Asset Purchase Agreement

This Asset Purchase Agreement is entered into as of April 30, 2007 (the “Agreement Date” ) among Accurel Systems International Corporation, a California corporation (the “ Seller ”); Implant Sciences Corporation, a Massachusetts corporation (the “ Guarantor ”) and Evans Analytical Group LLC, a Delaware limited liability company (the “Buyer” ). Capitalized terms used but not otherwise defined in the body of this Agreement are defined in Appendix A .

The Seller desires to sell substantially all of the Assets of the Seller to the Buyer on the terms set forth in this Agreement.

The Buyer desires to purchase substantially all of the Assets of the Seller on the terms set forth in this Agreement.

The Seller, the Guarantor and the Buyer, intending to be legally bound, agree as follows:

1.1    Purchased Assets. Subject to the terms and conditions set forth in this Agreement, and in reliance upon the representations, warranties, covenants and agreements of the Parties herein, at the Closing, the Seller will sell, assign, transfer, convey and deliver to the Buyer, and the Buyer shall purchase and acquire from the Seller, good and valid title to the following, free of any Encumbrances, except Permitted Encumbrances:

(a)    Seller Intellectual Property. All the Seller Owned Intellectual Property and all Intellectual Property Rights related thereto, and the Seller’s Intellectual Property Rights in and to the Third-Person Intellectual Property, including the Intellectual Property listed in Schedule 1.1(a) ;

(b)    Computer and Office Equipment. All of the Seller’s computer and office equipment, including the equipment listed in Schedule 1.1(b) ;

(c)    Laboratory Equipment. All of the Seller’s laboratory equipment, and all of Seller’s components and spare parts for laboratory equipment, including the equipment listed on Schedule 1.1(c) ;

(d)    General Equipment and Supplies. Any service equipment, telephones, pagers, computer peripherals, supplies, spare parts and other tangible personal property owned by the Seller;

(e)    Assumed Contracts. All of the Seller’s rights, claims and obligations under the Seller Contracts listed in Schedule 1.1(e) ), except as contemplated by Section 1.3(b)(xii) (the “ Assumed Contracts ”) and any cash deposits relating to the Assumed Contracts;

(f)    Promotional Materials. All brochures, pamphlets, stationery, letterhead and other promotional or marketing materials (including all copies thereof) related to the Business or the Trademarks;

(g)    Business Records. All Books and Records related to, necessary or useful for the conduct of the Business which shall not include the Corporate Documents; provided, that the Seller may retain copies of all such Books and Records;

(h)    Goodwill. The goodwill related to, or arising out of, the Business;

(i)    Governmental Authorizations. All rights of the Seller in or related to Governmental Authorizations necessary or useful for the conduct of the Business;

(j)    Claims; Credits. All claims, causes of action, rights of recovery and rights of setoff against, and deposits, prepayments and credits with, third Persons (including insurance companies), and all rights under or pursuant to all warranties, representations and guarantees made by third Persons related to the ownership, development or Use of any Asset or the conduct of the Business, including those items listed on Schedule 1.1(j) ;

(k)    Accounts Receivable. The accounts receivable recorded on the books of the Seller as of the Closing Date;

(l)    Inventory. All of the Seller’s raw materials, work in progress, finished products, supply and packaging items and similar items with respect to the Business, in each case wherever the same may be located;

(m)    Fixtures and Leasehold Improvements. All of Seller’s fixtures and leasehold improvements and all of Seller’s right, title and interest in fixtures and leasehold improvements in Seller’s leased facilities; and

(n)    Other Property. Except as provided in Section 1.2, all other Property of the Seller, whether or not described elsewhere in this Section 1.1 or similar thereto.

Subject to the exclusion of the Excluded Assets, the Property set forth in Sections 1.1(a) through (l) is referred to in this Agreement as the “Assets.”

1.2    Excluded Assets. Notwithstanding anything in Section 1.1, the Assets shall not include any of the following:

(a)    Tax Items. Any income tax deposits held as current assets on the balance sheet as of the Closing Date, prepayment, refund, claim, offset or other right of the Seller related to any Tax arising or resulting from or in connection with the ownership of the Assets or operation of the Business and attributable to any Taxable period ending on or prior to the Closing Date or, in the case of any Taxable period which includes but does not end on the Closing Date, the portion of such Taxable period up to and including the Closing Date;

(b)    Nontransferable Governmental Authorizations. Any Governmental Authorization the transfer of which would violate applicable Legal Requirements;

(c)    Rights Under Certain Agreements. All rights of the Seller under this Agreement (including any rights of the Seller relating to the Excluded Assets and the right to receive the purchase price hereunder), all rights of the Seller under any agreement, certificate, instrument or other document executed and delivered by the Seller and the Buyer in connection with the transactions contemplated hereby, or any other agreement between the Seller and the Buyer entered into during the Pre-Closing Period;

(d)    Corporate Documents. Corporate seals, certificates of incorporation, minute books, stock transfer books or other records related to the corporate organization of the Seller (the “Corporate Documents” ); and

(e)    Correspondence. All rights to receive mail and other communications addressed to the Seller that are not related to any of the Assets or the Business or the Assumed Liabilities.

(f)    Deposit Accounts; Cash; Accounts Receivable. Any balances in any deposit accounts, and any cash, cash equivalents, and marketable securities held by the Seller as of the Closing Date, excluding any cash deposits relating to the Assumed Contracts;

The Property listed in this Section 1.2 is referred to in this Agreement as the “Excluded Assets.”

