ASSET PURCHASE AGREEMENT

Exhibit 10.1

THIS AGREEMENT IS SUBJECT TO ARBITRATION UNDER THE SOUTH CAROLINA UNIFORM

ARBITRATION ACT PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION

ASSOCIATION. AS MODIFIED PURSUANT TO SECTION 11.11 HEREIN.

ASSET PURCHASE AGREEMENT

ACQUISITION OF ASSETS OF

MCALEER COMPUTER ASSOCIATES, INC.

BY

COMPUTER SOFTWARE INNOVATIONS, INC.

November 27, 2006

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (the “Agreement”) is entered into as of the 27 ^th day of November, 2006, by and among Computer Software Innovations, Inc. , a Delaware corporation (“Buyer”), McAleer Computer Associates, Inc. , an Alabama corporation with its principal place of business in Mobile, Alabama (“Seller”), and William J. McAleer , the sole shareholder of Seller (“Shareholder”).

RECITALS:

WHEREAS, Seller is engaged in educational management providing software, hardware, forms and printing, and consultation services to school systems primarily in Alabama, Georgia, Florida, Mississippi, Tennessee and Louisiana (the “Business”);

WHEREAS, Buyer wishes to acquire substantially all of the properties and assets of Seller and the Business and assume certain limited obligations of Seller, and Seller wishes to convey such assets to Buyer, subject to such limited obligations and subject to the terms and conditions set forth in this Agreement;

NOW, THEREFORE, in consideration for the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, in order to consummate said sale, the parties hereto agree as follows:

ARTICLE 1. PURCHASE AND SALE OF ASSETS.

1.1 Sale of Assets.

(a) Subject to the provisions of this Agreement and except for those assets expressly excluded in subsection (b) (the “Excluded Assets”), Seller agrees to sell and Buyer agrees to purchase, at the Closing (as defined in Section 1.5 hereof), all of the properties, assets and business of Seller of every kind and description, tangible and intangible, real, personal or mixed, and wherever located, including without limitation:

(i) all assets shown or reflected on the Base Balance Sheet (as defined in Section 2.7 hereof) of Seller, other than those identified in paragraph (b) below;

(ii) all work in process, including any and all invoices or billings issued in 2006 for services to be performed in 2007, any cash received relating to all invoices or billings issued in 2006 for services to be performed in 2007, if any, and any other items for which services have been prepaid (the “WIP”);

(iii) all furniture, fixtures, machinery, equipment, supplies, raw materials;

(iv) Any rights of Seller in software developed or owned by Seller, including all versions, variations, modifications, enhancements, additions or replacements thereof, the source codes and object codes (in all media), all software program documentation and user materials, and all associated utilities and support software and any rights of Seller in any software licensed by it together with all software program documentation and user materials for such software (collectively, the “Software”);

(v) Any hardware and related products of Seller or used in connection with the Business, including all versions, variations, modifications, enhancements, additions or replacements thereof, and all hardware documentation and user materials (collectively, the “Hardware”);

 

2

(vi) All technical and descriptive materials relating to the acquisition, design, development, manufacture, use, support or maintenance of the Software or the Hardware, including the computer source and/or object code and program documentation and related materials to the extent Seller has rights therein (collectively, the “Technical Documentation”);

(vii) all vehicles of Seller, if any;

(viii) the real property, building and improvements of Seller located at 3209 and 3213 Executive Park Circle, Mobile, Alabama (the “Real Property”);

(ix) all business records and contracts, including project files and customer histories other than those identified in paragraph (b) below (the “Business Records”);

(x) all of Seller’s good will and intangible assets including, without limitation, all, customer lists, brochures, marketing literature, licenses, permits, processes, files and records; and

(xi) all of Seller’s intellectual property including, without limitation, all trademarks, trade names, service marks, logos, patents, copyrights, website and domain names, technology, trade secrets and other intangible assets used in the Business including, but not limited to, the exclusive right to use the name of Seller as all or part of a trade or corporate name (collectively, the “Intellectual Property”).

The assets, property and business of Seller to be sold to and purchased by Buyer under this Agreement are hereinafter sometimes referred to as the “Subject Assets.”

(b) The following assets shall be excluded from the Subject Assets as Excluded Assets:

(i) assets and property disposed of since the date of the Base Balance Sheet in the ordinary course of business;

(ii) Seller’s corporate franchise, stock record books, corporate record books containing minutes of meetings of directors and Shareholders, original tax returns and financial statements, such other records as have to do exclusively with Seller’s organization or stock capitalization, and copies of such documents of Seller which Seller deems necessary to substantiate its income and other tax returns;

(iii) all cash and marketable securities of Seller, except for cash representing invoices paid in 2006 for services to be performed in 2007 or other prepayments for services under Section 1.1(a)(ii);

(iv) all benefit plans, if any, including the assets held by Seller under said benefit plans;

(v) all of Seller’s rights in or under insurance contracts;

(vi) all accounts receivable for any services performed by Seller prior to the Closing (“Accounts Receivable”); and

(vii) all the assets set forth on Schedule 1.1(b)(vii).

1.2 Assumption of Liabilities.

Upon the sale and purchase of the Subject Assets, with the exception of those matters listed in Schedule 1.2 (the “Assumed Liabilities”), Buyer shall not assume and shall not be liable for any debt, obligation, responsibility or liability of Seller, or any Affiliate (as defined below), or any claim against any of the foregoing or against the Subject Assets of the Business arising prior to

 

3

Closing, whether known or unknown, contingent or absolute, asserted or unasserted, or otherwise. Without limiting the foregoing sentence, Buyer shall have no responsibility with respect to the following, whether or not disclosed in the Base Balance Sheet or a Schedule hereto, including without limitation:

(i) any liabilities and obligations related to or arising from the transactions with any officer, director or shareholder of Seller or any person or organization controlled by, controlling, or under common control with any of them (an “Affiliate”);

(ii) liabilities and obligations for taxes of any kind, including taxes related to or arising solely from the transfers contemplated hereby, which transfer taxes shall be the responsibility of Seller, provided, ad valorem property taxes due on the Subject Assets (or under any real or personal property lease) shall be prorated among Buyer and Seller based upon the number of days in the taxable period to which such ad valorem property taxes apply that each party owns the Subject Assets;

