UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 28, 2014

VICON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

         
New York
1-7939
11-2160665
(State of Incorporation or
(Commission File Number)
(IRS Employer
Organization)
 
Identification No.)

131 Heartland Blvd., Edgewood, New York
11717
(Address of Principal Executive Offices)
(Zip Code)

(631) 952-2288
(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
þ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
þ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))







Item 1.01. Entry into a Material Definitive Agreement .
On March 28, 2014, Vicon Industries, Inc. (“Vicon”), IQinVision, Inc., a California corporation (“IQinVision”) and VI Merger Sub, Inc., a California corporation and wholly owned subsidiary of Vicon (“Merger Sub”) entered into an agreement and plan of merger and reorganization (the “Merger Agreement”), pursuant to which Merger Sub will be merged with and into IQinVision, with IQinVision surviving as a wholly-owned subsidiary of Vicon (the “Merger”).
Pursuant to the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), the issued and outstanding shares of capital stock of IQinVision will, in the aggregate, be converted into the right to receive an aggregate number of shares of Vicon common stock equal to the Outstanding Equity (as defined below) of Vicon immediately prior to the Effective Time (the “Merger Consideration”). The Merger Agreement defines “Outstanding Equity” to mean, with respect to Vicon, the total number of shares outstanding of Vicon common stock then issued and outstanding, excluding outstanding options to purchase Vicon common stock and any other securities convertible into Vicon common stock. In addition, all outstanding IQinVision options and stock appreciation rights, as well as IQinVision’s 2011 Stock Incentive Plan and 2001 Stock Incentive Plan, will be assumed by Vicon. Each option and stock appreciation right IQinVision assumed in the Merger will be converted into an option to purchase or stock appreciation right with respect to, as applicable, a number of shares of Vicon’s common stock representing the number of IQinVision shares subject to such option or stock appreciation right multiplied by the Common Stock Per Share Merger Consideration, as such term is defined in the Merger Agreement. The exercise price of each option and the base value per share of Vicon common stock for each stock appreciation right will be proportionately adjusted.
Following the consummation of the transactions contemplated by the Merger Agreement, the securityholders of Vicon immediately prior to the Effective Time and the securityholders of IQinVision immediately prior to the Effective Time will each own approximately 50% of the outstanding shares of common stock of Vicon after the Merger.
The Merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
Pursuant to the Merger Agreement, the board of directors of post-Merger Vicon (the “Board”) will consist of six-members, comprised of three directors of Vicon immediately prior to the Effective Time and three directors of IQinVision immediately prior to the Effective Time. In lieu of one such director, either of Vicon or IQinVision may appoint one person not currently serving on such party’s board of directors to the Board, subject to such person’s qualification as an independent director under applicable NYSE MKT LLC rules and approval by the other party.
Completion of the Merger is subject to a number of conditions, including, but not limited to (i) approval of the issuance of shares of Vicon common stock in connection with the Merger by Vicon’s shareholders and the adoption and approval of the Merger Agreement and the transactions contemplated thereby by IQinVision’s shareholders; (ii) the effectiveness of a registration statement on Form S-4 to be filed by Vicon with the Securities and Exchange Commission (the “SEC”) to register the issuance of the shares of Vicon common stock in connection with the Merger, which will contain a proxy statement/prospectus; (iii) approval for listing on the NYSE MKT LLC of such shares of Vicon common stock; (iv) exercise of dissenters’ rights by no more than 10% of IQinVision’s shareholders; and (v) other customary closing conditions.
As permitted by the Merger Agreement, Vicon expects to declare a special cash dividend of $0.55 per share payable with respect to shares of Vicon common stock held by shareholders of Vicon as of a record date prior to the Effective Time and payable within 15 days after the Effective Time.
Concurrently and in connection with the execution of the Merger Agreement, IQinVision entered into a voting agreement (the “Vicon Voting Agreement”) with Kenneth Darby, David W. Wright, Article 6 Marital Trust, Henry Partners, L.P., and Matthew Partners, L.P., shareholders of Vicon holding an aggregate of approximately 28% of the outstanding shares of Vicon common stock as of March 28, 2014, pursuant to which such shareholders agreed to vote their respective shares of Vicon common stock (i) in favor of the issuance of the Merger Consideration pursuant to the Merger Agreement and any actions required in furtherance thereof, (ii) against any proposal or transaction involving Vicon, the effect of which proposal or transaction is to delay, impair, prevent or nullify the Merger or the transaction contemplated by the Merger Agreement and (iii) against any other action or agreement that would result in a breach in any material respect of any covenant, representation or warranty of the Merger Agreement.





In addition, Vicon entered into a voting agreement (the “IQinVision Voting Agreement”) with certain of IQinVision’s shareholders holding an aggregate of approximately 72% of the outstanding shares of IQinVision common stock and 54% of the outstanding shares of IQinVision preferred stock, which includes 60% of the outstanding shares of IQinVision series A preferred stock, 76% of the outstanding shares of IQinVision series B preferred stock, 42% of the outstanding shares of IQinVision series C preferred stock, and 9% of the outstanding shares of IQinVision series D preferred stock, as of March 28, 2014, pursuant to which such shareholders agreed to vote their respective shares of IQinVision capital stock (i) in favor of the adoption of the Merger, the Merger Agreement and any actions required in furtherance thereof, (ii) against any other proposal or transaction involving IQinVision, the effect of which proposal or transaction would be to delay, impair, prevent or nullify the Merger or the transactions contemplated by the Merger Agreement, and (iii) against any other action or agreement that would result in a breach in any material respect of any covenant, representation or warranty of the Merger Agreement.
Both the Vicon Voting Agreement and the IQinVision Voting Agreement will terminate upon, among other things, the earlier of the Effective Time or termination of the Merger Agreement.
Concurrently and in connection with the execution of the Merger Agreement, certain shareholders of IQinVision and the continuing directors of Vicon following the Merger have entered into post-closing lock-up agreements with Vicon (the “Post-Closing Lock-up Agreements”). Pursuant to these agreements, each such shareholder will be subject to lock-up restrictions on the sale of Vicon common stock acquired in the Merger and/or owned by such shareholder immediately prior to the Effective Time, pursuant to which such shareholder may not, subject to certain exceptions, sell any of such Vicon common stock for a period of six months after the Effective Time.
Each of Vicon and IQinVision have made customary representations, warranties and covenants in the Merger Agreement, including among others, covenants that (i) each party will operate its business only in the usual, regular, and ordinary course during the interim period between execution of the Merger Agreement and completion of the Merger; (ii) each party will not engage in certain kinds of transactions or take certain actions during such period (including, but not limited to, the issuance and sale of its securities and the incurrence of debt, with certain exceptions); (iii) IQinVision will solicit approval by its shareholders of the Merger Agreement and the transactions contemplated thereby and the board of directors of IQinVision will recommend that its shareholders adopt and approve the Merger Agreement, subject to certain exceptions; and (iv) Vicon will convene and hold a meeting of its shareholders for the purpose of considering the approval of the issuance of shares of Vicon common stock in connection with the Merger, and the board of directors of Vicon will recommend that its shareholders adopt and approve such proposals, subject to certain exceptions. Vicon and IQinVision have each also agreed not to solicit proposals relating to alternative business combination transactions or enter into discussions or an agreement concerning any proposals for alternative business combination transactions, subject to exceptions in the event of their receipt of a “superior proposal,” as defined in the Merger Agreement.
The Merger Agreement contains termination rights in favor of each of Vicon and IQinVision in certain circumstances and further provides that, upon termination of the Merger Agreement under specified circumstances, either Vicon or IQinVision may be required to pay the other party a termination fee of $750,000. In addition, either party may terminate the Merger Agreement if the Merger has not been completed by September 28, 2014 (the “Outside Termination Date”), provided that if the registration statement on Form S-4 is not declared effective by September 28, 2014, then either party is generally entitled to extend the Outside Termination Date by 60 days.





The foregoing description of the Merger Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Merger Agreement, which is filed as Exhibit 2.1 to this current report on Form 8-K and is incorporated herein by reference. The Merger Agreement and related description are intended to provide you with information regarding the terms of the Merger Agreement and are not intended to modify or supplement any factual disclosures about Vicon in its reports filed with the SEC or about IQinVision. In particular, the Merger Agreement and related description are not intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to Vicon or IQinVision. The representations and warranties have been negotiated with the principal purpose of not establishing matters of fact, but rather as a risk allocation method establishing the circumstances in which a party may have the right not to close the Merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise. The assertions embodied in the representations and warranties made by Vicon and IQinVision in the Merger Agreement are qualified by information contained in confidential disclosure schedules that Vicon and IQinVision have delivered to each other in connection with the signing of the Merger Agreement made for purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts. The representations and warranties also may be subject to a contractual standard of materiality different from those generally applicable under the securities laws. Shareholders of Vicon and IQinVision are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Vicon, IQinVision or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement.
The foregoing descriptions of the Vicon Voting Agreement and the IQinVision Voting Agreement do not purport to be complete and are qualified in their entirety by reference to the forms of agreement attached as Exhibits 10.1 and 10.2, respectively, to this current report on Form 8-K, which are incorporated herein by reference.
The foregoing description of the Post-Closing Lock-up Agreements does not purport to be complete and is qualified in its entirety by reference to the form of agreement attached as Exhibit 10.3 to this current report on Form 8-K, which is incorporated herein by reference.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(b), (e)    On March 28, 2014, Kenneth M. Darby, Vicon’s Chief Executive Officer, entered into an agreement with Vicon whereby he agreed to resign from his position as Chief Executive Officer and as a director of Vicon upon Vicon’s hiring of his replacement. Pursuant to the agreement, Mr. Darby’s options to purchase 60,000 shares of Vicon’s common stock were immediately terminated and cancelled. Further, Vicon has agreed to continue to pay Mr. Darby’s base salary ($225,000 per annum) and medical benefits for four months following such resignation or earlier termination of employment by Vicon. A copy of such agreement is filed as Exhibit 10.4 to this current report on Form 8-K and is incorporated herein by reference.
(b)    Concurrently and in connection with the execution of the Merger Agreement, W. Gregory Robertson, David W. Wright and Bernard F. Reynolds delivered to Vicon written resignations from Vicon’s board of directors, which resignations are in each case contingent and effective upon the completion of the Merger.
Item 8.01. Other Events.
Attached hereto as Exhibit 99.1 is a joint press release of Vicon and IQinVision, dated March 31, 2014.





Item 9.01. Financial Statements and Exhibits
(d)      Exhibits
Exhibit Number
Description
2.1*
Agreement and Plan of Merger and Reorganization dated as of March 28, 2014 by and between Vicon Industries, Inc., IQinVision, Inc. and VI Merger Sub, Inc.
10.1
Form of Vicon Voting and Lock-Up Agreement dated as of March 28, 2014
10.2
Form of IQinVision Voting and Lock-Up Agreement dated as of March 28, 2014
10.3
Form of Post-Closing Lock-Up Agreement dated as of March 28, 2014
10.4
Employment Agreement Letter between the Registrant and Kenneth M. Darby dated March 28, 2014
99.1
Joint Press Release issued by Vicon and IQinVision on March 31, 2014

* Certain exhibits and schedules to the Agreement and Plan of Merger and Reorganization have been omitted pursuant to Item 601(b) of Regulation S-K. Vicon will furnish the omitted exhibits and schedules to the SEC upon request by the SEC.

Important Additional Information about the Proposed Merger
This communication is being made in respect of the proposed merger involving IQinVision, Inc. and Vicon Industries, Inc. Vicon intends to file a registration statement on Form S-4 with the SEC, which will contain a proxy statement/prospectus and other relevant materials, and plans to file with the SEC other documents regarding the proposed transaction. The final proxy statement/prospectus will be sent to the shareholders of Vicon in connection with a special meeting of shareholders to be held to vote on matters relating to the proposed transaction. The proxy statement/prospectus will contain information about Vicon, IQinVision, the proposed merger, and related matters. SHAREHOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE, AS THEY WILL CONTAIN IMPORTANT INFORMATION THAT SHAREHOLDERS SHOULD CONSIDER BEFORE MAKING A DECISION ABOUT THE MERGER AND RELATED MATTERS. In addition to receiving the proxy statement/prospectus and proxy card by mail, shareholders will also be able to obtain the proxy statement/prospectus, as well as other filings containing information about Vicon, without charge, from the SEC’s website (http://www.sec.gov) or, without charge, by contacting Vicon’s Investor Relations at (631) 650-6201.






No Offer or Solicitation
This communication is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction in connection with the Merger or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Participants in Solicitation
Vicon and its executive officers and directors may be deemed to be participants in the solicitation of proxies from Vicon’s shareholders with respect to the matters relating to the proposed merger. Information regarding Vicon’s executive officers and directors is available in Vicon’s proxy statement on Schedule 14A, filed with the SEC on April 1, 2013. Information regarding any interest that Vicon, IQinVision or any of the executive officers or directors of Vicon or IQinVision may have in the transaction with IQinVision will be set forth in the proxy statement/prospectus that Vicon intends to file with the SEC in connection with its shareholder vote on matters relating to the proposed merger. Shareholders will be able to obtain this information by reading the proxy statement/prospectus when it becomes available.
Forward-Looking Statements
Except for the historical information presented herein, matters discussed may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Statements that are not historical facts, including statements preceded by, followed by, or that include the words “will”; “potential”; “believe”; “anticipate”; “intend”; “plan”; “expect”; “estimate”; “could”; “may”; “should”; or similar statements are forward-looking statements. Such statements include, but are not limited to those referring to the potential for the generation of value, potential for revenue, potential for growth and the expected completion and outcome of the Merger and the transactions contemplated by the Merger Agreement and related agreements. Vicon disclaims any intent or obligation to update these forward-looking statements. Risks and uncertainties include, among others, failure to obtain necessary shareholder approval for the proposed merger with IQinVision and the matters related thereto; failure of either party to meet the conditions to closing of the transaction; delays in completing the transaction and the risk that the transaction may not be completed at all; failure to realize the anticipated benefits from the transaction or delay in realization thereof; the businesses of Vicon and IQinVision may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; operating costs and business disruption during the pendency of and following the transaction, including adverse effects on employee retention and on business relationships with third parties; as well as risks detailed from time to time in Vicon’s Form 10-K under the caption “Risk Factors” and in its other reports filed with the U.S. Securities and Exchange Commission. Copies of Vicon’s public disclosure filings are available from its investor relations department and the investor relations section of its website at http://www.vicon-security.com.





SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Dated: March 31, 2014

                                                                                              
                                    
VICON INDUSTRIES, INC.

                                    
By: /s/ John M. Badke
John M. Badke
Senior Vice President, Finance and
Chief Financial Officer

                                               

                                         

                                             






                                          
           
EXHIBIT INDEX


Exhibit Number
Description
2.1*
Agreement and Plan of Merger and Reorganization dated as of March 28, 2014 by and between Vicon Industries, Inc., IQinVision, Inc. and VI Merger Sub, Inc.
10.1
Form of Vicon Voting and Lock-Up Agreement dated as of March 28, 2014
10.2
Form of IQinVision Voting and Lock-Up Agreement dated as of March 28, 2014
10.3
Form of Post-Closing Lock-Up Agreement dated as of March 28, 2014
10.4
Employment Agreement Letter between the Registrant and Kenneth M. Darby dated March 28, 2014
99.1
Joint Press Release issued by Vicon and IQinVision on March 31, 2014

* Certain exhibits and schedules to the Agreement and Plan of Merger and Reorganization have been omitted pursuant to Item 601(b) of Regulation S-K. Vicon will furnish the omitted exhibits and schedules to the SEC upon request by the SEC.
















EXHIBIT 2.1






AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
by and among
VICON INDUSTRIES, INC.,
VI MERGER SUB, INC.
and
IQINVISION, INC.
Dated as of March 28, 2014







TABLE OF CONTENTS
Article and Page Numbers
Article 1 TRANSACTIONS AND TERMS OF MERGER      2
1.1      Merger.      2
1.2      Time and Place of Closing.      2
1.3      Effective Time.      2
Article 2 EFFECT OF MERGER      2
2.1      Charter.      2
2.2      Bylaws.      2
2.3      Directors and Officers.      3
Article 3 MANNER OF CONVERTING SHARES      3
3.1      Conversion of Shares.      3
3.2      Reserved.      4
3.3      Shares Held by Target or Buyer.      4
3.4      Dissenting Shareholders.      4
3.5      Fractional Shares.      5
3.6      Target Stock Options and Stock Appreciation Rights.      5
Article 4 EXCHANGE OF SHARES      6
4.1      Exchange Procedures.      6
4.2      Rights of Former Target Shareholders.      7
Article 5 REPRESENTATIONS AND WARRANTIES OF TARGET      8
5.1      Organization, Standing, and Power.      8
5.2      Authority of Target; No Breach By Agreement.      8
5.3      Capital Stock.      9
5.4      Target Subsidiaries.      10
5.5      Financial Statements.      10
5.6      Absence of Undisclosed Liabilities.      10
5.7      Absence of Certain Changes or Events.      10
5.8      Tax Matters.      10
5.9      Real Property.      12
5.10      Assets.      12
5.11      Intellectual Property.      13
5.12      Environmental Matters.      14
5.13      Compliance with Laws.      15
5.14      Labor Relations.      16
5.15      Employee Benefit Plans      16
5.16      Material Contracts.      19
5.17      Privacy of Customer Information      20
5.18      Legal Proceedings.      20
5.19      Statements True and Correct.      21






5.20      Tax and Regulatory Matters.      21
5.21      Required Vote of Target Shareholders.      22
5.22      Board Recommendation.      22
Article 6 REPRESENTATIONS AND WARRANTIES OF BUYER      22
6.1      Organization, Standing, and Power.      22
6.2      Authority; No Breach By Agreement.      23
6.3      Capital Stock.      23
6.4      Buyer Subsidiaries.      24
6.5      SEC Filings; Financial Statements.      25
6.6      Absence of Undisclosed Liabilities.      26
6.7      Absence of Certain Changes or Events.      27
6.8      Tax Matters.      27
6.9      Real Property.      28
6.10      Assets.      29
6.11      Intellectual Property.      30
6.12      Environmental Matters.      30
6.13      Compliance with Laws.      31
6.14      Labor Relations.      32
6.15      Employee Benefit Plans.      32
6.16      Material Contracts.      36
6.17      Privacy of Customer Information      36
6.18      Legal Proceedings.      37
6.19      Reports.      37
6.20      Statements True and Correct.      37
6.21      Vote of Buyer Shareholders.      38
6.22      Authority of Sub.      38
6.23      Tax and Regulatory Matters.      38
6.24      Board Recommendation.      39
Article 7 CONDUCT OF BUSINESS PENDING CONSUMMATION      39
7.1      Affirmative Covenants of Target.      39
7.2      Negative Covenants of Target.      39
7.3      Affirmative Covenants of Buyer.      41
7.4      Negative Covenants of Buyer.      41
7.5      Adverse Changes in Condition.      43
Article 8 ADDITIONAL AGREEMENTS      43
8.1      Registration Statement; Proxy Statement; Shareholder Approval.      43
8.2      Other Offers, Etc.      45
8.3      Exchange Listing.      46
8.4      Consents of Regulatory Authorities.      46
8.5      Filings with State Offices.      47
8.6      Agreement as to Efforts to Consummate.      47
8.7      Investigation and Confidentiality.      47
8.8      Press Releases.      48
8.9      Tax Treatment.      48
- ii -







8.10      State Takeover Laws.      48
8.11      Employee Benefits and Contracts.      48
8.12      Indemnification of Target Directors and Officers.      49
8.13      Buyer Board.      50
8.14      Section 16 Matters.      51
Article 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE      51
9.1      Conditions to Obligations of Each Party.      51
9.2      Conditions to Obligations of Buyer.      52
9.3      Conditions to Obligations of Target.      53
Article 10 TERMINATION      54
10.1      Termination.      54
10.2      Effect of Termination.      56
Article 11 RESERVED      56
Article 12 MISCELLANEOUS      56
12.1      Definitions.      56
12.2      Expenses.      68
12.3      Brokers and Finders.      69
12.4      Entire Agreement.      70
12.5      Amendments.      70
12.6      Waivers.      70
12.7      Assignment.      70
12.8      Notices.      71
12.9      Governing Law.      71
12.10      Counterparts.      72
12.11      Captions; Articles and Sections.      72
12.12      Interpretations.      72
12.13      Enforcement of Agreement.      72
12.14      Severability.      72















- iii -






EXHIBIT INDEX
Exhibit          Description     

Exhibit 1      Target Voting Agreement     
Exhibit 2      Buyer Voting Agreement     
Exhibit 3      Post Closing Lock-Up Agreement

Annex A      Approving Target Shareholders
Annex B      Approving Buyer Shareholders
Annex C      Lock-Up Shareholders
Annex D      Non-Continuing Directors



































- iv -







AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this “ Agreement ”) is made and entered into as of March 28, 2014, by and among VICON INDUSTRIES, INC. (“ Buyer ”), a New York corporation; VI MERGER SUB, INC. (“ Sub ”), a California corporation; and IQINVISION, INC. (“ Target ”), a California corporation.
Preamble
The respective Boards of Directors of Target, Sub and Buyer are of the opinion that the transactions described herein are in the best interests of the Parties to this Agreement and their respective shareholders. This Agreement provides for the acquisition of Target by Buyer pursuant to the merger of Sub with and into Target. At the effective time of such Merger, the outstanding shares of the capital stock of Target shall be converted into the right to receive shares of the common stock of Buyer (except as provided herein). As a result, shareholders of Target shall become shareholders of Buyer and Target shall continue to conduct its business and operations as a wholly owned subsidiary of Buyer. The transactions described in this Agreement are subject to the approvals of the shareholders of Target, the shareholders of Buyer, and the satisfaction of certain other conditions described in this Agreement. It is the intention of the Parties to this Agreement that the Merger for federal income tax purposes shall qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code.
Concurrently with the execution and delivery of this Agreement and as a condition to Buyer’s willingness to enter into this Agreement, the holders of Target Common Stock and Target Preferred Stock listed on Annex A (the “ Approving Target Shareholders ”) have entered into a Voting Agreement, dated as of the date of this Agreement, a copy of which is attached as Exhibit 1 hereto (the “ Target Voting Agreement ”), pursuant to which such Approving Target Shareholders have, among other things, agreed to vote all of the stock of Target owned by such Approving Target Shareholders in favor of the adoption of the Target Shareholder Approval Matters;
Concurrently with the execution and delivery of this Agreement and as a condition to Target’s willingness to enter into this Agreement, the shareholders of Buyer listed on Annex B (the “ Approving Buyer Shareholders ”) have entered into a Voting Agreement, dated as of the date of this Agreement, substantially in the form which is attached as Exhibit 2 hereto, pursuant to which such Approving Buyer Shareholders have, among other things, agreed to vote all of the stock of Buyer owned by such Approving Buyer Shareholders in favor of the adoption of the Buyer Shareholder Approval Matters;
Concurrently with the execution and delivery of this Agreement and as a condition to the Parties’ willingness to enter into this Agreement, the shareholders of Buyer and Target listed on Annex C have entered into a Post-Closing Lock-Up Agreement, dated as of the date of this Agreement, substantially in the form which is attached as Exhibit 3 hereto, pursuant to which such Persons have, among other things, agreed not to transfer any shares of Buyer Common Stock to any third party for the periods following the Effective Time set forth therein; and






Certain capitalized terms used in this Agreement are defined in Section 12.1 of this Agreement.
NOW, THEREFORE , in consideration of the above and the mutual warranties, representations, covenants, and agreements set forth herein, the Parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER

1. Merger.
Subject to the terms and conditions of this Agreement, at the Effective Time, Sub shall be merged (the “ Merger ”) with and into Target in accordance with the provisions of Section 1100 of the General Corporation Law of the State of California (the “ CGCL ”). Target shall be the Surviving Corporation resulting from the Merger and shall become a wholly owned Subsidiary of Buyer and shall continue to be governed by the Laws of the State of California. The Merger shall be consummated pursuant to the terms of this Agreement, which has been approved and adopted by the respective Boards of Directors of Target, Sub and Buyer.
2. Time and Place of Closing.
The closing of the transactions contemplated hereby (the “ Closing ”) will take place at 9:00 A.M. on the date that the Effective Time occurs (or the immediately preceding day if the Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties, acting through their authorized officers, may mutually agree. The Closing shall be held at such location as may be mutually agreed upon by the Parties.
3. Effective Time.
The Merger and other transactions contemplated by this Agreement shall become effective on the date and at the time a properly executed agreement of merger conforming to Chapter 11 of the CGCL shall be filed with the Secretary of State of the State of California (the “ Effective Time ”). Subject to the terms and conditions hereof, unless otherwise mutually agreed upon in writing by the authorized officers of each Party, the Parties shall use their reasonable efforts to cause the Effective Time to occur on the second business day following the satisfaction or waiver (to the extent waiver is permitted by applicable law), of the conditions set forth in Article 9 (other than those conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or waiver (if legally permissible) of those conditions) or at such other place, date and time as Buyer and Target may agree in writing.
ARTICLE 2
EFFECT OF MERGER

1. Charter.
The Articles of Incorporation of Sub in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation until duly amended or repealed.
2. Bylaws.

-2-







The Bylaws of Sub in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation until duly amended or repealed.
3. Directors and Officers.
The directors of Sub in office immediately prior to the Effective Time, together with such additional persons as may thereafter be elected, shall serve as the directors of the Surviving Corporation from and after the Effective Time in accordance with the Bylaws of the Surviving Corporation. The officers of Sub in office immediately prior to the Effective Time, together with such additional persons as may thereafter be elected, shall serve as the officers of the Surviving Corporation from and after the Effective Time in accordance with the Bylaws of the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES

1. Conversion of Shares.
Subject to the provisions of this Article 3, at the Effective Time, by virtue of the Merger and without any action on the part of Buyer, Target, Sub or the shareholders of any of the foregoing, the shares of the constituent corporations shall be converted as follows:
(a) Each share of capital stock of Buyer issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding from and after the Effective Time.
(b) Each share of Sub Common Stock issued and outstanding immediately prior to the Effective Time shall cease to be outstanding and shall be converted into one share of Surviving Corporation Common Stock.
(c) Each share of Target Capital Stock issued and outstanding immediately prior to the Effective Time shall cease to be outstanding and shall be converted into and exchanged for the right to receive that number of shares of Buyer Common Stock as set forth below:
(i) Each share of Target Series D Preferred Stock issued and outstanding immediately prior to the Effective Time shall cease to be outstanding and shall be converted into and exchanged for the right to receive the Series D Per Share Merger Consideration for each share of Target Common Stock into which such share of Series D Preferred Stock is convertible;
(ii) Each share of Target Series C Preferred Stock issued and outstanding immediately prior to the Effective Time shall cease to be outstanding and shall be converted into and exchanged for the right to receive the Series C Per Share Merger Consideration for each share of Target Common Stock into which such share of Series C Preferred Stock is convertible;
(iii) Each share of Target Series B Preferred Stock issued and outstanding immediately prior to the Effective Time shall cease to be outstanding and shall be converted into and exchanged for the right to receive the Series B Per Share Merger Consideration for each share of Target Common Stock into such share of Series B Preferred Stock is convertible;

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(iv) Each share of Target Series A Preferred Stock issued and outstanding immediately prior to the Effective Time shall cease to be outstanding and shall be converted into and exchanged for the right to receive the Series A Per Share Merger Consideration for each share of Target Common Stock into which such share of Series A Preferred Stock is convertible; and
(v) Each share of Target Common Stock issued and outstanding immediately prior to the Effective Time shall cease to be outstanding and shall be converted into and exchanged for the right to receive the Common Stock Per Share Merger Consideration;

provided, however, that each of the Series D Per Share Merger Consideration, Series C Per Share Merger Consideration, Series B Per Share Merger Consideration, Series A Per Share Merger Consideration and Common Stock Per Share Merger Consideration shall be increased (pro rata based on the number of Adjusted Series D Conversion Shares, Adjusted Series C Conversion Shares, Adjusted Series B Conversion Share, Adjusted Series A Conversion Shares and Common Stock Conversion Shares as a proportion of the total number of shares of Target Capital Stock outstanding, on an as-converted to Target Common Stock basis) to the extent necessary to increase the number of shares of Buyer Common Stock included in the aggregate Merger Consideration by the aggregate number of shares of Buyer Common Stock that would be cashed out as fractional interests under Section 3.5 if such increase to the Series D Per Share Merger Consideration, Series C Per Share Merger Consideration, Series B Per Share Merger Consideration, Series A Per Share Merger Consideration and Common Stock Per Share Merger Consideration was not made, in each case upon surrender of the certificate(s) representing the shares of Target Capital Stock as provided in Article 4, and all shares of Target Capital Stock that have been converted into the right to receive the Merger Consideration as provided in this Section 3.1 shall automatically be cancelled and shall cease to exist.
2. Reserved.

3. Shares Held by Target or Buyer.
Each of the shares of Target Capital Stock held by any Target Entity shall be canceled and retired at the Effective Time and no consideration shall be issued in exchange therefor.
4. Dissenting Shareholders.
Any holder of shares of Target Capital Stock who perfects such holder’s dissenters’ rights in accordance with and as contemplated by Section 1300(b) of the CGCL shall be entitled to receive from the Surviving Corporation the value of such shares in cash as determined pursuant to such provision of Law; provided, that no such payment shall be made to any dissenting shareholder unless and until such dissenting shareholder has complied with the applicable provisions of the CGCL and surrendered to Target the certificate or certificates representing the shares for which payment is being made. In the event that after the Effective Time a dissenting shareholder of Target fails to perfect, or effectively withdraws or loses, such holder’s right to appraisal of and payment for such holder’s shares, Buyer shall issue and deliver the consideration to which such holder of shares of Target Capital Stock is entitled under this Article 3 (without interest) upon surrender

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by such holder of the certificate or certificates representing the shares of Target Capital Stock held by such holder. If and to the extent required by applicable Law, the Surviving Corporation will establish (or cause to be established) an escrow account with an amount sufficient to satisfy the maximum aggregate payment that may be required to be paid to dissenting shareholders. Upon satisfaction of all claims of dissenting shareholders, the remaining escrowed amount, reduced by payment of the fees and expenses of the escrow agent, will be returned to the Surviving Corporation.
5. Fractional Shares.
Notwithstanding any other provision of this Agreement, each holder of shares of Target Capital Stock exchanged pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of Buyer Common Stock (after taking into account all certificates delivered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part of a share of Buyer Common Stock multiplied by the market value of one share of Buyer Common Stock at the Effective Time. The market value of one share of Buyer Common Stock at the Effective Time shall be the closing price of such common stock on the NYSE (as reported by The Wall Street Journal or, if not reported thereby, any other authoritative source selected by Buyer) on the last trading day preceding the Effective Time. No such holder will be entitled to dividends, voting rights, or any other rights as a shareholder in respect of any fractional shares.
6. Target Stock Options and Stock Appreciation Rights.
(a) At the Effective Time, each outstanding option to purchase Target Common Stock under the Target Stock Incentive Plan (each, a “ Target Stock Option ”), and each outstanding stock appreciation right under the Target Stock Incentive Plan (each, a “Target SAR ”), whether vested or unvested, and the Target Stock Incentive Plan, shall be assumed by Buyer, and Target shall take all corporate action necessary to ensure that each such Target Stock Option and Target SAR shall become an option to acquire or stock appreciation right with respect to, as applicable, on the same terms and conditions as were applicable under such Target Stock Option or Target SAR immediately prior to the Effective Time, a number of shares of Buyer Common Stock equal to the number of shares of Target Common Stock subject to such Target Stock Option or Target SAR immediately prior to the Effective Time, multiplied by the Common Stock Per Share Merger Consideration, with the result rounded down to the nearest whole number. The exercise price per share of Buyer Common Stock for each assumed Target Stock Option will equal the quotient obtained from dividing (i) the exercise price per share for the shares of Target Common Stock purchasable pursuant to the assumed Target Stock Option immediately prior to the Effective Time by (ii) the Common Stock Per Share Merger Consideration, with the result rounded up to the nearest whole cent, and the base value per share of Buyer Common Stock for each assumed Target SAR will equal the quotient obtained from dividing (i) the base value per share pursuant to the assumed Target SAR immediately prior to the Effective Time, by (ii) the Common Stock Per Share Merger Consideration, with the result rounded up to the nearest whole cent. Such Target Stock Options and Target SARs shall continue in effect on the same terms and conditions (including, if applicable, the vesting arrangements and other terms and conditions set forth in the Target Stock Incentive Plan and the applicable stock option or stock appreciation rights agreement) to which they are subject (subject to the adjustments required by this Section 3.6 after giving effect to the Merger), except that all references to Target therein shall be deemed to mean Buyer. To the extent permitted by applicable Law, all assumed Target Stock Options that prior to the Effective Time were treated as incentive or non-qualified stock options under the Code shall from and after the Effective Time continue to be treated as incentive or non-qualified stock options, respectively, under the Code.

