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STOCK PURCHASE AGREEMENT BY AND BETWEEN THE SHAREHOLDERS OF PWI TECHNOLOGIES, INC. AND INCENTRA SOLUTIONS, INC

Purchase and Sale Agreement

STOCK PURCHASE AGREEMENT BY AND BETWEEN THE SHAREHOLDERS OF PWI TECHNOLOGIES, INC. AND INCENTRA SOLUTIONS, INC | Document Parties: INCENTRA SOLUTIONS, INC | PWI TECHNOLOGIES, INC You are currently viewing:
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INCENTRA SOLUTIONS, INC | PWI TECHNOLOGIES, INC

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Title: STOCK PURCHASE AGREEMENT BY AND BETWEEN THE SHAREHOLDERS OF PWI TECHNOLOGIES, INC. AND INCENTRA SOLUTIONS, INC
Date: 4/4/2005
Industry: Software and Programming     Sector: Technology

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EXHIBIT 2.1

 

 

 

 

 

 

STOCK PURCHASE AGREEMENT

BY AND BETWEEN

THE SHAREHOLDERS OF

PWI TECHNOLOGIES, INC.

AND

INCENTRA SOLUTIONS, INC.

 

 

 

 

DATED AS OF MARCH 30, 2005

 

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TABLE OF CONTENTS

PAGE

----

RECITALS 8

ARTICLE I

PURCHASE AND SALE OF SHARES 8

SECTION 1.1. PURCHASE AND SALE OF SHARES 8

SECTION 1.2. CONSIDERATION 8

SECTION 1.3 CLOSING 11

ARTICLE II

REPRESENTATIONS AND WARANTIES OF THE COMPANY 12

SECTION 2.1 ORGANIZATION, STANDING AND CORPORATE POWER 12

SECTION 2.2 SUBSIDIARIES 12

SECTION 2.3 CAPITAL STRUCTURE 12

SECTION 2.4 AUTHORITY; NONCONTRAVENTION 13

SECTION 2.5 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES 14

SECTION 2.6 MATERIAL CONTRACTS 16

SECTION 2.7 PERMITS; COMPLIANCE WITH APPLICABLE LAWS 17

SECTION 2.8 ABSENCE OF LITIGATION 17

SECTION 2.9 TAX MATTERS 17

SECTION 2.10 EMPLOYEE BENEFIT PLANS 19

SECTION 2.11 LABOR MATTERS 22

SECTION 2.12 ENVIRONMENTAL MATTERS 23

SECTION 2.13 INTELLECTUAL PROPERTY 25

SECTION 2.14 INSURANCE MATTERS 27

SECTION 2.15 TRANSACTIONS WITH AFFILIATES 27

SECTION 2.16 VOTING REQUIREMENTS 27

SECTION 2.17 BROKERS 28

SECTION 2.18 REAL PROPERTY 28

SECTION 2.19 TANGIBLE PERSONAL PROPERTY 29

SECTION 2.20 INVESTMENT COMPANY 29

SECTION 2.21 BOARD APPROVAL 29

SECTION 2.22 BOOKS AND RECORDS 29

SECTION 2.23 STATUS OF SHARES BEING TRANSFERRED 29

SECTION 2.24 INVESTMENT IN PURCHASER COMMON STOCK 29

SECTION 2.25 DISCLOSURE 30

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PURCHASER 31

SECTION 3.1 ORGANIZATION; STANDING AND CORPORATE POWER 31

 

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SECTION 3.2 CAPITAL STRUCTURE 31

SECTION 3.3 AUTHORITY; NONCONTRAVENTION 32

SECTION 3.4 PURCHASER DOCUMENTS 33

SECTION 3.5 VOTING REQUIREMENTS 33

SECTION 3.6 BROKERS 34

SECTION 3.7 BOARD APPROVAL 34

SECTION 3.8 BOOKS AND RECORDS 34

SECTION 3.9 SARBANES OXLEY ACT COMPLIANCE 34

ARTICLE IV

COVENANTS RELATING TO CONDUCT OF BUSINESS 34

SECTION 4.1 CONDUCT OF BUSINESS BY THE COMPANY 34

SECTION 4.2 ADVICE OF CHANGES 36

SECTION 4.3 NO SOLICITATION BY THE COMPANY 36

SECTION 4.4 CONDUCT OF BUSINESS BY PURCHASER 37

SECTION 4.5 TRANSITION 37

ARTICLE V

ADDITIONAL AGREEMENTS 37

SECTION 5.1 ACCESS TO INFORMATION; CONFIDENTIALITY 37

SECTION 5.2 COMMERCIALLY REASONABLE EFFORTS 38

SECTION 5.3 FEES AND EXPENSES 38

SECTION 5.4 PUBLIC ANNOUNCEMENTS 38

SECTION 5.5 REGULATION D 38

SECTION 5.6 PURCHASER'S STOP TRANSFER ON ALLEGED BREACH OF

SHAREHOLDER REPRESENTATIONS AND WARRANTIES 39

SECTION 5.7 PURCHASER'S ASSUMPTION AND PAYMENT OF

OBLIGATIONS PERSONALLY GUARANTEED BY SHAREHOLDERS 39

SECTION 5.8 RULE 144 COMPLIANCE 37

SECTION 5.9 SHAREHOLDERS COVENANT NOT TO COMPETE 39

SECTION 5.10 SHAREHOLDER AFFILIATED COMPANIES TRADE PAYABLES

TO THE COMPANY; SECURITY INTEREST 40

ARTICLE VI

CONDITIONS PRECEDENT 40

SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO

EFFECT THE PURCHASE 40

SECTION 6.2 CONDITIONS TO OBLIGATIONS OF PURCHASER 41

SECTION 6.3 CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS 43

SECTION 6.4 FRUSTRATION OF CLOSING CONDITIONS 44

 

Page 3

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ARTICLE VII

INDEMNIFICATION; ARBITRATION 44

SECTION 7.1 INDEMNIFICATION 44

SECTION 7.2 CLAIMS AND PROCEDURE 46

SECTION 7.3 ARBITRATION 47

ARTICLE VIII

TERMINATION, AMENDMENT AND WAIVER 48

SECTION 8.1 TERMINATION 48

SECTION 8.2 EFFECT OF TERMINATION 49

SECTION 8.3 AMENDMENT 50

SECTION 8.4 EXTENSION; WAIVER 50

ARTICLE IX

GENERAL PROVISIONS 50

SECTION 9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND

AGREEMENTS 50

SECTION 9.2 NOTICES 50

SECTION 9.3 DEFINITIONS 51

SECTION 9.4 INTERPRETATION 52

SECTION 9.5 COUNTERPARTS 52

SECTION 9.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES 52

SECTION 9.7 GOVERNING LAW 52

SECTION 9.8 ASSIGNMENT 53

SECTION 9.9 CONSENT TO JURISDICTION 53

SECTION 9.10 HEADINGS 53

SECTION 9.11 SEVERABILITY 53

SECTION 9.12 ENFORCEMENT 53

 

