STOCK PURCHASE AGREEMENT

STOCK PURCHASE AGREEMENT

between

BLUE EARTH SOLUTIONS, INC.,

DATAMEG CORPORATION,

and

AMERICAN MARKETING & SALES, INC.

Dated as of March 17, 2009

STOCK PURCHASE AGREEMENT

STOCK PURCHASE AGREEMENT, dated as of March 17, 2009 (the “Agreement”), between Blue Earth Solutions, Inc., a Nevada corporation (“Buyer”), Datameg Corporation, a Delaware corporation (“Seller”) and American Marketing & Sales, Inc., a Massachusetts corporation (the “Company”).

W I T N E S S E T H :

WHEREAS, Seller owns Five Thousand (5,000) shares of common stock, without par value, of the Company, constituting all issued and outstanding shares of the Company (such shares being referred to herein as the “Stock”);

WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, the Stock on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, the Board of Directors of each of Seller and Buyer has approved the sale and purchase of the Stock (the “Purchase”); and

WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition to Buyer’s willingness to enter into this Agreement, Leonard J. Tocci, Lynel J. Tocci, Leanne J. Whitney, and Linnea J. Clary. Leonard J. Tocci (the “Principal Stockholders”) will enter into an note assumption agreement with the Parties hereto, substantially in the form attached hereto as Exhibit 1 (the “Assumption Agreement”), pursuant to which, among other things, the Principal Stockholders consent  to Buyer’s assumption of the Seller’s Purchase Money Note (Exhibit A to the Assumption Agreement), approving this Agreement and the transactions contemplated hereby (including the Purchase), upon the terms and subject to the conditions set forth in the Principal Stockholders’ Agreement.

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement, and intending to be legally bound hereby and thereby, the parties hereto agree as follows:

 

ARTICLE I

THE PURCHASE; CERTAIN RELATED MATTERS

1.1. The Purchase . Subject to the satisfaction or waiver of the conditions set forth in this Agreement, at the Closing (as defined below) and as of the Closing Date (as defined below), Seller shall sell to Buyer and Buyer shall purchase from Seller, the Stock.

1.2. Purchase Price . The purchase price for the Stock (the “Purchase Price”) shall be an amount equal to One Million of Buyer’s common stock, unregistered but entitled to piggy-back registration. The Purchase Price shall be delivered to Seller at the Closing.

1.3. Closing . Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to Section 9.2, and subject to the satisfaction or waiver of the conditions set forth in Article V hereof, the closing of the Purchase (the “Closing”) will take place at 9:00 a.m. on the second Business Day following the satisfaction or waiver of each of the conditions set forth in Article V (the “Closing Date”), at the offices of the Company, unless another date, time or place is agreed to in writing by the parties hereto. The Closing shall be deemed effective as of 12:01 a.m., Eastern Standard Time, on the Closing Date.

1.4. Closing Deliveries .

(a) At the Closing, Buyer shall deliver to Seller:

(i) One Million of Buyer’s common stock, unregistered but entitled to piggy-back registration;

(ii) the documents described in Sections 5.3(c), (d) and (e); and

(iii) such other documents and instruments as counsel for Seller shall reasonably request to consummate the transactions described herein.

(b) At the Closing, Seller shall deliver to Buyer:

(i) stock certificate(s) evidencing the Stock duly endorsed in blank, or accompanied by stock powers duly executed in blank, for transfer to Buyer, together with any required deed or stock transfer stamps;

(ii) the documents described in Sections 5.2(c), (d) and (e);

(iii) an executed receipt for the Closing Date Cash Amount less the sum of (A) the Environmental Offset Amount, if any and (B) the Escrow Amount, if any;

(iv) a good standing certificate for the Company issued by the Secretary of State of its state of incorporation and of such other applicable jurisdictions where the Company is qualified to do business, dated as of a date within twenty (20) days of the Closing Date;

 

(v) a bring-down good standing certificate for the Company, dated as of the Closing Date, issued by the Secretary of State of its state of incorporation;

(vi) a certificate signed by the Seller of its non-foreign status pursuant to Section 1.1445-2(b)(2) of the Treasury Regulations;

(vii) such other documents and instruments as counsel for Buyer shall reasonably request to consummate the transactions described herein.

(viii) Fifty Million unregistered Datameg common shares issued to Buyer in consideration of Buyer’s assumption of the Note.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Buyer as of the date hereof and as of the Closing Date as follows:

2.1. Due Organization .

(a) Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Seller has all requisite power and authority to enter into this Agreement and to perform its obligations hereunder.

(b) The Company is duly incorporated, validly existing and in good standing under the laws of the State of Massachusetts. The Company has all requisite power and authority to enter into this Agreement and to perform its obligations hereunder. The Company (i) has all requisite power and authority to own, lease and operate its properties and assets and to carry on its business as it is now being conducted, and (ii) is in good standing and is duly qualified to transact business in each jurisdiction in which its ownership or leasing of property or assets or its conduct of business would require such qualification, except where the failure to so qualify is not and would not be reasonably likely to, individually or in the aggregate, have a Material Adverse Effect. Set forth on Schedule 2.1(b) are the jurisdictions in which the Company is qualified to transact business.