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(b) As soon as practicable after the Effective Time, Buyer shall deliver to the holders of the Target Stock Options and Target SARs an appropriate notice evidencing the foregoing assumption setting forth the specific adjustments made to the assumed Target Stock Options and Target SARs, as provided in this Section 3.6.
(c) Buyer shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Buyer Common Stock for delivery upon exercise of the Target Stock Options and Target SARs (to the extent such Target SARs may be settled in shares of Buyer Common Stock) assumed in accordance with this Section 3.6. As soon as practicable (but in no event more than ten (10) business days after the Effective Time), Buyer shall file a registration statement on Form S-8 (or any successor form) with respect to the shares of Buyer Common Stock subject to such assumed Target Stock Options and Target SARs (to the extent such Target SARs may be settled in shares of Buyer Common Stock) and thereafter shall use commercially reasonable efforts to maintain the effectiveness of that registration statement for as long as any such assumed Target Stock Options and Target SARs remain outstanding.

ARTICLE 4
EXCHANGE OF SHARES
1. Exchange Procedures.
(a) Promptly after the Effective Time (and in any event within five (5) business days), Buyer shall make available to Buyer’s transfer agent or another exchange agent selected by Buyer (the “ Exchange Agent ”) for exchange in accordance with this Section 4.1 the shares of Buyer Common Stock issuable pursuant to this Agreement and cash in an amount sufficient to permit payment of cash in lieu of fractional shares pursuant to Section 3.5. Promptly after the Effective Time (and in any event within five (5) business days), Buyer shall cause the Exchange Agent to mail to each holder of record of a certificate or certificates which represented shares of Target Capital Stock immediately prior to the Effective Time (the “ Certificates ”) appropriate transmittal materials and instructions (which shall specify that delivery shall be effected, and risk of loss and title to such Certificates shall pass, only upon proper delivery of such Certificates to the Exchange Agent). The Certificate or Certificates of Target Capital Stock so delivered shall be duly endorsed as the Exchange Agent may require. In the event of a transfer of ownership of shares of Target Capital Stock represented by Certificates that is not registered in the transfer records of Target, the consideration provided in Section 3.1 may be issued to a transferee if the Certificates representing such shares are delivered to the Exchange Agent, accompanied by all documents required to evidence such transfer and by evidence satisfactory to the Exchange Agent that any applicable stock transfer taxes have been paid. If any Certificate shall have been lost, stolen, mislaid or destroyed, upon receipt of (i) an affidavit of that fact from the holder claiming such Certificate to be lost, mislaid, stolen or destroyed, (ii) such bond, security or indemnity as Buyer and the Exchange Agent may reasonably require and (iii) any other documents necessary to evidence and effect the bona fide exchange thereof, the Exchange Agent shall issue to such holder the consideration into which the shares represented by such lost, stolen, mislaid or destroyed Certificate shall have been converted. The Exchange Agent may establish such other reasonable and customary rules and procedures in connection with its duties as it may deem appropriate. The Surviving Corporation shall pay all charges and expenses, including those of the Exchange Agent, in connection with the distribution of the consideration provided in Section 3.1.

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(b) After the Effective Time, each holder of shares of Target Capital Stock (other than shares as to which statutory dissenters’ rights have been perfected as provided in Section 3.4) issued and outstanding at the Effective Time shall surrender the Certificate or Certificates representing such shares to the Exchange Agent and shall promptly upon surrender thereof receive in exchange therefor the consideration provided in Section 3.1. To the extent required by Section 3.5, each holder of shares of Target Capital Stock issued and outstanding at the Effective Time also shall receive, upon surrender of the Certificate or Certificates, cash in lieu of any fractional share of Buyer Common Stock to which such holder may be otherwise entitled (without interest). Buyer shall not be obligated to deliver the consideration to which any former holder of Target Capital Stock is entitled as a result of the Merger until such holder surrenders such holder’s Certificate or Certificates for exchange as provided in this Section 4.1.
(c) Each of Buyer, the Surviving Corporation and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Target Capital Stock such amounts, if any, as it is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code or any provision of state, local or foreign Tax Law. To the extent that any amounts are so withheld by Buyer, the Surviving Corporation or the Exchange Agent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Target Capital Stock in respect of which such deduction and withholding was made by Buyer, the Surviving Corporation or the Exchange Agent, as the case may be.
(d) Any other provision of this Agreement notwithstanding, neither Buyer, the Surviving Corporation nor the Exchange Agent shall be liable to a holder of Target Capital Stock for any amounts paid or property delivered in good faith to a public official pursuant to any applicable abandoned property, escheat or similar Law. Adoption of this Agreement by the shareholders of Target shall constitute ratification of the appointment of the Exchange Agent.
2. Rights of Former Target Shareholders.
At the Effective Time, the stock transfer books of Target shall be closed as to holders of Target Capital Stock immediately prior to the Effective Time and no transfer of Target Capital Stock by any such holder shall thereafter be made or recognized. Until surrendered for exchange in accordance with the provisions of Section 4.1, each Certificate theretofore representing shares of Target Capital Stock (other than shares as to which statutory dissenters’ rights have been perfected as provided in Section 3.4) shall from and after the Effective Time represent for all purposes only the right to receive the consideration provided in Sections 3.1 and 3.5 in exchange therefor. Whenever a dividend or other distribution is declared by Buyer on the Buyer Common Stock, the record date for which is at or after the Effective Time, the declaration shall include dividends or other distributions on all shares of Buyer Common Stock issuable pursuant to this Agreement, but no dividend or other distribution payable to the holders of record of Buyer Common Stock as of any time subsequent to the Effective Time shall be delivered to the holder of any Certificate until such holder surrenders such Certificate for exchange as provided in Section 4.1. However, upon surrender of such Certificate, any undelivered dividends and cash payments payable hereunder (without interest) shall be delivered and paid with respect to each share represented by such Certificate.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF TARGET
Except as set forth in the corresponding sections or subsections of the Target Disclosure Memorandum, Target hereby represents and warrants to Buyer as follows:
1. Organization, Standing, and Power.
Target is a corporation duly organized, validly existing, and in good standing under the Laws of the State of California, and has the corporate power and authority to carry on its business as now conducted and to own, lease and operate its Assets. Target is duly qualified or licensed to transact business as a foreign corporation in good standing in the states of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect. The minute book and other organizational documents for Target have been made available to Buyer for its review and, except as disclosed in Section 5.1 of the Target Disclosure Memorandum, are true and complete in all material respects as in effect as of the date of this Agreement and accurately reflect in all material respects all amendments thereto and all proceedings of the Board of Directors (including any committees of the Board of Directors) and shareholders thereof.
2. Authority of Target; No Breach By Agreement.
(a) Target has the corporate power and authority necessary to execute, deliver, and, other than with respect to the Merger, perform this Agreement, and with respect to the Merger, upon the approval of this Agreement and the Merger by Target’s shareholders in accordance with this Agreement and California law, to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated herein, including the Merger, have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Target, subject to the approval of this Agreement by the (i) holders of a majority of the outstanding shares of Target Common Stock, (ii) holders of at least a majority of the outstanding shares of Target Preferred Stock (voting on an as−converted to Target Common Stock basis) and (iii) holders of at least a majority of the outstanding shares of each series of the Target Preferred Stock (voting separately on an as−converted to Target Common Stock basis), as contemplated by Section 8.1, which is the only shareholder vote required for approval of this Agreement and consummation of the Merger by Target. Subject to such requisite shareholder approval, this Agreement represents a legal, valid, and binding obligation of Target, enforceable against Target in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, conservatorship, moratorium, or similar Laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought).


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(b) Neither the execution and delivery of this Agreement by Target, nor the consummation by Target of the transactions contemplated hereby, nor compliance by Target with any of the provisions hereof, will (i) conflict with or result in a breach of any provision of Target’s Articles of Incorporation or Bylaws or any resolution adopted by the board of directors or the shareholders of any Target Entity, or (ii) except as disclosed in Section 5.2 of the Target Disclosure Memorandum, constitute or result in a Default under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of any Target Entity under, any Contract or Permit of any Target Entity, where such Default or Lien, or any failure to obtain such Consent, is reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect, or, (iii) subject to receipt of the requisite Consents referred to in Section 9.1(c), constitute or result in a Default under, or require any Consent pursuant to, any Law or Order applicable to any Target Entity or any of their respective material Assets (including any Buyer Entity or any Target Entity becoming subject to or liable for the payment of any Tax or any of the Assets owned by any Buyer Entity or any Target Entity being reassessed or revalued by any Regulatory Authority).
(c) Other than in connection or compliance with the provisions of the Securities Laws, applicable state corporate and securities Laws, and the rules of the NYSE, and other than Consents required from Regulatory Authorities, and other than notices to or filings with the Internal Revenue Service or the Pension Benefit Guaranty Corporation with respect to any employee benefit plans, and other than Consents, filings, or notifications which, if not obtained or made, are not reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect, no notice to, filing with, or Consent of, any public body or authority is necessary for the consummation by Target of the Merger and the other transactions contemplated in this Agreement.
3. Capital Stock.
(a) The authorized capital stock of Target consists of (i) 20,000,000 shares of Target Common Stock, of which 5,766,922 shares are issued and outstanding as of the date of this Agreement and (i) 10,000,000 shares of preferred stock, no par value per share, of which 7,162,103 shares of Target Preferred Stock are outstanding as set forth in Section 5.3(a) of the Target Disclosure Memorandum, which are convertible into an aggregate of 7,640,769 shares of Target Common Stock. All of the issued and outstanding shares of capital stock of Target are duly and validly issued and outstanding and are fully paid and nonassessable under the CGCL. None of the outstanding shares of capital stock of Target has been issued in violation of any preemptive rights of the current or past shareholders of Target.
(b) Except as set forth in Section 5.3(b) of the Target Disclosure Memorandum, there are no shares of capital stock or other equity securities of Target outstanding and no outstanding Equity Rights relating to the capital stock of Target. Except as specifically contemplated by this Agreement, no Person has any Contract or any right or privilege (whether pre-emptive or contractual) capable of becoming a Contract or Equity Right for the purchase, subscription or issuance of any securities of Target.

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4. Target Subsidiaries.
Target has no Subsidiaries.
5. Financial Statements.
Target has disclosed in Section 5.5 of the Target Disclosure Memorandum all Target Financial Statements for periods ended prior to the date hereof and will deliver to Buyer copies of all Target Financial Statements prepared subsequent to the date hereof. The Target Financial Statements (as of the dates thereof and for the periods covered thereby) (i) are or, if dated after the date of this Agreement, will be, in accordance with the books and records of Target, which are or will be, as the case may be, complete and correct in all material respects and which have been or will have been, as the case may be, maintained in accordance with good business practices, and (ii) present or will present, as the case may be, fairly in all material respects the financial position of Target as of the dates indicated and the results of operations, changes in shareholders' equity, and cash flows of Target for the periods indicated, in accordance with GAAP (subject to exceptions as to consistency specified therein or as may be indicated in the notes thereto or, in the case of interim financial statements, to normal recurring year-end adjustments that are not material in amount or effect). Target maintains a system of internal control over financial reporting sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of Target’s Financial Statements in accordance with GAAP. Target’s external auditors have not identified to Target any material weakness in Target’s internal controls impacting the reliability of Target’s financial statements.
6. Absence of Undisclosed Liabilities.
No Target Entity has any Liabilities that are reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect, except Liabilities (i) which are accrued or reserved against in the balance sheet of Target (the “ Target Interim Balance Sheet ”) as of December 31, 2013 (the “ Interim Balance Sheet Date ”), included in the Target Financial Statements delivered prior to the date of this Agreement or reflected in the notes thereto, or (ii) incurred or paid (A) in the ordinary course of business consistent with past business practice and which are not reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect or (B) in connection with the transactions contemplated by this Agreement.
7. Absence of Certain Changes or Events.
Since the Interim Balance Sheet Date, except as disclosed in the Target Financial Statements delivered prior to the date of this Agreement or as disclosed in Section 5.7 of the Target Disclosure Memorandum, (i) there have been no events, changes, or occurrences which have had, or are reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect, and (ii)  none of the Target Entities has taken any action, or failed to take any action, prior to the date of this Agreement, which action or failure, if taken after the date of this Agreement, would represent or result in a material breach or violation of any of the covenants and agreements of Target provided in Article 7.
8. Tax Matters.

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(a) All Target Entities have filed with the appropriate Taxing authorities all Tax Returns in all jurisdictions in which Tax Returns are required to be filed, such Tax Returns have been filed timely to the extent such jurisdictions are in the United States, and such Tax Returns are correct and complete in all material respects. None of the Target Entities is the beneficiary of any extension of time within which to file any Tax Return. All Taxes of the Target Entities (whether or not shown on any Tax Return) have been fully paid. There are no Liens for any Taxes (other than a Lien for current real property or ad valorem Taxes not yet due and payable) on any of the Assets of any of the Target Entities. No claim is pending by an authority in a jurisdiction where any Target Entity does not file a Tax Return that such Target Entity may be subject to Taxes by that jurisdiction.
(b) None of the Target Entities has received any notice of assessment or proposed assessment in connection with any Taxes that have not been settled or paid, and there are not, to Target’s Knowledge, any threatened or pending disputes, claims, audits or examinations regarding any Taxes of any Target Entity or the assets of any Target Entity. No officer or employee responsible for Tax matters of any Target Entity expects any Regulatory Authority to assess any additional Taxes for any period for which Tax Returns have been filed. None of the Target Entities has waived any statute of limitations in respect of any Taxes or agreed to a Tax assessment or deficiency.
(c) Each Target Entity has complied with all applicable Laws, rules and regulations relating to the withholding of Taxes and the payment thereof to appropriate authorities, including Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee or independent contractor, and Taxes required to be withheld and paid pursuant to Sections 1441 and 1442 of the Internal Revenue Code or similar provisions under foreign Law.
(d) The unpaid Taxes of each Target Entity (i) did not, as of the most recent fiscal month end, exceed the reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the most recent balance sheet (rather than in any notes thereto) for such Target Entity and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with past custom and practice of the Target Entities in filing their Tax Returns.
(e) None of the Target Entities is a party to any Tax allocation or sharing agreement and none of the Target Entities has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was Target) or has any Tax Liability of any Person under Treasury Regulation Section 1.1502‑6 or any similar provision of state, local or foreign Law (other than the other members of the consolidated group of which Target is parent), or as a transferee or successor, by contract or otherwise.
(f) During the five-year period ending on the date hereof, none of the Target Entities was a distributing corporation or a controlled corporation in a transaction intended to be governed by Section 355 of the Internal Revenue Code.

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(g) None of the Target Entities has made any payments, is obligated to make any payments, or is a party to any contract that could obligate it to make any payments that could be disallowed as a deduction under Section 280G or 162(m) of the Internal Revenue Code. Target has not been a United States real property
holding corporation within the meaning of Internal Revenue Code Section 897(c)(2). None of the Target Entities has been or will be required to include any adjustment in taxable income for any Tax period (or portion thereof) pursuant to Section 481 of the Internal Revenue Code or any comparable provision under state or foreign Tax Laws as a result of transactions or events occurring prior to the Closing. The net operating losses of the Target Entities are not subject to any limitation on their use under the provisions of Sections 382 or 269 of the Internal Revenue Code or any other provisions of the Internal Revenue Code or the Treasury Regulations dealing with the utilization of net operating losses other than any such limitations as may arise as a result of the consummation of the transactions contemplated by this Agreement.
(h) Each of the Target Entities is in compliance in all material respects with, and its records contain all information and documents (including properly completed IRS Forms W‑9) necessary to comply in all material respects with, all applicable information reporting and Tax withholding requirements under federal, state, and local Tax Laws, and such records identify with specificity all accounts subject to backup withholding under Section 3406 of the Internal Revenue Code.
(i) No Target Entity has or has had in any foreign country a permanent establishment, as defined in any applicable tax treaty or convention between the United States and such foreign country, or if no treaty or convention between the United States and such foreign country exists, any presence sufficient to constitute a taxable presence under the laws of such foreign jurisdiction.
9. Real Property.
(a) No Target Entity owns any real property.
(b) Each Target Entity has a good leasehold estate in each lease of real property (“ Real Property Leases ”), under which such Target Entity is a tenant or a subtenant, in each case free and clear of all Liens. No Target Entity is in breach of or default under the terms of any Real Property Lease, except for any such breach or default that has not had and would not reasonably be expected to have, individually or in the aggregate, a Target Material Adverse Effect. To the knowledge of Target, no other party to any Real Property Lease is in breach of or default under the terms of any such Real Property Lease, which breach or default has had or would reasonably be expected to have, individually or in the aggregate, a Target Material Adverse Effect. Each Real Property Lease to which a Target Entity is a party is a valid and binding obligation of such Target Entity and, to the knowledge of Target, of each other party thereto, and is in full force and effect, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or hereafter in effect, relating to creditors’ rights generally and (ii) equitable remedies of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
10. Assets.

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(a) Except as disclosed in Section 5.10 of the Target Disclosure Memorandum or as disclosed or reserved against in the Target Financial Statements delivered prior to the date of this Agreement, the Target Entities have good and marketable title, free and clear of all Liens, to all of their respective Assets which are material to their respective businesses, except for any such Liens or other defects of title which are not reasonably likely to have a Target Material Adverse Effect. All tangible properties used in the businesses of the Target Entities are in good condition, reasonable wear and tear excepted, and are usable in the ordinary course of business consistent with Target’s past practices.
(b) All items of inventory of the Target Entities reflected on the most recent balance sheet included in the Target Financial Statements delivered prior to the date of this Agreement and prior to the Effective Time consisted and are expected to consist, as applicable, of items of a quality and quantity usable and saleable in the ordinary course of business and conform to generally accepted standards in the industry in which the Target Entities are a part, except inventory for which there is an appropriate reserve or accrual in such Target Financial Statements.
(c) The accounts receivable of the Target Entities as set forth on the Target Interim Balance Sheet included in the Target Financial Statements delivered prior to the date of this Agreement or arising since the date thereof are valid and genuine; have arisen solely out of bona fide sales and deliveries of goods, performance of services and other business transactions in the ordinary course of business consistent with past practice; and to Target’s Knowledge are not subject to valid defenses, set-offs or counterclaims. The allowance for collection losses on such Target Interim Balance Sheet has been determined in accordance with GAAP.
(d) All Assets which are material to Target’s business on a consolidated basis, held under leases or subleases by any of the Target Entities, are held under valid Contracts enforceable in accordance with their respective terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceedings may be brought), and each such Contract is in full force and effect.
(e) The Target Entities currently maintain insurance similar in amounts, scope, and coverage to that maintained by other peer organizations. None of the Target Entities has received notice from any insurance carrier that (i) any policy of insurance will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to such policies of insurance will be substantially increased. There are presently no claims pending under such policies of insurance and no notices of claims in excess of such amounts have been given by any Target Entity under such policies.
(f) The Assets of the Target Entities include all Assets required to operate the business of the Target Entities as presently conducted.
11. Intellectual Property.

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Each Target Entity owns or has a license to use all of the Intellectual Property used by such Target Entity in the course of its business, including sufficient rights in each copy possessed or otherwise used by each Target Entity. Each Target Entity is the owner of or has a license, with the right to sublicense, to any Intellectual Property sold or licensed to a third party by such Target Entity in connection with such Target Entity’s business operations, and such Target Entity has the right to convey by sale or license any Intellectual Property so conveyed. No Target Entity is in Default under any of its Intellectual Property licenses. No proceedings have been instituted, or are pending or to the Knowledge of Target threatened, which challenge the rights of any Target Entity with respect to Intellectual Property used, sold or licensed by such Target Entity in the course of its business, nor has any person claimed or alleged any rights to such Intellectual Property. To the Knowledge of Target, the conduct of the business of the Target Entities does not infringe any Intellectual Property of any other Person. Except as disclosed in Section 5.11 of the Target Disclosure Memorandum, no Target Entity is obligated to pay any recurring royalties to any Person with respect to any such Intellectual Property. Except as disclosed in Section 5.11 of the Target Disclosure Memorandum, every officer, director, or employee of any Target Entity is a party to a Contract which requires such officer, director or employee to assign any interest in any Intellectual Property to a Target Entity and to keep confidential any trade secrets, proprietary data, customer information, or other business information of a Target Entity, and, to the Knowledge of Target, no such officer, director or employee is party to any Contract with any Person other than a Target Entity which requires such officer, director or employee to assign any interest in any Intellectual Property to any Person other than a Target Entity or to keep confidential any trade secrets, proprietary data, customer information, or other business information of any Person other than a Target Entity. Except as disclosed in Section 5.11 of the Target Disclosure Memorandum, to the Knowledge of Target, no officer, director or employee of any Target Entity is party to any Contract which restricts or prohibits such officer, director or employee from engaging in activities competitive with any Person (other than any Target Entity).
12. Environmental Matters.
(a) Each Target Entity, and each property or facility leased or operated by it is, and has been, in compliance with all Environmental Laws, except for any such noncompliance which is not reasonably likely to have a Target Material Adverse Effect.
(b) There is no Litigation pending or to the Knowledge of Target, threatened, before any court, governmental agency, or authority or other forum in which any Target Entity or any property or facility leased or operated by it has been or, with respect to threatened Litigation, may be named as a defendant (i) for alleged noncompliance (including by any predecessor) with or Liability under any Environmental Law or (ii) relating to the release, discharge, spillage, or disposal into the environment of any Hazardous Material, whether or not occurring at, on, under, adjacent to, or affecting (or potentially affecting) a site currently or formerly owned, leased, or operated by any Target Entity nor, to the Knowledge of Target, is there any reasonable basis for any Litigation of a type described in this sentence.
(c) During the period of any Target Entity’s ownership or operation of any of their respective current or former properties or facilities, there have been no releases, discharges, spillages, or disposals of Hazardous Material in, on, under, adjacent to, or affecting (or potentially affecting) such properties. Prior to the period of any Target Entity’s ownership or operation of any of their respective current or former properties or facilities, to the Knowledge of Target, there were no releases, discharges, spillages, or disposals of Hazardous Material in, on, under, or affecting any such property or facility.

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13. Compliance with Laws.
Each Target Entity has in effect all Permits necessary for it to own, lease, or operate its material Assets and to carry on its business as now conducted, except for those Permits the absence of which are not reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect, and there has occurred no Default under any such Permit, other than Defaults which could not reasonably be anticipated to have, individually or in the aggregate, a Target Material Adverse Effect. Except as disclosed in Section 5.13 of the Target Disclosure Memorandum, none of the Target Entities:
(a) is in Default under any of the provisions of its articles or certificate of incorporation or bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Permits applicable to its business or employees conducting its business, except for Defaults which could not reasonably be anticipated to have, individually or in the aggregate, a Target Material Adverse Effect; or
(c) has received any written notification or communication from any agency or department of federal, state, or local government or any Regulatory Authority or the staff thereof (i) asserting that any Target Entity is not, or may not be, in compliance with any Laws or Orders (ii) threatening to revoke any Permits, or (iii) requiring any Target Entity to enter into or consent to the issuance of a cease and desist order, injunction formal agreement, directive, commitment, or memorandum of understanding, or to adopt any board resolution or similar undertaking, which restricts materially the conduct of its business or in any manner relates to its employment decisions, its employment or safety policies or practices; or
(d) has effectuated (i) a “plant closing” (as defined in the Worker Adjustment and Retraining Notification Act (the “ WARN Act ”)) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of any Target Entity; or (ii) a “mass layoff” (as defined in the WARN Act) affecting any site of employment or facility of any Target Entity; and no Target Entity has been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state or local Law. Except as set forth in Section 5.13 of the Target Disclosure Memorandum, none of any Target Entity’s employees has suffered an “employment loss” (as defined in the WARN Act) since six months prior to the Closing Date.
Section 5.13 of the Target Disclosure Memorandum contains a list of all independent contractors of each Target Entity (separately listed by Target Entity) and each such Person meets the standards under all Laws (including Treasury Regulations under the Internal Revenue Code and federal and state labor and employment Laws) as independent contractors and no such Person is an employee of any Target Entity under any applicable Law. Copies of all material reports, correspondence, notices and other documents relating to any inspection, audit, monitoring or other form of review or enforcement action by a Regulatory Authority have been made available to Buyer.
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14. Labor Relations.
(a) No Target Entity is the subject of any Litigation asserting that it or any other Target Entity has committed an unfair labor practice (within the meaning of the National Labor Relations Act or comparable state Law) or other violation of state or federal labor Law or seeking to compel it or any other Target Entity to bargain with any labor organization or other employee representative as to wages or conditions of employment, nor is any Target Entity party to any collective bargaining agreement or subject to any bargaining order, injunction or other Order relating to Target’s relationship or dealings with its employees, any labor organization or any other employee representative. There is no strike, slowdown, lockout or other job action or labor dispute involving any Target Entity pending or, to the Knowledge of Target, threatened and there has been no such actions or disputes in the past five years. To the Knowledge of Target, in the past five years, there has not been any attempt by any Target Entity employees or any labor organization or other employee representative to organize or certify a collective bargaining unit or to engage in any other union organization activity with respect to the workforce of any Target Entity. Except as required by applicable Law or pursuant to employment agreements identified on Section 5.15 of the Target Disclosure Memorandum, the employment of each employee and the engagement of each independent contractor of each Target Entity is terminable at will by the relevant Target Entity without any penalty, liability or severance obligation incurred by any Target Entity. No Target Entity will owe any amounts for wages or severance obligations to any of its employees or independent contractors as of the Closing Date outside of the ordinary course of business.
(b) All of the employees employed in the United States are either United States citizens or are legally entitled to work in the United States under the Immigration Reform and Control Act of 1986, as amended, other United States immigration Laws and the Laws related to the employment of non-United States citizens applicable in the state in which the employees are employed .
15. Employee Benefit Plans
(a) Target has disclosed in Section 5.15 of the Target Disclosure Memorandum, and has delivered or made available to Buyer prior to the execution of this Agreement, (i) copies of each Employee Benefit Plan currently adopted, maintained by, sponsored in whole or in part by, or contributed to by any Target Entity or ERISA Affiliate thereof for the benefit of employees, former employees, retirees, dependents, spouses, directors, independent contractors, or other beneficiaries or under which employees, retirees, former employees, dependents, spouses, directors, independent contractors, or other beneficiaries are eligible to participate (collectively, the “ Target Benefit Plans ”) and (ii) a list of each Employee Benefit Plan that is not identified in (i) above (e.g., former Employee Benefit Plans) but for which the Target Entity or ERISA Affiliate has or reasonably could have any obligation or Liability. Any of the Target Benefit Plans which is an “employee pension benefit plan,” as that term is defined in ERISA Section 3(2), is referred to herein as a “ Target ERISA Plan .” Each Target ERISA Plan which is also a “defined benefit plan” (as defined in Internal Revenue Code Section 414(j)) is referred to herein as a “ Target Pension Plan .”

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(b) Target has delivered to Buyer prior to the execution of this Agreement (i) all trust agreements or other funding arrangements for all Target Benefit Plans, (ii) all determination letters, rulings, opinion letters, information letters or advisory opinions issued by the United States Internal Revenue Service (“ IRS ”), the United States Department of Labor (“ DOL ”) or the Pension Benefit Guaranty Corporation during this calendar year or any of the preceding three calendar years, (iii) any filing or documentation (whether or not filed with the IRS) where corrective action was taken in connection with the IRS EPCRS program set forth in Revenue Procedure 2001-17 (or its predecessor or successor rulings), (iv) annual reports or returns, audited or unaudited financial statements, actuarial reports and valuations prepared for any Employee Benefit Plan for the current plan year and the three preceding plan years, and (v) the most recent summary plan descriptions and any material modifications thereto.
(c) Each Target Benefit Plan is in compliance with the terms of such Target Benefit Plan, in compliance with the applicable requirements of the Internal Revenue Code, in material compliance with the applicable requirements of ERISA, and in compliance with any other applicable Laws the breach or violation of which are reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect. Each Target ERISA Plan which is intended to be qualified under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the IRS that is still in effect and applies to the Target ERISA Plan as amended and as administered or, within the time permitted under Internal Revenue Code Section 401(b), has timely applied for a favorable determination letter which when issued will apply retroactively to the Target ERISA Plan as amended and as administered. Target is not aware of any circumstances likely to result in revocation of any such favorable determination letter. Target has not received any communication (written or unwritten) from any government agency questioning or challenging the compliance of any Target Benefit Plan with applicable Laws. No Target Benefit Plan is currently being audited by a governmental agency for compliance with applicable Laws or has been audited with a determination by the governmental agency that such Target Benefit Plan failed to comply with applicable Laws.
(d) There has been no oral or written representation or communication with respect to any aspect of the Target Benefit Plans made to employees of the Target which is not in accordance with the written or otherwise preexisting terms and provisions of such plans. Neither the Target nor any administrator or fiduciary of any Target Benefit Plan (or any agent of any of the foregoing) has engaged in any transaction, or acted or failed to act in any manner, which could subject the Target or Buyer to any direct or indirect Liability (by indemnity or otherwise) for breach of any fiduciary, co-fiduciary or other duty under ERISA. There are no unresolved claims or disputes under the terms of, or in connection with, the Target Benefit Plans other than claims for benefits which are payable in the ordinary course of business and no action, proceeding, prosecution, inquiry, hearing or investigation has been commenced with respect to any Target Benefit Plan.
(e) All Target Benefit Plan documents and annual reports or returns, audited or unaudited financial statements, actuarial valuations, summary annual reports, and summary plan descriptions issued with respect to the Target Benefit Plans are correct and complete in all material respects, have been timely filed with the IRS, the DOL or distributed to participants of the Target Benefit Plans (as required by Law), and there have been no changes in the information set forth therein.

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(f) No “party in interest” (as defined in ERISA Section 3(14)) or “disqualified person” (as defined in Internal Revenue Code Section 4975(e)(2)) of any Target Benefit Plan has engaged in any nonexempt “prohibited transaction” (described in Internal Revenue Code Section 4975(c) or ERISA Section 406).
(g) For any Target Pension Plan, the fair market value of such Target Pension Plan’s assets equals or exceeds the present value of all benefits (whether vested or not) accrued to date by all present or former participants in such Target Pension Plan. For this purpose the assumptions prescribed by the Pension Benefit Guaranty Corporation for valuing plan assets or liabilities upon plan termination shall be applied and the term “benefits” shall include the value of all benefits, rights and features protected under Internal Revenue Code Section 411(d)(6) or its successors and any ancillary benefits (including disability, shutdown, early retirement and welfare benefits) provided under any such employee pension benefit plan and all “benefit liabilities” as defined in ERISA Section 4001(a)(16). Since the date of the most recent actuarial valuation, there has been (i) no material change in the financial position of the Target Pension Plan, (ii) no change in the actuarial assumptions with respect to any Target Pension Plan, and (iii) no increase in benefits under any Target Pension Plan as a result of Target Pension Plan amendments or changes in any applicable Law which is reasonably likely to have, individually or in the aggregate, a material adverse effect on the funding status of such Target Pension Plan. All contributions with respect to an Employee Benefit Plan of Target, or any of its ERISA Affiliates that is subject to Internal Revenue Code Section 412 or ERISA Section 302 have or will be timely made and, with respect to any such Employee Benefit Plan, there is no Lien nor is there expected to be a Lien under Internal Revenue Code Section 412(n) or ERISA Section 302(f) or Tax under Internal Revenue Code Section 4971. No Target Pension Plan has a “liquidity shortfall” as defined in Internal Revenue Code Section 412(m)(5). Neither Target nor any of its ERISA Affiliates is subject to or can reasonably be expected to become subject to a Lien under Internal Revenue Code Section 401(a)(29). All premiums required to be paid under ERISA Section 4006 have been timely paid by Target and by its ERISA Affiliates.
(h) No Liability under Title IV of ERISA has been or is expected to be incurred by Target or its ERISA Affiliates and no event has occurred that could reasonably be anticipated to result in Liability under Title IV of ERISA being incurred by Target or its ERISA Affiliates with respect to any ongoing, frozen, or terminated single-employer plan of Target or the single-employer plan of any ERISA Affiliate. There has been no “reportable event,” within the meaning of ERISA Section 4043 for which the 30-day reporting requirement has not been waived by any ongoing, frozen, or terminated single employer plan of Target or of an ERISA Affiliate.
(i) Except as disclosed in Section 5.15 of the Target Disclosure Memorandum, no Target Entity has any Liability for retiree health and life benefits under any of the Target Benefit Plans and there are no restrictions on the rights of such Target Entity to amend or terminate any such retiree health or benefit Plan without incurring any Liability thereunder except to the extent required under Part 6 of Title I of ERISA or Internal Revenue Code Section 4980B. No Tax under Internal Revenue Code Sections 4980B or 5000 has been incurred with respect to any Target Benefit Plan and no circumstance exists which could give rise to such Taxes.

