Exhibit 10.13

 

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT dated as of the 17th day of November, 2004 (this
“Agreement”), is made and entered into by and among Merit Medical Systems, Inc.
(“Purchaser”), MedSource Packaging Concepts LLC, a Virginia limited liability
company (“Seller”), and each of the following individual residents of the
Commonwealth of Virginia: Robert E. Hale (“Hale”), Charles Long (“Long”), Gary
W. Kazee (“Kazee”), Willis P. Blackwood (“Blackwood”), Robert C. Walker
(“Walker”), Tommy J. West (“West”), and David T. Richardson (“Richardson”) (all
such individuals collectively are referred to as the “Members,” and individually
each a “Member”), relating to the sale of the assets of Seller’s medical
supplies and products packaging, marketing, distribution, sales and services
business to Purchaser.  Robert E. Hale shall serve as the “Member
Representative” for purposes of this Agreement.

 

WHEREAS, each of the board of directors of Purchaser and the Members and
managers of Seller has approved, and deems it advisable and in the best
interests of its respective shareholders or members to consummate the sale by
Seller and acquisition by Purchaser of the Acquired Assets (as defined herein),
subject only to those liabilities expressly assumed herein by Purchaser, upon
the terms set forth herein.

 

WHEREAS, the Members are the sole members of Seller, and each of the Members has
approved of, and consented to, the sale of the Acquired Assets to Purchaser.

 

NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:

 

ARTICLE I- DEFINITIONS AND INTERPRETATION

 

Section 1.1                                      Definitions.  For all purposes
of this Agreement, except as otherwise expressly provided or unless the context
clearly requires otherwise:

 

“Accounts Receivable” means any and all trade accounts, notes and other
receivables of Seller in respect of the Business and all claims relating thereto
or arising therefrom.

 

“Affiliate” shall have the meaning set forth in Rule 12b-2 of the Exchange Act.

 

“Agreement” or “this Agreement” shall mean this Asset Purchase Agreement,
together with the Exhibits hereto and the Disclosure Schedule.

 

“Applicable Law” shall mean any law, regulation, rule, order, judgment or decree
to which the Business, the Acquired Assets or Seller is subject.

 

“Acquired Assets” has the meaning set forth in Section 2.1(a).

 

“Associate” shall have the meaning set forth in Rule 12b-2 of the Exchange Act.

 

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

 

“Assumed Liabilities” has the meaning set forth in Section 2.3.

 

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“Business” shall mean the medical supplies and products packaging, marketing,
distribution, sales and services business heretofore conducted by Seller,
including the Acquired Assets and all the goodwill appurtenant to such business.

 

“Closing” shall mean the closing referred to in Section 3.1.

 

“Closing Date” shall mean the date of execution hereof.

 

“COBRA” shall mean Sections 601 through 607 of ERISA, Section 4980B of the Code,
and any comparable state or foreign laws requiring the provision of continuation
coverage for former employees under any Seller group health plan.

 

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

 

“Contract” shall mean any agreement, contract, purchase or sale order, mortgage,
indenture, lease, franchise or other instrument relating to the Business to
which Seller is a party or by which the Business or any of the Acquired Assets
is bound.

 

“Computer Software” shall mean computer software programs, databases and all
documentation related thereto.

 

“Defect” shall mean a defect or impurity of any kind, whether in design,
workmanship, manufacture, processing, or otherwise, including any dangerous
propensity associated with any reasonably foreseeable use of an item, or the
failure to warn of the existence of any defect, impurity, or dangerous
propensity other than the dangerous propensities inherent therein.

 

“Disclosure Schedule” shall mean the disclosure schedule of even date herewith
prepared and signed by each of the Seller and the Members and delivered to
Purchaser simultaneously with the execution hereof.

 

“Encumbrances” shall mean any and all liens, charges, security interests,
options, claims, mortgages, charges, easements, restrictions on use of
enjoyment, pledges, proxies, voting trusts or agreements, obligations,
understandings or arrangements imposing restrictions on title or use or other
restrictions on title or transfer of any nature whatsoever.

 

“Environmental Claim” shall mean any claim, action, cause of action,
investigation or notice (written or oral) by any Person alleging actual or
potential liability for investigatory, cleanup or governmental response costs,
or natural resources or property damages, or personal injuries, attorneys’ fees
or penalties relating to (i) the presence, or release into the environment, of
any Materials of Environmental Concern at any location owned or operated by
Seller related to the Business, now or in the past, or (ii) circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law.

 

“Environmental Law” shall mean each federal, state, local and foreign law and
regulation relating to pollution, protection or preservation of human health or
the environment, including ambient air, surface water, ground water, land
surface or subsurface strata, and natural resources, and including each law and
regulation relating to emissions, discharges, releases or threatened releases of
Materials of Environmental

 

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Concern, or otherwise relating to the manufacturing, processing, distribution,
use, treatment, generation, storage, containment (whether above ground or
underground), disposal, transport or handling of Materials of Environmental
Concern, or the preservation of the environment or mitigation of adverse effects
thereon and each law and regulation with regard to record keeping, notification,
disclosure and reporting requirements respecting Materials of Environmental
Concern.

 

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

 

“ERISA Affiliate” shall mean any trade or business, whether or not incorporated,
that together with Seller would be deemed a “single employer” within the meaning
of Section 4001(b) of ERISA.

 

“Escrow Agreement” shall have the meaning set forth in Section 2.5(b).

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Financial Statements” shall mean each of the Business’ (i) balance sheets as of
June 30, 2004, March 31, 2004, and each of December 31, 2003, 2002 and 2001;
(ii) statements of operations for the three month and six month periods ending
March 31, 2004 and June 30, 2004, respectively, and for the 12-month periods
ended December 31, 2003, 2002 and 2001, respectively; and (iii) statements of
cash flows for the three month and six month periods ending March 31, 2004 and
June 30, 2004, respectively, and for the 12-month periods ended December 31,
2003, 2002 and 2001, respectively.

 

“GAAP” shall mean United States generally accepted accounting principles, as
consistently applied.

 

“Governmental Entity” shall mean a court, arbitral, tribunal, administrative
agency or commission or other governmental or regulatory authority or agency or
any state, city, county, or other governmental or quasi-governmental body having
any jurisdiction over the Business, Acquired Assets, Seller or Members.

 

“Indebtedness” shall mean (i) all indebtedness for borrowed money or for the
deferred purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), (ii) any other indebtedness that is
evidenced by a loan agreement, note, bond, debenture or similar instrument,
(iii) all obligations under financing leases, (iv) all liabilities secured by
any lien on any property, and (v) all guarantee obligations.

 

“Intellectual Property” shall mean all (i) trademarks (U.S. and foreign
registered and unregistered trademarks, trade dress, domain names, service
marks, logos, trade names, business names and all registrations and applications
to register the same), (ii) patents (issued U.S. and foreign patents and pending
patent applications, patent disclosures, and any and all divisions,
continuations, continuations-in-part, reissues, reexaminations, and extensions
thereof, any counterparts claiming priority therefrom, utility models, patents
of importation/confirmation, certificates of invention and like statutory
rights), (iii) copyrights (U.S. and foreign registered and unregistered
copyrights, including those in computer software and databases, rights of
publicity and all registrations and applications to register the same),
(iv) trade secrets (all categories of trade secrets as defined in the Uniform
Trade Secrets Act, including business information), (v) licenses (all licenses
and agreements pursuant to which Seller has acquired rights in or to any
trademarks, patents or copyrights used by or for the benefit of the Business, or

 

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licenses and agreements pursuant to which Seller has licensed or transferred the
right to use any trademark, patent or copyright which constitutes a part of the
Acquired Assets), and (vi) all proprietary and confidential information of
Seller and all of Seller’s other information and intangible property rights that
are currently owned by Seller or the Business for the benefit of the Business or
used in the Business or that is necessary to conduct the Business as presently
conducted, including, without limitation: (a) trade secrets, technical
information, know-how, designs, processes, patents, patent applications, and
copyrights, and all improvements thereof, (b) all data, files, books and
records, customer lists, and order information, (c) the name “MedSource
Packaging Concepts” (and any derivatives of such name), and (d) all Internet
domain names and sites, email addresses, telephone numbers (and related
directory listings) and similar information and rights.

 

“Knowledge of Seller” concerning a particular area or aspect of the Acquired
Assets, Business or related affairs shall mean the knowledge of each Member and
of each of Seller’s management personnel of the Business and all knowledge which
was or could have been obtained upon inquiry by such of Seller’s management
level employees whose duties would, in the normal course of Seller’s affairs,
result in such management level employees having knowledge concerning such area
or aspect.

 

“Lease” shall mean each lease pursuant to which Seller (for the use or benefit
of the Business) leases any real or personal property.

 

“Liabilities” shall mean the debts, liabilities, claims, demands, expenses,
commitments and obligations (whether accrued or not, known or unknown, disclosed
or undisclosed, fixed or contingent, asserted or unasserted, liquidated or
unliquidated, arising prior to, at or after the Closing) of Seller (other than
the Retained Liabilities).

 

“Material Adverse Effect” means an effect on the financial condition, results of
operations, prospects or business of the Business or the Acquired Assets or
Liabilities of the Business, each taken as a whole (other than as a result of
changes (a) in law or applicable regulations or the official interpretations
thereof, or (b) in GAAP) that may reasonably be considered material by Purchaser
in its evaluation of Seller and the Business.