2.2. Authorization and Validity of Agreement . The execution, delivery and performance by Seller of this Agreement and the other Transactions Documents and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of Seller, and no other action on the part of Seller is necessary for the execution, delivery and performance by Seller of this Agreement or the other Transaction Documents and the consummation by it of the transactions contemplated hereby and thereby, subject to the approval of this Agreement by the Required Seller Stockholders (as defined below). This Agreement has been duly executed and delivered by Seller and this Agreement is, and, when executed and delivered, each of the other Transaction Documents will be, a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except to the extent that its enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting creditors’ rights generally and by general equity principles.

 

2.3. Subsidiaries . Except as set forth on Schedule 2.3, the Company does not own or control, directly or indirectly, or have any direct or indirect equity participation in, any corporation, partnership, limited liability company, trust, joint venture or other business association.

2.4. No Conflict . Except as set forth on Schedule 2.4, except as specifically contemplated in this Agreement (including, without limitation, with respect to the approval of the Required Seller Stockholders), the execution, delivery and performance by Seller of this Agreement and the other Transaction Documents and the consummation by it of the transactions contemplated hereby and thereby: (a) do not and will not violate, in any material respect, any Law or Order applicable to Seller or the Company; (b) do not and will not require any (i) consent or approval of, or (ii) material filing with or notice to, any Governmental Authority under any Law applicable to Seller or the Company, except for any consent, approval, filing or notice requirements which become applicable solely as a result of the specific regulatory status of Buyer or its affiliates or which Buyer or its affiliates are otherwise required to obtain; (c) do not and will not violate any provision of the organizational documents of Seller or the Company; (d) do not and will not, in any material respect, violate, breach, conflict with, or result in the termination of, or constitute a default under, or result in the loss of material rights of the Company under, or result in the acceleration of the performance by the Company under, any Material Contract (as defined below); and (e) do not and will not require the authorization or order of, registration, declaration or filing with, or notice to, any Governmental Authority or other Person with respect to Seller or the Company in connection with the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, except for such filings as may be required under the HSR Act.

2.5. Capitalization; Ownership of Stock .

(a) The authorized capital stock of the Company consists of 5,000 shares of common stock, without par value, all of which are outstanding as of the date hereof. Seller is and will be on the Closing Date the record and beneficial owner of the Stock. Seller holds the Stock free and clear of all Liens. All of the Stock has been duly authorized and validly issued and is fully paid and nonassessable and was issued in compliance with applicable laws. Upon the transfer of the Stock to Buyer on the Closing Date in accordance with Section 1.1, Buyer will receive good and marketable title to the Stock, free and clear of all Liens.

 

(b) There are no (i) outstanding options, warrants or other rights of any kind relating to the sale, issuance or voting of any shares of capital stock of any class of, or other ownership interests in, the Company which have been issued, granted or entered into by the Company or any securities convertible into or evidencing the right to purchase any shares of capital stock of any class of, or other ownership interests in, the Company; (ii) shares of capital stock of the Company reserved for any purpose; (iii) preemptive or similar rights with respect to the issuance, sale or other transfer (whether present, past or future) of capital stock of the Company; or (iv) agreements or other obligations (contingent or otherwise) which may require the Company to repurchase or otherwise acquire any shares of its capital stock.

 

2.6. Financial Statements . Schedule 2.6 contains a copy of (a) the audited balance sheet of the Company as of December 31, 2008, and the related statement of operations and cash flows for the year ended December 31, 2008 (together with the notes thereto, the “Audited Financial Statements”), and (b) the unaudited balance sheet of the Company as of and for the quarter ended March 31, 2009, and the related statement of operations and cash flows as of and for the same period (the “Most Recent Financial Statements,” and together with the Audited Financial Statements, the “Financial Statements”). The Financial Statements have been prepared in accordance with generally accepted accounting principles as applied in the United States on a consistent basis (“GAAP”), except as may be indicated in the notes thereto. The Financial Statements present fairly in all material respects the financial condition and results of operations of the Company as of the dates and for the periods stated therein, subject in the case of the Most Recent Financial Statements to the absence of notes and normal year-end adjustments not inconsistent with prior practice.

2.7. Absence of Material Adverse Change . Except as expressly contemplated hereby and except as set forth on Schedule 2.7, since the Most Recent Financial Statements, the Company has conducted its business in the ordinary course of business consistent with past practice, and the Company has not:

(a) redeemed or purchased, directly or indirectly, any Stock or declared, set aside or paid any dividends or distributions with respect to any Stock or any other security issued by it;

(b) split, combined, altered any term of or reclassified the Stock, or issued, sold or transferred any of its equity securities, securities convertible into its equity securities or warrants, options or other rights to acquire its equity securities, or any bonds or other securities issued by it;

(c) incurred any Indebtedness or become liable as a guarantor for any amount in excess of $100,000 in the aggregate, except for Current Liabilities incurred in the ordinary course of business consistent with past practice;

(d) discharged or satisfied any lien or encumbrance in excess of $100,000, other than in the ordinary course of business consistent with past practice;

 

(e) mortgaged, pledged or subjected to any Lien any of its properties or assets, except (i) Liens securing obligations of less than $100,000 and (ii) Liens for current property taxes or assessments not yet due and payable with respect to which the Company maintains adequate reserves;

 

(f) sold, leased, assigned or transferred any of its properties or assets or canceled without reasonable consideration any Indebtedness owing to or held by it, in each case except in the ordinary course of business consistent with past practice;

