EXHIBIT 10.2

 

 

ASSET PURCHASE AGREEMENT

by and among

 

Accellent Corp.,

as Parent,

 

CE Huntsville Holdings Corp.,

as Purchaser,

 

Campbell Engineering, Inc.,

as the Seller,

 

and

 

each of the Sharehoolders of the Seller

set forth on the signature page hereto,

constituting all of the Shareholders of the Seller

 

Dated as of September 12, 2005

 

 

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TABLE OF CONTENTS

 

Title

 

 

ARTICLE I DEFINITIONS AND TERMS

 

Section 1.1

Defined Terms

 

Section 1.2

Terms Generally

 

 

 

 

ARTICLE II ACQUISITION AND DISPOSITION OF ASSETS

 

Section 2.1

Purchase and Sale of Assets

 

Section 2.2

Excluded Assets

 

Section 2.3

Assumption and Exclusion of Liabilities

 

Section 2.4

Nondelivered Assets

 

Section 2.5

Non-Assignment if Breach

 

 

 

 

ARTICLE III PAYMENT AND DELIVERY

 

Section 3.1

Shareholder Real Estate Purchase Price; Purchase Price

 

Section 3.2

Adjustments to Purchase Price

 

Section 3.3

Payment of Purchase Price

 

Section 3.4

Earnout Payments

 

Section 3.5

Allocation of Consideration

 

Section 3.6

Closing

 

Section 3.7

Deliveries by the Seller

 

Section 3.8

Deliveries by the Shareholders

 

Section 3.9

Deliveries by Parent

 

Section 3.10

Deliveries by Purchaser

 

 

 

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDERS

 

Section 4.1

Authorization and Validity

 

Section 4.2

Equity; Good Title

 

Section 4.3

Organization

 

Section 4.4

No Conflict

 

Section 4.5

Governmental Consents

 

Section 4.6

Financial Statements

 

Section 4.7

Absence of Certain Changes or Events

 

Section 4.8

Absence of Undisclosed Liabilities

 

Section 4.9

Property; Assets

 

Section 4.10

Litigation and Claims; Compliance with Laws

 

Section 4.11

Taxes

 

Section 4.12

Insurance

 

Section 4.13

Environmental Matters

 

Section 4.14

Material Contracts

 

Section 4.15

Intellectual Property

 

Section 4.16 [a05-18456_1ex10d2.htm#Section4_16_195257]

Employee Benefits; ERISA [a05-18456_1ex10d2.htm#Section4_16_195257]

 

Section 4.17 [a05-18456_1ex10d2.htm#Section4_17_195305]

Labor Matters [a05-18456_1ex10d2.htm#Section4_17_195305]

 

Section 4.18 [a05-18456_1ex10d2.htm#Section4_18_195307]

Records [a05-18456_1ex10d2.htm#Section4_18_195307]

 

Section 4.19 [a05-18456_1ex10d2.htm#Section4_19_195309]

Affiliate Transactions [a05-18456_1ex10d2.htm#Section4_19_195309]

 

Section 4.20 [a05-18456_1ex10d2.htm#Section4_20_195311]

Indebtedness [a05-18456_1ex10d2.htm#Section4_20_195311]

 

Section 4.21 [a05-18456_1ex10d2.htm#Section4_21_195312]

Brokers, Finders, Etc. [a05-18456_1ex10d2.htm#Section4_21_195312]

 

Section 4.22 [a05-18456_1ex10d2.htm#Section4_22_195314]

Questionable Payments [a05-18456_1ex10d2.htm#Section4_22_195314]

 

Section 4.23 [a05-18456_1ex10d2.htm#Section4_23_195315]

Competing Business [a05-18456_1ex10d2.htm#Section4_23_195315]

 

Section 4.24 [a05-18456_1ex10d2.htm#Section4_24_195317]

Compliance With Bulk Sales Act; Uniform Commercial Code
[a05-18456_1ex10d2.htm#Section4_24_195317]

 

 

i

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Section 4.25 [a05-18456_1ex10d2.htm#Section4_25_195318]

Product Warranty and Liability [a05-18456_1ex10d2.htm#Section4_25_195318]

 

Section 4.26 [a05-18456_1ex10d2.htm#Section4_26_195319]

Naturalization of the Employees [a05-18456_1ex10d2.htm#Section4_26_195319]

 

Section 4.27 [a05-18456_1ex10d2.htm#Section4_27_195321]

Bank Accounts [a05-18456_1ex10d2.htm#Section4_27_195321]

 

Section 4.28 [a05-18456_1ex10d2.htm#Section4_28_195322]

Earnout Plan [a05-18456_1ex10d2.htm#Section4_28_195322]

 

 

 

 

ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
[a05-18456_1ex10d2.htm#Articlev_195241]

 

Section 5.1 [a05-18456_1ex10d2.htm#Section5_1_195323]

Authorization and Validity [a05-18456_1ex10d2.htm#Section5_1_195323]

 

Section 5.2 [a05-18456_1ex10d2.htm#Section5_2_195324]

Organization [a05-18456_1ex10d2.htm#Section5_2_195324]

 

Section 5.3 [a05-18456_1ex10d2.htm#Section5_3_195325]

No Conflict [a05-18456_1ex10d2.htm#Section5_3_195325]

 

Section 5.4 [a05-18456_1ex10d2.htm#Section5_4_195327]

Governmental Consents [a05-18456_1ex10d2.htm#Section5_4_195327]

 

Section 5.5 [a05-18456_1ex10d2.htm#Section5_5_195328]

Payment of Purchase Price [a05-18456_1ex10d2.htm#Section5_5_195328]

 

 

 

 

ARTICLE VI COVENANTS [a05-18456_1ex10d2.htm#Articlevi_195242]

 

Section 6.1 [a05-18456_1ex10d2.htm#Section6_1_195330]

Assignment of 401(k) Sponsorship [a05-18456_1ex10d2.htm#Section6_1_195330]

 

Section 6.2 [a05-18456_1ex10d2.htm#Section6_2_195331]

Employees [a05-18456_1ex10d2.htm#Section6_2_195331]

 

Section 6.3 [a05-18456_1ex10d2.htm#Section6_3_195332]

Proration [a05-18456_1ex10d2.htm#Section6_3_195332]

 

Section 6.4 [a05-18456_1ex10d2.htm#Section6_4_195334]

Cooperation [a05-18456_1ex10d2.htm#Section6_4_195334]

 

Section 6.5 [a05-18456_1ex10d2.htm#Section6_5_195336]

Further Assurances [a05-18456_1ex10d2.htm#Section6_5_195336]

 

 

 

 

ARTICLE VII SURVIVAL AND INDEMNIFICATION
[a05-18456_1ex10d2.htm#Articlevii_195243]

 

Section 7.1 [a05-18456_1ex10d2.htm#Section7_1_195337]

Survival of Representations and Warranties
[a05-18456_1ex10d2.htm#Section7_1_195337]

 

Section 7.2 [a05-18456_1ex10d2.htm#Section7_2_195340]

Indemnification by the Seller and the Shareholders
[a05-18456_1ex10d2.htm#Section7_2_195340]

 

Section 7.3 [a05-18456_1ex10d2.htm#Section7_3_195344]

Indemnification by Parent and Purchaser
[a05-18456_1ex10d2.htm#Section7_3_195344]

 

Section 7.4 [a05-18456_1ex10d2.htm#Section7_4_195346]

Notice and Resolution of Claim [a05-18456_1ex10d2.htm#Section7_4_195346]

 

Section 7.5 [a05-18456_1ex10d2.htm#Section7_5_195350]

Limitations [a05-18456_1ex10d2.htm#Section7_5_195350]

 

Section 7.6 [a05-18456_1ex10d2.htm#Section7_6_195351]

Exclusive Remedy [a05-18456_1ex10d2.htm#Section7_6_195351]

 

Section 7.7 [a05-18456_1ex10d2.htm#Section7_7_195354]

Mitigation of Damages [a05-18456_1ex10d2.htm#Section7_7_195354]

 

 

 

 

ARTICLE VIII MISCELLANEOUS [a05-18456_1ex10d2.htm#Articleviii_195245]

 

Section 8.1 [a05-18456_1ex10d2.htm#Section8_1_195356]

Notices [a05-18456_1ex10d2.htm#Section8_1_195356]

 

Section 8.2 [a05-18456_1ex10d2.htm#Section8_2_195357]

Amendment, Waiver [a05-18456_1ex10d2.htm#Section8_2_195357]

 

Section 8.3 [a05-18456_1ex10d2.htm#Section8_3_195359]

Assignment [a05-18456_1ex10d2.htm#Section8_3_195359]

 

Section 8.4 [a05-18456_1ex10d2.htm#Section8_4_195400]

Entire Agreement [a05-18456_1ex10d2.htm#Section8_4_195400]

 

Section 8.5 [a05-18456_1ex10d2.htm#Section8_5_195401]

Parties in Interest [a05-18456_1ex10d2.htm#Section8_5_195401]

 

Section 8.6 [a05-18456_1ex10d2.htm#Section8_6_195402]

Expenses [a05-18456_1ex10d2.htm#Section8_6_195402]

 

Section 8.7 [a05-18456_1ex10d2.htm#Section8_7_195403]

Governing Law; Jurisdiction; Service of Process
[a05-18456_1ex10d2.htm#Section8_7_195403]

 

Section 8.8 [a05-18456_1ex10d2.htm#Section8_8_195405]

Specific Performance [a05-18456_1ex10d2.htm#Section8_8_195405]

 

Section 8.9 [a05-18456_1ex10d2.htm#Section8_9_195406]

Transfer and Similar Taxes [a05-18456_1ex10d2.htm#Section8_9_195406]

 

Section 8.10 [a05-18456_1ex10d2.htm#Section8_10_195408]

Counterparts [a05-18456_1ex10d2.htm#Section8_10_195408]

 

Section 8.11 [a05-18456_1ex10d2.htm#Section8_11_195409]

Headings [a05-18456_1ex10d2.htm#Section8_11_195409]

 

 

ii

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ASSET PURCHASE AGREEMENT

 

This ASSET PURCHASE AGREEMENT, dated as of September 12, 2005 (this
“Agreement”), is made and entered into by and among Accellent Corp., a Colorado
corporation (“Parent”), CE Huntsville Holdings Corp., a Delaware corporation and
wholly owned subsidiary of Parent (“Purchaser”), Campbell Engineering, Inc., an
Alabama corporation (the “Seller”), and each of the shareholders of the Seller
signatory hereto, constituting all of the shareholders of the Seller (each
hereinafter individually referred to as a “Shareholder” and collectively
referred to as the “Shareholders”).

 

WITNESSETH

 

WHEREAS, the Seller is engaged in the business of providing precision machining,
assembly and engineering design for the aerospace and medical industries (the
“Business”);

 

WHEREAS, the Seller intends to sell, transfer and assign to Purchaser, and
Purchaser intends to purchase, acquire and assume from the Seller, substantially
all of the assets and certain liabilities of the Seller relating to the
operation of the Business all upon the terms and subject to the conditions set
forth in this Agreement;

 

WHEREAS, the Shareholders intend to sell, transfer and assign to Purchaser, and
Purchaser intends to purchase, acquire and assume from the Shareholders, the
Shareholder Real Estate (as hereinafter defined) upon the terms and subject to
the conditions set forth in this Agreement;

 

WHEREAS, the Shareholders, who collectively own all of the outstanding capital
stock of the Seller, have determined it to be in the Shareholders’ best
interests that (A) the Shareholders sell, transfer and assign to Purchaser, and
that Purchaser purchases, acquires and assumes from the Shareholders, the
Shareholder Real Estate and (B) the Seller sell, transfer and assign to
Purchaser, and that Purchaser purchases, acquires and assumes from the Seller,
such assets and liabilities of the Seller as set forth in this Agreement; and

 

WHEREAS, Parent has determined it to be in its and Purchaser’s best interests
for Parent to be the sole party hereunder obligated to pay, and to pay, to
Seller any Earnout Amounts (as hereinafter defined) required to be paid pursuant
to this Agreement.

 

NOW THEREFORE, in consideration of the mutual promises and covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

DEFINITIONS AND TERMS

 

Section 1.1                                      Defined Terms.  Each
capitalized term used and not otherwise defined herein shall have the respective
meaning ascribed to such term in Schedule 1.1 attached hereto or in the
Section referenced in such Schedule 1.1.

 

Section 1.2                                      Terms Generally.  The
definitions in Schedule 1.1 shall apply equally to both the singular and plural
forms of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
“include,” “includes” and “including” shall be deemed to be followed by the
phrase “without limitation” even if not followed actually by such phrase unless
the context expressly provides otherwise. Unless otherwise expressly defined,
terms defined in the Agreement shall have the same meanings when used in any
Exhibit or Schedule and terms defined in any Exhibit or Schedule shall have the
same meanings when used in the Agreement or in any other Exhibit or Schedule.
Unless the context requires otherwise, references to Articles and Sections refer
to Articles and Sections of this Agreement, and references to Schedules or
Exhibits refer to the Schedules and Exhibits attached to this Agreement, each of
which is made a part hereof for all purposes. The words “herein,” “hereof,”
“hereto” and “hereunder” and other words of similar import refer to this
Agreement as a whole and not to any particular provision of this

 

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

 

Agreement. The phrase “made available” in this Agreement shall mean that the
information referred to has been made available by the party in question. The
phrases “the date of this Agreement,” “the date hereof” and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to the
date set forth in the introductory paragraph of this Agreement. References to
“dollars” or “$” in this Agreement shall be deemed to refer to the applicable
denomination of federal funds of the United States of America.

 

ARTICLE II

ACQUISITION AND DISPOSITION OF ASSETS

 

Section 2.1                                      Purchase and Sale of Assets.

 

(a)                                  At the Closing, upon the terms and subject
to the conditions set forth in this Agreement, the Shareholders shall transfer,
assign, convey and deliver to Purchaser, and Purchaser shall receive from the
Shareholders, all right, title and interest in and to that certain real property
listed in Schedule 2.1(a) and the improvements thereon and the appurtenances
thereto (the “Shareholder Real Estate”) free and clear of all Liens, except as
otherwise contemplated herein and except for easements and non-monetary Liens
which do not adversely impact the use of the Shareholder Real Estate by the
Business as currently conducted. At the Closing, upon the terms and subject to
the conditions set forth in this Agreement, the Seller shall transfer, assign,
convey and deliver to Purchaser, and Purchaser shall receive from the Seller,
all right, title and interest in and to all of the Assets free and clear of all
Liens, except as otherwise contemplated herein. It is the intent of the parties
hereto that the “Assets” shall mean all right, title and interest in and to
substantially all of the assets useful to, used in or held for use in the
Business as of the Closing Date wherever such assets are located and whether
real, personal or mixed, tangible or intangible, and whether or not any such
assets have any value for accounting purposes or are carried or reflected on or
specifically referred to in the Seller’s books and records or financial
statements, which assets shall exclude the Excluded Assets but shall include the
following:

 

(i)                                     all Intellectual Property used in or
useful to the conduct of the Business including those items listed but not
exhaustively described in Schedule 2.1(a)(i);

 

(ii)                                  all contracts, agreements, contract
rights, license agreements, purchase and sales orders, quotations and other
executory commitments of the Seller entered into in connection with the conduct
of the Business listed in Schedule 2.1(a)(ii) (the “Contracts”);

 

(iii)                               all accounts receivable and all notes or
other securities and accounts (excluding the Seller’s bank accounts)
attributable to the Seller for operations of the Business on or after the
Closing Date;

 

(iv)                              all computer equipment and related software
and software licenses, office equipment and other personal property listed in
Schedule 2.1(a)(iv);

 

(v)                                 all books of account and customer and
supplier lists including addresses, drawings, files, papers and records of the
Seller;

 

(vi)                              all deposits, advance payments, prepaid items
and expenses, deferred charges, rights of offset and credits and claims for
refund relating to the Seller;

 

(vii)                           all claims, rights and causes in action against
third parties and all rights to insurance proceeds relating to any damage,
destruction or impairment of the tangible Assets prior to the Closing Date;

 

(viii)                        all licenses, permits, consents and certificates
of any regulatory, administrative or other governmental agency or body issued to
or held by the Seller and necessary or incidental to the conduct of the Business
(to the extent the same are transferable);

 

2

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(ix)                                all of the Seller’s right, title and
interest in, and benefits accruing to the Seller under, all real property owned
by the Seller and all leaseholds and subleaseholds relating to real property
(including all improvements thereon and appurtenances thereto);

 

(x)                                   all fixed assets, manufacturing equipment,
inventory and leasehold improvements;

 

(xi)                                all goodwill associated with the Assets, in
particular, and the Seller, in general; and

 

(xii)                             all other miscellaneous items set forth in
Schedule 2.1(a)(xii).

 

(b)                                 The sale, conveyance, assignment, transfer
and delivery of the Shareholder Real Estate and the Assets will be effected by
delivery by the Seller and Shareholders to Purchaser of (i) a Statutory Warranty
Deed or the Bill of Sale and Assignment Agreement, as applicable, (ii) executed
copies of the filings, consents, approvals, notices or waivers, and copies of
the instruments transferring, registering or issuing the consents, approvals,
permits, licenses, permissions, registrations or other authorizations referred
to herein, and (iii) such other instruments of conveyance, transfer and
assignment (collectively, the “Instruments of Transfer”) as shall be necessary
to vest in Purchaser full right, title and interest in and to (A) the Assets,
free and clear of all Claims and Liens, whether absolute, accrued, contingent or
otherwise and (B) the Shareholder Real Estate, free and clear of all Claims and
Liens, whether absolute, accrued, contingent or otherwise, other than as
contemplated herein and except for easements and non-monetary Liens which do not
adversely impact the use of the Shareholder Real Estate by the Business as
currently conducted.