 

“Materials of Environmental Concern” shall mean chemicals, pollutants,
contaminants, wastes, toxic or hazardous substances, materials and wastes,
petroleum and petroleum products, asbestos and asbestos-containing materials,
polychlorinated biphenyls, lead and lead-based paints and materials, and radon.

 

“Multiemployer Plan” has the meaning set forth in Section 3(37) of ERISA.

 

“Payoff Consideration” has the meaning set forth in section 2.5(a).

 

“Permits” means permits, certificates, licenses, filings, approvals and other
authorizations of any Governmental Entity.

 

“Person” shall mean a natural person, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Entity or other entity or organization.

 

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“Plan” shall mean each deferred compensation and each incentive compensation,
stock or unit purchase, stock or unit option and other equity compensation plan,
program, agreement or arrangement; each severance or termination pay, medical,
surgical, hospitalization, life insurance and other “welfare” plan, fund or
program (within the meaning of Section 3(1) of ERISA); each profit-sharing, unit
bonus or other plan, fund, or program that is a “pension plan” (within the
meaning of Section 3(2) of ERISA); each employment, termination or severance
agreement; and each other employee benefit plan, fund, program, agreement or
arrangement, in each case, that is sponsored, maintained or contributed to, or
required to be contributed to, by Seller or by any ERISA Affiliate, or to which
Seller or an ERISA Affiliate is party or has any obligations, whether written or
oral, for the benefit of any Member, manager, consultant, employee or former
employee of the Business.

 

“Product” shall mean any product or component thereof, built, designed,
manufactured, shipped, sold, marketed, distributed, packaged and/or otherwise
introduced into the stream of commerce by Seller on behalf of the Business,
including any product sold by Seller as the distributor, agent, or pursuant to
any other contractual relationship with a third-party manufacturer or vendor.

 

“Purchase Price” has the meaning set forth in Section 2.5(a).

 

“Purchaser” shall mean Merit Medical Systems, Inc., a Utah corporation.

 

“Purchaser Indemnified Persons” shall mean Purchaser and each of its Affiliates.

 

“Purchaser Losses” shall mean any and all actual losses, liabilities, damages,
judgments, settlements and expenses (including interest and penalties recovered
by a third party with respect thereto and reasonable attorneys’ fees and
expenses and reasonable accountants’ fees and expenses incurred in the
investigation or defense of any of the same or in asserting, preserving or
enforcing any of the rights of Purchaser arising under Article IX) incurred by
any of the Purchaser Indemnified Persons that arise out of:

 

(i)                                     any breach by any of Seller or Members
of any of their representations and warranties contained in or made by or
pursuant to this Agreement;

 

(ii)                                  any of the events, circumstances or
conditions described in Section 4.16 hereof, any pollution or threat to human
health or the environment that (A) is related in any way to the Business or
management, use, control, ownership or operation of the properties of the
Business prior to the Closing, including all on-site and off-site activities
involving Materials of Environmental Concern, and (B) occurred, existed, or
arises out of conditions or circumstances that occurred or existed, or was
caused, in whole or in part, on or before the Closing Date, whether or not the
pollution or threat to human health or the environment is described in the
Disclosure Schedule; or any Environmental Claim against the Business or any
Person whose liability for such Environmental Claim the Business has assumed or
retained either contractually or by operation of law;

 

(iii)                               any breach by any of the Seller or Members
of any of their covenants in this Agreement that survive the Closing;

 

(iv)                              any of the Retained Liabilities; or

 

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(v)                                 the waiver by the Parties of Virginia’s
“Bulk Sales” statute.

 

All statements contained in any exhibit, schedule or other writing delivered by
any of the Seller or Members pursuant hereto or in connection with the
Transactions shall be deemed representations and warranties.

 

“Real Property” shall mean the real property that is the subject of the Real
Property Lease.

 

“Real Property Leases” shall mean those two certain Leases, (a) the first, dated
4/25/01, between Seller and Carl York, Jr., and Richard Lert, Trustees of the
Ariana Austin Fairbanks of 1976 Waimalu Trust; Carl York, Jr., and Richard Lert,
Trustees of the Ariana Austin Fairbanks Trust, dated April 28, 1978; Carl
York, Jr., and Linda S. Dalby, Trustees of the 1976 Waimalu Mauku Trust; and
Carl York, Jr., and Linda S. Dalby, Trustees of the Waibalu Mauko Trust, dated
February 27, 1980 (Landlord), and (b) the second, dated November 10, 2000,
between Seller and Eskimo Pie Corporation, which Lease was assigned, effective
May 15, 2003, to 901 Moorefield LLC (Landlord), and includes all rights and
appurtenances pertaining to such lease and property, including all easements,
rights, interests, tenements, hereditaments and privileges.

 

“Required Consents” shall mean consents related to agreements which involve the
payment or receipt by Seller of amounts in excess of $5,000 per annum or other
agreements that may be material or have a material impact on the Business.

 

“Retained Assets” has the meaning set forth in Section 2.2.

 

“Retained Liabilities” has the meaning set forth in Section 2.4.

 

“Seller Indemnified Persons” shall mean each of Seller and its Affiliates.

 

“Seller Losses” shall mean any and all actual losses, liabilities, damages,
judgments, settlements and expenses (including interest and penalties recovered
by a third party with respect thereto and reasonable attorneys’ fees and
expenses and reasonable accountants’ fees and expenses incurred in the
investigation or defense of any of the same or in asserting, preserving or
enforcing any of Seller’s rights) incurred by any of the Seller Indemnified
Persons arising out of:

 

(i)                                     any breach by Purchaser of any of its
representations and warranties contained in or made by or pursuant to this
Agreement; or

 

(ii)                                  any breach by Purchaser of any of its
covenants in this Agreement that survive the Closing.

 

“Tax” or “Taxes” shall mean all taxes, charges, fees, duties, levies, penalties
or other assessments imposed by any federal, state, local or foreign
governmental authority, including income, gross receipts, excise, property,
sales, gain, use, license, custom duty, unemployment, capital stock, unit or
membership interest, transfer, franchise, payroll, withholding, social security,
minimum estimated, profit, gift, severance, value added, disability, premium,
recapture, credit, occupation, service, leasing, employment,

 

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stamp and other taxes, and shall include interest, penalties or additions
attributable thereto or attributable to any failure to comply with any
requirement regarding Tax Returns.

 

“Tax Audit” shall mean any deficiency, proposed adjustment, adjustment,
assessment audit, examination or other administrative or court proceeding, suit,
dispute or other claim.

 

“Tax Return” shall mean any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any such document
prepared on a consolidated, combined or unitary basis and also including any
schedule or attachment thereto, and including any amendment thereof.

 

“Title IV Plan” shall mean a Plan that is subject to Section 302 or Title IV of
ERISA or Section 412 of the Code.

 

“Transactions” shall mean all the transactions provided for or contemplated by
this Agreement.

 

“Transfer Taxes” shall mean all sales (including, without limitation, bulk
sales), use, transfer, recording, ad valorem, privilege, documentary, gains,
gross receipts, registration, conveyance, excise, license, stamp, duties or
similar Taxes and fees.

 

“Warrant” shall have the meaning set forth in Section 2.5(a).

 

Section 1.2                                      Interpretation.

 

(a)                                  Whenever the words “include,” “includes” or
“including” are used in this Agreement they shall be deemed to be followed by
the words “without limitation.”

 

(b)                                 The words “hereof,” “herein” and “herewith”
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, paragraph, exhibit and schedule references are
to the articles, sections, paragraphs, exhibits and schedules of this Agreement
unless otherwise specified.

 

(c)                                  The meaning assigned to each term defined
herein shall be equally applicable to both the singular and plural forms of such
term, and words denoting any gender shall include all genders.  Where a word or
phrase is defined herein, each of its other grammatical forms has a
corresponding meaning.

 

(d)                                 A reference to any party to this Agreement
or any other agreement or document shall include such party’s successors and
permitted assigns.

 

(e)                                  A reference to any legislation or to any
provision of any legislation shall include any amendment to, and any
modification or re-enactment thereof, any legislative provision substituted
therefore and all regulations and statutory instruments issued thereunder or
pursuant thereto.

 

(f)                                    As used in this Agreement, any reference
to any event, change or effect being material or having a material adverse
effect on or with respect to any entity (or group of entities taken as a whole)
means such event, change or effect is materially adverse to (i) the prospects,
consolidated financial condition, businesses or results of operations of such
entity as a whole (or, if used with respect thereto, of

 

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such group of entities taken as a whole) or (ii) the ability of such entity (or
group) to consummate the Transactions.

 

(g)                                 The parties have participated jointly in the
negotiation and drafting of this Agreement.  In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.

 

ARTICLE II- PURCHASE AND SALE OF ASSETS

 

Section 2.1                                      Sale and Transfer of Assets.

