Document:

Exhibit
10.1

 

STOCK
PURCHASE AGREEMENT

 

This Stock
Purchase Agreement (the “Agreement”) is entered into as of August 30, 2004 (the
“Effective Date”), by and between KD Holdings, a Denmark corporation
(“Holdings”), Kirsten Damgaard, an individual and the sole shareholder of
Holdings (“Stockholder”) (Holdings and Stockholder are hereinafter collectively
referred to as “Seller”), and dj Orthopedics, LLC, a Delaware limited liability
company (“Buyer”).

 

R  E
C  I  T  A  L  S

 

WHEREAS, Buyer and
Seller have entered into that certain letter agreement dated September 29, 2003
(the “Option”) pursuant to which Seller granted Buyer the option to purchase,
upon terms and conditions set forth therein, all of the outstanding capital
stock in dj Orthopedics Nordic ApS, formerly KD Innovations, (hereinafter, the
“Acquired Business”); and

 

WHEREAS, Buyer
wishes to exercise such Option and purchase the capital stock of the Acquired
Business, and Seller wishes to sell such capital stock, all on the terms and
conditions set forth in this Agreement.

 

A  G
R  E  E  M  E  N  T

 

NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants and agreements contained herein, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 

 

ARTICLE 1

 

PURCHASE AND SALE OF
STOCK

 

1.1           Purchase and Sale of Stock.  Subject to the terms and conditions of this
Agreement and pursuant to the exercise of the Option, Seller does hereby sell,
transfer, convey, assign and deliver to Buyer, and Buyer does hereby purchase,
acquire and accept from Seller, all of Seller’s right, title and interest in
and to the outstanding shares of capital stock of the Acquired Business (the
“Stock”).

 

1.2           Transactions on the Effective Date.   In consideration for the sale, assignment,
transfer and delivery of the Stock, Buyer shall pay Holdings in readily
available funds on the Effective Date pursuant to wire transfer instructions
provided by Seller to Buyer the sum of $700,000 in U.S. dollars (unless
specifically indicated to the contrary, all sums set forth in this Agreement
shall be in U.S. dollar currency). 
Holdings shall deliver to Buyer on the Effective Date the certificates
or other evidence of the Stock, accompanied by such transfer documents as are
necessary under the laws of Denmark to transfer such Stock to Buyer and to
evidence Buyer as the holder of all right, title and interest in the Stock.

 

1

 

1.3           Additional Scheduled Payments.  As additional consideration, Buyer hereby
agrees to pay Holdings the following amounts subject to the following
conditions:

 

(a)           Buyer shall make an additional
payment to Holdings on September 1, 2005 in the amount of $125,000 if the
aggregate “net operating income” (as defined below) of the Acquired Business in
the country of Denmark during calendar 2004 and the six-month period ending
June 30, 2005 equals or exceeds the sum of $250,000, and if such net operating
income for the country of Denmark during such period is less than $250,000, then
such payment shall be reduced in proportion to the shortfall in such net
operating income.

 

(b)           Similarly, Buyer shall make an
additional payment to Holdings on September 1, 2006 in the amount of $125,000
if the aggregate “net operating income” (as defined below) of the Acquired
Business in the country of Denmark during calendar 2005 and the six-month
period ending June 30, 2006 equals or exceeds the sum of $360,000, and if such
net operating income for the country of Denmark during such period is less than
$360,000, then such payment shall be reduced in proportion to the shortfall in
such net operating.

 

1.4         Possible Additional Consideration.  Buyer hereby agrees to pay Holdings
additional consideration of up to $250,000, at the time and in the manner described
below, if the Acquired Business achieves some or all the following cumulative
net operating income goals as of December 31 of the years shown below:

 

	
  2005

  	
   

  	
  $

  	
  258,000

  	
   

  
	
  2006

  	
   

  	
  $

  	
  687,000

  	
   

  
	
  2007

  	
   

  	
  $

  	
  1,303,000

  	
   

  
	
  2008

  	
   

  	
  $

  	
  2,065,000

  	
   

  

 

On March 1, 2006 and each subsequent March 1 through March 1, 2009, the
cumulative net operating income of the Acquired Business shall be determined as
of the preceding December 31, and if the applicable goal has been exceeded,
Buyer shall pay Holdings as additional consideration hereunder an amount equal
to 50% of such excess.  Once the
cumulative total of such additional consideration reaches $250,000, no further
such payments will be made.  The failure
of the Acquired Business to reach any applicable goal in a year subsequent to a
year in which the applicable goal was achieved will not affect any of such
additional consideration previously paid for the year in which such applicable
goal was achieved.

 

1.5           Determination
of Net Operating Income.   For
purposes of sections 1.3 and 1.4 above, “net operating income” shall be
determined by calculating the gross profit of the Acquired Business and
subtracting therefrom selling expenses, marketing expenses, general and
administrative expenses and depreciation. 
In addition, the net operating income figures in sections 1.3 and 1.4
above have been calculated using an exchange rate of 6.5 DKK per US dollar, and
such exchange rate shall be used for purposes of all calculations under
sections 1.3 and 1.4 above.  The
determination of such net operating income for the Acquired Business shall be
made by Buyer.  Following June 30 of
2005 and 2006, Buyer shall, to determine the payment under section 1.3 above,
calculate and report the net

 

2

 

operating income of the Acquired Business in the country of Denmark for
the period required by section 1.3, limiting such calculation for this purpose
to sales achieved in Denmark and expenses incurred in Denmark.  Following December 31 of each year from 2005
to and including 2008, Buyer shall, to determine the payment under section 1.4
above, calculate and report the cumulative net operating income of the Acquired
Business as a whole from January 1, 2005 through each such December 31.  Buyer shall report to Seller each such
calculation, which shall be the basis for any payment of additional
consideration by Buyer under either section 1.3 or 1.4 above.  If Seller disagrees with the determination
of Buyer, the parties agree to meet and discuss any such disagreement in order
to resolve any differences.  If the
disagreement is not resolved to Seller’s satisfaction, Seller shall be entitled
to resolve such disagreement through the dispute resolution procedure in
section 5.4(b) below.

