  Chairman

  

 

[Signature Page to Asset Purchase Agreement]Exhibit
10.84

 

NOTE
AMENDMENT AND EXTENSION AGREEMENT

 

This NOTE AMENDMENT AND EXTENSION AGREEMENT (“Agreement”)
is made effective as of November 3, 2009, between BIO-KEY INTERNATIONAL,
INC. (“Company”), and THE SHAAR
FUND, LTD. (“Holder”).

 

RECITALS:

 

A.            The Holder is the holder of the Eight Percent (8%)
Promissory Note Due November 3, 2009 issued by the Company in the
principal amount of $1,000,000 (the “Note”), the full principal amount
of which, together with accrued interest, is outstanding on the date hereof.

 

B.            At the request of the Company, the Holder has agreed
to extend the Maturity Date of the Note as hereinafter set forth.

 

C.            Capitalized terms used herein without definition
shall have the respective meanings ascribed to them in the Note.

 

NOW, THEREFORE, for and in consideration of
the premises and mutual covenants and conditions contained herein and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties covenant and agree as follows:

 

1.             Representation and Warranty.  The Company represents and warrants to the
Holder that no Payment Default or Event of Default has occurred and is
continuing under the Note.

 

2.             Amendment and Extension.  Subject to the truth and accuracy of the
foregoing representation and warranty, effective as of the date hereof, the
Note is amended as follows:

 

(a)           the first sentence of the
Note is amended to read as follows:

 

“FOR VALUE RECEIVED, BIO-KEY INTERNATIONAL,
INC., a corporation duly organized and validly existing under the laws of the
State of Delaware, U.S.A. (the “Company”), promises to pay to the order
of THE SHAAR FUND, LTD., the registered holder hereof and its successors and
assigns (the “Holder”), One Million Dollars ($1,000,000), and to pay
interest on the principal sum outstanding, at the rate of eight percent (8%)
per annum, due and payable on the date that is the earlier to occur of (a) the
fifth (5th) business day
after the occurrence of the Closing under and as defined in the Asset Purchase
Agreement dated August 13, 2009, as now or hereafter amended, restated,
supplemented or otherwise modified, between the Company and InterAct911 Mobile
Systems, Inc., or (b) January 31, 2010 (the “Maturity Date”).”

 

(b)           a new subsection (h) is
added to Section 6 (and the following subsection is re-lettered as
subsection (i)) which shall read as follows:

 

1

 

“(h)         the
Company shall default in the payment of any other outstanding indebtedness
incurred or guaranteed by the Company beyond any period of notice and
opportunity to cure, or the payment of such indebtedness shall be accelerated
by the holder thereof; or”

 

3.             General Provisions.

 

(a)           The amendment and extension set forth herein shall
not affect any other term or provision of the Note, which Note, as amended and
extended hereby, shall continue in full force and effect and is hereby ratified
and approved by the Company.

 

(b)           This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which constitute the same instrument.

 

[No further text on this page]

 

2

 

IN WITNESS WHEREOF, the parties have executed
this Agreement as of the date first set forth above.

 

 

	
   

  	
  Company:

  
	
   

  	
   

  
	
   

  	
  BIO-KEY INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas J. Colatosti

  
	
   

  	
   

  	
  Name: Thomas J. Colatosti

  
	
   

  	
   

  	
  Title: Chairman

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Holder:

  
	
   

  	
   

  	
   

  
	
   

  	
  THE SHAAR FUND, LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

3

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