Exhibit 10.1

 

 

STOCK PURCHASE AGREEMENT

 

Dated

 

April 12, 2004

 

BY AND AMONG

 

RAUCH ACQUISITION CORPORATION

 (“Purchaser”)

 

SYRATECH CORPORATION

(“Seller”)

 

AND

 

RAUCH INDUSTRIES, INC.

(the “Company”)

 

 

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TABLE OF CONTENTS

 

ARTICLE 1

DEFINITIONS

 

 

 

Section 1.1

Certain Definitions

 

 

 

ARTICLE 2

PURCHASE AND SALE

 

 

 

Section 2.1

Purchase and Sale

 

Section 2.2

Retained Seller Liabilities

 

Section 2.3

Purchase Price

 

Section 2.4

Company Cash and Working Capital Adjustment

 

Section 2.5

The Closing

 

 

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLER

 

 

 

Section 3.1

Corporate Status of Seller and the Company

 

Section 3.2

Capitalization; Ownership of Shares

 

Section 3.3

No Encumbrance on Shares

 

Section 3.4

Other Rights to Acquire Capital Stock

 

Section 3.5

Subsidiaries

 

Section 3.6

Due Authorization; No Conflicts

 

Section 3.7

Financial Statements

 

Section 3.8

Conduct of Business; Certain Actions

 

Section 3.9

Properties

 

Section 3.10

Licenses and Permits

 

Section 3.11

Intellectual Property Rights

 

Section 3.12

Compliance with Laws

 

Section 3.13

Employee Benefit Matters

 

Section 3.14

Contracts and Agreements

 

Section 3.15

Claims and Proceedings

 

Section 3.16

Taxes

 

Section 3.17

Bank Accounts

 

Section 3.18

Certain Consents

 

Section 3.19

Brokers

 

Section 3.20

Environmental Matters

 

Section 3.21

Insurance

 

Section 3.22

Controlled Group Liability

 

Section 3.23

Insolvency

 

 

 

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

 

 

Section 4.1

Status of Purchaser

 

 

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Section 4.2

Authority

 

Section 4.3

Capitalization; Ownership of Shares

 

Section 4.4

Brokers, Finders

 

 

 

ARTICLE 5

COVENANTS OF SELLER

 

 

 

Section 5.1

Licenses, Permits and Approvals

 

Section 5.2

Inspection

 

Section 5.3

Compliance

 

Section 5.4

Satisfaction of All Conditions Precedent

 

Section 5.5

Exclusivity

 

Section 5.6

Information Technology Transfer

 

Section 5.7

Overseas Sourcing Operations

 

Section 5.8

Payroll Expenses

 

Section 5.9

Consolidated Tax Returns

 

 

 

ARTICLE 6

CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER

 

 

 

Section 6.1

Truth of Representations and Warranties

 

Section 6.2

No Litigation Threatened

 

Section 6.3

Performance

 

Section 6.4

Consents and Approvals

 

Section 6.5

Permits and Licenses

 

Section 6.6

Closing Deliveries of Seller

 

 

 

ARTICLE 7

CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER

 

 

 

Section 7.1

Truth of Representations and Warranties

 

Section 7.2

Performance

 

Section 7.3

No Litigation Threatened

 

Section 7.4

Consents and Approvals

 

Section 7.5

Closing Deliveries of Purchaser

 

 

 

ARTICLE 8

CLOSING CONDITIONS

 

 

 

Section 8.1

Conditions to Obligations of Purchaser

 

Section 8.2

Conditions to Obligations of Seller

 

 

 

ARTICLE 9

TERMINATION

 

 

 

Section 9.1

Termination

 

Section 9.2

Effect of Termination

 

 

 

 

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ARTICLE 10

FURTHER AGREEMENTS

 

 

 

 

Section 10.1

Expenses of Sale

 

Section 10.2

Consents

 

Section 10.3

Third Party Reliance on Seller Representations and Warranties

 

Section 10.4

Post Closing Insurance Claims

 

Section 10.5

Public Announcement

 

Section 10.6

Tax Matters

 

 

 

ARTICLE 11

REPRESENTATIONS AND INDEMNIFICATION

 

 

 

Section 11.1

Survival of Representations and Warranties

 

Section 11.2

Indemnification by Seller

 

Section 11.3

Indemnification by Purchaser

 

Section 11.4

Environmental Insurance and Indemnification

 

Section 11.5

Defense of Third-Party Claims

 

Section 11.6

Direct Claims

 

 

 

ARTICLE 12

AMENDMENT AND WAIVER

 

 

 

Section 12.1

Amendment

 

Section 12.2

Waiver

 

 

 

ARTICLE 13

MISCELLANEOUS PROVISIONS

 

 

 

Section 13.1

Notices

 

Section 13.2

Further Assurance

 

Section 13.3

Counterpart Executions; Facsimiles

 

Section 13.4

Binding Effect

 

Section 13.5

Headings

 

Section 13.6

Effectiveness

 

Section 13.7

Invalid Provisions

 

Section 13.8

Miscellaneous

 

Section 13.9

Attorneys’ Fees and Costs

 

Section 13.10

Attachments

 

 

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STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of April 12, 2004, is
entered into by and among Rauch Acquisition Corporation, a Delaware corporation
(“Purchaser”), Syratech Corporation, a Delaware corporation (“Seller”) and Rauch
Industries, Inc., a North Carolina corporation and a wholly-owned subsidiary of
Seller (the “Company”).

 

WITNESSETH:

 

WHEREAS, the Company is engaged in the business of manufacturing, importing,
marketing, selling and distributing seasonal products; and

 

WHEREAS, Seller owns One Thousand (1,000) shares of the Company’s common stock
which shares constitute all of the issued and outstanding shares of capital
stock of the Company (the “Shares”); and

 

WHEREAS, Seller desires to sell, assign and transfer to Purchaser the Shares and
Purchaser desires to acquire the Shares from Seller, all upon the terms and
conditions set forth herein; and

 

WHEREAS, this Agreement sets forth the terms and conditions pursuant to which
the Purchaser will acquire from Seller the Shares.

 

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

 

ARTICLE 1

 

DEFINITIONS

 

Section 1.1.                                   Certain Definitions. The
following terms shall have the following meanings for purposes of this
Agreement:

 

“12/31 Balance Sheet” has the meaning set forth in Section 2.4 of this
Agreement.

 

“12/31 Net Working Capital” has the meaning set forth in Section 2.4 of this
Agreement.

 

“Accounts Receivable” means all accounts and notes receivable, negotiable
instruments and chattel paper the rights to which were generated by the
operations of the Company, and other evidences of indebtedness of, and rights to
receive payments from, any person which relate to the operation of the Company,
including, without limitation, charges for products and services rendered but
not yet billed (determined regardless of whether such charges are presently
billable pursuant to the terms of the contract under which such services were
rendered).

 

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“Arbitrating Accounting Firm” has the meaning set forth in Section 2.4(c)(i) of
this Agreement.

 

“Assumption Agreement” has the meaning set forth in Section 2.2 of this
Agreement.

 

“Cash Reconciliation Payment” has the meaning set forth in Section 2.4(b)(i) of
this Agreement.

 

“Code” has the meaning set forth in Section 3.13(a) of this Agreement.

 

“Company Bank Account” has the meaning set forth in Section 2.4(a)(i) of this
Agreement.

 

 “Closing” means the consummation and effectuation of the transaction
contemplated herein pursuant to the terms and conditions of this Agreement.

 

“Closing Date” means April 12, 2004, or such other date as agreed to by Seller
and Purchaser.

 

“Closing Date Balance Sheet” has the meaning set forth in Section 2.4 of this
Agreement.

 

“Closing Date Cash” has the meaning set forth in Section 2.4(a)(i) of this
Agreement.

 

“Closing Date Net Working Capital” has the meaning set forth in Section 2.4 of
this Agreement.

 

“Closing Date Net Working Capital Statement” has the meaning set forth in
Section 2.4(b) of this Agreement.

 

“Company” means Rauch Industries, Inc., a North Carolina corporation and a
wholly-owned subsidiary of Seller.

 

“Consent” has the meaning set forth in Section 3.18 of this Agreement.

 

“Encumbrances” means any and all security interests, liens, pledges, claims,
charges, escrows, encumbrances, encroachments, rights of first refusal,
subleases, conditional sales agreements, options, mortgages, indentures,
easements, licenses, restrictions, rights of way, servitude, equitable interest,
or other covenants, agreements, understandings, obligations, defects or
irregularities affecting title to any of the Shares, or any assets of the
Company, including, but not limited to the Real Property.

 

“Environmental Insurance Policy” has the meaning set forth in Section 11.4(a) of
this Agreement.

 

“Environmental Laws” means the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, the Superfund Amendments and
Reauthorization

 

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Act, as amended, the Resource Conservation and Recovery Act, as amended, the
Toxic Substances Control Act, as amended, the Clean Water Act, as amended, the
Clean Air Act, as amended, the Safe Drinking Water Act, as amended, the
Occupational Safety and Health Act (solely as it relates to hazardous chemicals
(but not including asbestos)), as amended, the Federal Insecticide, Fungicide
Rodenticide Act, as amended, and any applicable state or local law having a
similar subject matter, as well as any implementing regulations or decrees under
any such applicable federal, state or local law.

 

“Environmental Permits” has the meaning set forth in Section 3.20 of this
Agreement.

 

“ERISA” has the meaning set forth in Section 3.13(a) of this Agreement.

 

“Estimated Closing Date Balance Sheet” has the meaning set forth in
Section 2.4(a) of this Agreement.

 

“Financial Statements” has the meaning set forth in Section 3.7 of this
Agreement.

 

“GAAP” means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity or other practices and procedures as may be approved by a significant
segment of the accounting profession, which are applicable to the circumstances
as of the date of determination.  For purposes of this Agreement, GAAP shall be
applied in a manner consistent with the historic practices used by the Company.

 

“Governmental Authority” means any federal, territorial, state or local
governmental authority, supra-governmental authority, instrumentality, court,
governmental or self-regulatory organization, commission or tribunal or any
regulatory, administrative or other agency, or any political or other
subdivision, department or branch of any of the foregoing, whether within or
outside the United States.

 

“Hazardous Substance” means any material or substance which (i) constitutes a
hazardous substance, toxic substance, oil, pollutant, or hazardous chemical  (as
such terms are defined by or pursuant to any applicable Environmental Law, as in
effect as of the date hereof, (but not including asbestos)) or (ii) is regulated
or controlled as a hazardous substance, toxic substance, oil, pollutant, or
hazardous chemical (not including asbestos) pursuant to any Environmental law,
as in effect as of the date hereof.

 

“Indemnifying Party” has the meaning set forth in Section 11.5 of this
Agreement.

 

“Intellectual Property” has the meaning set forth in Section 3.11 of this
Agreement.

 

“Inter-Company Debt” has the meaning set forth in Section 2.4(a) of this
Agreement.

 

“Knowledge of Seller or Company” means the actual knowledge, without due
inquiry, of Michael B. Rowe and/or Gregory W. Hunt and/or, solely with respect
to Section 3.20 of this Agreement, Albert L. Kramer, Esq.

 

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“Loss” and “Losses” shall have the meaning set forth in Section 11.4 of this
Agreement.

 

“Minimum Closing Date Accounts Receivable” has the meaning set forth in
Section 2.4(a)(ii) of this Agreement.

 

“Minimum Closing Date Inventory” has the meaning set forth in
Section 2.4(a)(iii) of this Agreement.

 

“Minimum Closing Date Net Working Capital” has the meaning set forth in
Section 2.4(a)(iv) of this Agreement.

 

“Net Working Capital” has the meaning set forth in Section 2.4 of this
Agreement.

 

“Purchase Price” means One Dollar ($1.00) cash paid for the Purchase of the
Shares at the Closing.

 

“Purchaser” means Rauch Acquisition Corporation, a Delaware corporation.

 

“Prime Interest Rate” has the meaning set forth in Section 2.4(b)(i) of this
Agreement.

 

“Purchaser Indemnified Parties” has the meaning set forth in Section 11.2 of
this Agreement.

 

“Real Property” has the meaning set forth in Section 3.9 of this Agreement.

 

“Retained Seller Liabilities” means those liabilities of the Company assigned to
and assumed by Seller prior to the Closing Date and which are set forth on
Schedule 2.2 attached hereto and any long term debt; Inter-Company Debt;
interest-bearing debt; interest payable; accrued dividends and bank overdrafts;
current income taxes; letters of credit; pension or post-retirement employee
benefit plans; severance payments pursuant to existing written agreements;
pre-Closing litigation; claims arising from pre-Closing occurrences; and
liabilities arising under Environmental Laws, including Third-Party Actions
related thereto, in accordance with and limited to the representations and
warranties contained in Section 3.20 of this Agreement and subject to
Section 11.4 of this Agreement.

 

“Returns” has the meaning set forth in Section 3.16 of this Agreement.

 

“Seller” means Syratech Corporation, a Delaware corporation and the parent of
the Company.

 

“Service Fee” has the meaning set forth in Section 5.7 of this Agreement.

 

“Seller Indemnified Parties” has the meaning set forth in Section 11.3 of this
Agreement.

 

“Shares” has the meaning set forth in the recitals.

 

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“Stockholder” has the meaning set forth in Section 3.8 of this Agreement.

 

“Subsidiary” of any Person means any corporation, partnership, joint venture,
association or other entity of which more than 50% (by number of vote) of the
voting stock or other equity interest at the time outstanding shall at the time
be owned by such Person directly or indirectly through one or more
intermediaries.

 

“Taxes” has the meaning set forth in Section 3.16 of this Agreement.

 

“Tax Actions” has the meaning set forth in Section 3.16 of this Agreement.

 

“Welfare Benefit Plans” has the meaning set forth in Section 3.13(a) of this
Agreement.

 

“Working Capital Reconciliation Payment” has the meaning set forth in
Section 2.4(b)(ii) of this Agreement.

 

ARTICLE 2

 

PURCHASE AND SALE

 

Section 2.1.                                   Purchase and Sale.  Upon the
terms and subject to the satisfaction or waiver, if permissible, of all the
conditions set forth herein, on the Closing Date, Seller will sell, transfer,
convey, assign and deliver to Purchaser the Shares, and Purchaser will purchase,
accept and take assignment of the Shares from the Seller free and clear of all
Encumbrances.

 

Section 2.2.                                   Retained Seller Liabilities.

 

Seller shall retain all Retained Seller Liabilities.  Notwithstanding the
foregoing, and in addition, on or before the Closing Date, and prior to the
purchase of the Shares by Purchaser, Seller and the Company will execute and
enter into an Assignment and Assumption Agreement substantially in the form of
Exhibit A attached hereto (the “Assumption Agreement”), pursuant to which
Company shall assign, and Seller shall assume the Retained Seller Liabilities
specifically set forth on Schedule 2.2.

 

Section 2.3.                                   Purchase Price.  At Closing,
Purchaser shall pay Seller the Purchase Price.

 

Section 2.4.                                   Company Cash and Working Capital
Adjustment.  For purposes of the Agreement the term “Net Working Capital” shall
mean, at the time of computation, the amount determined by adding the Company’s
Accounts Receivable and inventory less current liabilities, provided however,
and for purposes of clarification, the definition of Net Working Capital
specifically excludes cash on hand (“Company Cash”) and cash in transit.

 

Subject to adjustment based on changes in Net Working Capital as of December 31,
2003 (the “12/31 Net Working Capital”) as reported on the Company’s December 31,
2003 balance

 

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sheet (the “12/31 Balance Sheet”) attached hereto as Schedule 2.4, and the
Company’s actual Closing Date Cash (as defined below) and Closing Date Net
Working Capital (the “Closing Date Net Working Capital”), each as reported on
the Company’s Closing Date balance sheet (the “Closing Date Balance Sheet”),
Seller and Purchaser agree as follows:

 

(a)                                  Seller Retention of Accounts Receivables,
Closing Date Cash and Closing Date Net Working Capital Requirements.  Subject to
Section 2.4(b), Seller has taken a preliminary pre-Closing distribution of
Accounts Receivable in the amount of Fifteen Million Five Hundred Three Thousand
Seven Hundred Eight Dollars and Seventy Six Cents ($15,503,708.76). The Accounts
Receivable distribution shall be adjusted on or prior to the Closing Date to
ensure that, on the Closing Date, and as reflected on the estimated Closing Date
Balance Sheet attached hereto as Schedule 2.4(a) (the “Estimated Closing Date
Balance Sheet”), the Company’s Closing Date Balance Sheet shall have or the
Seller shall cause the Company’s Closing Date Balance Sheet (by return of 
distribution) to have:

 

(i)                                     not less than Three Million One Hundred
Fifty Two Thousand Seven Hundred Eight Dollars and Seventy Six Cents
($3,152,708.76) in Company Cash (the “Closing Date Cash”) which amount shall
have been, on or before the Closing Date, and as a condition to Closing,
deposited by Seller in a Company bank account designated by, or acceptable to,
Purchaser and controlled by the Company (the “Company Bank Account”).
Notwithstanding the foregoing, if the Closing Date does not occur on April 12,
2004, the Closing Date Cash requirement shall be reduced by Seventeen Thousand
Dollars ($17,000.00) per business day until the actual Closing Date occurs
unless Seller fails to comply with all of the material terms and conditions
(including deliverables) of this Agreement, in which case no adjustment shall be
made in the Closing Date Cash until the date in which Seller can demonstrate it
is in full compliance, and such date is prior to the Closing Date.

 

(ii)                                  not less than One Million Seventy Seven
Thousand Dollars ($1,077,000.00) in Accounts Receivable (the “Minimum Closing
Date Accounts Receivable”).

 

(iii)                               not less than Seven Million Five Hundred
Forty Thousand Dollars ($7,540,000.00) in inventory (the “Minimum Closing Date
Inventory”).

 

(iv)                              not more than Three Hundred Sixty Thousand
Dollars ($360,000.00) in current liabilities (the “Maximum Closing Date Current
Liabilities”).

 

As a result, on the Closing Date, the Company shall have deposited the Closing
Date Cash in the Company Bank Account and shall have a minimum Closing Date Net
Working Capital of Eight Million Two Hundred Fifty Seven Thousand Dollars
($8,257,000.00) (the “Minimum Closing Date Net Working Capital”).

 

In addition, on the Closing Date, the Company shall have (i) no intercompany
debt with Seller or any of its affiliates or Subsidiaries (“Inter-Company
Debt”), which debt shall not be

 

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forgiven and shall have been satisfied in full by Seller pursuant to a Seller
capital contribution to the Company, (ii) no long term debt and (iii) no bank
accounts with negative book balances.

 

(b)                                 Determination of Closing Date Cash and
Closing Date Net Working Capital.  In order to confirm the amount of the actual
Closing Date Cash and Closing Date Net Working Capital, within sixty (60) days
following the Closing Date, Purchaser shall prepare and deliver to Seller the
Closing Date Balance Sheet and the Closing Date Net Working Capital Statement
for the Company dated as of the Closing Date.  The Closing Date Balance Sheet
and the Closing Date Net Working Capital Statement (i) shall be prepared based
on a consistent application of the accounting principles employed by the Company
in the preparation of the 12/31 Balance Sheet and the Estimated Closing Date
Balance Sheet, (ii) shall not take into consideration any events occurring after
the Closing Date and (iii) shall reflect any adjustments necessary to insure (a)
the Closing Date Cash has been delivered in full and deposited into the Company
Bank Account and whether any Company bank account reported negative book
balances and (b) the Closing Date Net Working Capital has the Minimum Closing
Date Accounts Receivable, Minimum Closing Date Inventory and the Maximum Closing
Date Current Liabilities.  Purchaser shall permit Seller’s accountants, at
Seller’s expense, reasonable access to and review of all work papers and other
pertinent information used in connection with the preparation of the Closing
Date Balance Sheet and the Closing Date Net Working Capital Statement.

 

(i)                                     Closing Date Cash.  If it is determined
that there is any shortfall in the amount of Closing Date Cash or any negative
book balance in any Company bank account, then, unless there is a dispute as
contemplated by Section 2.4(c)(i) below, the Seller shall return to the Company
an amount equal to the difference between the amount by which the Company Bank
Account had less than the Closing Date Cash plus an amount equal to any negative
book balances in any Company bank account as of the Closing Date (the “Cash
Reconciliation Payment”). Seller shall return the Cash Reconciliation Payment,
if any, together with interest thereon at the prime interest rate as reported in
The Wall Street Journal on the Closing Date, calculated on an annual basis but
pro rated for the actual number of days for which interest is to be paid (the
“Prime Interest Rate”), plus Two Percent (2.0%) from the Closing Date to the
date of payment, by wire transfer of same-day funds, not later than the third
(3rd) business day after determination of the actual Closing Date Cash, to an
account that the Company shall designate.

 

(ii)                                  Closing Date Net Working Capital.   If the
actual Closing Date Net Working Capital as shown on the Closing Date Balance
Sheet is more than Fifty Thousand Dollars ($50,000.00) less than the Minimum
Closing Date Net Working Capital, then, unless there is a dispute as
contemplated in Section 2.4(c)(ii) below, Seller shall return to the Company the
full amount of the difference between the amount by which the actual Closing
Date Net Working Capital as shown on the Closing Date Net Working Capital
Statement is less than the Minimum Closing Date Net Working Capital (the
“Working Capital Reconciliation Payment”).  Seller shall return the Working
Capital Reconciliation Payment, if any, together with interest thereon at the
Prime Interest Rate plus Two Percent (2.0%) from the Closing Date to the date of
payment, by wire transfer

 

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of same-day funds, not later than the third (3rd) business day after
determination of the actual Closing Date Net Working Capital, to an account that
the Company shall designate.

 

(c)                                  Disputes.

 

(i)                                     Closing Date Cash.  If Seller notifies
Purchaser in writing within ten (10) business days after receipt of the Closing
Date Balance Sheet that Seller disagrees with the determination of the Closing
Date Cash, and such notice states with reasonable specificity the basis for such
disagreement, Seller and Purchaser shall attempt in good faith to resolve such
dispute as soon as possible.  If the parties are unable to resolve such dispute
within thirty (30) days after Purchaser’s receipt of such notice, Seller and
Purchaser shall as soon as reasonably practicable thereafter jointly submit such
dispute for arbitration to an independent certified public accounting firm
mutually acceptable to Seller and Purchaser (or, if the parties cannot agree on
such an arbitrating accounting firm, to KPMG’s Atlanta office (the “Arbitrating
Accounting Firm”) for the purpose of resolving the dispute set forth in such
notice. The review performed by the Arbitrating Accounting Firm shall be limited
to the issues identified in the notice, which issues shall only relate to
whether the amount of the Closing Date Cash was in fact in the Company Bank
Account and whether the Company had any other Company bank accounts with
negative book balances. The Arbitrating Accounting Firm shall review and decide
if any return is required to be made by Seller to the Company and, if so, how
much within thirty (30) days after such submission.  The decision of the
Arbitrating Accounting Firm shall be set forth in writing and delivered to
Seller and Purchaser. The decision of the Arbitrating Accounting Firm shall be
final and binding on Seller and Purchaser.  Not later than the third (3rd)
business day after delivery of the final and binding Closing Date Cash amount by
the Arbitrating Accounting Firm, Seller shall return to the Company all amounts
then due, as determined by the Arbitrating Accounting Firm, together with
interest thereon at the Prime Interest Rate plus Two Percent (2.0%) from the
Closing Date to the date of payment, by wire transfer of same-day funds to an
account that the Company shall designate to Seller.

 

(ii)                                  Closing Date Working Capital.  If Seller
notifies Purchaser in writing within ten (10) business days after receipt of the
Closing Date Balance Sheet that Seller disagrees with the determination of the
Closing Date Net Working Capital as shown on the Closing Date Balance Sheet and
the Closing Date Net Working Capital Statement (and Minimum Closing Date
Accounts Receivable, Minimum Closing Date Inventory and Maximum Current
Liabilities) and that such dispute would result in an adjustment to the Closing
Date Net Working Capital reflected on the Closing Date Balance Sheet and the
Closing Date Net Working Capital Statement of at least Fifty Thousand Dollars
($50,000.00), and such notice states with reasonable specificity the basis for
such disagreement, Seller and Purchaser shall attempt in good faith to resolve
such dispute as soon as possible.  If the parties are unable to resolve such
dispute within thirty (30) days after Purchaser’s receipt of such notice, Seller
and Purchaser shall as soon as reasonably practicable thereafter jointly submit
such dispute for arbitration to an independent certified public accounting firm
mutually acceptable to Seller and Purchaser

 

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or, if the parties cannot agree on such an arbitrating accounting firm, the
Arbitrating Accounting Firm for the purpose of resolving the dispute set forth
in such notice.  The review performed by the Arbitrating Accounting Firm shall
be limited to the issues identified in the notice, which issues shall only
relate to whether the Closing Date Net Working Capital (and Minimum Closing Date
Accounts Receivable, Minimum Closing Date Inventory and Maximum Closing Date
Current Liabilities), as shown on the Closing Date Balance Sheet and Closing
Date Net Working Capital Statement, have been calculated correctly based on a
consistent application of the accounting principles employed by the Company in
the preparation of the 12/31 Balance Sheet, the 12/31 Net Working Capital
Statement and the Estimated Closing Date Balance Sheet. The Arbitrating
Accounting Firm shall review and decide the issue or issues that are the subject
of such dispute as specified in such notice within thirty (30) days after such
submission.  The decision of the Arbitrating Accounting Firm shall be set forth
in writing and delivered to Seller and Purchaser. The decision of the
Arbitrating Accounting Firm shall be final and binding on Seller and Purchaser,
and the Closing Date Net Working Capital reflected on the Closing Date Balance
Sheet and Closing Date Net Working Capital Statement (and Minimum Closing Date
Accounts Receivable, Minimum Closing Date Inventory and Maximum Closing Date
Current Liabilities), as adjusted to reflect the determination of the
Arbitrating Accounting Firm, shall constitute the final and binding “Closing
Date Net Working Capital” (and Minimum Closing Date Accounts Receivable, Minimum
Closing Date Inventory and Maximum Closing Date Current Liabilities) for
purposes of Section 2.4(b); provided, that the 12/31 Net Working Capital
reflected on the 12/31 Net Working Capital Statement shall not be adjusted
unless and until the decision of the Arbitrating Accounting Firm would result in
an adjustment to the 12/31 Net Working Capital shown on the 12/31 Net Working
Capital Statement submitted by Seller of at least Fifty Thousand Dollars
($50,000.00).  If the final and binding Closing Date Net Working Capital as
determined by the Arbitrating Accounting Firm is less than the Minimum Closing
Date Working Capital (or the Minimum Closing Date Accounts Receivable and/or
Minimum Closing Date Inventory are less than the Closing Date Accounts
Receivable or Inventory respectively or the current liabilities are more than
the Maximum Closing Date Current Liabilities) then, not later than the third
(3rd) business day after delivery of the final and binding Closing Date Net
Working Capital by the Arbitrating Accounting Firm, Seller shall return to the
Company an amount equal to the difference between the final and binding Minimum
Closing Date Working Capital (and/or Minimum Closing Date Accounts Receivable
and/or Minimum Closing Date Inventory and/or Maximum Closing Date Current
Liabilities) and the final and binding Closing Date Net Working Capital (and/or
the Closing Date Accounts Receivable and/or the Closing Date Inventory and/or
Maximum Closing Date Current Liabilities, respectively) as determined by the
Arbitrating Accounting Firm, together with interest thereon at the Prime
Interest Rate plus Two Percent (2.0%) from the Closing Date to the date of
payment, by wire transfer of same-day funds to an account that the Company shall
designate to Seller. If the final and binding Closing Date Net Working Capital
(and Minimum Closing Date Accounts Receivable, Minimum Closing Date Inventory
and Maximum Closing Date Current Liabilities) as determined by the Arbitrating
Accounting Firm is greater or less than (in the case of the Maximum Closing Date
Current Liabilities)

 

9

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the 12/31 Net Working Capital, then no adjustment shall occur. The fees and
costs of the Arbitrating Accounting Firm shall be shared equally by Purchaser
and Seller.

 

Section 2.5.                                   The Closing.  The Closing shall
be effective as of 12:01 a.m. Eastern Standard Time on the Closing Date.  It is
the intent of the parties that this Agreement, and all documents and agreements
executed in connection herewith, be effective as of the Closing Date.  The
parties agree to execute and deliver such additional documents and agreements as
may be necessary to effect the intent of the parties expressed herein,
including, transferring the Shares to the appropriate parties and causing
liabilities to be paid by the appropriate parties.

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller and the Company hereby jointly and severally represent and warrant to
Purchaser as follows (with the understanding that Purchaser is relying
materially on each such representation and warranty in entering into and
performing this Agreement):

 

Section 3.1.                                   Corporate Status of Seller and
the Company.  Seller is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware and has the full power and
authority to own, lease and operate properties and to carry on its business as
now conducted and as proposed to be conducted.  The Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of North Carolina and has the full power and authority to own, lease and
operate properties and to carry on its business as now conducted and as proposed
to be conducted.  Complete and correct copies of the certificate of
incorporation and bylaws of the Company and all amendments thereto have been
delivered to Purchaser and have been certified by the Secretary of the Company. 
The Company is qualified to do business as a foreign corporation and is in good
standing in the states set forth on Schedule 3.1 attached hereto. To the
Knowledge of Seller, the Company has not received any notice or communication
from any other jurisdiction to the effect that it is or may be required to
qualify to do business as a foreign corporation in any such jurisdiction, except
as set forth on Schedule 3.1.

 

Section 3.2.                                   Capitalization; Ownership of
Shares.  The authorized capital stock of the Company consists of One Thousand
(1,000) shares of common stock, par value One Dollar ($1.00) per share, of which
One Thousand (1,000) shares are issued and outstanding.  No shares of preferred
stock are issued or outstanding.  All such issued and outstanding Shares are
duly authorized, validly issued, fully paid, and nonassessable.  Except for the
Shares, there are, and, as of the Closing Date there will be, no other equity or
debt securities of the Company outstanding.  All of the Shares are owned of
record and beneficially by Seller.  None of the Shares were issued or will be
transferred under this Agreement in violation of any preemptive or preferential
rights of any person.

 

Section 3.3.                                   No Encumbrance on Shares.  Seller
is the true and lawful owner, of record and beneficially, of the Shares, free
and clear of any Encumbrance; none of the Shares is subject to any outstanding
options, warrants, calls, or similar rights of any other person to acquire the
same; none of the Shares is and as of the Closing Date will be subject to any
restrictions on

 

10

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transfer thereof; and Seller has and as of the Closing Date will have the full
power and authority to convey, and will convey to Purchaser at the Closing, good
and marketable title to the Shares, free and clear of any Encumbrances.

 

Section 3.4.                                   Other Rights to Acquire Capital
Stock. There are no authorized or outstanding warrants, options, or rights of
any kind to acquire from the Company or from Seller any equity or debt
securities of the Company or securities convertible into or exchangeable for
equity or debt securities of the Company.

 

SECTION 3.5.                                   SUBSIDIARIES.  THE COMPANY HAS NO
SUBSIDIARIES.

 

Section 3.6.                                   Due Authorization; No Conflicts. 
Seller and the Company have the full corporate power and corporate authority to
enter into and perform this Agreement and each other agreement, instrument, and
document required to be executed by Seller and the Company in connection
herewith.  The execution, delivery, and performance of this Agreement and such
other agreements, instruments, and documents have been duly authorized by the
Board of Directors of each of Seller and the Company.  This Agreement has been
duly and validly executed and delivered by each of the Company and Seller, in
each case, and constitutes a valid and binding obligation of the Company and
Seller, in each case enforceable in accordance with its terms.  The execution,
delivery, and performance of (a) this Agreement by the Company and Seller will
not (i) to the Knowledge of Seller, violate any federal, state, county, or local
law, rule, or regulation applicable to any such party, or their respective
properties, (ii) to the Knowledge of Seller, violate or conflict with, or permit
the cancellation of, any agreement to which any such party, is a party, or by
which any of them or any of their respective properties is bound, or result in
the creation of any lien, security interest, charge, or encumbrance upon any of
such properties, (iii) permit the acceleration of the maturity of any
indebtedness, or indebtedness secured by the property of, any such party, or
(iv) violate or conflict with any provision of the certificate of incorporation
or bylaws of the Company or Seller.

 

Section 3.7.                                   Financial Statements. The
following Financial Statements (herein so called) of the Company are attached
hereto on Schedule 3.7:

 

(A)                                  BALANCE SHEETS AND STATEMENTS OF INCOME AND
CASH FLOW OF THE COMPANY AS OF AND FOR EACH OF THE YEARS ENDED DECEMBER 31,
2002, 2001, AND 2000.

 

(B)                                 THE 12/31 BALANCE SHEET, 12/31 NET WORKING
CAPITAL STATEMENT AND STATEMENTS OF INCOME AND CASH FLOW OF THE COMPANY AS OF
AND FOR THE YEAR ENDED DECEMBER 31, 2003 (COLLECTIVELY WITH (A) ABOVE AND (C)
BELOW, THE “FINANCIAL STATEMENTS”).

 

(C)                                  THE ESTIMATED CLOSING DATE BALANCE SHEET.

 

The Financial Statements have been prepared in accordance with GAAP consistently
applied and fairly present the financial position and results of operations
(except for the omission of footnotes) of the Company as of the indicated dates
and for the indicated periods.  Except to the extent reflected or provided for
in the 12/31 Balance Sheet, the Company has no liabilities or obligations
(whether absolute, contingent, or otherwise), other than open-account current
liabilities incurred in the ordinary course of business subsequent to
December 31, 2003; and to

 

11

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the Knowledge of the Company and Seller, there exists no basis for the assertion
of any such liability or obligation.  Since December 31, 2003, there has been no
material adverse change in the financial position, assets, results of
operations, or business of the Company. To the Knowledge of the Company and
Seller, there are no pending or proposed statutes, rules, or regulations, nor
any current or pending developments or circumstances, which could have a
material adverse effect on the financial position, assets, results of
operations, or business of the Company.

 

Section 3.8.                                   Conduct of Business; Certain
Actions.  Except as set forth on Schedule 3.8, since December 31, 2003, the
Company has not (a) paid or declared any dividend or distribution or purchased
or retired any indebtedness from any holder of capital stock of the Company (a
“Stockholder”) and has not purchased, retired, or redeemed any capital stock
from any Stockholder, (b) except for payments authorized by this Agreement,
increased the compensation of any of the directors, officers, or key employees
or sales representatives of the Company or, except for wage and salary increases
made in the ordinary course of business and consistent with the past practices
of the Company, increased the compensation of any other employees or sales
representatives of the Company, (c) made any capital expenditures exceeding Ten
Thousand Dollars ($10,000.00) individually or Twenty Five Thousand Dollars
($25,000.00) in the aggregate, (d) sold any asset (or any group of related
assets) in any transaction (or series of related transactions) in which the
purchase price for such asset (or group of related assets) exceeded Ten Thousand
Dollars ($10,000.00) individually or Twenty Five Thousand Dollars ($25,000.00)
in the aggregate (other than sales of inventory in the ordinary course of
business), (e) discharged or satisfied any Encumbrance or paid any obligation or
liability, absolute or contingent, other than current liabilities incurred and
paid in the ordinary course of business, (f) made or guaranteed any loans or
advances to any party whatsoever, (g) suffered or permitted any material
Encumbrance to be created against or upon any of the assets of the Company, real
or personal, tangible or intangible, (h) cancelled, waived, or released any of
the Company’s debts, rights, or claims against third parties, (i) made any
change in the method of accounting of the Company, (j) made any investment or
commitment therefore in any person, business, corporation, association,
partnership, joint venture, trust, or other entity, (k) amended or experienced a
termination of any material contract, agreement, lease, franchise, or license to
which the Company is a party, except in the ordinary course of business, (l)
incurred or assumed any indebtedness (whether directly or by way of guaranty or
otherwise) for borrowed money, except in the ordinary course of business, (m)
suffered any material damage, destruction, or loss (whether or not covered by
insurance) to any assets, or (n) materially accelerated the collection of
Accounts Receivable or decelerated payment of accounts payable, except in the
ordinary course of business consistent with past practice.

 

Section 3.9.                                   Properties.

 

(a)  The Company has good and marketable title to and owns the real property
listed on Schedule 3.9(a) free and clear of all Encumbrances (the “Real
Property”).  The Company is not a party to any real property lease, sublease or
assignment, either as tenant or landlord.

 

(b)                                 Attached hereto as Schedule 3.9(b) is a list
and description of all personal properties (including inventory but excluding,
in the case of personal properties other than inventory, any asset having a book
value of less than Twenty Five Thousand Dollars

 

12

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($25,000.00) as of December 31, 2003) owned or leased by the Company or the
Seller as of the date hereof and which are utilized by the Company.   To the
Knowledge of Seller, the personal properties are free and clear of all
Encumbrances.  Except as set forth on Schedule 3.9(b), to the Knowledge of
Seller, the physical and personal properties owned by the Company in the conduct
of its business are in good operating condition and repair, normal wear and tear
excepted, and are free from material defects.

 

Section 3.10.                             Licenses and Permits.  To the
Knowledge of Seller, attached hereto as Schedule 3.10 is a list of all federal,
state, county, and local governmental licenses, certificates, and permits held
or applied for by the Company and necessary to operate the business in the
normal course.  To the Knowledge of Seller, the Company has complied in all
material respects, and is in compliance in all material respects, with the terms
and conditions of all such licenses, certificates, and permits, and, to the
Knowledge of Seller, no material violation of any such licenses, certificates,
or permits has occurred.  To the Knowledge of Seller, no additional license,
certificate, or permit is required from any federal, state, county, or local
governmental agency or body thereof in connection with the conduct of the
business of the Company, including with respect to any compliance with any
Environmental Laws, which, if not obtained, would materially and adversely
affect the business or properties of the Company.  No claim has been made by any
Governmental Authority (and, to the Knowledge of Seller, no such claim is
anticipated) to the effect that a license, permit, or order is necessary in
respect of the business conducted by the Company.

 

Section 3.11.                             Intellectual Property Rights.  To the
Knowledge of Seller, Schedule 3.11 hereto contains a true and complete list of
(a) all patents, patent applications, trademarks, trademark registrations, and
trademark applications service marks, service mark registrations, and service
mark applications, trade names, and copyrights, copyright registrations, and
copyright applications (collectively, “Intellectual Property”) owned by the
Company.  To the Knowledge of Seller, the Company has good and indefeasible
title, free and clear of any Encumbrances, to, owns or possesses adequate and
enforceable licenses or other rights to use, all Intellectual Property.  The
Company has not granted to any third party exclusive licenses or options to
obtain exclusive licenses under any of the Intellectual Property owned by the
Company listed on Schedule 3.11 hereto.

 

Section 3.12.                             Compliance with Laws.  To the
Knowledge of Seller, the Company has complied in all material respects, and is
in compliance in all material respects, with all federal, state, county, and
local laws, regulations, and orders applicable to its business and has filed
with the proper authorities all statements and reports required by the laws,
regulations, and orders to which the Company or any of its properties or
operations are subject.  To the Knowledge of Seller, no claim has been made by
any Governmental Authority (and, to the Knowledge of Seller, no such claim is
anticipated) to the effect that the business conducted by the Company fails to
comply, in any respect, with any law, rule, regulation, or ordinance.

 

SECTION 3.13.                             EMPLOYEE BENEFIT MATTERS.

 

(A)                                  WELFARE BENEFIT PLANS.  ATTACHED HERETO AS
SCHEDULE 3.13(A) IS A LIST OF EACH “EMPLOYEE BENEFIT PLAN,” AS DEFINED IN
SECTION 3(1) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 (AND ANY
SECTIONS OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”),

 

13

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which are amended by it) and all regulations promulgated thereunder, as the same
have from time to time been amended (“ERISA”) with respect to which the Company
has any obligation or liability (contingent or otherwise), including any
multiemployer welfare plan (within the meaning of section 3(37) of ERISA) (such
employee welfare benefit plans being hereinafter collectively referred to as the
“Welfare Benefit Plans”).

 

(B)                                 PENSION BENEFIT PLANS.  ATTACHED HERETO AS
SCHEDULE 3.13(B) IS A LIST OF EACH “EMPLOYEE PENSION BENEFIT PLAN” (AS DEFINED
IN SECTION 3(2) OF ERISA) WITH RESPECT TO WHICH THE COMPANY HAS ANY OBLIGATION
OR LIABILITY (CONTINGENT OR OTHERWISE), INCLUDING ANY MULTIEMPLOYER PLAN (AS
DEFINED IN SECTION 3001(A)(3) OF ERISA) (SUCH EMPLOYEE PENSION BENEFIT PLANS
BEING HEREINAFTER COLLECTIVELY REFERRED TO AS THE “PENSION BENEFIT PLANS”). 
WITH RESPECT TO EACH PENSION BENEFIT PLAN, INCLUDING AN “INDIVIDUAL ACCOUNT
PLAN” (AS DEFINED IN SECTION 3(34) OF ERISA), SCHEDULE 3.13(B) ATTACHED HERETO
ACCURATELY SETS FORTH (X) THE AMOUNT OF AND LIABILITY OF THE COMPANY FOR
CONTRIBUTIONS DUE WITH RESPECT TO SUCH PENSION BENEFIT PLAN AS OF MARCH 31,
2004, AND (Y) THE AMOUNT OF ANY CONTRIBUTION PAID WITH RESPECT TO SUCH PENSION
BENEFIT PLAN AS OF MARCH 31, 2004.

 

(C)                                  BENEFIT PLAN COMPLIANCE.  TO THE KNOWLEDGE
OF SELLER, ALL OF THE WELFARE BENEFIT PLANS AND PENSION BENEFIT PLANS AND ANY
RELATED TRUST AGREEMENTS OR ANNUITY CONTRACTS (OR ANY OTHER FUNDING INSTRUMENTS)
CURRENTLY COMPLY WITH THE PROVISIONS OF ERISA, THE CODE (INCLUDING
SECTION 410(B) OF THE CODE RELATING TO COVERAGE WHERE REQUIRED IN ORDER TO BE
TAX-QUALIFIED UNDER SECTION 401(A) OR 403(A) OF THE CODE) AND ALL OTHER
APPLICABLE LAWS AND REGULATIONS.  EACH PENSION BENEFIT PLAN THAT IS INTENDED TO
BE QUALIFIED UNDER SECTION 401 OF THE CODE IS SO QUALIFIED.

 

(D)                                 NO PROHIBITED TRANSACTIONS.  TO THE
KNOWLEDGE OF SELLER, NEITHER THE COMPANY NOR ANY OF ITS RESPECTIVE AGENTS OR
REPRESENTATIVES HAVE ENGAGED IN ANY TRANSACTION IN VIOLATION OF SECTION 406(A)
OR (B) OF ERISA (FOR WHICH NO EXEMPTION EXISTS UNDER SECTION 408 OF ERISA) OR
ANY “PROHIBITED TRANSACTION” (AS DEFINED IN SECTION 4975(C)(1) OF THE CODE) FOR
WHICH NO EXEMPTION EXISTS UNDER SECTION 4975(C)(2) OR (D) OF THE CODE WITH
RESPECT TO ANY WELFARE BENEFIT PLAN OR PENSION BENEFIT PLAN.

 

(E)                                  EFFECT OF CONSUMMATION.  TO THE KNOWLEDGE
OF SELLER, EXCEPT AS SET FORTH ON SCHEDULE 3.13(E), THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT WILL NOT: (I) ENTITLE ANY CURRENT
EMPLOYEE OF THE COMPANY TO SEVERANCE PAY OR UNEMPLOYMENT COMPENSATION, TO THE
KNOWLEDGE OF SELLER, NO FORMER EMPLOYEE, HAS ANY WRITTEN AGREEMENT WITH THE
COMPANY ENTITLING HIM OR HER TO ANY SUCH PAYMENT, OR (II) OTHERWISE ACCELERATE
THE TIME OF PAYMENT OR VESTING, OR INCREASE THE AMOUNT OF ANY COMPENSATION DUE
TO ANY CURRENT EMPLOYEE.

 

SECTION 3.14.                             CONTRACTS AND AGREEMENTS.  ATTACHED
HERETO AS SCHEDULE 3.14 IS A LIST OF ALL WRITTEN CONTRACTS, COMMITMENTS, LEASES,
AND OTHER AGREEMENTS (INCLUDING, WITHOUT LIMITATION, PROMISSORY NOTES, LOAN
AGREEMENTS, AND OTHER EVIDENCES OF INDEBTEDNESS) TO WHICH THE COMPANY IS A PARTY
OR BY WHICH THE COMPANY OR ITS PROPERTIES ARE BOUND, PURSUANT TO WHICH THE
OBLIGATIONS THEREUNDER OF EITHER PARTY THERETO ARE, OR ARE CONTEMPLATED AS
BEING, IN RESPECT OF ANY SUCH INDIVIDUAL CONTRACTS, COMMITMENTS, LEASES, OR
OTHER AGREEMENTS DURING THE TERM THEREOF, TWENTY FIVE THOUSAND DOLLARS
($25,000.00) OR GREATER, OR WHICH ARE OTHERWISE MATERIAL TO THE BUSINESS OF THE
COMPANY.  TO THE KNOWLEDGE OF SELLER, EACH SUCH CONTRACT, COMMITMENT, LEASE AND
OTHER

 

14

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agreement is in full force and effect, and the Company is not in default, and,
to the Knowledge of Seller, no other party thereto is in default (and no event
has occurred which, with the passage of time or the giving of notice, or both,
would constitute a default) under any of such contracts, commitments, leases, or
other agreements.  To the Knowledge of Seller, the Company has not waived any
material right under any such contracts, commitments, leases, or other
agreements.  The Company has not guaranteed any obligations of any other person.

 

Section 3.15.                             Claims and Proceedings.  Attached
hereto as Schedule 3.15 is a list and description of all claims, actions, suits,
proceedings, and investigations pending or, to the Knowledge of Seller,
threatened against or affecting the Company or any of its properties or assets,
at law or in equity, or before or by any Governmental Authority.  The Seller is
retaining all liabilities associated with or related to any such claims,
actions, suits, proceedings, and investigations disclosed on Schedule 3.15 or
otherwise existing as of the Closing Date or arising from any action of Seller
or the Company prior to the Closing Date.

 

Section 3.16.                             Taxes.

 

(a)                                  To the Knowledge of Seller, all federal,
foreign, state, county, and local income, gross receipts, excise, property,
franchise, license, sales, use, withholding, and other tax (collectively,
including any liability in respect thereof as a transferee or as an indemnitor,
guarantor, surety or in a similar capacity under any contract, arrangement,
agreement, understanding or commitment (whether oral or written) and together
with additional assessments, penalties and interest chargeable in connection
therewith, “Taxes”) returns, reports, and declarations of estimated tax
(collectively, “Returns”) which were required to be filed by the Company on or
before the Closing Date have been filed within the time and in the manner
provided by law, and, to the Knowledge of Seller, all such Returns are true and
correct and accurately reflect the Tax liabilities of the Company.  To the
Knowledge of Seller, there are no pending or threatened claims, assessments,
notices, proposals to assess, deficiencies, or audits, other than the current
audit of Seller which shall not have a material effect (collectively, “Tax
Actions”) with respect to any Taxes owed or allegedly owed by the Company. 
Other than the current audit, to the Knowledge of Seller, there is no basis for
any Tax Actions.  Except as set forth on Schedule 3.16, no Taxes other than as
set forth on the  Financial Statements are payable by the Company.
Notwithstanding the foregoing, all Taxes due and owing and any tax refunds for
any period prior to the Closing Date, including, but not limited to, any amounts
due and owing for the preparation and filing of the consolidated tax return of
Seller for the period ending on the Closing Date, shall be the responsibility
and obligation of Seller to pay and discharge, and, in the case of tax refunds,
to receive, and neither the Company nor Purchaser shall have any liability
related thereto.

 

(b)                                 Neither Seller nor the Company will claim
any Federal income tax loss or deduction on their tax return for the year ended
December 31, 2003 or the short period ended the Closing Date with regard to the
write-down of long-lived assets or inventory as described in Note 3 in the
financial statements included in Seller’s Annual Report on Form 10-K for the
year ended December 31, 2003.

 

Section 3.17.                             Bank Accounts.  Attached hereto as
Schedule 3.17 is a list of all banks or other financial institutions with which
the Company currently has an account or maintains a safe

 

15

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deposit box, showing the type and account number of each such account and safe
deposit box and the names of the persons authorized as signatories thereon or to
act or deal in connection therewith.  As of the Closing Date, the only bank
account of the Company shall be the Company Bank Account and such other bank
accounts as shall be mutually agreed upon by the parties.  As of the Closing
Date, the Company has no other active bank accounts and no bank account with a
negative book balance.

 

Section 3.18.                             Certain Consents.  To the Knowledge of
Seller, except as set forth on Schedule 3.18 attached hereto, no action,
consent, or approval of, or filing with (each a “Consent”), any Governmental
Authority or third party is required in connection with the execution, delivery,
or performance of this Agreement (or any agreement or other document executed in
connection herewith by the Company or Seller) or the transactions contemplated
hereby or thereby.

 

SECTION 3.19.                             BROKERS.  NEITHER THE COMPANY NOR
SELLER HAS ENGAGED, OR CAUSED ANY LIABILITY TO BE INCURRED TO, ANY FINDER,
BROKER, OR SALES AGENT IN CONNECTION WITH THE EXECUTION, DELIVERY, OR
PERFORMANCE OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 3.20.                             Environmental Matters.  Except as
described on Schedule 3.20 attached hereto, (a) there is no material uncured
violation of any Environmental Law by, at, or from any site or facility
currently owned or operated by the Company and except for federally permitted
releases, there have been no material unreported releases of oil or Hazardous
Substances by, at or from any site or facility currently owned or operated by
the Company, or resulting from shipments by any such facility; (b) to the
Knowledge of Seller, no Hazardous Substances are present at, on, or under the
Real Property, or have been disposed of at any of the Real Property, excepting
therefrom any such disposals which have been resolved in compliance with law;
(c) the Company possesses all material permits, licenses, approvals and other
authorizations required by Environmental Laws (collectively, “Environmental
Permits”) for its operations and such Environmental Permits are valid, current
and, to the Knowledge of Seller, there is no action pending and there are no
pending notices or written complaints received to revoke, modify, terminate or
amend any Environmental Permit; (d) the Company and its respective properties
are now in material compliance with (i) all Environmental Laws and (ii) all
requirements of Environmental Permits; (e) to the Knowledge of Seller, all
emission control equipment installed at the Real Property is pursuant to
requirements of Environmental Laws or Environmental Permits, and is operated in
accordance with the requirements of Environmental Laws; (f) to the Knowledge of
Seller, the Company has not received written notification that it is or there is
a basis for it to become, subject to any claim, action, obligation, proceeding,
investigation or evaluation, directly or indirectly relating to any of its
current or past operations or any of its currently operated properties, or
formerly owned or leased properties where such claims, actions, obligations,
proceedings, investigations, or evaluations have not been resolved, arising
under or pursuant to Environmental Laws which address pollution or protection of
the environment; and (g) the Company has not entered into any agreement with any
Governmental Authority or other person by which responsibility was assumed by
the Company or Seller, either directly or indirectly, for the conduct of any
investigation or remediation of environmental conditions.  Except as described
on Schedule 3.20 attached hereto, to the Knowledge of Seller, there are no
underground storage tanks, and there have been no releases from underground
storage tanks, located on the Real Property.  The Company and Seller have
provided Purchaser with copies of

 

16

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all environmental, health or safety assessments, investigations or other reports
relating to any Real Property that are in the Company’s or Seller’s possession,
custody or control.

 

Section 3.21.  Insurance.  All  pre-Closing insurance policies in respect of
Company are with solvent insurance carriers, are current in terms of premium
payments, and Seller agrees that Purchaser or Company after the Closing Date may
have access to such applicable insurance policies in the event that any claims
are brought against the Company resulting from pre-Closing occurrences.  In
addition, Seller shall continue to provide periodic loss summaries upon written
request by the Company or its carriers for future insurance policy renewals.

 

SECTION 3.22.                             CONTROLLED GROUP LIABILITY.  TO THE
KNOWLEDGE OF SELLER, THE COMPANY IS NOT AND WILL NOT BE SUBJECT TO ANY LIABILITY
ON ACCOUNT OF THE COMPANY AND SELLER HAVING BEEN AFFILIATED, PRIOR TO THE
CLOSING DATE, DIRECTLY OR INDIRECTLY, WITH ANY OTHER ENTITY OR PERSON UNDER CODE
SECTION 414, ERISA SECTION 4001 OR ANY SIMILAR FOREIGN LAW.

 

Section 3.23.                             Insolvency.  The transactions
contemplated hereby will not render Seller insolvent or subject Seller to any
voluntary or involuntary proceedings seeking liquidation, reorganization or
other relief under any bankruptcy or other similar law now or hereafter in
effect, or cause Seller to seek the appointment of a trustee, receiver,
liquidator or custodian of it or any part of its property.

 

ARTICLE 4

 

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser represents and warrants to, Seller that:

 

Section 4.1.                                   Status of Purchaser.  Purchaser
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has the full power and authority to own,
lease and operate properties and to carry on its business as now conducted and
as proposed to be conducted.

 

Section 4.2.                                   Authority.  The execution,
delivery and performance of this Agreement by Purchaser (i) have been duly
authorized by all necessary action on the part of Purchaser, (ii) do not and
will not violate or conflict with or result in any default under any agreement
or other instrument or any court order, judgment or decree to which Purchaser is
a party or by which Purchaser is bound, (iii) will not violate any federal,
state, county, or local law, rule, or regulations applicable to Purchaser, and
(iv) shall not require any consent, approval, authorization or permit of, or
filing with or notification to, any federal, state or local government’s
administrative or judicial authorities.  Purchaser has full legal capacity,
power and authority to enter into and perform this Agreement.

 

Section 4.3.                                   Capitalization; Ownership of
Shares. The authorized capital stock of Purchaser consists of Five Hundred
Thousand (500,000) shares of common stock, par value One Cent ($0.01) per share,
of which One Hundred (100) shares are issued and outstanding.  No

 

17

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shares of preferred stock are issued or outstanding.  All such issued and
outstanding Shares are duly authorized, validly issued, fully paid, and
nonassessable.

 

Section 4.4.                                   Brokers, Finders.  No agent,
broker, investment banker or other person or entity acting on behalf of
Purchaser, or under its authority, is or will be entitled to any broker’s or
finder’s fee or any other commission or similar fee from Purchaser, directly or
indirectly, in connection with the transactions contemplated by this Agreement.

 

ARTICLE 5

 

COVENANTS OF SELLER

 

As an inducement to enter into and perform this Agreement, Seller and Company
covenant and agree with Purchaser as follows:

 

Section 5.1.                                   Licenses, Permits and Approvals.
The Company shall assist Purchaser as reasonably required in obtaining or
transferring the licenses, permits, authorization and approvals necessary or
appropriate for the operation of the Company on and after the Closing Date.

 

Section 5.2.                                   Inspection.  From the date hereof
to the Closing Date, the Company shall give and cause the Company to give to
Purchaser and its officers, attorneys, accountants, and representatives free,
full, and complete access during reasonable business hours to all books,
records, tax returns, files, correspondence, personnel, facilities, and
properties of the Company; provide Purchaser and its officers, attorneys,
accountants, and representatives all information and material pertaining to the
business and affairs of the Company as Purchaser may deem necessary Any
investigation by Purchaser or its officers, attorneys, accountants, or
representatives shall not in any manner affect any of the representations and
warranties of the Company and Seller contained herein.  Notwithstanding the
foregoing sentence, Purchaser is not aware of any facts or circumstances that
would cause Purchaser to assert any claim for indemnification based upon the
representations and warranties of the Company and Seller.

 

Section 5.3.                                   Compliance.  From the date hereof
until the Closing Date, neither the Company nor Seller shall take or fail to
take any action which would cause any of the representations and warranties made
by Company and Seller herein to be untrue or incorrect as of the Closing Date.

 

Section 5.4.                                   Satisfaction of All Conditions
Precedent.  From the date hereof to the Closing Date, the Company and Seller
shall use their respective best efforts to cause all conditions precedent to the
obligations of Purchaser hereunder to be satisfied by the Closing Date.

 

Section 5.5.                                   Exclusivity.  Neither Seller nor
the Company will authorize or permit any of its officers, directors, employees
or agents to directly or indirectly solicit, initiate or encourage any inquiries
relating to, or the making of any proposal which constitutes, a “takeover
proposal” (as defined below, or recommend or endorse any takeover proposal, or
participate in any discussions or negotiations, or provide any party with any
nonpublic information, relating to any

 

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such takeover proposal or otherwise facilitate any effort to attempt to make or
implement a takeover proposal.  As used in this Agreement, “takeover proposal”
shall mean any proposal for the sale of a substantial equity interest in, or a
substantial portion of the assets of, the Company, other than the transactions
contemplated by this Agreement.

 

Section 5.6.                                   Information Technology Transfer. 
For a period not to exceed forty-five (45) days after the Closing Date, Seller
agrees, if feasible and pursuant to existing third-party agreements, to permit
the Company to continue to use its information technology services, including
but not limited to its email services and other software and document processing
services currently utilized by the Company in the normal course and as set forth
on Schedule 5.6 attached hereto.

 

Section 5.7.                                   Overseas Sourcing Operations.

 

(a)                                  Provision of Sourcing Operations Services. 
Seller agrees to assist Purchaser and the Company in the transition of the
Company’s overseas sourcing operations through the earlier of (i) December 31,
2004, or (ii) forty-five (45) days following written notice from Purchaser that
it wishes to terminate said arrangement. Seller shall perform such sourcing
services consistent with Seller’s past practices and in consideration thereof,
the Purchaser shall pay to Seller each month for which services are to be
rendered a fee in the amount of Twenty Five Thousand Dollars ($25,000.00)
(“Service Fee”).  Payment of the Service Fee shall be due in advance of the
rendering of such service at the address as set forth for Seller in Article 13
herein on or before the first (1st) day of each month.  For purposes hereof, in
consideration of services rendered by Seller as of the Closing Date through
April 30, 2004, a pro rata portion of the Service Fee shall be paid to Seller at
Closing.

 

(b)                                 Nonsolicitation of Seller’s Overseas
Employees.  In connection with the foregoing, the Company agrees that it shall
not, other than with respect to Mr. Eric Chou, solicit, employ, discuss
employment, recruit, attempt to recruit, hire or attempt to hire, or assist in
any manner any other person to do so, any current or prospective employee(s) of
the Seller or any former employee(s) of the Seller, whether based in Seller’s
overseas or domestic offices, whose employment with the Seller terminated within
twelve (12) months of the employee’s termination date.

 

Section 5.8.                                   Payroll Expenses.  The
obligations set forth in this Section 5.8 shall collectively be the “Payroll
Expenses.”

 

(a)                                  Salaried Employees.  One Hundred Twelve
Thousand Seven Hundred Seventy Five Dollars and Seventy One Cents ($112,775.71)
due and owing through April 15, 2004, shall be paid by Seller directly to
salaried employees of the Company on or before April 15, 2004, in accordance
with Company policy.

 

(b)                                 Other Payroll Obligations.  Twenty Eight
Thousand Nine Hundred Forty Dollars and Forty Cents ($28,940.40) shall be paid
by Seller to Purchaser at Closing for payment of the Company’s payroll
obligations including office payroll and plant payroll, due and owing through
April 12, 2004, and not including those set forth in Section 5.8(a), on or
before April 12, 2004.

 

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Section 5.9.                                   Consolidated Tax Returns.  Seller
agrees to prepare and file a consolidated tax return for Seller and the Company
for the periods up to and including the Closing Date.

 

ARTICLE 6

 

CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER

 

The obligations to be performed hereunder by Purchaser on the Closing Date shall
be subject to the satisfaction, at or before the Closing Date, of all covenants
and agreements contained herein which are to be performed by Seller at or prior
to the Closing Date and to the fulfillment at, or prior to, the Closing Date of
each of the following conditions precedent:

 

SECTION 6.1.                                   TRUTH OF REPRESENTATIONS AND
WARRANTIES. THE REPRESENTATIONS AND WARRANTIES OF EACH OF SELLER AND THE COMPANY
CONTAINED IN THIS AGREEMENT SHALL BE TRUE AND CORRECT AT AND AS OF THE CLOSING
DATE WITH THE SAME EFFECT AS THROUGH SUCH REPRESENTATIONS AND WARRANTIES HAD
BEEN MADE ON AND AS OF THE CLOSING DATE; EACH OF SELLER AND THE COMPANY SHALL
HAVE PERFORMED AND COMPLIED WITH ALL AGREEMENTS REQUIRED BY THIS AGREEMENT TO BE
PERFORMED OR COMPLIED WITH BY EACH OF SELLER AND THE COMPANY AT OR PRIOR TO THE
CLOSING DATE; AND PURCHASER SHALL HAVE RECEIVED A CERTIFICATE, DATED AS OF THE
CLOSING DATE, SIGNED BY SELLER AND THE COMPANY TO THE FOREGOING EFFECT.

 

Section  6.2.                                No Litigation Threatened.  No
action, suit or other proceeding shall be pending before any court, tribunal or
Governmental Authority seeking or threatening to restrain or prohibit the
consummation of the transaction contemplated by this Agreement, or seeking to
obtain substantial damages in respect thereof, or involving a claim that
consummation thereof would result in the violation of any law, decree or
regulation of any Governmental Authority having appropriate jurisdiction.

 

Section 6.3.                                   Performance. Each of the
agreements, obligations, conditions and covenants to be performed or complied
with by Seller and the Company on or before the Closing Date pursuant to the
terms hereof shall have been duly performed or complied with on or before the
Closing Date, and Seller shall have delivered to Purchaser on the Closing Date a
certificate, dated as of the Closing Date, to such effect.

 

Section  6.4.                                Consents and Approvals. All
governmental and other consents and approvals necessary to permit the
consummation of the transactions contemplated by this Agreement shall have been
received and all applicable time periods shall have expired or have been
terminated thereunder.

 

Section 6.5.                                   Permits and Licenses. Seller
shall have provided such assistance as reasonably required by Purchaser to
enable Purchaser to obtain all permits, licenses, certificates and governmental
authorizations, approvals or related certifications necessary for the operation
of the Company by Purchaser after the Closing Date.

 

Section 6.6.                                   Closing Deliveries of Seller. 
Seller shall have executed and delivered to Purchaser each of the closing
documents listed under Section 8.1.

 

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ARTICLE 7

 

CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER

 

The obligations to be performed hereunder by Seller on the Closing Date shall be
subject to the satisfaction, at or before the Closing Date, of all covenants and
agreements contained herein which are to be performed by Purchaser at or prior
to the Closing Date and to the fulfillment at, or prior to, the Closing Date, of
each of the following conditions precedent:

 

Section 7.1.                                   Truth of Representations and
Warranties. The representations and warranties of Purchaser contained in this
Agreement, and all representations and warranties set forth in any Exhibit or
Schedule attached hereto, shall be true, complete and correct as of the Closing
Date, without the necessity of any amendment or modification, with the same
force and effect as if made as of the Closing Date, and Purchaser shall have
delivered to Seller on the Closing Date a certificate, dated as of the Closing
Date, signed by Purchaser, to such effect.

 

Section 7.2.                                   Performance. Each of the
agreements, obligations, conditions and covenants to be performed or complied
with by Purchaser on or before the Closing Date pursuant to the terms hereof
shall have been duly performed or complied with on or before the Closing Date,
and Purchaser shall have delivered to Seller on the Closing Date a certificate,
dated as of the Closing Date, to such effect.

 

Section 7.3.                                   No Litigation Threatened.  No
action, suit or other proceeding shall be pending before any court, tribunal or
Governmental Authority seeking or threatening to restrain or prohibit the
consummation of the transactions contemplated by this Agreement, or seeking to
obtain substantial damages in respect thereof, or involving a claim that
consummation thereof could result in the violation of any law, decree or
regulation of any Governmental Authority having appropriate jurisdiction.

 

Section 7.4.                                   Consents and Approvals. All
governmental and other consents and approvals necessary to permit the
consummation of the transactions contemplated by this Agreement shall have been
received and all applicable time periods shall have expired or have been
terminated thereunder.

 

Section 7.5.                                   Closing Deliveries of
Purchaser.   Purchaser shall have executed and delivered to Seller each of the
closing documents listed under Section 8.2.

 

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ARTICLE 8

 

CLOSING CONDITIONS

 

Section 8.1.                                   Conditions to  Obligations of
Purchaser.  All obligations of Purchaser to consummate the transactions
contemplated hereby are subject to fulfillment by Seller of each of the
following:

 

(a)                                  Resignations.  Seller and the Company shall
cause each officer and director of the Company to deliver their written
resignations to Purchaser, which resignations shall be effective as of the
Closing Date and shall be in form of Exhibit B attached hereto.  Each such
resignation shall state that the Company is not in any way indebted or obligated
to the resigning party for termination pay, loans, advances, or otherwise except
for accrued salary.  Seller and the Company shall cause all persons serving as
trustees with respect to any Welfare Benefit Plan or Pension Benefit Plan to
deliver their written resignations to Purchaser, which resignations shall be
effective as of the Closing and shall be in form and substance satisfactory to
Purchaser.

 

 (B)                              INJUNCTIONS.  NO ACTION OR PROCEEDING SHALL
HAVE BEEN INSTITUTED OR THREATENED FOR THE PURPOSE OR WITH THE POSSIBLE EFFECT
OF ENJOINING OR PREVENTING THE CONSUMMATION OF THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY OR SEEKING DAMAGES ON ACCOUNT THEREOF.

 

(C)                                  THE CERTIFICATES FOR THE SHARES.  PURCHASER
SHALL HAVE RECEIVED FROM SELLER OR HIS DULY APPOINTED AGENT AND ATTORNEY-IN-FACT
THE STOCK CERTIFICATE OR CERTIFICATES REPRESENTING ALL OF THE SHARES OWNED BY
SELLER, FREE AND CLEAR OF ANY ENCUMBRANCES, DULY ENDORSED FOR TRANSFER OR
ACCOMPANIED BY STOCK POWERS DULY EXECUTED IN BLANK.

 

 (D)                              RELEASE FROM ENCUMBRANCES.  THE COMPANY SHALL
HAVE RECEIVED (AND DELIVERED TO PURCHASER) A RELEASE FROM SELLER AND A CONSENT
FROM ANY EXISTING LENDER(S) OR SECURED PARTIES OF ALL RESPECTIVE ENCUMBRANCES IT
OR THEY HAS AGAINST THE COMPANY, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY
TO PURCHASER.

 

(E)                                  GOOD STANDING AND CLOSING CERTIFICATES. 
SELLER AND THE COMPANY SHALL HAVE DELIVERED GOOD STANDING CERTIFICATES,
OFFICER’S CERTIFICATES, AND SIMILAR DOCUMENTS AND CERTIFICATES AS COUNSEL FOR
PURCHASER SHALL HAVE REASONABLY REQUESTED PRIOR TO THE CLOSING DATE.

 

(F)                                    ASSUMPTION AGREEMENT.  SELLER SHALL HAVE
EXECUTED THE ASSUMPTION AGREEMENT IN ACCORDANCE WITH SECTION 2.2 AND
SUBSTANTIALLY IN THE FORM OF EXHIBIT A ATTACHED HERETO.

 

(G)                                 CLOSING DATE CASH AND COMPANY BANK ACCOUNT. 
SELLER SHALL HAVE RETURNED OR CONTRIBUTED THE AMOUNT OF THE CLOSING DATE CASH
INTO THE COMPANY BANK ACCOUNT.

 

(H)                                 NO NEGATIVE BANK BOOK BALANCES.  THE COMPANY
SHALL PROVIDE A CERTIFICATE CERTIFYING THAT THERE ARE NO THEN OPEN COMPANY BANK
ACCOUNTS WITH NEGATIVE BOOK (GENERAL LEDGER) BALANCES AS OF THE CLOSING DATE.

 

(i)                                     Environmental Insurance Policy.  The
Seller shall have purchased and secured the Environmental Insurance Policy.

 

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(j)                                     Environmental Insurance Premium
Payment.  Seller shall have delivered the Seller Premium Payment to Aon
Environmental.

 

(k)                                  Pay-Roll Expenses.  The Seller shall have
delivered the full amount of the Pay-Roll Expenses to the Company Bank Account
and/or to the salaried employees pursuant to Section 5.8 of the Agreement.

 

SECTION 8.2.                                   CONDITIONS TO OBLIGATIONS OF
SELLER. THE OBLIGATIONS OF SELLER TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED
HEREBY ARE SUBJECT TO THE FULFILLMENT OF THE FOLLOWING CONDITIONS:

 

(A)                                  PURCHASE PRICE.  PURCHASER SHALL HAVE
DELIVERED TO SELLER THE PURCHASE PRICE IN ACCORDANCE WITH SECTION 2.3.

 

(B)                                 GOOD STANDING AND CLOSING CERTIFICATES. 
PURCHASER SHALL HAVE DELIVERED TO SELLER SUCH GOOD STANDING CERTIFICATES,
OFFICER’S CERTIFICATES, AND SIMILAR DOCUMENTS AND CERTIFICATES AS COUNSEL FOR
SELLER SHALL HAVE REASONABLY REQUESTED PRIOR TO THE CLOSING DATE.

 

ARTICLE 9

 

TERMINATION

 

Section 9.1.                                   Termination.  This Agreement may
be terminated prior to the Closing by (a) the mutual consent of Purchaser and
Seller, (b) Seller upon the failure of Purchaser to perform or comply with any
of its covenants or agreements contained herein prior to the Closing or if any
representation or warranty of Purchaser hereunder shall not have been true and
correct as of the time at which such was made, (c) Purchaser upon the failure of
Seller and the Company to perform or comply with any of its covenants or
agreements contained herein prior to the Closing or if any representation or
warranty of Seller or the Company hereunder shall not have been true and correct
as of the time at which such was made, (d) either Seller or Purchaser if the
Closing does not occur by April 30, 2004, unless extended by mutual agreement,
provided, that no party may terminate this Agreement pursuant to (b) or (c)
above if such party is, at the time of any such attempted termination, in
material breach of any term hereof.

 

Section 9.2.                                   Effect of Termination.  Upon the
termination of the Agreement pursuant to Section 9.1 hereof, the parties shall
be relieved of any further obligations under this Agreement other than (i)
confidentiality obligations and expense allocation provisions contained herein
and (ii) in respect of any breaches of this Agreement occurring prior to such
termination.

 

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ARTICLE 10

 

FURTHER AGREEMENTS

 

Section 10.1.                             Expenses of Sale.  Each party to this
Agreement shall bear its own legal, accounting and other related expenses in
connection with the purchase and sale provided for herein, including any
commissions pursuant to its agreements with third parties.

 

Section 10.2.                             Consents.  Purchaser and Seller shall
take all steps reasonably necessary to obtain the written consent or approval of
each governmental agency or third party whose consent or approval shall be
required in order to permit the consummation of the transactions contemplated by
this Agreement.

 

Section 10.3.                             Third Party Reliance on Seller
Representations and Warranties.  The Seller agrees that any third party
financial partner of Purchaser may, subject to Section 11.4,  rely on the
Seller’s representations and warranties contained herein for so long as such
representations and warranties survive and that Seller will cooperate in good
faith with any such parties in its due diligence investigation of the Company in
contemplation of a financing transaction.

 

Section 10.4.                             Post Closing Insurance Claims. Seller
agrees that it shall be its responsibility and obligation to make payments for
any and all claims, actions or occurrences occurring prior to the Closing Date,
whether known or unknown, that have not been paid or discovered prior to the
Closing Date and which are covered by Seller insurance polices and further agree
to reimburse the Company for any payments made by the Company after the Closing
Date for any such claims, actions or occurrences arising from occurrences
occurring prior to the Closing Date but not paid by the Company prior to the
Closing Date and which are covered by Seller insurance policies.  The
responsibility of Seller contemplated in this Section 10.4 shall be conditioned
expressly upon (i) Purchaser providing written notice to Seller of the existence
of any such material claims, and (ii) Purchaser agreeing to render reasonable
assistance to Seller in the defense of such claims.

 

Section 10.5.                             Public Announcement.  The parties will
consult with each other before issuing any press release or otherwise making any
public statements with respect to the sale and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law, regulation, contract or by obligations pursuant to any
public disclosure requirements.

 

Section 10.6.                             Tax Matters.  Following the Closing,
Purchaser and the Company and Seller shall cooperate fully, as and to the extent
reasonably requested by the other party and at the expense of the other party,
in connection with the filing of any Tax Returns and any audit, litigation or
other proceeding with respect to Taxes.  Such cooperation shall include the
retention and (upon the other party’s request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder.  Purchaser agrees (A) to retain all books and records with respect to
Tax matters pertinent to the Company or Holdings relating to any Taxable Period
beginning before the Closing Date until the expiration of the applicable statute
of limitations (and, to the extent notified by Purchaser or Seller, any
extensions thereof) of the respective

 

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Taxable Periods, and to abide by all record retention agreements entered into
with any taxing authority, and (B) to give the Seller reasonable written notice
prior to transferring, destroying or discarding any such books and records and,
if the Seller so requests, the Company, as the case may be, shall allow the
Seller to take possession of such books and records.

 

ARTICLE 11

 

REPRESENTATIONS AND INDEMNIFICATION

 

Section 11.1.                             Survival of Representations and
Warranties.  The representations and warranties of the parties contained herein
or in any certificate or writing delivered pursuant hereto shall survive the
Closing for a period of twelve (12) months after the Closing Date; provided,
that the representations and warranties of Seller set forth in Sections 3.7 and
3.16 shall survive the Closing until the expiration of the applicable statute of
limitations. The representations and warranties set forth in Section 3.20 shall
survive the Closing for a period of four (4) years after the Closing Date and
the representations and warranties of Seller set forth in Sections 3.1,3.2, 3.3
and 3.4 shall survive forever.  This Section 11.1 shall have no effect upon any
other agreement, covenant or obligation of the parties hereunder, whether to be
performed before or after the Closing.

 

Section 11.2.                             Indemnification by Seller.  Seller
agrees to indemnify and hold harmless Purchaser (and, following the Closing, the
Company) and each officer, director, employee and subsidiary of Purchaser
(collectively, the “Purchaser Indemnified Parties”) from and against any and all
damages, losses, claims, liabilities, Encumbrances, demands, charges, suits,
investigations, proceedings, judgments, penalties, reasonable costs, and
expenses (including court costs and reasonable attorneys’ fees) which any of the
Purchaser Indemnified Parties may sustain, or to which any of the Purchaser
Indemnified Parties may be subjected, arising out of (i) any material breach or
default by Seller or the Company of or under any of the representations,
warranties, covenants, conditions, agreements, or other provisions of this
Agreement or any agreement or document executed in connection herewith excepting
therefrom all indemnifications of environmental, health or safety matters
relating to Hazardous Substances or Environmental Laws which shall be subject to
and solely governed by Section 11.4; (ii) any Taxes owed by the Company with
respect to all taxable periods ending on or prior to the Closing Date and the
pre-Closing portion of amounts due and payable for Taxes in connection with all
taxable periods beginning before and ending on the Closing Date; (iii) any
failure to deliver the Shares free and clear of any Encumbrances; or (iv) any
Retained Seller Liabilities.

 

Section 11.3.                             Indemnification by Purchaser. 
Purchaser agrees to indemnify and hold harmless Seller and each officer,
director, employee and subsidiary of Seller, or of the Company, prior to the
Closing (collectively, the “Seller Indemnified Parties”) from and against any
and all damages, losses, claims, liabilities, demands, charges, suits,
investigations, proceedings, judgments, penalties, reasonable costs, and
expenses (including court costs and attorneys’ fees) which any of the Seller
Indemnified Parties may sustain, or to which any of the Seller Indemnified
Parties may be subjected, arising out of (i) any breach or default by Purchaser
of or under any of the representations, warranties, covenants, conditions,
agreements, or other provisions of this Agreement or any agreement or document
executed in connection herewith

 

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Section 11.4.                             Environmental Insurance and
Indemnification.

 

(a)                                  Environmental Insurance Policy.  On the
Closing Date, Seller shall purchase and secure the Environmental Site Liability
Policy which shall contain the terms, conditions and coverage set forth in the
policy substantially in the form attached hereto as Exhibit C (the
“Environmental Insurance Policy”) and including the terms contained in the
“Confirmation of Coverage Evidencing the Environmental Site Liability Policy”
attached hereto as Exhibit C-1 (the “Environmental Site Liability Binder”).
Among other things, the Environmental Insurance Policy shall name Purchaser as
the first named insured and Seller shall be a named insured, and any third party
lender of the Company or any third party lender’s affiliate(s), may be, at the
option of the Company, named as an additional insured party under the
Environmental Insurance Policy.  On the Closing Date, Seller shall pay One
Hundred Thirty Nine Thousand Four Hundred and Six Dollars and Fifty Three Cents
($139,406.53) (the “Seller Premium Payment”), which payment satisfies four (4)
years of the premium payments due under the Environmental Insurance Policy. 
Subject to the limitations set forth in Section 11.4(b), Seller shall be
responsible for the payment of any deductible amounts imposed under the
Environmental Insurance Policy. Purchaser and its assignees agree that it or
they will not cancel or terminate the Environmental Insurance Policy or remove
Seller as a named insured under the Environmental Insurance Policy.

 

(b)                                 Environmental Indemnity.  Seller agrees, for
a period of four (4) years from the Closing Date, to indemnify and hold
Purchaser, and following the Closing Date, the Purchaser and the Company, its or
their successors and assigns, harmless from and against any and all costs,
damages, losses, claims, liabilities, Encumbrances, demands, charges, suits,
investigations, proceedings, judgments, penalties, reasonable and necessary
expenses (including court costs and reasonable attorneys’ fees) which any of the
Purchaser Indemnified Parties may sustain, or to which any of the Purchaser
Indemnified Parties may be subjected, solely related to any breach of the
representations and warranties contained in Section 3.20, the removal of
Hazardous Substances and remedial actions with regard to Hazardous Substances
at, on or under the Real Property as of the Closing Date, provided that the
removal or remediation of Hazardous Substances is required as a result of a
violation of Environmental Laws or written lender requirement and provided
further, that the clean up of Hazardous Substances was not a result of a
voluntary clean up, unless such voluntary clean up was required by a lender or
Governmental Authority (hereinafter referred to individually as a “Loss” and
collectively as “Losses”).  Notwithstanding the foregoing, however, in no event
shall the indemnification responsibility of Seller as contemplated by this
Section 11.4(b) exceed, in the aggregate, Four Hundred Thousand Dollars
($400,000.00). This indemnity shall cover any Loss or Losses not covered by the
Environmental Insurance Policy and any payments for deductibles imposed under
the Insurance Policy.  This indemnity shall be conditioned upon (i) Seller
receiving prompt written notification from the Purchaser Indemnified Parties of
any claim for any Loss or Losses and adequate documentation substantiating same;
and (ii) Purchaser Indemnified Parties first seeking to recover any Loss or
Losses covered under the Environmental Insurance Policy and conforming to the
requirements thereof.  The obligations of Seller under this Section 11.4(b)
shall be transferable and assignable by the Company.

 

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SECTION 11.5.                             DEFENSE OF THIRD-PARTY CLAIMS.  EACH
RESPECTIVE INDEMNIFIED PARTY SHALL, AND PURCHASER AND SELLER AGREE TO USE THEIR
REASONABLE BEST EFFORTS TO CAUSE EACH RESPECTIVE INDEMNIFIED PARTY TO, GIVE
PROMPT WRITTEN NOTICE TO THE OTHER INDEMNIFIED PARTY (EACH AN “INDEMNIFYING
PARTY”) OF THE COMMENCEMENT OR ASSERTION OF ANY ACTION, PROCEEDING, DEMAND, OR
CLAIM BY A THIRD PARTY (COLLECTIVELY, A “THIRD-PARTY ACTION”) IN RESPECT OF
WHICH SUCH INDEMNIFIED PARTY SHALL SEEK INDEMNIFICATION HEREUNDER.  SUBJECT TO
THE LAST SENTENCE OF THIS SECTION 11.5, ANY FAILURE SO TO NOTIFY THE
INDEMNIFYING PARTY SHALL NOT RELIEVE SUCH INDEMNIFYING PARTY FROM ANY LIABILITY
THAT IT MAY HAVE TO SUCH INDEMNIFIED PARTY UNDER THIS ARTICLE 11 UNLESS AND TO
THE EXTENT THE FAILURE TO GIVE SUCH NOTICE MATERIALLY AND ADVERSELY PREJUDICES
SUCH INDEMNIFYING PARTY. THE INDEMNIFYING PARTY SHALL HAVE THE RIGHT TO ASSUME
CONTROL OF THE DEFENSE OF, SETTLE, OR OTHERWISE DISPOSE OF SUCH THIRD-PARTY
ACTION ON SUCH TERMS AS THEY DEEM APPROPRIATE; PROVIDED, HOWEVER, THAT:

 

(A)                                  THE INDEMNIFIED PARTY SHALL BE ENTITLED, AT
HIS, HER, OR ITS OWN EXPENSE, TO PARTICIPATE IN THE DEFENSE OF SUCH THIRD-PARTY
ACTION;

 

(B)                                 THE INDEMNIFYING PARTY SHALL OBTAIN THE
PRIOR WRITTEN APPROVAL OF THE INDEMNIFIED PARTY BEFORE ENTERING INTO OR MAKING
ANY SETTLEMENT, COMPROMISE, ADMISSION, OR ACKNOWLEDGMENT IN RESPECT OF THE
VALIDITY OF SUCH THIRD-PARTY ACTION OR ANY LIABILITY IN RESPECT THEREOF IF,
PURSUANT TO OR AS A RESULT OF SUCH SETTLEMENT, COMPROMISE, ADMISSION, OR
ACKNOWLEDGMENT, INJUNCTIVE OR OTHER EQUITABLE RELIEF COULD BE IMPOSED AGAINST
THE INDEMNIFIED PARTY OR IF, IN THE REASONABLE OPINION OF THE INDEMNIFIED PARTY,
SUCH SETTLEMENT, COMPROMISE, ADMISSION, OR ACKNOWLEDGMENT COULD HAVE A MATERIAL
ADVERSE EFFECT ON ITS BUSINESS OR, IN THE CASE OF AN INDEMNIFIED PARTY WHO IS A
NATURAL PERSON, ON HIS OR HER ASSETS OR INTERESTS;

 

(C)                                  NO INDEMNIFYING PARTY SHALL CONSENT TO THE
ENTRY OF ANY JUDGMENT OR ENTER INTO ANY SETTLEMENT THAT DOES NOT INCLUDE AS AN
UNCONDITIONAL TERM THEREOF THE GIVING BY EACH CLAIMANT OR PLAINTIFF TO EACH
INDEMNIFIED PARTY OF A RELEASE FROM ALL LIABILITY IN RESPECT OF SUCH THIRD-PARTY
ACTION UNLESS SUCH THIRD-PARTY ACTION IS INITIATED BY A GOVERNMENTAL AUTHORITY;
AND

 

(D)                                 THE INDEMNIFYING PARTY SHALL NOT BE ENTITLED
TO CONTROL (BUT SHALL BE ENTITLED TO PARTICIPATE AT ITS OR THEIR OWN EXPENSE IN
THE DEFENSE OF), AND THE INDEMNIFIED PARTY SHALL BE ENTITLED TO HAVE SOLE
CONTROL OVER, THE DEFENSE OR SETTLEMENT, COMPROMISE, ADMISSION, OR
ACKNOWLEDGMENT OF ANY THIRD-PARTY ACTION (I) AS TO WHICH THE INDEMNIFYING PARTY
FAILS TO ASSUME THE DEFENSE THEREOF WITHIN A REASONABLE LENGTH OF TIME OR (II)
TO THE EXTENT THE THIRD-PARTY ACTION SEEKS AN ORDER, INJUNCTION, OR OTHER
EQUITABLE RELIEF AGAINST THE INDEMNIFIED PARTY WHICH, IF SUCCESSFUL, WOULD
MATERIALLY ADVERSELY AFFECT THE BUSINESS, OPERATIONS, ASSETS, OR FINANCIAL
CONDITION OF THE INDEMNIFIED PARTY.

 

(e)                                  The parties hereto shall extend reasonable
cooperation in connection with the defense of any Third-Party Action pursuant to
this Article 11 and, in connection therewith, shall furnish such records,
information, and testimony and attend such conferences, discovery proceedings,
hearings, trials, and appeals as may be reasonably requested.

 

Section 11.6.                             Direct Claims. In any case in which an
Indemnified Party seeks indemnification hereunder which is not subject to
Section 11.5 hereof because no Third-Party Action is involved, the Indemnified
Party shall notify the Indemnifying Party, in writing of any

 

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costs which it claims are subject to indemnification under the terms of this
Article 11.  The failure of the Indemnified Party to exercise promptness in such
notification shall not amount to a waiver of such claim unless the resulting
delay materially prejudices the position of the Indemnifying Party with respect
to such claim.

 

ARTICLE 12

 

AMENDMENT AND WAIVER

 

Section 12.1.                             Amendment. This Agreement may not be
amended except by an instrument in writing signed by Purchaser and Seller.

 

Section 12.2.                             Waiver.  Any terms or provisions of
this Agreement may be waived in writing at any time by the party which is
entitled to the benefits thereof, or such party’s counsel.  Unless specifically
waived in writing, the failure of either party at any time or times to require
performance of any provision hereof shall in no manner affect such party’s right
at a later time to enforce the same.  No waiver by any party of a condition or
of the breach of any term, covenant, representation or warranty of this
Agreement, whether by conduct or otherwise, in any one or more instances shall
be deemed to be or construed as a further or continuing waiver of any such
condition or breach or a waiver of any other condition or of the breach of any
other term, covenant, representation or warranty of this Agreement.

 

ARTICLE 13

 

MISCELLANEOUS PROVISIONS

 

Section 13.1.                             Notices.  Each notice, request,
demand, approval or other communication which may be or is required to be given
under this Agreement shall be in writing and shall be deemed to have been
properly given (i) when delivered personally at the address set forth below for
the intended party during normal business hours at such address, (ii) when sent
by facsimile or other electronic transmission to the respective facsimile
transmission numbers of the parties set forth below with telephone confirmation
of receipt, (iii) when sent by recognized overnight courier or (iv) when sent by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:

 

If to Purchaser:

 

Rauch Acquisition Corporation

 

 

1775 Eye Street, NW

 

 

8th Floor

 

 

Washington, DC  20006

 

 

Attention:  Murry N. Gunty

 

 

Facsimile: (202) 367-3001

 

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With a copy to:

 

Rauch Industries, Inc.

 

 

2408 Forbes Road

 

 

Gastonia, North Carolina 28056

 

 

Attention:  Steven R. Hufft

 

 

Facsimile: (704) 868-4105

 

 

 

 

 

Patton Boggs LLP

 

 

2550 M Street, NW

 

 

Washington, DC  20037

 

 

Attention:  Douglas C. Boggs

 

 

Facsimile:  (202) 457-6315

 

 

 

If to Seller:

 

Syratech Corporation

 

 

175 McClellan Highway

 

 

East Boston, MA  02128

 

 

Attention:

Gregory W. Hunt

 

 

 

Vice President and CFO

 

 

Facsimile:  (617) 568-8178

 

 

 

with a copy to:

 

Faye A. Florence, Esq.

 

 

Vice President and General Counsel

 

 

Syratech Corporation

 

 

175 McClellan Highway

 

 

East Boston, MA  02128

 

 

Facsimile:  (617) 568-1361

 

Notices shall be given to such other addressee or address, or both, or by way of
such other facsimile transmission number, as a particular party may from time to
time designate by written notice to the other party hereto.  Each notice,
request, demand, approval or other communication which is sent in accordance
with this Section shall be deemed delivered, given and received for all purposes
of this Agreement as of (i) three (3) business days after the date of deposit
thereof for mailing in a duly constituted United States post office or branch
thereof, (ii) one (1) business day after deposit with a recognized overnight
courier service or (iii) upon confirmation of receipt of any facsimile
transmission.  Notice given to a party hereto by any other method shall only be
deemed to be delivered, given and received when actually received in writing by
such party.

 

Section 13.2.                             Further Assurances.  Each of the
parties hereto hereby agrees that after the Closing Date it will from time to
time, upon the reasonable request of another party hereto, take such further
action as the other may reasonably request to carry out the transfer of the
Shares and the other transactions contemplated by this Agreement including,
without limitation, the execution and delivery of all further evidences and
instruments of transfer, assignment and assumption.

 

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Section 13.3.                             Counterpart Executions; Facsimiles. 
This Agreement and any of the Exhibits, Schedules or other documents attached
hereto or otherwise contemplated hereby may be executed in any number of
counterparts with the same effect as if all of the parties had signed the same
document.  Such executions may be transmitted to the parties by facsimile and
such facsimile execution shall have the full force and effect of an original
signature.  All fully executed counterparts, whether original executions or
facsimile executions or a combination, shall be construed together and shall
constitute one and the same agreement.

 

Section 13.4.                             Binding Effect.  This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns.  Neither
this Agreement nor any of the rights or obligations of any of the parties hereto
may be assigned by any party hereto without the prior written consent of the
other parties hereto.

 

Section 13.5.                             Headings. The headings in this
Agreement are intended solely for convenience of reference and shall be given no
effect in the construction or interpretation of this Agreement.

 

Section 13.6.                             Effectiveness.  This Agreement shall
have no force or effect whatsoever unless and until the same shall have been
executed and delivered by Purchaser and Seller.

 

Section 13.7.                             Invalid Provisions.  If any provision
of this Agreement is deemed or held to be illegal, invalid, and unenforceable,
this Agreement shall be considered divisible and inoperative as to such
provision to the extent it is deemed to be illegal, invalid or unenforceable,
and in all other respects this Agreement shall remain in full force and effect. 
Further, should any provision contained in this Agreement ever be reformed or
rewritten by any judicial body of competent jurisdiction, such provision as so
reformed or rewritten shall be binding upon all parties hereto.

 

Section 13.8.                             Miscellaneous.  This Agreement (a)
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, between the parties hereto with respect to
the subject matter hereof; (b) is not intended to confer upon any other person
or entity who or which is not a party hereto any rights or remedies hereunder;
and (c) shall be governed in all respects, including validity, interpretation
and effect, by the substantive laws of the State of North Carolina, without
regard to its choice of law principles.

 

Section 13.9.                             Attorneys’ Fees and Costs.  In the
event of any litigation or arbitration between the parties arising out of or
relating to this Agreement, the prevailing party shall be entitled to recover
from the non-prevailing party all costs incurred and reasonable attorneys’ fees,
including attorneys’ fees in all investigations, arbitrations, trials,
bankruptcies and appeals.  If any dispute arising out of or relating to this
Agreement is submitted to arbitration, the arbitrator or arbitrators shall have
the power and authority to, and the parties hereby direct that such arbitrator
or arbitrators shall, determine entitlement to attorneys’ fees and costs, and
the amount of such attorneys’ fees and costs to be awarded to the prevailing
party.

 

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Section 13.10.                       Attachments.  Attached hereto, and hereby
incorporated by reference, are the following Schedules and Exhibits:

 

SCHEDULES

 

Schedule 2.2

 

Retained Seller Liabilities

Schedule 2.4

 

Company’s December 31, 2003 balance sheet

Schedule 2.4(a)

 

Estimated Closing Date Balance Sheet

Schedule 3.1

 

List of qualification states of the Company

Schedule 3.7

 

Financial Statements of the Company

Schedule 3.8

 

Conduct of Business; Certain Actions

Schedule 3.9(a)

 

List of real property owned by the Company

Schedule 3.9(b)

 

List of personal properties owned by the Company

Schedule 3.10

 

List of licenses, certificates & permits of Company

Schedule 3.11

 

List of Intellectual Property owned by the Company

Schedule 3.13(a)

 

List of Employee Benefit Plans

Schedule 3.13(b)

 

List of Employee Pension Benefit Plans

Schedule 3.13(e)

 

Effect of Consummation

Schedule 3.14

 

List of all written contracts and other agreements

Schedule 3.15

 

List litigation affecting the Company

Schedule 3.16

 

Taxes

Schedule 3.17

 

Bank Accounts

Schedule 3.18

 

Certain Consents

Schedule 3.20

 

Environmental Matters

Schedule 5.6

 

Information Technology Transfer

 

EXHIBITS

 

Exhibit A

 

Form of Assumption Agreement

Exhibit B

 

Form of Resignation

Exhibit C

 

Environmental Insurance Policy

Exhibit C-1

 

Confirmation of Coverage Evidencing the Environmental Site Liability Policy

 

 

[Signatures Appear on Following Page]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement
to be executed as of the day and year first above written.

 

 

 

PURCHASER:

 

 

 

RAUCH ACQUISITION CORPORATION

 

 

 

 

 

By:

/s/ Steven R. Hufft

 

 

 

Name:

Steven R. Hufft

 

 

Title:

President and Chief Executive Officer

 

 

 

 

 

SELLER:

 

 

 

SYRATECH CORPORATION

 

 

 

 

 

By:

Gregory W. Hunt

 

 

 

Name:

Gregory W. Hunt

 

 

Title:

Vice President and Chief Financial Officer

 

 

 

 

 

THE COMPANY:

 

 

 

RAUCH INDUSTRIES, INC.

 

 

 

 

 

By:

Gregory W. Hunt

 

 

 

Name:

Gregory W. Hunt

 

 

Title:

Vice President and Chief Financial Officer

 

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