ASSET PURCHASE AGREEMENT

Exhibit 2.1

E XECUTION C OPY

ASSET PURCHASE AGREEMENT

AMONG

TVI CORPORATION,

TVI HOLDINGS ONE, INC.,

SIGNATURE SPECIAL EVENT SERVICES, LLC

RIVER ASSOCIATES INVESTMENTS, LLC

(as the Selling Parties Representative)

AND

THE MEMBERS OF SIGNATURE SPECIAL EVENT SERVICES, LLC

OCTOBER 31, 2006

TABLE OF CONTENTS

 

 

i

ii

 

iii

EXHIBITS

 

 

iv

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (the “ Agreement ”) is entered into under seal as of October 31, 2006, among SIGNATURE SPECIAL EVENT SERVICES, LLC , a Delaware limited liability company, and its subsidiaries, if any (“ Signature ” or “ Seller ”); the members of the Seller who are signatories hereto (individually, a “ Member ” and collectively, the “ Members ”), RIVER ASSOCIATES INVESTMENTS, LLC , a Tennessee limited liability company (“ Selling Parties Representative ”) , TVI HOLDINGS ONE, INC ., a Maryland corporation, or its affiliated designee (“ Buyer ”), and TVI CORPORATION , a Maryland corporation (“ TVI ” or “ Parent ”). Buyer, Seller, Parent and Members are referred to herein individually as a “ Party ,” and collectively as the “ Parties .”

BACKGROUND

Seller desires to sell, and Buyer desires to purchase, the Assets (defined below) and, as part of such sale and purchase, Buyer is willing to assume certain obligations and liabilities of Seller, to the extent they relate to the Business (defined below), as set forth in this Agreement. Moreover, in consideration of the direct and indirect benefits accruing to the Members as the equity owners of Seller, the Members have agreed to join in certain of Seller’s representations, warranties and covenants hereunder and indemnify the Buyer and Parent in the event of any breach thereof in order to induce Buyer and Parent to enter into this Agreement, without which inducement Buyer and Parent would not have entered into this Agreement.

WITNESSETH

NOW, THEREFORE, in consideration of the respective covenants contained herein and intending to be legally bound hereby, the Parties agree under seal as follows:

ARTICLE I

DEFINITIONS

For convenience, certain capitalized terms used herein are listed in alphabetical order and defined in ARTICLE XIV hereof or elsewhere in this Agreement.

ARTICLE II

SALE AND PURCHASE OF ASSETS

AND ASSUMPTION OF CERTAIN LIABILITIES

2.1 Sale and Purchase of Assets .

(a) Subject to the terms and conditions of this Agreement, including Section 3.10(a) hereof, at the Closing Seller shall sell, transfer, convey, assign and deliver to Buyer and Buyer shall purchase, acquire and accept from Seller, all the right, title and interest of Seller in and to all property and assets owned by Seller and used in the Business, of every nature, kind and description, wherever located, including, without limitation the following (collectively, the “ Assets ”):

(i) All Tangible Assets;

(ii) all Accounts Receivable;

(iii) all Inventory and Rental Assets;

(iv) all Contracts of Seller and all Bids of Seller;

(v) all Governmental Authorizations and all pending applications therefor and renewals thereof;

(vi) all rent/security deposits, credits, prepayments, prepaid expenses (as scheduled), and deferred items (other than deferred income Taxes), claims, deposits, refunds, claims for refunds and rights to offset in respect thereof, rights against third parties, causes of action, chooses in action, rights of recovery, rights of set off, and rights of recoupment (including any such item relating to the payment of Taxes other than income Taxes), other prepaid items and all other intangible rights relating to the Assets or the Facilities, including, without limitation, those items as of September 30, 2006 listed on Schedule 2.1(a)(vi ) (to the extent not reduced in the Ordinary Course of Business since such date);

(vii) all insurance benefits, including rights and proceeds, arising from or relating to the Assets or the Assumed Liabilities prior to the Closing, unless expended in accordance with this Agreement;

(viii) all Seller Intellectual Property, including all going concern value, telephone, telecopy, website domains and e-mail addresses and listings and those items listed on Schedule 3.14(a) , and any and all associated goodwill, including the name “Signature Special Event Services;”

(ix) all data and Records related to the operations of Seller, including client and customer lists and Records, referral sources, research and development reports and Records, production reports and Records, service and warranty Records, equipment logs, operating guides and manuals, financial and accounting Records, creative materials, advertising materials, promotional materials, studies, reports, correspondence and other similar documents and Records and, subject to Legal Requirements, copies of all personnel Records, and all other printed, written or machine-readable materials in whatever form, including without limitation electronic databases, and whether held by Seller or stored on behalf of Seller by third parties, directly and exclusively related to any of the foregoing.

(b) Notwithstanding the foregoing, the transfer of the Assets pursuant to this Agreement shall not include the assumption of any Liability related to the Assets unless Buyer expressly assumes such Liability pursuant to Section 2.3.

2.2 Excluded Assets .

(a) Notwithstanding anything to the contrary herein, Seller shall not sell, transfer, convey, assign or deliver, and shall retain, any and all assets whatsoever in any of the following (the “ Excluded Assets ”): (i) all rights of Seller under this Agreement and the Transaction Documents, including the consideration received hereunder; (ii) any cash and cash equivalents; (iii) any note payable to Seller from any of Seller’s Members, equityholders or Affiliates (including, without limitation, any note receivable from Thomas Brown or any other Seller employees and any amount due under the February 28, 2003 Management Agreement between River Associates Investments, LLC and Seller); (iv) any of Seller’s Governing Documents, qualifications to conduct business as a foreign limited liability company, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, original minute books, and other documents relating to the organization, maintenance, and existence of Seller as a limited liability company; (v) all of Seller’s Federal income Tax

 

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returns; (vi) any of Seller’s insurance policies, (vi) any rights under the June 7, 2006 Premium Finance Agreement between the Seller and AICCO, Inc. and (vii) all rights in connection with, and assets of, the Benefit Plans.

2.3 Assumption of Liabilities

(a) Subject to Section 2.3(b), at the Closing, Buyer shall assume, and shall agree to pay and discharge as and when due only the following liabilities (collectively, the “ Assumed Liabilities ”):

(i) Those of Seller’s trade accounts payable and other operational accrued expenses including, without limitation, customer deposits, unearned revenue and payment obligations under credit cards, which have arisen in the Ordinary Course of Business and which constitute current liabilities and are included as such on the Final Balance Sheet (the “ Other Accrued Expenses ”); and

(ii) All Liabilities of Seller under the Material Contracts of Seller (other than those expressly listed on Schedule 3.15(a) hereof as “Excluded Contracts”) arising after the Closing Date (the “ Assumed Contracts ”).

(b) Notwithstanding anything to the contrary herein, Buyer shall not be deemed to assume or to be otherwise liable, and Seller will be responsible for, any Liabilities of Seller other than the Assumed Liabilities (the “ Excluded Liabilities ”). The Excluded Liabilities include, without limitation: (i) all amounts outstanding under any and all indebtedness for borrowed money, including lines of credit, letters of credit, notes payable and loans payable and any Related Party Loan Amounts; (ii) all environmental Liabilities that arise out of or result from events occurring or conditions existing on or prior to the Closing Date; (iii) except for those payment obligations expressly referenced in Section 2.3(a)(i) above all Tax Liabilities of Seller, including any such Liabilities of Seller related to consummation of the Contemplated Transactions; (iv) any Liabilities arising out of Seller’s violation or failure to comply with any Legal Requirement or any Order; (v) except for those payment obligations expressly referenced in Section 2.3(a)(i) above, any Liability arising under any Seller Benefit Plans; (vi) except for those payment obligations expressly referenced in Section 2.3(a)(i) above, any Liability arising out of or relating to payroll, workers’ compensation, workers’ compensation premiums, or unemployment benefits arising prior to the Closing Date; (vii) except for those payment obligations expressly referenced in Section 2.3(a)(i) above, any Liability attributable to employment with Seller, work by independent contractors, or work for Seller through temporary or seasonal labor; (ix) any fees, costs and expenses incurred by Seller in connection with this Agreement and the Contemplated Transactions; (x) any Liabilities of the Seller to any of Seller’s Members, equityholders or Affiliates; (xi) any Liabilities arising out of Seller’s Breach under any Contracts of Seller or Governmental Authorizations prior to the Closing Date; (xii) any Liability associated with indemnity rights or other Claims under or related to the February 7, 2003 Asset Purchase Agreement entered into between United Rental, Inc. and Seller; and (xiii) any matter or condition disclosed in Section 3.9(j) (with respect to the “IRS Independent Contractor Matter” and the “2004 Withholding Discrepancy”), Section 3.15(a)(xiii), Section 3.19, Section 3.21(c) and Section 3.23.

2.4 Consideration for Asset Purchase.

(a) Subject to the terms and conditions of this Agreement, the consideration for the purchase of the Assets shall be Twenty Million Dollars ($20,000,000), adjusted by the estimated Closing Date Working Capital Deficiency or the estimated Closing Date Working Capital Excess, as the case may be (the “ Purchase Price ”).

 

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(b) The Purchase Price shall be payable as follows:

(i) The cash payment described in Section 2.4(a) shall be made as follows:

(A) Two Million Dollars ($2,000,000)(the “ Escrow Fund ”), shall be deposited at the Closing in an escrow account pursuant to the terms of an Escrow Agreement in the form of Exhibit A attached hereto; and

(B) The balance thereof shall be paid to Seller by electronic funds transfer at the Closing;

(iii) Buyer shall execute an Assignment and Assumption Agreement in the form of Exhibit B to evidence its assumption of the Assumed Liabilities.

2.5 Post-Closing Adjustment for Working Capital .

(a) Closing Payment Adjustment . Subject to the provisions of Section 10.6 hereof, within five (5) Business Days after the final determination of the Final Balance Sheet as set forth below, the Purchase Price will be adjusted (the amount of any such adjustment, the “ Closing Payment Adjustment ”) and the Buyer or the Seller, as the case may be, will make whatever payments to each other as is necessary, if any, such that the Purchase Price is what it would have been had the Estimated Closing Date Working Capital equaled the Closing Date Working Capital reflected on the Final Balance Sheet (the “ Closing Payment Adjustment Amount ”).

(b) Adjustment Procedures . The adjustments described in this Section will be implemented as follows:

(i) Within seventy-five (75) days after the Closing Date, the Buyer shall prepare and deliver to the Seller a balance sheet of Seller as of the Closing Date (the “ Final Balance Sheet ”). The Parties acknowledge and agree that for purposes of determining the Closing Payment Adjustment pursuant to this Section 2.5(b)(i) the Final Balance Sheet shall be prepared in accordance with GAAP on a basis consistent with and utilizing the same principles, practices and policies of Seller as those used in preparing the unaudited financial statements referenced in subsection (b) of the definition of “Financial Statements.”