(g) made or granted any bonus or any wage or salary increase to any current or former employee or group of employees, directors, leased employees, contractors or consultants (other than in the ordinary course of business in accordance with past practice, or as required pursuant to the terms of any existing Company Benefit Plans or any existing Collective Bargaining Agreement) or made or granted any increase in any employee benefit plan or arrangement, or amended or terminated any existing employee benefit plan or arrangement or adopted any new employee benefit plan or arrangement (other than as contemplated hereby, as required pursuant to the terms of any existing Collective Bargaining Agreement or as required by applicable law) or entered into, modified or supplemented any employment, severance, Collective Bargaining Agreement or termination agreement;

(h) made capital expenditures or commitments therefor that aggregate in excess of $100,000;

(i) made any loans or advances to, or guarantees for the benefit of, any Person, including its affiliates (other than loans or advances made to employees in the ordinary course of business consistent with past practice);

(j) entered into or materially modified any Material Contracts or waived any material rights or obligations thereunder, except in the ordinary course of business consistent with past practice;

(k) entered into any other transaction or agreement requiring the Company to make aggregate payments in excess of $100,000, other than in the ordinary course of business consistent with past practice;

(l) amended or modified any of its organizational documents;

(m) suffered any material damage, destruction or loss with respect to any of its properties or assets, whether or not covered by insurance;

(n) made any material changes in accounting practices;

(o) made any material Tax election, changed its method of Tax accounting in any material respect or settled any material claim for Taxes;

(p) experienced any labor dispute;

 

(q) suffered any change that has had or would reasonably be expected to have a Material Adverse Effect; or

(r) agreed or entered into any arrangement to do any of the foregoing.

2.8. Absence of Undisclosed Liabilities . Except as set forth on Schedule 2.8, the Company has no obligations, liabilities or commitments of any nature whatsoever, asserted or unasserted, known or unknown, accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due and regardless of when or by whom asserted, which would be required to be set forth on a balance sheet prepared in accordance with GAAP, except (a) liabilities incurred in the ordinary course of business consistent with past practice, (b) liabilities reflected on the Financial Statements and the notes thereto (to the extent not heretofore extinguished), (c) liabilities which in the aggregate are not material in amount, (d) obligations and liabilities incurred at the request or with the consent of Buyer.

2.9. Real Property .

(a) The Company owns no real property.

(b) Schedule 2.9 lists all real property leased by the Company as of the date hereof (the “Real Property”). The Real Property includes all interests in real property used in the conduct of business and operations of the Company as currently conducted. Seller has made available to Buyer a true and complete copy of every lease and sublease (if applicable) pursuant to which the Company is a party or by which it is bound, a list of which is set forth on Schedule 2.9 (each a “Lease”). Except as disclosed on Schedule 2.9: (i) such Lease is in full force and effect, and the Company holds a valid and existing leasehold interest under each Lease, free and clear of all Liens other than Permitted Liens; (ii) neither the Company nor, to the knowledge of Seller, any other party to such Lease, is in breach or default, and no event has occurred which, with notice or lapse of time or both, would constitute such a breach or default or permit termination, modification or acceleration, under such Lease; and (iii) such Lease will continue to be binding in accordance with its terms following the Closing, except as may result from actions that may be taken by Buyer or its affiliates following the Closing. Except as set forth on Schedule 2.9: (A) the other parties to the Leases are not an affiliate of, and otherwise do not have any economic interest in, Seller or the Company; (B) the transactions contemplated by this Agreement do not require the consent of or notice to any other party to the Leases, will not result in a breach or default under the Leases, will not give rise to any recapture or similar rights, and will not otherwise cause any of the Leases not to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Closing; (C) no security deposit or portion thereof deposited with respect to any Lease has been applied in respect of a breach or default under any Lease which has not been redeposited in full; (D) none of the Leases contain any unsatisfied capital expenditure requirements or repair obligations of Seller or the Company other than ordinary maintenance and repair obligations; (E) none of the Leases have been leased, subleased, licensed or otherwise assigned to a third party by Seller or the Company, and Seller or the Company have not collaterally assigned or granted any other security interest in such Lease or any interest therein to any other person; and (F) there are no outstanding termination fees or contingent liabilities related to any Leases that have expired or been terminated.

 

(c) The uses for which the buildings, facilities and other improvements located on the Real Property are zoned do not restrict, or impair, in any material respect the use of the Real Property for purposes of the businesses of the Company.

(d) There are no pending or, to Seller’s knowledge, threatened condemnation, eminent domain, fire, health, safety, building, zoning or other land use regulatory proceedings, lawsuits or administrative actions relating to the future use of or requiring any change in the present use or operations of any portion of the Real Property. Neither the Seller, nor the Company has received notice of any pending or threatened special assessment proceedings affecting any portion of the Real Property.

(e) The Real Property and all present uses and operations of the Real Property comply in all material respects with all Laws, covenants, conditions, restrictions, easements, disposition agreements and similar matters affecting the Real Property. The Real Property and its continued use, occupancy and operation as used, occupied and operated in the conduct of the businesses of the Company do not constitute a nonconforming use and is not the subject of a special use permit under any Law.

(f) No Person other than the Company is in possession of any of the Real Property or any portion thereof, and there are no leases, subleases, licenses, concessions or other agreements, written or oral, granting to any Person other than the Company the right of use or occupancy of the Real Property or any portion thereof. No easement, utility transmission line or water main located on the Real Property adversely affects in any material respect the use of the Real Property or any improvement on the Real Property.

