ASSET PURCHASE AGREEMENT Among NOVA MEASURING INSTRUMENTS LTD. (Buyer) and HYPERNEX, INC. (The Corporation) and THE PERSONS LISTED ON SCHEDULE 4(a) (The Stockholders) Dated April 24, 2006 E-3



Exhibit4.19

ASSET PURCHASEAGREEMENT

among

NOVA MEASURINGINSTRUMENTS LTD.

(“Buyer”)

and

HYPERNEX, INC.

(the“Corporation”)

and

THE PERSONS LISTEDON SCHEDULE 4(a)

(the“Stockholders”)

dated

April 24, 2006

E-3



TABLE OF CONTENTS

 

 

 

 

 

Page

 

 


1.

Acquisition Transaction

1

 

 

 

2.

Purchase Price; Payment to Employees; Adjustment

3

 

 

 

3.

Employment Agreements, Agreements Not to Compete, Restricted Stock Agreements

6

 

 

 

4.

Representations, Warranties and Agreements of Corporation

6

 

 

 

5.

Representations, Warranties and Agreements of Buyer

25

 

 

 

6.

Continuation and Survival of Representations and Warranties

27

 

 

 

7.

Covenants of the Corporation and Stockholders Prior to Closing

28

 

 

 

8.

Covenants of Buyer Prior to Closing

28

 

 

 

9.

Conditions Precedent to Corporation’s and Stockholders’ Obligation to Close

29

 

 

 

10.

Conditions Precedent to Buyer’s Obligation to Close

29

 

 

 

11.

Termination

30

 

 

 

12.

Closing Date

31

 

 

 

13.

Deliveries by the Corporation at Closing

32

 

 

 

14.

Deliveries by Buyer at Closing

33

 

 

 

15.

Indemnification

33

 

 

 

16.

Board Observer

36

 

 

 

17.

Piggyback Registration Rights

36

 

 

 

18.

Further Assurances

37

 

 

 

19.

Dispute Resolution

37

 

 

 

20.

Representative

38

 

 

 

21.

Miscellaneous

39



EXHIBITS:

 

 

 

Exhibit “A-1” – Form of Employees Employment Agreement

 

 

 

Exhibit “A-2” – Form of Employees Agreement Not to Compete

 

 

 

Exhibit “A-3(i)” – Form of Employees Restricted Stock Agreement

 

 

 

Exhibit “A-3(ii) – Form of Managers Restricted Stock Agreement

 

 

 

Exhibit “B” – Bill of Sale

 

 

 

Exhibit “C” – Assignment of Registrable IP

– ii –



ASSET PURCHASEAGREEMENT

          ASSETPURCHASE AGREEMENT (the “Agreement”), made this 24th day of April, 2006 (the“Execution Date”), by and among Nova Measuring Instruments Ltd., a companyorganized and existing under the laws of the State of Israel (“Buyer”),HyperNex, Inc. a company organized and existing under the laws of the State ofDelaware (the “Corporation”) and the Persons (as hereinafter defined) listed inSchedule 4(a) (each individually, a “Stockholder” and together the“Stockholders”).

BACKGROUND

          TheCorporation is engaged in the business of designing, developing, manufacturingand selling metrology products and services which allow for rapid thin film phaseidentification, and crystallographic texture and grain size data analysis (the“Business”).

          Buyerdesires to engage in the Business in which the Corporation is engaged and toacquire substantially all the assets of the Corporation and assume certainliabilities and the Corporation desires to sell and assign such assets andliabilities to the Buyer all under the terms and conditions hereinafter setforth.

          NOWTHEREFORE, in consideration of the premises and of the mutual covenantshereinafter set forth, the parties hereto, intending to be legally bound,hereby agree as follows:

          1. AcquisitionTransaction.

                    (a)Purchase and Sale of Assets. On theClosing Date (as hereinafter defined), upon the terms and conditions herein setforth, Buyer agrees to purchase from the Corporation, and the Corporationagrees to sell, transfer, convey and deliver to Buyer, all of the AcquiredAssets (as hereinafter defined) in consideration of the assumption ofliabilities as provided in subsection 1(c) and the payment specified inSection 2. As used herein,“Acquired Assets” shall mean the Corporation’s right, title to and interest inall of the properties, rights and assets of the Corporation, wherever situated,of every kind, nature and description, tangible or intangible, whether arisingby contract, law or otherwise, except for the Excluded Assets (as hereinafterdefined), all as the same shall exist on the Closing Date, including, withoutlimitation, the following:

                         (i)all account receivable due to the Corporation;

                         (ii)all prepaid expenses and deposits;

                         (iii)all furniture, fixtures, equipment and other fixed assets and leaseholdimprovements used by the Corporation;

                         (iv)all inventory and all work in production, preparation or process, in each casewhether in the possession of the Corporation or third parties;



                         (v)all lists, mailing lists, documents, information and records (whether inprinted form or computer or other electronic media) related, in each case, topast, present and prospective customers of the Corporation;

                         (vi)copies of all existing files, accounting records, correspondence, internalreports and contractual documents, including databases and records (whether inprinted form or computer or other electronic media);

                         (vii)all promotional materials, market research studies, and sales media;

                         (viii)all rights of the Corporation in the Corporation Intellectual Property (ashereinafter defined) including the right to the Corporation’s name “HyperNex,Inc.”;

                         (ix)all rights, powers, privileges and claims arising under any contract,agreement, commitment or arrangement of any kind including all CompanyAgreements (as hereinafter defined);

                         (x)all licenses, permits and approvals that are transferable or assignable;

                         (xi)all rights of the Corporation in the software, software systems, databases anddatabase systems, whether owned, leased or licensed; and

                         (xii)all of the goodwill and going concern value related to the Corporation and theBusiness.

                    (b)Excluded Assets. Notwithstanding anyother provision of this Agreement, the “Acquired Assets” shall not include:

                         (i)copies of the Corporation’s company books and records of internal companyproceedings, tax records and work papers that the Corporation required by lawto retain;

                         (ii)Corporation’s charter, governing documents, corporate minute books and stocktransfer records; and

                         (iii)Corporation’s rights under this Agreement.

                    (c)Assumption of Liabilities. With theexception of those liabilities expressly assumed by Buyer in accordance withthe provisions of subsection 1(d) (the “Assumed Liabilities”), Buyer does notassume and shall in no event be liable for any debts, liabilities orobligations of the Corporation or any Stockholder, whether fixed or contingent,known or unknown, liquidated or unliquidated, secured or unsecured, orotherwise (“Excluded Liabilities”).Without limiting the foregoing, Buyer does not assume:

                         (i)any liability for Taxes (as hereinafter defined) payable for any periods priorto and including the Closing Date, unless specifically set forth on Schedule1(d)(i);

– 2 –



                         (ii)any liability or obligation to any employee, director, officer or stockholderof the Corporation, including without limitation, any liability in connectionwith any Employee Benefit Plan (as hereinafter defined) not specifically setforth on Schedule 1(d)(i);

                         (iii)any trade payables not specifically set forth on Schedule 1(d)(i);

                         (iv)unless specifically set forth on Schedule 1(d)(i), any liability or obligation for brokerage commissions, finders’fees or professional services of any kind, including attorneys’ fees, incurredin connection with the negotiation and execution of this Agreement and theconsummation of the transactions contemplated hereby whether or not disclosedin this Agreement;

                         (v)any liability or obligation arising under any arbitration or litigationproceeding, whether or not disclosed in this Agreement, unless such liabilityis pursuant to a settlement agreement executed prior to the date hereof andincluded herein as an Assigned Contract (as hereinafter defined);

                         (vi)any liability or obligation arising from events occurring on or prior to theClosing Date, whether or not disclosed in this Agreement, arising from (A)environmental matters, (B) the infringement by the Corporation upon anyintellectual property rights of others, or (C) the failure to comply with anyrequirements of law or any requirements of governmental bodies or agencies havingjurisdiction over the Corporation, the Acquired Assets or the conduct of theBusiness; and

                         (vii)any liability or obligation arising as a result of, or which existenceconstitutes, a breach of any of the Corporation’s representations, warrantiesor covenants contained in this Agreement.

                    (d)On the Closing Date, upon the terms and conditions herein set forth, Buyeragrees to assume and become responsible for only the liabilities that areAssumed Liabilities. As used herein,“Assumed Liabilities” shall mean:

                         (i)all liabilities and obligations set forth on Schedule 1(d)(i); and

                         (ii)all liabilities, obligations and agreements accruing after the Closing Date underthe terms of such agreements, contracts or arrangements specifically set forthon Schedule 1(d)(ii) (each, an “Assigned Contract”).

          2.Purchase Price; Payment to Employees; Adjustment.

                    (a)In consideration of the sale, conveyance, transfer and assignment of theAcquired Assets to Buyer, Buyer shall pay the Corporation, in ordinary sharesof Buyer, each having a par value of NIS 0.01 (“Buyer Shares”) the following:

                         (i)at the Closing, Buyer shall issue to the Corporation 883,350 Buyer Shares. The Buyer Shares issued pursuant to thissubsection 2(a)(i) are deemed to constitute the consideration being paid forthe Acquired Assets and are referred to herein as the “Consideration Shares.”

– 3 –



                         (ii)475,650 Buyer Shares (the “Holdback Shares”) will be issued to the Corporationfifteen (15) months after the Closing Date (as hereinafter defined) (the“Release Date”); provided, however, that if any dispute pursuant to subsection2(c)or Section 15 herein is not resolved on or prior to the Release Date, then(A) the undisputed portion of the Holdback Shares will be issued to theCorporation on the Release Date and, (B) the remainder of the Holdback Shareswill be issued to the Corporation within five (5) business days of resolutionof such dispute. In the event thatprior to such time the Corporation shall have distributed to the Stockholders,the right to receive the pro rata share of the Holdback Shares, the HoldbackShares will be issued by Buyer to the Stockholders and allocated in accordancewith the percentage set forth opposite each Stockholder’s name onSchedule 4(a) or as otherwise instructed in writing by the Representative(as hereinafter defined).

                    (b)To encourage certain employees of the Corporation listed in Schedule 2(b)(each, an “Employee” and together the “Employee”) including David S. Kurtz,Krzystof J. Kozaczek and Paul Moran (each, a “Manager” and together the“Managers”) to dedicate their efforts and attention to the Buyer’s business andin consideration of the Employees executing such agreements and instruments asset forth in Section 3 herein, Buyer shall issue Buyer Shares to the Employees(collectively, “Employees Shares”) as follows:

                         (i)at the Closing, Buyer shall issue to the Employees (to be allocated among theEmployees in accordance with thepercentages set forth opposite each Employee’s name or as otherwise specifiedon Schedule 2(b)) 286,650 Buyer Shares.The Buyer Shares issued pursuant to this subsection 2(b)(i) are referredto herein as the “Employees Consideration Shares.”

                         (ii)154,350 Buyer Shares (the “Employees Holdback Shares”) will be issued to theEmployees (to be allocated among the Employees in accordance with thepercentages set forth opposite each Employee’s name on Schedule 2(b)) on theRelease Date; provided, however, that if any dispute pursuant to subsection2(c) or Section 15 herein is not resolved on or prior to the Release Date, then(A) the undisputed portion of the Employees Holdback Shares will be issued tothe Employees on the Release Date and, (B) the remainder of the EmployeesHoldback Shares will be issued to the Employees within five (5) business daysof resolution of such dispute.

                    (c) 1. It is the intention of the parties that the Acquired Assets’ Net Worth(as hereinafter defined) at the Closing (the “Closing Net Worth”) be equal toor greater than (-$2,996,478). If theClosing Net Worth is determined to be less than (-$2,996,478) then 75.5% of theDeductible Shares (as hereinafter defined) shall be deducted from the HoldbackShares and 24.5% of the Deductible Shares shall be deducted from the EmployeesHoldback Shares. As used in thisAgreement, the term “Net Worth” means the amount by which the sum of the bookvalue of the Acquired Assets of the Corporation exceeds the sum of the bookvalue of the Assumed Liabilities, all as recognized, calculated and determinedin accordance with US GAAP consistently applied with prior periods. “Deductible Shares” shall mean the amount ofBuyer Shares, received by dividing: (x) the difference between (-$2,996,478)and the Closing Net Worth; by (y) the per share closing price of the BuyerShares on the Nasdaq stock market as of the Closing Date.

– 4 –



                         (i)Within sixty (60) days following the ClosingDate, Buyer shall prepare and deliver to the Corporation balance sheetsetting forth the Closing Net Worth (the “Net Worth Statement”), which NetWorth Statement shall set forth in reasonable detail the determination andcalculation of the Closing Net Worth.If and to the extent not within the control of Buyer, then for purposesof preparing the Net Worth Statement, the Representative shall make reasonablyavailable to Buyer (and Buyer’s accountants, attorneys, agents, andrepresentatives) during normal business hours, the books and records (includingany accountants work papers) of the Corporation upon reasonable advance noticeto the Representative, and shall otherwise cooperate in good faith with Buyerwith respect to the preparation of said Net Worth Statement. For a period of thirty (30) days afterreceipt by the Representative of the Net Worth Statement, the Representativeshall have the right to review such Net Worth Statement. Unless Buyer shall receive notice from theRepresentative within such 30-day period to the effect that the Corporationdisputes one or more amounts or items shown on the Net Worth Statement, the NetWorth Statement (including the determination and calculation of the Closing NetWorth set forth in the Net Worth Statement) shall be final, conclusive andbinding on the parties hereto. Any suchnotice from the Representative to Buyer disputing one or more amounts or itemson the Net Worth Statement as aforesaid shall specify in reasonable detail thenature and amount of said dispute or disputes.

                         (ii)If Buyer receives notice from the Representative within the aforementioned 30-dayperiod that Representative disputes one or more amounts or items shown on theNet Worth Statement, then Buyer and the Representative shall promptlythereafter meet in good faith to attempt to resolve any and all such disputedamounts or items. If and to the extentBuyer and the Representative resolve any such disputed amount or item, thensuch resolution shall be set forth in a writing signed by Buyer and theRepresentative . If and to the extentBuyer and the Representative are unable to agree upon a resolution of anydisputed amount or item within fifteen (15) days after receipt by Buyer of theRepresentative’s notice regarding the existence of such disputed amount oritem, then such disputed amount or item shall be resolved by an independentnationally recognized accounting firm, selected by mutual written agreement ofBuyer and Representative, which is not then providing, and has not provided atany time during the period commencing one-year prior to the Closing Datethrough the date of their determination pursuant to this subsection 2(c)(iii),services to any of (a) Buyer or any an individual, corporation, partnership,limited liability company, joint stock company, association, trust, estate,unincorporated organization, or other entity or group (each, a “Person”) whocontrols, is controlled by or is under a common control with the Buyer (an“Affiliate”) or (b) Corporation or any of its Affiliates (“IndependentAccountants”). Upon their appointment,the Independent Accountants shall certify to Buyer and the Corporation inwriting that they satisfy the foregoing qualifications. If Buyer and the Representative are unableto agree on mutually acceptable Independent Accountants during the aforesaid15-day period, then such Independent Accountants shall be selected, within ten(10) days thereafter, by mutual agreement of Buyer’s independent publicaccountant and Corporation’s independent public accountant joint notice of whichappointment shall be provided by such accountants to Buyer and the Corporation. Unless otherwise agreed by Buyer and theRepresentative, Buyer and the Corporation shall each have the opportunity tomake a written submission to the Independent Accountants with respect to thedisputed amounts or items setting forth their positions and analysis, alongwith reasonable supporting documentation (which may include this Agreement, theNet Worth Statement and the Representative’s notice disputing the same, and anyagreements of Buyer and Representative resolving any disputes with respect thereto),provided that such submissions are made within ten (10) business days aftereither (x) the date on which Buyer and the Representative mutually agree tosuch Independent Accountants, or (y) dates on which Buyer and theRepresentative, respectively, receive the aforesaid joint notice of theappointment of the Independent Accountants, as the case may be. Unless otherwise agreed in writing by Buyer,the Representative and the Independent Accountant, the Independent Accountantshall resolve the disputes based solely on the written submission orsubmissions received by the Independent Accountant, and there shall be no oralpresentations. Buyer and theCorporation shall instruct the Independent Accountants to promptly resolve suchdisputes and provide joint written notice of the resolutions of such disputessimultaneously to Buyer and the Representative. The resolution of such disputed amounts and items by theIndependent Accountants shall be final, conclusive and binding upon allparties. The fees and expenses of the Independent Accountants shall be borneequally by Buyer, on one hand, and the Representative, on the other hand.

