Document:

Exhibit
10.18

 

SETTLEMENT
AGREEMENT AND MUTUAL GENERAL RELEASE

 

This
Settlement Agreement and Mutual General Release (this “Agreement”) is entered
into this 18th day of February, 2005 
between Tapestry Pharmaceuticals, Inc., a Delaware corporation formerly
known as Napro BioTherapeutics, Inc. (“Tapestry”), on one hand, and TL Ventures
V L.P. and TL Ventures V Interfund L.P (collectively, “TL Ventures”), on the
other hand.

 

RECITALS

 

WHEREAS,
the parties are engaged in a litigation styled TL VENTURES V L.P. and TL
VENTURES V INTERFUND L.P v . NAPRO BIOTHERAPEUTICS, INC. Delaware Chancery
Action No. 110-N, arising from their past commercial dealings; and

 

WHEREAS,
Tapestry and TL Ventures desire to settle their dispute and mutually release
all claims either may have against the other;

 

AGREEMENT

 

NOW
THEREFORE, the parties agree as follows:

 

1.             Upon execution of this Agreement,
Tapestry will pay $3,184,136.99 to TL Ventures in immediately available funds
pursuant to the wire instructions attached hereto as Exhibit B and deliver two
promissory notes (the “Notes”) to TL Ventures in exchange for the delivery by
TL Ventures of the two outstanding 4% Convertible Subordinated Debentures
($8,000,000 in principal amount) (the “Debentures”).  The two Notes will have an aggregate
principal balance of $4,670,000 and will be in the form of the promissory note
attached hereto as Exhibit A.  The cash
payment will be shared, and the principal balance of the Notes will be split,
between the two TL Ventures entities in accordance with the principal balance
of the respective Debentures delivered by each of them.

 

2.             Within 10 days after both sides
have executed this Settlement Agreement, the parties will cause papers
dismissing all claims and counterclaims with prejudice to be filed in the
appropriate court in Delaware in the case TL VENTURES V L.P. and TL VENTURES V
INTERFUND L.P v. NAPRO BIOTHERAPEUTICS, INC. C.A.110-N,.

 

3.             In return for good and valuable
consideration, the receipt of which is hereby acknowledged, Tapestry, on behalf
of itself and, to the extent Tapestry may lawfully do so, its present and
former affiliates, parents, subsidiaries, successors, predecessors, officers,
members, representatives, agents, assigns, employees, directors, shareholders,
attorneys, and each of their heirs, executors, administrators, personal
representatives, agents, successors and assigns (collectively, the “Tapestry
Entities”) does hereby release, settle, and forever discharge TL Ventures V
L.P. and TL Ventures V Interfund L.P., and each of their present and former
affiliates, parents, subsidiaries, successors, predecessors, officers, members,
representatives, agents, assigns, employees, directors, shareholders,
attorneys, and each of their heirs, executors, administrators, personal representatives,
agents, successors and assigns (collectively, the “TL

 

1

 

Ventures
Entities”) from any and all legal and equitable claims and demands, actions and
causes of action, counterclaims, suits, qui tam actions, judgments, damages,
costs, contracts, quasi-contracts, agreements, expenses, liabilities, debts,
dues, accounts, sums of money, bonds, bills, covenants, and promises
(collectively, the “Claims”), whether the same are now known or unknown, or
suspected or unsuspected.

 

4.             In return for good and valuable consideration, the
receipt of which is hereby acknowledged, TL Ventures, on behalf of themselves
and, to the extent TL Ventures may lawfully do so, the other TL Ventures
Entities do hereby release, settle, and forever discharge each of the Tapestry
Entities from any and all Claims, whether the same are now known or unknown, or
suspected or unsuspected.  As used in
this Paragraph, the terms “TL Ventures Entities,” “Tapestry Entities,” and
“Claims” shall have the same meaning as in Paragraph 3 above.

 

5.             Tapestry has all required corporate power and authority
to enter this Agreement and issue the Notes. 
This Agreement and the Notes executed and delivered by Tapestry pursuant
hereto are valid and binding obligations of Tapestry, enforceable in accordance
with their respective terms.  The
execution, delivery and performance of this Agreement and the Notes executed
and delivered by Tapestry pursuant hereto, have been duly authorized by all
necessary corporate or other action of Tapestry.  The execution and delivery of this Agreement
and the Notes executed and delivered by Tapestry pursuant hereto, and the
performance of the obligations contemplated by this Agreement and the Notes, do
not and will not: (i) violate or result in a violation of, conflict with or
constitute or result in a default (whether after the giving of notice, lapse of
time or both) or loss of benefit under any contract or obligation to which
Tapestry or any of its subsidiaries is a party or by which its or any of its
subsidiaries assets are bound, or any provision of the Certificate of
Incorporation or Bylaws, or cause the creation of any lien upon any of the
assets of Tapestry; (ii) violate, conflict with or result in a violation of, or
constitute a default (whether after the giving of notice, lapse of time or
both) under, any provision of any law, regulation or rule, or any order of, or
any restriction imposed by, any court or governmental agency applicable to
Tapestry; (iii) except for reports to be filed by it as a company registered
under the Securities Exchange Act of 1934, as amended, require from Tapestry
any notice to, declaration or filing with, or consent or approval of any
governmental authority or other third party; or (iv) violate or result in a
violation of, or constitute a default (whether after the giving of notice,
lapse of time or both) under, accelerate any obligation under, or give rise to
a right of termination of, any agreement, permit, license or authorization to
which Tapestry or any of its subsidiaries is a party or by which Tapestry or
any of its subsidiaries is bound.

 

6.             Each of TL Ventures V L.P. and TL Ventures V Interfund
L.P has all required partnership power and authority to enter this
Agreement.  This Agreement is a valid and
binding obligation of each of TL Ventures V L.P. and TL Ventures V Interfund
L.P, enforceable in accordance with its terms. 
The execution, delivery and performance of this Agreement, has been duly
authorized by all necessary partnership or other action of each of TL Ventures
V L.P. and TL Ventures V Interfund L.P. 
The execution and delivery of this Agreement, and the performance of the
obligations contemplated by this Agreement and the Notes, do not and will not:
(i) violate or result in a violation of, conflict with or constitute or result
in a default (whether

 

2

 

after
the giving of notice, lapse of time or both) or loss of benefit under any
contract or obligation to which each of TL Ventures V L.P. and TL Ventures V
Interfund L.P or any of its subsidiaries is a party or by which its or any of
their respective subsidiaries assets are bound, or any provision of its limited
partnership agreement, or cause the creation of any lien upon any of the assets
of TL Ventures V L.P. or TL Ventures V Interfund L.P; (ii) violate, conflict
with or result in a violation of, or constitute a default (whether after the
giving of notice, lapse of time or both) under, any provision of any law,
regulation or rule, or any order of, or any restriction imposed by, any court
or governmental agency applicable to TL Ventures V L.P. or TL Ventures V
Interfund L.P; (iii) require from TL Ventures V L.P. or TL Ventures V Interfund
L.P any notice to, declaration or filing with, or consent or approval of any
governmental authority or other third party; or (iv) violate or result in a
violation of, or constitute a default (whether after the giving of notice,
lapse of time or both) under, accelerate any obligation under, or give rise to
a right of termination of, any agreement, permit, license or authorization to
which each of TL Ventures V L.P. and TL Ventures V Interfund L.P or any of
their respective subsidiaries is a party or by which each of TL Ventures V L.P.
and TL Ventures V Interfund L.P or any their respective subsidiaries is bound.

 

7.             Each party will use all
commercially reasonable efforts to take, or cause to be taken, all appropriate
action, and execute and deliver such documents, as may be necessary or
appropriate to carry out the provisions of this Agreement.

 

8.             Each party will be responsible for
its own costs and expenses incurred in connection with the litigation and this
Agreement.

 

9.             It is understood and agreed that
this Settlement Agreement contains the entire agreement among the parties with
regard to the subject hereof and that no party shall be liable or bound to any
other party by any representations, omissions, warranties, covenants, or
agreements except as specifically set forth herein or in the Notes.  It is further understood and agreed that this
Settlement Agreement may not be altered, modified or amended, or any of its
provisions waived, unless by a writing, executed by all parties.

 

10.           Notwithstanding anything herein to
the contrary, (i) the Notes and the obligations of Tapestry thereunder shall
survive execution and delivery of this Agreement and shall not be released
hereby, and (ii) the rights or obligations owed to Marc Ostro by Tapestry, or
from Mr. Ostro to Tapestry, in connection with his service as a director of
Tapestry shall survive execution and delivery of this Agreement and shall not
be released hereby, including, without limitation, Tapestry’s obligation to
provide indemnification to Mr. Ostro in accordance with Tapestry’s Certificate
of Incorporation and Bylaws, any agreement between Tapestry and Mr. Ostro
providing for indemnification or applicable law.

 

11.           It is understood and agreed that the
terms and conditions of this Settlement Agreement shall be kept confidential
and shall not be published, revealed, disclosed, publicized, communicated, or
otherwise made public in any manner or form unless required under applicable
law, or for Tapestry, except as made upon advice of counsel to comply with its
disclosure obligations as a public company or the listing agreement of The
Nasdaq Stock Market, Inc., in which case each party shall grant the other as
much prior notice and consultation as practicable

 

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prior to issuing any
press release or making any public disclosure. 
Notwithstanding the foregoing, however, the terms of the Settlement
Agreement may be disclosed to the parties’ counsel, auditors, accountants, or
financial advisors; provided, however, that those to whom disclosure is made
must be advised of and agree to maintain the confidentiality of this Settlement
Agreement.

 

12.           This Agreement shall be binding on
the parties and their respective successors and assigns.

 

AGREED this 18th day of
February 2005.

 

 

	
  TAPESTRY
  PHARMACEUTICALS, INC.

  	
  TL
  VENTURES V L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Kai Pace Larson

  	
   

  	
  By:

  	
  /s/ Marc J. Ostro

  	
   

  
	
   

  	
  Title:
  Vice President, General Counsel

  	
   

  	
  Title:
  Managing Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TL
  VENTURES V INTERFUND L.P

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc J. Ostro

  	
   

  
	
   

  	
   

  	
  Title:
  Managing Partner

  
						

 

4Exhibit
10.1

 

Execution
Copy

 

 

STOCK AND ASSET PURCHASE AGREEMENT

 

Dated as of February 21, 2005

 

Among

 

BIOTAGE AB

 

and

 

ARGONAUT TECHNOLOGIES, INC.

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I DEFINITIONS

  	
   

  
	
  1.1

  	
  Defined Terms.

  	
   

  
	
  1.2

  	
  Other Defined Terms

  	
   

  
	
  1.3

  	
  Rules of Construction

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II PURCHASE AND SALE OF THE
  TRANSFERRED SUBSIDIARIES AND THE TRANSFERRED ASSETS

  	
   

  
	
  2.1

  	
  Sale of the Transferred Subsidiaries

  	
   

  
	
  2.2

  	
  Purchase and Sale of Transferred Assets

  	
   

  
	
  2.3

  	
  Assumption of Liabilities

  	
   

  
	
  2.4

  	
  Transfer of Purchased Assets and Assumed
  Liabilities

  	
   

  
	
  2.5

  	
  Procedures for Assets Not Transferable

  	
   

  
	
  2.6

  	
  Payments Post-Closing

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III PURCHASE PRICE AND
  ADJUSTMENTS

  	
   

  
	
  3.1

  	
  Purchase Price

  	
   

  
	
  3.2

  	
  Payment of Purchase Price and Estimated
  Purchase Price Adjustment

  	
   

  
	
  3.3

  	
  Closing Date Net Working Capital Statement;
  Schedule of Cash and Cash Equivalents; and Actual Adjustment Amount.

  	
   

  
	
  3.4

  	
  Allocation of Purchase Price

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
  4.1

  	
  Representations and Warranties of the
  Company

  	
   

  
	
  4.2

  	
  Representations and Warranties of the Buyer

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V COVENANTS

  	
   

  
	
  5.1

  	
  Access; Information and Records;
  Confidentiality

  	
   

  
	
  5.2

  	
  Conduct of the Business Prior to the
  Closing Date

  	
   

  
	
  5.3

  	
  Acquisition Proposals.

  	
   

  
	
  5.4

  	
  Non-Solicitation

  	
   

  
	
  5.5

  	
  Non-Competition

  	
   

  
	
  5.6

  	
  Further
  Actions; Best Efforts.

  	
   

  
	
  5.7

  	
  Stockholder Approval; Preparation of Proxy
  Statement.

  	
   

  
	
  5.8

  	
  Public
  Announcements

  	
   

  
	
  5.9

  	
  Company
  Employee Benefits.

  	
   

  
	
  5.10

  	
  Insurance

  	
   

  
	
  5.11

  	
  Reorganization

  	
   

  
	
  5.12

  	
  Certain
  Notices

  	
   

  

 

 

	
  5.13

  	
  Certain Intellectual Property Covenants.

  	
   

  
	
  5.14

  	
  WARN

  	
   

  
	
  5.15

  	
  Intercompany
  Accounts

  	
   

  
	
  5.16

  	
  Confidentiality

  	
   

  
	
  5.17

  	
  Successors

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI TAX MATTERS

  	
   

  
	
  6.1

  	
  Control of
  Tax Audits

  	
   

  
	
  6.2

  	
  Tax Returns

  	
   

  
	
  6.3

  	
  Cooperation;
  Other Tax Matters

  	
   

  
	
  6.4

  	
  Transfer
  Taxes

  	
   

  
	
  6.5

  	
  Straddle
  Periods

  	
   

  
	
  6.6

  	
  Proration
  of Taxes

  	
   

  
	
  6.7

  	
  Section 338
  Elections

  	
   

  
	
  6.8

  	
  Tax Refunds

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII Closing

  	
   

  
	
  7.1

  	
  Closing
  Date

  	
   

  
	
  7.2

  	
  Deliveries
  by the Buyer

  	
   

  
	
  7.3

  	
  Deliveries
  by the Company

  	
   

  
	
  7.4

  	
  Actions at
  Closing Meeting

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII CONDITIONS PRECEDENT

  	
   

  
	
  8.1

  	
  Conditions
  Precedent to Obligations of Parties

  	
   

  
	
  8.2

  	
  Conditions
  to Obligations of the Buyer

  	
   

  
	
  8.3

  	
  Conditions
  to the Obligations of the Company

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX TERMINATION

  	
   

  
	
  9.1

  	
  Termination

  	
   

  
	
  9.2

  	
  Effect of
  Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X Indemnification

  	
   

  
	
  10.1

  	
  Indemnification

  	
   

  
	
  10.2

  	
  Limitations
  on Indemnity Payments

  	
   

  
	
  10.3

  	
  Notice of
  Indemnity Claims

  	
   

  
	
  10.4

  	
  Indemnification
  Procedures

  	
   

  
	
  10.5

  	
  Settlement
  of Indemnity Claims

  	
   

  
	
  10.6

  	
  Survival

  	
   

  
	
  10.7

  	
  Treatment
  of Indemnification Payments

  	
   

  
	
  10.8

  	
  Remedies
  Exclusive

  	
   

  

 

 

	
  ARTICLE XI MISCELLANEOUS

  	
   

  
	
  11.1

  	
  Notices

  	
   

  
	
  11.2

  	
  Counterparts;
  Facsimile Signature

  	
   

  
	
  11.3

  	
  Bulk Sales

  	
   

  
	
  11.4

  	
  Further
  Assurances

  	
   

  
	
  11.5

  	
  Entire
  Agreement

  	
   

  
	
  11.6

  	
  No
  Third-Party Beneficiaries

  	
   

  
	
  11.7

  	
  Assignment

  	
   

  
	
  11.8

  	
  Amendment
  and Modification; Waiver

  	
   

  
	
  11.9

  	
  Enforcement;
  Jurisdiction

  	
   

  
	
  11.10

  	
  Waiver of
  Jury Trial

  	
   

  
	
  11.11

  	
  Costs and
  Expenses

  	
   

  
	
  11.12

  	
  Setoff

  	
   

  
	
  11.13

  	
  Casualty
  Losses

  	
   

  
	
  11.14

  	
  Mutual
  Drafting.

  	
   

  
	
  11.15

  	
  Governing
  Law

  	
   

  
	
  11.16

  	
  Disclosure
  Schedules.

  	
   

  
	
  11.17

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  KNOWLEDGE OF THE BUYER

  	
   

  

 

 

STOCK AND ASSET PURCHASE AGREEMENT

 

STOCK AND ASSET PURCHASE AGREEMENT,
dated as of February 21, 2005 (this “Agreement”),
among Biotage AB, a corporation organized under the laws of Sweden (the “Buyer”) and Argonaut Technologies, Inc., a
Delaware corporation (the “Company”).

 

RECITALS

 

WHEREAS, the
Company, including through its Subsidiaries, is engaged in the chemistry consumables
business, which includes the following segments: (i) Argoresins, (ii) Solid
Phase Extraction Systems, Consumables and Services, (iii) Flash Chromatography
Systems, Consumables and Services and (iv) Quest, Trident and Nautalis
Discontinued Systems, Consumables and Services (collectively, the “Business”);

 

WHEREAS, upon the
terms and conditions set forth herein, the Buyer, through one or more of its
direct or indirect Subsidiaries, desires to purchase, and the Company desires
to sell or cause to be sold (the “Acquisition”)
to the Buyer and/or one or more of Buyer’s direct or indirect Subsidiaries set
forth on Exhibit A (the “Designated
Purchasers”):  (i) all of the
outstanding shares of capital stock of Argonaut Technologies Limited, a
corporation organized under the laws of the United Kingdom (the “Transferred Subsidiary”) and (ii) certain
of the assets and liabilities of the Company related to the Business as
described herein;

 

WHEREAS, the Board
of Directors of the Company has, by the unanimous vote of all directors (i)
determined that the Acquisition and the transactions contemplated by this
Agreement are expedient and in the best interests of the Company and its
stockholders and (ii) declared the advisability of this Agreement and resolved
to recommend that the Company’s stockholders approve the Acquisition and the
consummation of the transactions contemplated by this Agreement; and

 

NOW, THEREFORE, in
consideration of the foregoing and the respective representations, warranties,
covenants and agreements set forth herein, and intending to be legally bound
hereby, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1           Defined Terms.  Defined terms used in this Agreement have the
meanings ascribed to them as follows:

 

“Accounts” shall
mean the audited balance sheets and the audited profit and loss accounts of
each of the Transferred Subsidiaries in respect of the accounting reference
period of the Transferred Subsidiaries ended on the Accounts Date.

 

“Accounts Date” shall mean
December 31, 2003.

 

 

“Acquisition Proposal”
shall mean, other than the transactions contemplated hereby or any offer or
proposal made by the Buyer or a Subsidiary of the Buyer, any inquiry with
respect to, or a proposal or offer for a tender offer or exchange offer, merger,
reorganization, share exchange, consolidation or other business combination
involving, the Company and its Subsidiaries or any proposal or offer to acquire
in any manner an equity interest representing a 10% or greater economic or
voting interest in the Company, or the assets, securities or ownership
interests of or in the Company or any of its Subsidiaries representing 10% or
more of the consolidated assets of the Company and its Subsidiaries, other than
(i) a proposal with respect to a purchase of the Company’s property located at
Tir-Y-Berth Industrial Estate, New Road, Hegoed, Wales, (ii) a proposal with
respect to the Process Business and (iii) after any termination hereof, any
proposal for a bona fide equity financing transaction made after such termination
by a Person who has not made an Acquisition Proposal prior to such termination
and which represents a 30% or less economic and voting interest in the Company.

 

“Affiliate” shall mean, with respect to
any Person, any other Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such Person.  When used in this Agreement, “control”
(including, with its correlative meanings, the terms “controlling”, “controlled
by” and “under common control with”) shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
Contract or otherwise.

 

“Books and Records” shall mean originals or true copies of all
agreements, documents, books, records and files, of the Company and its
Subsidiaries, including records and files stored on computer disks or tapes or
any other storage medium prepared, used or held for use principally in
connection with the conduct or operation of the Business, including the
certificates of incorporation, check books, common seals and all statutory and
minute books (which for the purposes of Article VII shall be
written up to the date of Closing), and all unused share certificate forms, in
each case of the Transferred Subsidiaries.

 

“Business Day” shall mean any day other
than (i) a Saturday or Sunday or (ii) a day on which banks in San
Francisco, California, New York, New York or Stockholm, Sweden are required or
authorized by law, executive order or governmental decree to be closed.

 

“Business Employee” shall
mean any current or former employee, director, independent contractor or
consultant of the Business.

 

“Buyer Disclosure Schedule”
shall mean the Buyer’s disclosure schedule delivered by the Buyer to the
Company prior to the execution of this Agreement.

 

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

 

“Company Disclosure Schedule” shall mean
the Company’s disclosure schedule delivered by the Company to the Buyer
prior to the execution of this Agreement.

 

“Company Employees” shall
mean the Transferred Subsidiary Employees and US Employees, collectively, who
are, immediately prior to the Closing, employed with the Company or any of its
Affiliates.

 

2

 

“Confidentiality Agreement” shall mean
the Confidentiality Agreement dated January 7, 2004 between the Company
and the Buyer.

 

“Contracts” shall mean all
written and oral contracts, agreements, leases, subleases, licenses, purchase
orders, instruments of indebtedness, mortgages, deeds of trust, guarantees and
any other binding contractual arrangements related principally to the operation
of the Business or to which the Transferred Assets are subject.

 

“DGCL” shall mean the
Delaware General Corporation Law, as the same may be amended from time to time.

 

“dollars” or “$”
shall mean United States dollars.

 

“Environmental Laws” shall mean all
applicable Laws or Orders relating to (i) pollution, contamination, restoration
or protection of the environment, health or safety or natural resources, (ii)
the handling, use, presence, disposal, release or threatened release of any
Hazardous Substance or (iii) noise, odor, wetlands, pollution, contamination,
waste or injury or threat of injury to Persons or property.

 

“ERISA” shall mean the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder.

 

“Exchange Act” or “1934 Act” shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.

 

“GAAP” shall mean United
States generally accepted accounting principles.

 

“Governmental Authority” shall mean any
federal, state, municipal, foreign or other governmental body, department,
commission, board, bureau, agency, court or instrumentality, domestic or
foreign, or other entity exercising any executive, legislative, judicial,
quasi-judicial, regulatory or administrative function of government.

 

“Hazardous Substance”
shall mean any substance that is (i) listed, classified or regulated pursuant
to any Environmental Law, (ii) any petroleum or petroleum product or
by-product, asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon or (iii) any other
substance which may be the subject of regulatory action by any Governmental
Authority pursuant to any Environmental Law.

 

“Intellectual Property”
shall mean collectively, on a worldwide basis, all of the following types of
intangible assets:  (i) all
inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications, and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and re-examinations thereof,
(ii) all trademarks, service marks, trade dress, logos, domain names,
URLs, trade names, brand names, model names, corporate names and other source
indicators, including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (iii) all copyrights
(whether registered or unregistered), and all applications, registrations and
renewals in connection therewith, (iv) all mask works and all
applications, registrations, and renewals in connection

 

3

 

therewith, (v) all trade secrets and
confidential information (including confidential ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and marketing plans
and proposals), (vi) all computer software (including data and related
documentation and including software installed on hard disk drives and any
related source codes), (vii) all joint or partial interests in any of the
foregoing and (viii)  all rights to pursue, recover and retain damages,
costs and attorneys’ fees for past, present and future infringement or
misappropriations of the foregoing.

 

“Inventory” means all
inventory and all raw materials, work-in-process, finished products, supplies,
accessories, packaging materials, goods or parts held for sale or to be
furnished under Contracts, in each case whether or not in transit on the
Closing Date, that are used or held for use principally in the conduct or
operation of the Business.  For the
avoidance of doubt, “Inventory” shall include all discontinued products,
service and spare parts inventory, including finished goods inventory and any
and all stock that may be represented in the gross inventory values prior to
reserves, including with respect to the Quest, Trident and Nautalis Discontinued
Systems, Consumables and Services line of the Business.

 

“Knowledge of the Buyer” shall mean,
with respect to any matter in question, the knowledge, after reasonable
inquiry, of those individuals listed in Section 1.1(i) of the Buyer
Disclosure Schedule.

 

“Knowledge of the Company” shall mean,
with respect to any matter in question, the knowledge, after reasonable
inquiry, of individuals listed in Section 1.1(i) of the Company
Disclosure Schedule.

 

“Law” shall mean any
federal, state, local or foreign law, statute, common law, rule, regulation,
code, directive, ordinance or other requirement of general application of any
Governmental Authority, including Environmental Laws.

 

“Liabilities” means any
direct or indirect liability, indebtedness, claim, loss, damage, deficiency,
obligation or responsibility, fixed or unfixed, choate or inchoate, liquidated
or unliquidated, secured or unsecured, accrued, absolute, known or unknown,
contingent or otherwise.

 

“Licenses and Permits” shall mean all
licenses, permits, concessions, exemptions, consents, franchises, certificates,
variances, approvals and other authorizations that are required by Governmental
Authorities or otherwise under any applicable Law to conduct the Business as it
is presently conducted or to own or use the Transferred Assets.

 

“Lien” shall mean any
lien, claim, charge, option, mortgage, pledge or security interest, rights of
first refusal or rights of first offer, encumbrance (including leases,
easements, licenses, zoning ordinances, covenants, conditions, restrictions and
rights-of-way) or other similar right affecting real or personal property, in
each case, whether arising by contract, operation of law or otherwise.

 

“Material Adverse Effect” or “Material Adverse Change” shall mean any
event, change, circumstance or effect that is or would reasonably be expected
to be materially

 

4

 

adverse to the condition (financial or
otherwise), properties, assets (including intangible assets), liabilities,
businesses or results of operations of the Business or to have a material
adverse effect on the ability of the Company to consummate the transactions
contemplated hereunder on a timely basis; provided, however, that
a “Material Adverse Effect” shall not include (i) changes, effects and
circumstances resulting from (a) factors generally affecting the life sciences
industry or (b) changes in general economic, regulatory or political
conditions, including changes in the United States or worldwide capital
markets; (ii) the loss of Company Employees or customers having a relationship
with the Business as a result of the announcement or pendency of the
Acquisition, this Agreement or the transactions contemplated hereby, (iii)
compliance by the Company with its express obligations pursuant to the terms
and conditions of this Agreement; or (iv) any change in GAAP or applicable
laws, rules or regulations that occurs or becomes effective after the date of
this Agreement; provided, that in the case of any event, change, circumstance
or effect referred to in clause (i) above, such event, change, circumstance or
effect does not have a materially disproportionate effect on the Business
relative to other participants in the life sciences industry.

 

“Order” shall mean any
order, writ, injunction, judgment, decree or ruling entered, issued, made or
rendered by any court, administrative agency, arbitration tribunal or other
Governmental Authority of competent jurisdiction.

 

“Permitted Liens” shall mean (i)
mechanics’, carriers’, workers’ or repairmen’s Liens arising in the ordinary
course of business and securing payments or obligations that are not
delinquent, (ii) Liens for Taxes, assessments and other similar governmental
charges which are not due and payable and (iii) Liens that arise under zoning,
land use and other similar Laws and other imperfections of title or
encumbrances, if any, which do not materially affect the marketability of the
property subject thereto and do not materially impair the use of the property
subject thereto as used as of the date hereof.

 

“Person” shall mean any
individual, corporation, partnership, firm, limited liability company, joint
venture, association, joint stock company, trust, unincorporated organization,
Governmental Authority or other entity.

 

“Post-Closing Tax Period”
shall mean any taxable period beginning after the Closing Date and, with
respect to any Straddle Period, the portion of such Straddle Period beginning
after the Closing Date.

 

“Pre-Closing Tax Period”
shall mean any taxable period ending on or before the Closing Date and, with
respect to any Straddle Period, the portion of such Straddle Period ending on
the Closing Date.

 

“Previous Accounts” shall
mean the audited balance sheets of the Transferred Subsidiaries as of the end
of each of the two accounting reference periods immediately preceding the
period ended on the Accounts Date and the audited profit and loss accounts of
the Transferred Subsidiaries for such periods.

