ASSET PURCHASE AGREEMENT
 
This Asset Purchase Agreement (“Agreement”) is dated May 24, 2006, by and among
Freundlich Supply Company, Inc., a New York corporation (“Seller” or the
“Company”); and Michael Freundlich, a resident of New York (“Freundlich” or the
“Shareholder”); and Delaware Fastener Acquisition Corporation, a Delaware
corporation (“Buyer”).
 
RECITALS
 
The Company is engaged in the business of selling a broad range of nut products
used primarily for aerospace and military applications.

Shareholder owns one hundred (100) shares of the common stock of Seller, no par
value per share, which constitutes one hundred percent (100%) of the issued and
outstanding shares of capital stock of Seller. Seller desires to sell, and Buyer
desires to purchase, the Assets of Seller for the consideration and subject to
the terms set forth in this Agreement.
 
The parties, intending to be legally bound, agree as follows:
 
SECTION 1
DEFINITIONS AND USAGE
 
1.1 DEFINITIONS
 
For purposes of this Agreement, the following terms and variations thereof have
the meanings specified or referred to in this Section 1.1:
 
“Accounts Receivable”-- (a) all trade accounts receivable and other rights to
payment from customers of Seller and the full benefit of all security for such
accounts or rights to payment, including all trade accounts receivable
representing amounts receivable in respect of goods shipped or products sold or
services rendered to customers of Seller, (b) all other accounts or notes
receivable of Seller and the full benefit of all security for such accounts or
notes and (c) any claim, remedy or other right related to any of the foregoing.

“Accounts Receivable Assignment” - as defined in Section 2.11.
 
“Adjustment Amount”-- as defined in Section 2.8.

“Agreed Working Capital”-- as defined in Section 2.9(b).

“Allocation of Purchase Price” -- the agreed values of the Assets and Assumed
Liabilities to be transferred from Seller to Buyer hereunder, which allocation
shall be used by the parties for all Tax purposes and in all filings,
declarations and reports with the IRS in respect thereof, including the reports
required to be filed under Section 1060 of the Code.
 
“Assets”-- as defined in Section 2.1.

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“Assignment and Assumption Agreement”-- as defined in Section 2.7(a)(ii).
 
“Assumed Liabilities”-- as defined in Section 2.4(a).
 
“Balance Sheet”-- as defined in Section 3.4.
 
“Best Efforts”-- the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to achieve that result as
expeditiously as possible, provided, however, that a Person required to use Best
Efforts under this Agreement will not be thereby required to take actions that
would result in a material adverse change in the benefits to such Person of this
Agreement and the Contemplated Transactions or to dispose of or make any change
to its business, expend any material funds or incur any other material burden.
 
“Bill of Sale”-- as defined in Section 2.7(a)(i).
 
“Breach”-- any breach of, or any material inaccuracy in, any representation or
warranty or any breach of, or failure to perform or comply with, any covenant or
obligation, in or of this Agreement or any other Contract, or any event which
with the passing of time or the giving of notice, or both, would constitute such
a breach, inaccuracy or failure.
 
“Bulk Sales Laws”-- as defined in Section 5.10.

“Business of the Seller” - Seller is a stocking distributor of
internally-threaded fasteners, focusing on high-quality,
domestically-manufactured nut products. The Company’s nut products are used
primarily for aerospace and military applications and for industrial/commercial
applications that require a high level of certified/assured quality.
 
“Business Day”-- any day other than (a) Saturday or Sunday or (b) any other day
on which banks in New York are permitted or required to be closed.
 
“Buyer”-- as defined in the first paragraph of this Agreement.
 
“Buyer Indemnified Persons”-- as defined in Section 11.2.
 
“Closing”-- as defined in Section 2.6.
 
“Closing Date”-- the date on which the Closing actually takes place.
 
“Closing Financial Statements”-- as defined in Section 3.9.
 
“Closing Working Capital”-- as defined in Section 2.9(c).
 
“COBRA”-- as defined in Section 3.14(f).
 
“Code”-- the Internal Revenue Code of 1986.

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“Confidential Information”-- as defined in Section 12.1.
 
“Consent”-- any approval, consent, ratification, waiver or other authorization.

“Consulting Agreement”-- as defined in Section 2.7(a)(v).
 
“Contemplated Transactions”-- all of the transactions contemplated by this
Agreement.
 
“Contract”-- any agreement, contract, Lease, consensual obligation, promise or
undertaking (whether written or oral and whether express or implied), whether or
not legally binding.
 
“Copyrights”-- as defined in Section 3.23(a)(iii).
 
“Damages”-- as defined in Section 11.2.
 
“Employee Plans”-- as defined in Section 3.14(a).
 
“Encumbrance”-- any charge, claim, community or other marital property interest,
condition, equitable interest, lien, option, pledge, security interest,
mortgage, right of way, easement, encroachment, servitude, right of first
option, right of first refusal or similar restriction, including any restriction
on use, voting (in the case of any security or equity interest), transfer,
receipt of income or exercise of any other attribute of ownership.
 
“Environment”-- soil, land surface or subsurface strata, surface waters
(including navigable waters and ocean waters), groundwaters, drinking water
supply, stream sediments, ambient air (including indoor air), plant and animal
life and any other environmental medium or natural resource.
 
“Environmental, Health and Safety Liabilities”-- any cost, damages, expense,
liability, obligation or other responsibility arising from or under any
Environmental Law or Occupational Safety and Health Law, including those
consisting of or relating to:
 
a. any environmental, health or safety matter or condition (including on-site or
off-site contamination, occupational safety and health and regulation of any
chemical substance or product);
b. any fine, penalty, judgment, award, settlement, legal or administrative
proceeding, damages, loss, claim, demand or response, remedial or inspection
cost or expense arising under any Environmental Law or Occupational Safety and
Health Law;
c. financial responsibility under any Environmental Law or Occupational Safety
and Health Law for cleanup costs or corrective action, including any cleanup,
removal, containment or other remediation or response actions (“Cleanup”)
required by any Environmental Law or Occupational Safety and Health Law (whether
or not such Cleanup has been required or requested by any Governmental Body or
any other Person) and for any natural resource damages; or

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d. any other compliance, corrective or remedial measure required under any
Environmental Law or Occupational Safety and Health Law.
 
The terms “removal,” “remedial” and “response action” include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (CERCLA).
 
“Environmental Law”-- any Legal Requirement that requires or relates to:
 
a. advising appropriate authorities, employees or the public of intended or
actual Releases of pollutants or hazardous substances or materials, violations
of discharge limits or other prohibitions and the commencement of activities,
such as resource extraction or construction, that could have significant impact
on the Environment;
b. preventing or reducing to acceptable levels the Release of pollutants or
hazardous substances or materials into the Environment;
c. reducing the quantities, preventing the Release or minimizing the hazardous
characteristics of wastes that are generated;
d. assuring that products are designed, formulated, packaged and used so that
they do not present unreasonable risks to human health or the Environment when
used or disposed of;
e. protecting resources, species or ecological amenities;
f. reducing to acceptable levels the risks inherent in the transportation of
hazardous substances, pollutants, oil or other potentially harmful substances;
g. cleaning up pollutants that have been Released, preventing the Threat of
Release or paying the costs of such clean up or prevention; or
h. making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets.
 
“ERISA”-- the Employee Retirement Income Security Act of 1974.

“Escrow Agent”-- as defined in Section 2.3(b)

“Escrow Deposit” -- as defined in Section 2.3(b).

“Exchange Act”-- the Securities Exchange Act of 1934.
 
“Excluded Assets”-- as defined in Section 2.2.
 
“Facilities”-- any real property, leasehold or other interest in real property
currently owned or operated by Seller, including the Tangible Personal Property
used or operated by Seller. Notwithstanding the foregoing, for purposes of the
definitions of “Hazardous Activity” and “Remedial Action” and Sections 3.20 and
11.3, “Facilities” shall mean any real property, leasehold or other interest in
real property currently or formerly owned or operated by Seller, including the
Tangible Personal Property used or operated by Seller at the Facilities
specified in Section 3.8.
 

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“GAAP”-- generally accepted accounting principles for financial reporting in the
United States, applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 3.4 were
prepared.
 
“Governing Documents”-- with respect to any particular entity, (a) if a
corporation, the articles or certificate of incorporation and the bylaws; (b) if
a general partnership, the partnership agreement and any statement of
partnership; (c) if a limited partnership, the limited partnership agreement and
the certificate of limited partnership; (d) if a limited liability company, the
articles of organization and operating agreement; (e) if another type of Person,
any other charter or similar document adopted or filed in connection with the
creation, formation or organization of the Person; (f) all equityholders’
agreements, voting agreements, voting trust agreements, joint venture
agreements, registration rights agreements or other agreements or documents
relating to the organization, management or operation of any Person or relating
to the rights, duties and obligations of the equityholders of any Person; and
(g) any amendment or supplement to any of the foregoing.
 
“Governmental Authorization”-- any Consent, license, registration or permit
issued, granted, given or otherwise made available by or under the authority of
any Governmental Body or pursuant to any Legal Requirement.
 
“Governmental Body”-- any:
 
a. nation, state, county, city, town, borough, village, district or other
jurisdiction;
b. federal, state, local, municipal, foreign or other government;
c. governmental or quasi-governmental authority of any nature (including any
agency, branch, department, board, commission, court, tribunal or other entity
exercising governmental or quasi-governmental powers);
d. multinational organization or body;
e. body exercising, or entitled or purporting to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power; or
f. official of any of the foregoing.
 
“Hazardous Activity”-- the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment or use (including any withdrawal or other
use of groundwater) of Hazardous Material in, on, under, about or from any of
the Facilities or any part thereof into the Environment and any other act,
business, operation or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm, to persons or property on or off the
Facilities.
 
“Hazardous Material”-- any substance, material or waste which is or will
foreseeably be regulated by any Governmental Body, including any material,
substance or waste which is defined as a “hazardous waste,” “hazardous
material,” “hazardous substance,” “extremely hazardous waste,” “restricted
hazardous waste,” “contaminant,” “toxic waste” or “toxic substance” under any
provision of Environmental Law, and including petroleum, petroleum products,
asbestos, presumed asbestos-containing material or asbestos-containing material,
urea formaldehyde and polychlorinated biphenyls.

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“Improvements”-- all buildings, structures, fixtures and improvements located on
the Land or included in the Assets, including those under construction.

“Income Tax Refunds”—as defined in Section 2.1(j)
 
“Indemnified Person”-- as defined in Section 11.9.
 
“Indemnifying Person”-- as defined in Section 11.9.
 
“Intellectual Property Assets”-- as defined in Section 3.23(a).
 
“Interim Balance Sheet”-- as defined in Section 3.4.
 
“Inventories”-- all inventories of Seller, wherever located, including all
finished goods, work in process, raw materials, spare parts and all other
materials and supplies to be used or consumed by Seller in the production of
finished goods.
 
“IRS”-- the United States Internal Revenue Service and, to the extent relevant,
the United States Department of the Treasury.
 
“Knowledge”-- an individual will be deemed to have Knowledge of a particular
fact or other matter if:
 
a. that individual is actually aware of that fact or matter; or
b. a prudent individual could be expected to discover or otherwise become aware
of that fact or matter in the course of conducting a reasonably comprehensive
investigation regarding the accuracy of any representation or warranty contained
in this Agreement.
 
A Person (other than an individual) will be deemed to have Knowledge of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor or trustee of that
Person (or in any similar capacity) has, or at any time had, Knowledge of that
fact or other matter (as set forth in (a) and (b) above), and any such
individual (and any individual party to this Agreement) will be deemed to have
conducted a reasonably comprehensive investigation regarding the accuracy of the
representations and warranties made herein by that Person or individual.

“Lease” - as defined in Section 2.7(a)(iv).
 
“Legal Requirement”-- any federal, state, local, municipal, foreign,
international, multinational or other constitution, law, ordinance, principle of
common law, code, regulation, statute or treaty.
 
“Liability”-- with respect to any Person, any liability or obligation of such
Person of any kind, character or description, whether known or unknown, absolute
or contingent, accrued or unaccrued, disputed or undisputed, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, and
whether or not the same is required to be accrued on the financial statements of
such Person.

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“Marks”-- as defined in Section 3.23(a)(i).
 
“Material Consents”-- as defined in Section 7.3.
 
“Occupational Safety and Health Law”-- any Legal Requirement designed to provide
safe and healthful working conditions and to reduce occupational safety and
health hazards, including the Occupational Safety and Health Act, and any
program, whether governmental or private (such as those promulgated or sponsored
by industry associations and insurance companies), designed to provide safe and
healthful working conditions.
 
“Order”-- any order, injunction, judgment, decree, ruling, assessment or
arbitration award of any Governmental Body or arbitrator.
 
“Ordinary Course of Business”-- an action taken by a Person will be deemed to
have been taken in the Ordinary Course of Business only if that action:
 
(a) is consistent in nature, scope and magnitude with the past practices of such
Person and is taken in the ordinary course of the normal, day-to-day operations
of such Person;
(b) does not require authorization by the board of directors or Shareholder of
such Person (or by any Person or group of Persons exercising similar authority)
and does not require any other separate or special authorization of any nature;
and
(c) is similar in nature, scope and magnitude to actions customarily taken,
without any separate or special authorization, in the ordinary course of the
normal, day-to-day operations of other Persons that are in the same line of
business as such Person.
  
“Patents”-- as defined in Section 3.23(a)(ii).
 
“Permitted Encumbrances”-- as defined in Section 3.7.
 
“Person”-- an individual, partnership, corporation, business trust, limited
liability company, limited liability partnership, joint stock company, trust,
unincorporated association, joint venture or other entity or a Governmental
Body.
 
“Proceeding”-- any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, judicial or
investigative, whether formal or informal, whether public or private) commenced,
brought, conducted or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
 
“Purchase Price”-- as defined in Section 2.3.
 
“Record”-- information that is inscribed on a tangible medium or that is stored
in an electronic or other medium and is retrievable in perceivable form.
 

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“Related Person”--
With respect to a particular individual:
 
a. each other member of such individual’s Family;
b. any Person that is directly or indirectly controlled by any one or more
members of such individual’s Family;
c. any Person in which members of such individual’s Family hold (individually or
in the aggregate) a Material Interest; and
d. any Person with respect to which one or more members of such individual’s
Family serves as a director, officer, partner, executor or trustee (or in a
similar capacity).
 
With respect to a specified Person other than an individual:
 
a. any Person that directly or indirectly controls, is directly or indirectly
controlled by or is directly or indirectly under common control with such
specified Person;
b. any Person that holds a Material Interest in such specified Person;
c. each Person that serves as a director, officer, partner, executor or trustee
of such specified Person (or in a similar capacity);
d. any Person in which such specified Person holds a Material Interest; and
e. any Person with respect to which such specified Person serves as a general
partner or a trustee (or in a similar capacity).
 
For purposes of this definition, (a) “control” (including “controlling,”
“controlled by,” and “under common control with”) means the possession, direct
or indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, and shall be construed as such term is used in the rules
promulgated under the Securities Act; (b) the “Family” of an individual includes
(i) the individual, (ii) the individual’s spouse, (iii) any other natural person
who is related to the individual or the individual’s spouse within the second
degree and (iv) any other natural person who resides with such individual; and
(c) “Material Interest” means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act) of voting securities or other
voting interests representing at least ten percent (10%) of the outstanding
voting power of a Person or equity securities or other equity interests
representing at least ten percent (10%) of the outstanding equity securities or
equity interests in a Person.
 
“Release”-- any release, spill, emission, leaking, pumping, pouring, dumping,
emptying, injection, deposit, disposal, discharge, dispersal, leaching or
migration on or into the Environment or into or out of any property.
 
“Remedial Action”-- all actions, including any capital expenditures, required or
voluntarily undertaken (a) to clean up, remove, treat or in any other way
address any Hazardous Material or other substance; (b) to prevent the Release or
Threat of Release or to minimize the further Release of any Hazardous Material
or other substance so it does not migrate or endanger or threaten to endanger
public health or welfare or the Environment; (c) to perform pre-remedial studies
and investigations or post-remedial monitoring and care; or (d) to bring all
Facilities and the operations conducted thereon into compliance with
Environmental Laws and environmental Governmental Authorizations.

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“Representative”-- with respect to a particular Person, any director, officer,
manager, employee, agent, consultant, advisor, accountant, financial advisor,
legal counsel or other representative of that Person.
 
“Retained Liabilities”-- as defined in Section 2.4(b).
 
“SEC”-- the United States Securities and Exchange Commission.

“Secured Subordinated Promissory Note”-- as defined in Section 2.7(b)(ii).
 
“Securities Act”-- as defined in Section 3.3.

“Security Agreement” - as defined in Section 2.7(b)(ii).
 
“Seller”-- as defined in the first paragraph of this Agreement.
 
“Seller Contract”-- any Contract (a) under which Seller has or may acquire any
rights or benefits; (b) under which Seller has or may become subject to any
obligation or liability; or (c) by which Seller or any of the assets owned or
used by Seller is or may become bound.
 
“Shareholder”-- as defined in the first paragraph of this Agreement.
 
“Software”-- all computer software and subsequent versions thereof, including
source code, object, executable or binary code, objects, comments, screens, user
interfaces, report formats, templates, menus, buttons and icons and all files,
data, materials, manuals, design notes and other items and documentation related
thereto or associated therewith.
 
“Subsidiary”-- with respect to any Person (the “Owner”), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation’s or other Person’s board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred), are held by the Owner or one or more of its Subsidiaries.
 
“Tangible Personal Property”-- all machinery, equipment, tools, furniture,
office equipment, computer hardware, supplies, materials, vehicles and other
items of tangible personal property (other than Inventories) of every kind owned
or leased by Seller (wherever located and whether or not carried on Seller’s
books), together with any express or implied warranty by the manufacturers or
sellers or lessors of any item or component Part thereof and all maintenance
records and other documents relating thereto.
 

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“Tax”-- any income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, property, part environmental, windfall
profit, customs, vehicle, airplane, boat, vessel or other title or registration,
capital stock, franchise, employees’ income withholding, foreign or domestic
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, value added, alternative, add-on minimum and
other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever
and any interest, penalty, addition or additional amount thereon imposed,
assessed or collected by or under the authority of any Governmental Body or
payable under any tax-sharing agreement or any other Contract.
 
“Tax Return”-- any return (including any information return), report, statement,
schedule, notice, form, declaration, claim for refund or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
 
“Third Party”-- a Person that is not a party to this Agreement.
 
“Third-Party Claim”-- any claim against any Indemnified Person by a Third Party,
whether or not involving a Proceeding.
 
“Threat of Release”-- a reasonable likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.
 
“WARN Act”-- as defined in Section 3.21(d).
 
1.2 USAGE
 
a. Interpretation. In this Agreement, unless a clear contrary intention appears:
 
(i) the singular number includes the plural number and vice versa;
(ii) reference to any Person includes such Person’s successors and assigns but,
if applicable, only if such successors and assigns are not prohibited by this
Agreement, and reference to a Person in a particular capacity excludes such
Person in any other capacity or individually;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement, document or instrument means such agreement,
document or instrument as amended or modified and in effect from time to time in
accordance with the terms thereof;
(v) reference to any Legal Requirement means such Legal Requirement as amended,
modified, codified, replaced or reenacted, in whole or in part, and in effect
from time to time, including rules and regulations promulgated thereunder, and
reference to any section or other provision of any Legal Requirement means that
provision of such Legal Requirement from time to time in effect and constituting
the substantive amendment, modification, codification, replacement or
reenactment of such section or other provision;

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(vi) “hereunder,” “hereof,” “hereto,” and words of similar import shall be
deemed references to this Agreement as a whole and not to any particular
Article, Section or other provision hereof;
(vii) “including” (and with correlative meaning “include”) means including
without limiting the generality of any description preceding such term;
(viii) “or” is used in the inclusive sense of “and/or”;
(ix) with respect to the determination of any period of time, “from” means “from
and including” and “to” means “to and including;” and
(x) references to documents, instruments or agreements shall be deemed to refer
as well to all addenda, exhibits, schedules or amendments thereto.
 
b. Accounting Terms and Determinations. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP.

c. Legal Representation of the Parties. This Agreement was negotiated by the
parties with the benefit of legal representation, and any rule of construction
or interpretation otherwise requiring this Agreement to be construed or
interpreted against any party shall not apply to any construction or
interpretation hereof.
 