(iii) liabilities and obligations of Seller for damage or injury to person or property, including, without limitation, injuries to employees;

(iv) liabilities and obligations to employees of Seller, whether for accident, disability, or workers compensation insurance or benefits, benefits under employee benefit plans, or obligations related to or resulting from severance of employment by Seller;

(v) workmen’s liens on any of the Subject Assets;

(vi) liabilities incurred by Seller or Shareholder in connection with this Agreement and the transactions provided for herein, including counsel, broker and accountant’s fees, filing fees, transfer and other taxes, and expenses pertaining to Seller’s liquidation or the performance by Seller of its obligations hereunder;

(vii) liabilities of Seller related to environmental matters, including without limitation, liabilities associated with any disposal or use of hazardous materials or substances under Federal (including CERCLA) or state laws, common law or otherwise;

(viii) liabilities of Seller related to the Occupational Safety and Health Act (“OSHA”), or any other similarly applicable state law, and liabilities for healthcare expenses incurred prior to Closing;

(ix) liabilities of Seller with respect to any options, warrants, agreements or convertible or other rights to acquire any shares of its capital stock of any class or under any benefit plans;

(x) liabilities of Seller regarding any products manufactured or distributed by Seller prior to Closing; and

(xi) any other liabilities arising out of facts or circumstances existing prior to the Closing or the operation of Seller’s Business prior to the Closing.

1.3 Purchase Price and Payment.

(a) In consideration of the sale, transfer, conveyance, assignment and delivery of the Subject Assets by Seller to Buyer, and in reliance upon the representations and warranties made herein by Seller and Shareholder, Buyer will, in full payment therefor, pay to Seller a purchase price (the “Purchase Price”) of Four Million Fifty Thousand and No/100ths Dollars ($4,050,000.00) as set forth below.

 

4

(b) The Purchase Price shall be payable to Seller as follows: (i) One Hundred Thousand and No/100ths Dollars ($100,000.00) representing the Earnest Money described in Section 1.3(c) below shall be applied as a credit against the Purchase Price, (ii) Three Million Four Hundred Twenty Five Thousand and No/100ths Dollars ($3,425,000.00) in cash or by wire transfer or other immediately available funds at the Closing and (iii) Five Hundred Twenty Five Thousand and No/100ths Dollars ($525,000.00) being evidenced by a promissory note (the “Note”), the form of which is attached hereto as Exhibit A, which provides for payments of principal over five (5) years in equal quarterly installments for $26,250.00 per quarter, commencing March 31, 2007, plus interest on the unpaid balance computed in arrears for each quarterly payment using three (3) month LIBOR as published in the Wall Street Journal, in effect on the first business day at the beginning of such quarter and which shall be secured by a mortgage held by the Shareholder on the Real Property (“Mortgage”), the form of which is attached hereto as Exhibit B.

(c) Pursuant to and in accordance with that certain Letter Agreement among the parties dated September 14, 2006 (the “Letter Agreement”), Buyer paid to Seller One Hundred Thousand and No/100ths Dollars ($100,000.00) as earnest money (the “Earnest Money”). Upon the Closing, the Earnest Money shall be applied as a credit against the cash portion of the Purchase Price set forth above in Subsection 1.3(b)(i). In the event the Closing does not occur through no fault of the Seller of the Shareholder, the Earnest Money shall be retained by Seller or returned to Buyer as provided in Section 10.5 hereof.

1.4 Delivery of Consulting and Noncompetition Agreements. At the Closing, Shareholder shall enter into a consulting agreement with Buyer (the “Consulting Agreement”) that is mutually agreeable to Shareholder and Buyer and Seller and Shareholder shall enter into a confidentiality, noncompetition agreement with and for the benefit of Buyer (collectively, the “Noncompetition Agreements”), in the form attached hereto as Exhibit C.

1.5 Time and Place of Closing. The closing of the purchase and sale provided for in this Agreement (herein called the “Closing”) shall be held at the offices of Leatherwood Walker Todd and Mann, P.C., Greenville, South Carolina, on Tuesday, January 2, 2007 but with an effective date and time of 12:01 a.m. on Monday, January 1, 2007 (the “Closing Date”); provided, however, that the Closing may be postponed for such period as mutually agreed by the parties. Notwithstanding the foregoing, the parties acknowledge and agree that although the physical location of the Closing shall be in Greenville, South Carolina, each of the parties that desire to do so may execute and deliver all documents and instruments at Closing by facsimile or other mutually agreeable method of transmission with originally executed documents to be delivered separately.

1.6 Transfer of Subject Assets; Proration.

(a) At the Closing, Seller shall deliver or cause to be delivered to Buyer good and sufficient instruments of transfer transferring to Buyer title to all the Subject Assets including deeds, bills of sale, assignments of leases, title to vehicles subject to title registration, and such other instruments of transfer as may be required. Such instruments of transfer (i) shall be in the form and will contain the warranties, covenants and other provisions (not inconsistent with the provisions hereto) which are usual and customary for transferring the type of property involved under the laws of the jurisdictions applicable to such transfers, (ii) shall be in form and substance satisfactory to counsel for Buyer, and (iii) except as expressly provided herein, shall effectively vest in Buyer good and marketable title to all the Subject Assets and all of Seller’s rights and interest therein free and clear of all liens, restrictions and encumbrances, except liens for taxes not yet due and payable, it being understood that Seller shall procure and deliver at the Closing such certificates or other confirmations from the taxing authorities of the State of Alabama as are generally issuable by such authorities regarding Seller’s payment of taxes prior to the Closing, and, provided further, that Seller shall, after the Closing, promptly pay when due such taxes as are not included in the Assumed Liabilities.

(b) At the Closing Date, Buyer and Seller shall prorate as of the Closing Date all rents, utilities and other charges affecting the Subject Assets so that amounts attributable to periods prior to the Closing Date are borne by Seller (or, in the case of any

 

5

benefits, received by Seller) and amounts attributable to periods commencing on the Closing Date are borne by Buyer (or, in the case of any benefits, received by Buyer).