 

“Proceeding” shall mean
any action, suit, dispute, litigation, hearing, claim, grievance, arbitral
action or other proceeding before any Governmental Authority, at law or in
equity.

 

5

 

“Process Business” shall
mean the Company’s business of developing and manufacturing of instrument and
related services to address the chemical development workflow of compound
synthesis for the pharmaceutical and specialty chemical industries which is
conducted through the Company’s Advantage Series 2410/3400/4100, Endeavor and
Atlantis product lines.

 

“Representative” shall
mean any attorney, accountant, financial advisor or other authorized
representative of any Person.

 

“SEC” shall mean the
United States Securities and Exchange Commission.

 

“Securities Act” shall
mean the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

 

“Straddle Period” shall
mean any taxable period that begins on or before and ends after the Closing
Date.

 

“Subsidiary” and “Subsidiaries”
when used with respect to any Person shall mean any Person in which such Person
directly or indirectly owns 50% or more of the aggregate voting stock.  For purposes of this definition, “voting
stock” means stock or other interests that ordinarily has voting power for the
election of directors or managers.

 

“Superior Proposal” means
an Acquisition Proposal that is reasonably capable of being consummated, taking
into account all legal, financial, regulatory, timing, and similar aspects of,
and conditions to, the proposal, the likelihood of obtaining necessary
financing and the Person making the proposal, and, which, if consummated, would
result in a transaction more favorable to the Company’s stockholders from a
financial point of view than the transactions contemplated hereby (after giving
effect to any adjustments to the terms and provisions of this Agreement
proposed by Parent in response to such Acquisition Proposal after receipt of
notice of such Acquisition Proposal as required by Section 5.3); provided,
that for the purposes of this definition of “Superior Proposal,” the term
Acquisition Proposal shall have the meaning assigned to such term, except that
the reference to “10% or more” in the definition of “Acquisition Proposal”
shall be deemed to be a reference to “a majority”.

 

“Tax” or “Taxes” shall mean any taxes of any kind,
including those measured on, measured by or referred to as, income, alternative
or add-on minimum, gross receipts, escheat, capital, capital gains, sales, use,
ad valorem, franchise, profits, license,
privilege, transfer, withholding, payroll, employment, social, excise,
severance, stamp, occupation, premium, value added, property, environmental or
windfall profits taxes, customs, duties or similar fees, assessments or charges
of any kind whatsoever, together with any interest and any penalties, additions
to tax or additional amounts (including any interest thereon) imposed by any
Governmental Authority.

 

“Tax Returns” shall mean all reports,
estimates, declarations of estimated Tax, claims for refund, information
statements and returns relating to, or required to be filed in connection with,
any Taxes, including any schedule or attachment thereto, and including any
amendment thereof.

 

6

 

“Target Net Working Capital”
means $7,080,000.

 

“Transferred Subsidiary Employees”
shall mean those Business Employees whose service relationship is or was with
the Transferred Subsidiaries.

 

“Transferred Subsidiaries”
shall mean the Transferred Subsidiary and each Person in which the Transferred
Subsidiary owns any capital stock or other security interest, including
International Sorbent Technology Limited, a corporation organized under the
laws of England and Wales, and Jones Chromatography U.S.A., Inc., a Colorado
corporation.

 

“UK Tax Proceeding” shall
mean any current audit or investigation by the Inland Revenue, including any
Proceedings arising therefrom, related to intercompany transactions between the
Transferred Subsidiaries and the Company, including management fees,
intercompany charges and sales or transfers of goods.

 

“UK Tax Liability”
shall mean any Pre-Closing Tax Period Taxes for which the Transferred
Subsidiaries may be liable in connection with or as a result of the UK Tax
Proceeding.

 

“US Employees” shall mean
the employees of the Company set forth on Section 1.1(ii) of the
Company Disclosure Schedule.

 

1.2           Other Defined Terms.  The
following capitalized terms are defined in this Agreement in the Section indicated
below:

 

	
  Defined
  Term

  	
   

  	
  Section

  
	
  1060 Forms

  	
   

  	
  3.4

  
	
  Acquisition

  	
   

  	
  Recitals

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Assumed Liabilities

  	
   

  	
  2.3(a)

  
	
  Business

  	
   

  	
  Recitals

  
	
  Business Balance Sheet

  	
   

  	
  2.3(a)

  
	
  Buyer

  	
   

  	
  Preamble

  
	
  Buyer Expenses

  	
   

  	
  9.2(c)

  
	
  Buyer Indemnified Party

  	
   

  	
  10.1(a)

  
	
  Buyer Losses

  	
   

  	
  10.1(a)

  
	
  Change in Company
  Recommendation

  	
   

  	
  5.3(b)

  
	
  Claim Notice

  	
   

  	
  10.3

  
	
  Closing

  	
   

  	
  7.1

  
	
  Closing Date

  	
   

  	
  7.1

  
	
  Closing Date Cash
  Statement

  	
   

  	
  3.3(a)

  
	
  Closing Date Net Working
  Capital

  	
   

  	
  3.2(b)

  
	
  Closing Date Net Working
  Capital Statement

  	
   

  	
  3.3(a)

  
	
  Closing Date US Employees

  	
   

  	
  5.9(a)

  
	
  Closing Statement

  	
   

  	
  3.3(a)

  
	
  Company

  	
   

  	
  Preamble

  
	
  Company Indemnified Party

  	
   

  	
  10.1(b)

  
	
  Company Losses

  	
   

  	
  10.1(b)

  

 

7

 

	
  Defined
  Term

  	
   

  	
  Section

  
	
  Company Plans

  	
   

  	
  4.1(o)

  
	
  Company SEC Documents

  	
   

  	
  4.1(g)

  
	
  Company Special Meeting

  	
   

  	
  5.7(b)

  
	
  Consents

  	
   

  	
  2.5

  
	
  Deficiency

  	
   

  	
  3.3(d)

  
	
  Designated Purchasers

  	
   

  	
  Recitals

  
	
  Escrow Funds

  	
   

  	
  3.2(a)

  
	
  Excluded Assets

  	
   

  	
  2.2(b)

  
	
  Excluded Liabilities

  	
   

  	
  2.3(b)

  
	
  Financial Statements

  	
   

  	
  4.1(g)

  
	
  Foreign Benefit Plan

  	
   

  	
  4.1(o)

  
	
  Grace Acquisition

  	
   

  	
  10.1(a)

  
	
  Indemnified Party

  	
   

  	
  10.3

  
	
  Indemnifying Party

  	
   

  	
  10.3

  
	
  Indemnity Claim

  	
   

  	
  10.3

  
	
  Independent Accounting
  Firm

  	
   

  	
  3.3(c)

  
	
  Initial Closing Escrow
  Period

  	
   

  	
  3.2(a)

  
	
  Inventory Count

  	
   

  	
  3.3(a)

  
	
  Leader

  	
   

  	
  5.1(b)

  
	
  Leased Real Property

  	
   

  	
  2.2(a)

  
	
  Leases

  	
   

  	
  4.1(i)

  
	
  LIBOR

  	
   

  	
  3.3(e)

  
	
  Noncompetition Period

  	
   

  	
  5.5(a)

  
	
  Owned Real Property

  	
   

  	
  2.2(a)

  
	
  Periodic Taxes

  	
   

  	
  6.6

  
	
  Preliminary Closing Date
  Net Working Capital

  	
   

  	
  3.2(b)

  
	
  Preliminary Closing Date
  Net Working Capital Statement

  	
   

  	
  3.2(b)

  
	
  Proxy Statement

  	
   

  	
  5.7(a)

  
	
  Public Proposal

  	
   

  	
  9.2(b)

  
	
  Purchase Price

  	
   

  	
  3.1

  
	
  Recall

  	
   

  	
  4.1(x)

  
	
  Real Property Permits

  	
   

  	
  4.1(i)

  
	
  Related Person

  	
   

  	
  4.1(t)

  
	
  Reorganization

  	
   

  	
  5.11

  
	
  Seller Plans

  	
   

  	
  5.9(d)

  
	
  Stockholder Approval

  	
   

  	
  4.1(c)

  
	
  Surplus

  	
   

  	
  3.3(d)

  
	
  Tax Proceeding

  	
   

  	
  6.1

  
	
  Termination Date

  	
   

  	
  9.1(b)

  
	
  Termination Fee

  	
   

  	
  9.2(b)

  
	
  Third Party Claim

  	
   

  	
  10.4

  
	
  Transfer Costs

  	
   

  	
  6.4

  
	
  Transferred Assets

  	
   

  	
  2.2(a)

  
	
  Transferred Real Property

  	
   

  	
  2.2(a)

  
	
  Transferred Shares

  	
   

  	
  2.1

  
	
  Transferred Subsidiary

  	
   

  	
  Recitals

  

 

8

 

	
  Defined
  Term

  	
   

  	
  Section

  
	
  Transferred US Employees

  	
   

  	
  5.9(a)

  
	
  Transition Team

  	
   

  	
  5.1(b)

  
	
  US Employees

  	
   

  	
  2.2(a)

  
	
  Violation

  	
   

  	
  4.1(d)

  
	
  Voting Debt

  	
   

  	
  4.1(b)

  
	
  Wales Lease

  	
   

  	
  8.2(h)

  
	
  WARN

  	
   

  	
  4.1(p)

  

 

1.3           Rules of Construction.  References in this Agreement to gender
include references to all genders, and references to the singular include
references to the plural and vice versa. 
The words “include”, “includes” and “including” when used in this
Agreement shall be deemed to be followed by the phrase “without limitation”.  Unless the context otherwise requires,
references in this Agreement to Articles, Sections and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement.  Unless the context
otherwise requires, the words “hereof”, “hereby” and “herein” and words of
similar meaning when used in this Agreement refer to this Agreement in its
entirety and not to any particular Article, Section or provision of this
Agreement.  The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.

 

ARTICLE II

PURCHASE AND SALE OF THE TRANSFERRED SUBSIDIARIES AND THE TRANSFERRED ASSETS

 

2.1           Sale of the
Transferred Subsidiaries.  Subject to
the satisfaction or waiver of the conditions set forth in this Agreement, at
the Closing and as of the Closing Date, the Company shall sell, assign,
transfer, convey and deliver to the Buyer and/or the respective Designated
Purchaser, and the Buyer shall or shall cause the applicable Designated
Purchaser to purchase and acquire, all of the shares (the “Transferred Shares”) of the Transferred
Subsidiary.  In connection therewith, the
Company shall deliver to the Buyer and/or the applicable Designated Purchaser
share certificates representing the Transferred Shares showing the name of the
Buyer or the applicable Designated Purchaser as the registered holder, a
transfer of all the Transferred Shares duly executed by the Company in favor of
the Buyer or the applicable Designated Purchaser and all other documents
related to the Transferred Shares as the Buyer may reasonably request to
effectuate such sale, assignment, transfer, conveyance and delivery.

 

2.2           Purchase and Sale of
Transferred Assets.

 

(a)           Subject to the satisfaction or waiver of the conditions set
forth in this Agreement, at the Closing and as of the Closing Date, the Company
shall sell, transfer, convey, assign and deliver to the Buyer, and/or the
applicable Designated Purchaser, and the Buyer shall

 

9

 

or shall cause the applicable Designated
Purchaser to purchase and acquire, all of the Company’s and any of its
Subsidiaries’ right, title and interest in, to and under all of the properties,
assets, rights and claims used or held for use principally in the conduct or
operation of the Business as the same may exist on the Closing Date, whether
tangible or intangible (it being understood that to the extent any of such
properties, assets, rights and claims are owned or held by the Transferred
Subsidiaries and are not Excluded Assets, such properties, assets, rights and
claims shall not be transferred pursuant to this Section 2.2(a),
but rather by operation of law pursuant to the sale of the Transferred Shares
in accordance with Section 2.1), including all right, title and
interest of the Company and its Subsidiaries in, to and under:

 

(i)            all
billed and unbilled accounts and notes receivable principally related to the
Business, all prepayments and prepaid expenses and deposits and other current
assets principally related to the Business, and the full benefit of any and all
security for such accounts receivable, notes receivable, prepayments, prepaid
expenses and other current assets and all Proceedings related to any such
items, and, with respect to all such other items not principally related to the
Business, such items to the extent related to the Business;

 

(ii)           all
of the real property set forth in Section 2.2(a)(ii) of the Company
Disclosure Schedule (the “Owned Real Property”),
including all of the land structures, buildings, improvements and fixtures now
or subsequently leased, located thereon or related thereto;

 

(iii)          all
right, title and interest in, to and under the Leases related to the Business
and set forth in Section 4.1(i)(ii) of the Company Disclosure Schedule (the
“Leased Real Property” and together with
the Owned Real Property, the “Transferred Real Property”),
and all buildings, structures and other improvements situated thereon;

 

(iv)          all
Inventory existing on the Closing Date;

 

(v)           all
of the Company’s and its Subsidiaries owned or leased tangible personal
property located at the Transferred Real Property used or held for use
principally in the conduct or operation of the Business, including machinery,
mobile and immobile equipment, furniture, office equipment, furnishings,
transportation equipment, tools, tooling, dies, parts, supplies and other
tangible personal property and all warranties or guarantees, if any, express or
implied, existing for the benefit of the Company, any of its Subsidiaries or
the Business with respect thereto;

 

(vi)          all
right, title and interest in, to and under all the Contracts to which the
Company or any of its Subsidiaries is a party, including all rights to receive
goods and services purchased pursuant to such Contracts and all claims and
rights to take any other actions arising out of or related to such Contracts or
the Transferred Assets, or in respect thereof;

 

(vii)         all
of the Company’s and any of its Subsidiaries’ right, title and interest in and
to any Intellectual Property used or held for use in the conduct or operation
of the Business, but excluding the Company’s and any of its Subsidiaries’
rights under generally commercially available off-the-shelf software licenses;

 

10

 

(viii)        all
of the Company’s and any of its Subsidiaries’ rights under any Licenses and
Permits to the extent transferable under applicable Law and all rights under
any licenses or permits from third parties other than Governmental Authorities
required to conduct the Business as it is presently conducted or to own or use
the Transferred Assets;

 

(ix)           all
Books and Records, including any and all (A) subject to applicable Law, data
and records pertaining to the Transferred Subsidiary Employees and the US
Employees (as defined below) and (B) sales literature, promotional literature
and other selling and advertising material and lists of customers and suppliers
related to the Business;

 

(x)            all
rights under express or implied warranties, representations or guarantees made
by suppliers furnishing goods or services to the Business;

 

(xi)           all
credits and deferred charges related to, or arising in connection with, the
Business, including leases and rentals;

 

(xii)          all
information systems, hardware, telephone systems, software systems, database and
database systems used in the Business and any and all rights thereunder, in
each case, to the extent reflected as an asset on the Business Balance Sheet or
acquired after the date thereof and which would reasonably be expected to be
reflected as an asset thereon if the Business Balance Sheet was prepared as of
the Closing Date;

 

(xiii)         all
insurance proceeds received by the Company or any of its Subsidiaries in
respect of any Transferred Assets as a result of any damage or claim occurring
between the date of this Agreement and the Closing Date and any rights, claims
or causes of action existing or arising in respect of the Transferred Assets
under the Company’s insurance policies;

 

(xiv)        any
assets relating to the Liabilities assumed pursuant to Section 5.9(a);

 

(xv)         the
goodwill and going concern value of the Business; and

 

(xvi)        all
other properties, assets, rights and claims reflected on the Business Balance
Sheet or accrued after the date thereof and which would reasonably be expected
to be reflected thereon if the Business Balance Sheet was prepared as of the
Closing Date but not otherwise described in this Section 2.2(a).

 

The
properties, assets, rights and claims to be purchased by Buyer and/or the
Designated Purchaser pursuant to this Section 2.2(a), along with
the properties, assets, rights and claims of the Transferred Subsidiaries which
shall be transferred to the Buyer and/or the Designated Purchaser through the
sale of the Transferred Shares pursuant to Section 2.1, shall
collectively be referred to herein as the “Transferred
Assets”.  As of the Closing, risk of loss as
to the Transferred Assets shall pass from the Company to the Buyer, except as
may otherwise be expressly provided herein.

 

11

 

(b)           Notwithstanding Section 2.2(a), the Company
shall retain all of its existing right, title and interest in, to and under,
and the Transferred Assets shall exclude the following assets (the “Excluded Assets”):

 

(i)            all
cash and cash equivalents;

 

(ii)           all
assets of the Business sold or otherwise disposed of not in violation of any
provisions of this Agreement during the period from the date of this Agreement
until the Closing Date;

 

(iii)          all
income Tax Returns of the Company and, subject to Section 6.6, all Tax
refunds, Tax losses, Tax carryforwards, Tax credits and Tax benefits of the
Company;

 

(iv)          the
minute books for the board of directors, committees or shareholders’ meetings,
incorporation documents, stock transfers and Tax or similar or related corporate
records of the Company and its Subsidiaries, other than the Transferred
Subsidiaries;

 

(v)           all
of the assets to be transferred to the Company or one of its Subsidiaries,
other than the Transferred Subsidiaries, pursuant to the Reorganization;

 

(vi)          the
real property located at Tir-Y-Berth Industrial Estate, New Road, Hegoed,
Wales;

 

(vii)         all
of the Company’s right, title and interest under this Agreement and the
Confidentiality Agreement; and

 

(viii)        all
assets of the Company and its Subsidiaries, other than the Transferred
Subsidiaries, not used in connection with the operation of the Business.

 

2.3           Assumption of
Liabilities.

 

(a)           Subject to the satisfaction or waiver of the conditions set
forth in this Agreement, at the Closing and as of the Closing Date, the Buyer
shall or shall cause the applicable Designated Purchaser to assume and agree to
pay, discharge or perform when due only the following Liabilities (except to
the extent that such Liabilities constitute Liabilities of the Transferred
Subsidiaries which shall be assumed by the Buyer and/or the Designated
Purchaser by operation of law through its purchase of the Transferred Shares
pursuant to Section 2.1):

 

(i)            all
Liabilities related to the Business and reflected on the balance sheet of the
Business dated as of December 31, 2004 (the “Business
Balance Sheet”), other than any Excluded Liabilities;

 

(ii)           all
other Liabilities incurred after the date of the Business Balance Sheet not in
violation of the terms of this Agreement which would have been required to be
reflected on the Business Balance Sheet under GAAP if such Liabilities were
incurred on or prior to the date of the Business Balance Sheet, other than any
Excluded Liabilities;

 

12

 

(iii)          all
Liabilities arising under the Contracts (other than with respect to any Seller
Plans) to the extent such Liabilities (A) arise in the ordinary course of
business consistent with past practice pursuant to the terms of such Contracts,
(B) were not due to have been satisfied or discharged prior to the Closing
Date, and (C) have not arisen as a result of a default or breach of such
Contract by the Company or its Subsidiaries;

 

(iv)          all
warranty Liabilities to the extent such Liabilities (A) arise in the ordinary course
of business consistent with past practice under the terms of the Contracts or
under the Uniform Commercial Code and (B) were not due to have been satisfied
or discharged prior to the Closing Date; and

 

(v)           all
Liabilities arising as a result of the post-Closing operation of the Business
or the post-Closing ownership or use by the Buyer and its Subsidiaries of the
Transferred Assets.

 

The
Liabilities assumed by Buyer and/or the Designated Purchaser pursuant to this Section 2.3(a),
along with the Liabilities which shall be assumed by Buyer and/or the
Designated Purchaser through the purchase of the Transferred Shares pursuant to
Section 2.1, shall collectively be referred to herein as the “Assumed
Liabilities.”

 

(b)           Neither the Buyer nor any Designated Purchaser shall assume
pursuant to this Agreement or the transactions contemplated hereby any
Liabilities of the Company or any of its Subsidiaries other than the Assumed
Liabilities, and the Company and its Subsidiaries shall retain all such other
Liabilities, including:

 

(i)            any
claim or Liabilities related to or arising out of the use or ownership of any
Excluded Assets;

 

(ii)           Liabilities,
whether of the Transferred Subsidiaries or otherwise, to the Company or any
other Subsidiary or Affiliate of the Company for any management or similar
fees;

 

(iii)          any
Liabilities of the Company and the Transferred Subsidiaries, whether arising
prior to, on or after the Closing Date, to the extent arising from or as a
result of the conduct of any business of the Company or such Transferred
Subsidiaries other than the Business;

 

(iv)          claims
or Liabilities arising out of or otherwise with respect to or in connection
with the Reorganization;

 

(v)           Liabilities
relating to any Business Employee, whether or not arising under or in respect
of any Company Plan, other than those expressly assumed by the Buyer and/or the
applicable Designated Purchaser as set forth in Section 5.9(a);

 

(vi)          any
Liability of the Company or any Affiliate (other than the Transferred
Subsidiaries) of the Company for Taxes relating to any Pre-Closing Tax Period;

 

13

 

(vii)         Liabilities
to or with respect to Company Employees under any Company Plan or Liabilities
with respect to Company Employees which the Company retains pursuant to this
Agreement;

 

(viii)        Liabilities
under or relating to Environmental Laws to the extent relating to events or
conditions existing as of, or prior to, the Closing Date, other than routine
maintenance or similar obligations in the ordinary course of business;

 

(ix)           any
Liability of the Company or its Subsidiaries to any broker, finder or agent,
including SG Cowen & Co., LLC, for any investment banking or brokerage
fees, finder’s fees or commission with respect to the transactions contemplated
by this Agreement;

 

(x)            any
Liability with respect to a claim for personal injury (including wrongful
death) and/or property damage arising out of pre-Closing occurrences and based
on product liability, strict liability or other similar theories of recovery,
whether arising in contract or tort or otherwise;

 

(xi)           any
Liability with respect to the wrongful discharge claim in France by the Company’s
former employee, which employee was an employee of Argonaut Technologies, A.G.;

 

(xii)          any
Liability with respect to the mass spectrometer referred to in Section 4.1(f)(1)
of the Company Disclosure Schedule;

 

(xiii)         any
other Liability with the Company has expressly agreed to retain pursuant to the
provisions of this Agreement other than this Article II; and

 

(xiv)        except
to the extent expressly set forth in Section 2.3(a) or elsewhere in
this Agreement, Liabilities relating to the Business, the Transferred Assets,
the Transferred Subsidiaries, the Transferred Shares or the Business Employees
or arising out of the operation or ownership of the Business, the Transferred
Subsidiaries or the Transferred Shares or the employment of the Business
Employees, in each case, prior to the Closing Date.

 

The Liabilities retained by the Company and
its Subsidiaries pursuant to this Section 2.3(b) are referred to
herein as the “Excluded Liabilities”).

 

2.4           Transfer of
Purchased Assets and Assumed Liabilities. 
The Transferred Assets (other than the properties, assets, rights and
claims of the Transferred Subsidiaries which shall be transferred through the
purchase of the Transferred Shares pursuant to Section 2.1) shall
be sold, conveyed, transferred, assigned and delivered, and the Assumed
Liabilities shall be assumed, pursuant to transfer and assumption agreements or
other instruments in such form as is necessary to effect a conveyance of the
Transferred Assets and an assumption of the Assumed Liabilities in the
jurisdictions in which such transfers are to be made, and which shall be
satisfactory to the Buyer and the Company, to be executed (upon the terms and
subject to the conditions hereof) on the Closing Date by the Company and the
Buyer or the respective

 

14

 

Designated Purchaser, and such other conveyance and assumption
documents as may be required in such jurisdictions.

 

2.5           Procedures for
Assets Not Transferable. 
Notwithstanding anything to the contrary contained in this Agreement, to
the extent that the sale, conveyance, transfer, assignment or delivery or
attempted sale, conveyance, transfer, assignment or delivery to the Buyer or
any Designated Purchaser of any Transferred Shares or any Transferred Asset is
prohibited by applicable Law or would require any governmental or third-party
authorizations, approvals, consents or waivers (collectively, “Consents”) the Company shall use its, and
shall cause its Subsidiaries to use their respective reasonable best efforts to
obtain such Consents prior to the Closing and if any such Consents shall not
have been obtained prior to the Closing, this Agreement shall not constitute a
sale, conveyance, transfer, assignment or delivery thereof if any of the
foregoing would constitute a breach of applicable Law or the rights of any
third party; provided, however, that the Closing shall occur
notwithstanding the foregoing on the terms set forth herein; provided
further, however, that the Company shall not be relieved of its
obligation to sell, and the Buyer of its obligation to purchase, such
Transferred Assets.  Following the
Closing, the parties shall use their reasonable best efforts and shall
cooperate with each other to obtain promptly such Consents.  Pending or in the absence of such Consent,
the parties shall use their respective reasonable best efforts to implement an
alternative arrangement to permit the Buyer or the respective Designated
Purchaser, as the case may be, to realize, receive and enjoy substantially
similar rights and the full benefits of such Transferred Asset as if such
impediment to assignment or transfer did not exist, and to enable Buyer or the
respective Designated Purchaser to conduct the Business until such Consent is
obtained; provided, however, that after Closing, the Company
shall, and shall cause its Subsidiaries to, enforce, upon and at the request of
the Buyer and for the benefit of the Buyer, any rights of the Company or its
Subsidiaries arising with respect to third parties party thereto.  If such Consent is obtained, the Company
shall, and shall cause its Subsidiaries to, promptly convey, transfer, assign
and deliver, or cause to be conveyed, transferred, assigned and delivered, such
Transferred Asset to the Buyer or such Designated Purchaser.  The provisions of this Section 2.5
shall not in any way limit the Buyer’s rights under this Agreement in the event
that the conditions to Closing are not satisfied.

 

2.6           Payments
Post-Closing.

 

(a)           If, following the Closing Date, the Company or any of its
Subsidiaries receives any payment or other proceeds any portion of which
relates to any Transferred Assets, the Transferred Subsidiaries or otherwise
relates to the conduct or operation of the Business, including with respect to
any receivables purchased by the Buyer in the Acquisition, the Company shall,
and shall cause its Subsidiaries to, promptly remit to the Buyer the amount of
any such payments to the extent relating to the Transferred Assets, the
Transferred Subsidiaries or the Business.

 

(b)           If, following the Closing Date, the Buyer or any of its
Subsidiaries receives any payment or other proceeds any portion of which
relates to any Excluded Assets or otherwise relates to the conduct or operation
of the Company and its Subsidiaries other than the Business, the Buyer shall,
and shall cause its Subsidiaries to, promptly remit to the Company the amount
of any such payments to the extent relating to the Excluded Assets or such
other business.

 

15

 

ARTICLE III

PURCHASE PRICE AND ADJUSTMENTS

 

3.1           Purchase Price.  Subject to any adjustments required pursuant
to Sections 3.2 and 3.3, the aggregate purchase price for the
Transferred Shares and the Transferred Assets shall be an amount equal to
$19,930,000 (Nineteen Million, Nine Hundred And Thirty Thousand Dollars) (the “Purchase Price”), payable in cash by wire
transfer of immediately available funds to an account designated by the Company
at least two (2) Business Days prior to Closing.

 

3.2           Payment of Purchase
Price and Estimated Purchase Price Adjustment

 

(a)           Escrow.  At the Closing, the Buyer shall pay out of
the Purchase Price $2,000,000 (Two Million Dollars) (the “Escrow Funds”) to be held in an escrow
account in accordance with the terms of the Escrow Agreement to be executed
prior to Closing in the form of Exhibit B, $1,000,000 (One Million
Dollars) of which Escrow Funds shall be available for the Buyer to satisfy
claims under Section 10.1(a) and all of which shall be available to
satisfy claims under Section 10.1(a)(iv), including to make any
payment with respect to the UK Tax Liability, if any.  In the event that the UK Tax Proceeding is
finally resolved, which resolution shall be in accordance with the procedures
prescribed by Section 6.1, within one (1) year of the Closing Date,
and the amount paid, if any, with respect thereto is less than $1,000,000 (One
Million Dollars), the Buyer shall instruct the escrow agent to (i) pay any
amounts owed in respect of the UK Tax Liability to the party to which it is
due, (ii) deliver to the Company an amount equal to the excess of $1,000,000
(One Million Dollars) over the amount paid to finally settle and resolve the UK
Tax Liability, if any, and (iii) deliver the remaining Escrow Funds, if any,
within three (3) Business Days after the date that is one (1) year after the
Closing Date (such one (1) year and three (3) Business Day period, as extended
by this sentence, the “Initial Closing Escrow Period”), except that such period shall be increased, if at all,
to the extent that the Buyer has become aware of the assertion of any claim or
of the commencement of any Proceeding at law or in equity as to which it is
entitled to indemnification hereunder and has notified the Company thereof in
accordance with Article X prior to the end of the Closing Escrow
Period until such time as all such claims have been finally resolved in
accordance with the procedures set forth in the Escrow Agreement.  In the event that the UK Tax Proceeding is
not finally resolved within the Initial Closing Escrow Period, the Escrow Funds
shall continue to be held by the escrow agent and be available for the Buyer
until such time as the UK Tax Proceeding is finally resolved in accordance with
the procedures prescribed in Section 6.1.  Upon such resolution in accordance with the
procedures prescribed in Section 6.1, and after payment of the
Escrow Funds in satisfaction of the UK Tax Liability, if any, any remaining
Escrow Funds shall be distributed to the Company, subject to the terms of the
Escrow Agreement.

