Document:

Exhibit 4.28

 

Execution Copy

 

 

 

GUARANTEE AGREEMENT

between

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY,

as
Guarantor,

and

JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION,

as Guarantee Trustee

Dated
as of December 15, 2005

AMERICAN EQUITY CAPITAL TRUST XI

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  Interpretation and Definitions

  	
   

  	
  2

  
	
  Section 1.1.

  	
  Interpretation

  	
   

  	
  2

  
	
  Section 1.2.

  	
  Definitions

  	
   

  	
  2

  
	
  ARTICLE II

  	
  Reports

  	
   

  	
  6

  
	
  Section 2.1.

  	
  List of Holders

  	
   

  	
  6

  
	
  Section 2.2.

  	
  Periodic Reports
  to the Guarantee Trustee

  	
   

  	
  6

  
	
  Section 2.3.

  	
  Event of
  Default; Waiver

  	
   

  	
  6

  
	
  Section 2.4.

  	
  Event of
  Default; Notice

  	
   

  	
  6

  
	
  ARTICLE III

  	
  Powers, Duties and Rights of the Guarantee Trustee

  	
   

  	
  7

  
	
  Section 3.1.

  	
  Powers and
  Duties of the Guarantee Trustee

  	
   

  	
  7

  
	
  Section 3.2.

  	
  Certain Rights
  of the Guarantee Trustee

  	
   

  	
  8

  
	
  Section 3.3.

  	
  Compensation

  	
   

  	
  9

  
	
  Section 3.4.

  	
  Indemnity

  	
   

  	
  10

  
	
  Section 3.5.

  	
  Securities

  	
   

  	
  10

  
	
  ARTICLE IV

  	
  Guarantee Trustee

  	
   

  	
  10

  
	
  Section 4.1.

  	
  Guarantee
  Trustee; Eligibility

  	
   

  	
  10

  
	
  Section 4.2.

  	
  Appointment,
  Removal and Resignation of the Guarantee Trustee

  	
   

  	
  11

  
	
  ARTICLE V

  	
  Guarantee

  	
   

  	
  11

  
	
  Section 5.1.

  	
  Guarantee

  	
   

  	
  11

  
	
  Section 5.2.

  	
  Waiver of Notice
  and Demand

  	
   

  	
  12

  
	
  Section 5.3.

  	
  Obligations Not
  Affected

  	
   

  	
  12

  
	
  Section 5.4.

  	
  Rights of
  Holders

  	
   

  	
  13

  
	
  Section 5.5.

  	
  Guarantee of
  Payment

  	
   

  	
  13

  
	
  Section 5.6.

  	
  Subrogation

  	
   

  	
  13

  
	
  Section 5.7.

  	
  Independent
  Obligations

  	
   

  	
  13

  
	
  Section 5.8.

  	
  Enforcement

  	
   

  	
  14

  
	
  ARTICLE VI

  	
  Covenants and Subordination

  	
   

  	
  14

  
	
  Section 6.1.

  	
  Dividends,
  Distributions and Payments

  	
   

  	
  14

  
	
  Section 6.2.

  	
  Subordination

  	
   

  	
  14

  
	
  Section 6.3.

  	
  Pari Passu
  Guarantees

  	
   

  	
  15

  

 

i

 

 

	
  ARTICLE VII

  	
  Termination

  	
   

  	
  15

  
	
  Section 7.1.

  	
  Termination

  	
   

  	
  15

  
	
  ARTICLE VIII

  	
  Miscellaneous

  	
   

  	
  15

  
	
  Section 8.1.

  	
  Successors and
  Assigns

  	
   

  	
  15

  
	
  Section 8.2.

  	
  Amendments

  	
   

  	
  16

  
	
  Section 8.3.

  	
  Notices

  	
   

  	
  16

  
	
  Section 8.4.

  	
  Benefit

  	
   

  	
  17

  
	
  Section 8.5.

  	
  Governing Law

  	
   

  	
  17

  
	
  Section 8.6.

  	
  Submission to
  Jurisdiction

  	
   

  	
  17

  
	
  Section 8.7.

  	
  Counterparts

  	
   

  	
  17

  
	
  Section 8.8.

  	
  Severability

  	
   

  	
  18

  

 

ii

 

Guarantee Agreement,
dated as of December 15, 2005,
executed and delivered by American
Equity Investment Life Holding Company, an Iowa corporation (the “Guarantor”), having its principal
office at 5000 Westown Parkway, Suite 440, West Des Moines, IA 50266, and JPMorgan Chase Bank, National Association, a national banking association, as
trustee (in such capacity, the “Guarantee Trustee”), for the benefit of the Holders (as
defined herein) from time to time of the Preferred Securities (as defined
herein) of American Equity Capital Trust
XI, a Delaware statutory trust (the “Issuer”).

 

W i t n e s s e
t h :

 

Whereas, pursuant to
an Amended and Restated Trust Agreement, dated as of the date hereof (the “Trust Agreement”), among the Guarantor,
as Depositor, the Property Trustee, the Delaware Trustee and the Administrative
Trustees named therein and the holders from time to time of the Preferred
Securities (as hereinafter defined), the Issuer is issuing Twenty Million
Dollars ($20,000,000) aggregate Liquidation Amount (as defined in the Trust
Agreement) of its Floating Rate Preferred Securities (Liquidation Amount $1,000
per preferred security) (the “Preferred Securities”) representing preferred undivided beneficial
interests in the assets of the Issuer and having the terms set forth in the
Trust Agreement;

 

Whereas, the Preferred
Securities will be issued by the Issuer and the proceeds thereof, together with
the proceeds from the issuance of the Issuer’s Common Securities (as defined
below), will be used to purchase the Notes (as defined in the Trust Agreement)
of the Guarantor; and

 

Whereas, as incentive
for the Holders to purchase Preferred Securities the Guarantor desires
irrevocably and unconditionally to agree, to the extent set forth herein, to
pay to the Holders of the Preferred Securities the Guarantee Payments (as
defined herein) and to make certain other payments on the terms and conditions
set forth herein.

 

Now, Therefore, in
consideration of the purchase by each Holder of Preferred Securities, which
purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor
executes and delivers this Guarantee Agreement to provide as follows for the
benefit of the Holders from time to time of the Preferred Securities:

 

 

ARTICLE I

Interpretation and Definitions

 

SECTION 1.1.  Interpretation.

 

In this Guarantee Agreement, unless the context
otherwise requires:

 

(a)           capitalized terms used in this
Guarantee Agreement but not defined in the preamble hereto have the respective
meanings assigned to them in Section 1.2;

 

(b)           the words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”;

 

(c)           all references to “the Guarantee
Agreement” or “this Guarantee Agreement” are to this Guarantee Agreement as
modified, supplemented or amended from time to time;

 

(d)           all references in this Guarantee
Agreement to Articles and Sections are to Articles and Sections of this
Guarantee Agreement unless otherwise specified;

 

(e)           the words “hereby”, “herein”, “hereof”
and “hereunder” and other words of similar import refer to this Guarantee
Agreement as a whole and not to any particular Article, Section or other
subdivision;

 

(f)            a reference to the singular includes
the plural and vice versa; and

 

(g)           the masculine, feminine or neuter
genders used herein shall include the masculine, feminine and neuter genders.

 

SECTION 1.2.  Definitions.

 

As used in this Guarantee Agreement, the terms set
forth below shall, unless the context otherwise requires, have the following
meanings:

 

“Affiliate”  of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided,  that the Issuer shall not be deemed to be an
Affiliate of the Guarantor.  For the
purposes of this definition, “control”
when used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings
correlative to the foregoing.

 

“Beneficiaries” means any Person to whom
the Issuer is or hereafter becomes indebted or liable.

 

2

 

“Board of Directors” means either the board
of directors of the Guarantor or any duly authorized committee of that board.

 

“Common Securities” means the securities
representing common undivided beneficial interests in the assets of the Issuer.

 

“Debt” means with respect to any Person, whether recourse
is to all or a portion of the assets of such Person, whether currently existing
or hereafter incurred, and whether or not contingent and without duplication,
(i) every obligation of such Person for money borrowed; (ii) every obligation
of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses; (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers’ acceptances or similar
facilities issued for the account of such Person; (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable arising in the ordinary course of business);
(v) every capital lease obligation of such Person; (vi) all indebtedness of
such Person, whether incurred on or prior to the date of this Guarantee
Agreement or thereafter incurred, for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity forward contracts,
options, swaps and similar arrangements; (vii) every obligation of the type
referred to in clauses (i) through (vi) of another Person and all dividends of
another Person the payment of which, in either case, such Person has guaranteed
or is responsible or liable for, directly or indirectly, as obligor or
otherwise; and (viii) any renewals, extensions, refundings, amendments or
modifications of any obligation of the type referred to in clauses (i) through
(vii).

 

“Event of Default” means a default by the Guarantor on any
of its payment or other obligations under this Guarantee Agreement; provided, that except with respect
to a default in payment of any Guarantee Payments, the Guarantor shall have
received notice of default from the Guarantee Trustee and shall not have cured
such default within thirty (30) days after receipt of such notice.

 

“Guarantee Payments” means the following
payments or distributions, without duplication, with respect to the Preferred
Securities, to the extent not paid or made by or on behalf of the Issuer: (i)
any accumulated and unpaid Distributions (as defined in the Trust Agreement)
required to be paid on the Preferred Securities, to the extent the Issuer shall
have funds on hand available therefor at such time, (ii) the Redemption Price
with respect to any Preferred Securities to the extent the Issuer shall have
funds on hand available therefor at such time, and (iii) upon a voluntary or
involuntary termination, winding up or liquidation of the Issuer, unless Notes
are distributed to the Holders, the lesser of (a) the aggregate of the
Liquidation Amount of $1,000 per Preferred Security plus accumulated and unpaid
Distributions on the Preferred Securities to the date of payment, to the extent
that the Issuer shall have funds available therefor at such time and (b) the
amount of assets of the Issuer remaining available for distribution to Holders
in liquidation of the Issuer after satisfaction of liabilities to creditors of
the Issuer in accordance with applicable law (in either case, the “Liquidation Distribution”).

 

3

 

“Guarantee Trustee”  means JPMorgan Chase
Bank, National Association, until a Successor Guarantee Trustee, as defined
below, has been appointed and has accepted such appointment pursuant to the
terms of this Guarantee Agreement, and thereafter means each such Successor
Guarantee Trustee.

 

“Guarantor”  means
American Equity Investment Life Insurance Company and each of its successors
and assigns.

 

“Issuer” has the meaning set forth 
herein above.

 

“Holder”  means any holder, as registered on the books and
records of the Issuer, of any Preferred Securities; provided,  that, in determining whether the holders of the
requisite percentage of Preferred Securities have given any request, notice,
consent or waiver hereunder, “Holder” shall not include the Guarantor, the
Guarantee Trustee or any Affiliate of the Guarantor or the Guarantee Trustee.

 

“Indenture”  means the Junior Subordinated Indenture, dated as
of the date hereof, as supplemented and amended, between the Guarantor and
JPMorgan Chase Bank, National Association, as trustee.

 

“List of Holders”  has the meaning
specified in Section 2.1.

 

“Majority in Liquidation Amount of the
Preferred Securities”
means a vote by the Holder(s), voting separately as a class, of more
than fifty percent (50%) of the aggregate Liquidation Amount of all then
outstanding Preferred Securities issued by the Issuer.

 

“Obligations” means any costs, expenses or
liabilities (but not including liabilities related to taxes) of the Issuer,
other than obligations of the Issuer to pay to holders of any Trust Securities
the amounts due such holders pursuant to the terms of the Trust Securities.

 

“Officers’ Certificate”  means, with respect to
any Person, a certificate signed by the Chief Executive Officer, Chief
Financial Officer, President or a Vice President of such Person, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
such Person, and delivered to the Guarantee Trustee.  Any Officers’ Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Guarantee Agreement (other than the certificate provided pursuant to Section
2.2) shall include:

 

(a)           a statement that each officer signing
the Officers’ Certificate has read the covenant or condition and the
definitions relating thereto;

 

(b)           a brief statement of the nature and
scope of the examination or investigation undertaken by each officer in
rendering the Officers’ Certificate;

 

(c)           a statement that each officer has
made such examination or investigation as, in such officer’s opinion, is
necessary to enable such officer to express an informed opinion as to whether
or not such covenant or condition has been complied with; and

 

4

 

(d)           a statement as to whether, in the
opinion of each officer, such condition or covenant has been complied with.

 

“Person”  means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association,
government or any agency or political subdivision thereof or any other entity
of whatever nature.

 

“Preferred Securities” has the meaning set
forth in the first recital hereof.

 

“Responsible Officer”  means, with respect to
the Guarantee Trustee, the officer in the Worldwide Securities Services
department of the Trustee having direct responsibility for the administration
of this Guarantee Agreement.

 

“Senior Debt”  means the principal of and any premium, if any, and
interest on (including interest accruing on or after the filing of any petition
in bankruptcy or for reorganization relating to the Guarantor whether or not
such claim for post-petition interest is allowed in such proceeding) all Debt
of the Guarantor, whether incurred on or prior to the date of the Indenture or
thereafter incurred, unless it is provided
in the instrument creating or evidencing the same or pursuant to which the same
is outstanding, that such obligations are not superior in right of payment to
the Preferred Securities; provided, that if the Guarantor is
subject to the regulation and supervision of an insurance regulatory
authority,  the Guarantor
shall have received the approval
of such appropriate insurance regulatory authority  prior to issuing any such obligation; and provided, further, that Senior Debt shall
not include any other debt securities and guarantees in respect of such debt
securities issued to any trust other than the Trust (or a trustee of any such
trust), partnership or other entity affiliated with the Guarantor that is a
financing vehicle of the Guarantor (a “financing entity”) in connection with
the issuance by such financing entity of equity securities or other securities
that are treated as equity capital for regulatory capital purposes guaranteed
by the Guarantor pursuant to an instrument that ranks pari passu with or junior in right of
payment to the Indenture, including, without limitation, securities issued by
American Equity Capital Trust I, American Equity Capital Trust II, American
Equity Capital Trust III, American Equity Capital Trust IV, American Equity
Capital Trust V, American Equity Capital Trust VI, American Equity Capital
Trust VII, American Equity Capital Trust VIII, American Equity Capital Trust IX
and American Equity Capital Trust X.

 

“Trust Indenture Act” means the Trust
Indenture Act of 1939, as amended and as in effect on the date of this Guarantee
Agreement.

 

“Successor Guarantee Trustee”  means a successor
Guarantee Trustee possessing the qualifications to act as Guarantee Trustee
under Section 4.1.

 

Capitalized or otherwise defined terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the Trust Agreement as
in effect on the date hereof.

 

5

 

ARTICLE II

Reports

 

SECTION 2.1.  List of Holders.

 

The Guarantor shall furnish or cause to be furnished
to the Guarantee Trustee at such times as the Guarantee Trustee may request in
writing, within thirty (30) days after the receipt by the Guarantor of any such
request, a list, in such form as the Guarantee Trustee may reasonably require,
of the names and addresses of the Holders (the “List of Holders”) as of a date
not more than fifteen (15) days prior to the time such list is furnished, in
each case to the extent such information is in the possession or control of the
Guarantor and is not identical to a previously supplied list of Holders or has
not otherwise been received by the Guarantee Trustee in its capacity as
such.  The Guarantee Trustee may destroy
any List of Holders previously given to it on receipt of a new List of Holders.

 

SECTION 2.2.  Periodic Reports to the
Guarantee Trustee.

 

The Guarantor shall deliver to the Guarantee Trustee,
within one hundred and twenty (120) days after the end of each fiscal year of
the Guarantor ending after the date of this Guarantee Agreement, an Officers’
Certificate covering the preceding fiscal year, stating whether or not to the
knowledge of the signers thereof the Guarantor is in default in the performance
or observance of any of the terms or provisions or any of the conditions of
this Guarantee Agreement (without regard to any period of grace or requirement
of notice provided hereunder) and, if the Guarantor shall be in default
thereof, specifying all such defaults and the nature and status thereof of
which they have knowledge.  The delivery
requirements of this Section 2.2 may be satisfied by compliance with Section
8.16(a) of the Trust Agreement.

 

SECTION 2.3.  Event of Default; Waiver.

 

The Holders of a Majority in Liquidation Amount of the
Preferred Securities may,  on behalf of
the Holders, waive any past Event of Default and its consequences.  Upon such waiver, any such Event of Default
shall cease to exist, and any Event of Default arising therefrom shall be
deemed to have been cured, for every purpose of this Guarantee Agreement, but
no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent therefrom.

 

SECTION 2.4.  Event of Default; Notice.

 

(a)           The Guarantee Trustee shall, within
ninety (90) days after the occurrence of a default, transmit to the Holders
notices of all defaults actually known to the Guarantee Trustee, unless such
defaults have been cured or waived before the giving of such notice.  For the purpose of this Section 2.4,
the term “default” means any event that is,
or after notice or lapse of time or both would become, an Event of Default.

 

(b)           The Guarantee Trustee shall not be
deemed to have knowledge of any Event of Default unless the Guarantee Trustee
shall have received written notice, or a Responsible Officer

 

6

 

charged with the
administration of this Guarantee Agreement shall have obtained written notice,
of such Event of Default from the Guarantor or a Holder.

 

ARTICLE III

Powers, Duties and Rights of the Guarantee Trustee

 

SECTION 3.1.  Powers and Duties of the
Guarantee Trustee.

 

(a)           This
Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of
the Holders, and the Guarantee Trustee shall not transfer this Guarantee
Agreement to any Person except a Holder exercising its rights pursuant to Section
5.4(d) or to a Successor Guarantee Trustee upon acceptance by such
Successor Guarantee Trustee of its appointment to act as Successor Guarantee
Trustee.  The right, title and interest
of the Guarantee Trustee shall automatically vest in any Successor Guarantee
Trustee, upon acceptance by such Successor Guarantee Trustee of its appointment
hereunder, and such vesting and succession of title shall be effective whether
or not conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Guarantee Trustee.

 

(b)           The rights, immunities, duties and
responsibilities of the Guarantee Trustee shall be as provided by this
Guarantee Agreement and there shall be no other duties or obligations, express
or implied, of the Guarantee Trustee. 
Notwithstanding the foregoing, no provisions of this Guarantee Agreement
shall require the Guarantee Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.  Whether or not herein expressly so provided,
every provision of this Guarantee Agreement relating to the conduct or
affecting the liability of or affording protection to the Guarantee Trustee
shall be subject to the provisions of this Section 3.1.  To the extent that, at law or in equity, the
Guarantee Trustee has duties and liabilities relating to the Guarantor or the
Holders, the Guarantee Trustee shall not be liable to any Holder for the
Guarantee Trustee’s good faith reliance on the provisions of this Guarantee
Agreement.  The provisions of this
Guarantee Agreement, to the extent that they restrict the duties and
liabilities of the Guarantee Trustee otherwise existing at law or in equity,
are agreed by the Guarantor and the Holders to replace such other duties and
liabilities of the Guarantee Trustee.

 

(c)           No provision of this Guarantee
Agreement shall be construed to relieve the Guarantee Trustee from liability
for its own negligent action, negligent failure to act or own willful
misconduct, except that:

 

(i)            the Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a Responsible Officer of
the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment was
made; and

 

(ii)           the Guarantee Trustee shall not be
liable with respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders

 

7

 

of not less than a Majority in Liquidation Amount of
the Preferred Securities relating to the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee, or exercising
any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement.

 

SECTION 3.2.  Certain Rights of the
Guarantee Trustee.

 

(a)           Subject to the provisions of Section
3.1:

 

(i)            the Guarantee Trustee may
conclusively rely and shall be fully protected in acting or refraining from
acting in good faith and in accordance with the terms hereof upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document reasonably believed by it to be genuine
and to have been signed, sent or presented by the proper party or parties;

 

(ii)           any direction or act of the Guarantor
contemplated by this Guarantee Agreement shall be sufficiently evidenced by an
Officers’ Certificate unless otherwise prescribed herein;

 

(iii)          the Guarantee Trustee may consult with
counsel, and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted to be taken by it hereunder in good faith and in reliance thereon and
in accordance with such advice.  Such
counsel may be counsel to the Guarantee Trustee, the Guarantor or any of its
Affiliates and may be one of its employees. 
The Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Guarantee Agreement from any
court of competent jurisdiction;

 

(iv)          the Guarantee Trustee shall be under
no obligation to exercise any of the rights or powers vested in it by this
Guarantee Agreement at the request or direction of any Holder, unless such
Holder shall have provided to the Guarantee Trustee reasonable security or
indemnity against the costs, expenses (including reasonable attorneys’ fees and
expenses) and liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be requested by
the Guarantee Trustee; provided,
that, nothing contained in this Section 3.2(a)(iv) shall be taken to
relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of
its obligation to exercise the rights and powers vested in it by this Guarantee
Agreement; provided, further,
that nothing contained in this Section 3.2(a)(iv) shall prevent the
Guarantee Trustee from exercising its rights under Section 4.2 hereof.;

 

(v)           the Guarantee Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, and if the Guarantee Trustee shall determine to make
such inquiry or investigation, it

 

8

 

shall be entitled to examine the books, records and
premises of the Guarantor, personally or by agent or attorney;

 

(vi)          the Guarantee Trustee may execute any
of the trusts or powers hereunder or perform any duties hereunder either
directly or by or through its agents, attorneys, custodians or nominees and the
Guarantee Trustee shall not be responsible for any misconduct or negligence on
the part of any such agent, attorney, custodian or nominee appointed with due
care by it hereunder;

 

(vii)         whenever in the administration of this
Guarantee Agreement the Guarantee Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right hereunder, the Guarantee
Trustee (A) may request instructions from the Holders of a Majority in
Liquidation Amount of the Preferred Securities, (B) may refrain from enforcing
such remedy or right or taking such other action until such instructions are
received and (C) shall be protected in acting in accordance with such
instructions;

 

(viii)        except as otherwise expressly provided
by this Guarantee Agreement, the Guarantee Trustee shall not be under any
obligation to take any action that is discretionary under the provisions of
this Guarantee Agreement; and

 

(ix)           whenever, in the administration of
this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a
matter be proved or established before taking, suffering or omitting to take
any action hereunder, the Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part, request
and rely upon an Officers’ Certificate which, upon receipt of such request from
the Guarantee Trustee, shall be promptly delivered by the Guarantor.