(ii) The Seller shall have the right to review the books and Records relating to, and the work papers of the Buyer and its advisors utilized in preparing the Final Balance Sheet. The Final Balance Sheet shall be binding on the Seller unless the Seller presents to the Buyer within thirty (30) days after receipt of the Final Balance Sheet from the Buyer written notice of disagreement specifying in reasonable detail the nature and extent of the disagreement.

(iii) If the Seller delivers a timely notice of disagreement, the Buyer and the Seller shall attempt in good faith during the thirty (30) days immediately following the Buyer’s receipt of timely notice of disagreement to resolve any disagreement with respect to the Final Balance Sheet. If, at the conclusion of such thirty (30) day period, the Buyer and the Seller have not resolved their disagreements regarding the Final Balance Sheet, the Buyer and the Seller shall refer the items of disagreement for final determination to a mutually acceptable accounting firm with no prior relationship to the Parties (the “ Independent Accountants ”). The Buyer and the Seller shall be reasonably available to the Independent Accountants, who shall be instructed to render a final determination to both Buyer and Seller at the same time within the thirty (30) days immediately

 

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following their receipt of the referral. The Final Balance Sheet shall be deemed to be conclusive and binding on the Buyer and Seller upon (A) the failure of the Seller to deliver to the Buyer a notice of disagreement within thirty (30) days of its receipt of the Final Balance Sheet prepared by the Buyer, (B) resolution of any disagreement by mutual agreement of the Buyer and the Seller after a timely notice of disagreement has been delivered to the Buyer, or (C) notification by the Independent Accountants of their final determination of the items of disagreement submitted to them, as the case may be. The fees and disbursements of the Independent Accountants under this Section shall be shared equally by the Buyer and Seller.

(c) Payment of Closing Payment Adjustment . If the Closing Payment Adjustment Amount reflects an underpayment by Buyer to Seller, such amount shall be paid to Seller within five (5) days after the Final Balance Sheet has become final and binding on all Parties. Alternatively, if the Closing Payment Adjustment Amount reflects an overpayment by Buyer to Seller, the Seller shall make payment of such amount to the Buyer within five (5) days after the Final Balance Sheet has become final and binding on all Parties. In the event of a Closing Date Payment Adjustment, the payment due Seller or Buyer, as the case may be, under this Section 2.5 shall not be subject to the limitations of Section 10.3 and Section 10.4 hereof and Buyer’s indemnification rights under Article X hereof will be unaffected thereby. An example of the Closing Payment Adjustment calculation is included on Schedule 2.5(c) .

2.6 Allocation of Purchase Price . The Purchase Price (including the Assumed Liabilities) shall be allocated among the Assets as determined mutually by Seller and Buyer and in accordance with Schedule 2.6 . Buyer and Seller shall each report the federal, state and local income and other tax consequences of the Contemplated Transactions in a manner consistent with such allocation, including but not limited to the preparation and filing of Form 8594 under Code Section 1060 with their respective federal, state and local income tax returns for the taxable year that includes the Closing Date unless otherwise required by applicable law. In any Proceeding related to the determination of any Tax, no Party shall contend or represent that such allocation is not a correct allocation.

2.7 Escrow Fund . The purposes of the Escrow Fund shall be to fund payment of claims for indemnity pursuant to Article X. The Escrow Fund shall be maintained for fifteen (15) months in accordance with the Escrow Agreement. The Escrow Fund shall not be subject to any lien, attachment, trustee process or any other judicial process of any creditor of any Party, and shall be held and disbursed solely for the purposes and in accordance with the terms of the Escrow Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE MEMBERS

The Seller and the Members, jointly and severally, represent and warrant to the Buyer and the Parent that, except as set forth in the attached Disclosure Schedule, the statements contained in this Article III are true and correct as of the date of this Agreement and will be true and correct as of the Closing Date, except to the extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties will be true and correct as of such date). The Disclosure Schedule shall be arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this Article III and shall identify the specific exception(s) to which such disclosure relates. The disclosures in any section or subsection of the Disclosure Schedule shall not qualify as a disclosure in any other section or subsection in this Article III unless it is clear from a reading of the disclosure that such disclosure is applicable to such other section or subsection.

 

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3.1 Organization, Qualification and Corporate Power . Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all the powers necessary to own, lease and operate the assets and properties it now owns, leases and operates and to carry on its business as now conducted. Seller is duly qualified and in good standing as a foreign limited liability company in each of Maryland, North Carolina, Florida, Kentucky, New Jersey and California. Such states constitute all of the jurisdictions in which the nature of its business or its properties requires qualification. The Seller has furnished to the Buyer true, complete and correct copies of its Governing Documents. The Seller is not in default under, or in violation of any provision of, its Governing Documents.

3.2 Membership; Capitalization .

(a) The Members are the only members of the Seller. Each Member which is an entity is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation, as set forth on Schedule 3.2(a) . Each individual Member is a resident of his or her indicated jurisdiction as set forth on Schedule 3.2(a). The current address and telephone number of each Member are set forth on Schedule 3.2(a). Each Member holds his respective membership interests in the Seller free and clear of any Encumbrance.

(b) The authorized equity securities of Seller consist of units of equity ownership in the Seller, designated as Class A Units, Class B Units, Class C Units and Class D Units (the “ Seller Equity ”). Schedule 3.2(b)(i) sets forth, as of the date hereof, all of the issued and outstanding Seller Equity and the owners of record of such Seller Equity. The Seller Equity: (i) has been duly and validly issued; (ii) is fully paid and nonassessable; (iii) is held beneficially and of record only by the indicated Member; and (iv) was not issued in violation of any preemptive rights, rights of first refusal or first offer or other right. There are no outstanding or authorized equity appreciation, phantom equity or similar rights with respect to Seller, nor are there any voting trusts, proxies, equity holder agreements or any other agreements or understandings with respect to the ownership, control or voting of the Seller Equity. Except as set forth on Schedule 3.2(b)(ii) there are no outstanding options, or preemptive rights or rights of first refusal or first offer, nor are there any contracts, commitments, agreements, understandings, arrangements or restrictions to which Seller or any Seller is a party or by which Seller or any Seller is bound relating to any equity securities of Seller, whether or not outstanding, other than Seller’s Amended and Restated Limited Liability Company Agreement dated March 28, 2003, as amended (the “ LLC Agreement ”) and Seller’s Amended and Restated Members’ Agreement, dated March 28, 2003, (as amended) (the “ Members Agreement ”), full copies of each of which have been provided to Buyer. All of Seller’s Equity and any other securities whatsoever of Seller have been granted, offered, sold and issued in compliance with all applicable Legal Requirements.

3.3 Authorization of Contemplated Transactions . The Seller and each of the Members (other than individuals) has all requisite corporate (with respect to River Signature, Inc.) or limited liability company power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by the Seller and Members of this Agreement and the consummation by the Seller and Members of the Contemplated Transactions have been duly and validly authorized by all necessary corporate (with respect to River Signature, Inc.) or limited liability company action on the part of the Seller, including the approval of the holders of all of the issued and outstanding Seller Equity. This Agreement has been duly and validly executed and delivered by the Seller and the Members and constitutes a valid and binding obligation of the Seller and the Members, enforceable against the Seller and the Members in accordance with its terms and conditions, except to the extent such enforceability is subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or other law affecting or relating to creditors’ rights generally and general principles of equity (regardless of whether such enforceability is considered in a Proceeding in equity or at law).

 

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3.4 Noncontravention . Neither the execution and delivery by the Seller and the Members of this Agreement, nor the consummation by the Seller and Members of the Contemplated Transactions, will: (a) conflict with or violate any provision of the Governing Documents of the Seller or any Member, (b) require on the part of the Seller or the Members any filing with, or Governmental Authorization of, any Governmental Body, (c) except for the Consents and filings specified on Schedule 3.4(c) (the “ Required Consents ”), conflict with, result in a Breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party the right to terminate, modify or cancel, or require any notice, novation, consent or waiver under, any Contract to which the Seller or the Members is a party or by which the Seller or the Members are bound or to which any of their respective assets is subject, (d) result in the imposition of any Encumbrance upon any assets of the Seller or the Members or (e) violate any Order or Rule applicable to the Seller or any Member or any of his or its respective properties or assets.

3.5 No Subsidiaries . The Seller has no subsidiaries. The Seller does not own or control, directly or indirectly, or have any direct or indirect equity ownership, participation or similar interest in any Person.

3.6 Financial Statements; Books & Records .

(a) The Seller has provided to the Buyer the Financial Statements, copies of which are attached hereto as Schedule 3.6(a)(i) . Except as set forth on Schedule 3.6(a)(ii) , the Financial Statements fairly present, in all material respects, the financial condition, results of operations and cash flows of the Seller as of the respective dates thereof and for the periods referred to therein and are consistent with the books and Records of the Seller, all in accordance with GAAP ; provided, however , that the Financial Statements referred to in clause (b) of the definition of “Financial Statements” are subject to normal recurring year-end adjustments that will not, individually or in the aggregate, be material and do not include footnotes and other presentation items. Seller has also delivered to Buyer copies of all letters from Seller’s auditors to Seller’s board of managers or the audit committee thereof (or comparable bodies) since Seller’s Inception, together with copies of all responses thereto.

(b) The books of account and other financial Records of Seller, all of which have been made available to Buyer, represent actual, bona fide transactions and have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls. The minute books of Seller, all of which have been made available to Buyer, contain records of all meetings held of, and limited liability company action taken by, the Members, the board of managers and committees of the board of managers of Seller (or other comparable body), and no meeting of any such Members, board of managers or committee has been held for which minutes have not been prepared or are not contained in such minute books.