 

(b)           Estimated Purchase
Price Adjustment.  No later than
three (3) Business Days prior to the Closing Date, the Company shall deliver to
the Buyer a statement (the “Preliminary
Closing Date Net Working Capital Statement”) setting forth the
Company’s good faith estimate (the “Preliminary
Closing Date Net Working Capital”) of (i) the total Inventory plus
(ii) the total accounts receivable of the Business minus (ii) the total
accounts payable of the Business, in each case, calculated as of the Closing
Date (the “Closing Date Net Working Capital”),
calculated in accordance with GAAP, the methodology used in preparing the
Business

 

16

 

Balance Sheet and Section 3.2(b)
of the Company Disclosure Schedule, which shall be certified by the Company’s
chief financial officer (for the avoidance of doubt, the accounts receivable and
accounts payable of the Business shall include all such accounts with respect
to the Quest, Trident and Nautalis Discontinued Systems, Consumables and
Services line of the Business).  In the
event that the Buyer does not agree with the Company’s estimate, the Company
and the Buyer shall negotiate in good faith to mutually agree as promptly as
practicable on an acceptable estimate of the Preliminary Closing Date Net
Working Capital Statement.  At the
Closing, the amount of the Purchase Price that the Buyer shall be required to
pay to the Company pursuant to this Agreement shall be adjusted by the
difference between the Preliminary Closing Date Net Working Capital and the
Target Net Working Capital.  If the
Preliminary Closing Date Net Working Capital exceeds the Target Net Working
Capital, the amount of the Purchase Price paid by the Buyer to the Company at
Closing shall be increased dollar-for-dollar by the amount of such excess, and
if the Preliminary Closing Date Net Working Capital is less than the Target Net
Working Capital, the amount of the Purchase Price paid at the Closing shall be
decreased dollar-for-dollar by such shortfall, a portion of which shall be paid
to the escrow agent pursuant to paragraph (a) above.  The Purchase Price shall thereafter be
subject to further adjustment as provided in Section 3.3.

 

3.3           Closing Date Net
Working Capital Statement; Schedule of Cash and Cash Equivalents; and
Actual Adjustment Amount.

 

(a)           No later than sixty (60) days after the Closing Date, the
Company shall prepare (i) a balance sheet of the Business, which balance sheet
shall be prepared in accordance with GAAP, the methodology used in preparing
the Business Balance Sheet and Section 3.2(b) of the Company
Disclosure Schedule (the “Closing Statement”),
(ii) a statement of the actual Closing Date Net Working Capital (such
statement, as finally determined pursuant to the provisions of this Section 3.3,
the “Closing Date
Net Working Capital Statement”),
which statement shall be prepared in accordance with GAAP, the methodology used
in preparing the Business Balance Sheet and Section 3.2(b) of the
Company Disclosure Schedule, and (iii) a statement of the actual cash and cash
equivalents held by the Transferred Subsidiaries as of the Closing Date (such
statement, as finally determined pursuant to the provisions of this Section 3.3,
the “Closing Date
Cash Statement”),
which Closing Date Net Working Capital Statement and Closing Date Cash
Statement shall be prepared in accordance with GAAP, the methodology used in
preparing the Business Balance Sheet and Section 3.2(b) of the
Company Disclosure Schedule, and derived from the Closing Statement.  The Buyer shall cooperate with the Company
and its accountants to the extent required to enable the Company to prepare the
Closing Statement, the Closing Date Net Working Capital Statement and the
Closing Date Cash Statement in accordance with this Agreement.  In connection with the preparation of the
Closing Date Net Working Capital Statement, the Buyer and the Company shall
jointly conduct a physical inventory count of the Inventory (the “Inventory Count”), including all raw materials,
work-in-process, finished products, supplies, accessories, packaging materials,
goods or parts, in each case that are (i) used or held for use principally in
the conduct or operation of the Business by the Company or its Subsidiaries
(including the Transferred Subsidiaries) or (ii) in the possession of third
parties, commencing at a mutually agreed upon date within ten (10) days prior
to the Closing Date and be reconciled to, and completed by, the Closing
Date.  Any disputes with respect to the
Inventory Count shall be submitted to the Independent Accounting Firm in
accordance with the provisions of Section 3.3(c).

 

17

 

(b)           The Buyer may dispute the Closing Date Net Working Capital
Statement, the Closing Date Cash Statement and the Closing Statement by
notifying the Company within thirty (30) days after its receipt thereof.  During such 30-day period, and until the
Closing Date Net Working Capital Statement and the Closing Date Cash Statement
is finally determined, employees of the Buyer and its accountants shall be
entitled to access to the Company’s and its accountants’ work papers prepared
in connection with the Closing Date Net Working Capital Statement, the Closing
Date Cash Statement and the Closing Statement and shall be entitled to review
and discuss such work papers with the Company and its accountants.  Any notice delivered in accordance with this Section 3.3(b)
shall specify in reasonable detail the nature of any disagreement so
asserted.  If the Buyer does not so
notify the Company within such period, the Closing Date Net Working Capital
Statement, the Closing Date Cash Statement and the Closing Statement shall be
final, binding and conclusive on the parties. 
If the Buyer does so notify the Company, the Buyer and the Company and
their respective accountants shall attempt to reconcile their differences, and
any resolution by them as to any disputed amounts shall be final, binding and
conclusive on the parties thereto.

 

(c)           If the Buyer and the Company are unable to reach a
resolution with respect to all of the items specified in a notice provided
pursuant to Section 3.3(b) within twenty (20) days after receipt by
the Company of such notice, then either party may submit the items remaining in
dispute for resolution to KPMG LLP, provided that at such time neither party
has a conflict with respect to KPMG LLP, in which case the parties shall select
another mutually acceptable firm (such firm, the “Independent Accounting Firm”), which shall, within twenty
(20) days after such submission or such longer period as the Independent
Accounting Firm may reasonably require, determine and report to the Buyer and
the Company upon such remaining disputed items, and such determination shall be
final, binding and conclusive on the parties hereto.  The fees and
disbursements of the Independent Accounting Firm shall be allocated between the
Buyer and the Company in such manner that the Buyer shall be responsible for
that portion of the fees and expenses equal to such fees and expenses
multiplied by a fraction the numerator of which is the aggregate dollar value
of disputed items submitted to the Independent Accounting Firm that are
resolved against the Buyer (as finally determined by the Independent Accounting
Firm) and the denominator of which is the total dollar value of the disputed
items so submitted, and the Company shall be responsible for the remainder of
such fees and expenses.

 

(d)           Following the determination of the Closing Date Net Working
Capital pursuant to this Section 3.3, if (i) the Closing Date Net
Working Capital exceeds the Preliminary Closing Date Net Working Capital, (A)
the Purchase Price shall be increased dollar-for-dollar by the amount of such
surplus (the “Surplus”)
and (B) the Buyer shall pay to the Company the Surplus, with interest thereon
as calculated pursuant to Section 3.3(e) plus the total amount
reflected on the Closing Date Cash Statement, (ii) if the Closing Date Net
Working Capital is less than the Preliminary Closing Date Net Working Capital,
(A) the Purchase Price shall be decreased dollar-for-dollar by such deficiency
(the “Deficiency”) and (B) (x) if the total
amount reflected on the Closing Date Cash Statement is greater than the amount
of the Deficiency, the Buyer shall pay to the Company the excess of the total
amount reflected on the Closing Date Cash Statement over the Deficiency, or,
(y) if the total amount reflected on the Closing Date Cash Statement is less
than the amount of the Deficiency, the Company shall pay to the Buyer the
excess of the Deficiency over the total amount reflected on the Closing Date
Cash Statement, and (iii) if the Closing Date Net Working Capital is the same
as the Preliminary Closing Date

 

18

 

Net Working Capital, the Buyer shall pay to
the Company the total amount reflected on the Closing Date Cash Statement, in
each case with interest thereon as calculated pursuant to Section 3.3(e),
in each case, within five (5) Business Days after the Buyer and the Company
agree to the Closing Date Net Working Capital and the Closing Date Cash
Statement or within five (5) Business Days after the Independent Accounting Firm
finally determines the Closing Date Net Working Capital and the Closing Date
Cash Statement.  Any Surplus or
Deficiency, as applicable, together with interest thereon, and any payment with
respect to the Closing Date Cash Statement payable pursuant to this Agreement
shall be treated for tax purposes as an adjustment to the Purchase Price.

 

(e)           The party making such payment pursuant to Section 3.3(d),
shall pay interest thereon to the other party for the period from the Closing
Date to the date of payment at the London Inter-Bank Offer Rate (“LIBOR”) for six (6) month deposits in
U.S. dollars as quoted on Telerate Page 3750 on the Closing Date.  Payment of such excess (or difference) and
interest thereon shall be made by wire transfer in immediately available funds
to such account or accounts as are designated in writing by the party entitled
to receive such payment no later than the second Business Day prior to the date
on which such payment is due.

 

3.4           Allocation of
Purchase Price.  The Buyer and the
Company agree to allocate the Purchase Price (and any Liabilities assumed
hereunder that are properly treated as purchase price) in accordance with the
rules under Section 1060 of the Code and the Treasury Regulations
promulgated thereunder.  Such allocation shall
be mutually agreed upon between the parties. 
The Buyer and the Company agree to act in accordance with the
computations and allocations as determined pursuant to this Section 3.4
in any relevant Tax Returns or filings, including any forms or reports required
to be filed pursuant to Section 1060 of the Code, the Treasury Regulations
promulgated thereunder or any provisions of local, state and foreign law (“1060 Forms”), and to cooperate in the
preparation of any 1060 Forms and to file such 1060 Forms in the manner
required by applicable law.  Any issues
with respect to the allocation which have not been finally resolved within 60
days following Closing shall be referred to the Independent Accounting Firm in
accordance with the provisions of Section 3.3(c).  Notwithstanding the foregoing, the Buyer and
the Company shall agree to a tentative allocation of the Purchase Price (and
any Assumed Liabilities) between the Transferred Shares, on the one hand, and
the Transferred Assets, on the other hand, within 20 days after the date
hereof, and if the parties cannot mutually agree upon such an allocation, shall
refer such dispute to the Independent Accounting Firm who shall determine such
allocation, prior to the Closing Date, pursuant to the provisions of Section 3.3(c).

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

 

4.1           Representations and
Warranties of the Company.  Except as
set forth in applicable section of the Company Disclosure Schedule and
subject to Section 11.15, the Company hereby represents and warrants
to Buyer as follows:

 

19

 

(a)           Due Organization.  Each of the Company and each of the
Subsidiaries is a corporation duly organized, validly existing and, where
applicable, in good standing under the laws of the jurisdiction of its
organization.  Each of the Company and
each of the Subsidiaries (i) has all requisite corporate power and
authority to own, lease and operate all of its properties and assets and to
carry on its business as it is now being conducted, including the Business, and
(ii) is in good standing and is duly qualified to do business in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification necessary, except where the
failure to so qualify or be in good standing, individually or in the aggregate,
has not had, and would not reasonably be expected to have, a Material Adverse
Effect.  The copies of the certificate of
incorporation and by-laws or similar organizational documents of the Company
and the Transferred Subsidiaries which were previously made available to the
Buyer, are true, complete and correct copies of such documents as in effect on
the date of this Agreement.  The register
of members of the Transferred Subsidiaries contain accurate records of the
members of the Transferred Subsidiaries and the Transferred Subsidiaries have
not received any notice of any application or intended application for
rectification.  The statutory books of
the Transferred Subsidiaries and their registers are up to date in all material
respects and contain records which are complete and accurate in all material
respects of all matters required to be dealt with in such books.

 

(b)           Subsidiaries.

 

(i)            Except
for the Transferred Shares, the Company does not own or hold, directly or
indirectly, any equity interest of any kind in any Person that owns assets or
properties or conducts operations used or held for use in the Business. All of
the Transferred Shares and all of the shares of capital stock of the other
Transferred Subsidiaries have been duly authorized and validly issued and are
fully paid-up and non-assessable, to the extent such terms are applicable, with
no personal liability attaching to ownership thereof, and such shares or other
securities are owned by the Company or, in the case of the other Transferred
Subsidiaries, the Transferred Subsidiary, in each case free and clear of any
Lien. Upon consummation of the transactions contemplated hereby, the Buyer
and/or the Designated Purchaser will acquire good and valid title to the
Transferred Shares free and clear of all Liens. Except for this Agreement there
are no outstanding options, warrants, stock appreciation rights, rights to
subscribe to, calls, rights of first offer, rights of first refusal or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, shares of any capital
stock or other equity securities of the Transferred Subsidiaries, and there are
no Contracts or other arrangements by which the Transferred Subsidiaries may be
or become bound to issue additional shares of its capital stock or other equity
securities, or options, warrants or rights to purchase, acquire, subscribe to,
calls on, or rights of first offer, rights of first refusal or commitments for,
any shares of its capital stock or other equity securities.

 

(ii)           Neither
the Company nor any of its Subsidiaries has, owns or controls (of record or
beneficially), directly or indirectly, any interest in any other Person, or is
a party to or participant in any partnership, joint venture or other similar
investment related to the Business. 
Neither the Company nor any of its Subsidiaries is subject to any

 

20

 

obligation or requirement to provide funds to or make any investment
(whether in the form of a loan, capital contribution or otherwise) in any
Person related to the Business.

 

(iii)          The
authorized capital stock of the Transferred Subsidiary consists of 500,000
ordinary shares of 100 pence each.  At
the close of business on February 15, 2005, 179,018 shares were
outstanding and no shares were held in treasury.  Section 4.1(b)(iii) of the
Company Disclosure Schedule sets forth (i) the authorized capital stock of
each of the Transferred Subsidiaries (other than the Transferred Subsidiary)
and the par value of such shares, to the extent applicable, and (ii) the number
of shares of such capital stock outstanding and number of shares held in
treasury, in each case, for each of the Transferred Subsidiaries (other than
the Transferred Subsidiary) as of February 15, 2005. The Transferred
Subsidiary owns all of the shares of capital stock of each of the other
Transferred Subsidiaries.  There are no
outstanding obligations of the Transferred Subsidiaries to repurchase, redeem
or otherwise acquire any shares of capital stock of the Transferred
Subsidiaries or pursuant to which the Transferred Subsidiaries is or could be
required to register any shares of its capital stock or any other securities
under the Securities Act or under any other Laws.  No bonds, debentures, notes or other
indebtedness having the right to vote, or being convertible into or exercisable
or exchangeable for any securities having the right to vote, on any matters on
which stockholders may vote (“Voting Debt”)
of the Transferred Subsidiaries are issued or outstanding.

 

(c)           Authorization and Validity of
Agreement.  The Company has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby.  The execution,
delivery and performance by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action and no other corporate
action or proceeding on the part of the Company is or will be necessary for the
execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby (other than
the approval of the Acquisition and the consummation of the transactions
contemplated by this Agreement by the affirmative vote of the holders of a
majority of the outstanding stock of the Company entitled to vote thereon (the “Stockholder Approval”).  This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery hereof by the Buyer, constitutes a legal, valid and
binding obligation of the Company, enforceable against it in accordance with
its terms, except to the extent that its enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting creditors’ rights generally and by general equity principles (whether
considered in a proceeding in equity or at law).  The Company’s Board of Directors, by
resolutions duly adopted at a meeting duly called and held, has
(i) determined that the Acquisition and the transactions contemplated by
this Agreement are expedient and in the best interests of the Company and its
stockholders and declared the Acquisition and the transactions contemplated by
this Agreement advisable, (ii) approved this Agreement and the
transactions contemplated by this Agreement, including the Acquisition, and
(iii) recommended that the stockholders of the Company approve this
Agreement and the consummation of the transactions contemplated hereby and
directed that such matter be submitted for consideration by the stockholders of
the Company at the meeting of the stockholders to obtain the Stockholder
Approval.  The only vote of the
stockholders of the

 

21

 

Company required to approve the Acquisition
and the consummation of the transactions contemplated by this Agreement is the
Stockholder Approval.

 

(d)           No Conflict.  The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby and
compliance with the terms hereof will not, (i) conflict with, or result in any
violation of, or constitute a default (with or without notice or lapse of time
or both) under, or give rise to a right of termination, cancellation,
acceleration or increase of any obligation, liability or fee or the loss of a
material benefit under, or the creation of a Lien on the Transferred Assets
(any such conflict, violation, default, right of termination, cancellation or
acceleration, loss or creation, a “Violation”)
pursuant to, any provision of the certificate of incorporation or by-laws of
the Company or any of its Subsidiaries, (ii) result in any Violation of any of
the Contracts or any other material contract to which the Company or any of its
Subsidiaries is a party, or (iii) result in any Violation of any Licenses and
Permits, Order or Law applicable to the Business, the Transferred Assets or the
Transferred Subsidiaries or their respective properties, rights or assets,
except in the case of clauses (ii) and (iii) for any Violation which,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect.

 

(e)           Consents.  No consent, approval, Order, Licenses and
Permits, or registration, declaration or filing with, or notice to, any
Governmental Authority or of, with or from any other Person, is required in
connection with the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated hereby, except
for (i) the filing with the SEC of the Proxy Statement (as defined herein) and
the filing with the SEC of such reports and other materials under the Exchange
Act as may be required in connection with this Agreement and the transactions
contemplated hereby, and (ii) such other consents, approvals, Orders, Licenses
and Permits, registrations and filings which, if not obtained or made,
individually or in the aggregate, would not reasonably be expected to interfere
in any material respect with the conduct of the Business as currently
conducted.

 

(f)            Conduct of the Business.  Except as expressly contemplated hereby,
since September 30, 2004 (or as otherwise indicated in subclause (ii)
below) to the date of this Agreement, (i) the Company and its Subsidiaries have
conducted the operations of the Business only in the ordinary course of
business consistent with past practice, (ii) have not taken any action that
would have been prohibited by Section 5.2 if this Agreement had
been in effect at the time such action was taken (other than with respect to
subclauses (ix) and (xi) (excluding the proviso) in which case the reference
date shall be December 31, 2004, and subclause (xxii) which shall not be
deemed covered by this representation) and (iii) there has not been any
Material Adverse Effect.

 

(g)           Financial Statements; Undisclosed
Liabilities.

 

(i)            As
of their respective dates of filing with the SEC (or, if amended or superseded
by a filing prior to the date hereof, as of such filing), all of the reports,
prospectuses, registrations statements, proxy and information statements and
all other documents required to be filed by the Company with the SEC since January 1,
2002 (including all exhibits and schedules thereto and documents incorporated
by reference therein, the “Company SEC Documents”)
complied as to form in all material respects with the applicable requirements
of the Securities Act, the 1934 Act and the Sarbanes-

 

22

 

Oxley Act of 2002 and the related rules and regulations promulgated
thereunder, as the case may be, and none of the Company SEC Documents when
filed contained any untrue statement of material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading..

 

(ii)           Section 4.1(g)(i)
of the Company Disclosure Schedule contains a true and complete copy of
the (A) unaudited Business Balance Sheet and (B) the Argonaut Technologies,
Inc. Worldwide 2004 Unaudited Revenue Split Statement (collectively, the “Financial Statements”).  The Financial Statements present fairly, in
all material respects, on a pro forma basis, the financial condition and
results of operations of the Business as of the respective dates and for the
respective periods indicated therein. 
The Financial Statements were prepared from, and are in accordance with,
the Books and Records of the Business and using the same methodologies and
principles as used to prepare the financial statement filed by the Company with
the SEC, except as expressly stated therein. 
The Financial Statements have been prepared based on management’s good
faith belief of the results, and/or financial position, of the Business.

 

(iii)          All
of the Liabilities reflected on the Business Balance Sheet are related to the
Business and arose out of or were incurred in the ordinary course of
business.  Except (i) to the extent
reflected or reserved against in the Business Balance Sheet, or (ii) for
Liabilities that are incurred after the date of the Business Balance Sheet in
the ordinary course of business, there are no material Liabilities or other
obligations of any nature whatsoever relating to the Business.

 

(iv)          The
Accounts of the Transferred Subsidiaries incorporated in England and Wales:

 

(A)          have
been prepared in accordance with the generally accepted accounting practice
commonly adopted by companies carrying on businesses similar to those carried
on by such Transferred Subsidiaries in the United Kingdom as of the Accounts
Date;

 

(B)           show
a true and fair view of the state of affairs of such Transferred Subsidiaries
as of the Accounts Date and of their respective profits or losses for the
accounting reference period ended on that date;

 

(C)           comply with the
requirements of the United Kingdom
Companies Act 1985, as amended; and

 

(D)          (except as the Accounts
expressly disclose) are prepared using estimation techniques and accounting
policies which are the same in all material respects as those adopted in
preparing the Previous Accounts.

 

(v)           Since
the Accounts Date apart from the dividends provided for in the Accounts, no
dividend or other distribution has been declared, paid or made by the
Transferred Subsidiaries incorporated in England and Wales.

 

23

 

(h)           Takeover Statutes.  The Company has taken all corporate action
necessary to render inapplicable to the Voting Agreements the restrictions on
business combinations set forth in Section 203 of the DGCL and any similar
Laws.

 

(i)            Properties.

 

(i)            The
Owned Real Property is all of the real property legally and beneficially owned
by the Company or any of its Subsidiaries and used in connection with the
Business (other than the real property located at Tir-Y-Berth Industrial
Estate, New Road, Hegoed, Wales) and neither the Company nor any Transferred
Subsidiary has any estate, right, interest or Liability in any other land. The
Company or one of the Transferred Subsidiaries has good, marketable and
insurable fee simple title to the Owned Real Property, free and clear of all
Liens other than Permitted Liens. The existing use of each parcel of Owned Real
Property is the lawful use.  Neither the
Company nor the Transferred Subsidiaries has disposed of, or taken any steps to
dispose of, the Owned Real Property and are not under any commitment to dispose
of it in whole or in part.  All
certificates of occupancy, permits, licenses, approval and authorizations
(collectively, the “Real Property Permits”)
of all Governmental Authorities having jurisdiction over the Owned Real
Property or any portion thereof have been obtained and are in full force and
effect to operate and occupy such Owned Real Property, except to the extent the
absence or invalidity of any Real Property Permit does not materially and
adversely affect the value or operation and occupancy of such Owned Real
Property.  As of the date hereof, neither
the Company nor the Transferred Subsidiaries has received any written notice
from any Governmental Authority having jurisdiction over any of the Owned Real
Property suspending, revoking or canceling any Real Property Permit, or
modifying any Real Property Permit in a manner which materially and adversely
effects the operation of the Business or the occupancy of the Owned Real
Property.  As of the date hereof, there
are no disputes, actions or orders pending, or to the Knowledge of the Company,
threatened against or relating to the condemnation, use, occupation or
condition of the Owned Real Property (whether contingent or otherwise), or any
portion thereof.

 

(ii)           Section 4.1(i)(ii)
of the Company Disclosure Schedule contains a complete and accurate list
of (A) all real property leased by the Company and its Subsidiaries in
connection with the operation of the Business and (B) the agreements under
which such real property is leased (the “Leases”).  Except as, individually or in the aggregate,
has not had, and would not reasonably be expected to interfere in any material
respect with the conduct of the Business, (A) each Lease has been executed
and is in full force and effect, (B) none of the Company or any of its
Subsidiaries is in breach or default in any respect under any such Lease, and,
to the Knowledge of the Company, no event has occurred which, with notice or
lapse of time or both, would constitute such a material breach or default of
such Lease, (C) each Lease will continue to be binding in accordance with
its terms immediately following the Closing, except those Leases which would no
longer be binding as a result of actions that are taken by the Buyer or its
Affiliates, and (D) to the Knowledge of the Company, no party to such
Lease is in breach or default under such Lease or has repudiated any material
provision thereof.

 

(iii)          Where
necessary, (A) all titled deeds are either (1) fully stamped with ad valorem
stamp duty and a particulars delivered stamp or (2) accompanied by a

 

24

 

valid certificate from the Inland Revenue evidencing submission of a
land transaction return and (B) all documents of title include the consents for
the grant of the Leases.

 

(j)            Title to Transferred Assets;
Sufficiency of Assets.  The Company has good, valid and marketable
title, of record and beneficially, to all of the Transferred Assets and at the
Closing will transfer and deliver to the Buyer and/or the respective Designated
Purchaser legal and valid title to the Transferred Assets, free and clear of
all Liens, other than Permitted Liens. 
The Transferred Assets constitute all of the assets necessary for the
Buyer to conduct the Business in the manner in which it is currently being
conducted.  All of the machinery,
equipment and other tangible assets included in the Transferred Assets are in
good and usable condition, ordinary wear and tear excepted, have been maintained
in accordance with normal industry practice and are otherwise suitable for the
purposes for which they are currently used.

 

(k)           Taxes.

 

(i)            All
material Tax Returns required to be filed by each of the Transferred
Subsidiaries or in connection with the Business have been timely filed. All material
Taxes required to be paid (whether or not shown to be due on such Tax Returns)
by each of the Transferred Subsidiaries or in connection with the Business have
been timely paid. All such Tax Returns are true, correct and complete in all
material respects.

 

(ii)           There
is no material Proceeding, investigation, audit or examination proposed in
writing or currently ongoing against or with respect to any of the Transferred
Subsidiaries or in connection with the Business in respect of any Tax.  No deficiencies for any Taxes have been
proposed, asserted or assessed against any of the Transferred Subsidiaries or
in connection with the Business.

 

(iii)          All
Taxes required to have been withheld by each of the Transferred Subsidiaries or
in connection with the Business have been withheld and paid over to the proper
Governmental Authority.

 

(iv)          There
are no material Liens for Taxes upon any property or assets of any of the
Transferred Subsidiaries or the Business (other than for Taxes not yet due and
payable).

 

(v)           None
of the Transferred Subsidiaries has any material liability for the Taxes of any
Person (other than the Transferred Subsidiaries) including (A) under section 1.1502-6
of the Treasury Regulations (or any similar provision of state, local or
foreign law), (B) as a transferee or successor or (C) by Contract.

 

(vi)          None
of the Transferred Subsidiaries is a party to, is bound by or has any
obligation under, any tax sharing agreement or similar Contract or any
agreement that obligates it to make any payment computed by reference to the
taxes, taxable income or taxable losses of any other Person.

 

(vii)         None
of the Transferred Subsidiaries have within the last six (6) years acquired any
asset from any other company (other than another of the Transferred

 

25

 

Subsidiaries) which was, at the time of such acquisition, a member of
the same group of companies as the relevant Transferred Subsidiary for the
purposes of any Tax.

 

(viii)        No
liability for Taxes or deficit for any Tax purposes would arise for any of the
Transferred Subsidiaries from the loan relationships to which the relevant
Transferred Subsidiary is party being repaid to the extent of the amounts shown
in respect of such loan relationships in the books of the relevant Transferred
Subsidiary as of the date hereof.

 

(ix)           Each
of the Transferred Subsidiary and International Sorbent Technology Limited is a
registered and taxable person for the purposes of the United Kingdom Value
Added Tax Act 1994 and neither is nor has ever been treated for such purposes
as a member of a group for the purposes of United Kingdom value added tax.