 

1.6           Continued Employment of Stockholder.  Stockholder understands that her continued
employment and active participation in the Acquired Business during the period
of time reflected in section 1.4 above is a material consideration to the
Seller’s participation in the transaction provided for in this Agreement.  Accordingly, if Stockholder voluntarily
terminates her employment with the Acquired Business prior to the completion of
the payment opportunity under section 1.4 above, then Buyer shall have no
further obligation to make any payments under such section.

 

 

ARTICLE 2

 

REPRESENTATIONS AND
WARRANTIES

OF THE SELLER

 

Each of Holdings and the Stockholder represents and warrants, jointly
and severally, to the Buyer as follows:

 

2.1           Organization
and Good Standing.  The Acquired
Business is a corporation duly organized, validly existing and in good standing
under the laws of Denmark.  The Acquired
Business is duly qualified and registered to transact business and is in good
standing in every country and other jurisdiction in which the character and
extent of its business makes such qualification or registration necessary.  The Acquired Business has all necessary
corporate power and authority, including all necessary licenses and permits, to
carry on its business as it is now being conducted, and to own or lease and
operate its properties and assets.

 

2.2           Authorization
and Approvals.  Holdings has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder.  This
Agreement has been duly executed and delivered by the Seller and constitutes
the legal, valid and binding obligation of Seller, enforceable in accordance
with its terms, except as may be limited by bankruptcy, reorganization,
insolvency, moratorium or other laws relating to or affecting the enforcement
of creditors’ rights and remedies generally. 
This Agreement has been duly and validly authorized by and approved by
all requisite corporate action on the part of Holdings’ Board of Directors and

 

3

 

stockholders.  No further
approvals or consents by, or filings with, any national, regional or other
court or governmental or administrative body, agency or other third party is
required in connection with the execution and delivery by the Seller of this
Agreement, or the consummation by the Seller of the transactions contemplated
hereby.

 

2.3           Equity Structure of the Acquired
Business.  The Stock represents all
of the issued and outstanding capital stock of the Acquired Business and no
other stock or equity interest in the Acquired Business has been issued or is
outstanding.  Except for the Option and
this Agreement, there are no options, warrants, convertible debt or securities,
calls, agreements, arrangements or understandings or other rights of any kind
or character to purchase any equity interest in the Acquired Business or that
would otherwise result in the ownership of any equity interest in the Acquired
Business by any party other than the ownership of the Stock by Holdings.  The equity interest represented by the
Stock, and the Stock itself, has been duly authorized by all necessary
corporate action of the Acquired Business, is validly issued, fully paid and
nonassessable and has been issued in full compliance with all applicable laws
and regulations.

 

2.4           Title to Stock.  Holdings is the registered and beneficial
owner of the Stock, free and clear of any liens, encumbrances, security
interests, restrictions or claims whatsoever, with full power and authority to
convey the Stock to Buyer in accordance with the terms of this Agreement.  No other person or party has or can claim
any interest of any kind in the Stock or in any right in respect of the Stock.

 

2.5           No
Conflicts.  Neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (a) violate any provision of the charter or
organizational documents of the Acquired Business or Holdings, (b) violate, or
be in conflict with, or constitute a default (or other event which, with the
giving of notice or lapse of time or both, would constitute a default) under,
or give rise to any right of termination, cancellation or acceleration under
any of the terms, conditions or provisions of any lease, license, promissory
note, contract, agreement, mortgage, deed of trust or other instrument or
document to which the Acquired Business or the Seller is a party or by which
the Acquired Business or the Seller or any of its or her respective  properties or assets may be bound, (c)
violate any order, writ, injunction, decree, law, statute, rule or
regulation of any court or governmental authority applicable to the Acquired
Business or the Seller or any of its or her respective properties or assets or
(d) give rise to a declaration or imposition of any claim, lien, charge,
security interest or encumbrance of any nature whatsoever upon any of the
assets of the Acquired Business.

 

2.6           Taxes.  The Acquired Business has paid or caused to
be paid within the time and in the manner prescribed by law all national, regional
and local taxes of any type, including without limitation, income, franchise,
gross receipts, sales or property taxes, payable or due from and owed by the
Acquired Business for all periods ending on or prior to the date hereof except
for taxes which are accrued but not yet due and payable.  The Acquired Business has collected all
sales, use and value added taxes required to be collected, and has remitted, or
will remit on a timely basis, such amounts to the appropriate governmental
authorities and has furnished properly completed exemption certificates for all
exempt transactions.  The Acquired
Business has properly withheld income or similar taxes and required social
charges and paid such amounts to the proper

 

4

 

governmental authority with respect to all employees of the Acquired
Business.  None of the assets of the
Acquired Business are subject to any liens in respect of taxes (other than for
current taxes not yet due and payable).

 

2.7           Contracts.  Schedule 2.7 hereto contains a complete,
current and correct list of all material contracts, commitments, obligations or
agreements of the Acquired Business, whether written or oral, formal or
informal (the “Contracts”).  To the
knowledge of the Seller, no event has occurred which would constitute a default
(or any event which, with the giving of notice or lapse of time or both, would
constitute a default) under any term or provision of any of the Contracts and
thereby allow a party thereto to terminate or claim damages therefor.  Each of the Contracts is in full force and
effect and is the legal, valid and binding obligation of the Acquired Business
and, to the knowledge of the Seller, of the other parties thereto, enforceable
in accordance with its terms, except as may be limited by bankruptcy,
reorganization, insolvency, moratorium or other laws relating to or affecting
the enforcement of creditors’ rights and remedies generally.  The Acquired Business is not a party to any
Contract that restricts Acquired Business, or will restrict Buyer after the
Effective Date, from carrying on the Acquired Business or any part thereof, or
from competing in any line of business with any person, corporation or entity.

