ASSET PURCHASE AGREEMENT

                                   Exhibit 10.1

 

 

ASSET PURCHASE AGREEMENT

dated as of January 13, 2009

among

Tier Technologies, Inc.,

Cowboy Acquisition Company

and

ChoicePay, Inc.

TABLE OF CONTENTS
	Page
ARTICLE I  THE ASSET PURCHASE	1
1.1      Purchase and Sale of Assets	1
1.2      Assumption of Liabilities	1
1.3      Purchase Price	1
1.4      Escrows	1
1.5      The Closing	2
1.6      Allocation	3
1.7      Post-Closing Adjustments	3
1.8      Earn-Out Consideration	5
1.9      Use of Closing Payment	7
1.10         Further Assurances	7
ARTICLE II  REPRESENTATIONS AND WARRANTIES OF THE SELLER	7
2.1      Organization, Qualification and Corporate Power	8
2.2      Capitalization	8
2.3      Authorization of Transaction	8
2.4      Noncontravention	9
2.5      Subsidiaries	9
2.6      Financial Statements	9
2.7      Absence of Certain Changes	10
2.8      Undisclosed Liabilities	10
2.9      Tax Matters	10
2.10         Ownership and Condition of Assets	11
2.11         Owned Real Property	12
2.12         Real Property Leases	12
2.13         Intellectual Property	12
2.14         [INTENTIONALLY LEFT BLANK]	16
2.15         Contracts	16
2.16         Accounts Receivable	18
2.17         Powers of Attorney	18
2.18         Insurance	18
2.19         Litigation	18
2.20         Warranties	18
2.21         Employees	18
2.22         Employee Benefits	19
2.23         Environmental Matters	21
2.24         Legal Compliance	21
2.25         Customers and Suppliers	22
2.26         Permits	22
2.27         Certain Business Relationships With Affiliates	22
2.28         Brokers' Fees	22
2.29         Books and Records	22

2.30         Government Contracts	23
2.31         Solvency	23
ARTICLE III  PRESENTATIONS AND WARRANTIES OF THE BUYER PARENT AND THE BUYER	24
3.1      Organization and Corporate Power	24
3.2      Authorization of the Transaction	24
3.3      Noncontravention	24
3.4      Brokers' Fees	25
3.5      Acknowledgement	25
3.6      Sufficient Funds	25
ARTICLE IV  PRE-CLOSING COVENANTS	25
4.1      Closing Efforts	25
4.2      Governmental and Third-Party Notices and Consents	25
4.3      Stockholder Approval	26
4.4      Operation of Business	27
4.5      Access to Information	28
4.6      Exclusivity	29
4.7      FIRPTA Tax Certificate	29
4.8      Notice of Developments	29
4.9      Confidentiality	30
ARTICLE V  CONDITIONS TO CLOSING	30
5.1      Conditions to Obligations of each Party	30
5.2      Conditions to Obligations of the Buyer	30
5.3      Conditions to Obligations of the Seller	32
ARTICLE VI  POST-CLOSING COVENANTS	33
6.1      Propiertary Information	33
6.2      Solicitation and Hiring	33
6.3      Non-Competition	33
6.4      Tax Matters	34
6.5      Sharing of Data	34
6.6      Use of Name	35
6.7      Cooperation in Litigation	35
6.8      Collection of Accounts Receivable	35
6.9      Employees	36
6.10         Enforcement of Insurance Claims	36
ARTICLE VII  INDEMNIFICATION	36
7.1      Indemnification by the Seller	36
7.2      Indemnification by the Buyer Parent and the Buyer	37
7.3      Indemnification Claims	37
7.4      Survival of Representations and Warranties	40
7.5      Limitations	41
7.6      Treatment of Indemnity Payments	42

ARTICLE VIII  TERMINATION	42
8.1      Termination of Agreement	42
8.2      Effect of Termination	42
ARTICLE IX  DEFINITIONS	43
ARTICLE X  MISCELLANEOUS	55
10.1          Press Releases and Announcements	55
10.2          No Third Party Beneficiaries	55
10.3          Entire Agreement	55
10.4          Succession and Assignment	55
10.5          Counterparts and Facsimile Signature	55
10.6          Headings	55
10.7          Notices	55
10.8          Governing Law	56
10.9          Amendments and Waivers	56
10.10        Severability	56
10.11        Expenses	57
10.12        Submission to Jurisdiction	57
10.13        Specific Performance	57
10.14        Construction	58
10.15        Buyer Parent Guaranty; Acknowledgment	58
Exhibits
Exhibit A -     Closing Working Capital Escrow Agreement
Exhibit B -     Indemnification Escrow Agreement
Exhibit C -     Bill of Sale
Exhibit D -     Trademark Assignment
Exhibit E -      Instrument of Assumptions
Exhibit F -      Form of Non-Competition Agreement
Exhibit G -     Opinion of Seller's counsel
Exhibit H -     Form of Waiver
Schedules
Schedule 1.1(b) -      Excluded Assets
Schedule 1.6 -          Allocation of Purchase Price
Schedule 1.8 -          Earn-Out Contracts
Disclosure Schedule
Schedule 5.2(a) -      Required Consents
Schedule 6.9 -          Transferring Employees

 

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement is entered into as of January 13, 2009 by and between Tier Technologies, Inc., a Delaware corporation (the “Buyer Parent”), Cowboy Acquisition Company, a Delaware corporation and direct, wholly-owned subsidiary of the Buyer Parent (the “Buyer”), and ChoicePay, Inc., an Oklahoma corporation (the “Seller”).

This Agreement contemplates a transaction in which the Buyer will purchase substantially all of the assets and assume certain of the liabilities of the Seller.

Capitalized terms used in this Agreement shall have the meanings ascribed to them in Article IX.

In consideration of the representations, warranties and covenants herein contained, the Parties agree as follows.

ARTICLE I

THE ASSET PURCHASE

 (a)     Upon and subject to the terms and conditions of this Agreement, the Buyer shall purchase from the Seller, and the Seller shall sell, transfer, convey, assign and deliver to the Buyer, at the Closing, for the consideration specified below in this Article I, all right, title and interest in, to and under the Acquired Assets.

              (b)     Notwithstanding the provisions of Section 1.1(a), the Acquired Assets shall not include the Excluded Assets.

 (a)    Upon and subject to the terms and conditions of this Agreement, the Buyer shall assume and become responsible for, from and after the Closing, the Assumed Liabilities.

 (b)     Notwithstanding the terms of Section 1.2(a) or any other provision of this Agreement to the contrary, the Buyer shall not assume or become responsible for, and the Seller shall remain liable for, the Retained Liabilities.

   1.3   Purchase Price .  The Purchase Price shall consist of (i) the payment by the Buyer to or at the direction of the Seller at the Closing of $7,500,000 (the “Closing Payment”) and (ii) the Earn-Out Consideration.