SECTION 2
SALE AND TRANSFER OF ASSETS; CLOSING
 
2.1 ASSETS TO BE SOLD
 
Upon the terms and subject to the conditions set forth in this Agreement, at the
Closing, Seller shall sell, convey, assign, transfer and deliver to Buyer, and
Buyer shall purchase and acquire from Seller, free and clear of any Encumbrances
other than Permitted Encumbrances, all of Seller’s right, title and interest in
and to all of Seller’s personal property and assets, tangible and intangible, of
every kind and description, wherever located, including the following (but
excluding the Excluded Assets):
 
a. all Tangible Personal Property, including those items described in Exhibit
2.1(a);
b. all Inventories;
c. all Accounts Receivable;
d. all Seller Contracts, including those listed in Exhibit 3.18(a), and all
outstanding offers or solicitations made by or to Seller to enter into any
Contract;
e. all Governmental Authorizations and all pending applications therefor or
renewals thereof, in each case to the extent transferable to Buyer, including
those listed in Exhibit 3.15(b);
f. all data and Records related to the operations of Seller, including client
and customer lists and Records, referral sources, research and development
reports and Records, production reports and Records, service and warranty
Records, equipment logs, operating guides and manuals, financial and accounting
Records, creative materials, advertising materials, promotional materials,
studies, reports, correspondence and other similar documents and Records and,
subject to Legal Requirements, copies of all personnel Records and other Records
described in Section 2.2(g) and certification documentation for the Inventory;

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g. all of the intangible rights and property of Seller, including Intellectual
Property Assets, going concern value, goodwill, telephone, telecopy and e-mail
addresses and listings and those items listed in Exhibits 3.23(d), (e) and (f);
h. all insurance benefits, including rights and proceeds, arising from or
relating to the Assets or the Assumed Liabilities prior to the Closing, unless
expended in accordance with this Agreement;
i. all claims of Seller against third parties relating to the Assets, whether
choate or inchoate, known or unknown, contingent or noncontingent, including all
such claims listed in Exhibit 2.1(j); and
j. all rights of Seller relating to deposits and prepaid expenses, claims for
refunds and rights to offset in respect thereof that are not listed in Exhibit
2.2(e). As reflected in Exhibit 2.2(e), Seller and the Shareholder may be
entitled to certain Income Tax Refunds relating to the operations of Seller.
Such Income Tax Refunds are not included in the Assets.
 
All of the property and assets to be transferred to Buyer hereunder are herein
referred to collectively as the “Assets.”
 
Notwithstanding the foregoing, the transfer of the Assets pursuant to this
Agreement shall not include the assumption of any Liability related to the
Assets unless Buyer expressly assumes that Liability pursuant to Section 2.4(a).
 
2.2 EXCLUDED ASSETS
 
Notwithstanding anything to the contrary contained in Section 2.1 or elsewhere
in this Agreement, the following assets of Seller (collectively, the “Excluded
Assets”) are not part of the sale and purchase contemplated hereunder, are
excluded from the Assets and shall remain the property of Seller after the
Closing:
 
a. all cash, cash equivalents and short-term investments;
b.  all minute books, stock Records and corporate seals;
c.  the shares of capital stock of Seller held in treasury;
d.  all rights of Seller under this Agreement, the Bill of Sale, the Assignment
and Assumption Agreement, the Secured Subordinated Promissory Note, the Security
Agreement and all other documents to be delivered in connection with the
Contemplated Transactions; and
e.  the property and assets expressly designated in Exhibit 2.2(e), including
but not limited to the Income Tax Refunds and real property owned by Seller or
its affiliates.
 
2.3 CONSIDERATION

a. The consideration for the Assets (the “Purchase Price”) will be (a) Five
million dollars ($5,000,000.00) plus or minus the Adjustment Amount and (b) the
assumption of the Assumed Liabilities. In accordance with Section 2.7(b), at the
Closing, the Purchase Price, prior to adjustment on account of the Adjustment
Amount, shall be delivered by Buyer to Seller as follows: (a) Four million two
hundred fifty thousand dollars ($4,250,000.00) by certified check or other
immediately available funds, net of the Escrow Deposit; and (b) Seven hundred
fifty thousand dollars ($750,000.00) payable in the form of the Secured
Subordinated Promissory Note. The security for the Secured Subordinated
Promissory Note is defined in Section 2.7(b)(ii). The Adjustment Amount shall be
paid in accordance with Section 2.8.

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b. The Escrow Deposit, in the initial amount of $25,000.00, shall be paid by
Buyer to Howard J. Kerker, Esquire, attorney for Seller, (the “Escrow Agent”)
contemporaneous with execution of this Agreement. The Escrow Deposit shall be
held in an interest bearing account. The full amount of the Escrow Deposit,
together will all interest earned thereon, will be credited against the cash
consideration to be paid by Buyer at Closing, subject to the provisions of
Sections 9.2(b) and 9.2(c).
 
2.4 LIABILITIES
 
a. Assumed Liabilities. On the Closing Date, but effective as of the Closing,
Buyer shall assume and agree to discharge only the following Liabilities of
Seller (the “Assumed Liabilities”):
 
(i) any trade account payable reflected on the Interim Balance Sheet (other than
a trade account payable to any Shareholder or a Related Person of Seller or any
Shareholder) that remains unpaid at and is not delinquent as of the Closing;
(ii) any trade account payable (other than a trade account payable to any
Shareholder or a Related Person of Seller or any Shareholder) incurred by Seller
in the Ordinary Course of Business between the date of the Interim Balance Sheet
and the Closing that remains unpaid at and is not delinquent as of the Closing;
(iii) any Liability to Seller’s customers incurred by Seller in the Ordinary
Course of Business for nondelinquent orders outstanding as of the Closing
reflected on Seller’s books (other than any Liability arising out of or relating
to a Breach that occurred prior to the Closing); and
(iv) any liability to Seller’s suppliers for unfilled purchase orders, provided
that such unfilled purchase orders shall be for a quantity of parts that will be
sold in the Ordinary Course of Business for a cost consistent with prevailing
market cost.

b. Retained Liabilities. The Retained Liabilities shall remain the sole
responsibility of and shall be retained, paid, performed and discharged solely
by Seller. “Retained Liabilities” shall mean every Liability of Seller other
than the Assumed Liabilities, including:
 
(i) any Liability arising out of or relating to products of Seller sold prior to
the Closing other than to the extent assumed under Section 2.4(a)(iii);
(ii) any Liability under any Contract assumed by Buyer pursuant to Section
2.4(a) that arises after the Closing but that arises out of or relates to any
Breach that occurred prior to the Closing;
(iii) any Liability for Taxes, including (A) any Taxes arising as a result of
Seller’s operation of its business or ownership of the Assets prior to the
Closing, (B) any Taxes that will arise as a result of the sale of the Assets
pursuant to this Agreement and (C) any deferred Taxes of any nature;    

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(iv) any Liability under any Contract not assumed by Buyer under Section 2.4(a),
including any Liability arising out of or relating to Seller’s credit facilities
or any security interest related thereto;
(v) any Environmental, Health and Safety Liabilities arising out of or relating
to the operation of Seller’s business or Seller’s leasing, ownership or
operation of real property;
(vi) any Liability under the Employee Plans or relating to payroll, vacation,
sick leave, workers’ compensation, unemployment benefits, pension benefits,
employee stock option or profit-sharing plans, health care plans or benefits or
any other employee plans or benefits of any kind for Seller’s employees or
former employees or both;
(vii) any Liability under any employment, severance, retention or termination
agreement with any employee of Seller or any of its Related Persons;
(viii) any Liability arising out of or relating to any employee grievance
whether or not the affected employees are hired by Buyer;
(ix) any Liability of Seller to any Shareholder or Related Person of Seller or
any Shareholder;
(x) any Liability to indemnify, reimburse or advance amounts to any officer,
director, employee or agent of Seller;
(xi) any Liability to distribute to Shareholder or otherwise apply all or any
part of the consideration received hereunder;
(xii) any Liability arising out of any Proceeding pending as of the Closing;
(xiii) any Liability arising out of any Proceeding commenced after the Closing
and arising out of or relating to any occurrence or event happening prior to the
Closing;
(xiv) any Liability arising out of or resulting from Seller’s compliance or
noncompliance with any Legal Requirement or Order of any Governmental Body;
(xv) any Liability of Seller under this Agreement or any other document executed
in connection with the Contemplated Transactions; and
(xvi) any Liability of Seller based upon Seller’s acts or omissions occurring
after the Closing.
 
2.5 ALLOCATION
 
The Purchase Price shall be allocated as shall be agreed at Closing. After the
Closing, the parties shall make consistent use of the allocation, fair market
value and useful lives as agreed for all Tax purposes and in all filings,
declarations and reports with the IRS in respect thereof, including the reports
required to be filed under Section 1060 of the Code. Buyer shall prepare and
deliver IRS Form 8594 to Seller within forty-five (45) days after the Closing
Date to be filed with the IRS. In any Proceeding related to the determination of
any Tax, neither Buyer nor Seller or Shareholder shall contend or represent that
such allocation is not a correct allocation.
 
2.6 CLOSING
 
The purchase and sale provided for in this Agreement (the “Closing”) will take
place at the offices of Sichenzia Ross Friedman Ference LLP, 1065 Avenue of the
Americas, 21st Floor, New York, NY 10018, on or before June 30, 2006, unless
Buyer and Seller otherwise agree. Subject to the provisions of Article 9,
failure to consummate the purchase and sale provided for in this Agreement on
the date and time and at the place determined pursuant to this Section 2.6 will
not result in the termination of this Agreement and will not relieve any party
of any obligation under this Agreement. In such a situation, the Closing will
occur as soon as practicable, subject to Article 9.

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2.7 CLOSING OBLIGATIONS
 
In addition to any other documents to be delivered under other provisions of
this Agreement, at the Closing:
 
a. Seller and Shareholder, as the case may be, shall deliver to Buyer, together
with funds sufficient to pay (i) one-half of all sales taxes, and (ii) all other
Taxes necessary for the transfer, filing or recording thereof:
 
(i) a bill of sale for all of the Assets that are Tangible Personal Property in
the form of Exhibit 2.7(a)(i) (the “Bill of Sale”) executed by Seller;
(ii) assignments of all Intellectual Property Assets and separate assignments of
all registered Marks, Patents and Copyrights in the form of Exhibit 2.7(a)(ii)
executed by Seller;
(iii) such other deeds, bills of sale, assignments, certificates of title,
documents and other instruments of transfer and conveyance as may reasonably be
requested by Buyer, each in form and substance satisfactory to Buyer and its
legal counsel and executed by Seller;
(iv) the lease for the Premises in the form of Exhibit 2.7(a)(iv) (the “Lease”);
(v) a certificate executed by Seller and the Shareholder as to the accuracy of
their representations and warranties as of the date of this Agreement and as of
the Closing in accordance with Section 7.1 and as to their compliance with and
performance of their covenants and obligations to be performed or complied with
at or before the Closing in accordance with Section 7.2 (Exhibit 2.7(a)(v));
(vi) an opinion of counsel for the Seller and the Shareholder in form and
substance satisfactory to Buyer and its legal counsel (Exhibit 2.7(a)(vi)) ;
(vii) a certificate of the Secretary of Seller certifying, as complete and
accurate as of the Closing (Exhibit 2.7(a)(vii)), attached copies of the
Governing Documents of Seller, certifying and attaching all requisite
resolutions or actions of Seller’s board of directors and Shareholder approving
the execution and delivery of this Agreement and the consummation of the
Contemplated Transactions and the change of name contemplated by Section 5.9 and
certifying to the incumbency and signatures of the officers of Seller executing
this Agreement and any other document relating to the Contemplated Transactions
and accompanied by the requisite documents for amending the relevant Governing
Documents of Seller required to effect such change of name in form sufficient
for filing with the appropriate Governmental Body;
(viii) the Consulting Agreement in the form of Exhibit 2.7(b)(v);
(ix) an assignment of all of the Assets that are intangible personal property in
the form of Exhibit 2.7(a)(ix), which assignment shall also contain Buyer’s
undertaking and assumption of the Assumed Liabilities (the “Assignment and
Assumption Agreement”) executed by Seller; and
(x) the Allocation of Purchase Price, in the form of Exhibit 2.7(a)(x). 

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b. Buyer shall deliver to Seller and Shareholder, as the case may be, together
with funds sufficient to pay one-half of all sales taxes necessary for the
transfer, filing or recording thereof:
 
(i) Four million two hundred fifty thousand dollars ($4,250,000.00) by certified
check or other immediately available funds, net of the Escrow Deposit;
(ii) a promissory note executed by Buyer and payable to Seller in the principal
amount of Seven hundred fifty thousand dollars ($750,000.00) in the form of
Exhibit 2.7(b)(ii) (the “Secured Subordinated Promissory Note”). The Secured
Subordinated Promissory Note shall be secured with a subordinated lien on the
Assets, which subordinated lien will be evidenced by the Security Agreement. The
Seller will agree to execute a commercially reasonable subordination agreement
proffered by lenders to Buyer either contemporaneous with or subsequent to the
Closing, and will execute whatever documents may be reasonably necessary to make
Seller’s security interest in the Assets subordinate to Buyer’s lenders;
(iii) the Security Agreement (Exhibit 2.7(b)(iii)) and Financing Statement
necessary to perfect Seller’s security interest in the Assets, subject to the
limitations in Section 2.7(b)(ii);
(iv) the Assignment and Assumption Agreement, as such term is defined in Section
2.7(a)(ix) above;
(v)  the Consulting Agreement in the form of Exhibit 2.7(b)(v);
(vi) a certificate executed by Buyer as to the accuracy of its representations
and warranties as of the date of this Agreement and as of the Closing in
accordance with Section 8.1 and as to its compliance with and performance of its
covenants and obligations to be performed or complied with at or before the
Closing in accordance with Section 8.2 (Exhibit 2.7(b)(vi));
(vii) an opinion of counsel for the Buyer in form and substance satisfactory to
Seller and Stockholder (Exhibit 2.7(b)(vii));
(viii) a certificate of the Secretary of Buyer certifying, as complete and
accurate as of the Closing (Exhibit 2.7(b)(viii)), attached copies of the
Governing Documents of Buyer and certifying and attaching all requisite
resolutions or actions of Buyer’s board of directors approving the execution and
delivery of this Agreement and the consummation of the Contemplated Transactions
and certifying to the incumbency and signatures of the officers of Buyer
executing this Agreement and any other document relating to the Contemplated
Transactions;
                (ix) the executed Lease; and
(x) the Allocation of Purchase Price, in the form of Exhibit 2.7(a)(x).
 
2.8 ADJUSTMENT AMOUNT AND PAYMENT
 
The “Adjustment Amount” (which may be a positive or negative number) will be
equal to the amount determined by subtracting the Closing Working Capital from
the Agreed Working Capital. If the Adjustment Amount is positive, the Adjustment
Amount shall be subtracted from the cash consideration to be paid at Closing. If
the Adjustment Amount is negative, the Adjustment Amount shall be added to the
cash consideration to be paid at Closing.
 

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2.9 ADJUSTMENT PROCEDURE
 
a. “Working Capital” as of a given date shall mean the amount calculated by
subtracting the Assumed Liabilities as of that date from the sum of (i) all
Accounts Receivable, regardless of the aging thereof, and (ii) Inventory
included in the Assets as of that date.
b. The Agreed Working Capital Amount is $2,280,000.00.
c.  The day before Closing, Seller shall deliver to Buyer (i) a list of its
Accounts Receivable as of that date showing the aging thereof, (ii) a statement
of its Inventory value as of that date, and (iii) a list of the Assumed
Liabilities as of that date. Buyer shall then determine the Working Capital as
of the Closing by subtracting the Assumed Liabilities as of that date from the
sum of the Accounts Receivable as of that date and the Inventory as of that date
(the “Closing Working Capital”).
d. The Adjustment Amount shall be determined by subtracting the Closing Working
Capital from the Agreed Working Capital.
 
2.10 CONSENTS
 
a. If there are any Material Consents that have not yet been obtained (or
otherwise are not in full force and effect) as of the Closing, in the case of
each Seller Contract as to which such Material Consents were not obtained (or
otherwise are not in full force and effect) (the “Restricted Material
Contracts”), Buyer may waive the closing conditions as to any such Material
Consent and either:
 
(i) elect to have Seller continue its efforts to obtain the Material Consents;
or
(ii) elect to have Seller retain that Restricted Material Contract and all
Liabilities arising therefrom or relating thereto, on a cost neutral basis to
Seller.
 
If Buyer elects to have Seller continue its efforts to obtain any Material
Consents and the Closing occurs, notwithstanding Sections 2.1 and 2.4, neither
this Agreement nor the Assignment and Assumption Agreement nor any other
document related to the consummation of the Contemplated Transactions shall
constitute a sale, assignment, assumption, transfer, conveyance or delivery or
an attempted sale, assignment, assumption, transfer, conveyance or delivery of
the Restricted Material Contracts, and following the Closing, the parties shall
use Best Efforts, and cooperate with each other, to obtain the Material Consent
relating to each Restricted Material Contract as quickly as practicable. Pending
the obtaining of such Material Consents relating to any Restricted Material
Contract, the parties shall cooperate with each other in any reasonable and
lawful arrangements designed to provide to Buyer the benefits of use of the
Restricted Material Contract for its term (or any right or benefit arising
thereunder, including the enforcement for the benefit of Buyer of any and all
rights of Seller against a third party thereunder). Once a Material Consent for
the sale, assignment, assumption, transfer, conveyance and delivery of a
Restricted Material Contract is obtained, Seller shall promptly assign,
transfer, convey and deliver such Restricted Material Contract to Buyer, and
Buyer shall assume the obligations under such Restricted Material Contract
assigned to Buyer from and after the date of assignment to Buyer pursuant to a
special-purpose assignment and assumption agreement substantially similar in
terms to those of the Assignment and Assumption Agreement (which special-purpose
agreement the parties shall prepare, execute and deliver in good faith at the
time of such transfer, all at no additional cost to Buyer).

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b. If there are any Consents not listed on Exhibit 7.3 necessary for the
assignment and transfer of any Seller Contracts to Buyer (the “Nonmaterial
Consents”) which have not yet been obtained (or otherwise are not in full force
and effect) as of the Closing, Buyer shall elect at the Closing, in the case of
each of the Seller Contracts as to which such Nonmaterial Consents were not
obtained (or otherwise are not in full force and effect) (the “Restricted
Nonmaterial Contracts”), whether to:
 
(i) accept the assignment of such Restricted Nonmaterial Contract, in which
case, as between Buyer and Seller, such Restricted Nonmaterial Contract shall,
to the maximum extent practicable and notwithstanding the failure to obtain the
applicable Nonmaterial Consent, be transferred at the Closing pursuant to the
Assignment and Assumption Agreement as elsewhere provided under this Agreement;
or
(ii) reject the assignment of such Restricted Nonmaterial Contract, in which
case, notwithstanding Sections 2.1 and 2.4, (A) neither this Agreement nor the
Assignment and Assumption Agreement nor any other document related to the
consummation of the Contemplated Transactions shall constitute a sale,
assignment, assumption, conveyance or delivery or an attempted sale, assignment,
assumption, transfer, conveyance or delivery of such Restricted Nonmaterial
Contract, and (B) Seller shall retain such Restricted Nonmaterial Contract and
all Liabilities arising therefrom or relating thereto.