 

(b)           No provision of this Guarantee
Agreement shall be deemed to impose any duty or obligation on the Guarantee
Trustee to perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it in any jurisdiction in which it shall be
illegal, or in which the Guarantee Trustee shall be unqualified or incompetent
in accordance with applicable law, to perform any such act or acts or to
exercise any such right, power, duty or obligation.  No permissive power or authority available to
the Guarantee Trustee shall be construed to be a duty to act in accordance with
such power and authority.

 

SECTION 3.3.  Compensation.

 

The Guarantor agrees to pay to the Guarantee Trustee
from time to time reasonable compensation for all services rendered by it
hereunder (which compensation shall not be limited by any provisions of law in
regard to the compensation of a trustee of an express trust) and to reimburse
the Guarantee Trustee upon request for all reasonable expenses, disbursements
and advances (including the reasonable fees and expenses of its attorneys and
agents) incurred or made by the Guarantee Trustee in accordance with any
provisions of this Guarantee Agreement.

 

9

 

SECTION 3.4.  Indemnity.

 

The Guarantor agrees to indemnify and hold harmless
the Guarantee Trustee and any of its Affiliates and any of their officers,
directors, shareholders, employees, representatives or agents from and against
any loss, damage, liability, tax (other than income, franchise or other taxes
imposed on amounts paid pursuant to Section 3.3), penalty, expense or
claim of any kind or nature whatsoever incurred without negligence, bad faith
or willful misconduct on its part, arising out of or in connection with the
acceptance or administration of this Guarantee Agreement, including the costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder.  The Guarantee Trustee will not claim or exact
any lien or charge on any Guarantee Payments as a result of any amount due to
it under this Guarantee Agreement.  This
indemnity shall survive the termination of this Agreement or the resignation or
removal of the Guarantee Trustee.

 

In no event shall the Guarantee Trustee be liable for
any indirect, special, punitive or consequential loss or damage of any kind
whatsoever, including, but not limited to, lost profits, even if the Guarantee
Trustee has been advised of the likelihood of such loss or damage and
regardless of the form of action.

 

In no event shall the Guarantee Trustee be liable for
any failure or delay in the performance of its obligations hereunder because of
circumstances beyond its control, including, but not limited to, acts of God,
flood, war (declared or undeclared), terrorism, fire, riot, embargo, government
action, including any laws, ordinances, regulations, governmental action or the
like which delay, restrict or prohibit the providing of the services
contemplated by this Guarantee Agreement.

 

SECTION 3.5.  Securities.

 

The Guarantee Trustee or any other agent of the
Guarantee Trustee, in its individual or any other capacity, may become the
owner or pledgee of Common or Preferred Securities.

 

ARTICLE IV

Guarantee Trustee

 

SECTION 4.1.  Guarantee Trustee;
Eligibility.

 

(a)           There shall at all times be a
Guarantee Trustee which shall:

 

(i)            not be an Affiliate of the
Guarantor; and

 

(ii)           be a corporation organized and doing
business under the laws of the United States or of any State thereof,
authorized to exercise corporate trust powers, having a combined capital and
surplus of at least fifty million dollars ($50,000,000), subject to supervision
or examination by Federal or State authority and having an office within the
United States. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of such supervising or
examining authority, then, for the purposes of this Section 4.1, the
combined capital and surplus of

 

10

 

such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.

 

(b)           If at any time the Guarantee Trustee
shall cease to be eligible to so act under Section 4.1(a), the Guarantee
Trustee shall immediately resign in the manner and with the effect set out in Section
4.2(c).

 

(c)           If the Guarantee Trustee has or shall
acquire any “conflicting interest” within the meaning of Section 310(b) of the
Trust Indenture Act, the Guarantee Trustee shall either eliminate such interest
or resign in the manner and with the effect set out in Section 4.2(c).

 

SECTION 4.2.  Appointment, Removal and
Resignation of the Guarantee Trustee.

 

(a)           Subject to Section 4.2(b), the
Guarantee Trustee may be appointed or removed without cause at any time by the
Guarantor, except during an Event of Default.

 

(b)           The Guarantee Trustee shall not be
removed until a Successor Guarantee Trustee has been appointed and has accepted
such appointment by written instrument executed by such Successor Guarantee
Trustee and delivered to the Guarantor.

 

(c)           The Guarantee Trustee appointed
hereunder shall hold office until a Successor Guarantee Trustee shall have been
appointed or until its removal or resignation. 
The Guarantee Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument in writing executed by the Guarantee
Trustee and delivered to the Guarantor, which resignation shall not take effect
until a Successor Guarantee Trustee has been appointed and has accepted such
appointment by instrument in writing executed by such Successor Guarantee
Trustee and delivered to the Guarantor and the resigning Guarantee Trustee.

 

(d)           If no Successor Guarantee Trustee
shall have been appointed and accepted appointment as provided in this Section
4.2 within thirty (30) days after delivery to the Guarantor of an
instrument of resignation, the resigning Guarantee Trustee may petition, at the
expense of the Guarantor, any court of competent jurisdiction for appointment
of a Successor Guarantee Trustee.  Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Guarantee Trustee.

 

ARTICLE V

Guarantee

 

SECTION 5.1.  Guarantee.

 

(a)           The
Guarantor irrevocably and unconditionally agrees to pay in full to the Holders
the Guarantee Payments (without duplication of amounts theretofore paid by or
on behalf of the Issuer), as and when due, regardless of any defense (except
for the defense of payment by the Issuer), right of set-off or counterclaim
which the Issuer may have or assert.  The
Guarantor’s obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the

 

11

 

Holders.  The
Guarantor shall give prompt written notice to the Guarantee Trustee in the
event it makes any direct payment to the Holders hereunder.

 

(b)           The
Guarantor hereby also agrees to assume any and all Obligations of the Issuer,
and, in the event any such Obligation is not so assumed, subject to the terms
and conditions hereof, the Guarantor hereby irrevocably and unconditionally
guarantees to each Beneficiary the full payment, when and as due, of any and
all Obligations to such Beneficiaries. 
This Guarantee is intended to be for the Beneficiaries who have received
notice hereof.

 

SECTION 5.2.  Waiver of Notice and
Demand.

 

The Guarantor hereby waives notice of acceptance of
the Guarantee Agreement and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first
against the Guarantee Trustee, Issuer or any other Person before proceeding
against the Guarantor, protest, notice of nonpayment, notice of dishonor,
notice of redemption and all other notices and demands.

 

SECTION 5.3.  Obligations Not Affected.

 

The obligations, covenants, agreements and duties of
the Guarantor under this Guarantee Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:

 

(a)           the release or waiver, by operation
of law or otherwise, of the performance or observance by the Issuer of any
express or implied agreement, covenant, term or condition relating to the
Preferred Securities to be performed or observed by the Issuer;

 

(b)           the extension of time for the payment
by the Issuer of all or any portion of the Distributions (other than an
extension of time for payment of Distributions that results from the extension
of any interest payment period on the Notes as provided in the Indenture),
Redemption Price, Liquidation Distribution or any other sums payable under the
terms of the Preferred Securities or the extension of time for the performance
of any other obligation under, arising out of, or in connection with, the
Preferred Securities;

 

(c)           any failure, omission, delay or lack
of diligence on the part of the Holders to enforce, assert or exercise any
right, privilege, power or remedy conferred on the Holders pursuant to the
terms of the Preferred Securities, or any action on the part of the Issuer
granting indulgence or extension of any kind;

 

(d)           the voluntary or involuntary liquidation,
dissolution, sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings affecting,
the Issuer or any of the assets of the Issuer;

 

(e)           any invalidity of, or defect or
deficiency in, the Preferred Securities;

 

(f)            the settlement or compromise of any
obligation guaranteed hereby or hereby incurred; or

 

12

 

(g)           any other circumstance whatsoever
that might otherwise constitute a legal or equitable discharge or defense of a
guarantor, it being the intent of this Section 5.3 that the obligations
of the Guarantor hereunder shall be absolute and unconditional under any and all
circumstances.

 

There shall be no obligation of the Holders to give notice to, or
obtain the consent of, the Guarantor with respect to the happening of any of
the foregoing.

 

SECTION 5.4.  Rights of Holders.

 

The Guarantor expressly acknowledges that:  (a) this Guarantee Agreement will be
deposited with the Guarantee Trustee to be held for the benefit of the Holders;
(b) the Guarantee Trustee has the right to enforce this Guarantee Agreement on
behalf of the Holders; (c) the Holders of a Majority in Liquidation Amount of
the Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of this Guarantee Agreement or exercising any trust or power conferred upon
the Guarantee Trustee under this Guarantee Agreement; and (d) any Holder may
institute a legal proceeding directly against the Guarantor to enforce its
rights under this Guarantee Agreement, without first instituting a legal
proceeding against the Guarantee Trustee, the Issuer or any other Person.

 

SECTION 5.5.  Guarantee of Payment.

 

This Guarantee Agreement creates a guarantee of
payment and not of collection.  This
Guarantee Agreement will not be discharged except by payment of the Guarantee
Payments in full (without duplication of amounts theretofore paid by the
Issuer) or upon distribution of Notes to Holders as provided in the Trust
Agreement.

 

SECTION 5.6.  Subrogation.

 

The Guarantor shall be subrogated to all (if any)
rights of the Holders against the Issuer in respect of any amounts paid to the
Holders by the Guarantor under this Guarantee Agreement and shall have the
right to waive payment by the Issuer pursuant to Section 5.1; provided,  that, the Guarantor
shall not (except to the extent required by mandatory provisions of law) be
entitled to enforce or exercise any rights it may acquire by way of subrogation
or any indemnity, reimbursement or other agreement, in all cases as a result of
payment under this Guarantee Agreement, if, at the time of any such payment,
any amounts are due and unpaid under this Guarantee Agreement.  If any amount shall be paid to the Guarantor
in violation of the preceding sentence, the Guarantor agrees to hold such
amount in trust for the Holders and to pay over such amount to the Holders.

 

SECTION 5.7.  Independent Obligations.

 

The Guarantor acknowledges that its obligations
hereunder are independent of the obligations of the Issuer with respect to the
Preferred Securities and that the Guarantor shall be liable as principal and as
debtor hereunder to make Guarantee Payments pursuant to the terms of this
Guarantee Agreement notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 5.3.

 

13

 

SECTION 5.8.  Enforcement.

 

A Beneficiary may
enforce the Obligations of the Guarantor contained in Section 5.1(b)
directly against the Guarantor, and the Guarantor waives any right or remedy to
require that any action be brought against the Issuer or any other person or
entity before proceeding against the Guarantor.

 

ARTICLE VI

Covenants and Subordination

 

SECTION 6.1.  Dividends, Distributions
and Payments.

 

So long as any Preferred Securities remain
outstanding, if there shall have occurred and be continuing an Event of Default
or the Guarantor shall have entered into an Extension Period as provided for in
the Indenture and such period, or any extension thereof, shall have commenced
and be continuing, then the Guarantor may not (a) declare or pay any dividends
or distributions on, or redeem, purchase, acquire or make liquidation payment
with respect to, any of the Guarantor’s capital stock or (b) make any payment
of principal of or any interest or premium, if any, on or repay, repurchase or
redeem any debt securities of the Guarantor that rank pari passu in all respects with
or junior in interest to the Notes (other than (i) repurchases, redemptions or
other acquisitions of shares of capital stock of the Guarantor in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of any one of more employees, officers, directors or
consultants, in connection with a dividend reinvestment or stockholder stock
purchase plan or in connection with the issuance of capital stock of the
Guarantor (or securities convertible into or exercisable for such capital
stock) as consideration in an acquisition transaction entered into prior to the
occurrence of such Event of Default or the applicable Extension Period, (ii) as
a result of an exchange or conversion of any class or series of the Guarantor’s
capital stock (or any capital stock of a subsidiary of the Guarantor) for any
class or series of the Guarantor’s capital stock or any class of series of the
Guarantor’s indebtedness for any class or series of the Guarantor’s capital
stock, (iii) the purchase of fractional interests in shares of the Guarantor’s
capital stock pursuant to the conversions or exchange provisions of such
capital stock or the security being converted or exchanged, (iv) any
declaration of a dividend in connection with any rights plan, the issuance of
rights, stock or other property under any rights plan or the redemption or
repurchase of rights pursuant thereto, or (v) any dividend in the form of
stock, warrants, options or other rights where the dividend stock or the stock
issuable upon exercise of such warrants, options or other rights is the same
stock as that on which the dividend is being paid or ranks pari passu
with or junior to such stock).

 

SECTION 6.2.  Subordination.

 

The obligations of the Guarantor under this Guarantee
Agreement will constitute unsecured obligations of the Guarantor and will rank
subordinate and junior in right of payment to all Senior Debt of the Guarantor.

 

14

 

SECTION 6.3.  Pari Passu Guarantees.

 

(a)           The
obligations of the Guarantor under this Guarantee Agreement shall rank pari passu
with the obligations of the Guarantor under any similar guarantee agreements issued
by the Guarantor with respect to preferred securities (if any) similar to the
Preferred Securities, issued by trusts other than the Issuer established or to
be established by the Guarantor (if any), in each case similar to the Issuer American Equity Capital
Trust I, American Equity Capital Trust II, American Equity Capital Trust III ,
American Equity Capital Trust IV, American Equity Capital Trust V, American
Equity Capital Trust VI, American Equity Capital Trust VII, American Equity
Capital Trust VIII, American Equity Capital Trust IX and American Equity
Capital Trust X.

 

(b)           The
right of the Guarantor to participate in any distribution of assets of any of
its subsidiaries upon any such subsidiary’s liquidation or reorganization or
otherwise is subject to the prior claims of creditors of that subsidiary,
except to the extent the Guarantor may itself be recognized as a creditor of
that subsidiary.  Accordingly, the
Guarantor’s obligations under this Guarantee will be effectively subordinated
to all existing and future liabilities of the Guarantor’s subsidiaries, and
claimants should look only to the assets of the Guarantor for payments
thereunder. This Guarantee does not limit the incurrence or issuance of other
secured or unsecured debt of the Guarantor, including Senior Debt of the
Guarantor, under any indenture or agreement that the Guarantor may enter into
in the future or otherwise.

 

ARTICLE VII

Termination

 

SECTION 7.1.  Termination.

 

This Guarantee Agreement shall terminate and be of no
further force and effect upon (a) full payment of the Redemption Price of all
Preferred Securities, (b) the distribution of Notes to the Holders in exchange
for all of the Preferred Securities or (c) full payment of the amounts payable
in accordance with the Trust Agreement upon liquidation of the Issuer.  Notwithstanding the foregoing, this Guarantee
Agreement will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder must restore payment of any sums paid with
respect to Preferred Securities or this Guarantee Agreement.  The obligations of the Guarantor under Sections
3.3 and 3.4 shall survive any such termination or the resignation
and removal of the Guarantee Trustee.

 

ARTICLE VIII

Miscellaneous

 

SECTION 8.1.  Successors and Assigns.

 

All guarantees and agreements contained in this
Guarantee Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the

 

15

 

benefit of the Holders of the Preferred Securities
then outstanding.  Except in connection
with a consolidation, merger or sale involving the Guarantor that is permitted
under Article VIII of the Indenture and pursuant to which the successor or
assignee agrees in writing to perform the Guarantor’s obligations hereunder,
the Guarantor shall not assign its rights or delegate its obligations hereunder
without the prior approval of the Holders of a Majority in Liquidation Amount
of the Preferred Securities.

 

SECTION 8.2.  Amendments.

 

Except with respect to any changes that do not
adversely affect the rights of the Holders in any material respect (in which
case no consent of the Holders will be required), this Guarantee Agreement may
only be amended with the prior approval of the Guarantor, the Guarantee Trustee
and the Holders of not less than a Majority in Liquidation Amount of the
Preferred Securities.  The provisions of
Article VI of the Trust Agreement concerning meetings or consents of the
Holders shall apply to the giving of such approval.

 

SECTION 8.3.  Notices.

 

Any notice, request or other communication required or
permitted to be given hereunder shall be in writing, duly signed by the party
giving such notice, and delivered, telecopied or mailed by first class mail as
follows:

 

(a)           if given to the Guarantor, to the
address or facsimile number set forth below or such other address, facsimile
number or to the attention of such other Person as the Guarantor may give
notice to the Guarantee Trustee and the Holders:

 

American
Equity Investment Life Insurance Company

5000 Westown Parkway, Suite 440

West Des
Moines, IA 50266

Facsimile No.: (515) 221-0744

Attention: Wendy Carlson

 

(b)           if given to the Issuer, at the Issuer’s
address or facsimile number set forth below or such other address, facsimile
number or to the attention of such other Person as the Issuer may give notice
to the Guarantee Trustee and the Holders:

 

American
Equity Capital Trust XI

5000 Westown Parkway, Suite 440

West Des Moines, IA 50266

Facsimile No.: (515) 221-0744

Attention: Wendy Carlson

 

(c)           if given to the Guarantee Trustee, at
the address or facsimile number set forth below or such other address,
facsimile number or to the attention of such other Person as the Guarantee
Trustee may give notice to the Guarantor and the Holders:

 

16

 

JPMorgan Chase
Bank, National Association

600 Travis, 50th Floor

Houston, Texas
77002

Facsimile No.:
713-216-2101

Attention:
International Trust Services -

American Equity Capital Trust XI

 

(d)           if given to any Holder, at the
address set forth on the books and records of the Issuer.

 

All notices
hereunder shall be deemed to have been given when received in person,
telecopied with receipt confirmed, or mailed by first class mail, postage
prepaid, except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the
date of such refusal or inability to deliver.

 

SECTION 8.4.  Benefit.

 

This Guarantee Agreement is solely for the benefit of
the Holders and is not separately transferable from the Preferred Securities.

 

SECTION 8.5.  Governing Law.

 

This
Guarantee Agreement and the rights and obligations of each party hereto, shall
be construed and enforced in accordance with and governed by the laws of the
State of New York without reference to its conflict of laws provisions (other
than Section 5-1401 of the General Obligations Law).

 

SECTION 8.6.  Submission
to Jurisdiction.

 

ANY LEGAL ACTION
OR PROCEEDING BY OR AGAINST ANY PARTY HERETO OR WITH RESPECT TO OR ARISING OUT
OF THIS GUARANTEE AGREEMENT MAY BE BROUGHT IN OR REMOVED TO THE COURTS OF THE
STATE OF NEW YORK, IN AND FOR THE COUNTY OF NEW YORK, OR OF THE UNITED STATES
OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK (IN EACH CASE SITTING IN THE
BOROUGH OF MANHATTAN). BY EXECUTION AND DELIVERY OF THIS GUARANTEE AGREEMENT,
EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND COURTS OF
APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH
THIS GUARANTEE AGREEMENT.

 

SECTION 8.7.  Counterparts.

 

This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same
instrument.

 

17

 

SECTION 8.8.  Severability.

 

In the event that one or more of the provisions
contained in this Guarantee Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Guarantee,
but this Guarantee shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.

 

[Signature
pages follow.]

 

18

 

In Witness Whereof,
the undersigned have executed this Guarantee Agreement as of the date first
above written.

 

	
   

  	
  American
  Equity Investment Life Holding Company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Debra J.
  Richardson

  	
   

  
	
   

  	
  Name: Debra
  J. Richardson

  
	
   

  	
  Title:
  Secretary & Senior Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMorgan Chase Bank, National Association, 

  not in its individual capacity, but solely as Guarantee Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Shelly A. Sterling

  	
   

  
	
   

  	
  Name: Shelly A.
  Sterling

  
	
   

  	
  Title: Vice
  PresidentExhibit 10.1

 

Execution Copy

 

 

ASSET PURCHASE AGREEMENT

 

 

dated as of

 

 

March 10, 2006

 

 

between

 

 

DATAWATCH CORPORATION

 

 

and

 

 

CLEARSTORY SYSTEMS, INC.