 

 (a)    At the Closing, an amount equal to $300,000 otherwise payable by the Buyer to the Seller at Closing shall be paid by the Buyer to the Escrow Agent for the purpose of securing the post-closing adjustment set forth in Section 1.7 of this Agreement (the “Closing

(b)     At the Closing, an amount equal to $500,000 otherwise payable by the Buyer to the Seller at Closing shall be paid by the Buyer to the Escrow Agent for the purpose of securing the indemnification obligations of the Seller set forth in this Agreement (the “Indemnification Escrow Fund”).  The Indemnification Escrow Fund shall be held by the Escrow Agent under the Indemnification Escrow Agreement pursuant to the terms thereof.  The Indemnification Escrow Fund shall be held as a trust fund and 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 Indemnification Escrow Agreement.

1.5   The Closing .

(a)   The Closing shall take place at the offices of the Buyer in Reston, Virginia commencing at 9:00 a.m. local time on the Closing Date.  All transactions at the Closing shall be deemed to take place simultaneously, and no transaction shall be deemed to have been completed and no documents or certificates shall be deemed to have been delivered until all other transactions are completed and all other documents and certificates are delivered.

(b)   At the Closing:

(i)   the Seller shall deliver to the Buyer the various certificates, instruments and documents referred to in Section 5.2;

(ii)   the Buyer Parent and the Buyer shall deliver to the Seller the various certificates, instruments and documents referred to in Section 5.3;

(iii)   the Seller shall execute and deliver to the Buyer a bill of sale in substantially the form attached hereto as Exhibit C , one or more trademark assignments in substantially the form attached hereto as Exhibit D , and such other instruments of conveyance (such as real estate deeds, assigned certificates or documents of title, assigned negotiable instruments and stock transfer powers) as the Buyer may reasonably request in order to effect the sale, transfer, conveyance and assignment to the Buyer of valid ownership of the Acquired Assets;

(iv)   the Buyer shall execute and deliver to the Seller an instrument of assumption in substantially the form attached hereto as Exhibit E and such other instruments as the Seller may reasonably request in order to effect the assumption by the Buyer of the Assumed Liabilities;

(v)   the Buyer shall pay to or at the direction of the Seller, by wire transfer of immediately available funds to an account or accounts designated by the Seller, the

(vi)   the Buyer, the Seller and the Escrow Agent shall execute and deliver each of the Closing Working Capital Escrow Agreement and the Indemnification Escrow Agreement, and the Buyer shall deposit funds with the Escrow Agent in accordance with Section 1.4;

(vii)   the Seller shall deliver to the Buyer, or otherwise put the Buyer in possession and control of, all of the Acquired Assets of a tangible nature; and

(viii)   the Buyer and the Seller shall execute and deliver to each other a cross-receipt evidencing the transactions referred to above.

1.6   Allocation .  The Buyer and the Seller agree to allocate the Purchase Price and the Assumed Liabilities, including the Assumed Severance Payments (and all other capitalizable costs) among the Acquired Assets and the non-solicitation and non-competition covenants set forth in Sections 6.2 and 6.3 for all purposes (including financial accounting and tax purposes) in accordance with the allocation schedule attached hereto as Schedule 1.6 .  If the Closing Payment or the Earn-Out Consideration is adjusted pursuant to Section 1.7 or Section 1.8 below, the allocation of the Purchase Price among the Acquired Assets as set forth in Schedule 1.6 shall be appropriately modified by mutual agreement of the Buyer and the Seller, working together in good faith, to reflect increases or decreases in the various asset categories which give rise to such adjustments.

1.7   Post-Closing Adjustments .  The Purchase Price set forth in Section 1.3 shall be subject to adjustment after the Closing Date as follows:

(a)   Within 30 days after the Closing Date, the Seller shall prepare and deliver to the Buyer the Draft Closing Balance Sheet.  The Seller shall prepare the Draft Closing Balance Sheet in accordance with GAAP applied on a basis consistent with the application of GAAP to the preparation of the Financial Statements, which shall set forth the Closing Working Capital.

(b)   The Buyer shall deliver to the Seller, by the Objection Deadline Date, either a notice indicating that the Buyer accepts the Draft Closing Balance Sheet or a detailed statement describing its objections (if any) to the Draft Closing Balance Sheet.  If the Buyer delivers to the Seller a notice accepting the Draft Closing Balance Sheet, or the Buyer does not deliver a written objection to the Draft Closing Balance Sheet by the Objection Deadline Date, then, effective as of either the date of delivery of such notice of acceptance or as of the close of business on the Objection Deadline Date, the Draft Closing Balance Sheet shall be deemed to be the Final Closing Balance Sheet.  If the Buyer timely objects to the Draft Closing Balance Sheet, such objections shall be resolved as follows:

(i)   The Buyer and the Seller shall first use reasonable efforts and cooperate in good faith to resolve such objections.

(ii)   If the Buyer and the Seller do not reach a resolution of all objections set forth on the Buyer’s statement of objections within 15 days after delivery of such statement of objections, the Buyer and the Seller shall, within 10 days following the expiration of such 15-day period, engage the Accountant, pursuant to an engagement agreement executed by the Buyer, the Seller and the Accountant, to resolve any (and only those) remaining objections set forth on the Buyer’s statement of objections (the “Unresolved Objections”).  The Accountant shall not address any issues other than the Unresolved Objections.

(iii)   The Buyer and the Seller shall jointly submit to the Accountant, within 5 days after the date of the engagement of the Accountant (as evidenced by the date of the engagement agreement), a copy of the Draft Closing Balance Sheet, a copy of the statement of objections delivered by the Buyer to the Seller, and a statement setting forth the resolution of any objections agreed to by the Buyer and the Seller.  Each of the Buyer and the Seller shall submit to the Accountant (with a copy delivered to the other Party on the same day), within 10 days after the date of the engagement of the Accountant, a memorandum (which may include supporting exhibits) setting forth their respective positions on the Unresolved Objections.  Each of the Buyer and the Seller may (but shall not be required to) submit to the Accountant (with a copy delivered to the other Party on the same day), within 30 days after the date of the engagement of the Accountant, a memorandum responding to the initial memorandum submitted to the Accountant by the other Party.  Unless requested by the Accountant in writing, neither Party may present any additional information or arguments to the Accountant, either orally or in writing.  In the event that the Accountant makes such a request, a Party submitting any writing to the Accountant shall deliver a copy of such writing to the other Party on the same day, and any oral communication by a Party with the Accountant shall take place only in the presence (in person or telephonically) of the other Party.  In the event that the Accountant makes such request, a Party submitting any written material to the Accountant in response to such request (or otherwise in connection with the Unresolved Objections) shall deliver a copy of all such written material to the other Party on the same day, and any oral communication with the Accountant by a Party in response to such a request shall take place only in the presence (in person or telephonically) of the other Party.

(iv)   Within 45 days after the date of its engagement hereunder, the Accountant shall determine whether the objections raised by the Buyer are appropriate and shall issue a ruling which shall include a balance sheet, comprised of the Draft Closing Balance Sheet as adjusted pursuant to any resolutions to objections agreed upon by the Buyer and the Seller and pursuant to the Accountant’s resolution of the Unresolved Objections.  Such balance sheet shall be deemed to be the Final Closing Balance Sheet.