1.3    Liabilities.  

(a)    Assumed Liabilities. Subject to the terms and conditions set forth in this Agreement, at the Closing, the Buyer shall assume the following Liabilities of the Seller (collectively, the “Assumed Liabilities” ) by executing and delivering to the Seller the Assignment and Assumption Agreement:

(i)    Assumed Contracts. The obligations of the Seller under the Assumed Contracts; and

(ii)    Trade Accounts Payable. The obligations of the Seller for trade accounts payable incurred in the Ordinary Course of Business on or prior to the Closing Date that are set forth on Schedule 2.7(b).

(b)    Excluded Liabilities. Notwithstanding the foregoing, and notwithstanding anything to the contrary contained in this Agreement, the Buyer shall not assume any Liabilities other than the Assumed Liabilities (collectively, the “Excluded Liabilities” ). Without limiting the generality of the foregoing, the Assumed Liabilities shall not include, and the Buyer shall not be required to assume or to otherwise perform or discharge, the following Excluded Liabilities whether arising prior to, at or after the Closing Date:

(i)    any Liability of the Guarantor or any Person other than the Seller;

(ii)    any Liability of the Seller arising out of or relating to the execution, delivery or performance of any of the Transaction Agreements;

(iii)    any Liability of the Seller for any fees, costs or expenses of the type referred to in Section 8.2;

(iv)    except for Assumed Liabilities under the Assumed Contracts, any Liability arising from or relating to any action taken by the Seller or its agents, or any failure on the part of the Seller or its agents to take any action, at any time, whether prior to, at or after the Closing Date;

(v)    except for Assumed Liabilities under the Assumed Contracts, any Liability arising from or relating to the Business or any services performed for any Person by or on behalf of the Seller on or prior to the Closing Date;

(vi)    except for Assumed Liabilities under the Assumed Contracts, any Liability as successor-in-interest to the Seller or under any rule or principle of successor liability, continuity of enterprise, de facto merger, mere continuation or similar rule or principle;

(vii)    any Liability under the Sunnyvale Lease (including all associated payments, obligations and taxes related to the facility subject to the Sunnyvale Lease), and any Liability relating to or in connection with the Sunnyvale Lease, other than any Liability arising from or relating to the performance and obligations of Buyer under the Sunnyvale Sublease;

(viii)    any Liability of the Seller related to any Proceeding against the Seller;

(ix)    any Tax or Liability of the Seller for the payment of any Tax;

(x)    any Liability of the Seller to or on account of any Employee or former employee of the Seller under or with respect to employment, including any Liability relating to any Benefit Plan, or wages or commissions, accrued vacation days or sick days or other paid time off, and any Liability for severance payments or other obligations to or on account of Employees;

(xi)    any Liability of the Seller to the Guarantor or any other Related Party, Representative or Affiliate of the Seller, including any Intercompany Transactions and any payables due to the Guarantor, and including the Liabilities listed on Schedule 1.3(b)(xi) ;

(xii)    any Liability of the Seller under any Seller Contract, if (A) the Seller shall not have obtained, prior to the Closing, any Consent required to be obtained from any Person with respect to the assignment or delegation to the Buyer of any rights or obligations under such Seller Contract and (B) such Seller Contract would have been an Assumed Contract but for the Seller’s failure to obtain such Consent;

(xiii)    any Liability of the Seller under any Assumed Contract to the extent such Liability (A) was required to be performed by the Seller before the Closing Date in accordance with the terms of any Assumed Contracts, unless there exist accounts payable collected by the Buyer, or (B) arises from or relates to any Breach by the Seller of any provision of any Assumed Contracts;

(xiv)    any bank or other debt, loans or guarantee obligations of the Seller including, without limitation, any capitalized leases, loans from the Guarantor, bank lines of credit, equipment installment notes or other notes payable (other than those Assumed Liabilities under any Assumed Contracts listed in Schedule 1.1(e) );

(xv)    any lease obligations, including vehicle, office and equipment leases (other than those Assumed Liabilities under any Assumed Contracts listed in Schedule 1.1(e) );

(xvi)    any Liability of the Seller that arises or exists by virtue of any Breach of (A) any representation or warranty made by the Seller or the Guarantor in any of the Transaction Agreements, or (B) any covenant or obligation of the Seller or the Guarantor contained in any of the Transaction Agreements;

(xvii)    any Liability of the Seller arising out of or relating to the Seller Intellectual Property and the Intellectual Property Rights thereto, other than obligations of the Seller arising after the Closing (A) under inbound and outbound licenses for Intellectual Property that are Assumed Contracts listed in Schedule 1.1(e) or (B) described in Section 1.3(a)(ii);

(xviii)    any Payable of the Seller that remains unpaid as of the Closing, except those described in Section 1.3(a)(ii);

(xix)    any indemnity obligation of the Seller to any Person (other than indemnity obligations that are Assumed Liabilities under any Assumed Contracts listed in Schedule 1.1(e) );

(xx)    any Liability of the Seller or any Related Party that directly or indirectly arises from or relates to the presence of any Hazardous Material at any site owned, leased, occupied or controlled by the Seller on or at any time prior to the Closing or the generation, manufacture, production, transportation, importation, use, treatment, refinement, processing, handling, storage, discharge, Environmental Release or disposal of any Hazardous Material (whether lawfully or unlawfully) by or on behalf of the Seller prior to Closing; or

(xxi)    any Liability of the Seller that is not referred to specifically in Section 1.3(a).