(g) All water, sewer, gas, electric, telephone and drainage facilities, and all other utilities required by any Law or by the use and operation of the Real Property in the conduct of the businesses of Company are installed to the property lines of the Real Property, are connected pursuant to valid permits to municipal or public utility services or proper drainage facilities and in all material respects are (i) fully operable, (ii) adequate to service the Real Property in the operation of the businesses of the Company and (iii) permit compliance with the requirements of all Laws in the operation thereof. All outstanding charges with respect to such utilities that are due and payable are paid in full. To Seller’s knowledge, no fact or condition exists which could result in the termination or material reduction of the current access from the Real Property to existing roads or to sewer or other utility services presently serving the Real Property.

 

(h) There are no defects in the buildings, improvements and structures or fixtures located on or at the Real Property that would materially impair the conduct of the Business by Buyer. The mechanical, electrical, plumbing, HVAC and other systems servicing the Real Property are in good working order and repair, ordinary wear and tear excepted.

 

2.10. Title to Personal Properties .

(a) With respect to material personal properties and assets that are owned by the Company (“Owned Personal Property”), including all such properties and assets reflected as owned on the Most Recent Financial Statements (other than inventory sold in the ordinary course of business since the date thereof), the Company has good and valid title to all of such properties and assets, free and clear of all Liens other than Permitted Liens.

(b) With respect to material personal properties and assets that are leased by the Company (“Leased Personal Property”), the Company has a valid leasehold interest in such Leased Personal Property and all such leases are in full force and effect. Neither the Company, nor to the knowledge of Seller, any other party thereto is in breach or default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute a material breach or default or permit termination, modification or acceleration, under any such lease.

(c) Neither Seller nor any of its affiliates (other than the Company) has any interest in any equipment or other tangible assets or properties used in the businesses of the Company.

2.11. Condition of Properties . Except as disclosed on Schedule 2.11, (a) the Owned Personal Property (particularly all equipment, molds, tooling) and the Leased Personal Property constitute all material personal property necessary for the conduct of the Company’s business as presently conducted (except for assets and properties of Seller and its affiliates used to provide services to the Company as set forth on Schedule 2.11) and (b) the Owned Personal Property and the Leased Personal Property are in good operating condition and repair (subject to normal wear and tear given the use and age of such assets) and are usable in the continuing operations of the Company in substantially the same manner as such operations are presently conducted. Other than holding a security interest for payment of the Purchase Money Note (Exhibit A to Exhibit 1), no Principal Shareholder or other individual(s) has an ownership interest in any personal property necessary for the conduct of the Company’s business as presently conducted.

2.12. Tax Matters .

(a) Certain Defined Terms. For purposes of this Agreement, the following definitions shall apply:

(i) The term “Tax” and “Taxes” shall mean all taxes, however denominated, including any interest, penalties or other additions to tax or additional amounts with respect thereto that may become payable in respect thereof, imposed by any federal, territorial, state, local or foreign government or any agency or political subdivision of any such government, which taxes shall include, without limiting the generality of the foregoing, all income or profits taxes (including, but not limited to, federal income taxes and state income taxes), payroll and employee taxes, unemployment insurance taxes, social security taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business license taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes, transfer taxes net proceeds, value added, withholding, employment, deed, escheat, unclaimed property, alternative or add-on minimum, windfall profits, transaction, lease, service, service use, severance, energy, workers’ compensation, capital, premium, and other taxes, assessments, customs duties, fees, levies or governmental charges of any nature whatever, whether disputed or not.

 

(ii) The term “Returns” shall mean with respect to the Company and with respect to the Seller Group, but only to the extent it reflects the business activity and property of the Company or a Tax that could be or become a liability of the Company, all returns, reports, estimates, declarations of estimated Tax, information statements and returns relating to, or required to be filed in connection with, any Taxes, including any schedule or attachment thereto.

(iii) The term “Seller Group” shall mean the federal consolidated Tax return group of which Seller and the Company are members and any similar group on which the income of Seller and the Company is reported on a combined, consolidated or unitary basis for the purposes of any state or local Tax; but only to the extent such return reflects the business activity and property of the Company or a Tax that could be or become a liability of the Company.

(b) Except as set forth on Schedule 2.12(b), (i) all Returns required to be filed by or on behalf of the Company or any Seller Group on or before the Closing Date have been or will be duly filed on a timely basis and are accurate and complete in all material respects, (ii) all Taxes (whether or not shown to be due and payable on the Returns or on subsequent assessments with respect thereto) of the Company and any Seller Group have been paid in full, (iii) the Company has timely withheld and paid over all Taxes required to have been withheld and paid over, and complied with all information reporting requirements, including maintenance of required records with respect thereto, in connection with amounts paid or owing to any employee, creditor, independent contractor or other third party for all periods for which the statute of limitations has not expired and (iv) there are no liens on any of the assets of the Company with respect to Taxes, other than liens for Taxes not yet due and payable.