– 5 –



                    (d)Allocation of Consideration. Buyer andthe Corporation shall agree to allocate the aggregate amount of ConsiderationShares and Holdback Shares to be issued under this Agreement, among theAcquired Assets for all purposes (including financial accounting and taxpurposes) substantially in accordance with the allocation schedule set forth onSchedule 2(d). Such allocation shall bebinding upon the parties. Buyer, theCorporation and the Stockholders agree to conform with such allocation inreporting the sale of the Acquired Assets for federal, state and local incometax purposes, and in filing all information returns, including IRSForm 8594.

          3.Employment Agreements, Agreements Not to Compete, Restricted StockAgreements. At or prior to Closing,Buyer (or such subsidiary of Buyer asBuyer may direct) and the Employees shall enter into employment agreements,agreements not to compete and restricted stock agreements substantially in theforms attached hereto as Exhibit “A-1” (the “Employees Employment Agreements”),Exhibit “A-2” (the “Employees Agreements Not to Compete”), Exhibit “A-3(i)” (“EmployeesRestricted Stock Agreements”) and Exhibit “A-3(ii)” (“Managers Restricted StockAgreements”).

          4. Representations, Warranties and Agreementsof Corporation. As material inducementto Buyer to enter into this Agreement and to close hereunder, the Corporationhereby makes the following representations, warranties and agreements to andwith Buyer, which representations, warranties and agreements shall be true andcorrect as of the date of this Agreement and as of the Closing Date:

                    (a)Corporate Status of the Corporation.The Corporation is a corporation duly organized, validly existing and ingood standing under the laws of the State of Delaware and has the power andauthority to own its properties and to carry on its business as it is now beingconducted, and is duly qualified to do business as a foreign corporation in thejurisdictions specified in Schedule 4(a), which constitute(s) all thejurisdictions in which the failure to so qualify would have an adverse effect onthe Corporation. The Stockholderslisted on Schedule 4(a) are the record and beneficial holders of all theissued and outstanding shares of capital stock of the Corporation. Schedule 4(a) lists (i) the authorizedcapital stock of the Corporation; and (ii) the number of shares of capitalstock of the Corporation held by each shareholder. Except as set forth on Schedule 4(a) no shares of thecapital stock of the Corporation are issued and outstanding or reserved for anypurpose, and there is no outstanding option warrant or any other agreement orinstrument granting any Person the right to acquire any shares of the capitalstock of the Corporation. The minutebooks and stock records or similar documentation of the Corporation arecomplete and accurate in all material respects and all signatures includedtherein are the genuine signatures of the Persons indicated as signing. True,correct and complete copies of the Corporation’s minute books and stock recordsor similar documentation, including the Corporation’s Certificate ofIncorporation and Bylaws and all amendments thereto to date, have beendelivered to Buyer. The Corporation isnot in default under or in violation of any provision of its Certificate ofIncorporation or Bylaws.

– 6 –



                    (b) Due Authorization and Validity of Agreement. The Corporation has the requisite corporate power and authorityto enter into, execute, deliver and perform this Agreement and the otheragreements, documents or certificates being executed and delivered pursuant tothis Agreement, and to consummate all transactions contemplated hereby. The execution, delivery and performance ofthis Agreement and each other document, instrument or agreement contemplatedhereby have been duly authorized by all necessary corporate action on behalf ofCorporation and on behalf of each Stockholder which is a corporate entity. This Agreement constitutes the valid andbinding obligation of the Corporation and Stockholders enforceable inaccordance with its terms except as enforceability may be limited bybankruptcy, insolvency, moratorium and other similar laws affecting creditors’rights generally and by general principles of equity, whether considered in aproceeding at law or in equity.

                    (c) No Violationor Approval. The execution, delivery and performance of this Agreement and theconsummation of the transactions contemplated hereby and thereby, by theCorporation or any Stockholder will not result in a breach or violation of, ora default under, the Certificate of Incorporation of the Corporation, anystatute applicable to the Corporation or any agreement to which the Corporationis a party or by which the Corporation or any of the Acquired Assets are bound,any fiduciary duty or any order, judgment, decree, rule or regulation of anycourt having jurisdiction over the Corporation or the Acquired Assets. No consent, approval, order or authorizationof, or negotiation, declaration or filing with, any Federal, state or municipalauthority or other Person is required of the Corporation in connection with theexecution, delivery, and performance of this Agreement or the consummation ofany of the transactions contemplated hereby or thereby, by theCorporation.

                    (d) Subsidiaries and Joint Ventures.The Corporation does not own or control and has never owned orcontrolled any direct or indirect interest of any kind in any corporation,limited liability company, partnership, joint venture, association or any otherPerson.

                    (e) Officers; Directors; Bank Accounts. Set forth on Schedule 4(e) is a correctand complete list of all directors and officers of the Corporation, all bankaccounts and safe deposit boxes of the Corporation and all persons authorizedto sign checks drawn on such accounts and to have access to such safe depositboxes.

– 7 –



                    (f) Financial Statements. TheCorporation has provided the Buyer true and complete copies of the consolidatedfinancial statements of the Corporation consisting of (i) auditedconsolidated balance sheets of the Corporation as of December 31 2005,2004 and 2003, and the related audited consolidated statements of income,changes in owners’ equity and cash flows for the calendar years then ended(including the notes or other supplementary information thereto) (the “Year-EndFinancial Statements”) and (ii) a reviewed, unaudited consolidated balancesheet of the Company as of March 31, 2006, and the related unauditedconsolidated statements of income, changes in owners’ equity and cash flows forthe three months then ended (the “Interim Financial Statements,” and,collectively with the Year-End Financial Statements, the “FinancialStatements”). copies of all of which constitute Schedule 4(f). The Financial Statement were prepared in accordance withUS GAAP,consistently applied throughout the periods reported upon and with past periods(except for inconsistencies resulting from the revenue recognition policyrestatement described in the financial statements for the year ended December31, 2005), and fairly and accurately present the financial position of theCorporation as at the dates of such balance sheets, and the results of theoperations and cash flows of the Corporation for the periods ended on such dates,except that the Interim Financial Statements are subject to normal andrecurring year-end adjustments. Thefinancial statements as of and for the one year period ended December 31, 2005were audited by Urish Popeck & Co., LLC whose reports are included in suchfinancial statements. The financialstatements for the one-year periods ended December 31, 2004 and 2003, wereaudited by Parente Randolph, LLP whose reports are included in such financialstatements.

                    (g) Title toAssets. The Corporation has good and marketable title to all of theAcquired Assets in each case free and clear of any and all liens, pledges,claims, security interests, encumbrance, rights and options (collectively,“Liens”). No claim has been asserted byany Person to prevent or in any way limit the use by the Corporation of any ofthe Acquired Assets or challenging the validity or effectiveness of theCorporation’s ownership thereof, and the Corporation is not aware of any suchclaims. Except as set forth on Schedule 4(g),none of the rights of the Corporation in the Acquired Assets arises pursuant tocontract rights (i) that by their termsare not assignable without the consent of the other contracting party or parties,(ii) that may be terminated by the other party thereto as a result of theconsummation of the transactions contemplated by this Agreement, or (iii) inrespect of which the consummation of the transactions contemplated by thisAgreement would create a default. TheAcquired Assets include all assets necessary to conduct the Business aspresently conducted by the Corporation.

                    (h) Real Estate.

                         (i)The Corporation does not have any obligation or duty relating to, or any right,title or interest in, any real estate except for the single property disclosedon Schedule 4(h)(i) which the Corporation leases (the “Leased Property”). Except as set forth in Schedule 4(h)(i), theLeased Property is available to be used without restriction in the conduct andoperation of the business of the Corporation.The Leased Property is in good operating condition and repair and doesnot require any repairs other than normal routine maintenance to maintain themin good condition and repair.

                         (ii)The Corporation has not received any written notice from any insurance companywhich has issued a policy with respect to the Leased Property or from anypublic official or board of fire underwriters (or other body exercising similarfunctions) claiming any defects or deficiencies in, or suggesting or requestingthe performance of any repairs, alterations or other work to, the LeasedProperty, except for any written notices as to which all defects and suggestedrepairs, alterations or other work have been fully performed. The Corporation has not received any writtennotice from the applicable Landlord that such Landlord’s insurance premium forLandlord’s fire and extended coverage insurance for the building of which the Corporation’sLeased Property is a part has increased on account of the operations andactivities conducted by the Corporation at its Leased Property.

– 8 –



                         (iii)There are no property management, service, equipment, supply, security,maintenance, construction, concession or other agreements with respect to oraffecting the Leased Property that will burden Buyer after the date hereof,except as disclosed on Schedule 4(h)(iii).

                         (iv)All certificates of occupancy or similar documentation and all other licenses,permits, authorizations, consents, certificates and approvals required by allgovernmental authorities having jurisdiction over the Leased Property to theextent required to be obtained by the tenant or subtenant under the Lease (ashereinafter defined) for the Leased Property and any requisite certificates ofthe local board of fire underwriters (or other body exercising similarfunctions) have been issued for the Leased Property, have been paid for (to theextent applicable), are unconditional, valid and in full force and effect, andwill not be invalidated, violated or otherwise adversely affected by theexecution or performance of this Agreement or the consummation of any of thetransactions contemplated herein. TheCorporation is, to its knowledge, (A) in compliance with all provisions of theAmericans with Disabilities Act and the regulations promulgated thereunder withrespect to the Leased Property, and (B) in material compliance with all lawsapplicable to the use and occupancy by a tenant of the Leased Property.

                         (v)(A) All leases or subleases and any and all amendments and supplements thereto(collectively, the “Leases”) of the Leased Property, whether oral or written,are disclosed on Schedule 4(h)(v), including for each its date, the name of thelandlord (and owner if different from the landlord), the name of the lessee andany sublessee, the location and use of the property, the monthly base rentalpayment, any scheduled or formula increases or decreases in base rent, adescription of any provisions for tax or expense pass-throughs, the amount ofany security deposit, the lease expiration date, all options to renew,expansion rights, termination rights, unfunded tenant improvement allowancesand rights of first offer or refusal to purchase or lease and whether there areany non-disturbance agreements from mortgagees or paramount lessors; (B) TheCorporation has delivered to Buyer true, correct and complete copies of allLeases, and all such non-disturbance agreements; (C) except as disclosed onSchedule 4(h)(v), the Corporation is the holder of the lessee’s or sublessee’sinterest, as applicable, in each Lease and the Corporation has not assigned anyLease or any interest therein or subleased any portion of the Leased Property;(D) each Lease is in full force and effect; (E) the Corporation is paying itsrent currently and has not asserted any claim for set-off against rent whichhas not been resolved; (F) the Corporation is not, and, to the knowledge of theCorporation, each landlord under any Lease is not, in default under any Lease,and no event has occurred which, with the giving of notice or passage of timeor both, would constitute a default by the Corporation or, to the knowledge ofthe Corporation, any landlord under any Lease; and (G) neither the execution orperformance of this Agreement nor the consummation of any of the transactionscontemplated herein will result in a breach of or constitute a default underany of the Leases.

– 9 –



                    (i)Personal Property. Except as disclosedon Schedule 4(i), (A) the Corporation is the owner, lessee or licensee of allthe personal property now located in or upon the premises occupied by the Corporationand of all personal property that it uses in the operation of its business (acomplete list of which is set forth on Schedule 4(i), (B) all equipment,furniture and fixtures, and other tangible personal property of the Corporationis in good operating condition and repair and does not require any repairsother than normal routine maintenance to maintain such property in goodoperating condition and repair, and (C) all of the Corporation’s inventorycarried at any value on the Corporation’s balance sheet of December 31,2005 (including raw materials and work in process) is usable in the ordinarycourse of its business and is free from material defects and all finished goodsare salable to the Corporation’s knowledge at customary profit margins in theordinary course of its business.

                    (j)Intellectual Property.

                         (i)The Corporation owns or has the right to use all patents, trademarks, servicemarks, trade names, trade dress, domain names, logos, designs, corporate namesand copyrights (including issued patents, registrations and applicationspertaining thereto (whether or not filed) and extensions, continuations,renewals or divisions of any such issued patents, registrations orapplications) and all other intellectual property rights, trade secrets,processes, formulas, know-how, inventions, customer lists, supplier lists,manufacturer lists, manuals and other confidential or proprietary information,processes and formulae used in the Business or otherwise necessary for theconduct of its Business (collectively, “Intellectual Property”), free and clearof all Liens except as otherwise disclosed on Schedule 4(j)(i). Schedule 4(j)(i) contains a completeand accurate list of all Intellectual Property owned or used by the Corporationor used by the Corporation (“Corporation Intellectual Property”), whichincludes a separate list of all U.S. and foreign registered patents trademarksand service marks and applications for registration of any marks, domain nameregistrations, all registered copyrights and applications for registration ofcopyrights, and all filed patent applications and issued patents and inventiondisclosures of the Corporation (collectively, “Registrable IP”).

                         (ii)Schedule 4(j)(ii) contains a complete and accurate list of all of theCorporation’s Intellectual Property licensed by the Corporation (“LicensedIntellectual Property”) and all agreements for the use of all such LicensedIntellectual Property.Schedule 4(j)(ii) contains a complete and accurate list of alldomain name registrations owned or held by or for the Corporation, the dates ofeach registration and renewal, the registrars, user names and passwords foreach registration, and any disputes regarding such domain names.

                         (iii)The Corporation has used reasonable efforts to ensure that any trade secret (A)have been treated as confidential and proprietary and (B) have been disclosedby the Corporation only to (1) employees and contractors who have had a “needto know” the contents thereof in connection with the performance of theirduties to the Corporation and who have executed written agreements requiringthe recipient to keep the information in strict confidence, or (2) existing orprospective customers and strategic business contacts who have executed writtenagreements requiring the recipient to keep the information in confidence. There has been no violation by any Personthat has resulted, or would result, in the loss of protection of any trade secretor confidential information of the Corporation.