1.4    Purchase Price. The consideration to be paid by the Buyer to the Seller at the Closing in connection with the Transactions shall be equal to Twelve Million Eight Hundred Eighty Thousand Eight Hundred Ninety-Four Dollars ($12,880,894.00) minus Net Debt (the “ Total Net Consideration ”) payable as follows:

(a)    The Buyer shall pay to the Seller on the Closing Date an amount equal to the Total Net Consideration minus One Million Dollars ($1,000,000.00) (the “ Closing Payment ”);

(b)    The Buyer shall deposit One Million Dollars ($1,000,000.00) with the Escrow Agent pursuant to the terms of the Escrow Agreement, attached hereto as Exhibit E , to secure the indemnification obligations of the Seller and the Guarantor pursuant to this Agreement.

1.5    Closing. The consummation of the purchase and sale of the Assets, the assignment of the rights under the Assumed Contracts and the assumption of the Assumed Liabilities contemplated by this Agreement (the “Closing” ) shall occur on the Agreement Date or as soon as practicable thereafter, provided that all conditions to the Closing set forth in Sections 4 and 5 have been satisfied or waived in writing by the Party entitled to waive such conditions. The Closing shall be effected by: (a) the delivery of those signature pages, certificates, documents and opinions that are required to be delivered pursuant to Sections 4 and 5 to the respective recipients set forth in Sections 4 and 5 via personal delivery or facsimile or electronic image transmission; and (b) the transmission of a wire transfer to the accounts of the Seller in an aggregate amount equal to the Closing Payment.

1.6    Sales and Other Taxes.

(a)    The Seller shall (i) bear and pay all Taxes (including without limitation any sales taxes, use taxes, transfer taxes, income or franchise taxes on capital gain or depreciation recapture, documentary charges, recording fees or similar taxes) and all charges, fees or expenses similar to or in the nature of taxes, that may become payable in connection with the sale of the Assets to the Buyer or in connection with any pre-Closing distributions to the Guarantor; and (ii) file all necessary Tax Returns and other documentation with respect to such taxes; provided , however, that, if required by any Legal Requirement, the Buyer shall join in the execution of any such Tax Returns and other documentation. No execution of any Tax Returns by the Buyer shall be deemed to create any Liability of the Buyer to the Seller or any other Person or shall affect the indemnification by the Seller and Guarantor under Section 6.2.

(b)    Seller shall be responsible for and shall pay any and all Taxes arising or resulting from or in connection with the ownership of the Assets or operation of the Business attributable to any Taxable period ending on the Closing Date or, in the case of any Taxable period which includes but does not end on the Closing Date, the portion of such Taxable period up to and including the Closing Date. The Buyer shall be responsible for and shall pay any and all Taxes arising or resulting from or in connection with the ownership or use of the Assets or operation of the Business by the Buyer attributable to any Taxable period beginning after the Closing Date or, in the case of any Taxable period which includes but does not end on the Closing Date, the portion of such Taxable period beginning on the day after the Closing Date. Any and all other Taxes due pursuant to the Transaction contemplated hereby, including any and all transfer taxes, sales taxes, bulk transfer taxes, share transfer taxes, taxes related to excess depreciation re-capture, and/or taxes resulting from the structure of this Transaction shall be borne by Seller and any associated legal and other expenses incurred by Seller shall be borne by Seller.

(a)    The consideration referred to in Section 1.4 (and any other amount required for federal income Tax purposes to be included in the determination of the Purchase Price) is to be allocated among the Assets (the “Allocation” ) in a manner consistent with Schedule 1.7 . All fixed assets shall be valued at fair market value, such value to be determined, if necessary, through an independent appraisal at the expense of the Buyer. Further, for the purpose of determining the value of the fixed assets, buyer and Seller will agree to a valuation based on a “free standing” versus a “transfer in place” value for similar used fixed assets, to the extent consistent with applicable income Tax regulations.

(b)    The Seller and the Buyer will cooperate in preparing and filing with the Internal Revenue Service their respective IRS Forms 8594. No Party shall take a position on any Tax Return (including IRS Form 8594), before any Tax authority or in any Proceeding that is in any manner inconsistent with the allocation set forth in Schedule 1.7 without the prior written consent of the Buyer or the Seller, as the case may be, or unless specifically required pursuant to a determination by an applicable Tax authority. Each Party shall promptly advise the Buyer or the Seller, as the case may be, of the existence of any Tax audit, controversy or Proceeding related to the allocation of the Purchase Price among the Assets.

1.8    Confirmation of Net Debt. As soon as reasonably practicable after the Closing, but in any event not later than fifteen (15) business days thereafter, the Buyer and the Seller shall use commercially reasonable efforts to confirm the Net Debt set forth in Schedule 2.7(c) as of the Closing. If either the Buyer or the Seller determines that the Net Debt amounts set forth in Schedule 2.7(c) were incorrect, such Party shall recalculate the Total Net Consideration using the corrected Net Debt and provide notice thereof to the other Party. If the Buyer and the Seller are unable to resolve any disputed amounts within ten (10) business days after delivery of such notice to the Seller, then the disputed amounts shall be submitted to arbitration in accordance with Section 6.2. Upon final determination of the Total Net Consideration, the Buyer shall promptly pay to the Seller any excess of the final Total Net Consideration over the Total Net Consideration determined as of the Closing, or the Seller shall promptly pay to the Buyer any excess of the Total Net Consideration determined as of the Closing over the final Total Net Consideration.