2.11  
ASSIGNMENT OF ACCOUNTS RECEIVABLE FROM BUYER TO SELLER

In the event that Buyer shall not receive payment of any of the Accounts
Receivable within 90 days of Closing, Buyer may assign such uncollected Accounts
Receivable to Seller at any time within 180 days after Closing (an “Accounts
Receivable Assignment”), provided, however, that if Buyer shall assign any of
such Accounts Receivable to Seller after 120 days after Closing but before 180
days after Closing, Buyer shall provide Seller with whatever assistance Seller
may reasonably request in the collection of such Accounts Receivable. Upon the
occurrence of an Accounts Receivable Assignment, Buyer shall reduce the amount
of its next payments due under the Secured Subordinated Promissory Note by the
total amount of the Accounts Receivable assigned. This reduction shall not be
subject to the escrow provisions of Section 11.8 regarding items proposed to be
set off by Buyer against its liability to Seller, but shall be deemed to be
agreed to by Seller.
 
SECTION 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER
 
Seller and the Shareholder represent and warrant, jointly and severally, to
Buyer as follows:
 

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3.1 ORGANIZATION AND GOOD STANDING
 
a. Exhibit 3.1(a) contains a complete and accurate list of Seller’s jurisdiction
of incorporation and any other jurisdictions in which it is qualified to do
business as a foreign corporation. Seller is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under the Seller
Contracts. Seller is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification.
b. Complete and accurate copies of the Governing Documents of Seller, as
currently in effect, are attached to Exhibit 3.1(b).
c. Seller has no Subsidiary and, except as disclosed in Exhibit 3.1(c), does not
own any shares of capital stock or other securities of any other Person.
 
3.2 ENFORCEABILITY; AUTHORITY; NO CONFLICT
 
a. This Agreement constitutes the legal, valid and binding obligation of Seller
and each Shareholder, enforceable against each of them in accordance with its
terms. Upon the execution and delivery by Seller and Shareholder of the
Consulting Agreement, the Noncompetition Agreement and each other agreement to
be executed or delivered by any or all of Seller and Shareholder at the Closing
(collectively, the “Seller’s Closing Documents”), each of Seller’s Closing
Documents will constitute the legal, valid and binding obligation of each of
Seller and the Shareholder, enforceable against each of them in accordance with
its terms. Seller has the absolute and unrestricted right, power and authority
to execute and deliver this Agreement and the Seller’s Closing Documents to
which it is a party and to perform its obligations under this Agreement and the
Seller’s Closing Documents, and such action has been duly authorized by all
necessary action by the Shareholder and board of directors. Each Shareholder has
all necessary legal capacity to enter into this Agreement and the Seller’s
Closing Documents to which such Shareholder is a party and to perform his
obligations hereunder and thereunder.
b. Except as set forth in Exhibit 3.2(b), neither the execution and delivery of
this Agreement, nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):
 
(i) Breach (A) any provision of any of the Governing Documents of Seller or (B)
any resolution adopted by the board of directors or the Shareholder;
(ii) Breach or give any Governmental Body or other Person the right to challenge
any of the Contemplated Transactions or to exercise any remedy or obtain any
relief under any Legal Requirement or any Order to which Seller or the
Shareholder, or any of the Assets, may be subject;
(iii) contravene, conflict with or result in a violation or breach of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by Seller or that otherwise relates to the Assets or to the
business of Seller;
(iv) cause Buyer to become subject to, or to become liable for the payment of,
any Tax, other than one-half of all sales taxes necessary for the transfer,
filing or recording of and of the Assets;

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(v) Breach any provision of, or give any Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or payment under, or to cancel, terminate or modify, any Seller Contract;
(vi) result in the imposition or creation of any Encumbrance upon or with
respect to any of the Assets; or
(vii) result in any shareholder of the Seller having the right to exercise
dissenters’ appraisal rights.
 
c. Except as set forth in Exhibit 3.2(c), neither Seller nor the Shareholder is
required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
 
3.3 CAPITALIZATION
 
The authorized equity securities of Seller consist of two hundred (200) shares
of common stock, no par value per share, of which one hundred (100) shares are
issued and outstanding, and all of which are owned by the Shareholder.
Shareholder is and will be on the Closing Date the record and beneficial owner
and holder of the shares owned by him, free and clear of all Encumbrances. There
are no Contracts relating to the issuance, sale or transfer of any equity
securities or other securities of Seller. None of the outstanding equity
securities of Seller was issued in violation of the Securities Act of 1933, as
amended (the “Securities Act”), or any other Legal Requirement.
 
3.4 FINANCIAL STATEMENTS
 
Seller has delivered to Buyer: (a) an unaudited balance sheet of Seller as at
December 31, 2005 (the “Balance Sheet”), and the related unaudited statement of
income for the year then ended; (b) unaudited balance sheets of Seller as at
December 31 in each of the fiscal years 2001 through 2004, and the related
unaudited statement of income for each of the fiscal years then ended; and (c)
an unaudited balance sheet of Seller as at March 31, 2006, (the “Interim Balance
Sheet”) and the related unaudited statement of income for the two (2) months
then ended. Such financial statements fairly present (and the financial
statements delivered pursuant to Section 5.8 will fairly present) the financial
condition and the results of operations of Seller as at the respective dates of
and for the periods referred to in such financial statements. The financial
statements referred to in this Section 3.4 and delivered pursuant to Section 5.8
reflect and will reflect the consistent application of accounting principles
throughout the periods involved, except as disclosed in the notes to such
financial statements. The financial statements have been and will be prepared
from and are in accordance with the accounting Records of Seller.
 

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3.5 BOOKS AND RECORDS
 
The books of account and other financial Records of Seller, all of which have
been made available to Buyer, are complete and correct and represent actual,
bona fide transactions and have been maintained in accordance with sound
business practices and maintenance of an adequate system of internal controls.
The minute books of Seller, all of which have been made available to Buyer,
contain accurate and complete Records of all meetings held of, and corporate
action taken by, the Shareholder, the board of directors and committees of the
board of directors of Seller, and no meeting of the Shareholder, board of
directors or committee has been held for which minutes have not been prepared or
are not contained in such minute books.
 
3.6 SUFFICIENCY OF ASSETS
 
Except as set forth in Exhibit 3.6, the Assets (a) constitute all of the assets,
tangible and intangible, of any nature whatsoever, necessary to operate Seller’s
business in the manner presently operated by Seller and (b) include all of the
operating assets of Seller.
 
3.7 TITLE TO ASSETS; ENCUMBRANCES
 
Seller owns good and transferable title to all of the Assets free and clear of
any Encumbrances other than those described in Exhibit 3.7 (“Encumbrances”).
Seller warrants to Buyer that, at the time of Closing, all Assets shall be free
and clear of all Encumbrances other than those identified on Exhibit 3.7 as
acceptable to Buyer (“Permitted Encumbrances”).
 
3.8 CONDITION OF FACILITIES
 
a. Use of the Facilities for the various purposes for which it is presently
being used is permitted as of right under all applicable zoning legal
requirements and is not subject to “permitted nonconforming” use or structure
classifications. All Improvements are in compliance with all applicable Legal
Requirements, including those pertaining to zoning, building and the disabled,
are in good repair and in good condition, ordinary wear and tear excepted, and
are free from latent and patent defects. No part of any Improvement encroaches
on any real property not included in the Facilities, and there are no buildings,
structures, fixtures or other Improvements primarily situated on adjoining
property which encroach on any part of the Land. The Land for each owned
Facility abuts on and has direct vehicular access to a public road or has access
to a public road via a permanent, irrevocable, appurtenant easement benefiting
such Land and comprising a part of the Facilities, is supplied with public or
quasi-public utilities and other services appropriate for the operation of the
Facilities located thereon and is not located within any flood plain or area
subject to wetlands regulation or any similar restriction. To Seller’s
knowledge, after reasonable investigation, there is no existing or proposed plan
to modify or realign any street or highway or any existing or proposed eminent
domain proceeding that would result in the taking of all or any part of any
Facility or that would prevent or hinder the continued use of any Facility as
heretofore used in the conduct of the business of Seller.
b. Each item of Tangible Personal Property is in repair and operating condition,
ordinary wear and tear excepted, is suitable for immediate use in the Ordinary
Course of Business and is free from latent and patent defects. No item of
Tangible Personal Property is in need of repair or replacement other than as
part of routine maintenance in the Ordinary Course of Business. Except as
disclosed in Exhibit 3.8(b), all Tangible Personal Property used in Seller’s
business is in the possession of Seller.
 
 

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3.9 ACCOUNTS RECEIVABLE
 
All Accounts Receivable that are reflected on the Balance Sheet or the Interim
Balance Sheet or on the accounting Records of Seller as of the Closing Date
represent or will represent valid obligations arising from sales actually made
or services actually performed by Seller in the Ordinary Course of Business.
Except to the extent paid prior to the Closing Date, such Accounts Receivable
are or will be as of the Closing Date current and collectible net of the
respective reserves shown on the Balance Sheet or the Interim Balance Sheet or
as included in the Closing Working Capital (which reserves are adequate and
calculated consistent with past practice and, in the case of the reserve in the
Accounts Receivable included in the Closing Working Capital, will not represent
a greater percentage of the Accounts Receivable reflected in the Accounts
Receivable included in the Closing Working Capital than the reserve reflected on
the Interim Balance Sheet represented of the Accounts Receivable reflected
thereon and will not represent a material adverse change in the composition of
such Accounts Receivable in terms of aging). Subject to such reserves, each of
such Accounts Receivable either has been or will be collected in full, without
any setoff, within ninety (90) days after the day on which it first becomes due
and payable. There is no contest, claim, defense or right of setoff, other than
returns in the Ordinary Course of Business of Seller, under any Contract with
any account debtor of an Account Receivable relating to the amount or validity
of such Account Receivable. Exhibit 3.9 contains a complete and accurate list of
all Accounts Receivable as of the date of the Interim Balance Sheet, which list
sets forth the aging of each such Account Receivable.
 
3.10 INVENTORIES
 
All items included in the Inventories consist of a quality saleable in the
Ordinary Course of Business of Seller except for items of below-standard
quality, all of which have been written off or written down to net realizable
value in the Balance Sheet or the Interim Balance Sheet or on the accounting
Records of Seller as of the Closing Date, as the case may be. Seller is not in
possession of any inventory not owned by Seller, including goods already sold.
Inventories now on hand that were purchased after the date of the Balance Sheet
or the Interim Balance Sheet were purchased in the Ordinary Course of Business
of Seller at a cost not exceeding market prices prevailing at the time of
purchase. All items of Inventory meet the original quality specifications of the
respective manufacturers. The Seller has on file, and such information is
included in the Assets, proper certification documentation for the Inventory.
 
3.11 NO UNDISCLOSED LIABILITIES
 
Except as set forth in Exhibit 3.11, Seller has no Liability except for
Liabilities reflected or reserved against in the Balance Sheet or the Interim
Balance Sheet and current liabilities incurred in the Ordinary Course of
Business of Seller since the date of the Interim Balance Sheet.
 

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3.12 TAXES
 
a. Tax Returns Filed and Taxes Paid. Seller has filed or caused to be filed on a
timely basis all Tax Returns and all reports with respect to Taxes that are or
were required to be filed pursuant to applicable Legal Requirements. All Tax
Returns and reports filed by Seller are true, correct and complete, subject to
amendments thereof in connection with the Income Tax Refunds. Seller has paid,
or made provision for the payment of, all Taxes that have or may have become due
for all periods covered by the Tax Returns or otherwise, or pursuant to any
assessment received by Seller, except such Taxes, if any, as are listed in
Exhibit 3.12(a) and are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided in the Balance
Sheet and the Interim Balance Sheet. Except as provided in Exhibit 3.12(a),
Seller currently is not the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made or is expected to be made by
any Governmental Body in a jurisdiction where Seller does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There are no
Encumbrances on any of the Assets that arose in connection with any failure (or
alleged failure) to pay any Tax, and Seller has no Knowledge of any basis for
assertion of any claims attributable to Taxes which, if adversely determined,
would result in any such Encumbrance.
b. Delivery of Tax Returns and Information Regarding Audits and Potential
Audits. Seller has delivered or made available to Buyer copies of, and Exhibit
3.12(b) contains a complete and accurate list of, all Tax Returns filed since
2002.
c. Proper Accrual. The charges, accruals and reserves with respect to Taxes on
the Records of Seller are adequate (determined in accordance with GAAP) and are
at least equal to Seller’s liability for Taxes. There exists no proposed tax
assessment or deficiency against Seller except as disclosed in the Balance Sheet
or in Exhibit 3.12(c).
d. Specific Potential Tax Liabilities and Tax Situations.
 
(i) Withholding. All Taxes that Seller is or was required by Legal Requirements
to withhold, deduct or collect have been duly withheld, deducted and collected
and, to the extent required, have been paid to the proper Governmental Body or
other Person.
(ii) Tax Sharing or Similar Agreements. There is no tax sharing agreement, tax
allocation agreement, tax indemnity obligation or similar written or unwritten
agreement, arrangement, understanding or practice with respect to Taxes
(including any advance pricing agreement, closing agreement or other arrangement
relating to Taxes) that will require any payment by Seller.
(iii) Consolidated Group. Seller (A) has not been a member of an affiliated
group within the meaning of Code Section 1504(a) (or any similar group defined
under a similar provision of state, local or foreign law) and (B) has no
liability for Taxes of any person (other than Seller and its Subsidiaries) under
Treas. Reg. sect. 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor by contract or otherwise.
(iv) S Corporation. Seller is an S corporation as defined in Code Section 1361,
and Seller is not and has not been subject to either the built-in-gains tax
under Code Section 1374 or the passive income tax under Code Section 1375.
Exhibit 3.12(d)(iv) lists all the states and localities with respect to which
Seller is required to file any corporate, income or franchise tax returns and
sets forth whether Seller is treated as the equivalent of an S corporation by or
with respect to each such state or locality. Seller has properly filed Tax
Returns with and paid and discharged any liabilities for taxes in any states or
localities in which it is subject to Tax.
 
(v) Substantial Understatement Penalty. Seller has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code
Section 6662, if any.

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3.13 NO MATERIAL ADVERSE CHANGE
 
Since the date of the Balance Sheet, there has not been any material adverse
change in the business, operations, prospects, assets, results of operations or
condition (financial or other) of Seller, and, to Seller’s Knowledge, after
reasonable investigation, no event has occurred or circumstance exists that may
result in such a material adverse change.
 
3.14 EMPLOYEE BENEFITS
 
a. Set forth in Exhibit 3.14(a) is a complete and correct list of all “employee
benefit plans” as defined by Section 3(3) of ERISA, all specified fringe benefit
plans as defined in Section 6039D of the Code, and all other bonus,
incentive-compensation, deferred-compensation, profit-sharing, stock-option,
stock-appreciation-right, stock-bonus, stock-purchase, employee-stock-ownership,
savings, severance, change-in-control, supplemental-unemployment, layoff,
salary-continuation, retirement, pension, health, life-insurance, disability,
accident, group-insurance, vacation, holiday, sick-leave, fringe-benefit or
welfare plan, and any other employee compensation or benefit plan, agreement,
policy, practice, commitment, contract or understanding (whether qualified or
nonqualified, currently effective or terminated, written or unwritten) and any
trust, escrow or other agreement related thereto that (i) is maintained or
contributed to by Seller or any other corporation or trade or business
controlled by, controlling or under common control with Seller (within the
meaning of Section 414 of the Code or Section 4001(a)(14) or 4001(b) of ERISA)
(“ERISA Affiliate”) or has been maintained or contributed to in the last six (6)
years by Seller or any ERISA Affiliate, or with respect to which Seller or any
ERISA Affiliate has or may have any liability, and (ii) provides benefits, or
describes policies or procedures applicable to any current or former director,
officer, employee or service provider of Seller or any ERISA Affiliate, or the
dependents of any thereof, regardless of how (or whether) liabilities for the
provision of benefits are accrued or assets are acquired or dedicated with
respect to the funding thereof (collectively the “Employee Plans”). Exhibit
3.14(a) identifies as such any Employee Plan that is (w) a “Defined Benefit
Plan” (as defined in Section 414(l) of the Code); (x) a plan intended to meet
the requirements of Section 401(a) of the Code; (y) a “Multiemployer Plan” (as
defined in Section 3(37) of ERISA); or (z) a plan subject to Title IV of ERISA,
other than a Multiemployer Plan. Also set forth on Exhibit 3.14(a) is a complete
and correct list of all ERISA Affiliates of Seller during the last six (6)
years.
b. Seller has delivered to Buyer true, accurate and complete copies of (i) the
documents comprising each Employee Plan (or, with respect to any Employee Plan
which is unwritten, a detailed written description of eligibility,
participation, benefits, funding arrangements, assets and any other matters
which relate to the obligations of Seller or any ERISA Affiliate); (ii) all
trust agreements, insurance contracts or any other funding instruments related
to the Employee Plans; (iii) all rulings, determination letters, no-action
letters or advisory opinions from the IRS, the U.S. Department of Labor, the
Pension Benefit Guaranty Corporation (“PBGC”) or any other Governmental Body
that pertain to each Employee Plan and any open requests therefor; (iv) the most
recent actuarial and financial reports (audited and/or unaudited) and the annual
reports filed with any Government Body with respect to the Employee Plans during
the current year and each of the three preceding years; (v) all collective
bargaining agreements pursuant to which contributions to any Employee Plan(s)
have been made or obligations incurred (including both pension and welfare
benefits) by Seller or any ERISA Affiliate, and all collective bargaining
agreements pursuant to which contributions are being made or obligations are
owed by such entities; (vi) all securities registration statements filed with
respect to any Employee Plan; (vii) all contracts with third-party
administrators, actuaries, investment managers, consultants and other
independent contractors that relate to any Employee Plan, (viii) with respect to
Employee Plans that are subject to Title IV of ERISA, the Form PBGC-1 filed for
each of the three most recent plan years; and (ix) all summary plan
descriptions, summaries of material modifications and memoranda, employee
handbooks and other written communications regarding the Employee Plans.

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c. Except as disclosed in Exhibit 3.14(c), full payment has been made of all
amounts that are required under the terms of each Employee Plan to be paid as
contributions with respect to all periods prior to and including the last day of
the most recent fiscal year of such Employee Plan ended on or before the date of
this Agreement and all periods thereafter prior to the Closing Date, and no
accumulated funding deficiency or liquidity shortfall (as those terms are
defined in Section 302 of ERISA and Section 412 of the Code) has been incurred
with respect to any such Employee Plan, whether or not waived. The value of the
assets of each Employee Plan exceeds the amount of all benefit liabilities
(determined on a plan termination basis using the actuarial assumptions
established by the PBGC as of the Closing Date) of such Employee Plan. Seller is
not required to provide security to an Employee Plan under Section 401(a)(29) of
the Code. The funded status of each Employee Plan that is a Defined Benefit Plan
is disclosed on Exhibit 3.14(c) in a manner consistent with the Statement of
Financial Accounting Standards No. 87. Seller has paid in full all required
insurance premiums, subject only to normal retrospective adjustments in the
ordinary course, with regard to the Employee Plans for all policy years or other
applicable policy periods ending on or before the Closing Date.
d. Except as disclosed in Exhibit 3.14(d), no Employee Plan, if subject to Title
IV of ERISA, has been completely or partially terminated, nor has any event
occurred nor does any circumstance exist that could result in the partial
termination of such Employee Plan. The PBGC has not instituted or threatened a
Proceeding to terminate or to appoint a trustee to administer any of the
Employee Plans pursuant to Subtitle 1 of Title IV of ERISA, and no condition or
set of circumstances exists that presents a material risk of termination or
partial termination of any of the Employee Plans by the PBGC. None of the
Employee Plans has been the subject of, and no event has occurred or condition
exists that could be deemed, a reportable event (as defined in Section 4043 of
ERISA) as to which a notice would be required (without regard to regulatory
monetary thresholds) to be filed with the PBGC. Seller has paid in full all
insurance premiums due to the PBGC with regard to the Employee Plans for all
applicable periods ending on or before the Closing Date.
e. Neither Seller nor any ERISA Affiliate has any liability or has Knowledge of
any facts or circumstances that might give rise to any liability, and the
Contemplated Transactions will not result in any liability, (i) for the
termination of or withdrawal from any Employee Plan under Sections 4062, 4063 or
4064 of ERISA, (ii) for any lien imposed under Section 302(f) of ERISA or
Section 412(n) of the Code, (iii) for any interest payments required under
Section 302(e) of ERISA or Section 412(m) of the Code, (iv) for any excise tax
imposed by Section 4971 of the Code, (v) for any minimum funding contributions
under Section 302(c)(11) of ERISA or Section 412(c)(11) of the Code or (vi) for
withdrawal from any Multiemployer Plan under Section 4201 of ERISA.