 

(a)                                  On the terms set forth in this Agreement,
at the Closing, Seller shall sell, convey, assign, transfer and deliver to
Purchaser, and Purchaser shall purchase, acquire and accept from Seller, free
and clear of any Encumbrances, all right, title and interest in and to the
assets, properties and rights of the Business as those assets exist on Closing,
other than the Retained Assets, as that term is defined in Section 2.2,
(collectively, the “Acquired Assets”), including, without limitation, the
following:

 

(i)                                     the assets set forth on
Section 2.1(a)(i) of the Disclosure Schedule;

 

(ii)                                  all of Seller’s rights and benefits under
those contracts, purchase orders, leases, proposals or bids relating to the
Business identified in Section 2.1(a)(ii) of the Disclosure Schedule (the
“Assumed Contracts”);

 

(iii)                               all of Seller’s books, files and records
relating to the Business, the Acquired Assets or Assumed Liabilities, except for
certain books and records described on Section 2.1(a)(iii) of the Disclosure
Schedule;

 

(iv)                              all personal computers and software related to
or used in connection with the Acquired Assets or Business;

 

(v)                                 all inventory, supplies, and other
consumables related to or used in connection with the Acquired Assets or
Business (the “Inventory”);

 

(vi)                              all Permits used or held for use in connection
with the Acquired Assets or Business, solely to the extent such Permits may be
assigned or transferred;

 

(vii)                           all Accounts Receivable of the Business;

 

(viii)                        all rights under the Real Property Lease and any
other real property used or held for use by the Seller or in connection with the
Business, together with (i) all buildings, other facilities and other structures
and improvements related thereto, (ii) all rights, privileges, hereditaments and
appurtenances appertaining thereto or to any of such buildings or other
facilities or other structures or improvements, and (iii) all fixtures,
leasehold improvements, installations, equipment (including furniture, fax
machines and other office equipment) and other property attached thereto or
located thereon;

 

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(ix)                                all prepayments, deposits or advances
related to Assumed Contracts;

 

(x)                                   all equipment, machinery, vehicles, tools,
equipment replacement and spare parts and supplies owned by Seller and used or
held for use in connection with the Acquired Assets or Business;

 

(xi)                                any advertising or promotional materials
related to or used in connection with the Acquired Assets or Business;

 

(xii)                             all goodwill related to the Business and
Acquired Assets including the name “MedSource Packaging Concepts”;

 

(xiii)                          all manufacturer’s warranties to the extent
related to the Acquired Assets or Business and all claims under such warranties;

 

(xiv)                         all prepaid expenses of the Business;

 

(xv)                            all promissory notes or notes receivable in
favor of the Business;

 

(xvi)                         all security deposits, earnest deposits, and all
other forms of security placed with Seller related to or in connection with the
Acquired Assets or Business for the performance of a contract or agreement;

 

(xvii)                      all of Seller’s other tangible and intangible assets
and properties which are used in connection with the Business; and

 

(xviii)                   all right, title and interest in and to the
Intellectual Property of Seller used in connection with the Business or the
Acquired Assets including all of the Trade names and Trademarks listed on
Schedule 2.1(a)(xviii).

 

To the extent any Acquired Assets are owned, managed or leased by any subsidiary
of Seller, (i) such items are included within the term “Acquired Assets,”
(ii) such subsidiary is deemed to be included within the term “Seller,” and
(iii) Seller shall cause each such subsidiary, at the Closing, to convey such
Acquired Assets to Purchaser, or to Seller for conveyance to Purchaser, in
accordance with the provisions hereof.

 

Section 2.2                                      Retained Assets. 
Notwithstanding Section 2.1, all of Seller’s right, title and interest in the
following properties, assets and rights shall be excluded from the Acquired
Assets (collectively, the “Retained Assets”):

 

(i)                                     the assets set forth in Section 2.2 of
the Disclosure Schedule;

 

(ii)                                  any assets and associated claims arising
out of Retained Assets or Retained Liabilities;

 

(iii)                               all contracts between Seller and a third
party in which the third party or Seller is in material default or breach or is
the subject of bankruptcy, insolvency, or similar proceedings;

 

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(iv)                              any asset, offset, refund, insurance proceeds,
receipts and other benefits related to litigation for which Seller is retaining
the liability related to such litigation;

 

(v)                                 all Tax refunds;

 

(vi)                              all cash and cash equivalents of Seller; and

 

(vii)                           the record books of Seller.

 

Section 2.3                                      Assumption of Liabilities.

 

(a)                                  At the Closing, Purchaser shall assume the
following Liabilities of the Business (collectively, the “Assumed Liabilities”):

 

(i)                                     all Liabilities set forth on Section 2.3
of the Disclosure Schedules;

 

(ii)                                  all obligations under the Assumed
Contracts to be performed subsequent to the Closing Date; and

 

(iii)                               all obligations under the Real Property
Lease to be performed subsequent to the Closing Date.

 

(b)                                 Nothing contained in this Section 2.3 or in
any instrument of assumption executed by Purchaser at the Closing shall release
or relieve Seller or the Members from their representations, warranties,
covenants and agreements contained in this Agreement or any certificate,
schedule, instrument, agreement or document executed pursuant hereto or in
connection herewith, including, without limitation, Seller’s and the Members’
indemnification obligations in accordance with the provisions of Article IX
hereto.

 

Section 2.4                                      Retained Liabilities. 
Notwithstanding anything in this Agreement to the contrary, Purchaser shall not
assume, and shall be deemed not to have assumed, any Liabilities of Seller or
the Business except as provided in Section 2.3(a), and Seller shall be solely
and exclusively liable with respect to, and shall pay, perform or discharge, and
indemnify Purchaser against any loss, liability, damage or expense arising from
all Liabilities of Seller and the Business to the extent such Liability would be
considered a Retained Liability under this Section 2.4, whether disclosed or
undisclosed, whether known or unknown, whether asserted or unasserted, other
than the Assumed Liabilities (collectively, the “Retained Liabilities”),
including, without limitation, those Liabilities set forth below:

 

(i)                                     all Liabilities relating to the Retained
Assets;

 

(ii)                                  all Liabilities that Seller has expressly
agreed to retain, pay for or be responsible for pursuant to this Agreement;

 

(iii)                               all Liabilities of the Business arising out
of the conduct of the Business on or prior to Closing, including, without
limitation, all warranty, replacement or other claims with

 

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respect to Products or Inventory held by Seller or in process of being shipped
as of the Closing Date, unless otherwise expressly set forth herein;

 

(iv)                              all Liabilities of the Business under
Environmental Laws arising from activities occurring on or prior to the Closing;

 

(v)                                 all Liabilities of the Business for Taxes
attributable to any period (or portion thereof) ending on or prior to Closing,
including all Taxes arising out of the Business or the Acquired Assets,
including any ad valorem, real or personal or intangible property, sales,
personal, social security or other Taxes which are not due or assessed until
after Closing but which are attributable to any period (or portion thereof)
ending on or prior to Closing;

 

(vi)                              all Liabilities of the Business to the current
or former employees of the Business or their family members relating to or
arising out of any period on or prior to the Closing (including, without
limitation, all Liabilities under or with respect to Plans, and all Liabilities
with respect to vacation or sick or comp pay or benefits);

 

(vii)                           all Liabilities of Seller arising out of or
related to any Encumbrances on any Acquired Asset;

 

(viii)                        all Liabilities for death, personal injury, other
injury to Persons or property damage relating to, resulting from, caused by or
arising out of, directly or indirectly, use of or exposure to Acquired Assets or
Products (or any part or component) designed, manufactured, serviced, leased or
sold, or services performed, by the Seller or Business, including, without
limitation, any such Liabilities based on negligence, strict liability, design
or manufacturing Defect, conspiracy, failure to warn, or breach of express or
implied warranties of merchantability or fitness for any purpose or use or
allegations concerning any of the foregoing related to events or activities
occurring on or prior to the Closing Date;

 

(ix)                                all Liabilities arising from contracts
related to the Business entered into by Seller which, for whatever reason, are
not assignable to Purchaser as listed on Section 2.4(a)(ix) of the Disclosure
Schedule;

 

(x)                                   all Liabilities arising out of or relating
to the Business or Acquired Assets or Products of the Business and arising from
events or circumstances occurring on or prior to the Closing (or any part or
component) or services which are performed by the Business which constitute, may
constitute, or are alleged to constitute a tort, breach of contract or violation
of, or noncompliance with any Applicable Law, including, without limitation,
relating to employment, workers’ compensation, occupational health and safety,
occupational disease, occupational injury, toxic tort or Environmental Law;

 

(xi)                                any retrospective premiums, reinsurance
payments, payments under reimbursement contracts or other adjustments under any
insurance policy maintained for the benefit of the Business or its respective
predecessors covering any Liability that is a Retained Liability;

 

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(xii)                             all Liabilities of Seller under any guaranties
issued, granted or provided in connection with the Business for activities,
sales or services performed on or prior to the Closing Date;

 

(xiii)                          all tort claims or other claims of any kind or
nature related to the Products sold by Seller on or prior to the Closing Date;
and

 

(xiv)                         all other Liabilities to the extent relating to or
arising out of the operations or businesses of Seller other than the Assumed
Liabilities.

 

Section 2.5                                      Purchase Price; Warrant; Escrow
Agreement.

 

(a)                                  Subject to the terms of this Agreement, in
consideration of the aforesaid assumption of the Assumed Liabilities and the
sale, conveyance, assignment, transfer and delivery to Purchaser of the Acquired
Assets, at the Closing, Purchaser shall (i) pay on behalf of Seller those
certain liabilities of Seller set forth on Exhibit A attached hereto (such
liabilities are collectively referred to as the “Payoff Consideration”)
according to the payment instructions set forth on such exhibit, and
(ii) deliver seven separate warrants to purchase an aggregate of 100,000 shares
of common stock of the Purchaser, in a form substantially similar to that set
forth as Exhibit B attached hereto (the “Warrant,” and collectively with the
Payoff Consideration, the “Purchase Price”) to the Escrow Agent (as such term is
defined in the Escrow Agreement).  The exercise price of the shares issuable
upon exercise of the Warrant shall be equal to the average closing price of
Purchaser’s common stock as reported by the Nasdaq stock market for the ten
trading days immediately preceding the Closing Date.