2.    Representations and Warranties of the Seller. The Seller and Guarantor jointly and severally represent and warrant to and for the benefit of the Buyer Indemnitees, as follows, except as set forth in the Disclosure Schedule; provided, that a particular representation or warranty shall be deemed to be qualified by a particular item of disclosure only if, and to the extent that, the disclosure is set forth in the Schedule having the number corresponding to the particular Section in this Section 2 that contains the representation or warranty being qualified (all such Schedules having a number corresponding to any Section in this Section 2 shall be referred to collectively as the “Disclosure Schedule” and all references to Schedules in this Section 2 shall be deemed references to Schedules in the Disclosure Schedule).

2.1    Due Organization; No Subsidiaries; Etc. The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has full power and authority under applicable Legal Requirements to own, lease and operate its Property and to carry on the Business. The Seller is duly qualified and is authorized to do business and is in good standing as a foreign corporation under the laws of each of the jurisdictions listed in Schedule 2.1 .

2.2    Articles of Incorporation and Bylaws; Records. The Seller has delivered to the Buyer accurate and complete copies of the following, each as in effect as of the Agreement Date: (i) the Articles of Incorporation and Bylaws of the Seller, including all amendments thereto (collectively, the “Charter Documents” ); and (ii) the portion of the minutes and other records of meetings and actions taken by written consent without a meeting, of the Guarantor, the Seller Board and all committees of the Seller Board (collectively, the “Seller   Minutes” ) directly relating to the Transaction.

2.3    Authority; Binding Nature of Agreements. The Seller has the absolute and unrestricted right, power and authority to enter into and to perform its obligations under each of the Transaction Agreements to which it is or may become a party and the other agreements, certificates and instruments to be executed by Seller pursuant to this Agreement and to consummate the Transactions. The execution, delivery and performance by the Seller of the Transaction Agreements to which it is or may become a party have been duly authorized by all necessary action on behalf of the Seller, the Seller Board and the Guarantor. This Agreement has been, and each other Transaction Agreement to which the Seller is a party will be, duly executed and delivered by or on behalf of the Seller. This Agreement constitutes the legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) laws relating to the availability of specific performance, injunctive relief, or other equitable remedies (collectively, the “Enforceability Limitations” ). Upon the execution and delivery at the Closing of each of the Transaction Agreements to which the Seller will be a party, each of such Transaction Agreements to which the Seller will be a party will constitute the legal, valid and binding obligation of the Seller and will be enforceable against the Seller in accordance with its terms, except as may be limited by the Enforceability Limitations.

2.4    Non-Contravention. Subject to the receipt of the consents and approvals set forth on Schedule 2.5 , the execution and delivery of any of the Transaction Agreements to which the Seller is or will be a party by the Seller, the consummation of the Transactions and the performance of any Transaction Agreement to which the Seller is or will be a party will not directly or indirectly, with or without notice or lapse of time:

(a)    contravene, conflict with or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which the Seller or any Property of the Seller is subject;

(b)    contravene, conflict with or violate any provision of the Charter Documents;

(c)    contravene, conflict with or violate any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by the Seller or, to the Seller’s Knowledge, any Employee;

(d)    contravene, conflict with or result in a Breach of any provision of any Seller Contract, except as set forth on Schedule 2.4(d) ;

(e)    give any Person the right to (i) declare a default or exercise any remedy under any Seller Contract, (ii) accelerate the maturity or performance of any Seller Contract, or (iii) cancel, terminate or modify any Seller Contract, except as set forth on Schedule 2.4(e) ;

(f)    result in the imposition or creation of any Encumbrance upon any of the assets of the Seller, except as set forth on Schedule 2.4(f) .

2.5    Consents. Except as set forth in Schedule   2.5 , the Seller was not, is not and will not be required to make any filing with or give any notice to, or to obtain any Consent from, any Person in connection with (a) the execution and delivery of any of the Transaction Agreements to which the Seller is or will be a party, (b) the consummation of any of the Transactions or (c) the performance of any of the Transactions. 

2.6    Capitalization.  All of the issued and outstanding Stock is held of record and owned by the Guarantor. No action has been taken by the Guarantor, the Seller or the Seller Board to authorize or issue any other Stock. No action has been taken by the Guarantor, the Seller or the Seller Board to authorize or issue any Stock Right.

2.7    Financial Statements.  

(a)    Financial Statements. The following financial statements are attached to this Agreement as Exhibit A (collectively, the “Financial Statements” ): (a) the unaudited balance sheets of the Seller as of June 30, 2005 and June 30, 2006, and the related statements of income for the years then ended, together with all the notes thereto, and (b) the unaudited balance sheet of the Seller as of March 31, 2007 (the “Most Recent Balance Sheet” ), and the related statements of income for the period then ended, together with all notes thereto. The Financial Statements are accurate and complete in all material respects, have been prepared in accordance with GAAP consistently applied throughout the periods covered and present fairly the financial position of the Seller as of the respective dates thereof and the results of operations of the Seller for the periods covered thereby.

(b)    Accounts Receivable and Accounts Payable. The accounts receivable and accounts payable of the Seller as of the Closing Date are listed on the attached Schedule 2.7(b) . All such accounts receivable and accounts payable are reflected properly on the Seller’s books and records and are bona fide, valid receivables or payables representing amounts due or payable with respect to actual transactions in the Ordinary Course of Business. To the Knowledge of the Seller none of such receivables are subject to valid counterclaims or setoffs, other than refunds, waivers, discounts or write-offs of customer receivables in the Ordinary Course of Business which have not exceeded $25,000 in the aggregate since July 1, 2006.