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(j) Except as disclosed in Section 5.15 of the Target Disclosure Memorandum, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment (including severance, unemployment compensation, golden parachute, or otherwise) becoming due to any director or any employee of any Target Entity from any Target Entity under any Target Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under any Target Benefit Plan, or (iii) result in any acceleration of the time of payment or vesting of any such benefit.
(k) The actuarial present values of all accrued deferred compensation entitlements (including entitlements under any executive compensation, supplemental retirement, or employment agreement) of employees and former employees of any Target Entity and their respective beneficiaries, other than entitlements accrued pursuant to funded retirement plans subject to the provisions of Internal Revenue Code Section 412 or ERISA Section 302, have been fully reflected on the Target Financial Statements to the extent required by and in accordance with GAAP.
(l) All individuals who render services to any Target Entity and who are authorized to participate in a Target Benefit Plan pursuant to the terms of such Target Benefit Plan are in fact eligible to and authorized to participate in such Target Benefit Plan. All individuals participating in (or eligible to participate in) any Target Benefit Plan are common-law employees of a Target Entity.
(m) Neither the Target nor any of its ERISA Affiliates has had an “obligation to contribute” (as defined in ERISA Section 4212) to a “multiemployer plan” (as defined in ERISA Sections 4001(a)(3) and 3(37)(A)).
(n) All Target stock options have an exercise price per share that was not less than the “fair market value” of one share of Target Common Stock on the date of grant. All such stock options have been properly accounted for in accordance with GAAP in all material respects, and no change is expected in respect of any prior financial statements relating to expenses for stock−based compensation.
(o) Each Target Benefit Plan that is a “nonqualified deferred compensation plan” (as defined in section 409A(d)(1) of the Internal Revenue Code) subject to section 409A of the Internal Revenue Code has been operated since January 1, 2005 in good faith compliance with section 409A of the Internal Revenue Code and the regulations and guidance promulgated thereunder.
16. Material Contracts.
Except as disclosed in Section 5.16 of the Target Disclosure Memorandum or otherwise reflected in the Target Financial Statements, none of the Target Entities, nor any of their respective Assets, businesses, or operations, is a party to, or is bound or affected by, or receives benefits under, (i) any employment agreement that is not, subject to applicable Law, terminable at-will, or severance, termination, consulting or retirement
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Contract providing for aggregate payments to any Person in any calendar year in excess of $75,000, (ii) any Contract relating to the borrowing of money by any Target Entity or the guarantee by any Target Entity of any such obligation (other than Contracts evidencing trade payables and Contracts relating to borrowings or guarantees made in the ordinary course of business), (iii) any Contract which prohibits or restricts any Target Entity from engaging in any business activities in any geographic area, line of business or otherwise in competition with any other Person, (iv) any Contract between or among Target Entities, (v) any Contract involving Intellectual Property (other than Contracts entered into in the ordinary course with customers or vendors, including “shrink-wrap” software licenses), (vi) any Contract relating to the provision of data processing, network communication, or other technical services to or by any Target Entity entered into outside the ordinary course of business, (vii) any Contract relating to the purchase or sale of any goods or services (other than Contracts entered into in the ordinary course of business involving payments under any individual Contract not in excess of $100,000 per annum or that may be terminated at any time by a Target Entity without any material payment or penalty), and (viii) any other Contract or amendment thereto that would be required to be filed as an exhibit to a Form 10‑K filed by Target with the SEC as of the date of this Agreement if Target were subject to the reporting requirements of the Exchange Act (together with all Contracts referred to in Sections 5.9(b) and 5.15(a), the “ Target Contracts ”). With respect to each Target Contract and except as disclosed in Section 5.16 of the Target Disclosure Memorandum: (A) the Contract is in full force and effect; (B) no Target Entity is in Default thereunder, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect; (C) no Target Entity has repudiated or waived any material provision of any such Contract; and (D) no other party to any such Contract is, to the Knowledge of Target, in Default in any respect, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect, or has repudiated or waived any material provision thereunder. All of the indebtedness of any Target Entity for money borrowed is prepayable at any time by such Target Entity without penalty or premium.
17. Privacy of Customer Information
(a) Target is the sole owner of all IIPI relating to customers, former customers and prospective customers of Target, subject only to the rights of such customers. For purposes of this Agreement, “ IIPI ” means any information relating to an identified or identifiable natural Person.
(b) Target’s collection and use of such IIPI and the use of such IIPI by the Surviving Corporation as contemplated by this Agreement complies in all material respects with Target’s privacy policy and all applicable state, federal and foreign privacy Law, and any Contract or industry standard relating to privacy.
18. Legal Proceedings.
There is no Litigation instituted or pending, or, to the Knowledge of Target, threatened (or unasserted but considered probable of assertion and which if asserted would have at least a reasonable possibility of an unfavorable outcome) against any Target Entity, or against any director, officer or employee in their capacities as such or Employee Benefit Plan of any Target Entity, or against any Asset, interest, or right of any of them, which is reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect, nor are there any Orders outstanding against any Target Entity, which are reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect. Section 5.18 of the Target Disclosure Memorandum contains a summary of all Litigation as of the date of this Agreement to which any Target Entity is a party and which names a Target Entity as a defendant or cross-defendant or for which any Target Entity has any potential Liability. Section 5.18 of the Target Disclosure Memorandum contains a summary of all Orders to which any Target Entity is subject.
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19. Statements True and Correct.
(a) No representation or warranty or other statement made by Target in this Agreement, the Target Disclosure Memorandum or the certificates delivered pursuant to Section 9.2(d) contains or will contain any untrue statement of material fact or will omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(b) None of the information supplied or to be supplied by any Target Entity or any Affiliate thereof for inclusion in the Registration Statement to be filed by Buyer with the SEC will, when the Registration Statement becomes effective, be false or misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein not misleading.
(c) None of the information supplied or to be supplied by any Target Entity or any Affiliate thereof for inclusion in the Proxy Statement to be mailed to Buyer’s shareholders in connection with the Buyer Shareholders’ Meeting, and any other documents to be filed by a Target Entity or any Affiliate thereof with the SEC or any other Regulatory Authority in connection with the transactions contemplated hereby, will, at the respective time such documents are filed, and with respect to the Proxy Statement, when first mailed to the shareholders of Buyer, be false or misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or, in the case of the Proxy Statement or any amendment thereof or supplement thereto, at the time of the Buyer Shareholders’ Meeting, be false or misleading with respect to any material fact, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of any proxy for the Buyer Shareholders’ Meeting.
(d) All documents that any Target Entity or any Affiliate thereof is responsible for filing with any Regulatory Authority in connection with the transactions contemplated hereby will comply as to form in all material respects with the provisions of applicable Law.
20. Tax and Regulatory Matters.
No Target Entity or any Affiliate thereof has taken or agreed to take any action or has any Knowledge of any fact or circumstance that is reasonably likely to (i) prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially impede or delay receipt of any Consents of Regulatory Authorities referred to in Section 9.1(b) or result in the imposition of a condition or restriction of the type referred to in the last sentence of such Section.
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21. Required Vote of Target Shareholders.
Except for the approval (“ Target Shareholder Approval ”) by the written consent of (i) holders of at least a majority of the outstanding shares of Target Common Stock, (ii) holders of at least a majority of the outstanding shares of Target Preferred Stock (voting on an as−converted to Target Common Stock basis) and (iii) holders of at least a majority of the outstanding shares of each series of the Target Preferred Stock (voting separately on an as−converted to Target Common Stock basis) in favor of the adoption of this Agreement and the Merger (the “ Target Shareholder Approval Matters ”), no vote of the shareholders of Target or the holders of any other securities of Target (equity or otherwise) is required by the CGCL or any other applicable Law, the certificate of incorporation or bylaws or other equivalent organizational documents of Target to consummate the transactions contemplated hereby.
22. Board Recommendation.
The Board of Directors of Target, at a meeting duly called and held, has by unanimous vote of the directors present (who constituted all of the directors then in office) (i) determined that this Agreement and the transactions contemplated hereby, including the Merger and the transactions contemplated thereby, taken together, are fair to and in the best interests of the shareholders and (ii) resolved to recommend that the holders of the shares of Target Common Stock and Target Preferred Stock approve this Agreement, the Merger and the transactions contemplated hereby and thereby.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as expressly set forth in (i) Buyer’s Annual Reports on Form 10−K, (ii) Buyer’s Quarterly Reports on Form 10−Q, (iii) Buyer’s Proxy Statements on Form DEF 14A, and (iv) Buyer’s Current Reports on Form 8−K, in each case filed since January 1, 2013 and in each case including the exhibits thereto (other than any predictive, cautionary or forward looking disclosures contained under the captions “Risk Factors,” “Forward Looking Statements” or any similar precautionary sections and any other disclosures contained therein to the extent they are predictive, cautionary or forward looking in nature, but not to the extent that they consist of facts describing the current state of Buyer); or (b) the corresponding sections or subsections of the Buyer Disclosure Memorandum, Buyer and Sub hereby represent and warrant to Target as follows:
1. Organization, Standing, and Power.
Buyer is a corporation duly organized, validly existing, and in good standing under the Laws of the State of New York, and has the corporate power and authority to carry on its business as now conducted and to own, lease and operate its material Assets. Buyer is duly qualified or licensed to transact business as a foreign corporation in good standing in the states of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect.
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2. Authority; No Breach By Agreement.
(a) Buyer has the corporate power and authority necessary to execute, deliver and enter into this Agreement and, subject to the Buyer Shareholder Approval, to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein, including the Merger, have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Buyer, subject to the Buyer Shareholder Approval, which is the only shareholder vote required for approval of this Agreement and consummation of the Merger by Buyer. Subject to such requisite Buyer Shareholder Approval, this Agreement represents a legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, receivership, conservatorship, moratorium, or similar Laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Buyer, nor the consummation by Buyer of the transactions contemplated hereby, nor compliance by Buyer with any of the provisions hereof, will (i) conflict with or result in a breach of any provision of Buyer’s Certificate of Incorporation or Bylaws, or (ii) constitute or result in a Default under, or require any Consent pursuant to, or result in the creation of any Lien on any Asset of any Buyer Entity under, any Contract or Permit of any Buyer Entity, where such Default or Lien, or any failure to obtain such Consent, is reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect, or, (iii) subject to receipt of the requisite Consents referred to in Section 9.1(b), constitute or result in a Default under, or require any Consent pursuant to, any Law or Order applicable to any Buyer Entity or any of their respective material Assets (including any Buyer Entity or any Target Entity becoming subject to or liable for the payment of any Tax or any of the Assets owned by any Buyer Entity or any Target Entity being reassessed or revalued by any Regulatory Authority).
(c) Other than in connection or compliance with the provisions of the Securities Laws, applicable state corporate and securities Laws, and the rules of the NYSE, and other than Consents required from Regulatory Authorities, and other than notices to or filings with the IRS or the Pension Benefit Guaranty Corporation with respect to any employee benefit plans, and other than Consents, filings, or notifications which, if not obtained or made, are not reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect, no notice to, filing with, or Consent of, any public body or authority is necessary for the consummation by Buyer of the Merger and the other transactions contemplated in this Agreement.
3. Capital Stock.

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(a) The authorized capital stock of Buyer consists of (i) 25,000,000 shares of Buyer Common Stock, of which 5,360,083 shares are issued as of the date of this Agreement of which 856,198 shares are treasury stock. All of the 4,503,885 issued and outstanding shares of Buyer Common Stock are, and all of the shares of Buyer Common Stock to be issued in exchange for shares of Target Capital Stock upon consummation of the Merger, when issued in accordance with the terms of this Agreement, will be, duly and validly issued and outstanding and fully paid and nonassessable under the laws of the State of New York. None of the outstanding shares of Buyer Common Stock has been, and none of the shares of Buyer Common Stock to be issued in exchange for shares of Target Capital Stock upon consummation of the Merger will be, issued in violation of any preemptive rights of the current or past shareholders of Buyer.
(b) Except as set forth in Section 6.3(a), or as disclosed in Section 6.3 of the Buyer Disclosure Memorandum, there are no shares of capital stock or other equity securities of Buyer outstanding and no outstanding Equity Rights relating to the capital stock of Buyer.
4. Buyer Subsidiaries.
Buyer has disclosed in Section 6.4 of the Buyer Disclosure Memorandum all of the Buyer Subsidiaries as of the date of this Agreement that are corporations (identifying its jurisdiction of incorporation, each jurisdiction in which the character of its Assets or the nature or conduct of its business requires it to be qualified and/or licensed to transact business, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect, and the number of shares owned and percentage ownership interest represented by such share ownership) and all of the Buyer Subsidiaries that are general or limited partnerships or other non-corporate entities (identifying the Law under which such entity is organized, each jurisdiction in which the character of its Assets or the nature or conduct of its business requires it to be qualified and/or licensed to transact business, and the amount and nature of the ownership interest therein). Except as disclosed in Section 6.4 of the Buyer Disclosure Memorandum, Buyer or one of its wholly-owned Subsidiaries owns all of the issued and outstanding shares of capital stock (or other equity interests) of each Buyer Subsidiary. No capital stock (or other equity interest) of any Buyer Subsidiary are or may become required to be issued (other than to another Buyer Entity) by reason of any Equity Rights, and there are no Contracts by which any Buyer Subsidiary is bound to issue (other than to another Buyer Entity) additional shares of its capital stock (or other equity interests) or Equity Rights or by which any Buyer Entity is or may be bound to transfer any shares of the capital stock (or other equity interests) of any Buyer Subsidiary (other than to another Buyer Entity). There are no Contracts relating to the rights of any Buyer Entity to vote or to dispose of any shares of the capital stock (or other equity interests) of any Buyer Subsidiary. All of the shares of capital stock (or other equity interests) of each Buyer Subsidiary held by a Buyer Entity are fully paid and nonassessable free and clear of any Lien. Each Buyer Subsidiary is duly organized, validly existing, and in good standing under the Laws of the jurisdiction in which it is incorporated or organized, and has the power and authority necessary for it to own, lease and operate its Assets and to carry on its business as now conducted. Each Buyer Subsidiary is duly qualified or licensed to transact business as a foreign entity in good standing in the States of the United States and foreign jurisdictions where the character of its Assets or the nature or conduct of its business requires it to be so qualified or licensed, except for such jurisdictions in which the failure to be so qualified or licensed is not reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect.
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5. SEC Filings; Financial Statements.
(a) Buyer has timely filed and made available to Target all SEC Documents required to be filed by Buyer since October 1, 2010 (together with all such SEC Documents filed, whether or not required to be filed, the “ Buyer SEC Reports ”). The Buyer SEC Reports (i) at the time filed, complied in all material respects with the applicable requirements of the Securities Laws and other applicable Laws and (ii) did not, at the time they were filed (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing or, in the case of registration statements, at the effective date thereof) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Buyer SEC Reports or necessary in order to make the statements in such Buyer SEC Reports, in light of the circumstances under which they were made, not misleading. To the Knowledge of Buyer, none of the Buyer SEC Reports is the subject of any outstanding SEC comments or outstanding SEC investigation. No Buyer Subsidiary is required to file any form or report with the SEC. Buyer has made available to Target all material correspondence (if such correspondence has occurred since October 1, 2010) between the SEC, on the one hand, and any of the Buyer Entities, on the other hand, received by Buyer prior to the date of this Agreement. The certifications and statements required by (i) Rule 13a-14 under the Exchange Act and (ii) Section 906 of the Sarbanes-Oxley Act relating to the Buyer SEC Reports are accurate and complete in all material respects and comply as to form and content with applicable Laws. As used in this Section 6.5, the term “file” and variations thereof shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC.
(b) Each of the Buyer Financial Statements (including, in each case, any related notes) contained in the Buyer SEC Reports, including any Buyer SEC Reports filed after the date of this Agreement until the Effective Time, complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited interim statements, as permitted by Form 10‑Q of the SEC), and fairly presented in all material respects the consolidated financial position of Buyer and its Subsidiaries as at the respective dates and the consolidated results of operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount or effect.
(c) Buyer has established and maintains a system of internal control over financial reporting (as defined in Rule 13a-15 under the Exchange Act). Such internal controls are sufficient to provide reasonable assurance regarding the reliability of the Buyer’s financial reporting and the preparation of its financial statements for external purposes in accordance with GAAP. Buyer’s principal executive officer and its principal financial officer have disclosed, based on their then-most recent evaluation of internal control over financial reporting, to Buyer’s auditors and the audit committee of Buyer’s Board of Directors (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect Buyer’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Buyer’s internal controls over financial reporting.

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(d) Buyer has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 under the Exchange Act), and such disclosure controls and procedures are designed to ensure that material information relating to Buyer required to be included in reports filed by Buyer under the Exchange Act is accumulated and communicated to Buyer’s management, including its principal executive officer and its principal financial officer as appropriate to allow timely decisions regarding required disclosure.
(e) Except as set forth on Section 6.5 of the Buyer Disclosure Memorandum, Buyer is in compliance with all applicable NYSE listing rules and requirements and continued listing standards, and, to the Knowledge of Buyer, except for the Merger and the transactions contemplated thereby, or as set forth on Section 6.5 of the Buyer Disclosure Memorandum, there are no facts that cause or could reasonably be expected to cause Buyer to be non-compliant with any applicable NYSE listing rules and requirements and continued listing standards.
(f) Buyer’s auditor has at all times since the date of enactment of the Sarbanes-Oxley Act been: (i) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act); (ii) to the Knowledge of Buyer, “independent” with respect to Buyer within the meaning of Regulation S-X under the Exchange Act; and (iii) to the Knowledge of Buyer, in compliance with subsections (g) through (l) of Section 10A of the Exchange Act and the rules and regulations promulgated by the SEC and the Public Company Accounting Oversight Board thereunder.
(g) Since October 1, 2010, there have been no formal internal investigations regarding financial reporting or accounting policies and practices discussed with, reviewed by or initiated at the direction of the chief executive officer or chief financial officer of Buyer, the Board of Directors of Buyer or any committee thereof, other than ordinary course audits or reviews of accounting policies and practices or internal controls required by the Sarbanes-Oxley Act. Since October 1, 2010, neither Buyer nor its independent auditors have identified (i) any significant deficiency or material weakness in the system of internal accounting controls utilized by Buyer, (ii) any fraud, whether or not material, that involves Buyer’s management or other employees who have a role in the preparation of financial statements or the internal accounting controls utilized by Buyer, or (iii) any claim or allegation regarding any of the foregoing.
6. Absence of Undisclosed Liabilities.
No Buyer Entity has any Liabilities that are reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect, except Liabilities (i) which are accrued or reserved against in the consolidated balance sheet of Buyer (the “ Buyer Balance Sheet ”) as of December 31, 2013 (the “ Buyer Balance Sheet Date ”), included in the Buyer Financial Statements or reflected in the notes thereto, or (ii) incurred or paid (A) in the ordinary course of business consistent with past business practice and which are not reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect or (B) in connection with the transactions contemplated by this Agreement.
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7. Absence of Certain Changes or Events.
Since the Buyer Balance Sheet Date, except as disclosed in the Buyer Financial Statements filed with the SEC prior to the date of this Agreement or as disclosed in Section 6.7 of the Buyer Disclosure Memorandum, (i) there have been no events, changes or occurrences which have had, or are reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect, and (ii) none of the Buyer Entities has taken any action, or failed to take any action, prior to the date of this Agreement, which action or failure, if taken after the date of this Agreement, would represent or result in a material breach or violation of any of the covenants and agreements of Buyer provided in Article 7.
8. Tax Matters.
(a) All Buyer Entities have filed with the appropriate Taxing authorities all Tax Returns in all jurisdictions in which Tax Returns are required to be filed, such Tax Returns have been filed timely to the extent such jurisdictions are in the United States, and such Tax Returns are correct and complete in all material respects. None of the Buyer Entities is the beneficiary of any extension of time within which to file any Tax Return. All Taxes of the Buyer Entities (whether or not shown on any Tax Return) have been fully paid. There are no Liens for any Taxes (other than a Lien for current real property or ad valorem Taxes not yet due and payable) on any of the Assets of any of the Buyer Entities. No claim is pending by an authority in a jurisdiction where any Buyer Entity does not file a Tax Return that such Buyer Entity may be subject to Taxes by that jurisdiction.
(b) None of the Buyer Entities has received any notice of assessment or proposed assessment in connection with any Taxes that have not been settled or paid, and there are not, to Buyer’s Knowledge, any threatened or pending disputes, claims, audits or examinations regarding any Taxes of any Buyer Entity or the assets of any Buyer Entity. No officer or employee responsible for Tax matters of any Buyer Entity expects any Regulatory Authority to assess any additional Taxes for any period for which Tax Returns have been filed. None of the Buyer Entities has waived any statute of limitations in respect of any Taxes, nor agreed to a Tax assessment or deficiency.
(c) Each Buyer Entity has complied with all applicable Laws, rules and regulations relating to the withholding of Taxes and the payment thereof to appropriate authorities, including Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee or independent contractor, and Taxes required to be withheld and paid pursuant to Sections 1441 and 1442 of the Internal Revenue Code or similar provisions under foreign Law.
(d) The unpaid Taxes of each Buyer Entity (i) did not, as of the most recent fiscal month end, exceed the reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the most recent balance sheet (rather than in any notes thereto) for such Buyer Entity and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with past custom and practice of the Buyer Entities in filing their Tax Returns.

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(e) None of the Buyer Entities is a party to any Tax allocation or sharing agreement and none of the Buyer Entities has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was Buyer) or has any Tax Liability of any Person under Treasury Regulation Section 1.1502‑6 or any similar provision of state, local or foreign Law (other than the other members of the consolidated group of which Buyer is parent), or as a transferee or successor, by contract or otherwise.
(f) During the five-year period ending on the date hereof, none of the Buyer Entities was a distributing corporation or a controlled corporation in a transaction intended to be governed by Section 355 of the Internal Revenue Code.
(g) None of the Buyer Entities has made any payments, is obligated to make any payments, or is a party to any contract that could obligate it to make any payments that could be disallowed as a deduction under Section 280G or 162(m) of the Internal Revenue Code. Buyer has not been a United States real property holding corporation within the meaning of Internal Revenue Code Section 897(c)(2). None of the Buyer Entities has been or will be required to include any adjustment in taxable income for any Tax period (or portion thereof) pursuant to Section 481 of the Internal Revenue Code or any comparable provision under state or foreign Tax Laws as a result of transactions or events occurring prior to the Closing. The net operating losses of the Buyer Entities are not subject to any limitation on their use under the provisions of Sections 382 or 269 of the Internal Revenue Code or any other provisions of the Internal Revenue Code or the Treasury Regulations dealing with the utilization of net operating losses other than any such limitations as may arise as a result of the consummation of the transactions contemplated by this Agreement.
(h) Each of the Buyer Entities is in compliance in all material respects with, and its records contain all information and documents (including properly completed IRS Forms W‑9) necessary to comply in all material respects with, all applicable information reporting and Tax withholding requirements under federal, state, and local Tax Laws, and such records identify with specificity all accounts subject to backup withholding under Section 3406 of the Internal Revenue Code.
(i) No Buyer Entity has or has had in any foreign country a permanent establishment, as defined in any applicable tax treaty or convention between the United States and such foreign country, or if no treaty or convention between the United States and such foreign country exists, any presence sufficient to constitute a taxable presence under the laws of such foreign jurisdiction.
9. Real Property.
(a) Section 6.9 of the Buyer Disclosure Memorandum sets forth all material real property owned by each Buyer Entity (the “Owned Real Property”). Each Buyer Entity has good and marketable fee simple title to the Owned Real Property owned by it, free and clear of all Liens, except as set forth on Section 6.9 of the Buyer Disclosure Memorandum.

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(b) Each Buyer Entity has a good leasehold estate in each Real Property Lease under which such Buyer Entity is a tenant or a subtenant, in each case free and clear of all Liens. No Buyer Entity is in breach of or default under the terms of any Real Property Lease, except for any such breach or default that has not had and would not reasonably be expected to have, individually or in the aggregate, a Buyer Material Adverse Effect. To the knowledge of Buyer, no other party to any Real Property Lease is in breach of or default under the terms of any such Real Property Lease, which breach or default has had or would reasonably be expected to have, individually or in the aggregate, a Buyer Material Adverse Effect. Each Real Property Lease to which a Buyer Entity is a party is a valid and binding obligation of such Buyer Entity and, to the knowledge of Buyer, of each other party thereto, and is in full force and effect, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or hereafter in effect, relating to creditors’ rights generally and (ii) equitable remedies of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
10. Assets.
(a) Except as disclosed in Section 6.10 of the Buyer Disclosure Memorandum or as disclosed or reserved against in the Buyer Financial Statements, the Buyer Entities have good and marketable title, free and clear of all Liens, to all of their respective Assets which are material to its respective business, except for any such Liens or other defects of title which are not reasonably likely to have a Buyer Material Adverse Effect. All tangible properties used in the businesses of the Buyer Entities are in good condition, reasonable wear and tear excepted, and are usable in the ordinary course of business consistent with Buyer’s past practices.
(b) All items of inventory of the Buyer Entities reflected on the most recent balance sheet included in the Buyer Financial Statements delivered prior to the date of this Agreement and prior to the Effective Time consisted and are expected to consist, as applicable, of items of a quality and quantity usable and saleable in the ordinary course of business and conform to generally accepted standards in the industry in which the Buyer Entities are a part, except inventory for which there is an appropriate reserve or accrual in such Buyer Financial Statements.
(c) The accounts receivable of the Buyer Entities as set forth on the Buyer Balance Sheet included in the Buyer Financial Statements delivered prior to the date of this Agreement or arising since the date thereof are valid and genuine; have arisen solely out of bona fide sales and deliveries of goods, performance of services and other business transactions in the ordinary course of business consistent with past practice; and to Buyer’s Knowledge are not subject to valid defenses, set-offs or counterclaims. The allowance for collection losses on such Buyer Balance Sheet has been determined in accordance with GAAP.
(d) All Assets which are material to Buyer’s business on a consolidated basis, held under leases or subleases by any of the Buyer Entities, are held under valid Contracts enforceable in accordance with their respective terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceedings may be brought), and each such Contract is in full force and effect.

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(e) The Buyer Entities currently maintain insurance similar in amounts, scope and coverage to that maintained by other peer organizations. None of the Buyer Entities has received notice from any insurance carrier that (i) such insurance will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to such policies of insurance will be substantially increased. There are presently no claims pending under such policies of insurance and no notices have been given by any Buyer Entity under such policies.
(f) The Assets of the Buyer Entities include all assets required to operate the business of the Buyer Entities as presently conducted.
11. Intellectual Property.
Each Buyer Entity owns or has a license to use all of the Intellectual Property used by such Buyer Entity in the course of its business including sufficient rights in each copy possessed or otherwise used by each Buyer Entity. Each Buyer Entity is the owner of or has a license, with the right to sublicense, to any Intellectual Property sold or licensed to a third party by such Buyer Entity in connection with such Buyer Entity’s business operations, and such Buyer Entity has the right to convey by sale or license any Intellectual Property so conveyed. No Buyer Entity is in Default under any of its Intellectual Property licenses. No proceedings have been instituted, or are pending or to the Knowledge of Buyer threatened, which challenge the rights of any Buyer Entity with respect to Intellectual Property used, sold or licensed by such Buyer Entity in the course of its business, nor has any person claimed or alleged any rights to such Intellectual Property. To the Knowledge of Buyer, the conduct of the business of the Buyer Entities does not infringe any Intellectual Property of any other Person. Except as disclosed in Section 6.11 of the Buyer Disclosure Memorandum, no Buyer Entity is obligated to pay any recurring royalties to any Person with respect to any such Intellectual Property. Except as disclosed in Section 6.11 of the Buyer Disclosure Memorandum, every officer, director, or employee of any Buyer Entity is a party to a Contract which requires such officer, director or employee to assign any interest in any Intellectual Property to a Buyer Entity and to keep confidential any trade secrets, proprietary data, customer information, or other business information of a Buyer Entity, and, to the Knowledge of Buyer, no such officer, director or employee is party to any Contract with any Person other than a Buyer Entity which requires such officer, director or employee to assign any interest in any Intellectual Property to any Person other than a Buyer Entity or to keep confidential any trade secrets, proprietary data, customer information, or other business information of any Person other than a Buyer Entity. Except as disclosed in Section 6.11 of the Buyer Disclosure Memorandum, to the Knowledge of Buyer, no officer, director or employee of any Buyer Entity is party to any Contract which restricts or prohibits such officer, director or employee from engaging in activities competitive with any Person (other than any Buyer Entity).
12. Environmental Matters.
(a) Each Buyer Entity, each Owned Real Property and each property or facility leased or operated by a Buyer Entity is, and has been, in compliance with all Environmental Laws, except for any such noncompliance which is not reasonably likely to have a Buyer Material Adverse Effect.

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(b) There is no Litigation pending or to the Knowledge of Buyer, threatened, before any court, governmental agency, or authority or other forum in which any Buyer Entity, any Owned Real Property or any property or facility leased or operated by a Buyer Entity has been or, with respect to threatened Litigation, may be named as a defendant (i) for alleged noncompliance (including by any predecessor) with or Liability under any Environmental Law or (ii) relating to the release, discharge, spillage, or disposal into the environment of any Hazardous Material, whether or not occurring at, on, under, adjacent to, or affecting (or potentially affecting) a site currently or formerly owned, leased, or operated by any Buyer Entity nor, to the Knowledge of Buyer, is there any reasonable basis for any Litigation of a type described in this sentence.
(c) During the period of any Buyer Entity’s ownership or operation of any of their respective current or former properties or facilities, there have been no releases, discharges, spillages, or disposals of Hazardous Material in, on, under, adjacent to, or affecting (or potentially affecting) such properties. Prior to the period of any Buyer Entity’s ownership or operation of any of their respective current or former properties or facilities, to the Knowledge of Buyer, there were no releases, discharges, spillages, or disposals of Hazardous Material in, on, under, or affecting any such property or facility.
13. Compliance with Laws.
Each Buyer Entity has in effect all Permits necessary for it to own, lease, or operate its material Assets and to carry on its business as now conducted, except for those Permits the absence of which are not reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect, and there has occurred no Default under any such Permit, other than Defaults which could not reasonably be anticipated to have, individually or in the aggregate, a Buyer Material Adverse Effect. Except as disclosed in Section 6.13 of the Buyer Disclosure Memorandum, none of the Buyer Entities:
(a) is in Default under any of the provisions of its certificate or articles of incorporation or bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Permits applicable to its business or employees conducting its business, except for Defaults which could not reasonably be anticipated to have, individually or in the aggregate, a Buyer Material Adverse Effect; or
(c) has received any written notification or communication from any agency or department of federal, state, or local government or any Regulatory Authority or the staff thereof (i) asserting that any Buyer Entity is not, or may not be, in compliance with any Laws or Orders (ii) threatening to revoke any Permits, or (iii) requiring any Buyer Entity to enter into or consent to the issuance of a cease and desist order, injunction formal agreement, directive, commitment, or memorandum of understanding, or to adopt any board resolution or similar undertaking, which restricts materially the conduct of its business or in any manner relates to its employment decisions, its employment or safety policies or practices; or

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(d) has effectuated (i) a “plant closing” (as defined in the WARN Act ) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of any Buyer Entity; or (ii) a “mass layoff” (as defined in the WARN Act) affecting any site of employment or facility of any Buyer Entity; and no Buyer Entity has been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state or local Law. Except as set forth in Section 6.13 of the Buyer Disclosure Memorandum, none of any Buyer Entity’s employees has suffered an “employment loss” (as defined in the WARN Act) since six months prior to the Closing Date.

Section 6.13 of the Buyer Disclosure Memorandum contains a list of all independent contractors of each Buyer Entity (separately listed by Buyer Entity) and each such Person meets the standards under all Laws (including Treasury Regulations under the Internal Revenue Code and federal and state labor and employment Laws) as independent contractors and no such Person is an employee of any Buyer Entity under any applicable Law. Copies of all material reports, correspondence, notices and other documents relating to any inspection, audit, monitoring or other form of review or enforcement action by a Regulatory Authority have been made available to Target.