3.7 Absence of Certain Changes . Except as set forth on Schedule 3.7 , since the date of the Most Recent Balance Sheet, the Seller has operated its business only in the Ordinary Course of Business, and, except as set forth in Schedule 3.7:

(a) the Seller has not incurred any Debt;

(b) the Seller has not made any acquisition (by merger, consolidation, or acquisition of stock or assets or otherwise) of any other Person;

 

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(c) the Seller has not created any Encumbrance on any of its assets, tangible or intangible;

(d) except for sales to customers of the Seller’s products and services in the Ordinary Course of Business, the Seller has not sold, assigned or transferred any of its tangible assets;

(e) the Seller has not (i) amended any Contract with a Person that is or would be a Significant Person, or (ii) entered into or amended any Contract, other than a customer agreement, that is or would be a Material Contract;

(f) the Seller has not: (i) entered into or amended any employment or severance or similar agreement with any employee or any collective bargaining agreement, (ii) adopted or amended, or increased the payments to or benefits under, any Benefit Plan, or (iii) granted any increase in compensation payable or to become payable or the benefits provided to its directors, officers or employees;

(g) the Seller has not (i) made or changed any Tax election or (ii) made any material change in any method of accounting or accounting practice used by it, other than any such changes required by GAAP;

(h) the Seller has conducted and reflected in its books and Records each transaction referenced in Schedule 3.7 on an arm’s-length basis;

(i) there has been no change, event or development that has had or would be reasonably likely to have, individually or in the aggregate, a Seller Material Adverse Effect;

(j) there has not been any material casualty, loss, damage or destruction (whether or not covered by insurance);

(k) the Seller has not made any expenditure or commitment to purchase personal property or for additions to property, plant and equipment in excess of $25,000;

(l) the Seller has not issued, sold or otherwise disposed of any debenture, note, stock, or equity interest or modified or amended any right of any holder thereof;

(m) the Seller has not amended, terminated, waived, disposed of, or permitted to lapse, any material license or Governmental Authorization;

(n) the Seller has not delayed or postponed the payment of accounts payable and other liabilities outside the Ordinary Course of Business (where any such payment or Liability of $25,000 or more shall not be deemed to be in the Ordinary Course of Business);

(o) the Seller has not amended, cancelled, compromised, waived, or released any right or claim (or series of related rights and claims) outside the Ordinary Course of Business (where any such right or claim involving an amount of $25,000 or more shall not be deemed in the Ordinary Course of Business) and has not accelerated collection of accounts receivable or delayed payment of accounts payable;

(p) there has not been any material change in the accounting methods used by Seller; and

 

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(q) there has not been any amendment to the Governing Documents of the Seller.

3.8 Undisclosed Liabilities . Except as set forth on Schedule 3.8 , the Seller does not have any Liability, except for: (a) Liabilities shown on the Most Recent Balance Sheet, and (b) Liabilities which have arisen since the date of the Most Recent Balance Sheet in the Ordinary Course of Business.

3.9 Taxes .

(a) Except as set forth on Schedule 3.9(a) , the Seller has properly filed on a timely basis all Tax Returns that it was required to file, and all such Tax Returns were true, correct and complete in all respects. Except as set forth on Schedule 3.9(a), the Seller has properly paid on a timely basis all Taxes, whether or not shown on any of its Tax Returns that were due and payable. Except as set forth on Schedule 3.9(a), all Taxes that the Seller is or was required by law to withhold or collect have been withheld or collected and, to the extent required, have been properly paid on a timely basis to the appropriate Governmental Body. Except as set forth on Schedule 3.9(a), the Seller has complied with all information reporting and back-up withholding requirements including maintenance of the required Records with respect thereto, in connection with amounts paid to any employee, independent contractor, creditor or other Third Party.

(b) The unpaid Taxes of the Seller for periods through the date of the Most Recent Balance Sheet do not exceed the accruals and reserves for Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Most Recent Balance Sheet. Except for taxes associated with the consummation of the Contemplated Transactions, all Taxes attributable to the period from and after the date of the Most Recent Balance Sheet and continuing through the Closing Date are, or will be, attributable to the conduct by the Seller of its operations in the Ordinary Course of Business and are, or will be, consistent both as to type and amount with Taxes attributable to such comparable period in the immediately preceding year.

(c) The Seller has delivered to the Buyer: (i) complete and correct copies of all income Tax Returns of the Seller relating to Taxes for all Taxable periods for which the applicable statute of limitations has not yet expired and (ii) complete and correct copies of all private letter rulings, revenue agent reports, information document requests, notices of proposed deficiencies, deficiency notices, protests, petitions, closing agreements, settlement agreements, pending ruling requests and any similar documents submitted by, received by or agreed to by or on behalf of the Seller relating to Taxes for all Taxable periods for which the applicable statute of limitations has not yet expired. The income Tax Returns of the Seller specified in Schedule 3.9(c)(i) have been audited by the Internal Revenue Service or other applicable Governmental Body or are closed by the applicable statute of limitations for all periods through and including the Taxable period specified in Schedule 3.9(c)(i) . The Seller has delivered or made available to the Buyer complete and correct copies of all other Tax Returns of the Seller relating to Taxes for all Taxable periods for which the applicable statute of limitations has not yet expired. Except as set forth on Schedule 3.9(c)(ii) , no examination or audit of any Tax Return of the Seller by any Governmental Body is currently in progress or, to the Knowledge of the Seller, threatened or contemplated, and the Seller does not know of any basis upon which a Tax deficiency or assessment could reasonably be expected to be asserted against the Seller. Except as set forth on Schedule 3.9(c)(ii) , the Seller has not been informed by any jurisdiction that the jurisdiction believes that the Seller was required to file any Tax Return that was not filed.

(d) Except as set forth on Schedule 3.9(c)(ii) , the Seller has not (i) waived any statute of limitations with respect to Taxes or agreed to extend the period for assessment or collection of any Taxes, (ii) requested any extension of time within which to file any Tax Return, which Tax Return has not yet been filed, or (iii) executed or filed any power of attorney relating to Taxes with any Governmental Body.

 

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(e) Except as set forth on Schedule 3.9(c)(ii) , the Seller is not a party to any Tax Proceeding. The Seller is not and never has been a party to any specific transaction the main purpose of which has been to avoid, defer, or reduce Taxes. The Seller has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code.

(f) There are no Encumbrances with respect to Taxes upon any of the assets or properties of the Seller, other than with respect to Taxes not yet due and payable.

(g) Schedule 3.9(g) lists all the states and localities with respect to which the Seller is required to file any corporate, income or franchise tax returns. The Seller has properly filed Tax Returns with and paid and discharged any liabilities for taxes in any states or localities in which it is subject to Tax.

(h) None of the assets of the Seller: (i) is property that is required to be treated as being owned by any other Person pursuant to the provisions of former Section 168(f)(8) of the Internal Revenue Code of 1954, (ii) is “tax-exempt use property” within the meaning of Section 168(h) of the Code, (iii) directly or indirectly secures any debt the interest on which is tax exempt under Section 103(a) of the Code, or (iv) is subject to a lease under Section 7701(h) of the Code or under any predecessor section.

(i) Schedule 3.9(i) sets forth each jurisdiction in which the Seller files, or is required to file or has been required to file a Tax Return or is or has been liable for Taxes on a “nexus” basis and each jurisdiction that has sent notices or communications of any kind requesting information relating to the Seller’s nexus with such jurisdiction.

(j) Except as set forth on Schedule 3.9(j) , to the Seller’s Knowledge, there is no basis for the assertion of any claim relating or attributable to Taxes, which, if adversely determined, would result in any Encumbrance on the assets of the Seller, or would reasonably be expected to result in a Seller Material Adverse Effect.

3.10 Title; Condition of Assets .

(a) Except as set forth on Schedule 3.10(a) , the Assets: (i) constitute all of the assets, tangible and intangible, of any nature whatsoever, necessary to operate Seller’s Business in the manner presently operated by Seller, and (ii) include all of the operating assets of Seller. Seller owns good and transferable title to all of the Assets, free and clear of any Encumbrances and all Assets are free and clear of all Encumbrances, except for: (i) rights of lessors or lessees under the terms of the existing leases which are disclosed in Schedule 3.10(a)(i) ; (ii) liens for Taxes not yet due and payable for which Seller shall remain responsible unless expressly included herein as part of the Assumed Liabilities; (iii) liens imposed by any Legal Requirement and incurred in the Ordinary Course of Business for obligations not yet due and payable to laborers and materialmen; (iv) unperfected purchase money security interests existing in the Ordinary Course of Business without the execution of a security agreement (such items specified in the foregoing subsections (i) through (iv) being referred to herein as “ Permitted Encumbrances ”); and (v) Encumbrances expressly disclosed in Schedule 3.10(a)(v) .

 

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(b) Schedule 3.10(b) lists all Rental Assets. Except as set forth on Schedule 3.10(b) , all Rental Assets are Rental Ready. Seller has not entered into any Contract that grants a customer or any Third Party an option or other right to purchase any of the Rental Assets. Each Tangible Asset (other than Rental Assets) is in good repair and good operating condition, ordinary wear and tear excepted, is suitable for immediate use in the Ordinary Course of Business and is free from latent and patent defects. No Tangible Asset (other than Rental Assets) is in need of repair or replacement other than as part of routine maintenance in the Ordinary Course of Business. Except as disclosed in Schedule 3.10(c) , all Tangible Assets used in Seller’s business are in the possession of Seller.

(c) Schedule 3.10(c) lists: (i) all fixed assets (within the meaning of GAAP) of the Seller, indicating the cost, accumulated book depreciation (if any) and the net book value of each such fixed asset as of the date of the Most Recent Balance Sheet, subject to normal recurring year-end adjustments that will not, individually or in the aggregate, be material, and (ii) all other Tangible Assets (other than Inventory).

(d) Each item of equipment, motor vehicle and other asset that the Seller has possession of pursuant to a lease agreement or other contractual arrangement is in such condition that, upon its return to its lessor or owner under the applicable lease or contract, the obligations of the Seller to such lessor or owner to maintain such item will have been discharged in full.

3.11 Accounts Receivable . Schedule 3.11 contains a complete and accurate list of all Accounts Receivable as of September 30, 2006, which list sets forth the aging of each such Account Receivable. All Accounts Receivable that are reflected on the Most Recent Balance Sheet and on the accounting Records of Seller as of the Closing Date represent valid obligations arising from sales actually made or services actually performed by Seller in the Ordinary Course of Business. Other than as identified on Schedule 3.11 and except to the extent paid prior to the Closing Date, such Accounts Receivable are or will be as of the Closing Date collectible net of the respective reserves shown on the Most Recent Balance Sheet or on the Final Balance Sheet, respectively (which reserves are adequate and calculated consistent with past practice). Subject to such reserves, each of the Accounts Receivable either has been or, to the Knowledge of Seller, will be collected in full, without any setoff, within one hundred fifty (150) days after the day on which it first becomes due and payable. There is no contest, claim, defense or right of setoff, other than returns in the Ordinary Course of Business of Seller, under any Contract with any account debtor of an Account Receivable relating to the amount or validity of such Account Receivable.

3.12 Inventory . All items included in the Inventory consist of a quality and quantity usable and, with respect to finished goods, saleable, in the Ordinary Course of Business of Seller except for obsolete items and items of below-standard quality, all of which have been written off or written down to net realizable value in the Audited Balance Sheet or the Most Recent Balance Sheet or on the accounting Records of Seller as of the Closing Date, as the case may be. Seller is not in possession of any inventory not owned by Seller, including goods already sold. All of the Inventory have been valued at the lower of cost or market value on a first in, first out basis. Inventory on hand as of the Closing Date that were purchased after the date of either the Audited Balance Sheet or the Most Recent Balance Sheet were purchased in the Ordinary Course of Business of Seller at a cost not exceeding market prices prevailing at the time of purchase. The quantities of each item of Inventory (whether raw materials, work-in-process or finished goods) are not excessive but are reasonable in the present circumstances of Seller. Work-in-process Inventory are valued as of the Closing Date, according to GAAP.