 

 

 

 

 

 

 

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EXHIBITS

Exhibit A - Form of Employment Agreements

Exhibit B - Form of Registration Rights Agreement

Exhibit C - Form of Security Agreement

Exhibit D - Form of Settlement Agreement

Exhibit E - Form of Debt Assignment

Exhibit F - Form of Debt Forgiveness

SCHEDULES

Company Disclosure Schedule

Addendum to Company Disclosure Schedule

 

 

 

 

Page 5

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INDEX OF DEFINED TERMS

 

 

DEFINED TERMS

DEFINED SECTION

------------- -------

affiliate Section 9.3(a)

Agreement Preamble

AI Section 5.10

Closing Section 1.3

Closing Date Section 1.3

Closing Payment Section 1.2(a)

Code Section 2.9(e)

Company Preamble

Company Acquisition Proposal Section 4.3(a)

Company Certificate of Incorporation Section 2.2(b)

Company Common Stock Section 2.3(a)

Company Disclosure Schedule Article II

Company Financial Statements Section 2.5(a)

Company IP Agreements Section 2.13(g)

Company Material Contracts Section 2.6(b)

Company Permitted Lien Section 2.19

Competing Business Section 5.9

Dispute Section 7.3

Earn Out Payment Section 1.1

EBITDA Section 1.2(b)

Employee Plans Section 2.10(a)

Employment Agreements Section 6.2(h)

encumbrance Section 9.3(b)

Environmental Laws Section 2.12(d)(i)

Environmental Permits Section 2.12(d)(ii)

ERISA Section 2.10(a)

ERISA Affiliate Section 2.10(a)

Fiduciary Section 2.10(e)

GAAP Section 2.5(a)

Government Entities Section 2.4(c)

Governmental Entity Section 2.4(c)

Hazardous Substances Section 2.12(d)(iii)

indemnified party Section 7.2(a)

indemnifying party Section 7.2(a)

Initial Consideration Section 1.1

Intellectual Property Section 2.13(a)

IRS Section 2.10(g)

knowledge Section 9.3(c)

Liens Section 2.4(d)

material adverse change Section 9.3(d)

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material adverse effect Section 9.3(d)

Multi-Employer Plans Section 2.10(d)

Other Company Documents Section 2.7(c)

person Section 9.3(e)

Purchaser Preamble

Purchaser Common Stock Section 3.2(a)

Purchaser Employee Stock Options Section 3.2(a)

Purchaser Purchaser Indemnified Parties Section 7.1(a)

Purchaser Losses Section 7.1(a)

Purchaser SEC Documents Section 3.4(a)

Purchaser Preferred Stock Section 3.2(a)

Purchaser Stock Plans Section 3.2(a)

Permits Section 2.7(a)

Release Section 2.12(d)(iv)

Registration Rights Agreement Section 6.2(i)

Requisite Regulatory Approvals Section 6.1(b)

Restraints Section 6.1(c)

Sarbanes Oxley Act Section 3.9

SEC Section 3.4(a)

Securities Act Section 2.24(a)

Seller Indemnified Parties Section 7.1(b)

Seller Losses Section 7.1(b)

Shareholder Affiliated Companies Section 5.9

Shareholders Preamble

Shares Recitals

Software Section 2.13(a)

subsidiary Section 9.3(f)

Tangible Personal Property Section 2.18

Tax Section 2.9(i)(i)

Taxes Section 2.9(i)(i)

Tax Return Section 2.9(i)(ii)

Third Party Rights Section 2.13(d)

 

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STOCK PURCHASE AGREEMENT

STOCK PURCHASE AGREEMENT (this "Agreement") dated as of March ___,

2005, by and between INCENTRA SOLUTIONS, INC., a Nevada corporation

("Purchaser") and the persons whose names and signatures appear at the end of

this Agreement, all of whom are shareholders of PWI TECHNOLOGIES, INC., a

Washington corporation (the "Company"), referred to collectively as

"Shareholders" and individually as "Shareholder".

RECITALS

WHEREAS, Shareholders own all of the outstanding shares of capital

stock (the "Shares") of the Company;

WHEREAS, Shareholders intend to sell and Purchaser intends to purchase

the Shares;

NOW, THEREFORE, in consideration of the foregoing and the mutual

representations, warranties, covenants and agreements contained herein and other

good and valuable consideration, the receipt and sufficiency of which are hereby

acknowledged, the parties hereto intending to be legally bound do hereby agree

as follows:

ARTICLE I

PURCHASE AND SALE OF THE SHARES

SECTION 1.1. PURCHASE AND SALE OF THE SHARES. Upon the terms and

subject to the conditions of this Agreement, Shareholders agree to sell, convey,

assign and transfer, and Purchaser agrees to purchase, the Shares, free and

clear of all Encumbrances (as defined in Section 9.3(b) hereof) for the initial

aggregate sum of One Million One Hundred Thirty Five Thousand Dollars

($1,135,000.00), consisting of Three Hundred Thirty Five Thousand Dollars

($335,000.00) in cash and Eight Hundred Thousand Dollars ($800,000.00) in

Purchaser's unregistered common stock (together the "Initial Consideration");

together with further consideration consisting of the transfer to or retention

by the Shareholders of the receivables and debt instruments referenced in

Section 2.15 of the Company Disclosure Schedule, as described and limited in

Section 5.11. Purchaser shall pay Shareholders additional consideration pursuant

to the provisions of Section 1.2(b), if, and only if, the conditions of such

Section 1.2(b) are satisfied and only to the extent satisfied (the "Earn Out

Payment"). At the Closing (as defined in Section 1.3) each Shareholder will

transfer to Purchaser the Shares listed after his or her name in Section 1.1 of

the Company Disclosure Schedule, which together will constitute all of the

issued and outstanding Shares of the Company.

 

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SECTION 1.2. CONSIDERATION.

(a) Upon the terms and subject to the conditions of this Agreement, in

consideration of the sale, conveyance, assignment and transfer of the Shares to

Purchaser at the Closing, Purchaser agrees to:

(1) Pay to each Shareholder his or her pro rata share, as

defined below, of One Hundred Thousand Dollars ($100,000.00) at the Closing (the

"Closing Payment");

(2) As of the Closing Date, issue to each Shareholder, or to

his or her designee, his or her pro rata share, as defined below, of Eight

Hundred Thousand Dollars ($800,000.00) of Purchaser's unregistered common stock.