 

(b)                                 On the Closing Date, the Warrant shall be
placed in escrow, and be subject to the terms of that certain Escrow Agreement,
a form of which is attached hereto as Exhibit C, in addition to the terms of
this Agreement.  The Warrant shall remain in escrow for a period of 12 months
from the Closing Date and shall be a source of recovery for the Purchaser
against any Purchaser Losses.  In the event of each and any Purchaser Losses,
Seller and Member Representative, on behalf of the Members, may elect, within 15
days from the initial notice related thereto by Purchaser to Seller according to
the Escrow Agreement, either of the following methods to repay such Purchaser
Losses: (i) to have the number of shares issuable upon exercise of the Warrant
reduced by the amount of any Purchaser Losses, according to the following
formula: (A) each amount of Purchaser Losses shall be divided by the amount by
which each share issuable upon exercise of the Warrant exceeds the exercise
price thereof (if any) on the date when any amount of Purchaser Losses is
established, and (B) the quotient determined according to (A) above shall be the
number of shares issuable under the Warrant that are canceled as of such date;
or (ii) Seller, Member Representative or any of the Members, as determined among
themselves, may pay to Purchaser the amount of such Purchaser Losses in cash. 
If Purchaser has not received such amount in cash according to (ii) above within
15 days of the initial notice by Purchaser to Seller according to the Escrow
Agreement, Seller and the Member Representative, on behalf of the Members, shall
conclusively be deemed to have accepted the reduction in shares issuable under
the Warrant as set forth in (i) above.  Upon each event resulting in a reduction
in the number of shares exercisable upon issuance of the Warrant, the Warrant
shall be canceled and Purchaser shall deliver a new warrant, containing terms
identical to the Warrant other than the reduction in the number of shares
issuable upon exercise according to this Section 2.5(b), to the Escrow Agent.

 

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(c)                                  In the event that the shares issuable upon
exercise of the Warrant, according to the terms of this Agreement and the
Warrant, become exercisable during the term in which the Warrant is subject to
the Escrow Agreement, then Seller and the Member Representative, on behalf of
the Members, may elect to (i) choose to exercise all or a part of the Warrant
(according to the terms of the Warrant) and receive the shares issuable upon
such exercise, and (ii) if a registration statement with respect to such shares
filed with the Securities and Exchange Commission has been declared effective,
sell such shares according to all applicable laws, rules and regulations. 
Notwithstanding the foregoing, each of Seller, the Member Representative and the
Members acknowledge and agree that all such shares issued upon exercise of the
Warrant, and all such proceeds received upon sale of any such shares, shall be
made payable to the Escrow Agent and subject to the Escrow Agreement in the same
manner that the Warrant was held in the Escrow Agreement.

 

Section 2.6                                      Allocation of Purchase Price;
Tax Filings.  Purchaser and Seller shall allocate the Purchase Price plus
Assumed Liabilities among the Acquired Assets in the manner to be determined by
Purchaser in the exercise of its reasonable discretion.  Each of Purchaser and
Seller shall (i) timely file all forms (including Internal Revenue Service
Form 8594) and Tax Returns required to be filed in connection with such
allocation, (ii) be bound by such allocation for purposes of determining Taxes,
(iii) prepare and file, and cause its Affiliates to prepare and file, its Tax
Returns on a basis consistent with such allocation, and (iv) take no position,
and cause its Affiliates to take no position, inconsistent with such allocation
on any applicable Tax Return, in any audit or proceeding before any taxing
authority, in any report made for Tax, financial accounting or any other
purposes, or otherwise.  In the event that such allocation is disputed by any
taxing authority, the party receiving notice of such dispute shall promptly
notify the other party hereto concerning the existence and resolution of such
dispute.

 

ARTICLE III- THE CLOSING

 

Section 3.1                                      The Closing.  Upon the terms of
this Agreement, the consummation of the transactions contemplated by this
Agreement (the “Closing”) shall take place on the date of execution of this
Agreement, unless another date or place is agreed in writing by each of the
parties hereto.  The Closing shall occur at the offices of Parr Waddoups, Brown,
Gee & Loveless at 10:00 a.m. local time, or at such other place or time as the
parties shall agree.

 

Section 3.2                                      Deliveries by Seller.  At the
Closing, Seller shall deliver or cause to be delivered to Purchaser (unless
previously delivered), the following:

 

(a)                                  duly executed Bills of Sale for the
personal property in customary form reasonably acceptable to Purchaser;

 

(b)                                 duly executed Assignment of Contracts for
the Assumed Contracts in customary form reasonably acceptable to the Purchaser;

 

(c)                                  all documents of title and instruments of
conveyance necessary to transfer record and/or beneficial ownership to Purchaser
of all vehicles and any other property owned by Seller which are included in the
Acquired Assets as part of the Business and which require execution, endorsement
and/or delivery of a document in order to vest record or beneficial ownership
thereof in Purchaser;

 

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(d)                                 assignments of all Intellectual Property
which is listed in Section 3.2(e) of the Disclosure Schedule as owned by Seller
for the benefit of the Business;

 

(e)                                  assignment of the Real Property Lease;

 

(f)                                    executed copies of the Required Consents
referred to in Section 4.5 hereof;

 

(g)                                 all documents containing or relating to
“know-how” to be acquired by Purchaser pursuant hereto;

 

(h)                                 all of the books and records of Seller
relating to the Business, except as otherwise required by law and except as are
set forth in Section 2.1(a)(iii) of the Disclosure Schedule;

 

(i)                                     a certification of non-foreign status
for Seller in the form and manner which complies with the requirements of
Section 1445 of the Code and the regulations promulgated thereunder;

 

(j)                                     all Permits referred to in
Article 2.1(a)(vi) hereof;

 

(k)                                  any other certifications from Seller or any
of its Affiliates which may be required under Applicable Law necessary to
establish that no Taxes are due to any taxing authority for which the Purchaser
could have liability to withhold and pay with respect to the transfer of the
Business;

 

(l)                                     all such other deeds, endorsements,
assignments and other instruments as, in the reasonable opinion of Purchaser’s
counsel, are necessary to vest in Purchaser good and marketable title to the
Acquired Assets;

 

(m)                               all other previously undelivered documents
required to be delivered by Seller to Purchaser at or prior to the Closing in
connection with the Transactions; and

 

(n)                                 the opinion of counsel referred to in
Section 7.2(b) hereof.

 

Section 3.3                                      Deliveries by Purchaser.  At
the Closing, Purchaser shall deliver or cause to be delivered to Seller (unless
previously delivered), the following:

 

(a)                                  evidence of payment in full of each item of
the Payoff Consideration;;

 

(b)                                 executed copy of the Warrant;

 

(c)                                  executed copies of any assumption or
assignment document related to the Assumed Liabilities that Purchaser is
required (in its reasonable judgment) to execute ; and

 

(d)                                 such other documents as are required to be
delivered by Purchaser to Seller pursuant to this Agreement.

 

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ARTICLE IV- REPRESENTATIONS AND WARRANTIES

OF THE SELLER AND MEMBERS

 

Except as specifically set forth in the Disclosure Schedule prepared and signed
by Seller and Members and delivered to Purchaser simultaneously with the
execution hereof, Seller and Members, jointly and severally, represent and
warrant to Purchaser that all of the statements contained in this Article IV are
true and complete as of the date hereof.  Each exception set forth in the
Disclosure Schedule and each other response to this Agreement set forth in the
Disclosure Schedule is identified by reference to, or has been grouped under a
heading referring to, a specific individual section of this Agreement and,
except as otherwise specifically stated with respect to such exception, relates
only to such section.  In the event of any inconsistency between statements in
the body of this Agreement and statements in the Disclosure Schedule (excluding
exceptions expressly set forth in the Disclosure Schedule with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement shall control.

 

Section 4.1                                      Authorization.  Seller has full
power and authority to execute and deliver this Agreement and to consummate the
Transactions.  The execution, delivery and performance by Seller of this
Agreement and the consummation by it of the Transactions have been duly
authorized and unanimously consented to by Seller’s manager(s), if any, and the
Members, and no other member action on the part of Seller is necessary to
authorize the execution and delivery by Seller of this Agreement or the
consummation by it of the Transactions.

 

Section 4.2                                      Binding Agreement.  This
Agreement has been duly executed and delivered by Seller, Members and, assuming
due and valid authorization, execution and delivery thereof by Purchaser, this
Agreement is a valid and binding obligation of Seller and Members enforceable
against such persons in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws of general application affecting enforcement
of creditors’ rights generally, and (ii) the availability of the remedy of
specific performance or injunctive or other forms of equitable relief may be
subject to equitable defenses and would be subject to the discretion of the
court before which any proceeding therefore may be brought.