(v)   The resolution by the Accountant of the Unresolved Objections shall be conclusive and binding upon the Buyer and the Seller.  The Buyer and the Seller agree that the procedure set forth in this Section 1.7(b) for resolving disputes with respect to the Draft Closing Balance Sheet shall be the sole and exclusive method for resolving any such disputes; provided that this provision shall not prohibit either Party from instituting litigation to enforce the ruling of the Accountant.

(vi)   The Buyer and the Seller shall each pay one-half of the fees and expenses of the Accountant under this Section 1.7.

(c)   If the Closing Working Capital as shown on the Final Closing Balance Sheet is less than zero, then the Buyer may deduct from the initial Quarterly Earn-Out Payment and, if and to the extent necessary, from each subsequent Quarterly Earn-Out Payment, the entirety of the amount otherwise payable to the Seller until the entire Closing Working Capital Shortfall has been paid in full to the Buyer.  Notwithstanding the foregoing, if the Closing Working Capital Shortfall as shown on the Final Closing Balance Sheet is greater than $500,000, then (i) the Buyer and the Seller shall deliver to the Escrow Agent, within three business days after the date on which the Final Closing Balance Sheet is finally determined pursuant to this Section 1.7, a written notice executed by both parties instructing the Escrow Agent to (A) disburse to the Buyer from the Closing Working Capital Escrow Fund an amount equal to the lesser of (1) the Closing Working Capital Shortfall less $500,000 and (2) the full amount of the Closing Working Capital Escrow Fund, and (B) disburse to the Seller any amount remaining in the Closing Working Capital Escrow Fund, and (ii) the Buyer may deduct the remainder of the Closing Working Capital Shortfall from the Quarterly Earn-Out Payments as set forth in the previous sentence.

(d)   If the Closing Working Capital as shown on the Final Closing Balance Sheet is greater than zero, the Closing Payment shall be increased by such excess amount and the Buyer shall pay to the Seller, by wire transfer of immediately available funds to an account or accounts designated by the Seller, within three business days after the date on which the Final Closing Balance Sheet is finally determined pursuant to this Section 1.7, an amount equal to such excess.

1.8   Earn-Out Consideration .  Subject to Section 1.7(c), the Seller shall be entitled to additional consideration in the form of Earn-Out Consideration as follows:

(a)   Except as provided in Section 1.8(b), for each fiscal quarter commencing on the Closing and ending on December 31, 2013 (the “Earn-Out Period”), the Buyer shall pay to the Seller an amount equal to 20% of the Gross Profit generated by the Earn-Out Contracts during such fiscal quarter, or, with respect to the first such period, the portion of the fiscal quarter after the Closing (each, a “Quarterly Earn-Out Payment”).  The “Gross Profit generated by the Earn-Out Contracts” for any quarter shall be equal to the revenue recognized by the Buyer under the Earn-Out Contracts for that quarter minus the direct costs associated with performing those contracts, without any allocation of indirect costs, all calculated in accordance with GAAP.  For the avoidance of doubt, any references in this Section 1.8 to a “quarter” or “fiscal quarter” shall mean, with respect to the fiscal quarter ending March 31, 2009, only the portion of the fiscal quarter after the Closing.

(b)   Notwithstanding the foregoing, the sum of (i) the aggregate Earn-Out Consideration actually paid to the Seller plus (ii) all amounts deducted from any Quarterly Earn-Out Payments pursuant to Section 1.7(c) (such sum, the “Total Earn-Out Amount”), shall not exceed $2,000,000.  If, for any fiscal quarter during the Earn-Out Period, the Quarterly Earn-Out Payment would cause the Total Earn-Out Amount to exceed $2,000,000, then (A) such Quarterly Earn-Out Payment shall be reduced to an amount that will cause the Total Earn-Out Amount to equal $2,000,000, (B) no further Quarterly Earn-Out Payments shall be made (including without limitation any Quarterly Earn-Out Payments that are then being disputed pursuant to Section 1.8(d)).

(c)   No later than 30 days after the end of each fiscal quarter during the Earn-Out Period (unless pursuant to Section 1.8(b) no further Quarterly Earn-Out Payments shall be made), the Buyer shall at its expense prepare (or cause to be prepared) and deliver to the Seller a calculation of the Gross Profit generated by the Earn-Out Contracts for such fiscal quarter and a statement (each, a “Quarterly Earn-Out Statement”) of the amount, if any, of Quarterly Earn-Out Payment to be delivered to the Seller for such fiscal quarter.  Unless the Seller shall, in accordance with the provisions of subsection (d) below, challenge the Buyer’s determination of the Quarterly Earn-Out Payment for such fiscal quarter within 15 days after the delivery of the Quarterly Earn-Out Statement, the Buyer’s determination shall be conclusive and binding upon the Seller.  During such 15-day period after delivery of the Quarterly Earn-Out Statement, the Buyer shall make its relevant books and records and accounting personnel available to the Seller during normal business hours as reasonably requested by the Seller so as to enable the Seller to assess the data and methodology used in the calculations underlying the Quarterly Earn-Out Statement.

(d)   In the event that the Seller disputes the calculation of the Quarterly Earn-Out Payment for any fiscal quarter (an “Earn-Out Dispute”), the Seller shall notify the Buyer in writing by delivery of a notice (an “Earn-Out Dispute Notice”) within 15 days after delivery of the Quarterly Earn-Out Statement for such fiscal quarter, which Earn-Out Dispute Notice shall set forth in reasonable detail the Seller’s objections to the Quarterly Earn-Out Statement.  If the Seller timely delivers an Earn-Out Dispute Notice, such objections shall be resolved as follows:

(i)   The Buyer and the Seller shall first use reasonable efforts and cooperate in good faith to resolve such objections.

(ii)   If the Buyer and the Seller do not reach a resolution of all objections set forth in the Earn-Out Dispute Notice within 15 days after delivery of such Earn-Out Dispute Notice, the Buyer and the Seller shall, within 10 days following the expiration of such 15-day period, engage the Accountant, pursuant to an engagement agreement executed by the Buyer, the Seller and the Accountant, to resolve any remaining objections set forth in the Earn-Out Dispute Notice (the “Remaining Earn-Out Objections”).

(iii)   The Buyer and the Seller shall jointly submit to the Accountant, within 5 days after the date of the engagement of the Accountant (as evidenced by the date of the engagement agreement), a copy of the Quarterly Earn-Out Statement, a copy of the Earn-Out Dispute Notice delivered by the Seller to the Buyer, and a statement setting forth the resolution of any objections agreed to by the Buyer and the Seller.  Each of the Buyer and the Seller shall submit to the Accountant (with a copy delivered to the other Party on the same day), within 10 days after the date of the engagement of the Accountant, a memorandum (which may include supporting exhibits) setting forth their respective positions on the Remaining Earn-Out Objections.  Each of the Buyer and the Seller may (but shall not be required to) submit to the Accountant (with a copy delivered to the other Party on the same day), within 30 days after the date of the engagement of the Accountant, a memorandum responding to the initial memorandum submitted to the Accountant by the other Party.  Unless requested by the Accountant in writing, neither Party may present any additional information or arguments to the Accountant, either orally or in writing.  In the event that the Accountant makes such request, a Party submitting any written material to the Accountant in response to such request shall deliver

(iv)   Within 45 days after the date of its engagement hereunder, the Accountant shall determine whether the objections raised by the Seller are appropriate and shall issue a ruling which shall include a statement of the Quarterly Earn-Out Payment for such fiscal quarter.