(c) Except as set forth on Schedule 2.12(c), (i) there is no audit by a Governmental Authority or Taxing authority in process or pending with respect to any Tax of the Company or any Seller Group; (ii) no deficiencies exist or have been asserted, in writing, with respect to any Taxes of the Company or any Seller Group, and neither the Company nor any Seller Group has received written notice that it has not filed a Return or paid Taxes required to be filed or paid by it; (iii) neither the Company nor any Seller Group is a party to any action or proceeding for assessment or collection of any Taxes, nor has such event been asserted, in writing against the Company, any Seller Group or any of their respective assets; (iv) no waiver or extension of any statute of limitations is in effect with respect to any Taxes of the Company or any Seller Group; (v) the charges, accruals and reserves for Taxes with respect to the Company reflected on the books of the Company are adequate to cover material Tax liabilities accruing through the end of the last period for which the Company ordinarily records items on its books, (vi) the Company has no revenue deferred for Tax purposes; (vii) the Company has not agreed to and is not required to make by reason of a change in accounting method or otherwise, and could not be required to make by reason of a proposed or threatened change in accounting method or otherwise, any adjustment under Section 481(a) of the Code; (viii) the Company has not received (and is not subject to) any ruling from any Taxing authority and has not entered into (and is not subject to) any agreement with a Taxing authority; (ix) Seller and the Company have not entered into any compensatory agreements with respect to performance of services that could obligate it to make payments that would result in a nondeductible expense to the Company under Sections 162(m) or 280G of the Code or an excise Tax to the recipient of such payment pursuant to Section 4999 of the Code; (x) the Company has not participated in an international boycott as defined in Code Section 999; (xi) neither the Company nor any Seller Group has been the “distributing corporation” (within the meaning of Section 355(c)(2) of the Code) with respect to a transaction described in Section 355 of the Code within the three (3) year period ending as of the date of this Agreement and (xii) the Company and each member of a Seller Group have disclosed on its Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code.

 

(d) The Company is not a party to any tax allocation agreement or tax sharing agreement and has not assumed the liability for Taxes of any other person under contract.

(e) Except as set forth on Schedule 2.12(e), the Company has no liability for the Taxes of any Person, (i) as a transferee or successor, (ii) by contract, (iii) under Section 1.1502-6 of the Treasury regulations (or any similar provision of state, local or foreign Law), or (iv) otherwise. The Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) installment sale or open transaction disposition made on or prior to the Closing Date or (ii) prepaid amount received on or prior to the Closing Date. The Company has not participated in a “reportable transaction” within the meaning of Treas. Reg. § 1.6011-4(b).

(f) Except as set forth on Schedule 2.12(f), Seller has made available to Buyer complete and accurate copies of all of the Company’s Returns as filed that have been filed or will be filed (after giving effect to all valid extensions of time for filing) with respect to all Tax periods for which the applicable statute of limitations has not expired. Schedule 2.12(f) lists all jurisdictions in which the Company is required to pay Tax or file a Return under applicable state, local or foreign Tax Law.

(g) Except as set forth on Schedule 2.12(g), Seller owns all of the interests in Company that are treated as equity for U.S. federal income tax purposes. Seller is and will on the Closing Date be the “common parent” (as defined in Treasury Regulations Section 1.1502-77(a)(1)(i)) of a U.S. federal consolidated return group that includes Seller and Company. Seller has the authority to consent to making an election under Section 338(h)(10) of the Code and similar state elections with respect to the Purchase.

2.13. Legal Proceedings. Except as set forth on Schedule 2.13 :

(a) (i) there are no actions, suits, proceedings, arbitrations, litigations, investigations (each, an “Action”) or orders pending or (to the knowledge of Seller) threatened against or affecting the Company at law or in equity, or before or by any federal, state, municipal, foreign or other governmental department, commission, board, bureau, agency, court or instrumentality, domestic or foreign, or airport authority (“Governmental Authority”), (ii) to the knowledge of Seller no event has occurred, nor circumstance exist, that may give rise or serve as a reasonable basis for any such Action and (iii) there is no Action against any current or (to the knowledge of Seller) former director or employee of the Company with respect to which the Company has or is reasonably likely to have an indemnification obligation; and

(b) there is no (i) unsatisfied judgment, penalty or award against the Company or any of its properties or assets or (ii) Order to which the Company or any of its properties or assets are subject.

 

2.14. Government Licenses, Permits and Related Approvals .

(a) Except as set forth on Schedule 2.14(a), the Company owns or possesses, and is in material compliance with, all permits, licenses, franchises, certificates, approvals and other authorizations which are required under foreign, federal, state and local laws and regulations in the conduct of its business as it is presently conducted including, all FAA certificates, licenses, and approvals, EASA certificates, licenses, validations, and approvals, and any additional foreign CAA certificates, licenses, validations, and approvals necessary to carry on its business as it is now being conducted (collectively, the “Licenses and Permits”).

(b) All Licenses and Permits are listed on Schedule 2.14(b).

(c) Such Licenses and Permits are valid and in full force and effect and no loss of any of the Licenses and Permits is pending, or, to the knowledge of Seller, threatened as a result of the transactions contemplated by this Agreement or otherwise, except for normal expiration in accordance with the terms thereof.

(d) Except as set forth on Schedule 2.14(d), neither Seller nor the Company has received any written notice or claim against the Company during the past five (5) years alleging a violation of any Laws applicable to its business and to which the Company is subject.

(e) To the knowledge of Seller, no event has occurred and no circumstances exist that (with or without the passage of time or the giving of notice) may result in a violation of, conflict with, failure on the part of the Company to comply with the terms of, or the revocation, withdrawal, termination, cancellation, suspension or modification of any of the Licenses and Permits. Neither Seller nor the Company has received notice regarding any violation of, conflict with, failure on the part of the Company to comply with the terms of, or any revocation, withdrawal, termination, cancellation, suspension or modification of, any of the Licenses and Permits.