– 10 –



                         (iv)Except as disclosed in Schedule 4(j)(iv), all Persons who now, or have beenduring the three (3) year period prior to the date of this Agreement,employees, agents, consultants and/or contractors of the Corporation, who havecontributed to or participated in any material way in the conception and/ordevelopment of Intellectual Property for or on behalf of the Corporation haveexecuted nondisclosure agreements in the form provided to Buyer and either (A)have been a party to a “work-for-hire” arrangement or agreements with theCorporation in accordance with applicable law that has accorded the Corporationexclusive ownership of all tangible and intangible property thereby arising, or(B) have executed appropriate instruments of assignment in favor of theCorporation as assignee that have conveyed to the Corporation exclusiveownership of all tangible and intangible property thereby arising, with theresult that the Corporation is the sole and exclusive owner of, withoutlimitation, all right, title and interest in and to the CorporationIntellectual Property.

                         (v)The existence and the manufacture, importation into any country in the world,offering for sale, license, lease, transfer, use, reproduction, distribution,modification or other exploitation by the Corporation of any CorporationIntellectual Property, as Corporation Intellectual Property, is or was, or iscurrently contemplated to be, sold, licensed, leased, transferred, used orotherwise exploited by such Persons, does not and will not (A) infringe on anypatent, trademark, copyright or other intellectual property right of anyPerson, (B) constitute a misuse or misappropriation of any trade secret,know-how, process, proprietary information or other Intellectual Property ofany other Person or (3) entitle any other Person to any interest therein,or right to compensation from the Corporation.The Corporation has not received from any other Person any notificationwith respect to any matters of the type contemplated by the immediatelypreceding sentence. There are norestrictions on the Corporation’s ability to manufacture, import, market, offerfor sale, sell, license, lease, transfer, use, reproduce, distribute, modify,disclose or otherwise exploit any Corporation Intellectual Property. The Corporation has no knowledge of anyinfringement, misappropriation or other violation of any CorporationIntellectual Property by any third Person.

                    (k)Software. The Corporation has the rightto use, or is indemnified for or otherwise protected from any risk for using,the computer software used by the Corporation in connection with itsbusinesses. The Corporation has noknowledge of any claim or proceeding asserted or threatened in whichinfringement by such software upon the rights of any third parties isalleged. The Corporation has compliedin all material respects with all of their software license agreements. The Corporation shall not be in breach ofany software license agreement as a result of entering into this Agreement orby consummating any of the transactions contemplated hereunder.

                    (l)Accounts Receivable. Each of theaccounts receivable of the Corporation outstanding as of the Closing Dateconstitutes on such date a valid claim in the full amount thereof against thedebtor charged therewith on the books of the Corporation and was acquired inthe ordinary course of the Corporation’s business. No account debtor has any valid set-off, deduction or defensewith respect thereto and no account debtor has asserted any such set-off,deduction or defense. Such accountsreceivable will be fully collected to the extent of the face value thereof.

– 11-



                    (m)Insurance. The Corporation maintains insurance policies bearing thenumbers for the terms, with the companies, in the amounts, having the namedinsureds, providing the general coverage, and with the premiums disclosed onSchedule 4(m). All of such policies are in full force and effect, theCorporation is not in default of any provision thereof and all premiums due(without regard to any grace period) with respect to such policies have beenpaid. The Corporation has not been refused any insurance for which it hasapplied and has not received notice from any issuer of any policy issued to itof the insurer’s intention to cancel or refusal to renew any such policy issuedby such insurer. True, correct and complete copies of all such policies havebeen delivered to Buyer.

                    (n)Liabilities. At the Closing, the Corporation shall not have anyliabilities, whether fixed, contingent, or otherwise, except as and to theextent reflected on the Net Worth Statement or disclosed on Schedule 4(n).

                    (o)Contracts, Leases, Agreements and Other Commitments.

                         (i)All of the Company Agreements (as hereinafter defined) are in full force andeffect and are valid, binding and enforceable against the Corporation andagainst the other respective parties thereto, in accordance with theirrespective terms. The Corporation and all other parties to all of the CompanyAgreements have performed all obligations required to be performed to dateunder the Company Agreements and neither the Corporation nor any such otherparty is in default or in arrears under the terms thereof, and no conditionexists or event has occurred which, with the giving of notice or lapse of timeor both, would constitute a default thereunder or otherwise result in anypayment obligations on the part of the Corporation not reserved for in thebooks of the Corporation. Except as set forth in Schedule 4(o)(i), theexecution of this Agreement and the consummation of the transactions contemplatedhereby do not and will not, with or without the giving of notice, the lapse oftime, or both, result in an impairment or termination of, or result in a breachof any of the terms or provisions of, or constitute a default under, orconflict with, any Company Agreement. None of the terms or provisions of anyCompany Agreement adversely affects, or with the passage of time may reasonablybe anticipated to adversely affect, the business, prospects, conditions,affairs or operations of the Corporation or any of its properties or assets.The Corporation has not received any notice of any intention by any party toterminate or amend any Company Agreement.

                         (ii)Schedule 4(o)(ii) discloses (A) all outstanding written and oral proposals,bids, offers or guaranties made by the Corporation, which, if accepted, wouldresult in any or could impose any debts, obligations or liabilities upon theCorporation, and (B) all unexpired warranties relating to the Corporation’sproducts or services, detailing the products or services covered by eachwarranty (the “Product Warranties”).

                         (iii)For purposes of subsection 4(o) the term “Company Agreements” means (A) anymaterial written, oral or implied contract or agreement, including but notlimited to any contract or agreement for the purchase or sale of merchandise orfor the rendition of services, (B) any material written, oral or implied lease,or (C) any written, oral or implied power of attorney, guaranty, surety arrangementor other commitment granted by the Corporation to or for the benefit of anythird party. A “material” agreement, contract or lease shall mean an agreement,contract or lease pursuant to which the Corporation is obligated to pay, orprovide services valued at, or is entitled to receive, amounts in excess of$5,000. Any lease of real property shall be deemed a material lease. Schedule4(o)(iii) contains a complete list of all Company Agreements. True and correctcopies of all Company’s agreements have been provided to the Buyer.

– 12 –



                    (p)Labor Relations, Employees.

                         (i) Set forth on Schedule 4(p)(i) is a list (which with respect to any oralagreement, commitment or arrangement also contains a description) of:

                              (A)all employment agreements to which the Corporation is a party or by which it isbound;

                              (B)all non-compete and non-solicitation agreements to which the Corporation is aparty or by which it is bound;

                              (C)all agreements protecting proprietary or confidential processes to which theCorporation is a party or by which it is bound; and

                              (D)all independent contractor or consulting agreements to which the Corporation isa party or by which it is bound.

                         (ii)Set forth on Schedule 4(p)(ii) is a list of all employees of theCorporation, broken down by location, together with their exempt or non-exemptstatus, rate of base compensation, compensation arrangement (including wage orsalary increases, bonus or increase in any other direct or indirectcompensation), job title, original date of hire, accrued vacation benefits,sick leave benefits (including information as to whether or not such benefitsare payable in cash upon termination of employment) and any severance benefitsto which each employee is entitled, and other similar benefits, for eachemployee of the Corporation performing services for the Corporation.

                         (iii)The Corporation has delivered to Buyer true, complete and correct copies of allof the documents referred to in Schedule 4(p)(i) hereof and all of thepersonnel policies, handbooks, procedures, and forms of employment applicationsrelating to the employees of the Corporation.

– 13 –



                         (iv)(A) there is no union representing or purporting to represent any of theemployees of the Corporation and the Corporation is not subject to anycollective bargaining agreements with any union representing or purporting torepresent the employees of the Corporation; (B) there have been no strikes,slowdowns, or other work stoppages, lockouts, grievance proceedings,arbitrations, labor disputes, lawsuits, administrative proceedings orrepresentation questions pending or, to the knowledge of the Corporation,threatened, between the Corporation on the one hand, and any labor unionrepresenting or purporting to represent any employees of the Corporation, onthe other; (C) the Corporation is in compliance and has at all times compliedwith all laws relating to the employment, and employment practices including,but not limited to, equal employment opportunity laws including the obligationsnot to discriminate on the basis of age, sex (including sexual harassment,religion, national origin, disability or any other status protected by Federal,state or local law and the obligation not to retaliate under Federal, state orlocal law); wage and hour laws including the Fair Labor Standards Act (“FLSA”)and state law; family medical leave laws including the Family Medical Leave Act(“FMLA”) and state law; immigration laws including the Immigration Reform andControl Act (“IRCA”); benefit-related laws including the Consolidated OmnibusBudget Reconciliation Act (“COBRA”); health and safety laws including theOccupational Safety and Health Act (“OSHA”); law related to the notice oflayoff or termination and payment in the absence thereof including the WorkerAdjustment and Retraining Notification Act (“WARN”); workers compensation andcollective bargaining laws including the National Labor relations Act (“NLRA”);the payment of social security, unemployment compensation and similar taxes.The Corporation is not liable for any arrears of wages or any taxes orpenalties for failure to comply with any of the foregoing; and (D) there are noand since the Corporation’s inception there have never been any charges, suits,actions, administrative proceedings or investigations, and/or claims, institutedby or against, pending, or, to the knowledge of the Corporation, threatenedagainst, affecting, naming and/or involving the Corporation, whether domesticor foreign, before any court, governmental agency, department, board ofinstrumentality, or before any arbitrator (collectively “Actions”), concerning,or in any way related to the employees or to the employment practices of theCorporation, including, without limitation, Actions involving unfair laborpractices, collective bargaining, failure to pay wages or overtime, breach ofimplied or express employment contract, wrongful discharge and/or any otherrestriction on the right of the Corporation to terminate its respectiveemployees, employment discrimination or retaliation, occupational safety andhealth, workers’ compensation family and medical leave, violations of anywhistleblower protection and notice of layoff or termination;

                         (v)No action has been taken that could result in an involuntary termination of theemployment of a substantial number of the Corporation employees on or prior tothe Closing Date which could give rise to any obligation under WARN or anysimilar state or local law.

                         (vi) There are no express or implied agreements, policies, practices, orprocedures, whether written or verbal, pursuant to which any employee or agentor contractor of the Corporation is not terminable at will. The Corporation hasno knowledge of, or reason to believe that, any senior employee of the Corporationwill leave the employ of the Corporation as a result of the transactionscontemplated hereby.

– 14 –



                    (q)Employee Benefit Plans.

                         (i)Schedule 4(q)(i) is a complete and accurate list of all employee benefit planswhich the Corporation and any of its ERISA Affiliates (as hereinafter defined)maintain, sponsor, contribute to, are liable for (directly or indirectly) orare bound, legally or otherwise, including, without limitation, any profitsharing, deferred compensation, bonus, payroll, sick leave, consulting, stockoption, stock purchase, stock bonus, employee stock ownership plan (within themeaning of Section 4975(e)(7) of the Code), pension, retainer, retirement,vacation, change of control, disability, severance, insurance, welfare orincentive pay policy, agreement, practice or arrangement; any plan, agreementor arrangement if providing for fringe benefits or perquisites to employees,officers, directors or agents of the Corporation and any of its ERISAAffiliates, including but not limited to benefits relating to employer suppliedautomobiles, clubs, medical, dental, hospitalization, life insurance and othertypes of insurance, retiree medical, retiree life insurance and any other typeof benefits for retired and terminated employees; any employment agreement; andany other plan, policy agreement or arrangement whether or not an “employeebenefit plan” (within the meaning of Section 3(3) of the Employee RetirementIncome Security Act of 1974, as amended (“ERISA”) through the date of thisAgreement) (herein referred to individually as “Plan” and collectively as“Plans”). For purposes of this Agreement, “ERISA Affiliate” means all Personswhich are treated as being under common control with the Corporation, as thecase may be or any ERISA Affiliate under Section 414(b), (c), (in) or (o) ofthe Internal Revenue Code of 1986, as amended (“Code”).

                         (ii)Neither the Corporation nor any ERISA Affiliate has ever been obligated to filean IRS Form 5500 with respect to any Plan. True and complete copies of thefollowing documents with respect to any Plan of the Corporation and each ERISAAffiliate, as applicable, have been delivered to Buyer: (A) the most recentPlan document and trust agreement (including any amendments thereto), (B) allsummary plan descriptions, (C) a written description of each material nonwritten Plan, (D) each written communication to employees intended to describea Plan or any benefit provided by such Plan, and (E) all correspondence withthe IRS, the Department of Labor and the Pension Benefit Guaranty Corporation(“PBGC”) concerning any controversy.

                         (iii)Each Plan is and has been maintained in compliance in all material respectswith applicable law, including but not limited to ERISA, and the Code and withany applicable contractual obligations.

                         (iv)No Plan is subject to Section 412 of the Code.

                         (v)No Plan is or ever has been subject to Title IV of ERISA.

                         (vi)There are no pending or, to the knowledge of the Corporation, threatenedclaims, actions or lawsuits, other than routine claims for benefits in theordinary course, asserted or instituted against (A) any Plan or its assets, or(B) any fiduciary with respect to any Plan for which the Corporation or anyERISA Affiliate may be directly or indirectly be liable, throughindemnification obligations or otherwise.

                         (vii)Neither the Corporation nor any ERISA Affiliate has ever contributed to or beenobligated to contribute to any Plan that is a “multiemployer plan” as definedin Section 4001(a)(3) of ERISA or that is subject to Title IV of ERISA.

                         (viii)Neither the Corporation nor any ERISA Affiliate has engaged, directly orindirectly, in a non-exempt prohibited transaction (as defined in Section 4975of the Code or Section 406 of ERISA) in connection with any Plan.

                         (ix)No Plan is a nonqualified deferred compensation plan (as that term is used forpurposes of Section 409A of the Code).

– 15 –



                         (x)During the last two years there have been no amendments to any Plan, no writteninterpretation or announcement (whether or not written) by the Corporation orany ERISA Affiliate relating to any Plan, no Plan has been established, andthere have been and are no negotiations, demands, or proposals which arepending that concern any Plan, which resulted in or could reasonably beanticipated to result in a material increase in (A) the accrued or promisedbenefits of any employees of the Corporation or any ERISA Affiliate and (B) thelevel of expense incurred in respect thereof.

                         (xi)Neither the Corporation nor any ERISA Affiliate sponsors, maintains or hasobligations, direct, contingent or otherwise, with respect to any Plan that issubject to the laws of any country other than the United States.

                         (xii)Neither the Corporation nor any ERISA Affiliate sponsors, maintains or hasobligations, direct, contingent or otherwise, with respect to any Plan that isintended to be a tax-qualified plan under Section 401 of the Code.

                         (xiii)Each Plan that provides welfare benefits has been operated in compliance withall requirements of Sections 601 through 608 of ERISA and Section 4980B of theCode and regulations thereunder, relating to the continuation of coverage undercertain circumstances in which coverage would otherwise cease. Neither theCorporation nor any ERISA Affiliate has contributed to a nonconforming grouphealth plan (as defined under Code Section 5000(c)) and no ERISA Affiliate hasincurred a tax under Section 5000(a) of the Code which could become a liabilityof the Corporation or any ERISA Affiliate. No retired or former employee of theCorporation or any ERISA Affiliate is entitled to benefits under any Plan otherthan continuation of health coverage as required by Section 4980B of the Codeand any such former employee or retiree who is covered pursuant to therequirements of Section 4980B is paying for such coverage at the maximum ratepayment for continuation coverage may be required. The Corporation and eachERISA Affiliate has complied in all respects with the requirements of theHealth Insurance Portability and Accountability Act of 1996 with respect toeach Plan that provides welfare benefits. The Corporation does not maintain anyplan which is an “employee welfare benefit plan” (as such term is defined underSection (1) of ERISA) that has provided any “disqualified benefit” (as suchterm is defined in Section 4976(b) of the Code) with respect to which an excisetax could be imposed under Section 4976.