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  PAGE

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
   

  	
  1.01

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  PURCHASE AND
  SALE

  	
  5

  
	
   

  	
   

  	
   

  
	
   

  	
  2.01

  	
  Purchase and Sale

  	
  5

  
	
   

  	
  2.02

  	
  Excluded Assets

  	
  6

  
	
   

  	
  2.03

  	
  Assumption of Liabilities

  	
  6

  
	
   

  	
  2.04

  	
  Excluded Liabilities

  	
  7

  
	
   

  	
  2.05

  	
  Assignment of Contracts and Rights

  	
  7

  
	
   

  	
  2.06

  	
  Purchase Price; Closing

  	
  8

  
	
   

  	
  2.07

  	
  Earnout Payments

  	
  9

  
	
   

  	
  2.08

  	
  Allocation of Purchase Price

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  REPRESENTATIONS
  AND WARRANTIES OF SELLER

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.01

  	
  Corporate Existence and Power

  	
  12

  
	
   

  	
  3.02

  	
  Corporate Authorization

  	
  13

  
	
   

  	
  3.03

  	
  Governmental Authorization; Consents

  	
  13

  
	
   

  	
  3.04

  	
  Non-Contravention

  	
  13

  
	
   

  	
  3.05

  	
  Financial Statements

  	
  13

  
	
   

  	
  3.06

  	
  Absence of Certain Changes

  	
  14

  
	
   

  	
  3.07

  	
  Personal Property

  	
  15

  
	
   

  	
  3.08

  	
  Sufficiency of Purchased Assets

  	
  16

  
	
   

  	
  3.09

  	
  Title to Purchased Assets

  	
  16

  
	
   

  	
  3.10

  	
  Litigation

  	
  16

  
	
   

  	
  3.11

  	
  Material Contracts

  	
  16

  
	
   

  	
  3.12

  	
  Technology and Intellectual Property

  	
  17

  
	
   

  	
  3.13

  	
  Insurance Coverage

  	
  19

  
	
   

  	
  3.14

  	
  Compliance with Laws

  	
  20

  
	
   

  	
  3.15

  	
  Employees

  	
  20

  
	
   

  	
  3.16

  	
  Environmental Compliance

  	
  22

  
	
   

  	
  3.17

  	
  Customers and Suppliers

  	
  22

  
	
   

  	
  3.18

  	
  Transactions with Affiliates; Intercompany
  Arrangements

  	
  22

  
	
   

  	
  3.19

  	
  Finders’ Fees

  	
  22

  
	
   

  	
  3.20

  	
  Other Information

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  REPRESENTATIONS
  AND WARRANTIES OF BUYER

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.01

  	
  Organization and Existence

  	
  23

  
	
   

  	
  4.02

  	
  Corporate Authorization

  	
  23

  
	
   

  	
  4.03

  	
  Governmental Authorization

  	
  23

  
	
   

  	
  4.04

  	
  Non-Contravention

  	
  23

  
	
   

  	
  4.05

  	
  Litigation

  	
  23

  
	
   

  	
  4.06

  	
  Finders’ Fees

  	
  23

  
	
   

  	
  4.07

  	
  Financing

  	
  24

  

 

 

	
  ARTICLE V

  	
  COVENANTS OF
  SELLER

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.01

  	
  Conduct of the Business

  	
  24

  
	
   

  	
  5.02

  	
  Access to Information

  	
  24

  
	
   

  	
  5.03

  	
  Notices of Certain Events; Continuing Disclosure

  	
  25

  
	
   

  	
  5.04

  	
  Noncompetition

  	
  25

  
	
   

  	
  5.05

  	
  Trademarks; Tradenames

  	
  26

  
	
   

  	
  5.06

  	
  Information Statement

  	
  26

  
	
   

  	
  5.07

  	
  Shareholder Approval

  	
  27

  
	
   

  	
  5.08

  	
  No-Shop Provision

  	
  27

  
	
   

  	
  5.09

  	
  Delivery of Financial Statements

  	
  28

  
	
   

  	
  5.10

  	
  Billing

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  COVENANTS OF
  BUYER

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.01

  	
  Certain Obligations With Respect to the Operation of
  the Business

  	
  29

  
	
   

  	
  6.02

  	
  Post-Closing Transition

  	
  29

  
	
   

  	
  6.03

  	
  Seller License Agreement

  	
  29

  
	
   

  	
  6.04

  	
  Audit Fees

  	
  29

  
	
   

  	
  6.05

  	
  Application of Cash Receipts

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  COVENANTS OF
  BOTH PARTIES

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.01

  	
  Confidentiality

  	
  30

  
	
   

  	
  7.02

  	
  Further Assurances

  	
  31

  
	
   

  	
  7.03

  	
  Certain Filings

  	
  31

  
	
   

  	
  7.04

  	
  Public Announcements

  	
  31

  
	
   

  	
  7.05

  	
  Information Requests

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  TAX MATTERS

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.01

  	
  Tax Definitions

  	
  32

  
	
   

  	
  8.02

  	
  Tax Matters

  	
  32

  
	
   

  	
  8.03

  	
  Tax Cooperation; Allocation of Taxes

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  EMPLOYEE
  BENEFITS

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.01

  	
  Employee Benefits Definitions

  	
  35

  
	
   

  	
  9.02

  	
  ERISA Representations

  	
  36

  
	
   

  	
  9.03

  	
  Employees and Offers of Employment

  	
  37

  
	
   

  	
  9.04

  	
  Seller’s Employee Benefit Plans

  	
  38

  
	
   

  	
  9.05

  	
  No Third Party Beneficiaries

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  CONDITIONS TO
  CLOSING

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.01

  	
  Conditions to the Obligations of Each Party

  	
  39

  
	
   

  	
  10.02

  	
  Conditions to Obligation of Buyer

  	
  39

  
	
   

  	
  10.03

  	
  Conditions to Obligations of Seller

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  SURVIVAL;
  INDEMNIFICATION

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.01

  	
  Survival

  	
  40

  

 

ii

 

	
   

  	
  11.02

  	
  Indemnification

  	
  41

  
	
   

  	
  11.03

  	
  Limitation of Indemnification

  	
  42

  
	
   

  	
  11.04

  	
  Procedures

  	
  42

  
	
   

  	
  11.05

  	
  Exclusive Remedy

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
  TERMINATION

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.01

  	
  Grounds for Termination

  	
  43

  
	
   

  	
  12.02

  	
  Effect of Termination

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
  MISCELLANEOUS

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.01

  	
  Notices

  	
  44

  
	
   

  	
  13.02

  	
  Amendments; No Waivers

  	
  44

  
	
   

  	
  13.03

  	
  Expenses

  	
  45

  
	
   

  	
  13.04

  	
  Successors and Assigns

  	
  45

  
	
   

  	
  13.05

  	
  Governing Law

  	
  45

  
	
   

  	
  13.06

  	
  Counterparts; Effectiveness

  	
  45

  
	
   

  	
  13.07

  	
  Entire Agreement

  	
  45

  
	
   

  	
  13.08

  	
  Bulk Sales Laws

  	
  45

  
	
   

  	
  13.09

  	
  Captions

  	
  45

  
	
   

  	
  13.10

  	
  Jurisdiction

  	
  45

  

 

iii

 

	
  Exhibits

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Exhibit A

  	
  — Form of Assignment and Assumption Agreement

  
	
   

  	
  Exhibit B

  	
  — Trademark License Agreement

  
	
   

  	
  Exhibit C

  	
  — Shareholder Consent

  
	
   

  	
  Exhibit D

  	
  — Seller License Agreement

  
	
   

  	
  Exhibit E

  	
  — Press Release

  
	
   

  	
  Exhibit E-1
  

  	
  — Press Release

  
	
   

  	
  Exhibit F

  	
  — Legal Opinion

  
	
   

  	
   

  
	
  Schedules

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Schedule
  1.01

  	
  Infrastructure Software

  
	
   

  	
  Schedule
  2.01(d)

  	
  Prepaid Expenses and Deposits

  
	
   

  	
  Schedule
  2.03

  	
  Assumed Liabilities

  
	
   

  	
  Schedule
  2.03(a)

  	
  Deferred Revenue

  
	
   

  	
  Schedule
  2.03(e)

  	
  Accrued Vacation

  
	
   

  	
  Schedule
  2.07(b)

  	
  List Prices- ClearStory Products

  
	
   

  	
  Schedule
  3.03

  	
  Required Consents

  
	
   

  	
  Schedule
  3.05

  	
  Financial Statements of the Business

  
	
   

  	
  Schedule
  3.06

  	
  Ordinary Course

  
	
   

  	
  Schedule
  3.07

  	
  Personal Property

  
	
   

  	
  Schedule
  3.08

  	
  Sufficiency of Assets

  
	
   

  	
  Schedule
  3.09

  	
  Title to Purchased Assts

  
	
   

  	
  Schedule
  3.11

  	
  Material Contracts

  
	
   

  	
   

  	
  •     Third Party Agreements

  
	
   

  	
   

  	
  •      Vendor
  Contracts

  
	
   

  	
   

  	
  •      VAR
  Agreements

  
	
   

  	
   

  	
  •      Customer
  License Agreements

  
	
   

  	
  Schedule
  3.11(a)(iii)

  	
  Maintenance Contracts

  
	
   

  	
   

  	
  •      Maintenance
  Contracts Provided

  
	
   

  	
  Schedule 3.11(a)(v)

  	
  Indebtedness for Borrowed
  Money

  
	
   

  	
  Schedule 3.11(a)(vii)

  	
  Source Code Escrow

  
	
   

  	
  Schedule
  3.12(a)(i)

  	
  Intellectual Property - Trademarks

  
	
   

  	
  Schedule
  3.12(a)(ii)

  	
  Intellectual Property – Product and Services

  
	
   

  	
  Schedule
  3.12(a)(iii)

  	
  Intellectual Property - Product and Services - Licensed

  
	
   

  	
  Schedule
  3.12 (b)(i)

  	
  Intellectual Property – Licensed Technology Owned

  
	
   

  	
  Schedule
  3.12 (b)(i)

  	
  Intellectual Property – Licensed Technology Licensed

  
	
   

  	
  Schedule
  3.12(c)

  	
  Intellectual Property – Licensed Technology with 3rd Party
  Obligation

  
	
   

  	
  Schedule 3.12(e)

  	
  Intellectual
  Property – Third Parties with Rights to Owned Intellectual Property

  
	
   

  	
  Schedule
  3.12(h)

  	
  Intellectual Property – Publicly Available Software

  
	
   

  	
  Schedule 3.13

  	
  Insurance

  
	
   

  	
  Schedule
  3.14(b)

  	
  Permits

  
				

 

iv

 

	
   

  	
  Schedule
  3.15

  	
  Employees

  
	
   

  	
  Schedule
  3.15(b)

  	
  Consultants & Independent Contractors

  
	
   

  	
  Schedule
  3.15(d)

  	
  Employee Agreements

  
	
   

  	
  Schedule
  3.15(e)

  	
  Employee Terminations

  
	
   

  	
  Schedule
  3.15(f)

  	
  Severance Policy

  
	
   

  	
  Schedule
  5.11

  	
  Customer Overpayments

  
	
   

  	
  Schedule
  8.02(a)

  	
  Taxes Being Contested

  
	
   

  	
  Schedule
  8.02(c)

  	
  Taxes – Grounds for Assessment Against Buyer

  
	
   

  	
  Schedule
  8.02(f)

  	
  Tax Jurisdictions

  
	
   

  	
  Schedule
  9.02

  	
  Employee Benefit Plans

  
	
   

  	
  Schedule
  9.03

  	
  Employees

  

 

v

 

ASSET PURCHASE AGREEMENT

 

AGREEMENT dated as of
March 10, 2006 between DATAWATCH CORPORATION
a Delaware corporation (“Buyer”), and CLEARSTORY
SYSTEMS, INC., a Delaware corporation (“Seller”).

 

RECITALS:

 

WHEREAS, Seller
conducts a business (the “Business”) known as ClearStory Systems, Inc.,
Document Solutions, a business unit of the Seller that designs, manufactures
and markets products which include Radiant Business Document Server and Radiant MailManager; and

 

WHEREAS, Buyer
desires to purchase substantially all of the assets and to assume certain of
the liabilities of the Business from Seller,
and Seller desires to sell substantially all of the assets of the Business to
Buyer, upon the terms and subject to the conditions hereinafter set forth;

 

NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.01        Definitions.

 

(a)           The
following terms, as used herein, have the following meanings:

 

“Accounting Convention” means the accounting policies and
procedures of Seller used to prepare the Financial Statements and described in
Seller’s Annual Report on Form 10-KSB for the fiscal year ended March 31,
2005.

 

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

 

“Ancillary Agreements” means the Assignment and Assumption
Agreement, Bill of Sale, Trademark License Agreement, Seller License Agreement,
each in the form attached hereto.

 

“Balance Sheet” means the unaudited balance sheet of the
Business as of December 31, 2005 found in Schedule 3.05.

 

“Balance Sheet Date” means December 31, 2005.

 

“Business Intellectual Property” means all Intellectual Property
that is owned or held by or on behalf of Seller for use, or that is being,
and/or has been, used, or is currently under development for use, in the
Business as it has been, is currently or is currently planned to be conducted.

 

 

“Closing Date” means the date of the Closing.

 

“Deferred Revenue” means (i) contracts for maintenance
services that, as of the date of determination, are invoiced, but not yet recognized
as revenue and (ii) amounts under contracts for consulting services that,
as of the date of determination, have been billed but not yet recognized as
revenue as a result of an ongoing obligation to perform services and, in all
events, shall be calculated in accordance with the methodologies set forth on
Schedule 1.01(a) hereto. For greater clarity, Deferred Revenue does not
include customer overpayments that have been retained by the Seller.

 

“Infrastructure Software” means the Seller’s time tracking
software, call logging software, and internally used third party financial,
network related and desktop software products, as listed on
Schedule 1.01(b).

 

“Intellectual Property” means all tangible or intangible
proprietary information and materials, including without limitation:

 

(b)           (i) all
inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereon, and all patents, patent applications and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, divisions, revisions, extensions and re-examinations
thereof, (ii) all trademarks, services marks, trade dress, logos, trade
names, domain names, and corporate names, together with all translations,
adaptations, derivations and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and renewals in
connection therewith, (iii) all copyrights and all applications,
registrations and renewals in connection therewith, (iv) all mask works
and all applications, registrations and renewals in connection therewith,
(v) all trade secrets and confidential business information (including
ideas, research and development, know-how, formulas, compositions,
manufacturing and production process and techniques, methods, schematics,
technology, technical data, designs, drawings, flowcharts, block diagrams,
specifications, customer and supplier lists, pricing and cost information and
business and marketing plans and proposals), and (vi) all software and firmware
(including data, databases and related documentation);

 

(c)           all
documents, records and files relating to design, end user documentation,
manufacturing, quality control, sales, marketing or customer support for, and
tangible embodiments of, all intellectual property described herein; and

 

(d)           all
licenses, agreements and other rights in any third party product or any third
party intellectual property described in (a) and (b) above other than any “off-the-shelf”
third party software or related intellectual property.

 

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

 

“Material Adverse Change” means a material adverse change in the
business, assets, financial condition, or results of operations of Seller or
the Business taken as a whole;

 

2

 

provided, however, that none of the following shall be deemed by itself
or by themselves, either alone or in combination, to constitute a Material
Adverse Change:  (a) any change in
the market price or trading volume of Seller’s common stock; (b) any
adverse effect on the bookings, revenues, gross margins or earnings of the
Seller, or any delay in or reduction or cancellation of orders of the Seller’s
products, following execution of this Agreement which is primarily attributable
to the announcement of the execution of this Agreement and the transactions
contemplated hereby; (c) any change arising out of conditions affecting
the economy or industry of the Seller in general which does not affect the
Seller in a materially disproportionate manner relative to other participants
in the economy or such industry, respectively; (d) employee attrition
which is primarily attributable to the announcement of the execution of this
Agreement and the transactions contemplated hereby or (e) any short-term
adverse change in the Seller’s revenues, gross margins or earnings (including
any short-term delay in, or reduction or cancellation of, orders of the Seller’s
products), except for such changes as in the aggregate would be reasonably
expected to have (in light of all relevant facts and circumstances) a material
adverse impact on the Seller’s earnings power over a commercially reasonable
period of time (which period of time shall not be less than one year).

 

“Material Adverse Effect” means a material adverse effect on the
business, assets, financial condition, or results of operations of Seller or
the Business taken as a whole; provided, however, that none of the following
shall be deemed by itself or by themselves, either alone or in combination, to
constitute a Material Adverse Effect: 
(a) any change in the market price or trading volume of Seller’s
common stock; (b) any adverse effect on the bookings, revenues, gross
margins or earnings of the Seller, or any delay in or reduction or cancellation
of orders of the Seller’s products, following execution of this Agreement which
is primarily attributable to the announcement of the execution of this
Agreement and the transactions contemplated hereby; (c) any change arising
out of conditions affecting the economy or industry of the Seller in general
which does not affect the Seller in a materially disproportionate manner relative
to other participants in the economy or such industry, respectively;
(d) employee attrition which is primarily attributable to the announcement
of the execution of this Agreement and the transactions contemplated hereby or
(e) any short-term adverse change in the Seller’s revenues, gross margins
or earnings (including any short-term delay in, or reduction or cancellation
of, orders of the Seller’s products), except for such changes as in the
aggregate would be reasonably expected to have (in light of all relevant facts
and circumstances) a material adverse impact on the Seller’s earnings power
over a commercially reasonable period of time (which period of time shall not
be less than one year).

 

“Permitted Lien” means (i) mechanic’s and other similar
statutory liens that are not material in nature or amount, and (ii) liens
for Taxes or other governmental charges not yet due and payable or due but not
delinquent or that are being contested in good faith.

 

“Person” means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.

 

3

 

“to Seller’s Knowledge”, “Known to Seller” and words of
similar import means the knowledge of Seller and the knowledge of each of
Seller’s officers or directors.