 

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3.13 Real Property Leases .

(a) The Seller does not own, and has never owned, any real property.

(b) Schedule 3.13 lists all Leases. The Seller has delivered to the Buyer true, complete and correct copies of the Leases. With respect to each Lease:

(i) such Lease is legal, valid, binding, enforceable and in full force and effect in accordance with the terms thereof;

(ii) such Lease will continue to be legal, valid, binding, enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing;

(iii) neither the Seller nor to the Knowledge of the Seller, any other Person, is in Breach or violation of, or default under, any such Lease, and no event has occurred, is pending or, to the Knowledge of the Seller, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a Breach or default by the Seller or, to the Knowledge of the Seller, any other party under such Lease and to the Knowledge of the Seller, each parcel of Leased Real Property is in compliance in all material respects with all applicable Legal Requirements and Governmental Orders;

(iv) there are no disputes, oral agreements or forbearance programs in effect as to such Lease and no Person is currently entitled to assert any defense, off-set or penalty with respect to such Lease;

(v) the Seller has not assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold or subleasehold;

(vi) all facilities leased or subleased thereunder are supplied with utilities and other services adequate for the operation of said facilities and have all necessary governmental approvals and permits required in connection with the operation thereof;

(vii) the Seller is not aware of any Encumbrance, easement, covenant or other restriction applicable to the real property subject to such lease which would reasonably be expected to materially impair the current uses or the occupancy by the Seller of the property subject thereto;

(viii) other than the rental payment amounts set forth in Schedule 3.13, to the Knowledge of the Seller, no other amounts are owed or reasonably likely to be owed by the Seller with respect to any parcel of Leased Real Property; and

(ix) other than as set forth in Schedule 3.13, no landlord or Third Party Consent or other approval is required in connection with the transfer of the each such Lease in connection with this Agreement.

(c) Use of the Leased Real Property for the various purposes for which it is presently being used is permitted as of right under all applicable zoning legal requirements and is not subject to “permitted nonconforming” use or structure classifications.

 

3.14

Intellectual Property .

(a) Schedule 3.14(a) sets forth a list of all patents, patent applications, trademark registrations and trademark applications, service mark registrations and service mark applications, certification mark registrations and certification mark applications, copyright registrations and copyright

 

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registration applications, domain names, mask works registrations and mask works registration applications, both domestic and foreign, that are owned by Seller (collectively, “ Registered Intellectual Property ”), in each case enumerating specifically the applicable filing or registration number, subject matter, title, jurisdiction in which filing was made or from which registration issued, date of filing or issuance, names of all applicants, registrant(s) and current registered owner(s), as applicable, and status of any required issuance, renewal, maintenance or other payments. Schedule 3.14(a) also lists all unregistered trademarks, service marks and certification marks used by the Seller or any of its Affiliates. Schedule 3.14(a) also lists (i) any inter-Parties Proceedings before any Governmental Body (including the United States Patent and Trademark Office (“ PTO ”)), Internet registration authority, Uniform Domain Name Dispute Resolution Policies (“ UDRP ”) tribunal or equivalent authority anywhere in the world related thereto and (ii) the date on which such registrations will expire or by which time the rights therein will have to be renewed or extended to prevent expiration, lapse or other loss. The Registered Intellectual Property and all other Intellectual Property that are owned by the Seller are referred to herein as the “ Owned Intellectual Property .” Except as set forth in Schedule 3.14(a) , the Seller owns all right, title and interest in and to the Owned Intellectual Property validly and beneficially, free and clear of all Encumbrances, with the sole and exclusive right to use the same, subject to those licenses granted to others by the Seller and listed in Schedule 3.14(a) . The names of all joint owners of any jointly-owned Owned Intellectual Property are listed in Schedule 3.14(a) . The Seller has complied with its duty of candor and disclosure to the PTO and any relevant foreign patent office with respect to all patent applications filed by or on behalf of the Seller (the “ Patent Applications ”) and has made no material misrepresentation in the Patent Applications. All assignments of Registered Intellectual Property have been properly executed and recorded. All patents and registrations included in the Registered Intellectual Property are valid and enforceable and all issuance, renewal, maintenance and other payments that are or have become due with respect thereto have been timely paid by or on behalf of the Seller. There are no inventorship challenges or interferences declared with respect to any patents or patent applications included in the Registered Intellectual Property. The Seller has taken reasonable measures to protect the proprietary nature of each item of Owned Intellectual Property.

(b) Set forth in Schedule 3.14(b) is a list of (i) all material licenses, assignments and other transfers or grants of rights or interests (including any covenants not to asserts rights) in or to Owned Intellectual Property granted to others by the Seller or any of its Affiliates, and (ii) all material licenses, assignments and other transfers or grants of rights or interests in or to any Intellectual Property granted to the Seller by others (such items in this clause (ii), “ Licensed Intellectual Property ,” and, together with the Owned Intellectual Property, the “ Seller Intellectual Property ”). None of the rights related to the Intellectual Property are subject to termination or cancellation or change in its terms or provisions governing their use or other exploitation as a result of this Agreement or the transactions contemplated by this Agreement.

(c) None of the Seller Intellectual Property or the Seller’s products and services, or the manufacturing, importation, sale, marketing, distribution, provision or use thereof, infringes or violates, or constitutes a misappropriation of, any Intellectual Property rights of any Person. None of the Internal Systems, or the use thereof, infringes or violates, or constitutes a misappropriation of, any Intellectual Property rights of any Person. Schedule 3.14(c) lists any complaint, claim or notice, or written threat thereof, received by the Seller alleging any such infringement, violation or misappropriation; and the Seller has provided to the Buyer true, complete and correct copies of all written documentation in the possession of the Seller relating to any such complaint, claim, notice or threat. The Seller has provided to the Buyer true, complete and correct copies of all written documentation in the Seller’s possession relating to claims or disputes known to the Seller concerning any Seller Intellectual Property.

 

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(d) The Seller has not disclosed the source code for the Software or other confidential information constituting, embodied in or pertaining to the Software to any Person, except pursuant to the agreements listed on Schedule 3.14(d) , and the Seller has taken all reasonable measures to prevent disclosure of such source code. To the extent the Seller owns any proprietary Software, such Software does not embed, integrate, bundle, aggregate, link, or otherwise include any open source software.

(e) Except as set forth in Schedule 3.14(e) , all of the copyrightable materials (including Software) embedded in, integrated in or incorporated in the Seller’s products and services have been created by employees of the Seller within the scope of their employment by the Seller, or by independent contractors of the Seller who have executed agreements expressly assigning all right, title and interest in such copyrightable materials to the Seller. No portion of such copyrightable materials was jointly developed with any Third Party. Further, except as set forth in Schedule 3.14( e ), all patent rights in the Seller’s products and services have been created by employees or contractors of the Seller all of whom have executed agreements expressly assigning all right, title and interest in such patent rights to the Seller. No portion of such patent rights was jointly developed with any Third Party, or includes patentable contributions from any Third Party. Schedule 3.14(e) identifies each agreement between the Seller and (i) an employee; and/or (ii) an independent contractor, relating to the Intellectual Property.

(f) Schedule 3.14(f) identifies each item of the Internal Systems. To the Knowledge of the Seller, the Internal Systems and the Seller Intellectual Property are free from significant defects or programming errors and conform in all material respects to the written documentation and specifications therefor, if any.

 

3.15

Contracts .

(a) Schedule 3.15 lists the following agreements, arrangements or understandings (written, oral or otherwise) to which the Seller is a party as of the date of this Agreement (each, a “ Material Contract ”):

(i) any agreement (or group of related agreements) for the lease of personal property from or to third parties;

(ii) any agreement (or group of related agreements) with customers to which the Seller is delivering products or services or contemplating delivering products or services;

(iii) any agreement (or group of related agreements) with vendors, distributors or sales agents allowing for the resale, marketing or distribution of the Seller’s services or products;

(iv) any agreement concerning confidentiality or containing covenants restraining or limiting the freedom of the Seller to engage in any line of business or compete with any Person including, without limitation, by restraining or limiting the right to solicit customers or that could reasonably be expected, following the Closing, to restrain or limit the freedom of the Buyer, the Parent or any Affiliate thereof to engage in any line of business or compete with any Person;

(v) any agreement containing a right of first refusal;

 

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(vi) any agreement (or group of related agreements) that is terminable upon or prohibits the consummation of the Contemplated Transactions, or that requires consent in connection with the Contemplated Transactions;

(vii) any agreement (or group of related agreements) that provides for the Seller to be the exclusive or a preferred provider of any product or service to any Person or the exclusive or a preferred recipient of any product or service of any Person during any period of time or that otherwise involves the granting by any Person to the Seller of exclusive or preferred rights of any kind;

(viii) any agreement (or group of related agreements) that provides for any Person to be the exclusive or a preferred provider of any product or service to the Seller, or the exclusive or a preferred recipient of any product or service of the Seller during any period of time or that otherwise involves the granting by the Seller to any Person of exclusive or preferred rights of any kind;

(ix) any agreement (or group of related agreements) in which a party has agreed to purchase a minimum quantity of goods or services or that includes specific service level commitments;

(x) any agreement (or group of related agreements) in which the Seller has granted manufacturing rights, “most favored nation” or similar pricing provisions or marketing or distribution rights relating to any products or territory;

(xi) any agreement (or group of related agreements) under which it has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) Debt or under which it has imposed (or may impose) an Encumbrance on any of its assets, tangible or intangible;

(xii) any agreement for the disposition of any portion of the assets or business of the Seller (other than sales of products in the Ordinary Course of Business) or any agreement for the acquisition of the assets or business of any other entity (other than purchases of Inventory or components in the Ordinary Course of Business);

(xiii) any employment, consulting or similar agreement;

(xiv) any agreement involving any current or former officer, director or equityholder of the Seller or an Affiliate thereof;

(xv) any agreements that, by their terms bind Affiliates of the Seller or will bind Affiliates of the Buyer after the Closing;

(xvi) any agreement under which the consequences of a default or termination would reasonably be expected to have a Seller Material Adverse Effect;

(xvii) any agreement which contains any provisions requiring the Seller to indemnify any other Person; and

(xviii) any other agreement (or group of related agreements) either (A) involving more than $25,000, (B) not entered into in the Ordinary Course of Business or (C) that is otherwise material to the Seller.