(v)   The resolution by the Accountant of the Remaining Earn-Out Objections shall be conclusive and binding upon the Buyer and the Seller.  The Buyer and the Seller agree that the procedure set forth in this Section 1.8(d) for resolving disputes with respect to the Quarterly Earn-Out Payments shall be the sole and exclusive method for resolving any such disputes; provided that this provision shall not prohibit either Party from instituting litigation to enforce the ruling of the Accountant.

(vi)   The Buyer and the Seller shall each pay one-half of the fees and expenses of the Accountant under this Section 1.8.

(e)   Within 15 days after the earlier of (i) the Seller’s failure to deliver an Earn-Out Dispute Notice with respect to a Quarterly Earn-Out Statement on a timely basis or (ii) the resolution of any Earn-Out Dispute, the Buyer shall pay to the Seller the conclusive and binding Quarterly Earn-Out Payment as determined pursuant to Section 1.8(c) or 1.8(d), as applicable.  Each such Quarterly Earn-Out Payment shall be delivered by wire transfer of immediately available funds to an account or accounts designated in writing by the Seller.

1.9   Use of Closing Payment .  The Seller shall use the Closing Payment to (i) pay off all short- and long-term debt (including capital leases) of the Seller and (ii) pay off all other short- and long-term liabilities of the Seller.  The Seller may distribute any remaining funds as permitted by its governing documents and applicable law.

1.10   Further Assurances .  At any time and from time to time after the Closing, at the request of the Buyer and without further consideration, the Seller shall execute and deliver such other instruments of sale, transfer, conveyance and assignment and take such actions as the Buyer may reasonably request to more effectively transfer, convey and assign to the Buyer, and to confirm the Buyer’s rights to, title in and ownership of, the Acquired Assets and to place the Buyer in actual possession and operating control thereof.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller represents and warrants to the Buyer that, except as set forth in the Disclosure Schedule, the statements contained in this Article II are true and correct as of the date of this Agreement and will be true and correct as of the Closing as though made as of the Closing, 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).  

 

2.1   Organization, Qualification and Corporate Power .  The Seller is a corporation duly organized, validly existing and in corporate and tax good standing under the laws of the State of Oklahoma.  The Seller is duly qualified to conduct business and is in corporate and tax good standing under the laws of each jurisdiction listed in Section 2.1 of the Disclosure Schedule, which jurisdictions constitute the only jurisdictions in which the nature of the Seller’s businesses or the ownership or leasing of its properties requires such qualification except where the failure to be so qualified or in good standing would not, individually or in the aggregate, would not have a Seller Material Adverse Effect.  The Seller 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.  The Seller has furnished to the Buyer complete and accurate copies of its Certificate of Incorporation and by-laws.  The Seller is not in default under or in violation of any provision of its Certificate of Incorporation or by-laws.

2.2   Capitalization .  The authorized capital stock of the Seller consists of (a) 75,000,000 shares of common stock, $0.0007 par value per share, of which, as of the date of this Agreement, 1,800,239 shares were issued and outstanding and 4,000 shares were held in the treasury of the Seller, and (b) 15,000,000 shares of Preferred Stock, $0.0007 par value per share, of which (i) 70,000 shares have been designate as Series A 12% Preferred Stock, of which, as of the date of this Agreement, 58,130 shares were issued and outstanding, and (ii) 40,000 shares have been designated as Series B 16% Preferred Stock, of which, as of the date of this Agreement, 10,000 shares were issued and outstanding. Section 2.2 of the Disclosure Schedule sets forth a complete and accurate list, as of the date of this Agreement, of (i) all stockholders of the Seller, indicating the number and class or series of shares of capital stock of the Seller held by each stockholder and (for shares other than common stock) the number of shares of common stock (if any) into which such shares are convertible, (ii) all outstanding options, warrants or other instruments giving any party the right to acquire any of capital stock of the Seller, indicating (A) the holder thereof, (B) the number and class or series of capital stock of the Seller subject thereto and (for shares other than common stock) the number of shares of common stock (if any) into which such shares are convertible, (C) the exercise price, date of grant, vesting schedule and expiration date for each such option, warrant or other instrument.  There are no outstanding agreements or commitments to which the Seller is a party or which are binding upon the Seller providing for the redemption of any of its capital stock.

2.3   Authorization of Transaction .  The Seller has all requisite power and authority to execute and deliver this Agreement and the Ancillary Agreements and to perform its obligations hereunder and thereunder.  The execution and delivery by the Seller of this Agreement and, subject to obtaining the Requisite Stockholder Approval, which is the only approval required from the Seller’s stockholders, the performance by the Seller of this Agreement and the Ancillary Agreements and the consummation by the Seller of the transactions contemplated

2.4   Noncontravention .  Except as set forth at Section 2.4 of the Disclosure Schedule, neither the execution and delivery by the Seller of this Agreement or the Ancillary Agreements, nor the consummation by the Seller of the transactions contemplated hereby or thereby, will (a) conflict with or violate any provision of the Certificate of Incorporation or by-laws of the Seller, (b) require on the part of the Seller any notice to or filing with, or any permit, authorization, consent or approval of, any Governmental Entity, (c) 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, consent or waiver under, any contract or instrument to which the Seller is a party or by which the Seller is bound or to which any of their respective assets is subject, except for (i) any conflict, breach, default, acceleration, termination, modification or cancellation which, individually or in the aggregate, would not have a Seller Material Adverse Effect and would not adversely affect the consummation of the transactions contemplated hereby or (ii) any notice, consent or waiver the absence of which, individually or in the aggregate, would not have a Seller Material Adverse Effect and would not adversely affect the consummation of the transactions contemplated hereby, (d) result in the imposition of any Security Interest upon any assets of the Seller or (e) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Seller or any of its properties or assets.

2.5   Subsidiaries .  The Seller has no Subsidiaries.

2.6   Financial Statements .  The Seller has provided to the Buyer the Financial Statements.  The Financial Statements (i) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (except as may be indicated in the notes to such Financial Statements) and (ii) fairly present the financial position of the Seller as of the dates thereof and the results of its operations and cash flows for the periods indicated, consistent with the books and records of the Seller, except that the unaudited interim financial statements are subject to normal and recurring year-end adjustments which will not be material in amount or effect and do not include footnotes.

2.7   Absence of Certain Changes .  Since the Most Recent Balance Sheet Date, (a) there has occurred no event or development which, individually or in the aggregate, has had, or would reasonably be expected to have in the future, a Seller Material Adverse Effect, and (b) the Seller has not taken any of the actions set forth in paragraphs (a) through (n) of Section 4.4.

2.8   Undisclosed Liabilities .  The Seller has no liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) liabilities shown on the Most Recent Balance Sheet, (b) liabilities which have arisen since the Most Recent Balance Sheet Date in the Ordinary Course of Business and which are reflected on the Final Closing Balance Sheet and (c) contractual and other liabilities incurred in the Ordinary Course of Business which are not required by GAAP to be reflected on a balance sheet.