 

(e)           Each
of the following terms is defined in the Section set forth opposite such
term:  

 

	
  Term

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  Accounting Referee

  	
   

  	
  2.07

  
	
  Acquiror

  	
   

  	
  5.04

  
	
  Acquisition Proposal

  	
   

  	
  5.08

  
	
  Allocation Statement

  	
   

  	
  2.08

  
	
  Apportioned Obligation

  	
   

  	
  8.03

  
	
  Assumed Liabilities

  	
   

  	
  2.03

  
	
  Benefit Arrangement

  	
   

  	
  9.01

  
	
  Business

  	
   

  	
  Recitals

  
	
  Business Sale Event

  	
   

  	
  2.07

  
	
  Business Third Party Claim

  	
   

  	
  11.02

  
	
  Buyer Benefit Plans

  	
   

  	
  9.03

  
	
  Buyer Sale Event

  	
   

  	
  2.07

  
	
  Closing

  	
   

  	
  2.06

  
	
  Code

  	
   

  	
  8.01

  
	
  Commission

  	
   

  	
  5.06

  
	
  Contracts

  	
   

  	
  2.01

  
	
  Conveyance Documents

  	
   

  	
  2.06

  
	
  COBRA

  	
   

  	
  9.03

  
	
  COBRA Coverage

  	
   

  	
  9.04

  
	
  Damage

  	
   

  	
  11.02

  
	
  Earnout Payment

  	
   

  	
  2.07

  
	
  Earnout Payment Value

  	
   

  	
  2.07

  
	
  Earnout Period

  	
   

  	
  2.07

  
	
  Employee

  	
   

  	
  9.01

  
	
  Employee Plan

  	
   

  	
  9.01

  
	
  Environmental Laws

  	
   

  	
  3.16

  
	
  ERISA

  	
   

  	
  9.01

  
	
  Excluded Assets

  	
   

  	
  2.02

  
	
  Excluded Contracts

  	
   

  	
  2.01

  
	
  Excluded Liabilities

  	
   

  	
  2.04

  
	
  Financial Statements

  	
   

  	
  3.05(a)

  
	
  Hazardous Materials

  	
   

  	
  3.16

  
	
  Hired Employees

  	
   

  	
  9.03

  
	
  Holdback

  	
   

  	
  2.06

  
	
  Indemnified Party

  	
   

  	
  11.04

  
	
  Indemnifying Party

  	
   

  	
  11.04

  
	
  Information Statement

  	
   

  	
  5.06

  
	
  Initial Cash Payment

  	
   

  	
  2.06

  
	
  Initial Earnout Due Date

  	
   

  	
  2.07

  
	
  Initial Earnout Payment

  	
   

  	
  2.07

  
	
  Interested Person

  	
   

  	
  3.18

  
	
  Maintenance Agreements

  	
   

  	
  3.11

  
	
  Objection Notice

  	
   

  	
  2.07

  
	
  Owned Intellectual

  	
   

  	
  3.12

  
	
  Permit

  	
   

  	
  3.14

  
	
  Personal Property

  	
   

  	
  3.07

  
	
  Post-Closing Tax Period

  	
   

  	
  8.01

  
	
  Pre-Closing Tax Period

  	
   

  	
  8.01

  
	
  Purchased Assets

  	
   

  	
  2.01

  
	
  Purchase Price

  	
   

  	
  2.06

  
	
  Required Consent

  	
   

  	
  3.03

  
	
  Seller License Agreement

  	
   

  	
  6.03

  
	
  Tax

  	
   

  	
  8.01

  
	
  Tax Return

  	
   

  	
  8.01

  
	
  Transferred Employee

  	
   

  	
  9.01

  
	
  WARN Act

  	
   

  	
  9.03

  

 

4

 

ARTICLE II

 

PURCHASE AND SALE

 

2.01        Purchase and Sale.
Upon the terms and subject to the conditions of this Agreement, Buyer agrees to
purchase from Seller and Seller agrees to sell, transfer, assign and deliver,
or cause to be sold, transferred, assigned and delivered, to Buyer at Closing
all of Seller’s right, title and interest in the following assets of the
Business, as listed below (the “Purchased Assets”):

 

(a)           The
personal property and interests therein used by Seller or held by Seller for
use in connection with the Business, including equipment, furniture, office
equipment, and communications equipment, as listed on Schedule 3.07;

 

(b)           all
raw materials, work-in-process, finished goods, supplies and other inventories,
wherever situated used by Seller or held by Seller for use in connection with
the Business;

 

(c)           all
rights under all contracts, agreements, licenses, commitments, sales and
purchase orders and other instruments used by Seller or held by Seller for use
in connection with the Business, as listed on Schedule 3.11 other
than contracts and such other documents indicated thereon as “Excluded
Contracts” (the “Excluded Contracts”) but including any contract or other
document which would be listed on Schedule 3.11 but for any dollar
limitation contained in Section 3.11 (collectively, the “Contracts”);

 

(d)           all
prepaid expenses and deposits used by Seller or held by Seller for use in
connection with the Business, including without limitation the items set forth on Schedule 2.01(d);

 

(e)           all
of Seller’s rights, claims, credits, causes of action or rights of set-off
against third parties relating to the Business, including, without limitation,
unliquidated rights under manufacturers’ and vendors’ warranties;

 

(f)            all
of the Business Intellectual Property, except for the Infrastructure Software
and any other Business Intellectual Property expressly identified as an
Excluded Asset under Section 2.02 below, including without limitation the
items listed on Schedule 3.12;

 

(g)           all
transferable licenses, permits or other governmental authorizations affecting,
or relating in any way to, the Business, including without limitation the items
listed on Schedule 3.03;

 

(h)           all
books, records, files and papers, whether in hard copy or computer format used
by Seller or held by Seller for use in connection with the Business, including,
without limitation, engineering information, sales and promotional literature,
manuals and data, sales and purchase correspondence, lists of present and
former suppliers, lists of present and former customers, all call-in, tracking,
warranty and other information relating to the relationship

 

5

 

between the Seller
and its customers, personnel and employment records (to the extent the same may
be transferred or assigned under applicable law), and all information relating
to Taxes imposed on or with respect to the Business; and

 

(i)            all
goodwill associated with the Business or the Purchased Assets, together with
the right to represent to third parties that Buyer is the successor to the
Business.

 

2.02        Excluded Assets.
Buyer expressly understands and agrees that the following assets and properties
of Seller (the “Excluded Assets”) shall be excluded from the Purchased
Assets:

 

(a)           All
of Seller’s cash and cash equivalents on hand and in banks;

 

(b)           any
Purchased Assets sold or otherwise disposed of in the ordinary course of
operation of the Business and not in violation of any provisions of this
Agreement during the period from the date hereof until the Closing Date;

 

(c)           all
Infrastructure Software;

 

(d)           all
accounts, notes and other receivables used by Seller or held by Seller for use
in connection with the Business;

 

(e)           except
as set forth on Schedule 5.05, any and all Intellectual Property rights in
and to the name “ClearStory”; and

 

(f)            all
assets of Seller that are not Purchased Assets.

 

2.03        Assumption of Liabilities.
Upon the terms and subject to the conditions of this Agreement, Buyer agrees,
effective at the Closing, to assume the following liabilities (the “Assumed
Liabilities”):

 

(a)           all
liabilities and obligations of Seller arising under the Contracts (other than
liabilities or obligations attributable to any failure by Seller to comply with
the terms thereof except (i) to the extent reserved for in the Seller’s
financial statements and specifically disclosed to Buyer, (ii) for
obligations of Seller under warranty claims or expenses assumed under
Section 2.03(b) or (iii) as specifically identified on Schedule 2.03(a))
including, without limitation obligations associated with Deferred Revenue;

 

(b)           all
warranty claims or expenses of Seller in respect of products sold or services
rendered by the Business through the Closing Date, but only to the extent of
the reserve therefor shown on the Balance Sheet and any amounts properly
accrued since the Balance Sheet Date;

 

(c)           Seller’s
obligation to provide vacation time and vacation pay to the Transferred
Employees as listed on Schedule 2.03(c), and for liabilities for
vacation time and vacation pay properly accrued through the Closing Date.

 

6

 

2.04        Excluded Liabilities.
Notwithstanding any provision in this Agreement or any other writing to the contrary,
Buyer is assuming only the Assumed Liabilities and is not assuming any other
liability or obligation of Seller or any Affiliate of Seller (or any
predecessor owner of all or part of its business and assets) of whatever nature
whether presently in existence or arising or asserted hereafter. All such other
liabilities and obligations shall be retained by and remain obligations and
liabilities of Seller or its Affiliates (all such liabilities and obligations
not being assumed being herein referred to as the “Excluded Liabilities”).
Without limiting the foregoing, none of the following shall be Assumed
Liabilities for the purposes of this Agreement:

 

(a)           Any
and all liabilities and obligations of Seller for Taxes, (including any Taxes
that arise as a result of the transactions contemplated by this Agreement),
except as provided for by Section 8.03(c);

 

(b)           except
to the extent provided in Article VIII and Section 2.03(c), any
liabilities or obligations relating to employee benefits or compensation arrangements
existing as of the end of the day on the day immediately preceding the Closing
Date, including, without limitation, any liabilities or obligations under any
of Seller’s employee benefit agreements, plans or other arrangements listed on Schedule 9.02;

 

(c)           any
claims for refunds based on any warranty, express or implied, for products or
services provided to the extent not reserved therefor on the Balance Sheet or
not properly accrued since the Balance Sheet Date;

 

(d)           any
environmental liabilities;

 

(e)           any
amounts owing to Benefactor Funding Corp.;

 

(f)            any
liability or obligation relating to an Excluded Asset; and

 

(g)           any
liability or obligation relating to or arising under any Excluded Contract.

 

2.05        Assignment of Contracts and Rights.
Anything in this Agreement to the contrary notwithstanding, this Agreement
shall not constitute an agreement to assign any Purchased Asset or any claim or
right or any benefit arising thereunder or resulting therefrom if an attempted
assignment thereof, without consent of a third party thereto, would constitute
a breach or other contravention thereof or in any way adversely affect the
rights of Buyer or Seller thereunder. Seller and Buyer will use their best
efforts (but without any payment of money by Seller or Buyer) to obtain the
consent of the other parties to any such Purchased Asset or claim or right or
any benefit arising thereunder for the assignment thereof to Buyer as Buyer may
request. If such consent is not obtained, or if an attempted assignment thereof
would be ineffective or would adversely affect the rights of Seller or Buyer
thereunder so that Buyer would not in fact receive all such rights, Seller and
Buyer will cooperate in a mutually agreeable arrangement under which Buyer
would obtain the benefits and assume the obligations thereunder in accordance
with this Agreement, including subcontracting, sub-licensing, or subleasing to
Buyer, or under which Seller would enforce for the benefit of Buyer, with Buyer
assuming Seller’s

 

7

 

obligations, any
and all rights of Seller against a third party thereto. Seller will promptly
pay to Buyer when received all monies received by Seller under any Purchased
Asset or any claim or right or any benefit arising thereunder, except to the
extent the same represents an Excluded Asset. In such event, Seller and Buyer
shall, to the extent the benefits therefrom and obligations thereunder have not
been provided by alternate arrangements satisfactory to Buyer and Seller,
negotiate in good faith an adjustment in the consideration paid by Buyer for
the Purchased Assets, to the extent not otherwise adjusted pursuant to
Section 2.06(b).

 

2.06        Purchase Price; Closing.

 

(a)           The
purchase price for the Purchased Assets (the “Purchase Price”) is
(i) $4,340,000 in cash, subject to adjustment as provided in
Section 2.06(c) (as adjusted, the “Initial Cash Payment”),
(ii) the Earnout Payments and (iii) the assumption of the Assumed
Liabilities.

 

(b)           The
closing (the “Closing”) of the purchase and sale of the Purchased Assets
and the assumption of the Assumed Liabilities hereunder shall take place at the
offices of Choate, Hall & Stewart LLP, Boston, Massachusetts as soon as
possible, but in no event later than two business days after satisfaction of
the conditions set forth in Article X, or at such other time or place as
Buyer and Seller may agree. At the Closing,

 

(i)            Buyer shall pay to
Seller the Initial Cash Payment by wire transfer in immediately available funds
to an account maintained by Seller, such account to be designated by Seller by
written notice to Buyer not later than two business days prior to the Closing
Date.

 

(ii)           Seller and Buyer
shall enter into an Assignment and Assumption Agreement substantially in the
form attached hereto as Exhibit A, and Seller shall deliver to
Buyer such deeds, bills of sale, endorsements, consents, assignments and other
good and sufficient instruments of conveyance and assignment (the “Conveyance
Documents”) as the parties and their respective counsel shall deem
reasonably necessary or appropriate to vest in Buyer all right, title and
interest in, to and under the Purchased Assets.

 

(iii)          Each of Seller and
Buyer shall execute and deliver each of the Ancillary Agreements to be entered
into by it at the Closing, in each case substantially in the form attached as
an Exhibit to this Agreement.

 

(iv)          Seller shall have
arranged with Buyer for the physical delivery of the Personal Property and all
copies of the Business Intellectual Property, and the physical embodiment
thereof, including, without limitation, source code and all copies of all
versions of the source code for the ClearStory Products.

 

(v)           Without prejudice to
Buyer’s rights under Section 11.02 and Articles X and XI, Seller
shall deliver to Buyer revised schedules to this Agreement updating the
information shown thereon to the Closing Date.

 

8

 

(vi)          Seller and Buyer
shall execute and deliver all such instruments, documents and certificates as
may be reasonably requested by the other party that are necessary, appropriate
or desirable for the consummation at the Closing of the transactions
contemplated by this Agreement.

 

(c)           An
amount equal to $100,000 of the cash Purchase Price will be held by the Buyer at
Closing (the “Holdback”). The Holdback shall be released to the Seller
within 10 days after the delivery of the audited financial statements as
required under Section 5.09. To the extent that the Seller does not
deliver the audited financial statements as required under Section 5.09,
the Buyer shall be entitled to retain the Holdback. The Buyer is not limited to
set-off against the Holdback as an exclusive remedy for damages relating to the
breach of Section 5.09.

 

2.07        Earnout Payments.

 

(a)           For
the period beginning on the Closing Date and lasting until the eighteen month
anniversary of the Closing Date (the “Earnout Period”), Buyer shall pay
to the Seller, at the end of each fiscal quarter, in accordance with this
Section 2.07, an amount (each an “Earnout Payment” and together the
“Earnout Payments”) calculated by multiplying the Total ClearStory
Revenues for such period by 30%. Notwithstanding anything herein to the
contrary, as relates to the first $750,000 in accrued Earnout Payments (“Initial
Earnout Payment”), such Initial Earnout Payment shall be held-back by Buyer
and shall not be paid until twelve months after the Closing Date (“Initial
Earnout Due Date”); provided, however, that Buyer shall have
the right to offset against such Initial Earnout Payment any Damages owed by
Seller to the Buyer as and to the extent set forth in Article XI. After
payment of any such Damages and resolution of any such unresolved claim, any
amount of the Initial Earnout Payments remaining owed to the Seller with
respect to such claim shall be promptly paid to Seller by the Buyer. For
avoidance of doubt, the parties acknowledge and agree that only the Initial
Earnout Payment shall be subject to Buyer’s right of offset as aforesaid and
nothing in the immediately preceding sentence shall affect the timing of, or
Seller’s right to receive, any Earnout Payment other than the Initial Earnout
Payment.

 

(b)           “Total
ClearStory Revenues” shall mean the total net revenues of the Business
(whether undertaken by Buyer directly or whether operation by Buyer separately
as a distinct subsidiary of Buyer or otherwise directly or indirectly by
Buyer), for the applicable quarter or other period during the Earnout Period,
determined in accordance with generally accepted accounting principles and as
provided herein, from the sale or license, including subscriptions, of the
ClearStory Products, product maintenance contracts for ClearStory Products, or
the sale of business consulting and product implementation services related to
the ClearStory Products.

 

“ClearStory Products”
means the software products developed by the Seller known as Radiant Business
Document Server and Radiant MailManager, and all Business Intellectual
Property, as currently constituted, including without limitation any future enhancements
and derivatives thereof, new products developed with respect thereto, and
including without limitation any future support, maintenance or other
development services

 

9

 

performed. “Net
Revenues” shall be calculated in accordance with generally accepted
accounting principles as gross revenues less actual returns and a reasonable
reserve for bad debts (as calculated in a manner consistent with the historical
operations of the Business). To the extent the ClearStory Products form part of
another product or product suite or services of Buyer, the net revenues for the
ClearStory Products will be calculated by comparing the total price for the
products sold or licensed with the sum of the Buyer’s listed retail price for
the products sold or licensed, and applying any discount pro-rata (and not
disproportionately) across the combined products based on the listed retail
price for ClearStory Products or services sold or licensed and the listed
retail price of such other product or product suite. To the extent that
business consulting and product implementation services for ClearStory Products
are sold in conjunction with similar services for the Buyer’s products, the
revenues allocated to the services related to the ClearStory Products will be
calculated in the same proportion as the revenues for the licensed ClearStory
Products and Buyer’s products that are being installed, implemented or serviced.
Notwithstanding the foregoing, in no event shall the discount applied to a
ClearStory Product (exclusive of any discounts granted to VARs, OEMs or
distributors) exceed one-third of the listed retail price for the ClearStory
Products as of the date hereof and as indicated on Schedule 2.07(b), unless
Buyer and Seller agree to such greater discount. As relates to discounts
granted to VARs, OEM and distributors, any such discounts shall be reasonable
in light of all relevant facts and circumstances and shall not have a
disproportionate, adverse impact on the pricing of the ClearStory Products as
compared to Buyer’s other products.

 

(c)           The
right to receive the Earnout Payments is a contract right only and no
certificate evidencing such right shall be issued. The right to receive the
Earnout Payments shall not be transferred or assigned, except to a successor to
the Seller in connection with a sale of substantially all the Seller’s assets
or in connection with a merger or reorganization in which a majority of the
beneficial holders of the Seller’s voting securities do not, directly or
indirectly, hold a majority of the Seller’s voting securities after such
transaction, provided, however, that the Seller notifies Buyer of such transfer
in writing, provides Buyer with the transferee’s name and address and the exact
rights transferred and such transferee agrees in writing (in form and substance
satisfactory to Buyer) to be bound by the terms and conditions of this
Agreement.

 

(d)           Not
later than 30 days after the end of each fiscal quarter (or the ending period,
which may be shorter than a fiscal quarter) in the Earnout Period (other than a
fiscal quarter which is the end of the Buyer’s fiscal year), Buyer shall
prepare a written calculation of the Earnout Payment based on Buyer’s unaudited
consolidated financial statements for such period and shall deliver the Seller
a copy of such calculation and such unaudited financials together with payment
of the full amount of the Earnout Payment (less any applicable withholding) for
such period (except as it relates to the Initial Earnout Payment only, as
provided in Section 2.07(a)). Interest on any Earnout Payment that is not
paid within 30 days after the end of each fiscal quarter (or the ending period)
shall accrue interest at an annual interest rate of 12% starting 30 days after
the end of the corresponding fiscal quarter (or ending period) through the date
such Earnout Payment is paid in full.

 

(e)           Not
later than 60 days after the end of each fiscal year of Buyer in the Earnout
Period, Buyer shall prepare a preliminary written calculation of the Earnout
Payment for

 

10

 

the preceding
fourth quarter and shall deliver to the Seller a copy of such preliminary
calculation along with payment of the full amount of the Earnout Payment (less
any applicable withholding). Within fourteen days of the release of Buyer’s
audited financial statement for each such fiscal year, Buyer shall prepare a
final written calculation of the Earnout Payment for such fourth quarter based
on such financial results (reflecting any changes from the preliminary
calculation and corrections, if any, for prior quarters resulting from the
audit of Buyer’s financial statements) and shall deliver to the Seller a copy
of such calculation for such period adjusted for any such corrections (except
as provided in Section 2.07(a)). Interest on any Earnout Payment that is
not paid within 60 days after the end of each fiscal year of Buyer shall accrue
interest at an annual interest rate of 12% starting 60 days after the end of
each applicable fiscal year through the date such Earnout Payment is paid in
full.

 

(f)            Seller
will have thirty (30) days from receipt of the final calculation under
Section 2.07(d) or 2.07(e) in the 18 month period to contest in writing to
Buyer (the “Objection Notice”), which notice must be signed by the
Seller, a calculation of an Earnout Payment that it believes in good faith to
be inaccurate. For the sake of clarity, Seller’s Objection Notice may contest
any and all calculations and payments provided and made under
Sections 2.07(d) and 2.07(e). If the Seller issues an Objection Notice,
Buyer shall provide the Seller with reasonable access to the supporting
information for such calculations. Buyer and Seller shall use their best
efforts to reach agreement on the disputed amount. If Buyer and Seller are
unable to reach such agreement within twenty (20) days of receipt of the
Objection Notice by Buyer, the parties agree to cause independent accountants
of recognized standing reasonably satisfactory to Seller and Buyer (who shall
not have a material relationship with Buyer or the Seller) (the “Accounting
Referee”) promptly to review this Agreement and the disputed amounts. The
Accounting Referee shall deliver to Seller and Buyer, as promptly as
practicable, a report setting forth the calculation of the disputed amount. The
report of the Accounting Referee shall be final and binding upon the parties
hereto. The cost of each such review and report shall be borne by the Seller;
provided however, that Buyer shall bear all the expenses associated with any
such review if the applicable Earnout Payment exceeds Buyer’s original
calculation of such amount by more than five percent (5%) of such original
calculation. The Seller agrees to keep any information provided pursuant to
this Section 2.07 confidential; provided however; that nothing in this
sentence shall prevent the Seller from using such information to exercise the
Seller’s right to dispute the calculation as set forth above or to file any
required Tax Returns.

 

(g)           As
Buyer’s sole and exclusive remedy, and Seller’s sole and exclusive obligation
in respect of indemnity claims under Sections 11.02(a)(i) and 11.02(a)(ii),
Buyer shall have the right to offset the Initial Earnout Payment payable to the
Seller pursuant to this Section 2.07, against any amount owed by the
Seller to the Buyer pursuant to Section 11.02(a)(i) and 11.02(a)(ii).

 

(h)           In
the event that Buyer consummates a Buyer Sale Event or Business Sale Event, as
defined below, prior to the end of the Earnout Period, Buyer shall promptly
notify Seller. Within twenty (20) days after the Sale Event, the Buyer shall
pay to Seller a lump sum amount equal to the Earnout Payment Value (as defined
below). As used herein, “Earnout Payment Value” means (A) in the event of
a Buyer Sale Event, the net present value of (x) the

 

11

 

average quarterly
Earnout Payments from the Closing Date to the quarter immediately preceding the
quarter in which the Buyer Sale Event occurs multiplied by (y) the
remaining time period (expressed in fiscal quarters, or portions of a quarter)
of the Earnout Period; and (B) in the event of a Business Sale Event, the net
present value of the difference between (u) $2,250,000 and (w) the
aggregate amount paid to Seller pursuant to this Section 2.07 as of and
through the date of the Business Sale Event (to the extent the amount paid is
less than $2,250,000). Upon payment by Buyer of the Earnout Payment Value to
Seller, this Section 2.07 shall immediately terminate, without any further
liability of Buyer to Seller for Earnout Payments, except as set forth in this
paragraph. As used herein, (C) the term “Buyer Sale Event” shall mean
(i) a merger or consolidation of Buyer with or into any other Person if
immediately after such transaction Persons who were stockholders of Buyer
immediately before such transaction own less than 50% in voting power of the
issued and outstanding stock of the resulting or surviving entity; or
(ii) a sale by Buyer of all or substantially all of its assets, and
(D) the term “Business Sale Event” shall mean a sale by Buyer of all or
substantially all of the assets of the Business to a third party unaffiliated
with the Buyer.