1.7 Delivery of Records and Contracts. At the Closing, Seller shall deliver or cause to be delivered to Buyer all of Seller’s leases, contracts, commitments and rights, with such assignments thereof and consents to assignments as are necessary to assure Buyer of the full benefit of the same. Seller shall also deliver to Buyer at the Closing all of Seller’s Business Records, tax returns for the five (5) years prior to the Closing, books and other data relating to the Subject Assets, and the Business and operations represented thereby (except corporate records, original tax returns and financial statements, and other property of Seller excluded under Section 1.1(b)) and Seller shall take all requisite steps to put Buyer in actual possession and operating control of the assets and Business of Seller. After the Closing, Buyer shall afford to Seller and its accountants and attorneys reasonable access to the books and records of Seller delivered to Buyer under this Section 1.7, all of which shall be retained by Buyer until December 31, 2013, and shall permit Seller to make extracts and copies therefrom for the purpose of preparing such tax returns of Seller as may be required after the Closing and for other proper purposes approved by Buyer. Similarly, after the Closing, Seller shall afford to Buyer and its accountants and attorneys reasonable access to the books and records of Seller retained by Seller under Section 1.1(b) and shall permit Buyer to make extracts and copies therefrom for any proper purpose.

1.8 Change of Name. Immediately following the Closing, Seller shall file with the Secretary of State of Alabama an amendment to its Charter (as hereafter defined) changing its name to a name which does not include the phrase “McAleer Computer Associates” or the word “McAleer” or any derivation or permutation thereof, or any name confusingly similar to the name of Buyer or any of its subsidiaries or divisions (such names to be provided to Seller upon request). In connection with the Closing, Seller shall deliver to Buyer a statement consenting to the use of the name “McAleer Computer Associates” or “McAleer” by Buyer or any affiliate thereof, or shall have taken such other steps within Seller’s power to permit Buyer or any affiliate thereof to use the name.

1.9 Further Assurances. Seller and Shareholder from time to time after the Closing at the request of Buyer and without further consideration shall execute and deliver further instruments of transfer and assignment (in addition to those delivered under Section 1.6) and take such other action as Buyer may reasonably require to more effectively transfer and assign to, and vest in, Buyer each of the Subject Assets. To the extent that the assignment of any lease, contract, commitment or right shall require the consent of other parties thereto, this Agreement shall not constitute an assignment thereof except to the extent such consent is obtained; however, Seller shall use its best efforts before and after the Closing to obtain any necessary consents or waivers to assure Buyer of the benefits of such leases, contracts, commitments or rights. Seller shall cooperate with Buyer to permit Buyer to enjoy Seller’s rating and benefits under the worker’s compensation laws and unemployment compensation laws of applicable jurisdictions, to the extent permitted by such laws. Nothing herein shall be deemed a waiver by Buyer of its right to receive at the Closing an effective assignment of each of the leases, contracts, commitments or rights of Seller. In addition, Seller and Shareholder agree to cooperate with Buyer following the Closing in the preparation by Elliott Davis, LLC of audited financial statements of Seller for the period ending December 31, 2006, which financial statements shall be prepared at Buyer’s expense.

1.10 Tax Returns. Seller shall promptly prepare and file on or before the due date or any extension thereof all required Federal, state and local tax returns with respect to Seller’s operations prior to the Closing, all of which shall be subject to and consistent with the allocations determined in accordance with Section 1.11 hereof. Seller shall provide Buyer with copies of all such tax returns, the contents of which shall be kept confidential by Buyer unless disclosure is otherwise required by law, subpoena, court order or governmental audit.

 

6

1.11 Allocation of Purchase Price. The Purchase Price payable by Buyer for the Subject Assets pursuant to Section 1.3 and the face amount of the Assumed Liabilities assumed pursuant to Section 1.2 shall represent payment for the Subject Assets at the prices shown on Schedule 1.11. The prices reflected in Schedule 1.11 shall represent the fair market values of the Subject Assets at the Closing, to the best of the knowledge and belief of Buyer and the parties hereto agree that they will each timely file with the Internal Revenue Service Form 8594, Asset Acquisition Statement, reflecting such prices and they will not take a position inconsistent with such allocation for Federal income tax purposes. Any determination as to fair market value with respect to any of the Subject Assets shall be performed solely at the expense of Seller, and Buyer shall be required to incur no expense in connection with any obligation arising pursuant to this section.

1.12 Right to Hire Employees. Seller shall use its reasonable efforts to make available to Buyer all of Seller’s employees for hire at or after the Closing. Seller shall be responsible for all wages, benefits, severance obligations, vacation and sick leave accruals (if any such accruals exist) and other obligations for such employees relating to the period prior to the date such employee is no longer an employee of Seller. . The standard procedure established in Section 4 of Revenue Procedure 84-77, 1984-2 C.B. 753, relating to employment tax returns and statements shall be adopted by Buyer for the employees of Seller hired by Buyer after Closing. In timely fashion, Seller agrees to furnish Buyer with information it has which Buyer needs to comply with this procedure. Buyer will be the “successor employer” for FICA/FUTA purposes.

ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER.

Each of Seller and Shareholder, jointly and severally, hereby represents and warrants to Buyer as follows:

2.1 Organization and Qualification of Seller. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Alabama, with full power and authority to own, lease and operate its properties and to conduct its business in the manner and in the places where such properties are owned or leased or such business is conducted by it. The copies of Seller’s Articles of Incorporation or equivalent document as amended to date (“Charter”), certified by the Secretary of State of the State of Alabama and filed in the appropriate county in Alabama as required by the Alabama Business Corporation Act, and of Seller’s bylaws as amended to date, certified by Seller’s Secretary (or the equivalent), previously delivered to Buyer’s counsel, are, and will be at the Closing, complete and correct. Seller is not qualified to do business as a foreign corporation in any jurisdiction and is not required to be licensed or qualified to conduct its business or own its property in any other jurisdiction where the failure to be so qualified or in good standing would have a material adverse effect upon the business, business prospects, assets, operations or condition (financial or otherwise) of Seller (a “Material Adverse Effect”).

2.2 Capitalization of Seller. All of the issued and outstanding capital stock of Seller is owned of record and beneficially by Shareholder.