                         (xiv)Each of the Corporation and its ERISA Affiliates has funded each Plan inaccordance with the terms of such Plan through the date hereof, including thepayment of applicable premiums on insurance contract funding a Plan, forcoverage provided through the date hereof.

                         (xv)Except as contemplated herein or required by law, the execution of thisAgreement and the consummation of the transactions contemplated hereby, do notconstitute a triggering event under any Plan, policy, arrangement, statement,commitment or agreement which (either alone or upon the occurrence of anyadditional or subsequent event) will result in any obligation of theCorporation or any ERISA Affiliate to make any payment (whether of severancepay, including, and not limited to, salary, related vacation pay, pension payand other similar payments and costs, or otherwise) or to accelerate, vest orincrease the amount of benefits payable to any employee or former employee ordirector of the Corporation or any ERISA Affiliate. No Plan or agreementprovides for the payment of severance benefits upon the termination of anyemployee’s employment. No amounts paid or payable by Corporation will fail tobe deductible for federal income tax purposes by reason of Section 280G of theCode.

– 16 –



                         (xvi)The balance sheets of the Corporation as of December 31, 2003, 2004 and 2005,properly and adequately reflect, in accordance with US GAAP consistentlyapplied with prior periods, any and all liabilities and obligations of theCorporation and its ERISA Affiliates relating to any period ending on or priorto the date hereof to or in respect of current and former employees of theCorporation or any ERISA Affiliate or the Plans, for (A) unpaid compensation,salaries, wages, vacation pay, disability payments and other payroll items(including, without limitation, bonus, incentive or deferred compensation), (B)unpaid contributions, costs and expenses to or in respect of any Plans, and (C)severance or other termination benefits relating to, resulting from or arisingin respect of any termination of employment occurring on or prior to the datehereof.

                    (r)Litigation. Except for the matters set forth on Schedule 4(r), (A)Neither the Corporation nor any of the Acquired Assets, is a party or issubject to, or to the knowledge of the Corporation, threatened with, any suit,action, arbitration, administrative or other proceeding, either at law or inequity, or governmental investigation by or before any court, governmentaldepartment, commission, board, agency or instrumentality, domestic or foreign;(B) to the knowledge of the Corporation, there is no basis for any suit,action, arbitration, or administrative or other proceeding against theCorporation; (C) there is no judgment, decree, award or order outstandingagainst the Corporation; (D) the Corporation is not contemplating theinstitution by it of any suit, action, arbitration, administrative or otherproceeding; and (E) to the knowledge of the Corporation, there has been no occurrence that mayresult in a claim for damages against the Corporation. The insurance carriersof the Corporation have agreed to defend and indemnify the Corporation againstany loss resulting to the Corporation therefrom.

                    (s)Suppliers and Customers. Schedule 4(s) is a complete and accurate listof the names of all suppliers and customers of the Corporation whichrespectively contribute more than 5% of all sales and services to, and ordersand use of services from, the Corporation (“Suppliers” and “Customers,”respectively). The relationships of the Corporation with its Suppliers andCustomers are good commercial working relationships and no Supplier or Customerof the Corporation has canceled or otherwise terminated, or, to the knowledgeof the Corporation, threatened to cancel or otherwise terminate, itsrelationship with the Corporation, or has during the last twelve (12) monthsdecreased materially, or, to the knowledge of the Corporation, threatened todecrease or limit materially, its business with the Corporation. Nointerruptions or shortages in the supply of raw materials and other keysupplies are threatened or anticipated. To the knowledge of the Corporation (i)no new products have been developed by others that would result in a materialloss of business to the Corporation, render the Corporation’s productsobsolete, or otherwise place the Corporation’s products at a competitivedisadvantage; and (ii) the acquisition of the Acquired Assets by Buyer will notadversely affect the relationship of the Buyer, as successor to theCorporation, with any such Supplier or Customer.

                    (t)Conflicting Interests. No director, officer or manager of theCorporation (i) has any pecuniary interest in any supplier or customer of theCorporation or in any other business enterprise with which the Corporationconducts business or with which the Corporation is in competition; (ii) isindebted to the Corporation; (iii) is a party to any transaction or agreementwith the Corporation (apart from such Person’s status as a director, officer ormanager as such); or (iv) has any business or other interest in conflict withthe interests of the Corporation.

– 17 –



                    (u)Compliance with Law and Regulations. The Corporation is in compliancewith, and has at all times compliedwith, all requirements of U.S. Federal, state, and local law and, whereapplicable, their foreign equivalents, and all requirements of all governmentalbodies or agencies having jurisdiction over it, the conduct of its business,the use of its properties and assets, and all premises occupied by it. Withoutlimiting the foregoing,theCorporation has paid all monies to obtain, and has obtained and now holds, alllicenses, permits, certificates, and authorizations needed or required for theconduct of its business as currently conducted and the current use of itsproperties and the premises occupied by it. The Corporation has properly filedall reports and other documents required to be filed with any Federal, state,local and foreign government or subdivision or agency thereof. The Corporationhas not received any notice from any Federal, state or municipal authority orany insurance or inspection body that any of its properties, facilities,equipment, or business procedures or practices fails to comply with anyapplicable law, ordinance, regulation, building or zoning law, or requirementof any public authority or body. All licenses, permits, orders and approvalsissued by any governmental body or agency currently in effect and pertaining tothe Acquired Assets are listed on Schedule 4(u) and, except as noted on Schedule4(u) none of the items so listed will lapse or expire as a result of thetransactions contemplated hereby.

                    (v)Environmental Matters.

                         (i)The Corporation and to the knowledge of the Corporation, any predecessor of theCorporation is and at all times have been in compliance with all EnvironmentalLaws (as hereinafter defined) governing their business, operations, propertiesand assets, which compliance includes, but is not limited to: (A) thepossession by the Corporation of all permits and other governmentalauthorizations required under applicable Environmental Laws, which permits arein full force and effect, and compliance with the terms and conditions thereof,(B) all requirements relating to the Discharge (as hereinafter defined) andHandling of Regulated Substances (as hereinafter defined) and Wastes (ashereinafter defined); (C) all requirements relating to notice, record keepingand reporting; and (D) all applicable writs, orders, judgments, injunctions,governmental communications, decrees, informational requests or demands issuedpursuant to, or arising, under, any Environmental Law (“EnvironmentalDemands”). The Corporation has not received any communication from anygovernmental authority, employee, group or third party alleging that it is notin such full compliance or that it has investigatory or remedial obligations orother liability pursuant to Environmental Law. To the knowledge of theCorporation, there are no circumstances that may prevent or interfere with suchfull compliance or give rise to investigatory or remedial obligations or otherliabilities pursuant to any Environmental Law in the future. All permits andother governmental authorizations currently held by the Corporation pursuant toany Environmental Laws and Environmental Demands issued to the Corporation areidentified in Schedule 4(v).

– 18 –



                         (ii)There are no Environmental Claims (as hereinafter defined) pending or, to theknowledge of the Corporation, threatened against the Corporation or, to theknowledge of the Corporation, against a predecessor of the Corporation.

                         (iii)No Regulated Substances (as hereinafter defined) is present on or under or ismigrating from any of the Leased Properties other than Regulated Substances inconcentrations, quantities, types and/or locations as customarily used in theconduct of the Corporation’s business, and that will not require remediationpursuant to any applicable Environmental Law.

                         (iv)No portion of any of the Leased Properties constitutes land which is restrictedby applicable Environmental Law due to its physical characteristics, includingwithout limitation, a wetland or waterway, or land which is geologicallyunsuited for any use related to the conduct of the business of the Corporationor by virtue of a use restriction in connection with environmental remediation.

                         (v)No underground or above-ground storage tanks are present on any of the LeasedProperties.

                         (vi)No mold at levels posing a risk to the health of occupants is present on any ofthe Leased Properties nor do any conditions exist which are conducive to thegrowth of mold.

                         (vii)No asbestos or asbestos-containing materials is present on any of the LeasedProperties.

                         (viii)The Corporation has provided Buyer with all (i) permits and governmentalauthorizations and applications for same; (ii) reports and other submissions toany governmental authority in connection with any Environmental Law; (iii)records required to be maintained pursuant to Environmental Laws; (iv)Environmental Demands; (v) Environmental Claims; and (vi) records and reportsof any environmental tests pertaining to, or any environmental assessments of,any of the Leased Properties.

                         (ix)None of the Leased Properties are located in any state or province having a lawrequiring the performance of environmental investigation and remediation uponthe sale of a business, or, in the event of the Leased Properties are locatedin such a jurisdiction, the operations conducted by the Corporation at suchLeased Property(ies) are not subject to any such law.

                         (x)For purposes of this Agreement:

                              (A)“Discharge” means any manner of spilling, leaking, dumping, discharging,release or emitting, as any of such terms may further be defined in anyEnvironmental Law, into any medium including, without limitation groundwater,surface water, soil or air.

– 19 –



                              (B)“Environmental Claim” means any notice, Lien, claim, action, cause of action,order, communication, investigation, request for information or proceeding (written or oral) by any Personalleging potential liability (including, without limitation, potentialliability for investigatory costs, cleanup, removal or remediation costs,governmental response costs, natural resource damages, property damages,personal injuries, or penalties) arising out of, based on or resulting from (a)the presence, or threatened Discharge into the environment of any RegulatedSubstance at any location, whether or not owned or operated by the Corporation,and (b) circumstances forming the basis of any violation, or alleged violation,of, or liability pursuant to any Environmental Law.

                              (C)“Environmental Law” means any and all U.S. or Canadian Federal, state,provincial, regional, county and local or foreign laws, regulations, codes,orders, plans, common law injunctions, decrees, rulings, and judicial oradministrative interpretations thereof, which govern, purport to govern, orrelate to pollution, protection of the environment (including, withoutlimitation, ground water, surface water, soil and air) and public health andsafety, including, without limitation: the Comprehensive EnvironmentalResponse, Compensation and Liability Act of 1980, as amended by the SuperfundAmendment and Reauthorization Act of 1986, 42 U.S.C. 9601, et seq.(collectively, “CERCLA”); the Solid Waste Disposal Act, as amended by theResource Conservation and Recovery Act of 1976 and subsequent Hazardous andSolid Waste Amendments of 1984, 42 U.S.C. 6901, et seq.(collectively, “RCRA”); the Hazardous Materials Transportation Act, as amended,49 U.S.C. 1801, et seq.; the Clean Water Act, as amended, 33U.S.C. 1311, et seq.; the Clean Air Act, as amended, 42 U.S.C.7401, et seq.; the Toxic Substances Control Act, as amended, 15U.S.C. 2601, et seq. (the “TSCA”); the Emergency Planning andCommunity Right-to-Know Act of 1986, as amended, 42 U.S.C. 11001, et seq.(“EPCRA”); and the Occupational Safety and Health Act of 1970, as amended, 29U.S.C. 65 1, et seq. (“OSHA”) and their Canadian counterparts.

                              (D)“Handling” means any manner of generating, accumulating, storing, treating,disposing of, transporting, transferring, labeling, handling, manufacturing,processing or using, as any such terms may further be defined in anyEnvironmental Law, of any Regulated Substance.

                              (E)“Regulated Substance” shall be broadly construed to include without limitationany chemical, pollutant, contaminant, material, waste, toxic or hazardoussubstance, petroleum, petroleum product, asbestos, asbestos containingmaterial, and polychlorinated biphenyl regulated, listed, identified orcontrolled by, under or pursuant to any Environmental Law.

                              (F)“Waste” shall be broadly construed to include bulky wastes, construction anddemolition debris, garbage, solid wastes, liquid wastes, recyclable materials,sludge, special wastes, used oils, hazardous waste and plant and yard trash asthose terms are defined under any Environmental Law.

                    (w)Tax Matters.

                         (i)Definitions. The following terms shall have the meanings set forth inthis subsection 4(w) for purposes of this subsection 4(w) of this Agreement(except for “Tax” and “Taxes,” which shall have said meaning for all purposesof this Agreement):

                              “Affiliated Group” means any affiliated group within themeaning of Code Section 1504(a) or similar group defined under a similarprovision of state, local or foreign law.

– 20 –



                              “Code”means the Internal Revenue Code of 1986, as amended, or any successor statute.All references to specific sections of the Internal Revenue Code shall bedeemed to include any provisions of the Internal Revenue Code (or a relatedstatute) which replace or supersede the sections in effect at the time thisAgreement is executed.

                              “Regulation”or “Treasury Regulation” means regulations issued under the Code as suchregulations may be amended. All references herein to specific sections of theRegulations shall be deemed also to refer to any provisions of the Regulationswhich replace or supersede the sections in effect at the time of the executionof this Agreement.

                              “Return”and “Returns” mean any return, report, declaration, estimate, informationstatement, claim for refund, notice, form or any other kind of document,including any schedule or attachment thereto, and including amended versions ofany of the foregoing, relating to or required to be filed in connection withany Tax.

                              “Tax”and “Taxes” means any Federal, state (including District of Columbia),provincial, local, foreign (including possessions or territories of the UnitedStates) or other tax (whether income, gross receipts, franchise, excise,customs, sales, use, value added, ad valorem, real or personal property,license, transfer, employment, social security or any other kind of tax orpayment in lieu of tax no matter how denominated including any amount payableby the Corporation pursuant to a tax-sharing or other agreement relating to thesharing or payment of tax), or any assessment, levy, impost, withholding, feeor other governmental charge in the nature of a tax, and shall include alladditions to tax, interest, penalties and fines with respect thereto.

                         (ii)Tax Matters Relating to the Corporation.

                              (A)Except as set forth on Schedule 4(w)(ii)(A), the Corporation has at alltimes filed or will file when due in a timely fashion all Returns that arerequired to be filed on or before the date hereof or the Closing Date by orwith respect to the Corporation (taking into account all extensions of timewithin which to file to which they are entitled or which they may have beengranted). All such Returns are correct and complete. Except as set forth on Schedule4(w)(ii)(A), the Corporation is not the current beneficiary of anyextension of time within which to file any Return. No claim has been made by ataxing authority in a jurisdiction where the Corporation does not file Returnsthat any of them is or may be subject to or liable for any Tax imposed by thatjurisdiction.

                              (B)All Taxes for which the Corporation is liable and that are due on or before thedate hereof or the Closing Date (whether or not shown to be due on any Return)have been paid when due in a timely fashion (taking into account all extensionsof time within which to pay to which they are entitled or which they may havebeen granted). There are no Liens on any assets of the Corporation that arosein connection with any failure (or alleged failure) to pay any Tax other thanLiens for Taxes not yet due and payable or for Taxes that the Corporation iscontesting in good faith through appropriate proceedings as set forth on Schedule4(w)(ii)(B).

– 21 –



                              (C)The Corporation has withheld or collected and paid or deposited all Taxesrequired to have been withheld or collected and paid or deposited in connectionwith amounts paid or owing to any employee, independent contractor, creditor,stockholder, member, partner or other third party.

                              (D)No taxing authority has asserted or to the knowledge of the Corporation,threatened to assert, or provided notice of its intention to assert orconsideration of asserting any adjustment, deficiency or assessment for anyTaxes against the Corporation, and no basis exists for any such adjustment,deficiency or assessment which would result in additional Taxes owed by theCorporation for any period for which Returns have been filed. Schedule4(w)(ii)(D) lists all Federal, state, provincial, local, and foreign incomeReturns filed with respect to the Corporation and indicates those Returns ofthe Corporation that have been audited and those Returns of the Corporationwith respect to Taxes of the Corporation that currently are the subject ofaudit. Corporation has delivered to Buyer correct and complete copies of allFederal, state, local and foreign income tax Returns filed, examination reportsissued, and statements of deficiencies assessed against or agreed to by theCorporation or statements of deficiencies for which Corporation may be liable.