 

(f) To the knowledge of Seller, there are no pending FAA or foreign civil aviation authority (“CAA”) enforcement actions against the Company.

2.15. Environmental Matters. Except as set forth on Schedule 2.15 :

(a) the Company is and has been in compliance in all material respects with and has no material liability under all federal, state, local and foreign laws (including common law) and regulations relating to the protection of the environment and human and worker health and safety and/or relating to the spilling, releasing, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing (“Release”) or threatened Release, treatment, or storage of or exposure to pollutants, contaminants or hazardous or toxic materials, substances or wastes (“Hazardous Substances”) into ambient air, surface water, ground water, or lands, or otherwise relating to any legally binding regulation, code, order, decree, or judgment issued, entered, promulgated or approved thereunder (“Environmental Laws”);

(b) the Company holds and is and has been in compliance with all Licenses and Permits which are required under Environmental Laws (“Environmental Permits”);

(c) no loss of any Environmental Permits is pending, or, to the knowledge of Seller, threatened as a result of the transactions contemplated by this Agreement or otherwise, except for normal expiration in accordance with the terms thereof;

(d) neither Seller nor the Company has received any notice or claim, or is aware of any facts or circumstances which could reasonably be expected to form the basis for any claim, against the Company alleging a material violation of any Environmental Laws or Environmental Permits;

(e) there have been no Releases of any Hazardous Substances, and no person has been exposed to any Hazardous Substances at, to, in, on, under or from any real property currently or formerly owned, operated or leased by the Company (or any predecessors thereof) for which the Company is or may be liable, and neither Seller nor the Company has received any notice or claim alleging that the Company is or may be liable as a result of a Release of any Hazardous Substances at any location;

(f) (i) the Company is not subject to any outstanding Order from or agreement with any Governmental Authority or person relating to or arising under Environmental Laws, and (ii) the Company is not a party to any pending judicial or administrative proceedings or, to the knowledge of Seller, is the subject of any investigations by any Governmental Authority, pursuant to any Environmental Laws;

(g) neither Seller nor the Company has, expressly or by operation of law, assumed responsibility or agreed to indemnify or hold harmless any person for any liability or obligation relating to Environmental Laws;

 

(h) Seller has made available to Buyer all environmental reports, studies or audits in the possession or reasonable control of the Seller or the Company with respect to the Company or its properties or assets; and

(i) notwithstanding the generality of any other representations and warranties in this Agreement, the representations and warranties in this Section 2.15 and Sections 2.6 and 2.7 shall be deemed the only representations and warranties in this Agreement with respect to matters relating to Environmental Laws or to Hazardous Substances.

2.16. Employee Benefit Plans .

(a) Except as set forth on Schedule 2.16(a) (the plans disclosed on Schedule 2.16(a), being the “Company Benefit Plans”), the Company is not the sponsor of any “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), severance, change-in-control, employment, stock option, stock purchase, restricted stock, supplemental retirement, bonus or incentive plan, agreement, program or arrangement for the benefit of any current employees of the Company (the “Business Employees”) or former employees of the Company (the “Former Business Employees”) or its officers or directors. With respect to each Company Benefit Plan, Seller has made available to Buyer a written description or copy thereof.

(b) Schedule 2.16(b) sets forth each “employee benefit plan” (within the meaning of Section 3(3) of ERISA), severance, change-in-control, employment, stock option, stock purchase, restricted stock, supplemental retirement, bonus or incentive plan, agreement, program or arrangement maintained or contributed to by Seller or any of its Subsidiaries for the benefit of any Business Employees or officers or directors of the Company (each a “Seller Benefit Plan”). With respect to each Seller Benefit Plan, Seller has made available to Buyer a complete and accurate written description or copy thereof.

(c) With respect to each Company Benefit Plan and with respect to each Seller Benefit Plan that is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA, Seller has made available to Buyer, as applicable, a true and correct copy of (i) the plan documents and all amendments thereto, (ii) the most recent annual report on Form 5500, (iii) each trust agreement and group annuity contract, (iv) the most recent valuation report, (v) the most recent favorable determination letter, and (vi) the most recent summary plan description.

(d) Each Company Benefit Plan and Seller Benefit Plan intended to be qualified within the meaning of Section 401 of the Internal Revenue Code of 1986, as amended (the “Code”) has received a favorable determination letter as to its qualification from the Internal Revenue Service and nothing has occurred since the date of such determination that could reasonably be expected to adversely affect such qualification.

(e) Each Company Benefit Plan, and each Seller Benefit Plan that is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA, has been administered in all material respects with its terms and applicable Law (including, but not limited to, ERISA and the Code, and all rules and regulations promulgated thereunder).

 

(f) Except as set forth on Schedule 2.16(f), with respect to each Company Benefit Plan and Seller Benefit Plan that is subject to Part 3 of Title I or Title IV of ERISA (a “Title IV Plan”): (i) no reportable event under Section 4043 of ERISA for which the notice requirement has not been waived has occurred; (ii) no accumulated funding deficiency, whether or not waived under Code Section 412 has been incurred; (iii) no liability to the Pension Benefit Guaranty Corporation has been incurred and all premiums required to be paid thereto have been paid on behalf of each Title IV Plan; and (iv) no event or condition exists which (A) would constitute grounds for termination by the Pension Benefit Guaranty Corporation or (B) has caused or would give rise to a partial termination of any such Title IV Plan.