2.3 Subsidiaries. Seller does not own, directly or indirectly, any capital stock of any corporation and has no subsidiaries. Except as reflected on the Financial Statements (as defined in Section 2.7(a) hereof) or set forth on Schedule 2.3, Seller does not own securities issued by any other business organization or governmental authority and Seller is not a partner or participant in any joint venture or partnership of any kind.

2.4 Authorization of Transaction. Seller has the full power and authority to execute, deliver and perform this Agreement and to carry out the transactions contemplated hereby. All necessary action, corporate or otherwise, including receipt of the requisite approval of the Shareholders of Seller, has been taken by Seller to authorize the execution, delivery and performance of this Agreement, and the transactions contemplated hereby, the Agreement has been executed and delivered by Seller and Shareholder, and the Agreement is the legal, valid and binding obligation of Seller and Shareholder, enforceable against Seller and Shareholder in accordance with its terms.

 

7

2.5 Present Compliance with Obligations and Laws. Seller is not: (a) in violation of its Charter or bylaws; (b) in default in the performance of any obligation, agreement or condition of any debt instrument which would (with or without the passage of time or the giving of notice) afford to any person the right to accelerate any indebtedness or terminate any right; (c) in default of or breach of (with or without the passage of time or the giving of notice) any other contract to which it is a party or by which it or any of its assets are bound; or (d) in violation of any law, regulation, administrative order or judicial order, decree or judgment applicable to it or its business or assets or to which it is subject or by which any of its assets or business may be bound, where any such violation or default, individually or in the aggregate, could have a Material Adverse Effect.

2.6 No Conflict of Transaction With Obligations and Laws. Except as disclosed in Schedule 2.6, neither the execution, delivery and performance of this Agreement, nor the performance of the transactions contemplated hereby, will: (i) constitute a breach or violation of any provision of the Charter or bylaws of Seller; (ii) require any consent, approval or authorization of or declaration, filing or registration with any person, (iii) conflict with or constitute (with or without the passage of time or the giving of notice) a breach of, or default under, any debt instrument by Seller and to which Seller is a party, or give any person the right to accelerate any indebtedness or terminate, modify or cancel any right; (iv) constitute (with or without the passage of time or giving of notice) a default under or breach by Seller or Shareholder of any other agreement, instrument or obligation to which Seller or Shareholder is a party or by which it or he or any of their respective assets are bound; (v) result in a violation of any law, regulation, administrative order or judicial order applicable to Seller or its business or assets or to which it is subject, or by which its assets or business may be bound; (vi) invalidate or adversely affect any permit, license or authorization used in Seller’s Business or (vii) result in the creation of any lien upon any of the assets of Seller.

2.7 Financial Statements.

(a) Seller has delivered or will deliver to Buyer at Closing (i) audited financial statements of Seller for the periods ending December 31, 2004 and December 31, 2005, which shall be prepared by Elliott Davis, LLC, and (ii) unaudited balance sheet and income statement for the nine (9) month period ended September 30, 2006 (the “Financial Statements”) all of which are complete and correct and fairly present in all material respects the financial position of Seller on the date of such statements and the results of its operations on the applicable basis for the periods covered thereby, and such Financial Statements have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved and prior periods.

The balance sheet dated September 30, 2006 included in the Financial Statements is sometimes referred to hereinafter as the “Base Balance Sheet.”

(b) The books of account and other financial records of Seller: (i) have been maintained in accordance with good business and accounting practices, and reflect all items of income and expense and all assets and liabilities required to be reflected therein; and (ii) are in all material respects complete and correct, and do no contain or reflect any material inaccuracies or discrepancies.

2.8 Absence of Certain Changes and Undisclosed Liabilities.

(a) Except as set forth on Schedule 2.8(a) hereto, since the date of the Base Balance Sheet, Seller has operated the Business in the normal and ordinary course of business and there has not been any change in the financial condition, working capital, earnings, reserves, properties, assets, liabilities, business or operations of Seller which change by itself or in conjunction with all other such changes, whether or not arising in the ordinary course of business, has had or could be reasonably expected to have a Material Adverse Effect with respect to Seller.

 

8

(b) There are no Liabilities of Seller, other than Liabilities (i) reflected or reserved against on the Base Balance Sheet or (ii) disclosed on Schedule 2.8(b). For the purposed of this Section 2.8(b), “Liabilities” shall mean any debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, including those arising under any law, legal action or governmental order and those arising under any contract, agreement, arrangement, commitment or undertaking.

(c) All of the representations and warranties made by Seller and Shareholder in this Section 2.8, including any schedules thereto, regarding any material changes and undisclosed liabilities shall be updated as of the Closing Date by the Seller and Shareholder.

2.9 Payment of Taxes. Seller has duly and timely filed all federal, state, local, and foreign government income, excise, gross receipts or franchise tax returns, real estate and personal property tax returns, sales and use tax returns, employee tax and contribution returns, and all other tax returns, reports and declarations, including valid extensions therefor, or estimated taxes required to be filed by it, with respect to all applicable taxes (“Tax Returns”) including without limitation, with respect to all income, profit, franchise, sales, use, real property, personal property, ad valorem, excise, employment, social security and wage withholding, severance, stamp, occupation, and windfall profit taxes, of every kind, character or description, and imposed by any government or quasi-governmental authority (domestic or foreign), and any interest or fines, and any and all penalties or additions relating to such taxes, charges, fees, levies or other assessments (“Taxes”).