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f. Seller has, at all times, complied, and currently complies, in all material
respects with the applicable continuation requirements for its welfare benefit
plans, including (1) Section 4980B of the Code (as well as its predecessor
provision, Section 162(k) of the Code) and Sections 601 through 608, inclusive,
of ERISA, which provisions are hereinafter referred to collectively as “COBRA”
and (2) any applicable state statutes mandating health insurance continuation
coverage for employees.
g. The form of all Employee Plans is in compliance with the applicable terms of
ERISA, the Code, and any other applicable laws, including the Americans with
Disabilities Act of 1990, the Family Medical Leave Act of 1993 and the Health
Insurance Portability and Accountability Act of 1996, and such plans have been
operated in compliance with such laws and the written Employee Plan documents.
Neither Seller nor any fiduciary of an Employee Plan has violated the
requirements of Section 404 of ERISA. All required reports and descriptions of
the Employee Plans (including Internal Revenue Service Form 5500 Annual Reports,
Summary Annual Reports and Summary Plan Descriptions and Summaries of Material
Modifications) have been (when required) timely filed with the IRS, the U.S.
Department of Labor or other Governmental Body and distributed as required, and
all notices required by ERISA or the Code or any other Legal Requirement with
respect to the Employee Plans have been appropriately given.
h. Each Employee Plan that is intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter from the IRS, and Seller
has no Knowledge of any circumstances that will or could result in revocation of
any such favorable determination letter. Each trust created under any Employee
Plan has been determined to be exempt from taxation under Section 501(a) of the
Code, and Seller is not aware of any circumstance that will or could result in a
revocation of such exemption. Each Employee Welfare Benefit Plan (as defined in
Section 3(1) of ERISA) that utilizes a funding vehicle described in Section
501(c)(9) of the Code or is subject to the provisions of Section 505 of the Code
has been the subject of a notification by the IRS that such funding vehicle
qualifies for tax-exempt status under Section 501(c)(9) of the Code or that the
plan complies with Section 505 of the Code, unless the IRS does not, as a matter
of policy, issue such notification with respect to the particular type of plan.
With respect to each Employee Plan, no event has occurred or condition exists
that will or could give rise to a loss of any intended tax consequence or to any
Tax under Section 511 of the Code.
i. There is no material pending or threatened Proceeding relating to any
Employee Plan, nor is there any basis for any such Proceeding. Neither Seller
nor any fiduciary of an Employee Plan has engaged in a transaction with respect
to any Employee Plan that, assuming the taxable period of such transaction
expired as of the date hereof, could subject Seller or Buyer to a Tax or penalty
imposed by either Section 4975 of the Code or Section 502(l) of ERISA or a
violation of Section 406 of ERISA. The Contemplated Transactions will not result
in the potential assessment of a Tax or penalty under Section 4975 of the Code
or Section 502(l) of ERISA nor result in a violation of Section 406 of ERISA.
j. Seller has maintained workers’ compensation coverage as required by
applicable state law through purchase of insurance and not by self-insurance or
otherwise except as disclosed to Buyer on Exhibit 3.14(j).
k. Except as required by Legal Requirements and as provided in Section 10.1(d),
the consummation of the Contemplated Transactions will not accelerate the time
of vesting or the time of payment, or increase the amount, of compensation due
to any director, employee, officer, former employee or former officer of Seller.
There are no contracts or arrangements providing for payments that could subject
any person to liability for tax under Section 4999 of the Code.

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l. Except for the continuation coverage requirements of COBRA, Seller has no
obligations or potential liability for benefits to employees, former employees
or their respective dependents following termination of employment or retirement
under any of the Employee Plans that are Employee Welfare Benefit Plans.
m.  None of the Contemplated Transactions will result in an amendment,
modification or termination of any of the Employee Plans. No written or oral
representations have been made to any employee or former employee of Seller
promising or guaranteeing any employer payment or funding for the continuation
of medical, dental, life or disability coverage for any period of time beyond
the end of the current plan year (except to the extent of coverage required
under COBRA). No written or oral representations have been made to any employee
or former employee of Seller concerning the employee benefits of Buyer.
n. With respect to any Employee Plan that is a “multiemployer plan” within the
meaning of Section 4001(a)(3) of ERISA (“Multiemployer Plan”), and any other
Multiemployer Plan to which Seller has at any time had an obligation to
contribute:
 
(i) all contributions required by the terms of such Multiemployer Plan and any
collective bargaining agreement have been made when due; and
(ii) Seller would not be subject to any withdrawal liability under Part 1 of
Subtitle E of Title IV of ERISA if, as of the date hereof, Seller were to engage
in a “complete withdrawal” (as defined in ERISA Section 4203) or a “partial
withdrawal” (as defined in ERISA Section 4205) from such Multiemployer Plan.
 
3.15 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
 
a. Except as set forth in Exhibit 3.15(a):
 
(i) Seller is, and at all times since January 1, 2001, has been, in full
compliance with each Legal Requirement that is or was applicable to it or to the
conduct or operation of its business or the ownership or use of any of its
assets;
(ii) no event has occurred or circumstance exists that (with or without notice
or lapse of time) (A) may constitute or result in a violation by Seller of, or a
failure on the part of Seller to comply with, any Legal Requirement or (B) may
give rise to any obligation on the part of Seller to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature; and
(iii) Seller has not received, at any time since January 1, 2001, any notice or
other communication (whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible or potential violation
of, or failure to comply with, any Legal Requirement or (B) any actual, alleged,
possible or potential obligation on the part of Seller to undertake, or to bear
all or any portion of the cost of, any remedial action of any nature.
 
b. Exhibit 3.15(b) contains a complete and accurate list of each Governmental
Authorization that is held by Seller or that otherwise relates to Seller’s
business or the Assets. Each Governmental Authorization listed or required to be
listed in Exhibit 3.15(b) is valid and in full force and effect. Except as set
forth in Exhibit 3.15(b):
 

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(i) Seller is, and at all times since January 1, 2001, has been, in full
compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Exhibit 3.15(b);
(ii) no event has occurred or circumstance exists that may (with or without
notice or lapse of time) (A) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in Exhibit 3.15(b) or
(B) result directly or indirectly in the revocation, withdrawal, suspension,
cancellation or termination of, or any modification to, any Governmental
Authorization listed or required to be listed in Exhibit 3.15(b);
(iii) Seller has not received, at any time since January 1, 2001, any notice or
other communication (whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible or potential violation
of or failure to comply with any term or requirement of any Governmental
Authorization or (B) any actual, proposed, possible or potential revocation,
withdrawal, suspension, cancellation, termination of or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed for the renewal of the
Governmental Authorizations listed or required to be listed in Exhibit 3.15(b)
have been duly filed on a timely basis with the appropriate Governmental Bodies,
and all other filings required to have been made with respect to such
Governmental Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies.
 
The Governmental Authorizations listed in Exhibit 3.15(b) collectively
constitute all of the Governmental Authorizations necessary to permit Seller to
lawfully conduct and operate its business in the manner in which it currently
conducts and operates such business and to permit Seller to own and use its
assets in the manner in which it currently owns and uses such assets.
 
3.16 LEGAL PROCEEDINGS; ORDERS
 
a. Except as set forth in Exhibit 3.16(a), there is no pending or, to Seller’s
Knowledge, threatened Proceeding:
 
(i) by or against Seller or that otherwise relates to or may affect the business
of, or any of the assets owned or used by, Seller; or
(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, any of the Contemplated
Transactions.
 
To the Knowledge of Seller, no event has occurred or circumstance exists that is
reasonably likely to give rise to or serve as a basis for the commencement of
any such Proceeding. Seller has delivered to Buyer copies of all pleadings,
correspondence and other documents relating to each Proceeding listed in Exhibit
3.16(a). There are no Proceedings listed or required to be listed in Exhibit
3.16(a) that could have a material adverse effect on the business, operations,
assets, condition or prospects of Seller or upon the Assets.
 

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b. Except as set forth in Exhibit 3.16(b):
 
(i) there is no Order to which Seller, its business or any of the Assets is
subject; and
(ii) to the Knowledge of Seller, no officer, director, agent or employee of
Seller is subject to any Order that prohibits such officer, director, agent or
employee from engaging in or continuing any conduct, activity or practice
relating to the business of Seller.
 
c. Except as set forth in Exhibit 3.16(c):
 
(i) Seller is, and, at all times since January 1, 2001, has been in compliance
with all of the terms and requirements of each Order to which it or any of the
Assets is or has been subject;
(ii) no event has occurred or circumstance exists that is reasonably likely to
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which Seller
or any of the Assets is subject; and
(iii) Seller has not received, at any time since January 1, 2001, any notice or
other communication (whether oral or written) from any Governmental Body or any
other Person regarding any actual, alleged, possible or potential violation of,
or failure to comply with, any term or requirement of any Order to which Seller
or any of the Assets is or has been subject.
 
3.17 ABSENCE OF CERTAIN CHANGES AND EVENTS
 
Except as set forth in Exhibit 3.17, since the date of the Balance Sheet, Seller
has conducted its business only in the Ordinary Course of Business and there has
not been any:
 
a. change in Seller’s authorized or issued capital stock, grant of any stock
option or right to purchase shares of capital stock of Seller or issuance of any
security convertible into such capital stock;
b. amendment to the Governing Documents of Seller;
c. payment (except in the Ordinary Course of Business) or increase by Seller of
any bonuses, salaries or other compensation to any shareholder, director,
officer or employee or entry into any employment, severance or similar Contract
with any director, officer or employee;
d. adoption of, amendment to or increase in the payments to or benefits under,
any Employee Plan;
e. damage to or destruction or loss of any Asset, whether or not covered by
insurance;
f. entry into, termination of or receipt of notice of termination of (i) any
license, distributorship, dealer, sales representative, joint venture, credit or
similar Contract to which Seller is a party, or (ii) any Contract or transaction
involving a total remaining commitment by Seller;
g. sale (other than sales of Inventories in the Ordinary Course of Business),
lease or other disposition of any Asset or property of Seller (including the
Intellectual Property Assets) or the creation of any Encumbrance on any Asset;
h. cancellation or waiver of any claims or rights with a value to Seller;  

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i. indication by any customer or supplier of an intention to discontinue or
change the terms of its relationship with Seller;
j. material change in the accounting methods used by Seller; or
k. Contract by Seller to do any of the foregoing.
 
3.18 CONTRACTS; NO DEFAULTS
 
a. Exhibit 3.18(a) contains an accurate and complete list, and Seller has
delivered to Buyer accurate and complete copies, of:
 
(i) each Seller Contract that involves performance of services or delivery of
goods or materials by Seller;
(ii) each Seller Contract that involves performance of services or delivery of
goods or materials to Seller;
(iii) each Seller Contract that was not entered into in the Ordinary Course of
Business and that involves expenditures or receipts of Seller;
(iv) each Seller Contract affecting the ownership of, leasing of, title to, use
of or any leasehold or other interest in any real or personal;
(v) each Seller Contract with any labor union or other employee representative
of a group of employees relating to wages, hours and other conditions of
employment;
(vi) each Seller Contract (however named) involving a sharing of profits,
losses, costs or liabilities by Seller with any other Person;
(vii) each Seller Contract containing covenants that in any way purport to
restrict Seller’s business activity or limit the freedom of Seller to engage in
any line of business or to compete with any Person;
(viii) each Seller Contract providing for payments to or by any Person based on
sales, purchases or profits, other than direct payments for goods;
(ix) each power of attorney of Seller that is currently effective and
outstanding;
(x) each Seller Contract entered into other than in the Ordinary Course of
Business that contains or provides for an express undertaking by Seller to be
responsible for consequential damages;
(xi) each Seller Contract for capital expenditures;
(xii) each Seller Contract not denominated in U.S. dollars;
(xiii) each written warranty, guaranty and/or other similar undertaking with
respect to contractual performance extended by Seller other than in the Ordinary
Course of Business; and
(xiv) each amendment, supplement and modification (whether oral or written) in
respect of any of the foregoing.
 
Exhibit 3.18(a) sets forth reasonably complete details concerning such
Contracts, including the parties to the Contracts, the amount of the remaining
commitment of Seller under the Contracts and the location of Seller’s office
where details relating to the Contracts are located.
 

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b. Except as set forth in Exhibit 3.18(b), Shareholder does not have nor may he
acquire any rights under, and Shareholder does not have nor may he become
subject to any obligation or liability under, any Contract that relates to the
business of Seller or any of the Assets.
c. Except as set forth in Exhibit 3.18(c):
 
(i) each Contract identified or required to be identified in Exhibit 3.18(a) and
which is to be assigned to or assumed by Buyer under this Agreement is in full
force and effect and is valid and enforceable in accordance with its terms;
(ii) each Contract identified or required to be identified in Exhibit 3.18(a)
and which is being assigned to or assumed by Buyer is assignable by Seller to
Buyer without the consent of any other Person; and
(iii) to the Knowledge of Seller, no Contract identified or required to be
identified in Exhibit 3.18(a) and which is to be assigned to or assumed by Buyer
under this Agreement will upon completion or performance thereof have a material
adverse affect on the business, assets or condition of Seller or the business to
be conducted by Buyer with the Assets.
 
d. Except as set forth in Exhibit 3.18(d):
 
(i) Seller is, and at all times since January 1, 2001, has been, in compliance
with all applicable terms and requirements of each Seller Contract which is
being assumed by Buyer;
(ii) each other Person that has or had any obligation or liability under any
Seller Contract which is being assigned to Buyer is, and at all times since
January 1, 2001, has been, in full compliance with all applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with or without notice
or lapse of time) may contravene, conflict with or result in a Breach of, or
give Seller or other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or payment under,
or to cancel, terminate or modify, any Seller Contract that is being assigned to
or assumed by Buyer;
(iv) no event has occurred or circumstance exists under or by virtue of any
Contract that (with or without notice or lapse of time) would cause the creation
of any Encumbrance affecting any of the Assets; and
(v) Seller has not given to or received from any other Person, at any time since
January 1, 2001, any notice or other communication (whether oral or written)
regarding any actual, alleged, possible or potential violation or Breach of, or
default under, any Contract which is being assigned to or assumed by Buyer.
 
e. There are no renegotiations of, attempts to renegotiate or outstanding rights
to renegotiate any material amounts paid or payable to Seller under current or
completed Contracts with any Person having the contractual or statutory right to
demand or require such renegotiation and no such Person has made written demand
for such renegotiation.
f. Each Contract relating to the sale, design, manufacture or provision of
products or services by Seller has been entered into in the Ordinary Course of
Business of Seller and has been entered into without the commission of any act
alone or in concert with any other Person, or any consideration having been paid
or promised, that is or would be in violation of any Legal Requirement.

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3.19 INSURANCE
 
a. Seller has delivered to Buyer:
 
(i) accurate and complete copies of all policies of insurance (and
correspondence relating to coverage thereunder) to which Seller is a party or
under which Seller is covered, a list of which is included in Exhibit 3.19(a);
and
(ii) accurate and complete copies of all pending applications by Seller for
policies of insurance.
 
b. Exhibit 3.19(b) describes:
 
(i) any self-insurance arrangement by or affecting Seller, including any
reserves established thereunder;
(ii) any Contract or arrangement, other than a policy of insurance, for the
transfer or sharing of any risk to which Seller is a party or which involves the
business of Seller; and
(iii) all obligations of Seller to provide insurance coverage to Third Parties
(for example, under Leases or service agreements) and identifies the policy
under which such coverage is provided.
 
c. Except as set forth in Exhibit 3.19(c):
 
(i) all policies of insurance to which Seller is a party or that provide
coverage to Seller:
 
(A) are valid, outstanding and enforceable;
(B) are issued by an insurer that is financially sound and reputable;
(C) taken together, provide adequate insurance coverage for the Assets and the
operations of Seller for all risks normally insured against by a Person carrying
on the same business or businesses as Seller in the same location; and
(D) are sufficient for compliance with all Legal Requirements and Seller
Contracts;
 
(ii) Seller has not received (A) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights or (B) any notice of
cancellation or any other indication that any policy of insurance is no longer
in full force or effect or that the issuer of any policy of insurance is not
willing or able to perform its obligations thereunder;
(iii) Seller has paid all premiums due, and has otherwise performed all of its
obligations, under each policy of insurance to which it is a party or that
provides coverage to Seller; and
(iv) Seller has given notice to the insurer of all claims that may be insured
thereby.

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3.20 ENVIRONMENTAL MATTERS
 
Except as disclosed in Exhibit 3.20:
 
a. Seller is, and at all times has been, in full compliance with, and has not
been and is not in violation of or liable under, any Environmental Law. Neither
Seller nor the Shareholder has any basis to expect, nor has any of them or any
other Person for whose conduct they are or may be held to be responsible
received, any actual or threatened order, notice or other communication from (i)
any Governmental Body or private citizen acting in the public interest or (ii)
the current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with any Environmental Law, or of any
actual or threatened obligation to undertake or bear the cost of any
Environmental, Health and Safety Liabilities with respect to any Facility or
other property or asset (whether real, personal or mixed) in which Seller has or
had an interest, or with respect to any property or Facility at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used or processed by Seller or any other Person for whose conduct it
is or may be held responsible, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled or
received.
b. There are no pending or, to the Knowledge of Seller, threatened claims,
Encumbrances, or other restrictions of any nature resulting from any
Environmental, Health and Safety Liabilities or arising under or pursuant to any
Environmental Law with respect to or affecting any Facility or any other
property or asset (whether real, personal or mixed) in which Seller has or had
an interest.
c. Neither Seller nor the Shareholder has any Knowledge of or any basis to
expect, nor has any of them, or any other Person for whose conduct they are or
may be held responsible, received, any citation, directive, inquiry, notice,
Order, summons, warning or other communication that relates to Hazardous
Activity, Hazardous Materials, or any alleged, actual, or potential violation or
failure to comply with any Environmental Law, or of any alleged, actual, or
potential obligation to undertake or bear the cost of any Environmental, Health
and Safety Liabilities with respect to any Facility or property or asset
(whether real, personal or mixed) in which Seller has or had an interest, or
with respect to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used or processed by Seller or any
other Person for whose conduct it is or may be held responsible, have been
transported, treated, stored, handled, transferred, disposed, recycled or
received.
d. Neither Seller nor any other Person for whose conduct it is or may be held
responsible has any Environmental, Health and Safety Liabilities with respect to
any Facility or, to the Knowledge of Seller, with respect to any other property
or asset (whether real, personal or mixed) in which Seller (or any predecessor)
has or had an interest or at any property geologically or hydrologically
adjoining any Facility or any such other property or asset.
e. There are no Hazardous Materials present on or in the Environment at any
Facility or, to Seller’s Knowledge, after reasonable investigation, at any
geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, aboveground or underground storage tanks,
landfills, land deposits, dumps, equipment (whether movable or fixed) or other
containers, either temporary or permanent, and deposited or located in land,
water, sumps, or any other part of the Facility or such adjoining property, or
incorporated into any structure therein or thereon. Neither Seller nor any
Person for whose conduct it is or may be held responsible, or to the Knowledge
of Seller, any other Person, has permitted or conducted, or is aware of, any
Hazardous Activity conducted with respect to any Facility or any other property
or assets (whether real, personal or mixed) in which Seller has or had an
interest except in full compliance with all applicable Environmental Laws.