14. Labor Relations.
(a) No Buyer Entity is the subject of any Litigation asserting that it or any other Buyer Entity has committed an unfair labor practice (within the meaning of the National Labor Relations Act or comparable state Law) or other violation of state or federal labor Law or seeking to compel it or any other Buyer Entity to bargain with any labor organization or other employee representative as to wages or conditions of employment, nor is any Buyer Entity party to any collective bargaining agreement or subject to any bargaining order, injunction or other Order relating to Buyer’s relationship or dealings with its employees, any labor organization or any other employee representative. There is no strike, slowdown, lockout or other job action or labor dispute involving any Buyer Entity pending or, to the Knowledge of Buyer, threatened and there has been no such actions or disputes in the past five years. To the Knowledge of Buyer, in the past five years, there has not been any attempt by any Buyer Entity employees or any labor organization or other employee representative to organize or certify a collective bargaining unit or to engage in any other union organization activity with respect to the workforce of any Buyer Entity. Except as required by applicable Law or pursuant to employment agreements identified on Section 6.15 of the Buyer Disclosure Memorandum, the employment of each employee and the engagement of each independent contractor of each Buyer Entity is terminable at will by the relevant Buyer Entity without any penalty, liability or severance obligation incurred by any Buyer Entity. No Buyer entity will owe any amounts for wages or severance obligations to any of its employees or independent contractors as of the Closing Date outside of the ordinary course of business.
(b) All of the employees employed in the United States are either United States citizens or are legally entitled to work in the United States under the Immigration Reform and Control Act of 1986, as amended, other United States immigration Laws and the Laws related to the employment of non-United States citizens applicable in the state in which the employees are employed.
15. Employee Benefit Plans.

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(a) Buyer has disclosed in Section 6.15 of the Buyer Disclosure Memorandum, and has delivered or made available to Target prior to the execution of this Agreement, (i) copies in each case of all Employee Benefit Plans currently adopted, maintained by, sponsored in whole or in part by, or contributed to by any Buyer Entity or ERISA Affiliate thereof for the benefit of employees, former employees, retirees, dependents, spouses, directors, independent contractors, or other beneficiaries or under which employees, former employees, retirees, dependents, spouses, directors, independent contractors, or other beneficiaries are eligible to participate (collectively, the “ Buyer Benefit Plans ”) and (ii) a list of each Employee Benefit Plan that is not identified in (i) above (e.g., former Employee Benefit Plans) but for which the Buyer Entity or ERISA Affiliate has or reasonably could have any obligation or Liability. Any of the Buyer Benefit Plans which is an “employee pension benefit plan,” as that term is defined in ERISA Section 3(2), is referred to herein as a “ Buyer ERISA Plan .”) Each Buyer ERISA Plan which is also a “defined benefit plan” (as defined in Internal Revenue Code Section 414(j)) is referred to herein as a “ Buyer Pension Plan .”) No Buyer Pension Plan is or has been a multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) Buyer has delivered to Target prior to the execution of this Agreement (i) all trust agreements or other funding arrangements for all Buyer Benefit Plans, (ii) all determination letters, rulings, opinion letters, information letters or advisory opinions issued by the IRS, the DOL or the Pension Benefit Guaranty Corporation during this calendar year or any of the preceding three calendar years, (iii) any filing or documentation (whether or not filed with the IRS) where corrective action was taken in connection with the IRS EPCRS program set forth in Revenue Procedure 2001-17 (or its predecessor or successor rulings), (iv) annual reports or returns, audited or unaudited financial statements, actuarial reports and valuations prepared for any Employee Benefit Plan for the current plan year and the three preceding plan years, and (v) the most recent summary plan descriptions and any material modifications thereto.
(c) Each Buyer Benefit Plan is in compliance with the applicable terms of such Buyer Benefit Plan, in compliance with the applicable requirements of the Internal Revenue Code in material compliance with the terms of ERISA, and in compliance with any other applicable Laws the breach or violation of which are reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect. Each Buyer ERISA Plan which is intended to be qualified under Internal Revenue Code Section 401(a) has received a favorable determination letter from the IRS that is still in effect and applies to the Buyer ERISA Plan as amended and as administered or, within the time permitted under Internal Revenue Code Section 401(b), has timely applied for a favorable determination letter which when issued will apply retroactively to the Buyer ERISA Plan as amended and administered. Buyer is not aware of any circumstances likely to result in revocation of any such favorable determination letter. Buyer has not received any communication (written or unwritten) from any government agency questioning or challenging the compliance of any Buyer Benefit Plan with applicable Laws. No Buyer Benefit Plan is currently being audited by a governmental agency for compliance with applicable Laws or has been audited with a determination by the governmental agency that such Buyer Benefit Plan failed to comply with applicable Laws.

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(d) There has been no oral or written representation or communication with respect to any aspect of the Buyer Benefit Plans made to employees of the Buyer which is not in accordance with the written or otherwise preexisting terms and provisions of such plans. Neither the Buyer nor any administrator or fiduciary of any Buyer Benefit Plan (or any agent of any of the foregoing) has engaged in any transaction, or acted or failed to act in any manner, which could subject the Buyer or Target to any direct or indirect Liability (by indemnity or otherwise) for breach of any fiduciary, co-fiduciary or other duty under ERISA. There are no unresolved claims or disputes under the terms of, or in connection with, the Buyer Benefit Plans other than claims for benefits which are payable in the ordinary course of business and no action, proceeding, prosecution, inquiry, hearing or investigation has been commenced with respect to any Buyer Benefit Plan.
(e) All Buyer Benefit Plan documents and annual reports or returns, audited or unaudited financial statements, actuarial valuations, summary annual reports, and summary plan descriptions issued with respect to the Buyer Benefit Plans are correct and complete in all material respects, have been timely filed with the IRS, the DOL or distributed to participants of the Buyer Benefit Plans (as required by Law), and there have been no changes in the information set forth therein.
(f) No “party in interest” (as defined in ERISA Section 3(14)) or “disqualified person” (as defined in Internal Revenue Code Section 4975(e)(2)) of any Buyer Benefit Plan has engaged in any nonexempt “prohibited transaction” (described in Internal Revenue Code Section 4975(c) or ERISA Section 406).
(g) For any Buyer Pension Plan, the fair market value of such Buyer Pension Plan’s assets equals or exceeds the present value of all benefits (whether vested or not) accrued to date by all present or former participants in such Buyer Pension Plan. For this purpose the funding status shall be determined assuming the Buyer Pension Plan will be continued indefinitely and by using the assumption set forth in the most recent actuarial statement for such Buyer Pension Plan. Since the date of the most recent actuarial valuation, there has been (i) no material change in the financial position of any Buyer Pension Plan, (ii) no change in the actuarial assumptions with respect to any Buyer Pension Plan, and (iii) no increase in benefits under any Buyer Pension Plan as a result of Buyer Pension Plan amendments or changes in any applicable Law which is reasonably likely to have, individually or in the aggregate, a material adverse effect on the funding status of such Buyer Pension Plan. All contributions with respect to an Employee Benefit Plan of Buyer, or of any of its ERISA Affiliates that is subject to Internal Revenue Code Section 412 or ERISA Section 302 have or will be timely made and, with respect to any such Employee Benefit Plan, there is no Lien nor is there expected to be a Lien under Internal Revenue Code Section 412(n) or ERISA Section 302(f) or Tax under Internal Revenue Code Section 4971. No Buyer Pension Plan has a “liquidity shortfall” as defined in Internal Revenue Code Section 412(m)(5). Neither the Buyer nor any of its ERISA Affiliates is subject to or can reasonably be expected to become subject to a Lien under Internal Revenue Code Section 401(a)(29). All premiums required to be paid under ERISA Section 4006 have been timely paid by the Buyer and by each of its ERISA Affiliates.
(h) No Liability under Title IV of ERISA has been or is expected to be incurred by any of Buyer or its ERISA Affiliates and no event has occurred that could reasonably be anticipated to result in Liability under Title IV of ERISA being incurred by Buyer or any of its ERISA Affiliates with respect to any ongoing, frozen or terminated single-employer plan or the single-employer plan of any ERISA Affiliate. There has been no “reportable event,” within the meaning of ERISA Section 4043 for which the 30-day reporting requirement has not been waived by any ongoing, frozen or terminated single employer plan of Buyer or of any ERISA Affiliate.

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(i) Except as disclosed in Section 6.15 of the Buyer Disclosure Memorandum, no Buyer Entity has any Liability for retiree health and life benefits under any of the Buyer Benefit Plans and there are no restrictions on the rights of such Buyer Entity to amend or terminate any such retiree health or benefit Plan without incurring any Liability thereunder except to the extent required under Part 6 of Title I of ERISA or Internal Revenue Code Section 4980B. No Tax under Internal Revenue Code Sections 4980B or 5000 has been incurred with respect to any Buyer Benefit Plan and no circumstance exists which could give rise to such Taxes.
(j) Except as disclosed in Section 6.15 of the Buyer Disclosure Memorandum, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment (including severance, unemployment compensation, golden parachute, or otherwise) becoming due to any director or any employee of any Buyer Entity from any Buyer Entity under any Buyer Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under any Buyer Benefit Plan, or (iii) result in any acceleration of the time of payment or vesting of any such benefit.
(k) The actuarial present values of all accrued deferred compensation entitlements (including entitlements under any executive compensation, supplemental retirement, or employment agreement) of employees and former employees of any Buyer Entity and their respective beneficiaries, other than entitlements accrued pursuant to funded retirement plans subject to the provisions of Internal Revenue Code Section 412 or ERISA Section 302, have been fully reflected on the Buyer Financial Statements to the extent required by and in accordance with GAAP.
(l) All individuals who render services to any Buyer Entity and who are authorized to participate in a Buyer Benefit Plan pursuant to the terms of such Buyer Benefit Plan are in fact eligible to and authorized to participate in such Buyer Benefit Plan. All individuals participating in (or eligible to participate in) any Buyer Benefit Plan are common-law employees of a Buyer Entity.
(m) Neither the Buyer nor any of its ERISA Affiliates has had an “obligation to contribute” (as defined in ERISA Section 4212) to a “multiemployer plan” (as defined in ERISA Sections 4001(a)(3) and 3(37)(A)).
(n) All Buyer stock options have an exercise price per share that was not less than the “fair market value” of one share of Buyer Common Stock on the date of grant. All such stock options have been properly accounted for in accordance with GAAP in all material respects, and no change is expected in respect of any prior financial statements relating to expenses for stock−based compensation.
(o) Each Buyer Benefit Plan that is a “nonqualified deferred compensation plan” (as defined in section 409A(d)(1) of the Internal Revenue Code) subject to section 409A of the Internal Revenue Code has been operated since January 1, 2005 in good faith compliance with section 409A of the Internal Revenue Code and the regulations and guidance promulgated thereunder.

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16. Material Contracts.
Except as disclosed in Section 6.16 of the Buyer Disclosure Memorandum or otherwise reflected in the Buyer Financial Statements, none of the Buyer Entities, nor any of their respective Assets, businesses, or operations, is a party to, or is bound or affected by, or receives benefits under, (i) any employment agreement that is not, subject to applicable Law, terminable at-will, or severance, termination, consulting or retirement Contract providing for aggregate payments to any Person in any calendar year in excess of $75,000, (ii) any Contract relating to the borrowing of money by any Buyer Entity or the guarantee by any Buyer Entity of any such obligation (other than Contracts evidencing trade payables and Contracts relating to borrowings or guarantees made in the ordinary course of business), (iii) any Contract which prohibits or restricts any Buyer Entity from engaging in any business activities in any geographic area, line of business or otherwise in competition with any other Person, (iv) any Contract between or among Buyer Entities, (v) any Contract involving Intellectual Property (other than Contracts entered into in the ordinary course with customers or vendors, including “shrink-wrap” software licenses), (vi) any Contract relating to the provision of data processing, network communication, or other technical services to or by any Buyer Entity entered into outside the ordinary course of business, (vii) any Contract relating to the purchase or sale of any goods or services (other than Contracts entered into in the ordinary course of business involving payments under any individual Contract not in excess of $100,00 per annum or that may be terminated at any time by a Buyer Entity without any material payment or penalty), or (viii) any other Contract or amendment thereto that would be required to be filed as an exhibit to a Form 10‑K filed by Buyer with the SEC as of the date of this Agreement that has not been filed as an exhibit to Buyer’s Form 10‑K filed for the fiscal year ended September 30, 2013, or in an SEC Document and identified to Target (together with all Contracts referred to in Sections 6.9(b), and 6.15(a), the “ Buyer Contracts ”). With respect to each Buyer Contract and except as disclosed in Section 6.16 of the Buyer Disclosure Memorandum: (A) the Contract is in full force and effect; (B) no Buyer Entity is in Default thereunder, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect; (C) no Buyer Entity has repudiated or waived any material provision of any such Contract; and (D) no other party to any such Contract is, to the Knowledge of Buyer, in Default in any respect, other than Defaults which are not reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect, or has repudiated or waived any material provision thereunder. All of the indebtedness of any Buyer Entity for money borrowed is prepayable at any time by such Buyer Entity without penalty or premium.
17. Privacy of Customer Information
(a) Buyer is the sole owner of all IIPI relating to customers, former customers and prospective customers of Buyer, subject only to the rights of such customers.
(b) Buyer’s collection and use of IIPI relating to Buyer’s customers, former customers and prospective customers complies in all material respects with Buyer’s privacy policy and all applicable state, federal and foreign privacy Law, and any Contract or industry standard relating to privacy.

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18. Legal Proceedings.
There is no Litigation instituted or pending, or, to the Knowledge of Buyer, threatened (or unasserted but considered probable of assertion and which if asserted would have at least a reasonable possibility of an unfavorable outcome) against any Buyer Entity, or against any director, officer or employee in their capacities as such or Employee Benefit Plan of any Buyer Entity, or against any Asset, interest, or right of any of them, that is reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect, nor are there any Orders outstanding against any Buyer Entity, that are reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect. Section 6.18 of the Buyer Disclosure Memorandum contains a summary of all Litigation as of the date of this Agreement to which any Buyer Entity is a party and which names a Buyer Entity as a defendant or cross-defendant or for which any Buyer Entity has potential Liability. Section 6.18 the Buyer Disclosure Memorandum contains a summary of all Orders to which any Buyer Entity is subject.
19. Reports.
Since January 1, 2011, each Buyer Entity has timely filed all reports and statements, together with any amendments required to be made with respect thereto, that it was required to file with Regulatory Authorities (except, in the case of state securities authorities, failures to file which are not reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect). As of their respective dates, each of such reports and documents, including the financial statements, exhibits, and schedules thereto, complied in all material respects with all applicable Laws. As of its respective date, each such report and document did not, in all material respects, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading.
20. Statements True and Correct.
(a) No representation or warranty or other statement made by Buyer in this Agreement, the Buyer Disclosure Memorandum or the certificates delivered pursuant to Section 9.3(c) contains or will contain any untrue statement of material fact or will omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(b) None of the information supplied or to be supplied by any Buyer Entity or any Affiliate thereof for inclusion in the Registration Statement to be filed by Buyer with the SEC, will, when the Registration Statement becomes effective, be false or misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein not misleading.
(c) None of the information supplied or to be supplied by any Buyer Entity or any Affiliate thereof for inclusion in the Proxy Statement to be mailed to Buyer’s shareholders in connection with the Buyer Shareholders’ Meeting, and any other documents to be filed by any Buyer Entity or any Affiliate thereof with the SEC or any other Regulatory Authority in connection with the transactions contemplated hereby, will, at the respective time such documents are filed, and with respect to the Proxy Statement, when first mailed to the shareholders of Buyer, be false or misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or, in the case of the Proxy Statement or any amendment thereof or supplement thereto, at the time of the Buyer Shareholders’ Meeting, be false or misleading with respect to any material fact, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of any proxy for the Buyer Shareholders’ Meeting.

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(d) All documents that any Buyer Entity or any Affiliate thereof is responsible for filing with any Regulatory Authority in connection with the transactions contemplated hereby will comply as to form in all material respects with the provisions of applicable Law.
21. Vote of Buyer Shareholders.
Except for the approval (“ Buyer Shareholder Approval ”) by the vote of holders of a majority of the outstanding shares of Buyer Common Stock in favor of the issuance of the aggregate Merger Consideration (the “ Buyer Shareholder Approval Matters ”) no vote of the shareholders of Buyer or the holders of any other securities of Buyer (equity or otherwise) is required by any applicable Law, the certificate of incorporation or bylaws or other equivalent organizational documents of Buyer to consummate the transactions contemplated hereby.
22. Authority of Sub.
Sub is a corporation duly organized, validly existing and in good standing under the Laws of the State of California as a wholly owned Subsidiary of Buyer. The authorized capital stock of Sub shall consist of 100 shares of Sub Common Stock, all of which are validly issued and outstanding, fully paid and nonassessable and are owned by Buyer free and clear of any Lien. Sub has the corporate power and authority necessary to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein, including the Merger, have been duly and validly authorized by all necessary corporate action in respect thereof on the part of Sub. This Agreement represents a legal, valid, and binding obligation of Sub, enforceable against Sub in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought). Buyer, as the sole shareholder of Sub, has voted prior to the Effective Time the shares of Sub Common Stock in favor of approval of the Merger and this Agreement, as and to the extent required by applicable Law.
23. Tax and Regulatory Matters.

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No Buyer Entity or any Affiliate thereof has taken or agreed to take any action or has any Knowledge of any fact or circumstance that is reasonably likely to (i) prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially impede or delay receipt of any Consents of Regulatory Authorities referred to in Section 9.1(b) or result in the imposition of a condition or restriction of the type referred to in the last sentence of such Section.
24. Board Recommendation.
The Board of Directors of Buyer, at a meeting duly called and held, has by a vote of the directors present (who constituted all of the directors then in office) (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, taken together, are fair to and in the best interests of the shareholders and (ii) resolved to recommend that the holders of the shares of Buyer Common Stock approve the issuance of the Merger Consideration.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
1. Affirmative Covenants of Target.
From the date of this Agreement until the earlier of (i) the Effective Time, or (ii) the termination of this Agreement, unless the prior written consent of Buyer shall have been obtained, and except as otherwise expressly contemplated herein, Target shall (A) operate its business only in the usual, regular, and ordinary course, (B) use commercially reasonable efforts to preserve intact its business organization and Assets and maintain its rights and franchises, and (C) take no action which would (1) materially adversely affect the ability of any Party to obtain any Consents required for the transactions contemplated hereby without imposition of a condition or restriction of the type referred to in the last sentences of Section 9.1(b) or 9.1(c), or (2) materially adversely affect the ability of any Party to perform its covenants and agreements under this Agreement.
2. Negative Covenants of Target.
From the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement, unless the prior written consent of Buyer shall have been obtained, and except as otherwise expressly contemplated herein, Target covenants and agrees that it will not do or agree or commit to do any of the following:
(a) amend the articles of incorporation, bylaws or other governing instruments of Target, or
(b) incur any additional debt obligation or other obligation for borrowed money (other than indebtedness of a Target Entity to another Target Entity) in excess of an aggregate of $50,000 (for the Target Entities on a consolidated basis) except in the ordinary course of the business consistent with past practices, or impose, or suffer the imposition, on any Asset of any Target Entity of any Lien or permit any such Lien to exist (other than in connection with Liens in effect as of the date hereof that are disclosed in the Target Disclosure Memorandum); or

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(c) repurchase, redeem, or otherwise acquire or exchange (other than exchanges in the ordinary course under employee benefit plans or repurchases of shares of Target Common Stock from employees, officers, directors, consultants or other persons performing services for Target pursuant to agreements under which Target has the right to repurchase such shares upon the occurrence of certain events, such as the termination of services), directly or indirectly, any shares, or any securities convertible into any shares, of the capital stock of any Target Entity, or declare or pay any dividend or make any other distribution in respect of Target’s capital stock; or
(d) except for this Agreement, or pursuant to the exercise of stock options or conversion of Target Preferred Stock outstanding as of the date hereof and pursuant to the terms thereof in existence on the date hereof, or as disclosed in Section 7.2(d) of the Target Disclosure Memorandum, issue, sell, pledge, encumber, authorize the issuance of, enter into any Contract to issue, sell, pledge, encumber, or authorize the issuance of, or otherwise permit to become outstanding, any additional shares of Target Common Stock or any other capital stock of any Target Entity, or any stock appreciation rights, or any option, warrant, or other Equity Right, or amend the terms of any Target SAR (as amended to date) outstanding as of the date hereof; or
(e) adjust, split, combine or reclassify any capital stock of any Target Entity or issue or authorize the issuance of any other securities in respect of or in substitution for shares of Target Common Stock, or sell, lease, mortgage or otherwise dispose of or otherwise encumber any Asset other than in the ordinary course of business for reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S. Government agency securities, which in either case have maturities of three months or less, purchase any securities or make any material investment, either by purchase of stock of securities, contributions to capital, Asset transfers, or purchase of any Assets, in any Person, or otherwise acquire direct or indirect control over any Person; or
(g) grant any increase in compensation or benefits to the employees or officers of any Target Entity, except in accordance with past practice disclosed in Section 7.2(g) of the Target Disclosure Memorandum or as required by Law; pay any severance or termination pay or any bonus other than pursuant to written policies or written Contracts in effect on the date of this Agreement and disclosed in Section 7.2(g) of the Target Disclosure Memorandum; and enter into or amend any severance agreements with officers of any Target Entity; grant any material increase in fees or other increases in compensation or other benefits to directors of any Target Entity except in accordance with past practice disclosed in Section 7.2(g) of the Target Disclosure Memorandum; or
(h) enter into or amend any employment Contract between any Target Entity and any Person (unless such amendment is required by Law) that the Target Entity does not have the unconditional right to terminate without Liability (other than Liability for services already rendered), at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of any Target Entity or terminate or withdraw from, or make any material change in or to, any existing employee benefit plans of any Target Entity other than any such change that is required by Law or that, in the opinion of counsel, is necessary or advisable to maintain the tax qualified status of any such plan, or make any distributions from such employee benefit plans, except as required by Law, the terms of such plans or consistent with past practice; or

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(j) make any significant change in any Tax or accounting methods or systems of internal accounting controls, except as may be appropriate to conform to changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past practice, settle any Litigation involving any Liability of any Target Entity for material money damages or restrictions upon the operations of any Target Entity; or
(l) except in the ordinary course of business, enter into, modify, amend or terminate any material Contract or waive, release, compromise or assign any material rights or claims; or
(m) permit any shares of Target Common Stock or Target Preferred Stock to be issued or transferred on its books in the five business days preceding the Effective Time.
3. Affirmative Covenants of Buyer.
From the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement, unless the prior written consent of Target shall have been obtained, and except as otherwise expressly contemplated herein, Buyer covenants and agrees that it shall, and shall cause each of its Subsidiaries to, (a) operate its business only in the usual, regular and ordinary course, (b) use all reasonable efforts to preserve intact its business organization and Assets and maintain its rights and franchises, and (c) take no action which would (i) materially adversely affect the ability of any Party to obtain any Consents required for the transactions contemplated hereby without imposition of a condition or restriction of the type referred to in the last sentences of Section 9.1(b) or 9.1(c), or (ii) materially adversely affect the ability of any Party to perform its covenants and agreements under this Agreement.
4. Negative Covenants of Buyer.
From the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement, unless the prior written consent of Target shall have been obtained, and except as otherwise expressly contemplated herein, Buyer covenants and agrees that it will not do or agree or commit to do any of the following:
(a) amend the certificate or articles of incorporation, bylaws or other governing instruments of any Buyer Entity, or
(b) incur any additional debt obligation or other obligation for borrowed money (other than indebtedness of a Buyer Entity to another Buyer Entity) in excess of an aggregate of $50,000 (for the Buyer Entities on a consolidated basis) except in the ordinary course of the business of the Buyer Entities consistent with past practices, or impose, or suffer the imposition, on any Asset of any Buyer Entity of any Lien or permit any such Lien to exist (other than in connection with Liens in effect as of the date hereof that are disclosed in the Buyer Disclosure Memorandum); or

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(c) repurchase, redeem, or otherwise acquire or exchange (other than exchanges in the ordinary course under employee benefit plans or repurchases of shares of Buyer Common Stock from employees, officers, directors, consultants or other persons performing services for Buyer pursuant to agreements under which Buyer has the right to repurchase such shares upon the occurrence of certain events, such as the termination of services), directly or indirectly, any shares, or any securities convertible into any shares, of the capital stock of any Buyer Entity, or declare or pay any dividend or make any other distribution in respect of Buyer’s capital stock except that prior to the Effective Time, the Board of Directors of Buyer may declare a special cash dividend payable with respect to shares of Buyer Common Stock held by shareholders of Buyer as of a record date prior to the Effective Time and payable after the Effective Time, in an amount not to exceed $0.55 per share; or
(d) except for this Agreement, or pursuant to the exercise of stock options outstanding as of the date hereof and pursuant to the terms thereof in existence on the date hereof, or as disclosed in Section 7.4(d) of the Buyer Disclosure Memorandum, issue, sell, pledge, encumber, authorize the issuance of, enter into any Contract to issue, sell, pledge, encumber, or authorize the issuance of, or otherwise permit to become outstanding, any additional shares of Buyer Common Stock or any other capital stock of any Buyer Entity, or any stock appreciation rights, or any option, warrant, or other Equity Right; or
(e) adjust, split, combine or reclassify any capital stock of any Buyer Entity or issue or authorize the issuance of any other securities in respect of or in substitution for shares of Buyer Common Stock, or sell, lease, mortgage or otherwise dispose of or otherwise encumber (i) any shares of capital stock of any Buyer Subsidiary or (ii) any Asset other than in the ordinary course of business for reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S. Government agency securities, which in either case have maturities of three months or less, purchase any securities or make any material investment, either by purchase of stock of securities, contributions to capital, Asset transfers, or purchase of any Assets, in any Person, or otherwise acquire direct or indirect control over any Person; or
(g) grant any increase in compensation or benefits to the employees or officers of any Buyer Entity, except in accordance with past practice disclosed in Section 7.4(g) of the Buyer Disclosure Memorandum or as required by Law; pay any severance or termination pay or any bonus other than pursuant to written policies or written Contracts in effect on the date of this Agreement and disclosed in Section 7.4(g) of the Buyer Disclosure Memorandum; and enter into or amend any severance agreements with officers of any Buyer Entity; grant any material increase in fees or other increases in compensation or other benefits to directors of any Buyer Entity except in accordance with past practice disclosed in Section 7.4(g) of the Buyer Disclosure Memorandum; or
(h) enter into or amend any employment Contract between any Buyer Entity and any Person (unless such amendment is required by Law) that the Buyer Entity does not have the unconditional right to terminate without Liability (other than Liability for services already rendered), at any time on or after the Effective Time; or

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(i) adopt any new employee benefit plan of any Buyer Entity or terminate or withdraw from, or make any material change in or to, any existing employee benefit plans of any Buyer Entity other than any such change that is required by Law or that, in the opinion of counsel, is necessary or advisable to maintain the tax qualified status of any such plan, or make any distributions from such employee benefit plans, except as required by Law, the terms of such plans or consistent with past practice; or
(j) make any significant change in any Tax or accounting methods or systems of internal accounting controls, except as may be appropriate to conform to changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past practice, settle any Litigation involving any Liability of any Buyer Entity for material money damages or restrictions upon the operations of any Buyer Entity; or
(l) except in the ordinary course of business, enter into, modify, amend or terminate any material Contract or waive, release, compromise or assign any material rights or claims.
5. Adverse Changes in Condition.
Each Party agrees to give written notice promptly to the other Party upon becoming aware of the occurrence or impending occurrence of any event or circumstance relating to it or any of its Subsidiaries which (i) is reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect or a Buyer Material Adverse Effect, as applicable, or (ii) would cause or constitute a material breach of any of its representations, warranties, or covenants contained herein, and to use its reasonable efforts to prevent or promptly to remedy the same.
ARTICLE 8
ADDITIONAL AGREEMENTS
1. Registration Statement; Proxy Statement; Shareholder Approval.
(a) Each of Target and Buyer shall use reasonable best efforts to take or cause to be taken such actions as may be required to be taken under the Securities Act, the Exchange Act, any other federal securities Laws, any applicable state securities or “blue sky” Laws and any stock exchange requirements in connection with the Merger and the other transactions contemplated by this Agreement. Without limiting the foregoing, as promptly as practicable after the date of this Agreement, the parties hereto shall prepare and cause to be filed with the SEC the Proxy Statement and the Registration Statement in which the Proxy Statement will be included as a prospectus; provided , however , that prior to the filing of the Proxy Statement and the Registration Statement, Buyer shall consult with Target with respect to such filings and shall afford Target and its Representatives reasonable opportunity to comment thereon. Each of Target and Buyer shall use reasonable best efforts to cause the Registration Statement and the Proxy Statement to comply with the rules and regulations under the Securities Act and Exchange Act and to have the Registration Statement declared effective under the Securities Act as promptly as practicable after it is filed with the SEC. The parties hereto shall use reasonable best efforts to cause the Proxy Statement to be mailed to Buyer’s shareholders and Target’s shareholders, all as promptly as reasonably practicable after the date on which the Registration Statement is declared effective under the Securities Act (the “ S−4 Effective Date ”).

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Target shall provide Buyer with any information for inclusion in the Proxy Statement and the Registration Statement that may be required under applicable Law or that is reasonably requested by Buyer. Buyer shall notify Target promptly after the receipt of notice of the S-4 Effective Date from the SEC, or the receipt of comments from the SEC and of any request from the SEC for amendments or supplements to the Proxy Statement, the Registration Statement or for additional information, and Buyer will promptly supply to Target copies of all correspondence between Buyer or its Representatives, on the one hand, and the SEC or members of its staff, on the other hand, with respect to the Proxy Statement, the Registration Statement or the Merger. Each of Target and Buyer shall use reasonable best efforts to promptly resolve all SEC comments with respect to the Proxy Statement, the Registration Statement and any other required filings as promptly as practicable after receipt thereof. Each of Target and Buyer agree to correct any information provided by it for use in the Proxy Statement or the Registration Statement, which shall have become false or misleading in any material respect. Target will promptly notify the Buyer if at any time prior to the Buyer Shareholders’ Meeting Target becomes aware of any event which is required by applicable Law to be set forth in an amendment of, or a supplement to, the Proxy Statement or the Registration Statement. In such case, the parties will cooperate to promptly prepare and file such amendment or supplement with the SEC to the extent required by applicable Law and will mail such amendment or supplement to Buyer’s shareholders to the extent required by applicable Law; provided, however, that prior to such filing, each party shall consult with each other party with respect to such amendment or supplement and shall afford each such party and its Representatives reasonable opportunity to comment thereon. Notwithstanding the forgoing, no party shall have any obligation to notify the other parties of any matters to the extent that its board of directors or any committee thereof determines in good faith, after consultation with its outside legal counsel, that to do so would be inconsistent with the directors’ exercise of their fiduciary obligations to its shareholders under applicable Law.
Subject to the other provisions of this Agreement, not sooner than a reasonable period after the S−4 Effective Date, but prior to the Buyer Shareholders’ Meeting, Target shall take all action necessary in accordance with the CGCL and the Target’s Articles of Incorporation and Bylaws to solicit approval by written consent from Target’s shareholders for the purpose of obtaining the Target Shareholder Approval.
(b) Subject to the other provisions of this Agreement, Buyer shall (i) take all action necessary in accordance with the New York Business Corporation Law and Buyer’s Articles of Incorporation and Bylaws to duly call, give notice of, convene and hold a meeting of its shareholders as promptly as reasonably practicable following the mailing of the Proxy Statement for the purpose of obtaining the Buyer Shareholder Approval (the “ Buyer Shareholders’ Meeting ”) (including mailing the Proxy Statement as soon as reasonably practicable after the S−4 Effective Date and holding the Buyer Shareholders’ Meeting as soon as reasonably practicable after mailing the Proxy Statement, unless otherwise mutually agreed by Target and by Buyer), (ii) include in the Proxy Statement the recommendation of Buyer’s board of directors that its shareholders grant the Buyer Shareholder Approval and (iii) use all reasonable best efforts to solicit from its shareholders proxies to secure the Buyer Shareholder Approval. Buyer shall, in its capacity as the sole shareholder of Sub, approve this Agreement and the consummation of the transactions contemplated hereby. Buyer shall not submit any proposals to its shareholders at the Buyer Shareholders’ Meeting other than the Buyer Shareholder Approval Matters without the prior written consent of Target.