2.9   Tax Matters .

(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.  The Seller is not and has never been a member of a group of corporations with which it has filed (or been required to file) consolidated, combined or unitary Tax Returns.   The Seller has paid on a timely basis all Taxes that were due and payable.  The unpaid Taxes of the Seller for Tax periods through the Most Recent Balance Sheet Date 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 and all unpaid Taxes of the Seller for all Tax periods commencing after the Most Recent Balance Sheet Date arose in the Ordinary Course of Business and are of a type and amount commensurate with Taxes attributable to prior similar periods.  The Seller (i) has no actual or potential liability under Treasury Regulations Section 1.1502-6 (or any comparable or similar provision of federal, state, local or foreign law), as a transferee or successor, pursuant to any contractual obligation, or otherwise for any Taxes of any person other than the Seller and (ii) is not a party to or bound by any Tax indemnity, Tax sharing, Tax allocation or similar agreement.  All Taxes that the Seller was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been properly paid to the appropriate Governmental Entity.

(b)   The Seller has delivered or made available to the Buyer (i) complete and correct copies of all Tax Returns of the Seller relating to Taxes for the Seller’s prior three taxable years 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 statute of limitations has not yet expired.  The federal income Tax Returns of the Seller have been audited by the Internal Revenue Service or are closed by the applicable statute of limitations for all taxable years through the taxable year specified in Section 2.9(b) of the Disclosure Schedule.  No examination or audit of any Tax Return of the Seller by any Governmental Entity is currently in progress or, to the knowledge of the Seller, threatened or contemplated.  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.  The Seller has not (x) waived any statute of limitations with respect to Taxes or agreed to extend

(c)   The Seller has not made any payment, is not obligated to make any payment, and is not a party to any agreement that could obligate it to make any payment that may be treated as an “excess parachute payment” under Section 280G of the Code (without regard to Sections 280G(b)(4) and 280G(b)(5) of the Code).

(d)   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, or (iii) directly or indirectly secures any debt the interest on which is tax exempt under Section 103(a) of the Code.

(e)   The Seller does not own any interest in an entity that is characterized as a partnership for federal income Tax purposes.

(f)   Section 2.9(f) of the Disclosure Schedule sets forth each jurisdiction (other than United States federal) in which the Seller files, is required to file or has been required to file a Tax Return or is or has been liable for any 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.

(g)   There are no liens or other 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.

2.10   Ownership and Condition of Assets .

(a)   The Seller is the true and lawful owner and has good title to all of the Acquired Assets, free and clear of all Security Interests, except as set forth in Section 2.10(a)(i) of the Disclosure Schedule.  Upon execution and delivery by the Seller to the Buyer of the instruments of conveyance referred to in Section 1.5(b)(iii), the Buyer will become the true and lawful owner of and will receive good title to the Acquired Assets, free and clear of all Security Interests other than those set forth in Section 2.10(a)(ii) of the Disclosure Schedule.

(b)   The Acquired Assets are sufficient for the conduct of the Seller’s businesses as presently conducted and as presently proposed to be conducted by the Seller and, except as set forth in Section 2.10(b) of the Disclosure Schedule, constitute all assets used by the Seller in such businesses.  Each tangible Acquired Asset is free from material defects, has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear) and is suitable for the purposes for which it presently is used.

(c)   Section 2.10(c) of the Disclosure Schedule lists individually (i) all Acquired Assets which are fixed assets (within the meaning of GAAP), indicating the cost, accumulated book depreciation (if any) and the net book value of each such fixed asset as of the

(d)   Each item of equipment, motor vehicle and other asset that is being transferred to the Buyer as part of the Acquired Assets and 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 other terms of such lease or contract having been satisfied), the obligations of the Seller to such lessor or owner will have been discharged in full.

2.11   Owned Real Property .  The Seller owns no real property.

2.12   Real Property Leases .  Section 2.12 of the Disclosure Schedule lists all Leases.  The Seller has delivered or made available to the Buyer complete and accurate copies of the Leases.  With respect to each Lease:

(a)   such Lease is legal, valid, binding, enforceable, subject to the Enforceability Exception, and in full force and effect;

(b)   such Lease is assignable by the Seller to the Buyer without the consent or approval of any party (except as set forth in Section 2.4 of the Disclosure Schedule) and such Lease will continue to be legal, valid, binding, enforceable, subject to the Enforceability Exception, and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing;

(c)   neither the Seller nor, to the knowledge of the Seller, any other party, 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;

(d)   there are no disputes, oral agreements or forbearance programs in effect as to such Lease;

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

(f)   to the knowledge of the Seller, all facilities leased or subleased thereunder are supplied with utilities and other services adequate for the operation of said facilities; and

(g)   the Seller is not aware of any Security Interest, 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.

2.13   Intellectual Property .

(a)   Seller Registrations .  Section 2.13(a) of the Disclosure Schedule lists (i) all Seller Registrations, in each case enumerating specifically the applicable filing or registration number, title, jurisdiction in which filing was made or from which registration issued, date of filing or issuance, names of all current applicant(s) and registered owners(s), as applicable and (ii) all Unregistered Seller Intellectual Property.  All assignments of Seller Registrations to the Seller have been properly executed and recorded.  To the knowledge of the Seller, all Seller Registrations 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.

(b)   Prosecution Matters .  There are no inventorship challenges, opposition or nullity proceedings or interferences declared, commenced or provoked, or to the knowledge of the Seller threatened, with respect to any Patent Rights included in the Seller Registrations.  The Seller has complied with their duty of candor and disclosure to the United States Patent and Trademark Office and any relevant foreign patent office with respect to all patent and trademark applications filed by or on behalf of the Seller and have made no material misrepresentation in such applications.  The Seller has no knowledge of any information that would preclude the Seller from having clear title to the Seller Registrations or affecting the patentability or enforceability of any Seller Registrations.

(c)   Ownership; Sufficiency .  Each item of Seller Intellectual Property will be owned or available for use by the Buyer immediately following the Closing on substantially identical terms and conditions as it was immediately prior to the Closing.  Except as listed on Section 2.13(c) of the Disclosure Schedule, the Seller is the sole and exclusive owner of all Seller Owned Intellectual Property, free and clear of any Security Interests, and all joint owners of the Seller Owned Intellectual Property are listed in Section 2.13(c) of the Disclosure Schedule.  The Seller Intellectual Property constitutes all Intellectual Property necessary (i) to Exploit the Customer Offerings in the manner so done currently and contemplated to be done in the future by the Seller, (ii) to Exploit the Internal Systems as they are currently used and contemplated to be used in the future by the Seller, and (iii) otherwise to conduct the Seller’s business in all material respects in the manner currently conducted and contemplated to be conducted in the future by the Seller.