The total number of shares of Purchaser's unregistered common stock to be issued

pursuant to this Section 1.2(a)(2) shall be determined by dividing Eight Hundred

Thousand Dollars ($800,000.00) by the average closing price of Purchaser's

publicly traded common stock for the fifteen (15) trading day period ending, and

including, one day prior to the Closing Date.

(b) Purchaser shall pay Shareholder Gary Henderson ("Henderson") the

sum of Two Hundred Thirty Five Thousand Dollars ($235,000.00) in twelve (12)

equal monthly installments of Nineteen Thousand Five Hundred Eighty Three and

33/100 Dollars ($19,583.33) on the first day of each month beginning May 1, 2005

and ending April 1, 2006.

(c) On or before March 31, 2006, and subject to the conditions set

forth below, Purchaser will pay Shareholders an Earn Out Payment as follows:

(1) In the event Earnings Before Interest, Taxes, Depreciation

and Amortization, as defined below, ("EBITDA") of PWI

Technologies, Inc. for the twelve (12) month period beginning

February 1, 2005 and ending January 31, 2006 reaches Four

Hundred Fifty Thousand Dollars ($450,000.00), Purchaser shall

pay to each Shareholder his or her pro rata share, as defined

below, of One Hundred Thousand Dollars ($100,000.00) within

forty-five (45) days of the end of the month in which such

EBITDA level is reached; and,

(2) In the event Earnings Before Interest, Taxes, Depreciation

and Amortization, as defined below, ("EBITDA") of PWI

Technologies, Inc. for the twelve (12) month period beginning

February 1, 2005 and ending January 31, 2006 is equal to or

greater than Seven Hundred Fifty Thousand Dollars

($750,000.00), but less than One Million Dollars

($1,000,000.00), Purchaser shall issue to each Shareholder his

or her pro rata share, as defined below, of Five Hundred

Thousand Dollars ($500,000.00) of Purchaser's unregistered

common stock, with the total

 

Page 9

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number of shares to be issued determined by dividing Five

Hundred Thousand Dollars ($500,000.00) by the average closing

price of Purchaser's publicly traded common stock for the

fifteen (15) trading day period ending, and including, one day

prior to the Closing Date, adjusted for any stock split,

reverse split, stock dividends or other adjustments to

Purchaser common stock; or,

(3) In the event EBITDA of PWI Technologies, Inc. for the

twelve (12) month period beginning February 1, 2005 and ending

January 31, 2006 is equal to or greater than One Million

Dollars ($1,000,000.00) but less than One Million Fifty

Thousand Dollars ($1,050,000.00), Purchaser shall and shall

issue to each Shareholder his or her pro rata share, as

defined below, of One Million Dollars ($1,000,000.00) of

Purchaser's unregistered common stock plus One Dollar ($1.00)

of Purchaser's unregistered common stock for each One Dollar

($1.00) of EBITDA in excess of One Million Dollars

($1,000,000.00) for such period, with the total number of

shares to be issued determined by dividing the sum of One

Million Dollars ($1,000,000.00) plus One Dollar ($1.00) of

Purchaser's unregistered common stock for each One Dollar

($1.00) of EBITDA in excess of One Million Dollars

($1,000,000.00) for such period by the average closing price

of Purchaser's publicly traded common stock for the fifteen

(15) trading day period ending, and including, one day prior

to the Closing Date; adjusted for any stock split, reverse

split, stock dividends or other adjustments to Purchaser

common stock; or,

(4) In the event EBITDA of PWI Technologies, Inc. for the

twelve (12) month period beginning February 1, 2005 and ending

January 31, 2006 is equal to or greater than One Million Fifty

Thousand Dollars ($1,050,000.00), Purchaser shall pay to each

Shareholder his or her pro rata share, as defined below, of

One Hundred Thousand Dollars ($100,000.00) and shall issue to

each Shareholder his or her pro rata share, as defined below,

of One Million Dollars ($1,000,000.00) of Purchaser's

unregistered common stock plus One Dollar ($1.00) of

Purchaser's unregistered common stock for each One Dollar

($1.00) of EBITDA in excess of One Million Dollars

($1,000,000.00) for such period, with the total number of

shares to be issued determined by dividing the sum of One

Million Dollars ($1,000,000.00) plus One Dollar ($1.00) of

Purchaser's unregistered common stock for each One Dollar

($1.00) of EBITDA in excess of One Million Dollars

($1,000,000.00) for such period by the average closing price

of Purchaser's publicly traded common stock for the fifteen

(15) trading day period ending, and including, one day prior

to the Closing Date; adjusted for any stock split, reverse

split, stock dividends or other adjustments to Purchaser

common stock.

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(5) For purposes of this Agreement, EBITDA shall be defined as

the net income of the Company, as determined by generally

accepted accounting principles, plus interest, taxes,

depreciation and amortization and subject to the other

restrictions or limitations on allocation of expenses as

provided in this Agreement. The parties agree that no

headquarters or overhead expenses or costs of Purchaser or its

affiliates or subsidiaries or other charges of or from

Purchaser will be allocated or charged to Company for purposes

of determining EBITDA under this Agreement.

 

 

 

 

 

 

 

 

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(c) For purposes of this Agreement, a Shareholder's pro rata share

shall be determined by dividing the number of Shares held and transferred by

such Shareholder by the total number of the Shares.

(d) For purposes of the Earn Out Payment only, the right of Shareholder

Barry Andersen ("Andersen") to receive his pro rata share of any such payment

shall be subject to his continued employment with the Company as follows:

(1) In the event Andersen terminates his employment with the

Company or such employment is terminated for cause, as defined in his employment

agreement with the Company, within 180 days of the Closing, Andersen shall not

be entitled to receive any portion of his pro rata share of any Earn Out Payment

that otherwise becomes due; and

(2) in the event Andersen terminates his employment with the

Company or such employment is terminated for cause, as defined in his employment

agreement with the Company, more than 180 days after the Closing but within 365

days of the Closing, then Andersen shall be entitled to receive a portion of any

Earn Out Payment that otherwise becomes due that is equal to his pro rata share

of such payment times a fraction the numerator of which is the number of days

employment he completed after the Closing and the denominator of which is 365

days.

(3) Notwithstanding anything herein to the contrary, the

termination of Andersen's employment by reason of his death or disability shall

not affect his entitlement to receive his pro rata share of any Earn Out

Payment.