 

2.8           Title
to Assets.  The Acquired Business
has good, valid and marketable title to all of its assets.  All such assets are free and clear of title
defects, liens, claims, charges, pledges, security interests, easements or
other encumbrances of any kind or nature whatsoever, except for liens, taxes
and assessments not yet due and liens arising by law or in the ordinary course
of business that do not materially adversely affect such assets or the
operation of the Acquired Business.

 

2.9           Financial Statements. Schedule
2.9 contains the balance sheet of the Acquired Business as of August 28, 2004
(the “Balance Sheet”) and the statement of income and expenses of the Acquired
Business for the period from January 1, 2004 to the date of the Balance Sheet
(the “Income Statement” and collectively with the Balance Sheet, the “Financial
Statements”).  The Financial Statements
(i) have been prepared in conformity with generally accepted accounting
principles applicable to companies in the countries is which the Acquired
Business operates consistently applied with prior periods, and (ii) fairly
present the financial condition and results of operations of the Acquired
Business as of the dates and for the periods indicated therein. The Balance
Sheet accurately reflects all liabilities, obligations and commitments of any
nature (whether absolute, accrued, contingent or otherwise and whether matured
or unmatured) of the Acquired Business except (a) liabilities, obligations or
commitments incurred since the date of the Balance Sheet in the ordinary course
of business and consistent with past practice, (b) liabilities or obligations
described on Schedule 2.9 or Schedule 2.12 hereto and (c) other liabilities or
obligations that are not material, individually or in the aggregate, to the
Acquired Business.

 

2.10         Accounts
Receivable.  The Accounts Receivable
shown in the Balance Sheet, subject to changes in the ordinary course of
business from the date of the Balance Sheet to the Effective Date, constitute
all of the accounts receivable of the Acquired Business and represent bona
fide sales actually made or on or prior to such date in the ordinary
course of business of the Acquired Business and consistent with past
practices.  To Seller’s knowledge, there
is no contest, claim or right of

 

5

 

set-off contained in any oral or written agreement with any account
debtor relating to the amount or validity of any such Account Receivable.  The Accounts Receivable are valid and
collectible in the ordinary course of business.

 

2.11         Compliance
With Laws.  To the knowledge of
Seller, Seller has conducted the Acquired Business in compliance with, and is
not in violation of, applicable laws, statutes, ordinances, rules, regulations,
orders and other requirements of all national governmental authorities, and of all
territories, states, municipalities and other political subdivisions and
agencies thereof, having jurisdiction over the Acquired Business, including
without limitation all such laws, regulations, ordinances and requirements
relating to environment, antitrust, consumer protection, labor and employment,
zoning and land use, immigration, health, and occupational safety,  except where the failure to be in compliance
would not have a material adverse effect on the Acquired Business.  The Acquired Business has not received any
written notification of any asserted present or past failure to comply with any
laws, statutes, ordinances, rules, regulations, orders or other legal or
regulatory requirements.

 

2.12         Litigation.

 

(a)           Except
as set forth on Schedule 2.12, there is no pending or, to the best knowledge of
the Seller, threatened action, suit, arbitration proceeding, investigation or
inquiry before any court or governmental or administrative body or agency, or
any private arbitration tribunal, against, relating to or affecting the
Acquired Business, or the transactions contemplated by this Agreement, nor to
the best knowledge of the Seller, are there any facts or circumstances which
could reasonably lead to or provide the basis for any such threatened action, suit,
arbitration proceeding, investigation or inquiry.

 

(b)           There
is not in effect any order, judgment or decree of any court or governmental or
administrative body or agency enjoining, barring, suspending, prohibiting or
otherwise limiting the Acquired Business or any officer, director or employee
of the Acquired Business from conducting or engaging in any aspect of the
Acquired Business, or requiring Seller or any officer, director or employee of
Seller to take certain action with respect to any aspect of the Acquired
Business.

 

(c)           The
Acquired Business is not in violation of or in default under any order,
judgment, writ, injunction or decree of any court or governmental or
administrative body or agency.

 

2.13         Brokers
and Finders.  Seller has not engaged
or authorized any broker, finder, investment banker or other third party to act
on its behalf, directly or indirectly, as a broker, finder, investment banker
or in any other like capacity in connection with this Agreement or the
transactions contemplated hereby, nor has Seller consented to or acquiesced in
anyone so acting.  Seller knows of no
claim for compensation from any such broker, finder, investment banker or other
third party for so acting on behalf of Seller or any basis for such a claim.

 

6

 

2.14         Absence of Certain Changes.   Since the date of the Balance Sheet, the
Acquired Business has been conducted in the ordinary course consistent with
past practice and, to the knowledge of Seller, there has not been:

 

(a)           any event, occurrence or development
of a state of circumstances or facts relating to the Acquired Business which,
individually or in the aggregate, has had or could reasonably be expected to
have a material adverse effect thereon;

 

(b)           any sale, lease, license or other
disposition of any assets or properties of the Acquired Business, other than in
the ordinary course of business consistent with past practices;

 

(c)           any creation or assumption by the
Acquired Business of any lien, encumbrance or other charge on any of the assets
or properties of the Acquired Business;

 

(d)           any indebtedness for borrowed money
incurred by the Acquired Business or any commitment to incur indebtedness for
borrowed money entered into by the Acquired Business;

 

(e)           the incurrence by the Acquired
Business of any material liability or obligation not in the ordinary course of
business and consistent with past practice;

 

(f)            the entering into a material
contract or any amendment, modification or termination of any Contract listed
on Schedule 2.7 other that the expiration of any such Contract by its terms;

 

(g)           the addition or loss of any employee
of the Acquired Business, or any material increase in, or commitment to
increase, the direct or indirect compensation payable or to become payable to
any employee of the Acquired Business, or the commitment to make severance,
bonus or special payments to any such employee;

 

(h)           any material condemnation, seizure,
damage, destruction or other casualty loss (whether or not covered by insurance)
affecting any of the assets or properties of the Acquired Business; or

 

(i)            any notice of default or any other
claim, allegation or other assertion that the Acquired Business has been or
will be in breach or violation of any provision of any contract, agreement or
instrument to which it is a party and by which its assets are bound.