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(c) Neither the Board of Directors of Target, the Buyer nor any respective committee thereof shall (i) except as expressly permitted by this Article 8, withdraw, qualify or modify, or propose publicly to withdraw, qualify or modify, in a manner adverse to Buyer or Target, as the case may be, the approval or recommendation of such Board of Directors with respect to the Buyer Shareholder Approval Matters or Target Shareholder Approval Matters, as applicable, (ii) approve or recommend, or propose publicly to approve or recommend, any Acquisition Proposal, or (iii) cause Target or Buyer to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each, an “ Acquisition Agreement ”) related to any Acquisition Proposal. Notwithstanding the foregoing, in the event that, prior to obtaining the Buyer Shareholder Approval or Target Shareholder Approval, as applicable, the Board of Directors of Target or Buyer determines in good faith, after it has received a Superior Proposal and, after receipt of advice from outside counsel and outside financial advisor, that the failure to do so would be reasonably likely to result in a breach of the fiduciary duties of the Board of Directors of Target or Buyer to the Target shareholders or Buyer shareholders, respectively, under applicable Law, the Board of Directors of Target or Buyer, as applicable, may (subject to this and the following sentences) inform its shareholders that it no longer believes that the Merger is advisable and no longer recommends approval of the Buyer Shareholder Approval Matters or Target Shareholder Approval Matters, as applicable, and may (subject to this and the following sentences) approve or recommend a Superior Proposal and in connection therewith withdraw or modify its approval or recommendation with respect to the Buyer Shareholder Approval Matters or Target Shareholder Approval Matters (a “ Subsequent Determination ”), but only at a time that is after the third business day following Target or Buyer’s receipt of written notice advising Buyer or Target that the Board of Directors of Target or Buyer has received a Superior Proposal specifying the material terms and conditions of such Superior Proposal (and including a copy thereof with all accompanying documentation, if in writing), identifying the person making such Superior Proposal and stating that it intends to make a Subsequent Determination. After providing such notice, during such three business day period, Target or Buyer shall provide a reasonable opportunity to the other Party to make such adjustments in the terms and conditions of this Agreement as would enable Target or Buyer to proceed with its recommendation to its shareholders without a Subsequent Determination; provided, however, that any such adjustment shall be at the discretion of the Party making such adjustment. Any material amendment to an Acquisition Proposal shall require Buyer or Target, as applicable, to deliver a new notice to the other Party and, after such new notice, the other Party shall have an additional three business day period to make adjustments to the terms and conditions of this Agreement before the Buyer or Target, as applicable, may make a Subsequent Determination.
2. Other Offers, Etc.
(a) No Target Entity or Buyer Entity shall, nor shall it authorize or permit any of its Affiliates or Representatives to, directly or indirectly (i) solicit, initiate, encourage or induce the making, submission or announcement of any Acquisition Proposal, (ii) participate in any discussions or negotiations regarding, or furnish to any Person or “Group” (as such term is defined in Section 13(d) under the Exchange Act) any nonpublic information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to, any Acquisition Proposal, (iii) subject to this Article 8, approve, endorse or recommend any Acquisition Proposal, or (iv) enter into any Acquisition Agreement contemplating or otherwise relating to any Acquisition Transaction;

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provided however, that this Section 8.2(a) shall not prohibit a Target Entity or Buyer Entity from furnishing nonpublic information regarding such Party to, or entering into a confidentiality agreement or discussions or negotiations with, any Person or Group in response to a bona fide unsolicited written Acquisition Proposal submitted by such Person or Group (and not withdrawn) if (A) such Target Entity, Buyer Entity or their respective Representatives or Affiliates has not violated any of the restrictions set forth in this Section 8.2, (B) the Board of Directors of Target or Buyer, as applicable, determines in good faith (based on, among other things, the advice of its financial advisor) that such Acquisition Proposal constitutes, or is reasonably likely to result in, a Superior Proposal, (C) its Board of Directors concludes in good faith, after consultation with its outside legal counsel and outside financial advisor, that the failure to take such action would be reasonably likely to result in a breach of its fiduciary duties, as such duties would exist in the absence of this Section 8.2, to the shareholders of such Party under applicable Law, (D) (1) at least two business days prior to furnishing any such nonpublic information to, or entering into discussions or negotiations with, such Person or Group, such Party gives the other Party written notice of the identity of such Person or Group and of such Party’s intention to furnish nonpublic information to, or enter into discussions or negotiations with, such Person or Group, and (2) such Party receives from such Person or Group an executed confidentiality agreement containing terms no less favorable to the disclosing Party than the terms of the Confidentiality Agreement, and (E) contemporaneously with furnishing any such nonpublic information to such Person or Group, such Party furnishes such nonpublic information to the other Party (to the extent such nonpublic information has not been previously furnished by such Party to the other Party). In addition to the foregoing, each of Target and Buyer shall provide the other Party with at least two business days prior written notice of a meeting of the Board of Directors of such Party at which meeting such Board of Directors is reasonably expected to resolve to recommend a Superior Proposal to its shareholders and together with such notice a copy of the most recently proposed documentation relating to such Superior Proposal; provided further that both Parties hereby agree promptly to provide the other Party with any revised documentation and any Acquisition Agreement.
(b) In addition to the obligations of Target and Buyer set forth in Section 8.2(a), as promptly as practicable, and in any event within one business day after any of the executive officers of Target or Buyer become aware thereof, such Party shall advise the other Party of any request received by such Party for nonpublic information which such Party reasonably believes could lead to an Acquisition Proposal or of any Acquisition Proposal, the material terms and conditions of such request or Acquisition Proposal, and the identity of the Person or Group making any such request or Acquisition Proposal. Each Party shall keep the other Party informed promptly of material amendments or modifications to any such request or Acquisition Proposal.
3. Exchange Listing.
Buyer shall use its reasonable best efforts to maintain its existing listing on the NYSE and to list, prior to the Effective Time, on the NYSE, subject to official notice of issuance, the shares of Buyer Common Stock to be issued to the holders of Target Capital Stock pursuant to the Merger, and Buyer shall give all notices and make all filings with the NYSE required in connection with the transactions contemplated herein.
4. Consents of Regulatory Authorities.

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The Parties hereto shall cooperate with each other and use their reasonable efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings and to obtain as promptly as practicable all Consents of all Regulatory Authorities and other Persons which are necessary or advisable to consummate the transactions contemplated by this Agreement (including the Merger). The Parties agree that they will consult with each other with respect to the obtaining of all Consents of all Regulatory Authorities and other Persons necessary or advisable to consummate the transactions contemplated by this Agreement and each Party will keep the other apprised of the status of matters relating to contemplation of the transactions contemplated herein. Each Party also shall promptly advise the other upon receiving any communication from any Regulatory Authority whose Consent is required for consummation of the transactions contemplated by this Agreement which causes such Party to believe that there is a reasonable likelihood that any requisite Consent will not be obtained or that the receipt of any such Consent will be materially delayed.
5. Filings with State Offices.
Upon the terms and subject to the conditions of this Agreement, Target and Sub shall execute and file a copy of this Agreement with the Secretary of State of the State of California in connection with the Closing.
6. Agreement as to Efforts to Consummate.
Subject to the terms and conditions of this Agreement, each Party agrees to use, and to cause its Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper, or advisable under applicable Laws to consummate and make effective, as soon as reasonably practicable after the date of this Agreement, the transactions contemplated by this Agreement, including using its reasonable efforts to lift or rescind any Order adversely affecting its ability to consummate the transactions contemplated herein and to cause to be satisfied the conditions referred to in Article 9; provided, that nothing herein shall preclude either Party from exercising its rights under this Agreement.
7. Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party shall keep the other Party advised of all material developments relevant to its business and to the consummation of the Merger and shall permit the other Party to make or cause to be made such investigation of the business and properties of it and its Subsidiaries and of their respective financial and legal conditions as the other Party reasonably requests, provided that such investigation shall be reasonably related to the transactions contemplated hereby and shall not interfere unnecessarily with normal operations. Notwithstanding the foregoing, neither Party shall be required to provide such information or access to the extent it would cause a violation of any agreement to which such Party is a party (although each Party shall use commercially reasonable efforts to obtain any necessary consent so that such violation would not occur), would cause reasonable risk of a loss of a privilege to such Party, or would constitute a violation of any applicable Law. No investigation by a Party shall affect the ability of such Party to rely on the representations and warranties of the other Party.

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(b) In addition to the Parties’ respective obligations under the Confidentiality Agreement, which is hereby reaffirmed and adopted, and incorporated by reference herein, each Party shall, and shall cause its advisers and agents to, maintain the confidentiality of all confidential information furnished to it by the other Party concerning its and its Subsidiaries’ businesses, operations, and financial positions and shall not use such information for any purpose except in furtherance of the transactions contemplated by this Agreement. If this Agreement is terminated prior to the Effective Time, each Party shall promptly return or certify the destruction of all documents and copies thereof, and all work papers containing confidential information received from the other Party.
(c) Each Party shall use its reasonable efforts to exercise, and shall not waive any of, its rights under confidentiality agreements entered into with Persons which were considering an Acquisition Proposal with respect to such Party to preserve the confidentiality of the information relating to the Target Entities or Buyer Entities provided to such Persons and their Affiliates and Representatives.
(d) Each Party agrees to give the other Party notice as soon as practicable after any determination by it of any fact or occurrence relating to the other Party which it has discovered through the course of its investigation and which represents, or is reasonably likely to represent, either a material breach of any representation, warranty, covenant or agreement of the other Party or which has had or is reasonably likely to have a Target Material Adverse Effect or a Buyer Material Adverse Effect, as applicable.
8. Press Releases.
Prior to the Effective Time, Target and Buyer shall consult with each other as to the form and substance of any press release or other public disclosure materially related to this Agreement or any other transaction contemplated hereby; provided, that nothing in this Section 8.8 shall be deemed to prohibit any Party from making any disclosure which its counsel deems necessary or advisable in order to satisfy such Party’s disclosure obligations imposed by Law.
9. Tax Treatment.
Each of the Parties undertakes and agrees to use its reasonable efforts to cause the Merger, and to take no action which would cause the Merger not, to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code for federal income tax purposes, and to report the Merger for federal, state and local income tax purposes in a manner consistent therewith.
10. State Takeover Laws.
Each Target Entity shall take all necessary steps to exempt the transactions contemplated by this Agreement from, or if necessary to challenge the validity or applicability of, any applicable Takeover Law.
11. Employee Benefits and Contracts.

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Following the Effective Time, Buyer shall provide generally to officers and employees of the Target Entities employee benefits under employee benefit and welfare plans (other than stock option or other plans involving the potential issuance of Buyer Common Stock), on terms and conditions which when taken as a whole are substantially similar to those currently provided by the Target Entities to such officers and employees. For purposes of participation, vesting and (except in the case of Buyer retirement plans) benefit accrual under Buyer’s employee benefit plans, the service of the employees of the Target Entities prior to the Effective Time shall be treated as service with a Buyer Entity participating in such employee benefit plans. Buyer also shall cause the Surviving Corporation to honor in accordance with their terms all employment, severance, consulting and other compensation Contracts disclosed in Section 8.11 of the Target Disclosure Memorandum to Buyer between any Target Entity and any current or former director, officer, or employee thereof, and all provisions for vested benefits or other vested amounts earned or accrued through the Effective Time under the Target Benefit Plans. With respect to Buyer’s benefit plans, subject to any applicable plan provisions, contractual requirements or laws, Buyer shall, (a) cause to be waived any eligibility requirements or pre-existing condition limitations except to the extent such eligibility requirements, waiting periods, any evidence of insurability requirements or pre-existing conditions would apply under the analogous Target benefit plan in which any such participating Target employee was a participant or eligible to participate as of immediately prior to the Effective Time, and (b) give effect, in determining any deductibles, co-insurance or maximum out of pocket limitations, to amounts paid by such participating Target employee prior to the Effective Time under a Target benefit plan in which any such employee was a participant as of immediately prior to the Effective Time (to the same extent that such credit was given under such Target benefit plan prior to the Effective Time) in satisfying such requirements during the plan year in which the Effective Time occurs.
12. Indemnification of Target Directors and Officers.
(a) For a period of six years after the Effective Time, Buyer shall, and shall cause the Surviving Corporation to, indemnify, defend and hold harmless the present and former directors, officers, employees and agents of the Target Entities (each, an “ Indemnified Party ”) against all Liabilities arising out of actions or omissions arising out of the Indemnified Party’s service or services as directors, officers, employees or agents of Target or, at Target’s request, of another corporation, partnership, joint venture, trust or other enterprise occurring at or prior to the Effective Time (including the transactions contemplated by this Agreement) to the fullest extent permitted under applicable Law and Target’s Articles of Incorporation and Bylaws as in effect on the date hereof, including provisions relating to advances of expenses incurred in the defense of any Litigation and whether or not any Buyer Entity is insured against any such matter. Without limiting the foregoing, in any case in which approval by the Surviving Corporation is required to effectuate any indemnification, the Surviving Corporation shall direct, at the election of the Indemnified Party, that the determination of any such approval shall be made by independent counsel mutually agreed upon between Buyer and the Indemnified Party.
(b) Buyer shall, or shall cause the Surviving Corporation to, use its reasonable efforts (and Target shall cooperate prior to the Effective Time in these efforts) to maintain in effect for a period of six years after the Effective Time Target’s existing directors’ and officers’ liability insurance policy (provided that Buyer or the Surviving Corporation may substitute therefor (i) policies of at least the same coverage and amounts containing terms and conditions which are substantially no less advantageous or (ii) with the consent of Target given prior to the Effective Time, any other policy) with respect to claims arising from facts or events

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which occurred prior to the Effective Time and covering persons who are currently covered by such insurance; provided, that neither Buyer nor the Surviving Corporation shall be obligated to make aggregate annual premium payments for such six-year period in respect of such policy (or coverage replacing such policy) which exceed, for the portion related to Target’s directors and officers, 300% of the annual premium payments on Target’s current policy in effect as of the date of this Agreement (the “ Maximum Amount ”). If the amount of the premiums necessary to maintain or procure such insurance coverage exceeds the Maximum Amount, Buyer or the Surviving Corporation shall use its reasonable efforts to maintain the most advantageous policies of directors’ and officers’ liability insurance obtainable for a premium equal to the Maximum Amount.
(c) Any Indemnified Party wishing to claim indemnification under paragraph (a) of this Section 8.12, upon learning of any such Liability or Litigation, shall promptly notify Buyer thereof. In the event of any such Litigation (whether arising before or after the Effective Time), (i) Buyer or the Surviving Corporation shall have the right to assume the defense thereof and neither Buyer nor the Surviving Corporation shall be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if Buyer or the Surviving Corporation elects not to assume such defense or counsel for the Indemnified Parties advises that there are substantive issues which raise conflicts of interest between Buyer or the Surviving Corporation and the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and Buyer or the Surviving Corporation shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received; provided, that Buyer and the Surviving Corporation shall be obligated pursuant to this paragraph (c) to pay for only one firm of counsel for all Indemnified Parties in any jurisdiction; (ii) the Indemnified Parties will cooperate in the defense of any such Litigation; and (iii) neither Buyer nor the Surviving Corporation shall be liable for any settlement effected without its prior written consent, which shall not be unreasonably withheld; and provided further that neither Buyer nor the Surviving Corporation shall have any obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall determine, and such determination shall have become final, that the indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable Law.
(d) If Buyer or the Surviving Corporation or any successors or assigns shall consolidate with or merge into any other Person and shall not be the continuing or surviving Person of such consolidation or merger or shall transfer all or substantially all of its assets to any Person, then and in each case, proper provision shall be made so that the successors and assigns of Buyer or the Surviving Corporation shall assume the obligations set forth in this Section 8.12.
(e) The provisions of this Section 8.12 are intended to be for the benefit of and shall be enforceable by, each Indemnified Party and their respective heirs and representatives.
13. Buyer Board.

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Buyer shall take all requisite action to cause, effective immediately following the Effective Time, the board of directors of Buyer to consist of six (6) members, comprised of three directors of Buyer immediately prior to the Effective Time, subject to Section 9.3(e), and three directors of Target immediately prior to the Effective Time. The terms of the directors designated by Target and the terms of the directors designated by Buyer shall be equal as nearly as practicable within the classified board structure of Buyer under applicable Law. In lieu of one of the three directors to be appointed by Buyer or Target from the existing board members of Buyer or Target, as applicable, either Buyer or Target may appoint a person not currently serving on such Party’s board of directors if such person would qualify as an independent director under NYSE rules and such person is approved by the other Party not appointing such director. After the Effective Time, the composition of the Board shall be determined in accordance with applicable Law.
14. Section 16 Matters.
Prior to the Effective Time, the Board of Directors of Buyer, or an appropriate committee of non-employee directors, shall adopt a resolution in accordance with the procedures set forth in Rule 16b-3 promulgated under the Exchange Act and in accordance with the Interpretative Letter dated January 12, 1999 issued by the SEC relating to Rule 16b-3, so that the acquisition by any officer or director of Target who may become a covered person of Buyer for purposes of Section 16 of the Exchange Act and the rules and regulations thereunder (“ Section 16 ”) of shares of Buyer Common Stock pursuant to this Agreement and the Merger shall be an exempt transaction for purposes of Section 16.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
1. Conditions to Obligations of Each Party.
The respective obligations of each Party to perform this Agreement and consummate the Merger and the other transactions contemplated hereby are subject to the satisfaction of the following conditions, unless waived by both Parties pursuant to Section 12.6:
(a) Shareholder Approval . The shareholders of Target shall have approved this Agreement, and the consummation of the transactions contemplated hereby, including the Merger, as and to the extent required by Law, or by the provisions of any governing instruments. The shareholders of Buyer shall have approved the Merger and the issuance of shares of Buyer Common Stock pursuant to the Merger, as and to the extent required by Law, by the provisions of any governing instruments, or by the rules of the NYSE.
(b) Regulatory Approvals . All Consents of, filings and registrations with, and notifications to, all Regulatory Authorities required for consummation of the Merger shall have been obtained or made and shall be in full force and effect and all waiting periods required by Law shall have expired.
(c) Consents and Approvals . Each Party shall have obtained any and all Consents required for consummation of the Merger (other than those referred to in Section 9.1(b)) or for the preventing of any Default under any Contract or Permit of such Party which, if not obtained or made, is reasonably likely to have, individually or in the aggregate, a Target Material Adverse Effect or a Buyer Material Adverse Effect, as applicable.

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(d) Legal Proceedings . No court or governmental or Regulatory Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law or Order (whether temporary, preliminary or permanent) or taken any other action which prohibits, restricts or makes illegal consummation of the transactions contemplated by this Agreement.
(e) Registration Statement . The Registration Statement shall be effective under the Securities Act, no stop orders suspending the effectiveness of the Registration Statement shall have been issued, no action, suit, proceeding or investigation by the SEC to suspend the effectiveness thereof shall have been initiated and be continuing, and all necessary approvals under state securities Laws or the Securities Act or Exchange Act relating to the issuance or trading of the shares of Buyer Common Stock issuable pursuant to the Merger shall have been received.
(f) Exchange Listing . The Buyer Common Stock has been continually listed on the NYSE during the period commencing with the date of this Agreement to the Effective Time and remains listed on the NYSE as of the Effective Time and there is no order or notice outstanding that would result in or cause the Buyer Common Stock to be not listed on the NYSE or suspended from trading immediately following the Effective Time. The shares of Buyer Common Stock issuable pursuant to the Merger shall have been approved for listing on the NYSE, subject to official notice of issuance.
2. Conditions to Obligations of Buyer.
The obligations of Buyer to perform this Agreement and consummate the Merger and the other transactions contemplated hereby are subject to the satisfaction of the following conditions, unless waived by Buyer pursuant to Section 12.6(a):
(a) Representations and Warranties . The representations and warranties of Target set forth in this Agreement (other than those contained in Sections 5.2(a), 5.3(a), and 5.20, which are covered by the next succeeding sentence), disregarding all qualifications and exceptions contained therein related to “materiality” or “Target Material Adverse Effect,” shall be true and correct in all respects, in each case as of the date of this Agreement and as of the Effective Time, as though made on and as of the Effective Time (or, if given as of a specific date, at and as of such date), except where the failure of such representations or warranties to be true and correct has not had and would not reasonably be expected to have, individually or in the aggregate, a Target Material Adverse Effect. The representations and warranties of Target set forth in Sections 5.2(a), 5.3(a), and 5.20 shall be true and correct in all respects (except, in the case of Section 5.3(a), for such inaccuracies as are de minimis in the aggregate) as of the date hereof and as of the Effective Time, as though made on and as of the Effective Time (or, if given as of a specific date, as of such date).
(b) Performance of Agreements and Covenants . Each and all of the agreements and covenants of Target to be performed and complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Effective Time shall have been duly performed and complied with in all material respects.

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(c) Certificates . Target shall have delivered to Buyer (i) a certificate, dated as of the Effective Time and signed on its behalf by its chief executive officer and its chief financial officer, to the effect that the conditions set forth in Section 9.1 as relates to Target and in Sections 9.2(a), and 9.2(b) have been satisfied, and (ii) certified copies of resolutions duly adopted by Target’s Board of Directors and shareholders evidencing the taking of all corporate action necessary to authorize the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, all in such reasonable detail as Buyer and its counsel shall request.
(d) No Material Adverse Effect . Since the date hereof, no Target Material Adverse Effect shall have occurred.
(e) Dissenters’ Rights . No more than ten percent (10%) of the total issued and outstanding shares of Target Capital Stock have delivered written demand for the repurchase of their shares of Target Capital Stock in accordance with Section 1300 of the CGCL.
(f) FIRPTA Certificate . Target shall have delivered to Buyer (a) a certification from Target, dated no more than thirty (30) days prior to the Closing Date and signed by a responsible corporate officer of Target, that Target is not, and has not been at any time during the five years preceding the date of such certification, a United States real property holding company, as defined in Internal Revenue Code Section 897(c)(2), and (b) proof reasonably satisfactory to Buyer that Target has provided notice of such certification to the IRS in accordance with the provisions of Treasury regulations Section 1.897-2(h)(2).
3. Conditions to Obligations of Target.
The obligations of Target to perform this Agreement and consummate the Merger and the other transactions contemplated hereby are subject to the satisfaction of the following conditions, unless waived by Target pursuant to Section 12.6:
(a) Representations and Warranties . The representations and warranties of Buyer and Merger Sub set forth in this Agreement (other than those contained in Sections 6.2(a), 6.3(a), and 6.23 which are covered by the next succeeding sentence), disregarding all qualifications and exceptions contained therein related to “materiality” or “Buyer Material Adverse Effect,” shall be true and correct in all respects, in each case as of the date of this Agreement and as of the Effective Time, as though made on and as of the Effective Time (or, if given as of a specific date, at and as of such date), except where the failure of such representations or warranties to be true and correct has not had and would not reasonably be expected to have, individually or in the aggregate, a Buyer Material Adverse Effect. The representations and warranties set forth in Sections 6.2(a), 6.3(a), and 6.23 shall be true and correct in all respects (except, in the case of Section 6.3(a), for such inaccuracies as are de minimis in the aggregate) as of the date hereof and as of the Effective Time, as though made on and as of the Effective Time (or, if given as of a specific date, as of such date).

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(b) Performance of Agreements and Covenants . Each and all of the agreements and covenants of Buyer to be performed and complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Effective Time shall have been duly performed and complied with in all material respects.
(c) Certificates . Buyer shall have delivered to the Target (i) a certificate, dated as of the Effective Time and signed on its behalf by its chief executive officer and its chief financial officer, to the effect that the conditions set forth in Section 9.1 as relates to Buyer and in Sections 9.3(a) and 9.3(b) have been satisfied, and (ii) certified copies of resolutions duly adopted by Buyer’s Board of Directors and shareholders evidencing the taking of all corporate action necessary to authorize the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, all in such reasonable detail as Target and its counsel shall request.
(d) No Material Adverse Effect . Since the date hereof, no Buyer Material Adverse Effect shall have occurred.
(e) Board Resignations . Each of the members of the Board of Directors of Buyer identified on Annex D (the “ Non-Continuing Directors ”) shall have submitted an irrevocable letter of resignation, effective at the Effective Time.

ARTICLE 10
TERMINATION
1. Termination.
Notwithstanding any other provision of this Agreement, and notwithstanding the approval of this Agreement by the shareholders of Target and shareholders of Buyer or both, this Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time:
(a) By mutual written agreement of Buyer and Target; or
(b) By either Party (provided that the terminating Party is not then in material breach of any representation, warranty, covenant, or other agreement contained in this Agreement) in the event of a material breach by the other Party of any representation or warranty contained in this Agreement which cannot be or has not been cured within 30 days after the giving of written notice to the breaching Party of such breach and which breach is reasonably likely to permit such Party to refuse to consummate the transactions contemplated by this Agreement pursuant to the standard set forth in Section 9.2(a) or 9.3(a) as applicable; or
(c) By either Party (provided that the terminating Party is not then in material breach of any representation, warranty, covenant, or other agreement contained in this Agreement) in the event of a material breach by the other Party of any covenant or agreement contained in this Agreement which cannot be or has not been cured within 30 days after the giving of written notice to the breaching Party of such breach and which breach is reasonably likely to permit such Party to refuse to consummate the transactions contemplated by this Agreement pursuant to the standard set forth in Section 9.2(b) or 9.3(b) as applicable; or

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(d) By either Party (provided that the terminating Party is not then in material breach of any representation, warranty, covenant, or other agreement contained in this Agreement) in the event (i) any Consent of any Regulatory Authority required for consummation of the Merger and the other transactions contemplated hereby shall have been denied by final nonappealable action of such authority or if any action taken by such authority is not appealed within the time limit for appeal, (ii) any Law or Order permanently restraining, enjoining or otherwise prohibiting the consummation of the Merger shall have become final and nonappealable, or (iii) the shareholders of Buyer fail to vote their approval of the Buyer Shareholder Approval Matters at the Buyer Shareholders’ Meeting, or the shareholders of Target fail to approve the Target Shareholder Matters, where such matters were presented to such shareholders for approval and voted upon; or
(e) By either Party in the event that the Merger shall not have been consummated by September 28, 2014, if the failure to consummate the transactions contemplated hereby on or before such date is not caused by any breach of this Agreement by the Party electing to terminate pursuant to this Section 10.1(e); provided, that in the event that the Registration Statement has not been declared effective under the Securities Act by September 28, 2014, then either Party shall be entitled to extend the date for termination pursuant to this Section 10.1(e) for an additional sixty (60) days, unless the Party electing such extension has breached Section 8.1(a); or
(f) By Buyer in the event that (i) the Board of Directors of Target shall have failed to recommend, without modification or qualification, that shareholders of Target approve the Target Shareholder Approval Matters or shall have withdrawn, qualified or modified, or proposed publicly to withdraw, qualify or modify, in a manner adverse to Buyer, the recommendation of such Board of Directors, or (ii) the Board of Directors of Target shall have affirmed, recommended or authorized entering into any Acquisition Transaction other than the Merger, or (iii) Target breaches any of its obligations under Sections 8.1 or 8.2; or
(g) By Target in the event that (i) the Board of Directors of Buyer shall have failed to include in the Proxy Statement its recommendation, without modification or qualification, that shareholders of Buyer approve the Buyer Shareholder Approval Matters or shall have withdrawn, qualified or modified, or proposed publicly to withdraw, qualify or modify, in a manner adverse to Target, the recommendation of such Board of Directors in favor of the Buyer Shareholder Approval, or (ii) the Board of Directors of Buyer shall have affirmed, recommended or authorized entering into any Acquisition Transaction other than the Merger, or (iii) Buyer breaches any of its obligations under Sections 8.1 or 8.2; or
(h) By Target, (provided that Target has complied with its obligations under Sections 8.1 and 8.2), if prior to obtaining the Target Shareholder Approval, the Board of Directors of Target has authorized Target to accept or enter into a written agreement for a transaction constituting a Superior Proposal; provided, however, that (i) at least two business days prior to any such termination, Target shall, and shall cause its advisors to, negotiate with Buyer to make such adjustments in the terms and conditions of this Agreement as would enable Target to proceed with the transactions contemplated herein on such adjusted terms, and (ii) Target shall have tendered to Buyer payment in full of the amount specified in Section 12.2(b) concurrently with delivery of notice of termination pursuant to this Section 10.1(h); or

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(i) By Buyer, (provided that Buyer has complied with its obligations under Sections 8.1 and 8.2), if prior to obtaining the Buyer Shareholder Approval, the Board of Directors of Buyer has authorized Buyer to accept or enter into a written agreement for a transaction constituting a Superior Proposal; provided, however, that (i) at least two business days prior to any such termination, Buyer shall, and shall cause its advisors to, negotiate with Target to make such adjustments in the terms and conditions of this Agreement as would enable Buyer to proceed with the transactions contemplated herein on such adjusted terms, and (ii) Buyer shall have tendered to Target payment in full of the amount specified in Section 12.2(b) concurrently with delivery of notice of termination pursuant to this Section 10.1(i).
(j) By either Party (provided that the terminating Party is not then in material breach of any representation, warranty, covenant, or other agreement contained in this Agreement) in the event that any of the conditions precedent to the obligations of such Party to consummate the Merger cannot be satisfied or fulfilled by the date specified in Section 10.1(e).
2. Effect of Termination.
In the event of the termination and abandonment of this Agreement pursuant to Section 10.1, this Agreement shall become void and have no effect, except that the provisions of this Section 10.2, Section 8.7(b), and Article 12, shall survive any such termination and abandonment. Notwithstanding the foregoing, to the extent that any termination of this Agreement results from the willful and material breach by a Party of any representation or warranty or covenant set forth in this Agreement, then such Party shall be liable for any damages incurred or suffered by the other Party as a result of such breach.
ARTICLE 11
RESERVED