                              (E)Except as set forth on Schedule 4(w)(ii)(E), the Corporation has notwaived any statute of limitations in respect of Taxes or agreed to anyextension of time with respect to a Tax adjustment, assessment or deficiencyexcept for such waivers or extensions which, by their terms, have elapsed as ofthe date of this Agreement.

                              (F) Except as set forth on Schedule4(w)(ii)(F), the Corporation does not have any income or gain that may bereportable for a period ending after the date hereof or the Closing Datewithout the receipt of an equal amount of cash, which is attributable to atransaction occurring in or a change in accounting method made for a periodending on or prior to the date hereof or the Closing Date.

                              (G)There are no currently outstanding requests made by the Corporation or anyStockholder for tax rulings, determinations or information that could affectthe Taxes of the Corporation.

                              (H)The Corporation has not been obligated to deduct and withhold Taxes under CodeSections 1441 or 1445.

                              (I)No Stockholder is a foreign corporation within the meaning of Code Section7701(a)(5).

                              (J)The Corporation is not and has not been, within the past six years, a party toany Tax allocation or sharing agreement. The Corporation has not been a memberof an Affiliated Group defined in Code Section 1504(a) filing a consolidatedfederal income Tax Return and has any liability for the Taxes of any Person(other than the Corporation) under Regulation Section 1.1502-6 (or any similarprovision of state, local, or foreign law), or as a transferee or successor bycontract or otherwise. The Corporation has not been a member of a group ofcompanies filing a unitary, consolidated, combined state or foreign Return.

– 22 –



                              (K)Schedule 4(w)(ii)(K) sets forth the following information with respectof the Corporation as of the beginning of its current taxable year: (a) thefederal income tax basis in its assets; and (b) the amount of any net operatingloss, net capital loss, unused investment or other credit, unused foreign taxcredit, or excess charitable contribution allocable to the Corporation.

                              (L)The unpaid Taxes of the Corporation (a) did not, as of the balance sheet dateof December 31, 2005, exceed the reserve for Tax liability (rather than anyreserve for deferred Taxes established to reflect timing differences betweenbook and Tax items) set forth on the face of the balance sheet of theCorporation as of December 31, 2005 (rather than in any notes thereto), and (b)will not exceed that reserve as adjusted for the passage of time through theClosing Date as set forth on the face of the Net Worth Statement.

                              (M)The Corporation has not made any payments, is not obligated to make anypayments, and is not a party to any agreement or arrangement that couldobligate it to make payments of any “excess parachute payment” within themeaning of Code Section 280G.

                              (N)With respect to the Corporation’s contractors, consultants and other independentpersonnel (the “Contractors”), the Corporation has evaluated and classified theContractors as independent contractors and employees in accordance withInternal Revenue Service rules and regulations. The Corporation has maintained,monitored and continues to maintain and monitor those Contractors who areindependent contractors to assure compliance with Internal Revenue Servicerules and regulations.

                    (x)Conduct of Business; No Material Adverse Change. Since December 31,2005, the Corporation has conducted its business in a good and diligent mannerin the ordinary and usual course consistent with past practice, and there hasnot been:

                         (i)any material damage, destruction or loss (whether or not covered by insurance)with respect to any assets or properties owned or leased by the Corporation;

                         (ii)any material change by the Corporation in its accounting methods, principles orpractices;

                         (iii)any declaration, setting aside or payment of any dividends on or distributionsin respect of any of the capital stock of the Corporation , or any redemption,purchase or other acquisition by the Corporation of any of its securities;

                         (iv)any increase in the benefits under, or the establishment or amendment of, anybonus, insurance, severance, retention, change of control, deferred compensation,pension, retirement, profit sharing, option (including, without limitation, thegranting of stock options, stock appreciation rights, performance awards, orrestricted stock awards), stock purchase or other employee benefit plan, or anyincrease in the compensation payable or to become payable to directors,consultants, officers or employees of the Corporation, except for any increasesin salaries or wages payable or to become payable in the ordinary course ofbusiness and consistent with past practice;

– 23 –



                         (v)any payment by the Corporation to any director or officer or any Affiliate ofany of the foregoing, whether as a loan or otherwise, except regularcompensation and usual benefit payments made in the ordinary course of businessconsistent with past practice;

                         (vi)any entry by the Corporation into any contract with any director or officer, ofthe Corporation or any Affiliate of the foregoing other than on an arms-lengthbasis;

                         (vii)any material acquisition of any assets, business or Person (other than thepurchase of assets from suppliers or vendors in the ordinary course of business);

                         (viii)any sale, transfer, lease, exchange or other disposition of any material assetsor properties owned or leased by the Corporation (other than in the ordinarycourse of business consistent with past practice);

                         (ix)any capital expenditures made by or on behalf of the Corporation in excess of$10,000 in the aggregate;

                         (x)any waiver, release, discharge, transfer or cancellation by the Corporation ofany material rights or claims, other than in the ordinary course of business;

                         (xi)the creation of any Lien on any assets or properties owned or leased by theCorporation, except in the ordinary course of business;

                         (xii)any disclosure of any confidential information, except to employees andcontractors who reasonably need to know of the same and owe a duty ofconfidentiality to the Corporation; or

                         (xiii)any agreement or commitment by the Corporation to do any of the foregoing.

                    (y)Shares Not Registered. The Corporation and the Stockholders acknowledgeand agree that the Consideration Shares and the Holdback Shares have not beenregistered under the Securities Act of 1933 (the “Securities Act”), orregistered or qualified under any state securities laws (“State Acts”), and are“restricted securities” within the meaning of SEC Rule 144. The Corporation,and to the extent that Buyer Shares have been distributed by the Corporation tothe Stockholders, the Stockholders are acquiring the Consideration Shares andthe Holdback Shares for the Corporation’s or each Stockholder’s own account, asa principal, for investment purposes and not with a view to or for the sale orother disposition thereof. The Corporation and the Stockholders agree that theywill not sell, assign, distribute or otherwise dispose of the ConsiderationShares and the Holdback Shares in violation of the Securities Act or anyapplicable State Act. The Corporation and the Stockholders acknowledge andagree that the stock certificates representing the Buyer Shares that may beissued to the Corporation under this Agreement shall bear a restrictive legendsubstantially reading as follows:

– 24 –



 

 

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) NOR HAVE THEY BEEN APPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES REGULATORY AUTHORITIES OF ANY STATE OF THE UNITED STATE NEITHER THE SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED, ENCUMBERED OR IN ANY OTHER MANNER TRANSFERRED OR DISPOSED OF IN THE UNITED STATES OR TO A “U.S. PERSON” (AS DEFINED IN REGULATIONS PROMULGATED UNDER THE ACT) UNLESS EFFECTED PURSUANT TO AND IN COMPLIANCE WITH AN AVAILABLE EXEMPTION OR OTHERWISE REGISTERED UNDER THE ACT.”

                    (z)No Broker or Finder. Except for its obligation to Needham & Company,Inc., none of the Corporation or the Stockholders have incurred any obligation,contingent or otherwise, to a broker, finder, agent or other intermediary forintroducing the parties in connection with, or otherwise procuring, thisAgreement or the transaction(s) contemplated hereby.

                    (aa)Statements and Other Documents Not Misleading. Other than with respectto Buyer’s representations, warranties and agreements contained in Section 5herein and such documents to be delivered by Buyer pursuant to Section 13herein, neither this Agreement, including all Exhibits and Schedules, nor the closingdocuments, contains or will contain any untrue statement of any material factor omits or will omit to state any material fact necessary to be stated inorder to make any statement contained therein, document or other instrument notfalse or misleading.

          5.Representations, Warranties and Agreements of Buyer. As materialinducement to the Corporation to enter into this Agreement and to closehereunder, the Buyer makes the following representations, warranties andagreements to and with the Corporation, which representations, warranties andagreements shall be true and correct as of the date of this Agreement and as ofthe Closing Date:

                    (a)Corporate Status. Buyer is a corporation duly organized, validlyexisting and in good standing under the laws of the State of Israel, and hasthe corporate power and authority to execute, deliver and perform thisAgreement and the documents contemplated hereby. The Buyer’s authorized capitalconsists of 40,000,000 ordinary shares, par value of NIS 0.01 per share (the“Buyer Shares”). As of March 31, 2006, 15,480,144 Buyer Shares were issued andoutstanding and approximately390,000Buyer Shares may be issued upon exercise of outstanding options grantedpursuant to various stock option and stock award programs of Buyer. All BuyerShares to be issued pursuant to subsections 2(a)(i) and 2(a)(ii) will be, whenso issued, duly authorized, validly issued, fully paid and nonassessable, andwill not be issued in violation of any preemptive rights. Since the close ofbusiness on the Capital Structure Date, no shares of capital stock or otherequity securities of Buyer have been issued or reserved for issuance or becomeoutstanding, other than Buyer Shares described in this subsection 5(a) that havebeen issued upon the exercise of outstanding options.

– 25 –



                    (b)Authority. Buyer has the requisite corporate power and authority toexecute and deliver this Agreement, to perform its obligations hereunder and,to consummate the transactions contemplated hereby. This Agreement and thedocuments contemplated hereby to be executed and delivered by Buyer have beenduly executed and delivered by Buyer, or will be duly executed and delivered byBuyer, and constitute, or will constitute when executed and delivered, thelegal, valid and binding obligations of Buyer, enforceable against Buyer, inaccordance with their respective terms, except as enforceability hereof andthereof may be limited by bankruptcy, insolvency, moratorium and other similarlaws affecting creditors’ rights generally and by general principles of equity(whether considered in a proceeding in equity or at law or under applicablelegal codes).

                    (c)Governmental Authorization. The execution, delivery and performance byBuyer of this Agreement and the consummation by Buyer of the transactionscontemplated hereby require no action by or in respect of, or filing with, anygovernmental body, agency, official or authority other than the filing by Buyerof a current report on form 6-K with the U.S. Securities and ExchangeCommission (the “Commission”) and the filing of a copy thereof with IsraeliSecurities Authority and the Tel Aviv Stock Exchange.

                    (d)Non-Contravention. The execution and delivery of this Agreement, theconsummation of the transactions provided for herein, and the fulfillment ofthe terms hereof by Buyer do not and will not, with or without the giving ofnotice, the lapse of time, or both, result in the breach of any of the termsand provisions of, or constitute a default under, or conflict with, or causeany acceleration of any obligation of Buyer under, any agreement, indenture orother instrument by which Buyer is bound; Buyer’s Articles of Association; anyjudgment, decree, order, or award of any court, governmental body, orarbitrator; or any applicable law, rule, or regulation.

                    (e)Buyer’s Reports and Financial Statements.

                         (i)Since January 1, 2003, Buyer has filed all material forms, reports, schedules,statements and other documents with the Commission relating to periodscommencing on or after such date required to be filed by it pursuant to theU.S. federal securities laws and the Commission rules and regulations thereunder(such forms, reports, schedules, statements and other documents, in each case,as amended, being hereinafter referred to as the “Buyer Commission Filings”).As of their respective dates, the Buyer Commission Filings complied in allmaterial respects with all applicable requirements of the U.S. Federalsecurities laws and the Commission rules and regulations promulgatedthereunder, applicable to a “Foreign Private Issuer” as such term is defined inSEC Rule 405 and SEC Rule 3b-4, including, to the extent applicable, theSarbanes-Oxley Act of 2002 and the rules and regulations promulgatedthereunder, did not contain any untrue statement of a material fact or omit tostate a material fact required to be stated therein or necessary in order tomake the statements therein, in light of the circumstances under which theywere made, not misleading.

– 26 –



 

 

 

                    (ii) Except as set forth on Schedule 5(e)(ii), each of the consolidated financial statements of Buyer contained in the Buyer Commission Filings complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission applicable thereto, has been prepared in accordance with US GAAP (except (A) as may be indicated therein or in the notes or schedules thereto) and (B) in the case of unaudited quarterly consolidated statements, as permitted by applicable commission rules and regulations) and presents fairly, in all material respects, the consolidated financial position of Buyer as of the dates thereof and the consolidated results of its operations and changes in cash flows for the periods then ended (subject, in the case of unaudited quarterly statements, to normal year-end audit adjustment).

                    (f)Other than with respect to the Corporation’s representations, warranties andagreements contained in Section 4 herein, and such documents to be delivered bythe Corporation pursuant to Section 14 herein, neither this Agreement,including all Exhibits and Schedules, nor the closing documents, contains orwill contain any untrue statement of any material fact concerning Buyer oromits or will omit to state any material fact concerning Buyer necessary to bestated in order to make any statement contained therein, document or otherinstrument not false or misleading.

                    (g)No Broker or Finder. Except forits obligation to SVB Alliant, Buyer has not taken any action, or incurred anyobligation, contingent or otherwise, which would give rise to a valid claimagainst Stockholders and/or the Corporation by a broker, finder, agent or otherintermediary for introducing the parties in connection with, or otherwiseprocuring, this Agreement or the transaction(s) contemplated hereby.

          6.Continuation and Survival of Representations and Warranties.

                    (a)The representations and warranties of the parties hereunder shall survive theconsummation of the transaction provided for in this Agreement and shall expireafter fifteen months from the Closing Date, except for the representations andwarranties that are set forth in subsection 4(b), 4(g), 4(w), 5(a) and 5(b)which shall expire upon expiration of the applicable statute of limitations,and provided further that there shall be no expiration with respect to KnowingMisrepresentations on the part of the Corporation or Buyer . “Knowing Misrepresentation” shall mean anybreach of a representation or warranty that is qualified as to theCorporation’s or Buyer’s knowledge, or any knowing breach of a representationor warranty that is not qualified as to the Corporation’s or Buyer’s knowledgeas to which the Corporation or Buyer had actual knowledge of its falsity. “To the knowledge,” “knowing” orsimilarexpressions shall mean (i) with respect to the Corporation, the actualknowledge of the Managers, the Corporation’s officers and the members of theCorporation’s Board of Directors as of the date hereof, and (ii) with respectto the Buyer, the actual knowledge of Giora Dishon and Dror David.

                    (b)Each representation, warranty and covenant contained herein is independent ofall other representations, warranties and covenants contained herein (whetheror not covering an identical or a related subject matter) and must beindependently and separately complied with and satisfied. Exceptions or qualifications to any representationsor warranties contained herein shall not be construed as exceptions orqualifications to any other warranty or representation. No representation or warranty of theCorporation contained herein shall be deemed to have been waived, affected orimpaired by any investigation made by, or knowledge of, Buyer.

– 27 –



          7.Covenants of the Corporation and Stockholders Prior to Closing.

                    (a)Between the date of this Agreement and the Closing Date the Corporation shall,and the Stockholders will cause the Corporation to, conduct the Business in theordinary course and preserve intact the organization of the Corporation,maintain relations and good will with suppliers, customers, landlords,creditors, employees, agents and others having business relationships with theCorporation, and pay all of its obligations to suppliers, creditors and othersin a timely manner.