 

ARTICLE 3

 

REPRESENTATIONS AND
WARRANTIES

OF BUYER

 

Buyer represents
and warrants to the Seller as follows:

 

7

 

3.1           Organization
and Power.  Buyer is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has all requisite corporate power and
authority to own, lease and operate its properties, and to carry on its
business, as such is now being conducted.

 

3.2           Authorization
and Enforceability of Agreements. 
Buyer has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder.  This Agreement has been duly executed and delivered by Buyer and
constitutes the legal, valid and binding obligation of Buyer, enforceable in
accordance with its terms, except as may be limited by bankruptcy,
reorganization, insolvency, moratorium or other laws relating to or affecting
the enforcement of creditors’ rights and remedies generally.  This Agreement been duly and validly
authorized by and approved by all requisite corporate action on the part of
Buyer.  No further approvals or consents
by, or filings with, any federal, state, municipal, foreign or other court or
governmental or administrative body, agency or other third party is required in
connection with the execution and delivery by Buyer of this Agreement or the
consummation by Buyer of the transactions contemplated hereby.

 

3.3           No
Conflicts.  Neither the execution
and delivery of this Agreement, nor the consummation of the transactions
contemplated hereby will (a) violate any provisions of the charter or Bylaws of
Buyer, (b) violate, or be in conflict with, or constitute a default (or other
event which, with the giving of notice or lapse of time or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration under any of the terms, conditions or provisions
of any material lease, license, promissory note, contract, agreement, mortgage,
deed of trust or other instrument or document to which Buyer is a party or by
which Buyer or any of its properties or assets may be bound, (c) violate any
order, writ, injunction, decree, law, statute, rule or regulation of any court
or governmental authority applicable to Buyer or any of its properties or
assets or (d) give rise to a declaration or imposition of any claim, lien,
charge, security interest or encumbrance of any nature whatsoever upon any of
the assets of Buyer’s businesses.

 

3.4           Brokers
and Finders.  Buyer has not engaged
or authorized any broker, finder, investment banker or other third party to act
on behalf of Buyer, directly or indirectly, as a broker, finder, investment
banker or in any other like capacity in connection with this Agreement or the
transactions contemplated hereby, or consented to or acquiesced in anyone so
acting, and Buyer does not know of any claim for compensation from any such
broker, finder, investment banker or other third party for so acting on behalf
of Buyer or of any basis for such a claim.

 

8

 

ARTICLE 4

 

CERTAIN OTHER COVENANTS
AND AGREEMENTS

 

4.1           Consents and Filings Each
party shall use all commercially reasonable efforts to obtain or make, as the
case may be, as soon as possible, all filings and requests for governmental
approvals as may be required to be obtained or made by it in order to enable
such party to perform its obligations under this Agreement.

 

4.2           Delivery of Books and Records.  At the Closing, Seller will deliver to Buyer
all original contracts, books and records of the Acquired Business.

 

4.3           Cooperation and Further Assurance.               After the Closing, the parties
shall cooperate in good faith to facilitate the transfer of the Stock in the
manner contemplated hereunder with minimum disruption for the parties. Each
party shall execute such further documents and instruments as the other may
reasonably request to reflect the transactions contemplated hereunder and to
vest in Buyer full title to the Stock and the Acquired Business.

 

4.4           Transfer Taxes.  All sales, use, transfer, stamp, conveyance,
or other similar taxes, duties, excises or governmental charges imposed by any
governmental authority, domestic or foreign, with respect to the sale or
transfer of the Stock shall be borne entirely by Seller.

 

4.5           Transaction Expenses.  Each party shall pay its own expenses
incident to preparing for, entering into and carrying out this Agreement and
the transactions contemplated hereby, whether or not the Closing occurs.  Any such expenses of the Seller shall not be
charged to or incurred by the Acquired Business.

 

4.6           Non-compete.  In consideration of the purchase price paid
by Buyer hereunder and the other covenants and agreements contained herein,
Seller hereby agrees, during the time in which any payment may be due and
payable under either section 1.3 or section 1.4 of this Agreement and for a
period of three (3) years thereafter, that neither Stockholder, Holdings nor
any of its or her successors or assigns, shall compete, directly or indirectly,
with the Buyer, or any affiliate of the Buyer, in any business activity related
to the Acquired Business within the countries of Denmark, Norway, Sweden or
Finland.  For purposes of this section,
Seller’s activity in disposing of existing inventory of Sports Enterprises
shall not be considered to be activities in competition with Buyer or the
Acquired Business.

 

 

ARTICLE 5

 

INDEMNIFICATION

 

5.1           Indemnity
by the Seller.  The Seller shall
indemnify and hold harmless, Buyer and the officers, directors, agents,
affiliates and representatives of Buyer or any of them (the “Buyer

 

9

 

Indemnitees”) from and against, and shall reimburse the Buyer
Indemnitees for any loss, liability, damage or expense, including reasonable
attorneys’ fees and costs of investigation incurred as a result thereof, that
the Buyer Indemnitees shall incur or suffer (collectively “Buyer’s Recoverable
Losses”), arising out of or resulting from (a) a breach or default by Seller of
or under (i) any representation or warranty contained in Article 2
hereof; or (ii) any agreement or covenant under or pursuant to this Agreement;
or (b) any liability or obligation of the Acquired Business arising or incurred
on or prior to the Effective Date and not disclosed to Buyer under this
Agreement..