2.10 Title to Premises; Liens; Condition of Properties.

(a) Seller has good and marketable indefeasible fee simple title, free and clear of all liens and encumbrances to the Real Property except for those encumbrances permitted under a standard and customary title policy as set forth in Schedule 2.10(a) . Seller has not leased or otherwise granted to any person the right to use or occupy such Real Property or any portion thereof; and there are no outstanding options, rights of first offer or rights of first refusal to purchase the Real Property or any portion thereof or interest therein. There is no condemnation, expropriation or other proceeding in eminent domain, pending or to the knowledge of Seller and Shareholder threatened, affecting any parcel of Real Property or any portion thereof or interest therein. There is no injunction, decree, order, writ or judgment outstanding, nor any claims, litigation, administrative actions or similar proceedings, pending or to the knowledge of Seller and Shareholder threatened, relating to the ownership, lease, use or occupancy of the Real Property or any portion thereof, or the operation of Seller’s Business as currently conducted thereon. The Real Property is in compliance with all other applicable building, zoning, subdivision, health and safety and all other land use laws, including, as amended, and all insurance requirements affecting the Real Property (collectively, the “Real Property Law”), and to the knowledge of Seller and Shareholder, the current use and occupancy of the Real Property and operation of Seller’s Business thereon does not violate any Real Property Laws. All certificates of occupancy, permits, licenses, franchise, approvals and authorizations (collectively, the “Real Property Permits”) of all governmental authorities, board of fire underwriters, association or any other entity having jurisdiction over the Real Property, which are required to use or occupy the Real Property or operate Seller’s Business as currently conducted thereon, have been issued and are in full force and effect. Seller has not received any notice from any governmental authority or other entity having jurisdiction over the Real Property threatening a suspension, revocation, modification or cancellation of the any Real Property Permit.

(b) Seller has delivered to Buyer true, correct and complete copies of all material leases, subleases, rental agreements, tenancies or licenses related to any of the personal property.

(c) Except as specifically disclosed in Schedule 2.10(c) or in the Base Balance Sheet, Seller has good and marketable title to all its owned personal property, free from liens, pledges and encumbrances and each of its leases is valid, binding and enforceable

 

9

in accordance with its terms against Seller and, to the knowledge of Seller and Shareholder, against the other parties thereto, is subsisting and (subject to obtaining required consents) fully assignable by Seller, and no default by Seller exists thereunder, or to the knowledge of Seller and Shareholder, by any other party. Seller has not received notice that any party to any such lease intends to cancel, terminate or refuse to renew the same or to exercise or decline to exercise any option or any right thereunder.

(d) Except as otherwise specified in Schedule 2.10(d) hereto, to the knowledge of Seller and Shareholder, all machinery and equipment of Seller, and the HVAC system used by Seller, are in good condition, working order and repair, age and reasonable wear and tear excepted, are adequate for the uses to which they are put, have been maintained in accordance with the past practices of Seller’s business in a responsible manner as historically conducted, substantially conform with all applicable ordinances, regulations and zoning, safety or other laws, and do not encroach on property of others.

2.11 Work-in-Process; Accounts Receivable. All WIP of Seller existing as of the date hereof represent valid contracts for Seller’s services for which Seller, subject to applicable payment terms, is entitled to receive full payment.

2.12 Title to Intellectual Property.

(a) Except as set forth on Schedule 2.12(a)(i) (the “Permitted Intellectual Property Encumbrances”), Seller owns good and marketable title, free and clear from all encumbrances, to the Intellectual Property. Seller has delivered to Buyer true, correct and complete copies of all of the Intellectual Property. There are no oral contracts, agreements, licenses, or other commitments or arrangements between Seller and any person or entity in effect which evidence any intellectual property rights, trade secrets, or other proprietary information, processes, or formulae used in, or incidental to, the sale, license, sublicense, development, manufacture, support or maintenance of, or arising from Software or Hardware, or otherwise necessary for the ownership or use of the Subject Assets.

(b) Schedule 2.12(b) hereto sets forth the form and placement of the proprietary legends and copyright notices displayed in or on the Software and the Hardware which is owned by Seller. In no instance has the eligibility of the Software or the Hardware for protection under applicable copyright law been forfeited to the public domain by omission of any required notice or any other action.

(c) Schedule 2.12(c) hereto sets forth (i) the steps and methods that Seller has employed to protect its Intellectual Property and/or (ii) Seller’s Intellectual Property protection program. Seller has promulgated and used its best efforts to enforce such Intellectual Property protection program and/or protect its Intellectual Property. To the knowledge of Seller and Shareholder, there has been no material violation of such program by any person or entity or unauthorized disclosure of its Intellectual Property to any person or entity. The source code and system documentation relating to the Software owned by Seller (i) has at all times been maintained in confidence and (ii) has been disclosed by Seller only to employees and consultants having “a need to know” the contents thereof in connection with the performance of their duties to Seller.

(d) Except as set forth on Schedule 2.12(d) , all personnel, including employees, agents, consultants, and contractors, who have contributed to or participated in the conception and development of the Software, Hardware, Technical Documentation, or the Intellectual Property on behalf of Seller either (i) have been party to a “work-for-hire” arrangement or agreement with Seller, in accordance with applicable federal and state law, that has accorded Seller full, effective, exclusive, and original ownership of all tangible and intangible property thereby arising; or (ii) have executed appropriate instruments of assignment in favor of Seller as assignee that have conveyed to Seller full, effective, and exclusive ownership of all tangible and intangible property thereby arising.

 

10

(e) No claims have been asserted by any person or entity to the use of the Subject Assets and neither Seller nor Shareholder knows of any valid basis for any such claim. To the knowledge of Seller and Shareholder, the use of the Intellectual Property, such as patents and trademarks, by Seller does not infringe on the rights of any person or entity.

2.13 Adequacy of Technical Documentation. The Technical Documentation includes the object code, source code, system documentation, statements of principles of operation, and schematics for that portion of the Software which is owned by Seller, as well as any pertinent commentary or explanation that may be necessary to render such materials understandable and usable by a trained computer programmer. The Technical Documentation also includes any program (including compilers), “workbenches,” tools, and higher level (or “proprietary”) language used for the development, maintenance, and implementation of the Software. The Technical Documentation also includes the product manufacture documentation, statements of principles of operation, and schematics for the Hardware, as well as any pertinent commentary or explanation that may be necessary to render such materials understandable and usable by a trained computer hardware specialist.

2.14 Third Party Components in the Software and the Hardware.

(a) Software. Seller has validly and effectively obtained the right and license to use, copy, modify, and distribute the third-party programming and materials contained in the Software and the Technical Documentation. The Software and the Technical Documentation owned by Seller contain no other programming or materials in which any third party may claim superior, joint, or common ownership, including any right or license. The Software and the Technical Documentation owned by Seller do not contain derivative works of any programming or materials not owned in their entirety by Seller and included in the Subject Assets.