 

Section 2.2                                      Excluded Assets.  The Assets
shall not include (i) any original minute books, stockholder books, tax books
and other similar records of the Seller (a true and complete copy of each of
which has been provided to Purchaser) (ii) all cash on hand, cash equivalents
and bank accounts of the Seller (which accounts contain sufficient funds to
cover outstanding checks drawn on the Seller’s bank accounts as of the Closing
Date), (iii) the Seller’s rights in any insurance policies, other than rights to
insurance proceeds relating to any damage, destruction or impairment of the
tangible Assets prior to the Closing Date, and (iv) any assets of the Seller set
forth in Schedule 2.2 (collectively, the “Excluded Assets”); all of the Seller’s
right, title and interest in and to which, as the same exist as of the Closing
Date, shall be retained by the Seller.

 

Section 2.3                                      Assumption and Exclusion of
Liabilities.

 

(a)                                  Upon the terms and subject to the
conditions of this Agreement, at the Closing, Purchaser will assume and agree to
pay, perform and discharge as and when due only the following liabilities and
obligations of the Seller (collectively, the “Assumed Liabilities”): (i) those
current liabilities and obligations (including those relating to accounts
payable and accrued but unpaid employee payroll) of the Seller listed in
Schedule 2.3(a)(i); (ii) the future obligations of the Seller as of the Closing
Date under the contracts and agreements described in Schedule 2.1(a)(ii) (except
to the extent otherwise provided in such Schedule), together with such other
contractual obligations that relate solely to the Business that have been
entered into in the ordinary course of business of the Seller consistent with
past practices and have been disclosed to Purchaser prior to the Closing,
including warranty obligations solely to retool or replace defective products
sold in the ordinary course of business in an amount not to exceed TWENTY-FIVE
THOUSAND DOLLARS $25,000 in any trailing twelve (12) month period of the
Business (it being acknowledged that Purchaser assumes no other express or
implied warranty obligations of the Seller whatsoever, including any warranty
obligations with respect to products liability or monetary damages as a result
of the manufacture of defective products); and (iii) all accrued vacation and
sick leave of the Seller’s employees who will be employed by Purchaser following
the Closing Date as set forth in Schedule 2.3(a)(iii). The assumption of the
Assumed Liabilities by Purchaser will be effected by delivery by Purchaser to
the Seller of the duly executed Instruments of Transfer.

 

3

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

 

(b)                                 Except as explicitly set for above in
Section 2.3(a), the Seller shall retain, and Purchaser shall not assume, and
nothing contained in this Agreement shall be construed as an assumption by
Purchaser of, any other liabilities, obligations or undertakings of the Seller
(or any Subsidiary, division, associate or Affiliate of the Seller, or of any
Person) of any nature whatsoever, whether accrued, absolute, fixed or
contingent, known or unknown, due or to become due, unliquidated or otherwise,
including any liabilities relating to (i) all Indebtedness of the Seller,
(ii) Taxes with respect to or attributable to the Assets for all taxable periods
through the Closing Date, Taxes with respect to or attributable to the
properties, Business or operations of the Seller or any Subsidiary, division,
associate or Affiliate of the Seller and Taxes of the Seller with respect to or
attributable to the transactions contemplated hereby or otherwise, (iii) any
Liabilities associated with the Excluded Assets and (iv) any Liabilities
associated with the Assets that arise or relate to events that occurred prior to
the Closing Date. The Seller shall remain responsible for all of the
liabilities, obligations and undertakings of the Seller not expressly assumed by
Purchaser in Section 2.3(a). Purchaser is not assuming any liabilities,
obligations or undertakings whatsoever of the Shareholders.

 

Section 2.4                                      Nondelivered Assets. 
Notwithstanding anything else contained in this Agreement to the contrary, in
the event that an Asset is not delivered by the Seller to Purchaser at Closing
(a “Nondelivered Asset”), the Seller shall deliver such Nondelivered Asset to
Purchaser as soon as the Seller has actual knowledge of the existence of such
Nondelivered Asset.

 

Section 2.5                                      Non-Assignment if Breach. 
Notwithstanding anything contained in this Agreement to the contrary, this
Agreement shall not constitute an agreement to assign any of the Assets if the
attempted assignment, as a result of the absence of the consent or authorization
of a third party, would constitute a breach or default under any lease,
agreement, Liens or commitment or would in any way adversely affect the rights,
or increase the obligations, of any party or any Subsidiary with respect thereto
or would otherwise affect the ability of Purchaser to receive the benefit of the
Assets. If any such consent or authorization is not obtained, or if an attempted
assignment or assumption would be ineffective or would adversely affect the
rights or benefits or increase the obligations of Purchaser with respect to any
such Assets, then the parties shall enter into such reasonable cooperative
arrangements (including sublease, agency, partial closing, management, indemnity
or payment arrangements and enforcement at the cost and for the benefit of
Purchaser of any and all rights of the Seller against an involved third party)
to provide the parties with such benefits and obligations as most closely
approximate those contemplated by this Agreement.

 

ARTICLE III

PAYMENT AND DELIVERY

 

Section 3.1                                      Shareholder Real Estate
Purchase Price; Purchase Price.  The total purchase price to be paid to the
Shareholders in respect of the Shareholder Real Estate (the “Shareholder Real
Estate Purchase Price”) under this Agreement shall be an amount equal to FIVE
HUNDRED TWENTY-EIGHT THOUSAND DOLLARS ($528,000), which amount shall be payable
in the manner provided in Section 3.3 below. The total purchase price to be paid
to the Seller (the “Purchase Price”) under this Agreement shall be an amount up
to TWENTY-NINE MILLION SIX HUNDRED THOUSAND DOLLARS ($29,600,000), which amount
shall be payable in the manner provided in Section 3.3 and Section 3.4 below.

 

Section 3.2                                      Adjustments to Purchase Price.

 

(a)                                  The Purchase Price will be subject to the
following adjustments on the Closing Date, based on the difference between the
Net Working Capital Balance of the Seller as of the close of business on the day
immediately prior to the Closing Date as set forth in a schedule delivered by
the Seller to Purchaser prior to the Closing Date (the “Closing Net Working
Capital Balance”) and TWO

 

4

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

 

MILLION FOUR HUNDRED TWENTY-TWO THOUSAND FIVE HUNDRED TWENTY-SEVEN DOLLARS
($2,422,527) (the “Baseline Net Working Capital Balance”):

 

(i)                                     if the Baseline Net Working Capital
Balance exceeds the Closing Net Working Capital Balance, the Purchase Price will
be decreased by the amount by which the Baseline Net Working Capital Balance
exceeds the Closing Net Working Capital Balance; and

 

(ii)                                  if the Baseline Net Working Capital
Balance is equal to or less than the Closing Net Working Capital Balance, the
Purchase Price will not be adjusted pursuant to this Section 3.2(a).

 

For purposes of this Agreement, the “Net Working Capital Balance” of the Seller
shall mean all current assets of the Seller (including all amounts owed to the
Seller by any of the Shareholders) less all current liabilities (excluding the
current portion of any long-term Indebtedness and any Indebtedness comprised of
capital leases), calculated with respect to both the Baseline Net Working
Capital Balance and the Closing Net Working Capital Balance, in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby.

 

(b)                                 Following the Closing, the adjustments to
the Purchase Price pursuant to Section 3.2(a) will be subject to review by
Purchaser in accordance with the following procedure:

 

(i)                                     Purchaser shall have until ninety
(90) days after the Closing Date (the “Verification Period”) to verify the
Seller’s determinations of the Closing Net Working Capital Balance. Any
adjustments to such determinations shall be made by written notice to the Seller
within the Verification Period (an “Adjustment Notice”) setting forth
(A) Purchaser’s objections to the Seller’s determination of the Closing Net
Working Capital Balance, (B) Purchaser’s determination of the Closing Net
Working Capital Balance, and (C) the proposed adjustment to decrease the
Purchase Price (the “Proposed Purchase Price Adjustment”). If Purchaser does not
deliver an Adjustment Notice to the Seller within the Verification Period, the
Seller’s determination of the Closing Net Working Capital Balance shall be final
and binding upon the parties hereto.

 

(ii)                                  To the extent that the Seller has any
objection to the Proposed Purchase Price Adjustment, such objection shall be
made by written notice to Purchaser (the “Objection Notice”) within fifteen
(15) days after delivery of the Adjustment Notice (the “Objection Period”). If
the Seller does not deliver an Objection Notice to the Proposed Purchase Price
Adjustment within the Objection Period, the Purchase Price shall be adjusted by
an amount equal to such Proposed Purchase Price Adjustment and the Seller shall
pay Purchaser an amount equal to the Proposed Purchase Price Adjustment or
Purchaser may offset the Proposed Purchase Price Adjustment against the Escrow
Amount and the Earnout Amounts as set forth below.

 

(iii)                               If the Seller delivers an Objection Notice
in response to any Adjustment Notice delivered by Purchaser, and Purchaser and
the Seller are unable to agree upon the amount of any Proposed Purchase Price
Adjustment within fifteen (15) days after delivery of the Objection Notice, then
a nationally recognized accounting firm to be mutually agreed upon based on good
faith negotiations (the “Auditor”), shall be requested to conduct a review and
determine the amount of the Closing Net Working Capital Balance. The Auditor
shall be instructed in performing such review that Purchaser and the Seller
shall each be provided with copies of any and all correspondence and drafts
distributed by the Auditor to any party. Prior to issuing its final
determination, Purchaser and the Seller shall each have the opportunity to
provide the Auditor with any additional information that such party deems
relevant, provided that the Auditor shall not be required to use any such
information in connection with its review and determination of the Closing Net
Working Capital Balance. Upon completion of its review and determination, the
Auditor shall promptly deliver copies of its report to Purchaser and the Seller,
setting forth the Auditor’s determination of the Closing Net Working Capital
Balance (the “Auditor’s Report”). The Auditor’s Report will be conclusive and
binding upon both Purchaser and the Seller, and Purchaser shall be entitled to a

 

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Purchase Price Adjustment by an amount equal to the excess, if any, of the
Closing Net Working Capital Balance as determined by the Seller on or before the
Closing Date over the Closing Net Working Capital Balance determined by the
Auditor and reported in the Auditor’s Report and, unless such excess is paid in
cash by the Seller as contemplated pursuant to Section 3.2(b)(ii), to offset
such excess against the Escrow Amount and the Earnout Amount as described below.
Fifty percent (50%) of the costs and expenses of the Auditor and the Auditor’s
Report contemplated by this Section 3.2(b)(iii) shall be borne by Purchaser and
the remainder of such costs shall be borne by the Seller and the Shareholders.

 

Section 3.3                                      Payment of Purchase Price.

 

(a)                                  FIVE HUNDRED TWENTY-EIGHT THOUSAND DOLLARS
($528,000) shall be paid in cash on the Closing Date by Purchaser for the
benefit of the Shareholders in respect of the Shareholder Real Estate by
inter-bank wire transfers of immediately available federal funds payable in the
amounts and to the Persons set forth in Schedule 3.3(a).

 

(b)                                 SEVENTEEN MILLION SIX HUNDRED THOUSAND
DOLLARS ($17,600,000) of the Purchase Price, less any adjustments to the
Purchase Price made pursuant to Section 3.2, less the Escrow Amount, shall be
paid in cash on the Closing Date by Purchaser (the “Closing Cash Payment”) for
the benefit of the Seller by inter-bank wire transfers of immediately available
federal funds payable in the amounts and to the Persons set forth in
Schedule 3.3(b).

 

(c)                                  TWELVE MILLION DOLLARS ($12,000,000) of the
Purchase Price shall be paid after the Closing, if at all, by Parent for the
benefit of the Seller pursuant to the terms of the earnout arrangement set forth
in Section 3.4 hereof.

 

(d)                                 FOUR HUNDRED THOUSAND DOLLARS ($400,000)
(the “Escrow Amount”) of the Purchase Price shall not be paid to the Seller at
Closing and shall instead be deposited by Purchaser into an account to be
managed and paid out by the Escrow Agent in accordance with the terms of an
Escrow Agreement, substantially in the form attached hereto as Exhibit A (the
“Escrow Agreement”), to be entered into among Parent, Purchaser, the Seller and
the Escrow Agent at the Closing.

 

(e)                                  Notwithstanding any other provision in this
Agreement to the contrary, Seller hereby acknowledges and agrees that the
payment of any Earnout Amounts hereunder shall be the sole and exclusive
obligation of Parent.

 

(f)                                    Notwithstanding any other provision in
this Agreement to the contrary, in the event that either (i) the Purchase Price
is adjusted pursuant to Section 3.2(b) or (ii) Parent or Purchaser becomes
entitled to indemnification under Article VII, Purchaser may offset all or any
portion of the Escrow Amount, on a dollar-for-dollar basis, against the full
amount of any such adjustment or right to indemnification.

 

Section 3.4                                      Earnout Payments.  The Seller
shall be entitled to receive the 2005 Earnout Amount and the 2006 Earnout
Amount, or such applicable portions thereof, if any, as deferred payment of the
Purchase Price pursuant to the terms set forth below:

 

(a)                                  If, and only if, the EBITDA of the Business
for the fiscal year ending December 31, 2005 (the “2005 EBITDA”) is greater than
THREE MILLION THREE HUNDRED FIFTY THOUSAND DOLLARS ($3,350,000) (the “2005
Baseline EBITDA”), then Parent shall pay to the Seller an amount (the “2005
Earnout Amount”) in cash equal to the product of (i) TEN MILLION DOLLARS
($10,000,000) multiplied by (ii) a fraction, the numerator of which shall be the
difference between the 2005 EBITDA and the 2005 Baseline EBITDA, and the
denominator of which shall be the difference between the 2005 Target EBITDA and
the 2005 Baseline EBITDA, subject to a maximum possible 2005 Earnout Amount in
all circumstances of TEN MILLION DOLLARS ($10,000,000).

 

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(b)                                 Parent shall pay to the Seller an amount
(the “2006 Earnout Amount”) in cash equal to the lesser of (i) the applicable
2006 Earnout Cap or (ii) five times the EBITDA of the Business for the fiscal
year ending December 31, 2006 (the “2006 EBITDA”), less EIGHTEEN MILLION DOLLARS
($18,000,000), less the 2005 Earnout Amount. For purposes of this
Section 3.4(b), the “2006 Earnout Cap” shall equal (i) FOUR MILLION DOLLARS
($4,000,000) if the 2005 EBITDA is greater than FOUR MILLION FOUR HUNDRED
THOUSAND DOLLARS ($4,400,000) or (ii) THREE MILLION DOLLARS ($3,000,000) if the
2005 EBITDA is less than or equal to FOUR MILLION FOUR HUNDRED THOUSAND DOLLARS
($4,400,000).

 

(c)                                  Notwithstanding anything to the contrary
contained herein, in the event that either (i) the Purchase Price is adjusted
pursuant to Section 3.2(b) or (ii) Parent or Purchaser becomes entitled to
indemnification under Article VII, Parent may, upon five (5) days prior written
notice to the Seller, offset all or any portion of the Earnout Amounts, on a
dollar-for-dollar basis, against the full amount of any such right to
indemnification.

 

(d)                                 On or before April 15, 2006, Parent shall
provide to the Seller unaudited financial statements of the Business for the
fiscal year ended December 31, 2005, together with a detailed written statement
of its calculation of the 2005 EBITDA and the 2005 Earnout Amount, if any,
related thereto (the “2006 Statement”), and on or before April 15, 2007, Parent
shall provide to the Seller unaudited financial statements of the Business for
the fiscal year ended December 31, 2006, together with a detailed written
statement of its calculation of the 2006 EBITDA and the 2006 Earnout Amount, if
any, related thereto (the “2007 Statement”). In each instance, Parent shall
provide the Seller access to Purchaser’s books and records (including financial
statements) during normal business hours for the sole purpose of verifying the
Earnout Amounts. The 2005 Earnout Amount and the 2006 Earnout Amount, to the
extent not offset in accordance with Section 3.4(c), shall be payable within
thirty (30) days after (i) receipt by Parent of written notice from the Seller
that it has accepted, in the case of the 2005 Earnout Amount, the 2006 Statement
and, in the case of the 2006 Earnout Amount, the 2007 Statement, or
(ii) becoming conclusive and binding pursuant to Section 3.4(e) below. Each such
Earnout Amount, to the extent not offset in accordance with Section 3.4(c),
shall be made by wire transfer of immediately available funds to an account
designated by the Seller. In addition to the 2006 Statement and the 2007
Statement, for each completed fiscal quarter after the Closing Date other than
the fourth fiscal quarter of any fiscal year, Parent shall provide to the
Seller, on a quarterly basis, detailed written statements of its calculation of
the EBITDA of the Business for each such quarter within fifty-five (55) days
after the end of each such fiscal quarter through the period ended September 30,
2006. Purchaser covenants and agrees that it shall use commercially reasonable
efforts to market and sell products that make up the Business in a commercially
prudent manner during the period between the Closing Date and January 1, 2007.