 

(x)            All
documents in the possession or under the control of the Transferred
Subsidiaries or to the production of which any of the Transferred Subsidiaries
are entitled which are necessary to establish title to any asset or to effect
registration in respect of the holding of an asset or to produce the relevant
instrument as evidence in civil proceedings or in a hearing before an arbitrator
or referee and which, in the United Kingdom or elsewhere, attract either stamp
duty or transfer Tax or require to be stamped with a particular stamp denoting
that no duty is chargeable or that the document has been produced to the
appropriate authority, have been properly stamped or the transfer Tax duly paid
and there are no circumstances in which any of the Transferred Subsidiaries
will or may after Closing be liable to pay an amount of United Kingdom stamp
duty land tax, submit a United Kingdom stamp duty land transaction return or a
United Kingdom stamp duty land tax self certificate in respect of any
transaction entered into or action taken prior to Closing.

 

(xi)           None
of the Transferred Subsidiaries is liable to Tax in any jurisdiction other than
the jurisdiction in which it is incorporated, and none of the Transferred
Subsidiaries or the Company has or has ever had a permanent establishment in a
jurisdiction other than the jurisdiction of its incorporation.

 

(l)            Legal Proceedings.  There are no Proceedings which are pending
or, to the Knowledge of the Company, threatened against, affecting or involving
the Company, the Business, any of the Transferred Assets or any of the
Transferred Subsidiaries or challenging the validity of this Agreement or any of
the transactions contemplated hereby which, individually or in the aggregate,
has had, or would reasonably be expected to have, a Material Adverse
Effect.  Neither the Company nor any of
its Subsidiaries nor any of their respective properties is or are subject to
any Order affecting or involving the Business or the Transferred Assets, except
for those that, individually or in the aggregate, would not reasonably be
expected to interfere in any material respect with the conduct of the Business
as currently conducted.  There are no
formal or informal SEC inquiries or investigations, other governmental
inquiries or investigations or internal investigations or material
whistle-blower complaints pending, or to the Knowledge of the Company with
respect to SEC or other governmental inquiries or investigations, threatened,
relating to, affecting or involving the Business or the Transferred Assets,
including the Transferred Subsidiaries.

 

26

 

(m)          Licenses and Permits; Compliance
with Laws.  Except (other than in the case of clauses (i)
and (ii) below) as, individually or in the aggregate, has not had, and would
not reasonably be expected to have, a Material Adverse Effect:

 

(i)            the
Company or the Transferred Subsidiaries owns or possess all material Licenses
and Permits, and have made all filings, applications and registrations with all
Governmental Authorities (including all authorizations required by the Drug
Enforcement Administration and under the Federal Food, Drug and Cosmetic Act,
the regulations of the United States Food and Drug Administration and
Environmental Laws and all other similar Laws in other applicable
jurisdictions) and all such Licenses and Permits are in full force and effect;

 

(ii)           no
loss of any such material Licenses and Permits is pending in any Proceeding or,
to the Knowledge of the Company, has been threatened by a Governmental
Authority, except for normal expirations in accordance with the terms thereof
or applicable Law and all such Licenses and Permits may be transferred to the
Buyer or its Subsidiaries;

 

(iii)          the
Company and each of the Transferred Subsidiaries have complied with
(A) all terms and conditions of all Licenses and Permits and (B) all
Laws applicable to the operation of the Business and ownership or use of the
Transferred Assets, and it has not received any written notice of any pending
Proceeding alleging facts which, if true, would constitute a failure to comply
with either (A) or (B) of this Section 4.1(m)(iii);

 

(iv)          there
are no (A) unresolved violations, criticisms or exceptions noted by any
Governmental Authority in any report, comment letter or other written statement
relating to or based on any examinations of the Business, the Transferred
Subsidiaries or, with respect to the Business and the Transferred Assets, the
Company or its Subsidiaries or (B) written agreements, memoranda of
understanding, commitment letters or similar undertakings to which the
Business, the Transferred Subsidiaries or, with respect to the Business and the
Transferred Assets, the Company or its Subsidiaries is a party, or Orders from,
or any resolution adopted at the request of, any Governmental Authority; and

 

(v)           to
the Knowledge of the Company, each third party at any time engaged in the
testing, manufacturing, storage, packaging, labeling, sale or distribution of a
product on behalf of the Business, the Transferred Subsidiaries or, with
respect to the Business and the Transferred Assets, the Company or its
Subsidiaries has been, in compliance with all applicable Laws and Licenses and
Permits which have jurisdiction over the products being tested, manufactured,
stored, packaged, labeled, sold or distributed on behalf of the Business, the
Transferred Subsidiaries or, with respect to the Business and the Transferred
Assets, the Company or its Subsidiaries; provided, that with respect to
this Section 4.1(m)(v), the term “Knowledge of the Company” shall
mean, with respect to any such matter, the actual knowledge, without due
inquiry, of the individuals listed in Section 1.1(i) of the Company
Disclosure Schedule.

 

27

 

(n)           Environmental Matters.  Except as, individually or in the aggregate,
has not had, and would not reasonably be expected to have, a Material Adverse
Effect:

 

(i)            The
Company, its Subsidiaries and the Business have complied with all Environmental
Laws and, to the Knowledge of the Company, there is no condition that would,
individually or in the aggregate, reasonably be expected to prevent or interfere
with compliance with all Environmental Laws (in effect on the date hereof) in
the future;

 

(ii)           the
Transferred Real Property and all property operated by the Company or any of
its Subsidiaries or otherwise owned, used, occupied or operated in connection
with the Business (including soils, groundwater, surface water, buildings,
equipment or other structures or facilities) do not contain and are not
contaminated with any Hazardous Substance and no foreseen or proposed
alterations or improvements are required within three (3) years from the date
hereof in relation to such properties in order to maintain compliance with
Environmental Laws;

 

(iii)          the
properties formerly owned or operated by the Company or any of its Subsidiaries
or otherwise owned or operated in connection with the Business were not
contaminated with any Hazardous Substance during the period of ownership or
operation by the Company or any of its Subsidiaries;

 

(iv)          neither
the Company nor any of its Subsidiaries is subject to liability for any
Hazardous Substance disposal or contamination on any third party property under
Environmental Laws;

 

(v)           neither
the Company nor any of its Subsidiaries has received any notice, demand,
letter, claim or request for information indicating that the Company, any of
its Subsidiaries or the Business may be in violation of or subject to liability
under any Environmental law;

 

(vi)          neither
the Company nor any of its Subsidiaries is subject or a party to any indemnity
or other agreement with any third party relating to any Environmental Law or
Hazardous Substances; and

 

(vii)         there
are no other circumstances or conditions involving the Company, any of its
Subsidiaries or the Business that could be reasonably likely to result in any
claims, liability, investigations, costs or restrictions on the ownership, use
or transfer of any property of the Company or any of its Subsidiaries used or
held for use in the conduct or operation of the Business pursuant to any
Environmental Law.

 

(o)           Employee Benefit Plans.

 

(i)            Section 4.1(o)(i)
of the Company Disclosure Schedule contains a true and complete list of
each “employee benefit plan” (within the meaning of Section 3(3) of
ERISA), including “multiemployer plans” within the meaning of Section 3(37)
of ERISA), and all stock purchase, stock option, severance, employment,
consulting, independent contractor, change-in-control, fringe benefit,
collective

 

28

 

bargaining, bonus, incentive, deferred compensation, pensions, employee loan
and all other employee benefit plans, agreements, programs, policies or other
arrangements, whether or not subject to ERISA (including any funding mechanism
therefor now in effect or required in the future as a result of the transaction
contemplated by this Agreement or otherwise), under which (A) any Business
Employee has any present or future right to benefits and which are contributed
to, sponsored by or maintained by the Company or its Subsidiaries or
(B) any of the Transferred Subsidiaries has had or has any present or
future liability.  All such plans,
agreements, programs, policies and arrangements shall be collectively referred
to as the “Company Plans”.

 

(ii)           With
respect to each Company Plan, the Company has provided or made available to the
Buyer with a current, accurate and complete copy (or, to the extent no such
copy exists, an accurate description) thereof and, to the extent applicable:
(A) any related trust agreement or other funding instrument, (B) the
most recent determination letter, if applicable, (C) any summary plan
description and other written communications (or a description of any oral
communications) by the Company or its Subsidiaries to the Business Employees
concerning the extent of the benefits provided under a Company Plan, and
(D) to the extent applicable, for the most recent year, audited financial
statements and actuarial valuation reports.

 

(iii)          (A)
no event has occurred and no condition exists that would subject the Company or
its Subsidiaries, either directly or by reason of their affiliation with any
member of their “Controlled Group” (defined as any organization which is a
member of a controlled group of organizations within the meaning of
Sections 414(b), (c), (m) or (o) of the Code), to any tax, fine, lien,
penalty or other liability imposed by ERISA, the Code or other applicable Laws
for which any of the Transferred Subsidiaries, Buyer or any Designated
Purchaser would reasonably be expected to be liable, and (B) no Company Plan is
subject to Title IV of ERISA.

 

(iv)          With
respect to any Company Plan, no administrative investigation, audit or other
administrative proceeding by the Department of Labor, the Internal Revenue
Service, Inland Revenue or other Governmental Authority are pending, threatened
or in progress which, in any such case, individually or in the aggregate, could
reasonably be expected to result in a material liability to any of the
Transferred Subsidiaries, Buyer or any Designated Purchaser.

 

(v)           No
Company Plan exists that, as a result of the execution of this Agreement, the
Stockholder Approval, or the transactions contemplated by this Agreement
(whether alone or in connection with any subsequent event(s)), could: (A) result in any bonus payment, any severance pay or any
increase in severance pay upon any termination of employment after the date of
this Agreement, (B) accelerate the time of payment or vesting or result in any
payment or funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or result in any other material
obligation pursuant to, any of the Company Plans, or (C) limit or restrict
the right of any of the Transferred Subsidiaries or Buyer to merge, amend or
terminate any of the Company Plans.

 

29

 

(vi)          No
Company Plan is maintained outside the jurisdiction of the United States, or
covers any employee residing or working outside the United States (any such
Company Plan, a “Foreign Benefit Plan”).  With respect to any Foreign Benefit Plans, (A) all
Foreign Benefit Plans have been established, maintained and administered in
compliance in all material respects with their terms and all applicable
statutes, laws, ordinances, rules, orders, decrees, judgments, writs, and
regulations of any controlling Governmental Authority, (B) all Foreign
Benefit Plans that are required to be funded are fully funded, and with respect
to all other Foreign Benefit Plans, adequate reserves therefore have been
established on the Closing Statement, and (C) no material liability or
obligation of the Company or its Subsidiaries exists with respect to such
Foreign Benefit Plans that has not been disclosed on Section 4.1(o)(vi)
of the Company Disclosure Schedule.

 

(vii)         Other
than the Group Personal Pension Plan administered by Standard Life, no
agreement or arrangement exists for the provision by the Transferred
Subsidiaries of any relevant benefits (as defined in section 612(1) of the
Income and Corporation Taxes Act 1988 of the United Kingdom Parliament, with
the omission of the exception in that definition) for any officer or employee
or former officer or employee of the Business or for any dependant of any such
person and the Transferred Subsidiaries have never participated in any
agreement or arrangements providing such relevant benefits (as defined above).

 

(p)           Labor Matters.

 

(i)            Neither
the Company nor any of its Subsidiaries, with respect to the Business, is a
party to any U.S. or non-U.S. collective bargaining agreement or other labor
union contract (or is subject to any statutory scheme of similar import)
applicable to all or any of the Business Employees, nor, to the Knowledge of
the Company, are there any activities or proceedings of any labor union to
organize any Business Employees.

 

(ii)           The Company and its Subsidiaries are, with
respect to the Business, in compliance with all applicable Laws respecting
employment practices, terms and conditions of employment, management-labor
relations and wages and hours which are in effect as of the date of this
Agreement, except where the failure to comply, individually or in the
aggregate, has not had, and would not reasonably be expected to have, a
Material Adverse Effect.  Except for any
such event which, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect, there is no unfair
labor practice charge or other employment related complaint pending or, to the
Knowledge of the Company, threatened against the Company or any of its
Subsidiaries before any Governmental Authority, nor is there any Proceeding brought
by or on behalf of any employee, prospective employee, former employee,
retiree, labor organization or other representative of the Company’s or any of
its Subsidiaries’ employees pending or, to the Knowledge of the Company,
threatened against the Company, in each case, with respect to the operation of
the Business.  Neither the Company nor any of its
Subsidiaries is a party to or bound by any consent decree with, or citation by,
any Governmental Authority relating to employees or employment practices of, or
in connection with, the Business.  Except
for any such event which, individually or in the aggregate, has not had, and
would not reasonably be expected to

 

30

 

have, a Material Adverse Effect, there is no
labor strike, slowdown or work stoppage, lockout or labor disturbance pending
or, to the Knowledge of the Company, threatened against the Company or any of
its Subsidiaries, nor is there any grievance currently being asserted.  Neither the Company nor any of its
Subsidiaries has experienced any material work stoppage or work slowdown at any
time during the five (5) years immediately preceding the date of this Agreement
with respect to the operation of the Business.  The
Company and its Subsidiaries have paid in full to all Business Employees all
wages, salaries, commissions, bonuses, benefits and other compensation due to
such employees and neither the Company nor
any of its Subsidiaries is liable for any severance pay or other payments to
any Business Employee or former Business Employee arising from the termination
of employment. Neither the Company nor any of its Subsidiaries has
closed any plant or facility, effectuated any layoffs of employees or
implemented any early retirement, separation or window program within the past
five years, nor has any such party planned or announced any such action or
program for the future affecting, in whole or in part, Business Employees.  The Company and its Subsidiaries are, and
have operated the Business, in compliance with their respective obligations
pursuant to the Worker Adjustment and Retraining Notification Act of 1988 (“WARN”) and similar applicable Laws, and all other
notification and bargaining obligations arising under any collective bargaining
agreement, statute or otherwise.

 

(iii)          The
Transferred Subsidiary Employees and the US Employees constitute all employees
who are wholly or predominantly engaged for purposes of conducting, and
required in connection with the operation of, the Business.

 

(q)           Intellectual Property.

 

(i)            Section 4.1(q)(i)(A)
of the Company Disclosure Schedule sets forth a complete and accurate list
of all registered Intellectual Property used or held for use in the conduct or
operation of the Business, including (A) each patent, trademark or copyright
registration and (B) each pending patent application or application for
trademark or copyright registration. 
Except as, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect:  (A) the Company or one of the
Transferred Subsidiaries owns or, pursuant to an agreement set forth in Section 4.1(q)(iii)
of the Company Disclosure Schedule, has the right to use all the Intellectual
Property used or held for use in the conduct or operation of the Business free
and clear of all Liens (except Permitted Liens), and the Company has taken
commercially reasonable actions to maintain and protect each item of owned
Intellectual Property that is used or held for use in the conduct of the
operation of the Business; (B) the owned Intellectual Property and, to the
Knowledge of the Company, the licensed Intellectual Property, in each case used
or held for use in the conduct or operation of the Business is valid,
unexpired, subsisting and enforceable, and, except as set forth in Section 4.1(q)(i)(B),
no actions are necessary (including filing of documents or payments of fees)
within ninety (90) days after the Closing Date to maintain or preserve the
validity or status of any material registered Intellectual Property; and (C) as
of the date hereof, no Proceeding is pending or, to the Knowledge of the
Company, threatened which challenges the legality, validity, enforceability,
use or ownership of any Intellectual Property used or held for use in the
conduct or operation of the Business. 
The Company

 

31

 

or one of the Transferred Subsidiaries, as applicable, has taken all
necessary actions (including requiring that current and past employees,
contractors and agents execute confidentiality and non-disclosure agreements
and assign to the Company or the Transferred Subsidiaries all of their right,
title and interest in any owned Intellectual Property used or held for use in
the conduct or operation of the Business) to protect, preserve and maintain the
owned Intellectual Property used or held for use in the conduct or operation of
the Business.

 

(ii)           (A) To
the Knowledge of the Company, neither the Company nor any of its Subsidiaries
has infringed or misappropriated any Intellectual Property rights of third
parties, (B) neither the Company nor any of its Subsidiaries has received
any complaint, claim, demand or notice alleging any such infringement or
misappropriation (including any claim that the Company must license or refrain
from using any Intellectual Property rights of any third party) nor, to the
Knowledge of the Company, is there any valid basis for any such complaint,
claim, demand or notice and (C) to the Knowledge of the Company, no third
party has materially infringed or materially misappropriated, or is currently
infringing or misappropriating, any of the Intellectual Property used or held
for use in the conduct or operation of the Business.

 

(iii)          Section 4.1(q)(iii)
of the Company Disclosure Schedule identifies each material agreement
(including all amendments and revisions thereto) pursuant to which (A) the
Company or its Subsidiaries has granted a license or similar rights to any
third party with respect to any of the registered Intellectual Property
identified or required to be identified in Section 4.1(q)(i) of the
Company Disclosure Schedule, excluding consumer end-user licenses or (B) the
Company or its Subsidiaries has received a license or similar rights to any
Intellectual Property owned by a third party, excluding shrink-wrap or other
Intellectual Property generally commercially available, that is used or held
for use in the conduct or operation of the Business.  Except as, individually or in the aggregate,
has not had, and would not reasonably be expected to have, a Material Adverse
Effect, each such material agreement (A) is valid and enforceable and in
full force and effect, except to the extent it has previously expired in
accordance with its terms and (B) neither the Company nor any of its
Subsidiaries, nor, to the Knowledge of the Company, any third party, has
violated any provision of, or committed or failed to perform any act which,
with or without notice, lapse of time or both, would constitute a default under
such agreement.

 

(iv)          The
Transferred Assets include all of the Intellectual Property necessary to enable
Buyer to operate the Business in substantially the same manner as it is
currently operated, without infringing or misappropriating any rights of any
third party.

 

(r)            Brokers, Finders, etc.  No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any broker’s
or finder’s fee or any other similar commission or fee in connection with any
of the transactions contemplated by this Agreement, except SG Cowen & Co.,
LLC, whose fees and expenses will be paid by the Company in accordance with the
Company’s agreement with such advisor.

 

(s)           Insurance.  Section 4.1(s) of the Company
Disclosure Schedule contains a complete and accurate list of all material
policies or binders of insurance currently maintained by

 

32

 

the Company or any of its Subsidiaries that
provide coverage with respect to the Transferred Subsidiaries, the Business or
the Transferred Assets showing as to each policy or binder the carrier, policy
number, expiration dates and a general description of the type of coverage
provided (including whether it is a “claims made” or “occurrence” based
policy). Except as, individually or in the aggregate, has not had, and would
not reasonably be expected to have a Material Adverse Effect, all such policies
are in full force and effect.

 

(t)            Transactions with Related
Persons.  The Business does not include any Contracts
with any of the stockholders, directors, officers or employees (or any relative
or spouse of any of the foregoing Persons or any other Affiliate of the
foregoing Persons) (collectively, “Related Persons”)
of the Company.  Neither the Company nor
any Related Person has any interest, directly or indirectly, in any Contract,
Lien or other agreement relating to the Business or to which the Business is
subject.

 

(u)           Books and Records.  The Books and Records are complete and
correct in all material respects, have been maintained in accordance with good
practice, and reflect the basis for the financial position and results of
operations of the Business as set forth in the Financial Statements.

 

(v)           Certain Contracts.  Section 4.1(v)
of the Company Disclosure Schedule sets forth all of the Contracts to
which the Company or any of its Subsidiaries (including the Transferred
Subsidiaries) is a party or by which it is bound, in each case, relating to or
in connection with the Business, (i) with respect to the employment or
termination of, or severance or retirement arrangements relating to, any
Business Employees involving the payment of $100,000 or more per annum, or with
any consultants involving the payment of $100,000 or more per annum, (ii) which
is a “material contract” (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC), (iii) which provides for any payment by or to the
Company or any of its Subsidiaries in excess of $100,000 in any year or which
is not terminable within one year without penalty, (iv) which limits (or
purports to limit) in any way the ability of the Company, any of the
Transferred Subsidiaries or any of its Affiliates or of the Business to compete
or engage in any line of business, in any geographic area or with any person,
or which requires referrals of any business or requires any of the Transferred
Subsidiaries or Affiliates or the Business to make available investment
opportunities to any Person on a priority, equal or exclusive basis, (v) which
provides for or requires any aggregate future payments in excess of $100,000
with respect to, or in connection with, any capital expenditures or the
acquisition or construction of fixed assets, (vi) pursuant to which the Company
or any of its Subsidiaries has entered into a partnership or joint venture with
any other Person, (vii) which contains any ongoing indemnification obligation
by the Company or any of its Subsidiaries which could reasonably require the
payment by such entity in excess of $100,000 in the aggregate (excluding
product warranties and indemnities to the extent consistent with the Company’s
Standard Terms and Conditions), (viii) relating to, or evidencing, indebtedness
for borrowed money or any guarantee of indebtedness for borrowed money, in each
case involving an amount in excess of $100,000, (ix) since January 1,
2002, relating to the acquisition or disposition of any business (whether by
merger, sale of stock, sale of assets or otherwise) which involves an asset
value or purchase price in excess of $100,000, (x) between the Company or any
wholly-owned Subsidiary of the Company (other than the Transferred
Subsidiaries) and any of the Transferred Subsidiaries, (xi) relating to, or
evidencing, any indemnity or any guarantee of obligations of any

 

33

 

Person, (xii) which imposes any
confidentiality, non-disclosure or standstill obligation on the Company or its
Affiliates (except confidentiality provisions entered into in the ordinary
course of business consistent with past practice) or the Business, or (xiii)
any of the benefits or liabilities of which will be increased, or the vesting
of the benefits of which will be accelerated, by the occurrence of the
transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.  The
Company has previously made available to the Buyer complete and accurate copies
of each Contract of the type described in this Section 4.1(v).  All of the Contracts are valid and in full
force and effect, except where the failure to be in full force and effect,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect. 
Neither the Company nor any of its Subsidiaries nor the Business, and to
the Knowledge of the Company, none of the other parties thereto, has violated
any provision of, or committed or failed to perform any act which (with or
without notice, lapse of time or both) would constitute a default under the
provisions of any Contract, except in each case for those violations and
defaults which, individually or in the aggregate, have not had, and would not
reasonably be expected to have, a Material Adverse Effect. Each Contract will
be a valid and binding obligation of the Business and upon consummation of the
transactions contemplated hereby will be in full force and effect.

 

(w)          Customers and Suppliers.  Section 4.1(w) of the Company
Disclosure Schedule contains a list of the top ten customers and the top
ten suppliers for the Business for each of the last two fiscal years.  None of such customers or suppliers has
ceased to do business with the Company (with respect to the Business) or any of
the Transferred Subsidiaries and, to the Knowledge of the Company, as of the
date hereof, no such customer or supplier is currently threatening any material
modification or change in, or termination of, the business relationship (i)
with respect to the Business, with the Company or any of its Subsidiaries
(other than the Transferred Subsidiaries) or (ii) with any of the Transferred
Subsidiaries.

 

(x)            Products Liability.

 

(i)            Neither
the Company nor any of its Subsidiaries has received any written notice
relating to, nor, to the Knowledge of the Company, are there any facts or
circumstances which could reasonably be expected to give rise to, any material
claim involving any service provided or any product designed, manufactured,
serviced, produced, modified, distributed or sold by or on behalf of the
Company or any of its Subsidiaries relating to or in connection with the
conduct or operation of the Business, resulting from an alleged defect in
design, manufacture, materials or workmanship, performance, or any alleged
failure to warn, or from any alleged breach of implied warranties or
representations, or any alleged noncompliance with any applicable Laws, other
than routine service obligations in the ordinary course of business.

 

(ii)           There
has been no product recall, rework or post-sale warning or similar action
(collectively, a “Recall”)
conducted by the Company or any of its Subsidiaries with respect to any product
manufactured (or to be manufactured), shipped, sold or delivered by or on
behalf of the Business, or any investigation or consideration of or decision
made by any director, officer or key employee thereof concerning whether to
undertake or not undertake any Recall.

 

34

 

(y)           Inventory.  The Inventory as reflected in the Business
Balance Sheet is stated at the lower of cost or market, with adequate
allowances for excess and obsolete materials and materials below standard
quality in accordance with GAAP.  The
quantity and quality of the Inventory is such that the Inventory is readily
usable and saleable in the normal course of the operation of the Business,
except for such amounts as are reserved in accordance with GAAP and except for
the discontinued products, service and spare parts inventory with respect to
the Quest, Trident and Nautalis Discontinued Systems, Consumables and Services
line of the Business; provided, that the Quest finished good units are
saleable in connection with the operation of the Business.

 

(z)            Receivables.  All of the accounts receivable and notes receivable
relating to or in connection with the Business as reflected in the Business
Balance Sheet constitute valid and enforceable claims arising from bona fide
transactions in the ordinary course of the operations of the Business, and
there are no contingent or asserted claims, rights of return or other rights of
set-off against any thereof, except to the extent appropriately reserved for in
the Business Balance Sheet in accordance with GAAP.

 

(aa)         Opinion of Financial Advisor.  SG Cowen & Co., LLC has delivered to the
Company’s Board of Directors its written opinion (or oral opinion to be
confirmed in writing), dated as of the date hereof, that, as of such date, the
Purchase Price is fair, from a financial point of view, to the Company.

 

(bb)         Grace Acquisition. No claims for indemnification,
reimbursement, breach or other disputes, or any inquiries or correspondence
relating or reasonably expected to lead thereto, have been received or made
with respect to the Grace Acquisition, and to the Company’s Knowledge, there
are no facts, events or circumstances which exist, as of the date hereof, that
could give rise to any such claim or right of indemnification.

 

4.2           Representations and
Warranties of the Buyer.  Except as
set forth in applicable section of the Buyer Disclosure Schedule and
subject to Section 11.15, the Buyer hereby represents and warrants
to the Company as follows:

 

(a)           Due Organization and Power.  The Buyer is a corporation duly incorporated
or otherwise organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization.

 

(b)           Authorization and Validity of
Agreement.  The
Buyer has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby.  The execution, delivery and performance by
the Buyer of this Agreement and the consummation by the Buyer of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action by the board of directors and, prior to the Closing,
will be duly and validly authorized by all necessary action by the Buyer, and
no other corporate action or proceeding on the part of the Buyer is or will be
necessary for the execution, delivery and performance by the Buyer of this
Agreement and the consummation by the Buyer of the transactions contemplated
hereby.  This Agreement has been duly and
validly executed and delivered by the Buyer and, assuming the due
authorization, execution and delivery hereof and thereof by the Company,
constitutes a legal, valid and binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms, except to the extent that

 

35

 

enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other Laws relating to or affecting
creditors’ rights generally and by general equity principles (whether
considered in a proceeding in equity or at law).

 

(c)           No Conflict.  The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, (i) result
in any Violation of any provision of the articles or certificate of
incorporation, by-laws or similar organizational documents of the Buyer or any
of its Subsidiaries, (ii) result in any Violation of any material loan or
credit agreement, note, bond, mortgage, guarantee, deed of trust, indenture,
lease, to which the Buyer or any of its Subsidiaries is a party, or (iii)
result in any Violation of any license, permit, concession, exemption, consent,
franchise, certificate, variance, approval, Order or Law applicable to the
Buyer or any of its Subsidiaries or their respective properties, rights or
assets, except in the case of clauses (ii) or (iii) for any Violation which,
individually or in the aggregate, would not reasonably be expected to
materially adversely effect the ability of the Buyer to perform its obligations
under this Agreement.

 

(d)           Brokers, Finders, etc.  Neither the Buyer nor any
of its Affiliates has employed any agent, broker, investment banker, financial
advisor or other firm or Person in connection with the transactions
contemplated by this Agreement who is entitled to a fee or commission in
connection with such transactions.

 

(e)           Financing.  The Buyer will have
available to it, at the Closing, immediately available funds necessary to pay
the Purchase Price.

 

(f)            Legal Proceedings.  There are no
Proceedings pending, or to the Knowledge of the Buyer, threatened against or
affecting the Buyer or any of its Subsidiaries, or any of their respective
properties, assets or rights, and neither the Buyer nor any of its Subsidiaries
is subject to any Order rendered specifically against the Buyer or any of its
Subsidiaries which, in either case, would or seeks to enjoin, rescind or
materially delay the transactions contemplated by this Agreement or otherwise
hinder the Buyer from timely complying with the terms and provisions of this
Agreement.