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f. There has been no Release or, to the Knowledge of Seller, Threat of Release,
of any Hazardous Materials at or from any Facility or at any other location
where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by any Facility, or
from any other property or asset (whether real, personal or mixed) in which
Seller has or had an interest, or to the Knowledge of Seller any geologically or
hydrologically adjoining property, whether by Seller or any other Person.
g. Seller has delivered to Buyer true and complete copies and results of any
reports, studies, analyses, tests, or monitoring possessed or initiated by
Seller pertaining to Hazardous Materials or Hazardous Activities in, on, or
under the Facilities, or concerning compliance, by Seller or any other Person
for whose conduct it is or may be held responsible, with Environmental Laws.
 
3.21 EMPLOYEES
 
a. Exhibit 3.21(a) contains a complete and accurate list of the following
information for each employee, director, independent contractor, consultant and
agent of Seller, including each employee on leave of absence or layoff status:
name; job title; date of hiring or engagement; current compensation paid or
payable and any change in compensation since January 1, 2003; sick and vacation
leave that is accrued but unused; and service credited for purposes of vesting
and eligibility to participate under any Employee Plan, or any other employee or
director benefit plan.
b. Exhibit 3.21(b) contains a complete and accurate list of the following
information for each retired employee or director of Seller, or their
dependents, receiving benefits or scheduled to receive benefits in the future:
name; pension benefits; pension option election; retiree medical insurance
coverage; retiree life insurance coverage; and other benefits.
c. Exhibit 3.21(c) states the number of employees terminated by Seller since
July 1, 2005, and contains a complete and accurate list of the following
information for each employee of Seller who has been terminated or laid off, or
whose hours of work have been reduced by more than fifty percent (50%) by
Seller, in the six (6) months prior to the date of this Agreement: (i) the date
of such termination, layoff or reduction in hours; and (ii) the reason for such
termination, layoff or reduction in hours.
d. Seller has not violated the Worker Adjustment and Retraining Notification Act
(the “WARN Act”) or any similar state or local Legal Requirement. Seller has
terminated no employees during the ninety (90) day period prior to the date of
this Agreement.
e. To the Knowledge of Seller, no officer, director, agent, employee,
consultant, or contractor of Seller is bound by any Contract that purports to
limit the ability of such officer, director, agent, employee, consultant, or
contractor (i) to engage in or continue or perform any conduct, activity, duties
or practice relating to the business of Seller or (ii) to assign to Seller or to
any other Person any rights to any invention, improvement, or discovery. No
former or current employee of Seller is a party to, or is otherwise bound by,
any Contract that in any way adversely affected, affects, or will affect the
ability of Seller or Buyer to conduct the business as heretofore carried on by
Seller.

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3.22 LABOR DISPUTES; COMPLIANCE
 
a. Seller has complied in all respects with all Legal Requirements relating to
employment practices, terms and conditions of employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar Taxes and occupational
safety and health. Seller is not liable for the payment of any Taxes, fines,
penalties, or other amounts, however designated, for failure to comply with any
of the foregoing Legal Requirements.
b. Except as disclosed in Exhibit 3.22(b), (i) Seller has not been, and is not
now, a party to any collective bargaining agreement or other labor contract;
(ii) there has not been, there is not presently pending or existing, and to
Seller’s Knowledge there is not threatened, any strike, slowdown, picketing,
work stoppage or employee grievance process involving Seller; (iii) to Seller’s
Knowledge no event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute; (iv) there is not pending
or, to Seller’s Knowledge, threatened against or affecting Seller any Proceeding
relating to the alleged violation of any Legal Requirement pertaining to labor
relations or employment matters, including any charge or complaint filed with
the National Labor Relations Board or any comparable Governmental Body, and
there is no organizational activity or other labor dispute against or affecting
Seller or the Facilities; (v) no application or petition for an election of or
for certification of a collective bargaining agent is pending; (vi) no grievance
or arbitration Proceeding exists that might have an adverse effect upon Seller
or the conduct of its business; (vii) there is no lockout of any employees by
Seller, and no such action is contemplated by Seller; and (viii) to Seller’s
Knowledge there has been no charge of discrimination filed against or threatened
against Seller with the Equal Employment Opportunity Commission or similar
Governmental Body.
 
3.23 INTELLECTUAL PROPERTY ASSETS
 
a. The term “Intellectual Property Assets” means all intellectual property owned
or licensed (as licensor or licensee) by Seller in which Seller has a
proprietary interest, including:
 
(i) Seller’s name, all assumed fictional business names, trade names, registered
and unregistered trademarks, service marks and applications (collectively,
“Marks”);

(ii) all patents, patent applications and inventions and discoveries that may be
patentable (collectively, “Patents”);

(iii) all registered and unregistered copyrights in both published works and
unpublished works (collectively, “Copyrights”);

(iv) all rights in mask works;

(v) all know-how, trade secrets, confidential or proprietary information,
customer lists, Software, technical information, data, process technology,
plans, drawings and blue prints (collectively, “Trade Secrets”); and

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(vi) all rights in internet web sites and internet domain names presently used
by Seller (collectively “Net Names”).
 
b. Exhibit 3.23(b) contains a complete and accurate list and summary
description, including any royalties paid or received by Seller, and Seller has
delivered to Buyer accurate and complete copies, of all Seller Contracts
relating to the Intellectual Property Assets, except for any license implied by
the sale of a product and perpetual, paid-up licenses for commonly available
Software programs under which Seller is the licensee. There are no outstanding
and, to Seller’s Knowledge, no threatened disputes or disagreements with respect
to any such Contract.

c. Except as set forth in Exhibit 3.23(c), the Intellectual Property Assets are
all those necessary for the operation of Seller’s business as it is currently
conducted. Seller is the owner or licensee of all right, title and interest in
and to each of the Intellectual Property Assets, free and clear of all
Encumbrances, and has the right to use without payment to a Third Party all of
the Intellectual Property Assets, other than in respect of licenses listed in
Exhibit 3.23(c).

d. Marks

(i) Exhibit 3.23(d) contains a complete and accurate list and summary
description of all Marks.

(ii) Except as identified in Exhibit 3.23(d), all Marks have been registered
with the United States Patent and Trademark Office, are currently in compliance
with all formal Legal Requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal applications), are
valid and enforceable and are not subject to any maintenance fees or taxes or
actions falling due within ninety (90) days after the Closing Date.

(iii) No Mark has been or is now involved in any opposition, invalidation or
cancellation Proceeding and, to Seller’s Knowledge, no such action is threatened
with respect to any of the Marks.

(iv) To Seller’s Knowledge, there is no potentially interfering trademark or
trademark application of any other Person.

(v) No Mark is infringed or, to Seller’s Knowledge, has been challenged or
threatened in any way. None of the Marks used by Seller infringes or is alleged
to infringe any trade name, trademark or service mark of any other Person.

(vi) All products and materials containing a Mark bear the proper federal
registration notice where permitted by law.
 
e. Trade Secrets

(i) With respect to each Trade Secret, the documentation relating to such Trade
Secret, if any, is current, accurate and sufficient in detail and content to
identify and explain it and to allow its full and proper use without reliance on
the knowledge or memory of any individual.

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(ii) Seller has taken all reasonable precautions to protect the secrecy,
confidentiality and value of all Trade Secrets (including the enforcement by
Seller of a policy requiring each employee or contractor to execute proprietary
information and confidentiality agreements substantially in Seller’s standard
form, and all current and former employees and contractors of Seller have
executed such an agreement).

(iii) Seller has good title to and an absolute right to use the Trade Secrets.
The Trade Secrets are not part of the public knowledge or literature and, to
Seller’s Knowledge, have not been used, divulged or appropriated either for the
benefit of any Person (other than Seller) or to the detriment of Seller. No
Trade Secret is subject to any adverse claim or has been challenged or
threatened in any way or infringes any intellectual property right of any other
Person.
 
f. Net Names

(i) Exhibit 3.23(f) contains a complete and accurate list and summary
description of all Net Names.

(ii) All Net Names have been registered in the name of Seller and are in
compliance with all formal Legal Requirements.

(iii) No Net Name has been or is now involved in any dispute, opposition,
invalidation or cancellation Proceeding and, to Seller’s Knowledge, no such
action is threatened with respect to any Net Name.

  (iv) To Seller’s Knowledge, there is no domain name application pending of any
other person which would or would potentially interfere with or infringe any Net
Name.

  (v) No Net Name is infringed or, to Seller’s Knowledge, has been challenged,
interfered with or threatened in any way. No Net Name infringes, interferes with
or is alleged to interfere with or infringe the trademark, copyright or domain
name of any other Person.
 
3.24 COMPLIANCE WITH THE FOREIGN CORRUPT PRACTICES ACT AND EXPORT CONTROL AND
ANTIBOYCOTT LAWS
 
a. Seller and its Representatives have not, to obtain or retain business,
directly or indirectly offered, paid or promised to pay, or authorized the
payment of, any money or other thing of value (including any fee, gift, sample,
travel expense or entertainment with a value in excess of one hundred dollars
($100.00) in the aggregate to any one individual in any year) or any commission
payment, to:
 
(i) any person who is an official, officer, agent, employee or representative of
any Governmental Body or of any existing or prospective customer (whether
government owned or nongovernment owned);

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(ii) any political party or official thereof;
(iii) any candidate for political or political party office; or
(iv) any other individual or entity;
 
while knowing or having reason to believe that all or any portion of such money
or thing of value would be offered, given, or promised, directly or indirectly,
to any such official, officer, agent, employee, representative, political party,
political party official, candidate, individual, or any entity affiliated with
such customer, political party or official or political office.
 
b. Except as set forth in Exhibit 3.24(b), Seller has made all payments to Third
Parties by check mailed to such Third Parties’ principal place of business or by
wire transfer to a bank located in the same jurisdiction as such party’s
principal place of business.
c. Each transaction is properly and accurately recorded on the books and Records
of Seller, and each document upon which entries in Seller’s books and Records
are based is complete and accurate in all respects. Seller maintains a system of
internal accounting controls adequate to insure that Seller maintains no
off-the-books accounts and that Seller’s assets are used only in accordance with
Seller’s management directives.
d. Seller has at all times been in compliance with all Legal Requirements
relating to export control and trade embargoes. No product sold or service
provided by Seller during the last five (5) years has been, directly or
indirectly, sold to or performed on behalf of Cuba, Iraq, Iran, Libya or North
Korea.
e. Except as set forth in Exhibit 3.24(e), Seller has not violated the
antiboycott prohibitions contained in 50 U.S.C. sect. 2401 et seq. or taken any
action that can be penalized under Section 999 of the Code. Except as set forth
in Exhibit 3.24(e), during the last five (5) years, Seller has not been a party
to, is not a beneficiary under and has not performed any service or sold any
product under any Seller Contract under which a product has been sold to
customers in Bahrain, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi
Arabia, Sudan, Syria, United Arab Emirates or the Republic of Yemen.

3.25 RELATIONSHIPS WITH RELATED PERSONS
 
Except as disclosed in Exhibit 3.25, neither Seller nor the Shareholder nor any
Related Person of any of them has, or has had, any interest in any property
(whether real, personal or mixed and whether tangible or intangible) used in or
pertaining to Seller’s business. Neither Seller, Shareholder nor any Related
Person of any of them owns, or has owned, of record or as a beneficial owner, an
equity interest or any other financial or profit interest in any Person that has
(a) had business dealings or a material financial interest in any transaction
with Seller other than business dealings or transactions disclosed in Exhibit
3.25, each of which has been conducted in the Ordinary Course of Business with
Seller at substantially prevailing market prices and on substantially prevailing
market terms or (b) engaged in competition with Seller with respect to any line
of the products or services of Seller (a “Competing Business”) in any market
presently served by Seller, except for ownership of less than one percent (1%)
of the outstanding capital stock of any Competing Business that is publicly
traded on any recognized exchange or in the over-the-counter market. Except as
set forth in Exhibit 3.25, neither Seller, Shareholder nor any Related Person of
either of them is a party to any Contract with, or has any claim or right
against, Seller.

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3.26 BROKERS OR FINDERS
 
Neither Seller nor any of its Representatives have incurred any obligation or
liability, contingent or otherwise, for brokerage or finders’ fees or agents’
commissions or other similar payments in connection with the sale of Seller’s
business or the Assets or the Contemplated Transactions, except the liability of
Seller to Pinnacle Capital Corporation. Seller and the Shareholder indemnify
Buyer, its Shareholder, directors, officers, employees and agents from any
liability for payment of the fee and related costs payable to Pinnacle Capital
Corporation.
 
3.27 SECURITIES LAW MATTERS
 
Seller is acquiring the Secured Subordinated Promissory Note for its own account
and not with a view to its distribution within the meaning of Section 2(11) of
the Securities Act.

3.28 SOLVENCY
 
a. Seller is not now insolvent and will not be rendered insolvent by any of the
Contemplated Transactions. As used in this section, “insolvent” means that the
sum of the debts and other probable Liabilities of Seller exceeds the present
fair saleable value of Seller’s assets.
b. Immediately after giving effect to the consummation of the Contemplated
Transactions: (i) Seller will be able to pay its Liabilities as they become due
in the usual course of its business; (ii) Seller will not have unreasonably
small capital with which to conduct its present or proposed business; (iii)
Seller will have assets (calculated at fair market value) that exceed its
Liabilities; and (iv) taking into account all pending and threatened litigation,
final judgments against Seller in actions for money damages are not reasonably
anticipated to be rendered at a time when, or in amounts such that, Seller will
be unable to satisfy any such judgments promptly in accordance with their terms
(taking into account the maximum probable amount of such judgments in any such
actions and the earliest reasonable time at which such judgments might be
rendered) as well as all other obligations of Seller. The cash available to
Seller, after taking into account all other anticipated uses of the cash, will
be sufficient to pay all such debts and judgments promptly in accordance with
their terms.
 
3.29 DISCLOSURE
 
a. No representation or warranty or other statement made by Seller or the
Shareholder in this Agreement, any Exhibit hereto, the certificates delivered
pursuant to Section 2.7(a) or otherwise in connection with the Contemplated
Transactions contains any untrue statement or omits to state a material fact
necessary to make any of them, in light of the circumstances in which it was
made, not misleading.
b. Seller does not have Knowledge of any fact, after reasonable investigation,
that has specific application to Seller (other than general economic or industry
conditions) and that may materially adversely affect the assets, business,
prospects, financial condition or results of operations of Seller that has not
been set forth in this Agreement.
 

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SECTION 4
REPRESENTATIONS AND WARRANTIES OF BUYER
 
Buyer represents and warrants to Seller and Shareholder as follows:
 
4.1 ORGANIZATION AND GOOD STANDING
 
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, with full corporate power and authority
to conduct its business as it is now conducted.
 
4.2 AUTHORITY; NO CONFLICT
 
a. This Agreement constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms. Upon the execution and
delivery by Buyer of the Assignment and Assumption Agreement, the Consulting
Agreement, the Secured Subordinated Promissory Note, the Security Agreement, the
Lease and each other agreement to be executed or delivered by Buyer at Closing
(collectively, the “Buyer’s Closing Documents”), each of the Buyer’s Closing
Documents will constitute the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its respective terms. Buyer has the
absolute and unrestricted right, power and authority to execute and deliver this
Agreement and the Buyer’s Closing Documents and to perform its obligations under
this Agreement and the Buyer’s Closing Documents, and such action has been duly
authorized by all necessary corporate action.
b. Neither the execution and delivery of this Agreement by Buyer nor the
consummation or performance of any of the Contemplated Transactions by Buyer
will give any Person the right to prevent, delay or otherwise interfere with any
of the Contemplated Transactions pursuant to:
 
(i) any provision of Buyer’s Governing Documents;
(ii) any resolution adopted by the board of directors or the Shareholder of
Buyer;
(iii) any Legal Requirement or Order to which Buyer may be subject; or
(iv) any Contract to which Buyer is a party or by which Buyer may be bound.
 
Buyer is not and will not be required to obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
 
4.3 CERTAIN PROCEEDINGS
 
There is no pending Proceeding that has been commenced against Buyer and that
challenges, or may have the effect of preventing, delaying, making illegal or
otherwise interfering with, any of the Contemplated Transactions. To Buyer’s
Knowledge, no such Proceeding has been threatened.
 

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4.4 BROKERS OR FINDERS
 
Neither Buyer nor any of its Representatives have incurred any obligation or
liability, contingent or otherwise, for brokerage or finders’ fees or agents’
commissions or other similar payment in connection with the Contemplated
Transactions.
 
SECTION 5
COVENANTS OF SELLER PRIOR TO CLOSING
 
5.1 ACCESS AND INVESTIGATION
 
Between the date of this Agreement and the Closing Date, and upon reasonable
advance notice received from Buyer, Seller shall (and Shareholder shall cause
Seller to) (a) afford Buyer and its Representatives and prospective lenders and
their Representatives (collectively, “Buyer Group”) full and free access, during
regular business hours, to Seller’s personnel, properties (including subsurface
testing), Contracts, Governmental Authorizations, books and Records and other
documents and data, such rights of access to be exercised in a manner that does
not unreasonably interfere with the operations of Seller; (b) furnish Buyer
Group with copies of all such Contracts, Governmental Authorizations, books and
Records and other existing documents and data as Buyer may reasonably request;
(c) furnish Buyer Group with such additional financial, operating and other
relevant data and information as Buyer may reasonably request; and (d) otherwise
cooperate and assist, to the extent reasonably requested by Buyer, with Buyer’s
investigation of the properties, assets and financial condition related to
Seller. In addition, Buyer shall have the right to have the Real Property and
Tangible Personal Property inspected by Buyer Group, at Buyer’s sole cost and
expense, for purposes of determining the physical condition and legal
characteristics of the Real Property and Tangible Personal Property. In the
event subsurface or other destructive testing is recommended by any of Buyer
Group, Buyer shall be permitted to have the same performed. Buyer shall restore
the Real Property as close to its pre-test condition as is reasonably
practicable.
 
5.2 OPERATION OF THE BUSINESS OF SELLER
 
Between the date of this Agreement and the Closing, Seller shall (and
Shareholder shall cause Seller to):
 
a. conduct its business only in the Ordinary Course of Business;
b. except as otherwise directed by Buyer in writing, and without making any
commitment on Buyer’s behalf, use its Best Efforts to preserve intact its
current business organization, keep available the services of its officers,
employees and agents and maintain its relations and good will with suppliers,
customers, landlords, creditors, employees, agents and others having business
relationships with it;
c. confer with Buyer prior to implementing operational decisions of a material
nature, other than in the Ordinary Course of Business;
d. otherwise report periodically to Buyer concerning the status of its business,
operations and finances;

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e. make no material changes in management personnel without prior consultation
with Buyer;
f. maintain the Assets in a state of repair and condition that complies with
Legal Requirements and is consistent with the requirements and normal conduct of
Seller’s business;
g. keep in full force and effect, without amendment, all material rights
relating to Seller’s business;
h. comply with all Legal Requirements and contractual obligations applicable to
the operations of Seller’s business;
i. continue in full force and effect the insurance coverage under the policies
set forth in Exhibit 3.19 or substantially equivalent policies;
j. except as required to comply with ERISA or to maintain qualification under
Section 401(a) of the Code, not amend, modify or terminate any Employee Plan
without the express written consent of Buyer, and except as required under the
provisions of any Employee Plan, not make any contributions to or with respect
to any Employee Plan without the express written consent of Buyer, provided that
Seller shall contribute that amount of cash to each Employee Plan necessary to
fully fund all of the benefit liabilities of such Employee Plan on a
plan-termination basis as of the Closing Date;
k. cooperate with Buyer and assist Buyer in identifying the Governmental
Authorizations required by Buyer to operate the business from and after the
Closing Date and either transferring existing Governmental Authorizations of
Seller to Buyer, where permissible, or obtaining new Governmental Authorizations
for Buyer;
l. upon request from time to time, execute and deliver all documents, make all
truthful oaths, testify in any Proceedings and do all other acts that may be
reasonably necessary or desirable in the opinion of Buyer to consummate the
Contemplated Transactions, all without further consideration; and
m. maintain all books and Records of Seller relating to Seller’s business in the
Ordinary Course of Business.
 