 

(e)                                  The Seller shall notify Parent in writing
(the “Parent’s Notice”) within thirty (30) days after receipt of the 2006
Statement or the 2007 Statement, as the case may be (a “Statement”), with
respect to its acceptance or dispute of such Statement. In the event that the
Seller disputes such a Statement, the Seller shall set forth in such notice the
facts of the dispute and, to the best of its ability, its calculation of the
Earnout Amount in question. Parent and the Seller shall meet and use
commercially reasonable efforts to resolve the items or amounts in dispute. If
the parties are unable to reach an agreement within thirty (30) days after
Parent’s receipt of the Seller’s disagreement notification, then a nationally
recognized accounting firm to be mutually agreed upon based on good faith
negotiations (the “Accounting Referee”) shall be requested to conduct a review
of the disputed items or amounts and compute the Earnout Amount in question. In
making its calculation, the Accounting Referee shall consider only the items or
amounts in dispute (and to the extent required, any other amounts necessary to
derive the disputed items or amounts). Such determination shall be made within
thirty (30) days after the date on which the Accounting Referee begins its
review and shall be binding on the parties.

 

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The fees, costs and expenses of the Accounting Referee shall be shared equally
between the Seller and Parent.

 

(f)                                    In connection with this Section 3.4, upon
reasonable notice and during Parent’s and Purchaser’s normal business hours, the
Seller and its representatives (including accountants) shall have the right to
inspect the books and records relating to the Business as conducted by Purchaser
after the Closing Date. In the event of a dispute under Section 3.4(e) above,
Parent shall ensure access of the Accounting Referee to Parent’s auditor.

 

(g)                                 In calculating the 2005 EBITDA, the EBITDA
of the Seller for the period beginning on January 1, 2005 and ending on the
Closing Date as determined by reference to the financial statements of the
Seller described in Section 4.6 hereof, shall be added to, and included within,
the 2005 EBITDA. In calculating the 2005 EBITDA and the 2006 EBITDA, such
calculations (i) shall not include (A) any expenses allocated or incurred by the
Seller or Purchaser as a result of the transactions contemplated by this
Agreement, (B) any management fees, overhead fees or similar fees or allocations
paid by, or allocated to, the Business from any other business or Affiliate of
Purchaser, (C) any specified non-recurring shareholder expenses and costs set
forth on Schedule 3.4(g)(i)(C), (D) any “extraordinary items” of gain or loss as
that term is defined by GAAP, (E) for the period that the replacement employee
of each Shareholder and such Shareholder are simultaneously employed by
Purchaser, such Shareholder’s employment compensation and benefits, or
(F) excess benefits paid to the Shareholders (including life insurance premium
contributions and payments associated with the provision of automobiles to the
Shareholders) and charitable contributions made by the Seller, in each instance
prior to the Closing Date, in an aggregate amount up to FIFTY THOUSAND DOLLARS
($50,000), and (ii) shall include a deemed monthly rental expense of EIGHT
THOUSAND DOLLARS ($8,000) associated with the Shareholder Real Estate.

 

(h)                                 Notwithstanding anything to the contrary
contained in this Agreement, the maximum aggregate amount that may be paid to
the Seller under this Agreement in all circumstances shall be TWENTY-NINE
MILLION SIX HUNDRED THOUSAND DOLLARS ($29,600,000).

 

Section 3.5                                      Allocation of Consideration. 
The aggregate consideration paid by Purchaser to the Seller pursuant to this
Article III shall be allocated among the Assets according to the determination
of an independent appraisal to be conducted by an appraiser mutually agreed upon
by Purchaser and the Seller. The allocation of the Purchase Price as determined
by such appraiser shall be binding upon the parties and each party hereto shall
file all Tax Returns (including Form 8594) in a manner consistent with such
allocation. Notwithstanding anything to the contrary contained herein, the
aggregate amount of consideration to be allocated to the Non-Competition
Agreement for the Seller and the Shareholders shall be TWO HUNDRED THOUSAND
DOLLARS ($200,000). The cost of such independent appraiser shall be borne by
Purchaser.

 

Section 3.6                                      Closing.  The sale, conveyance,
assignment, transfer and delivery of the Assets by the Seller and payment of the
Closing Cash Payment by Purchaser (hereinafter called the “Closing”) shall take
place at the Huntsville, Alabama offices of Bradley Arant Rose & White LLP on
the date of the execution of this Agreement, or on such other date or at such
other time and place (including remotely or by facsimile) as may be mutually
agreed upon by the parties hereto. The date on which the Closing occurs is
referred to herein as the “Closing Date.” Notwithstanding the foregoing or any
other provision of this Agreement to the contrary, the parties hereto agree that
the Closing shall be deemed to take effect at 12:01 A.M. (Eastern Standard Time)
on the Closing Date.

 

Section 3.7                                      Deliveries by the Seller.  At
the Closing, the Seller shall deliver to Purchaser, and in the case of
subsections (g) and (h) below, Parent:

 

(a)                                  A duly executed Bill of Sale and Assignment
Agreement;

 

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(b)                                 A duly executed Statutory Warranty Deed for
the owned Real Property of the Seller and Title Policies or unconditional
commitments therefore paid for by the Seller;

 

(c)                                  Such other Instruments of Transfer as shall
be necessary to vest in Purchaser all of the Seller’s right, title and interest
in and to the Assets, free and clear of all Liens;

 

(d)                                 The resolutions duly adopted by the Seller’s
board of directors and the Shareholders authorizing (i) the execution and
delivery of, and performance by the Seller of its obligations under, this
Agreement and the other agreements contemplated hereby and (ii) the assignment
of the sponsorship of the Seller’s 401(k) plan to Purchaser;

 

(e)                                  A duly executed certificate of the
secretary or an assistant secretary of the Seller, dated the Closing Date, in
form and substance reasonably satisfactory to Purchaser, as to (i) the currency
and authenticity of the articles of incorporation and the bylaws of the Seller,
(ii) the currency and authenticity of the resolutions duly adopted by the
Seller’s board of directors and Shareholders authorizing (A) the execution and
delivery of, and performance by the Seller of its obligations under, this
Agreement and the other agreements contemplated hereby and (B) the assignment of
the sponsorship of the Seller’s 401(k) plan to Purchaser and (iii) the
incumbency and signatures of the officers of the Seller executing this Agreement
or any other agreement contemplated hereby.

 

(e)                                  Copies of all consents, approvals,
authorizations, agreements and other documentation required to be obtained by
the Seller to consummate the transactions contemplated by this Agreement without
breaching any of the Seller’s representations or warranties;

 

(f)                                    Payoff letters stating the payoff amounts
for the Seller’s Indebtedness relating to the Assets;

 

(g)                                 A duly executed Escrow Agreement;

 

(h)                                 A duly executed Non-Competition Agreement
(the “Non-Competition Agreement”) substantially in the form attached hereto as
Exhibit B; and

 

(i)                                     Such other documents, instruments and
writings reasonably requested by Parent or Purchaser at or prior to the Closing.

 

Purchaser will thereupon take actual possession of the Assets.

 

Section 3.8                                      Deliveries by the
Shareholders.  At the Closing, the Shareholders shall deliver to Purchaser, and
in the case of subsections (b) and (c) below, Parent:

 

(a)                                  A duly executed Statutory Warranty Deed for
the Shareholder Real Estate and Title Policies or unconditional commitments
therefore paid for by the Shareholders;

 

(b)                                 A duly executed Escrow Agreement;

 

(c)                                  A duly executed Non-Competition Agreement;

 

(d)                                 A duly executed Transition Services and
Consulting Agreement substantially in the form attached hereto as Exhibit C (the
“Transition Services and Consulting Agreement”) executed by Dr. Richard
Campbell;

 

(e)                                  A duly executed Transition Services
Agreement substantially in the form attached hereto as Exhibit D (the
“Transition Services Agreement”) executed by Mrs. [Sue] Campbell; and

 

(f)                                    Such other documents, instruments and
writings reasonably requested by Parent or Purchaser at or prior to the Closing.

 

Section 3.9                                      Deliveries by Parent.  At the
Closing, Parent shall deliver to the Seller, and in the case of
subsections (c) and (d) below, the Shareholders:

 

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(a)                                  The resolutions duly adopted by Parent’s
board of directors authorizing the execution and delivery of, and performance by
Parent of its obligations under, this Agreement and the other agreements
contemplated hereby;

 

(b)                                 A duly executed certificate of the secretary
or an assistant secretary of Parent, dated the Closing Date, in form and
substance reasonably satisfactory to the Seller, as to (i) the currency and
authenticity of the articles of incorporation and the bylaws of Parent, (ii) the
currency and authenticity of the resolutions duly adopted by Parent’s board of
directors authorizing the execution and delivery of, and performance by Parent
of its obligations under, this Agreement and the other agreements contemplated
hereby and (iii) the incumbency and signatures of the officers of Parent
executing this Agreement or any other agreement contemplated hereby;

 

(c)                                  A duly executed Escrow Agreement;

 

(d)                                 A duly executed Non-Competition Agreement;
and

 

(e)                                  Such other documents, instruments and
writings reasonably requested by the Seller at or prior to the Closing.

 

Section 3.10                                Deliveries by Purchaser.  At the
Closing, Purchaser shall deliver to the Seller all of the following deliverables
other than those contemplated by subsections (b), (h) and (i) below, and to the
Shareholders the deliverables contemplated by subsections (b), (h), (i) (f) and
(g) below:

 

(a)                                  The Closing Cash Payment by inter-bank wire
transfer of immediately available federal funds of the United States of America,
which amount shall be paid and delivered to or for the benefit of the Seller in
the amounts and to the Persons set forth on Schedule 3.3(b);

 

(b)                                 The Shareholder Real Estate Purchase Price
by inter-bank wire transfer of immediately available federal funds of the United
States of America, which amount shall be paid and delivered to or for the
benefit of the Shareholders in the amounts and to the Persons set forth on
Schedule 3.3(a);

 

(c)                                  A duly executed Bill of Sale and Assignment
Agreement;

 

(d)                                 The resolutions duly adopted by Purchaser’s
board of directors authorizing the execution and delivery of, and performance by
Purchaser of its obligations under, this Agreement and the other agreements
contemplated hereby;

 

(e)                                  A duly executed certificate of the
secretary or an assistant secretary of Purchaser, dated the Closing Date, in
form and substance reasonably satisfactory to the Seller, as to (i) the currency
and authenticity of the articles of incorporation and the bylaws of Purchaser,
(ii) the currency and authenticity of the resolutions duly adopted by
Purchaser’s board of directors authorizing the execution and delivery of, and
performance by Purchaser of its obligations under, this Agreement and the other
agreements contemplated hereby and (iii) the incumbency and signatures of the
officers of Purchaser executing this Agreement or any other agreement
contemplated hereby;

 

(f)                                    A duly executed Escrow Agreement;

 

(g)                                 A duly executed Non-Competition Agreement;

 

(h)                                 A duly executed Transition Services and
Consulting Agreement;

 

(i)                                     A duly executed Transition Services
Agreement; and

 

(j)                                     Such other documents, instruments and
writings reasonably requested by the Seller at or prior to the Closing.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDERS

 

Seller and each of the Shareholders hereby jointly and severally represent and
warrant to Parent and Purchaser that the statements contained in this Article IV
are accurate and complete as of the date hereof, except as set forth in the
disclosure schedules accompanying this Agreement. The disclosure schedules are
arranged in numbered and lettered paragraphs corresponding to the numbered and
lettered Sections contained in this Article IV.

 

Section 4.1                                      Authorization and Validity. 
The Seller has full corporate power and authority to enter into this Agreement
and the other documents and instruments to be executed and delivered by the
Seller pursuant hereto and to carry out its obligations hereunder and
thereunder. The Shareholders have full individual power and the legal capacity
to enter into this Agreement and the other documents and instruments to be
executed and delivered by the Shareholders pursuant hereto (to the extent that
such Person is a party hereto or thereto) and to carry out the Shareholders’
obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement by the Seller and the other documents and instruments to be
executed and delivered by the Seller pursuant hereto, and the consummation by
the Seller of the transactions contemplated hereby and thereby, have been duly
and validly authorized by the board of directors of the Seller and the
Shareholders and no other corporate act or proceeding on the part of the Seller
or the Shareholders, as applicable, is necessary to authorize the execution and
delivery by the Seller of this Agreement or the other documents or instruments
to be executed and delivered by the Seller pursuant hereto, or the consummation
by the Seller of the transactions contemplated hereby or thereby. This Agreement
and the other documents and instruments to be executed and delivered by the
Seller or the Shareholders pursuant hereto (to the extent that such Person is a
party hereto or thereto) have been duly and validly executed and delivered by
the Seller and the Shareholders (to the extent that such Person is a party
hereto or thereto) and, assuming this Agreement and the other documents and
instruments to be executed and delivered by the Seller or the Shareholders
pursuant hereto (to the extent that such Person is a party hereto or thereto)
are the valid and binding obligation of any other parties hereto or thereto,
constitutes a valid and binding obligation of the Seller and the Shareholders
(to the extent that such Person is a party hereto or thereto) enforceable
against the Seller and the Shareholders (to the extent that such Person is a
party hereto or thereto) in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency or other similar
laws, now or hereafter in effect, affecting creditors’ rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.

 

Section 4.2                                      Equity; Good Title.

 

(a)                                  As of the date hereof, the authorized
capital stock of the Seller consists of one thousand (1,000) shares of common
stock, par value $1.00 per share (the “Common Stock”). As of the date hereof,
one thousand (1,000) shares of the Common Stock are issued and outstanding, all
of which, when issued, were duly authorized, validly issued, fully paid and
nonassessable and free of any preemptive or other similar rights. No other
shares of the Capital Stock of the Seller are issued and outstanding.

 

(b)                                 All of the outstanding shares of Capital
Stock of the Seller are owned beneficially and of record by the Shareholders,
free and clear of all Liens and the Shareholders are bound by the terms of this
Agreement.

 

(c)                                  There are no outstanding subscriptions,
options, warrants, calls, rights, contracts, commitments, understandings,
restrictions or arrangements relating to the issuance, sale, transfer or voting
of any shares of Capital Stock of the Seller, including any rights of conversion
or exchange under any outstanding securities or other instruments.

 

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(d)                                 The Seller has no Subsidiaries. The Seller
does not own any equity or other ownership interests in any other Person.

 

Section 4.3                                      Organization.  The Seller
(a) is a corporation, duly incorporated, validly existing and in good standing
under the laws of the State of Alabama, and (b) has full power and authority to
own all of its properties and assets, including the Assets, and to carry on the
Business as it is now being conducted. The Seller is duly licensed or qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction where the ownership, lease or operation of its assets and
properties or the conduct of the Business requires such license or
qualification, except where the failure to be so licensed or qualified would not
have a Material Adverse Effect. The Seller has delivered to Purchaser a complete
and correct copy of the articles of incorporation, bylaws and other
organizational documents of the Seller. Such articles of incorporation, bylaws
and other organizational documents are in full force and effect and the Seller
is not in violation of any provision of such articles of incorporation, bylaws
or organizational documents.

 

Section 4.4                                      No Conflict.  Neither the
execution, delivery or performance of this Agreement or the other documents and
instruments to be executed and delivered by the Seller or the Shareholders
pursuant hereto, nor the consummation by the Seller or the Shareholders of the
transactions contemplated hereby or thereby, nor compliance by the Seller or the
Shareholders with any of the provisions hereof or thereof will (a) conflict with
or result in any breach of any provision of the articles of incorporation or
bylaws of the Seller, (b) except as set forth in Schedule 4.4(b), constitute a
change in control under, or require the consent from or the giving of notice to
a third party, result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, or result
in the creation of any Lien upon or affecting any of the Assets or the
Shareholder Real Estate, including the Contracts, pursuant to, any of the terms,
conditions or provisions of any contractual obligation of the Seller or the
Shareholders, (c) violate any order, writ, injunction, decree, statute, rule or
regulation of any Governmental Authority applicable to the Seller or the
Shareholders or to which any of their properties or assets (including the Assets
and the Shareholder Real Estate) may be bound, or (d) result in triggering of
any right of first refusal or other right under any joint venture or other
agreement to which the Seller or the Shareholders are a party.

 

Section 4.5                                      Governmental Consents.  No
consent, order or authorization of, or registration, declaration or filing with,
any Governmental Authority is required on the part of the Seller or the
Shareholders in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby by the
Seller or the Shareholders.

 

Section 4.6                                      Financial Statements.  The
Seller has previously furnished to Purchaser the Financial Statements and the
unaudited consolidated balance sheets and statements of income, changes in
shareholders’ equity and cash flow as of and for the three months ended
March 31, 2005 for the Seller (the “First Quarter Financial Statements”) and the
unaudited consolidated balance sheets and statements of income, changes in
shareholders’ equity and cash flow as of and for the three and six months ended
June 30, 2005 for the Seller (the “Second Quarter Financial Statements”). Except
as set forth in Schedule 4.6, the Financial Statements (including the notes
thereto), the First Quarter Financial Statements and the Second Quarter
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved, fairly present the financial
position of the Seller on the dates thereof, fairly present the results of
operations of the Seller for the periods involved, and are in accordance with
the books and records of the Seller (which books and records are accurate).
Reserves are reflected on the balance sheets in the Financial Statements, the
First Quarter Financial Statements and the Second Quarter Financial Statements
against assets in amounts that have been established on a basis consistent with
the past practice.