(d)   Protection Measures .  The Seller has taken reasonable measures to protect the proprietary nature of each item of Seller Owned Intellectual Property, and to maintain in confidence all trade secrets and confidential information comprising a part thereof.  The Seller has complied with all applicable contractual and legal requirements pertaining to information privacy and security.  No complaint relating to an improper use or disclosure of, or a breach in the security of, any such information has been made or, to the knowledge of the Seller, threatened against the Seller.  To the knowledge of the Seller, there has been no: (i) unauthorized disclosure of any third party proprietary or confidential information in the possession, custody or control of the Seller or (ii) breach of the Seller’s security procedures wherein confidential information has been disclosed to a third person.  The Seller has actively policed the quality of all goods and services sold, distributed or marketed under each of its Trademarks and has enforced adequate quality control measures to ensure that no Trademarks that it has licensed to others shall be deemed to be abandoned.

(e)   Infringement by Seller .  None of the Customer Offerings, or the Exploitation thereof by the Seller or by any reseller, distributor, customer or user thereof, or any other activity of the Seller, infringes or violates, or constitutes a misappropriation of, any Intellectual Property rights of any third party.  None of the Internal Systems, or the Seller’s past, current or currently contemplated Exploitation thereof, or any other activity undertaken by them in connection with their respective businesses, infringes or violates, or constitutes a misappropriation of, any Intellectual Property rights of any third party.  No complaint, claim or notice of any of the foregoing (including any notification that a license under any patent is or may be required) has been made, or, to the knowledge of the Seller, threatened against the Seller, and no request or demand for indemnification or defense has been received by the Seller from any reseller, distributor, customer, user or any other third party; and the Seller has provided to the Buyer copies of all such complaints, claims, notices, requests, demands or threats, as well as any legal opinions, studies, market surveys and analyses relating to any alleged or potential infringement, violation or misappropriation.

(f)   Infringement of Rights .  To the knowledge of the Seller, no person (including, without limitation, any current or former employee or consultant of Seller) is infringing, violating or misappropriating any of the Seller Owned Intellectual Property or any Seller Licensed Intellectual Property which is exclusively licensed to the Seller.  The Seller has provided to the Buyer copies of all correspondence, analyses and legal opinions concerning the infringement, violation or misappropriation of any Seller Owned Intellectual Property, and, to the knowledge of the Seller, no complaints, claims, notices or threats have been made concerning the infringement, violation or misappropriation of any Seller Owned Intellectual Property.

(g)   Outbound IP Agreements .  Section 2.13(g) of the Disclosure Schedule identifies each license, covenant or other agreement pursuant to which the Seller has assigned, transferred, licensed, distributed or otherwise granted any right or access to any person, or covenanted not to assert any right, with respect to any past, existing or future Seller Intellectual Property.  Except for the agreements listed in Section 2.13(g) of the Disclosure Schedule, the Seller has not agreed to indemnify any person against any infringement, violation or misappropriation of any Intellectual Property rights with respect to any Customer Offerings or any third party Intellectual Property rights.  The Seller is not a member of or party to any patent pool, industry standards body, trade association or other organization pursuant to the rules of which it is obligated to license any existing or future Intellectual Property to any person.

(h)   Inbound IP Agreements .  Section 2.13(h) of the Disclosure Schedule identifies (i) each item of Seller Licensed Intellectual Property and the license or agreement pursuant to which the Seller Exploits it (excluding currently-available, off the shelf software programs that are part of the Internal Systems and are licensed by the Seller pursuant to “shrink wrap” licenses, the total fees associated with which are less than $5,000) and (ii) each agreement, contract, assignment or other instrument pursuant to which the Seller has obtained any joint or sole ownership interest in or to each item of Seller Owned Intellectual Property.  No third party inventions, methods, services, materials, processes or Software are included in or required to Exploit the Customer Offerings or Internal Systems.  Other than pursuant to the license agreements listed in Section 2.13(h) of the Disclosure Schedule, none of the Customer Offerings or Internal Systems includes “shareware,” “freeware” or other Software or other material that was obtained by the Seller from third parties  (excluding currently available, off the shelf

(i)   Source Code .  The Seller has not licensed, distributed or disclosed, and knows of no distribution or disclosure by others (including its employees and contractors) of, the Seller Source Code to any person, except pursuant to the agreements listed in Section 2.13(i) of the Disclosure Schedule, and the Seller has taken all reasonable physical and electronic security measures to prevent disclosure of such Seller Source Code.  No event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time, or both) will, or would reasonably be expected to, nor will the consummation of the transactions contemplated hereby, result in the disclosure or release of such Seller Source Code by the Seller or its escrow agent(s) or any other person to any third party.

(j)   Authorship .  Other than as identified in Section 2.13(j) of the Disclosure Schedule and excluding any Software identified in Section 2.13(h) of the Disclosure Schedule and any currently available off the shelf software programs that are licensed by the Seller pursuant to “shrink wrap” or Open Source Materials, the total fees associated with which are less than $5,000, all of the Software and Documentation comprising, incorporated in or bundled with the Customer Offerings or Internal Systems have been designed, authored, tested and debugged by regular employees of the Seller within the scope of their employment or by independent contractors of the Seller who have executed valid and binding agreements expressly assigning all right, title and interest in such copyrightable materials to the Seller, waiving their non-assignable rights (including moral rights) in favor of the Seller and its permitted assigns and licensees, and have no residual claim to such materials.

(k)   Open Source Code .  Section 2.13(k) of the Disclosure Schedule lists all Open Source Materials that the Seller has utilized in any way in the Exploitation of the Customer Offerings or Internal Systems and describes the manner in which such Open Source Materials have been utilized, including, without limitation, whether and how the Open Source Materials have been modified and/or distributed by the Seller.  Except for the agreements listed in Section 2.13(k) of the Disclosure Schedule, the Seller has not (i) incorporated Open Source Materials into, or combined Open Source Materials with, the Customer Offerings; (ii) distributed Open Source Materials in conjunction with any other software developed or distributed by the Seller; or (iii) used Open Source Materials that create, or purport to create, obligations for the Seller with respect to the Customer Offerings or grant, or purport to grant, to any third party, any rights or immunities under Intellectual Property rights (including, but not limited to, using any Open Source Materials that require, as a condition of Exploitation of such Open Source Materials, that other Software incorporated into, derived from or distributed with such Open Source Materials be (x) disclosed or distributed in source code form, (y) licensed for the purpose of making derivative works, or (z) redistributable at no charge or minimal charge).

(l)   Employee and Contractor Assignments .   Each current employee of the Seller and, to the Seller’s knowledge, each past employee of the Seller hired after March 2007 has executed a “receipt and acknowledgment” of the Seller’s “HR Policy Manual” (a copy of which manual the Seller has made available to the Buyer).

(m)   Quality .  The Customer Offerings and the Internal Systems are free from significant defects in design, workmanship and materials and conform in all material respects to the written Documentation and specifications therefor.  The Customer Offerings and the Internal Systems do not contain any disabling device, virus, worm, back door, Trojan horse or other disruptive or malicious code that may or are intended to impair their intended performance or otherwise permit unauthorized access to, hamper, delete or damage any computer system, software, network or data.  The Seller has not received any warranty claims, contractual terminations or requests for settlement or refund due to the failure of the Customer Offerings to meet its specifications or otherwise to satisfy end user needs or for harm or damage to any third party.