 

5.2           Indemnity
by Buyer.  Buyer shall indemnify and
hold harmless the Seller and the officers, directors, agents, affiliates and
representatives of Seller or any of them (the “Seller Indemnitees”) from and
against, and shall reimburse the Seller Indemnitees for any loss, liability,
damage or expense, including reasonable attorneys’ fees and cost of
investigation incurred as a result thereof, that the Seller Indemnities shall
incur or suffer (collectively, “Seller’s Recoverable Losses”) resulting from
(a) a breach or default by Buyer of or under (i) any representation or warranty
contained in Article 3 hereof; or (ii) any agreement or covenant under
or pursuant to this Agreement;  or (b)
any liability or obligation of the Acquired Business arising or incurred after
the Effective Date or arising or incurred on or prior to the Effective Date and
disclosed to Buyer under this Agreement..

 

5.3           Limitations
on Liability; Offset.  Seller shall
have no liability to Buyer under Section 5.1 above until the aggregate of the
Buyer’s Recoverable Losses reaches $25,000, at which point Seller shall be
liable for all of Buyer’s Recoverable Losses to the extent provided in Section
5.1.  Seller shall not be obligated for
Buyer’s Recoverable Losses under section 5.1(a) above to the extent such losses
exceed the sum of $700,000 plus all amounts paid or payable under sections 1.3
or 1.4 above, nor shall Seller be liable for any claims described in Section
5.1(a) above which are first asserted after August 30, 2005, it being
understood that claims made on or prior to such expiration date shall survive
such expiration date  In the event that
Buyer shall incur a loss that is a Buyer Recoverable Loss at a time in which
any amounts remain to be paid under sections 1.3 or 1.4 above, Buyer may
satisfy Seller’s liability for such loss by reducing the amount of any such
payment or payments under said sections in the amount of such loss.  If Seller disputes its or her liability for
such loss, Seller may submit such dispute to the dispute resolution procedure
described below in section 5.4.

 

5.4                                 Claims
for Indemnification; Disputes

 

(a)           Claims for Indemnification.  Any party hereto shall give Seller or Buyer,
as the case may be (the “Indemnitor”), written notice (the “Claim Notice”) of
any claim (including the receipt of any demand) or the commencement of any
action with respect to which indemnity may be sought (the “Claim” or the
“Claims).  The Claim Notice shall state
(i) the aggregate amount of Buyer’s Recoverable Losses or Seller’s
Recoverable Losses (in either case, “Recoverable Losses”) as to which indemnification
is being sought (which amount may be estimated and updated from time to time),
(ii) the components of the amount of Recoverable Losses for which
indemnification is being sought (which components may be estimated and updated
from time to time); and (iii) the specific grounds upon which the Claim
for indemnification is being made.  The
right to indemnification for a Claim shall be deemed to be accepted by the
Indemnitor unless, within 30 days after the Indemnitor’s receipt of the Claim

 

10

 

Notice, the Indemnitor shall notify the claimant in writing that it
objects to the right to indemnification with respect to the Claim.

 

(b)           Resolution
of Disputes.  The parties shall
undertake in good faith to have their representatives promptly meet and attempt
to resolve all disputes regarding indemnification.  If the parties are unable to resolve such disputes within 30
days, the resolution of the disputes shall be referred to and settled by
arbitration in accordance with the Rules of Procedure of the Danish Institute
of Arbitration (Copenhagen Arbitration). 
The arbitration tribunal shall be composed of three artibrators.  Each party shall appoint one arbitrator and
the Institute shall appoint a third arbitrator who shall be the chairman of the
arbitration tribunal.  If a party has
not appointed an arbitrator within 30 days of having requested or received
notice of the arbitration, the Institute shall appoint such arbitrator.  The arbitrators in such a proceeding shall
have the authority to resolve any such dispute and award judgments for monetary
amounts, but shall not have the authority to award damages in the nature of
punitive, exemplary or consequential damages. 
The arbitration shall be conducted in English.  Judgment upon the award may be entered in any court of competent
jurisdiction or application may be made to such court for a judicial acceptance
of the award and an order of enforcement, as the case may be.  The successful or prevailing party shall be
entitled to recover all attorneys’ fees, expert witness fees and other costs
incurred in such action, in addition to any other relief to which it may be
entitled.

 

 

ARTICLE 6

 

GENERAL PROVISIONS

 

6.1           Entire
Agreement; Modifications; Waiver. 
Subject to the following sentence, this Agreement and the agreements
ancillary hereto, supersede any and all agreements heretofore made, written or
oral, relating to the subject matter hereof, and constitute the entire
agreement of the parties relating to the subject matter hereof.  This Agreement supersedes the September 29,
2003 option letter between Seller and Buyer except for the cost sharing
provisions of paragraph 1 of said letter, which provisions shall remain in
effect until all such costs for the period specified therein have been
calculated and reimbursed by Buyer as provided in said paragraph 1. This
Agreement may be amended only by an instrument in writing signed by Buyer and
Seller.  Inspection of documents or the
receipt of information pursuant to this Agreement shall not constitute a waiver
of any representation, warranty, covenant or condition hereunder.  No waiver shall be binding unless executed
in writing by the party making such waiver.

 

6.2           Severability.  If any clause or provision of this Agreement
shall be held invalid or unenforceable by the final determination of a court of
competent jurisdiction, and all appeals therefrom shall have failed or the time
for such appeals shall have expired, such clause or provision shall be deemed
eliminated from this Agreement but the remaining provisions shall nevertheless
be given full force and effect.

 

6.3           Successors
and Assigns.  Neither party hereto
may assign or transfer all or a portion of its rights or obligations under this
Agreement without the prior written consent of the other party.

 

11

 

Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of each of the parties hereto, and their respective
successors and assigns.

 

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

 

6.5           Governing
Law.  This Agreement shall be
construed and interpreted in accordance with the internal substantive laws of
the Country of Denmark.