ARTICLE 12
MISCELLANEOUS
1. Definitions.
(a) Except as otherwise provided herein, the capitalized terms set forth below shall have the following meanings:
“Acquisition Proposal” means any proposal (whether communicated to either Party or publicly announced to either Parties’ shareholders) by any Person (other than Buyer, Target or any Party or their Affiliates) for an Acquisition Transaction involving Target, Buyer or any of its present or future consolidated Subsidiaries, or any combination of such Subsidiaries, the assets of which constitute fifteen percent (15%) or more of the consolidated assets of Target or Buyer as reflected on such Parties’ consolidated statement of condition prepared in accordance with GAAP.
“Acquisition Transaction” means any transaction or series of related transactions (other than the transactions contemplated by this Agreement) involving: (i) any acquisition or purchase from Target or Buyer by any Person or “Group” (other than Buyer, Target or any of their Affiliates) of 15% or more in interest of the total outstanding voting securities of Target, Buyer or any of their Subsidiaries, or any tender offer or exchange offer that if consummated would result in any Person
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or “Group” (other than Buyer, Target or any of their Affiliates) beneficially owning 15% or more in interest of the total outstanding voting securities of Target, Buyer or any of their Subsidiaries, or any merger, consolidation, business combination or similar transaction involving Target or Buyer pursuant to which the shareholders of Target or Buyer immediately preceding such transaction hold less than 85% of the equity interests in the surviving or resulting entity (which includes the parent corporation of any constituent corporation to any such transaction) of such transaction; (ii) any sale or lease (other than in the ordinary course of business), or exchange, transfer, license (other than in the ordinary course of business), acquisition or disposition of 15% or more of the assets of Target or Buyer; or (iii) any liquidation or dissolution of Target or Buyer.
“Adjusted Series A Conversion Shares” means the sum of (i) the Series A Conversion Shares plus (ii) the Series A Adjustment Shares.
“Adjusted Series B Conversion Shares” means the sum of (i) the Series B Conversion Shares plus (ii) the Series B Adjustment Shares.
“Adjusted Series C Conversion Shares” means the sum of (i) the Series C Conversion Shares plus (ii) the Series C Adjustment Shares.
“Adjusted Series D Conversion Shares” means the sum of (i) the Series D Conversion Shares plus (ii) the Series D Adjustment Shares.
“Affiliate” of a Person means: (i) any other Person directly, or indirectly through one or more intermediaries, controlling, controlled by or under common control with such Person; (ii) any officer, director, partner, employer, or direct or indirect beneficial owner of any 10% or greater equity or voting interest of such Person; or (iii) any other Person for which a Person described in clause (ii) acts in any such capacity.
“Assets” of a Person means all of the assets, properties, businesses and rights of such Person of every kind, nature, character and description, whether real, personal or mixed, tangible or intangible, accrued or contingent, or otherwise relating to or utilized in such Person’s business, directly or indirectly, in whole or in part, whether or not carried on the books and records of such Person, and whether or not owned in the name of such Person or any Affiliate of such Person and wherever located.
“Buyer Common Stock” means the $0.01 par value common stock of Buyer.
“Buyer Disclosure Memorandum” means the written information entitled “Vicon Disclosure Memorandum” delivered on or prior to the date of this Agreement to Target describing in reasonable detail the matters contained therein and, with respect to each disclosure made therein, specifically referencing each Section of this Agreement under which such disclosure is being made. Notwithstanding the foregoing, information disclosed with respect to one Section shall also be deemed to be disclosed with respect to any other Section to which the relevance of such item is reasonably apparent on the face of such disclosure.
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“Buyer Entities” means, collectively, Buyer and all Buyer Subsidiaries.
“Buyer Financial Statements” means the consolidated balance sheets (including related notes and schedules, if any) of Buyer as of December 31, 2013, and as of September 30, 2013, and the related statements of operations, shareholders’ equity, and cash flows (including related notes and schedules, if any) for the three months ended December 31, 2013 and each of the three fiscal years ended September 30, 2013, 2012 and 2011, as filed by Buyer in SEC Documents.
“Buyer Material Adverse Effect” means an event, change or occurrence which, individually or together with any other event, change or occurrence, has a material adverse impact on (i) the financial position, business, or results of operations of Buyer and its Subsidiaries, taken as a whole, or (ii) the ability of Buyer to perform its obligations under this Agreement or to consummate the Merger or the other transactions contemplated by this Agreement, provided that “Buyer Material Adverse Effect” shall not be deemed to include the impact of (A) changes in Laws of general applicability or interpretations thereof by courts or governmental authorities, (B) changes in generally accepted accounting principles, (C) actions and omissions of Buyer (or any of its Subsidiaries) taken with the prior informed written Consent of Target in contemplation of the transactions contemplated hereby, (D) the direct effects of compliance with this Agreement on the operating performance of Buyer, including expenses incurred by Buyer in consummating the transactions contemplated by this Agreement, (E) effects demonstrably shown to have been proximately caused by the public announcement of, and the response or reaction of customers, vendors, licensors, investors or employees of Buyer to, this Agreement or any of the transactions contemplated by this Agreement, (F) failure of Buyer to meet the revenue or earnings projections provided to Target, the revenue or earnings predictions of equity analysts or any other published revenue or earnings predictions or expectations, for any period ending on or after the date of this Agreement, or (G) changes, solely in and of themselves, in the market price or trading volume of Buyer Common Stock (it being understood that the cause of any such changes may be deemed to constitute, in and of itself, a Buyer Material Adverse Effect and may be taken into consideration in determining whether a Buyer Material Adverse Effect has occurred).
“Buyer Subsidiaries” means the Subsidiaries of Buyer, which shall include the Buyer Subsidiaries described in the Buyer Financial Statements.
“Closing Date” means the date on which the Closing occurs.
“Common Stock Aggregate Merger Consideration” means the product of (i) the Common Stock Pro Rata Portion multiplied by (ii) the Merger Consideration.
“Common Stock Conversion Shares” means the difference of (i) the total number of shares of Target Common Stock outstanding immediately prior to the Effective Time, less (ii) the number of Preferred Adjustment Shares.
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“Common Stock Per Share Merger Consideration” means the quotient of (i) the Common Stock Aggregate Merger Consideration divided by (ii) the total number of shares of Target Common Stock outstanding immediately prior to the Effective Time.
“Common Stock Pro Rata Portion” means (i) the Common Stock Conversion Shares divided by (ii) the Outstanding Equity of Target.
“Confidentiality Agreement” means that certain Confidentiality Agreement, dated December 9, 2013, between Target and Buyer.
“Consent” means any consent, approval, authorization, clearance, exemption, waiver, or similar affirmation by any Person pursuant to any Contract, Law, Order, or Permit.
“Contract” means any written or oral agreement, arrangement, authorization, commitment, contract, indenture, instrument, lease, license, obligation, plan, practice, restriction, understanding, or undertaking of any kind or character, or other document to which any Person is a party or that is binding on any Person or its capital stock, Assets or business.
“Default” means (i) any breach or violation of, default under, contravention of, or conflict with, any Contract, Law, Order, or Permit, (ii) any occurrence of any event that with the passage of time or the giving of notice or both would constitute a breach or violation of, default under, contravention of, or conflict with, any Contract, Law, Order, or Permit, or (iii) any occurrence of any event that with or without the passage of time or the giving of notice would give rise to a right of any Person to exercise any remedy or obtain any relief under, terminate or revoke, suspend, cancel, or modify or change the current terms of, or renegotiate, or to accelerate the maturity or performance of, or to increase or impose any Liability under, any Contract, Law, Order, or Permit.
“Employee Benefit Plan” means each pension, retirement, profit-sharing, deferred compensation, stock option, employee stock ownership, share purchase, severance pay, vacation, bonus, retention, change in control or other incentive plan, medical, vision, dental or other health plan, any life insurance plan, flexible spending account, cafeteria plan, vacation, holiday, disability or any other employee benefit plan or fringe benefit plan, including any “employee benefit plan,” as that term is defined in Section 3(3) of ERISA and any other plan, fund, policy, program, practice, custom understanding or arrangement providing compensation or other benefits, whether or not such Employee Benefit Plan is or is intended to be (i) covered or qualified under the Code, ERISA or any other applicable Law, (ii) written or oral, (iii) funded or unfunded, (iv) actual or contingent or (v) arrived at through collective bargaining or otherwise.
“Environmental Laws” means all Laws relating to pollution or protection of human health or the environment (including ambient air, surface water, ground water, land surface, or subsurface strata) including the Comprehensive Environmental Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq. (“CERCLA”), the Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq. (“RCRA”), and other Laws relating to emissions, discharges, releases, or threatened releases of any Hazardous Material, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of any Hazardous Material.
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“Equity Rights” means all arrangements, calls, commitments, Contracts, options, rights to subscribe to, scrip, understandings, warrants, or other binding obligations of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of the capital stock of a Person or by which a Person is or may be bound to issue additional shares of its capital stock or other Equity Rights.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means any entity which together with a Target Entity would be treated as a single employer under Code Section 414.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exhibits” 1 through 3, inclusive, means the Exhibits so marked, copies of which are attached to this Agreement. Such Exhibits are hereby incorporated by reference herein and made a part hereof, and may be referred to in this Agreement and any other related instrument or document without being attached hereto.
“GAAP” means United States generally accepted accounting principles, consistently applied during the periods involved.
“Hazardous M a terial” means (i) any hazardous substance, hazardous material, hazardous waste, regulated substance, or toxic substance (as those terms are defined by any applicable Environmental Laws) and (ii) any chemicals, pollutants, contaminants, petroleum, petroleum products, or oil, asbestos-containing materials and any polychlorinated biphenyls.
“Intellectual Property” means any and all intellectual property rights arising from or associated with any of the following, whether protected, created or arising under the laws of the United States or any other jurisdiction: (i) trade names, trademarks and service marks (registered and unregistered), trade dress and similar rights, and applications (including intent to use applications) to register any of the foregoing; (ii) domain names and other Internet addresses or identifiers; (iii) patents and patent applications; (iv) copyrights (registered and unregistered) and applications for registration; (v) know-how, inventions, methods, processes, customer lists and any other information or any kind or nature, in each case to the extent any of the foregoing derives economic value (actual or potential) from not being generally known to other Persons who can obtain economic value from its disclosure; and (vi) any other proprietary, intellectual or industrial property rights of any kind or nature.
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“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
“Knowledge” as used with respect to a Person (including references to such Person being aware of a particular matter) means the personal knowledge of the chairman, president, chief financial officer, chief accounting officer or chief operating officer of such Person.
“Law” means any code, law (including common law), ordinance, regulation, reporting or licensing requirement, rule, or statute applicable to a Person or its Assets, Liabilities, or business, including those promulgated, interpreted or enforced by any Regulatory Authority.
“Liability” means any direct or indirect, primary or secondary, liability, indebtedness, obligation, penalty, cost or expense (including costs of investigation, collection and defense), claim, deficiency, guaranty or endorsement of or by any Person (other than endorsements of notes, bills, checks, and drafts presented for collection or deposit in the ordinary course of business) of any type, whether accrued, absolute or contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
“Lien” means any conditional sale agreement, default of title, easement, encroachment, encumbrance, hypothecation, infringement, lien, mortgage, pledge, reservation, restriction, security interest, title retention or other security arrangement, or any adverse right or interest, charge, or claim of any nature whatsoever of, on, or with respect to any property or property interest, other than (i) Liens for current property Taxes not yet due and payable, (ii) easements, rights of way, zoning ordinances and other similar encumbrances affecting the Owned Real Property, and (iii) Liens which do not materially impair the use of or title to the Assets subject to such Lien.
“Litigation” means any action, arbitration, cause of action, lawsuit, claim, complaint, criminal prosecution, governmental or other examination or investigation, audit (other than regular audits of financial statements by outside auditors), compliance review, inspection, hearing, administrative or other proceeding relating to or affecting a Party, its business, its records, its policies, its practices, its compliance with Law, its actions, its Assets (including Contracts related to it), or the transactions contemplated by this Agreement.
“Material” or “material” for purposes of this Agreement shall be determined in light of the facts and circumstances of the matter in question; provided that any specific monetary amount stated in this Agreement shall determine materiality in that instance.
“Merger Consideration” means a number of shares of Buyer Common Stock equal to the Outstanding Equity of Buyer immediately prior to the Effective Time, which shall be issued to the holders of shares of Target Capital Stock in accordance with Section 3.1 of this Agreement.
“NYSE” means the NYSE MKT LLC.
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“Order” means any administrative decision or award, decree, injunction, judgment, order, quasi-judicial decision or award, ruling, or writ of any federal, state, local or foreign or other court, arbitrator, mediator, tribunal, administrative agency, or Regulatory Authority.
Outstanding Equity ” means (i) with respect to Buyer, the total number of shares of Buyer Common Stock then issued and outstanding, excluding outstanding options to purchase Buyer Common Stock, and any other securities convertible into Buyer Common Stock, and (ii) with respect to Target, the total number of shares of Target Common Stock then issued and outstanding plus the total number of shares of Target Common Stock into which the Target Preferred Stock is convertible, excluding outstanding options to purchase Target Common Stock, and any other securities convertible into Target Common Stock.
“Party” means any of Target, Sub or Buyer, and “Parties” means Target, Sub and Buyer.
“Permit” means any federal, state, local, and foreign governmental approval, authorization, certificate, easement, filing, franchise, license, notice, permit, or right to which any Person is a party or that is or may be binding upon or inure to the benefit of any Person or its securities, Assets, or business.
“Person” means a natural person or any legal, commercial or governmental entity, such as, but not limited to, a corporation, general partnership, joint venture, limited partnership, limited liability company, limited liability partnership, trust, business association, group acting in concert, or any person acting in a representative capacity.
“Preferred Adjustment Shares” means 1,450,000 shares of Target Common Stock.
“Pro Rata Share” means a percentage equal to (i) the Merger Consideration payable to such Target Shareholder divided by (ii) the aggregate Merger Consideration.
“Proxy Statement” means the letter to shareholders of Buyer, notice of meeting with respect to the Buyer Shareholders’ Meeting, proxy statement/prospectus, forms of proxy and any other proxy solicitation materials to be filed with the SEC and distributed to shareholders of Buyer in connection with the Merger.
“Registration Statement” means the Registration Statement on Form S‑4, or other appropriate form, including any pre-effective or post-effective amendments or supplements thereto, filed with the SEC by Buyer under the Securities Act with respect to the shares of Buyer Common Stock to be issued to the shareholders of Target in connection with the transactions contemplated by this Agreement.
“Regulatory Authorities” means, collectively, the SEC, the NYSE and all other federal, state, county, local or other governmental or regulatory agencies, authorities (including taxing and self-regulatory authorities), instrumentalities, commissions, boards or bodies having jurisdiction over the Parties and their respective Subsidiaries.
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“Representative” means any investment banker, financial advisor, attorney, accountant, employee, consultant, or other representative or agent engaged by a Person.
“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002.
“SEC” means the United States Securities and Exchange Commission.
“SEC Documents” means all forms, proxy statements, registration statements, reports, schedules, and other documents filed, or required to be filed, by a Party or any of its Subsidiaries with any Regulatory Authority pursuant to the Securities Laws.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Securities Laws” means the Securities Act, the Exchange Act, the Sarbanes-Oxley Act of 2002, as amended, the Investment Company Act of 1940, as amended, the Investment Advisors Act of 1940, as amended, the Trust Indenture Act of 1939, as amended, and the rules and regulations of any Regulatory Authority promulgated thereunder.
“Series A Adjustment Shares” means the product of (i) the Preferred Adjustment Shares multiplied by (ii) the Series A Pro Rata Adjustment Amount.
“Series A Aggregate Merger Consideration” means the product of (i) the Series A Pro Rata Portion multiplied by (ii) the Merger Consideration.
“Series A Conversion Shares” means the total number of shares of Target Common Stock into which all shares of Target Series A Preferred Stock outstanding immediately prior to the Effective Time are convertible.
“Series A Per Share Merger Consideration” means the quotient of (i) the Series A Aggregate Merger Consideration divided by (ii) the Series A Conversion Shares.
“Series A Pro Rata Adjustment Amount” means the quotient of (i) the Series A Conversion Shares divided by (i) the total number of shares of Target Common Stock into which all shares of Target Preferred Stock outstanding immediately prior to the Effective Time are convertible.
“Series A Pro Rata Portion” means the quotient of (i) the Adjusted Series A Conversion Shares divided by (ii) the Outstanding Equity of Target.
“Series B Adjustment Shares” means the product of (i) the Preferred Adjustment Shares multiplied by (ii) the Series B Pro Rata Adjustment Amount.
“Series B Aggregate Merger Consideration” means the product of (i) the Series B Pro Rata Portion multiplied by (ii) the Merger Consideration.
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“Series B Conversion Shares” means the total number of shares of Target Common Stock into which all shares of Target Series B Preferred Stock outstanding immediately prior to the Effective Time are convertible.
“Series B Per Share Merger Consideration” means the quotient of (i) the Series B Aggregate Merger Consideration divided by (ii) the Series B Conversion Shares.
“Series B Pro Rata Adjustment Amount” means the quotient of (i) the Series B Conversion Shares divided by (i) the total number of shares of Target Common Stock into which all shares of Target Preferred Stock outstanding immediately prior to the Effective Time are convertible.
“Series B Pro Rata Portion” means (i) the Adjusted Series B Conversion Shares divided by (ii) the Outstanding Equity of Target.
“Series C Adjustment Shares” means the product of (i) the Preferred Adjustment Shares multiplied by (ii) the Series C Pro Rata Adjustment Amount.
“Series C Aggregate Merger Consideration” means the product of (i) the Series C Pro Rata Portion multiplied by (ii) the Merger Consideration.
“Series C Conversion Shares” means the total number of shares of Target Common Stock into which all shares of Target Series C Preferred Stock outstanding immediately prior to the Effective Time are convertible.
“Series C Per Share Merger Consideration” means the quotient of (i) the Series C Aggregate Merger Consideration divided by (ii) the Series C Conversion Shares.
“Series C Pro Rata Adjustment Amount” means the quotient of (i) the Series C Conversion Shares divided by (i) the total number of shares of Target Common Stock into which all shares of Target Preferred Stock outstanding immediately prior to the Effective Time are convertible.
“Series C Pro Rata Portion” means (i) the Adjusted Series C Conversion Shares divided by (ii) the Outstanding Equity of Target.
“Series D Adjustment Shares” means the product of (i) the Preferred Adjustment Shares multiplied by (ii) the Series D Pro Rata Adjustment Amount.
“Series D Aggregate Merger Consideration” means the product of (i) the Series D Pro Rata Portion multiplied by (ii) the Merger Consideration.
“Series D Conversion Shares” means the total number of shares of Target Common Stock into which all shares of Target Series D Preferred Stock outstanding immediately prior to the Effective Time are convertible.
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“Series D Per Share Merger Consideration” means the quotient of (i) the Series D Aggregate Merger Consideration divided by (ii) the Series D Conversion Shares.
“Series D Pro Rata Adjustment Amount” means the quotient of (i) the Series D Conversion Shares divided by (i) the total number of shares of Target Common Stock into which all shares of Target Preferred Stock outstanding immediately prior to the Effective Time are convertible.
“Series D Pro Rata Portion” means (i) the Adjusted Series D Conversion Shares divided by (ii) the Outstanding Equity of Target.
“Sub Common Stock” means the $1.00 par value common stock of Sub.
“Subsidiaries” means all those corporations, associations, or other business entities of which the entity in question either (i) owns or controls 50% or more of the outstanding equity securities either directly or through an unbroken chain of entities as to each of which 50% or more of the outstanding equity securities is owned directly or indirectly by its parent (provided, there shall not be included any such entity the equity securities of which are owned or controlled in a fiduciary capacity), (ii) in the case of partnerships, serves as a general partner, (iii) in the case of a limited liability company, serves as a managing member, or (iv) otherwise has the ability to elect a majority of the directors, trustees or managing members thereof.
“Superior Proposal” means any Acquisition Proposal (on its most recently amended or modified terms, if amended or modified) (i) involving the acquisition of the entire equity interest in, or all or substantially all of the assets and liabilities of, the Target Entities or the Buyer Entities and (ii) with respect to which the Board of Directors of Target or Buyer, as applicable (A) determines in good faith that such Acquisition Proposal, if accepted, is reasonably likely to be consummated on a timely basis, taking into account all legal, financial, regulatory and other aspects of the Acquisition Proposal and the Person or Group making the Acquisition Proposal, and (B) determines in its good faith judgment (based on, among other things, the advice of its financial advisor) to be more favorable from a financial point of view to such Party’s shareholders than the Merger taking into account all relevant factors (including whether, in the good faith judgment of the Board of Directors of such Party, after obtaining the advice of its financial advisor, any proposed changes to this Agreement that may be proposed by the other Party in response to such Acquisition Proposal).
“Surviving Corporation” means Target as the surviving corporation resulting from the Merger.
“Target Capital Stock” means, collectively, the Target Common Stock, the Target Series A Preferred Stock, the Target Series B Preferred Stock, the Target Series C Preferred Stock and the Target Series D Preferred Stock.
“Target Common Stock” means the common stock, no par value, of Target.
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“Target Disclosure Memorandum” means the written information entitled “IQinVision Disclosure Memorandum” delivered on or prior to the date of this Agreement to Buyer describing in reasonable detail the matters contained therein and, with respect to each disclosure made therein, specifically referencing each Section of this Agreement under which such disclosure is being made. Notwithstanding the foregoing, information disclosed with respect to one Section shall also be deemed to be disclosed with respect to any other Section to which the relevance of such item is reasonably apparent on the face of such disclosure.
“Target Entities” means, collectively, Target and all Target Subsidiaries.
“Target Financial Statements” means the balance sheets (including related notes and schedules, if any) of Target as of December 31, 2013, and the related statements of income, changes in shareholders’ equity, and cash flows (including related notes and schedules, if any) for the three fiscal years ended December 31, 2013.
“Target Material Adverse Effect” means an event, change or occurrence which, individually or together with any other event, change or occurrence, has a material adverse impact on (i) the financial position, business, or results of operations of Target and its Subsidiaries, taken as a whole, or (ii) the ability of Target to perform its obligations under this Agreement or to consummate the Merger or the other transactions contemplated by this Agreement, provided that “Target Material Adverse Effect” shall not be deemed to include the impact of (A) changes in Laws of general applicability or interpretations thereof by courts or governmental authorities, (B) changes in generally accepted accounting principles, (C) actions and omissions of Target (or any of its Subsidiaries) taken with the prior informed written Consent of Buyer in contemplation of the transactions contemplated hereby, (D) the direct effects of compliance with this Agreement on the operating performance of Target, including expenses incurred by Target in consummating the transactions contemplated by this Agreement, (E) effects demonstrably shown to have been proximately caused by the public announcement of, and the response or reaction of customers, vendors, licensors, investors or employees of Target to, this Agreement or any of the transactions contemplated by this Agreement, or (F) failure of Target to meet the revenue or earnings projections provided to Buyer for any period ending on or after the date of this Agreement,.
“Target Preferred Stock” means, collectively, the Target Series A Preferred Stock, the Target Series B Preferred Stock, the Target Series C Preferred Stock and the Target Series D Preferred Stock.
“Target Series A Preferred Stock” means the Series A preferred stock, no par value, of Target.
“Target Series B Preferred Stock” means the Series B preferred stock, no par value, of Target.
“Target Series C Preferred Stock” means the Series C preferred stock, no par value, of Target.
“Target Series D Preferred Stock” means the Series D preferred stock, no par value, of Target.
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“Target Shareholders” means the shareholders of Target as of the Closing Date.
“Target Stock Incentive Plan” means the IQinVision 2011 Stock Incentive Plan and 2001 Stock Incentive Plan.
“Target Subsidiaries” means the Subsidiaries of Target, which shall include the Target Subsidiaries described in Section 5.4 and any corporation, limited liability company, limited partnership, limited liability partnership or other organization acquired as a Subsidiary of Target in the future and held as a Subsidiary by Target at the Effective Time.
“Tax” or “Taxes” means any federal, state, county, local, or foreign taxes, charges, fees, levies, imposts, duties, or other assessments, including income, gross receipts, excise, employment, sales, use, transfer, recording license, payroll, franchise, severance, documentary, stamp, occupation, windfall profits, environmental, federal highway use, commercial rent, customs duties, capital stock, paid-up capital, profits, withholding, Social Security, single business and unemployment, disability, real property, personal property, registration, ad valorem, value added, alternative or add-on minimum, estimated, or other tax or governmental fee of any kind whatsoever, imposed or required to be withheld by the United States or any state, county, local or foreign government or subdivision or agency thereof, including any interest, penalties, and additions imposed thereon or with respect thereto.
“Tax Return” means any report, return, information return, or other information required to be supplied to a Regulatory Authority in connection with Taxes, including any return of an affiliated or combined or unitary group that includes a Party or its Subsidiaries.
(b) The terms set forth below shall have the meanings ascribed thereto in the referenced sections:

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Term
Page

 
Term
Page

Acquisition Agreement
45

 
Individually Identifiable
 
Agreement
1

 
  Personal Information
20, 36

Approving Buyer Shareholders
1

 
IRS
17

Approving Target Shareholders
1

 
Maximum Amount
50

Buyer
1

 
Merger
2

Buyer Benefit Plans
33

 
Owned Real Property
28

Buyer Contracts
36

 
Real Property Leases
12

Buyer ERISA Plan
33

 
S-4 Effective Date
43

Buyer Pension Plan
33

 
Sub
1

Buyer SEC Reports
25

 
Subsequent Determination
45

Buyer Shareholder Approval
38

 
Target
1

Buyer Shareholder Approval Matters
38

 
Target Benefit Plans
16

Buyer Shareholders' Meeting
44

 
Target Contracts
20

Certificates
6

 
Target ERISA Plan
17

CGCL
2

 
Target Pension Plan
17

Closing
2

 
Target Shareholder Approval
22

DOL
17

 
Target Shareholder Approval Matters
22

Effective Time
2

 
Target Voting Agreement
1

Exchange Agent
6

 
Termination Fee
69

Indemnified Party
49

 
WARN Act
15




(c) Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed followed by the words “without limitation.”
2. Expenses.
(a) Except as otherwise provided in this Section 12.2, each of the Parties shall bear and pay all direct costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including filing, registration and application fees, printing fees, and fees and expenses of its own financial or other consultants, investment bankers, accountants, and counsel.
(b) Notwithstanding the foregoing, if:
(i) Either Target or Buyer terminates this Agreement pursuant to Section 10.1(d)(iii), 10.1(e) or 10.1(j) and there has been publicly announced and not withdrawn another Acquisition Proposal with respect to Target , and within nine months of such termination Target shall either (A) consummate an Acquisition Transaction or (B) enter into an Acquisition Agreement with respect to an Acquisition Transaction, whether or not such Acquisition Transaction is subsequently consummated (but changing, in the case of (A) and (B), the references to the 15% and 85% amounts in the definition of Acquisition Transaction to 50%); or

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(ii) Either Target or Buyer terminates this Agreement pursuant to Section 10.1(d)(iii), 10.1(e) or 10.1(j) and there has been publicly announced and not withdrawn another Acquisition Proposal with respect to Buyer, and within nine months of such termination Buyer shall either (A) consummate an Acquisition Transaction or (B) enter into an Acquisition Agreement with respect to an Acquisition Transaction, whether or not such Acquisition Transaction is subsequently consummated (but changing, in the case of (A) and (B), the references to the 15% and 85% amounts in the definition of Acquisition Transaction to 50%); or
(iii) Buyer shall terminate this Agreement pursuant to Section 10.1(f); or
(iv) Target shall terminate this Agreement pursuant to Section 10.1(g); or
(v) Target shall terminate this Agreement pursuant to Section 10.1(h);
(vi) Buyer shall terminate this Agreement pursuant to Section 10.1(i); or
(vii) Target shall terminate this Agreement pursuant to Section 10.1(c), (e) or (j) if the reason for such termination is Buyer’s failure to have delivered irrevocable letters of resignation, effective immediately prior to the Closing, from each of the Non-Continuing Directors,
then, in the case of a termination under clauses (i),(iii), or (v) above, Target shall pay to Buyer an amount equal to $750,000.00 (the “ Termination Fee ”), and in the case of a termination under clauses (ii),(iv), (vi) or (vii) above, Buyer shall pay to Target the Termination Fee. The Party required to pay the Termination Fee hereby waives any right to set-off or counterclaim against such amount. If the Termination Fee shall be payable pursuant to subsection (b)(i) or (b)(ii) of this Section 12.2, the Termination Fee shall be paid in same-day funds at or prior to the earlier of the date of consummation of such Acquisition Transaction or the date of execution of an Acquisition Agreement with respect to such Acquisition Transaction. If the Termination Fee shall be payable pursuant to subsection (b)(iii) or b(iv) of this Section 12.2, the Termination Fee shall be paid in same-day funds upon the earlier of (i) the execution of an Acquisition Agreement with respect to such Acquisition Transaction or (ii) two business days from the date of termination of this Agreement. If the Termination Fee shall be payable pursuant to subsection (b)(v) or (b)(vi) of this Section 12.1(c), the Termination Fee shall be paid in same-day funds at or prior to the termination of this Agreement.
(c) The Parties acknowledge that the agreements contained in paragraph (b) of this Section 12.2 are an integral part of the transactions contemplated by this Agreement, and that without these agreements, they would not enter into this Agreement; accordingly, if any Party fails to pay promptly any fee payable by it pursuant to this Section 12.2, then such Party shall pay to the other Party, its costs and expenses (including attorneys’ fees) in connection with collecting such fee, together with interest on the amount of the Termination Fee at a rate per annum equal to the “U.S. Prime Rate” (as published in the Wall Street Journal) in effect on the date such overdue amount was originally required to be paid.
(d) On any termination of this Agreement pursuant to subsections (b)(i)-(b)(vi) of this Section 12.2, subject to (i) Section 10.2 and (ii) the payment of any amounts owing pursuant to this Section 12.2, there shall be no other liability on the part of Target or Buyer to the other except as provided in the Confidentiality Agreement.
3. Brokers and Finders.
Except as set forth in Sections 12.3 of the Buyer Disclosure Memorandum and the Target Disclosure Memorandum, each of the Parties represents and warrants that neither it nor any of its officers, directors, employees, or Affiliates has employed any broker or finder or incurred any Liability for any financial advisory fees, investment bankers’ fees, brokerage fees, commissions, or finders’ fees in connection with this
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Agreement or the transactions contemplated hereby. In the event of a claim by any broker or finder based upon such broker’s representing or being retained by or allegedly representing or being retained by Target or by Buyer, each of Target and Buyer, as the case may be, agrees to indemnify and hold the other Party harmless of and from any Liability in respect of any such claim.
4. Entire Agreement.
Except as otherwise expressly provided herein, this Agreement (including the documents and instruments referred to herein) constitutes the entire agreement between the Parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereto, written or oral (except, as to Section 8.7(b), for the Confidentiality Agreement). Nothing in this Agreement expressed or implied, is intended to confer upon any Person, other than the Parties or their respective successors, any rights, remedies, obligations, or liabilities under or by reason of this Agreement, other than as provided in Sections 8.11 and 8.12.
5. Amendments.
To the extent permitted by Law, this Agreement may be amended by a subsequent writing signed by each of the Parties upon the approval of each of the Parties, provided, however, that after obtaining the Buyer Shareholder Approval or the Target Shareholder Approval, there shall not be made any amendment that requires further approval by the shareholders of Buyer or Target, as applicable, without the further approval of such shareholders.
6. Waivers.
(a) Prior to or at the Effective Time, Buyer, acting through its Board of Directors, chief executive officer or other authorized officer, shall have the right to waive any Default in the performance of any term of this Agreement by Target, to waive or extend the time for the compliance or fulfillment by Target of any and all of its obligations under this Agreement, and to waive any or all of the conditions precedent to the obligations of Buyer under this Agreement, except any condition which, if not satisfied, would result in the violation of any Law. No such waiver shall be effective unless in writing signed by a duly authorized officer of Buyer
(b) Prior to or at the Effective Time, Target, acting through its Board of Directors, chief executive officer or other authorized officer, shall have the right to waive any Default in the performance of any term of this Agreement by Buyer or Sub, to waive or extend the time for the compliance or fulfillment by Buyer or Sub of any and all of its obligations under this Agreement, and to waive any or all of the conditions precedent to the obligations of Target under this Agreement, except any condition which, if not satisfied, would result in the violation of any Law. No such waiver shall be effective unless in writing signed by a duly authorized officer of Target.
(c) The failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect the right of such Party at a later time to enforce the same or any other provision of this Agreement. No waiver of any condition or of the breach of any term contained in this Agreement in one or more instances shall be deemed to be or construed as a further or continuing waiver of such condition or breach or a waiver of any other condition or of the breach of any other term of this Agreement.
7. Assignment.
Except as expressly contemplated hereby, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any Party hereto (whether by operation of Law or otherwise) without the prior written consent of the other Party. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and assigns.
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8. Notices.
All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered by hand, by facsimile transmission, by registered or certified mail, postage pre-paid, or by courier or overnight carrier, to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall be deemed to have been delivered as of the date so delivered, except that if sent by registered or certified mail, such notices or communications shall be deemed to have been delivered three (3) business days following such mailing:
Target:
IQinVision, Inc.
 
33122 Valle Road
 
San Juan Capistrano, CA 92675
 
Facsimile Number: (949) 334-3311
 
Attention: Charles Chestnutt
 
 
Copy to Counsel:
Stradling Yocca Carlson & Rauth, P.C.
 
660 Newport Center Drive
 
Suite 1600
 
Newport Beach, CA 92660
 
Facsimile Number: (949) 725-4100
 
Attention: Christopher D. Ivey
 
 
Buyer:
Vicon Industries, Inc.
 
131 Heartland Blvd.
 
Edgewood, New York 11717
 
Facsimile Number: (631) 951-2288
 
Attention: Kenneth M. Darby
 
 
Copy to Counsel:
Fox Rothschild LLP
 
100 Park Avenue
 
New York, New York 10016
 
Facsimile Number: (212) 692-0940
 
Attention: Alison Newman
 
 
    
9. Governing Law.
Regardless of any conflict of law or choice of law principles that might otherwise apply, the Parties agree that this Agreement shall be governed by and construed in all respects in accordance with the laws of the State of New York, except to the extent required under the CGCL. The Parties all expressly agree and acknowledge that the State of New York has a reasonable relationship to the Parties and/or this Agreement. As to any dispute, claim, or litigation arising out of or relating in any way to this Agreement or the transaction at issue in this Agreement, the Parties hereto hereby agree and consent to be subject to the exclusive jurisdiction
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of the United States District Court for the Southern District of New York. If jurisdiction is not present in federal court, then the Parties hereby agree and consent to the exclusive jurisdiction of the state courts of New York, New York. Each Party hereto hereby irrevocably waives, to the fullest extent permitted by Law, (a) any objection that it may now or hereafter have to laying venue of any suit, action or proceeding brought in such court, (b) any claim that any suit, action or proceeding brought in such court has been brought in an inconvenient forum, and (c) any defense that it may now or hereafter have based on lack of personal jurisdiction in such forum.

10. Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
11. Captions; Articles and Sections.
The captions contained in this Agreement are for reference purposes only and are not part of this Agreement. Unless otherwise indicated, all references to particular Articles or Sections shall mean and refer to the referenced Articles and Sections of this Agreement.
12. Interpretations.
Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against any Party, whether under any rule of construction or otherwise. No Party to this Agreement shall be considered the draftsman. The Parties acknowledge and agree that this Agreement has been reviewed, negotiated, and accepted by all Parties and their attorneys and shall be construed and interpreted according to the ordinary meaning of the words used so as fairly to accomplish the purposes and intentions of all Parties hereto.
13. Enforcement of Agreement.
The Parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement was not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.
14. Severability.
Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.