SECTION 1.3 CLOSING. Subject to the satisfaction or, to the

extent permitted by applicable law, waiver of the conditions to consummation of

the Purchase contained in Article VI hereof, the closing of the Purchase (the

"Closing") shall take place at 10:00 a.m., Denver time, on a date specified by

the parties (the "Closing Date"), which date shall not be later than the third

business day following satisfaction or, to the extent permitted by applicable

law, waiver of the conditions to consummation of the Purchase contained in

Article VI (other than those conditions that by their nature are to be satisfied

at the Closing, but subject to the fulfillment or, to the extent permitted by

applicable law, waiver of those conditions), unless another time or date is

agreed to by the parties hereto. The Closing will be held at the offices of

Purchaser, located at 1140 Pearl Street, Boulder, CO 80302 or at such other

location as is agreed to by the parties hereto.

 

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ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth on the Disclosure Schedule delivered by the Company

to Purchaser prior to the execution of this Agreement which hereby is

incorporated by reference in and constitutes an integral part of this Agreement

(the "COMPANY DISCLOSURE SCHEDULE"), the Shareholders hereby represent and

warrant to Purchaser as follows:

SECTION 2.1 ORGANIZATION, STANDING AND CORPORATE POWER.

(a) Each of the Company and its subsidiaries is a corporation duly organized,

validly existing and in good standing under the laws of the state of its

incorporation or organization and has the requisite corporate power and

authority to carry on its business as presently being conducted. Each of the

Company and its subsidiaries is duly qualified or licensed to conduct business

and is in good standing in each jurisdiction in which the nature of its business

or the ownership, leasing or operation of its properties makes such

qualification or licensing necessary, except for those jurisdictions where the

failure to be so qualified or licensed or to be in good standing individually or

in the aggregate would not reasonably be expected to have a material adverse

effect on the Company.

(b) The Company has delivered or made available to Purchaser prior to the

execution of this Agreement complete and correct copies of the certificate of

incorporation and by-laws of the Company and each of its subsidiaries, each as

in effect at the date of this Agreement. (c)

SECTION 2.2. SUBSIDIARIES. Section 2.2 of the Company Disclosure

Schedule lists the names and jurisdiction of incorporation or organization of

all the subsidiaries of the Company, whether consolidated or unconsolidated. The

outstanding securities of the subsidiaries of Company are set forth in Section

2.2 of the Company Disclosure Schedules and all outstanding shares of capital

stock of, or other equity interests in, each such subsidiary: (i) have been duly

authorized, validly issued and are fully paid and nonassessable and (ii) are

owned directly or indirectly by Company, free and clear of all Liens. Except as

set forth above or in Section 2.2 of the Company Disclosure Schedule, the

Company does not own, directly or indirectly, any capital stock of or other

equity or voting interests in any person.

SECTION 2.3. CAPITAL STRUCTURE. As of the date hereof:

(a) (i) The only class of capital stock authorized by the

Company is common stock ("Company Common Stock"); (ii) 1,000,000 shares of

Company Common Stock are authorized and 800,000 shares of Company Common Stock

are issued and outstanding, all held by Shareholders in the amounts set forth

next to their respective names in Section 2.3(a) of the Company Disclosure

Schedule; and (iii) no shares of

 

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Company Common Stock are held by the Company in its treasury and no shares of

Company Common Stock are held by subsidiaries of the Company

(b) Except as set forth on Section 2.3(b) of the Company

Disclosure Schedule, all outstanding shares of capital stock of the Company have

been duly authorized and validly issued and are fully paid and nonassessable and

are not subject to preemptive rights created by statute, the Company's

Certificate of Incorporation (the "COMPANY CERTIFICATE OF INCORPORATION") or any

agreement to which the Company is a party or by which the Company may be bound.

(c) Except as set forth in Section 2.3(c) of the Company

Disclosure Schedule, there are outstanding (i) no shares of capital stock or

other voting securities of the Company, (ii) no securities of the Company

convertible into or exchangeable for shares of capital stock or voting

securities of the Company, and (iii) no options or other rights to acquire from

the Company, and no obligation of the Company to issue, any capital stock,

voting securities or securities convertible into or exchangeable for capital

stock of the Company.

SECTION 2.4. AUTHORITY; NONCONTRAVENTION.

(a) Shareholders have the power and authority to execute,

deliver and perform this Agreement and the other agreements to be executed and

delivered by Shareholders in connection herewith and to consummate the

transactions contemplated hereby and thereby. All acts and proceedings required

to be taken by or on the part of Shareholders to authorize Shareholders to

execute, deliver and perform this Agreement and the other agreements to be

executed and delivered by Shareholders in connection herewith and to consummate

the transactions contemplated hereby and thereby have been duly and validly

taken. This Agreement constitutes a valid and binding agreement, and the other

agreements to be executed and delivered by Shareholders in connection herewith

when so executed and delivered will constitute valid and binding agreements, of

Shareholders.

(b) Except as set forth in Section 2.4(b) of the Company

Disclosure Schedule, the execution and delivery of this Agreement does not, and

the consummation of the transactions contemplated hereby will not, conflict with

or result in a violation of, or default (with or without notice or lapse of

time, or both) under, or give rise to a right of termination, cancellation or

acceleration of any material obligation under (i) any provision of the Company

Certificate of Incorporation or by-laws, (ii) any material loan or credit

agreement, note, mortgage, indenture, lease or other material agreement or (iii)

material instrument, permit, license, judgment, order, decree, statute, law,

ordinance, rule or regulation applicable to the Company or its properties or

assets.

 

 

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(c) The execution, delivery and performance by the

Shareholders of this Agreement and the consummation of the purchase and sale of

the Shares by the Shareholders require no consent, approval, order or

authorization of, action by or in respect of, or registration or filing with,

any governmental body, court, agency, official or authority (each, a

"GOVERNMENTAL ENTITY", collectively "GOVERNMENT ENTITIES").

(d) The execution and delivery of this Agreement and the

consummation of the purchase and sale of the Shares will not result in the

creation of any pledges, claims, liens, charges, encumbrances, adverse claims,

mortgages and security interests of any kind or nature whatsoever (collectively,

"LIENS") upon any asset of the Company.

(e) Except as set forth in Section 2.4(e) of the Company

Disclosure Schedule, no consent, approval, waiver or other action by any person

(other than the Governmental Entities referred to in (d) above) under any

Company Material Contract is required or necessary for, or made necessary by

reason of, the execution, delivery and performance of this Agreement by the

Shareholders or the consummation of the purchase and sale of the Shares.

SECTION 2.5. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.