(g) Except as set forth on Schedule 2.16(g), none of the Company Benefit Plans or Seller Benefit Plans is a “multiemployer plan” as defined in Section 3(37) of ERISA or has been subject to Sections 4063 or 4064 of ERISA. The Company has no liability, contingent or otherwise, with respect to a “multiemployer plan” contributed to by Seller or any Person that together with the Company is or was at any time treated as a single employer under Section 414 of the Code or Section 4001 of ERISA.

(h) Except as set forth on Schedule 2.16(h), all contributions as well as obligations of the Company or Seller under any Company Benefit Plan or Seller Benefit Plan which are due for any period ending on or before the Closing Date have been paid or accrued by the Seller or the Company (as applicable) within the time required by Law.

(i) Except as set forth on Schedule 2.16(i), no Company Benefit Plan provides deferred compensation to any Business Employee or Former Business Employee that is taxable under Section 409A of the Code or would be taxable under Section 409A of the Code as a result of the transactions contemplated by this Agreement.

(j) No disputes are pending before, or to Seller’s knowledge, are threatened by any Governmental Authority or by any participant or beneficiary against any Company Benefit Plan, other than routine claims for benefits.

(k) No prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of the Code) for which a statutory or administrative exemption does not exist has occurred with respect to any Company Benefit Plan which could result in a material liability to the Company.

(l) The Company has no liability with respect to any “employee welfare benefit plan” within the meaning of Section 3(1) of ERISA that provides benefits to retired employees (other than as required by Section 601 of ERISA).

(m) The consummation of the transactions contemplated by this Agreement will not (i) entitle any Business Employee to severance pay, (ii) accelerate the time of payment or vesting of, or increase the amount of, compensation or benefits due to any Business Employee, (iii) result in any sale bonus, stay bonus or other transaction-based bonus being due to any Business Employee or (iv) result in the payment to any Business Employee of any amount that would be an “excess parachute payment” within the meaning of Section 280G of the Code.

 

(n) The Company has no commitment, intention, or understanding to create, modify, or terminate any Company Benefit Plan that would result in additional liability to Buyer or Company, except as set forth in Article VII below.

2.17. Intellectual Property .

(a) Schedule 2.17(a) sets forth a true and complete list (by name, owner and, where applicable, registration number and jurisdiction of registration, application, certification or filing) of (i) all registered, pending applications for Company Owned Intellectual Property and (ii) all in-bound licenses, sublicenses or other agreements pursuant to which a third party authorizes the Company to use, practice any rights under, or grant sublicenses with respect to, any Intellectual Property. Notwithstanding anything to the contrary herein, Schedule 2.17(a) need not include any licenses for click-wrap, shrink-wrap, open source or off-the-shelf software.

(b) Except with respect to non-exclusive licenses under the Company Intellectual Property, which are either expressly provided and/or implied in connection with a customer’s use of the Company’s products or services, and which are disclosed in Schedule 2.17(b), the Company does not license, sublicense, nor is it a party to any other agreement, pursuant to which it authorizes a third party to use, practice any rights under or grant sublicenses with respect to Company Intellectual Property.

(c) Except as set forth in Schedule 2.17(c), (i) the Company has good title to each registration, application, and, to the knowledge of Seller, other material items of Company Owned Intellectual Property, free and clear of any Liens; (ii) the Company owns or has the right to use pursuant to license, sublicense, or other written agreement, all material items of Company Intellectual Property used in the operation of the business of the Company, as presently conducted.

(d) All registration, maintenance and renewal fees applicable to the Company Owned Intellectual Property that are currently due have been paid and all documents and certificates related to such items have been filed with the relevant Governmental Authority or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such items.

(e) To the knowledge of Seller, (i) no holding, decision or judgment has been rendered in any action or proceeding before any court or administrative authority denying the validity of, the Company’s right to register, or the Company’s right to own or use, any Company Intellectual Property, and (ii) there are no pending actions or proceedings challenging the validity, enforceability, ownership, or use of any Company Intellectual Property.

 

(f) To the knowledge of Seller, no third party is infringing upon, misappropriating, or otherwise violating any Company Owned Intellectual Property, and the Company and Seller have taken reasonable measures to protect and enforce the Company Owned Intellectual Property against other Persons, including the confidentiality of trade secrets owned by the Company.

(g) There are no claims pending against the Company, nor has any officer of Seller received actual notice of any claims made against the Company, in the past five (5) years by a third party, that the conduct of the Company’s business in the manner currently conducted infringes upon, misappropriates or otherwise violates the Intellectual Property rights of any other Person.

2.18. Insurance .

(a) Schedule 2.18(a) sets forth (i) an accurate and complete list of each insurance policy and fidelity bond which covers the Company and its business, properties, assets, directors and employees (the “Policies”) and (ii) a list of all pending claims and the claims history for the Company under the Policies during the current year and the preceding three (3) years (including with respect to insurance obtained but not currently maintained). There are no pending claims under any of such Policies as to which coverage has been questioned, denied or disputed by the insurer or in respect of which the insurer has reserved its rights.

(b) Schedule 2.18(b) describes any self-insurance arrangement by or affecting the Company, including any reserves thereunder, and describes the loss experience for all claims that were self-insured in the current year and the preceding three (3) years.