                    (b)Between the date of this Agreement and the Closing Date the Corporation shall,and the Stockholders will cause the Corporation to, use its reasonable effortsto avoid taking (or failing to take) any action which they know or should knowwould result in the inaccuracy of, or the breach or violation of, any of therepresentations, warranties, covenants and agreements of the Corporation setforth herein.

                    (c)Between the date of this Agreement and the Closing Date, the Corporation andthe Stockholders shall promptly notify Buyer in writing if they become aware ofany fact or condition that causes or constitutes an inaccuracy in, or thebreach or violation of, any of therepresentations, warranties, covenants or agreements of the Corporation and theStockholders set forth herein.

                    (d)Between the date of this Agreement and the Closing Date the Corporation shalland Stockholders shall cause the Corporation to, afford Buyer (and itsattorneys, accountants, representatives and agents) during normal businesshours, upon reasonable advance notice, with full and free access to theCorporation’s premises, accounts, books and records, personnel, properties,assets, contracts, financial and tax information, and such other documents,data and information as Buyer may reasonably request, and to provide Buyer withsuch copies thereof as Buyer may reasonably request; provided, however, thatBuyer shall schedule such access in such a way as to avoid material disruptionof the normal business operations of the Corporation.

          8.Covenants of Buyer Prior to Closing.

                    (a)Between the date of this Agreement and the Closing Date, Buyer shall use itsreasonable efforts to avoid taking (or failing to take) any action which it knowsor should know would result in the inaccuracy of, or the breach or violation of,any of the representations, warranties, covenants and agreements of Buyer setforth herein.

                    (b)Between the date of this Agreement and the Closing Date, Buyer shall promptlynotify the Corporation in writing if Buyer becomes aware of any fact orcondition that causes or constitutes a material inaccuracy in, or the materialbreach or violation of, any of the representations, warranties, covenants oragreements of Buyer.

– 28 –



                    (c)Buyer shall use commercially reasonable efforts to maintain a presence in StateCollege, Pennsylvania, which location will serve as the principal place ofbusiness for the Managers.

          9.Conditions Precedent to Corporation’s and Stockholders’ Obligation to Close. Corporation’s and Stockholders’obligationto sell the Acquired Assets, to take the other actions required to be taken bythe Corporation at Closing, and to otherwise close the transactions subject tothis Agreement, is subject to the satisfaction, at or prior to Closing, of eachof the following conditions (any of which may be waived, in whole or in part,by the Corporation):

                    (a)All of Buyer’s representations and warranties in this Agreement must have beenaccurate in all material respects as of the date of this Agreement and must beaccurate in all material respects as of the Closing Date as if made on theClosing Date, except for changes contemplated by this Agreement or consented toin writing by Corporation.

                    (b)All of the covenants and obligations that Buyer is required to perform orcomply with pursuant to this Agreement at or prior to Closing must have beenperformed and complied with in all material respects, except as otherwiseconsented to in writing by the Corporation.

                    (c)Buyer must have delivered each of the documents required to be delivered to theCorporation pursuant to Section 14.

                    (d)Buyer must have issued the Consideration Shares and the Employees ConsiderationShares.

                    (e)There shall be (i) in effect no injunction, decree, or order of any court ofcompetent jurisdiction that prohibits the sale of the Acquired Assets to Buyer,or that otherwise prohibits this Agreement or the consummation of thetransactions contemplated by this Agreement, that has been adopted or issued,or has otherwise become effective, since the date of this Agreement, and (ii)no action or litigation pending or threatened in writing by any Person sincethe date of this Agreement in which (A) an injunction is or may be soughtagainst this Agreement or the transactions contemplated by this Agreement, or(B) relief is or may be sought against any party hereto as a result of thisAgreement or the transactions contemplated hereby, and in which in the goodfaith judgment of the Corporation (relying on the advice of its legal counsel),such Person has a reasonable possibility of prevailing and such relief wouldhave a material adverse effect on the Buyer or the Corporation as a whole.

          10.Conditions Precedent to Buyer’s Obligation to Close. Buyer’s obligation to buy the AcquiredAssets, to assume the Assumed Liabilities, to issue the Consideration Sharesand the Holdback Shares, to take the other actions required to be taken byBuyer at Closing, and to otherwise close the transactions pursuant to thisAgreement, is subject to the satisfaction, at or prior to Closing, of each ofthe following conditions (any of which may be waived, in whole or in part, byBuyer):

                    (a)All of the representations and warranties of the Corporation in this Agreementmust have been accurate in all material respects as of the date of thisAgreement and must be accurate in all material respects as of the Closing Dateas if made on the Closing Date, except for changes contemplated by thisAgreement or consented to in writing by Buyer.

– 29 –



                    (b)All of the covenants and obligations that the Corporation is required toperform or comply with pursuant to this Agreement at or prior to Closing musthave been performed and complied with in all material respects, except asotherwise consented to in writing by Buyer.

                    (c)The Corporation must have delivered each of the documents required to bedelivered to Buyer pursuant to Section 13.

                    (d)Buyer shall have negotiated and executed new agreements in form and substancesatisfactory to Buyer amending the agreements listed on Schedule 10(d)with the Persons listed therein.

                    (e)There shall not have occurred any theft, loss, damage, or destruction to or ofa material portion of the assets, properties, or business of the Corporation,whether or not covered by insurance.

                    (f)There shall be (A) in effect no injunction, decree, or order of any court ofcompetent jurisdiction that prohibits the sale of the Acquired Assets to Buyer,or that otherwise prohibits this Agreement or the consummation of thetransactions contemplated by this Agreement, that has been adopted or issued,or has otherwise become effective, since the date of this Agreement, and (B) noaction or litigation pending or threatened in writing by any Person since thedate of this Agreement in which (x) an injunction is or may be sought againstthis Agreement or the transactions contemplated by this Agreement, or (y)relief is or may be sought against any party hereto as a result of thisAgreement or the transactions contemplated hereby, and in which in the goodfaith judgment of Buyer (relying on the advice of its legal counsel), suchPerson has a reasonable possibility of prevailing and such relief would have amaterial adverse effect on Buyer, the Corporation or the Business.

                    (g)There shall not have been a material adverse change in the financial conditionand in the results of operations of, and there shall not have been any materialadverse change in the condition of the assets of or in the business prospectsof the Corporation (taken as a whole).

                    (h)Buyer shall have completed its due diligence review of the Corporation and theresults of such review shall be satisfactory to Buyer.

                    (i)Buyer’s Board of Directors shall have approved the consummation of thetransactions contemplated by this Agreement.

          11.Termination.

                    (a)This Agreement may be terminated, and the purchase of the Acquired Assets, theassumption of the Assumed Liabilities and the other transactions contemplatedby this Agreement may be abandoned, as follows:

– 30 –



                              (i)By the mutual written consent of the Buyer and the Corporation.

                              (ii)By the Corporation, if any of the conditions set forth in Section 9 hasnot been satisfied or waived in writing by the Corporation on or prior toClosing.

                              (iii)By Buyer, if any of the conditions set forth in Section 10 have not beensatisfied or waived in writing by Buyer on or prior to Closing.

                              (iv)By Buyer or the Corporation, if Closing has not been consummated (for anyreason other than a breach or violation of any representation, warranty,covenant or agreement contained in this Agreement by the party seeking suchtermination) on or before May 30, 2006 (orsuch later date, as to which the Corporation and Buyer, in their respectivesole and absolute discretion, may agree in writing).

                              (v)By Buyer, if the Corporation in good faith files on or before Closing anypetition in bankruptcy, reorganization, liquidation or receivership, or apetition in bankruptcy, reorganization, liquidation or receivership is filed onor before Closing against the Corporation by any Person not a party to thisAgreement and is not withdrawn or dismissed on or before Closing.

                              (vi)By the Corporation, if Buyer in good faith files on or before Closing anypetition in bankruptcy, reorganization, liquidation or receivership, or apetition in bankruptcy, reorganization, liquidation or receivership is filed onor before Closing against the Buyer by any Person not a party to this Agreementand is not withdrawn or dismissed on or before Closing.

                    (b)If the Corporation terminates this Agreement in accordance withsubsection 11(a), the Corporation shall give Buyer prompt written noticeof such termination, including in reasonable detail the basis for suchtermination.

                    (c)If Buyer terminates this Agreement in accordance with subsection 11(a),Buyer shall give the Corporation prompt written notice of such termination,including in reasonable detail the basis for such termination.

                    (d)The termination of this Agreement shall render null and void, and of no furtherforce or effect, all of the rights and obligations of the parties under thisAgreement; provided, however, that nosuch termination shall be deemed to relieve any defaulting or breaching partyfrom any liability to the other parties hereto, or to otherwise eliminate,reduce or affect in any way any cause of action, action or claim, whether atlaw, in equity or otherwise, which any non-defaulting and non-breaching partymay or shall have against the defaulting or breaching party under or arisingout of this Agreement, or to be deemed an election of remedies which precludes,waives or otherwise affects any of the foregoing.

          12.Closing Date. The Closing of thetransactions provided for in this Agreement (herein sometimes called the“Closing”) shall take place at the offices of Buyer’s counsel, Wolf, Block,Schorr and Solis-Cohen LLP, 1650 Arch Street, 22nd Floor, Philadelphia, PA, at11:30 a.m. on May 1, 2006, or at such other place, date and time as shall beagreed to in writing between Buyer and the Corporation. The date and time of Closing is sometimesherein called the “Closing Date.”

– 31 –



          13.Deliveries by the Corporation at Closing. At the Closing, the Corporation will deliver or cause to bedelivered to Buyer the following in form and substance reasonably acceptable tocounsel to Buyer:

                    (a)Bill of Sale in the form attached hereto as Exhibit “B”;

                    (b)Assignment of Registrable IP in the form attached hereto as Exhibit “C”;

                    (c)a certified copy of the Certificate of Incorporation of the Corporation, andall amendments thereto, issued by the Department of State of Delaware and datedas of a date within thirty (30) days prior to the Closing Date;

                    (d)“good standing” and “no tax Lien” certificates for the Corporation issued byeach jurisdiction in which the Corporation is incorporated or qualified to dobusiness as a foreign corporation, all of which shall be dated as of a datewithin thirty (30) days prior to the Closing Date;

                    (e)the Employees Employment Agreements duly executed and delivered by eachEmployee on or prior to the Closing Date, each substantially in the formattached hereto as Exhibit “A-1”;

                    (f)the Employees Agreements Not to Compete duly executed and delivered by eachEmployee on or prior to the Closing Date, each substantially in the formattached hereto as Exhibit “A-2”;

                    (g)the Employees Restricted Stock Agreements duly executed and delivered by eachEmployee (other than the Managers) on or prior to Closing Date eachsubstantially in the form attached hereto as Exhibit “A-3(i)”;

                    (h)the Managers Restricted Stock Agreements duly executed and delivered by eachManager on or prior to Closing Date each substantially in the form attachedhereto as Exhibit “A-3(ii)”;

                    (i)a certificate executed by the Chief Executive Officer of the Corporationcertifying as to the matters set forth in subsection 10(a) and subsection10(b);

                    (j)a certificate of the Secretary dated the Closing Date, certifying theCorporation’s certificate of incorporation, bylaws and resolutions ofCorporation’s board of directors and Stockholders relating to this agreementand the transactions provided for herein including without limitation, anywaiver by each Stockholder of any right, preference or privilege to which suchStockholder is entitled in connection with the transactions contemplatedhereby; and

– 32 –



                    (k)all such further documents, instruments and agreements which may be reasonablyrequested by Buyer or its counsel to assign the Assigned Contracts and effectand carry out any provision of this Agreement.

          14.Deliveries by Buyer at Closing. At the Closing, Buyer will deliver orcause to be delivered to, as the case may be, to the Corporation, thefollowing:

                    (a)the duly executed stock certificates representing the Consideration Shares;

                    (b)a Certificate of the Secretary of Buyer, dated as of the Closing Date,confirming that all necessary corporate action has been taken to authorize theexecution and delivery of this Agreement by Buyer;

                    (c)the Employees Employment Agreements duly executed and delivered on or prior tothe Closing Date, each substantially in the form attached hereto as Exhibit“A-1”, the terms of each taken as a whole being, with respect to each employee,no less favorable than the terms each such Employee received from theCorporation immediately prior to the date hereof;

                    (d)the Employees Agreements Not to Compete duly executed and delivered on or priorto the Closing Date, each substantially in the form attached hereto as Exhibit“A-2”;

                    (e)the Employees Restricted Securities Agreement duly executed and delivered byeach Employee (other than the Managers) on or prior to Closing Date, eachsubstantially in the form attached hereto as Exhibit “A-3(i)”;

                    (f)the Managers Restricted Securities Agreement duly executed and delivered byeach Manager on or prior to Closing Date, each substantially in the formattached hereto as Exhibit “A-3(ii)”;

                    (g)a certificate executed by the President or Chief Executive Officer of Buyercertifying as to the matters set forth in subsections 9(a) and 9(b); and

                    (h)all such further documents, instruments and agreements which may be reasonablyrequested by the Corporation or counsel to the Corporation to effect and carryout any provision of this Agreement.

          15.Indemnification.

                    (a)Indemnification of Buyer.Subject to any provisions hereof to the contrary, the Corporation theStockholders and the Managers hereby, jointly and severally, indemnify andagree to hold harmless Buyer, its successors and assigns and each such entity’sofficers, directors, shareholders and agents (collectively, the “BuyerIndemnified Parties”) (each of whom shall be a third party beneficiary hereof)from, against and in respect of the amount of any and all CorporationDeficiencies (as hereinafter defined); provided, however, that other than asspecifically set forth herein, each Stockholder’s liability for CorporationDeficiencies shall be several and not joint.

– 33 –



                    (b)Definition of “Corporation Deficiencies”. As used in this Section 15, “Corporation Deficiencies” means anyand all loss or damage incurred by the Buyer Indemnified Parties resultingfrom:

                              (i)any misrepresentation, breach of any representation or warranty, or any non-fulfillmentof any representation, warranty, covenant or agreement on the part of theCorporation contained in Section 4 herein;

                              (ii)the conduct of the Corporation’s business to the extent not constituting anAssumed Liability;

                              (iii)any Excluded Liability; or

                              (iv)any and all actions, suits, proceedings, demands, assessments,penalties, liabilities, judgments, reasonable attorneys’ fees, costs, expensesand interest incident to any of the foregoing.

                    (c)Indemnification of the Corporation and Stockholders. Subject to anyprovisions hereof to the contrary, Buyer hereby indemnifies and agrees to holdharmless the Corporation and the Stockholders, and each of their respectivesuccessors and assigns and each such entity’s officers, directors, shareholdersand agents (collectively the “Seller Indemnified Parties”) (each of whom shallbe a third party beneficiary hereof) from, against and in respect of the amountof any and all Buyer Deficiencies (as hereinafter defined).

                    (d)Definition of “Buyer Deficiencies”.As used in this Section 15, “Buyer Deficiencies” means any and all lossor damage incurred by the Corporation or the Stockholders resulting from:

                              (i)any misrepresentation, breach of any representation or warranty, or anynon-fulfillment of any representation, warranty, covenant or agreement on thepart of the Buyer contained in Section 5 herein;

                              (ii)any Assumed Liability;

                              (iii)any liability or obligation arising from the conduct of the business by Buyerafter the Closing Date to the extent that such liability or obligation wouldnot be the result of any Corporation Deficiency set forth in subsection 15(b);or

                              (iv)any and all actions, suits, proceedings, demands, assessments, penalties,liabilities, judgments, reasonable attorneys’ fees, costs, expenses andinterest incident to any of the foregoing.