 

2.08        Allocation of Purchase Price.

 

(a)           As
soon as practicable after the Closing, Buyer shall deliver to Seller a
statement (the “Allocation Statement”), setting forth the value of the
Purchased Assets and of the covenant not to compete described in
Section 5.04 hereof, which shall be used for the allocation of the
Purchase Price and the Assumed Liabilities among the Purchased Assets and the
covenant not to compete (the allocation shall be made in accordance with all
applicable provisions of the Code and any applicable state or local law).

 

(b)           Except
as required by law, Seller and Buyer agree to report an allocation of such
Purchase Price among the Purchased Assets and the covenant not to compete in a
manner entirely consistent with the Allocation, and agree to act in accordance
with such Allocation Statement in the preparation of financial statements and
filing of all Tax Returns. Each party shall notify the other party if it
receives notice that the IRS or other governmental agency proposes any
allocation different than that set forth in the Allocation Statement.

 

ARTICLE III

 

REPRESENTATIONS AND
WARRANTIES OF SELLER

 

Except as set forth in
the disclosure schedules dated as of the date hereof and delivered herewith to
Buyer, (which disclosure schedules identify the section and subsection to which
each disclosure therein relates), Seller hereby represents and warrants to
Buyer as of the date hereof that:

 

3.01        Corporate Existence and Power.
Seller is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on the Business as now conducted. Seller is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the

 

12

 

property owned or
leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect. Seller
has heretofore delivered to Buyer true and complete copies of the corporate
charter and bylaws of Seller as currently in effect.

 

3.02        Corporate Authorization.
The execution, delivery and performance by Seller of this Agreement and each of
the Ancillary Agreements, and the consummation by Seller of the transactions
contemplated hereby and thereby are within Seller’s corporate powers and have
been duly authorized by all necessary corporate action on the part of Seller. Each
of this Agreement and each Ancillary Agreement to which Seller is a party has
been duly executed and delivered by Seller and constitutes a valid and binding
agreement of Seller, enforceable in accordance with its terms.

 

3.03        Governmental Authorization; Consents.

 

(a)           The
execution, delivery and performance by Seller of this Agreement and each of the
Ancillary Agreements to which Seller is a party require no action by or in
respect of, or filing with, any governmental body, agency, or official.

 

(b)           Except
as set forth in Schedule 3.03, no consent, approval, waiver or
other action (a “Required Consent”) by any Person (other than any
governmental body, agency, official or authority referred to in (a) above)
under any contract listed on Schedule 3.11 or any other material
contract, agreement, indenture, lease, instrument, or other document binding
upon or to which the Seller is a party is required or necessary for the
execution, delivery and performance by Seller of this Agreement and each
Ancillary Agreement to which Seller is a party, or for the consummation of the
transactions contemplated hereby or thereby.

 

3.04        Non-Contravention.
The execution, delivery and performance by Seller of this Agreement and each
Ancillary Agreement to which Seller is a party, and the consummation of the
transactions contemplated hereby and thereby, do not and will not
(i) contravene or conflict with the corporate charter or bylaws of Seller,
(ii) assuming compliance with the matters referred to in
Section 3.03(a), contravene or conflict with any provision of any law,
regulation, judgment, injunction, order, Permit or decree binding upon or
applicable to Seller or the Business; (iii) assuming the receipt of all
Required Consents, constitute a default (with or without notice or lapse of
time, or both) under or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Seller, or to a loss of any benefit,
relating to the Business to which Seller is entitled under any provision of any
agreement, contract or other instrument binding upon Seller or (iv) result
in the creation or imposition of any Lien (other than a Permitted Lien) on any
Purchased Asset.

 

3.05        Financial Statements.

 

(a)           The
“Financial Statements” include:

 

13

 

(i)            the unaudited
balance sheet of the Business as of March 31, 2005 and the related
unaudited statements of operations and cash flows for the Business for the 12
months ended March 31, 2005; and

 

(ii)           the unaudited
balance sheet of the Business as of December 31, 2005 and the related
unaudited consolidated statements of income and cash flows for the Business for
the fiscal nine months ended December 31, 2005.

 

(b)           Each
of the balance sheets included in the Financial Statements fairly presents in
all material respects the financial position of the Business as of its date,
and the other statements included in the Financial Statements fairly present in
all material respects the results of operations and cash flows, as the case may
be, of the Business for the periods therein set forth, in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved (except for the calculation of Deferred Revenue
which on the unaudited financial statements is calculated in accordance with
the methodologies set forth on Schedule 2.03(a)) and, without limiting the
generality of the foregoing, have been prepared in accordance with the specific
accounting policies and procedures described in the Accounting Convention
except as otherwise stated therein and, with respect to the unaudited financial
statements, for the omission of footnote disclosures and, with respect to the
unaudited interim financial statements, to the extent consistent with generally
accepted accounting principles, normally recurring year-end audit adjustments.

 

3.06        Absence of Certain Changes.
Since the Balance Sheet Date through the date of this Agreement, except as
reflected in Schedule 3.06, Seller has conducted the Business in
the ordinary course consistent with past practices, and there has not been any
of the following with respect to the Business:

 

(a)           Material
Adverse Change or any event, occurrence, development or state of circumstances
or facts which could reasonably be expected to result in a Material Adverse
Change, or any condition, event or occurrence which, individually or in the
aggregate, could reasonably be expected to prevent or materially delay Seller’s
ability to consummate the transactions contemplated by this Agreement or
perform its obligations hereunder or under the Ancillary Agreements;

 

(b)           payment
or grant of any right relating to the Business by Seller to any Interested
Person, or any charge by any Interested Person to Seller relating to the
Business, or other transaction between Seller relating to the Business and any
Interested Person, except in any such case for employee compensation payments
in the ordinary course of business of Seller consistent with past practice.

 

(c)           incurrence,
assumption or guarantee by Seller of any indebtedness for borrowed money with
respect to the Business;

 

(d)           creation
or assumption by Seller of any Lien (other than a Permitted Lien) on any
Purchased Asset;

 

14

 

(e)           damage,
destruction or other casualty loss (whether or not covered by insurance)
affecting the Business or any Purchased Asset in an amount greater than
$10,000;

 

(f)            transaction
or commitment made, or any contract or agreement entered into, by Seller
relating to the Business or any Purchased Asset (including the acquisition or
disposition of any assets) or any relinquishment by Seller of any contract or
other right, in either case, material to the Business, other than transactions and
commitments in the ordinary course of business consistent with past practices
and those contemplated by this Agreement;

 

(g)           change
in any material method of Tax or financial accounting or accounting practice or
any making of a material Tax election or change of an existing election by
Seller with respect to the Business;

 

(h)           (i) grant
of any severance or termination pay to any employee of the Business,
(ii) entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
employee of the Business, (iii) change in benefits payable under existing
severance or termination pay policies of Seller relating to the Business or
employment agreements to which any employee of the Business is a party or
(iv) change in compensation, bonus or other benefits payable to employees
of the Business;

 

(i)            labor
dispute, other than routine individual grievances, or any activity or
proceeding by a labor union or representative thereof to organize any employees
of the Business, or any lockouts, strikes, slowdowns, work stoppages or threats
thereof by or with respect to such employees;

 

(j)            employee
terminations (other than for poor performance or for cause) and/or layoffs, and
Seller has preserved intact and kept available the services of present
employees, in each case in accordance with past practice,

 

(k)           capital
expenditure, or commitment for a capital expenditure, for additions or
improvements to property, plant and equipment in an amount greater than
$10,000;

 

(l)            action
which, if it had been taken or occurred after the execution of this Agreement,
would have required the consent of Buyer pursuant to this Agreement; or

 

(m)          agreement,
undertaking or commitment to do any of the foregoing.

 

3.07        Personal Property.

 

(a)           Seller
has good and marketable title to, or in the case of leased personal property
has valid leasehold interests in, all personal property
(including machinery and equipment, inventory, and furniture) (whether tangible
or intangible) used in the Business (the “Personal Property”). All of
such Personal Property is listed on Schedule 3.07. None of such
Personal Property is subject to any Liens, other than:

 

15

 

(i)            Liens disclosed on
the Balance Sheet;

 

(ii)           Permitted Liens; or

 

(iii)          Liens that do not
materially detract from the value of the Personal Property as now used, or
materially interfere with any present or intended use of the Personal Property.

 

(b)           The
Personal Property has no material defects, is in good operating condition and
repair (ordinary wear and tear excepted), and is generally adequate for the
uses to which it is being put.

 

3.08        Sufficiency of Purchased Assets. As
of the date of this Agreement, the Purchased Assets constitute, and on the
Closing Date will constitute, all of the assets or property used or held for
use in the Business as of each such date except as set forth on Schedule 3.08.
On the Closing Date, the Purchased Assets will be generally adequate to conduct
the Business as currently conducted except as set forth on Schedule 3.08.

 

3.09        Title to Purchased Assets.
Upon consummation of the transactions contemplated hereby, Buyer will have
acquired good and marketable title in and to, or a valid leasehold interest in,
each of the Purchased Assets, free and clear of all Liens, except for:

 

(a)           Permitted
Liens; or

 

(b)           Liens
that do not materially detract from the value of such Purchased Asset as now
used, or materially interfere with any present or intended use of such Purchased
Asset.

 

3.10        Litigation. There
is no claim, action, suit, investigation or proceeding pending against, or to
the Seller’s Knowledge, threatened against or affecting, the Business or any
Purchased Asset, or the transactions contemplated hereby before any court or
arbitrator or any governmental body, agency, official or authority.

 

3.11        Material Contracts.

 

(a)           Except
for the Contracts disclosed in Schedule 3.11 (and referenced to the
applicable subsection below), as of the date of this Agreement, and, in each
case, with respect to, or relation to the Business, Seller is not a party to or
subject to any:

 

(i)            contract for the
purchase of materials, supplies, goods, services, equipment or other assets
providing for annual payments by Seller of, or pursuant to which in the last
year Seller paid, in the aggregate $10,000 or more;

 

(ii)           sales, distribution
or other similar agreement providing for the sale or license by Seller of
materials, supplies, goods, services, equipment or other assets that provide for
annual payments to Seller of, or pursuant to which in the last year Seller
received, in the aggregate $10,000 or more;

 

16

 

(iii)          maintenance
agreements (“Maintenance Agreements”), except as set forth on Schedule 3.11(a)(iii),
which schedule lists all customer names, invoice dates, renewal dates, value of
maintenance contracts, and any non-standard terms;

 

(iv)          partnership,
joint venture or other similar contract arrangement or agreement;

 

(v)           contract
relating to indebtedness for borrowed money or the deferred purchase price of
property (whether incurred, assumed, guaranteed or secured by any asset),
except contracts relating to indebtedness incurred in the ordinary course of
business in an amount not exceeding $10,000;

 

(vi)          employment
or consulting agreement;

 

(vii)         license,
technology transfer, franchise, source code escrow or other agreement in
respect of any Business Intellectual Property or other property owned or used
by Seller;

 

(viii)        agency,
dealer, sales representative or other similar agreement;

 

(ix)           contract
or other document that limits the freedom of Seller to compete in any line of
business or with any Person or in any area to own, operate, sell, transfer,
pledge or otherwise dispose of or encumber any Purchased Asset and that would
so limit the freedom of Buyer after the Closing Date;

 

(x)            contract
or commitment with or for the benefit of any Interested Person; or

 

(xi)           other
contract or commitment not made in the ordinary course of business that is
material to the Business taken as a whole.

 

(b)           Each Contract disclosed in any
Schedule to this Agreement or required to be disclosed pursuant to
Section 3.11(a) is a valid and binding agreement of Seller and is in full
force and effect, and neither Seller nor, to Seller’s Knowledge, any other
party thereto is in default in any material respect under the terms of any such
Contract, nor, to Seller’s Knowledge, has any event or circumstance occurred
that, with notice or lapse of time or both, would constitute an event of
default thereunder.

 

(c)           Each Contract disclosed in any
Schedule to this agreement is not subject to any amendments, side letters,
modifications or other agreements relating thereto, except for written
amendments, modifications or other agreements as so disclosed in any Schedule.

 

3.12        Technology and Intellectual Property.

 

(a)           Schedule 3.12(a) lists:  (i) all patents and all registered
trademarks, service marks, copyrights and mask works, and any applications and
renewals for any of the foregoing owned by or on behalf of Seller or its
Affiliates for the benefit of the Business; (ii) all hardware

 

17

 

products and tools, software and firmware products and
tools and services that are currently sold, published, offered, or under
development by Seller or its Affiliates for the benefit of the Business; and
(iii) all licenses (in and out), sublicenses and other agreements to which
Seller or its Affiliates is a party and pursuant to which Seller or any other
person is authorized to use any of the Business Intellectual Property or
exercise any other right with regard thereto.

 

(b)           Each item of the Business Intellectual
Property is either:  (i) owned
solely by Seller or its Affiliates free and clear of any liens (the “Owned
Intellectual Property”), as listed on Schedule 3.12(b)(i); or
(ii) rightfully used and authorized for use by Seller and its successors
pursuant to a valid and enforceable written license as listed on Schedule 3.12(b)(ii).
All of the Business Intellectual Property that is used by Seller pursuant to a
license or other grant of a right by a third party to use its proprietary
information is separately identified as such under Schedule 3.12(b).
Seller has all rights in the Business Intellectual Property necessary to carry
out the Business former, current and currently planned future activities,
including without limitation (except as noted on Schedule 3.12(b))
rights to make, use, exclude others from using, reproduce, modify, adapt,
create derivative works based on, translate, distribute (directly and
indirectly), transmit, display and perform publicly, license, rent, lease,
assign and sell the Business Intellectual Property in all geographic locations
and fields of use, and to sublicense any or all such rights to third parties,
including the right to grant further sublicenses.

 

(c)           Seller is not in material violation
of any license, sublicense or other agreement listed on Schedule 3.11
to which Seller is a party or otherwise bound relating to any of the Business
Intellectual Property. Except as noted in Schedule 3.12(c), neither
Seller nor any of its Affiliates is obligated to provide any consideration (whether
financial or otherwise) to any third party, nor is any third party otherwise
entitled to any consideration, with respect to any exercise of rights by Seller
or Buyer, as successor to Seller, in Business Intellectual Property.

 

(d)           To the Seller’s Knowledge, the use of
the Owned Intellectual Property and to the Seller’s actual knowledge, the use
of the Intellectual Property listed on Schedule 3.12(b)(ii) by
Seller as currently used and as currently proposed to be used does not infringe
any other Person’s copyright, trade secret rights, right of privacy, moral
right, patent, trademark, service mark, trade name, firm name, logo, trade
dress or mask work or any other intellectual property right. No claims
(i) challenging the validity, enforceability, effectiveness or ownership
by Seller of any of the Owned Intellectual Property or (ii) to the effect
that the use, reproduction, modification, manufacture, distribution, licensing,
sublicensing, sale, or any other exercise of rights in any of the Owned Intellectual
Property by Seller, infringes or will infringe on any intellectual property or
other proprietary or personal right of any Person have been asserted against
Seller or, to Seller’s Knowledge, are threatened by any Person. There are no
legal or governmental proceedings, including interference, re-examination,
reissue, opposition, nullity, or cancellation proceedings pending that relate
to any of the Owned Intellectual Property, other than review of pending patent
applications, and Seller is not aware of any information indicating that such
proceedings are threatened or contemplated by any governmental entity or any
other Person. To the Seller’s Knowledge, there is no unauthorized use,
infringement, or misappropriation of any of the Owned Intellectual Property, by
any third party, employee or former employee.

 

18

 

(e)           Schedule 3.12(e)
separately lists all parties (other than employees) who have created any
portion of, or otherwise have any rights in or to, the Owned Intellectual
Property. Seller has secured from all parties (including employees) who have
created any portion of, or otherwise have any rights in or to, the Owned
Intellectual Property valid and enforceable written assignments of any such
work, invention, improvement or other rights to Seller and has provided true
and complete copies of such assignments to Buyer.

 

(f)            The transactions contemplated under
this Agreement shall not alter, impair or otherwise affect any rights of Seller
or any Affiliate in any of the Business Intellectual Property.

 

(g)           Seller has taken commercially
reasonable measures to protect the proprietary nature of the Business
Intellectual Property and to maintain in confidence all trade secrets and
confidential information owned or used by Seller in the Business.

 

(h)           Except as disclosed on Schedule 3.12(h),
the Owned Intellectual Property and the Business Intellectual Property that is
distributed with, or as a part of, Seller’s products and services do not
include any Publicly Available Software and Seller has not used Publicly
Available Software in whole or in part in the development of any part of the
Owned Intellectual Property in a manner that may subject the Owned Intellectual
Property in whole or in part, to all or part of the license obligations of any
Publicly Available Software. “Publicly Available Software” means each of
(i) any software that contains, or is derived in any manner (in whole or
in part) from, any software that is distributed as free software, open source
software (e.g. Linux), or similar licensing and distribution models; and
(ii) any software that requires as a condition of use, modification,
and/or distribution of such software that such software or other software
incorporated into, derived from, or distributed with such software (a) be
disclosed or distributed in source code form; (b) be licensed for the
purpose of making derivative works; or (c) be redistributable at no or
minimal charge. Publicly Available Software includes, without limitation,
software licensed or distributed under any of the following licenses or
distribution models similar to any of the following:  (a) GNU General Public License (GPL) or
Lesser/Library GPL (LGPL), (b) the Artistic License (e.g. PERL),
(c) the Mozilla Public License, (d) the Netscape Public License,
(e) the Sun Community Source License (SCSL), the Sun Industry Source
License (SISL), and the Apache Server License.

 

3.13        Insurance Coverage. Schedule 3.13
lists all of the insurance policies and fidelity bonds covering the Purchased
Assets, the business and operations of the Business and its employees. Seller
has furnished to Buyer true and complete copies of all insurance policies and
fidelity bonds listed in Schedule 3.13. There is no claim by Seller
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds. All
premiums payable under all such policies and bonds have been paid and Seller is
otherwise in full compliance with the terms and conditions of all such policies
and bonds. Such policies of insurance and bonds (or other policies and bonds
providing substantially similar insurance coverage) have been effect since
January 1, 2005 and remain in full force and effect. Such policies of
insurance and bonds are of the type and in amounts customarily carried by
Persons conducting businesses similar to the Business. Seller

 

19

 

does not know of any threatened termination of, or
premium increase with respect to, any of such policies or bonds.

 

3.14        Compliance with Laws.

 

(a)           Seller is not and has not been in
violation of any applicable provisions of any laws, statutes, ordinances or
regulations and to Seller’s Knowledge is not under investigation with respect
to and has not been threatened to be charged with or given notice of any
violation of, any law, rule, ordinance or regulation applicable to the
Purchased Assets or the conduct of the Business.

 

(b)           Schedule 3.14(b)
correctly describes each governmental license, permit, concession or franchise
(a “Permit”) material to the Business, together with the name of the
governmental agency or entity issuing such Permit. Except as set forth on Schedule 3.14(b),
such Permits are valid and in full force and effect and, assuming the related
Required Consents have been obtained prior to the Closing Date, are
transferable by Seller and will not be terminated or impaired or become
terminable as a result of the transactions contemplated hereby. Upon consummation
of such transactions, Buyer will, assuming the related Required Consents have
been obtained prior to the Closing Date, have all of the right, title and
interest in all the Permits.

 

(c)           Seller is not in default under, and
no condition exists that with notice or lapse of time or both would constitute
a default under, any judgment, order or injunction of any court, arbitrator or
governmental body, agency, official or authority.

 

3.15        Employees.

 

(a)           Schedule 3.15 sets forth,
with respect to each employee of Seller who is employed in the Business
(including any such employee of Seller who is on a leave of absence)
(i) the name of such employee and the date as of which such employee was
originally hired by Seller, and whether the employee is on an active or inactive
status; (ii) such employee’s title; (iii) such employee’s annualized
compensation as of the date of this Agreement, including base salary, vacation
and/or paid time off accrual amounts, bonus and/or commission potential, equity
vesting schedule, severance pay potential, and any other compensation forms;
(iv) each current benefit plan in which such employee participates or is
eligible to participate; and (v) any governmental authorization that is
held by such employee and that is used in connection with the Business. Except
as disclosed in Schedule 3.15(a), the employment of each of the
employees of the Business is terminable by Seller at will.

 

(b)           Schedule 3.15(b) lists
all Persons who are currently performing services for the Business who are
classified as “consultants” or “independent contractors,” the compensation of
each such Person and whether Seller is party to an agreement with such Person
(whether or not in writing). Any such agreements are listed on Schedule 3.11
and have been made available (or, in the case of agreements that are not in
writing, a summary thereof has been delivered) to Buyer. All Persons engaged by
Seller for the benefit of the Business as independent contractors, rather than
employees, have been properly classified as such and have been engaged in
accordance with all applicable foreign, federal, state and/or local laws.

 

20

 

(c)           Seller is not and has never been a
party to or bound by any union contract, collective bargaining agreement or
similar contract. There has never been any slowdown, work stoppage, labor
dispute or union organizing activity, or any similar activity or dispute,
affecting Seller or any of their employees.