5.3 NEGATIVE COVENANT
 
Except as otherwise expressly permitted herein, between the date of this
Agreement and the Closing Date, Seller shall not, and Shareholder shall not
permit Seller to, without the prior written Consent of Buyer, (a) take any
affirmative action, or fail to take any reasonable action within its control, as
a result of which any of the changes or events listed in Sections 3.13 or 3.17
would be likely to occur; (b) make any modification to any material Contract or
Governmental Authorization, other than in the Ordinary Course of Business; (c)
allow the levels of finished goods, supplies or other materials included in the
Inventories to vary materially from the levels customarily maintained; or (d)
enter into any compromise or settlement of any litigation, proceeding or
governmental investigation relating to the Assets, the business of Seller or the
Assumed Liabilities.
 

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5.4 REQUIRED APPROVALS
 
As promptly as practicable after the date of this Agreement, Seller shall make
all filings required by Legal Requirements to be made by it in order to
consummate the Contemplated Transactions. Seller and Shareholder also shall
cooperate with Buyer and its Representatives with respect to all filings that
Buyer elects to make or, pursuant to Legal Requirements, shall be required to
make in connection with the Contemplated Transactions. Seller and Shareholder
also shall cooperate with Buyer and its Representatives in obtaining all
Material Consents (including taking all actions requested by Buyer to cause
early termination of any applicable waiting period under the HSR Act).
 
5.5 NOTIFICATION
 
Between the date of this Agreement and the Closing, Seller and Shareholder shall
promptly notify Buyer in writing if any of them becomes aware of (a) any fact or
condition that causes or constitutes a Breach of any of Seller’s representations
and warranties made as of the date of this Agreement or (b) the occurrence after
the date of this Agreement of any fact or condition that would or be reasonably
likely to (except as expressly contemplated by this Agreement) cause or
constitute a Breach of any such representation or warranty had that
representation or warranty been made as of the time of the occurrence of, or
Seller’s or the Shareholder’s discovery of, such fact or condition. Such
delivery shall not affect any rights of Buyer under Section 9.2 and Article 11.
During the same period, Seller and Shareholder also shall promptly notify Buyer
of the occurrence of any Breach of any covenant of Seller or Shareholder in this
Article 5 or of the occurrence of any event that may make the satisfaction of
the conditions in Article 7 impossible or unlikely.
 
5.6 NO NEGOTIATION
 
Until such time as this Agreement shall be terminated pursuant to Section 9.1,
neither Seller nor the Shareholder shall directly or indirectly solicit,
initiate, encourage or entertain any inquiries or proposals from, discuss or
negotiate with, provide any nonpublic information to or consider the merits of
any inquiries or proposals from any Person (other than Buyer) relating to any
business combination transaction involving Seller, including the sale by
Shareholder of Seller’s stock, the merger or consolidation of Seller or the sale
of Seller’s business or any of the Assets (other than in the Ordinary Course of
Business). Seller and Shareholder shall notify Buyer of any such inquiry or
proposal within twenty-four (24) hours of receipt or awareness of the same by
Seller or the Shareholder.
 
5.7 BEST EFFORTS
 
Seller and Shareholder shall use their Best Efforts to cause the conditions in
Article 7 and Section 8.3 to be satisfied.
 
5.8 INTERIM FINANCIAL STATEMENTS
 
Until the Closing Date, Seller shall deliver to Buyer within ten (10) days after
the end of each month a copy of the balance sheet and income statement for such
month prepared in a manner and containing information consistent with Seller’s
current accountant-prepared, unaudited financial statements.
 

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5.9 CHANGE OF NAME
 
On or before the Closing Date, Seller shall (a) amend its Governing Documents
and take all other actions necessary to change its name to one sufficiently
dissimilar to Seller’s present name, in Buyer’s judgment, to avoid confusion and
(b) take all actions requested by Buyer to enable Buyer to change its name to
Seller’s present name. In the event that Seller shall assume from the Buyer an
uncollectible account receivable and then collect such account receivable, Buyer
shall cooperate with Seller to enable it to negotiate for Seller’s benefit a
check that may be payable to “Freundlich Supply Company, Inc.” or similar name.
 
5.10 PAYMENT OF LIABILITIES
 
Seller shall pay or otherwise satisfy in the Ordinary Course of Business all of
its Liabilities and obligations. Buyer and Seller hereby waive compliance with
the bulk-transfer provisions of the Uniform Commercial Code (or any similar law)
(“Bulk Sales Laws”) in connection with the Contemplated Transactions.
 
SECTION 6
COVENANTS OF BUYER PRIOR TO CLOSING
 
6.1 REQUIRED APPROVALS
 
As promptly as practicable after the date of this Agreement, Buyer shall make,
or cause to be made, all filings required by Legal Requirements to be made by it
to consummate the Contemplated Transactions. Buyer also shall cooperate, and
cause its Related Persons to cooperate, with Seller (a) with respect to all
filings Seller shall be required by Legal Requirements to make and (b) in
obtaining all Consents identified in Exhibit 3.2(c), provided, however, that
Buyer shall not be required to dispose of or make any change to its business,
expend any material funds or incur any other burden in order to comply with this
Section 6.1.
 
6.2 BEST EFFORTS
 
Buyer shall use its Best Efforts to cause the conditions in Article 8 and
Section 7.3 to be satisfied.
 
SECTION 7
CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE
 
Buyer’s obligation to purchase the Assets and to take the other actions required
to be taken by Buyer at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Buyer, in whole or in part):
 

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7.1 ACCURACY OF REPRESENTATIONS
 
a. All of Seller’s and Shareholder’s representations and warranties in this
Agreement (considered collectively), and each of these representations and
warranties (considered individually), shall have been accurate in all material
respects as of the date of this Agreement, and shall be accurate in all material
respects as of the time of the Closing as if then made.
b. Each of the representations and warranties in Sections 3.2(a) and 3.4, and
each of the representations and warranties in this Agreement that contains an
express materiality qualification, shall have been accurate in all respects as
of the date of this Agreement, and shall be accurate in all respects as of the
time of the Closing as if then made.
 
7.2 SELLER’S PERFORMANCE
 
All of the covenants and obligations that Seller and Shareholder are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), shall have been duly performed and complied with in
all material respects.
 
7.3 CONSENTS
 
Each of the Consents identified in Exhibit 7.3 (the “Material Consents”) shall
have been obtained and shall be in full force and effect.
 
7.4 ADDITIONAL DOCUMENTS
 
Seller and Shareholder shall have caused the documents and instruments required
by Section 2.7(a) and the following documents to be delivered (or tendered
subject only to Closing) to Buyer:
 
a. an opinion of Howard J. Kerker, Esquire, dated the Closing Date, in the form
of Exhibit 7.4(a);
b. The articles of incorporation and all amendments thereto of Seller, duly
certified as of a recent date by the Secretary of State of the jurisdiction of
Seller’s incorporation (Exhibit 7.4(b));
c. If requested by Buyer, any Consents or other instruments that may be required
to permit Buyer’s qualification in each jurisdiction in which Seller is licensed
or qualified to do business as a foreign corporation under the name “Freundlich
Supply Company” or any derivative thereof;
c. Releases of all Encumbrances on the Assets, other than Permitted
Encumbrances;
d. Certificates dated as of a date not earlier than the third business day prior
to the Closing as to the good standing of Seller and payment of all applicable
State Taxes by Seller, executed by the appropriate officials of the State of New
York and each jurisdiction in which Seller is licensed or qualified to do
business as a foreign corporation as specified in Exhibit 3.1(a); and
e. Such other documents as Buyer may reasonably request for the purpose of:
 
(i) evidencing the accuracy of any of Seller’s representations and warranties;
(ii) evidencing the performance by Seller or the Shareholder of, or the
compliance by Seller or the Shareholder with, any covenant or obligation
required to be performed or complied with by Seller or such Shareholder;

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(iii) evidencing the satisfaction of any condition referred to in this Article
7; or
(iv) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
 
7.5 NO PROCEEDINGS
 
Since the date of this Agreement, there shall not have been commenced or
threatened against Buyer, or against any Related Person of Buyer, any Proceeding
(a) involving any challenge to, or seeking Damages or other relief in connection
with, any of the Contemplated Transactions or (b) that may have the effect of
preventing, delaying, making illegal, imposing limitations or conditions on or
otherwise interfering with any of the Contemplated Transactions.
 
7.6 NO CONFLICT
 
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), contravene or conflict with or result in a violation of or cause Buyer or
any Related Person of Buyer to suffer any adverse consequence under (a) any
applicable Legal Requirement or Order or (b) any Legal Requirement or Order that
has been published, introduced or otherwise proposed by or before any
Governmental Body, excluding Bulk Sales Laws.
 
7.7 GOVERNMENTAL AUTHORIZATIONS
 
Buyer shall have received such Governmental Authorizations as are necessary or
desirable to allow Buyer to operate the Assets from and after the Closing.
 
7.8 ENVIRONMENTAL REPORT
 
Buyer shall have received an environmental site assessment report with respect
to Seller’s Facilities, which report shall be acceptable in form and substance
to Buyer in its sole discretion.
 
7.9 WARN ACT NOTICE PERIODS AND EMPLOYEES
 
a. All requisite notice periods under the Warn Act shall have expired.
b. Substantially all employees of Seller shall be available for hiring by Buyer,
in its sole discretion, on and as of the Closing Date.
 

SECTION 8
CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE
 
Seller’s obligation to sell the Assets and to take the other actions required to
be taken by Seller at the Closing is subject to the satisfaction, at or prior to
the Closing, of each of the following conditions (any of which may be waived by
Seller in whole or in part):
 

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8.1 ACCURACY OF REPRESENTATIONS
 
All of Buyer’s representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), shall have been accurate in all material respects as of the date
of this Agreement and shall be accurate in all material respects as of the time
of the Closing as if then made.
 
8.2 BUYER’S PERFORMANCE
 
All of the covenants and obligations that Buyer is required to perform or to
comply with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), shall have been performed and complied with in all material
respects.
 
8.3 CONSENTS
 
Each of the Consents identified in Exhibit 8.3 shall have been obtained and
shall be in full force and effect.
 
8.4 ADDITIONAL DOCUMENTS
 
Buyer shall have caused the documents and instruments required by Section 2.7(b)
and the following documents to be delivered (or tendered subject only to
Closing) to Seller and Shareholder:
 
a. an opinion of Sichenzia Ross Friedman Ference LLP, dated the Closing Date, in
the form of Exhibit 2.7(b)(vii); and
b. such other documents as Seller may reasonably request for the purpose of
 
(i) evidencing the accuracy of any representation or warranty of Buyer,
(ii) evidencing the performance by Buyer of, or the compliance by Buyer with,
any covenant or obligation required to be performed or complied with by Buyer or
(iii) evidencing the satisfaction of any condition referred to in this Article
8.
 
8.5 NO INJUNCTION
 
There shall not be in effect any Legal Requirement or any injunction or other
Order that (a) prohibits the consummation of the Contemplated Transactions and
(b) has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.
 

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SECTION 9
TERMINATION
 
9.1 TERMINATION EVENTS
 
By notice given prior to or at the Closing, subject to Section 9.2, this
Agreement may be terminated as follows:
 
a. by Buyer if a material Breach of any provision of this Agreement has been
committed by Seller or Shareholder and such Breach has not been waived by Buyer;
b. by Seller if a material Breach of any provision of this Agreement has been
committed by Buyer and such Breach has not been waived by Seller;
c. by Buyer if any condition in Article 7 has not been satisfied as of the date
specified for Closing in the first sentence of Section 2.6 or if satisfaction of
such a condition by such date is or becomes impossible (other than through the
failure of Buyer to comply with its obligations under this Agreement), and Buyer
has not waived such condition on or before such date;
d. by Seller if any condition in Article 8 has not been satisfied as of the date
specified for Closing in the first sentence of Section 2.6 or if satisfaction of
such a condition by such date is or becomes impossible (other than through the
failure of Seller or the Shareholder to comply with their obligations under this
Agreement), and Seller has not waived such condition on or before such date;
e. by mutual consent of Buyer and Seller;
f. by Buyer if the Closing has not occurred on or before June 30, 2006, or such
later date as the parties may agree upon, unless the Buyer is in material Breach
of this Agreement; or
g. by Seller if the Closing has not occurred on or before June 30, 2006, or such
later date as the parties may agree upon, unless the Seller or Shareholder are
in material Breach of this Agreement.
 
9.2 EFFECT OF TERMINATION
 
a. Each party’s right of termination under Section 9.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
such right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 9.1, all obligations of the parties under this
Agreement will terminate, except that the obligations of the parties in this
Section 9.2 and Articles 12 and 13 (except for those in Section 13.5) will
survive, provided, however, that, if this Agreement is terminated because of a
Breach of this Agreement by the nonterminating party or because one or more of
the conditions to the terminating party’s obligations under this Agreement is
not satisfied as a result of the party’s failure to comply with its obligations
under this Agreement, the terminating party’s right to pursue all legal remedies
will survive such termination unimpaired.

b. In the event the Agreement shall be terminated by Buyer under Sections 9.1(a)
or 9.1(c), the Escrow Deposit, and all interest earned thereon, shall be
returned to Buyer. In this event, all obligations of the Escrow Agent shall
cease.

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c. In the event the Agreement shall be terminated for any other reason, the
Escrow Deposit, and all interest earned thereon, shall be paid to Seller as
liquidated damages. In this event, all obligations of the Escrow Agent shall
cease.
 
SECTION 10
ADDITIONAL COVENANTS
 
10.1 EMPLOYEES AND EMPLOYEE BENEFITS
 
a. Information on Active Employees. For the purpose of this Agreement, the term
“Active Employees” shall mean all employees employed on the Closing Date by
Seller for its business who are:
 
(i) bargaining unit employees currently covered by a collective bargaining
agreement; or
(ii) employed exclusively in Seller’s business as currently conducted, including
employees on temporary leave of absence, including family medical leave,
military leave, temporary disability or sick leave, but excluding employees on
long-term disability leave.
 
b. Employment of Active Employees by Buyer.
 
(i) Buyer is not obligated to hire any Active Employee but may interview all
Active Employees. Buyer will provide Seller with a list of Active Employees to
whom Buyer has made an offer of employment that has been accepted to be
effective on the Closing Date (the “Hired Active Employees”). Subject to Legal
Requirements, Buyer will have reasonable access to the Facilities and personnel
Records (including performance appraisals, disciplinary actions, grievances and
medical Records) of Seller for the purpose of preparing for and conducting
employment interviews with all Active Employees and will conduct the interviews
as expeditiously as possible prior to the Closing Date. Access will be provided
by Seller upon reasonable prior notice during normal business hours. Effective
immediately before the Closing, Seller will terminate the employment of all of
its Hired Active Employees.
(ii) Neither Seller nor the Shareholder nor their Related Persons shall solicit
the continued employment of any Active Employee (unless and until Buyer has
informed Seller in writing that the particular Active Employee will not receive
any employment offer from Buyer) or the employment of any Hired Active Employee
after the Closing. Buyer shall inform Seller promptly of the identities of those
Active Employees to whom it will not make employment offers, and Seller shall
assist Buyer in complying with the WARN Act as to those Active Employees.
(iii) It is understood and agreed that (A) Buyer’s expressed intention to extend
offers of employment as set forth in this section shall not constitute any
commitment, Contract or understanding (expressed or implied) of any obligation
on the part of Buyer to a post-Closing employment relationship of any fixed term
or duration or upon any terms or conditions other than those that Buyer may
establish pursuant to individual offers of employment, and (B) employment
offered by Buyer is “at will” and may be terminated by Buyer or by an employee
at any time for any reason (subject to any written commitments to the contrary
made by Buyer or an employee and Legal Requirements). Nothing in this Agreement
shall be deemed to prevent or restrict in any way the right of Buyer to
terminate, reassign, promote or demote any of the Hired Active Employees after
the Closing or to change adversely or favorably the title, powers, duties,
responsibilities, functions, locations, salaries, other compensation or terms or
conditions of employment of such employees.

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c. Salaries and Benefits.
 
(i) Seller shall be responsible for (A) the payment of all wages and other
remuneration due to Active Employees with respect to their services as employees
of Seller through the close of business on the Closing Date, including pro rata
bonus payments and all vacation pay earned prior to the Closing Date; (B) the
payment of any termination or severance payments and the provision of health
plan continuation coverage in accordance with the requirements of COBRA and
Sections 601 through 608 of ERISA; and (C) any and all payments to employees
required under the WARN Act.
(ii) Seller shall be liable for any claims made or incurred by Active Employees
and their beneficiaries through the Closing Date under the Employee Plans. For
purposes of the immediately preceding sentence, a charge will be deemed
incurred, in the case of hospital, medical or dental benefits, when the services
that are the subject of the charge are performed and, in the case of other
benefits (such as disability or life insurance), when an event has occurred or
when a condition has been diagnosed that entitles the employee to the benefit.
 
c. Seller’s Retirement Plans. All Hired Active Employees who are participants in
Seller’s retirement plans shall retain their accrued benefits under Seller’s
retirement plans as of the Closing Date, and Seller (or Seller’s retirement
plans) shall retain sole liability for the payment of such benefits as and when
such Hired Active Employees become eligible therefor under such plans. All Hired
Active Employees shall become fully vested in their accrued benefits under
Seller’s retirement plans as of the Closing Date, and Seller will so amend such
plans if necessary to achieve this result. Seller shall cause the assets of each
Employee Plan to equal or exceed the benefit liabilities of such Employee Plan
on a plan-termination basis as of the Closing.

d. No Transfer of Assets. Neither Seller nor Shareholder nor their respective
Related Persons will make any transfer of pension or other employee benefit plan
assets to Buyer.
 
e. General Employee Provisions.
 
(i) Seller and Buyer shall give any notices required by Legal Requirements and
take whatever other actions with respect to the plans, programs and policies
described in this Section 10.1 as may be necessary to carry out the arrangements
described in this Section 10.1.
(ii) Seller and Buyer shall provide each other with such plan documents and
summary plan descriptions, employee data or other information as may be
reasonably required to carry out the arrangements described in this Section
10.1.
(iii) If any of the arrangements described in this Section 10.1 are determined
by the IRS or other Governmental Body to be prohibited by law, Seller and Buyer
shall modify such arrangements to as closely as possible reflect their expressed
intent and retain the allocation of economic benefits and burdens to the parties
contemplated herein in a manner that is not prohibited by law.

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(iv) Seller shall provide Buyer with completed I-9 forms and attachments with
respect to all Hired Active Employees, except for such employees as Seller
certifies in writing to Buyer are exempt from such requirement.
(v) Buyer shall not have any responsibility, liability or obligation, whether to
Active Employees, former employees, their beneficiaries or to any other Person,
with respect to any employee benefit plans, practices, programs or arrangements
(including the establishment, operation or termination thereof and the
notification and provision of COBRA coverage extension) maintained by Seller.
 
10.2 PAYMENT OF ALL TAXES RESULTING FROM SALE OF ASSETS BY SELLER
 
Seller shall pay in a timely manner all Taxes resulting from or payable in
connection with the sale of the Assets pursuant to this Agreement, regardless of
the Person on whom such Taxes are imposed by Legal Requirements, except that
Buyer shall pay one-half of all sales taxes imposed on the transfer of the
Assets.
 