 

Section 4.3                                      Organization; Qualification of
Seller.  Seller (i) is a limited liability company organized, validly existing
and in good standing under the laws of the Commonwealth of Virginia; (ii) has
full power and authority to carry on the Business as it is now being conducted
and to own the Business; and (iii) is duly qualified or licensed to do business
as a foreign entity in good standing in every jurisdiction in which the conduct
of the Business requires such qualification or, if not so qualified in any such
jurisdiction, it can become so qualified in such jurisdiction without any
material adverse effect (including assessment of state taxes for prior years)
upon its business and properties.  Seller has heretofore made available to
Purchaser complete and correct copies of the certificate or articles of
organization and operating agreement of Seller as presently in effect or other
organizational documents.

 

Section 4.4                                      Subsidiaries and Affiliates. 
Section 4.4 of the Disclosure Schedule sets forth the jurisdictions in which
Seller is qualified to do business, the authorized and outstanding capital of
Seller, along with the membership interest owned by each Member.

 

Section 4.5                                      Required Consents and
Approvals; No Violations.  Except as set forth on Section 4.5 of the Disclosure
Schedule none of the execution, delivery or performance of this Agreement by
Seller or any Member, the consummation by Seller of the Transactions or
compliance by Seller or any Member with any of the provisions hereof will
(i) conflict with or result in any breach of any provision of

 

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the certificate or articles of organization, operating agreement or similar
organizational documents of Seller, (ii) require any filing with, or permit,
authorization, consent or approval of, any Governmental Entity or other Person
(including, without limitation, consents from parties to loans, contracts,
leases and other agreements to which any of Seller or a Member is a party),
(iii) require any consent, approval or notice under, or result in a violation or
breach of, or constitute (with or without due notice or the passage of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any contract, agreement, arrangement or understanding to which Seller or any
Member is a party or by which the Business or Acquired Assets are bound, or
(iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Seller, the Business, the Acquired Assets, or any of their
properties or assets.

 

Section 4.6                                      Financial Statements.  True and
complete copies of the Financial Statements, together with the related auditors
reports (if applicable), are included in Section 4.6 of the Disclosure
Schedule.  The Financial Statements have been prepared from, are in accordance
with and accurately reflect, the books and records of Seller, comply in all
material respects with applicable accounting requirements and income tax filing
requirements, have been prepared on a consistent basis during the periods
involved (except as may be stated in the notes thereto) and fairly present the
financial position and the results of operations and cash flows (and changes in
financial position, if any) of Seller and the Business as of the times and for
the periods referred to therein (subject, in the case of unaudited statements,
to normally recurring year-end audit adjustments which are not material either
individually or in the aggregate).

 

Section 4.7                                      Books and Records.  Seller’s
books of account and other records relating to the Business are complete and
correct in all material respects and have been maintained in accordance with
sound business practices.

 

Section 4.8                                      Liabilities.  Seller has
sufficient assets (including without limitation the Retained Assets) apart from
the Acquired Assets to satisfy all liabilities of Seller that are not being
assumed or paid off by Purchaser pursuant to this Agreement (including without
limitation the Retained Liabilities).  Seller and Members represent and warrant
that the assets of Seller not being sold to Purchaser will be used by Seller and
Members to satisfy all liabilities of the Seller that are not being assumed by
Purchaser in this Agreement or satisfied by the Payoff Consideration.  Except as
disclosed in the Financial Statements and as set forth in Section 4.8 of the
Disclosure Schedule, the Business has no liability or obligation of any nature,
(including, without limitation, any direct or indirect indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, fixed or unfixed, known or unknown, asserted or unasserted,
liquidated or unliquidated, secured or unsecured) that has, or would be
reasonably likely to have, a Material Adverse Effect.  The liabilities to be
paid by Purchaser as part of the Purchase Price are all of the liabilities of
Seller and there are no other liabilities of Seller.  Upon Purchaser paying the
Purchase Price, by Purchaser waiving the requirements of Virginia’s “Bulk Sales”
statute, no party will have any claim against the Acquired Assets or against
Purchaser for failure to comply with Virginia’s Bulk Sales statute and Seller
and the Members, jointly and severally, will indemnify and hold Purchaser
harmless against all such liability, loss, cost or expense.

 

Section 4.9                                      Accounts Receivable.  All
Accounts Receivable of the Business represent sales actually made in the
ordinary course of business.  Each of the Accounts Receivable to be included in
the Acquired Assets will be collected in full, within 90 days from the Closing
Date.

 

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Section 4.10                                Material Contracts.

 

(a)                                  Section 4.10(a) of the Disclosure
Schedule sets forth the following, including any legally binding oral agreements
or arrangements covered by the following:

 

(i)                                     each agreement that materially or
adversely affects or materially restricts the freedom of Seller to compete in
its lines of business or with any Person or in any geographical area, for any
length of time, or otherwise to conduct its business as presently conducted or
materially and adversely affect or materially restrict, the business,
operations, assets, properties or condition (financial or other) of the Business
as currently conducted;

 

(ii)                                  each of Seller’s collective bargaining or
union contract or agreement and each employment or severance contract or
agreement which constitutes a part of the Acquired Assets related to an employee
of the Business;

 

(iii)                               each contract or agreement for the receipt
of maintenance, consulting or other services which constitutes a part of the
Acquired Assets, except those contracts or agreements terminable without penalty
on 30 or fewer days’ notice or those involving the receipt or payment of less
than $5,000;

 

(iv)                              each contract or agreement for the purchase of
equipment, materials or supplies which constitutes a part of the Acquired
Assets, except those contracts or agreements terminable without penalty on 30 or
fewer days’ notice or those involving the receipt or payment of less than
$5,000;

 

(v)                                 each contract or agreement with any employee
or third party which constitutes a part of the Acquired Assets which is not
terminable without penalty on 30 or fewer days’ notice;

 

(vi)                              other than this Agreement, each agreement for
the acquisition or disposition of Acquired Assets in an amount of $5,000 or
more;

 

(vii)                           all leases and loans, capitalized or other, for
Acquired Assets which are leased, or owned, by Seller and which are not Retained
Liabilities;

 

(viii)                        each indemnification agreement entered into by
Seller in the last two years from the date hereof which constitutes a part of
the Acquired Assets and each such agreement entered into prior thereto if Seller
has any continuing obligations to perform services thereunder;

 

(ix)                                each agreement which involves the receipt or
payment of more than $5,000 which constitutes a part of the Acquired Assets and
(1) is not terminable without Liability, penalty or premium (whether imposed by
contract, law, regulation or otherwise) on 30 or fewer days’ notice or (2) has
an unexpired term of over one year;

 

(x)                                   each agreement, warranty, contract, or
lease involving more than $5,000 relating to any of the Acquired Assets; and

 

(xi)                                each Assumed Contract.

 

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(b)                                 Seller has made available to Purchaser true,
correct and complete copies of all agreements set forth in Section 4.10(a) of
the Disclosure Schedule (the “Material Contracts”).

 

(c)                                  Except as set forth in Section 4.10(c) of
the Disclosure Schedule, each Material Contract is in full force and effect, has
not been modified or amended and constitutes the legal, valid and binding
obligation of Seller, as the case may be, as a party thereto, in accordance with
the terms of such agreement.  To the Knowledge of Seller, each Material Contract
is a legal, valid and binding obligation of the other party or parties to such
Material Contract.  In the past twelve months, Seller has not given or received
a notice of default under (whether oral or written) or had any material dispute
with respect to any Material Contract.

 

Section 4.11                                Absence of Certain Changes.  Except
as set forth in Section 4.11 of the Disclosure Schedule, since December 31,
2003, the Business has been conducted only in the ordinary and usual course
consistent with past practice, and neither Seller (with respect to the Acquired
Assets) nor the Business has or could reasonably be expected to have:

 

(a)                                  suffered any Material Adverse Effect;

 

(b)                                 except as set forth in Section 4.11(b) of
the Disclosure Schedule, incurred any liability or obligation (absolute,
accrued, contingent or otherwise) except items incurred in the ordinary course
of business and consistent with past practice, none of which exceeds $5,000
(counting obligations or liabilities arising from one transaction or a series of
similar transactions, and all periodic installments or payments under any lease
or other agreement providing for periodic installments or payments, as a single
obligation or liability), or increased, or experienced any change in any
assumptions underlying or methods of calculating, any bad debt, contingency or
other reserves;

 

(c)                                  except as set forth in Section 4.11(c) of
the Disclosure Schedule, paid, discharged or satisfied any claim, liability or
obligation (whether absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities and obligations reflected or
reserved against in Seller’s latest balance sheet or incurred in the ordinary
course of business and consistent with past practice since the date of such
balance sheet;

 

(d)                                 permitted or allowed any of its property or
assets (real, personal or mixed, tangible or intangible) to be subjected to any
mortgage, pledge, lien, security interest, encumbrance, restriction or charge of
any kind, except for liens for current taxes not yet due, except as set forth in
Section 4.11(d) of the Disclosure Schedule;

 

(e)                                  except as set forth in Section 4.11(e) of
the Disclosure Schedule, written down the value of any inventory or written off
as uncollectible any notes or accounts receivable, except for immaterial
write-downs and write-offs in the ordinary course of business and consistent
with past practice;

 

(f)                                    except as set forth in Section 4.11(f) of
the Disclosure Schedule, cancelled any debts or waived any claims or rights of
substantial value;

 

(g)                                 sold, transferred, or otherwise disposed of
any of its properties or assets (real, personal or mixed, tangible or
intangible), except in the ordinary course of business and consistent with past
practice;

 

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(h)                                 except as set forth in Section 4.11(h) of
the Disclosure Schedule, disposed of or permitted to lapse any rights to the use
of any Intellectual Property, or disposed of or disclosed to any Person other
than representatives of Purchaser any trade secret, formula, process, know-how
or other Intellectual Property not theretofore a matter of public knowledge;

 

(i)                                     except as set forth in
Section 4.11(i) of the Disclosure Schedule, granted any general increase in the
compensation of employees of the Business (including any such increase pursuant
to any bonus, pension, profit-sharing or other plan or commitment) or any other
increase in the compensation payable or to become payable to any employee of the
Business, and no such increase is customary on a periodic basis or required by
agreement or understanding;

 

(j)                                     except as set forth in Section 4.11(j)
of the Disclosure Schedule, made any single capital expenditure or commitment in
excess of $5,000 for additions to property, plant, equipment or intangible
capital assets or made aggregate capital expenditures and commitments in excess
of $10,000 (on a Business-wide basis) for additions to property, plant,
equipment or intangible capital assets;

 

(k)                                  declared, paid or set aside for payment any
dividend or other distribution in respect of its units or membership interests;

 

(l)                                     made any change in any method of
accounting or accounting practice; or

 

(m)                               paid, loaned or advanced any amount to, or
sold, transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement with,
any of its Members or managers or any Affiliate or Associate of any of its
Members or managers except for compensation to employees at rates not exceeding
the rates of such fees and compensation paid during the year ended December 31,
2003.