[ Signature Page Follows ]

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IN WITNESS WHEREOF , each of the Parties has caused this Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.



VICON INDUSTRIES, INC.


By:      /s/ Kenneth M. Darby         
Name: Kenneth M. Darby
Title: Chairman and CEO



VI MERGER SUB, INC.


By:      /s/ Kenneth M. Darby         
Name: Kenneth M. Darby
Title: Chairman and CEO


IQINVISION, INC.


By:      /s/ Charles Chestnutt         
Name: Charles Chestnutt
Title: Chief Executive Officer

















Annex A
Approving Target Shareholders

Charles Chestnutt
Rob Ledenko
Gregg Bone
Gioia Messinger
Peter DeAngelis
Martin Gray
Richard Fryling
John L. Moss
Ken Olson
Buddy Flerl
Gordian, Inc.
Wolfen Revocable Trust Dated 7-22-02
The Lawrence P. Wolfen Testamentary Trust





Annex B
Approving Buyer Shareholders

Kenneth M. Darby
Julian A. Tiedemann
David W. Wright
Henry Partners, L.P.
Matthew Partners, L.P.
Article 6 Marital Trust





Annex C
Lock-Up Shareholders

Kenneth M. Darby
Julian A. Tiedemann
Arthur D. Roche

Charles Chestnutt
Rob Ledenko
Gregg Bone
Gioia Messinger
Peter DeAngelis
Martin Gray
Richard Fryling
John L. Moss
Ken Olson
Buddy Flerl
Gordian, Inc.





Annex D
Non-Continuing Directors


David W. Wright
W. Gregory Robertson
Bernard F. Reynolds








EXHIBIT 10.1


VICON INDUSTRIES, INC. VOTING AND LOCK-UP AGREEMENT
This VICON INDUSTRIES, INC. VOTING AND LOCK-UP AGREEMENT (this “ Agreement ”), dated as of March 28, 2014, is by and between IQinVision, Inc., a California corporation (the “ Company ”), and each of the undersigned shareholders (each, a “ Shareholder ,” and, collectively, the “ Shareholders ”) of Vicon Industries, Inc., a New York corporation (“ Vicon ”), identified on the signature page hereto.
A. The Company, Vicon and VI Merger Sub, Inc., a California corporation and direct, wholly owned subsidiary of Vicon (“ Merger Sub ”) are entering into an Agreement and Plan of Merger and Reorganization (as amended from time to time, the “ Merger Agreement ”), dated as of the date hereof, pursuant to which Merger Sub will merge with and into the Company (the “ Merger ”), after which time the Company will be a direct, wholly owned subsidiary of Vicon;
B. As of the date hereof, each Shareholder is the Beneficial Owner (as defined below) of, and has the sole right to vote and dispose of, that number of each class of the issued and outstanding capital stock of Vicon (the “ Vicon Shares ”) set forth opposite such Shareholder’s name on Schedule A hereto; and
C. Concurrently with the entry by the Company, Vicon and Merger Sub into the Merger Agreement, and as a condition and inducement to the willingness of the Company to enter into the Merger Agreement and incur the obligations set forth therein, the Company has required that the Shareholders enter into this Agreement.
Accordingly, and in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I.
Definitions
Capitalized terms used but not defined in this Agreement are used in this Agreement with the meanings given to such terms in the Merger Agreement. In addition, for purposes of this Agreement:
Affiliate ” means, with respect to any specified Person, a Person who, at the time of determination, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified Person. For purposes of this Agreement, with respect to a Shareholder, “ Affiliate ” does not include Vicon and the Persons that directly, or indirectly through one or more intermediaries, are controlled by Vicon. For the avoidance of doubt, no officer or director of Vicon will be deemed an Affiliate of another officer or director of Vicon by virtue of his or her status as an officer or director of Vicon.
Beneficially Owned ” or “ Beneficial Ownership ” with respect to any securities means having beneficial ownership of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act, disregarding the phrase “within 60 days” in paragraph (d)(1)(i) thereof), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities,





securities Beneficially Owned by a Person include securities Beneficially Owned by (i) all Affiliates of such Person, and (ii) all other Persons with whom such Person would constitute a “group” within the meaning of Section 13(d) of the Exchange Act and the rules promulgated thereunder.
Beneficial Owner ” with respect to any securities means a Person that has Beneficial Ownership of such securities.
Subject Shares ” means, with respect to a Shareholder, without duplication, (i) the Vicon Shares owned by such Shareholder on the date hereof as described on Schedule A , (ii) any additional shares of Vicon acquired by such Shareholder, over which such Shareholder acquires Beneficial Ownership from and after the date hereof, whether pursuant to existing stock option agreements, warrants or otherwise, and (iii) any shares into which the Vicon Shares may be converted, exchanged or reclassified. Without limiting the other provisions of this Agreement, in the event that Vicon changes the number of Vicon Shares issued and outstanding prior to the Termination Date (as defined in Article VI ) as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, combination, recapitalization, subdivision, or other similar transaction, the number of Subject Shares subject to this Agreement will be equitably adjusted to reflect such change.
Transfer ” means, with respect to a security, the sale, transfer, pledge, hypothecation, encumbrance, assignment or disposition of such security or the Beneficial Ownership thereof, and each option, agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing. As a verb, “ Transfer ” has a correlative meaning.
ARTICLE II.
Covenants of Shareholders
2.1 Irrevocable Proxy. Concurrently with the execution of this Agreement, each Shareholder agrees to deliver to the Company a proxy in the form attached hereto as Exhibit A (the “ Proxy ”), which will be irrevocable to the extent provided in Section 609 of the Business Corporation Law of the State of New York with respect to the Subject Shares referred to therein.
2.2 Agreement to Vote.
(a) At each and every meeting of the shareholders of Vicon held prior to the Termination Date, however called, and at every adjournment or postponement thereof prior to the Termination Date, or in connection with each and every written consent of, or any other action by, the shareholders of Vicon given or solicited prior to the Termination Date, each Shareholder will vote, or provide a consent with respect to, all of the Subject Shares entitled to vote or to consent thereon (i) in favor of the issuance of the aggregate Merger Consideration pursuant to the Merger Agreement, and any actions required in furtherance thereof, and (ii) against any proposal or transaction involving Vicon, the effect of which proposal or transaction is to delay, impair, prevent or nullify the Merger or the transactions contemplated by the Merger Agreement, and (iii) against any other action or agreement that would result in a breach in any material respect of any covenant, representation or warranty or any other obligation or agreement of Vicon or its shareholders under the Merger Agreement.
(b) No Shareholder will enter into any agreement with any Person (other than the Company) prior to the Termination Date (with respect to periods prior to or after the Termination Date) directly or indirectly to vote, grant any proxy or give instructions with respect to the voting of, the Subject Shares in respect of the matters described in Section 2.2(a) hereof, or the effect of which would be





inconsistent with or violate any provision contained in this Section 2.2 . Any vote or consent (or withholding of consent) by any Shareholder that is not in accordance with this Section 2.2 will be considered null and void, and the provisions of the Proxy will be deemed to take immediate effect.
2.3 Revocation of Proxies . Each Shareholder hereby represents and warrants that any proxies heretofore given in respect of the Subject Shares with respect to the matters described in Section 2.2(a) hereof are not irrevocable, and such Shareholder hereby revokes any and all prior proxies with respect to such Subject Shares as they relate to such matters. Prior to the Termination Date, such Shareholder will not directly or indirectly grant any proxies or powers of attorney with respect to the matters set forth in Section 2.2(a) hereof (other than to the Company), deposit any of the Subject Shares or enter into a voting agreement (other than this Agreement) with respect to any of the Subject Shares relating to any matter described in Section 2.2(a) .
2.4 No Transfer of Subject Shares; Publicity . Each Shareholder agrees that:
(a) It (i) will not Transfer or agree to Transfer any of the Subject Shares or, with respect to any matter described in Section 2.2(a) , grant any proxy or power-of-attorney with respect to any of the Subject Shares, (ii) will take all action reasonably necessary to prevent creditors in respect of any pledge of the Subject Shares from exercising their rights under such pledge, and (iii) will not take any action that would make in a material respect any of its representations or warranties contained herein untrue or incorrect or would have the effect of preventing or disabling such Shareholder from performing any of its material obligations hereunder; provided, however, that Shareholder may (x) Transfer shares to Affiliates or charitable organizations, (y) if Shareholder is an individual, Transfer the Subject Shares to any member of Shareholder’s immediate family, or to a trust for the benefit of Shareholder or any member of Shareholder’s immediate family for estate planning purposes or for the purposes of personal tax planning, and (z) Transfer Subject Shares upon the death of Shareholder ( any such transferee permitted under clause (x), (y) and (z) , a “ Permitted Transferee”); provided, further, that any such Transfer shall be permitted only if, as a precondition to such Transfer, the Permitted Transferee agrees in writing to be bound by all of the terms of this Agreement.
(b) Unless required by applicable Law or permitted by the Merger Agreement, such Shareholder will not, and will not authorize or direct any of its Affiliates or Representatives to, make any press release or public announcement with respect to this Agreement or the Merger Agreement or the transactions contemplated hereby or thereby, without the prior written consent of the Company in each instance.
ARTICLE III.
Representations, Warranties and Additional Covenants of Shareholders
Each Shareholder represents, warrants and covenants to the Company that:
3.1 Ownership . Such Shareholder is the sole Beneficial Owner and the record and legal owner of the Subject Shares identified opposite such Shareholder’s name on Schedule A and such shares constitute all of the capital stock of Vicon Beneficially Owned by such Shareholder. Such Shareholder has good and valid title to all of the Subject Shares, free and clear of all Liens, claims, options, proxies, voting agreements and security interests and has the sole right to such Subject Shares and there are no restrictions on rights of disposition or other Liens pertaining to such Subject Shares. None of the Subject Shares is subject to any voting trust or other contract with respect to the voting thereof, and no proxy, power of attorney or other authorization has been granted with respect to any of such Subject Shares, except, with respect to a Shareholder





that is a partnership, limited partnership, a limited liability company or similar entity, under the partnership agreement, limited partnership agreement, operating agreement or other governing document governing Shareholder and applicable Law (a “ Partnership Agreement ”), the terms of which Partnership Agreement do not conflict with the terms hereof or the obligations of such Shareholder.
3.2 Authority and Non-Contravention .
(a) Such Shareholder has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by such Shareholder and the consummation by such Shareholder of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of such Shareholder, and no other proceedings on the part of such Shareholder are necessary to authorize this Agreement or to consummate the transactions contemplated hereby.
(b) Assuming due authorization, execution and delivery of this Agreement by the Company, this Agreement has been duly and validly executed and delivered by such Shareholder and constitutes the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms except (i) to the extent limited by applicable bankruptcy, insolvency or similar laws affecting creditors’ rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
(c) Such Shareholder is not nor will it be required to make any filing with or give any notice to, or to obtain any consent from, any Person in connection with the execution, delivery or performance of this Agreement or obtain any permit or approval from any Regulatory Authority for any of the transactions contemplated hereby, except to the extent required by Section 13 or Section 16 of the Exchange Act and the rules promulgated thereunder.
(d) Neither the execution and delivery of this Agreement by such Shareholder nor the consummation of the transactions contemplated hereby will directly or indirectly (whether with notice or lapse of time or both) (i) conflict with, result in any violation of or constitute a default by such Shareholder under any mortgage, bond, indenture, agreement, instrument or obligation to which such Shareholder is a party or by which it or any of the Subject Shares are bound, or violate any permit of any Regulatory Authority, or, to such Shareholder’s knowledge, any applicable Law to which such Shareholder, or any of the Subject Shares, may be subject, or (ii) result in the imposition or creation of any Lien upon or with respect to any of the Subject Shares; except, in each case, for conflicts, violations, defaults or Liens that would not individually or in the aggregate be reasonably expected to prevent or materially impair or delay the performance by such Shareholder of its obligations hereunder.
(e) Such Shareholder has sole voting power and sole power to issue instructions with respect to the matters set forth in Article II hereof and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Subject Shares, with no limitations, qualifications or restrictions on such rights.
3.3 Total Shares . Except as set forth on Schedule A , no Shareholder is the Beneficial Owner of, and does not have (whether currently, upon lapse of time, following the satisfaction of any conditions, upon the occurrence of any event or any combination of the foregoing) any right to acquire, any Vicon Shares or any securities convertible into or exchangeable or exercisable for Vicon Shares. No Shareholder has any other





interest in or voting rights with respect to any Vicon Shares or any securities convertible into or exchangeable or exercisable for Vicon Shares.
3.4 Reliance . Each Shareholder understands and acknowledges that the Company is entering into the Merger Agreement in reliance upon Shareholders’ execution, delivery and performance of this Agreement.
ARTICLE IV.
Representations, Warranties and Covenants of the Company
The Company represents, warrants and covenants to Shareholders that:
(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby.
(b) Assuming due authorization, execution and delivery of this Agreement by the Shareholders, this Agreement has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except (i) to the extent limited by applicable bankruptcy, insolvency or similar laws affecting creditors’ rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
ARTICLE V.
[Reserved]
ARTICLE VI.
Term and Termination
6.1 This Agreement will become effective upon its execution by the Shareholders and the Company. This Agreement will terminate upon the earliest of (a) the Effective Time, (b) the termination of the Merger Agreement, or (c) written notice by the Company to the Shareholders of the termination of this Agreement (the date of the earliest of the events described in clauses (a), (b), and (c), the “ Termination Date ”). Notwithstanding the foregoing, Article VII of this Agreement shall survive any termination hereof.
ARTICLE VII.
General Provisions
7.1 Action in Shareholder Capacity Only . Each Shareholder is entering into this Agreement solely in such Shareholder’s capacity as a record holder and beneficial owner, as applicable, of the Subject Shares and not in such Shareholder’s capacity as a director or officer of Vicon. Notwithstanding any asserted conflict, nothing herein will limit or affect any Shareholder’s ability to act as an officer or director of Vicon, or to make any presentations to the Vicon Board of Directors or take any other action that he or she determines





to be necessary or appropriate in his or her discretion, without regard to this Agreement or any conflict of interest.
7.2 No Ownership Interest . Nothing contained in this Agreement will be deemed to vest in the Company or any of its Affiliates any direct or indirect ownership or incidents of ownership of or with respect to the Subject Shares. All rights, ownership and economic benefits of and relating to the Subject Shares will remain and belong to the Shareholders, and neither the Company nor any of its Affiliates will have any authority to manage, direct, superintend, restrict, regulate, govern or administer any of the policies or operations of Vicon or exercise any power or authority to direct any Shareholder in the voting of any of the Subject Shares, except as otherwise expressly provided herein or in the Merger Agreement.
7.3 Notices . All notices, consents, waivers and other communications under this Agreement must be in writing (including facsimile or similar writing) and must be given:

If to the Company, to:
IQinVision, Inc.
33122 Valle Road
San Juan Capistrano, CA 92675
Facsimile Number: (949) 334-3311

with a copy (which will not constitute notice) to:
Stradling Yocca Carlson & Rauth, P.C.
660 Newport Center Drive
Suite 1600
Newport Beach, CA 92660
Facsimile Number: (949) 725-4100
Attention: Christopher D. Ivey

If to any Shareholder, to such Shareholder at its address set forth on Schedule A ,
or such other address or facsimile number as a party may hereafter specify for the purpose by notice to the other parties hereto. Each notice, consent, waiver or other communication under this Agreement will be effective only (a) if given by facsimile, when the facsimile is transmitted to the facsimile number specified in this Section and the appropriate facsimile confirmation is received or (b) if given by overnight courier or personal delivery when delivered at the address specified in this Section.
7.4 Further Actions . Upon the reasonable request of any party to this Agreement, the other party will (a) furnish to the requesting party any additional information, (b) execute and deliver, at their own expense, any other documents and (c) take any other actions as the requesting party may reasonably require to more effectively carry out the intent of this Agreement. Each Shareholder hereby agrees that the Company and Vicon may publish and disclose in the Registration Statement and Proxy Statement (including all documents and schedules filed with the SEC) such Shareholder’s identity and ownership of Subject Shares and the nature of such Shareholder’s commitments, arrangements, and understandings under this Agreement and may further file this Agreement as an exhibit to the Registration Statement or in any other filing made by the Company and/or Vicon with the SEC relating to the Merger Agreement or the transactions contemplated thereby. Each Shareholder agrees to notify the Company promptly of any additional shares of capital stock of Vicon of which such Shareholder becomes the record or beneficial owner after the date of this Agreement.





7.5 Entire Agreement and Modification . This Agreement, the Proxy and any other documents delivered by the parties in connection herewith constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, between the parties with respect to its subject matter and constitute (along with the documents delivered pursuant to this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended, supplemented or otherwise modified except by a written document executed by the party against whose interest the modification will operate. The parties will not enter into any other agreement inconsistent with the terms and conditions of this Agreement and the Proxy, or that addresses any of the subject matters addressed in this Agreement and the Proxy.
7.6 Drafting and Representation . The parties agree that the terms and language of this Agreement were the result of negotiations between the parties and, as a result, there will be no presumption that any ambiguities in this Agreement will be resolved against any party. Any controversy over construction of this Agreement will be decided without regard to events of authorship or negotiation.
7.7 Severability . Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without affecting the validity or enforceability of the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision will be interpreted to be only so broad as is enforceable.
7.8 No Third-Party Rights . No Shareholder may assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the Company. The Company may not assign any of its rights or delegate any of its obligations under this Agreement with respect to any Shareholder without the prior written consent of such Shareholder. This Agreement will apply to, be binding in all respects upon, and inure to the benefit of each of the respective successors, personal or legal representatives, heirs, distributes, devisees, legatees, executors, administrators and permitted assigns of any Shareholder and the successors and permitted assigns of the Company. Nothing expressed or referred to in this Agreement will be construed to give any Person, other than the parties to this Agreement, any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement except such rights as may inure to a successor or permitted assignee under this Section.
7.9 Enforcement of Agreement . Each Shareholder acknowledges and agrees that the Company could be damaged irreparably if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any breach of this Agreement by any Shareholder could not be adequately compensated by monetary damages. Accordingly, each Shareholder agrees that, (a) it will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (b) in addition to any other right or remedy to which the Company may be entitled, at law or in equity, the Company will be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking.
7.10 Waiver . The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither any failure nor any delay by a party in exercising any right, power or privilege under this Agreement, the Proxy or any of the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable Law, (a) no claim or right arising out of





this Agreement, the Proxy or any of the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in a written document signed by the other party, (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given, and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of that party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement, the Proxy or the documents referred to in this Agreement.
7.11 Governing Law . This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto will be governed by, construed under and enforced in accordance with the laws of the State of New York, without giving effect to principles of conflict or choice of laws.
7.12 Consent to Jurisdiction . Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement, the Proxy or the transactions contemplated hereby or thereby will be brought exclusively in the United States District Court for the Southern District of New York or, if such court does not have jurisdiction over the subject matter of such proceeding or if such jurisdiction is not available, in the Courts of the State of New York, in New York, New York, and each of the parties hereby consents to the exclusive jurisdiction of those courts (and of the appropriate appellate courts therefrom) in any suit, action or proceeding and irrevocably waives, to the fullest extent permitted by applicable Law, any objection which it may now or hereafter have to the laying of the venue of any suit, action or proceeding in any of those courts or that any suit, action or proceeding which is brought in any of those courts has been brought in an inconvenient forum. Process in any suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any of the named courts. Without limiting the foregoing, each party agrees that service of process on it by notice as provided in Section 7.3 will be deemed effective service of process. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
7.13 Counterparts . This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original, but all of which, taken together, will constitute one and the same instrument. A facsimile or electronic copy of a party’s signature printed by a receiving facsimile machine or printer (including signatures in Adobe PDF or similar format) shall be deemed an original signature for purposes hereof.
7.14 Expenses . Except as otherwise provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby will be paid by the party incurring such expenses.
7.15 Headings; Construction . The headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. In this Agreement (a) words denoting the singular include the plural and vice versa, (b) ”it” or “its” or words denoting any gender include all genders and (c) the word “including” means “including without limitation,” whether or not expressed.
[Signature pages follow]







IN WITNESS WHEREOF, the parties hereto have caused this Vicon Industries, Inc. Voting and Lock-Up Agreement to be duly executed as of the day and year first above written.
THE COMPANY:
IQINVISION, INC.
 
 
 
 
By:
 
 
 
Name:
 
 
Title:
 
 
 







IN WITNESS WHEREOF, the parties hereto have caused this Vicon Industries, Inc. Voting and Lock-Up Agreement to be duly executed as of the day and year first above written.
SHAREHOLDER:
 
 
 







SCHEDULE A
STOCKHOLDERS
NAME AND
ADDRESS OF STOCKHOLDERS
 
VICON SHARES
BENEFICIALLY OWNED
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 








EXHIBIT A
IRREVOCABLE PROXY
From and after the date hereof and until the Termination Date (as defined below), on which date this proxy will terminate and be of no further force or effect, the undersigned shareholder (“ Shareholder ”) of Vicon Industries, Inc., a New York corporation (“ Vicon ”), hereby irrevocably (to the full extent permitted by Section 609 of the New York Business Corporation Law) grants to, and appoints, IQinVision, Inc., a California corporation (the “ Company ”), and any designee of the Company, and each of them individually, as the sole and exclusive attorney and proxy of the undersigned, with full power of substitution and re-substitution, to vote the Subject Shares (as defined in the Voting Agreement (as defined below)) of the Shareholder, or grant a consent or approval in respect of the Subject Shares of the Shareholder, in a manner consistent with Section 2.2 of the Voting Agreement, if and only if the Shareholder (i) fails to vote or (ii) attempts to vote (whether by proxy, in person or by written consent) in a manner inconsistent with the terms of Section 2.2(a) of the Voting Agreement. Upon the undersigned’s execution of this Proxy, any and all prior proxies given by the undersigned with respect to any Subject Shares relating to the voting rights expressly provided herein are hereby revoked and the undersigned agrees not to grant any subsequent proxies with respect to the Subject Shares relating to such voting rights at any time prior to the Termination Date, on which date this proxy will terminate and be of no further force or effect.
This Proxy is irrevocable, is coupled with an interest and is granted pursuant to that certain Vicon Voting and Lock-Up Agreement (as amended from time to time, the “ Voting Agreement ”) of even date herewith, by and among the Company and Shareholder, and is granted in consideration of the Company entering into the Merger Agreement (as defined in the Voting Agreement). As used herein, the term “ Termination Date ,” and all capitalized terms used herein and not otherwise defined, will have the meanings set forth in the Voting Agreement. The Shareholder agrees that this proxy will be irrevocable until the Termination Date, on which date this proxy will terminate and be of no further force or effect, and is coupled with an interest sufficient at law to support an irrevocable proxy and given to the Company as an inducement to enter into the Merger Agreement and, to the extent permitted under applicable law, will be valid and binding on any Person to whom Shareholder may transfer any of his, her or its Subject Shares in breach of the Voting Agreement. The Shareholder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof.
The attorneys and proxies named above, and each of them, are hereby authorized and empowered by the undersigned, at any time prior to the Termination Date, on which date this proxy will terminate and be of no further force or effect, to act as the undersigned’s attorney and proxy to vote the Subject Shares, and to exercise all voting and other rights of the undersigned with respect to the Subject Shares at every annual, special or adjourned meeting of the shareholders of the Company and in every written consent in lieu of such meeting in a manner consistent with Section 2.2 of the Voting Agreement.
This Proxy will be binding upon the heirs, estate, executors, personal representatives, successors and assigns of Shareholder (including any transferee of any of the Subject Shares), and all authority herein conferred or agreed to be conferred will survive the death or incapacity of the Shareholder.
If any provision of this Proxy or any part of any such provision is held under any circumstances to be invalid or unenforceable in any jurisdiction, then (a) such provision or part thereof will, with respect to such circumstances and in such jurisdiction, be deemed amended to conform to applicable laws so as to be valid and enforceable to the fullest possible extent, (b) the invalidity or unenforceability of such provision or part thereof under such circumstances and in such jurisdiction will not affect the validity or enforceability of such provision or part thereof under any other circumstances or in any other jurisdiction, and (c) the invalidity or unenforceability of such provision or part thereof will not affect the validity or enforceability





of the remainder of such provision or the validity or enforceability of any other provision of this Proxy. Each provision of this Proxy is separable from every other provision of this Proxy, and each part of each provision of this Proxy is separable from every other part of such provision.
Dated: ______________, 2014
 
_____________________________
Shareholder Signature


_____________________________
Shareholder Name

___________________________
Title of Signatory (if applicable)







EXHIBIT 10.2



IQINVISION, INC. VOTING AND LOCK-UP AGREEMENT
This IQinVision, INC. VOTING AND LOCK-UP AGREEMENT (this “ Agreement ”), dated as of March 28, 2014, is by and between Vicon Industries, Inc., a New York corporation (the “ Company ”), and each of the undersigned shareholders (each, a “ Shareholder ,” and, collectively, the “ Shareholders ”) of IQinVision, Inc., a California corporation (“ IQinVision ”), identified on the signature page hereto.
A.      The Company, IQinVision and VI Merger Sub, Inc., a California corporation and direct, wholly owned subsidiary of the Company (“ Merger Sub ”) are entering into an Agreement and Plan of Merger and Reorganization (as amended from time to time, the “ Merger Agreement ”), dated as of the date hereof, pursuant to which Merger Sub will merge with and into IQinVision (the “ Merger ”), after which time IQinVision will be a direct, wholly owned subsidiary of the Company;
B.      As of the date hereof, each Shareholder is the Beneficial Owner (as defined below) of, and has the sole right to vote and dispose of, that number of each class of the issued and outstanding capital stock of IQinVision (the “ IQinVision Shares ”) set forth opposite such Shareholder’s name on Schedule A hereto; and
C.      Concurrently with the entry by the Company, IQinVision and Merger Sub into the Merger Agreement, and as a condition and inducement to the willingness of the Company to enter into the Merger Agreement and incur the obligations set forth therein, the Company has required that the Shareholders enter into this Agreement.
Accordingly, and in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I


Definitions
Capitalized terms used but not defined in this Agreement are used in this Agreement with the meanings given to such terms in the Merger Agreement. In addition, for purposes of this Agreement:
Affiliate ” means, with respect to any specified Person, a Person who, at the time of determination, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified Person. For purposes of this Agreement, with respect to a Shareholder, “ Affiliate ” does not include IQinVision and the Persons that directly, or indirectly through one or more intermediaries, are controlled by IQinVision. For the avoidance of doubt, no officer or director of IQinVision will be deemed an Affiliate of another officer or director of IQinVision by virtue of his or her status as an officer or director of IQinVision.
Beneficially Owned ” or “ Beneficial Ownership ” with respect to any securities means having beneficial ownership of such securities (as determined pursuant to Rule 13d-3 under the Exchange Act, disregarding the phrase “within 60 days” in paragraph (d)(1)(i) thereof), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities, securities Beneficially Owned by a Person include securities Beneficially Owned by (i) all Affiliates of such Person, and (ii) all other Persons with whom such Person would constitute a “group” within the meaning of Section 13(d) of the Exchange Act and the rules promulgated thereunder.
Beneficial Owner ” with respect to any securities means a Person that has Beneficial Ownership of such securities.
Subject Shares ” means, with respect to a Shareholder, without duplication, (i) the IQinVision Shares owned by such Shareholder on the date hereof as described on Schedule A , (ii) any additional shares of IQinVision acquired





by such Shareholder, over which such Shareholder acquires Beneficial Ownership from and after the date hereof, whether pursuant to existing stock option agreements, warrants or otherwise, and (iii) any shares into which the IQinVision Shares may be converted, exchanged or reclassified. Without limiting the other provisions of this Agreement, in the event that IQinVision changes the number of IQinVision Shares issued and outstanding prior to the Termination Date (as defined in Article VI ) as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, combination, recapitalization, subdivision, or other similar transaction, the number of Subject Shares subject to this Agreement will be equitably adjusted to reflect such change.
Transfer ” means, with respect to a security, the sale, transfer, pledge, hypothecation, encumbrance, assignment or disposition of such security or the Beneficial Ownership thereof, and each option, agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing. As a verb, “ Transfer ” has a correlative meaning.

ARTICLE II


Covenants of Shareholders
1. Irrevocable Proxy . Concurrently with the execution of this Agreement, each Shareholder agrees to deliver to the Company a proxy in the form attached hereto as Exhibit A (the “ Proxy ”), which will be irrevocable to the extent provided in Section 705 of the General Corporation Law of the State of California with respect to the Subject Shares referred to therein.
2. Agreement to Vote .
(a) At each and every meeting of the shareholders of IQinVision held prior to the Termination Date, however called, and at every adjournment or postponement thereof prior to the Termination Date, or in connection with each and every written consent of, or any other action by, the shareholders of IQinVision given or solicited prior to the Termination Date, each Shareholder will vote, or provide a consent with respect to, all of the Subject Shares entitled to vote or to consent thereon (i) in favor of the Merger, the Merger Agreement, and any actions required in furtherance thereof, (ii) the amendment of the Articles of Incorporation of IQinVision to permit the conversion of each series of Target Preferred Stock upon the election of the holders of a majority of the outstanding shares of such series, (iii) the conversion of the shares of Target Preferred Stock into Target Common Stock at the applicable conversion price in accordance with the Articles of Incorporation of IQinVision, and (iii) against any proposal or transaction involving IQinVision, the effect of which proposal or transaction is to delay, impair, prevent or nullify the Merger or the transactions contemplated by the Merger Agreement, and against any other action or agreement that would result in a breach in any material respect of any covenant, representation or warranty or any other obligation or agreement of IQinVision or its shareholders under the Merger Agreement.
(b) No Shareholder will enter into any agreement with any Person (other than the Company) prior to the Termination Date (with respect to periods prior to or after the Termination Date) directly or indirectly to vote, grant any proxy or give instructions with respect to the voting of, the Subject Shares in respect of the matters described in Section 2.2(a) hereof, or the effect of which would be inconsistent with or violate any provision contained in this Section 2.2 . Any vote or consent (or withholding of consent) by any Shareholder that is not in accordance with this Section 2.2 will be considered null and void, and the provisions of the Proxy will be deemed to take immediate effect.
3. Revocation of Proxies . Each Shareholder hereby represents and warrants that any proxies heretofore given in respect of the Subject Shares with respect to the matters described in Section 2.2(a) hereof are not irrevocable, and such Shareholder hereby revokes any and all prior proxies with respect to such Subject Shares as they relate to such matters. Prior to the Termination Date, such Shareholder will not directly or indirectly grant any proxies or powers of attorney with respect to the matters set forth in Section 2.2(a) hereof (other than to the Company), deposit any of the Subject Shares or enter into a voting agreement (other than this Agreement) with respect to any of the Subject Shares relating to any matter described in Section 2.2(a) .
4. No Transfer of Subject Shares; Publicity . Each Shareholder agrees that:
(a) It (i) will not Transfer or agree to Transfer any of the Subject Shares or, with respect to any matter described in Section 2.2(a) , grant any proxy or power-of-attorney with respect to any of the Subject Shares, (ii) will take all action reasonably necessary to prevent creditors in respect of any pledge of the Subject Shares from exercising their rights under such pledge, and (iii) will not take any action that would make in a material respect any





of its representations or warranties contained herein untrue or incorrect or would have the effect of preventing or disabling such Shareholder from performing any of its material obligations hereunder; provided, however, that Shareholder may (x) Transfer shares to Affiliates or charitable organizations, (y) if Shareholder is an individual, Transfer the Subject Shares to any member of Shareholder’s immediate family, or to a trust for the benefit of Shareholder or any member of Shareholder’s immediate family for estate planning purposes or for the purposes of personal tax planning, and (z) Transfer Subject Shares upon the death of Shareholder ( any such transferee permitted under clause (x), (y) and (z) , a “ Permitted Transferee”); provided, further, that any such Transfer shall be permitted only if, as a precondition to such Transfer, the Permitted Transferee agrees in writing to be bound by all of the terms of this Agreement.
(b) Unless required by applicable Law or permitted by the Merger Agreement, such Shareholder will not, and will not authorize or direct any of its Affiliates or Representatives to, make any press release or public announcement with respect to this Agreement or the Merger Agreement or the transactions contemplated hereby or thereby, without the prior written consent of the Company in each instance.