 

6.6           Notices.  All notices required or desired to be given
hereunder shall be given in writing and signed by the party so giving notice,
and shall be effective when personally delivered or sent by facsimile with
receipt confirmed or two business days after transmission if sent by overnight
delivery service and appropriate confirmation is received, addressed as set
forth below.  Any party from time to
time may change such party’s address for giving notice by giving notice thereof
in the manner outlined above:

 

	
  If to Buyer:

  
	
   

  	
   

  
	
   

  	
  dj Orthopedics, LLC

  
	
   

  	
  2985 Scott Street

  
	
   

  	
  Vista, California 
  92083

  
	
   

  	
  Attention:

  	
  Donald M. Roberts

  
	
   

  	
  Facsimile:

  	
  (760) 734-3536

  
	
   

  	
   

  
	
  If to the Seller:

  
	
   

  	
   

  
	
   

  	
  KD Holdings

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attention:

  	
  Kirsten Damgaard

  
	
   

  	
  Facsimile:

  

 

6.7           Recitals,
Schedules and Exhibits.  The
recitals, schedules and exhibits to this Agreement are incorporated herein and,
by this reference, made a part hereof as if fully set forth at length herein.

 

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

 

12

 

	
   

  	
   

  	
  DJ ORTHOPEDICS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “Buyer”

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  KD HOLDINGS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Kirsten Damgaard

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  “Seller”

  	
   

  
														

 

13Exhibit
10.26

 

TIME AMERICA, INC.

 

NOTE PURCHASE AGREEMENT

 

This NOTE PURCHASE
AGREEMENT (“Agreement”) is dated as of April 16, 2004, by and among Time
America, Inc., a Nevada corporation (the “Company”), and Frances L.
Simek (the “Investor”).

 

W  I  T
N  E  S  S  E  T  H:

 

WHEREAS, the Company desires to sell and
issue to the Investor, and the Investor desires to purchase from the Company,
$500,000 in original principal amount of a Promissory Note, in the identical
form and substance of Exhibit A attached hereto, on the terms
and conditions set forth herein (the “Note”), to bear interest (computed
on the basis of a 360-day year and actual days elapsed) from the date of
issuance at the rate of fifteen percent (15.0%) per annum;

 

WHEREAS, the Note will be secured by all of the Company’s assets, which security
interest shall be evidenced by a Security Agreement (the “Security Agreement”),
in substantially the form and substance of Exhibit B attached hereto;

 

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

 

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

 

“Closing” and “Closing
Date” shall have the meanings ascribed to such terms in Section 1.3 herein.

 

“Holder” and “Holders”
shall include an Investor or Investors, respectively, and any transferee of the
Notes which have been transferred in compliance thereof.

 

“Maturity Date” shall
mean May 1, 2009, the date upon which the Notes mature and the principal
thereof and all interest thereon becomes due and payable.

 

 “Regulation D” shall mean Regulation D as
promulgated pursuant to the Securities Act, and as subsequently amended.

 

ARTICLE I

 

Purchase and Sale of the Notes

 

Section 1.1  Purchase and Sale.  Upon the following terms and conditions, the
Company shall issue and sell to the Investor, and the Investor shall purchase from
the Company, the aggregate principal amount $500,000.

 

 

Section 1.2  Purchase Price.  The purchase price for the Note shall be
100% of the principal amount thereof (the “Note Purchase Price”).

 

Section 1.3  The Closing.  (a) 
The closing of the purchase and sale of the Note, shall take place by
facsimile transmission of signature pages to each of the documents contemplated
by this Agreement, and the satisfaction or waiver of the other conditions set
forth in Article V hereof. The date on which the Closing occurs is referred to
herein as the “Closing Date.”

 

(b)                                 On
the Closing Date, the Company shall deliver to the Investor the Note, and an
executed counterpart of this Agreement and the Security Agreement, and such
Investor shall deliver to the Company the purchase price for the Note purchased
by such Investor hereunder by wire transfer in immediately available funds to
an account designated in writing prior to the Closing Date by the Company and
executed counterparts of this Agreement and the Security Agreement.  In addition, each party shall deliver all
documents, instruments and writings required to be delivered by such party
pursuant to this Agreement at or prior to the Closing Date.

 

ARTICLE II

 

Representations and Warranties

 

Section 2.1  Representations and Warranties of the
Company.  The Company hereby makes
the following representations and warranties to the Investor from and as of the
date hereof through the Closing Date:

 

(a)                                  Organization
and Qualification; Material Adverse Effect.  The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada.  Except for the Company’s wholly owned
subsidiary, Time America, Inc., there are no other corporations or other
entities (including partnerships, limited liability companies and joint
ventures) in which the Company directly or indirectly owns at least a majority
of the voting power represented by the outstanding capital stock or other
voting securities or interests having voting power under ordinary circumstances
to elect a majority of the directors or similar members of the governing body,
or otherwise to direct the management and policies, of such corporation or
entity.  The Company has the requisite
corporate power to own its properties and to carry on its business as now being
conducted.  The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not, individually or in the aggregate, have a
Material Adverse Effect.  “Material
Adverse Effect” means any adverse effect on the business, operations,
properties, or financial condition of the entity with respect to which such
term is used and which is material to such entity and other entities
controlling or controlled by such entity, taken as a whole, and any material
adverse effect on the transactions contemplated under the Agreement or any
other agreement or document contemplated hereby.

 

(b)                                 Authorization;
Enforcement.  (i)  The Company has the requisite corporate
power and authority to enter into and perform this Agreement,  the Note and the Security

 

2

 

Agreement in accordance with the terms hereof, (ii) the execution and
delivery of this Agreement and the Security Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including the issuance of the Notes in accordance with the terms of this
Agreement, have been duly authorized by all necessary action, and no further
consent or authorization of the Company is required, (iii) this Agreement has
been duly executed and delivered by the Company, and (iv) each of this
Agreement, the Security Agreement, and the Notes constitutes the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or similar laws relating to the enforcement of
creditors’ rights generally and by general principles of equity.