 

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Section 4.7                                      Absence of Certain Changes or
Events.  Except as set forth in Schedule 4.7, since June 30, 2005 (a) the Seller
has conducted the Business only in the ordinary course and consistent with past
practice, (b) there have not been any developments or events with respect to the
Business which have had or would reasonably be likely to have, individually or
in the aggregate, a Material Adverse Effect and (c) except as contemplated in
this Agreement, the Seller has not:

 

(i)                                     adopted any amendment to its articles of
incorporation or bylaws;

 

(ii)                                  (A) sold, leased, transferred or disposed
of any assets or rights, other than assets or rights that individually or in the
aggregate would not be material, in either case, and other than in the ordinary
course of business consistent with past practice, (B) incurred any Lien upon any
assets or rights, except for Liens incurred in the ordinary course of business
consistent with past practice, (C) acquired or leased any assets or rights other
than in the ordinary course of business consistent with past practice, or
(D) entered into any commitment or transaction with respect to (A), (B) or
(C) above;

 

(iii)                               (A) incurred, assumed or refinanced any
Indebtedness or (B) made any loans, advances or capital contributions to, or
investments in, any Person;

 

(iv)                              paid, discharged or satisfied any liability,
obligation, or Lien other than payment, discharge or satisfaction of
(A) Indebtedness as it matures and becomes due and payable or (B) liabilities,
obligations or Liens in the ordinary course of business consistent with past
practice;

 

(v)                                 except as required in connection with the
preparation of the Financial Statements, First Quarter Financial Statements and
Second Quarter Financial Statements pursuant to Section 4.6, (A) changed any of
the accounting or tax principles, practices or methods used by the Seller,
except as required by changes in applicable Tax Laws, or (B) changed reserve
amounts or policies;

 

(vi)                              entered into any employment contract or other
arrangement or made any change in the compensation payable or to become payable
to any Shareholder or any of its officers, employees, agents, consultants or
Persons acting in a similar capacity (other than general increases in wages to
employees who are not officers or Persons acting in a similar capacity or
Affiliates, in the ordinary course consistent with past practice), or to Persons
providing management services, entered into or amended any employment,
severance, consulting, termination or other agreement or employee benefit plan
or made any loans to any of its Affiliates, officers, employees, agents or
consultants or Persons acting in a similar capacity or made any change in its
existing borrowing or lending arrangements for or on behalf of any of such
Persons pursuant to an employee benefit plan or otherwise;

 

(vii)                           paid or made any accrual or arrangement for
payment of any pension, retirement allowance or other employee benefit pursuant
to any existing plan, agreement or arrangement to any Affiliate, officer,
employee or Person acting in a similar capacity; or paid or agreed to pay or
made any accrual or arrangement for payment to any Affiliate, officers,
employees or Persons acting in a similar capacity of any amount relating to
unused vacation days, except payments and accruals made in the ordinary course
consistent with past practice; grant, issue, accelerate or accrue salary or
other payments or benefits pursuant to any pension, profit-sharing, bonus, extra
compensation, incentive, deferred compensation, stock purchase, stock option,
stock appreciation right, group insurance, severance pay, retirement or other
employee benefit plan, agreement or arrangement, or any employment or consulting
agreement with or for the benefit of any Affiliate, officer, employee, agent or
consultant or Person acting in a similar capacity, whether past or present; or
amend in any material respect any such existing plan, agreement or arrangement
in a manner consistent with the foregoing;

 

(viii)                        entered into any collective bargaining agreement;

 

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(ix)                                made any payments (other than regular
compensation payable to officers and employees or Persons acting in a similar
capacity of the Seller in the ordinary course consistent with past practice),
loans, advances or other distributions to, or enter into any transaction,
agreement or arrangement with, the Seller’s Affiliates, officers, employees,
agents, consultants or Persons acting in a similar capacity, shareholders of
their Affiliates, associates or family members;

 

(x)                                   made or authorized any capital
expenditures, except in the ordinary course consistent with past practice not in
excess of $100,000 individually or $250,000 in the aggregate;

 

(xi)                                incurred any Taxes, except in the ordinary
course of business consistent with past practice;

 

(xii)                             settled or compromised any Tax liability or
agreed to any adjustment of any Tax attribute or made any election with respect
to Taxes;

 

(xiii)                          failed to duly and timely file any Tax Return
with the appropriate Governmental Authorities required to be filed by it in a
true and complete and correct form and to timely pay all Taxes shown to be due
thereon;

 

(xiv)                         (A) entered into, amended, renewed or permitted
the automatic renewal of, terminated or waived any right under, any Material
Contract, or, except in the ordinary course of business consistent with past
practice, any other agreement, or (B) took any action or failed to take any
action that, with or without either notice or lapse of time, would constitute a
default under any Material Contract;

 

(xv)                            (A) made any change in its working capital
practices generally, including accelerating any collections of cash or accounts
receivable or deferring payments or (B) failed to make timely accruals,
including with respect to accounts payable and liabilities incurred in the
ordinary course of business consistent with past practice;

 

(xvi)                         failed to renew (at levels consistent with
presently existing levels), and has not terminated or amended or failed to
perform, any of its obligations or permitted any material default to exist or
caused any material breach under, or entered into (except for renewals in the
ordinary course of business consistent with past practice), any material policy
of insurance;

 

(xvii)                      experienced any damage, destruction, or loss to its
property not covered by insurance;

 

(xviii)                   disposed of or permitted to lapse any material
Intellectual Property or granted any license or sublicense of any rights with
respect to Intellectual Property;

 

(xix)                           experienced significant failure on the part of
the Seller to operate the Business in the ordinary course and consistent with
past practice so as to preserve its business operations intact or to preserve
the goodwill of suppliers, customers and others having business relations with
the Seller;

 

(xx)                              received, and the Seller has no Knowledge of,
any notice or other indication that any key supplier, vendor or customer of the
Seller will cease doing business with the Seller (whether as a result of the
consummation of the transactions contemplated hereby or otherwise) in the same
manner and at the same level as previously conducted with the Seller, other than
changes which occur from time to time in the ordinary course of business or as a
result of the expiration or completion of any contracts (for purposes of this
Article IV, “key suppliers, vendors and customers” of the Seller refers to those
suppliers, vendors and customers of the Seller whose business failure would be
reasonably likely to result in a Material Adverse Affect on the Business or the
Seller);

 

(xxi)                           except in the ordinary course of business
consistent with past practice, and except as required by any Law, provided any
confidential information to any Person other than Purchaser;

 

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(xxii)                        changed the compensation levels (including any
bonus or formula for the calculation of any bonus) applicable to any class of
the Seller’s employees;

 

(xxiii)                     declared, set aside or paid any dividend or made any
distribution with respect to the Capital Stock; or

 

(xxiv)                    by action on the part of the Seller, cancelled,
compromised, waived or released any rights or claims.

 

Section 4.8                                      Absence of Undisclosed
Liabilities.  Except as set forth on Schedule 4.8, the Seller has no Liabilities
that would be required to be reserved against or disclosed in a financial
statement prepared in accordance with GAAP, except for (i) Liabilities set forth
on the face of the balance sheet, or otherwise reserved against, in the Second
Quarter Financial Statements (rather than in the notes thereto), and
(ii) Liabilities which have arisen after the date of the balance sheet in the
Second Quarter Financial Statements in the ordinary course of business
consistent with past practice (none of which, to Seller’s Knowledge, results
from, arises out of, related to, is in the nature of, or was caused by any
breach of contract, breach of warranty, tort, infringement, or violation of
law), which in either case have not had and could not reasonably be expected to
have a Material Adverse Effect.

 

Section 4.9                                      Property; Assets.

 

(a)                                  The Seller owns, or otherwise has a valid
leasehold interest providing sufficient and legally enforceable rights to use,
all of the property and assets necessary or otherwise material to the conduct of
the Business. The Shareholders jointly own the Shareholder Real Estate in fee
simple. Except as set forth in Schedule 4.9(a), the Seller has good and
marketable title to all assets reflected on the Second Quarter Balance Sheet,
free and clear of all Liens; provided, however, that any Real Property may be
subject to easements and non-monetary Liens which do not adversely impact the
use of the Shareholder Real Estate by the Business as currently conducted.
Except as set forth in Schedule 4.9(a), all such assets which have a value in
excess of $1,000, singly, are in good operating condition and repair (ordinary
wear and tear excepted), have been reasonably maintained consistent with
standards generally followed in the industry, are suitable for their present
uses and, in the case of owned or leased structures, are structurally sound.

 

(b)                                 Schedule 4.9(b) contains a list of all real
property owned, leased or used by the Seller including the Shareholder Real
Estate (the “Real Property”), indicating whether such property is owned, leased
or used. Except as set forth in Schedule 4.9(b), the current use of the Real
Property by the Seller and the Shareholder Real Estate by the Shareholders does
not violate the certificate of occupancy thereof or any local zoning or similar
land use or other Laws and none of the structures on the Real Property
encroaches upon real property of another Person, and no structure of any other
Person encroaches upon any Real Property. The Seller and the Shareholders have
not received notice of any pending or threatened condemnation proceeding, or of
any sale or other disposition in lieu of condemnation, affecting any of the Real
Property. Each parcel of Real Property abuts on or has direct vehicular access
to a public road. The Seller does not own, lease or use any Real Property other
than the Real Property listed in Schedule 4.9(b). Except as set forth in
Schedule 4.9(b), the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the Real Property and the
Shareholders have not assigned, transferred, conveyed, mortgaged, deeded in
trust or encumbered any interest in the Shareholder Real Estate.

 

(c)                                  Schedule 4.9(c) sets forth as of June 30,
2005, a complete and accurate list of all furniture, equipment, fixed assets,
leasehold improvements, manufacturing equipment, automobiles and all other
tangible personal property (including its net book value) owned by, in the
possession of, or used by the Seller in connection with the Business. Except as
set forth in Schedule 4.9(c), such personal property is not held under any
lease, security agreement, conditional sales contract, or other title retention
or

 

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security arrangement or subject to any Liens or encumbrances, and is not located
other than in the possession of the Seller.

 

(d)                                 All receivables of the Seller reflected on
the balance sheet in the Second Quarter Financial Statements or created after
the date of the balance sheet in the Second Quarter Financial Statements arose
from valid transactions in the ordinary course of business consistent with past
practice.

 

Section 4.10                                Litigation and Claims; Compliance
with Laws.

 

(a)                                  Schedule 4.10(a) sets forth all Litigation
as of the date hereof, including the name of the claimant, the date of the
alleged act or omission, a detailed narrative as to the nature of the alleged
act or omission, the date the matter was referred to an insurance carrier of the
Seller (if referred), the estimated amount of exposure, the amount the Seller
has reserved, or the amount of the Seller’s claim and estimated expenses of the
Seller in connection with such matters. Except as set forth in Schedule 4.10(a),
there is no Litigation which is not fully covered (other than applicable
deductibles) by the insurance policies referenced in Section 4.12. Neither the
Seller nor any of the Assets is subject to any order, consent decree, settlement
or similar agreement with any Governmental Authority. There is no judgment,
injunction, decree, order or other determination of an arbitrator or
Governmental Authority specifically applicable to the Seller or the Shareholders
or any of the Seller’s properties or assets. There is no Litigation relating to
alleged unlawful discrimination or sexual harassment. As of the date hereof,
there is no Litigation which seeks to prevent consummation of the transactions
contemplated hereby or which seeks material damages in connection with the
transactions contemplated hereby.

 

(b)                                 Except as set forth in Schedule 4.10(b), the
Seller has complied and is in compliance with all Laws applicable to the Seller
and the Business except where the failure to be in compliance would not
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Schedule 4.10(b), the Seller holds all material licenses, permits and other
authorizations of Governmental Authorities necessary to conduct the Business as
now being conducted or, under currently applicable Laws, to continue to conduct
the Business as now being conducted. Except as set forth in Schedule 4.10(b), to
the Knowledge of the Seller there is no intent to make any changes in the
conduct of the Business that will result in or cause the Seller to be in
noncompliance with applicable Laws or that will require changes in or a loss of
any such licenses, permits or other authorizations or an increase in any
expenses related thereto except where such noncompliance, change, loss or
increase would not reasonably be expected to have a Material Adverse Effect.
Such licenses, permits and other authorizations as aforesaid held by the Seller
are valid and in full force and effect, and there are no (i) actions pending, or
to the Knowledge of the Seller, threatened or (ii) to the Knowledge of the
Seller, investigations pending or threatened that could result in the
termination, impairment or nonrenewal thereof.

 

Section 4.11                                Taxes.

 

(a)                                  All United States federal Tax Returns and
all other Tax Returns required to be filed with any taxing authority by the
Seller have been timely filed in accordance in all respects with all applicable
Laws and are true, correct and complete in all material respects. The Seller has
timely paid all Taxes due and payable and the Seller has withheld and paid all
Taxes required to have been withheld and paid by the Seller in connection with
amounts paid or owing to any employee, Independent Contractor, creditor,
shareholder or other third party. Except as set forth in Schedule 4.11, there is
no action, suit, proceeding, audit or claim pending against the Seller in
respect of any Taxes, nor has any such action, suit, proceeding, audit or claim
been threatened in writing. The Seller is not a party to or bound by any Tax
sharing or allocation agreement or similar contract or assignment or any
agreement that obligates the Seller to make any payment computed by references
to the Taxes, taxable income or taxable losses of any other Person. There are no
Liens with respect to Taxes on any of the assets or properties of the Seller.
The Seller is not, and has never been, a member of an affiliated, consolidated,
combined or unitary group, other than one of which the Seller was the common
parent and has no liability for the

 

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Taxes of any Person (other than itself) under Treasury Regulation §1.1502-6 (or
any similar provision of state, local or foreign law), or as a transferee or
successor, by contract or otherwise.

 

(b)                                 All deficiencies asserted or assessments
made as a result of any examinations of the Seller have been fully paid, or are
fully reflected as a liability in the Second Quarter Balance Sheet, or are being
contested and an adequate reserve therefor has been established and is fully
reflected in the Second Quarter Balance Sheet. The Seller has not received
written notice from any Governmental Authority in a jurisdiction in which such
entity does not file a Tax Return stating that such entity is or may be subject
to taxation by that jurisdiction.

 

(c)                                  None of the assets of the Seller is
property required to be treated as being owned by any other Person pursuant to
the “safe harbor lease” provisions of former Section 168(f)(8) of the Code.
Neither the Seller nor any predecessors thereof by merger or consolidation has
within the past three (3) years been a party to a transaction intended to
qualify under Section 355 of the Code or under so much of Section 356 of the
Code as relates to Section 355 of the Code. The Seller has not made any
payments, is not obligated to make any payments, and is not a party to any
agreement (other than this Agreement) or other arrangement that would obligate
it to make any payments that would not be deductible under Section 280G of the
Code. The Seller is not a party to any joint venture, partnership or other
written arrangement or contract which would be treated as a partnership for
United States federal income tax purposes for any period for which the statute
of limitations for any Tax on the income therefrom has not expired. The due but
unpaid Taxes of the Seller did not, as of the date hereof, exceed the reserve
for Tax liability (rather than any reserve for deferred Taxes, established to
reflect timing differences between book and Tax income) set forth on the face of
the Second Quarter Balance Sheet (rather than in any notes thereto).

 

(d)                                 The Seller has been an S corporation as
defined in Section 1361(a)(ii) of the Code for all applicable periods since
1988. The Seller has never had any shareholder that was not an individual and
who was not either a U.S. citizen or resident alien or a domestic trust as
described in Section 1361(c)(2) of the Code. The Seller has never had more than
thirty-five (35) shareholders. The Seller has had, since its inception, only one
(1) class of stock outstanding, its common stock. No creditor of the Seller has
ever had the right, as a result of any financing to the Seller, to acquire any
equity interest in the Seller or otherwise participate in the equity of the
Seller. The Seller has never had any subsidiaries. Any trust that has been a
shareholder of the Seller since the Seller’s inception has met the requirements
of Section 1361(c)(2) of the Code for the entire period that it was or has been
a shareholder of the Seller.

 

Section 4.12                                Insurance.  Schedule 4.12 sets forth
a complete and accurate list as of the date hereof of all primary, excess and
umbrella policies, bonds and other forms of insurance owned or held by or on
behalf of or providing insurance coverage to the Seller and the Business and
Assets (or, to the extent purchased by Seller, its officers, salespersons,
agents or employees or Persons acting in a similar capacity) and the extent, if
any, to which the limits of liability under such policies have been exhausted.
True and complete copies of such policies are attached to Schedule 4.12. All
such policies are in full force and effect and all such policies in such amounts
will be outstanding and in full force and effect at the Closing. The Seller has
not received notice of default under any such policy, nor has it received
written notice of any pending or threatened termination of cancellation,
coverage limitation or reduction, or material premium increase with respect to
any such policy, other than renewal requirements in the ordinary course of
business consistent with past practice. Schedule 4.12 sets forth a complete and
accurate summary of all of the self-insurance coverage provided by the Seller.
No letters of credit have been posted and no cash has been restricted to support
any reserves for insurance on the balance sheet in the Second Quarter Financial
Statements.

 

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Section 4.13                                Environmental Matters.  Except as
otherwise described on Schedule 4.13:

 

(a)                                  The Seller has complied and is in
compliance with, and the Real Property and all improvements thereon are in
compliance with, all Environmental Laws.

 

(b)                                 The Seller has no liability, known or
unknown, contingent or absolute, under any Environmental Law, nor is the Seller
responsible for any such liability of any other Person under any Environmental
Law, whether by contract, by operation of law or otherwise. There are no facts,
circumstances, or conditions existing, initiated or occurring prior to the
Closing Date, which have or will result in liability to the Seller under
Environmental Laws. There are no pending or to the Knowledge of the Seller,
threatened Environmental Claims.

 

(c)                                  The Seller has been duly issued, and
maintains all Environmental Permits necessary to operate the Business or Assets
as currently operated. A true and complete list of all such Environmental
Permits, all of which are valid and in full force and effect, is set forth in
Schedule 4.13(c). Seller has timely filed applications for all Environmental
Permits. All of the Environmental Permits set forth in Schedule 4.13(c)are
transferable and none require consent, notification, or other action to remain
in full force and effect following consummation of the transactions contemplated
hereby.

 

(d)                                 The Real Property contains no underground
improvements, including but not limited to treatment or storage tanks, or
underground piping associated with such tanks, used currently or in the past for
the management of Hazardous Materials, and no portion of the Real Property is or
has been used as a dump or landfill or consists of or contains filled in land or
wetlands. With respect to any real property formerly owned, operated, or leased
by the Seller, during the period of such ownership, operation or tenancy, no
portion of such property was used as a dump or landfill, and the Seller is not
aware of any such use at any time prior to its ownership, operation, or tenancy
of such real property. Neither PCBs, “toxic mold,” nor asbestos-containing
materials are present on or in the Real Property or the improvements thereon.
There has been no Release of Hazardous Materials at, on, under, or from the Real
Property, nor was there such a Release at any real property formerly owned,
operated or leased by the Seller, in each case during the period of such
ownership, operation, or tenancy, such that the Seller is or could be liable for
Remediation with respect to such Hazardous Materials. No water body into which
Hazardous Materials are Released in connection with the Seller’s business is
currently listed or proposed for listing under 33 U.S.C. §1313(d), nor are such
properties adjacent to any such water body.

 

(e)                                  The Seller has furnished to Purchaser
accurate and complete copies of all environmental assessments, reports, audits
and other documents in its possession or under its control that relate to the
Real Property, compliance with Environmental Laws, or any other real property
that the Seller formerly owned, operated, leased or used. To the Seller’s
Knowledge, any information the Seller has furnished to Purchaser concerning the
environmental conditions of the Real Property, prior uses of the Real Property,
and the operations of the Seller related to compliance with Environmental Laws
is accurate and complete.

 

(f)                                    No Real Property, and to the Knowledge of
the Seller, without inquiry, no property to which Hazardous Materials
originating on or from such properties or the Business or Assets has been sent
for treatment or disposal, is listed or proposed to be listed on the National
Priorities List or CERCLIS or on any other governmental database or list of
properties that may or do require Remediation under Environmental Laws. The
Seller has not arranged, by contract, agreement, or otherwise, for the
transportation, disposal or treatment of Hazardous Materials at any location
such that it is or could be liable for Remediation of such location pursuant to
Environmental Laws.

 

(g)                                 No Encumbrance in favor of any person
relating to or in connection with any Environmental Claim has been filed or has
attached to the Real Property.

 

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(h)                                 No authorization, notification, recording,
filing, consent, waiting period, Remediation, or approval is required under any
Environmental Law in order to consummate the transactions contemplated hereby.

 

(i)                                     To the Knowledge of the Seller, without
inquiry, no proposed or final regulation published pursuant to Environmental
Laws and no Environmental Permit for which the Seller has or should have
applied, could reasonably be expected to result in a capital expenditure in
excess of $10,000.

 

Section 4.14                                Material Contracts.

 

(a)                                  Schedule 4.14 lists (without duplication)
each of the following contracts and other agreements (or, in the case of oral
contracts, summaries thereof) to which the Seller is a party or by or to which
the Seller or any of its assets or properties is bound or subject (such
contracts and agreements being “Material Contracts”):

 

(i)                                     any advertising, market research or
other marketing agreements;

 

(ii)                                  any employment, severance,
non-competition, consulting or other agreements of any nature with any current
or former shareholder, officer or employee of the Seller or any Affiliate of any
of such Persons;

 

(iii)                               any agreements relating to the making of any
loan, guarantee or advance by the Seller;

 

(iv)                              any agreements providing for the
indemnification by the Seller of any Person;

 

(v)                                 any agreements with any Governmental
Authority except those entered into in the ordinary course of business and
consistent with past practice which are not material to the Seller;

 

(vi)                              any contracts, agreements and other
arrangements for the sale of assets or for the furnishing of services, goods or
products by or to the Seller (A) with firm commitments having a value in excess
of $10,000 or (B) having a term which is greater than six months and which is
not terminable by the Seller on less than 90 days’ notice without the payment of
any termination fee or similar payment;

 

(vii)                           any broker, distributor, dealer, representative
or agency agreements;

 

(viii)                        any agreements (including settlement agreements)
currently in effect pursuant to which the Seller licenses the right to use any
Intellectual Property to any Person or from any Person, and any research and
development agreements;

 

(ix)                                any confidentiality agreements entered into
by the Seller during the period commencing five years prior to the date hereof
pursuant to which confidential information has been provided to a third party or
by which the Seller was restricted from providing information to third parties;

 

(x)                                   any voting trust or similar agreements
relating to the Capital Stock to which either a Shareholder or the Seller is a
party;

 

(xi)                                any leases of Real Property;

 

(xii)                             any joint venture, partnership or similar
documents or agreements;

 

(xiii)                          any agreements that limit or purport to limit
the ability of the Seller or the Shareholders to own, operate, sell, transfer,
pledge or otherwise dispose of any assets or to compete with any business;

 

(xiv)                         any agreement (or group of related agreements)
under which the Seller has incurred, assumed, or guaranteed any indebtedness or
borrowed money or any capitalized lease obligation in excess of $25,000 in the
aggregate or under which it has imposed a security interest on any of its assets
(including the Assets), tangible or intangible;

 

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(xv)                            any other agreement (or group of related
agreements) under which the consequences of a default or termination could
reasonably be expected to have a Material Adverse Effect;

 

(xvi)                         any other agreement (or group of related
agreements) the performance of which involves the payment of consideration in
excess of $50,000 in the aggregate during any twelve (12)-month period; or

 

(xvii)                      all other agreements, contracts or commitments not
made in the ordinary course of business and consistent with past practice which
are material to the Seller.

 

(b)                                 Each Material Contract is legal, valid and
binding on and enforceable against the Seller, and, to the Knowledge of the
Seller, the other parties thereto, and is in full force and effect. Except as
set forth in Schedule 4.14(b), upon consummation of the transactions
contemplated by this Agreement, each Material Contract shall remain in full
force and effect without any loss of benefits thereunder and without the need to
obtain the consent of any party thereto to the transactions contemplated by this
Agreement. The Seller is not (and with the giving of notice or lapse of time
would not be) in material breach of, or material default under, any Material
Contract and, to the Knowledge of the Seller, no other party thereto is in
material breach of, or material default under, any Material Contract. Neither
the Seller nor the Shareholders have received any written notice that any
Material Contract is not enforceable against any party thereto, that any
Material Contract has been terminated or repudiated before the expiration of its
term or that any party to a Material Contract intends to terminate or repudiate
such Material Contract prior to the termination date specified therein, or that
any other party is in breach of, or default under, any Material Contract. True
and complete copies of all Material Contracts or, in the case of oral
agreements, if any, written summaries thereof, have been delivered to Purchaser.

 

Section 4.15                                Intellectual Property.

 

(a)                                  The Seller is the sole and exclusive owner
of, or has the valid right to use, sell and license, all Intellectual Property
necessary or otherwise material to the conduct of the Business as currently
conducted and as currently proposed to be conducted free and clear of all Liens,
but, in the case of any licensed Intellectual Property, subject to the terms of
the applicable licenses thereof. Other than Excluded Assets and the Intellectual
Property of any customer which has been provided solely pursuant to any
contracts with such customer with respect to the manufacture of the products for
such customer, Schedule 2.1(a)(i) sets forth a complete and accurate list
(including whether the Seller is the owner or licensee thereof) of all
(i) patents and patent applications, (ii) trademark or service mark
registrations and applications, (iii) copyright registrations and applications
and (iv) material unregistered copyrights, service marks, trademarks and trade
names, each as owned or licensed by the Seller. The Seller is currently listed
in the records of the appropriate federal, state or other governmental agency as
the sole owner of record for each owned application and registration listed in
Schedule 2.1(a)(i).

 

(b)                                 Each item of Intellectual Property listed in
Schedule 2.1(a)(i) is valid and subsisting, in full force and effect in all
material respects, and has not been canceled, expired or abandoned. The Seller
possesses all right, title and interest in and to each such item free and clear
of all Liens, provided, however, in the case of any licensed Intellectual
Property, subject to the terms of the applicable licenses thereof. True and
correct copies of all such Intellectual Property licenses have been previously
delivered to Purchaser. There is no pending, existing, or to the Knowledge of
Seller, threatened, opposition, interference, cancellation proceeding or other
legal or governmental proceeding before any court or registration authority in
any jurisdiction against the items listed in Schedule 2.1(a)(i) or the
Intellectual Property, which could reasonably be expected to have a Material
Adverse Effect. Except as set forth on Schedule 4.15(b), no Intellectual
Property registration or application is subject to any maintenance fees or taxes
or actions falling due, including without limitation the filing of an affidavit
of use, renewal or response to an official action, within six (6) months after
the Closing Date.

 

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(c)                                  Schedule 2.1(a)(i) lists all of the
Computer Programs, other than non-material off-the-shelf software licensed
pursuant to shrink-wrap licenses, which are owned, licensed, leased or otherwise
used by the Seller in connection with the operation of the Business as currently
conducted, and identifies which is owned, licensed, leased or otherwise used, as
the case may be. Each Computer Program listed on Schedule 2.1(a)(i) is either
(i) owned by the Seller, (ii) currently in the public domain or otherwise
available to the Seller without the license, lease or consent of any third party
or (iii) used under rights granted to the Seller pursuant to a written
agreement, license or lease from a third party, which written agreement, license
or lease is set forth in Schedule 2.1(a)(i). The Seller uses the Computer
Programs set forth in Schedule 2.1(a)(i) in connection with the operation of the
Business as currently conducted and such use does not violate the rights of any
third party. All Computer Programs identified in Schedule 2.1(a)(i) as owned by
the Seller were developed for the Seller by (A) employees of the Seller within
the scope of their employment, (B) third parties as “work-made-for-hire,” as
that term is defined under Section 101 of the United States Copyright Act (or
under analogous laws of foreign jurisdictions, as applicable) pursuant to
written agreements or (C) independent contractors who have assigned the entire
right, title, and interest in and to such Computer Programs to the Seller
pursuant to written agreements. None of the Computer Programs identified on
Schedule 2.1(a)(i) as owned by the Seller contains any shareware, open source
code, or other software whose use may require disclosure or licensing of
intellectual property or proprietary rights embedded therein.

 

(d)                                 Schedule 2.1(a)(i) sets forth a complete and
accurate list of all agreements, other than non-material off-the-shelf software
licensed pursuant to shrink-wrap licenses, pertaining to the use of or granting
any right to use or practice any rights under any Intellectual Property, whether
the Seller is the licensee or licensor thereunder (the “Licenses”) and any
written settlements or assignments relating to any Intellectual Property. The
Seller has delivered to Purchaser complete and correct copies of all material
Licenses (as amended to date), as well as copies of all registrations and
applications identified on Schedule 2.1(a)(i), including all other material
written documentation evidencing ownership and prosecution (if applicable) of
each such item. The Licenses are valid and binding obligations of each party
thereto, enforceable against each such party in accordance with their terms, and
there are no breaches or defaults under any Licenses, nor has any event occurred
which with notice or lapse of time would constitute a breach or default, or
permit termination, modification or acceleration, of any Licenses. No party to
any License has given the Seller notice of its intention to cancel, terminate,
change the scope of rights under, or fail to renew any License. Each License
will continue to be valid, binding and enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby upon obtaining the Required Intellectual Property Consents (as
hereinafter defined), if any. The Seller has not granted any sublicense or
similar right with respect to any License.

 

(e)                                  No trade secret or confidential know-how
either of which is material to the Business as currently operated has been
disclosed or authorized to be disclosed to any third party, other than pursuant
to a non-disclosure agreement that protects the Seller’s proprietary interests
in and to such trade secrets and confidential know-how. The Seller has taken all
reasonable precautions to protect the secrecy, confidentiality and value of its
trade secrets and confidential know-how. The Seller has at all times complied
with and is in compliance with all applicable laws relating to privacy, data
protection or the collection, retention, use and disclosure of personal
information. The Seller has at all times complied in all material respects with
and is in compliance with all rules, policies and procedures established by the
Seller from time to time with respect to privacy, publicity, data protection and
the collection, retention, use and disclosure of personal information.

 

(f)                                    To the Knowledge of the Seller, the
conduct of the Business as currently conducted and as conducted for the three
(3) year period immediately preceding the Closing Date does not and did not
interfere with, infringe upon or misappropriate any intellectual property right
owned or controlled by any third party, nor to the Knowledge of the Seller will
Purchaser interfere with, infringe upon or

 

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misappropriate any intellectual property right owned or controlled by any third
party as a result of the continued operation of the Business as currently
conducted and as currently proposed to be conducted. To the Knowledge of Seller,
no third party is interfering with, infringing upon or misappropriating, or has
at any time during the three (3) year period immediately preceding the Closing
Date interfered with, infringed upon or misappropriated, any Intellectual
Property owned by the Seller and no such claims have been made against a third
party by the Seller. There are no claims or suits pending or, to the Knowledge
of the Seller, threatened, and the Seller has not received any written notice of
a third party demand, Claim or suit (i) alleging that the Seller’s activities or
the conduct of the Business infringes or infringed upon or constitutes or
constituted the unauthorized use of the proprietary rights of any third party or
(ii) to the Knowledge of the Seller, challenging ownership, use, validity or
enforceability of the Intellectual Property.

 

(g)                                 There are no settlements, consents,
judgments or orders or other agreements with the Seller which restrict the
rights of the Seller to use any Intellectual Property, or other agreements by
the Seller which restrict the Seller’s rights to use any Intellectual Property
owned by the Seller.

 

(h)                                 Except as set forth in Schedule 4.15(h),
each item of Intellectual Property owned, licensed or available for use by the
Seller immediately prior to the consummation of the transactions contemplated
hereby will be owned, licensed or available for use by Purchaser on identical
terms and conditions immediately subsequent to such consummation free and clear
of all Liens. The consummation of the transactions contemplated hereby will not
require the consent of any Governmental Authority or third party in respect of
any such Intellectual Property except for such consents set forth in
Schedule 4.15(h) (the “Required Intellectual Property Consents”).

 

(i)                                     Except as set forth on Schedule 4.15(i),
no current or former officer, director, employee or consultant of the Seller has
any right, title or interest, directly or indirectly, in whole or in part, in or
to any Intellectual Property.

 

Section 4.16                                Employee Benefits; ERISA.

 

(a)                                  Schedule 4.16(a) contains a true and
complete list of each employment, bonus, deferred compensation, incentive
compensation, stock purchase, stock option, restricted stock, stock appreciation
right or other stock-based incentive, severance, change-in-control, or
termination pay, hospitalization or other medical, disability, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension, or
retirement plan, program, agreement or arrangement, and each other employee
benefit plan, program, agreement or arrangement, whether written or unwritten,
which is or was within the last three years sponsored by, maintained by,
participated in or contributed to or required to be contributed to by the Seller
or by any trade or business, whether or not incorporated (an “ERISA Affiliate”),
that together with the Seller would be deemed a “single employer” within the
meaning of Section 4001(b)(1) of ERISA, for the benefit of any current or former
employee of the Seller or any ERISA Affiliate (the “Plans”).
Schedule 4.16(a) identifies each of the Plans that is an “employee welfare
benefit plan,” or “employee pension benefit plan” as such terms are defined in
Sections 3(1) and 3(2) of ERISA (such plans being hereinafter referred to
collectively as the “ERISA Plans”). Neither the Seller nor any ERISA Affiliate
has any formal plan or commitment, whether legally binding or not, to create any
additional Plan or modify or change any existing Plan that would affect any
current or former employee of the Seller or any ERISA Affiliate.

 

(b)                                 With respect to each of the Plans, the
Seller has heretofore delivered to Purchaser true and complete copies of each of
the following documents, as applicable:

 

(i)                                     a copy of the Plan documents (including
all amendments thereto) for each written Plan or a written description of any
Plan that is not otherwise in writing;

 

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(ii)                                  a copy of the annual report or Internal
Revenue Service Form 5500 Series, if required under ERISA, with respect to each
ERISA Plan for the last three Plan years ending prior to the date of this
Agreement for which such a report was filed;

 

(iii)                               a copy of the most recent Summary Plan
Description (“SPD”), together with all Summaries of Material Modification issued
with respect to such SPD, if required under ERISA, with respect to each ERISA
Plan, and all other material employee communications relating to each ERISA
Plan;

 

(iv)                              if the Plan is funded through a trust or any
other funding vehicle, a copy of the trust or other funding agreement (including
all amendments thereto) and the latest financial statements thereof, if any;

 

(v)                                 all contracts relating to the Plans with
respect to which the Seller or any ERISA Affiliate may have any liability,
including insurance contracts, investment management agreements, subscription
and participation agreements and record keeping agreements;

 

(vi)                              the most recent determination letter received
from the IRS with respect to each Plan that is intended to be qualified under
Section 401(a) of the Code.; and

 

(vii)                           a copy of all correspondence with respect to the
Plans with the Internal Revenue Service or the U.S. Department of Labor.

 

(c)                                  No Plan is (i) a defined benefit plan
within the meaning of ERISA Section 3(35), (ii) a multiemployer plan within the
meaning of ERISA Section 3(37), or (iii) a voluntary employees’ beneficiary
association within the meaning of Code Section 501(c)(9). No liability under
Title IV of ERISA has been incurred by the Seller or any ERISA Affiliate that
has not been satisfied in full, and no condition exists that presents a material
risk.

 

(d)                                 Neither the Seller, nor any ERISA Affiliate,
any of the ERISA Plans, any trust created thereunder, nor to the Knowledge of
the Seller, any trustee or administrator thereof has engaged in a transaction or
has taken or failed to take any action in connection with which the Seller or
any ERISA Affiliate could be subject to any material liability for either a
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975(a) or (b), 4976 or 4980B of the Code.

 

(e)                                  All contributions and premiums which the
Seller or any ERISA Affiliate is required to pay under the terms of each of the
ERISA Plans and Section 412 of the Code, have, to the extent due, been paid in
full or properly recorded on the financial statements or records of the Seller.

 

(f)                                    Each of the Plans has been operated and
administered in all material respects in accordance with its terms and with
applicable Laws, including but not limited to ERISA and the Code.

 

(g)                                 Each of the ERISA Plans that is intended to
be “qualified” within the meaning of Section 401(a) of the Code is so qualified.
The Seller has finally applied for and received a currently effective
determination letter from the IRS stating that it is so qualified, and no event
has occurred with would affect such qualified status.

 

(h)                                 No amounts payable under any of the Plans or
any other contract, agreement or arrangement with respect to which the Seller
may have any liability could fail to be deductible for federal income tax
purposes by virtue of Section 280G of the Code.

 

(i)                                     No Plan provides benefits, including
death or medical benefits (whether or not insured) with respect to current or
former employees of the Seller or any ERISA Affiliate after retirement or other
termination of service (other than (i) coverage mandated by applicable Laws,
(ii) death benefits or retirements benefits under any “employee pension plan,”
as that term is defined in Section 3(2) of ERISA, (iii) deferred compensation
benefits accrued as liabilities on the books of the Seller or an ERISA
Affiliate, or (iv) benefits, the full direct cost of which is borne by the
current or former employee (or beneficiary thereof)).

 

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(j)                                     The consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee or officer of the Seller or any ERISA Affiliate to severance pay,
unemployment compensation or any other similar termination payment or
(ii) accelerate the time of payment or vesting or increase the amount of or
otherwise enhance any benefit due any such employee, officer or director.

 

(k)                                  There are no pending or, to the Knowledge
of the Seller, threatened or anticipated, claims by or on behalf of any Plan, by
an employee or beneficiary under any such Plan, or otherwise involving any such
Plan (other than routine claims for benefits).

 

(l)                                     On and after the Closing, Purchaser and
its Affiliates shall assume no liability or obligation and shall have no
liability or obligation with respect to any Seller Plan or any benefits or other
amounts payable and provided under any Seller Plan or any contract relating to
employment or termination of employment between the Seller or any of its
Affiliates and any of their employees or former employees.

 

Section 4.17                                Labor Matters.  Except as set forth
in Schedule 4.17, (i) there is no labor strike, dispute, slowdown, stoppage or
lockout actually pending, or to the Knowledge of the Seller, threatened against
or affecting the Seller and during the past five years there has not been any
such action, (ii) the Seller is not a party to or bound by any collective
bargaining or similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee association
applicable to employees of the Seller, (iii) none of the employees of the Seller
is represented by any labor organization and the Seller has no Knowledge of any
union organizing activities among the employees of the Seller within the past
five years, nor does any question concerning representation exist concerning
such employees, (iv) there are no written personnel policies, rules or
procedures applicable to employees of the Seller, other than those set forth in
Schedule 4.17, true and correct copies of which have been delivered to Purchaser
prior to the Closing Date, (v) the Seller is, and has at all times been, in
compliance, in all material respects, with all applicable Laws respecting
employment and employment practices, terms and conditions of employment,
wages, hours of work and occupational safety and health, and is not engaged in
any unfair labor practices as defined in the National Labor Relations Act or
other applicable Laws, (vi) there is no unfair labor practice charge or
complaint against the Seller pending or, to the Knowledge of the Seller,
threatened before the National Labor Relations Board or any similar state or
foreign agency, (vii) there is no grievance arising out of any collective
bargaining agreement or other grievance procedure, (viii) to the Knowledge of
the Seller, no charges with respect to or relating to the Seller are pending
before the Equal Employment Opportunity Commission or any other agency
responsible for the prevention of unlawful employment practices, (ix) the Seller
has not received a notice of the intent of any federal, state, local or foreign
agency responsible for the enforcement of labor or employment Laws to conduct an
investigation with respect to or relating to the Seller and no such
investigation is in progress, and (x) there are no complaints, lawsuits or other
proceedings pending or, to the Knowledge of the Seller, threatened in any forum
by or on behalf of any present or former employee of the Seller, any applicant
for employment or classes of the foregoing alleging breach of any express or
implied contract or employment, any Laws governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment relationship. To the Seller’s Knowledge, no executive, key
employee, or group of employees has any plans to reject any employment
opportunity associated with the Business that may be offered by Purchaser other
than the Shareholders. Prior to the Closing, the Seller has terminated the
employment of all of the employees of the Seller who have not tendered their
resignation to the Seller on or prior to the Closing Date.

 

Section 4.18                                Records.  Complete copies of all
minute books of the board of directors and the Shareholders of the Seller have
been made available by the Seller to Purchaser. The minute books do not contain
any omissions that would have a Material Adverse Effect.

 

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Section 4.19                                Affiliate Transactions. 
Schedule 4.19 lists all agreements, arrangements and currently proposed
agreements and arrangements, by or between the Seller, on the one hand, with or
for the benefit of any current or former partner, officer or other Affiliate of
the Seller or any of such Person’s Affiliates, or any entity in which any such
Person has a direct or indirect material interest. Schedule 4.19 lists all
payments of any kind since January 1, 2005, from the Seller, to or for the
benefit of any current or former partner, officer or other Affiliate of the
Seller or any of such Person’s Affiliates, or any entity in which any such
Person has a direct or indirect material interest. To the extent being assumed
by Purchaser, all outstanding debts and other obligations of the Seller to the
Shareholders were incurred in return for fair and adequate consideration paid or
delivered by them in cash or other property. All debts of the Shareholders or
the Seller’s officers or the respective Affiliates of the Seller to the Seller
are reflected on the Second Quarter Balance Sheet.

 

Section 4.20                                Indebtedness.  The Seller has no
Indebtedness outstanding other than as reflected in the balance sheet in the
Second Quarter Financial Statements and, with respect to Indebtedness incurred
after the date thereof, as set forth in Schedule 4.20.

 

Section 4.21                                Brokers, Finders, Etc.  Except as
set forth in Schedule 4.21, neither the Seller nor the Shareholders have
employed or are subject to the valid claim of, nor have the Seller or the
Shareholders incurred any Liability that would be payable by the Seller for any
brokerage, finder’s or other fees or commissions of, any broker, finder or other
financial intermediary in connection with the transactions contemplated by this
Agreement.

 

Section 4.22                                Questionable Payments.  Neither the
Seller, any officer thereof, nor the Shareholders have used any funds of the
Seller for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, made any direct or indirect unlawful
payments to government officials or employees from corporate funds, established
or maintained any unlawful or unrecorded fund or corporate moneys or other
assets, made any false or fictitious entries on the books or records of any such
corporations, made any bribe, payoff, kickback or other unlawful payment.

 

Section 4.23                                Competing Business.  Neither the
Shareholders nor the Shareholders’ Relatives have any direct or indirect
interest of any nature whatever in any Person which competes with, conducts any
business similar to, has any arrangement or agreement with, or is involved in
any way with, any business similar to the Business.

 

Section 4.24                                Compliance With Bulk Sales Act;
Uniform Commercial Code.  There are not, and will not be, any creditors who can
legally object to the transfer of the Assets under any applicable Bulk Sales Act
or the Uniform Commercial Code, or statutes of similar import, if applicable.

 

Section 4.25                                Product Warranty and Liability.  It
is the Seller’s standard practice to sell each product sold by the Seller in
conformity with all applicable contractual commitments, if any, and all express
and implied warranties of the manufacturer. All products sold by the Seller have
been sold in conformity with such practice, except for such deviations therefrom
that have not had, and would not reasonably be expected to have, a Material
Adverse Effect. Except as set forth in Schedule 4.25, no product sold by the
Seller is subject to any other guaranty, warranty or other indemnity beyond the
applicable standard terms and conditions of sale. No third party has advised the
Seller that it has any liability, and to the Seller’s Knowledge, it has no
liability, arising out of any injury to individuals or property as a result of
the ownership, possession or use of any product sold by the Seller prior to the
Closing.

 

Section 4.26                                Naturalization of the Employees. 
The Seller has not received a notice of any violation of any immigration and
naturalization laws relating to employment and employees and has properly
completed and maintained all applicable forms (including I-9 forms) and the
Seller is in compliance with all such immigration and naturalization laws and
there are no citations, investigations, administrative proceedings or formal
complaints of violations of the immigration or naturalization laws

 

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pending or, to the Knowledge of the Seller, threatened before the Immigration
and Naturalization Service of any federal, state or administrative agency or
court against or involving the Seller.

 

Section 4.27                                Bank Accounts.  Attached hereto as
Schedule 4.27 is a list of all banks or other financial institutions
(collectively, “Banks”) with which the Seller has an account or maintains a safe
deposit box, showing the type and account number of each such account and safe
deposit box and the names of the Persons authorized as signatories thereon or to
act or deal in connection therewith. Each of the Seller’s accounts at the Banks
contains sufficient funds to pay all outstanding checks that have been drawn on
such accounts and sufficient funds to pay all outstanding checks shall remain in
such accounts until the outstanding checks are cashed.

 

Section 4.28                                Earnout Plan.  To the extent that
the Seller has determined to implement any plan pursuant to which employees of
the Seller may obtain a portion of the Earnout Amounts (the “Earnout Plan”), the
Seller has (i) provided the Earnout Plan to Purchaser for approval,
(ii) obtained approval of the Earnout Plan from Purchaser and (iii) not amended,
revised or changed the Earnout Plan in any manner after obtaining Purchaser’s
approval of the Earnout Plan. The rights of the employees of Seller pursuant to
the Earnout Plan are non-transferable, non-forfeitable and are not conditioned
upon any future employment with, or service to, the Seller or Purchaser. The
employees eligible to participate in the Earnout Plan are only those employees
who were employed with the Seller prior to the Closing.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER

 

Parent and Purchaser hereby jointly and severally represent and warrant to the
Seller and the Shareholders that the statements contained in this Article V are
accurate and complete as of the date hereof, except as set forth in the
disclosure schedules accompanying this Agreement. The disclosure schedules are
arranged in numbered and lettered paragraphs corresponding to the numbered and
lettered Sections contained in this Article V.

 

Section 5.1                                      Authorization and Validity. 
Each of Parent and Purchaser has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by Parent and
Purchaser and the consummation by Parent and Purchaser of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and Purchaser, and no other corporate proceedings on the
part of Parent or Purchaser are necessary to authorize this Agreement or the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and Purchaser, and, assuming due execution
and delivery by the Seller and the Shareholders, constitutes a valid and binding
obligation of Parent and Purchaser enforceable against Parent and Purchaser in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors’ rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.

 

Section 5.2                                      Organization.  Parent is a
corporation organized under the laws of the state of Colorado. Purchaser is a
corporation organized under the laws of the State of Delaware. Each of Parent
and Purchaser is duly organized, validly existing and in good standing and has
full power and authority to carry on its business as presently conducted. Each
of Parent and Purchaser is duly licensed or qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the ownership,
lease or operation of its assets and properties or the conduct of its business
requires such license or qualification. Each of Parent and Purchaser has
delivered to the Seller a complete and correct copy of its certificate of
incorporation and bylaws, each as amended to date. Such organizational documents
are in full force and effect.

 

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Section 5.3                                      No Conflict.  Neither the
execution, delivery or performance of this Agreement or the other documents and
instruments to be executed and delivered by Parent or Purchaser pursuant hereto,
nor the consummation by Parent or Purchaser of the transactions contemplated
hereby or thereby, nor compliance by Parent or Purchaser with any of the
provisions hereof or thereof will (a) conflict with or result in any breach of
any provision of the articles of incorporation or bylaws of Parent or Purchaser,
(b) except as set forth in Schedule 5.3(b), constitute a change in control
under, or require the consent from or the giving of notice to a third party,
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, or result in the creation of any
Lien upon or affecting any of the assets of Parent or Purchaser pursuant to, any
of the terms, conditions or provisions of any contractual obligation of Parent
or Purchaser or (c) violate any order, writ, injunction, decree, statute,
rule or regulation of any Governmental Authority applicable to Parent or
Purchaser or to which any of its properties or assets may be bound.

 

Section 5.4                                      Governmental Consents.  No
consent, order or authorization of, or registration, declaration or filing with,
any Governmental Authority is required on the part of Parent or Purchaser in
connection with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby by Parent or Purchaser.

 

Section 5.5                                      Payment of Purchase Price. 
Purchaser has the ability to pay the Closing Cash Payment and Parent has the
ability to pay the Earnout Amounts and such payments do not require the consent
or approval of any third party or constitute or cause any breach of any
agreement to which Parent or Purchaser is a party.

 

ARTICLE VI

COVENANTS

 

Section 6.1                                      Assignment of
401(k) Sponsorship.  The Seller and the Shareholders shall take any and all
actions necessary and shall deliver any documents reasonably requested by
Purchaser to effect on Closing the assignment of the plan sponsorship and the
plan administration to Purchaser with respect to the Seller’s 401(k) plan.

 

Section 6.2                                      Employees.  At the Closing,
Purchaser shall offer employment to all of the employees of the Seller who have
not tendered their resignation to the Seller on or prior to the date hereof at
substantially their current annual salary or hourly rates of compensation listed
on Schedule 6.2 hereto and shall offer such employees benefits substantially
similar to the benefits offered to such employees by the Seller as of the date
hereof.

 

Section 6.3                                      Proration.  The Shareholders
and Purchaser shall prorate all real property taxes with respect to the
Shareholder Real Estate that are incurred, accrued or payable as of the Closing
Date based upon the most recent tax bills and information available. On the
Closing Date, the proration shall be calculated and paid to Purchaser in cash or
other immediately available funds, but not as an adjustment to the Purchase
Price.

 

Section 6.4                                      Cooperation.  From and after
the Closing Date, the Seller and the Shareholders shall cooperate with Purchaser
and any accounting firm engaged by Purchaser to provide any opinion on the
Financial Statements and/or any review of the other financial statements of the
Business prior to the Closing Date that may be required to be included from time
to time by Purchaser or Parent in registration statements or periodic or other
reports filed by Purchaser or Parent from time to time with the Securities and
Exchange Commission, which cooperation shall include the giving of
representation or other letters of reliance to such accounting firm in
connection therewith, and to furnish to the officers, employees, authorized
agents, accountants, counsel, financing sources and representatives of Purchaser
and its Affiliates such additional financial information and operating data and
other information regarding the Business prior to the Closing and the assets,
properties and goodwill of the

 

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Seller related to the Business prior to the Closing as the Purchaser and its
Affiliates may from time to time reasonably request.

 

Section 6.5                                      Further Assurances.  From and
after the Closing Date, the Seller and the Shareholders shall promptly execute,
acknowledge and deliver any other assurances or documents reasonably requested
by Purchaser to permit Purchaser to satisfy its obligations hereunder or to
evidence title, or to provide Purchaser with the benefits enumerated in this
Agreement.

 

ARTICLE VII

SURVIVAL AND INDEMNIFICATION

 

Section 7.1                                      Survival of Representations and
Warranties.  Each of the representations and warranties made by Parent and
Purchaser in this Agreement shall terminate on the second anniversary date of
the Closing. Each of the representations and warranties made by the Shareholders
or the Seller in this Agreement shall terminate on the second anniversary of the
Closing Date; provided, however, that (i) the representations and warranties
contained in Sections 4.11, 4.13, 4.16 and 4.26 shall survive the Closing until
90 days following the expiration of the applicable statute of limitations;
(ii) the representations and warranties contained in Sections 4.1, 4.2 and 4.3
shall survive the Closing and remain in full force and effect without
termination. In the event notice of any claim for indemnification under
Section 7.4(a) hereof shall have been given within the applicable survival
period, the representations and warranties that are the subject of such
indemnification claim shall survive until such time as such claim is finally
resolved. The covenants and agreements of the parties set forth in this
Agreement and the indemnification obligations of the parties hereunder shall
survive indefinitely except as expressly provided herein. This Section 7.1 shall
not limit any claim for willful fraud or willful misrepresentation or any
covenant or agreement by the parties which contemplates performance after the
Closing.

 

Section 7.2                                      Indemnification by the Seller
and the Shareholders.

 

(a)                                  Subject to the other provisions of this
Article VII, the Seller and each of the Shareholders shall, jointly and
severally, indemnify, defend and hold harmless the Purchaser Indemnified Parties
from and against any and all expenses, losses, damages, liabilities and
out-of-pocket costs (including attorneys’ fees and expenses), in each case, net
of insurance proceeds if and when actually received (“Damages”) suffered by any
of the Purchaser Indemnified Parties to the extent resulting from, arising out
of, or incurred with respect to:

 

(i)                                     any breach of or inaccuracy in any
representation or warranty (other than the Seller and Shareholder Non-Basket
Representations) as of the Closing Date of the Seller or the Shareholders
contained in this Agreement;

 

(ii)                                  any breach of any covenant of the Seller
or the Shareholders contained in this Agreement;

 

(iii)                               any breach of or inaccuracy in any
representation or warranty as of the Closing Date of the Seller or the
Shareholders contained in Sections 4.1 and 4.3 of this Agreement (collectively,
the “Seller and Shareholder Non-Basket Representations”);

 

(iii)                               all Litigation arising for any period up to
and including the Closing Date;

 

(iv)                              all Liabilities relating to Environmental
Claims arising from any facts, circumstances or conditions existing, initiated
or occurring up to and including the Closing Date; and

 

(v)                                 all Liabilities of Seller other than the
Assumed Liabilities.

 

(b)                                 The Purchaser Indemnified Parties may bring
a claim seeking indemnification for Damages under Section 7.2(a)(i) under the
terms and provisions of this Article VII only if the Damages

 

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therefrom exceed on an individual basis an amount equal to TEN THOUSAND DOLLARS
($10,000), or on an aggregate basis, an amount equal to SEVENTY-FIVE THOUSAND
DOLLARS ($75,000) (the “Seller’s Indemnification Threshold”), at which time all
Damages under such Section may be claimed in full; provided, however, that the
Seller’s Indemnification Threshold shall not apply to claims for willful fraud
or willful misrepresentation. Notwithstanding anything to the contrary contained
herein and solely for purposes of determining whether the Seller’s
Indemnification Threshold has been exceeded, all qualifications and exceptions
contained in Article IV relating to materiality or words of similar import
(including Material Adverse Effect) shall be disregarded for purposes of
determining whether there has been a breach or inaccuracy of any such
representation or warranty pursuant to Section 7.2(a)(i) and the Seller’s
Indemnification Threshold exceeded.

 

Section 7.3                                      Indemnification by Parent and
Purchaser.

 

(a)                                  Subject to the other provisions of this
Article VII, Parent and Purchaser shall indemnify, defend and hold harmless the
Seller Indemnified Parties from and against any and all Damages suffered by any
of the Seller Indemnified Parties to the extent resulting from, arising out of,
or incurred with respect to:

 

(i)                                     any breach of or inaccuracy in any
representation or warranty (other than the Parent and Purchaser Non-Basket
Representations) as of the Closing Date of Parent or Purchaser contained in this
Agreement;

 

(ii)                                  any breach of any covenant of Parent or
Purchaser contained in this Agreement;

 

(iii)                               any breach of or inaccuracy in any
representation or warranty as of the Closing Date of Parent or Purchaser
contained in Sections 5.1 and 5.2 of this Agreement (collectively, the “Parent
and Purchaser Non-Basket Representations”);

 

(iv)                              all Litigation arising for any period after
the Closing Date; and

 

(v)                                 Liabilities arising after the Closing Date
from the Assumed Liabilities to the extent not resulting, directly or
indirectly, from any breach of this Agreement by the Seller or the Shareholders.

 

(b)                                 The Seller Indemnified Parties may bring a
claim seeking indemnification for Damages under Sections 7.3(a)(i) under the
terms and provisions of this Article VII only if the Damages therefrom exceed on
an individual basis an amount equal to TEN THOUSAND DOLLARS ($10,000), or on an
aggregate basis, an amount equal to SEVENTY-FIVE THOUSAND DOLLARS ($75,000) (the
“Purchaser’s Indemnification Threshold”), at which time all Damages under such
Section may be claimed in full; provided, however, that the Purchaser’s
Indemnification Threshold shall not apply to claims for willful fraud or willful
misrepresentation or to claims arising out of the failure of Parent or Purchaser
to pay the Purchase Price. Notwithstanding anything to the contrary contained
herein and solely for purposes of determining whether the Purchaser’s
Indemnification Threshold has been exceeded, all qualifications and exceptions
contained in Article V relating to materiality or words of similar import
(including shall be disregarded for purposes of determining whether there has
been a breach or inaccuracy of any such representation or warranty pursuant to
Section 7.3(a)(i) and the Purchaser’s Indemnification Threshold exceeded.

 

Section 7.4                                      Notice and Resolution of Claim.

 

(a)                                  An indemnified party under this Agreement
shall promptly give written notice to the indemnifying party after obtaining
knowledge of any third party claim or litigation against the indemnified party
as to which recovery may be sought against the indemnifying party because of the
indemnity set forth in Sections 7.2 or 7.3, specifying in reasonable detail the
claim or litigation and the basis for indemnification; provided, however, that
the failure of the indemnified party promptly to notify the indemnifying party
of any such matter shall not release the indemnifying party, in whole or in
part,

 

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from its obligations under this Article VII except to the extent the indemnified
party’s failure to so notify in breach of this subsection (a) materially
prejudices the indemnifying party’s ability to defend against such third party
claim or litigation. The indemnified party shall permit the indemnifying party
to assume the defense of any such claim, litigation or any litigation resulting
from such third party claim.

 

(b)                                 If the indemnifying party assumes the
defense of any such third party claim or litigation, the obligations of the
indemnifying party under this Agreement shall consist of actively and diligently
conducting the investigation, defense or settlement of such claim or litigation
(including the retention of legal counsel) and, to the extent the indemnified
party is entitled to indemnification, holding the indemnified party harmless
from and against any and all losses caused by or arising out of any settlement
approved by the indemnifying party or any judgment in connection with such claim
or litigation, to the extent of such indemnification obligation. The
indemnifying party shall not, in the defense of such claim or litigation,
consent to entry of any judgment (except with the written consent of the
indemnified party) or enter into any settlement (except with the written consent
of the indemnified party): (i) that does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the indemnified party a
complete release from, all liability in respect of such claim or litigation, or
(ii) in the good faith judgment of the indemnified party, the effect of which is
to permit any injunction, declaratory judgment, other order or other equitable
relief to be entered, directly or indirectly, against any indemnified party
which would likely be adverse to the continuing business interests of such
indemnified party. The indemnifying party shall permit the indemnified party to
participate in such defense or settlement through counsel chosen by the
indemnified party, with the fees and expenses of such counsel borne by the
indemnified party.

 

(c)                                  Failure by the indemnifying party to notify
the indemnified party of its election to assume the defense of any such claim or
litigation by a third party within thirty (30) days after notice thereof has
been given to the indemnifying party shall be deemed a waiver by the
indemnifying party of its right to assume the defense of such claim or
litigation. If the indemnifying party does not assume the defense of such claim
or litigation by a third party, the indemnified party may defend or settle such
claim or litigation in such matter as the indemnified party may deem appropriate
and may settle such claim or litigation on such terms as it may deem
appropriate.

 

(d)                                 If any matter as to which a Purchaser
Indemnified Party may be able to assert a claim for Damages under this
Article VII is pending or unresolved, or any other matter as to which such
Purchaser Indemnified Party actually or potentially may suffer Damages exists,
at the time any payment of the Escrow Amount or the Earnout Amounts, as
applicable, is due from Parent or Purchaser to the Seller or the Shareholders,
whether pursuant to Section 3.4(a), Section 3.4(b) or otherwise, Parent or
Purchaser shall have the right, in addition to other rights and remedies and
methods of recovery (whether under this Agreement or pursuant to applicable
law), to withhold, or instruct and cause the Escrow Agent to withhold, from such
payment an amount equal to the claim until such matters are resolved. If it is
finally determined that such claims are covered by this Article VII, the amount
of such claims, to the extent indemnification applies, may be obtained from the
Seller or Shareholders or offset against the Escrow Amount or the Earnout
Amounts, as applicable, and the remainder of the Escrow Amount or the Earnout
Amounts, if any, shall be delivered to the Shareholders pursuant to the Escrow
Agreement, Section 3.3(d) or Section 3.4, as applicable. If any matter as to
which a Purchaser Indemnified Party has asserted a claim for Damages under this
Article VII that is resolved in such Purchaser Indemnified Party’s favor, Parent
or Purchaser shall have the right, in addition to other rights and remedies and
methods of recovery (whether under this Agreement or pursuant to applicable
law), to instruct and cause the Escrow Agent to release and pay to Parent or
Purchaser, the amount of such claim, to the extent indemnification applies with
respect thereto, in accordance with the Escrow Agreement.

 

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Section 7.5                                      Limitations.  Notwithstanding
anything to the contrary contained herein, under no circumstances shall the
Seller’s or the Shareholders’ aggregate indemnification obligations under this
Article VII exceed an amount equal to EIGHTEEN MILLION FIVE HUNDRED THOUSAND
DOLLARS ($18,500,000), and under no circumstances shall Parent’s or Purchaser’s
indemnification obligations under this Article VII exceed an amount equal to
EIGHTEEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($18,500,000); provided, however,
that the obligations of Parent and Purchaser under Sections 3.3 and 3.4 shall
not be subject to such cap.

 

Section 7.6                                      Exclusive Remedy.  Subject to
Section 8.8, (a) the indemnities provided in this Article VII are intended to be
and shall be the sole and exclusive remedies of the Seller Indemnified Parties
and the Purchaser Indemnified Parties regarding any matter touching upon or
relating to the negotiation, entry of, consummation and closing of this
Agreement and the performance of the Business; (b) the purpose of this exclusive
and sole remedy provision is that the total amount recoverable from the
Shareholders and the Seller on the one hand, or Purchaser on the other, as
described in Section 7.5 hereof, represents the total amount recoverable from
them for any and all causes of action against them whether under this Agreement
or otherwise; and (c) each party is relying upon the other’s agreement and
representation that the remedies provided for in this Article VII shall be the
sole and exclusive remedies of (i) the Purchaser Indemnified Parties against
Seller and the Shareholders and (ii) the Seller Indemnified Parties against
Purchaser. Notwithstanding anything to the contrary contained in this Agreement,
the limitations contained in Section 7.5 and Section 7.6 shall not apply to
claims for willful fraud or willful misrepresentation.

 

Section 7.7                                      Mitigation of Damages.  Each of
Purchaser, the Seller and the Shareholders agree to use commercially reasonable
efforts to mitigate any Damages which are subject to indemnification hereunder.

 

ARTICLE VIII

MISCELLANEOUS

 

Section 8.1                                      Notices.  All notices or other
communications hereunder shall be deemed to have been duly given and made if in
writing and if served by personal delivery upon the party for whom it is
intended, if delivered by registered or certified mail, return receipt
requested, or by a national courier service, or if sent by facsimile, provided,
however that the facsimile is promptly followed by telephone confirmation
thereof to the appropriate person at the address set forth below, or at such
other address as may be designated in writing hereafter, in the same manner, by
such person.

 

To the Seller or the Shareholders:

 

Campbell Engineering, Inc.

2719 Trevor Drive

Huntsville, Alabama 35802

Telephone: (256) 882-2745

Attention: Richard A. Campbell

 

with a copy to:

 

Bradley Arant Rose & White LLP

One Federal Place

1819 - 5th Avenue North

Birmingham, Alabama 35203-2119

Telephone: (205) 521-8246

Facsimile: (205) 488-6246

Attention: Denson N. Franklin, III

 

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To Parent or Purchaser:

 

Accellent Corp.

200 West 7th Avenue

Collegeville, Pennsylvania 19426

Telephone: (610) 489-0300

Facsimile: (610) 489-1150

Attention: Stewart Fisher

 

with a copy to:

 

Hogan & Hartson L.L.P.

One Tabor Center

1200 17th Street, Suite 1500

Denver, Colorado 80202

Telephone: (303) 899-7300

Facsimile: (303) 899-7333

Attention: Christopher J. Walsh

 

Any such notice shall be deemed delivered (a) on the date delivered if by
personal delivery, (b) on the date upon which the return receipt is signed or
delivery is refused or the notice is designed by the postal authorities as a not
deliverable, as the case may be, if mailed by registered or certified mail,
(c) on the next succeeding Business Day if sent by national courier service, or
(d) on the date telecommunicated if by telecopier if confirmed by telephone
confirmation.

 

Section 8.2                                      Amendment, Waiver.  Any
provision of this Agreement may be amended or waived if, and only if such
amendment or waiver is in writing and signed, in the case of an amendment, by
Parent, Purchaser, the Seller and the Shareholders, or in the case of a waiver,
by the party against whom the waiver is to be effective. No failure or delay by
any party in exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.

 

Section 8.3                                      Assignment.  No party to this
Agreement may assign any of its rights or obligations under this Agreement
without the prior written consent of the other parties hereto; provided,
however, that each of Parent and Purchaser may assign any of its rights and
obligations hereunder in whole or in part to any of its Affiliates without
obtaining the consent of the other parties hereto, but shall remain liable for
its obligations hereunder.

 

Section 8.4                                      Entire Agreement.  This
Agreement (including all Schedules and Exhibits hereto) contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings, oral or written, with
respect to such matters.

 

Section 8.5                                      Parties in Interest.  This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any Person other than
Parent, Purchaser, the Seller, the Shareholders or their successors or permitted
assigns, any rights or remedies under or by reason of this Agreement.

 

Section 8.6                                      Expenses.  All costs and
expenses incurred by Parent and Purchaser in connection with this Agreement and
the transactions contemplated hereby shall be borne by Parent and Purchaser, and
all costs and expenses incurred by the Shareholders and all costs and expenses
related to the transactions contemplated hereby incurred by the Seller in
connection with this Agreement and the transactions contemplated hereby shall be
borne by the Shareholders and the Sellers as they may mutually agree.

 

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Section 8.7                                      Governing Law; Jurisdiction;
Service of Process.  This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware without regard to its rules of
conflict of laws. Each of Parent, Purchaser, the Shareholders and the Seller
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the Court of Chancery of the State of Delaware, County of New
Castle or, if under applicable Law, exclusive jurisdiction is vested in federal
courts, then of the United States of America located in the District of Delaware
(collectively, the “Delaware Courts”) for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waives
any objection to the laying of venue of any such litigation in the Delaware
Courts and agrees not to plead or claim in any Delaware Court that such
litigation brought therein has been brought in an inconvenient forum. Any party
hereto may make service on another party by sending or delivering a copy of the
process to the party to be served at the address and in the manner provided for
the giving of notices in Section 8.1. Nothing in this Section, however, shall
affect the right of any party to serve legal process in any other manner
permitted by law.

 

Section 8.8                                      Specific Performance.  The
parties hereto agree that if any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise breached,
irreparable damage would occur, no adequate remedy at law would exist and
damages would be difficult to determine, and that the parties shall be entitled
to specific performance of the terms hereof, in addition to any other remedy at
law or equity.

 

Section 8.9                                      Transfer and Similar Taxes. 
Notwithstanding any other provision of this Agreement to the contrary, the
Seller shall assume and promptly pay when due all sales, property, use,
privilege, transfer, documentary, gains, stamp, duties, and similar Taxes and
fees (including any penalties, interest or additions) imposed upon any party
incurred in connection with the transactions contemplated by this Agreement;
provided, however, any recording fees or deed taxes shall be payable by
Purchaser.

 

Section 8.10                                Counterparts.  This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original
and all of which together shall constitute one instrument. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original itself.

 

Section 8.11                                Headings.  The heading references
herein and in the table of contents hereto are for convenience purposes only, do
not constitute a part of this Agreement, and shall not be deemed to limit or
affect any of the provisions hereof.

 

[SIGNATURE PAGE FOLLOWS]

 

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SIGNATURES

 

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

 

 

 

ACCELLENT CORP.

 

 

 

By:

/s/ STEWART A. FISHER

 

 

Name: Stewart A. Fisher

Title: Chief Financial Officer, Vice President, Secretary and Treasurer

 

 

 

 

CE HUNTSVILLE HOLDINGS CORP.

 

 

 

By:

/s/ STEWART A. FISHER

 

 

Name: Stewart A. Fisher

Title: Chief Financial Officer, Vice President, Secretary and Treasurer

 

 

 

 

CAMPBELL ENGINEERING, INC.

 

 

 

By:

/s/ RICHARD A. CAMPBELL

 

 

Name: Richard A. Campbell

Title: President

 

 

 

 

SHAREHOLDERS

 

 

 

By:

/s/ RICHARD A. CAMPBELL

 

 

Name: Richard A. Campbell

Title: Shareholder

 

 

 

 

By:

/s/ SUE CAMPBELL

 

 

Name: Sue Campbell

Title: Shareholder

 

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Schedule 1.1

 

DEFINITIONS

 

“Accounting Referee” shall have the meaning set forth in Section 3.4(e) hereof.

 

“Adjustment Notice” shall have the meaning set forth in
Section 3.2(b)(i) hereof.

 

“Affiliate” shall mean, as to any Person (i) any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person, (ii) any corporation or organization (other than a Subsidiary of
such Person) of which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities, (iii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity, (iv) any relative or spouse of such Person, or
(v) any relative of such spouse who has the same home as such Person, relative
or spouse or who is a director or officer of such Person or any of its parents
or Subsidiaries. The term “control” (including, with correlative meanings, the
terms “controlled by” and “under common control with”), as applied to any
Person, means the possession, direct or indirect, of the power to elect a
majority of the board of directors of such Person or to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or other ownership interest, by contract or
otherwise.

 

“Agreement” shall have the meaning set forth in the preamble hereof.

 

“Assets” shall have the meaning set forth in Section 2.1(a) hereof.

 

“Assumed Liabilities” shall have the meaning set forth in Section 2.3(a) hereof.

 

“Auditor” shall have the meaning set forth in Section 3.2(b)(iii) hereof.

 

“Auditor’s Report” shall have the meaning set forth in
Section 3.2(b)(iii) hereof.

 

“Banks” shall have the meaning set forth in Section 4.29 hereof.

 

“Baseline Net Working Capital Balance” shall have the meaning set forth in
Section 3.2(a) hereof.

 

“Bill of Sale and Assignment Agreement” shall mean such bills of sale,
assignment and assumption agreements to be entered into by and between Purchaser
and the Seller on the date of this Agreement, in form and substance reasonably
satisfactory in each case to Purchaser and the Seller, pursuant to which the
Seller will transfer the Assets held by it, and assign the liabilities to be
assigned by it, to Purchaser and Purchaser will acquire such Assets and assume
such liabilities from the Seller, as contemplated by Sections 2.1 and 2.3 of
this Agreement.

 

“Business” shall have the meaning set forth in the first recital of this
Agreement.

 

“Business Day” shall mean any day other than a Saturday, a Sunday or a day on
which banks in the State of Alabama are authorized or obligated by law or
executive order to close.

 

“Capital Stock” shall mean, as to the Seller, all of the shares of the Seller’s
Common Stock and all other shares, regardless of class or series, of the
Seller’s capital stock authorized to be issued in accordance with the Seller’s
articles of incorporation, as the same may be amended as of the Closing Date.

 

“CERCLIS” shall mean the Comprehensive Environmental Response, Compensation,
Liability Information System.

 

“Claims” shall mean all demands, claims, actions or causes of action,
assessments, complaints, directives, citations, information requests issued by a
Governmental Authority, legal proceedings, orders, notices of potential
responsibility, losses, damages (including, without limitation, diminution in
value), Liabilities, sanctions, costs and expenses, including interest,
penalties and attorneys’ and experts’ fees and disbursements.

 

“Closing” shall have the meaning set forth in Section 3.6 hereof.

 

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

 

“Closing Cash Payment” shall have the meaning set forth in
Section 3.3(b) hereof.

 

“Closing Date” shall have the meaning set forth in Section 3.6 hereof.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

“Common Stock” shall have the meaning set forth in Section 4.2(a) hereof.

 

“Computer Programs” shall mean any and all (i) computer software programs and
software development tools, including all source and object code, (ii) databases
and compilations, including any and all data and collections of data, whether
machine readable or otherwise, (iii) descriptions, flow-charts and other work
product used to design, plan, organize and develop any of the foregoing, and
(iv) documentation, including user manuals and training materials, relating to
any of the foregoing.

 

“Contracts” shall have the meaning set forth in Section 2.1(a)(ii).

 

“Damages” shall have the meaning set forth in Section 7.2 hereof.

 

“Delaware Courts” shall have the meaning set forth in Section 8.7 hereof.

 

“Earnout Amounts” shall mean, collectively, the 2005 Earnout Amount and the 2006
Earnout Amount.

 

“Earnout Plan” shall have the meaning set forth in Section 4.28 hereof.

 

“EBITDA” shall mean earnings before interest expense, income tax expense,
depreciation and amortization of the Business for the period in question, as
determined by the financial statements of the Seller or Purchaser, as
applicable, prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby.

 

“Environmental Claims” shall mean all Claims pursuant to Environmental Laws,
including those based on, arising out of or otherwise relating to: (i) the
Remediation, presence or Release of, or exposure to, Hazardous Materials or
other environmental conditions initiated, existing or occurring prior to the
Closing Date at, on, under, above, from, or about any Real Property or any real
properties formerly owned, leased or operated by the Seller or any of its
predecessors or Affiliates; (ii) the off-site Release, treatment,
transportation, storage or disposal prior to the Closing Date of Hazardous
Materials originating from the Seller’s Assets or Business; (iii) any violations
of Environmental Laws by the Seller prior to the Closing Date, including
reasonable expenditures necessary to cause the Seller to be in compliance with
or resolve violations of Environmental Laws.

 

“Environmental Laws” shall mean any Laws (including the Comprehensive
Environmental Response, Compensation, and Liability Act), including any plans,
other criteria, or guidelines promulgated pursuant to such Laws, now or
hereafter in effect relating to the Remediation, generation, production,
installation, use, storage, treatment, transportation, Release, threatened
Release, or disposal of Hazardous Materials, or noise control, or the protection
of human health, safety, natural resources, animal health or welfare, or the
environment.

 

“Environmental Permits” shall mean any Permits, licenses, certificates and
approvals required under any Environmental Law.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

 

“ERISA Affiliate” shall have the meaning set forth in Section 4.16(a) hereof.

 

“ERISA Plans” shall have the meaning set forth in Section 4.16(a) hereof.

 

“Escrow Agent” shall mean Wells Fargo Bank, N.A. or such other Person as
determined in accordance with the Escrow Agreement.

 

“Escrow Agreement” shall have the meaning set forth in Section 3.3(d) hereof.

 

1.1-2

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“Escrow Amount” shall have the meaning set forth in Section 3.3(d) hereof.

 

“Excluded Assets” shall have the meaning set forth in Section 2.2 hereof.

 

“Exhibit” shall have the meaning set forth in Section 1.2 hereof.

 

“Financial Statements” shall mean the audited consolidated balance sheets and
statements of income, changes in shareholders’ equity and cash flow as of and
for the fiscal years ended December 31, 2003 and December 31, 2004 for the
Seller.

 

“First Quarter Financial Statements” shall have the meaning set forth in
Section 4.6 hereof.

 

“GAAP” shall mean United States generally accepted accounting principles and
practices (including sales being recognized at the time of shipment).

 

“Governmental Authority” shall mean any national, federal, state, local or
foreign judicial, legislative, executive or governmental regulatory authority.

 

“Hazardous Materials” shall mean any wastes, substances, radiation, or materials
(whether solids, liquids or gases): (i) which are hazardous, toxic, infectious,
explosive, radioactive, carcinogenic, or mutagenic; (ii) which are or become
defined as “pollutants,” “contaminants,” “hazardous materials,” “hazardous
wastes,” “hazardous substances,” “toxic substances,” “radioactive materials,”
“solid wastes,” or other similar designations in, or otherwise subject to
regulation under, any Environmental Laws; (iii) the presence of which on the
Real Property cause or threaten to cause a nuisance pursuant to applicable
statutory or common law upon the Real Property or to adjacent properties;
(iv) which contain without limitation polychlorinated biphenyls (PCBs), mold,
methyl-tertiary butyl ether (MTBE), asbestos or asbestos-containing materials,
lead-based paints, urea-formaldehyde foam insulation, or petroleum or petroleum
products (including crude oil or any fraction thereof); or (v) which pose a
hazard to human health, safety, natural resources, employees, or the
environment.

 

“Indebtedness” of any Person at any date shall mean (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business consistent with past practice and payable in accordance with
customary practices) and including earn-out or similar contingent purchase
amounts, (b) any other indebtedness of such Person which is evidenced by a note,
bond, debenture or similar instrument, (c) all obligations of such Person under
any capitalized lease, (d) all obligations of such Person in respect of
acceptances issued or created for the account of such Person, (e) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof,
and (f) all guarantees by such Person of obligations of others.

 

“Independent Contractor” shall mean those third parties other than attorneys,
accountants and financial advisors, providing services to or on behalf of the
Seller, that were paid by the Seller at least ten thousand dollars ($10,000) for
any applicable year.

 

“Instruments of Transfer” shall have the meaning set forth in
Section 2.1(b) hereof.

 

“Intellectual Property” shall mean all intellectual property rights used or
available for use in the Business as currently conducted or as currently
contemplated by the Seller to be conducted, or in or to which the Seller has any
right, title or interest, including all patents and patent applications,
together with all reissuances, continuations, continuations-in-part, revisions,
extensions and reexaminations thereof; trademarks, trademark registrations and
applications, service marks, service mark registrations and applications, trade
names, trade dress, logos, designs, proprietary rights, slogans and general
intangibles of like nature, together with all goodwill symbolized by or related
to the foregoing; copyrights, copyright registrations and applications; mask
works and all applications, registrations and renewals in connection therewith;
Computer Programs; all domain names and the content contained on

 

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the Seller’s Internet web site(s); product plans, technology, process
engineering, drawings, schematic drawings, secret processes, proprietary
knowledge, including without limitation, trade secrets, know-how, confidential
information and formulae.

 

“IRS” shall mean the Internal Revenue Service of the United States of America.

 

“Key Suppliers, Vendors and Customers” shall have the meaning set forth in
Section 4.7 hereof.

 

“Knowledge” with respect to any particular representation or warranty contained
in this Agreement, when used to apply to the “Knowledge” of a Shareholder, shall
be deemed to be followed by the phrase “after reasonable inquiry of such
Shareholders” and, when otherwise used, shall mean the actual knowledge or
conscious awareness after due inquiry of the senior officers or individuals
performing similar functions of the Person.

 

“Laws” shall mean any federal, state, foreign or local law, statute, ordinance,
rule, regulation, order, determination, writ, judgment or decree, administrative
order, and administrative or judicial decision.

 

“Liabilities” shall mean debts, liabilities, commitments, obligations, duties
and responsibilities of any kind and description, whether absolute, accrued,
contingent, monetary or nonmonetary, direct or indirect, known or unknown or
matured or unmatured or of any other nature.

 

“Licenses” shall have the meaning set forth in Section 4.15(d) hereof.

 

“Liens” shall mean any lien, pledge, mortgage, deed of trust, security interest,
lease, charge, option, right of first refusal, easement, encroachment,
reservation, servitude, transfer restriction under any shareholder or similar
agreement, order, decree, judgment, condition or any other encumbrance of any
nature whatsoever.

 

“Litigation” shall mean any litigation, legal action, arbitration, proceeding,
material demand, material claim or investigation pending, or, to the Knowledge
of the Seller, threatened, planned or reasonably probable, against, affecting or
brought by or against the Shareholders, the Seller, the Seller’s present or
former employees or agents affiliated at any time with the Seller relating to
the Business or any of the Assets.

 

“Material Adverse Effect” shall mean, with respect to the same or any similar
events, acts, conditions or occurrences, whether individually or in the
aggregate resulting in, a material adverse effect on or a material adverse
change in (a) the Assets, (b) any of the Business, condition (financial or
otherwise), operations or liabilities of the Seller, (c) the legality or
enforceability against the Seller or the Shareholders of this Agreement or
(d) the ability of the Seller and each of the Shareholders to perform its, her
or his (as the case may be) obligations and to consummate the transactions under
this Agreement. For purposes of clauses (a) and (b) of this definition and
without limiting the generality of the foregoing, an effect or change with
respect to the same or any similar event(s), act(s), condition(s) or
occurrence(s) individually or in the aggregate with respect to which the Seller
would reasonably be expected to have $50,000 in the aggregate or more in Damages
being asserted against, imposed upon or sustained by the Assets or the Seller or
its Business, taken as a whole, shall constitute a “material adverse” effect or
change.

 

“Material Contracts” shall have the meaning set forth in Section 4.14(a) hereof.

 

“Net Working Capital Balance” shall have the meaning set forth in
Section 3.2(a) hereof.

 

“Non-Competition Agreement” shall have the meaning set forth in
Section 3.7(h) hereof.

 

“Nondelivered Assets” shall have the meaning set forth in Section 2.4 hereof.

 

“Objection Notice” shall have the meaning set forth in
Section 3.2(b)(ii) hereof.

 

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“Objection Period” shall have the meaning set forth in
Section 3.2(b)(ii) hereof.

 

“Parent” shall have the meaning set forth in the preamble hereof.

 

“Parent and Purchaser Non-Basket Representations” shall have the meaning set
forth in Section 7.3(a)(iii) hereof.

 

“Parent’s Notice” shall have the meaning set forth in Section 3.4(e) hereof.

 

“PBGC” shall have the meaning set forth in Section 4.16(d) hereof.

 

“Permits” shall mean as to any Person, all licenses, permits, franchises,
orders, approvals, concessions, registrations, authorizations and qualifications
under any federal, state, local or foreign laws with any and all Governmental
Authorities or with any and all industry or other nongovernmental
self-regulatory organizations that are issued to such Person.

 

“Person” shall mean an individual, a corporation, a partnership, limited
liability company, an association, a trust or other entity or organization.

 

“Plans” shall have the meaning set forth in Section 4.16(a) hereof.

 

“Proposed Purchase Price Adjustment” shall have the meaning set forth in
Section 3.2(b)(i) hereof.

 

“Purchase Price” shall have the meaning set forth in Section 3.1 hereof.

 

“Purchaser” shall have the meaning set forth in the preamble hereof.

 

“Purchaser Indemnified Parties” shall mean Parent, Purchaser and their
respective successors, assigns, Affiliates, agents and employees.

 

“Purchaser’s Indemnification Threshold” shall have the meaning set forth in
Section 7.3(b) hereof.

 

“Real Property” shall have the meaning set forth in Section 4.9(b) hereof.

 

“Relatives” shall mean such person’s spouse, lineal ancestor or descendant,
brother or sister.

 

“Release” shall mean any presence, emission, spill, seepage, leak, escape,
leaching, discharge, injection, pumping, pouring, emptying, dumping, disposal,
migration, or release of Hazardous Materials from any source into or upon the
environment, including the air, soil, improvements, surface water, groundwater,
sewer, septic system, storm drain, publicly owned treatment works, or waste
treatment, storage, or disposal systems.

 

“Remediation” shall mean any investigation, clean-up, removal action, remedial
action, restoration, repair, response action, corrective action, monitoring,
sampling and analysis, installation, reclamation, closure, or post-closure in
connection with the suspected, threatened or actual Release of Hazardous
Materials.

 

“Required Intellectual Property Consents” shall have the meaning set forth in
Section 4.15(h).

 

“Schedule” and any references to specific items therein shall mean the
disclosure schedule delivered by the Shareholders and the Seller to Purchaser
contemporaneously with the execution of this Agreement or the disclosure
schedule delivered by Purchaser to the Seller contemporaneously with the
execution of this Agreement, as the case may be.

 

“Seller” shall have the meaning set forth in the preamble hereof.

 

“Seller and Shareholder Non-Basket Representations” shall have the meaning set
forth in Section 7.2(a)(iii) hereof.

 

“Seller Indemnified Parties” shall mean the Shareholders, the Seller and their
respective successors, assigns, Affiliates, agents and employees.

 

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“Seller’s Indemnification Threshold” shall have the meaning set forth in
Section 7.2(b) hereof.

 

“Shareholder(s)” shall have the meaning(s) set forth in the preamble hereof.

 

“Shareholder Real Estate” shall have the meaning set forth in Section 2.1(a).

 

“Shareholder Real Estate Purchase Price” shall have the meaning set forth in
Section 3.1 hereof.

 

“SPD” shall have the meaning set forth in Section 4.16(b)(iv) hereof.

 

“Statement” shall have the meaning set forth in Section 3.4(e) hereof.

 

“Statutory Warranty Deed” shall mean a statutory warranty deed from the
Shareholders or the Seller, as applicable, to Purchaser conveying fee title to
the Shareholder Real Estate and to the Real Property owned by the Seller, as
contemplated by Section 2.1 of this Agreement, in each case in form and
substance reasonably satisfactory to Purchaser.

 

“Subsidiary” shall mean, with respect to any Person, any corporation or other
organization, whether incorporated or unincorporated, of which such Person or
any other subsidiary of such person beneficially owns a majority of the voting
or equity interests.

 

“Tax Law” shall mean any Law relating to Taxes.

 

“Tax Return” shall mean any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Authority in connection with the determination, assessment, collection, or
payment of any Taxes or in connection with the administration, implementation,
or enforcement of or compliance with any Law relating to any Tax.

 

“Taxes” shall mean all taxes (including any income taxes, payroll taxes, capital
gains taxes, value-added taxes, excise taxes, sales taxes, property taxes, gift
taxes, transfer taxes or estate taxes), levies, assessments, tariffs, duties
(including any customs duties), deficiencies, or other fees, and any related
charges or amounts (including any fines, penalties, interest, or additions to
tax), imposed, assessed, or collected by or under the authority of any
Governmental Authority or payable pursuant to any tax-sharing agreement or any
other contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency, or fee.

 

“Title Policy” shall mean an ALTA title insurance policy on each parcel of the
Shareholders Real Estate and of the owned Real Property of the Seller, each
issued to Purchaser by a title company reasonably acceptable to Purchaser, in an
amount not less than the fair market value of the applicable parcel, and, in
each case, containing such endorsements as Purchaser may reasonably request and
issued pursuant to a title commitment or title report reasonably approved and
accepted by Purchaser.

 

“Transition Services Agreement” shall have the meaning set forth in
Section 3.8(d) hereof.

 

“Transition Services and Consulting Agreement” shall have the meaning set forth
in Section 3.8(c) hereof.

 

“2005 Baseline EBITDA” shall have the meaning set forth in
Section 3.4(a) hereof.

 

“2005 Earnout Amount” shall have the meaning set forth in Section 3.4(a) hereof.

 

“2005 EBITDA” shall have the meaning set forth in Section 3.4(a) hereof.

 

“2005 Target EBITDA” shall mean FIVE MILLION ONE HUNDRED THOUSAND DOLLARS
($5,100,000).

 

“2006 Earnout Amount” shall have the meaning set forth in Section 3.4(b) hereof.

 

“2006 Earnout Cap” shall have the meaning set forth in Section 3.4(b) hereof.

 

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“2006 EBITDA” shall have the meaning set forth in Section 3.4(b) hereof.

 

“2006 Statement” shall have the meaning set forth in Section 3.4(d) hereof

 

“2007 Statement” shall have the meaning set forth in Section 3.4(d) hereof.

 

“Verification Period” shall have the meaning set forth in
Section 3.2(b)(i) hereof.

 

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