(a) The Company has furnished to the Purchaser true, correct

and complete copies of: (i) balance sheets of the Company as of December 31,

2001, December 31, 2002 and December 31, 2003 compiled by the Company; (ii)

income statements of the Company for the fiscal years ended December 31, 2001,

December 31, 2002 and December 31, 2003 compiled by the Company, (iii) a balance

sheet, income statement, statement of cash flow and statement of Shareholders'

equity of the Company for the fiscal year ended December 31, 2004 audited by the

Company's independent accountants, and (iv) an income statement and statement of

cash flows for the Company for the period from January 1, 2005 through and

including March 21, 2005, and a balance sheet for the Company as of March 21,

2005 (collectively, the "Company Financial Statements"). Except as set forth in

Section 2.5(a) of the Company Disclosure Schedule, the Company Financial

Statements have been prepared by the Company on the basis of the books and

records maintained by the Company in the ordinary course of business in a manner

consistently used and applied throughout the periods involved and the accounting

practices and procedures have been applied consistently for interim periods

after the periods of the Company Financial Statements. Except as set forth in

Section 2.5(a) of the Company Disclosure Schedule, The Company Financial

Statements have been prepared in accordance with generally accepted accounting

principles ("GAAP") and fairly present in all material respects the financial

condition of the Company and its subsidiaries as at the respective dates

thereof.

 

 

 

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(b) Except for liabilities (i) set forth in Section 2.5 of the

Company Disclosure Schedule, (ii) reflected in the Company Financial Statements

or described in any notes thereto (or for which neither accrual nor footnote

disclosure is required pursuant to GAAP), or (iii) incurred in the ordinary

course of business, consistent with past practice or in connection with this

Agreement or the transactions contemplated hereby, neither the Company nor any

of its subsidiaries has any material liabilities or obligations of any nature.

The Company is not in default in respect of any terms or conditions of any

indebtedness.

(c) Other than changes in the usual and ordinary conduct of

business since December 31, 2004, there have been, and at the Closing Date there

will be, no changes in the financial condition of the Company. None of these

changes is, and at the Closing Date none will be, materially adverse.

Specifically, but, not by way of limitation, since its balance sheet of December

31, 2004 the Company has not, and prior to the Closing Date will not have:

(i) Issued or sold any stock, bond, or other Company

securities;

(ii) Except for current liabilities incurred and obligations

under contracts entered into in the ordinary course of business and except as

set forth in Section 2.5(b)(ii) of the Company Disclosure Schedule, incurred any

obligation or liability, absolute or contingent;

(iii) Except for current liabilities shown on the balance

sheet and current liabilities incurred since that date in the ordinary course of

business and except as set forth in Section 2.5(b)(iii) of the Company

Disclosure Schedule, discharged or satisfied any lien or encumbrance, or paid

any obligation or liability, absolute or contingent;

(iv) Mortgaged, pledged or subjected to lien or any other

encumbrance, any of its assets, tangible or intangible;

(v) Except in the ordinary course of business, sold or

transferred any of its tangible assets or canceled any debts or claims;

(vi) Sold, assigned, or transferred any patents, formulas,

trademarks, trade names, copyrights, licenses, or other intangible assets;

(vii) Suffered any extraordinary losses, been subjected to any

strikes or other labor disturbances, or waived any rights of any substantial

value; or

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(viii) Except for transactions contemplated by this Agreement,

entered into any transaction other than in the ordinary course of business.

(d) Subject to any changes that may have occurred in the

ordinary and usual course of business, the assets of the Company at the Closing

Date will be substantially those owned by it and shown on the Company Financial

Statements.

(e) Except to the extent that an allowance for uncollectible

accounts has been established on its books and is reflected in the Company

Financial Statements, all accounts receivable and notes receivable of the

Company are current and collectible. Such accounts receivable of the Company

have arisen in the ordinary course of business in arms-length transactions for

goods actually sold and services actually performed or to be performed.

(f) All inventory to be transferred to Purchaser pursuant to

this Agreement is in saleable condition.

SECTION 2.6. MATERIAL CONTRACTS.

(a) Each Company Material Contract is valid and binding on and

enforceable against the Company (or, to the extent a subsidiary is a party, such

subsidiary) and each other party thereto and is in full force and effect. Except

as set forth in Section 2.6 of the Company Disclosure Schedule, neither the

Company nor any of its subsidiaries is in breach or default under any Company

Material Contract. Except as set forth in Section 2.6 of the Company Disclosure

Schedule, neither the Company nor any of its subsidiaries knows of, and has not

received notice of, any violation or default under (nor, to the knowledge of the

Shareholders, does there exist any condition which with the passage of time or

the giving of notice or both would result in such a violation or default under)

any Company Material Contract by any other party thereto. Prior to the date

hereof, the Company has made available to Purchaser true and complete copies of

all Company Material Contracts.

(b) As used in this Agreement, "COMPANY MATERIAL CONTRACTS"

shall mean any contract, license agreement, commitment, lease, or restriction of

any kind to which the Company is a party or by which the Company or any of its

subsidiaries is bound or to which any of the Company's or any of its

subsidiaries' assets are subject which involve payments to or from the Company

of at least $50,000.

 

 

 

 

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SECTION 2.7. PERMITS; COMPLIANCE WITH APPLICABLE LAWS.

(a) The Company and its subsidiaries own and/or possess all

material permits, licenses, variances, authorizations, exemptions, orders,

registrations and approvals of all Governmental Entities which are required for

the operation of the business of the Company and its subsidiaries (the

"PERMITS") as presently conducted. The Company and its subsidiaries are in

compliance in all material respects with the terms of the Permits. All the

Permits are in full force and effect and no suspension, modification or

revocation of any of them is pending or threatened nor do grounds exist for any

such action.

(b) Except as set forth in Section 2.7(b) of the Company

Disclosure Schedule, each of the Company and its subsidiaries is in compliance

in all material respects with all applicable statutes, laws, regulations,

ordinances, Permits, rules, writs, judgments, orders, decrees and arbitration

awards of each Governmental Entity applicable to the Company or any of its

subsidiaries.

(c) Except for filings with respect to Taxes, which are the

subject of Section 2.9 and not covered by this Section 2.7(c) and except as set

forth in Section 2.7(c) of the Company Disclosure Schedule, the Company and each

of its subsidiaries has timely filed all regulatory reports, schedules, forms,

registrations and other documents, together with any amendments required to be

made with respect thereto, that they were required to file with each

Governmental Entity (the "OTHER COMPANY DOCUMENTS"), and have timely paid all

fees and assessments, if any, due and payable in connection therewith, except

where the failure to make such payments and filings individually or in the

aggregate would not have a material adverse effect on the Company.