(c) All Policies are in full force and effect.

(d) All premiums due under the Policies have been paid in full or, with respect to premiums not yet due, accrued. The Company has not received a notice of cancellation of any Policy or of any material changes that are required in the conduct of the businesses of the Company as a condition to the continuation of coverage under, or renewal of, any such Policy. There is no existing default of, and Seller has no knowledge of any threatened termination of, or material premium increase with respect to, any Policy and none of such Policies provides for retroactive premium adjustments.

2.19. Material Contracts .

(a) Except (i) as set forth on Schedule 2.19(a), (ii) for licenses of, and other agreements with respect to, the items referred to in Section 2.17 and (iii) for Leases, as to which no representations or warranties are made other than as set forth in Section 2.9, the Company is not a party to or bound by, nor are any of its assets affected by, any:

 

(i) note, debenture, bond, equipment trust, letter of credit, indenture loan or other agreement relating to Indebtedness, lending or investing of money or to the mortgaging or pledging of any of its assets;

(ii) Contract with a Governmental Authority;

(iii) guaranty of Indebtedness, other than endorsements made for collection in the ordinary course of business;

(iv) indemnification or other reimbursement obligations in excess of $100,000;

(v) Contract for the purchase of materials, supplies, goods or services that involves or would reasonably be expected to involve (A) annual payments by the Company of $100,000 or more or (B) aggregate payments by the Company, of $250,000 or more;

(vi) Contracts which prohibit it from freely engaging in any activity in any geographic region;

(vii) Contract (A) for the sale by the Company of materials, supplies, goods, services, equipment or other assets, and that involves a specified annual minimum dollar sales amount by the Company of $100,000 or more, or (B) pursuant to which the Company received payments of more than $100,000 in the year ended December 31, 2008 or expects to receive payments of more than $100,000 in the years ending December 31, 2009 and December 31, 2010;

(viii) Contract that requires the Company to purchase its total requirements of any product or service from a third party or that contains “take or pay” provisions;

(ix) employment, consulting, termination or severance Contract, other than any such Contract that is terminable at-will by the Company without liability to the Company;

 

(x) partnership or joint venture Contract;

(xi) distribution, dealer, representative or sales agency Contract;

(xii) Contract for the lease of personal property that provides for payments to or by the Company in any one case of $100,000 or more annually or $500,000 or more over the term of the lease;

(xiii) Contract for any capital expenditure or leasehold improvement in any one case in excess of $100,000 or in the aggregate greater than $250,000;

(xiv) Contract that relates to the acquisition or disposition of any material business (whether by merger, sale of stock, sale of assets or otherwise);

 

(xv) Collective Bargaining Agreement or other Contract with any labor organization, union or association; or

(xvi) any other Contracts not described above which involve the payment to or by the Company of $100,000 or more in any twelve consecutive month period.

(b) Except as set forth on Schedule 2.19(b), (i) each contract or commitment listed on Schedule 2.19(a) (the “Material Contracts”) is valid, binding and enforceable against the Company; (ii) the Company is not in material default under any Material Contract, has performed all material obligations under the Material Contracts required to be performed by it, and has not received any claim of default under any Material Contract; and (iii) Seller has no knowledge of any breach or anticipated breach by any other party to any Material Contract.

(c) Seller has made available to Buyer true and complete copies of each Material Contract.

2.20. Transactions with Affiliates .

(a) Except set forth in Schedule 2.20(a), there are no Contracts between the Company, on the one hand, and Seller or any of its officers, directors, consultants or employees, or any affiliate of any of the foregoing, on the other hand.

(b) Except set forth in Schedule 2.20(b), the Company is not indebted, directly or indirectly, to Seller, or to any of its directors, officers or employees, or to any affiliate of any of the foregoing, other than in connection with expenses or advances of expenses incurred in the ordinary course of business or employee relocation expenses and for other customary employee benefits made generally available to all employees. Neither Seller nor any of the Company’s directors, officers or employees nor any affiliate of the foregoing (i) are, directly or indirectly, indebted to the Company or (ii) have any direct or indirect ownership interest in any Person with which the Company has a business relationship, or any Person that competes with the Company, except that Seller or the Company’s directors, officers or employees or any affiliate of any of the foregoing may own stock in (but not exceeding two percent (2%) of the outstanding capital stock of) publicly traded companies that may compete or have a business relationship with the Company. None of Seller, the directors, officers or employees of the Company, or any affiliate of any of the foregoing has, direct or indirect (other than through the Company) economic, interest in any Material Contract. None of Seller, the directors, officers or employees of the Company, or any affiliate of any of the foregoing has any material commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship with any of the Company’s customers, suppliers, service providers, joint venture partners, licensees and competitors.

2.21. Vote Required . The affirmative vote of the holders of a majority of the outstanding shares of Seller Common Stock (the “Required Seller Stockholders”) is necessary to approve this Agreement and the transactions contemplated thereby. The affirmative vote of the Required Seller Stockholders is the only vote of the holders of any class or series of capital stock of Seller necessary to approve this Agreement and to consummate the transactions contemplated hereby.

 

2.22. Brokers, Finders, etc . Except as set forth on Schedule 2.22, Seller has not employed, nor is it subject to any valid claim of, any broker, finder, consultant or other intermediary in connection with the transactions