(c)    Net Debt.   Schedule 2.7(c) sets forth true, correct and complete statements of (a) all Seller accounts payable that, as of the Closing, are more than 30 days past their due dates, and (d) all Transaction expenses of the Seller or the Guarantor payable by the Buyer after the Closing.

2.8    Liabilities.

(a)    The Seller does not have any Liabilities of any nature and there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against the Company giving rise to a Liability, other than (i) Liabilities as and to the extent specifically set forth on the Most Recent Balance Sheet, (ii) Liabilities set forth in Schedule 2.8(a) , and (iii) Liabilities that have been incurred by the Seller in bona fide transactions entered into in the Ordinary Course of Business after the date of the Most Recent Balance Sheet in amounts consistent with past practice none of which is in excess of $25,000 (individually, or collectively for any group of related transactions) and none of which result from, arise out of, relate to, are in the nature of, or were caused by any breach of contract, breach of warranty, tort, infringement or violation of any Legal Requirement.

(b)    Schedule 2.8(b ) provides an accurate and complete breakdown of (i) the aging of the accounts payable of the Seller as of the Closing Date; (ii) any customer deposits or other deposits held by the Seller as of the Closing Date; (iii) all notes payable and other indebtedness of the Seller as of the Closing Date (the “Payables” ).

(c)    Since March 9, 2005, the Seller has not (i) made a general assignment for the benefit of creditors, (ii) filed, or had filed against it, any bankruptcy petition or similar filing, (iii) suffered the attachment or other judicial seizure of all or a substantial portion of its Property, (iv) admitted in writing its inability to pay its debts as they become due, (v) been convicted of, or pleaded guilty or no contest to, any felony, or (vi) taken or been the subject of any Proceeding that may have an adverse effect on its ability to comply with or perform any of its covenants or obligations under any of the Transaction Agreements to which the Seller is or will be a party, except as set forth on Schedule 2.8(c) .

(d)    Except as set forth on Schedule 2.8(d) , since March 9, 2005, the Seller has not guaranteed or otherwise agreed to cause, insure or become liable for, and the Seller has never pledged any of its Property to secure, the performance or payment of any Liability of any other Person.

(e)    There are no Encumbrances on any of the assets of the Seller, other than Permitted Encumbrances.

2.9    Absence of Changes. Since the date of the Most Recent Balance Sheet:

(a)    No Material Adverse Effect has occurred, and no Prior Event has occurred that could reasonably be expected to have a Material Adverse Effect;

(b)    There has been no damage, destruction or loss affecting the Property of the Seller, or any interruption in the use thereof, whether or not covered by insurance;

(c)    The Seller has not entered into any lease of or license for any Property from any Person, other than in the Ordinary Course of Business or pursuant to Seller Contracts listed in Schedule 2.13(a)(ii) ;

(d)    The Seller has not sold or otherwise transferred, or entered into any lease of any Property to any Person, other than in the Ordinary Course of Business or pursuant to Seller Contracts listed in Schedule 2.13(b ) ;

(e)    The Seller has not written off as uncollectible, or established any extraordinary reserve with respect to, any account receivable or other indebtedness to the Seller, except as set forth on Schedule 2.9(e) ;

(f)    The Seller has not (i) established or adopted any Benefit Plan, or (ii) paid any bonus or made any profit-sharing or similar payment to, or increased the amount of the wages, salary, commissions, fees, fringe benefits or other compensation or remuneration payable to, any of its directors, officers, Employees or independent contractors or any other Person;

(g)    No Contract by which the Seller or any Property owned or used by the Seller is or was bound, or under which the Seller has or had any rights or interest, has been amended or terminated;

(h)    The Seller has not incurred, assumed or otherwise become subject to, any Liability, other than accounts payable that are of the type that would be reflected as current Liabilities in a balance sheet prepared in accordance with GAAP and that were incurred by the Seller in bona fide transactions entered into in the Ordinary Course of Business in amounts consistent with past practices;

(i)    The Seller has not discharged any Encumbrance or discharged or paid any indebtedness or other Liability, other than accounts payable that (i) are reflected as current Liabilities in the Most Recent Balance Sheet or have been incurred by the Seller in bona fide transactions entered into in the Ordinary Course of Business in amounts that are consistent with past practice and are not material, and (ii) have been discharged or paid in the Ordinary Course of Business;

(j)    The Seller has not forgiven any debt or otherwise released or waived any right or claim;

(k)    The Seller has not changed any of its methods of accounting or accounting practices in any respect;

(l)    The Seller has not suffered any adverse change or any threat of an adverse change in its relations with, or any loss or threat of loss of, any of its material vendors, clients, customers or distributors;

(m)    The Seller has not failed to pay or discharge when due any Liabilities;

(n)    The Seller has not instituted, settled or agreed to settle any Proceeding;

(o)    The Seller has not granted or suffered the imposition of any Encumbrances on any of its Property, other than Permitted Encumbrances;

(p)    The Seller has not entered into any transaction outside the Ordinary Course of Business, except as set forth in the Transaction Agreements; and

(q)    The Seller has not agreed, committed or offered, in writing or otherwise, to take any of the actions referred to in clauses (c) through (p) above.

2.10    Tangible Property.   Schedule 2.10 accurately identifies all equipment, materials, prototypes, tools, supplies, vehicles, furniture, fixtures, improvements and other tangible Property owned or leased by the Seller with an individual book value of greater than $5,000 . Each item of Property identified or required to be identified in Schedule 2.10 , other than equipment identified on Schedule 2.10 as being in storage or held on consignment for sale: (i) is free of defects and deficiencies and in good condition and repair, ordinary wear and tear excepted; and (ii) complies in all respects with, and is being operated and otherwise used in full compliance with, all applicable Legal Requirements. Other than equipment identified on Schedule 2.10 as being in storage or held on consignment for sale [or relating to third party servicing], each item of equipment listed on Schedule 1.1(c) that is also identified on Schedule 2.10 is performing at or above the standards communicated to Seller’s customers for the tests for which such equipment is used.   Schedule 2.10 identifies all Seller Contracts pursuant to which any tangible Property is leased to the Seller.