– 34 –



                    (e)Procedures for Establishment of Deficiencies.

                              (i)In the event that any claim shall be asserted against a party which, ifsustained, would result in a Deficiency, the indemnified party, within areasonable time after learning of such claim, shall notify the indemnifyingparty of such claim, and shall extend to the indemnifying party a reasonableopportunity to defend against such claim, at the indemnifying party’s soleexpense and through legal counsel reasonably satisfactory to the indemnifiedparty, provided that the indemnifying party proceeds in good faith,expeditiously and diligently. Theindemnified party shall, at its option and expense, have the right toparticipate in any defense undertaken by the indemnifying party with legalcounsel of its own selection. If theindemnifying party, in the reasonable judgment of the indemnified party, hasfailed to prosecute such defense in good faith in an expeditious and diligentmanner, the indemnified party shall have the right to defend and/or settle suchclaim on behalf of the indemnifying party.No settlement or compromise of any claim which may result in aDeficiency may be made by the indemnifying party without the prior writtenconsent of the indemnified party unless the proposed settlement is solely amonetary settlement and prior to such settlement or compromise the indemnifyingparty acknowledges in writing the indemnifying party obligation to pay in fullthe amount of the settlement and all associated expenses and the indemnifiedparty is furnished with either (A) security reasonably satisfactory to theindemnified party that the indemnifying party will in fact pay such amount andexpenses, or (B) a full release from the claimant in form and substancereasonably satisfactory to the indemnified party.

                              (ii)In the event that the indemnified party asserts the existence of anyDeficiency, the indemnified party shall give written notice to the indemnifyingparty of the nature and amount of the Deficiency asserted. The indemnified party shall reasonablycooperate with such actions as the indemnifying party may seek to take tomitigate the impact of any alleged breach.Such request shall not be deemed to constitute an admission of liabilityon the part of the indemnifying party.If the indemnifying party, within a period of fifteen (15) business daysafter the giving of such notice by the indemnified party, shall not givewritten notice to the indemnified party announcing its intention to contestsuch assertion of the indemnified party (such notice by the indemnifying partybeing hereinafter called the “Contest Notice”), such assertion of theindemnified party shall be deemed accepted and the amount of the Deficiencyshall be deemed established. In theevent, however, that a Contest Notice is given to the indemnified party withinsaid 15-day period, then the contested assertion of a Deficiency may beestablished pursuant to the provisions of Section 19 herein.

                              (iii)The indemnified and indemnifying parties may agree in writing, at any time, asto the existence and amount of a Deficiency, and, upon the execution of suchagreement, such Deficiency shall be deemed established.

                    (f)Payment of Deficiencies. Subjectto the limitations set forth in subsection (g), the indemnifying partyhereby agree to pay in cash the amount of each established Deficiency to theindemnified party within five (5) business days after the final establishmentthereof. Any amounts not paid by theindemnifying party when due under this subsection 15(f) shall bear interestfrom the due date thereof until the date paid at a rate equal to 3% over the“prime rate” as published from time to time in The Wall Street Journal.

– 35 –



                    (g)Limitation.

                              (i)With the exception of (A) any Deficiencies resulting from any misrepresentationor breach of representation or warranty contained in subsections 4(b),4(g), 4(w), 5(a) and 5(b) herein or (B)any claims of Knowing Misrepresentation on the part of any party to thisAgreement, (x) there shall be no liability for any Deficiencies resulting fromany misrepresentation or breach of representation or warranty on the part ofeither the Corporation under Section 4 or Buyer under Section 5 unless anduntil the aggregate of all such Corporation Deficiencies or Buyer Deficiencies,whichever is applicable, exceeds $50,000, in which event there shall beliability for all such Deficiencies, and (y) neither party shall be liable orotherwise responsible for that portion of any such Deficiencies that exceeds(i) with respect to the Corporation Deficiencies, the Holdback Shares and theEmployees Holdback Shares; and (ii) with respect to Buyer Deficiencies, anamount equal to the value at the Closing Date of the Holdback Shares and theEmployees Holdback Shares, which shall be the maximum cumulative, aggregateliability of the parties hereto.

                              (ii)With respect to Deficiencies resulting from any (A) misrepresentation or breachof representation or warranty contained in subsections 4(b), 4(g), 4(w),5(a) and 5(b) herein; or (B) any Knowing Misrepresentation, neither party shallbe liable or otherwise responsible for that portion of any such Deficienciesthat exceeds an amount equal to the value at the Closing Date of the BuyerShares issuable pursuant to this Agreement.The Corporation, the Stockholders or the Managers, may satisfy anddischarge such liability by tendering back to the Buyer the Buyer Sharesreceived by them pursuant to this Agreement, such Buyer Shares being deemed tohave the value of such Buyer Shares at the Closing Date.

                              (iii)Notwithstanding any of the foregoing, any party to this Agreement shall haveunlimited recourse against any other party that has committed any KnowingMisrepresentation.

          16. BoardObserver. As ofClosing, and for so long as the Corporation continues to hold, or in the eventthat following distribution of Buyer Shares by the Corporation to theStockholders the Stockholders continue to hold, in the aggregate, Buyer Sharesin an amount equal to 8% of the outstanding capital stock of Buyer, theRepresentative shall be entitled to designate one individual (the “Observer”)to attend and observe any regular or special meeting of the board of directorsof the Buyer and shall be entitled to receive all information distributed tothe board of directors of the Buyer at the time of the original distribution ofsuch information; provided, however, that the Observer shall agree to hold inconfidence and trust and to act in a fiduciary manner with respect to allinformation so provided and to be bound by the Buyer’s code of ethics, policiesand procedures; and provided further, that the Buyer reserves the right towithhold any information and to exclude the Observer from any meeting orportion thereof for any reason if access to such information or attendance atsuch meeting could affect any evidentiary privilege between Buyer and itsadvisors or otherwise adversely affects Buyer. The initial Observer will be Craig Gomulka.

– 36 –



          17.Piggyback Registration Rights.At any time after the Buyer Shares issued to the Corporation pursuant tothis Agreement have been distributed to the Stockholders by the Corporation,and/or the Employees Consideration Shares have been vested and distributed tothe Employees or their designees, if Buyer at any time proposes to register anyof its securities under the Securities Act for sale to the public (except withrespect to registration statements on Forms S-4, F-4 or S-8 or anotherform not available for registering the Buyer Shares to be issued under thisAgreement for sale to the public), each such time it will give written noticeof its intention to do so to the Representative who will provide notice of thesame to all persons who received Buyer Shares hereunder. Upon the written request of any of suchholders made to the Representative within fifteen (15) days after receipt ofsuch notice, and forwarded to Buyer within five (5) days thereafter, Buyerwill, subject to the limits contained in this Section 17, use its best effortsto cause all such Buyer Shares then held by such holders which are sought to beregistered hereunder, to be registered under the Securities Act and qualified forsale under any state blue sky law, all to the extent requisite to permit suchsale or other disposition by such holders of the Buyer Shares so registered;provided, however, that if Buyer is advised in writing in good faith by anymanaging underwriter of the Buyer’s securities being offered in a publicoffering pursuant to such registration statement that the amount to be sold byPersons other than the Buyer (collectively, “Selling Security Holders”) isgreater than the amount which can be offered without adversely affecting theoffering, Buyer may reduce the amount offered for the accounts of all SellingSecurity Holders (including the Stockholders and other holders of Buyer Shareshereunder) who have a contractual, incidental “piggy back” right to includesuch securities in a registration statement to a number deemed satisfactory bysuch managing underwriter; provided, however, that no reductionshall be made in the amount of Buyer Shares offered for the accounts of theStockholders and other holders hereunder unless such reduction is imposed prorata with respect to all securities whose holders have or may hereafter acquirea contractual, incidental “piggy back” right to include such securities in theregistration statement as to which inclusion has been requested pursuant tosuch right. Notwithstanding theforegoing, Buyer’s obligation to register the Buyer Shares under this Section17 shall terminate at such time when the holders thereof may sell all of suchBuyer Shares, without limitation or restriction, as to timing and amount,pursuant to Rule 144 of the Securities Act.

          18.Further Assurances. Buyer, theCorporation and Stockholders agree to execute and deliver all such otherinstruments and take all such other action as any party may reasonably requestfrom time to time, after the date hereof and without payment of furtherconsideration, in order to effectuate the transactions provided for herein. Theparties shall cooperate fully with each other and with their respective counseland accountants in connection with any steps required to be taken as part oftheir respective obligations under this Agreement, including, withoutlimitation, the preparation of financial statements and preparation and filingof Tax Returns.

          19.Dispute Resolution.

                    (a)In the event of a dispute between the parties, including indemnification claimspursuant to Section 15, the parties shall first promptly attempt in good faithto resolve such dispute for a period of not less than thirty (30) calendardays. If such good faith efforts arenot successful within such 30-day period, at any time thereafter, any party maygive the other written notice of a dispute (a “Dispute Notice”), the partiesshall attempt in good faith to agree to the appointment of an independentmediator (a “Mediator”) to assist the parties in resolving the dispute. Should the parties agree to a Mediator, thematter shall be referred to such Mediator for resolution in accordance with theusual practices and procedures of such Mediator; provided, however, that noparty shall have an obligation to participate in any mediation after a datewhich is thirty (30) calendar days after the applicable Dispute Notice wasserved. The parties shall cooperatewith the Mediator and shall provide any relevant information requested by theMediator. If the parties cannot agreeon the selection of a Mediator within twenty (20) calendar days after deliveryof the Dispute Notice, or if the dispute is not resolved by the Mediator asprovided herein, then the dispute shall be determined by arbitration inaccordance with the provisions of subsection 19(b) hereunder.

– 37 –



                    (b)Any dispute which is not settled or otherwise resolved through the provisionsof subsection 19(a) above shall be determined by arbitration in Philadelphia,Pennsylvania by a single arbitrator in accordance with the rules of theAmerican Arbitration Association (“AAA”) or any other rules agreed upon by theparties, except that (i) every person named on any list of potentialarbitrators shall be a neutral and impartial lawyer with excellent academic andprofessional credentials who has practiced law for at least fifteen (15) years,specializing in either general commercial litigation or general corporate andcommercial matters, and who has had experience, and is generally available toserve, as an arbitrator, and (ii) each party shall be entitled to strike on aperemptory basis, for any reason or no reason, any or all of the names ofpotential arbitrators on any list submitted to the party by the AAA as well asany person selected by the AAA to serve as an arbitrator by administrativeappointment. In the event the parties cannot agree on the selection of thearbitrator from the one or more lists submitted by the AAA within thirty (30)calendar days after the AAA transmits to the parties its first list ofpotential arbitrators, AAA shall nominate three Persons who meet the criteriaset forth herein. Each party shall beentitled to strike one of such three nominees on a peremptory basis within five(5) calendar days after its receipt of such list of nominees, indicating itsorder of preference with respect to the remaining nominees. If two of suchnominees have been stricken by the parties to the dispute, the unstrickennominee shall be the arbitrator.Otherwise, the selection of the arbitrator shall be made by the AAA fromthe remaining nominees in accordance with the parties’ mutual order ofpreference, or by random selection in the absence of a mutual order ofpreference. The arbitrator shall base his or her award on the terms of thisAgreement, on applicable law and judicial precedent, shall include in suchaward the findings of fact and conclusions of law upon which the award is basedand shall not grant any remedy or relief that a court could not grant underapplicable law. The arbitration shallbe governed by the substantive laws of the Commonwealth of Pennsylvania applicable to contracts made and tobe performed therein, without regard to conflicts of laws rules. Judgment on the award rendered by thearbitrator(s) may be entered in any court having jurisdiction thereof.

                    (c)If any party to a dispute fails to proceed with the dispute resolutionprocedures set forth in this Section 19 or unsuccessfully seeks to stay suchproceedings, or fails to comply with any arbitration award, or is unsuccessfulin vacation or modifying the award pursuant to a petition or application forjudicial review, the other party shall be entitled to be awarded costs,including reasonable attorneys’ fees, paid or incurred by such other party insuccessfully compelling such proceedings or defending against the attempt tostay, vacate or modify such arbitration award and/or successfully defending orenforcing the award.

          20.Representative.

                    (a) For purposes of this Agreement, the“Representative” shall mean DonJones. All actions of theRepresentative shall be made personally by the Representative, and noRepresentative shall be permitted to assign or delegate its rights or duties,whether by operation of law or otherwise.In the event of the death, incapacity, incompetency, disability orresignation of the Representative, the Corporation, or if dissolved at suchtime, the remaining Stockholders shall elect a new Representative who shallhave full authority to take all actions required or permitted to be taken bythe Representative under this Agreement.Prompt written notice of the election of a substitute Representativeshall be provided to Buyer by the substitute Representative so elected, andBuyer shall be entitled to rely on the authority of any substituteRepresentative elected pursuant to the procedures set forth in this subsection20(a).

– 38 –



                    (b)In addition to, and not in substitution of, the provisions set forth insubsection 20(a), the Corporation and each of the Stockholders herebyauthorizes the Representative to take any and all actions (or not to take anyor all actions), and/or to prepare, determine, calculate, negotiate, executeand deliver any and all agreements, notices, consents, determinations,documents and other instruments, which the Corporation or any such Stockholder(or the Representative on behalf of the Corporation of any such Stockholder) isrequired or permitted to take, prepare, determine, calculate, negotiate,execute and/or deliver under or pursuant to this Agreement and/or ascontemplated by this Agreement, all in the name of and on the behalf of theCorporation or any such Stockholder, including, but not limited to, the makingand execution of any amendments to this Agreement, the giving and receipt ofany notices or consents pursuant hereto, the execution of any and all documentsrequired to be executed in order to complete Closing hereunder or appropriateor incidental to so complete Closing hereunder, to calculate, determine,negotiate and give notice of or otherwise with respect to any adjustment to anyissuance of Buyer Shares to be made pursuant to this Agreement, to acceptservice of process in connection with any claim related to this Agreement andto prosecute, defend or settle in the Representative’s discretion allindemnification disputes (including hiring of counsel and other litigationassistance). From and after theClosing, Buyer shall be entitled to deal exclusively with the Representativewith respect to any matter arising under this Agreement. Such appointment shall, to the fullestextent permitted by law, survive the dissolution or liquidation of the Corporation,the death, disability, incapacity, or incompetency of any Stockholder.

          21.Miscellaneous.

                    (a)Indulgences, Etc. Neither the failure nor any delay on the part of anyparty to exercise any right, remedy, power or privilege under this Agreementshall operate as a waiver thereof, nor shall any single or partial exercise ofany right, remedy, power or privilege preclude any other or further exercise ofthe same or of any other right, remedy, power or privilege, nor shall anywaiver of any right, remedy, power or privilege with respect to any occurrencebe construed as a waiver of such right, remedy, power or privilege with respectto any other occurrence. No waiver shall be effective unless it is in writingand is signed by the party asserted to have granted such waiver.

                    (b)Controlling Law. This Agreement and all questions relating to itsvalidity, interpretation, performance and enforcement (including, withoutlimitation, provisions concerning limitations of actions), shall be governed byand construed in accordance with the laws of the Commonwealth of Pennsylvania, notwithstanding anyconflict-of-laws doctrines of such state or other jurisdiction to the contrary,and without the aid of any canon, custom or rule of law requiring constructionagainst the draftsman.