 

(d)           Schedule 3.15(d) lists
all current employee manuals and handbooks, employment policy statements,
employment agreements, and other materials relating to the employment of the
current employees of the Business. Seller has made available to Buyer complete
copies of all such documents.

 

(e)           Except as disclosed in Schedule 3.15(e),
(i) none of the employees of the Business has notified or otherwise
indicated to Seller that he or she intends to terminate his or her employment
with Seller, or not to accept employment with Buyer; (ii) Seller does not
have a present intention to terminate the employment of any employee of the
Business; (iii) to Seller’s Knowledge, no employee of the Business has
since January 1, 2006 received an offer of an employment from any other
Person; (iv) all employees of the Business have executed Seller’s form
Noncompetition, Nondisclosure and Developments Agreement; (v) no employee
of the Business is a party to or is bound by any employment contract, patent
disclosure agreement, noncompetition agreement or other restrictive covenant or
other contract with any third party that would be likely to affect in any way
(A) the performance by such employee of any of his or her duties or
responsibilities as a employee, or (B) the business or operations of the
Business; (vi) to the Knowledge of Seller, no employee of the Business is
in violation of any term of any employment contract, patent disclosure
agreement, noncompetition agreement, or any other restrictive covenant with any
third party relating to the right of any such employee to be employed by
Seller; and (vii) Seller is not and never has been engaged in any dispute
or litigation with an employee of the Business or former employee of the
Business regarding Intellectual Property matters.

 

(f)            Except as disclosed in Schedule 3.15(f),
(i) Seller does not have an established severance pay practice or policy;
(ii) no employee of the Business is entitled to any severance pay, bonus
compensation, acceleration of payment or vesting of any equity interest, or
other payment from Seller or Buyer (other than accrued salary, vacation, or
other paid time off in accordance with the policies of Seller) as a result of
or in connection with the transactions contemplated by this Agreement or any
Ancillary Agreement or as a result of any termination by the Business on or
after the Closing of any Person employed by Seller on or prior to the Closing
Date.

 

(g)           Seller is in compliance with all
currently applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours. Seller is not engaged, and to
Seller’s Knowledge has never engaged, in any unfair labor practice of any
nature. The employees of the Business have been, and currently are, properly
classified under the Fair Labor Standards Act of 1938, as amended, and under
any applicable state law. Seller has not failed to pay, any of its employees,
consultants or contractors for any wages (including overtime), salaries,
commissions, bonuses, benefits or other direct

 

21

 

compensation for any services performed by them to the
date hereof or amounts required to be reimbursed to such individuals.

 

(h)           Seller, and each employee of the
Business, is in compliance with all applicable visa and work permit
requirements, and no visa or work permit held by an employee of the Business
will expire during the six month period following the date of this Agreement.

 

3.16        Environmental Compliance.

 

(a)           The Seller has complied in all
material respects with all federal, state and local laws (including, without
limitation, case law, rules, regulations, orders, judgments, decrees, permits,
licenses and governmental approvals) which are intended to protect the
environment and/or human health or safety (collectively, “Environmental Laws”);
and

 

(b)           The Seller has not handled,
generated, used, stored, transported or disposed of any material, substance or
waste which is regulated by Environmental Laws (“Hazardous Materials”),
except where such handling, generation, use, storage, transportation or disposal
has not had, and could not reasonably be expected to have, a Material Adverse
Effect. The foregoing does not constitute a representation or warranty that no
violation of Environmental Laws has occurred with respect to premises occupied
by the Seller, although Seller has no knowledge of any such violation.

 

3.17        Customers and Suppliers. Seller has
not received notice from and is not otherwise aware that (a) any customer
(or group of customers under common ownership or control) that accounted for a
material percentage of the aggregate products and services furnished by the
Business during the past 18 months has stopped or intends to stop purchasing
the products or services of the Business or (b) any supplier (or group of
suppliers under common ownership or control) that accounted for a material
percentage of the aggregate supplies purchased by the Business during the past
18 months has stopped or intends to stop supplying products or services to the
Business.

 

3.18        Transactions with Affiliates; Intercompany Arrangements.
There are no agreements, loans, leases, royalty agreements or other continuing
transactions, in each cases relating to the Business or the Purchased Assets
between Seller and (i) any officer, director or stockholder of Seller or
any of their Affiliates or (ii) any member of any officer, director or
stockholder of Seller’s family or any of their Affiliates (“Interested
Person”). To the Knowledge of Seller, no Interested Person (x) has any
material direct or indirect interest in any entity that does business with
Seller with respect to the Business or (y) has any direct or indirect
interest in any property, asset or right that is used by Seller in the conduct
of the Business. No Interested Person has any contractual relationship
(including that of creditor or debtor) with Seller other than such
relationships as result solely from being an officer, director or stockholder
of Seller.

 

3.19        Finders’ Fees. Except for Berkery,
Noyes & Co., LLC, whose fees will be paid by Seller, there is no investment
banker, broker, finder or other intermediary that has been retained by or is
authorized to act on behalf of Seller who might be entitled to any fee or

 

22

 

commission from Buyer, Seller or any of their respective
Affiliates upon consummation of the transactions contemplated by this
Agreement.

 

3.20        Other Information. None of this
Agreement, the Ancillary Agreements and the schedules, exhibits and other
documents delivered in connection herewith and therewith, when read together as
a whole, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein not
misleading.

 

ARTICLE
IV

 

REPRESENTATIONS
AND WARRANTIES OF BUYER

 

Buyer hereby represents and warrants to Seller that:

 

4.01        Organization and Existence. Buyer is
a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.

 

4.02        Corporate Authorization. The
execution, delivery and performance by Buyer of this Agreement, each of the
Ancillary Agreements and the
consummation by Buyer of the transactions contemplated hereby and thereby are
within the corporate powers of Buyer and have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement and each of the Ancillary Agreements to which Seller is a party have
been duly executed and delivered by Buyer and constitute valid and binding
agreements of Buyer.

 

4.03        Governmental Authorization. The
execution, delivery and performance by Buyer of this Agreement and each of the
Ancillary Agreements require no action by or in respect of, or filing with, any
governmental body, agency, official or authority.

 

4.04        Non-Contravention. The execution,
delivery and performance by Buyer of this Agreement and each of the Ancillary
Agreements and the consummation by Buyer of the transactions contemplated
hereby and thereby do not and will not (i) contravene or conflict with the
corporate charter or bylaws of Buyer or (ii) assuming compliance with the
matters referred to in Section 4.03, contravene or conflict with any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to Buyer.

 

4.05        Litigation. There is no action,
suit, investigation or proceeding pending against, or to the knowledge of Buyer
threatened against or affecting, Buyer before any court or arbitrator or any
governmental body, agency or official which in any manner challenges or seeks
to prevent, enjoin, alter or materially delay the transactions contemplated
hereby.

 

4.06        Finders’ Fees. There is no
investment banker, broker, finder or other intermediary that has been retained
by or is authorized to act on behalf of Buyer who might be entitled to any fee
or commission from Seller or any of its Affiliates upon consummation of the
transactions contemplated by this Agreement.

 

23

 

4.07        Financing. Prior to and on the
Closing Date, Buyer will have sufficient and available funds to enable Buyer to
pay the Initial Cash Payout and to pay all fees and expenses related to the transactions
contemplated by this Agreement payable by Buyer on the Closing Date.

 

ARTICLE
V

 

COVENANTS
OF SELLER

 

Seller agrees that:

 

5.01        Conduct of the Business. From the
date hereof until the Closing Date, Seller shall conduct the Business in the
ordinary course consistent with past practices and shall use its reasonable
best efforts to preserve intact the business organization and relationships
with third parties and to keep available the services of the present employees
of the Business. Without limiting the generality of the foregoing, from the
date hereof until the Closing Date, Seller will not:

 

(a)           acquire a material amount of assets
related to the Business from any other Person;

 

(b)           sell, lease, license or otherwise
dispose of any Purchased Assets except (i) pursuant to existing contracts
or commitments, (ii) in the ordinary course consistent with past practices
and (iii) without the consent of Buyer, which shall not be unreasonably
withheld;

 

(c)           renew or enter into any Maintenance
Agreement except in the ordinary course of business and on the Seller’s
standard terms and conditions without the consent of Buyer, which shall not be
unreasonably withheld; or

 

(d)           terminate or otherwise layoff any
employees of the Business, and will preserve intact and keep available the
services of all employees of the Business, in each case in accordance with past
practices.

 

Seller will not take or
agree or commit to take any action that would make any representation and
warranty made by Seller under this Agreement on the date of its execution and
delivery inaccurate in any respect at, or as of any time prior to, the Closing
Date.

 

5.02        Access to Information. From the date
hereof until the Closing Date, Seller shall (a) give Buyer, its counsel,
financial advisors, financing sources, auditors and other authorized
representatives full reasonable access to the offices, properties, books and
records of Seller related to the Business, (b) furnish to Buyer, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information relating to the Business as
such Persons may reasonably request and (c) instruct the employees,
counsel and financial advisors of Seller to reasonably cooperate with Buyer in
its investigation of the Business. No investigation by Buyer pursuant to this
Section shall affect any representation or

 

24

 

warranty given by Seller hereunder or any of Buyer’s
rights under this Agreement, including without limitation under Articles X
and XI.

 

5.03        Notices of Certain Events; Continuing Disclosure.

 

(a)           Seller shall promptly notify Buyer
of:

 

(i)            any
notice or other communication from any Person alleging that the consent of such
Person is or may be required in connection with the transactions contemplated
by this Agreement;

 

(ii)           any
notice or other communication from any governmental or regulatory agency or
authority in connection with the transactions contemplated by this Agreement;
and

 

(iii)          any
actions, suits, claims, investigations or proceedings commenced or, to Seller’s
Knowledge threatened against, or relating to or involving or otherwise
affecting Seller or the Business or that relate to the consummation of the
transactions contemplated by this Agreement, or any material developments
relating to any actions, suits, claims, investigations or proceedings disclosed
pursuant to section 3.10.

 

(b)           Until the Closing Date, Sellers shall
have the continuing obligation promptly to advise Buyer with respect to any
matter hereafter arising or discovered that, if existing or known at the date
of this Agreement, would have been required to be set forth or described in a
Schedule to this Agreement, or that constitutes a breach or prospective breach
of this Agreement by Seller.

 

(c)           No notice pursuant to this Section
shall affect any representation or warranty given by Seller hereunder or any of
Buyer’s rights under this Agreement, including without limitation under
Articles X and XI.

 

5.04        Noncompetition.

 

(a)           Seller agrees that for a period of
three full years from the Closing Date,
neither it nor any Person that, as of the date of this Agreement or the Closing
Date, is an Affiliate of Seller shall:

 

(i)            engage,
either directly or indirectly, as a principal or for its own account, or solely
or jointly with others, or as a stockholder in any corporation or joint stock
association, in any business that competes with the Business as it exists on
the Closing Date; provided that nothing herein shall prohibit the purchase
or ownership of up to 5% of the outstanding stock of a publicly-traded company
that competes with the Business; or

 

25

 

(ii)           employ
or solicit, or receive or accept the performance of services by, any Transferred
Employee; or

 

(iii)          advise
any customer or supplier of the Business with respect to its business
relationship with the Business.

 

(b)           For the sake of clarity, in the event
Seller is acquired after the Closing Date by a Person (the “Acquiror”)
the business activities of Acquiror on the date Acquiror acquires Seller
(including any activities that compete with the Business as it exists on the
Closing Date) shall not be deemed a violation of the provisions of this
Section 5.04 notwithstanding the fact that the combined entity of Acquiror
and Seller will continue to engage in such business activities.

 

(c)           If any provision contained in this
Section shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Section, but this Section shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein. It is the intention of the parties that if any of the restrictions or
covenants contained herein is held to cover a geographic area or to be for a
length of time which is not permitted by applicable law, or in any way
construed to be too broad or to any extent invalid, such provision shall not be
construed to be null, void and of no effect, but to the extent such provision
would be valid or enforceable under applicable law, a court of competent
jurisdiction shall construe and interpret or reform this Section to provide for
a covenant having the maximum enforceable geographic area, time period and
other provisions (not greater than those contained herein) as shall be valid
and enforceable under such applicable law. Seller acknowledges that Buyer would
be irreparably harmed by any breach of this Section and that there would be no
adequate remedy at law or in damages to compensate Buyer for any such breach. Seller
agrees that Buyer shall be entitled to injunctive relief requiring specific
performance by Seller of this Section, and Seller consents to the entry
thereof.

 

5.05        Trademarks; Tradenames. As soon as
practicable after the Closing Date, Seller shall eliminate the use of all of
the trademarks, tradenames, service marks and service names used in the
Business, in any of their forms or spellings, on all advertising, stationery,
business cards, checks, purchase orders and acknowledgments, customer
agreements and other contracts and business documents. Seller shall grant Buyer
the right to use the ClearStory name, as described in the Trademark License
Agreement at Exhibit B. 

 

5.06        Information Statement.

 

(a)           The Seller has prepared an
information statement (the “Information Statement”) in connection with
the transactions contemplated hereby in a form reasonably acceptable to Buyer. The
Seller shall file the Information Statement with the Securities and Exchange
Commission (the “Commission”) as a preliminary information statement
within one business day after the date hereof in accordance with
Rule 14c-2 of the Securities Exchange Act of 1934. The Information
Statement shall include the recommendation of the Seller’s Board of Directors
in favor of approval and adoption of this Asset Purchase Agreement.

 

26

 

(b)           Seller shall notify Buyer promptly
after the receipt of any comments of the Commission on, or of any request by
the Commission for amendments or supplements to, the Information Statement and
shall supply Buyer with copies of all correspondence between Seller or any of
its representatives and the Commission with respect to the Information
Statement. Seller shall use its reasonable best efforts to respond to any
comments from the Commission with respect to the preliminary Information
Statement and to make any further filings (including amendments or supplements
thereto or, if necessary or appropriate, amendments to any periodic report
filed by Seller with the Commission) in connection therewith that Seller shall
deem necessary, proper or desirable and shall cause the definitive Information
Statement to be mailed to Seller’s stockholders at the earliest practicable
time. If at any time prior to the Closing Date, any event shall occur relating
to Buyer, Seller or any of their respective officers, directors, partners or
Affiliates which should be described in an amendment or supplement to the
Information Statement, such party shall inform the other promptly after
becoming aware of such event. Whenever Buyer or Seller learn of the occurrence
of any event which should be described in an amendment of, or a supplement to,
the Information Statement, the parties shall cooperate to promptly cause such
amendment or supplement to be prepared, filed with and cleared by the
Commission and, if required by applicable law, disseminated to the persons and
in the manner required.

 

5.07        Shareholder Approval.  Seller shall
deliver to Buyer immediately upon the execution of this Agreement, an
irrevocable written consent of stockholders on the form set forth as Exhibit C,
executed by CIP Capital LP, Selway Partners, LLC, CSSMK, LLC, Selway
Management, Inc., SCP Private Equity Partners II, LLC and Mitchell Klein
(including affiliates), who together shall hold no less than 18,336,295 shares,
or approximately 80% of the votes entitled to be cast.

 

5.08        No-Shop Provision.  From the date
hereof until the Closing Date, the Seller shall not:

 

(a)           enter into any agreement,
understanding or arrangement relating to any proposal, plan, agreement,
understanding or arrangement contemplating (directly or indirectly):

 

(i)            any
merger, consolidation, reorganization, recapitalization or similar transaction
involving the Seller, any of Seller’s subsidiaries or any other entity
controlled by Seller or any of Seller’s subsidiaries;

 

(ii)           any
transfer or issuance of any capital stock or other securities of Seller, any of
Seller’s subsidiaries or any other entity controlled by Seller or any of Seller’s
subsidiaries for the purpose of effecting a change of control of Seller, or

 

(iii)          any
transfer of any material asset of the Business (collectively, an “Acquisition
Proposal”).

 

(b)           engage in any discussions or
negotiations relating to, any Acquisition Proposal;

 

27

 

(c)           provide any information regarding
Buyer or its business or operations to any party (other than to Buyer) in
connection with any possible Acquisition Proposal; or

 

(d)           solicit or encourage the submission
of any Acquisition Proposal;

 

(e)           provided however, that from the date
hereof until the Closing Date, the Seller may engage in discussions with other
parties regarding the purchase of solely the assets of the Seller not utilized in
the Business.

 

(f)            In addition, Seller shall use its
commercially reasonable efforts to prevent any Associate of Seller from doing
any of the foregoing. “Associate” means, with respect to Seller:  (i) Seller’s subsidiaries and other
entities under the control of the Seller, (ii) Seller’s directors,
officers, employees, agents, representatives, accountants, attorneys and
advisors, and (iii) the directors, officers, employees, partners, agents, representatives,
accountants, attorneys and advisors of the Seller’s subsidiaries and other
affiliates.

 

(g)           In the event that Seller receives a
written or oral inquiry expressing interest in an Acquisition Proposal from any
third party, Seller shall immediately by electronic mail, notify Buyer in
writing of such inquiry. If the Seller engages in any discussions under
5.08(e), and the third party initiates or attempts to pursue any discussions of
the purchase of the Business, the Purchased Assets, whether as a stand alone
purchase or as part of the purchase of the Seller, its securities or all or
substantially all of its assets, the Seller shall immediately (i) cease all
discussions; (ii) inform the third party that neither the Business nor the
Purchased Assets are for sale; and (iii) immediately inform Buyer by electronic
mail of such discussions.

 

5.09        Delivery of Financial Statements. The
Seller shall deliver to the Buyer the audited balance sheet and the related
statements of operations and cash flows as of March 31, 2006, along with
the unqualified audit opinion, (which may include explanatory language
regarding the going concern of the Business or the Seller) of the independent
registered accounting firm of Miller Ellin & Company, LLP, by May 15,
2006.

 

5.10        Billing. The Seller agrees that it
shall not invoice any customers for, or receive any customer payment or
deposits with respect to, maintenance service contracts that contain service
periods that commence on or after July 1, 2006, provided that the Seller
may invoice customers for and receive payments with respect to service periods
that commence during July 2006 if the Closing does not occur on or prior to
April 18, 2006; provided that the Seller is in compliance with the
provisions of Section 7.02 hereof with respect to completing the Closing on
or prior to April 18, 2006. The parties further agree, provided that the
Seller is in compliance with the provisions of Section 7.02, if the
Closing does not occur by the 15th of any month beginning with May 2006,
the Seller may invoice customers for and receive payments with respect to
service periods that commence during the month that begins approximately 75
days after the 15th of such month (for example if the Closing does
not occur by May 15th, amounts may be billed for August 2006 and if
the Closing does not occur by July 15th, amounts may be billed for
September 2006).

 

28

 

5.11        Customer Overpayments   The Seller agrees that within thirty (30)
days after the Closing, it shall send cash refunds to any customers of the
Business in the amounts listed on Schedule 5.11 for which customer
overpayments that have been retained by the Seller.

 

ARTICLE
VI

 

COVENANTS
OF BUYER

 

6.01        Certain Obligations With Respect to the Operation of the
Business.

 

(a)           At all times during the Earnout
Period, the Buyer shall keep books and records with respect to the operations
of the Business and shall maintain financial records with respect thereto, in
all events sufficient to determine the Earnout Payment. The Buyer, for so long
as the Earnout Payment is payable or are in dispute, shall provide access
(during normal business hours and upon reasonable prior written notice) to a
Seller representative from a nationally recognized accounting firm, who is not
reasonably objectionable to the Buyer, to such books and records for purposes
of verifying the Earnout Payment. Such books and records shall be kept in
accordance with generally accepted accounting principles, consistent with the
historical practices of Buyer, to the extent practicable.

 

(b)           Until the date that is six months
from the Closing Date, without prior consultation with and approval by Seller,
Buyer shall not provide customer maintenance or software upgrades under any
Contract or additional licenses to any customer of the Business that is more
than 120 days past due in paying amounts owed to Seller under accounts
receivable outstanding as of the Closing Date.

 

6.02        Post-Closing
Transition. To
the extent Buyer’s employees temporarily reside at Seller’s office in
Westborough, MA after the Closing to facilitate transition issues, Buyer agrees
that such employees (and any equipment or other assets of Buyer) shall be
removed from Seller’s premises by June 1, 2006.

 

6.03        Seller
License Agreement.
At the Closing, the Buyer shall enter into a non-exclusive, end-user
license agreement in favor of Seller for 15 named users, containing the terms and
conditions set forth in the Seller License Agreement attached hereto as Exhibit
D, which are the same terms and conditions as are set forth in Seller’s
standard end-user agreement (the “Seller License Agreement”). Pursuant
to the Seller License Agreement, Buyer will grant Seller a non-exclusive right
and license to use Radiant Business Document Server and Radiant MailManager for
Seller’s own internal business purposes. In addition, the Buyer shall provide
the Seller standard support and maintenance for such software products for a
period of not less than 5 years, at the annual rate of $5,000 per year.