 

(c)                                  No Conflicts.  The
execution, delivery and performance of this Agreement, the Security Agreement,
and the Notes by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) result in
a violation of the organizational documents, as amended, of the Company or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which the Company is a
party, or result in a violation of any Federal, state, local or foreign law,
rule, regulation, order, judgment or decree (including Federal and state
securities laws and regulations) applicable to the Company or by which any
property or asset of the Company is bound (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect);
provided that, for purposes of such representation as to Federal, state, local
or foreign law, rule or regulation, no representation is made herein with
respect to any of the same applicable solely to the Investors and not to the
Company.  The business of the Company
has not been, is not now being conducted in violation of any law, ordinance or
regulation of any governmental entity, except for violations which either
singly or in the aggregate do not and will not have a Material Adverse
Effect.  The Company is not required
under Federal, state, local or foreign law, rule or regulation to obtain any
consent, authorization or order of, or to make any filing or registration with,
any court or governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement, the Security Agreement, or the
Notes, provided that, for purposes of the representation made in this sentence,
the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investors herein.

 

(d)                                 No
Undisclosed Liabilities.  The
Company does not have any liabilities or obligations not disclosed in the
Company’s most recent financial statements, as filed with the Commission, other
than those liabilities incurred in the ordinary course of its business since December
31, 2003, or liabilities or obligations, individually or in the aggregate,
which do not or would not have a Material Adverse Effect on the Company.

 

(e)                                  No General Solicitation.  Neither
the Company nor, to the Company’s knowledge, any of its affiliates or any
person acting on its or their behalf has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Securities.

 

3

 

(f)                                    No
Litigation.  No litigation or claim
(including those for unpaid taxes) against the Company is pending or, to the
Company’s knowledge, threatened, and no other event has occurred, which if
determined adversely would have a Material Adverse Effect on the Company, or
would materially adversely effect the transactions contemplated hereby.

 

(g)                                 Brokers.  The Company has taken no action that would
give rise to any claim by any person for brokerage commissions, finder’s fees
or similar payments by the Company relating to this Agreement or the
transactions contemplated hereby or thereby.

 

ARTICLE III

 

Covenants

 

Section 3.1  Replacement Certificates.  The certificate(s) representing the Notes
held by any Investor (or then holder) may be exchanged by such Investor (or
such holder) at any time and from time to time for certificates with different
denominations representing an equal amount of Notes as reasonably requested by
such Investor upon surrendering the same. 
No service charge will be made for such registration, transfer or
exchange.

 

Section 3.2  Subordination.  Investor subordinates to the obligations of
the Company under any Senior Indebtedness: (a) indebtedness of the Company to
Investor under this Note, including, without limitation, all rights of
subrogation, indemnification, reimbursement or contribution (collectively, the
“Subordinated Indebtedness”); and (b) all liens, security interests,
claims and right of any kind that Investor may now have or hereafter acquire
against the Company and/or the property of the Company which secure, result
from or otherwise pertain to the Subordinated Indebtedness.  For purposes of this Note, the term “Senior
Indebtedness” shall mean indebtedness of the Company and indebtedness
guaranteed by the Company for (i) money borrowed from banks or other lending
institutions whether outstanding on the date of this Note or thereafter
incurred, and (ii) any other indebtedness or obligation of the Company, whether
outstanding on the date of this Note or thereafter created, incurred, assumed
or guaranteed, which is evidenced by a note or other similar instrument, unless
by the terms of such note or other instrument it is provided that such
indebtedness is not superior in right of payment to this Note.

 

ARTICLE IV

 

Conditions

 

Section 4.1  Conditions Precedent to the Obligation of
the Company to Issue and Sell the Notes. 
The obligation hereunder of the Company to issue and sell the Notes to
the Investor is subject to the satisfaction, at or before the Closing Date, of
each of the conditions set forth below. 
These conditions are for the Company’s sole benefit and may be waived by
the Company at any time in its sole discretion.

 

(a)                                  Accuracy
of the Investor’s Representations and Warranties.  The representations and warranties of the Investor shall be true
and correct in all material respects as

 

4

 

of the date when made and as of the Closing Date as though made at that
time (except for representations and warranties that speak as of a particular
date, which shall be true and correct in all material respects as of such other
date), and except that all representations and warranties that by their terms
are qualified by reference to “materiality” or to a “Material Adverse Effect”
shall be, or have been, true and correct in all respects.

 

(b)                                 Performance
by the Investors.  Each Investor
shall have performed all agreements and satisfied all conditions required
hereby to be performed or satisfied by such Investor at or prior to the Closing
Date.

 

(c)                                  No
Injunction.  No statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement.

 

(d)                                 Approvals.
The Company’s Board of Directors shall have approved the transactions
contemplated by this Agreement.

 

Section 4.2  Conditions Precedent to the Obligation of
the Investor to Purchase the Notes. 
The obligation hereunder of the Investor to acquire and pay for the
Notes is subject to the satisfaction, at or before the Closing Date, of each of
the conditions set forth below.  These
conditions are for the Investor’s sole benefit and may be waived by the
Investor at any time in its sole discretion.

 

(a)                                  Accuracy
of the Company’s Representations and Warranties.  The representation and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a particular date which shall be true and correct
in all material respects as of such other date), and except that all
representations and warranties that by their terms are qualified by reference
to “materiality” or to a “Material Adverse Effect” shall be, or have been, true
and correct in all respects.

 

(b)                                 Performance
by the Company.  The Company shall
have performed all agreements and satisfied all conditions required to be
performed or satisfied by the Company at or prior to the Closing Date.

 

(c)                                  No
Injunction.  No statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental
authority or competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement.

 

ARTICLE V

 

Termination

 

Section 5.1  Termination by Mutual Consent.  This Agreement may be terminated at any time
prior to the Closing Date by the mutual written consent of the Company and the
Investor.

 

5

 

Section 5.2  Other Termination.  This Agreement may be terminated by an
authorized representative of the Company or by the Investor at any time if the
Closing Date shall not have occurred by the fifth business day following the
date of this Agreement; provided, however, that the right to terminate this
Agreement under Section 5.2 shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing Date to have occurred on or prior to
such date.