– 39 –



                    (c)Confidentiality; Public Announcements.From and after the Closing, the Corporation and the Stockholders willtreat and hold as such all of the Confidential Information, refrain from usingany of the Confidential Information except in connection with this Agreement,and deliver promptly to the Buyer or destroy, at the request and option of theBuyer, all tangible embodiments (and all copies) of the Confidential Informationwhich are within the Corporation or the Stockholders’ possession. In the event that the Corporation or any ofthe Stockholders, as the case may be,is requested or required (by oral question or request for information ordocuments in any legal proceeding, interrogatory, subpoena, civil investigativedemand, or similar process) to disclose any Confidential Information, theCorporation or any such Stockholder shall notify the Buyer promptly of therequest or requirement so that the Buyer may seek an appropriate protectiveorder or waive compliance with the provisions of thissubsection 20(c). If, in theabsence of a protective order or the receipt of a waiver hereunder, theCorporation or any such Stockholder, as the case may be, is, on the advice ofcounsel, compelled to disclose any Confidential Information to any tribunal orelse stand liable for contempt, the Corporation or any such Stockholder maydisclose the Confidential Information to the tribunal; provided, however, thatsuch Stockholder shall use reasonable best efforts to obtain, at the request ofthe Buyer at its sole expense, an order or other assurance that confidentialtreatment will be accorded to such portion of the Confidential Informationrequired to be disclosed as the Buyer shall designate. “Confidential Information” shall meanconfidential information and trade secrets of the Corporation, includingwithout limitation, (i) the identity, lists or descriptions of any customers,referral sources or organizations; (ii) financial statements, cost reports orother financial information; (iii) contracts proposals, or bidding information;(iv) business plans, product roadmaps and training operations, methods andmanuals; (v) personnel records; and (vi) fee structure and management systems, policiesor procedures, including related forms and manuals and (vii) any data,software, reports, formulae, drawings, sketches and other information disclosedby the Corporation to any Stockholder and was identified as confidential orproprietary in connection with such disclosure. The Representative shall consult with Buyer and Buyer shallconsult with the Representative before issuing any press release or otherwisemaking any public statements with respect to this Agreement, the transactionscontemplated hereby and any negotiations in connection therewith and, except asmay be required under applicable law, as provided above, shall not issue anysuch press release or make any such public statement prior to suchconsultation.

                    (d)No Fractional Shares. Nofractional shares may be issued in connection with this Agreement. Any number of Buyer Shares which may beissued pursuant to any provision of this Agreement shall be rounded to thenearest whole number.

                    (e)Expenses. Except as otherwiseprovided herein, each party shall pay the fees and expenses of its ownadvisers, counsel, accountants and other experts, if any, and all otherexpenses incurred by such party incident to the negotiation, preparation,execution, delivery and performance of this Asset Purchase Agreement and anydocuments or instrument contemplated in connection therewith.

                    (f)Notices. All notices, requests,demands and other communications required or permitted under this Agreementshall be in writing and shall be deemed to have been duly given, made andreceived only when delivered (personally, by courier service such as FederalExpress, or by other messenger), when sent by electronic facsimile, addressedas set forth below:

– 40 –



 

 

 

 

(i)

If to Buyer:

 

 

 

 

 

Nova Measuring Instruments Ltd.

 

 

P. O. Box 266

 

 

Rehovoth 76100

 

 

Israel

 

 

Attention: Dror David

 

 

Fax: 972-8-9407776

 

 

 

 

 

with a copy, given in the manner prescribed above, to:

 

 

 

 

 

David Gitlin, Esquire

 

 

Wolf, Block, Schorr and Solis-Cohen LLP

 

 

1650 Arch Street

 

 

Philadelphia, PA 19103

 

 

Telephone: 215-977-2284

 

 

Fax: 215-405-3884

 

 

 

 

(ii)

If to Stockholder(s):

 

 

 

 

 

to their respective addresses as set forth on Schedule 4(a)

 

 

 

 

(iii)

If to the Corporation:

 

 

 

 

 

HyperNex, Inc.

 

 

3006 Research Drive

 

 

State College, PA 16803

 

 

Telephone: 814-235-0606

 

 

Fax: 814-235-0605

 

 

 

 

 

with a copy, given in a matter prescribed above, to:

 

 

 

 

 

Michael L. Hund, Esquire

 

 

Buchanan Ingersoll PC

 

 

213 Market Street, 3rd Floor

 

 

Harrisburg, PA 17101

 

 

Telephone: 717-237-4866

 

 

Fax: 717-233-0852

 

 

 

 

(iii)

If to the Representative:

 

 

 

 

 

Don Jones

 

 

c/o Draper Triangle Ventures L.P.

 

 

Two Gateway Center, 20th Floor

 

 

Pittsburgh, PA 15222

 

 

Telephone: 412-288-9800

– 41 –



                    Anyparty may alter the address to which communications or copies are to be sent bygiving notice of such change of address in conformity with the provisions ofthis subsection for the giving of notice.

                    (g)Exhibits and Schedules. All Exhibits and Schedules attached hereto arehereby incorporated by reference into, and made a part of, this Agreement.

                    (h)Binding Nature of Agreement. This Agreement shall be binding upon andinure to the benefit of the parties hereto and their respective successors andassigns, except that the Corporation and the Stockholders may not assign ortransfer their rights or obligations under this Agreement other than byoperation of law without the prior written consent of Buyer (which consentshall not be unreasonably delayed, conditioned or withheld).

                    (i)Execution in Counterparts. This Agreement may be executed in any numberof counterparts, each of which shall be deemed to be an original as against anyparty whose signature appears thereon, and all of which shall togetherconstitute one and the same instrument.

                    (j)Provisions Separable. The provisions of this Agreement are independentof and separable from each other, and no provision shall be affected orrendered invalid or unenforceable by virtue of the fact that for any reason anyother or others of them may be invalid or unenforceable in whole or in part.However, in the event any provision of this Agreement shall be held or declaredinvalid or unenforceable in whole or in part by any court of competentjurisdiction, such court shall (to the full extent permitted by applicable law)revise or reform the Agreement, and/or take such other action as may be necessaryor appropriate, with respect to such invalid or unenforceable provision so asto carry out the intent of the parties as expressed in this Agreement in amanner that is not so invalid or unenforceable.

                    (k)Entire Agreement. This Agreement contains the entire understandingbetween the parties hereto with respect to the subject matter hereof, andsupersedes all prior and contemporaneous agreements and understandings,inducements or conditions, express or implied, oral or written.

                    (l)Section Headings. The Section headings in this Agreement are forconvenience only; they form no part of this Agreement and shall not affect itsinterpretation.

                    (m)Gender and Number. Words used herein, regardless of the number andgender specifically used, shall be deemed and construed to include any othernumber, singular or plural, and any other gender, masculine, feminine orneuter, as the context indicates is appropriate.

                    (n)Number of Days. In computing the number of days for purposes of thisAgreement, all days shall be counted, including Saturdays, Sundays andHolidays; provided, however, that if the final day of any time period falls ona Saturday, Sunday or Holiday; then the final day shall be deemed to be thenext day which is not a Saturday, Sunday or such Holiday. For purposes of thisSection, “Holiday” shall mean a day, other than a Saturday or Sunday, on whichnational banks are or may elect to be closed.

– 42 –



[Intentionally left blank]

– 43 –



          INWITNESS WHEREOF, the parties have caused this Agreement to be executed anddelivered by their proper and duly authorized officers, on the date first abovewritten.

 

 

 

 

NOVA MEASURING INSTRUMENTS, LTD.

 

 

 

By:

Giora Dishon

 

 


 

Name: Giora Dishon

 

Title:   President and CEO

 

 

 

 

HYPERNEX, INC.

 

 

 

By:

David S. Kurtz

 

 


 

Name: David S. Kurtz

 

Title:   President



STOCKHOLDERS:

          (numbersnext to each Stockholder’s Name reflect such Stockholder’s holding of thecapital stock of the Corporation)

 

 

 

80,093 – A

DRAPER TRIANGLE VENTURES L.P.

49,050 – A2

By:

   Draper Triangle Partners, LLC, its

 

 

   General Partner

 

 

 

 

By:

Michael J. Stubler

 

 


 

Name: Michael J. Stubler

 

Title:   Managing Director

 

Date:   4/20/06

 

 

 

402 – A

DRAPER TRIANGLE VENTURES

 

CO-INVESTMENT FUND, L.P.

 

By:

  Draper Triangle Partners, LLC, its

 

 

  General Partner

 

 

 

 

By:

Michael J. Stubler

 

 


 

Name: Michael J. Stubler

 

Title:   Managing Director

 

Date:   4/20/06

 

 

 

10,556 – Common

Robert Anderson

1,548 – A


 

Robert Anderson

 

Date:  4/20/06

 

 

45,000 – Common

Davis S. Kurtz

1,548 – A


 

David S. Kurtz

 

Date: 4/20/06

 

 

1,548 – A

Gary Hillman

 


 

Gary Hillman

 

Date:  4/20/06

 

 

1,548 – A

SONHENDER PARTNERSHIP L.P.

613 – A2

By:

   Sonhender, Inc., its General Partner

 

 

 

 

By:

Thomas W. Henderson

 

 


 

Name: Thomas W. Henderson

 

Title:   President

 

Date:   4/24/06



 

 

 

1,548 – A

Brian M. McInerney

613 – A2


 

Brian M. McInerney

 

Date:  4/23/06

 

 

1,548 – A

William F. Stotz

 


 

William F. Stotz

 

Date:  4/23/06

 

 

3,096 – A

James D. Roberge

1,226 – A2


 

James D. Roberge

 

Date:  4/21/06

 

 

4,644 – A

H. L. PAC PARTNERSHIP

1,839 – A2

 

 

By:

Henry J. Gailliot

 

 


 

Name: Henry J. Gailliot

 

Title:  General Partner

 

Date:  4/23/06

 

 

12,384 – A

GLEN ARDEN ASSOCIATES

4,906 – A2

 

 

By:

John A. Staley, IV

 

 


 

Name: John A. Staley, IV

 

Title:  General Partner

 

Date:  4/21/06

 

 

28,008 – A

ADVANCED TECHNOLOGY MATERIALS, INC.

3,065 – A2

 

 

By:

Daniel P. Sharkey

 

 


 

 

Daniel P. Sharkey, Chief Financial Officer

 

Date:  4/20/06

 

 

26,000 – Common

Krzysztof J. Kozaczek

 


 

Krzysztof J. Kozaczek

 

Date: 4/20/06

 

 

20,624 – Common

Paul Moran

 


 

Paul Moran

 

Date: 4/20/06



 

 

 

10,556 – Common

CREATIVE DESIGN CORPORATION

 

 

By:

Gary Hillman

 

 


 

 

Gary Hillman, President

 

Date:  4/20/06

 

 

 

42,765 – A2

DRAPER FISHER JURVETSON FUND VI, L.P.

 

By:

Draper Fisher Jurvetson Management

 

 

Company VI, LLC, its General Partner

 

 

 

 

By:

John Fisher

 

 


 

Name:

John Fisher

 

Title: 

Managing Member

 

Date:

 

 


 

 

1,196 – A2

DRAPER FISHER JURVETSON PARTNERS VI, LLC

 

By:

John Fisher

 

 


 

Name: 

John Fisher

 

Title:

Managing Member

 

Date:

 

 


 

 

2,023 – A2

DRAPER ASSOCIATES, L.P.

 

By:

________________________, its General Partner

 

 

 

 

By:

Timothy C. Draper

 

 


 

Name:

Timothy C. Draper

 

Title:

General Partner

 

Date:

 

 


 

 

45,984 – A2

CID SEED FUND, L.P.

 

By:

CID Seed Fund Partners I, its Managing Partner

 

 

 

 

By:

Robert J. O’Brien

 

 


 

Name:

Robert J. O’Brien

 

Title:

Managing Partner

 

Date:

4/20/06



 

 

 

8,124 – A2

BEN FRANKLIN TECHNOLOGY PARTNERS,

 

CENTRAL AND NORTHERN PENNSYLVANIA

 

 

 

 

By:

Kathleen D. Matason

 

 


 

Name: 

Kathleen D. Matason

 

Title:

Director of Operations

 

Date:

4/24/06



OmittedExhibits and Schedules

Exhibits

 

 

 

Exhibit “A-1” – Form of Employees Employment Agreement

 

 

 

Exhibit “A-2” – Form of Employees Agreement Not to Compete

 

 

 

Exhibit “A-3(i)” – Form of Employees Restricted Stock Agreement

 

 

 

Exhibit “A-3(ii) – Form of Managers Restricted Stock Agreement

 

 

 

Exhibit “B” – Bill of Sale

 

 

 

Exhibit “C” – Assignment of Registrable IP

Schedules

 

 

 

Schedule 1(d)(i) – Assumed Liabilities

 

 

 

Schedule 1(d)(iii) – Assigned Contracts

 

 

 

Schedule 2(b) – Employee Restricted Stock Allocatino

 

 

 

Schedule 2(d) – Purchase Price Allocation

 

 

 

Schedule 4(a) – Stockholders

 

 

 

Schedule 4(e) – Director, Officers, Bank Accounts

 

 

 

Schedule 4(f) – Financial Statements

 

 

 

Schedule 4(g) – Title to Assets

 

 

 

Schedule 4(h)(i) – Each-Interests to Real Property

 

 

 

Schedule 4(h)(iii) – Property Management Agreements

 

 

 

Schedule 4(h)(v) – Leases

 

 

 

Schedule 4(i)(A) – Personal Property List

 

 

 

Schedule 4(i)(B) – Conditional of Personal Property



 

 

 

Schedule 4(i)(C) – Inventory Proeperty

 

 

 

Schedule 4(j)(i) – Owned Intellectual Property

 

 

 

Schedule 4(j)(ii) – Licensed Intellectual Property

 

 

 

Schedule 4(j)(iv) – Person Who Have Not Executed Non-Disclosure Agreements

 

 

 

Schedule 4(m) – Insurance

 

 

 

Schedule 4(n) – Liabilities

 

 

 

Schedule 4(o)(i) – Exception to Enforceability of Contracts

 

 

 

Schedule 4(o)(iii) – Company Agreements

 

 

 

Schedule 4(p)(i) – Employment, Non-Compete and Non-Disclosure Agreements

 

 

 

Schedule 4(p)(ii) – Employees and Employment Terms

 

 

 

Schedule 4(p)(iii) – Employment Applications

 

 

 

Schedule 4(q)(i) – Benefit Plans

 

 

 

Schedule 4(r) – Litigation

 

 

 

Schedule 4(s) – Suppliers and Customers

 

 

 

Schedule 4(u) – Compliance with Laws and Regulations

 

 

 

Schedule 4(v) – Environmental Matters

 

 

 

Schedule 4(w)(ii)(A) – Exceptions to Corporate Tax Returns

 

 

 

Schedule 4(w)(ii)(B) – Exceptions to Taxes Due

 

 

 

Schedule 4(w)(ii)(D) – Tax Returns

 

 

 

Schedule 4(w)(ii)(E) – Tax Waivers

 

 

 

Schedule 4(w)(ii)(F) – Income Reportable After Closing Date

 

 

 

Schedule 4(w)(ii)(K) – Income Tax Basis; Net Operating Gain or Loss

 

 

 

Schedule 5(e)(ii) – Subsequent Events

 

 

 

Schedule 10(d) – Agreements to be Renegotiated