 

(g)           Board
Approvals.  The Board of Directors of
the Buyer, by resolutions duly adopted at a meeting duly called and held, has
(A) determined that this Agreement and the Acquisition are advisable and
in the best interests of the Buyer and its stockholders and (B) approved
the transactions contemplated by this Agreement, including the
Acquisition.  No other corporate
proceedings on the part of the Buyer are necessary to authorize the transaction
contemplated by this Agreement.

 

(h)           Investment Intent.  The Buyer is acquiring the Transferred Shares
for investment and not with a view toward, or for sale in connection with, any
distribution thereof in violation of any applicable federal or state securities
Laws.  The Buyer acknowledges that the
Transferred Shares have not been registered under the Securities Act or the
securities or “blue sky” laws of any state or province and that the Transferred
Shares may not be sold, transferred, offered for sale, pledged, hypothecated or
otherwise disposed of without registration under the Securities Act, except
pursuant to an exemption from such registration available under the Securities
Act, and without compliance with state, provincial and foreign securities Laws,
in each case to the extent applicable.

 

36

 

ARTICLE V

COVENANTS

 

5.1           Access;
Information and Records; Confidentiality.

 

(a)           From the date hereof to the Closing Date or the earlier
termination of this Agreement, upon reasonable prior written notice, the
Company shall, and shall cause its Subsidiaries to, and use its reasonable best
efforts to cause its and its Subsidiaries’ officers, directors and employees
to, afford the officers, employees, auditors and other Representatives of the
Buyer reasonable access, consistent with applicable Law, at all reasonable
times to its officers, employees, properties, offices, plants and other
facilities and to all Books and Records relating to the Transferred Assets, the
Business and the Transferred Subsidiaries, and shall furnish the Buyer with all
financial, operating and other data and information as the Buyer, through its
officers, employees or other Representatives, may from time to time reasonably
request in writing and any reports and other documents filed by the Company
during such period with any Governmental Authority pursuant to the requirements
of applicable Law relating to the Business. 
At the request of the Buyer, the Company shall, and shall cause its
Subsidiaries, to take all reasonable actions to facilitate contact, including
arranging meetings, between the Buyer or its Representatives and the customers
and suppliers of the Business.

 

(b)           Promptly following execution of this Agreement, the parties
shall establish a transition planning team (the “Transition Team”) to be led by Dave Patteson (the “Leader”), of the Buyer, and comprised
of 3 representatives of the Buyer and 1 representative of the Company, who
shall be Steve Nelson.  The Transition
Team shall be responsible for, subject to the oversight of the Leader,
facilitating a transition and integration planning process designed to ensure
the efficient transfer of the Business to the Buyer, which shall include
taking, or causing to be taken, those actions specified in Section 5.1(b)
of the Company Disclosure Schedule.  To
the extent the actions set forth in Section 5.1(b) of the Company
Disclosure Schedule, or any other actions identified by the Transition Team,
are not accomplished prior to the Closing Date, the Company and the Buyer shall
agree upon a commercially reasonable arrangement in order to ensure that such
actions are completed promptly following the Closing.

 

(c)           The Buyer agrees that all communications by the Buyer to any
Business Employees currently employed by the Company or the Transferred
Subsidiaries shall be coordinated through the Company’s representative on the
Transition Team, unless the Company shall otherwise consent (such consent not
to be unreasonably withheld).

 

(d)           The Buyer will hold, and will use its reasonable best
efforts to cause its officers, employees and other Representatives to hold, any
nonpublic information in confidence in accordance with the provisions of the
Confidentiality Agreement, the terms of which are incorporated herein by reference.

 

(e)           No such investigation under this Section 5.1 by
the Buyer shall affect the representations and warranties of the Company and
its Subsidiaries herein.

 

37

 

5.2           Conduct
of the Business Prior to the Closing Date.

 

(a)           During the period commencing on the date hereof and
continuing until the Closing, the Company agrees as to itself and its
Subsidiaries that, except as expressly permitted or required by this Agreement,
including pursuant to the Reorganization, or as set forth in Section 5.2(a)
of the Company Disclosure Schedule, or to the extent that the Buyer shall
otherwise consent in writing, the Company and its Subsidiaries shall carry on
the Business only in the ordinary course of business and consistent with past
practice, including using reasonable best efforts to:

 

(i)            preserve
intact, protect and maintain the Business;

 

(ii)           keep
available and continue to provide all services currently provided to the
Business;

 

(iii)          (A)
maintain all rights, privileges, licenses and other authorizations (including
all Intellectual Property) necessary or desirable for the operation of the
Business, (B) keep available the services of the Business Employees,
(C) maintain the relationship with, and goodwill of, customers, suppliers,
vendors, distributors and other Persons with whom the Company or any of its
Subsidiaries otherwise has business relationships relating to the Business,
(D) continue in all material respects the current sales, marketing and promotional
activities relating to the Business, (E) keep and maintain the Transferred
Assets, including the properties and assets of the Transferred Subsidiaries, in
good operating condition and repair to permit their use in the continuing
operation of the Business, ordinary wear and tear excepted, (F) perform all of
its obligations under the Contracts and the Leases included within the
Transferred Assets in accordance with the terms thereof, and (G) maintain in
place its insurance policies (or replacement policies in similar amounts and
protecting against similar risks) as in effect as of the date hereof;

 

(iv)          pay
and discharge all Liabilities as they become due and all payables in the
ordinary course of business and in the same manner as previously paid (subject to
the Company’s ability to pursue in good faith any bona fide disputes);

 

(v)           cause
the Books and Records to be maintained in the usual, regular and ordinary
manner; and

 

(vi)          comply
in all material respects with all Laws applicable to the Business and, promptly
following receipt thereof, give to the Buyer copies of any notice received from
any Governmental Authority or other Person alleging any violation of any such
Laws.

 

(b)           Without limiting the generality of clause (a) above and
subject to (x) the exceptions therein and in Section 5.2(b) of the
Company Disclosure Schedule and (y) the Reorganization, from the date of
this Agreement to the Closing, the Company shall not and shall not permit any
of its Subsidiaries to do any of the following, unless approved or consented to
in writing by the Buyer (which consent shall not be unreasonably withheld or
delayed):

 

(i)            (A)
acquire or agree to acquire by merging or consolidating with, by purchasing a
substantial equity interest in or a substantial portion of the assets of, by

 

38

 

forming a partnership or joint venture with, or by any other manner, any
business or any corporation, partnership, association or other Person or
business organization or division thereof, (B) otherwise acquire any property
or assets (except as set forth in Section 5.2(b)(xviii) or (xxii)),
or (C) make any investment, either by purchase of stock or securities,
contribution to capital, property transfer or otherwise;

 

(ii)           sell,
lease, assign, transfer, license, sublicense, encumber or otherwise dispose of,
in whole or in part, any of the Transferred Assets, other (A) than the property
located at Tir-Y-Berth Industrial Estate, New Road, Hegoed, Wales, which sale
shall take place only on a “VAT exclusive” basis to the extent lawful and (B)
sales of Inventory in the ordinary course of business consistent with past
practice;

 

(iii)          enter
into any new line of business or modify, change or otherwise alter in any
material respect the fundamental nature of the Business;

 

(iv)          enter
into, cancel, rescind, terminate, renew, assign or make any material change to
any Contract, other than the expiration of a Contract in accordance with its
terms as of the date hereof;

 

(v)           enter
into any Contract that limits or otherwise restricts the Company or any of its
Subsidiaries or Affiliates (or any successors thereto) or that by its terms
could, after the Closing, limit or restrict the Buyer or any of their
respective Subsidiaries or Affiliates (or any successors thereto), from
engaging or competing in any line of business or in any geographic area, or
require referrals of any business or require the Company or any of its
Subsidiaries or Affiliates to make available any investment opportunities to
any Person on a priority, equal or exclusive basis;

 

(vi)          make
any prepayment or other payment on or in respect of any Liabilities of the
Business unless required by the terms thereof on the date of this Agreement, or
incur, create or assume any indebtedness or Liabilities for borrowed money or
guarantee any such obligation or issue or sell any debt securities or warrants
or enter into any “keepwell” or other similar arrangements which would
constitute an Assumed Liability;

 

(vii)         incur,
create, assume or suffer to exist any Lien on any Transferred Asset (except for
Permitted Liens) unless such Lien is released upon or prior to Closing;

 

(viii)        except
as required by any applicable Law, Governmental Authority or any Company
Plan:  (A) increase the compensation or
benefits of any present or former director, officer, employee, consultant or
independent contractor of the Business, (B) loan or advance any money or other
property, or make any payment or distribution of any compensation, to any
present or former director, officer, employee, consultant or independent
contractor of the Business, (C) establish, adopt, enter into, amend or
terminate any Company Plan or any plan, agreement, program, policy, trust, fund
or other arrangement that would be a Company Plan if it were in existence as of
the date of this Agreement, (D) grant any severance or termination pay, other
than in accordance with the terms of any agreement in effect as of the date
hereof, or (E) grant any equity or equity-based awards in any of the
Transferred Subsidiaries;

 

39

 

(ix)           terminate
any Business Employees (except as provided for in the Reorganization or for
cause) or hire any new Business Employees;

 

(x)            issue,
deliver, sell, pledge or transfer or authorize or propose the issuance,
delivery, sale, pledge or transfer of, any shares of capital stock or rights to
purchase the capital stock of any of the Transferred Subsidiaries, any Voting
Debt or any securities convertible into or exercisable or exchangeable for, or
any rights, warrants or options to acquire, any such shares or Voting Debt, or
enter into any agreement with respect to any of the foregoing;

 

(xi)           other
than cash dividends, (A) declare or pay any dividends on or make other
distributions (whether in cash, stock or property or any combination thereof)
in respect of any of the capital stock of the Transferred Subsidiaries, (B)
split, combine or reclassify any of the capital stock of the Transferred
Subsidiaries, or (C) repurchase, redeem or otherwise acquire, or permit the
Subsidiaries to purchase, redeem or otherwise acquire, any shares of the
capital stock of the Transferred Subsidiaries or any securities convertible
into or exercisable or exchangeable for any shares of the capital stock of the
Transferred Subsidiaries; provided, however, that no cash
dividends may be paid which would result in the Transferred Subsidiary having
less than $300,000 in cash or cash equivalents as of the Closing Date;

 

(xii)          transfer,
abandon or grant any material right under, or enter into any settlement
regarding the breach or infringement of, any Intellectual Property owned by or
used or held for use in the conduct or operation of the Business, or modify any
existing right with respect thereto, except to the extent that the Company’s
sale or disposition of Inventory in the ordinary course of business consistent
with past practice constitutes the grant of an implied license or an exhaustion
of remedies under the Intellectual Property;

 

(xiii)         enter
into or amend any collective bargaining agreement or union contract or other
agreement covering the Business Employees or enter into any negotiations for
the purposes of entering into any such agreement, except as required by
applicable Law, Governmental Authority or any Company Plan;

 

(xiv)        effectuate
a “plant closing,” “mass layoff” or other similar triggering event as those
terms are defined in WARN or any other applicable Law, affecting in whole or in
part any site of employment, facility, operating unit or employee of the
Business or any of the Transferred Subsidiaries;

 

(xv)         (A)
institute, settle or agree to settle any Proceeding by or before any
Governmental Authority that creates or imposes any continuing obligation or
restriction on the Business or would otherwise constitute an Assumed Liability
or (B) waive, release or relinquish any material claims or rights relating to
the Business or the Transferred Assets;

 

(xvi)        amend
or propose to amend the certificate of incorporation, by-laws, articles of
association, memorandum of association or other organizational documents of the
Transferred Subsidiaries or enter into, or permit any of the Transferred

 

40

 

Subsidiaries to enter into a reduction of capital, a plan of
consolidation, a scheme of arrangement, merger or reorganization with any
Person;

 

(xvii)       adopt
a plan of complete or partial liquidation, dissolution, restructuring,
recapitalization or reorganization or resolutions providing for or authorizing
the foregoing, other than the Reorganization or a plan of liquidation pursuant
to which no formal actions are taken in furtherance of the implementation or
completion of such liquidation, other than the approval of such plan, prior to
the Closing Date;

 

(xviii)      incur
any capital expenditures in excess of $5,000 individually or $50,000 in the
aggregate relating to the Business;

 

(xix)         make
or permit any change to its accounting methods or principles, except as
required by changes in GAAP as concurred in by the Company’s independent
auditors;

 

(xx)          enter
into any agreement with a Related Person relating to the Business;

 

(xxi)         (A)
accelerate the delivery or sale of products or (B) offer discounts or price
protection on the sale of products or premiums on the purchase of raw materials
that are, in the case of this clause (B), greater on an absolute or
proportionate basis than the Company’s past practice;

 

(xxii)        (A)
purchase, order or otherwise acquire Inventory unless such inventory is (1)
necessary to meet a delivery obligation to a customer prior to the Closing Date
or (2) necessary to meet a required customer support or service or (B) write
down the value of any Inventory or Transferred Asset, except as may be required
by GAAP;

 

(xxiii)       (A)
make, rescind or change any Tax election, annual Tax accounting period or
method of Tax accounting, (B) settle or compromise any Tax claim or assessment,
(C) file any amended Tax Return or (D) surrender any right to claim a Tax
refund, in each case, with respect to any of the Transferred Subsidiaries;

 

(xxiv)       amend,
modify or alter the Rights Agreement, dated as of May 24, 2004, between the
Company and U.S. Stock Transfer Corporation, as Rights Agent, or take any
action to exempt any third Person from all or any provisions thereof; or

 

(xxv)        otherwise
commit to do, or take any action or omit to take any action that would result
in, any of the foregoing.

 

5.3           Acquisition
Proposals.

 

(a)           From the date hereof until the Closing Date or, if earlier,
the termination of this Agreement, the Company agrees that (i) it and its
officers and directors shall not, (ii) its Subsidiaries and their officers and
directors shall not, and (iii) its Representatives and controlled Affiliates
shall not, take any action to, directly or indirectly (x) solicit,
initiate or knowingly facilitate or encourage, or respond to, any inquiries
with respect to, or the making, submission or reaffirmation of any Acquisition
Proposal, or (y) engage in any discussions, negotiations or other

 

41

 

communications relating to an Acquisition
Proposal, or (z) furnish to any Person (other than the Buyer, its officers,
directors, employees or Representatives), or provide any Person (other than the
Buyer, its officers, directors, employees or Representatives) access to, its
properties, Books and Records or any non-public information or data with
respect to the Company or its Subsidiaries, this Agreement or any agreement
entered into by the Buyer or the Company in connection therewith or the
transactions contemplated hereby or thereby. 
Notwithstanding the foregoing, prior to the approval of the Acquisition
and the transactions contemplated by this Agreement by the Company’s
stockholders in accordance with this Agreement, the Company may (A) provide
access to its properties and Books and Records in response to a request
therefor by a Person who has made an unsolicited bona fide written Acquisition
Proposal if the Company’s Board of Directors receives from the party so
requesting such information an executed confidentiality agreement on terms
substantially similar to those contained in the Confidentiality Agreement
(except for such changes specifically necessary in order for the Company to be
able to comply with its obligations under this Agreement) or (B) engage in any
negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal, if and only to the extent that prior to
taking any of the actions set forth in clauses (A) or (B) with respect to an
Acquisition Proposal, (x) the Company’s Board of Directors shall have
determined in good faith, after consultation with its outside legal counsel and
financial advisors, that the failure to take such action would violate the
fiduciary duties of the Company’s Board of Directors under applicable Law and
that such Acquisition Proposal constitutes or is reasonably likely to result in
a Superior Proposal from the party that made the applicable Acquisition
Proposal and (y) the Company shall have informed the Buyer promptly following (and
in no event later than 24 hours after) the taking by it of any such action.

 

(b)           Except as set forth in this Section 5.3(b),
the Company may not (i) withhold, withdraw, amend, qualify, modify or change in
a manner adverse to the Buyer (or propose to do any of the foregoing), or fail
to make, all or any portion of its recommendation that the Company’s
stockholders approve the Acquisition and the consummation of the transactions
contemplated by this Agreement, (ii) approve or recommend any Acquisition Proposal
or (iii) take any
other action or make any other public statements in connection with the Company
Special Meeting inconsistent with its recommendation (collectively, a “Change in Company Recommendation”).  Notwithstanding the foregoing, if, prior to the receipt of the
Stockholder Approval, if and to the extent the Company’s Board of Directors
concludes in good faith, after consultation with its financial advisors and the
Company’s outside legal counsel, in response to a bona fide written Acquisition
Proposal which was unsolicited and did not otherwise result from a breach of Section 5.3(a),
that such proposal is a Superior Proposal and that not terminating this
Agreement to accept such Superior Proposal and/or failure to recommend such
Superior Proposal to the stockholders of the Company would violate the
fiduciary duties of the Company’s Board of Directors under applicable Law, the
Company may terminate this Agreement and/or the Company’s Board of Directors
may effect a Change in Company Recommendation, as applicable; provided, however,
that the Company shall not terminate this Agreement pursuant to this sentence,
and any purported termination pursuant to this sentence shall be void and of no
force or effect, unless concurrently with such termination pursuant to this Section 5.3(b)
the Company pays to the Buyer the Termination Fee payable pursuant to Section 9.2(b);
provided, further, however, that the Company shall not
exercise its rights to terminate this Agreement and the Company’s Board of
Directors shall not effect a Change in Company Recommendation pursuant to this Section 5.3(b)
unless the Company shall have delivered to the Buyer a prior

 

42

 

written notice advising the Buyer that the
Company or the Company’s Board of Directors intends to take such action with
respect to a Superior Proposal, specifying in reasonable detail the material
terms and conditions of the Superior Proposal, this notice to be delivered not
less than five (5) Business Days prior to the time the action is taken, and
during this five (5) Business Day period, the Company and its directors,
officers, employees and other Representatives shall negotiate in good faith
with the Buyer to make such adjustments in the terms and conditions of this
Agreement such that such Acquisition Proposal would no longer constitute a
Superior Proposal.

 

(c)           The Company shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
Persons conducted heretofore with respect to any Acquisition Proposal.  The Company also shall, if it has not already
done so, promptly request that each Person that has received any confidential
information or data concerning the Company and its Subsidiaries in connection
with its consideration of any Acquisition Proposal return or destroy all such
information or data heretofore furnished.

 

(d)           Nothing contained in this Agreement shall prohibit the
Company or the Company’s Board of Directors from taking and disclosing to the
Company’s stockholders a position with respect to a tender or exchange offer by
a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act or from making any disclosure required by applicable Law with
regard to an Acquisition Proposal.

 

(e)           Promptly after receipt by the Company, its Subsidiaries, or
any of their respective directors, officers, employees or other Representatives
of an Acquisition Proposal, or if any non-public information is requested from,
or any discussions or negotiations are sought to be initiated or continued
with, the Company, its Subsidiaries or any of their respective directors,
officers, employees or other Representatives, the Company shall provide the
Buyer with written notice of the material terms and conditions of any
Acquisition Proposal or the identity of any party requesting non-public
information or seeking discussions or negotiations, and thereafter shall keep
the Buyer informed, on a current basis, of the status and material terms and
conditions of any proposals or offers. 
The Company shall make available to the Buyer (to the extent it has not
previously done so) all non-public information made available to any Person
making an Acquisition Proposal.

 

5.4           Non-Solicitation.  The Company agrees that for a period of two
(2) years from and after the
Closing Date it shall not, and its shall cause its Subsidiaries not to, without
the prior written consent of the Buyer, directly or indirectly, solicit to hire
or hire (or cause to seek to cause to leave the employ of the Buyer or its
Subsidiaries) (i) any Business Employee or (ii) any Person employed by the
Buyer or any of its Subsidiaries who became known to or was identified to the
Company or its Subsidiaries in connection with the transactions contemplated by
this Agreement, unless, in the case of clause (i) or (ii) above, such Person
ceased to be an employee of the Buyer or its Subsidiaries prior to such action
by the Company or any of its Subsidiaries, or, in the case of such Person’s
voluntary termination of employment with the Buyer or its Subsidiaries, at
least three months prior to such action by the Company or any of its
Subsidiaries.  Notwithstanding the
foregoing, the restrictions set forth in this Section 5.4 shall not
apply to bona fide public advertisements for employment placed by the Company
or its Subsidiaries and not specifically targeted at the employees of the Buyer
or its Subsidiaries.

 

43

 

5.5           Non-Competition.

 

(a)           In consideration of the Buyer entering into this Agreement
and in order that the Buyer may enjoy the full benefit of the Transferred
Assets and the Business, for a period of three (3) years from and after the
Closing Date (the “Noncompetition Period”),
neither the Company nor any of its controlled Affiliates shall, directly or
indirectly, whether as principal, agent, partner, officer, director,
stockholder, employee, consultant or otherwise, alone or in association with
any other Person, own, manage, operate, control, participate in, invest in,
perform services for, or otherwise carry on, a business which, directly or
indirectly, is in competition with the Business in North America, Europe, Japan
and any other jurisdiction where the Business is currently conducted.

 

(b)           The Company acknowledges and agrees that the remedy at law
for any breach, or threatened breach, of any of the provisions of this Section 5.5
will be inadequate and, accordingly, the Company covenants and agrees that the
Buyer shall, in addition to any other rights and remedies which the Buyer may
have at Law, be entitled to equitable relief, including injunctive relief, and
to the remedy of specific performance with respect to any breach or threatened
breach of such covenant, as may be available from any court of competent jurisdiction.  In addition, the Company and the Buyer agree
that the terms of the covenant in this Section 5.5 are fair and
reasonable in light of the Buyer’s plans for the Transferred Assets and the
Business and are necessary to accomplish the full transfer of the goodwill and
other intangible assets contemplated hereby. 
In the event that any of the covenants contained in this Section 5.5
shall be determined by any court of competent jurisdiction to be unenforceable
for any reason whatsoever, then any such provision or provisions shall not be
deemed void, and the parties hereto agree that said limits may be modified by
the court and that said covenant contained in this Section 5.5
shall be amended in accordance with said modification, it being specifically
agreed by the parties that it is their continuing desire that this covenant be
enforced to the full extent of its terms and conditions or if a court finds the
scope of the covenant unenforceable, the court should redefine the covenant so
as to comply with applicable Law.

 

5.6           Further Actions;
Best Efforts.

 

(a)           Subject to the terms and conditions of this Agreement, each
party shall use its reasonable best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws to consummate the Acquisition and the other
transactions contemplated by this Agreement, including preparing and filing as
promptly as practicable, all documentation, if any, to effect all necessary
filings, notices, petitions, statements, registrations, submissions of
information, applications and other documents necessary to consummate the
Acquisition and the other transactions contemplated by this Agreement.

 

(b)           In the event that any Proceeding or Order is instituted (or
threatened to be instituted) by a Governmental Authority or private party
challenging the Acquisition or any other transaction contemplated by this
Agreement, or any other agreement contemplated hereby, (i) each of the
Buyer, the Company and its Subsidiaries shall cooperate in all respects with
each other and use its respective reasonable best efforts to contest and resist
any such Proceeding or Order and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order, whether temporary,
preliminary or permanent, that is in effect and that prohibits,

 

44

 

prevents or restricts consummation of the
transactions contemplated by this Agreement, and (ii) each of the Buyer,
the Company and its Subsidiaries shall use their respective reasonable best
efforts to defend, at its own cost and expense, any action or actions, whether
judicial or administrative, in connection with the transactions contemplated by
this Agreement.

 

5.7           Stockholder
Approval; Preparation of Proxy Statement.

 

(a)           As promptly as reasonably practicable following the date
hereof (but in no event later than March 10, 2005, the Buyer and the
Company shall cooperate in preparing and shall cause to be filed with the SEC
mutually acceptable proxy materials (the “Proxy Statement”) relating to the matters to be considered by the
stockholders in connection with the Company Special Meeting (as defined
below).  The Company shall use reasonable
best efforts to have the Proxy Statement cleared by the SEC.  No filing of, or amendment or supplement to,
or correspondence with the SEC or its staff with respect to the Proxy Statement
will be made by the Company without providing the Buyer a reasonable
opportunity to review and comment thereon. 
The Company will advise the Buyer, promptly after it receives notice
thereof, of any request by the SEC for the amendment of the Proxy Statement or
comments thereon and responses thereto or requests by the SEC for additional
information.  The Company will cause the
final Proxy Statement to be mailed to the Company’s stockholders as promptly as
practicable subsequent to its filing with the SEC.  If at any time prior to the Company Special
Meeting any information relating to the Company or the Buyer, or any of their
respective Affiliates, officers or directors, should be discovered by the
Company or the Buyer and that 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, in light of the circumstances under which they were made,
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 the Company.

 

(b)           As soon as practicable following the execution and delivery
of this Agreement, the Company shall duly take all lawful action to set a
record date for, duly call, give notice of, convene and hold a special meeting
of its stockholders (the “Company Special Meeting”) for the purpose of considering the approval of the
Acquisition and the transactions contemplated by this Agreement and such other
matters as may in the reasonable judgment of the Company be appropriate for
consideration at the Company Special Meeting. 
The Company’s Board of Directors shall recommend that the stockholders
of the Company approve the Acquisition and the consummation of the transactions
contemplated by this Agreement and the Company shall include such
recommendation in the Proxy Statement and shall not make or effect any Change in
Company Recommendation.  Unless this
Agreement is terminated in accordance with the provisions hereof, this
Agreement shall be submitted to the stockholders of the Company at the Company
Special Meeting for the purpose of approving the Acquisition and the
consummation of the transactions contemplated by this Agreement, and the
Company shall use its reasonable best efforts to secure the vote or consent of
stockholders required by the DGCL to effect the transactions contemplated by
this Agreement.

 

5.8           Public Announcements.  Each
of the Company and the Buyer shall use its respective reasonable best efforts
to develop a joint communications plan and each party shall use its respective
reasonable best efforts (a) to ensure that all press releases and other public

 

45

 

statements with
respect to the transactions contemplated hereby shall be consistent with such
joint communications plan, and (b) unless otherwise required by applicable
Law or by obligations pursuant to any listing agreement with, or the rules of,
any securities exchange, to consult with each other before issuing any press
release or otherwise making any public statement with respect to this Agreement
or the transactions contemplated hereby.

 

5.9           Company Employee
Benefits.

 

(a)           Buyer shall, or shall cause the Designated Purchaser to,
offer employment, commencing on the Closing Date, to only those US Employees
who are actively employed by the Company in the Business on the day immediately
preceding the Closing Date and which are set forth on Section 1.1(ii)
of the Company Disclosure Schedule (the “Closing Date US Employees”), at a wage and salary level
that is the same as that provided to such employees of the Company on the day
preceding the Closing Date.  With respect
to the Liabilities relating to the Closing Date US Employees who accept the
offer of employment described above (the “Transferred US Employees”) and arising out of the
Company Plans, Buyer shall, as of the Closing Date, assume only those Liabilities
described in Sections 2.3(a)(i) or (ii) of this Agreement and
that are directly related to such Transferred US Employees’ employment with the
Business. In addition to the foregoing, Buyer shall reimburse the Company for
all Severance Costs (as such term is hereinafter defined) incurred by the
Company in a lump sum within thirty (30) days after Buyer receives from the
Company an invoice stating the name of each Closing Date US Employee whose
employment with the Company was terminated, his or her years of service with
the Company through such date of termination, his or her annual rate of base
salary as in effect immediately prior to the Closing Date, and the total amount
of severance paid or payable to such employee by the Company.  For purposes of this Agreement, the term “Severance Costs” shall mean, for each Closing
Date US Employee who does not accept the offer of employment described above
and whose employment with the Company or any Affiliate thereof is involuntarily
terminated thereby within thirty (30) days after the Closing Date, the amount
of severance payments to which such employee would be entitled under the Seller
Plan that is a severance plan (as in effect on the date hereof) applicable to
such employee, if his employment were involuntarily terminated on the Closing
Date; provided,  however, that such amount shall only be included
in the definition of Severance Costs to the extent that the Company provides
such employee with severance payments that are at least equal to such
amount.  For the avoidance of doubt,
Buyer shall not assume any Liabilities relating to change in control, severance
and other similar agreements or arrangements between the Company or its
Subsidiaries and any Company Employee.