10.3 PAYMENT OF OTHER RETAINED LIABILITIES
 
In addition to payment of Taxes pursuant to Section 10.2, Seller shall pay, or
make adequate provision for the payment, in full all of the Retained Liabilities
and other Liabilities of Seller under this Agreement. If any such Liabilities
are not so paid or provided for, or if Buyer reasonably determines that failure
to make any payments will impair Buyer’s use or enjoyment of the Assets or
conduct of the business previously conducted by Seller with the Assets, Buyer
may, at any time after the Closing Date, elect to make all such payments
directly (but shall have no obligation to do so) and set off and deduct the full
amount of all such payments from the first maturing installments of the unpaid
principal balance of the Secured Subordinated Promissory Note pursuant to
Section 11.8. Buyer shall receive full credit under the Secured Subordinated
Promissory Note and this Agreement for all payments so made.
 
10.4 REMOVING EXCLUDED ASSETS
 
On or before the Closing Date, Seller shall remove all Excluded Assets from all
Facilities and other Real Property to be occupied by Buyer. Such removal shall
be done in such manner as to avoid any damage to the Facilities and other
properties to be occupied by Buyer and any disruption of the business operations
to be conducted by Buyer after the Closing. Any damage to the Assets or to the
Facilities resulting from such removal shall be paid by Seller at the Closing.
Should Seller fail to remove the Excluded Assets as required by this Section,
Buyer shall have the right, but not the obligation, (a) to remove the Excluded
Assets at Seller’s sole cost and expense; (b) to store the Excluded Assets and
to charge Seller all storage costs associated therewith; (c) to treat the
Excluded Assets as unclaimed and to proceed to dispose of the same under the
laws governing unclaimed property; or (d) to exercise any other right or remedy
conferred by this Agreement or otherwise available at law or in equity. Seller
shall promptly reimburse Buyer for all costs and expenses incurred by Buyer in
connection with any Excluded Assets not removed by Seller on or before the
Closing Date.

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10.5 REPORTS AND RETURNS
 
Seller shall promptly after the Closing prepare and file all reports and returns
required by Legal Requirements relating to the business of Seller as conducted
using the Assets, to and including the Closing.
 
10.6 ASSISTANCE IN PROCEEDINGS
 
Seller will cooperate with Buyer and its counsel in the contest or defense of,
and make available its personnel and provide any testimony and access to its
books and Records in connection with, any Proceeding involving or relating to
(a) any Contemplated Transaction or (b) any action, activity, circumstance,
condition, conduct, event, fact, failure to act, incident, occurrence, plan,
practice, situation, status or transaction on or before the Closing Date
involving Seller or its business or the Shareholder.
 
10.7 NONCOMPETITION, NONSOLICITATION AND NONDISPARAGEMENT
 
a. Noncompetition. For a period of five (5) years after the Closing Date,
neither Seller nor Shareholder shall, anywhere in the United States, directly or
indirectly invest in, own, manage, operate, finance, control, advise, render
services to or guarantee the obligations of any Person engaged in or planning to
become engaged in the Business of the Seller (“Competing Business”), provided,
however, that Seller may purchase or otherwise acquire up to (but not more than)
five percent (5%) of any class of the securities of any Person (but may not
otherwise participate in the activities of such Person) if such securities are
listed on any national or regional securities exchange or have been registered
under Section 12(g) of the Exchange Act.
b. Nonsolicitation. For a period of five (5) years after the Closing Date,
neither Seller nor Shareholder shall, directly or indirectly:
 
(i) solicit the business of any Person who is a customer of Buyer;
(ii) cause, induce or attempt to cause or induce any customer, supplier,
licensee, licensor, franchisee, employee, consultant or other business relation
of Buyer to cease doing business with Buyer, to deal with any competitor of
Buyer or in any way interfere with its relationship with Buyer;
(iii) cause, induce or attempt to cause or induce any customer, supplier,
licensee, licensor, franchisee, employee, consultant or other business relation
of Seller on the Closing Date or within the year preceding the Closing Date to
cease doing business with Buyer, to deal with any competitor of Buyer or in any
way interfere with its relationship with Buyer; or
(iv) hire, retain or attempt to hire or retain any employee or independent
contractor of Buyer or in any way interfere with the relationship between Buyer
and any of its employees or independent contractors.
 
c. Nondisparagement. After the Closing Date, neither Seller nor Shareholder
shall disparage Buyer or any of Buyer’s shareholders, directors, officers,
employees or agents.

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d. Modification of Covenant. If a final judgment of a court or tribunal of
competent jurisdiction determines that any term or provision contained in
Section 10.7(a) through (c) is invalid or unenforceable, then the parties agree
that the court or tribunal will have the power to reduce the scope, duration or
geographic area of the term or provision, to delete specific words or phrases or
to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision. This Section 10.7
will be enforceable as so modified after the expiration of the time within which
the judgment may be appealed. This Section 10.7 is reasonable and necessary to
protect and preserve Buyer’s legitimate business interests and the value of the
Assets and to prevent any unfair advantage conferred on Seller.
 
10.8 CUSTOMER AND OTHER BUSINESS RELATIONSHIPS
 
After the Closing, Seller and Shareholder will cooperate with Buyer in its
efforts to continue and maintain for the benefit of Buyer those business
relationships of Seller existing prior to the Closing and relating to the
business to be operated by Buyer after the Closing, including relationships with
lessors, employees, regulatory authorities, licensors, customers, suppliers and
others, and Seller will satisfy the Retained Liabilities in a manner that is not
detrimental to any of such relationships. Seller and Shareholder will refer to
Buyer all inquiries relating to such business. Neither Seller nor any of its
officers, employees, agents or the Shareholder shall take any action that would
tend to diminish the value of the Assets after the Closing or that would
interfere with the business of Buyer to be engaged in after the Closing,
including disparaging the name or business of Buyer.
 
10.9 RETENTION OF AND ACCESS TO RECORDS
 
After the Closing Date, Buyer shall retain for a period consistent with Buyer’s
record-retention policies and practices those Records of Seller delivered to
Buyer. Buyer also shall provide Seller and Shareholder and their Representatives
reasonable access thereto, during normal business hours and on at least three
days’ prior written notice, to enable them to prepare financial statements or
tax returns or deal with tax audits. After the Closing Date, Seller shall
provide Buyer and its Representatives reasonable access to Records that are
Excluded Assets, during normal business hours and on at least three days’ prior
written notice, for any reasonable business purpose specified by Buyer in such
notice.
 
10.10 FURTHER ASSURANCES
 
Subject to the proviso in Section 6.1, the parties shall cooperate reasonably
with each other and with their respective Representatives in connection with any
steps required to be taken as part of their respective obligations under this
Agreement, and shall (a) furnish upon request to each other such further
information; (b) execute and deliver to each other such other documents; and (c)
do such other acts and things, all as the other party may reasonably request for
the purpose of carrying out the intent of this Agreement and the Contemplated
Transactions.
 

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SECTION 11
INDEMNIFICATION; REMEDIES
 
11.1 SURVIVAL
 
All representations, warranties, covenants and obligations in this Agreement,
the certificates delivered pursuant to Section 2.7 and any other certificate or
document delivered pursuant to this Agreement shall survive the Closing and the
consummation of the Contemplated Transactions, subject to Section 11.7. The
right to indemnification, reimbursement or other remedy based upon such
representations, warranties, covenants and obligations shall not be affected by
any investigation (including any environmental investigation or assessment)
conducted with respect to, or any Knowledge acquired (or capable of being
acquired) at any time, whether before or after the execution and delivery of
this Agreement or the Closing Date, with respect to the accuracy or inaccuracy
of or compliance with any such representation, warranty, covenant or obligation.
The waiver of any condition based upon the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, reimbursement or other
remedy based upon such representations, warranties, covenants and obligations.
 
11.2 INDEMNIFICATION AND REIMBURSEMENT BY SELLER AND SHAREHOLDER
 
Seller and each Shareholder, jointly and severally, will indemnify and hold
harmless Buyer, and its Representatives, shareholders, subsidiaries and Related
Persons (collectively, the “Buyer Indemnified Persons”), and will reimburse the
Buyer Indemnified Persons for any loss, liability, claim, damage, expense
(including costs of investigation and defense and reasonable attorneys’ fees and
expenses) or diminution of value, whether or not involving a Third-Party Claim
(collectively, “Damages”), arising from or in connection with:
 
a. any Breach of any representation or warranty made by Seller or the
Shareholder in (i) this Agreement (ii) the certificates delivered pursuant to
Section 2.7 (for this purpose, each such certificate will be deemed to have
stated that Seller’s and the Shareholder’s representations and warranties in
this Agreement fulfill the requirements of Section 7.1 as of the Closing Date as
if made on the Closing Date), (iii) any transfer instrument or (iv) any other
certificate, document, writing or instrument delivered by Seller or the
Shareholder pursuant to this Agreement;
b. any Breach of any covenant or obligation of Seller or the Shareholder in this
Agreement or in any other certificate, document, writing or instrument delivered
by Seller or the Shareholder pursuant to this Agreement;
c. any Liability arising out of the ownership or operation of the Assets prior
to the Closing other than the Assumed Liabilities;
d. any brokerage or finder’s fees or commissions or similar payments based upon
any agreement or understanding made, or alleged to have been made, by any Person
with Seller or the Shareholder (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions;
e. any product or component thereof manufactured by or shipped, or any services
provided by, Seller, in whole or in part, prior to the Closing Date;

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f. any noncompliance with any Bulk Sales Laws or fraudulent transfer law in
respect of the Contemplated Transactions;
g. any liability under the WARN Act or any similar state or local Legal
Requirement that may result from an “Employment Loss”, as defined by 29 U.S.C.
sect. 2101(a)(6), caused by any action of Seller prior to the Closing or by
Buyer’s decision not to hire previous employees of Seller;
h. any Employee Plan established or maintained by Seller; or
i. any Retained Liabilities.
 
11.3 INDEMNIFICATION AND REIMBURSEMENT BY SELLER-- ENVIRONMENTAL MATTERS
 
In addition to the other indemnification provisions in this Article 11, Seller
and each Shareholder, jointly and severally, will indemnify and hold harmless
Buyer and the other Buyer Indemnified Persons, and will reimburse Buyer and the
other Buyer Indemnified Persons, for any Damages (including costs of cleanup,
containment or other remediation) arising from or in connection with:
 
a. any Environmental, Health and Safety Liabilities arising out of or relating
to: (i) the ownership or operation by any Person at any time on or prior to the
Closing Date of any of the Facilities, Assets or the business of Seller, or (ii)
any Hazardous Materials or other contaminants that were present on the
Facilities or Assets at any time on or prior to the Closing Date; or
b. any bodily injury (including illness, disability and death, regardless of
when any such bodily injury occurred, was incurred or manifested itself),
personal injury, property damage (including trespass, nuisance, wrongful
eviction and deprivation of the use of real property) or other damage of or to
any Person or any Assets in any way arising from or allegedly arising from any
Hazardous Activity conducted by any Person with respect to the business of
Seller or the Assets prior to the Closing Date or from any Hazardous Material
that was (i) present or suspected to be present on or before the Closing Date on
or at the Facilities (or present or suspected to be present on any other
property, if such Hazardous Material emanated or allegedly emanated from any
Facility and was present or suspected to be present on any Facility, on or prior
to the Closing Date) or (ii) Released or allegedly Released by any Person on or
at any Facilities or Assets at any time on or prior to the Closing Date.
 
Buyer will be entitled to control any Remedial Action, any Proceeding relating
to an Environmental Claim and, except as provided in the following sentence, any
other Proceeding with respect to which indemnity may be sought under this
Section 11.3. The procedure described in Section 11.9 will apply to any claim
solely for monetary damages relating to a matter covered by this Section 11.3.
 
11.4 INDEMNIFICATION AND REIMBURSEMENT BY BUYER
 
Buyer will indemnify and hold harmless Seller, and will reimburse Seller, for
any Damages arising from or in connection with:
 

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a. any Breach of any representation or warranty made by Buyer in this Agreement
or in any certificate, document, writing or instrument delivered by Buyer
pursuant to this Agreement;
b. any Breach of any covenant or obligation of Buyer in this Agreement or in any
other certificate, document, writing or instrument delivered by Buyer pursuant
to this Agreement;
c. any claim by any Person for brokerage or finder’s fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by such Person with Buyer (or any Person acting on Buyer’s behalf) in
connection with any of the Contemplated Transactions;
d. any Assumed Liabilities; or
e. any liability arising out of the ownership or operation of the Assets after
the Closing, other than the Retained Liabilities
 
11.5 LIMITATIONS ON AMOUNT-- SELLER AND SHAREHOLDER
 
Seller and Shareholder shall have no liability (for indemnification or
otherwise) with respect to claims under Section 11.2(a) until the total of all
Damages with respect to such matters exceeds twenty-five thousand dollars
($25,000). Total damages shall not exceed the Purchase Price. However, this
Section 11.5 will not apply to claims under Section 11.2(c) through (i) or to
matters arising in respect of Sections 3.14, 3.20, 3.29, or to any Breach of any
of Seller’s and Shareholder’s representations and warranties of which the Seller
had Knowledge, after reasonable investigation, at any time prior to the date on
which such representation and warranty is made or any intentional Breach by
Seller or the Shareholder of any covenant or obligation, and Seller and the
Shareholder will be jointly and severally liable for all Damages with respect to
such Breaches.
 
11.6 LIMITATIONS ON AMOUNT-- BUYER
 
Buyer will have no liability (for indemnification or otherwise) with respect to
claims under Section 11.4(a) until the total of all Damages with respect to such
matters exceeds twenty-five thousand dollars ($25,000). However, this Section
11.6 will not apply to claims under Section 11.4(c), 11.4(d), 11.4(e) or matters
arising in respect of Section 4.4 or to any Breach of any of Buyer’s
representations and warranties of which Buyer had Knowledge at any time prior to
the date on which such representation and warranty is made or any intentional
Breach by Buyer of any covenant or obligation, and Buyer will be liable for all
Damages with respect to such Breaches.
 
11.7 TIME LIMITATIONS
 
(a) If the Closing occurs, Seller and Shareholder will have liability (for
indemnification or otherwise) with respect to any Breach of (i) a covenant or
obligation to be performed or complied with prior to the Closing Date (other
than those in Sections 2.1 and 2.4(b) and Articles 10 and 12, as to which a
claim may be made at any time) or (ii) a representation or warranty, only if
Buyer notifies Seller or Shareholder on or before May 31, 2009 of a claim
specifying the factual basis of the claim in reasonable detail to the extent
then known by Buyer.

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(b) If the Closing occurs, Buyer will have liability (for indemnification or
otherwise) with respect to any Breach of (i) a covenant or obligation to be
performed or complied with prior to the Closing Date (other than those in
Article 12, as to which a claim may be made at any time) or (ii) a
representation or warranty, only if Seller or Shareholder notify Buyer on or
before May 31, 2009 of a claim specifying the factual basis of the claim in
reasonable detail to the extent then known by Seller or the Shareholder.
 
11.8 RIGHT OF SETOFF
 
Upon notice to Seller specifying in reasonable detail the basis therefor, Buyer
may propose to set off any amount to which it may be entitled under this Article
11 against amounts otherwise payable under the Secured Subordinated Promissory.
Any amount so proposed shall be deposited by Buyer into an escrow account
maintained by its attorney until such claim is agreed to by the parties or
otherwise finally determined. The proposal to exercise such right of setoff by
Buyer in good faith, whether or not ultimately determined to be justified, will
not constitute an event of default under the Secured Subordinated Promissory
Note or any instrument securing the Secured Subordinated Promissory Note.
Neither the exercise of nor the failure to exercise such right of setoff or to
give a notice of a claim will constitute an election of remedies or limit Buyer
in any manner in the enforcement of any other remedies that may be available to
it.
 
11.9 THIRD-PARTY CLAIMS
 
a. Promptly after receipt by a Person entitled to indemnity under Section 11.2,
11.3 (to the extent provided in the last sentence of Section 11.3) or 11.4 (an
“Indemnified Person”) of notice of the assertion of a Third-Party Claim against
it, such Indemnified Person shall give notice to the Person obligated to
indemnify under such Section (an “Indemnifying Person”) of the assertion of such
Third-Party Claim, provided that the failure to notify the Indemnifying Person
will not relieve the Indemnifying Person of any liability that it may have to
any Indemnified Person, except to the extent that the Indemnifying Person
demonstrates that the defense of such Third-Party Claim is prejudiced by the
Indemnified Person’s failure to give such notice.
b. If an Indemnified Person gives notice to the Indemnifying Person pursuant to
Section 11.9(a) of the assertion of a Third-Party Claim, the Indemnifying Person
shall be entitled to participate in the defense of such Third-Party Claim and,
to the extent that it wishes (unless (i) the Indemnifying Person is also a
Person against whom the Third-Party Claim is made and the Indemnified Person
determines in good faith that joint representation would be inappropriate or
(ii) the Indemnifying Person fails to provide reasonable assurance to the
Indemnified Person of its financial capacity to defend such Third-Party Claim
and provide indemnification with respect to such Third-Party Claim), to assume
the defense of such Third-Party Claim with counsel satisfactory to the
Indemnified Person. After notice from the Indemnifying Person to the Indemnified
Person of its election to assume the defense of such Third-Party Claim, the
Indemnifying Person shall not, so long as it diligently conducts such defense,
be liable to the Indemnified Person under this Article 11 for any fees of other
counsel or any other expenses with respect to the defense of such Third-Party
Claim, in each case subsequently incurred by the Indemnified Person in
connection with the defense of such Third-Party Claim, other than reasonable
costs of investigation. If the Indemnifying Person assumes the defense of a
Third-Party Claim, (i) such assumption will conclusively establish for purposes
of this Agreement that the claims made in that Third-Party Claim are within the
scope of and subject to indemnification, and (ii) no compromise or settlement of
such Third-Party Claims may be effected by the Indemnifying Person without the
Indemnified Person’s Consent unless (A) there is no finding or admission of any
violation of Legal Requirement or any violation of the rights of any Person; (B)
the sole relief provided is monetary damages that are paid in full by the
Indemnifying Person; and (C) the Indemnified Person shall have no liability with
respect to any compromise or settlement of such Third-Party Claims effected
without its Consent. If notice is given to an Indemnifying Person of the
assertion of any Third-Party Claim and the Indemnifying Person does not, within
ten (10) days after the Indemnified Person’s notice is given, give notice to the
Indemnified Person of its election to assume the defense of such Third-Party
Claim, the Indemnifying Person will be bound by any determination made in such
Third-Party Claim or any compromise or settlement effected by the Indemnified
Person.

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c. Notwithstanding the foregoing, if an Indemnified Person determines in good
faith that there is a reasonable probability that a Third-Party Claim may
adversely affect it or its Related Persons other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
the Indemnified Person may, by notice to the Indemnifying Person, assume the
exclusive right to defend, compromise or settle such Third-Party Claim, but the
Indemnifying Person will not be bound by any determination of any Third-Party
Claim so defended for the purposes of this Agreement or any compromise or
settlement effected without its Consent (which may not be unreasonably
withheld).
d. Notwithstanding the provisions of Section 13.4, Seller and each Shareholder
hereby consent to the nonexclusive jurisdiction of any court in which a
Proceeding in respect of a Third-Party Claim is brought against any Buyer
Indemnified Person for purposes of any claim that a Buyer Indemnified Person may
have under this Agreement with respect to such Proceeding or the matters alleged
therein and agree that process may be served on Seller and Shareholder with
respect to such a claim anywhere in the world.
e. With respect to any Third-Party Claim subject to indemnification under this
Article 11: (i) both the Indemnified Person and the Indemnifying Person, as the
case may be, shall keep the other Person fully informed of the status of such
Third-Party Claim and any related Proceedings at all stages thereof where such
Person is not represented by its own counsel, and (ii) the parties agree (each
at its own expense) to render to each other such assistance as they may
reasonably require of each other and to cooperate in good faith with each other
in order to ensure the proper and adequate defense of any Third-Party Claim.
f. With respect to any Third-Party Claim subject to indemnification under this
Article 11, the parties agree to cooperate in such a manner as to preserve in
full (to the extent possible) the confidentiality of all Confidential
Information and the attorney-client and work-product privileges. In connection
therewith, each party agrees that: (i) it will use its Best Efforts, in respect
of any Third-Party Claim in which it has assumed or participated in the defense,
to avoid production of Confidential Information (consistent with applicable law
and rules of procedure), and (ii) all communications between any party hereto
and counsel responsible for or participating in the defense of any Third-Party
Claim shall, to the extent possible, be made so as to preserve any applicable
attorney-client or work-product privilege.
 