SECTION 2.8. ABSENCE OF LITIGATION. Section 2.8 of the Company

Disclosure Schedule contains a true and current summary description of each

pending and, to the Shareholders' knowledge, threatened litigation, action,

suit, case, proceeding, investigation or arbitration. Except as set forth in

Section 2.8 of the Company Disclosure Schedule, no action, inquiry, demand,

charge, requirement or investigation by any Governmental Entity and no

litigation, action, suit, case, proceeding, investigation or arbitration by any

person or Governmental Entity, in each case with respect to the Company or any

of its subsidiaries or any of their respective properties or Permits, is pending

or, to the knowledge of the Shareholders, threatened.

SECTION 2.9. TAX MATTERS.

(a) Except as set forth in Section 2.9 of the Company

Disclosure Schedule, each of the Company and its subsidiaries has (i) filed with

the appropriate Governmental Entities all United States federal and state income

and other material Tax

 

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Returns required to be filed by it (giving effect to all extensions) and such

Tax Returns are true, correct and complete in all material respects; (ii) paid

in full all United States federal income and other material Taxes required to

have been paid by it; and (iii) made adequate provision for all accrued Taxes

not yet due. The accruals and provisions for Taxes reflected in the Company

Financial Statements are adequate in accordance with GAAP for all Taxes accrued

or accruable through the date of such statements.

(b) Except as set forth in Section 2.9 of the Company

Disclosure Schedule, as of the date of this Agreement, no Federal, state, local

or foreign audits or other administrative proceedings or court proceedings are

presently pending with regard to any Taxes or Tax Returns of the Company or any

of its subsidiaries, and neither the Company nor any of its subsidiaries has

received a written notice of any material pending or proposed claims, audits or

proceedings with respect to Taxes.

(c) Except as set forth in Section 2.9 of the Company

Disclosure Schedule, no deficiency or proposed adjustment which has not been

settled or otherwise resolved for any amount of Tax has been proposed, asserted,

or assessed in writing by any Governmental Entity against, or with respect to,

the Company or any of its subsidiaries. There is no action, suit or audit now in

progress, pending or, to the knowledge of the Company, threatened against or

with respect to the Company or any of its subsidiaries with respect to any

material Tax.

(d) Neither the Company nor any of its subsidiaries has been

included in any "consolidated," "unitary" or "combined" Tax Return (other than

Tax Returns which include only the Company) provided for under the laws of the

United States, any foreign jurisdiction or any state or locality with respect to

Taxes for any taxable year.

(e) No election under Section 341(f) of the Internal Revenue

Code as from time to time amended (the "Code") has been made by the Company or

any of its subsidiaries.

(f) No claim has been made in writing by any Governmental

Entities in a jurisdiction where the Company or any of its subsidiaries does not

file Tax Returns that the Company is, or may be, subject to taxation by that

jurisdiction.

(g) Except as set forth in Section 2.9 of the Company

Disclosure Schedule, each of the Company and its subsidiaries has made available

to Purchaser correct and complete copies of (i) all of its material Tax Returns

filed within the past three (3) years, (ii) all audit reports, letter rulings,

technical advice memoranda and similar documents issued by a Governmental Entity

within the past three (3) years relating to the Federal, state, local or foreign

Taxes due from or with respect to the Company or any of its subsidiaries, and

(iii) any closing letters or agreements entered

 

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<PAGE>

into by the Company with any Governmental Entities within the past three (3)

years with respect to Taxes.

(h) Except as set forth in Section 2.9 of the Company

Disclosure Schedule, neither the Company nor any of its subsidiaries has

received any notice of deficiency or assessment from any Governmental Entity for

any amount of Tax that has not been fully settled or satisfied, and to the

knowledge of the Company, no such deficiency or assessment is proposed.

(i) For purposes of this Agreement:

(i) "TAX" or "TAXES" shall mean all federal, state,

county, local, foreign and other taxes of any kind whatsoever

(including, without limitation, income, profits, premium,

excise, sales, use, occupancy, gross receipts, franchise, ad

valorem, severance, capital levy, production, transfer,

license, stamp, environmental, withholding, employment,

unemployment compensation, payroll related and property taxes,

import duties and other governmental charges and assessments),

whether or not measured in whole or in part by net income, and

including deficiencies, interest, additions to tax or

interest, and penalties with respect thereto, and including

expenses associated with contesting any proposed adjustment

related to any of the foregoing.

(ii) "TAX RETURN" shall mean any return, information

report or filing with respect to Taxes, including any

schedules attached thereto and including any amendments

thereof.

SECTION 2.10. EMPLOYEE BENEFIT PLANS.

(a) Section 2.10 of the Company Disclosure Schedule contains a

true and complete list of all pension, stock option, stock purchase, benefit,

welfare, profit-sharing, retirement, disability, vacation, severance,

hospitalization, insurance, incentive, deferred compensation and other similar

fringe or employee benefit plans, funds, programs or arrangements, whether

written or oral, in each of the foregoing cases which (i) covers, is maintained

for the benefit of, or relates to any or all current or former employees of the

Company or any of its subsidiaries and any other entity ("ERISA AFFILIATE")

related to the Company under Section 414(b), (c), (m) and (o) of the Code and

(ii) is not a "multiemployer plan" as defined in Section 3(37) or Section

4001(a)(3) of the Employee Retirement Income Security Act of 1974, as amended

("ERISA") or Section 414 of the Code (the "EMPLOYEE PLANS"). Section 2.10 of the

Company Disclosure Schedule identifies and includes but is not limited to, each

of the Employee Plans that is

 

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<PAGE>

subject to Section 302 or Title IV of ERISA or Section 412 of the Code. Neither

the Company, any of its subsidiaries nor any ERISA Affiliate of the Company or

any of its subsidiaries has any commitment or formal plan, whether or not

legally binding, to create any additional employee benefit plan or modify or

change any existing Employee Plan other than as may be required by the express

terms of such Employee Plan or applicable law.

(b) With respect to each Employee Plan that has been qualified

or is intended to be qualified under the Code or that is an "Employee Benefit

Plan" within the meaning of Section 3.3 of ERISA, such Employee Plan has been

duly approved and adopted by all necessary and appropriate action of the Board

of Directors of the Company (or a duly constituted committee thereof).

(c) Except as set forth in Section 2.10 of the Company

Disclosure Schedule, with respect to the Employee Plans, all required

contributions for all periods ending before the Closing Date have been or will

be paid in full by the Closing Date. Subject only to normal retrospective

adjustments in the ordinary course, all required insurance premiums have been or

will be paid in full with regard to such Employee Plans for policy years or

other applicable policy periods ending on or before the Closing Date by the

Closing Date. As of the date hereof, none of the Employee Plans has unfunded

benefit liabilities, as defined in Section 4001(a)(16) of ERISA.