 

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(b) The Seller has delivered to the Buyer a true, complete and correct copy of each agreement listed on Schedules 3.14 or  3.15 , or with respect to each such unwritten agreement, the Seller has provided a detailed description of the terms of such unwritten agreement. With respect to each agreement so listed: (i) the agreement is legal, valid, binding and enforceable and in full force and effect; (ii) the agreement will continue to be legal, valid, binding and enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing; (iii) except as set forth on Schedule 3.15(b)(iii) , neither the Seller nor, to the Knowledge of the Seller, any other Person, is in Breach or violation of, or default under, any material provision of such agreement, and no event has occurred, is pending or, to the Knowledge of the Seller, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a Breach or default of any material provision of such agreement by the Seller or, to the Knowledge of the Seller, of any other Person under such agreement; (iv) neither the Seller nor, to the Knowledge of the Seller, any other Person, has made any misrepresentation under any provision of such agreement likely to result in a claim of $25,000 or greater; (v) to the Knowledge of Seller, there are no renegotiations of, attempts to renegotiate or outstanding rights to renegotiate any material amounts paid or payable to Seller under current or completed Material Contracts with any Person having the contractual or statutory right to demand or require such renegotiation and no such Person has made written demand for such renegotiation by an amount of $25,000 or greater; and (vi) each Material Contract relating to the sale, design, manufacture or provision of products or services by Seller has been entered into in the Ordinary Course of Business of Seller and has been entered into without the commission of any act alone or in concert with any other Person, or any consideration having been paid or promised, that is or would be in violation of any Legal Requirement.

3.16 Government Contract Matters .

(a) Schedule 3.16(a) identifies all of the Seller’s Government Contracts. Except as set forth in Schedule 3.16(a), and in addition to the representations made by Seller in Section 3.15 hereof, with respect to each and every such Government Contract or Bid which, if accepted, would result in a Government Contract (a “ Government Bid ”) to which any Seller, is a party:

(i) the Seller has complied with all terms and conditions of such Government Contracts or Government Bid, including all clauses, provisions and requirements incorporated expressly, by reference or by operation of law therein;

(ii) the Seller has complied with all requirements of all Rules or agreements pertaining to such Government Contracts or Government Bid;

(iii) all representations and certifications executed, acknowledged or set forth in or pertaining to such Government Contracts or Government Bid were, to the Seller’s Knowledge, complete and correct as of their effective date, and the Seller has, to the Seller’s Knowledge, complied with all such representations and certifications;

(iv) neither the United States Government nor any prime contractor, subcontractor or other Person has notified the Seller, either in writing or, to the Seller’s Knowledge, orally, that the Seller has breached or violated any Rule, certification, representation, clause, provision or requirement pertaining to such Government Contracts or Government Bid;

(v) no termination for convenience, termination for default, cure notice or show cause notice is currently in effect pertaining to such Government Contracts or Government Bid;

 

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(vi) to the Seller’s Knowledge, no cost incurred by the Seller pertaining to such Government Contracts or Government Bid has been formally questioned or challenged, is the subject of any investigation or has been disallowed by the United States Government; and

(vii) to the Seller’s Knowledge, no money due to the Seller pertaining to such Government Contracts or Government Bid has been withheld or set off nor has any claim been made to withhold or set-off money and the Seller is entitled to all progress payments received with respect thereto. Each Government Contracts is valid and subsisting.

(b) Except as set forth in Schedule 3.16(b) :

(i) neither the Seller nor, to the Seller’s Knowledge, any of its managers, officers, employees, consultants, agents or Affiliates is (or during the last three (3) years has been) under administrative, civil or criminal investigation, indictment or information by any Governmental Body, or any audit or investigation by any Governmental Body with respect to any alleged irregularity, misstatement or omission arising under or relating to any Government Contract or Government Bid, and have not entered into any plea or settlement agreement with respect thereto; and

(ii) during the last three (3) years, the Seller has not conducted or initiated any internal investigation or made a voluntary disclosure to the United States Government, with respect to any alleged irregularity, misstatement or omission arising under or relating to any Government Contract or Government Bid. To the Seller’s Knowledge, there exists no irregularity, misstatement or omission arising under or relating to any Government Contracts or Government Bid that has led or could lead to any of the consequences set forth in clause (i) or (ii) of the immediately preceding sentence or any other damage, penalty assessment, recoupment of payment or disallowance of cost.

(c) Except as set forth in Schedule 3.16(c) , there exist:

(i) no outstanding claims, demands or requests for equitable adjustment against the Seller either by the United States Government or by any prime contractor, subcontractor, vendor or other Third Party, arising under or relating to any Government Contracts or Government Bid; and

(ii) no disputes between the Seller and the United States Government under the Contract Disputes Act or any other Federal statute or to the Seller’s Knowledge, between any Member and any prime contractor, subcontractor or vendor arising under or relating to any Government Contracts or Government Bid. To the Seller’s Knowledge, except as set forth in Schedule 3.16(c), the Seller has no interest in any pending or potential claim against the United States Government or any prime contractor, subcontractor or vendor arising under or relating to any Government Contracts or Government Bid. Schedule 3.16(c) lists each Government Contracts which is currently under audit (other than routine audits conducted in the ordinary course of business) by the United States Government or any other Person that is a party to such Government Contracts.

(d) Except as set forth in Schedule 3.16(d) , during the last three (3) years, the Seller has not been debarred or suspended from participation in the award of contracts with the United States or any Governmental Body (excluding for this purpose ineligibility to bid on certain contracts due to generally applicable bidding requirements), nor has the Seller entered into any administrative settlement agreement with respect to any actual or threatened suspension or debarment. To the Seller’s Knowledge, there exist no facts or circumstances that would warrant the institution of suspension or debarment

 

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proceedings or the finding of nonresponsibility or ineligibility on the part of the Seller with respect to the Business or any director, officer, manager or employee of the Seller in respect of the Business. To the Seller’s Knowledge, no payment has been made by the Seller, or by any Person on behalf of the Seller, in connection with any Government Contracts in violation of applicable procurement laws or regulations or in violation of, or requiring disclosure pursuant to, the Foreign Corrupt Practices Act. Except as set forth in Schedule 3.16(d), the Seller’s cost accounting and procurement systems and the associated entries reflected in the Seller’s financial statements with respect to the Government Contracts are in compliance in all respects with all Rules.

(e) Except as set forth in Schedule 3.16(e) , all goods and services provided by the Seller to the United States Government pursuant to any Government Contracts or to any other Person pursuant to any Government Contracts or as a part of the delivery to the United States Government or to any other Person pursuant to any Government Contracts of any article designed, engineered or manufactured in the Business were complete and correct in all material respects as of the date so provided. Except as set forth in Schedule 3.16(e), the Seller has provided all goods and services to the United States Government or to any other Person pursuant to the Government Contracts as required by rule and/or the terms of the applicable Government Contracts.

(f) Except as set forth in Schedule 3.16(f) , the Seller has not, within the three (3) years prior to the date hereof, received any adverse or negative assessment of its performance under any Government Contracts.

(g) Any security clearances held by the Seller and its employees are in full force and effect and constitute all of the security clearances necessary for the conduct of the Seller’s business as currently conducted.

3.17 Customers and Suppliers .

(a) Schedule 3.17(a) sets forth a list of each customer of the Seller which has paid more than $50,000 to the Seller in either of the following periods: (i) January 1, 2005 through December 31, 2005, and (ii) January 1, 2006 through September 30, 2006. Such listing includes the amounts paid to the Seller by such customer during each such period. Except as set forth on Schedule 3.17(a), all customers are located in the United States and none of Seller’s products and services are sold, delivered or performed outside of the United States.

(b) Schedule 3.17(b) sets forth a list of each supplier of the Seller to which the Seller has paid more than $25,000 in either of the following periods: (i) January 1, 2005 through December 31, 2005, and (ii) January 1, 2006 through September 30, 2006. Such listing includes the amounts paid by the Seller to such supplier during each such period.

(c) Each customer or supplier listed on Schedule 3.17(a) and 3.17(b) is a referred to herein as a “Significant Person”. Except as set forth in Schedule 3.17(c) , Seller has not received any written notice from any Significant Person that such Person intends to terminate or materially and adversely modify any existing agreements with the Seller, or materially reduce the amount paid to the Seller for products or services and, to the Knowledge of the Seller, no Significant Person has threatened to terminate any continuing relationship it has with the Seller. The Seller has not received written notice from any Significant Person that it has filed or intends to file a petition under applicable bankruptcy laws or otherwise seek relief from or make an assignment for the benefit of its creditors.

 

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3.18 Insurance . Schedule 3.18 lists each insurance policy (including fire, theft/crime, casualty, comprehensive general liability, workers compensation, business interruption, environmental, errors and omissions, directors and officers, fiduciary liability, employment practices liability, product liability and automobile insurance policies and bond and surety arrangements) to which the Seller is a party, all of which are in full force and effect including the name of the insurer and policy numbers. To the Knowledge of the Seller, such insurance policies are of the type and in amounts customarily carried by organizations conducting businesses or owning assets similar to those of the Seller. There is no claim pending or, to the Knowledge of the Seller, any existing facts which are reasonably likely to result in a claim under any such policy, and if any of the foregoing have been disclosed, no such claim or existing facts were questioned, denied or disputed by the underwriter of such policy. All premiums due and payable under all such policies have been paid, the Seller will not be liable for retroactive premiums or similar payments and the Seller is otherwise in compliance in all material respects with the terms of such policies. The Seller has not been denied insurance coverage at any time since Seller’s Inception and no policies have been cancelled or have been refused to be renewed by the insurer since Seller’s Inception. The Seller has no Knowledge of any threatened termination of, or premium increase with respect to, any such policy. Each such policy will continue to be enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing. The Seller has not failed to timely give any notice required or failed to satisfy any requirements under such insurance policies or binders of insurance.

3.19 Litigation . Except as set forth in Schedule 3.19 , there is no Proceeding which is pending or, to the Knowledge of the Seller, has been threatened against the Seller, and to the Knowledge of the Seller, no event has occurred or circumstance exists that would be reasonably likely to give rise to or serve as the basis for any Proceeding. There are no judgments, orders or decrees outstanding against the Seller.

3.20 Warranties . Except as set forth in Schedule 3.20 , none of the products and services provided by the Seller are subject to any guaranty, warranty, right of credit or other indemnity.

3.21 Employees .

(a) Schedule 3.21(a) accurately identifies, as of the date of this Agreement, the following information as to each such employee: name, position/title, date of hire, whether on leave of absence or layoff status, and the following information since September 30, 2005: weekly salary or hourly wage rate, annual overtime compensation, bonuses received, and the date and amounts of increases to their wage rate or salary.