 

(b)           From and after the Closing Date until the first anniversary
of the Closing Date, the Buyer shall, or shall cause the Transferred
Subsidiaries or Designated Purchaser(s), as applicable, to, provide the
Transferred US Employees and Transferred Subsidiary Employees, for so long as
such employees remain so employed by the Buyer or any Subsidiary of the Buyer
during such time, health benefits which are no less favorable, in the
aggregate, than those provided to employees of a division of the Buyer or any
Subsidiary of the Buyer, that is of a size, nature and in a geographic location
that is substantially similar to the Company, who are in positions comparable
to positions held by such employees with the Buyer or its Subsidiaries from
time to time after the Closing Date.

 

46

 

(c)           From and after the Closing Date, the Buyer shall, or shall
cause the Transferred Subsidiaries or Designated Purchaser, as applicable, to,
recognize the prior service with the Company or its Subsidiaries of each
Transferred US Employee and Transferred Subsidiary Employee employed as of
immediately prior to the Closing Date in connection with all employee benefit
plans, programs or policies (including vacation) of the Buyer or any of its
Affiliates in which any such employees are eligible to participate following
the Closing Date for purposes of eligibility, vesting and levels of vacation
and severance benefits (but not for purposes of benefit accruals under any
defined benefit pension plan or to the extent that such recognition would
result in duplication of benefits).  From
and after the Closing Date, and to the extent permitted by applicable Law
and/or applicable insurance providers, the Buyer will, or will cause the
Transferred Subsidiaries or Designated Purchaser, as applicable, to, cause any
pre-existing conditions or limitations and eligibility waiting periods (to the
extent that such waiting periods would be inapplicable, taking into account
service with the Company and any of its Affiliates), under any group health
plans of the Buyer or its Affiliates in which Transferred US Employees and
Transferred Subsidiary Employees are otherwise to become eligible to
participate in after the Closing Date, to be waived with respect to such
employees and their eligible dependents. 
The Buyer shall, or shall cause the Transferred Subsidiaries or
Designated Purchaser, as applicable, to, give each Transferred US Employee and
Transferred Subsidiary Employee credit for any deductibles and annual
out-of-pocket limits for medical expenses paid during the applicable plan year
in which the Closing occurs under any welfare plans maintained or contributed
to by the Company or the Transferred Subsidiaries prior to the Closing in
satisfying any deductibles and annual out-of-pocket limits for medical expenses
for the same plan year under any welfare plans maintained or contributed to by
the Buyer or its Affiliates in which such employees participate during such
year.

 

(d)           Except as required by applicable Law, as of the Closing Date
the Transferred US Employees and Transferred Subsidiary Employees shall cease
to accrue further benefits under the employee benefit plans and arrangements
maintained by the Company and its Affiliates (excluding any such plans
maintained solely by any of the Transferred Subsidiaries) (the “Seller Plans”); provided, however,
that the Company shall take such actions as may be necessary to, effective
immediately prior to the Closing Date, cause (i) the US Employees who become
employed by Buyer or a Designated Purchaser on the Closing Date to be fully
vested in any unvested portion of their account balances under any Seller Plans
that are defined contribution plans and (ii) all Transferred Subsidiary
Employees to become fully vested in any unvested benefits under any Seller
Plans that are pension plans.  From and
after the Closing Date, the Company shall remain solely responsible for any and
all Liabilities in respect of the Seller Plans, except as otherwise provided
herein.  In addition to the foregoing,
the Company shall indemnify and hold harmless each Buyer Indemnified Party from
and against, and shall reimburse each Buyer Indemnified Party for any and all
Losses incurred by the Buyer Indemnified Party in respect of any claim or
Liabilities arising from or related to any suit or claim of violation brought
against Buyer under WARN and other similar applicable Laws for any actions
taken by the Company in connection with, on or prior to the Closing Date with
regard to any site of employment, facility, operating unit or employee affected
by this Agreement.

 

5.10         Insurance.  To the extent that any insurance policies or
binders cover any loss, liability, claim, damage or expense relating to the
Business, the Transferred Assets or the Transferred Subsidiaries and relating
to or arising out of occurrences or wrongful acts prior to

 

47

 

the Closing Date
and such policies continue after the Closing Date to permit claims to be made
thereunder with respect to such occurrences or acts prior to the Closing Date,
the Company and its Affiliates shall cooperate with the Buyer and its
Affiliates (including the Transferred Subsidiaries post-Closing) to submit any
such claims, including filing and furnishing required notices for the benefit
of or on behalf of the Buyer or its Affiliates under such policies or pursuing
claims previously made.  The Company
shall use its reasonable best efforts so that, on and after the Closing Date,
the Buyer and its Affiliates (including the Transferred Subsidiaries post-Closing)
will be able to have the right to make claims for indemnification to the extent
possible under the terms of such policies and, to the extent assignable, shall
assign the right to make such claims to the Buyer.

 

5.11         Reorganization.  Notwithstanding anything to the contrary
contained in this Article V or any other provision of this
Agreement, it is the explicit intent of the Buyer and the Company that the
Company and its Subsidiaries shall consummate at or prior to the Closing
certain transactions, including asset transfers, to ensure that the Transferred
Subsidiaries only own assets used or held for use principally in the conduct or
operation of the Business, and are subject only to Liabilities that fall within
the definition of Assumed Liabilities, in furtherance of the transactions
contemplated hereby and as set forth in Section 5.11 of the Company
Disclosure Schedule (the “Reorganization”),
and the Company agrees to cause the Reorganization to occur prior to the
Closing.  The Company shall provide the Buyer
copies of, and the opportunity to review and comment on, the documents relating
to the Reorganization prior to their execution and shall not make any such
transfers or take other similar actions without the prior written consent of
the Buyer.

 

5.12         Certain Notices.  From and after the date of this Agreement
until the Closing, the Company and the Buyer shall promptly notify each other
orally and in writing of (a) any notice or other communication from any Person
alleging that the Consent of such Person is or may be required in connection
with the Acquisition and the other transactions contemplated by this Agreement,
(b) any Proceedings commenced or, to the Knowledge of the Company or the
Knowledge of the Buyer, as the case may be, threatened against, relating to or
involving or otherwise affecting such party or any of its Subsidiaries that, if
pending on the date of this Agreement, would have been required to be disclosed
pursuant to Article IV, or that relate to the transactions
contemplated by this Agreement, (c) in the case of the Company, any customer,
supplier, vendor or distributor threatening any material modification or change
in, or termination of, its business relationship with the Business and (d) in
the case of the Company, any fact, event, change or circumstance known to it
that (i) individually or taken together with all other facts, events, changes
and circumstances known to it, has had, or would reasonably be expected to
have, a Material Adverse Effect or (ii) would result in, or would reasonably be
expected to result in, any of the conditions to the Acquisition set forth in Article VIII
not being satisfied or which would adversely affect, in any material respect,
the ability of the parties to consummate the Acquisition and the other transactions
contemplated by this Agreement on a timely basis.

 

5.13         Certain
Intellectual Property Covenants.

 

(a)           The Company shall and shall cause its Subsidiaries to, at
their expense, take such actions prior to and after the Closing as reasonably
required, or as requested by Buyer, to duly execute, deliver and file as of the
Closing Date or as soon thereafter as practicable all instruments and documents
necessary to ensure that the records and registrations of all

 

48

 

Intellectual Property used or held for use in
the conduct or operation of the Business, in the United States Patent and
Trademark Office or the United States Copyright Office and all counterpart or
similar agencies wherever such Intellectual Property is registered, correctly
reflect all transactions affecting the ownership by Buyer of such Intellectual
Property.

 

(b)           The Company hereby grants Buyer
for a period of twelve (12) months following the Closing a non-exclusive,
worldwide, royalty free and fully paid-up, non-assignable and sublicensable
only to Affiliates of Buyer, license to use the name “ARGONAUT TECHNOLOGIES
INC.” in connection with the sale and offering for sale of products and the
provision of services by the Buyer or its Affiliates in connection with the
Business, provided that such products and services shall be of the same kind
and quality as those sold, offered for sale and/or provided by the Company or
its Subsidiaries in connection with the Business prior to the Closing.  Notwithstanding the foregoing, immediately
following the Closing, Buyer shall and shall cause its Affiliates to begin to
take the necessary steps to transition away from the name “ARGONAUT
TECHNOLOGIES INC.”

 

(c)           Buyer hereby grants the Company
for a period of six (6) months following the Closing a non-exclusive,
worldwide, royalty free and fully paid-up, non-assignable and sublicensable
only to Affiliates of the Company, license to use the trademarks, service
marks, trade dress, design marks, logos, trade names, domain names, web-sites,
brand names, model names and corporate names that are included in the
Transferred Assets solely to the extent that such trademarks, service marks,
trade dress, design marks, logos, trade names, domain names, web-sites, brand
names, model names and corporate names were used prior to the Closing.  Notwithstanding the foregoing, immediately
following the Closing, the Company shall and shall cause its Affiliates to
begin to take the necessary steps to transition away from the use of all trademarks,
service marks, trade dress, design marks, logos, trade names, domain names,
web-sites, brand names, model names and corporate names that are included in
the Transferred Assets, such that no later than six (6) months following the
Closing Date, the Company shall and shall cause its Subsidiaries to forever
cease to sell any products or provide any services under, or apply to register,
in each case throughout the world, any trademarks, service marks, trade dress,
design marks, logos, trade names, domain names, web-sites, brand names, model
names and corporate names that are the same as or confusingly similar to any of
the trademarks and trade names included in the Transferred Assets.

 

5.14         WARN.  The Company shall not, at any time within the
60-day period prior to the Closing Date, effectuate a “plant closing” or “mass
layoff,” as those terms are defined in the WARN or any other similar triggering
event under similar applicable Laws, affecting in whole or in part any site of
employment, facility or operating unit of the Business.

 

5.15         Intercompany Accounts.  The Company shall take any and all actions
necessary so that, as of the Closing, there will not be outstanding any
Liabilities, and there shall have been settled all intercompany accounts,
between the Company and its Affiliates (other than the Transferred
Subsidiaries), on the one hand, and the Business or the Transferred
Subsidiaries, on the other hand.

 

5.16         Confidentiality.  The Company recognizes that by reason of its
ownership of the Business, the Transferred Assets and the Transferred Shares,
it and its Affiliates have acquired confidential information and trade secrets
concerning the Business the use or disclosure

 

49

 

of which could
cause the Buyer or its Affiliates substantial loss and damages that could not
be readily calculated and for which no remedy at law would be adequate.  Accordingly, the Company covenants and agrees
with the Buyer that the Company and its Affiliates will not at any time, except
in performance of the Company’s obligations to the Buyer or with the prior
written consent of the Buyer, directly or indirectly, disclose any proprietary,
secret or confidential information relating to the Business that any such
Person may learn or has learned by reason of its ownership of the Business, the
Transferred Assets and the Transferred Shares, unless (i) such information
becomes known to the public generally through no fault of the Company or of its
Affiliates or (ii) disclosure is required in the opinion of its independent
counsel, by applicable Law.  The parties
hereto agree that the covenant contained in this Section 5.16
imposes a reasonable restraint on the Company, its Affiliates and its
employees.

 

5.17         Successors.

 

(a)           In the event that the Company (or any of its respective
successors or assigns) shall (i) consolidate or merge with any other Person and
shall not be the continuing or surviving corporation or entity in such
consolidation or merger, (ii) transfer all or substantially all of its
properties and assets to any other person, or (iii) adopt a plan of dissolution
or liquidation, then in each case proper provision shall be made so that the
continuing or surviving corporation or entity (or its successors or assigns, if
applicable), or transferee of such assets, or such liquidating trust or other
agent, as the case may be, shall expressly assume all of the Company’s
obligations under this Agreement, including pursuant to Articles II and X.  Prior to any such transaction, the Company
shall notify the Buyer of any transaction that would trigger the terms of this Section 5.17
and the terms thereof, including the identity of the purchaser.

 

(b)           In the event that the Buyer (or any of its respective
successors or assigns) shall consolidate or merge with any other Person and
shall not be the continuing or surviving corporation or entity in such
consolidation or merger, or transfers all or substantially all of its
properties and assets to any other person, then in each case proper provision
shall be made so that the continuing or surviving corporation or entity (or its
successors or assigns, if applicable), or transferee of such assets, as the
case may be, shall expressly assume all of the Buyer’s obligations under this
Agreement, including pursuant to Articles II and X.

 

ARTICLE VI

TAX MATTERS

 

6.1           Control of Tax
Audits.  The Company shall have the
right to represent the interests of the Transferred Subsidiaries in any Tax
audit or administrative or court proceeding (a “Tax Proceeding”) relating to any Tax covered by Sections
10.1(a)(iv) and (vi) and to employ counsel of its choice; provided
that if the results of such Tax audit or proceeding could reasonably be
expected to have a material adverse effect on the Buyer, any of the Buyer’s
Affiliates or any of the Transferred Subsidiaries for any Post-Closing Tax
Period, then the Company and the Buyer shall jointly control the defense and
settlement of any such Tax audit or proceeding and each party shall cooperate
with the other party at its own expense and there shall

 

50

 

be no settlement
or closing or other agreement with respect thereto without the consent of the
other party, which consent will not be unreasonably withheld or delayed.  The Company shall promptly notify the Buyer
if it decides not to control the defense or settlement of any such Tax audit or
administrative or court proceeding and the Buyer thereupon shall be permitted
to defend and settle such Tax audit or proceeding.  With respect to any Tax Proceeding of any of
the Transferred Subsidiaries relating to a Straddle Period, the Company and the
Buyer shall jointly control the defense and settlement of any such Tax audit or
proceeding and each party shall cooperate with the other party at its own
expense and there shall be no settlement or closing or other agreement with
respect thereto without the consent of the other party, which consent will not
be unreasonably withheld or delayed. 
Notwithstanding the foregoing, the Company shall not be entitled to
settle the UK Tax Proceeding without the prior written consent of the Buyer if
the amount of such settlement would exceed (a) the amount of Escrow Funds
available at such time to satisfy such claim, plus (b) the amount tendered by
the Company to the Buyer to satisfy its indemnification obligation under this
Agreement with respect to such proposed settlement.

 

6.2           Tax Returns.  The Buyer shall, or cause the Transferred
Subsidiaries to, properly prepare or cause to be properly prepared, and shall
timely file or cause to be timely filed, all Tax Returns of the Transferred
Subsidiaries that are required to be filed after the Closing Date. 
Such Tax Returns shall be prepared in a manner consistent with past
practices, unless such past practices are not in accordance with applicable
law.  The Company shall pay all Taxes
shown as due and owing on such Tax Returns or otherwise levied or assessed upon
any of the Transferred Subsidiaries to the extent such Taxes relate to a
Pre-Closing Tax Period.

 

6.3           Cooperation; Other
Tax Matters.  The Company and the
Buyer shall cooperate fully with each other in connection with the preparation
and timely filing of any Tax Returns required to be prepared and filed by the
Buyer or the Company, or in connection with the preparation or filing of any
election, claim for refund, consent or certification.  For the avoidance of doubt, with respect to
the Transferred Subsidiaries, all Tax Returns and other records and information
relating to Taxes shall be retained by the Transferred Subsidiaries and
constitute part of the Transferred Assets and shall be transferred to the Buyer
through the sale of the Transferred Shares pursuant to Section 2.1;
provided, however, the Buyer shall provide the Company with
copies of such Tax Returns upon reasonable request.  The Company will provide copies of all Tax
Returns of the Company that are reasonably requested by the Buyer or its
Subsidiaries in connection with a Tax Proceeding.

 

6.4           Transfer Taxes.  The Company and the Buyer shall share equally
and be responsible for the timely payment of (on an after-tax basis) all sales
(including bulk sales), use, value added, documentary, stamp, gross receipts,
registration, transfer, conveyance, excise, recording, license, stock transfer
stamps, UK Stamp Duty Land Tax and other similar Taxes and fees (“Transfer Costs”) arising out of or in
connection with or attributable to the transactions effected pursuant to this
Agreement. The Company and the Buyer shall use their respective commercially
reasonable efforts to deliver certain of the Transferred Assets, as
appropriate, through an electronic delivery or in such other manner reasonable
calculated and legally permitted, and take all other commercially reasonable
actions necessary, to minimize or avoid the incurrence of Transfer Costs.

 

6.5           Straddle Periods.  Taxes attributable to Straddle Periods
(including any Taxes resulting from a Tax audit or administrative or court
proceeding) shall be apportioned to the

 

51

 

period ending on
the Closing Date and to the period beginning on the day after the Closing Date
by means of a closing of the books and records of the Company as of the close
of business on the Closing Date and, to the extent not susceptible to such
allocation, by apportionment on the basis of elapsed days unless such Tax is
transaction based (such as sales, transfer and other similar Taxes) in which
case such Tax shall be apportioned to the period in which the related
transaction occurred/occurs.

 

6.6           Proration of Taxes.  Real and personal property Taxes and ad
valorem Taxes (and related Tax refunds or credits) (collectively, “Periodic Taxes”) relating to the
Transferred Assets shall be prorated between the Company and the Buyer for any
Straddle Period.  Periodic Taxes relating
to the Transferred Assets and attributable to Straddle Periods shall be
prorated between the Buyer and the Company based on the relative periods such
assets of the Company were owned by each respective party during the fiscal
period of the taxing jurisdiction for which such Taxes were imposed by such
jurisdiction (as such fiscal period is or may be reflected on the bill rendered
by such taxing jurisdiction).  On the
Closing Date, the Buyer and the Company shall pay or be reimbursed, on this
prorated basis, for Periodic Taxes relating to the Transferred Assets that have
been paid prior to the Closing Date.  The
Buyer or the Company shall promptly forward an invoice to the other party for its
reimbursable pro rata share, if any, of any Periodic Taxes relating to the
Transferred Assets paid after the Closing Date.

 

6.7           Section 338
Elections.  Neither the Buyer nor any
of its Affiliates shall make an election under Section 338 of the Code
with respect to the Transferred Subsidiaries without the prior written consent
of the Company, such consent not to be unreasonably withheld or delayed; provided
that, if requested by the Company, and at the Company’s expense, the Buyer
shall cause the purchaser of the Transferred Shares to make an election under Section 338
of the Code with respect to any or all of the Transferred Subsidiaries (other
than any of the Transferred Subsidiaries that is a United States corporation
for United States tax purposes) so long as making such election would not be
reasonably expected to have an adverse impact on the Buyer or its Affiliates.

 

6.8           Tax Refunds.  Any Tax refunds that are received by the
Transferred Subsidiaries relating to a Pre-Closing Tax Period (excluding Tax
refunds attributable to a loss originating in a Post-Closing Tax Period) shall
be for the account of the Company, and the Buyer shall pay or shall cause the
relevant Transferred Subsidiary to pay over to the Company any such refund
within fifteen (15) days after receipt; provided, however, that
the Company shall be responsible for all Taxes resulting from the disallowance
of such Tax refunds; provided, further, that any amounts payable
under this Section 6.8 shall be subject to any right of offset
and/or setoff pursuant hereto.

 

ARTICLE VII

CLOSING

 

7.1           Closing Date.  Unless this Agreement shall have been
terminated and the transactions herein shall have been abandoned pursuant to Article IX
hereof, the closing of the

 

52

 

transactions
contemplated by this Agreement (the “Closing”)
shall take place at the offices of Simpson Thacher & Bartlett LLP at 10:00
a.m. New York City time on the date (the “Closing
Date”) that is two (2) Business Days after satisfaction or waiver
(subject to applicable Law) of the conditions (excluding conditions that, by
their terms, are to be satisfied on the Closing Date) set forth in Article VIII,
or at such other time or date as agreed to in writing by the parties
hereto.  Notwithstanding the foregoing,
the Closing shall for all purposes be deemed to occur at the close of business
in New York, New York on the Closing Date.

 

7.2           Deliveries by the
Buyer.  At the Closing, the Buyer
shall execute, deliver to the Company and/or file, or shall cause the
respective Designated Purchaser to execute, deliver to the Company and/or file
the following in such form and substance (except for clause (a)) as are
reasonably acceptable to the Company:

 

(a)           the Purchase Price as provided in Section 3.1
hereof (as adjusted pursuant to Section 3.2(b)) less the Escrow
Funds to be deposited by Buyer with the escrow agent at Closing;

 

(b)           the assignment and conveyance instruments described in Article II
hereof;

 

(c)           the documents described in Article VIII hereof;

 

(d)           the Escrow Agreement; and

 

(e)           such other documents and instruments as counsel for the
Buyer and the Company mutually agree to be reasonably necessary to consummate
the transactions described herein.

 

7.3           Deliveries by the
Company.  At the Closing, the Company
shall execute, deliver to the Company and/or file the following in such form
and substance as are reasonably acceptable to the Buyer:

 

(a)           deeds transferring the Owned Real Property to Buyer and/or
the Designated Purchaser subject to any and all Permitted Liens;

 

(b)           the Books and Records (which Books and Records pertaining to
any of the Transferred Subsidiaries organized under the laws of the United
Kingdom shall be transferred to the Buyer in the United Kingdom);

 

(c)           transfers of all of the Transferred Shares duly executed by
the Company and endorsed or accompanied by stock powers and such other
instruments or assignment and conveyance as may be appropriate pursuant to Section 2.1
hereof together with definitive share certificates for the Transferred Shares
each showing the name of the Company as registered holder;

 

(d)           share certificates showing the name of the Transferred
Subsidiary as registered holder of all of the shares in each of the other
Transferred Subsidiaries;

 

(e)           the Escrow Agreement;

 

53

 

(f)            all of the Tax Returns of the
Transferred Subsidiaries;

 

(g)           the documents described in Article VIII hereof;

 

(h)           all such deeds, endorsements, Consents and other instruments
as shall be necessary to vest in Buyer or the Designated Purchaser good title,
rights and interest to the Transferred Assets (other than the properties,
assets, rights and claims of the Transferred Subsidiaries which shall be
transferred through the Purchase of the Transferred Shares pursuant to Sections
2.1 and 7.3(c)), including the assignment and conveyance instruments
described in Article II hereof;

 

(i)            such deeds, leases, licenses and
other documents as may be in the possession of the Company or its Subsidiaries
in relation to the Owned Real Property;

 

(j)            resignations and releases,
effective as of the Closing Date, of all members of the board of directors of
each of the Transferred Subsidiaries;

 

(k)           a notice of resignation of the existing auditors of the
Transferred Subsidiaries;

 

(l)            duly executed powers of attorney
reasonably acceptable to the Buyer in favor of the Buyer or the applicable
Designated Purchaser with respect to the Transferred Shares; and

 

(m)          such other documents and instruments as counsel for the
Buyer and the Company mutually agree to be reasonably necessary to consummate
the transactions described herein.

 

7.4           Actions at Closing
Meeting.  The Company shall procure
that the following business is transacted at the meetings of the board of
directors of each of the Transferred Subsidiaries prior to the Closing:

 

(a)           the directors of the Transferred Subsidiary shall approve
registration of the transfers of the Transferred Shares to the Buyer or the
applicable Designated Purchase and the entry of such Person in the register of
the members of the Transferred Subsidiary, in each case subject to the
transfers being presented duly stamped;

 

(b)           the situation of the registered office of each of the
Transferred Subsidiaries shall be changed to that nominated by the Buyer;

 

(c)           all existing mandates for the operation of the bank accounts
of each of the Transferred Subsidiaries shall be revoked and new mandates
issued giving authority to persons nominated by the Buyer;

 

(d)           the accounting reference date of each of the Transferred
Subsidiaries shall be changed to December 31;

 

(e)           Messrs. Jeff Bork, Mats-Olof Wallin and David Patteson are
appointed directors of each of the Transferred Subsidiaries, and Mr. Edward P.
Connell is appointed as secretary of each of the Transferred Subsidiaries in
each case, subject to such persons having consented to act; and

 

54

 

(f)            Deloitte Touche Tohmatsu shall
be appointed to replace the existing auditors of the Transferred Subsidiaries.

 

ARTICLE VIII

CONDITIONS PRECEDENT

 

8.1           Conditions Precedent
to Obligations of Parties.  The
respective obligations of each of the parties hereto to effect the Acquisition
are subject to the satisfaction, at or prior to the Closing Date, of each of
the following conditions:

 

(a)           No Injunctions; Illegality.  At the Closing Date, there shall be no Order
or other legal restraint or prohibition of any nature of any court or
Governmental Authority of competent jurisdiction that is in effect that
restrains or prohibits the consummation of the Acquisition.  There shall not be any action taken, or any
statute, rule or regulation enacted, entered, enforced or deemed applicable to
the Acquisition, by any Governmental Authority which makes the consummation of
the Acquisition illegal.

 

(b)           Stockholder Approval.  The Company shall have obtained the
Stockholder Approval at the Company Special Meeting.

 

8.2           Conditions to
Obligations of the Buyer  The
obligation of the Buyer to effect the Acquisition is subject to the
satisfaction or waiver, at or prior to the Closing Date, of each of the
following conditions:

 

(a)           Representations and Warranties.  Each of the representations and warranties of
the Company set forth in this Agreement (read without regard to any
qualifications regarding materiality or Material Adverse Effect or any similar
standard or qualification) shall be true and correct as of the date of this
Agreement and (except to the extent such representations and warranties speak
as of any earlier date) as of the Closing Date as though made on and as of the
Closing Date, other than such failures to be true and correct that individually
or in the aggregate would not reasonably be expected to have a Material Adverse
Effect, and the Buyer shall have received a certificate signed on behalf of the
Company by the Chief Executive Officer and the Chief Financial Officer of the
Company to such effect.

 

(b)           Performance of Obligations of
the Company.  The Company shall have performed or complied
with in all material respects all of its obligations required to be performed
or complied with by it under this Agreement at or prior to the Closing Date,
and the Buyer shall have received a certificate signed on behalf of the Company
by the Chief Executive Officer and Chief Financial Officer of the Company to
such effect.

 

(c)           Governmental Consents.  All consents, approvals and authorizations of
any Governmental Authority required to be made or obtained by the Company or
the Buyer or any of their respective Subsidiaries to consummate the Acquisition
the failure of which to be made or obtained would, individually or in the
aggregate, have a Material Adverse Effect shall be in full force and effect at
the Closing.

 

55

 

(d)           FIRPTA Certificate.  The Company shall have delivered to Buyer a
certificate(s) in form and substance reasonably satisfactory to Buyer, duly
executed and acknowledged, certifying any facts that would exempt the
transactions contemplated hereby from withholding under section 1445 of
the Code and the Treasury Regulations promulgated thereunder.

 

(e)           Licenses and Permits.  The Buyer shall have received, or shall
receive as of the Closing, all material Licenses and Permits necessary to
conduct the Business in all material respects with past practices and in all
material respects in compliance with all applicable Laws.

 

(f)            No Proceedings.  There shall not be pending or threatened any
investigation or Proceeding to which a Governmental Authority is a party (i)
seeking to restrain or prohibit the consummation of the transactions
contemplated hereby or (ii) seeking to prohibit or limit the ownership or
operation by the Buyer or the Company of any material portion of the Business
or the Transferred Assets (including the Transferred Subsidiaries).

 

(g)           Material Adverse Change.  There shall not have occurred or arisen after
the date hereof, and prior to Closing, any Material Adverse Effect.

 

(h)           Lease. The Company shall have
obtained the lawful assignment of the lease held by International Sorbent
Technology Limited in relation to Unit 40, Duffryn Industrial Estate, Ystrad
Mynach, Caerphilly, Wales (the “Wales Lease”)
to Argonaut Technologies Limited on or prior to Closing.

 

8.3           Conditions to the
Obligations of the Company.  The
obligation of the Company to effect the Acquisition is subject to the
satisfaction or waiver, at or prior to the Closing Date, of each of the
following conditions:

 

(a)           Representations and Warranties.  Each of the representations and warranties of
the Buyer set forth in this Agreement (read without regard to any
qualifications regarding materiality or Material Adverse Effect or any similar
standard or qualification) shall be true and correct as of the date of this
Agreement and (except to the extent such representations and warranties speak
as of any earlier date) as of the Closing Date as though made on and as of the
Closing Date, other than such failures to be true and correct that individually
or in the aggregate would not reasonably be expected to materially adversely
affect the ability of the Buyer to perform its obligations under this
Agreement, and the Company shall have received a certificate signed on behalf
of the Buyer by the Chief Executive Officer and the Chief Financial Officer of
the Buyer to such effect.