(b) Hardware. Seller has validly and effectively obtained the right and license to use, copy, modify, and distribute the third-party products and materials contained in the Hardware and the Technical Documentation. The Hardware and the Technical Documentation contain no other products or materials in which any third party may claim superior, joint, or common ownership, including any right or license. The Hardware and the Technical Documentation owned by Seller do not contain derivative works of any products or materials not owned in their entirety by Seller and included in the Subject Assets.

2.15 Third Party Interests or Marketing Rights in the Software and the Hardware. Seller has not granted, transferred, or assigned any right or interest in the Software, the Hardware, the Technical Documentation or the Intellectual Property to any person or entity, except as set forth on Schedule 2.20 hereto. Except as set forth in Schedule 2.15 hereto, all Material Contracts relating to the Software constitute only end-user agreements, each of which grants the end-user thereunder solely the nonexclusive right and license to use an identified piece of Software and related user documentation, for internal purposes only, on a single central processing unit (CPU). There are no contracts, agreements, licenses, and other commitments or arrangements in effect with respect to the marketing, distribution, licensing, or promotion of the Software or the Hardware or any other Technical Documentation, or the Intellectual Property by any independent salesperson, distributor, sub licensor, or other remarketer or sales organization.

2.16 Labor and Employee Relations.

(a) Except as shown on Schedule 2.16(a) hereto, there are no currently effective consulting or employment agreements or other material agreements with individual consultants or employees to which Seller is a party. Complete and accurate copies of all such written agreements have been delivered by Seller to Buyer.

(b) None of the employees of Seller is covered by any collective bargaining agreement with any trade or labor union, employees’ association or similar association. Seller has complied with all applicable laws, rules and regulations relating to the

 

11

employment of labor, including without limitation those relating to wages, hours, unfair labor practices, discrimination, and payment of social security and similar taxes, except where failure to comply would not have a Material Adverse Effect. There are no representation elections, arbitration proceedings, labor strikes, slowdowns or stoppages, or claims of discrimination or unfair labor practices pending, or, to the knowledge of Seller and Shareholder, threatened, with respect to the employees of Seller.

(c) There are no complaints against Seller pending or, to the knowledge of Seller and Shareholder, threatened before the National Labor Relations Board or any similar state or local labor agencies, or before the Equal Employment Opportunity Commission or any similar state or local agency, by or on behalf of any employee or former employee of Seller.

(d) There is no contingent liability or accruals for sick leave, vacation time, severance pay or similar items not set forth on the Base Balance Sheet or on Schedule 2.16(d) . The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not trigger any severance pay obligation under any contract or at law or any notice requirement under any federal or state plant closing law.

(e) There has not been any citation, fine or penalty imposed or asserted against Seller under any law or regulation relating to employment, immigration or occupational safety matters.

(f) Seller has furnished Buyer a complete and accurate list of all employees of Seller, their date of hire and their rate of compensation as of the date of this Agreement (including a breakdown of the portion thereof attributable to salary, bonus and other compensation). Except as previously disclosed to Buyer in writing, each of Seller’s employees is an employee at will and will be no longer employed by Seller on the Closing Date. Buyer may hire such of Seller’s then former employees on the day following the Closing Date as Buyer decides to hire upon such terms as determined by Buyer in its sole discretion. Seller shall be responsible for all severance and other employment related payments accrued as of the Closing Date.

2.17 ERISA and Employee Benefits

(a) Attached hereto as Schedule 2.17 is a list of each employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1976, as amended (“ERISA”) which is or has been maintained for the benefit of employees of Seller.

(b) As of the Closing, none of the Subject Assets will be subject to any lien arising under ERISA, and Seller will not have any liability in respect to any Employee Benefit Plan for which Buyer could be held liable. For purposes of this Agreement, “Employee Benefit Plans” means all pension, retirement, profit sharing, deferred compensation, stock ownership, stock purchase, stock option, restricted stock, bonus, severance or termination pay, payroll practice, vacation, cafeteria, medical, group, life, health, accident, disability, death, or other employee benefit plans or arrangements, including (without limitation) any pension plan (within the meaning of Section 3(2) of ERISA) and any welfare plan (within the meaning of Section 3(1) of ERISA), covering any present or former employees, consultants, officers, or directors (or dependents or beneficiaries of any such persons) of Seller or to which Seller is a party or bound or by which Seller otherwise may have any liability to any present or former employee, consultant, officer, or director (or to any dependent or beneficiary of any such person) of Seller.

2.18 Environmental Matters. To Seller and Shareholder’s knowledge: (a) there are no and have not been any Hazardous Materials or underground storage tanks at, on, under or around the Real Property; (b) the Real Property has been operated and used in compliance with all applicable environmental laws; (c) there are no actions, suits, claims, proceedings, investigations or enforcement actions pending or threatened under any environmental law with respect to the Real Property; and (d) neither Seller nor Shareholder has received any notice, claim or demand from any governmental entity or other person regarding the presence of Hazardous

 

12

Materials at, on, under or around the Real Property or alleging that the Real Property are in violation of any environmental laws. Seller has delivered to Buyer copies of all environmental reports in Seller’s possession. To Seller or Shareholder’s knowledge, the environmental reports are accurate and complete and neither Seller nor Shareholder is aware of any other reports or information pertaining to the environmental condition of the Real Property, other than as set forth in the environmental reports. “Hazardous Materials” shall mean any waste, pollutant, chemical, hazardous material, hazardous substance, toxic substance, hazardous waste, special waste, solid waste, asbestos, radioactive materials, polychlorinated biphenyls, petroleum or petroleum-derived substance or waste (regardless of specific gravity), or any constituent or decomposition product of any such pollutant, material, substance or waste, including, but not limited to, any hazardous substance or constituent contained within any waste and any other pollutant, material, substance or waste regulated under or as defined by any environmental laws.