(d) The Company has no "multi-employer plans," as defined in

Section 3(37) or Section 4001(a)(3) of ERISA or Section 414 ("MULTI-EMPLOYER

PLANS"), and never has had any such plans.

(e) With respect to each Employee Plan (i) no prohibited

transactions as defined in Section 406 of ERISA or Section 4975 of the Code have

occurred or are expected to occur as a result of the Purchase or the

transactions contemplated by this Agreement, (ii) no action, suit, grievance,

arbitration or other type of litigation, or claim with respect to the assets of

any Employee Plan (other than routine claims for benefits made in the ordinary

course of plan administration for which plan administrative review procedures

have not been exhausted) is pending or, to the knowledge of the Company,

threatened or imminent against the Company, any ERISA Affiliate or any

fiduciary, as such term is defined in Section 3(21) of ERISA ("FIDUCIARY"),

including, but not limited to, any action, suit, grievance, arbitration or other

type of litigation, or claim regarding conduct that allegedly interferes with

the attainment of rights under any Employee Plan. To the knowledge of the

Company, neither the Company, nor its directors, officers, employees nor any

Fiduciary has any liability for failure to comply with ERISA or the Code for any

action or failure to act in connection with the administration or investment of

such plan. None of the Employee Plans is subject to any pending investigations

or to the knowledge of the Company threatened investigations from any

Governmental Agencies who enforce applicable laws under ERISA and the Code.

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<PAGE>

(f) Each of the Employee Plans is, and has been, operated in

accordance with its terms and each of the Employee Plans, and administration

thereof, is, and has been, in all material respects in compliance with the

requirements of any and all applicable statutes, orders or governmental rules or

regulations currently in effect, including, but not limited to, ERISA and the

Code. Except as set forth in Section 2.10 of the Company Disclosure Schedule,

all required reports and descriptions of the Employee Plans (including but not

limited to Form 5500 Annual Reports, Form 1024 Application for Recognition of

Exemption Under Section 501(a), Summary Annual Reports and Summary Plan

Descriptions) have been timely filed and distributed as required by ERISA and

the Code. Any notices required by ERISA or the Code or any other state or

federal law or any ruling or regulation of any state or federal administrative

agency with respect to the Employee Plans, including but not limited to any

notices required by Section 4980B of the Code, have been appropriately given.

(g) The Internal Revenue Service (the "IRS") has issued a

favorable determination letter or opinion letter with respect to each Employee

Plan intended to be "qualified" within the meaning of Section 401(a) of the Code

that has not been revoked and, to the knowledge of the Shareholders, no

circumstances exist that could adversely affect the qualified status of any such

plan and the exemption under Section 501(a) of the Code of the trust maintained

thereunder. Each Employee Plan intended to satisfy the requirements of Section

125, 501(c)(9) or 501(c)(17) of the Code has satisfied such requirements in all

material respects.

(h) With respect to each Employee Plan to which the Company or

any ERISA Affiliate made, or was required to make, contributions on behalf of

any employee during the five-year period ending on the last day of the most

recent plan year end prior to the Closing Date, (i) no liability under Title IV

or Section 302 of ERISA has been incurred by the Company or any ERISA Affiliate

that has not been satisfied in full, and (ii) to the knowledge of the

Shareholders, no condition exists that presents a material risk to the Company

or any ERISA Affiliate of incurring any such liability and (iii) the present

value of accrued benefits under such plan, based upon the actuarial assumptions

used for funding purposes in the most recent actuarial report prepared by such

plan's actuary with respect to such plan did not exceed, as of its latest

valuation date, the then current value of the assets of such plan allocable to

such accrued benefits. No Employee Plan or any trust established thereunder has

incurred any "accumulated funding deficiency" (as defined in Section 302 of

ERISA and Section 412 of the Code), whether or not waived, as of the last day of

the most recently ended fiscal year.

(i) Except as set forth in Section 2.10 of the Company

Disclosure Schedule, no Employee Plan provides medical, surgical,

hospitalization, death or similar benefits (whether or not insured) for

employees for periods extending beyond their retirement or other termination of

service, other than (i) coverage mandated by Section 4980B of the Code, Section

601 of ERISA or other applicable law, (ii) death benefits under any "pension

plan," (iii) benefits the full cost of which is borne by the employee

 

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(or his beneficiary) or (iv) Employee Plans that can be amended or terminated by

the Company without consent. The Company does not have any current or projected

liability with respect to post-employment or post-retirement welfare benefits

for retired, former, or current employees of the Company.

(j) No material amounts payable under the Employee Plans will

fail to be deductible for Federal income tax purposes by virtue of Section

162(m) of the Code.

(k) To the extent that the Company is deemed to be a fiduciary

with respect to any Plan that is subject to ERISA, the Company (i) during the

past five years has complied with the requirements of ERISA and the Code in the

performance of its duties and responsibilities with respect to such employee

benefit plan and (ii) has not knowingly caused any of the trusts for which it

serves as an investment manager, as defined in Section 3(38) of ERISA, to enter

into any transaction that would constitute a "prohibited transaction" under

Section 406 of ERISA or Section 4975 of the Code, with respect to any such

trusts, except for transactions that are the subject of a statutory or

administrative exemption.

(l) No person will be entitled to a "gross up" or other

similar payment in respect of excise taxes under Section 4999 of the Code with

respect to the transactions contemplated by this Agreement.

(m) None of the Employee Plans have been completely or

partially terminated and none has been the subject of a "reportable event" as

that term is defined in Section 4043 of ERISA. No amendment has been adopted

which would require the Company or any ERISA Affiliate to provide security

pursuant to Section 307 of ERISA or Section 401(a)(29) of the Code.

SECTION 2.11. LABOR MATTERS.

(a) With respect to employees of the Company or its

subsidiaries: (i) to the knowledge of the Shareholders, no senior executive or

key employee has any plans to terminate employment with the Company or any of

its subsidiaries; (ii) there is no unfair labor practice charge or complaint

against the Company pending or, to the knowledge of the Shareholders, threatened

before the National Labor Relations Board or any other comparable Governmental

Entity; (iii) there is no demand for recognition made by any labor organization

or petition for election filed with the National Labor Relations Board or any

other comparable Governmental Entity; (iv) no grievance or any arbitration

proceeding arising out of or under collective bargaining agreements is pending

and, to the knowledge of Shareholders, no claims therefor have been threatened

other than grievances or arbitrations incurred in the ordinary course of

business; (v) the execution and delivery of this Agreement and the consummation

of the transactions contemplated hereby and

 

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thereby will not give rise to termination of any existing collective bargaining

agreement or permit any labor organization to commence or initiate any

negotiations in respect of wages, hours, benefits, severance or working

conditions under any such existing collective bargaining agreements; and (vi)

there is no litigation, arbitration proceeding, governmental investigation,

administrative charge, citation or action of any kind pending or, to the

knowledge of the Shareholders, proposed or threatened against the Company

relating to employment, employment practices, terms and conditions of employment

or wages, benefits, severance and hours.