 

(b)           Performance of Obligations of
the Buyer.  The Buyer shall have performed or complied
with in all material respects all of its obligations required to be performed
or complied with by it under this Agreement at or prior to the Closing Date,
and the Company shall have received a certificate signed on behalf of the Buyer
by the Chief Executive Officer and Chief Financial Officer of the Buyer to such
effect.

 

56

 

ARTICLE IX

TERMINATION

 

9.1           Termination.
This Agreement may be terminated and the Acquisition contemplated hereby may be
abandoned at any time prior to the Closing, whether before or after approval of
the Acquisition and the consummation of the transactions contemplated by this
Agreement by the stockholders of the Company:

 

(a)           By mutual written consent of the Buyer and the Company;

 

(b)           By either the Company or the Buyer, upon written notice to
the other party, if the Acquisition shall not have been consummated on or
before July 1, 2005 (the “Termination
Date”); provided, however, that the right to terminate
this Agreement under this Section 9.1(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the primary cause of, or resulted in, the failure of such consummation to occur
on or before such date;

 

(c)           By either the Company or the Buyer, upon written notice to
the other party, if any Governmental Authority shall have issued an Order or
taken any other action (which the parties shall have used their respective
reasonable best efforts to resist, resolve or lift, as applicable, in
accordance with Section 5.6) permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement, and such
Order shall have become final and nonappealable;

 

(d)           By the Buyer, upon written notice to the Company, if the
Company shall have (i) effected a Change in Company Recommendation (or resolved
to take any such action) whether or not permitted by the terms hereof, (ii)
materially breached its obligations under this Agreement by reason of a failure
to call the Company Special Meeting in accordance with Section 5.7
or a failure to prepare and mail to its stockholders the Proxy Statement in
accordance with Section 5.7 (provided that, in the event the
Company fails to file its Proxy Statement by March 8, 2005, so long as the
Company has diligently worked to do so and continues to diligently work to file
the Proxy Statement promptly, the Buyer agrees that the Company shall not be in
material breach of its obligations under Section 5.7 for purposes
of this Section 9.1(d)), or (iii) otherwise failed to comply with
or perform in any material respect its obligations under Section 5.3;

 

(e)           By either the Buyer or the Company if the stockholders do
not vote to approve the Acquisition and the other transactions contemplated by
this Agreement at the duly convened Company Special Meeting (or any adjournment
or postponement thereof);

 

(f)            By the Company, if prior to the
vote of the stockholders at the Company Special Meeting and after compliance in
all material respects with the applicable provisions of Section 5.3,
the Company elects to enter into a binding agreement with respect to a Superior
Proposal and prior to such termination, the Company pays the Termination Fee
required pursuant to Section 9.2(b)(iii);

 

57

 

(g)           By the Buyer, upon written notice provided to the Company,
if there shall have been a breach of any representation, warranty, covenant or
agreement on the part of the Company contained in this Agreement which breach
would, individually or in the aggregate together with all such other then
uncured breaches by the Company, constitute grounds for the conditions set
forth in Section 8.2(a) or (b) not to be satisfied at the
Closing Date and such breach is not reasonably capable of being cured (i) prior
to the Termination Date or (ii) if such breach is reasonably capable of being
cured prior to the Termination Date, such breach shall not have been cured
prior to the earlier of (A) thirty (30) days after the Buyer has provided to
the Company written notice of such breach and (B) three (3) Business Days prior
to the Termination Date; or

 

(h)           By the Company, upon written notice provided to the Buyer,
if there shall have been a breach of any representation, warranty, covenant or
agreement on the part of the Buyer contained in this Agreement which breach
would, individually or in the aggregate together with all such other then
uncured breaches, constitute grounds for the conditions set forth in Section 8.3(a)
or (b) not to be satisfied at the Closing Date and, such breach is not
reasonably capable of being cured (i) prior to the Termination Date or (ii) if
such breach is reasonably capable of being cured prior to the Termination Date,
such breach shall not have been cured prior to the earlier of (A) thirty (30)
days after the Company has provided to the Buyer written notice of such breach
and (B) three (3) Business Days prior to the Termination Date.

 

9.2           Effect of
Termination.

 

(a)           In the event of termination of this Agreement by either the
Company or the Buyer as provided in Section 9.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on
the part of the Buyer or the Company or their respective officers or directors
except for Sections 4.1(r), 4.2(d), 5.8, this Section 9.2
and Article XI each of which shall survive termination; provided,
however, that nothing herein shall relieve any party from liability for
any intentional and material breach of any of the representations, warranties,
covenants or agreements set forth in this Agreement.

 

(b)           The Company shall pay the Buyer, by wire transfer of
immediately available funds, $800,000 (Eight Hundred Thousand Dollars) (the “Termination Fee”) in the event that this Agreement is
terminated as follows:

 

(i)            if
the Buyer shall terminate this Agreement pursuant to Section 9.1(d)(i),
then the Company shall pay the Termination Fee on the Business Day immediately
following such termination;

 

(ii)           if
(A) either party shall terminate this Agreement pursuant to Section 9.1(e),
and (B) at any time after the date of this Agreement and at or before the date
of the Company Special Meeting (or any adjournment or postponement thereof), an
Acquisition Proposal shall have been publicly announced or otherwise disclosed
or communicated to the Company’s Board of Directors (a “Public
Proposal”) and shall not have been withdrawn prior to the time of
the Company Special Meeting, and (C) within twelve (12) months following such
termination, the Company either (1) enters into an agreement or letter of
intent providing for an Acquisition Proposal (other than the Public Proposal)
or an Acquisition Proposal (other than the Public Proposal) is consummated or

 

58

 

(2) consummates the transaction contemplated by the Public Proposal,
then the Company shall pay the Termination Fee concurrently with the
consummation of such transaction, less any amounts paid to the Buyer pursuant
to Section 9.2(c);

 

(iii)          if
the Company shall terminate this Agreement pursuant to Section 9.1(f),
then the Company shall pay the Termination Fee prior to such termination; and

 

(iv)          if
(A) the Buyer shall terminate this Agreement pursuant to Sections 9.1(b)
(but only if the Public Proposal referred to in clause (B) shall have been made
or solicited by a stockholder or group of stockholders holding 5% or more of
the Company’s common stock), 9.1 (d)(ii), (d)(iii) or 9.1(g)
(but only if such termination under Section 9.1(g) is due to an
intentional breach of any representation, warranty or covenant by the Company),
and (B) at any time after the date of this Agreement and before such
termination there shall have been a Public Proposal with respect to the
Company, and (C) within twelve (12) months following such termination, the
Company either (1) enters into an agreement or letter of intent providing for
an Acquisition Proposal (other than the Public Proposal) or an Acquisition
Proposal (other than the Public Proposal) is consummated or (2) consummates the
transaction contemplated by the Public Proposal, then the Company shall pay the
Termination Fee concurrently with the consummation of such transaction, less in
any of the foregoing cases amounts paid to the Buyer pursuant to Section 9.2(c);

 

provided, however, that for
the purposes of this Section 9.2(b), the term Acquisition Proposal
shall have the meaning assigned to such term, except that the reference to “10%
or more” in the definition of “Acquisition Proposal” shall be deemed to be a
reference to “40% or more.”

 

(c)           In the event this Agreement is terminated by (i) the Buyer
pursuant to Section 9.1(d)(ii) or (iii), (ii) the Company or
the Buyer pursuant to Section 9.1(e) or (iii) the Buyer pursuant to
Section 9.1(g) (but only if such termination under Section 9.1(g)
is due to an intentional breach of any representation, warranty or covenant by
the Company), the Company shall reimburse the Buyer for all its reasonable
costs and expenses (including reasonable legal, consulting and account fees and
expenses) incurred by the Buyer or its Affiliates in connection with this
Agreement (the “Buyer Expenses”);
provided, the Company shall not be required to reimburse the Buyer for
any such Buyer Expenses exceeding $400,000 (Four Hundred Thousand Dollars); provided,
further, the Company shall not be required to pay any Buyer Expenses in
the event that the Company has previously paid the Termination Fee with respect
to any such termination.  The Company
shall promptly, but in no event later than three (3) Business Days after it
receives notice from the Buyer setting forth the amount of such costs and
expenses, pay such amount by wire transfer of same day funds to an account
designated by the Buyer.

 

(d)           The Company hereby acknowledges that the agreements
contained in this Section 9.2 are an integral part of the
transactions contemplated by this Agreement, and that, without these
agreements, the Buyer would not enter into this Agreement; accordingly, if the
Company fails to pay all amounts due to the Buyer on the dates specified, then
the Company shall pay all costs and expenses (including reasonable legal fees
and expenses) incurred by the Buyer in connection with any Proceeding taken by
it to collect such unpaid amounts, together with interest on such unpaid
amounts at the prime lending rate prevailing at such time, as published in the Wall
Street Journal, from the date such amount were required to be paid until

 

59

 

the date actually received by the Buyer.  Payment of the fees described in this Section 9.2(d)
shall not be in lieu of damages incurred in the event of breach of this
Agreement, to the extent permitted by Article X.

 

ARTICLE X

INDEMNIFICATION

 

10.1         Indemnification.

 

(a)           Following the Closing and subject to the terms and
conditions of this Article X, the Company shall indemnify, defend
and hold harmless the Buyer and its Affiliates and their respective officers,
directors, employees, stockholders, assigns and successors (each, a “Buyer Indemnified Party”) from and against, and shall
reimburse each Buyer Indemnified Party for, any and all losses (but not lost
profits and consequential or punitive damages, except to the extent awarded by
a court of competent jurisdiction in respect of a third party claim), Taxes,
damages, liabilities, costs and expenses, including interest, penalties, court
costs and reasonable attorneys’ fees and expenses, imposed upon or incurred by
such Buyer Indemnified Party (“Buyer Losses”),
with respect to:

 

(i)            any
inaccuracy or breach of any representation or warranty made by the Company
(other than the representations and warranties set forth in Sections
4.1(k)(i) – (vi));

 

(ii)           any
breach of any covenant or agreement made by the Company herein;

 

(iii)          any
Liabilities, other than the Assumed Liabilities, of the Company or any of its
Affiliates, including any Excluded Liabilities;

 

(iv)          the
UK Tax Liability;

 

(v)           any
Liability arising out of or related to the Asset Purchase Agreement, dated July 29,
2003 between Grace Construction Products Limited, The Separations Group, Jones
Chromatography U.S.A., Inc., Argonaut Technologies Limited and the Company and
the transactions contemplated thereby (the “Grace
Acquisition”);

 

(vi)          except
for Transfer Costs, which are covered in Section 6.4:  (A) all Taxes imposed (whether payable in
cash or by use of a loss carryback or tax credit that is generated in a
Post-Closing Tax Period) on any of the Transferred Subsidiaries for any
Pre-Closing Tax Period and (B) all Taxes (whether payable in cash or by use of
a loss carryback or tax credit that is generated in a Post-Closing Tax Period)
of any Person (other than the Transferred Subsidiaries) imposed on any of the
Transferred Subsidiaries (1) as a result of being a member on or prior to the Closing
Date of any consolidated, combined, affiliated or unitary Tax Group or (2) as a
transferee or successor, by contract,

 

60

 

or otherwise, which Taxes, with respect to this clause (2), relate to an
event or transaction occurring before the Closing;

 

(vii)         any
Liability arising from or related to the Wales Lease including any Liability,
fines or penalties arising in connection with any assignment or purported
assignment of the Wales Lease to Argonaut Technologies Limited.

 

(b)           Following the Closing and subject to the terms and
conditions provided in this Article X, the Buyer shall indemnify,
defend and hold harmless, the Company and its Affiliates and their respective
officers, directors, employees, stockholders, assigns and successors (each, a “Company Indemnified Party”) from and against, and shall
reimburse each Buyer Indemnified Party for, any and all losses (but not lost
profits and consequential or punitive damages, except to the extent awarded by
a court of competent jurisdiction in respect of a third party claim), damages,
liabilities, costs and expenses, including interest, penalties, court costs and
reasonable attorneys’ fees and expenses, imposed upon or incurred by such
Company Indemnified Party (“Company Losses”),
with respect to:

 

(i)            any
inaccuracy or breach of any representation or warranty made by the Buyer;

 

(ii)           any
breach of any covenant or agreement made by the Buyer herein;

 

(iii)          any
of the Assumed Liabilities;

 

(iv)          except
for Transfer Costs, which are covered in Section 6.4 and Taxes for
which the Company is responsible pursuant to Section 10.1(a):  (A) all Taxes imposed on any of the
Transferred Subsidiaries for any Post-Closing Tax Period and (B) all Taxes of
any Person (other than the Transferred Subsidiaries) imposed on any of the
Transferred Subsidiaries (1) as a result of being a member after the Closing
Date of any consolidated, combined, affiliated or unitary Tax Group or (2) as a
transferee or successor, by contract, or otherwise, which Taxes, with respect
to this clause (2), relate to an event or transaction occurring after the
Closing or

 

(v)           except
for those matters with the Company has indemnified the Buyer Indemnified
Parties pursuant to Section 10.1(a), the conduct of the Business by
the Buyer or the use or operation of the Transferred Assets, in each case after
the close of business on the Closing Date.

 

10.2         Limitations on
Indemnity Payments. Notwithstanding anything contained herein to the
contrary, the maximum aggregate liability of (a) the Company to all Buyer
Indemnified Parties taken together for all Buyer Losses under Section 10.1(a)(i)
and (b) the Buyer to all Company Indemnified Parties taken together for all
Company Losses under Section 10.1(b)(i) shall, in each such case,
be limited to a maximum of $1,000,000 (One Million Dollars), except with
respect to the Company’s obligations with respect to the UK Tax Liability,
which shall be limited to a maximum of $2,000,000 (Two Million Dollars).  Notwithstanding anything contained herein to
the contrary, (x) the Company shall not be obligated to make any
indemnification payment under Section 10.1(a)(i) unless and until
the aggregate Buyer Losses

 

61

 

sustained by Buyer
Indemnified Parties and (y) the Buyer shall not be obligated to make any
indemnification payment under Section 10.1(b)(i) unless and until
the aggregate Company Losses sustained by Company Indemnified Parties, in each
such case, collectively exceeds $200,000 (Two Hundred Thousand Dollars), and
then any indemnification with respect to such Buyer Losses or Company Losses
shall be made only to the extent of such excess.  Notwithstanding the foregoing, the
limitations and qualifications set forth in this Section 10.2 shall
not apply to indemnification for breaches of the representations and warranties
contained in Sections 4.1(a), (b), (c) and (r) and 4.2(a),
(b) and (d).  The Buyer
Indemnified Parties’ remedies with respect to Buyer Losses specified in (i) Sections
10.1(a)(i) and (vii) shall be satisfied by application of the Escrow
Funds held pursuant to the Escrow Agreement in accordance with the terms herein
and therein, (ii) in Section 10.1(a)(iv) shall be satisfied first
by application of the Escrow Funds held pursuant to the Escrow Agreement in
accordance with its terms herein and therein, and if any such Buyer Losses
shall be in excess of the amount of the Escrow Funds, then the Company shall be
obligated to satisfy any such excess amounts, and (iii) Sections 10.1(a)(ii),
(iii), (v) and (vi) shall be satisfied by the Company; provided
that, if the Company fails to pay amounts due pursuant to this Section 10.2(iii),
such amounts may be satisfied by application of the Escrow Funds held pursuant
to the Escrow Agreement in accordance with the terms herein and therein.  The amount of any Buyer Losses or Company
Losses for which indemnification is provided under this Article X
shall be reduced to take into account any net Tax benefit actually realized by
the indemnified party as a result of the payment of such losses.  In computing the amount of any such Tax
benefit actually realized, an indemnified party shall be deemed to actually
realize the benefit arising from the payment of such losses after the use of
all other losses, deductions, credits or items of such indemnified party.  In no event shall any Buyer Indemnified Party
or Company Indemnified Party, as applicable, be entitled to indemnification in
respect of Liabilities, Buyer Losses or Company Losses, as the case may be, for
which such Buyer Indemnified Party or Company Indemnified Party, as the case
may be, has already been compensated pursuant to Section 3.3 or
this Article X; provided that such restriction on
indemnification shall only apply to the extent that such Buyer Indemnified
Party or Company Indemnified Party, as the case may be, has actually received
payment in respect of such Liabilities, Buyer Losses or Company Losses, as
applicable.

 

10.3         Notice of Indemnity
Claims.  If any Buyer Indemnified
Party or Company Indemnified Party entitled to or seeking indemnification
hereunder (an “Indemnified Party”)
(i) determines that any event, occurrence, fact, condition or claim has given
or could give rise to any Buyer Losses or Company Losses, as applicable, for which
such Indemnified Party is or may be entitled to, or may seek, indemnification
under this Agreement, (ii) otherwise identifies an event, occurrence, fact,
condition or claim giving rise (or which may give rise) to a right of
indemnification hereunder in favor of such Indemnified Party, or (iii) with
respect to any Third Party Claim (as defined herein), becomes aware of the
assertion of any claim or of the commencement of any Proceeding at law or in
equity (any of the foregoing, an “Indemnity
Claim”), such Indemnified Party shall promptly notify the
party obligated to provide indemnification or from whom indemnification is
being or will be sought (the “Indemnifying
Party”) in writing of such Indemnity Claim (a “Claim Notice”) describing the facts
giving rise to the claim for indemnification under this Agreement and shall
include in such Claim Notice (if then known) the amount or the method of
computation of the amount of such claim and a reference to the provision of
this Agreement or any other agreement, document or instrument executed
hereunder or in connection with this Agreement upon which such claim is based;

 

62

 

provided, however, that the failure of any Indemnified
Party to give timely notice thereof shall not affect any of its rights to
indemnification hereunder nor relieve the Indemnifying Party from any of its
indemnification obligations hereunder, except to the extent the Indemnifying
Party is materially prejudiced by such failure.

 

10.4         Indemnification
Procedures.  Any obligation to
provide indemnification hereunder with respect to any Proceeding at law or in
equity by or against any third party, including any Governmental Authority (a “Third Party Claim”), except with respect to
Tax Proceedings, which shall be governed by Article VI, shall be subject
to the following terms and conditions:

 

(a)           Within ten (10) days after receipt of a Claim Notice, the
Indemnifying Party shall give written notice to the Indemnified Party stating
whether it disputes the Indemnity Claim and whether it will defend against such
Indemnity Claim.  The Indemnifying Party
shall be entitled, at its sole cost and expense, subject to Section 10.5,
to assume and control the defense, compromise, settlement and investigation of
such Indemnity Claim, including the management of any Proceeding relating
thereto, and to employ and engage counsel reasonably acceptable to the
Indemnified Party.  The Indemnified Party
shall at all times have the right to fully participate in the defense of an
Indemnity Claim at its own cost and expense directly or through counsel; provided, however,
that if the named parties to a Proceeding include both the Indemnifying Party
and the Indemnified Party and the Indemnified Party has been advised by counsel
that (i) representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct or (ii) there
may be one or more legal or equitable defenses available to it that are
different from or additional to those available to the Indemnifying Party,
then, in either case, the Indemnified Party shall be entitled to retain its own
counsel at the cost and expense of the Indemnifying Party (except that the
Indemnifying Party shall not be obligated to pay the fees and expenses of more
than one separate counsel for all Indemnified Parties, taken together).  Notwithstanding the foregoing, the
Indemnified Party, during the period the Indemnifying Party is determining
whether to elect to assume the defense of a matter covered by this Section 10.4,
may take such reasonable actions as it deems necessary to preserve any and all
rights with respect to the matter, without such actions being construed as a
waiver of the Indemnified Party’s rights to defense and indemnification under this
Agreement.

 

(b)           If the Indemnifying Party exercises the right to undertake
the defense and investigation of any such Indemnity Claim as provided in Section 10.4(a), then (i) the
Indemnified Party agrees to cooperate with the Indemnifying Party in such efforts
and make available to the Indemnifying Party all witnesses, records, materials
and information in the Indemnified Party’s possession, under its control or to
which it may have access as may be reasonably requested by the Indemnifying
Party, and (ii) the Indemnifying Party will keep the Indemnified Party
reasonably informed of the progress of the defense of any such Indemnity
Claim.  If the Indemnifying Party fails
to undertake the defense and investigation of any such Indemnity Claim as
provided in Section 10.4(a),
including conducting a good faith and diligent defense, then (i) the
Indemnified Party against which such Indemnity Claim has been asserted shall
have the right to undertake the defense, compromise, settlement and
investigation of such Indemnity Claim on behalf of, and at the cost and expense
of and for the account and risk of, the Indemnifying Party, (ii) the
Indemnifying Party agrees to cooperate with the Indemnified Party in such
efforts and make available to the Indemnified Party all witnesses, records,
materials and

 

63

 

information in the Indemnifying Party’s
possession, under its control or to which it may have access as may be
reasonably requested by the Indemnified Party, and (iii) the Indemnified Party
will keep the Indemnifying Party reasonably informed of the progress of the
defense of any such Indemnity Claim.

 

10.5         Settlement of
Indemnity Claims.  The Indemnifying
Party shall not, without the prior written consent of the Indemnified Party,
(a) settle or compromise any Indemnity Claim or consent to the entry of any
final judgment that does not include as an unconditional term thereof the
delivery by the claimant or plaintiff of a written release or releases from all
liability in respect of such Indemnity Claim of all Indemnified Parties
affected by such Indemnity Claim, or (b) settle or compromise any Indemnity
Claim if the settlement imposes equitable remedies or material obligations on
the Indemnified Party other than financial obligations for which such
Indemnified Party shall be indemnified hereunder. Except in the event the
Indemnified Party has assumed the defense of the Indemnified Claim pursuant to Section 10.4(b),
the Indemnified Party shall not, without the prior written consent of the
Indemnifying Party, settle or compromise any Indemnity Claim or consent to the
entry of any final judgment with respect to an Indemnity Claim.

 

10.6         Survival.  All covenants and agreement of the parties
made in this Agreement shall survive the Closing Date unless otherwise
expressly provided herein.  The
representations and warranties of the Company and the Buyer contained in this
Agreement shall survive the Closing Date for a period of twelve (12) months following
the Closing Date, notwithstanding any investigation at any time made by or on
behalf of the party, except (a) the representations and warranties of the
Company contained in Sections 4.1(a), (b), (c), (j),
and (r) and the representations and warranties of the Buyer contained in
Sections 4.2(a), (b) and (d) shall survive indefinitely
and (b) the representations and warranties of the Company contained in Sections
4.1(k) shall survive until ninety (90) days following the expiration of the
applicable statue of limitations or statutory tax assessment period (including
all periods of extension, whether automatic or permissive).  If any Claim Notice for indemnification under
Section 10.1(a) or 10.1(b) shall have been given within the
applicable survival period, the representations and warranties that are the
subject of such indemnification claim shall survive until such time as such
claim is finally resolved.

 

10.7         Treatment of
Indemnification Payments.  Each of
the Buyer and the Company agrees to treat any payment made under this Article X
as an adjustment to the Purchase Price. 
If, notwithstanding such treatment by the parties, any indemnity payment
is determined to be taxable income rather than an adjustment to the Purchase
Price by any taxing authority, then the indemnifying party shall indemnify the
indemnified party for any Taxes imposed on the indemnified party or by reason
of the receipt of such indemnity payment (including any payments under this Section 10.7).

 

10.8         Remedies Exclusive.  Except for any equitable relief, including
injunctive relief or specific performance, to which any party to this Agreement
may be entitled, the indemnification contemplated by this Article X shall be the sole and
exclusive remedy of any Buyer Indemnified Party or Company Indemnified Party
with respect to this Agreement or the transactions contemplated hereby or
thereby, except with respect to any damages incurred by any party as a result
of, or in connection with any, fraud or willful breach on the part of the other
party; provided, however, that nothing in this Section 10.8
shall limit the rights or remedies

 

64

 

expressly provided
for in this Agreement or any other instrument delivered hereunder or the rights
or remedies which, as a matter of applicable Law or public policy, cannot be
limited or waived.

 

ARTICLE XI

MISCELLANEOUS

 

11.1         Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed duly given (a) on the
date of delivery if delivered personally, or by telecopy or facsimile, upon
confirmation of receipt, (b) on the first Business Day following the date
of dispatch if delivered by a recognized next-day courier service, or
(c) on the fifth Business Day following the date of mailing if delivered
by registered or certified mail return receipt requested, postage prepaid.  All notices hereunder shall be delivered as
set forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:

 

(i)            if
to the Company, to it at:

 

Argonaut
Technologies, Inc.
220 Saginaw Drive

Redwood City, CA 94063

Attention:  Lissa Goldenstein

Facsimile:  (650) 716-1557

 

with
copies to:

 

O’Melveny
& Myers LLP

Embarcadero Center West

275 Battery Street

Suite 2600

San Francisco, CA 94111

Attention:  Michael J. Kennedy

Facsimile:  415-984-8701

 

(ii)           if
to the Buyer, to it at:

 

Biotage AB

Kungsgatan
76

SE-753 18 Uppsala

Sweden

Attention:  Jeff Bork

Facsimile:  +46 18 56 57 58

 

65

 

with copies
to:

 

Simpson
Thacher & Bartlett LLP

425
Lexington Avenue

New York,
New York 10017

Attention:  Richard A. Miller

Caroline B. Gottschalk

Facsimile: 
212-455-2502

 

11.2         Counterparts;
Facsimile Signature.  This Agreement
may be executed in any number of counterparts, each of which shall be
considered one and the same agreement and shall become effective when all
counterparts have been signed by each of the parties and delivered to the other
party, it being understood that the parties need not sign the same counterpart.  Any party may execute this Agreement by
facsimile signature, and the other parties will be entitled to rely on such
facsimile signature as conclusive evidence that this Agreement has been duly
executed by such party.

 

11.3         Bulk Sales.  The parties hereto agree to waive compliance
with the provisions of the Laws of any jurisdiction relating to a bulk sale or
transfer of assets that may be applicable to the transactions contemplated by
this Agreement.

 

11.4         Further Assurances.  From time to time after the Closing and
without further consideration, the Company shall, and shall cause its
Subsidiaries to, execute, acknowledge and deliver such documents and
instruments of conveyance, assignment, transfer and delivery and take or cause
to be taken such other actions as the Buyer may reasonably request in order to
carry out the purpose and intention of this Agreement, including to consummate
more effectively the purchase, sale, conveyance, assignment, transfer and
delivery of the Transferred Shares and the Transferred Assets as contemplated
by this Agreement, to vest in the Buyer and/or the Designated Purchaser title
to the Transferred Shares and the Transferred Assets or to enable the Buyer
and/or the Designated Purchaser to protect, exercise and enjoy all rights and benefits
of the Company or its Subsidiaries with respect thereto and as otherwise
appropriate to consummate the transactions contemplated by this Agreement.

 

11.5         Entire Agreement.  This Agreement (including the documents and
the instruments referred to herein) and the Escrow Agreement constitutes the
entire agreement among all the parties hereto and terminates and supersedes all
prior agreements and understandings, oral and written, among all the parties
hereto with respect to the subject matter hereof and thereof, other than the
Confidentiality Agreement which shall survive the execution and delivery of
this Agreement as provided for herein.

 

11.6         No Third-Party
Beneficiaries.  This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns. 
Nothing in this Agreement, expressed or implied, is intended to or shall
confer on any Person other than the parties hereto or their respective
successors and assigns, any rights, remedies or Liabilities under or by reason
of this Agreement.

 

11.7         Assignment.  Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise), without
the prior written consent of the other parties, and any attempt to make any
such assignment without such consent shall be null and void; provided,

 

66

 

however, that the
Buyer may assign in writing its rights and obligations, in whole or in part, to
one or more of its wholly-owned Subsidiaries, but the Buyer shall remain
jointly and severally liable with any such assignee(s) with respect to all
obligations of the Buyer hereunder.