ARTICLE III

Representations, Warranties and
Additional Covenants of Shareholders
Each Shareholder represents, warrants and covenants to the Company that:
1. Ownership . Such Shareholder is the sole Beneficial Owner and the record and legal owner of the Subject Shares identified opposite such Shareholder’s name on Schedule A and such shares constitute all of the capital stock of IQinVision Beneficially Owned by such Shareholder. Such Shareholder has good and valid title to all of the Subject Shares, free and clear of all Liens, claims, options, proxies, voting agreements and security interests and has the sole right to such Subject Shares and there are no restrictions on rights of disposition or other Liens pertaining to such Subject Shares. None of the Subject Shares is subject to any voting trust or other contract with respect to the voting thereof, and no proxy, power of attorney or other authorization has been granted with respect to any of such Subject Shares, except, with respect to a Shareholder that is a partnership, limited partnership, a limited liability company or similar entity, under the partnership agreement, limited partnership agreement, operating agreement or other governing document governing Shareholder and applicable Law (a “ Partnership Agreement ”), the terms of which Partnership Agreement do not conflict with the terms hereof or the obligations of such Shareholder.
2. Authority and Non-Contravention .
(a) Such Shareholder has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by such Shareholder and the consummation by such Shareholder of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of such Shareholder, and no other proceedings on the part of such Shareholder are necessary to authorize this Agreement or to consummate the transactions contemplated hereby.
(b) Assuming due authorization, execution and delivery of this Agreement by the Company, this Agreement has been duly and validly executed and delivered by such Shareholder and constitutes the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms except (i) to the extent limited by applicable bankruptcy, insolvency or similar laws affecting creditors’ rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
(c) Such Shareholder is not nor will it be required to make any filing with or give any notice to, or to obtain any consent from, any Person in connection with the execution, delivery or performance of this Agreement or obtain any permit or approval from any Regulatory Authority for any of the transactions contemplated hereby.
(d) Neither the execution and delivery of this Agreement by such Shareholder nor the consummation of the transactions contemplated hereby will directly or indirectly (whether with notice or lapse of time or both) (i) conflict with, result in any violation of or constitute a default by such Shareholder under any mortgage, bond, indenture, agreement, instrument or obligation to which such Shareholder is a party or by which it or any of the Subject Shares are bound, or violate any permit of any Regulatory Authority, or, to such Shareholder’s knowledge, any applicable Law to which such Shareholder, or any of the Subject Shares, may be subject, or (ii) result in the imposition or creation of any Lien upon or with respect to any of the Subject Shares; except, in each case, for conflicts,





violations, defaults or Liens that would not individually or in the aggregate be reasonably expected to prevent or materially impair or delay the performance by such Shareholder of its obligations hereunder.
(e) Such Shareholder has sole voting power and sole power to issue instructions with respect to the matters set forth in Article II hereof and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Subject Shares, with no limitations, qualifications or restrictions on such rights.
3. Total Shares . Except as set forth on Schedule A , no Shareholder is the Beneficial Owner of, and does not have (whether currently, upon lapse of time, following the satisfaction of any conditions, upon the occurrence of any event or any combination of the foregoing) any right to acquire, any IQinVision Shares or any securities convertible into or exchangeable or exercisable for IQinVision Shares. No Shareholder has any other interest in or voting rights with respect to any IQinVision Shares or any securities convertible into or exchangeable or exercisable for IQinVision Shares.
4. Reliance . Each Shareholder understands and acknowledges that the Company is entering into the Merger Agreement in reliance upon Shareholders’ execution, delivery and performance of this Agreement.
5. Marital Status . Each married Shareholder shall cause his or her spouse to execute and deliver to the Company a Spousal Consent in the form of that attached hereto, and should any other Shareholder hereafter become married, such Shareholder shall promptly cause his or her spouse to execute and deliver to the Company a Spousal Consent in such form.

ARTICLE IV

Representations, Warranties and Covenants of the Company
The Company represents, warrants and covenants to Shareholders that:
(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby.
(b) Assuming due authorization, execution and delivery of this Agreement by the Shareholders, this Agreement has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except (i) to the extent limited by applicable bankruptcy, insolvency or similar laws affecting creditors’ rights and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

ARTICLE V

Dissenters’ Rights
1. Shareholder agrees not to exercise any rights of appraisal or any dissenters’ rights that Shareholder may have (whether under applicable Law or otherwise) or could potentially have or acquire in connection with the Merger.

ARTICLE VI

Term and Termination
1. This Agreement will become effective upon its execution by the Shareholders and the Company. This Agreement will terminate upon the earliest of (a) the Effective Time, (b) the termination of the Merger Agreement, or (c) written notice by the Company to the Shareholders of the termination of this Agreement (the date of the earliest of the events described in clauses (a), (b), and (c), the “ Termination Date ”). Notwithstanding the foregoing, Article VII of this Agreement shall survive any termination hereof.

ARTICLE VII

General Provisions
1. Action in Shareholder Capacity Only . Each Shareholder is entering into this Agreement solely in such Shareholder’s capacity as a record holder and beneficial owner, as applicable, of the Subject Shares and not in such Shareholder’s capacity as a director or officer of IQinVision. Notwithstanding any asserted conflict, nothing





herein will limit or affect any Shareholder’s ability to act as an officer or director of IQinVision, or to make any presentations to the IQinVision Board of Directors or take any other action that he or she determines to be necessary or appropriate in his or her discretion, without regard to this Agreement or any conflict of interest.
2. No Ownership Interest . Nothing contained in this Agreement will be deemed to vest in the Company or any of its Affiliates any direct or indirect ownership or incidents of ownership of or with respect to the Subject Shares. All rights, ownership and economic benefits of and relating to the Subject Shares will remain and belong to the Shareholders, and neither the Company nor any of its Affiliates will have any authority to manage, direct, superintend, restrict, regulate, govern or administer any of the policies or operations of IQinVision or exercise any power or authority to direct any Shareholder in the voting of any of the Subject Shares, except as otherwise expressly provided herein or in the Merger Agreement.
3. Notices . All notices, consents, waivers and other communications under this Agreement must be in writing (including facsimile or similar writing) and must be given:

If to the Company, to:
Vicon Industries, Inc.
131 Heartland Blvd.
Edgewood, New York 11717
Attention: Chairman

with a copy (which will not constitute notice) to:
Fox Rothschild LLP
100 Park Avenue
New York, New York 10016
Facsimile Number: (212) 878-7951
Attention: Alison Newman

If to any Shareholder, to such Shareholder at its address set forth on Schedule A ,
or such other address or facsimile number as a party may hereafter specify for the purpose by notice to the other parties hereto. Each notice, consent, waiver or other communication under this Agreement will be effective only (a) if given by facsimile, when the facsimile is transmitted to the facsimile number specified in this Section and the appropriate facsimile confirmation is received or (b) if given by overnight courier or personal delivery when delivered at the address specified in this Section.
4. Further Actions . Upon the reasonable request of any party to this Agreement, the other party will (a) furnish to the requesting party any additional information, (b) execute and deliver, at their own expense, any other documents and (c) take any other actions as the requesting party may reasonably require to more effectively carry out the intent of this Agreement. Each Shareholder hereby agrees that the Company and IQinVision may publish and disclose in the Registration Statement and Proxy Statement (including all documents and schedules filed with the SEC) such Shareholder’s identity and ownership of Subject Shares and the nature of such Shareholder’s commitments, arrangements, and understandings under this Agreement and may further file this Agreement as an exhibit to the Registration Statement or in any other filing made by the Company and/or IQinVision with the SEC relating to the Merger Agreement or the transactions contemplated thereby. Each Shareholder agrees to notify the Company promptly of any additional shares of capital stock of IQinVision of which such Shareholder becomes the record or beneficial owner after the date of this Agreement.
5. Entire Agreement and Modification . This Agreement, the Proxy and any other documents delivered by the parties in connection herewith constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, between the parties with respect to its subject matter and constitute (along with the documents delivered pursuant to this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended, supplemented or otherwise modified except by a written document executed by the party against whose interest the modification will operate. The parties will not enter into any other agreement





inconsistent with the terms and conditions of this Agreement and the Proxy, or that addresses any of the subject matters addressed in this Agreement and the Proxy.
6. Drafting and Representation . The parties agree that the terms and language of this Agreement were the result of negotiations between the parties and, as a result, there will be no presumption that any ambiguities in this Agreement will be resolved against any party. Any controversy over construction of this Agreement will be decided without regard to events of authorship or negotiation.
7. Severability . Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without affecting the validity or enforceability of the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision will be interpreted to be only so broad as is enforceable.
8. No Third-Party Rights . No Shareholder may assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the Company. The Company may not assign any of its rights or delegate any of its obligations under this Agreement with respect to any Shareholder without the prior written consent of such Shareholder. This Agreement will apply to, be binding in all respects upon, and inure to the benefit of each of the respective successors, personal or legal representatives, heirs, distributes, devisees, legatees, executors, administrators and permitted assigns of any Shareholder and the successors and permitted assigns of the Company. Nothing expressed or referred to in this Agreement will be construed to give any Person, other than the parties to this Agreement, any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement except such rights as may inure to a successor or permitted assignee under this Section.
9. Enforcement of Agreement . Each Shareholder acknowledges and agrees that the Company could be damaged irreparably if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any breach of this Agreement by any Shareholder could not be adequately compensated by monetary damages. Accordingly, each Shareholder agrees that, (a) it will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (b) in addition to any other right or remedy to which the Company may be entitled, at law or in equity, the Company will be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking.
10. Waiver . The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither any failure nor any delay by a party in exercising any right, power or privilege under this Agreement, the Proxy or any of the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable Law, (a) no claim or right arising out of this Agreement, the Proxy or any of the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in a written document signed by the other party, (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given, and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of that party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement, the Proxy or the documents referred to in this Agreement.
11. Governing Law . This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto will be governed by, construed under and enforced in accordance with the laws of the State of California, without giving effect to principles of conflict or choice of laws.
12. Consent to Jurisdiction . Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement, the Proxy or the transactions contemplated hereby or thereby will be brought exclusively in the United States District Court for the Southern District of New York or, if such court does not have jurisdiction over the subject matter of such proceeding or if such jurisdiction is not available, in the Courts of the State of New York, in New York, New York, and each of the parties hereby consents to the exclusive jurisdiction of those courts (and of the appropriate appellate courts therefrom) in any suit, action or proceeding and irrevocably waives, to the fullest extent permitted by applicable Law, any objection which it may now or hereafter have to the laying of the venue of any suit, action or proceeding in any of those courts or that any suit, action or proceeding which is brought in any of those courts has been brought in an inconvenient forum. Process in any suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any of the named courts. Without limiting the foregoing, each party agrees that service of process on it by notice as





provided in Section 7.3 will be deemed effective service of process. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
13. Counterparts . This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original, but all of which, taken together, will constitute one and the same instrument. A facsimile or electronic copy of a party’s signature printed by a receiving facsimile machine or printer (including signatures in Adobe PDF or similar format) shall be deemed an original signature for purposes hereof.
14. Expenses . Except as otherwise provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby will be paid by the party incurring such expenses.
15. Headings; Construction . The headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. In this Agreement (a) words denoting the singular include the plural and vice versa, (b) “it” or “its” or words denoting any gender include all genders and (c) the word “including” means “including without limitation,” whether or not expressed.
[Signature page follows]









IN WITNESS WHEREOF, the parties hereto have caused this IQinVision Voting and Lock-Up Agreement to be duly executed as of the day and year first above written.
THE COMPANY:                  VICON INDUSTRIES, INC.
By:     
Name:
Title:
SHAREHOLDERS:         

    

    

    









SCHEDULE A
SHAREHOLDERS
NAME AND
ADDRESS OF SHAREHOLDERS
SHARES BENEFICIALLY OWNED
 
 
Target
Common Stock
Target
Preferred Stock
 
 
 
 
 








EXHIBIT A
IRREVOCABLE PROXY
From and after the date hereof and until the Termination Date (as defined below), on which date this proxy will terminate and be of no further force or effect, the undersigned shareholder (“ Shareholder ”) of IQinVision, Inc., a California corporation (“ IQinVision ”), hereby irrevocably (to the full extent permitted by Section 705 of the General Corporation Law of the State of California) grants to, and appoints, Vicon Industries, Inc., a New York corporation (the “ Company ”), and any designee of the Company, and each of them individually, as the sole and exclusive attorney and proxy of the undersigned, with full power of substitution and re-substitution, to vote the Subject Shares (as defined in the Voting Agreement (as defined below)) of the Shareholder, or grant a consent or approval in respect of the Subject Shares of the Shareholder, in a manner consistent with Section 2.2 of the Voting Agreement, if and only if the Shareholder (i) fails to vote or (ii) attempts to vote (whether by proxy, in person or by written consent) in a manner that is inconsistent with the terms of Section 2.2(a) of the Voting Agreement. Upon the undersigned’s execution of this Proxy, any and all prior proxies given by the undersigned with respect to any Subject Shares relating to the voting rights expressly provided herein are hereby revoked and the undersigned agrees not to grant any subsequent proxies with respect to the Subject Shares relating to such voting rights at any time prior to the Termination Date, on which date this proxy will terminate and be of no further force or effect.
This Proxy is irrevocable, is coupled with an interest and is granted pursuant to that certain IQinVision Voting and Lock-Up Agreement (as amended from time to time, the “ Voting Agreement ”) of even date herewith, by and among the Company and Shareholder, and is granted in consideration of the Company entering into the Merger Agreement (as defined in the Voting Agreement). As used herein, the term “ Termination Date ,” and all capitalized terms used herein and not otherwise defined, will have the meanings set forth in the Voting Agreement. The Shareholder agrees that this proxy will be irrevocable until the Termination Date, on which date this proxy will terminate and be of no further force or effect, and is coupled with an interest sufficient at law to support an irrevocable proxy and given to the Company as an inducement to enter into the Merger Agreement and, to the extent permitted under applicable law, will be valid and binding on any Person to whom Shareholder may transfer any of his, her or its Subject Shares in breach of the Voting Agreement. The Shareholder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof.
The attorneys and proxies named above, and each of them, are hereby authorized and empowered by the undersigned, at any time prior to the Termination Date, on which date this proxy will terminate and be of no further force or effect, to act as the undersigned’s attorney and proxy to vote the Subject Shares, and to exercise all voting and other rights of the undersigned with respect to the Subject Shares at every annual, special or adjourned meeting of the shareholders of the Company and in every written consent in lieu of such meeting in a manner consistent with Section 2.2 of the Voting Agreement.





This Proxy will be binding upon the heirs, estate, executors, personal representatives, successors and assigns of Shareholder (including any transferee of any of the Subject Shares), and all authority herein conferred or agreed to be conferred will survive the death or incapacity of the Shareholder.
If any provision of this Proxy or any part of any such provision is held under any circumstances to be invalid or unenforceable in any jurisdiction, then (a) such provision or part thereof will, with respect to such circumstances and in such jurisdiction, be deemed amended to conform to applicable laws so as to be valid and enforceable to the fullest possible extent, (b) the invalidity or unenforceability of such provision or part thereof under such circumstances and in such jurisdiction will not affect the validity or enforceability of such provision or part thereof under any other circumstances or in any other jurisdiction, and (c) the invalidity or unenforceability of such provision or part thereof will not affect the validity or enforceability of the remainder of such provision or the validity or enforceability of any other provision of this Proxy. Each provision of this Proxy is separable from every other provision of this Proxy, and each part of each provision of this Proxy is separable from every other part of such provision.
Dated: ______________, 2014
    
Name: ________________________________








FORM OF SPOUSAL CONSENT
I ____________________, spouse of ____________________, have read and approve the foregoing IQinVision Voting and Lock-Up Agreement (the “ Agreement ”). In consideration of the terms and conditions as set forth in the Agreement, I hereby appoint my spouse as my attorney in fact with respect to the exercise of any rights and obligations under the Agreement, and agree to be bound by the provisions of the Agreement insofar as I may have any rights or obligations in the Agreement under the community property laws of the State of California or similar laws relating to marital or community property in effect in the state of our residence as of the date of the Agreement.
Date: _______________
Signature of Spouse: ____________________________
Printed Name of Spouse: _________________________







EXHIBIT 10.3
Post-Closing Lock-Up Agreement

Vicon Industries, Inc.
131 Heartland Blvd.
Edgewood, New York 11717

Ladies and Gentlemen:
This Post-Closing Lock-Up Agreement (this “ Agreement ”) is being delivered pursuant to that certain Agreement and Plan of Merger and Reorganization (as amended from time to time, the “ Merger Agreement ”), dated as of March 28, 2014, by and among Vicon Industries, Inc., a New York corporation (“ Vicon ”), VI Merger Sub, Inc., a California corporation and a direct, wholly owned subsidiary of Vicon (“ Merger Sub ”), and IQinVision, Inc., a California corporation (“ IQinVision ”). Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings ascribed to them in the Merger Agreement. Pursuant to the terms of this Agreement, the undersigned (“ Shareholder ”) is agreeing that (i) all shares of Vicon Common Stock issued to Shareholder as Merger Consideration in connection with the Merger, and/or (ii) all shares of Vicon Common Stock held by the Shareholder as of the Closing Date; in each case, including any shares issued in connection with any stock split, stock dividend, recapitalization, reorganization, or the like (collectively, the “ Lock-Up Shares ”), shall be subject to the restrictions and obligations as set forth in this Agreement.
As a material inducement to Vicon’s willingness to enter into the Merger Agreement and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the undersigned agrees that, without the prior written consent of Vicon, the undersigned will not, directly or indirectly, or publicly announce an intention to, offer, sell, pledge, contract to sell (including any short sale), grant any option to purchase or otherwise dispose of any Lock-Up Shares or enter into any Hedging Transaction (as defined below) relating to the Lock-Up Shares (each of the foregoing referred to as a “ Disposition ”) for a period from the Effective Time until the six-month anniversary of the Closing Date (the “ Lapse Date ”).
The foregoing restrictions are expressly intended to preclude the undersigned from engaging in any Hedging Transaction or other transaction which is designed to or reasonably expected to lead to or result in a Disposition even if the securities would be disposed of by someone other than the undersigned. “ Hedging Transaction ” means any short sale (whether or not against the box) or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to any security (other than a broad-based market basket or index) that includes, relates to or derives any significant part of its value from the Lock-Up Shares.
Notwithstanding the foregoing, the undersigned may transfer any or all of the Lock-Up Shares (i) by gift or to any member of the immediate family of the undersigned or to any trust or partnership for the direct or indirect benefit of the undersigned or the immediate family of the undersigned (including by will or intestate succession), provided that any such transfer shall not involve a disposition for value, (ii) to any limited partners, members or shareholders of the undersigned, (iii) in transactions relating to shares of Vicon Common Stock acquired in open market transactions or pursuant to employee benefit plans or incentive compensation plans after the execution of this Agreement; and (iv) pursuant to a bona fide third-party tender





offer, merger, consolidation or other similar transaction made to all holders of Vicon Common Stock involving a change of control of Vicon; provided, however, that in any such case it shall be a condition to the transfer pursuant to clauses (i) and (ii) above, that (1) the transferee executes an agreement stating that the transferee is receiving and holding the Lock-Up Shares subject to the provisions of this Agreement and there shall be no further transfer of such Lock-Up Shares except in accordance with this Agreement, (2) any such transfers are not required to be reported with the SEC on Form 4 pursuant to Section 16 of the Exchange Act, and (3) the undersigned does not otherwise voluntarily effect any public filing or report regarding such transfers (other than a filing on Form 5 made after the Lapse Date).
Without limiting the restrictions or obligations herein, any Disposition by the undersigned shall remain at all times subject to applicable securities laws.
The undersigned agrees that Vicon may place an appropriate restrictive legend on the stock certificates representing the Lock-Up Shares issued to the undersigned to indicate that such shares are subject to the terms of this Agreement. Vicon agrees that it will (or will instruct the transfer agent for Vicon to) promptly remove such restrictive legend upon the termination of this Agreement. The undersigned agrees that Vicon may, and the undersigned will, with respect to any Lock-Up Shares, cause the transfer agent for Vicon to note stop transfer instructions with respect to the Lock-Up Shares on the transfer books and records of Vicon.
The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Agreement. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and any obligations of the undersigned shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.
Neither the execution and delivery of this Agreement by the Shareholder nor the consummation of the transactions contemplated hereby will directly or indirectly (whether with notice or lapse of time or both) (i) conflict with, result in any violation of or constitute a default by the Shareholder under any mortgage, bond, indenture, agreement, instrument or obligation to which the Shareholder is a party or by which it or any of the Lock-Up Shares are bound, (ii) violate any applicable Law to which the Shareholder, or any of the Lock-Up Shares, may be subject, or (iii) result in the imposition or creation of any Lien upon or with respect to any of the Lock-Up Shares; except, in each case, for conflicts, violations, defaults or Liens that would not individually or in the aggregate be reasonably expected to prevent or materially impair or delay the performance by such Shareholder of its obligations hereunder.
If Shareholder is married and is resident in a state that has community property laws or similar laws relating to marital property, he or she shall cause his or her spouse to execute and deliver to Vicon a Spousal Consent in the form of that attached hereto, and should Shareholder hereafter become married, Shareholder shall promptly cause his or her spouse to execute and deliver to the Company a Spousal Consent in such form.
This Agreement shall terminate immediately and be of no further force or effect upon the earliest to occur of:
(a) immediately prior to the consummation of (i) any acquisition or purchase from Vicon by any Person or group (within the meaning of Section 13(d)(3) of the Exchange Act (“ Group ”)) of a 50% or more interest in the total outstanding voting securities of Vicon (other than as a result of the Merger), (ii) any merger, consolidation, business combination, share exchange or similar transaction involving Vicon pursuant to which the stockholders of Vicon immediately preceding such transaction will hold securities representing less than 50% of the total outstanding voting power of the surviving or resulting entity of such transaction (or Vicon entity of such surviving or resulting entity) (other than as a result of the Merger), or (iii) any sale,





lease, exchange, transfer, exclusive license or disposition of assets (including capital stock or other ownership interests in subsidiaries) representing 50% or more of the aggregate fair market value of the consolidated assets of Vicon and its subsidiaries taken as a whole;
(b) immediately following the launch of any tender offer or exchange offer that if consummated would result in any Person or Group beneficially owning securities representing 50% or more of the total outstanding voting power of Vicon; or
(c) (i) the filing of a petition by or against Vicon under any chapter of the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time, or under any similar law relating to bankruptcy, insolvency or other relief for debtors, (ii) appointment of a receiver, trustee, custodian or liquidator of or for all or any part of the assets or property of Vicon, or (iii) the making of a general assignment for the benefit of creditors by Vicon;
(d) the Lapse Date;
(e) if the undersigned is a director of Vicon or IQinVision as of the date hereof, and is not appointed to serve, or does not continue to serve (as applicable), as a director of Vicon following the Effective Time pursuant to Section 8.13 of the Merger Agreement, the Effective Time; or
(f) if the undersigned serves (or continues to serve) as a director of Vicon following the Effective Time pursuant to Section 8.13 of the Merger Agreement, the date the undersigned ceases to be a director of Vicon.
This Agreement and any claim, controversy or dispute arising under or related to this Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws principles thereof.

[Signature Page Follows]






 
Very truly yours,
 
 
Dated: March 28, 2014
_____________________________
Shareholder Signature


_____________________________
Shareholder Name
 

___________________________
Title of Signatory (if applicable)
 
 
 
Acknowledged and Agreed:
 
 
 
VICON INDUSTRIES, INC.
 
 
 
By:______________________________
 
Name:
Title:
 
 







FORM OF SPOUSAL CONSENT

I ____________________, spouse of ____________________, have read and approve the foregoing Post-Closing Lock-up Agreement (the “ Agreement ”). In consideration of the terms and conditions as set forth in the Agreement, I hereby appoint my spouse as my attorney in fact with respect to the exercise of any rights and obligations under the Agreement, and agree to be bound by the provisions of the Agreement insofar as I may have any rights or obligations in the Agreement under the community property laws of the State of California or similar laws relating to marital or community property in effect in the state of our residence as of the date of the Agreement.

Date: ________________________________________


Signature of Spouse: ____________________________
Printed Name of Spouse: _________________________







EXHIBIT 10.4


Vicon Industries, Inc.





March 28, 2014

Kenneth M. Darby

Dear Ken:

This letter will confirm the terms of your continued employment with Vicon Industries, Inc., a New York corporation (the “ Company ”), as approved by the Company’s Compensation Committee:

1.
Following the date hereof, you will continue to be employed as the Company’s Chief Executive Officer at your current base salary of $225,000 per annum, and you will continue to be provided with the same level of benefits and perquisites currently provided to you.
2.
You hereby agree to resign from your position as Chief Executive Officer of the Company and as a director of the Company upon the Company’s hiring of a new Chief Executive Officer to replace you. Following such resignation or any earlier termination of your employment by the Company, you will continue to receive regular payments of your base salary and continuation of your medical benefits for four months.
3.
By your execution of this letter, you agree that the options issued to you by the Company to purchase 60,000 shares of Common Stock shall immediately terminate and be cancelled.
4.
Following your resignation as Chief Executive Officer as provided herein, the Company will assign to you, and you will assume all future obligations under, the Company’s leases of the automobile and mobile phone used by you.
[Signature Page Follows]






This letter agreement and any claim, controversy or dispute arising under or related to this letter agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws principles thereof.


Sincerely yours,

VICON INDUSTRIES, INC.


By:      /s/ Bernard F. Reynolds
Name:      Bernard F. Reynolds
Title:
Chairman Compensation Committee, BOD

Acknowledged and Agreed
this 28th day of March, 2014:

/s/ Kenneth M. Darby
Kenneth M. Darby





EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact:

For Vicon Industries, Inc.:
 
For IQinVision, Inc.
Investor Relations: Joan Wolf:
 
Director of Marketing: Wendi Burke
Phone: (631) 650-6201
 
(949) 369-8100
 
 
Public Relations: Bruce J. Doneff
 
 
(843) 473-3022
 
 
 




VICON AND IQinVISION ANNOUNCE MERGER AGREEMENT
Merger to Create Integrated Video Security Solutions Company

Vicon Expects to Declare a Special Cash Dividend of $0.55 to its Shareholders

Edgewood, NY and San Juan Capistrano, CA - March 31, 2014 - Vicon Industries, Inc. (VII: NYSE-MKT) (“Vicon”), and IQinVision, Inc. (“IQinVision”), a privately held California corporation, announced today that they have entered into a definitive merger agreement that is expected to create a global provider of integrated solutions to the video security market. Vicon is a designer and producer of video security and surveillance systems. IQinVision designs and produces high performance HD megapixel IP cameras.
The merger has been approved by the boards of directors of both companies and is subject to shareholder approval, and other customary closing conditions. The transaction is expected to close in Vicon’s September quarter. Under the terms of the merger agreement, Vicon will issue shares of Vicon common stock to IQinVision shareholders in an all-stock merger whereby IQinVision shareholders will own approximately 50% of the outstanding common stock of the combined company. After the merger, Vicon will have approximately 9,000,000 shares outstanding.
As permitted and contemplated by the merger agreement, Vicon expects to declare a special cash dividend of $0.55 per share payable with respect to shares of Vicon common stock held by shareholders of Vicon as of a record date prior to the completion of the merger and payable to such holders within 15 days after the completion of the merger.






“Vicon is thrilled to join forces with IQinVision,” said Ken Darby, Vicon Chairman and CEO. “Together, with the Vicon line of HD megapixel robotic dome cameras, our enterprise class video management software, ViconNet® and IQinVision’s highly regarded IQeye brand, we bring a compelling solution offering to the video security market. The IQinVision transaction is consistent with our strategy of providing high quality, proprietary solutions to our customers. The Vicon/IQinVision combination will yield meaningful operational benefits, together with significant market and technological synergies. It’s a logical first step to strategic growth for both companies,” said Darby.
“This is a great fit for IQinVision as we combine with one of the iconic brands in the industry. Our product offerings are complementary to Vicon’s solutions, and we believe Vicon’s worldwide sales organization will effectively promote the IQeye brand to new markets and accelerate the growth of our sales footprint,” said Charles Chestnutt, CEO of IQinVision.

Ken Darby, who has delayed his retirement, will continue to lead the Company until his successor is named. The search for a new CEO was recently restarted.

Both Vicon and IQinVision’s product offerings will retain their existing branding, and both companies will continue to sell into and service their existing channels and customers. Customers will see no difference in sales, service, and support levels compared with prior to the merger.

For the twelve months ended December 31, 2013, IQinVision and Vicon combined generated $56 million in revenue. Following the merger, the board of directors of the combined company will consist of three directors designated by Vicon and three directors designated by IQinVision. TM Capital Corp. and Imperial Capital acted as financial advisors to Vicon and IQinVision, respectively.
Important Additional Information about the Proposed Merger
This communication is being made in respect of the proposed merger involving Vicon Industries, Inc. and IQinVision, Inc. Vicon will file with the SEC a current report on Form 8-K, which will include the merger agreement and related documents. In addition, Vicon intends to file a registration statement on Form S-4 with the SEC, which will contain a proxy statement/prospectus and other relevant materials, and plans to file with the SEC other documents regarding the proposed transaction. The final proxy statement/prospectus will be sent to the shareholders of Vicon in connection with a special meeting of shareholders of Vicon to be held to vote on matters relating to the proposed transaction. The proxy statement/prospectus will contain information about Vicon, IQinVision, the proposed merger, and related matters. SHAREHOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS) AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE, AS THEY WILL CONTAIN IMPORTANT INFORMATION THAT SHAREHOLDERS SHOULD CONSIDER BEFORE MAKING A DECISION ABOUT THE MERGER AND RELATED MATTERS. In addition to receiving the proxy statement/prospectus and proxy card by mail, shareholders will also be able to obtain the proxy statement/prospectus, as well as other filings containing information about Vicon, without charge, from the SEC’s website (http://www.sec.gov) or, without charge, by contacting Joan Wolf at Vicon Investor Relations at (631) 650-6201. This announcement is neither a solicitation of proxy, an offer to purchase, nor a solicitation of an offer to sell shares of Vicon.





Participants in Solicitation
Vicon and its executive officers and directors may be deemed to be participants in the solicitation of proxies from Vicon’s shareholders with respect to the matters relating to the proposed merger. IQinVision may also be deemed a participant in such solicitation. Information regarding Vicon’s executive officers and directors is available in Vicon’s proxy statement on Schedule 14A, filed with the SEC on April 1, 2013. Information regarding any interest that Vicon, IQinVision or any of the executive officers or directors of Vicon or IQinVision may have in the transaction with IQinVision will be set forth in the proxy statement/prospectus that Vicon intends to file with the SEC in connection with its shareholder vote on matters relating to the proposed merger. Shareholders will be able to obtain this information by reading the proxy statement/prospectus when it becomes available.
About Vicon
Vicon develops video management software and also designs, assembles, and markets cameras, network video servers/recorders, encoders and storage medium. Vicon products are used in video system applications principally for security, surveillance, safety and communication purposes by a broad group of end users worldwide.
About IQinVision, Inc.
IQinVision has been designing, manufacturing and marketing the IQeye line of HD megapixel IP cameras since 1998. A world leader in IP network camera products, IQinVision is renowned for image quality, stability and reliability in the harshest environments. ONVIF and PSIA compliant, IQeye cameras are integrated with all leading NVRs and are backed by the most comprehensive warranty program in the industry. IQinVision’s products are widely deployed in banking/finance, city surveillance, commercial/industrial, critical infrastructure, education, gaming, government/law enforcement, healthcare, retail and transportation applications. IQinVision is a privately-held corporation headquartered in San Juan Capistrano, California with a regional office in the Netherlands.





Vicon Forward-Looking Statements
Except for the historical information presented herein, matters discussed may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Statements that are not historical facts, including statements preceded by, followed by, or that include the words “will”; “potential”; “believe”; “anticipate”; “intend”; “plan”; “expect”; “estimate”; “could”; “may”; “should”; or similar statements are forward-looking statements. Such statements include, but are not limited to those referring to the potential for the generation of value, potential for revenue, potential for growth and the expected completion and outcome of the merger and the transactions contemplated by the merger agreement and related agreements. Vicon disclaims any intent or obligation to update these forward-looking statements. Risks and uncertainties include, among others, failure to obtain necessary shareholder approval for the proposed merger with IQinVision and the matters related thereto; failure of either party to meet the conditions to closing of the transaction; delays in completing the transaction and the risk that the transaction may not be completed at all; failure to realize the anticipated benefits from the transaction or delay in realization thereof; the businesses of Vicon and IQinVision may not be combined successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; operating costs and business disruption during the pendency of and following the transaction, including adverse effects on employee retention and on business relationships with third parties; as well as risks detailed from time to time in Vicon’s Form 10-K under the caption “Risk Factors” and in its other reports filed with the U.S. Securities and Exchange Commission. Copies of Vicon’s public disclosure filings are available from its investor relations department and its website under the investor relations tab at http://www.vicon-security.com.