 

Section 4.12                                Title to Assets; Encumbrances. 
Seller has good, valid and marketable title to all the Acquired Assets that it
purports to own (tangible and intangible) free and clear of all Encumbrances. 
Upon closing the transactions as contemplated in this Agreement, Purchaser will
own the Acquired Assets free and clear of all Encumbrances.  The rights,
properties and other assets to be conveyed to Purchaser pursuant hereto include
all rights, properties and other assets used by Seller to conduct the Business
or necessary to permit Purchaser to conduct the Business after the Closing in
all material respects in the same manner as such business has been conducted by
Seller prior to the date hereof.

 

Section 4.13                                Real Property.

 

(a)                                  Seller owns no real property. 
Section 4.13(a) of the Disclosure Schedule sets forth the location of the leased
Real Property, and includes a status report therefore.  To the knowledge of the
Seller, there are no proceedings, claims, disputes or conditions affecting the
Real Property that might curtail or interfere with the use of such property.  To
the knowledge of the Seller, neither the whole nor any portion of the Real
Property nor any other Acquired Asset is subject to any governmental decree or
order to be sold or is being condemned, expropriated or otherwise taken by any
public authority, nor to the Knowledge of Seller has any such condemnation,
expropriation or taking been proposed.  Seller is not a party to any lease,
assignment or similar arrangement under which any Seller or Member is a lessor,
assignor or otherwise makes available for use by any third party any portion of
the Real Property.

 

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(b)                                 Seller has not received any notice of, or
other writing referring to, any requirements or recommendations by any insurance
company that has issued a policy covering any part of the leased Real Property
or related property or by any board of fire underwriters or other body
exercising similar functions, requiring or recommending any repairs or work to
be done on any part of the Real Property, which repair or work has not been
completed.

 

(c)                                  Seller has obtained all appropriate
certificates of occupancy, licenses, easements and rights of way, required to
use and operate the Real Property in the manner in which the Real Property is
currently being used and operated by Seller.  True and complete copies of all
such certificates, permits and licenses to the extent they are in the possession
of Seller have heretofore been furnished to Purchaser.  Seller (with respect to
the Business) has all approvals, permits and licenses (including any and all
environmental permits) necessary to operate the Real Property as currently
operated, and no such approvals, permits or licenses will be required, as a
result of the Transactions, to be issued after the date hereof in order to
permit Purchaser and the Business, following the Closing, to continue to operate
the Real Property in the same manner as heretofore, other than any such
approvals, permits and licenses that are ministerial in nature and are normally
issued in due course upon application therefore without further action by the
applicant.

 

(d)                                 Except as set forth in Section 4.13(e) of
the Disclosure Schedule, there are no material, unusual matters which could
delay, prevent, prohibit, impair or materially limit the currently intended use
or occupancy of the Real Property.

 

Section 4.14                                Leases.

 

(a)                                  Section 4.14(a) of the Disclosure
Schedule contains an accurate and complete description of the terms of the Real
Property Leases.  A true and complete copy of each lease has been delivered to
Purchaser.  The Real Property Leases are valid, binding and enforceable upon
Seller, and to the Knowledge of Seller, upon the other party thereto in
accordance with their terms and are in full force and effect.  To the Knowledge
of Seller, the leasehold estate created by each of the Real Property Leases is
free and clear of all Encumbrances.  Except for the failure to pay rent, the
exact amount of such rent that is owed as of the date hereof is set forth on
Section 4.14(a) of the Disclosure Schedule and is a part of the Payoff
Consideration and is accrued and identified on Seller’s financial statements,
there are no existing defaults by Seller under either of the Real Property
Leases.  No event has occurred that (whether with or without notice, lapse of
time or the happening or occurrence of any other event) would constitute a
default under the Real Property Leases.  Seller has no reason to believe that
the lessor under either of the Real Property Leases will not consent (where such
consent is necessary) to the consummation of the Transactions without requiring
any modification of the rights or obligations of the lessee thereunder.

 

(b)                                 Section 4.14(b) of the Disclosure
Schedule contains an accurate and complete description of the terms of each
Lease.  True and complete copies of each such lease has been delivered to
Purchaser.  Each Lease is valid, binding and enforceable upon Seller, and to the
Knowledge of Seller, upon the other party thereto in accordance with its terms
and is in full force and effect.  To the Knowledge of Seller, the leasehold
estate created by each Lease is free and clear of all Encumbrances.  There are
no existing defaults by Seller under any Lease.  No event has occurred that
(whether with or without notice, lapse of time or the happening or occurrence of
any other event) would constitute a default under any Lease.  Seller has no
reason to believe that the lessor under any Lease will not consent (where such
consent is

 

20

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necessary) to the consummation of the Transactions without requiring any
modification of the rights or obligations of the lessee thereunder.

 

Section 4.15                                Condition of Assets.

 

(a)                                  Except as set forth in Section 4.15(a) of
the Disclosure Schedule, none of the Acquired Assets have any Defects and all
Acquired Assets are in good operating condition and repair and are adequate and
fit for the uses to which they are being put.  Other than the Acquired Assets,
no item of property or other asset is necessary for the operations and business
of the Business or of Seller as conducted as of the Closing Date.  To the
Knowledge of Seller, none of the Acquired Assets is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost.  Seller has not received notification that it is in
violation of any applicable building, zoning, health or other law, ordinance or
regulation in respect of the Acquired Assets.

 

(b)                                 Except as set forth on Section 4.15(b) of
the Disclosure Schedule, all raw material, work-in-process and finished goods
inventory of Seller (i) is of a quantity and quality usable or salable in the
ordinary course of business except for obsolete inventory which has been written
down on Seller’s June 30, 2004 balance sheet to its net realizable value, and
(ii) is reflected on the Financial Statements at the lower of cost or market,
and all such inventory shown on the Financial Statements has been acquired by
Seller for value.

 

Section 4.16                                Environmental Matters.

 

(a)                                  Seller is in material compliance with all
Environmental Laws.  Such compliance includes, but is not limited to, Seller’s
possession of all permits and other governmental authorizations required under
all applicable Environmental Laws, and compliance with the terms and conditions
thereof.  Each permit and other governmental authorization currently held by
Seller (pursuant to the Environmental Laws) is specifically identified in
Section 4.16(a) of the Disclosure Schedule.

 

(b)                                 Except as set forth in Section 4.16(b) of
the Disclosure Schedule, Seller has not received any communication (written or
oral), whether from a Governmental Entity, citizens group, employee or
otherwise, that alleges that Seller is not in full compliance with all
Environmental Laws.  Seller has delivered to Purchaser prior to the execution of
this Agreement all information that is in the possession of or reasonably
available to Seller regarding environmental matters pertaining to, or the
environmental condition of, Seller or the compliance (or non-compliance) by the
Business with any Environmental Laws.

 

(c)                                  There is no Environmental Claim by any
Person that is pending or threatened against the Seller, the Business or the
Acquired Assets, or against any Person whose liability for any Environmental
Claim Seller has retained or assumed either contractually or by operation of
law.

 

(d)                                 Except as set forth in Section 4.16(d) of
the Disclosure Schedule, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including the release, emission,
discharge, presence or disposal of any Materials of Environmental Concern, that
could form the basis of any Environmental Claim against Seller, the Business or
the Acquired Assets, or, to the Knowledge of Seller, against any Person whose
liability for any Environmental Claim Seller has retained or assumed either
contractually or by operation of law.

 

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(e)                                  Without in any way limiting the generality
of the foregoing, (i) all on-site and off-site locations where Seller or the
Business has (previously or currently) stored, disposed or arranged for the
disposal of Materials of Environmental Concern are specifically identified in
Section 4.16(e) of the Disclosure Schedule, (ii) all underground storage tanks,
and the capacity and contents of such tanks, located on any property owned,
leased, operated or controlled by Seller for the use or benefit of the Business
are specifically identified in Section 4.16(e) of the Disclosure Schedule,
(iii) to the Knowledge of Seller there is no asbestos contained in or forming
part of any building, building component, structure or office space owned,
operated or controlled by the Business and (iv) to the Knowledge of Seller no
PCBs or PCB-containing items are used or stored at any property owned, operated
or controlled by Seller for the benefit of the Business.