(b) Except as disclosed in Schedule 3.21(b) , with respect to the Seller: (i) there is no collective bargaining agreement or relationship with any labor organization; (ii) since Seller’s Inception, no labor organization or group of employees has filed any representation petition or made any written or oral demand for recognition; (iii) to the Knowledge of the Seller, either currently or at anytime since September 30, 2004, no union organizing or decertification efforts are or were underway or contemplated and no other question concerning representation exists or existed; (iv) no labor strike, work stoppage, slowdown, or other labor dispute has occurred since Seller’s Inception, and none is underway or, to the Knowledge of the Seller, contemplated; (v) there is no pending or, to the Seller’s Knowledge, contemplated, workers’ compensation liability, experience or matter; and (vi) there is no claim, charge, complaint, grievance, arbitration, litigation, administrative proceeding, investigation, inquiry, obligation or other Claim of any kind arising out of employment-related acts or omissions, pending or, to the Seller’s Knowledge, threatened, in any forum, nor does Seller have any Knowledge of any basis for any such Claim.

 

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(c) Schedule 3.21(c) lists all employment-related Claims that have been filed or threatened with respect to Seller’s employees during the past three (3) years. A copy of all documents related to any Claim listed on the Schedule is attached to the Schedule.

(d) To the Knowledge of the Seller, no Significant Employee: (i) has any present intention to terminate or reduce his employment, or (ii) is a party to any confidentiality, non-competition, proprietary rights or other such agreement between such individual and any other Person besides the Seller, that would be material to the performance of such individual’s employment duties, or the ability of the Seller to conduct its business.

(e) Seller has complied in all material respects with all laws relating to employment including, but not limited to, provisions thereof relating to wages, hours, equal opportunity, collective bargaining and the payment of social security and other taxes.

(f) Within the past four (4) years, the Seller has not implemented any plant closing or mass layoff of employees as those terms are defined in the Worker Adjustment and Retraining Notification Act (the “ WARN Act ”), or any similar foreign, state or local law, regulation or ordinance, and no such action will be implemented without Seller’s full compliance with all legal obligations. During the ninety (90) day period prior to the date of this Agreement, Seller has terminated no more than ten (10) employees.

(g) There is no obligation, expectation or other commitment to make any further bonuses or other payments to any of Seller’s employees in respect of periods prior to the Closing Date (whether relating to the Seller’s profits or otherwise).

(h) Other than with respect to employment-related Other Accrued Expenses assumed by Buyer, on or before Closing, Seller will pay all compensation (including but not limited to payment for accrued but unused vacation, comp time, sick leave, etc.) which it owes to its employees with respect to all periods through the date of Closing.

(i) There are no employment agreements with respect to any employee of Seller and all of Seller’s employees are employed on an at-will basis. There is no obligation to provide any form of severance or post-Closing compensation to any employee or independent contractor of Seller.

(j) [intentionally omitted]

(k) Except as set forth in Schedule 3.21(k) , Seller does not have an affirmative action plan, Seller is not subject to any consent decree, and Seller has no employment-related obligations under any judgment or agreement. A copy of any such plan, decree, judgment, or agreement is attached to such Schedule.

(l) Seller has provided Buyer with all work rules, policies, etc. and a copy of its present and all former employee handbook and manuals.

(m) Schedule 3.21(m) lists all workers’ compensation claims filed by any of its employees since Seller’s Inception, including for each claim, the name of the employee, the nature of the injury and the amount of workers’ compensation benefits awarded.

(n) Schedule 3.21(n) lists the name of each Person engaged by Seller as an independent contractor and the amounts paid to each independent contractor during each of the past three

 

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(3) years and during 2006. Such Schedule also sets forth the name and address of each temporary employment agency or company utilized by Seller since January 1, 2004 and the amounts paid to each temporary employment agency or company. The Seller will provide Buyer with a copy of all agreements, Form 1099s, insurance policies, and other documentation related to its engagement of independent contractors and temporary employment agencies or companies. Schedule 3.21(n) lists any Claim related to an independent contractor or to a worker supplied to Seller by a temporary employment agency or company which was filed or threatened since Seller’s Inception and Seller does not have any Knowledge of any basis for any other Claim. Seller has fully complied with all of its obligations to each independent contractor and each temporary employment agency or company.

(o) Schedule 3.21(o) contains a list of all employees of the Seller who are a party to a non-competition or confidentiality/assignment of inventions agreement with the Seller; copies of such agreements have previously been delivered to the Buyer. Schedule 3.21(o) contains a list of all employees of the Seller who are not citizens of the United States.

3.22 Employee Benefits .

(a) Schedule 3.22 is a complete and correct listing of all Benefit Plans currently maintained or ever maintained by Seller, together with true, complete and correct copies of such Benefit Plans, agreements and any trusts related thereto, summaries of the Benefit Plans and other written communications regarding the Benefit Plans distributed to employees, and classifications of employees covered thereby as of the date of the Most Recent Balance Sheet. Unless disclosed in Schedule 3.22, Seller is not required to contribute to any Benefit Plan pursuant to the provisions of any collective bargaining agreement establishing the terms and conditions of employment of any of Seller’s employees.

(b) All Benefit Plans that are intended to qualify under Section 401(a) of the Code are and have been so qualified and have been determined by the Internal Revenue Service to be qualified in form, and copies of such determination letters have been delivered to Buyer’s counsel. All reports and other documents required to be filed with any Governmental Body or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audits or tax returns) have been timely filed or distributed, and copies thereof have been provided to Buyer. Neither the Members, any such Benefit Plan, Seller, nor any “disqualified person” or “party in interest” (as such terms are defined in Section 4975 of the Code or Section 3(14) of ERISA) has engaged in any transaction prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. No Benefit Plan has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(a) of ERISA, and Seller has not incurred any Liability for excise tax or penalty due to the Internal Revenue Service or any Liability to the PBGC.

(c) There have been no terminations, partial terminations or discontinuance of contributions to any such Benefit Plan intended to qualify under Section 401 (a) of the Code.

(d) No such Benefit Plan subject to the provisions of Title IV of ERISA has been terminated.

(e) There have been no “reportable events” (as that phrase is defined in Section 4043 of ERISA) with respect to any Benefit Plan.

(f) Seller has not incurred Liability under Section 4062 of ERISA.

 

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(g) No circumstances exist pursuant to which Seller could have any direct or indirect Liability whatsoever (including, but not limited to, any Liability to any multi-employer plan or the PBGC under Title IV of ERISA or to the Internal Revenue Service for any excise tax or penalty, or being subject to any statutory lien to secure payment of any such Liability) with respect to any Benefit Plan now or heretofore maintained or contributed to by any entity other than Seller that is, or at any time was, a member of a “controlled group” (as defined in Section 412(n)(6)(B) of the Code) that includes Seller.

(h) Seller is not now, nor can it as a result of its past activities become, liable to the PBGC or to any multi-employer employee pension benefit plan under the provisions of Title IV of ERISA.

(i) All Benefit Plans and the administration thereof are in substantial compliance with their terms and all applicable provisions of ERISA and the Code and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations and other guidance. Seller has delivered to Buyer true, complete and correct copies of the Annual Returns filed for each Benefit Plan for the three most recent plan years and true, complete and correct copies of any reports issued to Seller with respect to each Benefit Plan by the Third Party administrator of each Benefit Plan, including the Plan’s financial statements and discrimination testing for the three most recent plan years.

(j) All accrued contribution obligations of Seller with respect to any Benefit Plan have either been fulfilled in their entirety or are fully reflected on the balance sheet of Seller as of the date of the Most Recent Balance Sheet.

(k) No claim, lawsuit, arbitration or other action has been threatened, asserted, or instituted against any Benefit Plan or related trust, any trustee or fiduciaries thereof, Seller, or any director, officer or employee thereof.

(l) No Benefit Plan is currently, or ever has been, under audit or investigation by any Governmental Body and no such completed audit, if any, has resulted in the imposition of any tax or penalty.

(m) Each Benefit Plan intended to meet requirements for tax-favored treatment under Sections 79, 105, 106, 117, 120, 125, 127, 129 or 132 of the Code satisfies the applicable requirements under the Code.

(n) With respect to each Benefit Plan that is funded fully or partially through an insurance policy, Seller has no Liability in the nature of retroactive rate adjustment, loss sharing arrangement or other actual or contingent Liability arising wholly or partially out of events occurring on or before the date of the Most Recent Balance Sheet.

(o) Except as set forth on Schedule 3.22(o) , the consummation of the Contemplated Transactions will not give rise to any Liability, including, without limitation, Liability for severance pay, unemployment compensation or termination pay, or accelerate the time of payment or vesting or increase the amount of compensation or benefits due to any current, former, or retired employee or their beneficiaries solely by reason of such transactions.

(p) Neither Seller nor any member of a “controlled group” which includes Seller maintains, contributes to, or in any way provides for any benefits of any kind whatsoever (other than under Section 4980B of the Code or Title I, Subtitle B, Part 6 of ERISA, the federal Social Security Act or a plan qualified under Section 401(a) of the Code) to any current or future retiree or terminated employee.

 

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(q) Neither Seller nor any officer or employee thereof, has made any promises or commitments, whether legally binding or not, to create any additional plan, agreement or arrangement, or to modify or change any existing Benefit Plan.

(r) Seller has complied in all respects with the requirements of Section 4980B of the Code and Title I, Subtitle B, Part 6 of ERISA. Schedule 3.22(r) lists the name, Social Security Number and last known address of any ”qualified beneficiary” (as defined in Section 4980B(g)(1) of the Code) with respect to the Facilities to whom Seller is providing COBRA continuation coverage under Section 4980B of the Code as of the Closing Date, or who as of the Closing Date is eligible to elect COBRA continuation coverage.  Schedule 3.22(r) lists the following for each such qualified beneficiary: the “qualifying event” (as defined in Section 4980B(f)(3) of the Code) that gave rise to COBRA entitlement; the date of the qualifying event; the beginning and ending date of the continuation coverage period; the type of coverage elected (e.g., single or family coverage); the monthly premium; and the date of the most recently paid monthly premium and the month to which such premium relates.

(s) All nonqualified deferred compensation plans, within the meaning of Section 409A of the Code, maintained by Seller satisfy the requirements of Section 409A of the Code.