 

11.8         Amendment and
Modification; Waiver.  This Agreement
may be amended, modified and supplemented by the parties hereto, by action
taken or authorized by their respective Boards of Directors, at any time before
or after the Stockholder Approval, but, after any such approval, no amendment
shall be made which by Law requires further approval by such stockholders
without such further approval.  This
Agreement may not be amended, except by an instrument in writing signed on
behalf of each of the parties hereto.  At
any time prior to the Closing, the parties hereto, by action taken or
authorized by their respective Boards of Directors, may, to the extent legally
permitted, (a) extend the time for the performance of any of the obligations or
other acts of any other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
hereto and (c) waive compliance with any of the agreements or conditions
contained herein.  Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.  The failure of a party to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of those
rights.

 

11.9         Enforcement; Jurisdiction.  The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this
Agreement in any federal court or state court sitting in the State of Delaware,
this being in addition to any other remedy to which they are entitled at law or
in equity subject to the terms hereof. 
In addition, each of the parties hereto (a) hereby irrevocably
agrees that any legal action or proceeding with respect to this Agreement or
for recognition and enforcement of any judgment in respect hereof brought by
another party hereto or its successors or assigns may be brought and determined
in the Court of Chancery of the State of Delaware or the federal courts located
in the State of Delaware, and each party hereto hereby irrevocably submits with
regard to any such action or proceeding for itself and in respect of its
property, generally and unconditionally, to the exclusive jurisdiction of the
aforesaid courts, and (b) irrevocably waives, and agrees not to assert, by
way of motion, as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement, (i) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
other than the failure to lawfully serve process, (ii) that it or its property
is exempt or immune from jurisdiction of any such court or from any legal
process commenced in such courts (whether through service of notice, attachment
prior to judgment, attachment in aid of execution of judgment, execution of
judgment or otherwise), and (iii) to the fullest extent permitted by applicable
Law, that (A) the suit, action or proceeding in any such court is brought in an
inconvenient forum, (B) the venue of such suit, action or proceeding is
improper and (C) this Agreement, or the subject matter hereof, may not be
enforced in or by such courts.

 

11.10       Waiver of Jury Trial.  EACH
OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR

 

67

 

OTHERWISE) ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY.

 

11.11       Costs and Expenses.  Regardless
of whether the transactions contemplated by this Agreement are consummated and
except as otherwise provided in this Agreement, the Company, on the one hand,
and the Buyer, on the other hand, will each bear their own costs and expenses
(including attorneys’ fees and costs) incurred in connection with this
Agreement and the transactions contemplated by this Agreement.

 

11.12       Setoff.  The Company agrees that the Buyer and its
Subsidiaries may setoff against any amounts due and owing to the Company or any
of its Subsidiaries hereunder any amounts due to the Buyer or its Subsidiaries
under this Agreement.  Each of the
Company and its Subsidiaries hereby waives any right of setoff it may have or
to which it may be entitled under this Agreement from time to time against
Buyer and its Subsidiaries and expressly waives the right to cause or instruct
the escrow agent to do the same with respect to any payment from the Escrow
Funds.

 

11.13       Casualty Losses.  If there shall have been suffered between the
date of this Agreement and the Closing Date any casualty or loss relating to
the Transferred Assets or any asset of the Transferred Subsidiaries, then at
the Closing all claims to insurance proceeds or other rights of the Company or
any of its Subsidiaries against third parties relating from such casualty or
loss shall (to the extent assignable) be separately assigned by the Company or
its Subsidiaries to the Buyer and/or the Designated Purchaser.  To the extent not so assignable, the Company
shall, and shall cause its Subsidiaries to, remit all proceeds received from
insurers or third parties in respect of such claims to the Buyer.

 

11.14       Mutual Drafting.The
parties hereto have been represented by counsel who have carefully negotiated
the provisions hereof.  As a consequence,
the parties do not intend that the presumptions of any laws or rules relating
to the interpretation of contracts against the drafter of any particular clause
should be applied to this Agreement and therefore waive their effects.  The provisions of this Agreement shall be
interpreted in a reasonable manner to effect the intent of the parties.

 

11.15       Governing Law.  This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of
Delaware, without giving effect to the principles of conflict of laws thereof.

 

11.16       Disclosure Schedules.  Each disclosure set forth in the Company
Disclosure Schedule or Buyer Disclosure Schedule shall be deemed
disclosed for purposes of, and shall qualify and be treated as an exception to,
only the specific section of this Agreement specified therefor, except to
the extent that disclosure in one specific section of the Company
Disclosure Schedule or Buyer Disclosure Schedule, as the case may be, is
specifically referred to in another specific section of the Company
Disclosure Schedule or Buyer Disclosure Schedule, as applicable, or by
appropriate cross-reference and except to that it would be reasonably apparent
that a reference in one specific section in the Company Disclosure Schedule or
Buyer Disclosure Schedule, as the case may be, also relates to another specific
section of the Company Disclosure Schedule or Buyer Disclosure
Schedule.

 

68

 

11.17       Severability.  Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability and shall
not render invalid or unenforceable the remaining terms and provisions of this
Agreement or affect the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.  If any provision of this Agreement is so broad
as to be unenforceable, the provision shall be interpreted to be only so broad
as is enforceable.

 

[SIGNATURE PAGE FOLLOWS]

 

69

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective duly authorized Representative as of
the date first above written.

 

	
   

  	
  BIOTAGE AB

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Bork

  	
   

  
	
   

  	
   

  	
  Name:  Jeff Bork

  
	
   

  	
   

  	
  Title:  President and CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARGONAUT TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lissa A.
  Goldenstein

  	
   

  
	
   

  	
   

  	
  Name:  Lissa A. Goldenstein

  
	
   

  	
   

  	
  Title:  President and CEO

  

 

 

Exhibit A

 

Designated Purchasers

 

Transferred Shares pursuant to Section 2.1

Biotage UK Ltd

 

Transferred Assets pursuant to Section 2.2

Biotage, LLC

 

 

Exhibit B

 

ESCROW AGREEMENT

 

ESCROW AGREEMENT
(the “Agreement”) entered into as of the       th
day of February, 2005, by and among Biotage AB, a corporation organized under
the laws of Sweden (“Buyer”), Argonaut Technologies, Inc., a Delaware
corporation (the “Company”), and
[        ], as escrow agent (the “Escrow
Agent”).

 

WHEREAS, pursuant to
a Sale and Asset Purchase Agreement dated as of February       ,
2005 (the “Purchase Agreement”), between Buyer and the Company, Buyer will
acquire from the Company certain assets and shares and assume certain
liabilities of the Company;

 

WHEREAS, the
Purchase Agreement contemplates the due execution and delivery of this
Agreement at, and as a condition to, the Closing;

 

WHEREAS, the Company
has agreed to indemnify Buyer against breaches of the representations,
warranties and covenants made by the Company in the Purchase Agreement and
against certain other matters as specified in Articles III, VI and X of the
Purchase Agreement;

 

WHEREAS, to secure
partially the payment of the Company’s indemnification obligations and other
obligations pursuant to Articles III, VI and X of the Purchase Agreement, if
any, Two Million Dollars ($2,000,000) of the consideration to be received by
the Company pursuant to the Purchase Agreement is being deposited, pursuant to Section 3.2(a)
of the Purchase Agreement, in escrow to be held by the Escrow Agent as
hereinafter provided; and

 

WHEREAS, the Escrow
Agent is willing to act as escrow agent on the terms and conditions hereinafter
set forth;

 

NOW, THEREFORE, in
consideration of the mutual promises and covenants contained herein, the
parties hereby agree as follows:

 

1.             Defined
Terms.  Unless otherwise indicated,
all capitalized terms used herein shall have the respective meanings attributed
to them in the Purchase Agreement.

 

2.             Establishment
of Escrow.  Pursuant to Section 3.2(a)
of the Purchase Agreement, on the Closing Date, the Buyer shall deliver to the
Escrow Agent Two Million Dollars ($2,000,000) (the “Closing Escrow”),
and the Escrow Agent shall deposit the Closing Escrow into an escrow account
(the “Escrow Account”).  All
amounts held in the Escrow Account shall be held, invested and distributed
pursuant to the terms and conditions of this Agreement.  No part of the Escrow Account or any interest
accrued thereon may be withdrawn from the escrow established hereunder (the “Escrow”)
without the prior written consent of the Company and the Buyer, except as
expressly provided otherwise in Section 4 of this Agreement. The
Escrow Agent shall hold all amounts in the Escrow Account in a separate
account, apart from any other funds or accounts of the Escrow Agent

 

 

or any other person.  The Escrow
Agent shall keep an accurate record of all transactions with respect to such
amount.

 

3.             Administration
of Escrow.

 

3.1           Any
monies held in the Escrow Account shall be invested and reinvested by the
Escrow Agent as specifically directed in writing by the Company, to the extent
permitted by law, in (a) direct obligations issued or guaranteed by the
United States of America or any agency or instrumentality thereof; (b) obligations
(including certificates of deposit and bankers’ acceptances) of banks and
savings and loan associations which at the date of their last public reporting
had total assets in excess of $500 million; and (c) mutual funds sponsored
by the Escrow Agent investing exclusively in the securities described in the
foregoing clauses (a) and (b) (the “Mutual Funds”).  If the Company does not provide directions to
the Escrow Agent for any investment or reinvestment of monies held in the
Escrow Account, such monies shall be invested in the Mutual Funds. Neither the
Escrow Agent, the Buyer nor the Company shall be liable or responsible for any
loss resulting from any investment or reinvestment made pursuant to this Section 3.  The Escrow Account shall be increased from
time to time by any and all interest accrued and paid or dividends or similar
return received by the Escrow Agent thereon (“Interest”) after payment
of expenses incurred in connection with the investment, reinvestment or sale
thereof, pursuant to this Section 3.1 and shall be distributed in
accordance with this Agreement.

 

4.             Claims
by the Buyer.

 

4.1           Direct
Claim Notices.  If the Buyer wishes
to make a claim for losses under this Agreement for any amount that it is
entitled to receive under Article X of the Purchase Agreement (the “Direct
Claim Payment”), the Buyer shall deliver to the Escrow Agent (with a copy
to the Company) a written notice signed by the Buyer (i) specifying (x) in
reasonable detail the amount of the Direct Claim Payment sought and nature of
the Direct Claim or (y) a reasonable estimate of the amount of losses which the
Buyer expect to incur with respect to any matter for which the Buyer may be
entitled to submit a claim notice under Section 10.3 of the
Purchase Agreement (in either case, a “Direct Claim Notice”) and (ii)
that the Direct Claim Payment specified in clause (i) is the Buyer’s good faith
estimate of the amount that the Buyer is entitled to receive under Article X
of the Purchase Agreement.  The Direct
Claim Notice shall clearly state that it is a “Direct Claim Notice.”  Any Direct Claim Notice to be delivered for a
claim against the Closing Escrow must be given by the Buyer on or prior to the
date that is three business days after the one-year anniversary of the Closing
Date (the “Initial Closing Escrow Termination Date”) and must relate to
a claim which arose prior to such anniversary; provided, however,
that if the UK Tax Proceeding is not resolved by the Initial Closing Escrow
Termination Date, such period shall be extended for claims in respect of the UK
Tax Liability as provided in Section 3.2(a) of the Purchase
Agreement (the date, as so extended pursuant to such Section 3.2(a),
shall be the “Initial Closing Escrow Termination Date”).

 

4.2           If
the time period required to resolve the claim underlying any Direct Claim
Notice (including the time required for the Independent Accounting Firm to
determine the amount to be paid or reserved from the Closing Escrow in respect
of any Direct Claim Notice) extends beyond

 

2

 

the Initial Closing Escrow Termination Date, the Escrow Agent shall
retain the aggregate amount shown in such Direct Claims Notice(s), including
Interest thereon, and extend the Initial Closing Escrow Termination Date by the
period of time remaining until all such remaining claims are finally resolved
(the “Extended Escrow Termination Date”).  Funds in the Escrow Account in excess of the
amounts shown in all such remaining Direct Claim Notices on the Initial Closing
Escrow Termination Date (an “Overage”) including Interest thereon shall
be paid to the Company within three business days after the Initial Closing
Escrow Termination Date.

 

4.3           The
Company shall have 10 business days to provide written notice of objection to
the Purchaser and the Escrow Agent of any Direct Claim Notice, specifying in
reasonable detail any items disputed. 
After receipt of any such dispute notice, the parties agree to negotiate
in good faith to resolve such dispute. 
If any such dispute cannot be resolved by the parties within thirty
days, the parties agree to appoint the Independent Accounting Firm (or if the
Independent Accounting Firm is unable to resolve such dispute, another mutually
acceptable third party) to settle such dispute in accordance with Section 7(d).  If the Company does not provide any such
written notice of objection pursuant to this Section 4.3, the
Escrow Agent shall promptly pay such amount including any Interest thereon to
the Buyer from the Escrow Account and deliver a copy of the Direct Claim Notice
to the Company; provided that in the case of a Direct Claim Notice
provided pursuant to Section 4.1(i)(y), the Escrow Agent shall pay
such amount as is finally resolved to be the amount of losses actually incurred
by the Buyer.

 

4.4           Each
of the Buyer and the Company hereby agrees that it will deliver notices to the
Escrow Agent only in accordance with Section 16 hereof.

 

5.             Release
and Termination of Escrow Account. 
On a date not later than three business days after the Initial Closing
Escrow Termination Date or the Extended Escrow Termination Date, if any, the
Escrow Agent shall make a cash payment to the Company from the Escrow Account
of an amount equal to all funds remaining in the Escrow Account including Interest
thereon, less any amounts that are paid to the Buyer as a result of each such
Direct Claim Notice.

 

6.             Fees
of Escrow Agent.  All fees and costs
of the Escrow Agent (including reasonable attorneys’ fees) shall be paid out of
the Escrow Account; provided, however, any such fees in excess of
$15,000 annually (the “Fee Cap”) shall be paid by the Company. The
Escrow Agent shall send copies of periodic invoices for fees and costs to the
Company and the Buyer, and the Company shall pay the amount of any invoice
reflecting fees in excess of the Fee Cap within 30 days of receipt of such
invoice.  In the event any amounts owed
to the Escrow Agent remain unpaid upon the expiration of such 30-day period,
the Company and the Buyer hereby authorize the Escrow Agent to disburse such
unpaid fees and costs to itself from the Escrow Account.  If such amounts are deducted from the Escrow
Account, the Company shall promptly make such adjusting payments to the Escrow
Account as shall be necessary so that it pays all such fees and costs.  The Escrow Agent shall have no liability for
any such fees and costs unless arising from its own bad faith, gross negligence
or willful misconduct.

 

3

 

7.             Responsibilities
and Liabilities of the Escrow Agent.

 

(a)           The
Escrow Agent shall deal with the Escrow Account and any interest accrued
thereon only in accordance with (a) this Agreement and, to the extent referred
to herein, the Purchase Agreement or (b) written instructions given in
conformity with this agreement. The Escrow Agent assumes no liabilities except
those expressed in this Agreement and shall have no responsibility or liability
to any person with respect to any action taken, suffered or omitted to be taken
by it in good faith under this Agreement, or for any mistake of fact or law, or
for anything that it may do or refrain from doing in connection herewith,
except to the extent that such actions constitute bad faith, gross negligence
or willful misconduct.

 

(b)           The
Escrow Agent shall be protected in acting upon any notice, request,
certificate, approval, consent, or other document delivery of which complies
with Section 16 and that the Escrow Agent reasonably believes to be
genuine and to be signed by the proper party or parties. The Escrow Agent may
assume that any person purporting to give notice, receipt or advice or make any
statement or execute any document with the provisions hereof has been duly
authorized to do so. The Escrow Agent may act in reliance upon the advice of
counsel satisfactory to it in reference to any matter in connection with this
Agreement and shall not incur any liability for any action taken in good faith
in accordance with such advice.

 

(c)           The
Escrow Agent shall be deemed conclusively to have given and delivered any
notice required to be given or delivered hereunder if the same is in writing,
signed by any of the Escrow Agent’s authorized officers and mailed by
registered or certified mail, addressed to each of the parties at its address
set forth herein, or otherwise is in accordance with Section 16.

 

(d)           In
the event of any disagreement between the other parties hereto resulting in
adverse claims or demands being made in connection with the Escrow Account
(which disagreement is not resolved within 30 days), or in the event that the
Escrow Agent in good faith is in doubt as to what action it should take
hereunder, (i) the Escrow Agent shall be entitled, without liability on its
part, to refrain from making any disbursement or taking any further action, and
(ii) the parties shall appoint the Independent Accounting Firm (as such term is
defined in the Purchase Agreement) to resolve such disagreement, which
Independent Accounting Firm shall settle such disagreement in its sole
discretion.  The fees and expenses of such
Independent Accounting Firm shall be allocated between the Buyer and the
Company in such manner that the Buyer shall be responsible for that portion of
the fees and expenses equal to such fees and expenses multiplied by a faction
the numerator of which is the aggregate dollar value of disputed items
submitted to the Independent Accounting Firm that are resolved against the
Buyer (as finally determined by the Independent Accounting Firm) and the
denominator of which is the total dollar value of the disputed items so
submitted, and the Company shall be responsible for the remainder of such fees
and expenses.  The determination of the
Independent Accounting Firm shall be set forth in writing (such determination
to include a work sheet setting forth all material calculations used in
arriving at such determination and to be based solely on information provided
to the Independent Accounting Firm by the Buyer and the Company) delivered to
each of the Buyer and the Company and shall be final, binding and non-appealable
on the parties hereto.  The Escrow Agent
shall retain any disputed amounts in the Escrow Fund until the Escrow Agent
shall have received either the final decision of the Independent
Accounting Firm as described above or written instructions jointly
executed by the Buyer and the Company directing delivery of the amounts of the
Escrow Account in dispute, in which event the

 

4

 

Escrow Agent shall deliver the amounts of the Escrow Account in dispute
in accordance with such order and instructions. The Escrow Agent shall act on
such order without further questions. In any event, the Escrow Agent shall not
be liable by reason of such action or omission to act to any of the parties
hereto or to any other person, firm, association, or corporation, even if
thereafter any such order, judgment, decree or levy be reversed, modified,
annulled, set aside, or vacated.

 

(e)           The
Escrow Agent shall have no responsibility for and makes no representation as to
the validity, genuineness or sufficiency of this Agreement or the value,
validity or genuineness of any check for payment of money deposited with the
Escrow Agent under this Agreement.

 

(f)            The
Buyer and the Company hereby appoint the Escrow Agent as their attorney-in-fact
for the purposes of causing effective transfers of property from the Escrow
Account in accordance with the terms of this Agreement.

 

(g)           The
Escrow Agent or any successor Escrow Agent hereunder may resign hereunder
(i) at any time, with the consent of the Buyer and the Company and the
appointment of a substitute Escrow Agent by the Buyer and the Company;
(ii) upon the petitioning of a court of competent jurisdiction seeking the
appointment of a substitute Escrow Agent and the appointment by such court of a
substitute Escrow Agent; or (iii) upon 60 days’ written notice to the
Buyer and the Company and the appointment of a substitute Escrow Agent by the
Buyer and the Company, and such resignation shall be effective from the date
specified in such notice.  After receipt
of notice of the Escrow Agent’s intent to resign, the Buyer and the Company
will work in good faith to select a substitute Escrow Agent. In case the office
of the Escrow Agent shall become vacant for any reason, the Buyer and the
Company shall appoint a bank or trust company with an office in New York City
having a net worth (as reflected in its latest publicly available certified
financial statements) in excess of $500,000,000 as successor Escrow Agent
hereunder by an instrument or instruments in writing delivered by the Buyer and
the Company to such successor Escrow Agent, whereupon such successor Escrow
Agent shall succeed to all rights and obligations of the retiring Escrow Agents
as if this Agreement were originally executed by such successor Escrow Agent,
and the retiring Escrow Agent shall deliver to such successor Escrow Agent the
Escrow Account and any interest accrued thereon.

 

(h)           Subject
to Sections 4, 8 and 14 hereof, the Escrow Agent shall not have any
interest in the Escrow Account, but shall serve as escrow holder only and have
possession thereof. Any payments of income from the Escrow Account shall be
subject to withholding regulations then in force with respect to United States
taxes. The parties hereto will provide the Escrow Agent with appropriate W-9
forms for tax identification number certification or non-resident alien
certifications.

 

8.             Indemnification.  The Escrow Agent shall be indemnified by the
Buyer and the Company against any claim or charge made against the Escrow Agent
by reason of any action or failure to act in connection with any of the
transactions contemplated by this Agreement, and against any loss the Escrow
Agent may sustain in carrying out the terms of this Agreement, except as a
result of the Escrow Agent’s bad faith, gross negligence or willful
misconduct.  The Buyer and the Company
shall each be liable for one-half of any such claims, charges or losses.

 

5

 

9.             Termination
Date.  This Agreement shall terminate
on the date when all claims pursuant to Section 4 hereof are
resolved and all funds have been disbursed from the Escrow Account in
accordance with the provisions of this Agreement.

 

10.           Interpleader.  In the event that the Escrow Agent shall at
any time be confronted with inconsistent claims or demands by the parties
hereto, the Escrow Agent shall have the right to interplead said parties in any
court of competent jurisdiction and request that such court determine such
respective rights of the parties with respect to this Agreement, and upon doing
so, the Escrow Agent automatically shall be released from any obligations or
liability as a consequence of any such claims or demands, except that the
Escrow Agent shall not be released from any liability for its bad faith, gross
negligence or willful misconduct occurring during the time that it served as
Escrow Agent.

 

11.           Removal
of the Escrow Agent.  The Buyer and
the Company, together, shall have the right to remove the Escrow Agent
hereunder by giving notice in writing to the Escrow Agent, specifying the date
upon which such removal shall take effect. 
In the event of such removal, the Buyer and the Company agree that,
prior to the effective date of removal of the Escrow Agent, they will jointly
appoint a successor to the Escrow Agent (the “Successor Escrow Agent”),
and the Escrow Agent hereby agrees that, upon receiving joint written
instructions from the Buyer and the Company, it shall turn over and deliver to
such Successor Escrow Agent all of the funds in the Escrow Account and other
amounts held by it pursuant to this Agreement in accordance with the terms of
such written instructions and render the accounting required by Section 13
hereof.

 

12.           Successor
Escrow Agent.  Upon receipt of the
Escrow Fund and any other amounts held by the Escrow Agent pursuant to this
Agreement, the Successor Escrow Agent shall thereupon be bound by all of the
provisions hereof, and the term “Escrow Agent” as used herein shall mean the
Successor Escrow Agent.

 

13.           Accounting.  In the event of the resignation or removal of
the Escrow Agent, upon the termination of this Agreement or upon demand under
reasonable circumstances, the Escrow Agent shall render to the Buyer and the
Company and the Successor Escrow Agent(s), if any, an account in writing of the
property constituting the Escrow Fund and all distributions therefrom unless
waived in writing by both the Buyer and the Company.  The Buyer and the Company together shall each
pay one-half of all reasonable fees and expenses of the Escrow Agent for the
preparation of such accounting, including the reasonable fees and disbursements
of counsel.

 

14.           Tax
Matters.  The parties agree that to
the extent permitted by applicable law, the Buyer and the Company and their
respective assigns will include the Interest in their respective gross incomes
for federal, state and local income tax (collectively, “Income Tax”)
purposes in accordance with their respective percentage interest in the Escrow
Fund, and pay any Income Tax resulting therefrom.  The parties also agree for Income Tax purposes
to treat all payments from the Buyer to the Escrow Fund as payments of purchase
price to the Company. Notwithstanding the foregoing, the Escrow Agent shall
report and, as required, withhold any taxes as it determines may be required by

 

6

 

any law or regulation in effect.  The Escrow Agent shall remit
such taxes to the appropriate authorities.

 

15.           Amendments.  This Agreement may only be amended by the
mutual written agreement of the Buyer, the Company and the Escrow Agent.

 

16.           Notices.  Any notices or other communications given
hereunder shall be delivered personally or sent by telecopy or telefax, a
reputable overnight courier service, or registered or certified mail, addressed
as follows or to such other address of which the parties may have given notice:

 

	
  If to the Company

  	
   

  	
  Argonaut Technologies, Inc.

  
	
   

  	
   

  	
  220 Saginaw Drive

  
	
   

  	
   

  	
  Redwood City, CA 94063

  
	
   

  	
   

  	
  Attention:

  
	
   

  	
   

  	
  Fax No.:

  
	
   

  	
   

  	
   

  
	
  Copy to:

  	
   

  	
  O’Melveny & Myers LLP

  
	
   

  	
   

  	
  Embarcadero Center West

  
	
   

  	
   

  	
  275 Battery Street

  
	
   

  	
   

  	
  Suite 2600

  
	
   

  	
   

  	
  San Francisco, CA 94111

  
	
   

  	
   

  	
  Attention:  Michael J. Kennedy

  
	
   

  	
   

  	
  Facsimile:  415-984-8701

  
	
   

  	
   

  	
   

  
	
  If to the Buyer:

  	
   

  	
  Biotage AB

  
	
   

  	
   

  	
  Kungsgatan 76

  
	
   

  	
   

  	
  SE-753 18 Uppsala

  
	
   

  	
   

  	
  Sweden

  
	
   

  	
   

  	
  Attention: Jeff Bork

  
	
   

  	
   

  	
  Fax No.: +46 18 56 57 58

  
	
   

  	
   

  	
   

  
	
  Copy to:

  	
   

  	
  Simpson Thacher & Bartlett
  LLP

  
	
   

  	
   

  	
  425 Lexington Avenue

  
	
   

  	
   

  	
  New York, New York 10017

  
	
   

  	
   

  	
  Attention:

  	
  Richard A. Miller

  
	
   

  	
   

  	
   

  	
  Caroline B. Gottschalk

  
	
   

  	
   

  	
  Facsimile:

  	
  212-455-2502

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to Escrow Agent:

  	
   

  	
   

  
	
   

  	
   

  	
  Attn:

  
	
   

  	
   

  	
  Fax No.:

  

 

7

 

Such notices or other communications shall be deemed received
(a) on the date delivered or sent, if delivered personally or sent by
telecopy or telefax transmission confirmed, (b) the day after being sent,
if sent by a reputable overnight receipted courier service, or (c) three
business days after being sent, if sent by registered or certified mail.

 

17.           Governing
Law.  This Agreement shall be
governed by, and construed in accordance with and subject to, the laws of the
State of New York applicable to agreements made and to be performed entirely
within such state.  No suit, action or proceeding with
respect to this Agreement may be brought in any court or before any similar
authority other than (i) a federal court located in the State of New York or
(ii) if no such court has jurisdiction over any such suit, action or
proceeding, any other court of competent jurisdiction in the State of New
York.  Each of the parties submits to the
exclusive jurisdiction of such courts in any such suit, action or proceeding
arising out of or relating to this Agreement and agrees that all claims in
respect of the suit, action or proceeding may be heard and determined in any
such court.  Each party also agrees not
to bring any action or proceeding arising out of or relating to this Agreement
in any other court.  Each of the parties
waives any defense of inconvenient forum to the maintenance of any suit, action
or proceeding so brought and waives any bond, surety, or other security that
might be required of any other party with respect thereto.

 

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

 

19.           Entire
Agreement, Modification.  This
Agreement embodies the entire agreement between the parties with respect to the
subject matter hereof, and except as specifically provided herein there are no
prior representations, warranties, or agreements relating thereto.  No change in, addition to, or waiver of the
terms and conditions hereof shall be binding upon the parties hereto unless
approved in writing by the parties.

 

20.           Captions.  The captions contained in this Agreement are
inserted for convenience only and do not constitute a part of this Agreement
and shall not affect the meaning or interpretation hereof.

 

21.           Successors
and Assigns.  This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. The Buyer may assign their rights hereunder
to any person to whom they may assign their rights under the Purchase
Agreement.

 

[Signature
Pages Follow]

 

8

 

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

 

 

	
  COMPANY:

  	
  ARGONAUT TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  BUYER:

  	
  BIOTAGE AB

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

9

 

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

 

 

	
  ESCROW AGENT:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

10

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