2.11    Title to Assets.  The Seller owns and has good and valid title to all of the Assets, free of any Encumbrance other than Encumbrances set forth on Schedule 2.11 , including all rights of the Seller under the Assumed Contracts. The Assets collectively constitute, as of the Closing, all of the Property necessary to enable the Buyer to conduct the Business.

2.12    Real Property. Since March 9, 2005, the Seller has not owned any real property or any interest in real property, except for (a) the leaseholds created under real property leases that have expired or been terminated and (b) under the real property leases identified in Schedule 2.12 . The Seller enjoys peaceful and undisturbed possession of the real property that it leases.

2.13    Intellectual Property.

(a)    As of Closing Date, Seller exclusively owns, or is authorized to Use, legally enforceable Intellectual Property Rights in and to all Seller Intellectual Property.

(i)    Schedule 2.13(a)(i) hereto sets forth all United States and foreign: (i) patents and patent applications, (ii) registered or applied for trademarks, trade names, brand names and corporate names, and service marks, (iii) Internet domain name registrations and applications and (iv) copyright registrations and applications owned or licensed by Seller in each case described in clauses (i) through (iv), that are material to the operations of the Business as presently conducted, specifying as to each item, as applicable: (A) the title of the item; (B) the jurisdictions in which the item is issued or registered or in which an application for issuance or registration has been filed; and (C) the issuance, registration or application numbers and dates.

(ii)    Schedule 2.13(a)(ii) hereto sets forth all material licenses, sublicenses and other agreements or permissions under which the Seller is a licensor or licensee or otherwise is authorized to use or practice any Intellectual Property. Seller has provided to Buyer a true and complete copy of all such licenses, sublicenses and other agreements or permissions listed on Schedule 2.13(a)(ii) .

(iii)    Schedule 2.13(a)(iii) hereto sets forth and describes the status of any material agreements involving Intellectual Property currently in negotiation or proposed by the Seller.

(b)    Except as set forth on Schedule 2.13(b) hereto, the Seller owns, free and clear of all Liens other than Permitted Encumbrances or has the right to use all Intellectual Property used in the Business or that is necessary for the operation of the Business.

(c)    Except as set forth on Schedule 2.13(c) hereto, the Seller has not been, during the three years preceding the date of this Agreement, a party to any Claim, nor, to the Knowledge of the Seller, is any Claim threatened in writing, that challenges the validity, enforceability, ownership or right to use, sell or license any Intellectual Property, except for Claims that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. To the Knowledge of the Seller, no third party is infringing upon any Intellectual Property except for infringements that, individually or in the aggregate, and could not reasonably be expected to have a Material Adverse Effect.

(d)    Since March 9, 2005, the Seller has taken all reasonable precautions to protect the secrecy, confidentiality, and value of its trade secrets and the proprietary nature and value of the technology included in the Intellectual Property, except for failures to take such precautions that, individually or in the aggregate, have not resulted and could not reasonably be expected to have a Material Adverse Effect. To the Seller’s Knowledge, prior to March 9, 2005 the Seller has taken all reasonable precautions to protect the secrecy, confidentiality, and value of its trade secrets and the proprietary nature and value of the technology included in the Intellectual Property, except for failures to take such precautions that, individually or in the aggregate, have not resulted and could not reasonably be expected to have a Material Adverse Effect.

(e)    The Seller is not, and, as a result of the execution and delivery of this Agreement or its performance of its obligations hereunder, will not be, in violation of any agreement relating to any Intellectual Property used in the Business, except for violation that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. After the completion of the transactions contemplated by this Agreement, the Buyer will own all right, title and interest in and to or have a license to use all Intellectual Property used in the Business, except for failures to own or have available for use that, individually or in the aggregate, have not resulted and could not reasonably be expected to result in a Material Adverse Effect.

2.14    Contracts.

(a)    Schedule 2.14 identifies, with reasonable specificity, each material Seller Contract. Each Seller Contract is valid and in full force and effect. Schedule 2.14 also identifies and provides an accurate description of each proposed Contract as to which any current bid, offer, written proposal, term sheet or similar document has been submitted or received by the Seller in writing.

(b)    The Seller has not Breached any Seller Contract, other than a Breach that could not reasonably be expected to have a Material Adverse Effect on Buyer or such Seller Contract. To the Seller’s Knowledge, no other Person has Breached any Seller Contract. The Seller has not waived any Breach of any Seller Contract by another party thereto, and no other party to any Seller Contract has waived any Breach of any Seller Contract by the Seller. Since March 9, 2005, no Prior Event has occurred that might, with or without notice or lapse of time, (i) result in a Breach of any Seller Contract by the Seller or, to the Seller’s Knowledge, any other Person, or (ii) give the Seller or, to the Seller’s Knowledge, any other Person the right to (A) exercise any remedy under any Seller Contract, (B) claim or receive a material refund, rebate, chargeback or penalty under any Seller Contract, (C) accelerate the maturity or performance of any Seller Contract, or (D) cancel, terminate or modify any Seller Contract. The Seller has not received any notice or other communication, in writing or otherwise, regarding any actual, alleged, possible or potential material Breach of any Seller Contract by the Seller or any other Person, other than a Breach that could not reasonably be expected to have a Material Adverse Effect on Buyer or such Seller Contract.