2.19 Permits. Seller holds and is in compliance with all licenses, permits, registrations, orders, authorizations, approvals and franchises which are required to permit it to conduct its business as presently conducted, except where failure to so comply would not have a Material Adverse Effect, and Seller has delivered to Buyer, true, correct and complete copies of all such licenses, permits, registrations, orders, authorizations, approvals and franchises and, except as indicated on Schedule 2.19 hereto, are now valid, in full force and effect, and, except as set forth in Schedule 2.19 , Buyer shall have full benefit of the same. Seller has not received any notification of any asserted present failure (or past and unremedied failure) by it to have obtained any such license, permit, registration, order, authorization, approval or franchise. Seller has not received any notification of non-compliance or violation with any such license, permit, registrations, order, authorizations, approvals or franchises.

2.20 Material Contracts.

(a) Seller has or has caused to be delivered to Buyer true, correct and complete copies all of the material contracts and agreements (including oral and informal arrangements) of Seller and all agreements relating to Intellectual Property (collectively, the “Material Contracts”).

(b) Except as disclosed in Schedule 2.20(b) , each Material Contract is valid and binding on the respective parties thereto and is in full force and effect. Neither Seller nor Shareholder has received any notice that Seller is in breach of or default under any Material Contract or that any event occurred or failed to occur which, with the giving of notice or passage of time or both, would constitute a breach of or default under any Material Contract.

(c) Except as disclosed in Schedule 2.20(c) , no other party to any Material Contract is in breach thereof or default thereunder in any material respect nor has any event occurred or failed to occur which, with the giving of the notice or passage of time or both, would constitute a material breach of or default under any Material Contract by any other party to any Material Contract.

(d) Except as disclosed in Schedule 2.20(d) , there is no contract, agreement or other arrangement granting any person any preferential right to purchase, other than in the ordinary course of business consistent with past practice, any of the properties or assets of Seller, including the Subject Assets.

2.21 Warranty or Other Claims. Except as set forth on Schedule 2.21 , neither Seller nor Shareholder knows of, or has reason to know of, any existing or threatened claims, or any facts upon which a claim could be based, against Seller for product that is defective or fails to meet any product warranty. No claim is being asserted against Seller for renegotiation or price redetermination of any business transaction, and neither Seller nor Shareholder has knowledge of any facts upon which any such claim could be based.

2.22 Litigation. Schedule 2.22 sets forth an accurate and complete list of (a) all claims, actions, suits, arbitration or other proceeding or investigations (collectively, “Actions”) in the past five (5) years by or against Seller (or by or against any Affiliate,

 

13

including Shareholder, relating to the Business or Seller), or affecting any of the Subject Assets or the Business, and (b) all Actions which to the knowledge of Seller or Shareholder are currently threatened to be brought. Except for matters described in Schedule 2.22 hereto, there are no Actions pending (or, to the knowledge of Seller and Shareholder, threatened) against Seller and there are no outstanding court orders, court decrees, or court stipulations to which Seller is a party or by which any of its assets are bound, any of which (a) question this Agreement or affect the transactions contemplated hereby, or (b) restrict the present business, properties, operations, prospects, assets or condition, financial or otherwise, of Seller, or (c) will result in any material adverse change in the business, properties, operations, prospects, or assets of Seller, on a standalone or consolidated basis. Neither Seller nor Shareholder has any reason to believe that any such claim, action, suit, arbitration or other proceeding or investigation may be brought against Seller.

2.23 Insurance. Seller maintains (i) insurance on all of its property (including leased premises) that insures against loss or damage by fire or other casualty (including extended coverage) and (ii) insurance against liabilities, claims and risks of a nature and in such amounts as are normal and customary in its industry. Seller has delivered to Buyer true, correct and complete copies of all policies of insurance maintained by Seller (including insurance providing benefits for employees) in effect on the date hereof, together with complete and correct information with respect to the premiums, coverages, insurers, expiration dates, and deductibles in respect of such policies. To the knowledge of Seller and Shareholder, such policies are sufficient for compliance with all requirements of law currently applicable to Seller and of all agreements to which Seller is a party, will remain in full force and effect through the respective expiration dates of such policies without the payment of additional premiums. Except for amounts deductible under policies of insurance described on such schedule or with respect to risks assumed as a self-insurer and described on such schedule, Seller is not, nor has it been at any time, subject to any liability as a self-insurer of the businesses or assets of Seller that is reasonably likely to have a Material Adverse Effect. Except as set forth on Schedule 2.23 , there are no claims pending or, to the knowledge of Seller and Shareholder, overtly threatened, under any of said policies, or disputes with insurers, and all premiums due and payable thereunder have been paid, and all such policies are in full force and effect in accordance with their respective terms. No notice of cancellation or termination has been received with respect to any such policy. Except as set forth on Schedule 2.23 , Seller has not been refused any insurance with respect to its assets or operations, nor has its coverage been limited, by any insurance carrier with which it has applied for any such insurance or with which it has carried insurance.

2.24 Finder’s Fee. Neither Seller nor Shareholder has incurred or become liable for any broker’s commission or finder’s fee relating to or in connection with the transactions contemplated by this Agreement.

2.25 Disclosure of Material Information. Neither this Agreement nor any exhibit hereto or certificate issued pursuant hereto contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements herein or therein not misleading, relating to the business or affairs of Seller. There is no fact known to Seller or Shareholder which adversely affects, or is likely to (so far as now can be reasonably foreseen) materially adversely affect, the business, condition (financial or otherwise) or prospects of Seller which has not been specifically disclosed herein.

ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BUYER.

Buyer hereby represents and warrants to Seller and Shareholder as follows:

3.1 Organization of Buyer. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with full power to own or lease its properties and to conduct its business in the manner and in the places where such properties are owned or leased or such business is conducted by it. Buyer is, or prior to the Closing, will be duly qualified to transact business in the State of Alabama.

 

14

3.2 Authorization of Transaction. Buyer has the full power and authority to execute, deliver and perform this Agreement and to carry out the transactions contemplated hereby. All necessary action, corporate or otherwise, including approval of the board of directors of Buyer, has been taken by Buyer to authorize the execution, delivery and performance of this Agreement and the transactions and agreements contemplated hereby and the same constitute the legal, valid and binding obligations of Buyer enforceable in accordance with their respective terms.