(n)   Support and Funding .  The Seller has neither sought, applied for nor received any support, funding, resources or assistance from any federal, state, local or foreign governmental or quasi-governmental agency or funding source in connection with the Exploitation of the Customer Offerings, the Internal Systems or any facilities or equipment used in connection therewith.

2.14   [INTENTIONALLY LEFT BLANK]

2.15   Contracts .

(a)   Section 2.15 of the Disclosure Schedule lists the following agreements (written or oral) to which the Seller is a party as of the date of this Agreement:

(i)   any agreement (or group of related agreements) for the lease of personal property from or to third parties providing for lease payments in excess of $25,000 per annum or having a remaining term longer than twelve months;

(ii)   any agreement (or group of related agreements) for the purchase or sale of products or for the furnishing or receipt of services (A) which calls for performance over a period of more than one year, (B) which involves more than the sum of $25,000, or (C) in which the Seller has granted manufacturing rights, “most favored nation” pricing provisions or marketing or distribution rights relating to any products or territory or has agreed to purchase a minimum quantity of goods or services or has agreed to purchase goods or services exclusively from a certain party;

(iii)   any agreement concerning the establishment or operation of a partnership, joint venture or limited liability company;

(iv)   any agreement (or group of related agreements) under which it has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness (including capitalized lease obligations) involving more than $25,000 or under which it has imposed (or may impose) a Security Interest on any of its assets, tangible or intangible;

(v)   any agreement for the disposition of any significant portion of the assets or business of the Seller (other than sales of products in the Ordinary Course of Business)

(vi)   any agreement concerning exclusivity or confidentiality;

(vii)   any employment or consulting agreement;

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

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

(x)   any agreement which contains any provisions requiring the Seller to indemnify any other party (excluding indemnities contained in agreements for the purchase, sale or license of products entered into in the Ordinary Course of Business);

(xi)   any agreement that could reasonably be expected to have the effect of prohibiting or impairing the conduct of the business of the Seller or any of its subsidiaries as currently conducted and as currently proposed to be conducted by the Seller;

(xii)   any agreement under which the Seller is restricted from selling, licensing or otherwise distributing any of its technology or products, or providing services to, customers or potential customers or any class of customers, in any geographic area, during any period of time or any segment of the market or line of business;

(xiii)   any agreement which would entitle any third party to receive a license or any other right to Intellectual Property of the Buyer or any of the Buyer’s Affiliates following the Closing; and

(xiv)   any other agreement (or group of related agreements) either involving more than $25,000 or not entered into in the Ordinary Course of Business.

(b)   The Seller has delivered or made available to the Buyer a complete and accurate copy of each agreement listed in Section 2.13 or Section 2.15 of the Disclosure Schedule.  With respect to each agreement so listed:  (i) the agreement is legal, valid, binding and enforceable subject to the Enforceability Exception and in full force and effect; (ii) for those agreements to which the Seller is a party, the agreement is assignable by the Seller to the Buyer without the consent or approval of any party (except as set forth in Section 2.4 of the Disclosure Schedule) and will continue to be legal, valid, binding and enforceable subject to the Enforceability Exception and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing; and (iii) neither the Seller nor, to the knowledge of the Seller, any other party, is in breach or violation of, or default under, any 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 by the Seller or, to the knowledge of the Seller, any other party under such agreement.

2.16   Accounts Receivable .  All accounts receivable of the Seller reflected on the Most Recent Balance Sheet (other than those paid since such date) are valid receivables subject to no setoffs or counterclaims and are current and collectible (within 90 days after the date on which it first became due and payable), net of the applicable reserve for bad debts on the Most Recent Balance Sheet.  A complete and accurate list of the accounts receivable reflected on the Most Recent Balance Sheet, showing the aging thereof, is included in Section 2.16 of the Disclosure Schedule.  All accounts receivable of the Seller that have arisen since the Most Recent Balance Sheet Date are valid receivables subject to no setoffs or counterclaims and are collectible (within 90 days after the date on which it first became due and payable), net of a reserve for bad debts in an amount proportionate to the reserve shown on the Most Recent Balance Sheet.  The Seller has not received any written notice from an account debtor stating that any account receivable in an amount in excess of $5,000 is subject to any contest, claim or setoff by such account debtor.

2.17   Powers of Attorney .  There are no outstanding powers of attorney executed on behalf of the Seller.

2.18   Insurance .  Section 2.18 of the Disclosure Schedule lists each insurance policy (including fire, theft, casualty, comprehensive general liability, workers compensation, business interruption, environmental, 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.  There is no material claim pending under any such policy as to which coverage has been questioned, denied or disputed by the underwriter of such policy.  All premiums due and payable under all such policies have been paid and the Seller is otherwise in compliance in all material respects with the terms of such policies.

 

2.19   Litigation .  There is no Legal Proceeding which is pending or, to the knowledge of the Seller, has been threatened in writing against the Seller which (a) seeks either damages in excess of $1,000 or equitable relief or (b) in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement.  There are no judgments, orders or decrees outstanding against the Seller.

 

2.20   Warranties .  No product or service manufactured, sold, leased, licensed or delivered by the Seller is subject to any guaranty, warranty, right of return, right of credit or other indemnity other than (i) the applicable standard terms and conditions of sale or lease of the Seller, which are set forth in Section 2.20 of the Disclosure Schedule, and (ii) manufacturers’ warranties for which the Seller has no liability.  Section 2.20 of the Disclosure Schedule sets forth the aggregate expenses incurred by the Seller in fulfilling its obligations under its guaranty, warranty, right of return and indemnity provisions during each of the fiscal years and the interim period covered by the Financial Statements; and the Seller does not know of any reason why such expenses should significantly increase as a percentage of sales in the future.

 

2.21   Employees .

 

(a)   Section 2.21 of the Disclosure Schedule contains a list of all employees of the Seller, along with the position and the annual rate of compensation of each such person.  No employee of the Seller has executed a non-competition agreement with the Seller.  Section 2.21 of the Disclosure Schedule contains a list of all employees of the Seller who are not citizens of

 

(b)   The Seller is not a party to or bound by any collective bargaining agreement, nor has any of them experienced any strikes, grievances, claims of unfair labor practices or other collective bargaining disputes.  The Seller has no knowledge of any organizational effort made or threatened, either currently or within the past two years, by or on behalf of any labor union with respect to employees of the Seller.

 

2.22   Employee Benefits .

 

(a)   Section 2.22(a) of the Disclosure Schedule contains a complete and accurate list of all Seller Plans.  Complete and accurate copies of (i) all Seller Plans which have been reduced to writing, (ii) written summaries of all unwritten Seller Plans, (iii) all related trust agreements, insurance contracts and summary plan descriptions, and (iv) all annual reports filed on IRS Form 5500, 5500C or 5500R and (for all funded plans) all plan financial statements for the last five plan years for each Seller Plan, have been delivered to the Buyer.