3.23 Environmental Matters .

Except as set forth on Schedule 3.23 :

(a) (i) There has been no Release or threat of a Release of a Hazardous Substance (as defined below) at any property owned, operated or leased by Seller or otherwise involving Seller, including, without limitation, the real property under the Leases or any real property owned by Seller (collectively, the “ Real Property ”) or any real property formerly owned, operated or leased to or by Seller (collectively, the “ Former Real Property ”);

(ii) Seller, the Real Property and all of Seller’s businesses and operations, are and have been in compliance with all applicable Environmental Laws (as defined below) and have no Liability under any applicable Environmental Law;

(iii) there are not now, nor have there ever been, any above or underground storage tanks, or transformers containing or contaminated with PCBs at the Real Property or, to Seller’s Knowledge, any Former Real Property;

(iv) there are no Hazardous Materials on, under or about the Real Property, and Seller has never generated, transported, accumulated, treated, or disposed of any Hazardous Materials on the Real Property

(v) Seller has provided to Buyer true and accurate copies of all reports, audits, investigation, correspondence and similar documents within its possession or control that relate to Seller’s or the Real Property’s compliance with and Liability under Environmental Laws

Seller has not received notice of any actual or threatened claim, demand, investigation, notice of violation, enforcement, Response, Removal, Remedial action, statutory lien or other governmental or regulatory action instituted against, Seller or the Real Property pursuant to any of the Environmental Laws;

 

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(b) As used in this Agreement:

(i) “ Environmental Laws ” means any law, regulation or order in effect on or prior to the Closing Date and concerning or relating to industrial hygiene or the protection of health, safety and/or the environment, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §9601 as amended (“ CERCLA ”), the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et. seq., as amended, the Federal Water Pollution Act, 33 U.S.C. §1251 et seq., as amended, the Clean Air Act, 42 U.S.C. §7401 et seq., as amended, the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §136 et seq., as amended, or the Safe Drinking Water Act, 42 U.S.C. §300 et seq., as amended, or regulations promulgated thereunder, and all other federal, state and local laws related to Hazardous Substances.

(ii) “ Hazardous Substance ” means any substance regulated under any of the Environmental Laws.

(iii) “ PCB ” means any polychlorinated biphenyl.

(iv) “ Release ” means any release, spill, emission, leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching or migration on or into the Environment or into or out of any property.

(v) “ Response ”, “ Removal ” and “ Remedial Action ” have the meanings ascribed to them in Sections 101(23)-101(25) of CERCLA.

3.24 Legal Compliance . Except as set forth on Schedule 3.24 , the Seller is currently conducting, and has at all times since its inception conducted, its businesses in compliance with each applicable Legal Requirement of any Governmental Body. The Seller has not received any notice or communication from any Governmental Body alleging noncompliance with any applicable law, rule or regulation.

3.25 Governmental Authorizations . Schedule 3.25 sets forth a list of all Governmental Authorizations issued to or held by the Seller. Such listed Governmental Authorizations are the only governmental authorization or other approvals that are required for the Seller to conduct its business as presently conducted or as contemplated to be conducted by any business plans or projections delivered by the Seller to the Buyer. Each such Governmental Authorization is in full force and effect; the Seller is in compliance with the terms of each such Governmental Authorization; and, to the Knowledge of the Seller, no suspension or cancellation of such Governmental Authorization is threatened and there is no basis for believing that such Governmental Authorization will not be renewable upon expiration. Each such Governmental Authorization will continue in full force and effect immediately following the Closing.

3.26 Certain Relationships .

(a) Except as disclosed in Schedule 3.26(a) , none of Seller, any Member, any Manager or any Affiliate or Related Person of any of them has, during the past three (3) years, had any interest in any property (whether real, personal or mixed and whether tangible or intangible) used in or pertaining to Seller’s business. None of Seller, any Member, any Manager or any Affiliate or Related Person of any of

 

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them owns, or during the past three (3) years has: (i) owned, of record or as a beneficial owner, an equity interest in any Person that has had business dealings or a financial interest in any transaction (including any series of similar transactions or currently proposed transactions) with Seller, or (ii) had any other direct or indirect financial interest in any transaction (including any series of similar transactions or currently proposed transactions), with Seller other than, in either case, business dealings or transactions disclosed in Schedule 3.26(a), each of which has been conducted in the Ordinary Course of Business with Seller at substantially prevailing market prices and on substantially prevailing market terms. Except as set forth in Schedule 3.26(a), none of Seller, any Member, Manager or any Affiliate or Related Person of any of them has any claim or right against, Seller.

(b) None of Seller, any Member, any Manager or any Affiliate or Related Person of any of them owns, or during the past three (3) years has engaged in competition with Seller with respect to any line of event rental (including disaster relief) products or services of Seller (a “ Competing Business ”) in any market presently served by Seller, except for ownership of less than one percent (1%) of the outstanding capital stock of any Competing Business that is publicly traded on any recognized public exchange or market.

3.27 Brokers’ Fees . Except as set forth in Schedule 3.27 , neither the Seller nor any Member has any Liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the Contemplated Transactions.

3.28 Books and Records . Seller’s personnel files with regard to I-9 “Employment Eligibility Verification” forms and related and supporting documentation, customer correspondence files and other non-financial books and Records accurately reflect, in all material respects, Seller’s business operations since Seller’s Inception and have been maintained in accordance with good business and bookkeeping practices for the associated matters.

3.29 No Seller Material Adverse Effect . Except as set forth in Schedule 3.29 , since June 30, 2006, there have been neither any Seller Material Adverse Effect, nor any transactions, conditions or events which, individually, or in the aggregate have or are reasonably likely to have had a Seller Material Adverse Effect upon the ability of the Seller to consummate the Contemplated Transactions or otherwise perform fully its obligations hereunder.

3.30 No Other Representations or Warranties .

(a) Except for the representations and warranties of Seller and the Members expressly set forth in this Agreement, none of Seller, the Members or any other Person makes any other express or implied representation or warranty on behalf of Seller and the Members or otherwise, in each case in respect of Seller and the Members, the Business or Seller’s assets and liabilities, or otherwise.

(b) EXCEPT AS SET FORTH IN THIS ARTICLE III, SELLER AND THE MEMBERS MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED (INCLUDING THOSE REFERRED TO IN THE UNIFORM COMMERCIAL CODE OR IN ANY STATUTE OR RULE OF LAW THAT CAN BE LIMITED OR WAIVED AND WOULD OTHERWISE BE APPLICABLE TO REAL PROPERTY), AND THE ASSETS AND BUSINESS SHALL BE DEEMED TO BE “AS IS, WHERE IS” ON THE CLOSING DATE, AND IN THEIR THEN PRESENT CONDITION. WITHOUT LIMITING THE GENERALITY OF THE FORGOING, SELLER AND THE MEMBERS MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO ANY FINANCIAL PROJECTIONS OR FORECAST DELIVERED BY OR ON BEHALF OF SELLER TO BUYER

 

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AND THE BUYER ACKNOWLEDGES THAT IT HAS NOT RELIED UPON SAME. IN ANY EVENT, SELLER AND THE MEMBERS MAKE NO WARRANTY OF MERCHANTABILITY, SUITABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY, WITH RESPECT TO ANY OF THE TANGIBLE ASSETS OF SELLER, OR AS TO THE CONDITION OR WORKMANSHIP THEREOF OR THE ABSENCE OF ANY DEFECTS HEREIN, WHETHER LATENT OR PATENT. NOTHING CONTAINED IN THIS SECTION IS INTENDED TO NEGATE THE OBLIGATIONS OF SELLER AND THE MEMBERS FOR BREACHES OF THE REPRESENTATIONS AND WARRANTIES OF SELLER AND THE MEMBERS IN ARTICLE III, BUT ONLY TO THE EXTENT PROVIDED IN ARTICLE X HEREOF.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT

Buyer and Parent hereby jointly and severally represent and warrant to Seller and the Members that the following statements contained in this Article IV are true and correct and complete as of the date of this Agreement and will be true, correct and complete as of the Closing Date:

4.1 Organization and Corporate Power . Each of the Buyer and the Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland. Each of the Buyer and the Parent has all requisite corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it.

4.2 Authorization of Contemplated Transactions . Each of the Buyer and the Parent has all requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by the Buyer and Parent of this Agreement and the consummation by the Buyer and Parent of the Contemplated Transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Buyer and Parent, as the case may be. This Agreement has been duly and validly executed and delivered by the Buyer and Parent and constitutes a valid and binding obligation of each, enforceable against them in accordance with its terms and conditions, except to the extent such enforceability is subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or other law affecting or relating to creditors’ rights generally and general principles of equity (regardless of whether such enforceability is considered in a Proceeding in equity or at law).

4.3 Noncontravention . Neither the execution and delivery by the Buyer and Parent of this Agreement, nor the consummation of the Contemplated Transactions, will: (a) conflict with or violate any provision of the Governing Documents of the Buyer or Parent, (b) require on the part of the Buyer or Parent any filing with, or Governmental Authorization of, any Governmental Body, (c) conflict with, result in Breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any Person any right to terminate, modify or cancel, or require any notice, Consent or waiver under, any contract or instrument to which the Buyer or Parent is a party or by which either is bound or to which any of either’s assets are subject, except for (i) any conflict, Breach, default, acceleration, termination, modification or cancellation which would not reasonably be expected to materially and adversely affect the consummation of the Contemplated Transactions contemplated hereby or (ii) any notice, consent or waiver the absence of which would not reasonably be expected to materially and adversely affect the consummation of the Contemplated Transactions, or (d) violate any Order or Rule applicable to the Buyer or Parent or any of their properties or assets.

 

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4.4 Litigation . As of the date of this Agreement, there is no Proceeding or investigation pending against or, to the Buyer’s or Parent’s Knowledge, threatened against or affecting Buyer, Parent or any of their respective officers or directors in their capacity as officers or directors of Buyer or Parent before any Governmental Body, which in any manner challenges or seeks to prevent, enjoin, alter or materially delay any of the Contemplated Transactions.

4.5 Finder’s Fees . Except as set forth in Schedule 4.5 , neither the Buyer nor the Parent has any Liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the Contemplated Transactions.

4.6 No Other Representations or Warranties .

(a) Except for the representations and warranties of Buyer and the Parent expressly set forth in this Agreement, none of Buyer, the Parent or any other Person makes any other express or implied representation or warranty on behalf of Buyer and the Parent or otherwise, in each case in respect of Buyer and the Parent, their business, assets and liabilities, or otherwise.

(b) EXCEPT AS SET FORTH IN THIS ARTICLE IV, BUYER AND THE PARENT MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED (INCLUDING THOSE REFERRED TO IN THE UNIFORM COMMERCIAL CODE OR IN ANY STATUTE OR RULE OF LAW THAT CAN BE LIMITED OR WAIVED AND WOULD OTHERWISE BE APPLICABLE TO REAL PROPERTY). NOTHING CONTAINED IN THIS SECTION IS INTENDED TO NEGATE THE OBLIGATIONS OF BUYER AND THE PARENT FOR BREACHES OF THE REPRESENTATIONS AND WARRANTIES OF BUYER AND THE PARENT IN ARTICLE IV, BUT ONLY TO THE EXTENT PROVIDED IN ARTICLE X HEREOF.