(c)    The performance of the Seller Contracts by the Seller in accordance with the express terms thereof does not and will not result in any violation of or failure to comply with any Legal Requirement.

(d)    Neither the Seller nor any other Person is currently renegotiating any amount paid or payable to or by the Seller under any Seller Contract or any other term or provision of any Seller Contract.

(e)    The Seller has no Knowledge of any objection by any party to any Seller Contract, or any reasonable basis therefor, to the performance of such Seller Contract by the Buyer or any Affiliate thereof or the assignment to the Buyer or any Affiliate thereof of any right under such Seller Contract.

2.15    Customers.   Schedule 2.15 accurately identifies, and provides an accurate and complete breakdown of the revenues received from, each customer of the Seller for the fiscal year beginning July 1, 2005 and ending June 30, 2006 and for the first nine (9) months of the fiscal year ending June 30, 2007, in excess of $5,000. Except as set forth on Schedule 2.15 , the Seller has not received any notice or other communication, in writing or otherwise, or other information, indicating that any customer may cease dealing with the Seller or might otherwise reduce the volume of business transacted by such customer with the Seller.

(a)    The Seller is and at all times has been in full compliance with each Legal Requirement that is applicable to it or to the conduct of its Business or the ownership or use of any of its Property and for which the consequences of noncompliance could reasonably be expected to have a Material Adverse Effect.

(b)    No event has occurred, and no condition or circumstance exists, that might, with or without notice or lapse of time, constitute or result directly or indirectly in a violation by the Seller of, or a failure on the part of the Seller to comply with, any applicable Legal Requirement, the consequences of which could reasonably be expected to have a Material Adverse Effect.

(c)    The Seller has not received any notice from any Governmental Body or any other Person regarding any actual, alleged, possible or potential violation of, or failure to comply with, any Legal Requirement. To the Seller’s Knowledge, no Governmental Body has proposed or is considering any Legal Requirement that does not apply similarly to the business of the Buyer that, if adopted or otherwise put into effect, (i) could reasonably be expected to have a Material Adverse Effect or adversely affect the ability of the Seller to comply with or perform any covenant or obligation under any of the Transaction Agreements to which it is or will be a party, or (ii) could reasonably be expected to prevent, delay, make illegal or interfere with any of the Transactions.  

2.17    Governmental Authorizations.   Schedule 2.17 identifies each Governmental Authorization that is held by the Seller and each currently pending application by Seller for a Governmental Authorization other than those the lack of which could not be reasonably expected to have a Material Adverse Effect. The Seller has delivered to the Buyer accurate and complete copies of all of the Governmental Authorizations identified in Schedules 2.17 , including all renewals thereof and all amendments thereto. Other than pending applications, each Governmental Authorization identified or required to be identified in Schedules 2.17 (each a “Seller Governmental Authorization” ) is valid and in full force and effect.

(a)    Since March 9, 2005, the Seller is and has been in full compliance with all of the terms and requirements of each Seller Governmental Authorization, and to the Seller’s Knowledge the Seller has been in full compliance with all of the terms and requirements of each Seller Governmental Authorization prior to March 9, 2005, except to the extent that noncompliance could not be reasonably expected to have a Material Adverse Effect. To the Seller’s Knowledge, no event has occurred, and no condition or circumstance exists, that might, with or without notice or lapse of time, (i) constitute or result directly or indirectly in a violation of or a failure to comply with any term or requirement of any Seller Governmental Authorization, or (ii) result directly or indirectly in the revocation, withdrawal, suspension, cancellation, termination or modification of any Seller Governmental Authorization.

(b)    Since March 9, 2005, the Seller has not received any notice or other communication, in writing or otherwise, from any Governmental Body or any other Person regarding (i) any actual, alleged, possible or potential violation of or failure to comply with any term or requirement of any Seller Governmental Authorization, (ii) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination or modification of any Seller Governmental Authorization, or (iii) the Seller’s failure to obtain any necessary Governmental Authorization, and to the Seller’s Knowledge the Seller has not received any such notice or other communication prior to March 9, 2005.

(c)    All applications required to have been filed for the renewal of the Seller Governmental Authorizations have been duly filed on a timely basis with the appropriate Governmental Bodies, and each other notice or filing required to have been given or made with respect to such Seller Governmental Authorizations has been duly given or made on a timely basis with the appropriate Governmental Body.

(d)    The Seller Governmental Authorizations constitute all of the Governmental Authorizations necessary (i) to enable the Seller to conduct the Business as it is currently conducted, and (ii) to permit the Seller to own and use its Property in the manner in which they are currently owned and used, in each case other than those the lack of which could not be reasonably expected to have a Material Adverse Effect.

(a)    Since March 9, 2005, each Tax required to have been paid, or claimed by any Governmental Body to be payable, by the Seller has been duly paid in full on a timely basis. Since March 9, 2005, any Tax required to have been withheld or collected by the Seller has been duly withheld and collected, and each such Tax has been duly and timely paid to the appropriate Governmental Body or the amount of each such Tax has been properly set aside in accounts for such purpose and will be duly and timely paid to the appropriate Governmental Body. Other than Taxes incurred in the ordinary course of business, the Seller has no liability for unpaid Taxes accruing after the date of the Most Recent Balance Sheet.