 

(b)   Each Seller Plan has been administered in all material respects in accordance with its terms and each of the Seller and the ERISA Affiliates has in all material respects met its obligations with respect to each Seller Plan and has made all required contributions thereto.  The Seller, each ERISA Affiliate and each Seller Plan are in compliance in all material respects with the currently applicable provisions of ERISA and the Code and the regulations thereunder (including Section 4980 B of the Code, Subtitle K, Chapter 100 of the Code and Sections 601 through 608 and Section 701 et seq. of ERISA).  All filings and reports as to each Seller Plan required to have been submitted to the Internal Revenue Service or to the United States Department of Labor have been duly submitted.  No Seller Plan has assets that include securities issued by the Seller or any ERISA Affiliate.

 

(c)   There are no Legal Proceedings (except claims for benefits payable in the normal operation of the Seller Plans and proceedings with respect to qualified domestic relations orders) against or involving any Seller Plan or asserting any rights or claims to benefits under any Seller Plan that could give rise to any material liability.

 

(d)   All the Seller Plans that are intended to be qualified under Section 401(a) of the Code have received determination letters from the Internal Revenue Service or is maintained pursuant to a prototype plan that has received an opinion letter from the Internal Revenue Service issued in conjunction with the prototype plan, in each case to the effect that such Seller Plans are qualified and the plans and the trusts related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, no such determination letter has been revoked and revocation has not been threatened, and no such Seller Plan has been amended since the date of its most recent determination letter or application therefor in any respect, and no act or omission has occurred, that would adversely affect its qualification or materially increase its cost.  Each Seller Plan which is required to satisfy Section

 

(e)   Neither the Seller nor any ERISA Affiliate has ever maintained an Employee Benefit Plan subject to Section 412 of the Code or Title IV of ERISA.

 

(f)   At no time has the Seller or any ERISA Affiliate been obligated to contribute to any “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA).

 

(g)   There are no unfunded obligations under any Seller Plan providing benefits after termination of employment to any employee of the Seller (or to any beneficiary of any such employee), including but not limited to retiree health coverage and deferred compensation, but excluding continuation of health coverage required to be continued under Section 4980B of the Code or other applicable law and insurance conversion privileges under state law.  The assets of each Seller Plan which is funded are reported at their fair market value on the books and records of such Seller Plan.

 

(h)   No act or omission has occurred and no condition exists with respect to any Seller Plan that would subject the Seller or any ERISA Affiliate to (i) any material fine, penalty, tax or liability of any kind imposed under ERISA or the Code or (ii) any contractual indemnification or contribution obligation protecting any fiduciary, insurer or service provider with respect to any Seller Plan.

 

(i)   No Seller Plan is funded by, associated with or related to a “voluntary employee’s beneficiary association” within the meaning of Section 501(c)(9) of the Code.

 

(j)   Each Seller Plan is amendable and terminable unilaterally by the Seller at any time without liability or expense to the Seller or such Seller Plan as a result thereof (other than for benefits accrued through the date of termination or amendment and reasonable administrative expenses related thereto) and no Seller Plan, plan documentation or agreement, summary plan description or other written communication distributed generally to employees by its terms prohibits the Seller from amending or terminating any such Seller Plan.

 

(k)   Section 2.22(k) of the Disclosure Schedule discloses each: (i) agreement with any stockholder, director, executive officer or Transferring Employee of the Seller (A) the benefits of which are contingent, or the terms of which are altered, upon the occurrence of a transaction involving the Seller of the nature of any of the transactions contemplated by this Agreement, (B) providing any term of employment or compensation guarantee or (C) providing severance benefits or other benefits after the termination of employment of such director, executive officer or Transferring Employee; (ii) agreement, plan or arrangement under which any person may receive payments from the Seller that may be subject to the tax imposed by Section 4999 of the Code or included in the determination of such person’s “parachute payment” under Section 280G of the Code; and (iii) agreement or plan binding the Seller, including any stock option plan, stock appreciation right plan, restricted stock plan, stock purchase plan, severance benefit plan or Seller Plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions

 

(l)   Section 2.22(l) of the Disclosure Schedule sets forth the policy of the Seller with respect to accrued vacation, accrued sick time and earned time off and the amount of such liabilities as of January 3, 2009.

 

(m)   Each Seller Plan that is a “nonqualified deferred compensation plan” (as defined in Code Section 409A(d)(1)) has been operated since January 1, 2005 in good faith compliance with Code Section 409A and IRS Notice 2005-1.  No Seller Plan that is a “nonqualified deferred compensation plan” has been materially modified (as determined under Notice 2005-1) after October 3, 2004.  No event has occurred that would be treated by Code Section 409A(b) as a transfer of property for purposes of Code Section 83.  No stock option or equity unit option granted under any Seller Plan has an exercise price that has been or may be less than the fair market value of the underlying stock or equity units (as the case may be) as of the date such option was granted or has any feature for the deferral of compensation other than the deferral of recognition of income until the later of exercise or disposition of such option.

 

2.23   Environmental Matters .

 

(a)   The Seller has complied with all applicable Environmental Laws.  There is no pending or, to the knowledge of the Seller, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation, inquiry or information request by any Governmental Entity, relating to any Environmental Law involving the Seller.

 

(b)   The Seller has no liabilities or obligations arising from the release of any Materials of Environmental Concern into the environment.

 

(c)   The Seller is not a party to or bound by any court order, administrative order, consent order or other agreement with any Governmental Entity entered into in connection with any legal obligation or liability arising under any Environmental Law.

 

(d)   Set forth in Section 2.23(d) of the Disclosure Schedule is a list of all documents (whether in hard copy or electronic form) that contain any environmental reports, investigations and audits relating to premises currently or previously owned or operated by the Seller (whether conducted by or on behalf of the Seller or a third party, and whether done at the initiative of the Seller or directed by a Governmental Entity or other third party) which were issued or conducted during the past five years and which the Seller (i) has possession of or (ii) has knowledge of and access to.  A complete and accurate copy of each such document has been provided to the Buyer.

 

(e)   The Seller is not aware of any material environmental liability of any solid or hazardous waste transporter or treatment, storage or disposal facility that has been used by the Seller.

 

2.24   Legal Compliance .  The Seller is currently conducting, and has at all times since January 1, 2004 conducted, its business in material compliance with each applicable law (including rules and regulations thereunder) of any federal, state, local or foreign government, or

 

2.25   Customers and Suppliers .  Section 2.25 of the Disclosure Schedule sets forth a list of (a) each customer of the Seller during the last full fiscal year or the interim period through the Most Recent Balance Sheet Date and the amount of revenues accounted for by such customer during each such period and (b) each supplier that of any product or service to the Seller.  To the Seller’s knowledge, no such customer or supplier has indicated within the year prior to the date of this Agreement that it will stop, or decrease the rate of, buying products or services or supplying products or services, as applicable, to the Seller.  No unfilled customer order or commitment obligating the Seller to process, manufacture or deliver products or perform services will result in a loss to the Seller upon completion of performance.

 

2.26   Permits .  Section 2.26 of the Disclosure Schedule sets forth a list of all material Permits issued to or held by or required to be obtained for the operation of the Seller’s business by the Seller.  Such listed Permits are the only Permits that are required for the Seller to conduct its business as presently conducted or as proposed to be conducted by the Seller, except for those the absence of which, individually or in the aggr