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11.10 OTHER CLAIMS

 
A claim for indemnification for any matter not involving a Third-Party Claim may
be asserted by notice to the party from whom indemnification is sought and shall
be paid promptly after such notice.
 
SECTION 12
CONFIDENTIALITY
 
12.1 DEFINITION OF CONFIDENTIAL INFORMATION
 
a. As used in this Article 12, the term “Confidential Information” includes any
and all of the following information of Seller, Buyer or Shareholder that has
been or may hereafter be disclosed in any form, whether in writing, orally,
electronically or otherwise, or otherwise made available by observation,
inspection or otherwise by either party (Buyer on the one hand or Seller and
Shareholder, collectively, on the other hand) or its Representatives
(collectively, a “Disclosing Party”) to the other party or its Representatives
(collectively, a “Receiving Party”):
 
(i) all information that is a trade secret under applicable trade secret or
other law;
(ii) all information concerning product specifications, data, know-how,
formulae, compositions, processes, designs, sketches, photographs, graphs,
drawings, samples, inventions and ideas, past, current and planned research and
development, current and planned manufacturing or distribution methods and
processes, customer lists, current and anticipated customer requirements, price
lists, market studies, business plans, computer hardware, Software and computer
software and database technologies, systems, structures and architectures;
(iii) all information concerning the business and affairs of the Disclosing
Party (which includes historical and current financial statements, financial
projections and budgets, tax returns and accountants’ materials, historical,
current and projected sales, capital spending budgets and plans, business plans,
strategic plans, marketing and advertising plans, publications, client and
customer lists and files, contracts, the names and backgrounds of key personnel
and personnel training techniques and materials, however documented), and all
information obtained from review of the Disclosing Party’s documents or property
or discussions with the Disclosing Party regardless of the form of the
communication; and
(iv) all notes, analyses, compilations, studies, summaries and other material
prepared by the Disclosing Party to the extent containing or based, in whole or
in part, upon any information included in the foregoing.
 
b. Any trade secrets of a Disclosing Party shall also be entitled to all of the
protections and benefits under applicable trade secret law and any other
applicable law. If any information that a Disclosing Party deems to be a trade
secret is found by a court of competent jurisdiction not to be a trade secret
for purposes of this Article 12, such information shall still be considered
Confidential Information of that Disclosing Party for purposes of this Article
12 to the extent included within the definition. In the case of trade secrets,
each of Buyer, Seller and Shareholder hereby waives any requirement that the
other party submit proof of the economic value of any trade secret or post a
bond or other security.
 

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12.2 RESTRICTED USE OF CONFIDENTIAL INFORMATION
 
a. Each Receiving Party acknowledges the confidential and proprietary nature of
the Confidential Information of the Disclosing Party and agrees that such
Confidential Information (i) shall be kept confidential by the Receiving Party;
(ii) shall not be used for any reason or purpose other than to evaluate and
consummate the Contemplated Transactions; and (iii) without limiting the
foregoing, shall not be disclosed by the Receiving Party to any Person, except
in each case as otherwise expressly permitted by the terms of this Agreement or
with the prior written consent of an authorized representative of Seller with
respect to Confidential Information of Seller or Shareholder (each, a “Seller
Contact”) or an authorized representative of Buyer with respect to Confidential
Information of Buyer (each, a “Buyer Contact”). Each of Buyer and Seller and
Shareholder shall disclose the Confidential Information of the other party only
to its Representatives who require such material for the purpose of evaluating
the Contemplated Transactions and are informed by Buyer, Seller or Shareholder,
as the case may be, of the obligations of this Article 12 with respect to such
information. Each of Buyer, Seller and Shareholder shall (iv) enforce the terms
of this Article 12 as to its respective Representatives; (v) take such action to
the extent necessary to cause its Representatives to comply with the terms and
conditions of this Article 12; and (vi) be responsible and liable for any breach
of the provisions of this Article 12 by it or its Representatives.
b. Unless and until this Agreement is terminated, Seller and each Shareholder
shall maintain as confidential any Confidential Information (including for this
purpose any information of Seller or Shareholder of the type referred to in
Sections 12.1(a)(i), (ii) and (iii), whether or not disclosed to Buyer) of the
Seller or Shareholder relating to any of the Assets or the Assumed Liabilities.
Notwithstanding the preceding sentence, Seller may use any Confidential
Information of Seller before the Closing in the Ordinary Course of Business in
connection with the transactions permitted by Section 5.2.
c. From and after the Closing, the provisions of Section 12.2(a) above shall not
apply to or restrict in any manner Buyer’s use of any Confidential Information
of the Seller or Shareholder relating to any of the Assets or the Assumed
Liabilities.
 
12.3 EXCEPTIONS
 
Sections 12.2(a) and (b) do not apply to that part of the Confidential
Information of a Disclosing Party that a Receiving Party demonstrates (a) was,
is or becomes generally available to the public other than as a result of a
breach of this Article 12 or the Confidentiality Agreement by the Receiving
Party or its Representatives; (b) was or is developed by the Receiving Party
independently of and without reference to any Confidential Information of the
Disclosing Party; or (c) was, is or becomes available to the Receiving Party on
a nonconfidential basis from a Third Party not bound by a confidentiality
agreement or any legal, fiduciary or other obligation restricting disclosure.
Neither Seller nor the Shareholder shall disclose any Confidential Information
of Seller or Shareholder relating to any of the Assets or the Assumed
Liabilities in reliance on the exceptions in clauses (b) or (c) above.
 

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12.4 LEGAL PROCEEDINGS
 
If a Receiving Party becomes compelled in any Proceeding or is requested by a
Governmental Body having regulatory jurisdiction over the Contemplated
Transactions to make any disclosure that is prohibited or otherwise constrained
by this Article 12, that Receiving Party shall provide the Disclosing Party with
prompt notice of such compulsion or request so that it may seek an appropriate
protective order or other appropriate remedy or waive compliance with the
provisions of this Article 12. In the absence of a protective order or other
remedy, the Receiving Party may disclose that portion (and only that portion) of
the Confidential Information of the Disclosing Party that, based upon advice of
the Receiving Party’s counsel, the Receiving Party is legally compelled to
disclose or that has been requested by such Governmental Body, provided,
however, that the Receiving Party shall use reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded by any Person to
whom any Confidential Information is so disclosed. The provisions of this
Section 12.4 do not apply to any Proceedings between the parties to this
Agreement.
 
12.5 RETURN OR DESTRUCTION OF CONFIDENTIAL INFORMATION
 
If this Agreement is terminated, each Receiving Party shall (a) destroy all
Confidential Information of the Disclosing Party prepared or generated by the
Receiving Party without retaining a copy of any such material; (b) promptly
deliver to the Disclosing Party all other Confidential Information of the
Disclosing Party, together with all copies thereof, in the possession, custody
or control of the Receiving Party or, alternatively, with the written consent of
a Seller Contact or a Buyer Contact (whichever represents the Disclosing Party)
destroy all such Confidential Information; and (c) certify all such destruction
in writing to the Disclosing Party, provided, however, that the Receiving Party
may retain a list that contains general descriptions of the information it has
returned or destroyed to facilitate the resolution of any controversies after
the Disclosing Party’s Confidential Information is returned.
 
12.6 ATTORNEY-CLIENT PRIVILEGE
 
The Disclosing Party is not waiving, and will not be deemed to have waived or
diminished, any of its attorney work product protections, attorney-client
privileges or similar protections and privileges as a result of disclosing its
Confidential Information (including Confidential Information related to pending
or threatened litigation) to the Receiving Party, regardless of whether the
Disclosing Party has asserted, or is or may be entitled to assert, such
privileges and protections. The parties (a) share a common legal and commercial
interest in all of the Disclosing Party’s Confidential Information that is
subject to such privileges and protections; (b) are or may become joint
defendants in Proceedings to which the Disclosing Party’s Confidential
Information covered by such protections and privileges relates; (c) intend that
such privileges and protections remain intact should either party become subject
to any actual or threatened Proceeding to which the Disclosing Party’s
Confidential Information covered by such protections and privileges relates; and
(d) intend that after the Closing the Receiving Party shall have the right to
assert such protections and privileges. No Receiving Party shall admit, claim or
contend, in Proceedings involving either party or otherwise, that any Disclosing
Party waived any of its attorney work-product protections, attorney-client
privileges or similar protections and privileges with respect to any
information, documents or other material not disclosed to a Receiving Party due
to the Disclosing Party disclosing its Confidential Information (including
Confidential Information related to pending or threatened litigation) to the
Receiving Party.
 

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SECTION 13
GENERAL PROVISIONS
 
13.1 EXPENSES
 
Except as otherwise provided in this Agreement, each party to this Agreement
will bear its respective fees and expenses incurred in connection with the
preparation, negotiation, execution and performance of this Agreement and the
Contemplated Transactions, including all fees and expense of its
Representatives. If this Agreement is terminated, the obligation of each party
to pay its own fees and expenses will be subject to any rights of such party
arising from a Breach of this Agreement by another party.
 
13.2 PUBLIC ANNOUNCEMENTS AND DISCLOSURES
 
Any public announcement, press release or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Buyer determines. Except with the prior consent of
Buyer or as permitted by this Agreement, neither Seller, Shareholder nor any of
their Representatives shall disclose to any Person (a) the fact that any
Confidential Information of Seller or Shareholder has been disclosed to Buyer or
its Representatives, that Buyer or its Representatives have inspected any
portion of the Confidential Information of Seller or Shareholder, that any
Confidential Information of Buyer has been disclosed to Seller, Shareholder or
their Representatives or that Seller, Shareholder or their Representatives have
inspected any portion of the Confidential Information of Buyer or (b) any
information about the Contemplated Transactions, including the status of such
discussions or negotiations, the execution of any documents (including this
Agreement) or any of the terms of the Contemplated Transactions or the related
documents (including this Agreement). Seller and Buyer will consult with each
other concerning the means by which Seller’s employees, customers, suppliers and
others having dealings with Seller will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication. Buyer retains the right to disclose this Agreement in its
entirety in public filings with the U.S. Securities and Exchange Commission.
 
13.3 NOTICES
 
All notices, Consents, waivers and other communications required or permitted by
this Agreement shall be in writing and shall be deemed given to a party when (a)
delivered to the appropriate address by hand or by nationally recognized
overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with
confirmation of transmission by the transmitting equipment; or (c) received or
rejected by the addressee, if sent by certified mail, return receipt requested,
in each case to the following addresses, facsimile numbers or e-mail addresses
and marked to the attention of the person (by name or title) designated below
(or to such other address, facsimile number, e-mail address or person as a party
may designate by notice to the other parties):

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Seller (before the Closing):      Freundlich Supply Company, Inc.
2200 Arthur Kill Road
Staten Island, NY 10309
Attention: Michael Freundlich
Fax no.: (718) 356-3661
E-mail address: inspector1492@aol.com
 
with a mandatory copy to:         Howard J. Kerker, Esquire
600 Madison Avenue
22nd Floor
New York, NY 10022
Fax no.: (212) 758-1747
E-mail address: hjkpc@aol.com
 
Seller (after the Closing):      Freundlich Supply Company, Inc.
2200 Arthur Kill Road
Staten Island, NY 10309
Attention: Michael Freundlich
Fax no.: (718) 356-3661
E-mail address: inspector1492@aol.com
 
with a mandatory copy to:         Howard J. Kerker, Esquire
600 Madison Avenue
22nd Floor
New York, NY 10022
Fax no.: (212) 758-1747
E-mail address: hjkpc@aol.com
 
Shareholder:        Michael Freundlich
2200 Arthur Kill Road
Staten Island, NY 10309
Fax no.: (718) 356-3661
E-mail address: inspector1492@aol.com
 
with a mandatory copy to:         Howard J. Kerker, Esquire
600 Madison Avenue
22nd Floor
New York, NY 10022
Fax no.: (212) (212) 758-1747
E-mail address: hjkpc@aol.com
 

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Buyer:         Delaware Fastener Acquisition Corporation
P. O. Box 2127
Jenkintown, PA 19046
Attention: Alex Katz
Fax no.: (215) 885-6281
E-mail address: katza@comcast.net
 
with a mandatory copy to:         Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, NY 10018
Attention: Darrin M. Ocasio, Esq.
Fax no.: (212) 930-9725
E-mail address: dmocasio@srff.com
 
13.4 JURISDICTION; SERVICE OF PROCESS
 
Any Proceeding arising out of or relating to this Agreement or any Contemplated
Transaction may be brought in the courts of the State of New York, County of New
York, or, if it has or can acquire jurisdiction, in the United States District
Court for the Southern District of New York, and each of the parties irrevocably
submits to the exclusive jurisdiction of each such court in any such Proceeding,
waives any objection it may now or hereafter have to venue or to convenience of
forum, agrees that all claims in respect of the Proceeding shall be heard and
determined only in any such court and agrees not to bring any Proceeding arising
out of or relating to this Agreement or any Contemplated Transaction in any
other court. The parties agree that either or both of them may file a copy of
this paragraph with any court as written evidence of the knowing, voluntary and
bargained agreement between the parties irrevocably to waive any objections to
venue or to convenience of forum. Process in any Proceeding referred to in the
first sentence of this section may be served on any party anywhere in the world.
 
13.5 ENFORCEMENT OF AGREEMENT
 
Buyer, Seller and Shareholder acknowledge and agree that each respective party
would be irreparably damaged 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 either party could not be adequately compensated in all cases by
monetary damages alone. Accordingly, in addition to any other right or remedy to
which a party hereto may be entitled, at law or in equity, it shall 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.
 

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13.6 WAIVER; REMEDIES CUMULATIVE
 
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither any failure nor any delay by any party in exercising any
right, power or privilege under this Agreement 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 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
writing 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 or the documents referred to in this Agreement.
 
13.7 ENTIRE AGREEMENT AND MODIFICATION
 
This Agreement supersedes all prior agreements, whether written or oral, between
the parties with respect to its subject matter (including any letter of intent
and any confidentiality agreement between Buyer and Seller) and constitutes
(along with the Exhibits and other 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 agreement
executed by the party to be charged with the amendment.
 
13.8 ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS
 
No party may assign any of its rights or delegate any of its obligations under
this Agreement without the prior written consent of the other parties, except
that Buyer may assign any of its rights and delegate any of its obligations
under this Agreement to any Subsidiary of Buyer and may collaterally assign its
rights hereunder to any financial institution providing financing in connection
with the Contemplated Transactions. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon and inure to the
benefit of the successors and permitted assigns of the parties. 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 shall inure to a successor or permitted
assignee pursuant to this Section 13.9.
 
13.9 SEVERABILITY
 
If any provision of this Agreement is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
 
 

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13.10 CONSTRUCTION
 
The headings of Articles and Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to “Articles” and “Sections” refer to the corresponding Articles and
Sections of this Agreement.
 
13.11 TIME OF ESSENCE
 
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
 
13.12 GOVERNING LAW
 
This Agreement will be governed by and construed under the laws of the State of
New York without regard to conflicts-of-laws principles that would require the
application of any other law.
 
13.13 EXECUTION OF AGREEMENT
 
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement. The exchange
of copies of this Agreement and of signature pages by facsimile transmission
shall constitute effective execution and delivery of this Agreement as to the
parties and may be used in lieu of the original Agreement for all purposes.
Signatures of the parties transmitted by facsimile shall be deemed to be their
original signatures for all purposes.
 
13.14 SHAREHOLDER OBLIGATIONS
 
The liability of each Shareholder hereunder shall be joint and several with
Seller and with the other Shareholder. Where in this Agreement provision is made
for any action to be taken or not taken by Seller, Shareholder jointly and
severally undertake to cause Seller to take or not take such action, as the case
may be. Without limiting the generality of the foregoing, Shareholder shall be
jointly and severally liable with Seller for the indemnities set forth in
Article 11.
 
13.15 REPRESENTATIVE OF SELLER AND SHAREHOLDER
 
a. Seller hereby constitutes and appoints Shareholder as its representative
(“Selling Parties’ Representative”) and its true and lawful attorney in fact,
with full power and authority in its name and on its behalf:
 
(i) to act in the absolute discretion of the Selling Parties Representative, but
only with respect to the following provisions of this Agreement, with the power
to: (A) designate the accounts for payment of the Purchase Price pursuant to
Section 2.7(b)(i); (B) act pursuant to Section 2.9 with respect to any Purchase
Price adjustment; (C) consent to the assignment of rights under this Agreement
in accordance with Section 13.9; (D) give and receive notices pursuant to
Section 13.3; (E) terminate this Agreement pursuant to Section 9.1 or waive any
provision of this Agreement pursuant to Article 8, Section 9.1 and Section 13.6;
(F) accept service of process pursuant to Section 13.4; and (G) act in
connection with any matter as to which Seller and the Shareholder, jointly and
severally, have obligations, or are Indemnified Persons, under Article 11; and

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(ii) in general, to do all things and to perform all acts, including executing
and delivering all agreements, certificates, receipts, instructions and other
instruments contemplated by or deemed advisable to effectuate the provisions of
this Section 13.15.
 
This appointment and grant of power and authority is coupled with an interest
and is in consideration of the mutual covenants made herein and is irrevocable
and shall not be terminated by any act of either of the Shareholder or Seller or
by operation of law, whether by the death or incapacity of the Shareholder or by
the occurrence of any other event. Each Shareholder and Seller hereby consents
to the taking of any and all actions and the making of any decisions required or
permitted to be taken or made by the Selling Parties Representative pursuant to
this Section 13.15. Each of the Shareholder and Seller agree that the Selling
Parties Representative shall have no obligation or liability to any Person for
any action or omission taken or omitted by the Selling Parties Representative in
good faith hereunder, and each of the Shareholder shall, on a proportionate
basis in accordance with his or her ownership interest in the Seller, indemnify
and hold the Selling Parties Representative harmless from and against any and
all loss, damage, expense or liability (including reasonable counsel fees and
expenses) which the Selling Parties Representative may sustain as a result of
any such action or omission by the Selling Parties Representative hereunder.
 
b. Buyer shall be entitled to rely upon any document or other paper delivered by
the Selling Parties Representative as (i) genuine and correct and (ii) having
been duly signed or sent

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by the Selling Parties Representative, and the Buyer shall not be liable to
either the Shareholder or Seller for any action taken or omitted to be taken by
Buyer in such reliance.

 
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
 
 

 
FREUNDLICH SUPPLY COMPANY, INC.

 
by:  /s/ Michael Freundlich                                 
Michael Freundlich, President

 

SHAREHOLDER
 
/s/ Michael Freundlich                                        
Michael Freundlich

 

 
DELAWARE FASTENER ACQUISITION CORPORATION

 
by:  /s/ Alex Katz                                                 
Name: Alex Katz
Title: President

ESCROW AGENT
 

/s/ Howard J. Kerker                                           
Howard J. Kerker, Esquire, with regard to
Sections 2.3(b), 9.2(b) and 9.2(c) only

 

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