 

6.04        Audit Fees. Within 10 days after the
later of (i) receipt of the audited financial statements required pursuant
to Section 5.09 hereof, or (ii) receipt of an invoice for the audits
of such financial statements of the Business and the financial statements of
the Business required pursuant to Section 10.02(e) hereof, Buyer shall pay
to Miller Ellin & Company, LLP its fees for such audits, in an aggregate
amount not to exceed $60,000.

 

29

 

6.05        Application
of Cash Receipts. If, at any time after the Closing, the Buyer
receives any payments in respect of invoices billed by the Seller prior to the
Closing, then the Buyer shall promptly remit such payments to the Seller. In
addition, and in furtherance thereof, the Buyer acknowledges and agrees that it
shall apply any such payments so received, first, against the invoices billed
by the Seller prior to the Closing, before it applies any such payments against
invoices billed by the Buyer after the Closing.

 

ARTICLE
VII

 

COVENANTS
OF BOTH PARTIES

 

The parties hereto agree
that:

 

7.01        Confidentiality. The Seller and its
Affiliates will hold, and will use their best efforts to cause their respective
officers, directors, employees, accountants, counsel, consultants, advisors and
agents to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all confidential
documents and information concerning Buyer furnished to Seller and its
Affiliates in connection with the transactions contemplated by this Agreement,
and, after the Closing Date, all confidential documents and information
concerning the Business, except to the extent that such information can be
shown to have been (i) previously known on a nonconfidential basis by
Seller (other than with regard to all documents and information concerning the
Business), (ii) in the public domain through no fault of Seller or
(iii) later lawfully acquired by Seller from sources other than Buyer; provided
that Seller may disclose such information to its officers, directors,
employees, accountants, counsel, consultants, advisors and agents in connection
with the transactions contemplated by this Agreement so long as such persons
are informed by Seller of the confidential nature of such information and are
directed by Seller to treat such information confidentially in accordance with
this Agreement. The Buyer and its Affiliates will hold, and will use their best
efforts to cause their respective officers, directors, employees, accountants,
counsel, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning both
the Seller and the Business furnished to Buyer and its Affiliates in connection
with the transactions contemplated by this Agreement, but after the Closing
Date, only the confidential documents and information concerning the Seller not
related to the Business except to the extent that such information can be shown
to have been (i) previously known on a nonconfidential basis by Buyer,
(ii) in the public domain through no fault of Buyer or (iii) later
lawfully acquired by Buyer from sources other than Seller; provided that
Buyer may disclose such information to its officers, directors, employees,
accountants, counsel, consultants, advisors and agents in connection with the
transactions contemplated by this Agreement so long as such persons are
informed by Buyer of the confidential nature of such information and are
directed by Buyer to treat such information confidentially in accordance with
this Agreement. The obligation of the disclosing party to hold any such
information in confidence shall be satisfied if they exercise the same care
with respect to such information as they would take to preserve the
confidentiality of their own similar information. If this Agreement is
terminated, (a) Seller will, and will use its best efforts to cause its
officers, directors, employees, accountants, counsel,

 

30

 

consultants, advisors and agents to, destroy or
deliver to Buyer, upon request, all documents and other materials, and all
copies thereof, obtained by Seller or on its behalf concerning Buyer in
connection with this Agreement that are subject to such confidence, and
(b) Buyer will, and will use its best efforts to cause its officers,
directors, employees, accountants, counsel, consultants, advisors, and agents
to, destroy or deliver to Seller, upon request, all documents and other
materials, and all copies thereof, obtained by Buyer or on its behalf
concerning Seller in connection with this Agreement that are subject to such
confidence. Upon the Closing, Seller shall not retain any copies of the source
code for the ClearStory Products or any other Business Intellectual Property.

 

7.02        Further Assurances.

 

(a)           Subject to the terms and conditions
of this Agreement, each party will use its best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements. Seller and Buyer
each agree to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be
necessary or desirable in order to consummate or implement expeditiously the
transactions contemplated by this Agreement and to vest in Buyer good and
marketable title to the Purchased Assets.

 

(b)           Seller hereby constitutes and
appoints, effective as of the Closing Date, Buyer and its successors and
assigns as the true and lawful attorney of Seller with full power of
substitution in the name of Buyer or in the name of Seller, but for the benefit
of Buyer (i) to collect for the account of Buyer any items of Purchased
Assets and (ii) to institute and prosecute all proceedings which Buyer may
in its sole discretion deem proper in order to assert or enforce any right,
title or interest in, to or under the Purchased Assets, and to defend or
compromise any and all actions, suits or proceedings in respect of the
Purchased Assets. Buyer shall be entitled to retain for its account any amounts
collected pursuant to the foregoing powers, including any amounts payable as
interest in respect thereof.

 

7.03        Certain Filings. Seller and Buyer
shall cooperate with each other (a) in determining whether any action by
or in respect of, or filing with, any governmental body, agency, official or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by this Agreement and
the Ancillary Agreements and (b) in taking such actions or making any such
filings, furnishing information required in connection therewith and seeking
timely to obtain any such actions, consents, approvals or waivers.

 

7.04        Public Announcements. The parties
agree to consult with each other before issuing any press release or making any
public statement with respect to this Agreement or the transactions
contemplated hereby and, except as may be required by applicable law or stock
exchange regulation, will not issue any such press release or make any such
public statement prior to such consultation. Notwithstanding the foregoing, the
parties agree to issue the press releases attached hereto as Exhibit E
and Exhibit E-1 at the signing of this agreement. Each party

 

31

 

also acknowledges that both the Buyer and Seller will
need to file a Form 8-K with the Commission (in accordance with the rules of
the Commission) relating to the signing of this Agreement and the Closing.

 

7.05        Information Requests. After the
Closing, for a period of six months, both the Buyer and the Seller will afford
to the other party’s officers, employees, counsel, accountants and other
authorized representatives reasonable access during normal business hours to
all personnel, books and records relating to the Purchased Assets, and shall
furnish to such persons such financial and operating data and other information
concerning the Purchased Assets as such persons from time to time reasonable
requests. Prior to the Closing, Seller shall provide Buyer with the records and
data from their call logging and bug tracking software in an electronic or
printed format that is reasonably acceptable to both parties.

 

ARTICLE
VIII

 

TAX
MATTERS

 

8.01        Tax Definitions. The following
terms, as used herein, have the following meanings:

 

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

 

“Post-Closing Tax
Period” means any Tax period (or portion thereof) beginning after the
Closing Date.

 

“Pre-Closing Tax
Period” means any Tax period (or portion thereof) ending on or before the
Closing Date.

 

“Tax” means any
federal, state, local or foreign net income, alternative or add-on minimum,
gross income, gross receipts, sales, use, value-added, ad valorem, franchise,
capital, paid-up capital, profits, lease, service, transfer, greenmail,
license, withholding, estimated, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit tax, customs
duty or other tax, governmental fee or other like assessment or charge of any
kind whatsoever (including liability for Taxes imposed on another Person,
whether incurred or borne as a transferee or successor or by contract or
otherwise), together with any interest or any penalty, addition to tax or
additional amount imposed by any governmental authority (domestic or foreign)
responsible for the imposition of any such tax.

 

“Tax Return” means
any return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.

 

8.02        Tax Matters. Seller hereby
represents and warrants to Buyer as of the date hereof and as of the Closing
Date that:

 

32

 

(a)           Seller has timely filed all Tax
Returns required to be filed and has timely paid all Taxes owed (whether or not
shown or required to be shown on such Tax Returns), in each case to the extent
such Taxes and Tax Returns related to the Purchased Assets or the operation of
the Business. All such Tax Returns were complete and correct in all respects. No
portion of any Tax Return that relates to the Purchased Assets or the operation
of the Business has been the subject of any audit, action, suit, proceeding,
claim or examination by any governmental authority, and no such audit, action,
suit, proceeding, claim, deficiency or assessment is pending or, to the
knowledge of Seller, threatened. Seller is not currently the beneficiary of any
extension of time within which to file any such Tax Return, and Seller has not
waived any statute of limitation with respect to any such Tax or agreed to any
extension of time with respect to a Tax assessment or deficiency. No claim has
ever been made by a Tax authority in a jurisdiction where Seller does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction in
connection with the Business or the Purchased Assets. There are no Liens for
Taxes upon the Purchased Assets other than Permitted Liens, (and Schedule 8.02(a)
contains a list of all Taxes being contested in good faith). Seller does not
have, and has not had, a permanent establishment or other taxable presence in
any foreign country in connection with the operation of the Business or the acquisition,
use, or holding of the Purchased Assets, as determined under the laws of such
country or any applicable Tax treaty or convention between the United States
and such foreign country. Seller does not have any liability for the Taxes of
any Person (other than Seller) under Treasury Regulation Section 1.1502-6 (or
any corresponding provision of state, local or foreign Tax law), or as a
transferee or successor, or by contract, or otherwise that could have any
adverse effect upon the Buyer (or any Affiliate).

 

(b)           Seller has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid
or owing to any employee, stockholder, independent contractor, creditor, or
other third party and relating to the Business or the Purchased Assets. None of
the Assumed Liabilities is an obligation to make a payment that will not be
deductible under Section 280G of the Code.

 

(c)           Except as set forth on Schedule 8.02(c),
no state of facts exists or has existed that would constitute grounds for the
assessment against Buyer, whether by reason of transferee liability or
otherwise, of any liability for any Tax of anyone other than Buyer. The
Purchased Assets do not include any stock or other ownership interests in any
foreign or domestic corporations, partnerships, joint ventures, limited
liability companies, business trusts, or other entities.

 

(d)           Seller has timely paid all Taxes, and
all interest and penalties due thereon and payable by it, for the Pre-Closing
Tax Period which will have been required to be paid on or prior to the Closing
Date, the non-payment of which would result in a Lien on any Purchased Asset,
would otherwise adversely affect the Business or would result in Buyer becoming
liable or responsible therefor.

 

(e)           Seller has established, in accordance
with generally accepted accounting principles applied on a basis consistent
with that of preceding periods, adequate reserves for the payment of, and will
timely pay, all Taxes which arise from or with respect to the Purchased

 

33

 

Assets or the operation of the Business and are
incurred in or attributable to a Pre-Closing Tax Period, the non-payment of
which would result in a Lien on any Purchased Asset, would otherwise adversely
affect the Business or would result in Buyer becoming liable therefor.

 

(f)            Schedule 8.02(f)
contains a list of all jurisdictions (whether foreign or domestic) to which any
Tax is properly payable by Seller in connection with the Business or the
Purchased Assets.

 

8.03        Tax Cooperation; Allocation of Taxes.

 

(a)           Buyer and Seller agree to furnish or
cause to be furnished to each other, upon request, as promptly as practicable,
such information and assistance relating to the Purchased Assets and the
Business as is reasonably necessary for the filing of all Tax Returns and
making of any election related to Taxes, the preparation for any audit by any
governmental authority, and the prosecution or defense of any claim, suit or
proceeding relating to any Tax Return. Seller and Buyer shall cooperate with
each other in the conduct of any audit or other proceeding related to Taxes
involving the Business or the Purchased Assets and each shall execute and
deliver such powers of attorney and other documents as are necessary to carry
out the intent of this paragraph (a) of Section 8.03. In addition, Buyer
and Seller agree to maintain or arrange for the maintenance of all records
necessary to comply with this Section 8.03 for a period of seven (7) years
from the Closing Date (or such longer period as may be reasonably requested in
writing by Buyer or Seller) and each party agrees to afford the other
reasonable access to such records during normal business hours.

 

(b)           All real property Taxes, personal
property Taxes and similar ad  valorem obligations levied with
respect to the Purchased Assets for a taxable period which includes (but does
not end on) the Closing Date (collectively, the “Apportioned Obligations”)
shall be apportioned between Seller and Buyer as of the Closing Date based on
the number of days of such taxable period included in the Pre-Closing Tax
Period and the number of days of such taxable period included in the
Post-Closing Tax Period, equitably adjusted if necessary to reflect changes in
taxable assets as between the Pre-Closing Period and Post-Closing Period or
portions thereof. Seller shall be liable for the proportionate amount of such
Taxes that is attributable to the Pre-Closing Tax Period. At Closing, Seller
and Buyer shall present a statement to the other setting forth the amount of
reimbursement to which each is entitled under this Section 8.03(b)
together with such supporting evidence as is reasonably necessary to calculate
such amount to be reimbursed. Such amount shall be paid by the party owing it
to the other at the Closing. Thereafter, Seller shall notify Buyer upon receipt
of any bill for real or personal property Taxes relating to the Purchased
Assets, part or all of which are attributable to the Post-Closing Tax Period,
and shall promptly deliver such bill to Buyer who shall pay the same to the
appropriate governmental authority; provided that if such bill covers the
Pre-Closing Tax Period, Seller shall also remit prior to the due date of
assessment to Buyer payment for the proportionate amount of such bill that is
attributable to the Pre-Closing Tax Period. If either Seller or Buyer shall
thereafter make a payment for which it is entitled to reimbursement under this
Section 8.03(b), the other party shall make such reimbursement promptly
but in no event later than 30 days after the presentation of a statement
setting forth the amount of reimbursement to which the presenting

 

34

 

party is entitled along with such supporting evidence
as is reasonably necessary to calculate the amount of reimbursement. Any
payment required under this Section and not made within 10 days of delivery of
the statement shall bear interest at the rate per annum determined, from time
to time, under the provisions of Section 6621(a)(2) of the Code for each
day until paid.

 

(c)           Any transfer, documentary, sales,
use, stamp, or other Taxes assessed upon or with respect to the transfer of the
Purchased Assets to Buyer and any recording or filing fees with respect thereto
shall be borne and paid by Buyer, and Buyer shall promptly reimburse Seller for
any such amounts paid by Seller. Buyer and Seller shall cooperate to minimize
the amount of all the foregoing taxes and shall provide each other with any
appropriate resale exemption certifications, tax clearance certificates and
other similar documentation. The party that is required by applicable law to
make the filings, reports, or returns and to handle any audits or controversies
with respect to any of the foregoing taxes shall do so, and the other party
shall cooperate (and make reimbursement) with respect thereto as necessary.

 

ARTICLE
IX

 

EMPLOYEE
BENEFITS

 

9.01        Employee Benefits Definitions. The
following terms, as used herein, having the following meaning:

 

“Benefit Arrangement”
means an employment, severance or similar contract, arrangement or policy
(written or oral) and each plan or arrangement providing for severance,
insurance coverage (including any self-insured arrangements), workers’
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, pension or retirement benefits or for deferred compensation,
profit-sharing, bonuses, phantom stock, stock options, stock appreciation
rights or other forms of incentive compensation or post-retirement insurance, compensation
or benefits or any Co-employment agreement that (i) is not an Employee
Plan, (ii) is entered into, maintained or contributed to, as the case may
be, by Seller and (iii) covers any Employee or former Employee of Seller.

 

“Employee” for
purposes of this Section IX means any employee of Seller.

 

“Employee Plan”
means each “employee benefit plan,” as such term is defined in
Section 3(3) of ERISA, that (i) is subject to any provision of ERISA
and (ii) is maintained or contributed to by Seller or any of its ERISA
Affiliates or any Co-Employer, as the case may be.

 

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended.

 

“Transferred Employees”
means those Employees listed on Schedule 9.03 who are being offered
employment by Buyer and who commence employment with Buyer as of the Closing
Date.

 

“Business Employees”
means any Employee of the Seller who is primarily engaged in activities on
behalf of the Business.

 

35

 

9.02        ERISA Representations. Seller hereby
represents and warrants to Buyer that:

 

(a)           Schedule 9.02 lists each
Employee Plan that covers any Employee, copies of all of which, and a summary
plan description of each, have previously been furnished to Buyer. With respect
to each Employee Plan, all annual reports (Form 5500) required to be filed
with the Internal Revenue Service or Department of Labor have been properly
filed on a timely basis and Seller has provided the most recently filed
Form 5500.

 

(b)           Schedule 9.02 also includes
a list of each Benefit Arrangement of Seller, copies or descriptions of which
have been made available or furnished previously to Buyer.

 

(c)           None of the Employee Plans or Benefit
Arrangements listed on Schedule 9.02 is subject to the laws of any
jurisdiction outside the United States.

 

(d)           No non-exempt “prohibited
transaction,” as defined in Section 406 of ERISA or Section 4975 of
the Code, has occurred with respect to any Employee Plan.

 

(e)           Neither Seller nor any ERISA
Affiliate maintains or has ever maintained or contributed to or expects to
incur liability with respect to any Employee Plan subject to Title IV of
ERISA. Seller has not incurred nor does it reasonably expect to incur any
liability with respect to any transaction described in Section 4069 of
ERISA.

 

(f)            Each Employee Plan which is intended
to be qualified under Section 401(a) of the Code is so qualified and has
been so qualified during the period from its adoption to date, and each trust
forming a part thereof is exempt from tax pursuant to Section 501(a) of
the Code. Seller has furnished to Buyer copies of the most recent Internal
Revenue Service determination or opinion letter with respect to each such
Employee Plan. Each Employee Plan and Benefit Arrangement has been maintained
in compliance with its terms and with the applicable requirements prescribed by
any and all statutes, orders, rules and regulations.

 

(g)           With respect to the Business
Employees and former Business Employees, there are no employee post-retirement
health or welfare plans in effect, except as required by Section 4980B of
the Code or applicable state law. No tax under Section 4980B or 4980D of
the Code has been incurred in respect of any Employee Plan that is a group
health plan, as defined in Section 5000(b)(1) of the Code.

 

(h)           All contributions, reserves or
premium payments accrued under each Employee Plan and Benefit Arrangement have
been made as of the Closing Date or are reflected on the Balance Sheet.

 

(i)            No Employee will become entitled to
any bonus, retirement, severance or similar benefit or enhanced benefit solely
as a result of the transactions contemplated hereby.

 

36

 

9.03        Employees and Offers of Employment.

 

(a)           On or prior to the Closing Date,
Buyer may, at its sole discretion, offer employment on an at-will basis to all
of the Business Employees. Buyer shall provide to Seller a complete and
accurate list of the Transferred Employees at least two (2) business days prior
to Closing.

 

(b)           Seller agrees to (i) use
reasonable efforts to cooperate with Buyer in Buyer’s recruitment of the Business
Employees, (ii) terminate the employment of the Transferred Employees with
Seller (or, alternatively, at the discretion of Seller, cause the Transferred
Employee to voluntarily terminate his employment and, in connection therewith,
Seller will accept the resignation of the Transferred Employees) on or
immediately prior to the Closing Date. Seller agrees to pay any and all
liabilities with respect to each Business Employee, including, but not limited
to, all such liabilities relating to such termination, including, without
limitation any payments and benefits due such Business Employees pursuant to
accrued salary and wages, bonuses, commissions, pension, retirement, savings,
health, welfare and other benefits and severance, payments or similar payments
of the Transferred Employees, excluding vacation accruals assumed by the Buyer
in accordance with Section 2.03(e) , and (iii) provide to each
Transferred Employee any notice (which notice shall be reasonably acceptable to
Buyer) required under any law or regulations in respect of such termination
including, without limitation, the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended (“COBRA”), and the Federal Workers Adjustment
and Retraining Notification Act (“WARN Act”).

 

(c)           Buyer agrees that it will make offers
of employment to the Business Employees in good faith, with terms and
conditions, including, but not limited to, salary and benefits, to be
determined at the Buyer’s sole discretion. Nothing herein shall be construed as
an offer of employment on other than an employee-at-will basis. Seller will
make all reasonable efforts to assist Buyer in hiring all such Business
Employees, and Seller will not take any action that would impede, hinder,
interfere or otherwise compete with Buyer’s effort to hire any Transferred
Employee or any other Business Employee. Buyer shall not assume responsibility
for any Business Employee until such employee commences employment with Buyer,
but in no event shall Buyer assume any responsibility for any commitment,
obligation, duty or liability (i) of Seller to any Business Employee, or
(ii) to any Business Employee that arose prior to the Closing Date, except
as expressly set forth herein. Buyer shall not assume responsibility for any
employee of Seller who is not a Transferred Employee and Seller agrees to
continue to assume all responsibilities, commitments and/or liabilities for any
employee of Seller who is not a Transferred Employee.

 

(d)           Seller shall use its commercially
reasonable efforts (without, however, any requirement to pay monies or any
other form of consideration) to assist Buyer in Buyer’s hiring of certain of
Seller’s key Business Employees and in its entering into employment or
consulting arrangements with them.

 

(e)           Buyer shall employ the Transferred
Employees following the Closing Date in accordance with the terms and
conditions set forth in the employment offer letters to be

 

37

 

delivered to the Transferred Employees by the Buyer. Nothing
herein shall prevent Buyer from terminating the employment of any such
Transferred Employee.