(b) Section 2.11(b) of the Company Disclosure Schedule lists

the name, title, date of employment and current annual salary of each current

salaried employee whose annual salary exceeds $100,000. The execution and

delivery of this Agreement and the consummation of the transactions contemplated

hereby and thereby will not (i) result in any payment (including severance,

unemployment compensation, tax gross-up, bonus or otherwise) becoming due to any

current or former director, employee or independent contractor of the Company or

any of its subsidiaries, from the Company or any of its subsidiaries under any

Employee Plan or other agreement, (ii) materially increase any benefits

otherwise payable under any Employee Plan or other agreement, or (iii) result in

the acceleration of the time of payment, exercise or vesting of any such

benefits.

(c) Section 2.11(c) of the Company Disclosure Schedule sets

forth all contracts, agreements, plans or arrangements covering any employee of

the Company or its subsidiaries containing "change of control," "stay-put,"

transition, retention, severance or similar provisions, and sets forth the names

and titles of all such employees, the amounts payable under such provisions,

whether such provisions would become payable as a result of the Purchase and the

transactions contemplated by this Agreement, and when such amounts would be

payable to such employees, all of which are in writing, have heretofore been

duly approved by the Company's Shareholders, and true and complete copies of all

of which have heretofore been delivered to Purchaser. There is no contract,

agreement, plan or arrangement (oral or written) covering any employee of the

Company that individually or collectively could give rise to the payment of any

amount that would not be deductible pursuant to the terms of Section 280G of the

Code.

SECTION 2.12 ENVIRONMENTAL MATTERS. Except for such matters which would

not, individually or in the aggregate, reasonably be expected to result in a

material adverse effect on the Company or are listed in Section 2.12 of the

Company Disclosure Schedule, to the best of Shareholder's knowledge:

(a) COMPLIANCE. (i) The Company and its subsidiaries are in

compliance in all material respects with all applicable Environmental Laws; (ii)

neither the Company nor any of its subsidiaries has received any written

communication from any person or governmental entity that alleges that the

Company or any of its subsidiaries is not in compliance with applicable

Environmental Laws; and (iii) there have not been any

 

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Releases of Hazardous Substances by the Company or any of its subsidiaries, or,

by any other party, at any property currently or formerly owned or operated by

the Company or any of its subsidiaries that occurred during the period of the

Company's or any of its subsidiaries' ownership or operation of such property.

(b) ENVIRONMENTAL PERMITS. The Company and its subsidiaries

have all Environmental Permits necessary for the conduct and operation of its

business, and all such permits are in good standing or, where applicable, a

renewal application has been timely filed and is pending agency approval, and

the Company or its subsidiaries are in compliance with all terms and conditions

of all such Environmental Permits and is not required to make any expenditure in

order to obtain or renew any Environmental Permits.

(c) ENVIRONMENTAL CLAIMS. There are no Environmental Claims

pending or, to the Company's knowledge, threatened, against the Company, or

against any real or personal property or operation that the Company owns, leases

or manages.

(d) As used in this Agreement:

(i) "ENVIRONMENTAL LAWS" shall mean any and all binding and

applicable local, municipal, state, federal or international

law, statute, treaty, directive, decision, judgment, award,

regulation, decree, rule, code of practice, guidance, order,

direction, consent, authorization, permit or similar

requirement, approval or standard concerning (A)

occupational, consumer and/or public health and safety,

and/or (B) environmental matters (including clean-up

standards and practices), with respect to buildings,

equipment, soil, sub-surface strata, air, surface water, or

ground water, whether set forth in applicable law or applied

in practice, whether to facilities such as those of the

Company Properties in the jurisdictions in which the Company

Properties are located or to facilities such as those used

for the transportation, storage or disposal of Hazardous

Substances generated by the Company or otherwise.

(ii) "ENVIRONMENTAL PERMITS" shall mean Permits required by

Environmental Laws.

(iii) "HAZARDOUS SUBSTANCES" shall mean any and all

dangerous substances, hazardous substances, toxic

substances, radioactive substances, hazardous wastes,

special wastes, controlled wastes, oils, petroleum and

petroleum products, computer component parts, hazardous

chemicals and any other materials which are regulated by the

Environmental Laws or otherwise found or determined to be

potentially harmful to human health or the environment.

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<PAGE>

(iv) "RELEASE" shall mean any spilling, leaking, pumping,

emitting, emptying, discharging, injecting, escaping,

leaching, migrating, dumping or disposing of Hazardous

Substances (including the abandonment or discarding of

barrels, containers or other closed receptacles containing

Hazardous Substances) into the environment.

SECTION 2.13 INTELLECTUAL PROPERTY.

(a) Section 2.13(a) of the Company Disclosure Schedule sets

forth, for the Intellectual Property (as defined below) owned or purported to be

owned by the Company or any of its subsidiaries, a complete and accurate list of

all U.S. and foreign (i) patents and patent applications, (ii) trademarks and

service marks which are registered or the subject of an application for

registration and material unregistered trademarks or service marks , (iii)

copyrights which are registered or the subject of an application for

registration, and (iv) Internet domain names. The Company or one of its

subsidiaries owns or has the valid right to use all patents and patent

applications, patent rights, trademarks, service marks, trademark or service

mark registrations and applications, trade names, logos, designs, Internet

domain names, slogans and general intangibles of like nature, together with all

goodwill related to the foregoing, copyrights, copyright registrations, renewals

and applications, Software (as defined below), technology, inventions,

discoveries, trade secrets and other confidential information, know-how,

proprietary processes, designs, processes, techniques, formulae, algorithms,

models and methodologies, licenses, and all other proprietary rights

(collectively, the "INTELLECTUAL PROPERTY") that it owns or purports to own or

is licensed to Company in a manner sufficient for the conduct of the business of

the Company as it currently is conducted. "SOFTWARE" means any and all (i)

computer programs, including any and all software implementations of algorithms,

models and methodologies, whether in source code or object code, (ii) databases

and compilations, including any and all data and collections of data, whether

machine readable or otherwise, (iii) descriptions, flow-charts and other work

product used to design, plan, organize and develop any of the foregoing, (iv)

the technology supporting and content contained on any owned or operated

Internet site(s), and (v) all documentation, including user manuals and train


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