(b)    Schedule 2.18(b) accurately identifies each examination or audit of any Tax Return of the Seller since March 9, 2005 that has been conducted or is currently being conducted by a Governmental Body. The Seller has delivered to the Buyer accurate and complete copies of all audit reports and similar documents relating to such Tax Returns.

(c)    The Seller has not requested nor granted any currently effective waiver or extension of any statute of limitations with respect to the assessment or filing of any Tax or Tax Return with respect thereto.

(d)    No claim or other Proceeding is pending or, to the Seller’s Knowledge, has been Threatened against the Seller in respect of any Tax. The Seller has no unsatisfied Liabilities for Taxes. The Seller has not received any notice of deficiency or similar document, other than deficiencies that have been fully paid and satisfied.

(e)    The Seller has no Liability for the Taxes of any other Person (i) under Treasury Regulation Section 1.1502-6 (or any similar Legal Requirement), except with respect to the Seller Group, (ii) as a transferee or successor, (iii) by Contract or (iv) otherwise.

(g)    No Taxing authority has raised any issue with respect to Taxes which, by application of similar principles, could result in the issuance of a notice of deficiency or similar notice of intention to assess Taxes by any taxing authority to Seller.

2.19    Employee and Labor Matters.

(a)    Schedule 2.19(a) accurately sets forth, with respect to each current employee of the Seller, including any employee who is on a leave of absence (each an “ Employee ” ): (i) the name and title of such Employee; (ii) the annualized salary and the bonus received by such Employee from the Seller with respect to services performed in the calendar year 2006; (iii) the nation(s) of which such Employee is a citizen; and (iv) if such Employee is not a US citizen, such Employee’s immigration or residency status and to the Knowledge of the Seller the status of any pending applications for any visa, residency permit or similar Governmental Authorization for such Employee.

(b)    Schedule 2.19(b) accurately identifies each former employee of the Seller or spouse or other dependent of such former employee who is receiving or is scheduled to receive any benefits from the Seller relating to such former employee’s employment with the Seller, and accurately describes such benefits.

(c)    Except as set forth on Schedule 2.19(c) , the employment of each Employee is terminable by the Seller at will, and no Employee is entitled to severance pay or other benefits following termination or resignation or upon the execution and delivery of this Agreement or the consummation of any of the Transactions.

(d)    Seller has not received any notice that an Employee intends to terminate his employment prior to the Closing, or that an Employee has received an offer to join a business other than Buyer that competes with the Business. To the Knowledge of Seller, no Employee is a party to or is bound by any confidentiality agreement, non-competition agreement or other Contract that may have an adverse effect on (A) the performance by such Employee of any of his duties or responsibilities as an Employee of the Seller or (B) the Business.

(e)    Since March 9, 2005, the Seller is not engaged in any unfair labor practice of any nature, and to the Seller’s Knowledge the Seller has not engaged in any unfair labor practice or any nature prior to March 9, 2005. Since March 9, 2005, there has not been any slowdown, work stoppage, labor dispute or union organizing activity, or any similar activity or dispute, affecting the Seller or any of its Employees, and, to the Seller’s Knowledge, no Person has threatened to commence any such slowdown, work stoppage, labor dispute or union organizing activity or any similar activity or dispute. The Seller is not a party to or bound by, and has not been a party to or bound by, any union Contract, collective bargaining agreement or similar Contract.

(f)    Schedule 2.19(f) sets forth the name of each independent contractor or consultant to whom the Seller has made or owes any payment of any nature in fiscal years 2005 and 2006 and the first nine (9) months of fiscal year 2007, and in the case of payments owed, shows detail regarding such payment including due date, basis for payment, recurrence and necessary withholdings, if any.

(g)    None of the current officers, directors or, to the Seller’s Knowledge, Employees of the Seller have been convicted of, or pleaded guilty or no contest to, any felony.

2.20    Benefit Plans; ERISA.

(a)    Schedule 2.20 lists all Benefit Plans currently maintained by the Seller. The Seller has, with respect to each such plan, delivered to the Buyer true and complete copies of all plan texts and agreements and related trust agreements, insurance policies and service provider agreements.

(b)    With respect to each Benefit Plan, to the Seller’s Knowledge, no event has occurred, and there exists no condition or set of circumstances in connection with which the Seller could, directly or indirectly, be subject to any Liability under ERISA, the Code or any other applicable law, except Liability for benefits claims and funding obligations payable in the Ordinary Course of Business.

(c)    No prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code, or breach of fiduciary duty under Title I of ERISA has occurred with respect to any Benefit Plan or with respect to the Seller.

(d)    The Seller and each Affiliate of the Seller have made all payments due from them to date with respect to each Benefit Plan.

(e)    Since March 9, 2005, the Seller has not effectuated (i) a “plant closing” or partial “plant closing” (as defined in the federal Worker Adjustment and Retraining Notification Act (the “WARN Act” ) or any similar Legal Requirement) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Seller, (ii) a “mass layoff” (as defined in the WARN Act or any similar Legal Requirement) affecting any site of employment or facility of the Seller, or (iii) a “mass layoff” or “relocation” or “termination” at any “covered establishment” (as defined in California Labor Code Sections 1400 through 1408) of the Seller.

2.21    Environmental Matters.  The Seller’s operation of the Business is, and has been at all times since March 9, 2005, in compliance with all Environmental Laws, Environmental Permit requirements, Use restrictions, and waste control requirements. The Seller has obtained all Environmental Permits necessary to conduct the Business, and all such Environmental Permits are currently in effect. Schedule 2.21 sets forth a list of all Hazardous Materials used by the