3.3 No Conflict of Transaction with Obligations and Laws.

(a) Neither the execution, delivery and performance of this Agreement or any of the agreements contemplated hereby, nor the performance of the transactions contemplated hereby, will: (i) constitute a breach or violation of Buyer’s Charter or bylaws; (ii) conflict with or constitute (with or without the passage of time or the giving of notice) a breach of, or default under any material agreement, instrument or obligation to which Buyer is a party or by which it or its assets are bound which would materially affect the performance by Buyer of its obligations under this Agreement; or (iii) result in a violation of any law, regulation, administrative order or judicial order applicable to Buyer.

(b) The execution, delivery and performance of this Agreement and the transactions contemplated hereby by Buyer do not require the consent, waiver, approval, authorization, exemption of or giving of notice to any governmental authority, except for Buyer’s obligations to disclose under the Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (collectively, the “Exchange Act”).

3.4 Finder’s Fee. Buyer has not incurred or become liable for any broker’s commission or finder’s fee relating to or in connection with the transactions contemplated by this Agreement.

3.5 Authorization from Others. Buyer has obtained and delivered to Seller all authorizations, consents and permits of others required to permit the consummation by Buyer of the transactions contemplated by this Agreement and the agreements contemplated hereby.

3.6 Litigation. There is no litigation pending or, to the knowledge of Buyer, threatened against Buyer which will have a material adverse effect on its properties, assets or business or which would prevent or hinder the consummation of the transactions contemplated by this Agreement.

ARTICLE 4. COVENANTS OF SELLER AND THE SHAREHOLDER.

Seller and Shareholder hereby jointly and severally covenant and agree with Buyer as follows:

4.1 Conduct of Business. Between the date of this Agreement and the Closing, Seller will refrain from (i) conducting the Business outside the normal and ordinary course, (ii) entering into any material agreement that is reasonably likely to have a Material Adverse Effect; or (iii) making any change, incurring any obligation or taking any action that is reasonably likely to have a Material Adverse Effect.

4.2 Authorization from Others. Prior to the Closing, Shareholder will have obtained, and will cause Seller to have obtained, all authorizations, consents and permits of others required to permit the consummation by Shareholder and Seller of the transactions contemplated by this Agreement.

4.3 Breach of Representations and Warranties. Prior to the Closing, promptly upon the occurrence of, or promptly upon Seller and Shareholder becoming aware of the imminent or threatened occurrence of, any event which would cause or constitute a breach, or would have caused or constituted a breach had such event occurred or been known to Seller or Shareholder prior to the date hereof, of any of the representations and warranties of Seller and Shareholder contained in or referred to in this Agreement, such person shall give detailed written notice thereof to Buyer, and Seller and Shareholder shall use their best efforts to prevent or promptly remedy the same.

 

15

4.4 Consummation of Agreement. Seller and Shareholder shall use its and his best efforts to perform and fulfill, and, in case of Shareholder, to cause Seller to perform and fulfill, all conditions and obligations on their part to be performed and fulfilled under this Agreement, to the end that the transactions contemplated by this Agreement shall be fully carried out. To this end, Seller will obtain all necessary authorizations or approvals of its Shareholders and Board of Directors.

4.5 Exclusivity. Neither Seller nor Shareholder shall, directly or indirectly, (a) encourage, solicit, initiate, engage or participate in discussions or negotiations with any person or entity (other than the Buyer) concerning any merger, consolidation, sale of material assets, recapitalization, accumulation of shares of capital stock of Seller, or other business combination involving Seller or (b) provide any information concerning the business, properties or assets of Seller to any person or entity (other than the Buyer and its representatives or, Buyer’s lender and its representatives). Seller and Shareholder shall give Buyer prompt written notice if either of them receive any inquiry or offer from any other person or entity relating to the foregoing.

ARTICLE 5. COVENANTS OF BUYER.

Buyer hereby covenants and agrees with Seller and Shareholder as follows:

5.1 Authorization from Others. Prior to the Closing, Buyer will have obtained all authorizations, consents and permits of others required to permit the consummation by Buyer of the transactions contemplated by this Agreement.

5.2 Consummation of Agreement. Buyer shall use its best efforts to perform and fulfill all conditions and obligations on its part to be performed or fulfilled under this Agreement, to the end that the transactions contemplated by this Agreement shall be fully carried out. To this end, Buyer will obtain any approvals of its Shareholders or Board of Directors which may be required in order to consummate the transactions contemplated hereby.

5.3 Cost of Audited Financial Statements. Buyer shall pay all invoices of Elliott Davis, LLC relating to the preparation of financial statements of Seller for the periods ending December 31, 2004, December 31, 2005 and December 31, 2006.

ARTICLE 6. CONDITIONS TO OBLIGATIONS OF BUYER.

The obligations of Buyer to consummate this Agreement and the transactions contemplated hereby are subject to the condition that on or before the Closing the actions required by this Article 6 will have been accomplished or waived in writing by Buyer.

6.1 Representations; Warranties; Covenants. Each of the representations and warranties of Seller and Shareholder contained in Article 2 shall be true and correct in all material respects as though made on and as of the Closing. Seller and Shareholder shall, on or before the Closing, have performed in all material respects all of its obligations hereunder which by the terms hereof are to be performed on or before the Closing; and Seller shall have delivered to Buyer a certificate of Seller’s President dated as of the Closing to the foregoing effect.

6.2 Absence of Certain Litigation. There shall not be any (a) injunction, restraining order or order of any nature issued by any court of competent jurisdiction which directs that this Agreement or any material transaction contemplated hereby shall not be consummated as herein provided, (b) suit, action or other proceeding by any federal, state, local or foreign government (or any agency thereof) pending before any court or governmental agency, or threatened to be filed or initiated, wherein such complainant seeks the restraint or prohibition of the consummation of any material transaction contemplated by this Agreement or asserts the illegality

 

16

thereof or (c) suit, action or other proceeding by a private party pending before any court or governmental agency, or threatened to be filed or initiated, which in the reasonable opinion of counsel for Buyer is likely to result in the restraint or prohibition of the consummation of any material transaction contemplated hereby or the obtaining of an amount in payment (or indemnification) of material damages from or other material relief against any of the parties or against any directors or officers of Buyer, in connection with the consummation of any material transaction contemplated hereby.

6.3 No Bankruptcy. Seller shall not (i) have commenced a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect