Exhibit 10.1

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

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

 
MEMBERSHIP INTEREST PURCHASE AGREEMENT

By and Among

SpongeTech Delivery Systems, Inc.

as Purchaser,

and

Dicon Technologies, LLC,

and

Wayne M. Celia
Sam Ginsberg
Clyde Williams
Roy Geronemus
John Scheib

as Seller(s)

Dated as of July 9, 2009
 

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

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

 
 
 

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

 

TABLE OF CONTENTS

 
PAGE
ARTICLE 1.  SALE AND PURCHASE OF MEMBERSHIP INTERESTS
1
1.1
Sale and Purchase of Membership Interests
1
     
ARTICLE II.  PURCHASE PRICE; ADDITIONAL FUNDS; RETAINED INDEBTEDNESS
2
2.1
Purchase Price
2
2.2
Additional Funds
2
2.3
Payoff of Wachovia Note
2
2.4
Retained Indebtedness
2
     
ARTICLE III.  CLOSING
3
3.1
Time and Place of Closing
3
3.2
Deliveries by the Company and the Sellers
3
3.3
Deliveries by the Purchaser
4
     
ARTICLE IV.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS
5
4.1
Organization and Qualification
5
4.2
Membership Interests; Company Books
5
4.3
Title to Membership Interests
5
4.4
Binding Obligation
6
4.5
No Defaults or Consents
6
4.6
No Company Defaults or Consents
6
4.7
No Proceedings
6
4.8
Financial Statements and Audit Representation
7
4.9
Absence of Undisclosed Liabilities
7
4.10
Absence of Certain Changes or Events
7
4.11
Real Property
9
4.12
Taxes, Tax Returns and Other Reports
11
4.13
Intangible Rights
11
4.14
Equipment and Other Tangible Property
12
4.15
Books of Account
12
4.16
Litigation
12
4.17
Commitments
13
4.18
Insurance
14
4.19
Compliance with Laws; Permits
14

 

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

 
4.20
Absence of Questionable Payments
15
4.21
Hazardous Substances; Hazardous Wastes and Pollutants
15
4.22
Conditions Affecting Business
15
4.23
Debt Instruments
16
4.24
Suppliers and Customers
16
4.25
Employee Benefit Matters
16
4.26
Bank Accounts
19
4.27
Full Disclosure
19
     
ARTICLE V.  REPRESENTATIONS AND WARRANTIES OF PURCHASER
19
5.1
Organization
19
5.2
Authority
20
5.3
No Violations
20
     
ARTICLE VI.  INDEMNIFICATION
20
6.1
Indemnification of the Purchaser
20
6.2
Indemnification of the Sellers
21
6.3
Procedure for Indemnification
21
6.4
Limitations on Losses
22
6.5
Other Rights and Remedies Not Affected
22
     
ARTICLE VII.  RESTRICTIVE COVENANTS; COVENANTS
23
7.1
The Purchaser’s Access to Information and Properties
23
7.2
Company’s Conduct of Business and Operations
23
7.3
General Restrictions
23
7.4
Notice Regarding Changes
25
7.5
Ensure Conditions Met
25
7.6
Maintenance of Insurance Policies
26
7.7
Casualty Loss
26
7.8
Covenant Not to Compete
26
7.9
Covenant Not to Interfere With Company's Business
26
7.10
Covenant Not to Disclose Confidential Information
27
7.11
Remedies
27
7.12
Bank Accounts
27
     
ARTICLE VIII.  MISCELLANEOUS
28
8.1
Survival of Representations, Warranties and Other Provisions
28
8.2
Fees and Expenses
28
8.3
Brokers
28
8.4
Taxes
28

 

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

 
8.5
Publicity
28
8.6
No Waiver
28
8.7
Entire Agreement; Written Modifications
29
8.8
Binding Effect
29
8.9
No Third Party Beneficiaries
29
8.10
Notices
29
8.11
Cooperation
30
8.12
Headings; Gender and “Person”
30
8.13
Schedules and Exhibits
30
8.14
Joint and Several Liability
30
8.15
Severability
31
8.16
Counterparts
31
8.17
Governing Law
31
8.18
Consent to Jurisdiction
31
8.19
Construction
31
     
ARTICLE IX.  DEFINITIONS
31

EXHIBITS

Exhibit A – Employment Agreement between the Company and Celia
Exhibit B – Employment Agreement between the Company and Wayne Celia, Jr.
Exhibit C – Employment Agreement between the Company and Michael Derr
Exhibit D – Employment Agreement between the Company and Rosalind Nathanial
Exhibit E – Employment Agreement between the Company and Harvey Goodman
Exhibit F – Employment Agreement between the Company and Scott Lyddon

 
 

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

 

APPENDIX I

INDEX OF DEFINITIONS

The following index indicates the Sections (or the recitals) of this Agreement
containing the definitions of certain terms used in this Agreement:

Affiliate
9.1
Balance Sheet
4.8(a)
Benefit Program or Agreement
4.25(a)(ii)
Business
Recitals
Closing
3.1
Code
9.2
Consulting Agreement
3.2(c)
Contracts
9.3
Environmental Laws
4.21(b)
Equipment Purchase Funds
2.2(a)
ERISA
4.25(a)(i)
Exhibits
9.4
Financial Statements
4.8(a)
GAAP
9.5
Governmental Authorities
9.6
H.H. Brown License Agreement
3.2(g)(i)
Indemnified Party
6.3(a)
Indemnifying Party
6.3(a)
Intangible Rights
4.13
Inventory
9.7
Knowledge of the Company
9.8
Leased Premises
4.11(b)
Legal Requirements
9.9
Leases
4.11(b)
Lien
9.10
Litigation
4.16
Losses
6.1(a)
Material Adverse Effect
4.10(a)
Membership Interests
Recitals
Multiemployer Plan
4.25(c)(i)
Owned Premises
4.11(a)

 

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

 
Permits
4.19(b)
Permitted Encumbrances
9.11
Person
9.12
Plan
4.25(a)(i)
Properties
9.13
Purchase Price
2.1
Purchaser’s Indemnification Events
6.1
Retained Liabilities
2.4(a)
Retired Indebtedness and Obligations
2.4(b)
Seller’s Indemnification Events
6.2
Tangible Company Properties
4.14
Tax Returns
4.12(a)
Taxes
4.12(a)
Third Party Claim
6.3(a)
Used
9.14
Wachovia Note
2.3
Working Capital Line of Credit
2.2(b)

 
 

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

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT, dated as of July 9, 2009 by and
among SPONGETECH DELIVERY SYSTEMS, INC., a Delaware corporation, having its
principal office at 43 West 33rd Street, Suite 600, New York, New York 10001
(the "Purchaser"), DICON TECHNOLOGIES, LLC, a New Jersey limited liability
company having its principal office at 100 Dicon Drive, Black Creek, Georgia
31308 (the “Company”), and WAYNE M. CELIA (“Celia”), having an address at 242
Purdue Court, Paramus, NJ 07652, SAM GINSBERG (“Ginsberg”) having an address at
6 Woodsford Bend, Briarcliff Manor, NY 10510, CLYDE WILLIAMS (“Williams”) having
an address at 4726 36th Street N.W., Washington, DC 20008, ROY GERONEMUS
(“Geronemus”) having an address at 1725 York Avenue, New York, NY 10128, and
JOHN SCHEIB (“Scheib”) having an address at 3024 Waters Road, Amsterdam, NY
12010, (Celia, Ginsberg, Williams, Geronemus and Scheib are collectively
referred to herein as the “Sellers”).

WITNESSETH:

WHEREAS, the Sellers are the record and beneficial owners of all of the issued
and outstanding membership interests (the “Membership Interests”) of the
Company; and

WHEREAS, the Company is in the business of developing and manufacturing products
derived from “Hydrophilic Urethane Chemistry” (the “Business”); and

WHEREAS, the Sellers desire to sell to the Purchaser, and the Purchaser desires
to acquire from the Sellers, all of the Membership Interests, on the terms and
conditions hereinafter set forth; and

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

ARTICLE I
SALE AND PURCHASE OF MEMBERSHIP INTERESTS

1.1           Sale and Purchase of Membership Interests.  Subject to the terms
and conditions of this Agreement and on the basis of and in reliance upon the
representations, warranties, obligations and agreements set forth herein, on the
Closing Date, the Sellers shall sell, assign, transfer, convey and deliver to
the Purchaser, and the Purchaser shall purchase from the Sellers, all of the
Membership Interests for the consideration set forth below.

 
 

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

 

ARTICLE II
PURCHASE PRICE; ADDITIONAL FUNDS; RETAINED INDEBTEDNESS

2.1           Purchase Price.  In consideration of the sale, assignment,
transfer, issuance, conveyance and delivery to the Purchaser of the Membership
Interests, the Purchaser shall pay to the Sellers Two Million Three Hundred
Fifty Thousand ($2,350,000) Dollars by wire transfer to the Ellis, Painter,
Ratterree & Adams, LLP Escrow Account at the Closing (the "Purchase Price").

2.2           Additional Funds.     The Purchaser agrees to provide the
following funding to the Company:

(a)           Equipment Purchase Amount.    Following the Closing, the Purchaser
agrees to provide to the Company, upon the Company’s written request, up to
$250,000 (the “Equipment Purchase Funds”) for the Company’s purchase of
specifically identified and agreed upon manufacturing equipment which, when
delivered and installed, shall constitute a second production line dedicated for
the manufacturing of Purchaser’s products.

(b)           Working Capital Line of Credit.      The Purchaser agrees to
provide to the Company an additional $270,000.00 in the form of an inter-company
credit line (the “Working Capital Line of Credit”), which shall be used by the
Company for its general working capital needs.

2.3           Payoff of Wachovia Note.       The Purchaser shall pay by wire
transfer at the Closing to Wachovia Bank the full payment of all outstanding
principal and interest under that certain promissory note dated December 3, 2008
in the original principal amount of $2,500,000 (the “Wachovia Note”).

 
2.4
Retained Indebtedness

(a)         On the Closing Date, the only interest bearing and non-interest
bearing liabilities and obligations for borrowed money or other amounts due to
the Sellers or other Affiliates of the Company or to third parties  that the
Purchaser will assume are those set forth on Schedule 2.4 attached hereto
(collectively, the “Retained Liabilities”).  The Company and the Sellers
represent and warrant to the Purchaser that all Contracts evidencing the
previously mentioned Retained Liabilities are set forth on Schedule 2.4 hereto.
 
(b)           The Company shall be responsible for obtaining and/or confirming
cancellation on or prior to the Closing Date of that certain “Officer Loan”
dated June 12, 2009, which has an outstanding amount due of $412,332.42, and all
other interest bearing and non-interest bearing liabilities and obligations for
borrowed money or other amounts due to the Sellers or other Affiliates of the
Company or to third parties and any other liabilities or obligations not
specifically set forth in Section 2.4(a) (collectively, the “Retired
Indebtedness and Obligations”).

 
2

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

 

ARTICLE III
CLOSING

3.1           Time and Place of Closing.  The closing (the "Closing") of the
sale and purchase of the Membership Interests shall take place by the Parties
making all deliveries required under this Article III in escrow through their
respective counsel on or before July 9, 2009 (the “Closing Date”).  For all
purposes, the Closing will be deemed to have occurred at 12:01 a.m., Eastern
Standard Time, on the Closing Date.

3.2           Deliveries by the Company and the Sellers.  On the Closing Date,
the Company and the Sellers shall deliver, or cause to be delivered, the
following:

(a)           Certificates representing the Membership Interests, representing
100% of the issued and outstanding Membership Interests of the Company, duly
endorsed in blank for transfer, or with appropriate powers in blank attached;

(b)           The membership interest book, membership interest ledger, minute
books, and corporate seal of the Company;

(c)           An Employment Agreement between the Company and Celia
substantially in the form of Exhibit A attached hereto (the “Celia Employment
Agreement”);

(d)           An Employment Agreement between the Company and each of Wayne
Celia, Jr., Michael Derr, Rosalind Nathanial, Harvey Goodman and Scott Lyddon,
substantially in the forms of Exhibits B, C, D, E and F, respectively, attached
hereto;

(e)           Evidence satisfactory to the Purchaser that the “Officer Loan” has
been cancelled;

(f)           An acknowledgement from H.H. Brown Shoe Technologies, LLC (“H.H.
Brown”) to the sale of the Membership Interests to the Purchaser, and an
acknowledgement and confirmation from H.H. Brown that the Intellectual Property
License Agreement effective November 30, 2007 by and between H.H. Brown and the
Company (the “H.H. Brown License Agreement”) remains in force and effect as of
the Closing Date, and that as of the Closing Date, the Company is not in breach
of any of its material obligations under the H. H. Brown License Agreement.

(g)           An incumbency certificate for the Company dated the Closing Date,
including specimen signatures, together with copies, certified by the Secretary
or the Assistant Secretary of the Company, of (i) the Company's articles of
organization, as in effect on the Closing Date; (ii) the Company's operating
agreement, as in effect on the Closing Date; (iii) resolutions of the Company’s
Board of Managers authorizing the execution, delivery and performance by the
Company of this Agreement and the documents, instruments, certificates and other
agreements being executed and delivered by the Company pursuant to the terms
hereof;

 
3

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

 

(h)           A good standing certificate for the Company, dated not more than
30 days prior to the Closing Date, issued by the Secretary of State of the State
of New Jersey stating that the Company is validly existing and/or in good
standing under the laws of such jurisdiction;

(i)           Written consent from the Development Authority of Bryan County,
the lessor under that certain Lease dated as of August 1, 2008, to waive, until
September 30, 2009, the requirement contained in Section 6.13(a) therein to
present audited financial statements of the Company within 180 days after the
fiscal year end; and

(j)           All other documents, instruments and writings required to be
delivered by the Sellers at or prior to the Closing pursuant to this Agreement
or otherwise required in connection herewith.

3.3           Deliveries by the Purchaser.  On the Closing Date, the Purchaser
shall deliver, or cause to be delivered, the following:

(a)           Payment to the Sellers of the Purchase Price;

(b)           The Celia Employment Agreement;

(c)           Payment to Wachovia Bank of the outstanding principal and interest
of the Wachovia Note;

(d)           An incumbency certificate for the Purchaser dated the Closing
Date, including specimen signatures, together with copies, certified by the
Secretary or the Assistant Secretary of the Purchaser, of (i) the Purchaser's
certificate of incorporation, as in effect on the Closing Date, and (ii)
resolutions of the Purchaser's Board of Directors authorizing the execution,
delivery and performance by the Purchaser of this Agreement and the documents,
instruments, certificates and other agreements being executed and delivered by
the Purchaser pursuant to the terms hereof;

(e)           A good standing certificate for the Purchaser, dated not more than
30 days prior to the Closing Date, issued by the Secretary of State of Delaware,
stating that the Purchaser is validly existing and/or in good standing under the
laws of such state; and

(f)           All other documents, instruments and writings required to be
delivered by the Purchaser at or prior to the Closing pursuant to this Agreement
or otherwise required in connection herewith.

 
4

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

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS

The Company and the Sellers, jointly and severally, hereby make the following
representations and warranties to the Purchaser and, with respect to those
representations and warranties regarding the Company, the Sellers hereby
acknowledge that they have reviewed all relevant books and records of the
Company, made all necessary inquiries of the officers, members and management of
the Company and performed such other investigations as the Sellers deemed
necessary to be able to so represent and warrant:

4.1           Organization and Qualification.  The Company is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of New Jersey with full power and authority to own its
properties and to carry on its business as now conducted.  The Company is duly
qualified or licensed and has all permits necessary to transact business, and is
in good standing in each jurisdiction wherein the nature of the business
conducted by the Company or its ownership, leasing or use of real property
requires it to be so qualified or licensed or to hold such permits.

4.2           Membership Interests; Company Books.

(a)           The Membership Interests are the only membership interests in the
Company and there are no other interests, units or securities of the Company
which are issued or outstanding.  There are no outstanding subscriptions,
options, warrants, rights, calls, contracts, commitments, understandings or
agreements to purchase or otherwise acquire, or relating to the issuance of, any
interests, units or other securities of the Company, including, without
limitation, any rights of conversion or exchange under any outstanding
securities or instruments, other than this Agreement.

(b)           The copies of the articles of organization and operating agreement
of the Company, certified by the Secretary or the Assistant Secretary thereof,
which have been previously delivered to the Purchaser, are true, complete and
correct in all respects.  No manager or officer of the Company has taken any
action on behalf of the Company, nor authorized the Company to take any action,
other than such items which are set forth on the Schedules attached hereto or
which otherwise have been disclosed to the Purchaser prior to the execution
hereof.

4.3           Title to Membership Interests.  The Sellers are the lawful record
and beneficial owners of the Membership Interests, each having the percentage
ownership of the Company set forth opposite his or her name on Schedule
4.3.  Each of the Sellers has good and marketable title to his or her Membership
Interests, free and clear of all pledges, liens, encumbrances, claims and other
charges thereon of any kind or nature, including, without limitation, any
agreements, subscriptions, options, warrants, calls, commitments or rights of
any character granting to any Person any interest or right to acquire from the
Sellers at any time, or upon the happening of any stated event, any of the
Membership Interests.  The Membership Interests have been validly issued in full
compliance with applicable federal, state and other securities and other laws in
accordance with the Company’s articles of organization, and without any
violation of any preemptive rights, and are fully paid and non-assessable.

 
5

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

 

4.4           Binding Obligation. This Agreement constitutes the legal, valid
and binding obligation of the Sellers and the Company enforceable against each
of them in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights generally and to general equitable principles.

4.5           No Defaults or Consents.  The execution and delivery of this
Agreement and the Exhibits by the Sellers and the Company and the performance by
the Sellers and the Company of their obligations hereunder and thereunder will
not violate any provision of law or any judgment, award, or decree or any
indenture, agreement, or other instrument to which the Sellers and/or the
Company is a party, or by which the properties or assets of the Sellers or the
Company is bound or affected, or conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under, any such
indenture, agreement, or other instrument, in each case except to the extent
that such violation, default, or breach could not reasonably be expected to
delay or otherwise significantly impair the ability of the parties to consummate
the transactions contemplated hereby.

4.6           No Company Defaults or Consents.  Neither the execution and
delivery of this Agreement nor the carrying out of any of the transactions
contemplated hereby will:

(a)           violate or conflict with any of the terms, conditions, or
provisions of the Certificate of Organization or Limited Liability Company
Agreement of the Company;

(b)           violate, conflict with or constitute a default under the terms,
conditions or provisions of the H.H. Brown License Agreement;

(c)           violate any  material Legal Requirements applicable to the
Company;

(d)           violate, conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of time or both), or
accelerate or permit the acceleration of the performance required by, or give
any other party the right to terminate, any  material Contract or Permit binding
upon or applicable to the Company;

(e)           result in the creation of any Lien on any Properties of the
Company; or

(f)           require either the Sellers or the Company to obtain or make any
waiver, consent, action, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority to the extent that the rules,
regulations or orders of such body are binding upon any of the Company or the
Sellers or otherwise have the effect of law.

4.7           No Proceedings.  No suit, action, or other proceeding is pending
or, to the Knowledge of the Company, threatened before any Governmental
Authority seeking to restrain the Company or the Sellers or prohibit their entry
into this Agreement or prohibit the Closing, or seeking damages against the
Company or its Properties as a result of the consummation of this Agreement.
 
6

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

 
4.8           Financial Statements and Audit Representation.

(a)           The Sellers have furnished the Purchaser with the unaudited
balance sheets of the Company as of May 31, 2009, December 31, 2008 and December
31, 2007 (the “Balance Sheet”) and statements of income and operations for the
five months ended May 31, 2009, the twelve months ended December 31, 2008 and
the period from inception to December 31, 2007 (collectively, the “Financial
Statements”), certified by Celia, as the President and the representative of the
Sellers, and by the Controller of the Company, to be true, correct and
complete.  The Financial Statements fairly present the financial position and
results of operations for the Company on the date and for the period(s) then
ended, in accordance with GAAP applied on a consistent basis as of the end of
and for all prior periods since the date of the Company’s formation, except as
set forth on Schedule 4.8 attached hereto  The assets of the Company reflected
on the Balance Sheet are presented at book value as of the respective dates
thereof and have never been written-up or re-valued.
 
(b)           The Company and the Sellers pledge full cooperation with the
Purchaser in connection with an audit of the Financial Statements. To the
Knowledge of the Company and the Sellers, the Financial Statements for the
fiscal years ended December 31, 2008 and 2007 as well as the 2009 interim stub
periods, all of which may be required to be audited and included in various
filings by the Purchaser in compliance with rules and regulations of the
Securities and Exchange Commission, are “auditable,” and the Company and the
Sellers have no knowledge of any state of facts or the occurrence of any event
which might render the Financial Statements unauditable.

4.9           Absence of Undisclosed Liabilities.  The Company has no
liabilities or obligations, except:

(a)           liabilities or obligations which are reflected, disclosed or
reserved against on the Balance Sheet and not heretofore paid or discharged; or

(b)           liabilities or obligations specifically disclosed in any Schedule
to this Agreement.

For purposes of this Agreement, the term "liabilities" or "obligations" shall
include, without limitation, all direct or indirect indebtedness, guaranties,
endorsements, claims, losses, damages, judgments, deficiencies, costs, expenses
or responsibilities, known or unknown, fixed or unfixed, choate or inchoate,
whether liquidated or unliquidated, secured or unsecured or whether accrued,
absolute, contingent or otherwise.

4.10           Absence of Certain Changes or Events.  Except as otherwise set
forth on Schedule 4.10(a) attached hereto, since the Balance Sheet date, there
has not been:
 
7

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

 
(a)           any event, circumstance, or change (other than general economic
conditions) that had or can reasonably be expected to have a material adverse
effect on the business, operations, prospects, Properties, financial condition,
or working capital of the Company, taken as a whole (a “Material Adverse
Effect”);
 
(i)           any damage, destruction, or loss (whether or not covered by
insurance) that had or might have a Material Adverse Effect; or
 
(ii)          any material adverse change in the Company’s sales patterns,
pricing policies, accounts receivable, or accounts payable.
 
(b)           Except as otherwise set forth on Schedule 4.10(b) attached hereto,
since the Balance Sheet date, the Company has not done any of the following:
 
(i)           merged into or with or consolidated with, any other corporation or
acquired the business or assets of any Person;
 
(ii)          purchased any securities of any Person not in the ordinary course
of its business;
 
(iii)         created, incurred, assumed, guaranteed, or otherwise become liable
or obligated with respect to any indebtedness, or made any loan or advance to,
or any investment in, any Person, except in each case in the ordinary course of
business;
 
(iv)         made any change in any existing election, or made any new election,
with respect to any tax law in any jurisdiction which election could have an
effect on the tax treatment of the Company or the Company’s business operations;
 
(v)          entered into, amended, or terminated any material agreement,
including, without limitation, any clearing or custody agreement;
 
(vi)         sold, transferred, leased, mortgaged, encumbered, or otherwise
disposed of, or agreed to sell, transfer, lease, mortgage, encumber, or
otherwise dispose of, any Properties except (1) in the ordinary course of
business, or (2) pursuant to any agreement specified in Schedule 4.17 attached
hereto;
 
(vii)        settled any claim or litigation, or filed any motions, orders,
briefs, or settlement agreements in any proceeding before any Governmental
Authority or any arbitrator;
 
(viii)       incurred or approved, or entered into any agreement or commitment
to make, any expenditures in excess of $25,000 (other than those arising in the
ordinary course of business or those required pursuant to any agreement
specified in Schedule 4.13 attached hereto);
 
(ix)          maintained its books of account other than in the usual, regular,
and ordinary manner in accordance with GAAP and on a basis consistent with prior
periods or made any change in any of its accounting methods or practices that
would be required to be disclosed under GAAP;
 
8

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

 
(x)           adopted any Plan or Benefit Program or Agreement, or granted any
increase in the compensation payable or to become payable to managers,
directors, officers, or employees (including, without limitation, any such
increase pursuant to any bonus, profit-sharing, or other plan or commitment),
other than merit increases to non-officer employees in the ordinary course of
business and consistent with past practice;
 
(xi)          suffered any extraordinary losses or waived any rights of material
value;
 
(xii)         been notified on any default under the H.H. Brown License
Agreement;
 
(xiii)        made any payment to any Affiliate or forgiven any indebtedness due
or owing from any Affiliate to the Company;
 
(xiv)        (1) accelerated receivables, (2) delayed payables, or (3) changed
in any material respect the Company’s practices in connection with the payment
of payables and/or the collection of receivables;
 
(xv)         engaged in any one or more activities or transactions with an
Affiliate or outside the ordinary course of business;
 
(xvi)        declared, set aside, or made any distributions or other payments in
respect of its equity securities, or repurchased, redeemed, or otherwise
acquired any such securities;
 
(xvii)       amended its Certificate of Organization or Limited Liability
Company Agreement;
 
(xviii)      issued any Membership Interests or other securities, or granted, or
entered into any agreement to grant, any options, convertible rights, other
rights, warrants, calls, or agreements relating to its Membership Interests; or
 
(xix)         committed to do any of the foregoing.

4.11         Real Property.

(a)           Schedule 4.11(a) sets forth a list of all real property or any
interest therein (including without limitation, any option or other right or
obligation to purchase any real property or any interest therein) currently
owned, or owned since the Company’s inception, by the Company, in each case
setting forth the street address and legal description of each property covered
thereby (the “Owned Premises”).
 
9

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

 
(b)           Schedule 4.11(b) sets forth a list of all current leases,
licenses, or similar agreements relating to the Company’s use or occupancy of
real estate owned by a third party (“Leases”), true, correct, and complete
copies of which have previously been furnished to Purchaser, in each case
setting forth (i) the lessor and lessee thereof and the commencement date, term,
and renewal rights under each of the Leases, and (ii) the street address and
legal description of each property covered thereby (the “Leased Premises”).  The
Leases and all guaranties with respect thereto, are in full force and effect and
have not been amended in writing or otherwise, and no party thereto is in
default or breach under any such Lease.  To the Knowledge of the Company, no
event has occurred which, with the passage of time or the giving of notice or
both, would cause a material breach of or default under any of such Leases by
the Company.  Other than ordinary annual adjustments for taxes and expenses,
neither the Company nor its agents or employees have received written notice of
any claimed abatements, offsets, defenses, or other bases for relief or
adjustment under any Lease.
 
(c)           With respect to each Owned Premises and Leased Premises, as
applicable:  (i) the Company has good, marketable, and insurable fee simple
interest in the Owned Premises and a valid leasehold interest in the Leased
Premises, free and clear of any Liens, covenants, easements, or title defects
other than Permitted Encumbrances that have had or could reasonably be expected
to have a Material Adverse Effect on the Company’s use and occupancy of the
Owned Premises and the Leased Premises; (ii) the portions of the buildings
located on the Owned Premises and the Leased Premises that are used in the
business of the Company are each in reasonable repair and condition, normal wear
and tear excepted, and are in the aggregate sufficient to satisfy the Company’s
current and reasonably anticipated normal business activities as conducted
thereon, and, to the Knowledge of the Company, there is no latent material
defect in the improvements on any Owned Premises, structural elements thereof,
the mechanical systems (including, without limitation, all heating, ventilating,
air conditioning, plumbing, electrical, utility, and sprinkler systems) therein,
the utility system servicing each Owned Premises and the roofs which have not
been disclosed to the Purchaser in writing prior to the date of this Agreement;
(iii) each of the Owned Premises and the Leased Premises (1) has direct access
to public roads or access to public roads by means of a perpetual access
easement, such access being sufficient to satisfy the current transportation
requirements of the business presently conducted at such parcel; and (2) is
served by all utilities in such quantity and quality as are necessary and
sufficient to satisfy the current normal business activities conducted at such
parcel; and (iv) the Company has not received notice of (1) any condemnation,
eminent domain, or similar proceeding affecting any portion of the Owned
Premises or the Leased Premises or any access thereto, and, to the Knowledge of
the Company, no such proceedings are contemplated, (2) any special assessment or
pending improvement liens to be made by any Governmental Authority which may
affect any of the Owned Premises or the Leased Premises, or (3) any violations
of building codes and/or zoning ordinances or other governmental regulations
with respect to the Owned Premises or the Leased Premises.
 
10

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

 
4.12         Taxes, Tax Returns and Other Reports.

(a)           All federal, state and local tax returns, reports and statements
(including all income tax, unemployment compensation, social security and
hospital insurance (Medicare), payroll, sales and use, excise, privilege,
property, ad valorem, franchise, license, school and any other tax under the
laws of the United States or any state or municipal or political subdivision
thereof) required to be filed by the Company (collectively, the "Tax Returns")
have been filed with the appropriate governmental agencies in all jurisdictions
in which the Tax Returns are required to be filed, and all of the Tax Returns
are complete and correct in all material respects and properly reflect the tax
liabilities of the Company for the periods, properties or events covered
thereby.  All federal, state and local taxes, assessments, interest,
deficiencies, fees and other governmental charges or impositions which are
called for by the Tax Returns, or claimed to be due by a taxing authority from
the Company, or upon or required by any of the respective properties, assets or
income owned or used by the Company (collectively, the "Taxes") have been
properly accrued or paid.  The accruals for Taxes, if any, contained in the
Company Financial Statements are adequate to cover the tax liabilities of the
Company as of the dates thereof.  The Sellers have not received any notice of
assessment or proposed assessment and there are no tax claims asserted against
the Company or any of its assets or properties.  There are no tax liens on any
of the assets or properties owned or used by the Company.  The Sellers have no
knowledge of any basis for any additional assessment of any Taxes against the
Company and the Company is not subject to any extension of a period for the
assessment of any Taxes.  All Taxes which the Company is required by law to
withhold or collect have been duly withheld or collected and have been timely
paid over to the proper authorities.  There are no outstanding agreements or
waivers extending the statute of limitations with respect to, and the Company is
not now subject to any extension of a period for the assessment of, any federal,
state or local income tax or other Taxes.

(b)           There is not currently, and there has never been, an audit or
other examination of Taxes by federal, state or local tax authorities.

4.13         Intangible Rights.  Set forth on Schedule 4.13 attached hereto is a
list and description of all material foreign and domestic patents, patent
rights, trademarks, service marks, trade names, brands, and copyrights (whether
or not registered and, if applicable, including pending applications for
registration) owned, Used, licensed, or controlled by the Company and all
goodwill associated therewith.  The Company owns or has the right to use and
shall as of the Closing Date own or have the right to use any and all
information, know-how, trade secrets, patents, copyrights, trademarks, trade
names, software, formulae, methods, processes, and other intangible properties
that are necessary or customarily Used by the Company for the ownership,
management, or operation of its Properties (“Intangible Rights”) including, but
not limited to, the Intangible Rights listed on Schedule 4.13.  Except as set
forth on Schedule 4.13, (i) the Company is the sole and exclusive owner of all
right, title, and interest in and to all of the Intangible Rights, and has the
exclusive right to use and license the same, free and clear of any claim or
conflict with the Intangible Rights of others; (ii) no royalties, honorariums,
or fees are payable by the Company to any person by reason of the ownership or
use of any of the Intangible Rights; (iii) there have been no claims made
against the Company asserting the invalidity, abuse, misuse, or unenforceability
of any of the Intangible Rights and no grounds for any such claims exist; (iv)
the Company has not made any claim of any violation or infringement by others of
any of its Intangible Rights or interests therein, and, to the Knowledge of the
Company, no grounds for any such claims exist; (v) the Company has not received
any notice that it is in conflict with or infringing upon the asserted
intellectual property rights of others in connection with the Intangible Rights,
and neither the use of the Intangible Rights nor the operation of the Company’s
businesses is infringing or has infringed upon any intellectual property rights
of others; (vi) the Intangible Rights are sufficient and include all
intellectual property rights necessary for the Company to lawfully conduct its
business as presently being conducted; (vii) no interest in any of the Company’s
Intangible Rights has been assigned, transferred, licensed, or sublicensed by
the Company to any person other than the Purchaser pursuant to this Agreement;
(viii) to the extent that any item constituting part of the Intangible Rights
has been registered with, filed in or issued by, any Governmental Authority,
such registrations, filings, or issuances are listed on Schedule 4.13 and were
duly made and remain in full force and effect; (ix) to the Knowledge of the
Company, there has not been any act or failure to act by the Company or any of
its managers, officers, employees, attorneys, or agents during the prosecution
or registration of, or any other proceeding relating to, any of the Intangible
Rights or of any other fact which could render invalid or unenforceable, or
negate the right to issuance of any of the Intangible Rights; (x) to the extent
any of the Intangible Rights constitutes proprietary or confidential
information, the Company has reasonably safeguarded such information from
disclosure; and (xi) all of the Company’s current Intangible Rights will remain
in full force and effect following the Closing without alteration or impairment.
 
11

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

 
4.14         Equipment and Other Tangible Property.  Except as otherwise set
forth on Schedule 4.14 attached hereto, the Company’s equipment, furniture,
machinery, vehicles, structures, fixtures, and other tangible property included
in the Properties (the “Tangible Company Properties”), other than Inventory, is
suitable for the purposes for which intended and in operating condition and
repair consistent with normal industry standards, except for ordinary wear and
tear, and except for such Tangible Company Properties as shall have been taken
out of service on a temporary basis for repairs or replacement consistent with
the Company’s prior practices and normal industry standards.  To the Knowledge
of the Company, the Tangible Company Properties are free of any known structural
or engineering defects, and since the Company’s inception, there has not been
any significant interruption of the Company’s business due to inadequate
maintenance or obsolescence of the Tangible Company Properties.

4.15         Books of Account. Except as set forth on Schedule 4.8, the books of
account of the Company reflect all of its items of income and expense, together
with its assets, liabilities and accruals required to be reflected therein, all
in accordance with GAAP.  None of the Company's records, systems, controls, data
or information is recorded, stored, maintained, operated or otherwise wholly or
partly dependent upon or held by any means (including any electronic, mechanical
or photographic process, whether computerized or not) which (including all means
of access thereto and therefrom) are not under the exclusive ownership and
direct control of the Company.

4.16         Litigation.  There are no actions, suits or legal, administrative,
arbitration or other proceedings or governmental investigations (collectively,
the "Litigation") pending or, to the knowledge of the Sellers, threatened
against the Company before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign and no basis exists for any such action.  The Company is not
a party to or subject to the provisions of any judgment, order, writ,
injunction, decree or award of any court, arbitrator or governmental or
regulatory official, body or authority.  Neither the Sellers nor the Company is
engaged in, a party to or, to the knowledge of the Sellers, threatened with any
suit, action or legal, administrative, arbitration or other proceeding or
governmental investigation which, if adversely determined, would adversely
affect or impede the purchase of the Membership Interests by the Purchaser or
the transactions contemplated by this Agreement or would have a Material Adverse
Effect.
 
12

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

 
4.17         Commitments.

(a)           Except as otherwise set forth on Schedule 4.17 attached hereto,
the Company is not a party to or bound by any of the following, whether written
or oral:
 
(i)           any Contract that cannot by its terms be terminated by the Company
with 30 days’ or less notice without penalty or whose term continues beyond one
year after the date of this Agreement;
 
(ii)          Contract or commitment for capital expenditures by the Company in
excess of $5,000 per calendar quarter in the aggregate;
 
(iii)         lease or license with respect to any Properties, real or personal,
whether as landlord, tenant, licensor, or licensee;
 
(iv)         Contract, indenture, or other instrument relating to the borrowing
of money or the guarantee of any obligation or the deferred payment of the
purchase price of any Properties;
 
(v)          partnership agreement, joint venture agreement, or limited
liability company agreement;
 
(vi)         Contract with any Affiliate of the Company (including the Sellers)
relating to the provision of goods or services by or to the Company;
 
(vii)        Contract for the sale of any assets that in the aggregate have a
net book value on the Company’s books of greater than $25,000;
 
(viii)       Contract that purports to limit the Company’s freedom to compete
freely in any line of business or in any geographic area;
 
(ix)          preferential purchase right, right of first refusal, or similar
Contract;
 
(x)           Contract or commitment that impacts or is likely to impact the
calculation of the Company’s net capital; or
 
(xi)          other Contract that is material to the business of the Company.
 
(b)           All of the Contracts listed or required to be listed on Schedule
4.17 are valid, binding, and in full force and effect, and the Company has not
been notified or advised by any party thereto of such party’s intention or
desire to terminate or modify any such Contract in any respect, except as
disclosed on Schedule 4.17.  Neither the Company nor, to the Knowledge of the
Company, any other party is in breach of any of the terms or covenants of any
Contract listed or required to be listed on Schedule 4.17.  Following the
Closing, the Company will continue to be entitled to all of the benefits
currently held by the Company under each Contract listed or required to be
listed on Schedule 4.17.
 
13

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

 
(c)           Except as otherwise set forth on Schedule 4.17(c) attached hereto,
the Company is not a party to or bound by any Contract or Contracts the terms of
which were arrived at by or otherwise reflect less-than-arm’s-length
negotiations or bargaining.
 
4.18         Insurance.  Schedule 4.18 attached hereto is a list of all
insurance policies (including, without limitation, fire, liability, product
liability, workers’ compensation, and vehicular) presently in effect that relate
to the Company or its Properties, including the amounts of such insurance and
annual premiums with respect thereto, all of which have been in full force and
effect from and after the date(s) set forth on Schedule 4.18.  Such policies are
sufficient for compliance by the Company with all applicable Legal Requirements
and all material Contracts.  None of the insurance carriers has indicated to the
Company an intention to cancel any such policy or to materially increase any
insurance premiums (including, without limitation, workers’ compensation
premiums), or that any insurance required to be listed on Schedule 4.18 will not
be available in the future on substantially the same terms as currently in
effect.  The Company has no claim pending or anticipated against any of its
insurance carriers under any of such policies, and, to the Knowledge of the
Company, there has been no actual or alleged occurrence of any kind which could
reasonably be expected to give rise to any such claim.  Since the Company’s
inception, all notices required to have been given by the Company or the Sellers
to any insurance company have been timely and duly given, and no insurance
company has asserted that any claim is not covered by the applicable policy
relating to such claim.
 
4.19         Compliance with Laws; Permits.

(a)           The Company has received no notice of, and the Sellers have no
knowledge of any state of facts or the occurrence of any event which reasonably
might form the basis for alleging, any violation by the Company of any federal,
state or local law, statute, rule or regulation applicable to the Company, its
assets or properties or its business as now conducted or any of the Permits
which would have a Material Adverse Effect.  The Company has complied with each
and every, and is not in violation of any, judgment, order, writ, injunction or
decree of any governmental authority, court or administrative authority having
jurisdiction over the Company, its assets or properties or applicable to its
business as now or heretofore conducted.

(b)           The Company has all permits, rights, approvals, licenses,
authorizations, legal status, orders, certificates of occupancy or Contracts
under any Legal Requirement or otherwise granted by any Governmental Authority
(collectively, the "Permits") which are necessary to enable it to conduct the
Business as now conducted and has not failed to adhere to the requirements
thereof.  The Company has taken all steps necessary to maintain all of the
Permits, all of which are valid, in good standing and in full force and
effect.  A complete and correct list of all Permits is attached hereto as
Schedule 4.19(b) and true and correct copies thereof have been delivered to the
Purchaser.
 
14

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

 
(c)           No notice to, filing with or consent from any governmental body,
authority or agency is required as a result of the change in ownership of the
Membership Interests contemplated by this Agreement, nor will any Permit
otherwise be terminated, modified, or impaired or rendered invalid by reason of
such change of ownership.

4.20         Absence of Questionable Payments.  Neither the Company nor any
manager, officer, employee or agent of, nor any consultant to, the Company has
unlawfully offered, paid, or agreed to pay, directly or indirectly, any money or
anything of value to, or for the benefit of, or unlawfully received or agreed to
receive, directly or indirectly, any money or anything of value from, or on
behalf of, any vendor, supplier, wholesaler, contractor, distributor or
manufacturer or any other Person, or any officer or employee thereof or any
individual who is or was a candidate for public office, or any public official
or employee of any governmental or regulatory body or authority.  No payments
have been made by or on behalf of the Company which could give rise to a civil
cause of action to void any customer Contracts, material Commitments or Permits
of the Company as having been illegally obtained.

4.21         Hazardous Substances; Hazardous Wastes and Pollutants.

(a)           The Company, to the knowledge of the Sellers, has complied with
each and every, and is not in material violation of any, federal, state or local
ordinance, rule, regulation and statute governing or in any way applicable to
the generation, transport, storage, treatment, handling, release, emission,
discharge and disposal of solid or hazardous wastes, hazardous substances or
pollutants.  The Company has not received any notice, report or other
information regarding any actual or alleged violation of Environmental Laws, or
any liabilities or potential liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or corrective
obligations, relating to the Company or their respective facilities arising
under Environmental Laws.

(b)           For purposes of this Agreement, “Environmental Laws” shall mean
all federal, state or local laws, ordinances, rules, regulations, orders or
directives or under common law relating to the environment, health or safety,
including, without limitation, claims arising under (i) the Comprehensive
Environmental Response, Compensation and Liability Act and all rules and
regulations promulgated thereunder, or any similar federal, state or local law,
rule or regulation, (ii) the Resource Conservation and Recovery Act and all
rules and regulations promulgated thereunder, or any similar federal, state or
local law, rule or regulation, (iii) the Clean Air Act and all rules and
regulations promulgated thereunder, or any similar federal, state or local law,
rule or regulations, (iv) the Toxic Substance Control Act and all rules and
regulations promulgated thereunder or (vi) any other federal, state or local
law, rule or regulation relating to the emission or discharge of any material
into the environment or at common law, all as presently in effect and as the
same may hereafter be amended.

4.22         Conditions Affecting Business.  Except for normal competitive
pressures, there are no conditions existing with respect to the Company's
markets, products, services, clients, customers, facilities, personnel or
suppliers which are known to the Sellers, which would be expected to result in a
Material Adverse Effect.
 
15

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

 
4.23         Debt Instruments.  Except for the Retained Liabilities, the Company
has no liabilities or debts.

4.24         Suppliers and Customers.  Schedule 4.24 sets forth (i) the ten
principal suppliers of the Company during each of the fiscal years ended
December 31 since the Company’s inception, together with the dollar amount of
goods purchased by the Company from each such supplier during each such period,
and (ii) the ten principal customers of the Company during each of the fiscal
years ended December 31since the Company’s inception, together with the dollar
amount of goods and/or services sold by the Company to each such customer during
each such period.  Except as otherwise set forth on Schedule 4.24 attached
hereto, the Company maintains good relations with all suppliers and customers
listed or required to be listed in Schedule 4.24 as well as with governments,
partners, financing sources, and other parties with whom the failure to maintain
good relations could have a Material Adverse Effect and no such party has
canceled, terminated, or made any threat to the Company to cancel or otherwise
terminate its relationship with the Company or to materially decrease its
services or supplies to the Company or its direct or indirect purchase or usage
of the products or services of the Company.

4.25         Employee Benefit Matters.

(a)           Schedule 4.25(a) provides a description of each of the following,
if any, which is sponsored, maintained, or contributed to by the Company for the
benefit of the employees or agents of the Company, which has been so sponsored,
maintained, or contributed to with respect to which the Company has or may have
any actual or contingent liability:
 
(i)           every “employee benefit plan,” as such term is defined in Section
3(3) of ERISA, including, but not limited to, employee benefit plans, such as
foreign plans, which are not subject to the provisions of the Employment
Retirement Income Security Act of 1974, and the rules and regulations
promulgated thereunder (collectively, “ERISA”) (each, a “Plan”); and,
 
(ii)           each personnel policy, employee manual, or other written
statements of rules or policies concerning employment, stock option plan,
collective bargaining agreement, bonus plan or arrangement, incentive award plan
or arrangement, vacation and sick leave policy, severance pay policy or
agreement, deferred compensation agreement or arrangement, consulting agreement,
employment contract and each other employee benefit plan, agreement,
arrangement, program, practice, or understanding which is not described in
Section 4.25(a)(i) (each, a “Benefit Program or Agreement”).
 
(b)  True, correct, and complete copies of the Plans (if any), and related
trusts, if applicable, including all amendments thereto, have been furnished to
the Purchaser.  There has also been furnished to the Purchaser, with respect to
each Plan required to file such report and description, the three most recent
reports on Form 5500 and the summary plan description.  True, correct, and
complete copies or descriptions of all Benefit Programs or Agreements have also
been furnished to Purchaser.
 
16

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

 
(c)  Except as otherwise set forth on Schedule 4.25(c) attached hereto:
 
(i)           Neither the Sellers nor the Company contributes to or has an
obligation to contribute to, and neither the Sellers nor the Company has at any
time since the inception of the Company contributed to or had an obligation to
contribute to, and do not have any actual or contingent liability under a
multiemployer plan within the meaning of Section 3(37) of ERISA (“Multiemployer
Plan”) or a multiple employer plan within the meaning of Section 413(b) and (c)
of the Code.
 
(ii)          Each of the Sellers and the Company has substantially performed
all obligations, whether arising by operation of law or by contract, required to
be performed by it in connection with all the Plans and Benefit Programs and
Agreements to which it is a Party or otherwise bound, and, to the Knowledge of
the Company, there have been no defaults or violations by any other party to any
Plans or Benefit Programs or Agreements;
 
(iii)         All material reports and disclosures relating to the Plans
required to be filed with or furnished to the applicable Governmental Authority,
Plan participants, or Plan beneficiaries have been filed or furnished in
accordance with applicable law in a timely manner, and each Plan and each
Benefit Program or Agreement has been administered in substantial compliance
with its governing documents;
 
(iv)         Each of the Plans intended to be qualified under Section 401 of the
Code satisfies the requirements of such section and has received a favorable
determination letter from the Internal Revenue Service regarding such qualified
status and has not, since receipt of the most recent favorable determination
letter, been amended or operated in a way which could adversely affect such
qualified status;
 
(v)          There are no actions, suits, or claims pending (other than routine
claims for benefits) or, to the Knowledge of the Company, threatened against, or
with respect to, any of the Plans, Benefit Programs, or Agreements, or their
assets;
 
(vi)         All contributions required to be made to the Plans pursuant to
their terms and provisions and applicable law have been made timely;
 
(vii)        The Company does not maintain any Plan subject to Title IV of
ERISA;
 
(viii)       Neither any of the Plans nor any trust created thereunder or with
respect thereto has engaged in any “prohibited transaction” or
“party-in-interest transaction” as such terms are defined in Section 4975 of the
Code and Section 406 of ERISA which could subject any Plan, the Sellers, or any
officer, manager, director, or employee thereof to a tax or penalty on
prohibited transactions or party-in-interest transactions pursuant to Section
4975 of the Code or Section 502(i) of ERISA;
 
(ix)          To the knowledge of the Sellers, there is no matter pending (other
than routine qualification determination filings) with respect to any of the
Plans or Benefit Programs or Agreements before the Internal Revenue Service, the
Department of Labor, or the PBGC;
 
17

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

 
(x)           Each trust funding a Plan, which is intended to be exempt from
federal income taxation pursuant to Section 501(c)(9) of the Code, satisfies the
requirements of such section and has received a favorable determination letter
from the Internal Revenue Service regarding such exempt status and has not,
since receipt of the most recent favorable determination letter, been amended or
operated in a way which would adversely affect such exempt status.
 
(xi)          The Company does not have any obligation to provide health
benefits or death benefits to former employees, except as specifically required
by law;
 
(xii)           Neither the execution and delivery of this Agreement by the
Company or by the Sellers nor the consummation of any or all of the transactions
contemplated hereby will: (1) entitle any current or former employee of the
Company to severance pay, unemployment compensation, or any similar payment, (2)
accelerate the time of payment or vesting or increase the amount of any
compensation due to any such employee or former employee, or (3) directly or
indirectly result in any payment made to or on behalf of any person to
constitute a “parachute payment” within the meaning of Section 280G of the Code;
 
(xiii)        Neither the Sellers nor the Company has incurred any liability or
taken any action, and, to the Knowledge of the Company, no action or event has
occurred, that could cause the Company to incur any liability (1) under Section
412 of the Code or Title IV of ERISA with respect to any “single-employer plan”
within the meaning of Section 4001(a)(15) of ERISA that is not a Plan, or (2) to
any Multiemployer Plan, including without limitation an account of a partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA.

 
(xiv)        Since the Company’s inception, other than ordinary course
grievances, and disputes, none of which had a material impact on the Company,
there have not been any (1) work stoppages, labor disputes, or other significant
controversies between the Company and its employees, (2) labor union grievances
or organizational efforts, or (3) unfair labor practice or labor arbitration
proceedings pending or threatened.
 
(xv)         Except as set forth on Schedule 4.25(d) attached hereto, the
Company is not a party to any agreement, and has not established any policy or
practice, requiring the Company to make a payment or provide any other form or
compensation or benefit to any person performing services for the Company upon
termination of such services which would not be payable or provided in the
absence of the consummation of the transactions contemplated by this Agreement.

 
18

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

 
 
(d)  Schedule 4.25(d) sets forth by number and employment classification of
employees employed by the Company as of the date of this Agreement, and, except
as set forth therein, none of said employees are subject to union or collective
bargaining agreements with the Company.  Schedule 4.25(d) also sets forth for
each such employee and independent registered representative, his current
compensation, his deferred compensation, and his payout and expense charge
backs, advances, and amounts due to each such employee or independent registered
representative, as applicable, as of the end of the month preceding the date of
this Agreement and as of the Closing Date.  The Sellers shall have no liability
on or after the Closing Date for any obligation of the Company accruing prior to
the Closing Date for the payment of compensation or the provision of benefits to
any employee or independent registered representative under any Plan, Benefit
Program, or Agreement.  It is understood, that the Company shall be responsible
for paying all accrued but unpaid compensation and benefits arising prior to the
Closing Date.
 
(e)   There has been no material violation by any sponsor, trustee, or
administrator of any Plan of any provision of ERISA or the Code in connection
with the establishment, operation, or administration of any Plan.
 
(f)    All of the Company’s employees and independent contractors have been
appropriately classified for federal and state labor law purposes and federal
and state income and employment tax purposes and the Company has withheld and
timely paid all necessary taxes with respect to each of its employees and
independent contractors.  In this regard, all independent registered
representatives have been classified as independent contractors and not
employees and the Company has not received any notice from any Governmental
Authority concerning such classification.
 
4.26        Bank Accounts.  Schedule 4.26 sets forth (a) the name of each bank
or financial institution in which the Company has or maintains an account
(whether checking, savings or otherwise), lock box or safe deposit box, the
numbers (or other means of identification) of all such accounts, lock boxes or
safe deposit boxes and the names of all persons authorized to draw thereon or to
have access thereto, and (b) the names of all persons holding powers of attorney
from the Company, together with true, correct and complete copies of such powers
of attorney.

4.27        Full Disclosure.  The representations and warranties of the Company
and the Sellers in this Agreement are on the date hereof, and will be on the
Closing Date, true, correct and complete in all material respects.  No
representation or warranty by the Sellers or the Company in this Agreement or in
any statement, list, certificate or instrument furnished or to be furnished
pursuant hereto or in connection with the negotiation, execution or performance
of this Agreement contains or will contain any untrue statement of a material
fact or omits or will omit to state any fact necessary to make any statement
herein or therein not misleading.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER

The Purchaser hereby represents and warrants to the Sellers as follows:

5.1          Organization.  The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with full corporate power and authority to own its properties and to carry on
its business as now conducted.

 
19

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

 

5.2          Authority.  The Purchaser has all requisite power and authority to
execute, deliver and perform this Agreement and the transactions contemplated
herein.  The Purchaser's execution, delivery and performance of this Agreement,
and the transactions contemplated herein, have been duly authorized by its Board
of Directors and no other action is required for such execution, delivery and
performance by law, the Purchaser's certificate of incorporation or bylaws or
otherwise.  This Agreement constitutes the legal, valid and binding obligation
of, and is enforceable against, the Purchaser in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights generally and to general equitable
principles.

5.3          No Violations.  The authorization, execution and delivery of this
Agreement and the consummation of the transactions contemplated herein by the
Purchaser do not and will not, with or without the giving of notice or passage
of time or both, (a) violate, result in the breach of any term or provision of,
or require any notice, filing or consent under (i) the certificate of formation
or operating agreement of the Purchaser, (ii) any statutes, laws, rules,
regulations, ordinances, licenses or permits of any governmental body, authority
or agency applicable to the Purchaser or (iii) any judgment, decree, writ,
injunction, order or award of any arbitrator, court or governmental body,
authority or agency binding upon the Purchaser or any of its properties or
assets; (b) result in the breach of any term or provision of, require any notice
or consent under, give rise to a right of termination of, constitute a default
under, result in the acceleration of, or give rise to a right to accelerate any
obligation under any loan agreement, mortgage, indenture, financing agreement,
lease or any other agreement or instrument to which the Purchaser is a party or
by which its properties or assets are bound; or (c) result in any lien, claim,
encumbrance or restriction on any of the properties or assets of the Purchaser.

ARTICLE VI
INDEMNIFICATION

6.1          Indemnification of the Purchaser.  From and after the Closing, (i)
the Sellers shall, jointly and severally, reimburse, indemnify and hold harmless
the Purchaser and its Affiliates, stockholders, members, officers, directors,
managers, employees, agents, representatives, successors and assigns from and
against and in respect of each of the following (collectively, the "Purchaser's
Indemnification Events"):

(a)           any and all damages, losses, deficiencies, liabilities, claims,
demands, charges, costs and expenses of every nature and character whatsoever,
including, without limitation, reasonable attorneys’ fees and costs
(collectively, the "Losses") that result from, relate to or arise out of any
misrepresentation or breach of warranty, covenant or agreement of the Sellers in
this Agreement or any omission from any agreement, document, statement, list,
certificate or instrument furnished by or on behalf of the Sellers or Company in
connection with the negotiation, execution or performance of this Agreement and
the transactions contemplated herein;

(b)           any and all Losses that result from, relate to or arise out of the
conduct of the Business or the acts or omissions of the prior to the Closing
Date; and

 
20

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

 

(c)           any and all actions, suits, claims, proceedings, investigations,
demands, assessments, audits, fines, judgments, costs and other expenses
(including, without limitation, reasonable legal fees and expenses) incident to
any of the foregoing or to the successful enforcement of this Section.

6.2          Indemnification of the Sellers.  From and after the Closing, the
Purchaser shall reimburse, indemnify and hold harmless the Sellers and their
agents, representatives, heirs, legal representatives, successors and assigns
from and against and in respect of each of the following (collectively, the
"Sellers’ Indemnification Events"):

(a)           any and all Losses that result from, relate to or arise out of any
misrepresentation or breach of warranty, covenant or agreement of the Purchaser
in this Agreement or any omission from any agreement, document, statement, list,
certificate or instrument furnished by or on behalf of the Purchaser in
connection with the negotiation, execution or performance of this Agreement and
the transactions contemplated herein;

(b)           any and all Losses that result from, relate to or arise out of the
conduct of the Business or the acts or omissions of the Company after the
Closing Date; and

(c)           any and all actions, suits, claims, proceedings, investigations,
demands, assessments, audits, fines, judgments, costs and other expenses
(including, without limitation, reasonable legal fees and expenses and costs of
any environmental investigation or response) incident to any of the foregoing or
to the successful enforcement of this Section.

6.3          Procedure for Indemnification.

(a)           Promptly after receipt by a party (an "Indemnified Party") of
notice of the assertion of any claim by a person not a party to this Agreement
(a "Third Party Claim") with respect to which such Indemnified Party expects to
make a request for indemnification hereunder, such party shall give the party
who may become obligated to provide indemnification hereunder (the "Indemnifying
Party") written notice describing such claim or fact in reasonable detail.  Upon
receipt of such notice, the Indemnifying Party may, at its option, assume the
defense of the Indemnified Party against such claim (including the employment of
counsel, who shall be reasonably satisfactory to the Indemnified Party, and the
payment of expenses).  The Indemnified Party shall have the right to employ
separate counsel in any such action or claim and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the expense
of the Indemnifying Party, unless (i) the Indemnifying Party shall have failed,
within a reasonable time after having been notified by the Indemnified Party of
the existence of such claim as provided in the preceding sentence, to assume the
defense of such claim, (ii) the employment of such counsel has been specifically
authorized in writing by the Indemnifying Party, which authorization shall not
be unreasonably withheld, or (iii) the named parties to any such action
(including impleaded parties) include both the Indemnified Party and the
Indemnifying Party and the Indemnified Party shall have been advised in writing
by such counsel that there may be one or more legal defenses available to the
Indemnifying Party which are not available to, or the assertion of which would
be adverse to the interests of, the Indemnified Party.  The Indemnifying Party
shall not settle or compromise any such claim without the Indemnified Party's
prior written consent, unless the terms of such settlement or compromise release
the Indemnified Party from any and all liabilities with respect to such Third
Party Claim.

 
21

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

 

(b)           Any indemnifiable claim that is not a Third Party Claim shall be
asserted by written notice to the Indemnifying Party.  If the Indemnifying Party
does not respond to such notice within 60 days, it shall have no further right
to contest the validity of such claim.  In the event that a dispute arises
between the Indemnifying Party and the Indemnified Party as a result of any such
claim, the Indemnifying Party and the Indemnified Party shall attempt in good
faith to negotiate a resolution thereof; provided, that the foregoing shall not
preclude the assertion by the Indemnified Party of any right (whether hereunder
or otherwise) or the seeking of any and all remedies against the Indemnifying
Party for any such claim.

6.4          Limitations on Losses.

(a)           No amounts of indemnity shall be payable in the case of a claim or
claims by an Indemnified Party under this Article VI unless such Indemnified
Party has suffered, incurred, sustained or become subject to losses in excess of
$35,000 in the aggregate (the “Threshold”), in which event such Indemnified
Party shall be entitled to claim indemnity for the full amount of its losses;
provided, however, that the Threshold shall not apply and need not be surpassed
for any claims with respect to matters covered by Sections 4.3 and 4.12.

(b)           In case any event shall occur that would otherwise entitle any
party to assert a claim for indemnification hereunder, no Losses shall be deemed
to have sustained by such party to the extent of (i) any actual tax savings
realized by such party with respect thereto or (ii) any proceeds (net of taxes
and collection costs) received by such party from any property insurance
policies maintained by or on behalf of such party with respect to losses to such
party’s property.  The parties agree to submit a claim under such property
insurance policies prior to making a request for indemnification hereunder.

(c)           Except as otherwise set forth below, the Purchaser may not seek
indemnification from the Sellers for the Purchaser’s Indemnification Events, and
the Sellers may not seek indemnification from the Purchaser for the Seller’s
Indemnification Events, after two (2) years from the Closing Date.  For Third
Party Claims relating to Taxes, the foregoing limitation shall not apply and an
Indemnified Party may seek indemnification from an Indemnifying Party through
and until the expiration of the statutory limitations period.

6.5          Other Rights and Remedies Not Affected.  The indemnification rights
of the parties hereto under this Agreement are independent of and in addition to
such rights and remedies as the parties may have at law or in equity for any
fraud, misrepresentation, breach of warranty or failure to fulfill any agreement
or covenant hereunder on the part of any party hereto, including, without
limitation, the right to seek specific performance, rescission or restitution,
none of which rights or remedies shall be affected or diminished hereby;
provided, however, that in the absence of fraud, the Sellers liability under any
recovery obtained by the Purchaser shall be limited by the provisions of Section
6.4 of this Agreement.

 
22

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

 

ARTICLE VII
RESTRICTIVE COVENANTS; COVENANTS

The Parties hereto do hereby covenant and agree, as follows:
 
7.1          The Purchaser’s Access to Information and Properties.  The Company
shall permit the Purchaser and its authorized employees, agents, accountants,
legal counsel, and other representatives to have access to the books, records,
employees, independent registered representatives, counsel, accountants,
engineers, and other representatives of the Company during normal working hours
and without unreasonable interruption to the Company’s operations for the
purpose of conducting an investigation of the Company’s financial condition,
corporate status, operations, prospects, business, and Properties.  The Company
shall make available to the Purhcaser for examination and reproduction all
documents and data of every kind and character relating to the Company in
possession or control of, or subject to reasonable access by, the Company and/or
the Sellers, including, without limitation, all files, records, data, and
information relating to the Properties (whether stored in paper, magnetic or
other storage media) and all agreements, instruments, contracts, assignments,
certificates, orders, and amendments thereto.  Also, the Company shall allow the
Purchaser access to, and the right to inspect, the Properties, except to the
extent that such Properties are operated by a third-party operator, in which
case the Company shall use its best efforts to cause the operator of such
Properties to allow the Purchaser access to, and the right to inspect, such
Properties.
 
7.2          Company’s Conduct of Business and Operations.  The Company shall
keep the Purchaser advised as to all material operations and proposed material
operations relating to the Company.  The Company shall (a) conduct its business
in the ordinary course, (b) endeavor  to keep available the services of present
employees and independent registered representatives, (c) maintain and operate
its Properties in a good and workmanlike manner, (d) pay or cause to be paid all
costs and expenses (including but not limited to insurance premiums) incurred in
connection therewith in a timely manner, (e) use reasonable efforts to keep all
Contracts listed or required to be listed on Schedule 4.17 in full force and
effect, (f) comply with all of the covenants contained in all such material
Contracts, (g) maintain in force until the Closing Date insurance policies
(subject to the provisions of Section 4.25) equivalent to those in effect on the
date hereof, and (h) comply in all material respects with all applicable Legal
Requirements.  Except as otherwise contemplated in this Agreement, the Company
will use commercially reasonable efforts to preserve the present relationships
of the Company with persons having significant business relations therewith.
 
7.3          General Restrictions.  Except as otherwise expressly permitted in
this Agreement, between the date of this Agreement and the Closing Date, without
the prior written consent of Purchaser, which consent shall not be unreasonably
withheld, the Company shall not:
 
(a)           declare, set aside, or make any distributions or other payments in
respect of its equity securities, or repurchase, redeem, or otherwise acquire
any such securities;

 
23

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

 

(b)           merge into or with or consolidate with, any other corporation or
acquire the business or assets of any Person;
 
(c)           purchase any securities of any Person, not in the ordinary course
of business;
 
(d)           amend its Certificate of Organization or Limited Liability Company
Agreement;
 
(e)           issue any Membership Interests or other securities, or grant, or
enter into any agreement to grant, any options, convertibility rights, other
rights, warrants, calls, or agreements relating to its securities;
 
(f)           create, incur, assume, guarantee, or otherwise become liable or
obligated with respect to any indebtedness, or make any loan or advance to, or
any investment in, any Person, except in each case in the ordinary course of
business;
 
(g)           make any change in any existing election, or make any new
election, with respect to any tax law in any jurisdiction which election could
have an effect on the tax treatment of the Company or the Company’s business
operations;
 
(h)           enter into, amend, or terminate any material Contract;
 
(i)            sell, transfer, lease, mortgage, encumber, or otherwise dispose
of, or agree to sell, transfer, lease, mortgage, encumber, or otherwise dispose
of, any Properties except (1) in the ordinary course of business, or (2)
pursuant to any Contract specified in Schedule 4.17;
 
(j)           settle any material claim or litigation, or file any material
motions, orders, briefs, or settlement agreements in any proceeding before any
Governmental Authority or any arbitrator;
 
(k)           other than in the ordinary course of business consistent with past
practices, incur or approve, or enter into any agreement or commitment to make,
any expenditures in excess of $25,000 (other than those required pursuant to any
Contract specified in Schedule 4.17);
 
(l)            maintain its books of account other than in the usual, regular,
and ordinary manner in accordance with GAAP and on a basis consistent with prior
periods or make any change in any of its accounting methods or practices;
 
(m)           make any material change, whether written or oral, to any Contract
with any of the suppliers or customers listed or required to be listed on
Schedule 4.24;
 
(n)           accelerate or delay collection of any notes or accounts receivable
in advance of or beyond their regular due dates or the dates when they would
have been collected in the ordinary course of business consistent with past
practices;

 
24

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

 

(o)           delay or accelerate payment of any accrued expense, trade payable,
or other liability beyond or in advance of its due date or the date when such
liability would have been paid in the ordinary course of business consistent
with past practices;
 
(p)           adopt any Plan, Benefit Program, or Agreement or increase the
compensation payable to any employee or independent registered representative
(including, without limitation, any increase pursuant to any bonus,
profit-sharing, or other incentive plan or commitment);
 
(q)           become a party to or bound by any of the Contracts described in
Section 4.17(a), whether written or oral;
 
(r)            engage in any one or more activities or transactions outside the
ordinary course of business;
 
(s)           enter into any transaction or make any commitment which could
result in any of the representations, warranties, or covenants of the Company
and/or the Sellers contained in this Agreement not being true and correct after
the occurrence of such transaction or event;
 
(t)            terminate any employee at a supervisory level or above;
 
(u)           engage in any transactions with any of the Sellers or any
Affiliate of the Company or the Sellers other than on an arm's-length basis;
 
(v)           commit to do any of the foregoing.
 
7.4          Notice Regarding Changes.  The Company and the Sellers shall
promptly inform the Purchaser in writing of any change in facts and
circumstances that could render any of the representations and warranties made
herein by the Company and/or the Sellers inaccurate or misleading if such
representations and warranties had been made upon the occurrence of the fact or
circumstance in question.  The Purchaser shall promptly inform the Sellers in
writing of any change in facts and circumstances that could render any of the
representations and warranties made herein by it inaccurate or misleading if
such representations and warranties had been made upon the occurrence of the
fact or circumstance in question.
 
7.5          Ensure Conditions Met.  Subject to the terms and conditions of this
Agreement, each of the Parties hereto shall use all reasonable commercial
efforts to take or cause to be taken all actions and do or cause to be done all
things required under applicable Legal Requirements in order to consummate the
transactions contemplated hereby, including, without limitation, (i) obtaining
all Permits, authorizations, consents and approvals of any Governmental
Authority or other person which are required for or in connection with the
consummation of the transactions contemplated hereby and by the Exhibits, (ii)
taking any and all reasonable actions necessary to satisfy all of the conditions
to each party’s obligations hereunder, and (iii) executing and delivering all
agreements and documents required by the terms hereof to be executed and
delivered by such party on or prior to the Closing.

 
25

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

 

7.6          Maintenance of Insurance Policies.  The Company shall take all
actions necessary or appropriate to cause any and all insurance coverage
currently carried by or for the benefit of the Company as set forth on Schedule
4.18 to remain in full force and effect.
 
7.7          Casualty Loss.  If, between the date of this Agreement and the
Closing, any material portion of the Properties of the Company shall be
destroyed or damaged in whole or in part by fire, earthquake, flood, other
casualty, or any other cause, then the Company shall, at the Purchaser’s
election, (i) cause such Properties to be repaired or replaced prior to the
Closing with Properties of substantially the same condition and function, (ii)
deposit in a separate account an amount sufficient to cause such Properties to
be so repaired or replaced, or (iii) enter into contractual arrangements
satisfactory to the Purchaser so that the Company will have at the Closing the
same economic value as if such casualty had not occurred.
 
7.8          Covenant Not to Compete.

(a)           During the period commencing on the Closing Date and ending five
(5) years after the date thereof (the “Restricted Period”), each of Ginsberg,
Williams, Geronemus and Scheib will not directly or indirectly own, manage,
operate, control, invest in, lend to or acquire an interest in, or otherwise
engage or participate in (whether as a proprietor, general or limited partner,
member, shareholder, joint venturer, investor, employee, consultant or other
participant), or use or permit their names to be used in, any Prohibited
Activities or any business, entity or venture which engages in Prohibited
Activities in the United States of America.  For purposes of this Agreement,
“Prohibited Activities” shall mean entering into any agreements, whether direct
or indirect, written, oral or otherwise, with any Person to develop,
manufacture, distribute or sell products which are competitive with the Business
as conducted on the Closing Date.

(b)           Celia shall not be subject to this Section 7.8, but instead shall
be governed by the covenant not to compete contained in the Celia Employment
Agreement.

7.9          Covenant Not to Interfere With Company's Business.

(a)           During the Restricted Period, the Sellers will not, directly or
indirectly, solicit, induce or influence any customer, supplier, lender, lessor
or any other person which has, after giving effect to the transactions
contemplated hereby, a business relationship with the Company to discontinue or
reduce the extent of such relationship with the Company.

(b)           During the Restricted Period, the Sellers will not, directly or
indirectly (i) recruit, solicit or otherwise induce or influence any person
employed by the Company or any future Affiliate thereof in any management,
executive, supervisory, marketing or sales capacity (a “Key Employee”) to
discontinue or terminate his or her employment relationship with the Company or
(ii) employ or seek to employ, or cause any other entity whose business would be
competitive with any aspect of the Company's business to employ or seek to
employ, any Key Employee.

 
26

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

 

7.10        Covenant Not to Disclose Confidential Information.  From and after
the Closing Date, the Sellers hereby agree that they will not at any time,
directly or indirectly, disclose to anyone, use or otherwise exploit any
Confidential Information (as hereinafter defined) for their own benefit or for
the benefit of any party other than the Company.  For purposes of this
Agreement, “Confidential Information” shall mean, after giving effect to the
transactions contemplated hereby, any of the Company's or any of its future
Affiliates' customer lists, prospect lists, supplier lists, pricing information,
product information, information regarding the Company's or such Affiliates'
manufacturing or other processes, business plans, marketing plans, financial
information or other information which is material to the Company or any of its
future Affiliates and is not generally known by or disclosed to the public.

7.11        Remedies.

(a)           The Sellers expressly agree that any breach by the Sellers of any
provision of Sections 7.8 through 7.10 hereof will result in irreparable injury
to the Purchaser and the Company, that the remedy at law for any breach will be
inadequate and that, in the event of any such breach or if any such breach is
threatened or anticipated, the Purchaser and/or the Company, in addition to any
other relief available to them, shall be entitled to temporary and permanent
injunctive relief without the necessity of posting a bond or proving actual
damages.  The Sellers further acknowledge and agree that the Purchaser and the
Company shall be entitled to an equitable accounting of all earnings, profits
and other benefits realized directly or indirectly by the Sellers as the result
of any such breach, and further agree to pay the reasonable legal fees and
expenses incurred by the Purchaser and the Company in enforcing the provisions
contained herein.

(b)           The Sellers acknowledge and agree that the provisions contained
herein are reasonable limitations as to time and scope of activity, and such
restrictions do not impose a greater restraint than is necessary to protect the
goodwill or other business interests of the Purchaser and the Company.  In the
event, however, that the provisions contained herein are determined to exceed
the restrictions permitted by law, then the provisions contained herein shall be
deemed to be reformed so as to contain the maximum restrictions permitted by
law.
 
7.12        Bank Accounts.          As soon as practicable following the
Closing, the Company shall (i) authorize Steven Moskowitz as a person authorized
to draw from each of the Company’s accounts listed on Schedule 4.26 or to have
access thereto, and (iii) instruct each bank or financial institution listed on
Schedule 4.26 hereto that Steven Moskowitz shall be a required co-signatory for
any draw, check or wire transfer from any such accounts in amounts of fifty
thousand dollars ($50,000) or more.

 
27

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

 

ARTICLE VIII
MISCELLANEOUS

8.1          Survival of Representations, Warranties and Other Provisions.

(a)      All representations, warranties and agreements made by the parties in
this Agreement or in any agreement, document, statement, list, certificate or
instrument furnished hereunder or in connection with the negotiation, execution,
and performance of this Agreement shall survive the Closing for a period of two
(2) years following the Closing Date.  Notwithstanding any investigation or
audit conducted before or after the date hereof or the decision of any party to
complete the transactions contemplated herein, each party shall be entitled to
rely upon the representations, warranties and agreements set forth herein and
therein.

(b)           All other rights and obligations of the parties under this
Agreement, including, without limitation, the rights and obligations contained
in Article VI hereof, which by their nature or the express terms hereof are
intended to survive, shall survive the Closing, but shall be subject to the
limitations provided for in Article VI hereof.

8.2           Fees and Expenses.  Except as otherwise provided in Section 6.4
hereof, all legal, accounting and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated herein shall be
paid by the party incurring such expenses.

8.3           Brokers.  Each party hereto represents and warrants to the other
that Cresta Capital Strategies, LLC (“Cresta”) was the sole broker or finder
that consulted with the parties with regard to the transactions contemplated by
this Agreement. Any fees required to be paid to Cresta in connection therewith
shall be paid by the Purchasers.

8.4           Taxes.  The Sellers shall be liable for all federal, state and
local taxes on capital gains, transfer, intangible, documentary, stamp and other
similar taxes which may be due or payable in connection with the sale and
transfer of the Membership Interests to the Purchaser.

8.5           Publicity.  The Parties hereto agree that prior to the Closing
Date, none of them will make or engage in any press release, publicity or other
public disclosure of the matters which are the subject of this Agreement without
the prior written consent of Purchaser and the Company, unless such party
believes in good faith upon consultation with counsel that such press release,
publicity or other public disclosure is required by law or legal process, in
which event such party will give Purchaser and the Company as much advance
notice thereof as is practicable under the circumstances and will give good
faith consideration to any comments made with respect thereto by the other
Parties hereto prior to the time when such press release, publicity or other
public disclosure is made

8.6           No Waiver.  No failure on the part of any party hereto at any time
to require the performance by any other party of any term of this Agreement
shall be taken or held to be a waiver of such term or in any way affect such
party's right to enforce such term, and no waiver on the part of any party
hereto of any term of this Agreement shall be taken or held to be a waiver of
any other term hereof or the breach thereof.  Any waiver hereunder shall only be
effective if in writing and signed by the party sought to be charged therewith,
and such waiver shall only be effective for the instance and express purpose for
which it was given.

 
28

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

 

8.7           Entire Agreement; Written Modifications.  This Agreement, together
with the other documents and instruments to be executed and delivered pursuant
hereto, contains the entire agreement between the parties hereto with respect to
the subject matter hereof; all representations, promises and prior or
contemporaneous understandings among the parties with respect to the subject
matter hereof are merged into and expressed herein; and any and all prior
agreements among the parties with respect to the subject matter hereof are
hereby canceled.  This Agreement shall not be amended, modified or supplemented
without the written agreement of the parties hereto at the time of such
amendment, modification or supplement.

8.8           Binding Effect.  All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
successors and assigns or the estate, heirs and legal representatives of each of
the parties hereto.  This Agreement may not be assigned by either of the parties
hereto, except that the Purchaser may assign its rights hereunder to any of its
Affiliates, provided that the Purchaser shall remain liable in all respects for
the performance of this Agreement.

8.9           No Third Party Beneficiaries.  This Agreement is solely for the
benefit of the parties hereto and their respective successors and permitted
assigns, and no other person or entity shall have any right, benefit, priority
or interest in, under or because of the existence of, this Agreement.

8.10         Notices.  Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be sent by hand delivery, by reputable overnight courier providing a
receipt against delivery, by registered or certified mail, by electronic mail or
facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party) and shall be
deemed given when received at the addresses set forth below:

If to the Purchaser:
Spongetech Delivery Systems, Inc.
 
43 West 33rd Street, Suite 500
 
New York, NY  10022
 
Attn: Steven Y. Moskowitz
 
Fax No: (212) 594-4172
 
Email: steven@spongetech.com
   
With a copy to:
Gersten Savage LLP
 
600 Lexington Avenue, 9th Floor
 
New York, NY  10022
 
Attn:  Arthur S. Marcus, Esq.
 
Fax No.:  (212) 752-9700
 
Email: amarcus@gerstensavage.com

 
29

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

 

If to the Company:
Dicon Technologies, LLC
 
100 Dicon Drive
 
Black Creek, Georgia
 
Fax No.:  (912) 851-1505
 
Email: Wayne@Dicontech.com
   
If to the Sellers:
Wayne Celia
 
242 Purdue Court
 
Paramus, NY 07652
 
Fax No.:  (912) 851-1505
 
Email: Wayne@Dicontech.com
   
With a copy to:
Ellis, Painter, Ratterree & Adams, LLP
 
2 East Bryan Street
 
Savannah, Georgia 31401
 
Attn:  J. Wiley Ellis, Esq.
 
Fax No. (912) 233-8608
 
Email: www.wellis@epra-law.com

or such other party or address as may be expressly designated by either party by
notice given in accordance with the foregoing provisions.

8.11         Cooperation.  Subject to the terms and conditions herein provided,
the parties hereto shall use commercially reasonable efforts both prior to and
subsequent to the Closing Date to take, or cause to be taken, such actions and
to execute and deliver, or cause to be executed and delivered, such additional
documents and instruments and to do, or cause to be done, all things necessary,
proper or advisable under the provisions of this Agreement and under applicable
law to consummate and make effective the transactions contemplated by this
Agreement.

8.12         Headings, Gender and "Person”.  All section headings contained in
this Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement.  Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or neuter, as the context
requires.  Any reference to a "person" herein shall include an individual, firm,
partnership, trust, governmental authority or body, association, unincorporated
organization or any other entity.

8.13         Schedules and Exhibits.  All Schedules and Exhibits referred to
herein are intended to be and hereby are specifically made a part of this
Agreement.

8.14         Joint and Several Liability.  All agreements, promises,
undertakings, representations and warranties of the Sellers set forth in this
Agreement and in any document, instrument, agreement or certification executed
and delivered by the Sellers in connection with this Agreement shall be deemed
to have been made and given jointly and severally by each Seller, and each
reference herein to the Sellers shall be deemed to be a reference to each Seller
individually and/or collectively, as the context shall require, for the
Purchaser to realize the full benefit from this Agreement.

 
30

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

 

8.15         Severability.  If any provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other provisions of this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party.  Upon
such determination that any provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled.

8.16         Counterparts.  This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument.  This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties.  It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.

8.17         Governing Law.  This Agreement shall be governed by, and construed
and interpreted in accordance with, the laws of the State of New York, without
regard to the conflicts of laws principles thereof.

8.18         Consent to Jurisdiction.  In connection with any litigation arising
out of or relating to the subject matter of this Agreement, each of the parties
hereby irrevocably (a) consents and submits to the exclusive jurisdiction of the
state and federal courts of the State of New York, (b) agrees that service of
process may be effected by sending the same by overnight courier to the
addresses designated in Section 8.10 hereof and (c) waives all defenses based
upon any alleged inconvenience of defending an action instituted in either of
the aforesaid courts.

8.19         Construction.  Each party hereby acknowledges and agrees that it
and its independent counsel have had an opportunity to review and make changes
to this Agreement and that the normal rule of construction, whereby ambiguities
are resolved against the drafting party, shall be inapplicable to this Agreement
and the construction hereof.

ARTICLE IX. DEFINITIONS
 
Capitalized terms used in this Agreement are used as defined in this Article IX
or elsewhere in this Agreement.
 
9.1           Affiliate.  The term “Affiliate” shall mean, with respect to any
person, any other person controlling, controlled by or under common control with
such person.  The term “Control” as used in the preceding sentence means, with
respect to a corporation, the right to exercise, directly or indirectly, more
than 50% of the voting rights attributable to the Membership Interests of the
controlled corporation and, with respect to any person other than a corporation,
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person.

 
31

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

 

9.2           Code.  The term “Code” shall mean the Internal Revenue Code of
1986, as amended.
 
9.3           Contracts.  The term “Contracts,” when described as being those of
or applicable to any person, shall mean any and all contracts, agreements,
franchises, understandings, arrangements, leases, licenses, registrations,
authorizations, easements, servitudes, rights of way, mortgages, bonds, notes,
guaranties, liens, indebtedness, approvals, or other instruments or undertakings
to which such person is a party or to which or by which such person or the
property of such person is subject or bound, excluding any Permits.
 
9.4           Exhibits.  The term “Exhibits” shall mean any or all of the
exhibits to this Agreement and any and all other agreements, instruments, or
documents required or expressly provided under this Agreement to be executed and
delivered in connection with the transactions contemplated by this Agreement.
 
9.5           GAAP.  “GAAP” means U.S. generally accepted accounting principles.
 
9.6           Governmental Authorities.  The term “Governmental Authorities”
shall mean any nation or country (including but not limited to, the United
States) and any commonwealth, territory, or possession thereof and any federal,
state or local government or political subdivision of any of the foregoing,
including but not limited to any judicial, legislative, executive,
administrative or regulatory authority, agency, commission, tribunal or body, or
non-governmental regulating body or other instrumentalities.
 
9.7           Inventory.  The term “Inventory” shall mean all goods,
merchandise, and other personal property owned and held for sale, and all raw
materials, works-in-process, materials, and supplies of every nature which
contribute to the finished products of the Company in the ordinary course of its
business, specifically excluding, however, damaged, defective, or otherwise
unsaleable items.
 
9.8           Knowledge of the Company.  The term “Knowledge of the Company”
shall mean the actual knowledge of the Sellers, or key employees of the Company
listed on Schedule 9.8 hereof, with respect to the matter in question, and such
knowledge as the other managers, officers, managerial personnel, or key
employees of the Company reasonably should have obtained upon diligent
investigation and inquiry into the matter in question.
 
9.9           Legal Requirements.  The term “Legal Requirements,” when described
as being applicable to any Person, shall mean any and all laws (statutory,
judicial, or otherwise), ordinances, regulations, judgments, orders, directives,
injunctions, writs, decrees, or awards of, and any Contracts with, any
Governmental Authority, in each case as and to the extent applicable to such
person or such person’s business, operations, or properties

 
32

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

 

9.10         Lien.  The term “Lien” shall mean any and all liens, mortgages,
adverse claims, charges, security interests, encumbrances, other restrictions or
limitations, or rights of any third persons whatsoever other than liens arising
from acts of the Purchaser (collectively, “Liens”)
 
9.11         Permitted Encumbrances.  “Permitted Encumbrances” means such of the
following as to which no enforcement, collection, execution, levy, or
foreclosure proceeding shall have been commenced and as to which the Company is
not otherwise subject to civil or criminal liability due to its existence:  (a)
liens for Taxes not yet due and payable (or being contested in good faith), for
which adequate reserves have been maintained and are reflected in the most
recent audited financial statements in accordance with GAAP; (b) liens imposed
by law, such as materialmen’s, mechanics’, carriers, workmen’s and repairmen’s
liens and other similar liens arising in the ordinary course of business
securing obligations that (i) are not in excess of $25,000 in the case of a
single property or $100,000 in the aggregate at any time or (ii) are being
contested in good faith; (c) pledges or deposits to secure obligations under
workers’ compensation laws or similar legislation or to secure public or
statutory obligations; (d) minor survey exceptions, reciprocal easement
agreements, and other customary encumbrances on title to real property that do
not individually or in the aggregate materially adversely affect the value of or
the use of such property for its current and anticipated purposes; (e) liens
evidencing a purchase money security interest or liens on property subject to a
capital lease obligation, provide such liens attach solely to the property being
acquired to leased; and (f) those security interests summarized in Schedule 9.11
attached hereto.
 
9.12         Person.  The term “Person” shall mean any individual, partnership,
joint venture, firm, corporation, association, limited liability company, trust,
or other enterprise or any governmental or political subdivision or any agency,
department, or instrumentality thereof.
 
9.13         Properties.  The term “Properties” shall mean any and all
properties and assets (real, personal or mixed, tangible or intangible) owned or
Used by the Company.
 
9.14         Used.  The term “Used” shall mean, with respect to the Properties,
Contracts, or Permits of the Company, those owned, leased, licensed, or
otherwise held by the Company which were acquired for use or held for use by the
Company in connection with the Company’s business and operations, whether or not
reflected on the Company’s books of account.
 
[The balance of this page intentionally left blank.]

 
33

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

 

IN WITNESS WHEREOF, the undersigned have caused this Membership Interest
Purchase Agreement to be executed and delivered as of the day and year first
above written.

 

 
SPONGETECH DELIVERY SYSTEMS, INC.
         
By:
/s/ Steven Y. Moskowitz
     
Name:   Steven Y. Moskowitz
     
Title:     Chief Operating Officer
           
DICON TECHNOLOGIES, LLC
           
By:
/s/ Wayne Celia
     
Name:   Wayne Celia
     
Title:     President & CEO
           
/s/ Wayne M. Celia
   
WAYNE M. CELIA
         
/s/ Sam Ginsberg
   
SAM GINSBERG
         
/s/ Clyde Williams
   
CLYDE WILLIAMS
         
/s/ Roy Geronemus
   
ROY GERONEMUS
         
/s/ John Scheib
   
JOHN SCHEIB
 

 
34

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

 

Exhibit A

SpongeTech Delivery Systems, Inc.
43 W33rd Street, Suite 600
New York, NY 10001

July 9, 2009

PERSONAL & CONFIDENTIAL
Wayne M. Celia
242 Purdue Ct.
Paramus, NJ 07652

Dear Wayne:

This is a compensation arrangement between Wayne M. Celia, Dicon Technologies
LLC (the “Company”), and SpongeTech Delivery Systems, Inc., the Company’s parent
company (“SpongeTech”) effective July 1, 2009 and ending December 31, 2011 (the
“Term”).

1.           During the Term, you will be employed as President and CEO for the
Company.   You shall have powers and authority superior to any other officer or
employee of the Company or of any subsidiary of the Company, including, without
limitation, the duties and responsibilities customarily associated with a chief
executive (e.g., control of day-to-day operations, signing checks, hiring and
firing, etc.).  You shall be required to report solely to, and shall be subject
solely to the supervision and direction of, the Chief Executive Officer, Chief
Financial Officer, Chief Operating Officer of SpongeTech and the Board of
Directors of SpongeTech, and no other person or group shall be given authority
to supervise or direct you in the performance of your duties.  In addition, you
shall regularly consult with the Chief Executive Officer, Chief Financial
Officer and the Chief Operating Officer of SpongeTech with respect to the
Company's business and affairs.  You shall devote substantially all your working
time, attention and energies exclusively to the business and affairs of the
Company (excluding any vacation and sick leave to which you are entitled),
render such services to the best of your ability, and use your reasonable best
efforts to promote the interests of the Company. You agree to faithfully perform
such duties. You further agree to comply with the instructions and personnel
practices and policies of the Company and SpongeTech, as may be amended from
time to time, all of which you acknowledge have been received by you and/ or
have been made available to you for review in the Human Resources Department.
Your obligations hereunder shall run only to the Company and SpongeTech, and not
to its affiliates, if any.

2.           Your compensation arrangement during the year 2009-2011 will follow
Schedule A of this Agreement and follow Schedule B for incentive compensation.
As an employee, you will be eligible for the various fringe benefits program
pursuant to the terms of such programs available for employees occupying
positions of similar status with the Company.

3.  You agree that unless required by court order or other legal compulsory
process that you will not disclose the terms of this compensation agreement with
anyone except your immediate family, tax advisor or legal counsel and provided
that he/she/they agree not to further disclose same.

 
 

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

 

4.           Termination.

4.1           Termination for Cause.  Notwithstanding anything contained to the
contrary in this Agreement, this Agreement may be terminated by the Company or
SpongeTech for Cause.  As used in this Agreement, “Cause” shall only mean (i) an
act or acts of personal dishonesty taken by you and intended to result in your
substantial personal enrichment at the expense of the Company or SpongeTech,
(ii) subject to the following sentences, repeated violation by you of your
material obligations under this Agreement which are demonstrably willful and
deliberate on your part  (including, but not limited to, your failure to follow
the instructions of SpongeTech’s Chief Executive Officer, Chief Financial
Officer or Chief Operating Officer) and which are not remedied in a reasonable
period of time after receipt of written notice from SpongeTech’s or the
Company’s Board of Directors, (iii) the willful engaging by you in illegal
conduct, or gross misconduct, that is materially and demonstrably detrimental to
the Company or SpongeTech or the brand or reputation of the Company or
SpongeTech, respectively, monetarily or otherwise; or (iv) your conviction of,
or plea of nolo contendere to, any criminal act which is a felony.

Upon any reasonable and good faith determination by SpongeTech’s Board of
Directors that Cause exists under clauses (i), (ii) or (iii) of the preceding
sentence (to the extent the violation under said clause (ii) has not been cured
by you), SpongeTech shall cause a special meeting of the Board to be called and
held at a time mutually convenient to the Board and you, but in no event later
than ten (10) business days after Executive's receipt of the notice contemplated
by clauses (i), (ii) or (iii).  You shall have the right to appear before such
special meeting of the Board with legal counsel of your choosing to refute any
determination of Cause specified in such notice, and any termination of your
employment by reason of such Cause determination shall not be effective until
you are afforded such opportunity to appear.  Any termination for Cause pursuant
to clause (i) or (iv) of the first sentence of this Paragraph 4.1 shall be made
in writing to you, which notice shall set forth in detail all acts or omissions
upon which the Company or SpongeTech is relying for such termination.  Upon any
termination pursuant to this Paragraph 4.1, your shall be entitled to be paid
your salary to the date of termination and the Company and SpongeTech shall have
no further liability hereunder.

4.2           Disability.  Notwithstanding anything contained in this Agreement
to the contrary, the Company or SpongeTech, by written notice to you, shall at
all times have the right to terminate this Agreement, and your employment
hereunder, if you shall, as the result of mental or physical incapacity, illness
or disability, fail to perform his duties and responsibilities provided for
herein for a period of more than one hundred twenty (120) consecutive days in
any 12-month period.  Upon any termination pursuant to this Paragraph 4.2, you
shall be entitled to be paid any unpaid salary accrued through the effective
date of termination.

4.3           Death.  In the event of your death during the Term of your
employment hereunder, the Company shall pay to your estate an amount equal to
salary for the remaining Term of this Agreement.

 
 

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

 

4.4           Termination Without Cause.  At any time, the Company or SpongeTech
shall have the right to terminate your employment hereunder by written notice to
you; provided, however, that the Company shall (i) pay to you any unpaid salary
accrued through the effective date of termination specified in such notice, and
any pro-rata bonus that would be payable had you completed a full year of
employment, and (ii) pay to you in a lump sum, in cash within 30 days after the
date of employment termination, an amount equal to 100% of your annual salary
then in effect. In addition, the Company shall continue to pay your health and
disability insurance for the longer of a period of twelve months or the
remaining Term of this Agreement. The Company or SpongeTech shall be deemed to
have terminated your employment pursuant to this Paragraph 4.4 if such
employment is terminated (i) by the Company or SpongeTech without Cause, (ii) by
you voluntarily for "Good Reason”, or (iii) as a result of a Charge in Control.

For purposes of this Agreement, "Good Reason" means:

(a)           the assignment to you of any duties inconsistent in any respect
with your position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by this
Agreement, or any other action by the Company or SpongeTech which results in a
diminution in such position, authority, duties or responsibilities, excluding
for this purpose an isolated,  insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company or SPongeTech promptly after
receipt of notice thereof given by your;

(b)           any failure by the Company to comply with any of the compensation
or benefit provisions of this Agreement,  other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by your;

(c)           any change in the designation of the particular executive that the
you are obligated to report to under Paragraph 1 hereof;

(d)           any purported termination by the Company or SpongeTech of your
employment otherwise than as expressly permitted by this Agreement;

(f)           any termination by your for any reason during the three-month
period following the effective date of any “Change in Control” of SpongeTech.

For purposes of this Agreement, a “Change in Control” shall mean:

(a)           The acquisition (other than by or from SpongeTech), at any time
after the date hereof, by any person, entity or “group”, within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more of either the then
outstanding shares of SpongeTech’s common stock or the combined voting power of
SpongeTech’s then outstanding voting securities entitled to vote generally in
the election of directors; or

 
 

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

 

(b)           Steven Moskowitz ceases for any reason to be the Company’s Chief
Operating Officer or comparable position.

(c)           Approval by the shareholders of SpongeTech of (A) a
reorganization, merger or consolidation with respect to which persons who were
the shareholders of SpongeTech immediately prior to such reorganization, merger
or consolidation do not, immediately thereafter, own more than 51% of the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated company's then outstanding voting
securities, (B) a liquidation or dissolution of SpongeTech, or (C) the sale of
all or substantially all of the assets of SpongeTech, unless the approved
reorganization, merger, consolidation, liquidation, dissolution or sale is
subsequently abandoned; or

 (d)           The approval by the Board of the sale, distribution and/or other
transfer or action (and/or series of sales, distributions and/or other transfers
or actions from time to time or over a period of time), that results in
SpongeTech’s ownership of less than 50% of SpongeTech’s current assets.

5.           It is also understood that during your employment with the Company
and thereafter, you will not reveal to anyone outside the Company confidential
information, proprietary information or trade secrets of the Company or
SpongeTech to which you have acquired information during your employment with
us. Proprietary; or confidential information includes but is not limited to,
financial and operating data, customer lists and information relating to our
customers, business plans, products, technology and know-how. In the event of a
violation of this paragraph, the Company and SpongeTech shall, in addition to
all other remedies available to it, have the right to injunctive relief,
termination of your employment without notice, and any attorneys’ fees and costs
incurred to enforce this provision.

6.           You understand and agree that all designs, concepts, graphics,
drawings, inventions, text and copy, illustrations, memoranda, software, charts,
renderings, specifications, engineering designs and specifications,
presentations and other materials prepared by you in the course of your work
(“Work Product”) for and with the Company will be deemed “work made for hire"
such that the Company and SpongeTech will be the joint owners of all rights to
and interest in such Work Product including without limitation all copyrights,
patents and trademarks therein. In the event that the Work Product or any
portion thereof does not qualify as "work made for hire”, then you hereby assign
all rights, title and interest in the Work Product to the Company and SpongeTech
and will sign all documents necessary to reflect such assignment.

7.           You agree that if you leave our employment, either voluntarily or
otherwise, and for a period of two years thereafter, you will not, directly or
indirectly, solicit or attempt to solicit any employee of the Company or
SpongeTech to terminate his or her employment with the Company or Spongetech,
respectively, or otherwise employ or attempt to employ or assist anyone else to
employ any person who is then in the employ of the Company or Spongetech, or who
was in the employ of the Company or Spongetech at any time during the then
preceding two-year period. You further agree that during this period you will
not otherwise interfere with or attempt to disrupt the relationship between the
Company, Spongetech or its affiliates, divisions and related companies or any
person or business that was a customer, supplier, licensor, contractor or
employee of these entities on the date your employment and compensation from the
Company ended to the extent permitted by applicable law.

 
 

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

 

8.              You agree that you will not, at any time, during the Term of
this Agreement, and for one (1) year following (a) the termination of this
Agreement or your employment hereunder by the Company or SpongeTech for Cause,
or (b) your termination of this Agreement for Good Reason, either directly or
indirectly, engage in, with or for any enterprise, institution, whether or not
for profit, business, or company, competitive with the “Business” of the Company
or Spongetech as such Business may be conducted on the date thereof, as a
creditor, guarantor, or financial backer, stockholder, director, officer,
consultant, advisor, employee, member, or otherwise of or through any
corporation, partnership, association, sole proprietorship or other entity;
provided, that an investment by you, your spouse or your children is permitted
if such investment is not more than four percent (4%) of the total debt or
equity capital of any such competitive enterprise or business. Spongetech shall
have the right in its sole discretion to waive this covenant not to
non-compete.  As used herein, the Term “Business” shall mean, with respect to
the Company, the development, manufacture and distribution of products derived
from “Hydrophilic Urethane Chemistry,” and with respect to Spongetech, the
development, manufacture, sale and distribution of hydrophilic polyurethane and
polyurethane sponge cleaning and waxing products.

9.           This compensation arrangement supersedes any prior compensation
arrangement, whether written or oral, and, subject to Paragraph 4 herein, will
continue until either party gives to the other thirty (30) days notice in
writing of its desire to terminate it. At the end of the thirty (30) day period
this arrangement and your employment will come to an end, except as to those
provisions which specifically survive termination.

10.           You agree that in the event you leave your employment with the
Company, irrespective of the time, manner or cause of such termination, you will
immediately surrender to the Company all books, records or other written papers
or documents entrusted to you or which you have otherwise acquired pertaining to
the company or any of its subsidiaries, affiliates, divisions or related
companies and all other property, including computer data files, of the Company
or SpongeTech that may be in your possession, custody or control.

11.           You agree that this arrangement has been entered into in the State
of New Jersey and shall be governed and construed by the laws of the state of
New Jersey without giving effect to the conflict of law provisions thereof.

12.           Any controversy involving this agreement or breach thereof, your
employment or the termination thereof, including any claims under any.
employment discrimination or wage payment statute, to the extent legally
permissible, shall be settled by final and binding arbitration pursuant to the
provisions of the Employment Dispute Resolution Rules of the American
Arbitration Association then in effect, and provided that arbitration hearings,
if any, shall be held in Allendale, NJ. Judgment on the award rendered by the
arbitrator is enforceable in any court having jurisdiction thereof.

 
 

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

 

13.           This compensation arrangement, except for the provisions of any
2009-2011 incentive Bonus plans, shall continue subsequent to the year 2011
until a new compensation arrangement is entered into or until terminated as
provided in paragraphs 4 or 9.

14.           If any provision of this agreement is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, such determination shall
not affect the remaining provisions of this agreement or render any other
provision of this agreement invalid, illegal or unenforceable.

15.           The provisions of paragraphs 3, 5, 6, 7, 8, 12 and 13 survive
termination of this agreement.

Please sign the original of this agreement, initial each page and return it to
my attention. You may keep a copy for your own records.

I wish you success with the Company.

Sincerely yours,

Dicon Technologies, LLC
           
By:
     
Name:
   
Title:
                 
ACCEPTED:
Spongetech Delivery Systems, Inc.
 
Wayne M. Celia
       
By:
     
Name: Steven Moskowitz
 
(Signature)
Title: COO
       
(Date)
   
 
(Date)
   

 
 

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

 

Schedule A

Annualized Salary Schedule

Year
 
Annualized Salary
   
Semi-monthly
 
2009
  $ 265,000     $ 11,042  
2010
  $ 274,275     $ 11,428  
2011
  $ 283,875     $ 11,828  

Includes an annual 3.5% COL raise

 
 

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

 
 
Exhibit B

Dicon Technologies LLC
100 Dicon Drive
Black Creek, GA 31308

July 9, 2009

PERSONAL & CONFIDENTIAL
Wayne M. Celia Jr.
242 Purdue Court
Paramus, NJ 07652

Dear Wayne:

This is a compensation arrangement between Wayne M. Celia Jr. and Dicon
Technologies LLC (the "Company"), effective July 1, 2009 and ending June 30,
2010.

1. As Director of Marketing for Dicon Technologies, your Compensation
arrangement during the year 2009-2010 will follow Schedule A of this agreement.
As an employee, you will be eligible for the various fringe benefits program
pursuant to the terms of such programs available for employees occupying
positions of similar status with the Company.

2. You agree that unless required by court order or other legal compulsory
process that you will not disclose the terms of this compensation agreement with
anyone except your immediate family, tax advisor or legal counsel and provided
that he/she/they agree not to further disclose same.

3. You agree to faithfully perform for the Company such duties as may be
assigned to you by the Company. You further agree to devote your entire business
time, attention and energies exclusively to such employment and to comply with
the instructions and personnel practices and policies of the Company, as
amended, all of which you  acknowledge have been received by you and/or have
been made available to you for review in the Human Resources Department.

4. It is also understood that during your employment with the Company and
thereafter, you will not reveal to anyone outside the Company confidential
information, proprietary information or trade secrets of the Company or of
SpongeTech Delivery Systems, Inc., the Company’s parent company (“SpongeTech”)
to which you have acquired information during your employment with us.
Proprietary or confidential information includes but is not limited to,
financial and operating data, customer lists and information relating to
customers, business plans, products, technology and know-how. In the event of a
violation of this paragraph, the Company shall, in addition to all other
remedies available to it, have the right to injunctive relief, termination of
your employment without notice, and any attorneys’ fees and costs incurred to
enforce this provision.
 

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

 
5. You understand and agree that all designs, concepts, graphics, drawings,
inventions, text and copy, illustrations, memoranda, software, charts,
renderings, specifications, engineering designs and specifications,
presentations and other materials prepared by you in the course of your work
(“Work Product”) for and with the Company will be deemed “work made for hire"
such that the Company and SpongeTech will be the joint owners of all rights to
and interest in such Work Product including without limitation all copyrights
therein. In the event that the Work Product or any portion thereof does not
qualify as "work made for hire”, then you hereby assign all rights, title and
interest in the Work Product to the Company and SpongeTech and will sign all
documents necessary to reflect such assignment.

6. You agree that if you leave our employment, either voluntarily or otherwise,
and for a period of two years thereafter, you will not, directly or indirectly,
solicit or attempt to solicit any employee of the Company or SpongeTech to
terminate his or her employment with the Company or SpongeTech, respectively, or
otherwise employ or attempt to employ or assist anyone else to employ any person
who is then in the employ of the Company or SpongeTech, or who was in the employ
of the Company or SpongeTech at any time during the then preceding two-year
period. You further agree that during this period you will not otherwise
interfere with or attempt to disrupt the relationship between the Company,
SpongeTech or its affiliates, divisions and related companies or any person or
business that was a customer, supplier, licensor, contractor or employee of
these entities on the date your employment and compensation from the Company
ended to the extent permitted by applicable law.

7.  You agree that you will not, at any time, during the term of this Agreement,
and for one (1) year following the termination of this Agreement or your
employment hereunder, either directly or indirectly, engage in, with or for any
enterprise, institution, whether or not for profit, business, or company,
competitive with the “Business” of the Company or SpongeTech as such Business
may be conducted on the date thereof, as a creditor, guarantor, or financial
backer, stockholder, director, officer, consultant, advisor, employee, member,
or otherwise of or through any corporation, partnership, association, sole
proprietorship or other entity; provided, that an investment by you, your spouse
or your children is permitted if such investment is not more than four percent
(4%) of the total debt or equity capital of any such competitive enterprise or
business. SpongeTech shall have the right in its sole discretion to waive this
covenant not to non-compete.  As used herein, the term “Business” shall mean,
with respect to the Company, the development, manufacture and distribution of
products derived from “Hydrophilic Urethane Chemistry,” and with respect to
SpongeTech, the development, manufacture, sale and distribution of hydrophilic
polyurethane and polyurethane sponge cleaning and waxing products.
 
8.  This compensation arrangement supersedes any prior compensation arrangement,
whether written or oral, and will continue until either party gives to the other
thirty (30) days notice in writing of its desire to terminate it. At the end of
the thirty (30) day period this arrangement and your employment will come to an
end, except as to those provisions which specifically survive termination. This
agreement and your employment may be terminated at any time without notice for
cause, as determined by the Company. Any salary and/or incentive compensation
will be prorated for the period this arrangement was in effect during the year.
 

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

 
8a. If terminated without cause, as determined by the Company, employee will be
entitled to 2 months severance at the compensation level relevant to the current
applicable year.

9. You agree that in the event you leave your employment with the Company,
irrespective of the time, manner or cause of such termination, you will
immediately surrender to the company all books, records or other written papers
or documents entrusted to you or which you have otherwise acquired pertaining to
the company or any of its subsidiaries, affiliates, divisions or related
companies and all other property, including computer data files, of the Company
or SpongeTech that may be in your possession, custody or control.

10. You agree that this arrangement has been entered into in the State of New
Jersey and shall be governed and construed by the laws of the state of New
Jersey without giving effect to the conflict of law provisions thereof.

11. Any controversy involving this agreement or breach thereof, your employment
or the termination thereof, including any claims under any. employment
discrimination or wage payment statute, to the extent legally permissible, shall
be settled by final and binding arbitration pursuant to the provisions of the
Employment Dispute Resolution Rules of the American Arbitration Association then
in effect, and provided that arbitration hearings, if any, shall be held in
Allendale, NJ. Judgment on the award rendered by the arbitrator is enforceable
in any court having jurisdiction thereof.

12. This compensation arrangement shall continue subsequent to the year 2010
until a new compensation arrangement is entered into or until terminated as
provided in paragraph 8.

13. If any provision of this agreement is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, such determination shall
not affect the remaining provisions of this agreement or render any other
provision of this agreement invalid, illegal or unenforceable.

14. The provisions of paragraphs 2, 4, 5, 6, 7, 11 and 12 survive termination of
this agreement.

Please sign the original of this agreement, initial each page and return it to
my attention. You may keep a copy for your own records.
 

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

 
I wish you success with the Company.

Sincerely yours,

Dicon Technologies, LLC
         
 
   
Wayne Celia
   
President
       
ACCEPTED:
   
Wayne M. Celia Jr.
         
 
   
(Signature)
   
 
   
(Date)
     
 
   
(Date)
   

 

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

Schedule A

Annualized Salary Schedule

Year
 
Annualized Salary
   
Semi-monthly
 
2009 - 2010
  $ 60,000.00     $ 2500.00  

 

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

Exhibit C

Dicon Technologies LLC
100 Dicon Drive
Black Creek, GA 31308

July 9, 2009

PERSONAL & CONFIDENTIAL
Michael Derr
 
Dear Michael:
 
This is a compensation arrangement between Michael Derr and Dicon Technologies
LLC (the "Company"), effective July 1, 2009 and ending June 30, 2010.

1. As Vice President of Research and Development for Dicon Technologies, your
Compensation arrangement during the year 2009-2010 will follow Schedule A of
this agreement. As an employee, you will be eligible for the various fringe
benefits program pursuant to the terms of such programs available for employees
occupying positions of similar status with the Company.

2. You agree that unless required by court order or other legal compulsory
process that you will not disclose the terms of this compensation agreement with
anyone except your immediate family, tax advisor or legal counsel and provided
that he/she/they agree not to further disclose same.

3. You agree to faithfully perform for the Company such duties as may be
assigned to you by the Company. You further agree to devote your entire business
time, attention and energies exclusively to such employment and to comply with
the instructions and personnel practices and policies of the Company, as
amended, all of which you acknowledge have been received by you and/or have been
made available to you for review in the Human Resources Department.

4. It is also understood that during your employment with the Company and
thereafter, you will not reveal to anyone outside the Company confidential
information, proprietary information or trade secrets of the Company or of
SpongeTech Delivery Systems, Inc., the Company’s parent company (“SpongeTech”)
to which you have acquired information during your employment with us.
Proprietary or confidential information includes but is not limited to,
financial and operating data, customer lists and information relating to
customers, business plans, products, technology and know-how. In the event of a
violation of this paragraph, the Company shall, in addition to all other
remedies available to it, have the right to injunctive relief, termination of
your employment without notice, and any attorneys’ fees and costs incurred to
enforce this provision.
 

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

5. You understand and agree that all designs, concepts, graphics, drawings,
inventions, text and copy, illustrations, memoranda, software, charts,
renderings, specifications, engineering designs and specifications,
presentations and other materials prepared by you in the course of your work
(“Work Product”) for and with the Company will be deemed “work made for hire"
such that the Company and SpongeTech will be the joint owners of all rights to
and interest in such Work Product including without limitation all copyrights
therein. In the event that the Work Product or any portion thereof does not
qualify as "work made for hire”, then you hereby assign all rights, title and
interest in the Work Product to the Company and SpongeTech and will sign all
documents necessary to reflect such assignment.

6. You agree that if you leave our employment, either voluntarily or otherwise,
and for a period of two years thereafter, you will not, directly or indirectly,
solicit or attempt to solicit any employee of the Company or SpongeTech to
terminate his or her employment with the Company or SpongeTech, respectively, or
otherwise employ or attempt to employ or assist anyone else to employ any person
who is then in the employ of the Company or SpongeTech, or who was in the employ
of the Company or SpongeTech at any time during the then preceding two-year
period. You further agree that during this period you will not otherwise
interfere with or attempt to disrupt the relationship between the Company,
SpongeTech or its affiliates, divisions and related companies or any person or
business that was a customer, supplier, licensor, contractor or employee of
these entities on the date your employment and compensation from the Company
ended to the extent permitted by applicable law.

7.  You agree that you will not, at any time, during the term of this Agreement,
and for one (1) year following the termination of this Agreement or your
employment hereunder, either directly or indirectly, engage in, with or for any
enterprise, institution, whether or not for profit, business, or company,
competitive with the “Business” of the Company or SpongeTech as such Business
may be conducted on the date thereof, as a creditor, guarantor, or financial
backer, stockholder, director, officer, consultant, advisor, employee, member,
or otherwise of or through any corporation, partnership, association, sole
proprietorship or other entity; provided, that an investment by you, your spouse
or your children is permitted if such investment is not more than four percent
(4%) of the total debt or equity capital of any such competitive enterprise or
business. SpongeTech shall have the right in its sole discretion to waive this
covenant not to non-compete.  As used herein, the term “Business” shall mean,
with respect to the Company, the development, manufacture and distribution of
products derived from “Hydrophilic Urethane Chemistry,” and with respect to
SpongeTech, the development, manufacture, sale and distribution of hydrophilic
polyurethane and polyurethane sponge cleaning and waxing products.
 

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

 
8.  This compensation arrangement supersedes any prior compensation arrangement,
whether written or oral, and will continue until either party gives to the other
thirty (30) days notice in writing of its desire to terminate it. At the end of
the thirty (30) day period this arrangement and your employment will come to an
end, except as to those provisions which specifically survive termination. This
agreement and your employment may be terminated at any time without notice for
cause, as determined by the Company. Any salary and/or incentive compensation
will be prorated for the period this arrangement was in effect during the year.

8a. If terminated without cause, as determined by the Company, employee will be
entitled to 2 months severance at the compensation level relevant to the current
applicable year.

9. You agree that in the event you leave your employment with the Company,
irrespective of the time, manner or cause of such termination, you will
immediately surrender to the company all books, records or other written papers
or documents entrusted to you or which you have otherwise acquired pertaining to
the company or any of its subsidiaries, affiliates, divisions or related
companies and all other property, including computer data files, of the Company
or SpongeTech that may be in your possession, custody or control.

10. You agree that this arrangement has been entered into in the State of New
Jersey and shall be governed and construed by the laws of the state of New
Jersey without giving effect to the conflict of law provisions thereof.

11. Any controversy involving this agreement or breach thereof, your employment
or the termination thereof, including any claims under any. employment
discrimination or wage payment statute, to the extent legally permissible, shall
be settled by final and binding arbitration pursuant to the provisions of the
Employment Dispute Resolution Rules of the American Arbitration Association then
in effect, and provided that arbitration hearings, if any, shall be held in
Allendale, NJ. Judgment on the award rendered by the arbitrator is enforceable
in any court having jurisdiction thereof.

12. This compensation arrangement shall continue subsequent to the year 2010
until a new compensation arrangement is entered into or until terminated as
provided in paragraph 8.

13. If any provision of this agreement is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, such determination shall
not affect the remaining provisions of this agreement or render any other
provision of this agreement invalid, illegal or unenforceable.

14. The provisions of paragraphs 2, 4, 5, 6, 7, 11 and 12 survive termination of
this agreement.

Please sign the original of this agreement, initial each page and return it to
my attention. You may keep a copy for your own records.
 

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

 
I wish you success with the Company.

Sincerely yours,

Dicon Technologies, LLC
         
 
   
Wayne Celia
   
President
       
ACCEPTED:
   
Michael Derr .
         
 
   
(Signature)
   
 
   
(Date)
     
 
   
(Date)
   

 

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

Schedule A
 
Annualized Salary Schedule

Year
 
Annualized Salary
   
Semi-monthly
 
2009 - 2010
  $ 83,200.56     $ 3466.69  

 

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

Exhibit D

 
Dicon Technologies LLC
100 Dicon Drive
Black Creek, GA 31308

July 9, 2009

PERSONAL & CONFIDENTIAL
Rosalind Nathanial

Dear Rosalind:

This is a compensation arrangement between Rosalind Nathanial and Dicon
Technologies LLC (the "Company"), effective July 1, 2009 and ending June 30,
2010.

1. As Chief Financial Officer for Dicon Technologies, your Compensation
arrangement during the year 2009-2010 will follow Schedule A of this agreement.
As an employee, you will be eligible for the various fringe benefits program
pursuant to the terms of such programs available for employees occupying
positions of similar status with the Company.

2. You agree that unless required by court order or other legal compulsory
process that you will not disclose the terms of this compensation agreement with
anyone except your immediate family, tax advisor or legal counsel and provided
that he/she/they agree not to further disclose same.

3. You agree to faithfully perform for the Company such duties as may be
assigned to you by the Company. You further agree to devote your entire business
time, attention and energies exclusively to such employment and to comply with
the instructions and personnel practices and policies of the Company, as
amended, all of which you acknowledge have been received by you and/or have been
made available to you for review in the Human Resources Department.

4. It is also understood that during your employment with the Company and
thereafter, you will not reveal to anyone outside the Company confidential
information, proprietary information or trade secrets of the Company or of
SpongeTech Delivery Systems, Inc., the Company’s parent company (“SpongeTech”)
to which you have acquired information during your employment with us.
Proprietary or confidential information includes but is not limited to,
financial and operating data, customer lists and information relating to
customers, business plans, products, technology and know-how. In the event of a
violation of this paragraph, the Company shall, in addition to all other
remedies available to it, have the right to injunctive relief, termination of
your employment without notice, and any attorneys’ fees and costs incurred to
enforce this provision.
 

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

5. You understand and agree that all designs, concepts, graphics, drawings,
inventions, text and copy, illustrations, memoranda, software, charts,
renderings, specifications, engineering designs and specifications,
presentations and other materials prepared by you in the course of your work
(“Work Product”) for and with the Company will be deemed “work made for hire"
such that the Company and SpongeTech will be the joint owners of all rights to
and interest in such Work Product including without limitation all copyrights
therein. In the event that the Work Product or any portion thereof does not
qualify as "work made for hire”, then you hereby assign all rights, title and
interest in the Work Product to the Company and SpongeTech and will sign all
documents necessary to reflect such assignment.

6. You agree that if you leave our employment, either voluntarily or otherwise,
and for a period of two years thereafter, you will not, directly or indirectly,
solicit or attempt to solicit any employee of the Company or SpongeTech to
terminate his or her employment with the Company or SpongeTech, respectively, or
otherwise employ or attempt to employ or assist anyone else to employ any person
who is then in the employ of the Company or SpongeTech, or who was in the employ
of the Company or SpongeTech at any time during the then preceding two-year
period. You further agree that during this period you will not otherwise
interfere with or attempt to disrupt the relationship between the Company,
SpongeTech or its affiliates, divisions and related companies or any person or
business that was a customer, supplier, licensor, contractor or employee of
these entities on the date your employment and compensation from the Company
ended to the extent permitted by applicable law.

7.  You agree that you will not, at any time, during the term of this Agreement,
and for one (1) year following the termination of this Agreement or your
employment hereunder, either directly or indirectly, engage in, with or for any
enterprise, institution, whether or not for profit, business, or company,
competitive with the “Business” of the Company or SpongeTech as such Business
may be conducted on the date thereof, as a creditor, guarantor, or financial
backer, stockholder, director, officer, consultant, advisor, employee, member,
or otherwise of or through any corporation, partnership, association, sole
proprietorship or other entity; provided, that an investment by you, your spouse
or your children is permitted if such investment is not more than four percent
(4%) of the total debt or equity capital of any such competitive enterprise or
business. SpongeTech shall have the right in its sole discretion to waive this
covenant not to non-compete.  As used herein, the term “Business” shall mean,
with respect to the Company, the development, manufacture and distribution of
products derived from “Hydrophilic Urethane Chemistry,” and with respect to
SpongeTech, the development, manufacture, sale and distribution of hydrophilic
polyurethane and polyurethane sponge cleaning and waxing products.
 

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

 
8. This compensation arrangement supersedes any prior compensation arrangement,
whether written or oral, and will continue until either party gives to the other
thirty (30) days notice in writing of its desire to terminate it. At the end of
the thirty (30) day period this arrangement and your employment will come to an
end, except as to those provisions which specifically survive  termination. This
agreement and your employment may be terminated at any time without notice for
cause, as determined by the Company. Any salary and/or incentive compensation
will be prorated for the period this arrangement was in effect during the year.

8a. If terminated without cause, as determined by the Company, employee will be
entitled to 2 months severance at the compensation level relevant to the current
applicable year.

9. You agree that in the event you leave your employment with the Company,
irrespective of the time, manner or cause of such termination, you will
immediately surrender to the company all books, records or other written papers
or documents entrusted to you or which you have otherwise acquired pertaining to
the company or any of its subsidiaries, affiliates, divisions or related
companies and all other property, including computer data files, of the Company
or SpongeTech that may be in your possession, custody or control.

10. You agree that this arrangement has been entered into in the State of New
Jersey and shall be governed and construed by the laws of the state of New
Jersey without giving effect to the conflict of law provisions thereof.

11. Any controversy involving this agreement or breach thereof, your employment
or the termination thereof, including any claims under any. employment
discrimination or wage payment statute, to the extent legally permissible, shall
be settled by final and binding arbitration pursuant to the provisions of the
Employment Dispute Resolution Rules of the American Arbitration Association then
in effect, and provided that arbitration hearings, if any, shall be held in
Allendale, NJ. Judgment on the award rendered by the arbitrator is enforceable
in any court having jurisdiction thereof.

12. This compensation arrangement shall continue subsequent to the year 2010
until a new compensation arrangement is entered into or until terminated as
provided in paragraph 8.

13. If any provision of this agreement is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, such determination shall
not affect the remaining provisions of this agreement or render any other
provision of this agreement invalid, illegal or unenforceable.

14. The provisions of paragraphs 2, 4, 5, 6, 7, 11 and 12 survive termination of
this agreement.
 
Please sign the original of this agreement, initial each page and return it to
my attention. You may keep a copy for your own records.
 

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

 
I wish you success with the Company.

Sincerely yours,

Dicon Technologies, LLC
         
 
   
Wayne Celia
   
President
       
ACCEPTED:
   
Rosalind Nathanial
         
 
   
(Signature)
   
 
   
(Date)
     
 
   
(Date)
   

 

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

Schedule A

Annualized Salary Schedule

Year
 
Annualized Salary
   
Semi-monthly
 
2009 - 2010
  $ 70,000.00     $ 2916.67  

 

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

Exhibit E
 
Dicon Technologies LLC
100 Dicon Drive
Black Creek, GA 31308

July 9, 2009

PERSONAL & CONFIDENTIAL
Harvey Goodman
2817 Westridge Road
Minnetonka, MN 55305

Dear Harvey:

This is a compensation arrangement between Harvey Goodman and Dicon Technologies
LLC (the "Company"), effective July 1, 2009 and ending June 30, 2010.

1. As VP of Sales for Dicon Technologies, your Compensation arrangement during
the year 2009-2010 will follow Schedule A of this agreement. As an employee, you
will be eligible for the various fringe benefits program pursuant to the terms
of such programs available for employees occupying positions of similar status
with the Company.

2. You agree that unless required by court order or other legal compulsory
process that you will not disclose the terms of this compensation agreement with
anyone except your immediate family, tax advisor or legal counsel and provided
that he/she/they agree not to further disclose same.

3. You agree to faithfully perform for the Company such duties as may be
assigned to you by the Company. You further agree to devote your entire business
time, attention and energies exclusively to such employment and to comply with
the instructions and personnel practices and policies of the Company, as
amended, all of which you acknowledge have been received by you and/ or have
been made available to you for review in the Human Resources Department.

4. It is also understood that during your employment with the Company and
thereafter, you will not reveal to anyone outside the Company confidential
information, proprietary information or trade secrets of the Company or of
SpongeTech Delivery Systems, Inc., the Company’s parent company (“SpongeTech”)
to which you have acquired information during your employment with us.
Proprietary or confidential information includes but is not limited to,
financial and operating data, customer lists and information relating to
customers, business plans, products, technology and know-how. In the event of a
violation of this paragraph, the Company shall, in addition to all other
remedies available to it, have the right to injunctive relief, termination of
your employment without notice, and any attorneys’ fees and costs incurred to
enforce this provision.

 
 

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

 

5. You understand and agree that all designs, concepts, graphics, drawings,
inventions, text and copy, illustrations, memoranda, software, charts,
renderings, specifications, engineering designs and specifications,
presentations and other materials prepared by you in the course of your work
(“Work Product”) for and with the Company will be deemed “work made for hire"
such that the Company and SpongeTech will be the joint owners of all rights to
and interest in such Work Product including without limitation all copyrights
therein. In the event that the Work Product or any portion thereof does not
qualify as "work made for hire”, then you hereby assign all rights, title and
interest in the Work Product to the Company and SpongeTech and will sign all
documents necessary to reflect such assignment.

6. You agree that if you leave our employment, either voluntarily or otherwise,
and for a period of two years thereafter, you will not, directly or indirectly,
solicit or attempt to solicit any employee of the Company or SpongeTech to
terminate his or her employment with the Company or SpongeTech, respectively, or
otherwise employ or attempt to employ or assist anyone else to employ any person
who is then in the employ of the Company or SpongeTech, or who was in the employ
of the Company or SpongeTech at any time during the then preceding two-year
period. You further agree that during this period you will not otherwise
interfere with or attempt to disrupt the relationship between the Company,
SpongeTech or its affiliates, divisions and related companies or any person or
business that was a customer, supplier, licensor, contractor or employee of
these entities on the date your employment and compensation from the Company
ended to the extent permitted by applicable law.

7.  You agree that you will not, at any time, during the term of this Agreement,
and for one (1) year following the termination of this Agreement or your
employment hereunder, either directly or indirectly, engage in, with or for any
enterprise, institution, whether or not for profit, business, or company,
competitive with the “Business” of the Company or SpongeTech as such Business
may be conducted on the date thereof, as a creditor, guarantor, or financial
backer, stockholder, director, officer, consultant, advisor, employee, member,
or otherwise of or through any corporation, partnership, association, sole
proprietorship or other entity; provided, that an investment by you, your spouse
or your children is permitted if such investment is not more than four percent
(4%) of the total debt or equity capital of any such competitive enterprise or
business. SpongeTech shall have the right in its sole discretion to waive this
covenant not to non-compete.  As used herein, the term “Business” shall mean,
with respect to the Company, the development, manufacture and distribution of
products derived from “Hydrophilic Urethane Chemistry,” and with respect to
SpongeTech, the development, manufacture, sale and distribution of hydrophilic
polyurethane and polyurethane sponge cleaning and waxing products.

8.  This compensation arrangement supersedes any prior compensation arrangement,
whether written or oral, and will continue until either party gives to the other
thirty (30) days notice in writing of its desire to terminate it. At the end of
the thirty (30) day period this arrangement and your employment will come to an
end, except as to those provisions which specifically survive termination. This
agreement and your employment may be terminated at any time without notice for
cause, as determined by the Company. Any salary and/or incentive compensation
will be prorated for the period this arrangement was in effect during the year.

 
 

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

 
 
8a. If terminated without cause, as determined by the Company, employee will be
entitled to 2 months severance at the compensation level relevant to the current
applicable year.

9. You agree that in the event you leave your employment with the Company,
irrespective of the time, manner or cause of such termination, you will
immediately surrender to the company all books, records or other written papers
or documents entrusted to you or which you have otherwise acquired pertaining to
the company or any of its subsidiaries, affiliates, divisions or related
companies and all other property, including computer data files, of the Company
or SpongeTech that may be in your possession, custody or control.

10. You agree that this arrangement has been entered into in the State of New
Jersey and shall be governed and construed by the laws of the state of New
Jersey without giving effect to the conflict of law provisions thereof.

11. Any controversy involving this agreement or breach thereof, your employment
or the termination thereof, including any claims under any. employment
discrimination or wage payment statute, to the extent legally permissible, shall
be settled by final and binding arbitration pursuant to the provisions of the
Employment Dispute Resolution Rules of the American Arbitration Association then
in effect, and provided that arbitration hearings, if any, shall be held in
Allendale, NJ. Judgment on the award rendered by the arbitrator is enforceable
in any court having jurisdiction thereof.

12. This compensation arrangement shall continue subsequent to the year 2010
until a new compensation arrangement is entered into or until terminated as
provided in paragraph 8.

13. If any provision of this agreement is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, such determination shall
not affect the remaining provisions of this agreement or render any other
provision of this agreement invalid, illegal or unenforceable.

14. The provisions of paragraphs 2, 4, 5, 6, 7, 11 and 12 survive termination of
this agreement.

Please sign the original of this agreement, initial each page and return it to
my attention. You may keep a copy for your own records.

 
 

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

 

I wish you success with the Company.

Sincerely yours,

Dicon Technologies, LLC
         
 
   
Wayne Celia
   
President
       
ACCEPTED:
   
Harvey. Goodman
         
 
   
(Signature)
   
 
   
(Date)
     
(Date)
   

 
 

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

 

Schedule A
 
Annualized Salary Schedule

Year
 
Annualized Salary
   
Semi-monthly
 
2009 - 2010  Current
  $ 169,700     $ 7070.83  

Dicon will pay up to $25,000 for moving expense to the metro area.

 
 

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

 

Exhibit F

 
Dicon Technologies LLC
100 Dicon Drive
Black Creek, GA 31308

July 9, 2009

PERSONAL & CONFIDENTIAL
Scott G. Lyddon

Dear Scott:

This is a compensation arrangement between Scott Lyddon and Dicon Technologies
LLC (the “Company”), effective July 1, 2009 and ending June 30, 2010.

1. As Operations Manager for Dicon Technologies, your Compensation arrangement
during the year 2009-2010 will follow Schedule A of this agreement. As an
employee, you will be eligible for the various fringe benefits program pursuant
to the terms of such programs available for employees occupying positions of
similar status with the Company.

2. You agree that unless required by court order or other legal compulsory
process that you will not disclose the terms of this compensation agreement with
anyone except your immediate family, tax advisor or legal counsel and provided
that he/she/they agree not to further disclose same.

3. You agree to faithfully perform for the Company such duties as may be
assigned to you by the Company. You further agree to devote your entire business
time, attention and energies exclusively to such employment and to comply with
the instructions and personnel practices and policies of the Company, as
amended, all of which you acknowledge have been received by you and/or have been
made available to you for review in the Human Resources Department.

4. It is also understood that during your employment with the Company and
thereafter, you will not reveal to anyone outside the Company confidential
information, proprietary information or trade secrets of the Company or of
SpongeTech Delivery Systems, Inc., the Company’s parent company (“SpongeTech”)
to which you have acquired information during your employment with us.
Proprietary or confidential information includes but is not limited to,
financial and operating data, customer lists and information relating to
customers, business plans, products, technology and know-how. In the event of a
violation of this paragraph, the Company shall, in addition to all other
remedies available to it, have the right to injunctive relief, termination of
your employment without notice, and any attorneys’ fees and costs incurred to
enforce this provision.

 
 

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

 

5. You understand and agree that all designs, concepts, graphics, drawings,
inventions, text and copy, illustrations, memoranda, software, charts,
renderings, specifications, engineering designs and specifications,
presentations and other materials prepared by you in the course of your work
(“Work Product”) for and with the Company will be deemed “work made for hire"
such that the Company and SpongeTech will be the joint owners of all rights to
and interest in such Work Product including without limitation all copyrights
therein. In the event that the Work Product or any portion thereof does not
qualify as "work made for hire”, then you hereby assign all rights, title and
interest in the Work Product to the Company and SpongeTech and will sign all
documents necessary to reflect such assignment.

6. You agree that if you leave our employment, either voluntarily or otherwise,
and for a period of two years thereafter, you will not, directly or indirectly,
solicit or attempt to solicit any employee of the Company or SpongeTech to
terminate his or her employment with the Company or SpongeTech, respectively, or
otherwise employ or attempt to employ or assist anyone else to employ any person
who is then in the employ of the Company or SpongeTech, or who was in the employ
of the Company or SpongeTech at any time during the then preceding two-year
period. You further agree that during this period you will not otherwise
interfere with or attempt to disrupt the relationship between the Company,
SpongeTech or its affiliates, divisions and related companies or any person or
business that was a customer, supplier, licensor, contractor or employee of
these entities on the date your employment and compensation from the Company
ended to the extent permitted by applicable law.

7.  You agree that you will not, at any time, during the term of this Agreement,
and for one (1) year following the termination of this Agreement or your
employment hereunder, either directly or indirectly, engage in, with or for any
enterprise, institution, whether or not for profit, business, or company,
competitive with the “Business” of the Company or SpongeTech as such Business
may be conducted on the date thereof, as a creditor, guarantor, or financial
backer, stockholder, director, officer, consultant, advisor, employee, member,
or otherwise of or through any corporation, partnership, association, sole
proprietorship or other entity; provided, that an investment by you, your spouse
or your children is permitted if such investment is not more than four percent
(4%) of the total debt or equity capital of any such competitive enterprise or
business. SpongeTech shall have the right in its sole discretion to waive this
covenant not to non-compete. As used herein, the term “Business” shall mean,
with respect to the Company, the development, manufacture and distribution of
products derived from “Hydrophilic Urethane Chemistry,” and with respect to
SpongeTech, the development, manufacture, sale and distribution of hydrophilic
polyurethane and polyurethane sponge cleaning and waxing products.

 
 

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

 

8. This compensation arrangement supersedes any prior compensation arrangement,
whether written or oral, and will continue until either party gives to the other
thirty (30) days notice in writing of its desire to terminate it. At the end of
the thirty (30) day period this arrangement and your employment will come to an
end, except as to those provisions which specifically survive termination. This
agreement and your employment may be terminated at any time without notice for
cause, as determined by the Company. Any salary and/or incentive compensation
will be prorated for the period this arrangement was in effect during the year.

8a. If terminated without cause, as determined by the Company, employee will be
entitled to 2 months severance at the compensation level relevant to the current
applicable year.

9. You agree that in the event you leave your employment with the Company,
irrespective of the time, manner or cause of such termination, you will
immediately surrender to the company all books, records or other written papers
or documents entrusted to you or which you have otherwise acquired pertaining to
the company or any of its subsidiaries, affiliates, divisions or related
companies and all other property, including computer data files, of the Company
or SpongeTech that may be in your possession, custody or control.

10. You agree that this arrangement has been entered into in the State of New
Jersey and shall be governed and construed by the laws of the state of New
Jersey without giving effect to the conflict of law provisions thereof.

11. Any controversy involving this agreement or breach thereof, your employment
or the termination thereof, including any claims under any. employment
discrimination or wage payment statute, to the extent legally permissible, shall
be settled by final and binding arbitration pursuant to the provisions of the
Employment Dispute Resolution Rules of the American Arbitration Association then
in effect, and provided that arbitration hearings, if any, shall be held in
Allendale, NJ. Judgment on the award rendered by the arbitrator is enforceable
in any court having jurisdiction thereof.

12. This compensation arrangement shall continue subsequent to the year 2010
until a new compensation arrangement is entered into or until terminated as
provided in paragraph 8.

13. If any provision of this agreement is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, such determination shall
not affect the remaining provisions of this agreement or render any other
provision of this agreement invalid, illegal or unenforceable.

14. The provisions of paragraphs 2, 4, 5, 6, 7, 11 and 12 survive termination of
this agreement.

Please sign the original of this agreement, initial each page and return it to
my attention. You may keep a copy for your own records.

 
 

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

 

I wish you success with the Company.

Sincerely yours,

Dicon Technologies, LLC
               
Wayne Celia
   
President
       
ACCEPTED:
   
Scott G. Lyddon
               
(Signature)
         
(Date)
     
(Date)
   

 
 

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

 

Schedule A

Annualized Salary Schedule

Year
 
Annualized Salary
   
Semi-monthly
 
2009 - 2010 (current)
  $ 75,470.16     $ 3144.59  
2009 – 2010 (after move to GA)
  $ 82,500.00     $ 3312.50  

Dicon will pay moving expenses to relocate employee to the Savanna area.

 
 

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