 

(f)                                    Seller has provided to Purchaser a copy
of each assessment, report, datum, result of investigations or audit, and other
information that is in the possession of or reasonably available to Seller
regarding environmental matters pertaining to or the environmental condition of
the Business or the Acquired Assets, or the compliance (or noncompliance) by
Seller, the Business or the Acquired Assets with any Environmental Laws.

 

(g)                                 Except as set forth in Section 4.16(g) of
the Disclosure Schedule, Seller is not, and none of the Acquired Assets are,
subject to any Environmental Laws requiring (i) the performance of site
assessment for Materials of Environmental Concern, (ii) the removal or
remediation of Materials of Environmental Concern, (iii) the giving of notice
to, or receiving the approval of, any Governmental Entity or (iv) the recording
or delivery to any other Person of any disclosure document or statement
pertaining to environmental matters by virtue of the Transactions or as a
condition to the effectiveness of any of the Transactions.

 

Section 4.17                                Contracts and Commitments.

 

(a)                                  Except as set forth in Section 4.17(a) of
the Disclosure Schedule, no Person has any agreement, option, understanding or
commitments or any right or privilege (whether by law, preemptive or
contractual) capable of becoming an agreement, option or commitment, for the
purchase or other acquisition from Seller of the Business or any of the Acquired
Assets.

 

(b)                                 The Business has no agreements, contracts,
commitments or restrictions that require the making of any charitable
contribution.

 

(c)                                  Except as set forth in Section 4.17(c) of
the Disclosure Schedule, no material purchase contracts or commitments of the
Business continue for a period of more than 12 months or are in excess of the
normal, ordinary and usual requirements of business.

 

(d)                                 Except as set forth in Section 4.17(d) of
the Disclosure Schedule, the Business has no outstanding contracts with
managers, employees, agents, consultants, advisors, salesmen, sales
representatives, distributors or dealers that are not cancelable by it on notice
of not longer than 30 days and without liability, penalty or premium or any
agreement or arrangement providing for the payment of any bonus or commission
based on sales or earnings.

 

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(e)                                  Except as set forth in Section 4.17(e) of
the Disclosure Schedule, the Business has no employment agreement, or any other
agreement that contains any severance or termination pay liabilities or
obligations.

 

(f)                                    Except as set forth in Section 4.17(f) of
the Disclosure Schedule, Seller is not (with respect to the Acquired Assets or
Business) in material default under or in violation of, nor is there any valid
basis for any claim of default under or violation of, any contract, commitment
or restriction to which it is a party or by which it is bound which defaults and
violations in the aggregate would have a Material Adverse Effect upon the
Business.

 

(g)                                 Set forth in Section 4.17(g) of the
Disclosure Schedule is a list of each employee and their current compensation
and benefits.

 

(h)                                 Except as set forth in Section 4.17(h) of
the Disclosure Schedule, Seller (with respect to the Acquired Assets or
Business) are not restricted by agreement from carrying on their business
anywhere in the world.

 

(i)                                     Seller has no outstanding agreement to
acquire any debt obligations of others.

 

(j)                                     Except as set forth in Section 4.17(j)
of the Disclosure Schedule, none of Seller, the Acquired Assets or the Business
has any power of attorney outstanding or any obligations or liabilities (whether
absolute, accrued, contingent or otherwise), as guarantor, surety, co-signer,
endorser, co-maker, indemnitor or otherwise in respect of the obligation of any
Person, corporation, partnership, joint venture, association, organization or
other entity.

 

Section 4.18                                Customers and Suppliers.  Except as
set forth in Section 4.18 of the Disclosure Schedule, there has not been a
Material Adverse Effect because of a change in the business relationship of the
Business during the period January 1, 2004 through the date hereof with any
supplier or vendor from whom the Business purchased more than 5% of the
equipment, goods or services (on a consolidated basis) which it purchased during
the same period.  To the Knowledge of Seller, the consummation of the
Transactions will not have a Material Adverse Effect on any vendor, supplier or
subcontractor relationship.  Set forth on Section 4.18 of the Disclosure
Schedule is a list of the ten largest vendors of the Business during the first
nine months of 2004.

 

Section 4.19                                Insurance.  Section 4.19 of the
Disclosure Schedule sets forth (a) a true and complete list and description of
all insurance policies, other insurance arrangements and other contracts or
arrangements for the transfer or sharing of insurance risks by Seller or the
Business or with respect to the Acquired Assets in force on the date hereof with
respect to the business or assets of the Business for the last ten years,
together with a statement of the aggregate amount of claims paid out, and claims
pending, under each such insurance policy or other arrangement through the date
hereof and (b) a description of such risks which the Business or the managers or
Members of Seller has designated as being self-insured.  The Business has
policies of insurance issued by an insurer that Seller believes is financially
sound and reputable of the type and in amounts Seller believe is customarily
carried by Persons conducting businesses or owning assets similar to those of
the Business.  All such policies are in full force and effect, all premiums due
thereon have been paid and the Business is otherwise in compliance in all
material respects with the terms and provisions of such policies.  Furthermore,
(a) the Business has not received any notice of cancellation or non-renewal of
any such policy or arrangement nor is the termination of any

 

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such policies or arrangements threatened, (b) there is no claim pending under
any of such policies or arrangements as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or arrangements, (c) the
Business has received no notice from any of its insurance carriers that (i) any
insurance premiums will be increased in the future or (ii) that any insurance
coverage presently provided for will not be available to the Business in the
future on substantially the same terms as now in effect or (iii) any claims have
been denied by the insurer and no such notice is expected to be received, and
(d) none of such policies or arrangements provides for any retrospective premium
adjustment, experienced-based liability or loss sharing arrangement affecting
the Business.

 

Section 4.20                                Casualties.  Since December 31,
2003, Seller has not been affected in any way as a result of flood, fire,
explosion or other casualty that would have a Material Adverse Effect (whether
or not material and whether or not covered by insurance).  Seller is not aware
of any circumstance which is likely to cause it to suffer any material adverse
change in its business, operations or prospects, other than general economic
conditions and typical industry risks.

 

Section 4.21                                Litigation.  Except as set forth in
Section 4.21 of the Disclosure Schedule, there is no action, claim, charge,
audit, suit, inquiry, proceeding or investigation by or before any Governmental
Entity or brought by any third party pending or, to the Knowledge of Seller,
threatened against or involving the Business or the Acquired Assets, or which
questions or challenges the validity of this Agreement or any action taken or to
be taken by Seller pursuant to this Agreement or in connection with the
Transactions.  To the Knowledge of Seller, there is no basis for any such
action, proceeding or investigation.  Seller is not subject to any judgment,
order or decree which may have a Material Adverse Effect on the Acquired Assets
or Seller’s ability to acquire any property or conduct the Business.

 

Section 4.22                                Compliance with Laws; Permits and
Licenses.

 

(a)                                  Each of Seller and the Business have
complied, in a timely manner and in all material respects with all laws,
rules and regulations, ordinances, judgments, decrees, orders, writs and
injunctions of all United States federal, state, local, foreign governments and
agencies thereof that affect the business, properties or assets of the Business
or the Acquired Assets, and to the Knowledge of Seller there are no
circumstances that, if not remedied or modified, would prevent or materially
interfere with such compliance.

 

(b)                                 Seller and the Business has in effect and
obtained all Permits necessary to conduct the Business as it is presently being
conducted in accordance with the ordinances, rules, requirements and regulations
of any Governmental Entity having jurisdiction over its properties or
activities, and there has occurred no default under any such Permit, and to the
Knowledge of Seller there are no Permits or licenses that, if not obtained,
would prevent or materially interfere with the conduct of the Business as it is
presently being conducted.  A list of all Permits necessary to conduct the
Business is attached hereto as Section 4.22(b) of the Disclosure Schedule.

 

(c)                                  Without limiting the foregoing, (i) the
operations of the Business do not violate or fail to comply in any material
respect with applicable health, fire, safety, zoning or building codes, laws or
ordinances, rules or regulations; (ii) Seller has not received any notice not
heretofore complied with or in the process of being complied with, from any
Governmental Entity having jurisdiction over its properties or activities, or
any insurance or inspection body, that its operations or any of its properties,
facilities, equipment, or business procedures or practices fail to comply in all
material respects with any Applicable

 

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Law, ordinance, regulation, building or zoning law, or requirement of any public
authority or body; and (iii) there are no pending or, to the Knowledge of
Seller, threatened actions or proceedings by any Governmental Entity alleging
violations in any material respect of such codes, laws or ordinances.

 

Section 4.23                                Employee Benefit Plans.

 

(a)                                  Section 4.23(a) of the Disclosure
Schedule contains a true and complete list of all Plans (other than at will
employment arrangements that may be terminated at any time without liability). 
Neither Seller nor any ERISA Affiliate has any commitment or formal plan,
whether legally binding or not, to create any additional employee benefit plan
or modify or change any existing Plan that would affect any employee or former
employee of the Business or Seller.

 

(b)                                 Seller has heretofore delivered to Purchaser
a true and complete copy of each Plan and any amendments thereto (or if a Plan
is not a written Plan, a description thereof), each agreement creating or
modifying any related trust, insurance contract, or other funding vehicle for
such plan, the most recent annual report and summary plan description required
under ERISA or the Code and the most recent determination letter (or master
prototype opinion letter, if applicable) issued by the Internal Revenue Service
with respect to each Plan intended to qualify under Section 401 of the Code.