ARTICLE V

COVENANTS OF SELLER AND MEMBERS PRIOR TO CLOSING

5.1 Operation of the Business . From the date hereof to the Closing, Seller will conduct the Business in the Ordinary Course of Business, subject to Seller and the Members taking such steps as they deem reasonably necessary to implement the Contemplated Transactions. Seller shall take no action out of the Ordinary Course of Business without the prior consent of the Buyer. By way of example and not of limitation, the Seller shall not take, or suffer, any of the actions contemplated by Section 3.7 of this Agreement, without the prior written consent of the Buyer, which consent shall not unreasonably be withheld. Additionally, between the date of this Agreement and the Closing, Seller and Members shall promptly notify Buyer in writing if any of them becomes aware of : (a) any fact or condition that causes or constitutes a Breach of any of Seller’s representations and warranties made as of the date of this Agreement, or (b) the occurrence after the date of this Agreement of any fact or condition that would or would be reasonably likely to (except as expressly contemplated by this Agreement) cause or constitute a Breach of any such representation or warranty had that representation or warranty been made as of the time of the occurrence of, or discovery of, such fact or condition. Additionally, Seller will: (i) use its Best Efforts to preserve intact its current business organization, keep available the services of its officers, employees and agents and maintain its relations and good will with suppliers, customers, landlords, creditors, employees, agents and others having business relationships with it; (ii) confer with Buyer prior to implementing operational decisions of a material nature; (iii) otherwise report periodically to Buyer concerning the status of its business, operations and finances; (iv) make no material changes in management personnel without prior consultation with Buyer; and (v) maintain all books and Records of Seller relating to Seller’s business in the Ordinary Course of Business.

 

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5.2 Access . Seller shall give Buyer and its accountants, environmental consultants, counsel and other representatives full access, without unreasonably interfering with business operations, to all properties, books, Contracts and Records of Seller related to the Assets, Business or the Facilities and shall furnish to Buyer all such documents, Records and information as Buyer shall from time to time reasonably request.

5.3 Maintenance of the Assets . From the date hereof to the Closing, Seller shall continue to maintain and service the Assets consistent with past practice.

5.4 Employees . Seller shall provide Buyer with reasonable access to Significant Employees at the Facilities for purpose of discussing potential future employment. From and after the Closing Date, upon the reasonable request of Buyer and to the extent permitted by applicable Legal Requirements, Seller shall make available to Buyer any Records in its possession with respect to former Seller employees hired by Buyer.

5.5 Payment of Liabilities . Seller shall pay or otherwise satisfy in the Ordinary Course of Business all of its Liabilities and obligations. Buyer and Seller hereby waive compliance with the bulk-transfer provisions of the Uniform Commercial Code (or any similar law) (“ Bulk Sales Laws ”) in connection with the Contemplated Transactions.

5.6 Fulfillment of Conditions . Seller and the Members shall use commercially reasonable efforts to fulfill the conditions specified in Article VIII to the extent that the fulfillment of such conditions is within their control. The foregoing obligation includes: (a) the execution and delivery of the Transaction Documents and (b) taking or refraining from such actions as may be necessary to fulfill such conditions (including conducting Seller’s business in such manner that on the Closing Date the representations and warranties of Seller contained herein shall be accurate as though then made, except as contemplated by the terms hereof).

5.7 Performance of Obligations . Seller’s performance of any of its obligations under this Agreement for the benefit of either Buyer or Parent shall be deemed to be for the benefit of both of them.

ARTICLE VI

COVENANTS OF BUYER AND PARENT PRIOR TO CLOSING

From the date hereof to the Closing, Buyer and Parent shall use commercially reasonable efforts to fulfill the conditions specified in Article VIII to the extent that the fulfillment of such conditions is within their control. The foregoing obligation includes (a) the execution and delivery of the Transaction Documents and (b) taking or refraining from such actions as may be necessary to fulfill such conditions.

ARTICLE VII

FURTHER COVENANTS

7.1 Commercially Reasonable Efforts . Subject to the terms and conditions of this Agreement, each Party shall use commercially reasonably efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Legal Requirements to consummate the Contemplated Transactions, including the execution and delivery of any additional instruments necessary to consummate the Contemplated Transactions.

 

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7.2 Expenses . Whether or not the Closing occurs, all costs and expenses incurred in connection with this Agreement and the Contemplated Transactions shall be paid by the Party incurring the costs or expenses. Buyer will pay one-half and Seller will pay one-half of the fees and expenses of the escrow agent under the Escrow Agreement.

7.3 Governmental Authorizations . Except as otherwise herein provided, Buyer shall be solely responsible for obtaining and maintaining at its expense all Governmental Authorizations, whether in the United States or in any other jurisdiction, that are, in Buyer’s discretion, required or advisable for the complete operation and performance of any aspect of the Assets, Assumed Liabilities and Facilities after the Closing. Seller agrees to cooperate with Buyer, without further cost to Seller, to assist Buyer in effecting the transfer of any Governmental Authorization.

7.4 Receipt of Payments Post-Closing . After the Closing Date, Seller and Buyer will reasonably cooperate to assist each other in directing customers and other third parties to make payments (in satisfaction of Accounts Receivable or otherwise) to the account of the Party to which such payments are properly allocated under the terms of this Agreement. If and to the extent that, after the Closing, either Party receives any payment of funds which should have been directed to the account of the other Party as aforesaid, the Party in receipt of such payment will hold such funds in trust for the other Party and will promptly (but in any event within seven (7) days following receipt) remit the funds to such other Party.

7.5 Government Contract Matters

(a) To the extent not previously completed, as soon as practicable following the execution of this Agreement, the Seller shall contact the Responsible Contracting Officer (as such term is defined in Federal Acquisition Regulations Part 42, Paragraph 42.1202(a)) with regard to each Government Contract and inform same of the series of transactions contemplated hereby and prepare (with Parent’s assistance, as necessary), a written request for the novation of such Government Contracts meeting the requirements of the Federal Acquisition Regulations Part 42, as reasonably interpreted by the Responsible Contracting Officer and any applicable agency regulations or policies. The request for novation shall be submitted by the Seller to each Responsible Contracting Officer, for the Governmental Body (or, in the case of Government Contracts not subject to the Federal Acquisition Regulations, Parent and the Seller shall cooperate in seeking to cause the applicable Governmental Body) to (i) recognize Buyer as the Seller’s successor in interest to the Government Contracts and (ii) enter into one or more novation agreements (collectively, “ Novation Agreements ”) in form and substance reasonably satisfactory to Parent and the Seller and their respective counsel.

(b) The Seller and Parent will cooperate and use their respective commercially reasonable efforts to obtain as promptly as practicable all consents, approvals and waivers required, if any, for the purpose of completing the Novation Agreements with regard to any of the Government Contracts. Notwithstanding anything to the contrary in this Agreement, nothing in this Section 7.5 shall require the Seller or Parent to expend any material sum, make a material financial commitment or grant or agree to any material concession to any third Person to obtain any such consent, approval, waiver or novation. If any and all consents, approvals or waivers necessary for the assignment, transfer or novation of any Government Contract, shall not have been obtained prior to the Closing Date, then as of the Closing Date, as permitted by Legal Requirements, the Parties shall take all necessary steps and actions to provide Parent with the benefits of such Government Contracts.

 

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7.6 Returns & Reports; Taxes . Seller shall promptly after the Closing prepare and file all reports and returns required by Legal Requirements relating to the business of Seller as conducted using the Assets, to and including the Closing Date. Seller shall pay in a timely manner all Taxes resulting from or payable in connection with the sale of the Assets pursuant to this Agreement, regardless of the Person on whom such Taxes are imposed by Legal Requirements; provided that, Seller and Buyer shall each pay one-half of any transfer taxes imposed on the contemplated transfer of the Tangible Assets. For a period of four (4) years following the Closing, Seller shall provide to Buyer copies of Seller’s Federal income Tax returns and other related documentation reasonably requested by Buyer from time to time.

7.7 Post-Closing Operation of Business . Seller and Members understand, acknowledge and agree that the Buyer is entitled to manage and operate the Business after the Closing in its sole and absolute discretion. The Seller and Members further agree that the Seller and Members shall have no claim against the Buyer or its Affiliates, and the Buyer will have no Liability to the Seller or the Members, with respect to the post-Closing management and operation of the Business.

7.8 Collection of Accounts Receivable .

(a) Commencing on the Closing Date and continuing through the Repurchase Date (the “ Interim Receivables Period ”), Buyer shall exercise reasonable commercial efforts, in the Ordinary Course of Business and consistent with its collection practices (which need not include commencement of litigation), to collect all Accounts Receivable. During the Interim Receivables Period, Buyer shall have the authority to settle any Accounts Receivable, in its sole discretion, in such amounts and on such terms as it deems to be commercially reasonable under the circumstances; provided that , for so long as he is employed by the Buyer, the approval of Thomas Brown will be required for any write-off, write-down or other compromise regarding any Accounts Receivable; provided further , that if Mr. Brown is not so employed, the approval of Seller will be required for any write-off, write-down or other compromise of any Accounts Receivable of more than $10,000, such approval not to be unreasonably withheld or delayed. Payments received during the Interim Receivables Period, if any, which are not otherwise designated to be applied to a particular invoice, shall be applied to the oldest applicable invoice. None of TVI, the Buyer nor their agents or employees shall be liable to any Member or Seller for any error of judgment, or any action taken, suffered or omitted to be taken during the Interim Receivables Period with regard to the Accounts Receivable, except in the case of gross negligence, willful misconduct or fraud. The Parties agree to consult and cooperate as necessary and reasonable under the circumstances to promote the efficient collection of all Accounts Receivable during the Interim Receivables Period. Upon reasonable request, Buyer shall provide written detail to Seller from time to time during the Interim Receivables Period regarding its collection efforts associated with all uncollected Accounts Receivable.

(b) Buyer shall have the right, by written notice (the “ Receivables Notice ”) to Seller given on or after one hundred fifty (150) days following the Closing Date (or with specific respect to Accounts Receivable consisting on the Closing Date of percentage of completion revenues and earned but unbilled revenues, on or after one hundred fifty (150) days following the date such amounts first become due and payable)(alternatively, the “ Repurchase Date ”), to require Seller to repurchase for cash and without recourse, within ten (10) Business Days of the date of the Receivables Notice, all of the Accounts Receivable of Seller reflected on the books and records of the Seller on the Closing Date that are at the Repurchase Date uncollected (the “ Uncollected Accounts Receivable ”). In such an event, Seller shall, without further demand from Buyer, repurchase all Uncollected Accounts Receivable for a purchase price equal to their aggregate face value (less the aggregate amount of the reserve or allowance for bad debts as shown on the Final Balance Sheet (which shall be $100,000), less any write-off, write-down or other compromise during the Interim Receivables Period relating to the Accounts Receivable as existing as of

 

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the Closing Date made in accordance with Section 7.8(a) above), and Seller shall pay such funds by wire transfer of immediately available fu