 

(f)            As soon as reasonably practicable
after the Closing Date, Buyer shall take all reasonable action so that all
Transferred Employees who accept employment with the Buyer after the Closing
Date (“Hired Employees”) shall be entitled to participate in each
employee benefit plan, program or arrangement of Buyer of general applicability
(the “Buyer Benefit Plans”) to the same extent as similarly-situated
employees of Buyer and its subsidiaries (it being understood that inclusion of
the Hired Employees in the Buyer Benefit Plans may occur at different times
with respect to different plans). Buyer shall, subject to any third party
insurers consent, use its commercially reasonable efforts to cause each Buyer
Benefit Plan in which the Hired Employees are eligible to participate to take
into account for purposes of eligibility and vesting thereunder including, but
not limited to, applicability of minimum waiting periods for participation, the
service of such employees with the Seller.

 

(g)           WARN. Any notice required under the
WARN Act that is, has been or will be required of Seller to its employees or former
employees by reason of its acts on or prior to the Closing Date, or by reason
of the transaction consummation hereby, will be given by Seller.

 

9.04        Seller’s Employee Benefit Plans.

 

(a)           Seller shall retain all obligations
and liabilities under the Employee Plans and Benefit Arrangements in respect of
each Employee or former Employee (including any beneficiary thereof). No assets
of any Employee Plan or Benefit Arrangement shall be transferred to Buyer or
any of its Affiliates or to any plan of Buyer or any of its Affiliates. Accrued
benefits or account balances of Transferred Employees under the 401(k) Plan
shall be fully vested as of the Closing Date. Seller shall cooperate and assist
any Transferred Employee who so requests, in making a direct rollover of the
Transferred Employee’s vested account balance to Buyer’s 401(k) plan as soon as
practicable after the Closing date. Buyer shall cooperate with Seller and any
Transferred Employee with respect to such direct rollover, provided that Buyer
determines that the direct rollover is permitted under the Code and regulations
thereunder. Each of the parties hereto shall pay its own expenses in connection
with such direct rollover.

 

(b)           With respect to any Employee Plans
that are group health plans as defined in Section 5000(b)(1) of the Code,
Seller shall satisfy the notice requirements of Section 4980B and 9801 of the
Code. Seller shall treat all Employees (and their beneficiaries) who terminate
employment with Seller as a result of this transaction as “qualified
beneficiaries” entitled to continuation health coverage as described in Section
4980B of the Code (“COBRA Coverage”), regardless of whether the Employee
becomes a Transferred Employee, and Seller shall continue to provide COBRA
Coverage for the maximum period required by law to any former Employee (or
beneficiary) who is eligible for COBRA Coverage as of the Closing Date. Seller
shall promptly notify Buyer if it ceases to provide any group coverage to any
of its Employees.

 

9.05        No Third Party Beneficiaries. No
provision of this Article IX or any other provision in this Agreement
shall create any third party beneficiary or other rights in any

 

38

 

employee or former employee (including any beneficiary
or dependent thereof) of Seller or of any of its subsidiaries in respect of
continued employment (or resumed employment) with either Buyer or the Business
or any of their Affiliates and no provision of this Article IX shall
create any such rights in any such Persons in respect of any benefits that may
be provided, directly or indirectly, under any Employee Plan or Benefit
Arrangement or any plan or arrangement that may be established by Buyer or any
of its Affiliates. No provision of this Agreement shall constitute a limitation
on rights to amend, modify or terminate after the Closing Date any such plans
or arrangements of Buyer or any of its Affiliates.

 

ARTICLE
X

 

CONDITIONS
TO CLOSING

 

10.01      Conditions to the Obligations of Each Party.
The obligations of Buyer and Seller to consummate the Closing are subject to
the satisfaction of the following conditions:

 

(a)           No provision of any applicable law or
regulation and no judgment, injunction, order or decree shall prohibit the
consummation of the Closing.

 

(b)           Each other party to this Agreement
shall have executed and delivered each of the Ancillary Agreements to be
entered into by it, in each case substantially in the form attached as an
exhibit to this Agreement, and any other documents or items required to be delivered
by it pursuant to Section 2.06.

 

10.02      Conditions to Obligation of Buyer. The
obligation of Buyer to consummate the Closing is subject to the satisfaction of
the following further conditions:

 

(a)           (i) Seller shall have performed
in all material respects all of its obligations hereunder required to be
performed by it on or prior to the Closing Date, (ii) the representations
and warranties of Seller contained in this Agreement at the time of its
execution and delivery and in any certificate or other writing delivered by
Seller pursuant hereto shall be true and correct at and as of the Closing Date,
as if made at and as of such date except for such untruths or inaccuracies
that, individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on the Business and (iii) Buyer shall have received a
certificate signed by the of Seller to the foregoing effect.

 

(b)           There
has not been any Material Adverse Change or any event, occurrence, development
or state of circumstances or facts which could reasonably be expected to result
in a Material Adverse Change, or any condition, event or occurrence which,
individually or in the aggregate, could reasonably be expected to prevent or
materially delay Seller’s ability to consummate the transactions contemplated
by this Agreement or perform its material obligations hereunder.

 

(c)           No
court, arbitrator or governmental body, agency or official shall have issued
any order, and there shall not be any statute, rule or regulation, restraining
the effective operation by Buyer of all or any material portion of the
Purchased Assets after the Closing Date

 

39

 

and no proceeding
challenging this Agreement or the transactions contemplated hereby or seeking
to prohibit, alter, prevent or materially delay the Closing (i) shall have been
instituted by any governmental authority before any court, arbitrator or
governmental body, agency or official and be pending or (ii) shall have been
instituted by any Person (other than a governmental authority) before any
court, arbitrator or governmental body, agency or official and be pending,
where such proceeding would in the reasonable judgment of the Buyer reasonably
be expected to result in a ruling that would prohibit, alter, prevent or
materially delay the Closing.

 

(d)           Buyer shall have received an opinion
of Sullivan & Worcester LLP, dated the Closing Date, in substantially the
form attached hereto as Exhibit F.

 

(e)           Buyer shall have received the audited
balance sheet of the Business as of March 31, 2005 and the related
statements of the Business of operations and cash flows of the Business for the
one year period ending March 31, 2005 together with an unqualified audit
opinion (which may include explanatory language regarding the going concern of
the Business or the Seller) of the independent registered accounting firm of
Miller Ellin & Company, LLP.

 

(f)            Seller shall have received all of
the Required Consents as set forth on Schedule 3.03.

 

(g)           No later than two (2) days prior to
Closing, Seller shall deliver to Buyer a draft balance sheet of the Business as
of March 31, 2006.

 

10.03      Conditions to Obligations of Seller. The
obligation of Seller to consummate the Closing is subject to the satisfaction
of the following further conditions: 
(i) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing
Date, (ii) the representations and warranties of Buyer contained in this
Agreement at the time of its execution and delivery and in any certificate or
other writing delivered by Buyer pursuant hereto shall be true and correct at
and as of the Closing Date, as if made at and as of such date except for such
untruths or inaccuracies that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect (as such term would be
applied to the business of Buyer)and (iii) Seller shall have received a
certificate signed by the Chief Executive Officer of Buyer to the foregoing
effect.

 

ARTICLE
XI

SURVIVAL; INDEMNIFICATION

 

11.01      Survival.

 

(a)           The covenants, agreements,
representations and warranties of the parties hereto contained in this
Agreement or the Ancillary Agreements or in any certificate or other writing
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive the Closing until the first anniversary of the Closing Date,
except as to matters as to which a Person has made a claim for indemnity or
given notice of claim on or prior to the first

 

40

 

anniversary of the Closing Date, which matters shall
survive the expiration of such period until such claim is finally resolved and
any obligations with respect thereto are fully satisfied, or

 

(i)            in
the case of Section 7.01 (Confidentiality);

 

(ii)           in
the case of Section 5.04 (Noncompetition), for the period set forth
therein; and

 

(iii)          in
the case of Section 11.02(a)(iv), until the expiration of the applicable
statute of limitations giving effect to any waivers, extensions or mitigation
thereof.

 

Notwithstanding the
preceding sentence, any covenant, agreement, representation or warranty in
respect of which indemnity may be sought under Section 10.02 shall survive
the time at which it would otherwise terminate pursuant to the preceding
sentence, if notice of the inaccuracy or breach thereof giving rise to such
right to indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time.

 

(b)           All indemnification payments made
under this Agreement shall be treated as adjustments to the Purchase Price.

 

11.02      Indemnification. Seller hereby
indemnifies Buyer against and agrees to hold it harmless from any and all
damage, loss, liability and expense (including without limitation reasonable
expenses of investigation and reasonable attorneys’ fees and expenses in
connection with any action, suit or proceeding) (“Damage”) incurred or
suffered by Buyer arising out of:

 

(a)           (i) any misrepresentation or
breach of warranty (determined without regard to any materiality qualification
contained in any representation or warranty giving rise to claim for indemnity
hereunder) made or to be performed by Seller pursuant to the provisions of this
Agreement the Ancillary Agreements and any certificate or other writing
delivered pursuant hereto or thereto; and

 

(ii)           any
claim, action, suit or proceeding by any third party (a “Business Third
Party Claim”) alleging facts that if proven true would constitute a
misrepresentation or breach of warranty by Seller;

 

(iii)          any
breach of any covenant made by Seller pursuant to Article V, Article VII,
Section 8.03 and Section 9.03 of this Agreement; and

 

(iv)          any
Tax obligations of Seller (other than any Tax obligations under
Section 8.03(c) hereof), whether as a result of a Permitted Lien or
otherwise, notwithstanding any disclosure on any disclosure schedule hereto or
otherwise of the possibility of any such Taxes or the existence of any reserves
therefor.

 

(b)           Buyer hereby indemnifies Seller against
and agrees to hold it harmless from any and all Damages incurred or suffered by
Seller arising out of:

 

41

 

(i)            any
misrepresentation or breach of warranty (determined without regard to any
materiality qualification contained in any representation or warranty giving
rise to claim for indemnity hereunder) made or to be performed by Buyer
pursuant to the provisions of this Agreement the Ancillary Agreements and any
certificate or other writing delivered pursuant hereto or thereto; and

 

(ii)           any
Business Third Party Claim alleging facts that if proven true would constitute
a misrepresentation or breach of warranty by Buyer; and

 

(iii)          any
breach of any covenant or agreement made by Buyer pursuant to Article VI,
Article VII, Section 8.03 and Section 9.03 of this Agreement.

 

11.03      Limitation of Indemnification. Notwithstanding
the provisions of Section 11.02, (i) neither Seller nor Buyer shall
be liable for Damages under Section 11.02(a)(i) and 11.02(b)(i), respectively
unless the aggregate amount of Damages with respect to all such
misrepresentations or breaches of warranty (determined without regard to any
materiality qualification contained in any representations, warranty or
covenant giving rise to claim for indemnity hereunder) exceeds $50,000, (ii) Seller’s
maximum liability under Section 11.02(a)(i) and 11.02(a)(ii) shall not
exceed the Initial Earnout Payment and (iii)
Seller’s maximum liability under 11.02(a)(iv) shall not exceed the aggregate
amount of the Initial Cash Payment and the Earnout Payments. Pursuant to
Section 2.07, the Buyer shall holdback the Initial Earnout Payment to pay
Damages and Buyer’s sole and exclusive remedy with respect to claims for
indemnification under
Sections 11.02(a)(i) and 11.02(a)(ii) shall be the holdback of the Initial
Earnout Payment.

 

11.04      Procedures. Any party seeking
indemnification under Sections 8.02, 9.02, and 11.02 (the “Indemnified Party”) shall give prompt notice to the party against
whom indemnity is sought (the “Indemnifying Party”) of the assertion of
any Third Party Claim; provided that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party of any liability or obligation hereunder, except to the
extent that the Indemnifying Party has been prejudiced thereby. The
Indemnifying Party may, and at the request of the Indemnified shall,
participate in and control the defense of any Third Party Claim at its own
expense. If the Indemnifying Party assumes control of the defense of any Third
Party Claim, the Indemnifying Party shall not be liable under
Sections 8.02, 9.02 and 11.02 for any settlement effected by the
Indemnified Party without its consent of any Third Party Claim. Notwithstanding
the foregoing, if the Indemnifying Party assumes the defense of a Third Party
Claim and if the Indemnified Party later determines in good faith that a Third
Party Claim is likely to materially adversely affect it or its business in a
manner that may not be adequately compensated by the money damages, then the
Indemnified Party may, by written notice to the Indemnifying Party, assume the
exclusive right to defend, compromise, or settle such claim. If the Indemnified
Party shall so assume the exclusive right to defend, compromise, or settle such
claim, all attorneys’ fees and other expenses incurred by the Indemnified Party
in the defense, compromise or settlement of such claim shall be at the
Indemnified Party’s expense and shall not be eligible for indemnification from
the Indemnifying Party, but the Indemnifying Party shall be entitled to be
indemnified by the Indemnifying Party for the full amount of any other Damages
suffered by the

 

42

 

Indemnified Party as a result of or arising out of the
Third Party Claim. The party controlling the
defense of any third party suit, action or proceeding shall keep the other
party advised of the status of such action, suit or proceeding and the defense
thereof and shall consider in good faith recommendations made by the other
party with respect thereto.

 

11.05      Exclusive Remedy. After the Closing,
Sections 8.02, 9.02 and 11.02 shall provide the exclusive remedy for any
misrepresentation or breach of warranty, covenant or other agreement or other
claim arising out of this Agreement or the transactions contemplated hereby,
other than the covenants contained in Sections 5.04 (Noncompetition) and
7.01 (Confidentiality), or with respect to claims for fraud, willful
misrepresentation or willful breach.

 

ARTICLE
XII

 

TERMINATION

 

12.01      Grounds for Termination. This
Agreement may be terminated at any time prior to the Closing:

 

(a)           by written agreement of Buyer and
Seller;

 

(b)           by either Buyer or Seller if the
Closing shall not have been consummated on or before June 30, 2006;
provided that such termination right shall not be available to a party that has
failed to fulfill its obligations under this Agreement or whose acts or
omissions have been a significant cause of the Closing not occurring on or before
such date; and

 

(c)           by either Seller or Buyer if
consummation of the transactions contemplated hereby would violate any
nonappealable final order, decree or judgment of any court or governmental body
having competent jurisdiction.

 

The party desiring to
terminate this Agreement pursuant to clauses (b) or (c) shall give notice of
such termination to the other party.

 

12.02      Effect of Termination. If this
Agreement is terminated as permitted by Section 12.01, such termination
shall be without liability of either party (or any shareholder, director,
officer, employee, agent, consultant or representative of such party) to the
other party to this Agreement; provided that if such termination shall
result from the willful failure of any party to fulfill a condition to the
performance of the obligations of another party or to perform a covenant of
this Agreement or from a willful breach of any representation or warranty by
any party to this Agreement, such party shall be fully liable for any and all
Damages incurred or suffered by the other parties as a result of such failure
or breach. The provisions of Sections 7.01 (Confidentiality), 13.03
(Expenses) and 13.10 (Jurisdiction) shall survive
any termination hereof pursuant to Section 12.01.

 

43

 

ARTICLE
XIII

 

MISCELLANEOUS

 

13.01      Notices. All notices, requests,
demands or other communications that are required or may be given pursuant to
the terms of this Agreement shall be in writing and shall be deemed to have
been duly given:  (i) on the date of
delivery, if personally delivered by hand, (ii) upon the third day after
such notice is deposited in the United States mail, if mailed by registered or
certified mail, postage prepaid, return receipt requested, (iii) upon the
date scheduled for delivery after such notice is sent by a nationally
recognized overnight express courier or (iv) by fax upon written
confirmation (including the automatic confirmation that is received from the
recipient’s fax machine) of receipt by the recipient of such notice:

 

	
  if to Buyer, to:

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
  Datawatch Corporation

  Quorum Office Park

  271 Mill Road

  Chelmsford, MA 01824

  Attn: Chief Financial Officer

  Phone: 978-441-2200

  Facsimile: 978-453-4443

  	
   

  	
   

  	
  William B. Simmons, Jr.

  Choate, Hall & Stewart LLP

  Two International Place

  Boston, MA 02110

  Telephone: (617) 248-5095

  Facsimile: (617) 248-4000

  
	
   

  	
   

  	
   

  
	
  if to Seller, to:

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
  ClearStory Systems,
  Inc.

  	
   

  	
   

  	
  Alfred L. Browne, III

  
	
   

  	
  One Research Drive

  Suite 200B

  Westborough, MA 01581

  Attn: Hank Nelson

  Telephone: (508) 870-4100

  Facsimile: (508) 870-4221

  	
   

  	
   

  	
  Sullivan &
  Worcester, LLP

  One Post Office Square

  Boston, MA 02109

  Telephone: (617) 338-2800

  Facsimile: (617) 338-2880

  

 

13.02      Amendments; No Waivers.

 

(a)               Any provision of this Agreement
may be amended prior to the Closing Date if, and only if, such amendment is in
writing and signed by Buyer and Seller. Any provision of this Agreement may be
waived by Buyer or Seller if the waiver is in writing and signed by the party
to be bound.

 

(b)              No failure or delay by either
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.

 

44

 

13.03      Expenses. All costs and expenses
incurred in connection with this Agreement shall be paid by the party incurring
such cost or expense.

 

13.04      Successors and Assigns. The provisions
of this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.

 

13.05      Governing Law. This Agreement and the
Ancillary Agreements shall be construed in accordance with and governed by the
law of the State of Delaware, without
regard to the conflicts of law rules of such state.

 

13.06      Counterparts; Effectiveness. This
Agreement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement shall become effective when each party
hereto shall have received a counterpart hereof signed by the other parties
hereto.

 

13.07      Entire Agreement. This Agreement and
the Ancillary Agreements constitute the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements, understandings and negotiations, both
written and oral, between the parties with respect to the subject matter hereof.
No representation, inducement, promise, understanding, condition or warranty
not set forth herein has been made or relied upon by either party hereto. None
of the provisions of this Agreement and the Ancillary Agreements is intended to
confer upon any Person other than the parties hereto any rights or remedies
hereunder.

 

13.08      Bulk Sales Laws. Buyer and Seller each
hereby waive compliance by Seller with the provisions of the “bulk sales”, “bulk
transfer” or similar laws of any state.

 

13.09      Captions. The captions herein are
included for convenience of reference only and shall be ignored in the
construction or interpretation hereof.

 

13.10      Jurisdiction. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Delaware, and each of the parties hereby consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any such
action or proceeding may be served on any party anywhere in the world, whether
within or without the State of Delaware.

 

45

 

IN WITNESS WHEREOF, the
parties hereto here caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.

 

 

	
   

  	
  DATAWATCH
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert W.
  Hagger

  
	
   

  	
   

  	
  Name: Robert W.
  Hagger

  
	
   

  	
   

  	
  Title: President
  and CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CLEARSTORY
  SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Henry T.
  Nelson 

  
	
   

  	
   

  	
  Name: Henry T.
  Nelson

  
	
   

  	
   

  	
  Title: President
  and CEO

  
				

 

[Signature Page to Asset Purchase
Agreement]

 

46

 

Exhibit A

 

ASSIGNMENT
AND ASSUMPTION AGREEMENT

 

ASSIGNMENT  AND  ASSUMPTION  AGREEMENT, dated as of March 10, 2006, between DATAWATCH CORPORATION, a Delaware corporation (“Buyer”), and CLEARSTORY
SYSTEMS, INC., a Delaware corporation (“Seller”).

 

W I T N E
S S E T H

 

WHEREAS, Buyer
and Seller have concurrently herewith consummated the purchase by Buyer of the
Purchased Assets pursuant to the terms and conditions of the Asset Purchase
Agreement dated March 10, 2006 between Buyer and Seller (the “Asset Purchase
Agreement”); terms defined in the Asset Purchase Agreement and not
otherwise defined herein being used herein as therein defined);

 

WHEREAS,
pursuant to the Asset Purchase Agreement, Buyer has agreed to assume certain
liabilities and obligations of Seller with respect to the Purchased Assets and
the Business;

 

NOW,  THEREFORE, in consideration of the sale of the Purchase
Assets and in accordance with the terms of the Asset Purchase Agreement, Buyer
and Seller agree as follows:

 

1.             (a)           Seller
does hereby sell, transfer, assign and deliver to Buyer all of the right, title
and interest of Seller in, to and under the Purchased Assets; provided
that no sale, transfer, assignment or delivery shall be made of any or any
material portion of any of the Contracts or Permits if an attempted sale,
assignment, transfer or delivery, without the consent of a third party, would
constitute a breach or other contravention thereof or in any way adversely
affect the rights of Buyer or Seller thereunder.

 

(b)           Buyer does hereby accept all the
right, title and interest of Seller in, to and under all of the Purchased
Assets (except as aforesaid) and Buyer assumes and agrees to pay, perform and
discharge promptly and fully when due all of the Assumed Liabilities and to
perform all of the obligations of Seller to be performed under the Contracts.

 

2.             This Agreement shall be construed in accordance with and
governed by the law of the State of Delaware, without regard to the conflicts
of law rules of such state.

 

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

 

 

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

 

 

	
   

  	
  DATAWATCH
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CLEARSTORY
  SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

[Signature Page to Assignment
& Assumption Agreement]

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