 

ARTICLE VI

 

Miscellaneous

 

Section 6.1  Stamp Taxes; Agent Fees.  The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Notes pursuant
hereto.

 

Section 6.2  Specific Enforcement; Consent to
Jurisdiction.

 

(a)                                  The
Company and the Investor acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached.  It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity.

 

(b)                                 The
Company and the Investor (i) hereby irrevocably submit to the exclusive
jurisdiction of the United States District Court, the Arizona State courts and
other courts of the United States sitting in Maricopa County, Arizona for the
purposes of any suit, action or proceeding arising out of or relating to this
Agreement and (ii) hereby waives, and agrees not to assert in any such suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in
an inconvenient forum or that the venue of the suit, action or proceeding is
improper.  The Company and the Investor
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof.  Nothing in this paragraph shall affect or limit any right to
serve process in any other manner permitted by law.

 

Section 6.3  Entire Agreement; Amendment.  This Agreement together with the agreements
and documents executed in connection herewith, contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein, neither the Company nor the Investor
makes any representation, warranty, covenant or undertaking with respect to
such matters.  No provision of this
Agreement may be waived or amended other than by a written instrument signed by
the party against whom enforcement of any such amendment or waiver is sought.

 

Section 6.4  Notices.  Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: 
(i) upon receipt, when delivered personally; (ii) upon receipt, when
sent by facsimile (provided confirmation of transmission is mechanically or
electronically

 

6

 

generated and kept on file by the sending party); or (iii) one business
day after deposit with a nationally recognized overnight delivery service, in
each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such
communications shall be:

 

	
  to the Company:

  	
   

  	
  Time america,
  Inc.

  
	
   

  	
   

  	
  51 West Third
  Street

  
	
   

  	
   

  	
  Suite 310

  
	
   

  	
   

  	
  Tempe,
  Arizona  85281

  
	
   

  	
   

  	
  Telephone:  480-296-0400

  
	
   

  	
   

  	
  Facsimile:
  480-296-0444

  
	
   

  	
   

  	
  Attn:

  	
  Craig J. Smith

  
	
   

  	
   

  	
   

  	
  Chief Financial
  Officer

  
	
   

  	
   

  	
   

  
	
  with copies to:

  	
   

  	
  Squire, Sanders
  & Dempsey L.L.P.

  
	
   

  	
   

  	
  Two Renaissance
  Square

  
	
   

  	
   

  	
  40 North Central
  Avenue, Suite 2700

  
	
   

  	
   

  	
  Phoenix,
  Arizona  85004-4498

  
	
   

  	
   

  	
  Telephone:  602-528-4134

  
	
   

  	
   

  	
  Facsimile:  602-253-8129

  
	
   

  	
   

  	
  Attn:

  	
  Gregory R. Hall,
  Esq.

  
	
   

  	
   

  	
   

  
	
  to the Investor:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

Any party hereto may from
time to time change its address for notices by giving at least five (5) days
written notice of such changed address to the other parties hereto.  Written confirmation of receipt (A) given by
the recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above.

 

Section 6.5  Indemnity.  Each party shall indemnify, defend and hold harmless each other
party against any loss, cost or damages (including reasonable attorney’s fees)
incurred as a result of such parties’ breach of any representation, warranty,
covenant or agreement in this Agreement.

 

Section 6.6  Waivers.  No waiver by any party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof, nor shall any

 

7

 

delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right accruing to it thereafter.

 

Section 6.7  Headings.  The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof.

 

Section 6.8  Successors and Assigns.  Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. 
The parties hereto may amend this Agreement without notice to or the
consent of any third party.  The Company
may not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the Investor, except that the Company may assign
this Agreement in connection with a merger, consolidation, business combination
or the sale of all or substantially all of its assets provided that the Company
is not released from any of its obligations hereunder, such successor in
interest or assignee assumes all obligations of the Company hereunder, and
appropriate adjustment of the provisions contained in this Agreement, and the
Notes is made, in form and substance satisfactory to the Investor, to place the
Investor in substantially the same position as they would have been but for
such assignment.  The Investor may not
assign this Agreement (in whole or in part) or any rights or obligations
hereunder without the Company’s prior written consent (which consent may be
withheld for any reason in their sole discretion).

 

Section 6.9  No Third Party Beneficiaries.  This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.

 

Section 6.10  Governing Law.  This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Arizona without regard to such State’s principles of conflict of laws.

 

Section 6.11  Survival.  The representations and warranties and the agreements and
covenants of the Company and each Investor contained herein shall survive the
Closing.

 

Section 6.12  Execution.  This Agreement may be executed in two or more counterparts, all
of which shall be considered one and the same agreement, it being understood
that all parties need not sign the same counterpart.

 

Section 6.13  Publicity.   The Company agrees that it will not include in any public
announcement the name of any Investor without its consent, unless and until
such disclosure is required by law or applicable regulation, and then only to
the extent of such requirement.

 

Section 6.14  Severability. The parties acknowledge
and agree that all representations, warranties, covenants and agreements of the
Investors hereunder are several and not joint, that no Investor shall have any
responsibility or liability for the representations,  agreements, acts or omissions of any other Investor, and that any
rights granted to “Investors” hereunder shall be enforceable by each Investor
hereunder.

 

8

 

Section 7.15  Expenses.  Each party shall pay its own expenses incident to the preparation
and performance of this Agreement and the documents provided for herein.

 

9

 

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

 

	
   

  	
  TIME AMERICA,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas S.
  Bednarik

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Thomas S.
  Bednarik

  
	
   

  	
   

  	
  Title:

  	
  President and
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INVESTOR:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Frances
  Simek

  	
   

  
	
   

  	
   

  	
  Frances Simek

  
						

 

10

 

EXHIBITS
AND SCHEDULES

 

	
  Exhibit A

  	
   

  	
  Form of Notes

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Form of Security Agreement

  

 

 

 

I-1

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