 

(c)                                  Except as listed in Section 4.23(c) of the
Disclosure Schedule:

 

(i)                                     All contributions (including all
employer contributions and employee salary reduction contributions) that are due
have been made within the time periods prescribed by ERISA or the Code to each
Plan that is a “pension plan” within the meaning of Section 3(2) of ERISA (a
“Pension Plan”) and all contributions for any period ending on or before the
Closing Date which are not yet due have been made to each such Pension Plan or
accrued in accordance with the past custom and practice of Seller.  All premiums
or other payments for all periods ending on or before the Closing Date have been
timely paid with respect to each Plan that is a “welfare plan” within the
meaning of Section 3(1) of ERISA.

 

(ii)                                  Other than a Multiemployer Plan, no Plan
that is a Pension Plan has been completely or partially terminated or been the
subject of a “reportable event” within the meaning of Section 4043 of ERISA.  No
proceeding by the PBGC to terminate any such Pension Plan has been instituted
or, to the Knowledge of Seller or any Member or manager (or employee with
responsibility for employee benefits matters) of Seller, threatened.  The market
value of assets under each Pension Plan (including any Pension Plan that is a
Multiemployer Plan) equals or exceeds the present value of all vested and
non-vested liabilities thereunder, as calculated in accordance with the terms of
the Plan and the PBGC or other regulatory agency methods, factors, and
assumptions applicable to a Pension Plan terminating on the date hereof.

 

(iii)                               Neither Seller nor any ERISA Affiliate has
incurred, and none of Seller or any Member or manager (or employee with
responsibility for employee benefits matters) of Seller has any reason to expect
that Seller or any ERISA Affiliate will incur, any Liability (other than for
PBGC premiums) to any Person under Title IV of ERISA or under the Code with
respect to any Pension Plan, including, without limitation, any “withdrawal
liability” within the meaning of

 

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Section 4201 of ERISA or other liability under Subtitle E of Title IV of ERISA
with respect to any Multiemployer Plan.

 

(iv)                              No “complete withdrawal” or “partial
withdrawal” (within the meaning of ERISA Sections 4203 and 4205, respectively)
has occurred with respect to Seller or any ERISA Affiliate of Seller under any
Multiemployer Plan, no liability for any such withdrawal has been asserted, and
no events or circumstances have occurred which could result in any such complete
or partial withdrawal (other than the sale contemplated by this Agreement). 
Neither Seller nor ERISA Affiliate of Seller is bound by any contract or
agreement, or has any obligation or liability, described in Section 4204 of
ERISA.

 

(d)                                 None of Seller, the Business, any ERISA
Affiliate, any Plan nor any trust thereunder, nor any trustee or administrator
thereof has engaged in a transaction with respect to a Plan pursuant to which
either a civil penalty under Section 409 or Section 502(i) of the ERISA or a tax
under Section 4975 or 4976 of the Code could be imposed.

 

(e)                                  Each Plan that covers employees of Seller
or the Business has been operated and administered in all material respects in
accordance with its terms and Applicable Law, including ERISA and the Code.  In
the case of any Plan maintained for the benefit of employees in Canada or
otherwise outside the United States, such Plan has complied with all Applicable
Laws of the country in which the Plan is maintained and operated.

 

(f)                                    Each Plan which covers employees of
Seller or the Business that is intended to be “qualified” within the meaning of
Section 401(a) of the Code is so qualified, and the trusts maintained thereunder
are exempt from taxation under Section 501(a) of the Code.  Each Plan intended
to satisfy the requirements of Code Sections 125 or 501(c)(9) has satisfied such
requirements.

 

(g)                                 No Plan provides medical, surgical,
hospitalization or death benefits (whether or not insured) for employees or
former employees of the Business or the Seller for periods extending beyond
their retirement or other termination of service, other than (i) coverage
mandated by COBRA, (ii) death benefits under any Pension Plan.

 

(h)                                 Neither Purchaser nor the Business will, as
a result of the consummation of the Transactions be liable to any current or
former employee or their dependants of Seller or the Business for any severance
pay, unemployment compensation or any other payment or liability under any Plan,
except as expressly provided in this Agreement.  The consummation of the
Transactions will not, either alone or in combination with another event,
accelerate the time of payment or vesting, or increase the amount of any
compensation under any Plan that covers employees of Seller or the Business.

 

(i)                                     Except for routine claims for benefits,
there are no pending, threatened or anticipated claims with respect to any Plan,
by any employee of Seller or the Business.

 

Section 4.24                                Taxes.

 

(a)                                  All Tax Returns required to be filed on or
prior to the Closing Date by or with respect to the Acquired Assets or the
operations or the income of Seller and the Business have, within the time and
manner prescribed by law, been duly filed with the appropriate tax authorities. 
All such Tax Returns are

 

26

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true, correct, and complete in all respects and all Taxes shown to be due on
such Tax Returns have been paid.  Seller has timely paid or caused to be paid
all Taxes required to be paid or have made adequate reserves therefore for all
taxable years or periods ending on or before the Closing Date and for the
portion of the taxable year or period through and including the Closing Date in
the case of any taxable period that begins before and ends after the Closing
Date.  Purchaser will not incur any Transfer Taxes as a result of the sale of
the Business and the Acquired Assets hereunder.

 

(b)                                 There are no Encumbrances for Taxes upon any
of the Acquired Assets except for statutory liens for Taxes not yet due.

 

(c)                                  Other than any Tax Returns that have not
yet been required to be filed, Seller has made available to Purchaser true and
correct copies of the United States federal income Tax Return and any material
state, local or foreign Tax Return filed by Seller for each of the taxable years
ended December 31, 2001, 2002, and 2003.

 

(d)                                 Seller currently is not the beneficiary of
any extension of time within which to file any Tax Return.  No claim has ever
been made by an authority in a jurisdiction where Seller does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.

 

(e)                                  Seller has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, Member, or other third
party.  Seller has withheld and remitted in a timely manner all sales and use
taxes required to be collected from third persons.

 

(f)                                    None of Seller or any Member or manager
(or employee responsible for Tax matters) of Seller expects any authority to
assess additional Taxes for any period for which Tax Returns have been filed. 
There is no dispute or claim concerning any Liability related to Tax matters of
Seller either (i) claimed or raised by any authority in writing or (ii) as to
which Seller and the Members and managers (and employees responsible for Tax
matters) of Seller has Knowledge based upon personal contact with any agent of
such authority.

 

(g)                                 Seller has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.

 

(h)                                 The unpaid Taxes of Seller (i) did not, as
of December 31, 2003, exceed the reserve for Tax liability (rather than any
reserve for deferred Taxes established to reflect timing differences between the
book and Tax income) set forth on the face of Seller’s December 31, 2003 balance
sheet (rather than in any notes thereto) and (ii) will not exceed that reserve
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of Seller in filing their Tax Returns.

 

(i)                                     Seller is not a party to any Tax
allocation or sharing agreement.  Seller (i) has not been a member of an
affiliated group filing a consolidated federal income Tax Return, or (ii) has no
liability for the Taxes of any Person (other than Seller) under Reg. § 1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract or otherwise.

 

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Section 4.25                                Intellectual Property.

 

(a)                                  Section 4.25(a) of the Disclosure
Schedule sets forth a true and complete list of all Intellectual Property and
Computer Software used or held for use in connection with the Business, together
with all licenses related to the foregoing, whether Seller or the Business is
the licensee or licensor thereunder.

 

(b)                                 Seller is the sole and exclusive owner or
valid licensee of all Intellectual Property, free and clear of all Encumbrances.

 

(c)                                  All patents, registrations and applications
for Intellectual Property that are owned by Seller or are used in and are
material to the conduct of the Business as currently conducted (i) are valid,
subsisting, in proper form and are enforceable, and have been duly maintained,
including the submission of all necessary filings and fees in accordance with
the legal and administrative requirements of the appropriate jurisdictions and
(ii) have not lapsed, expired or been abandoned, and no patent, registration or
application therefore to the Knowledge of Seller is the subject of any
opposition, interference, cancellation proceeding or other legal or governmental
proceeding before any Governmental Entity in any jurisdiction.

 

(d)                                 Seller owns or has the valid right to use
all of the Intellectual Property used by it or held for use by it in connection
with its business.  To the Knowledge of Seller, there are no conflicts with or
infringements of any Intellectual Property by any third party.  The conduct of
the Business as currently conducted to the Knowledge of Seller, does not
conflict with or infringe in any way on any proprietary right of any third
party.  There is no claim, suit, action or proceeding pending or, to the
Knowledge of Seller, threatened against Seller or the Business (i) alleging any
such conflict or infringement with any third party’s proprietary rights or
(ii) challenging the ownership, use, validity or enforceability of the
Intellectual Property.

 

(e)                                  The Computer Software used by the Business
was either (i) developed by employees of Seller or the Business within the scope
of their employment, (ii) developed on behalf of Seller or the Business by a
third party, and all ownership rights therein have been assigned or otherwise
transferred to or vested in Seller or the Business, as the case may be, pursuant
to written agreements or (iii) licensed or acquired from a third party pursuant
to a written license, assignment, or other contract that is in full force and
effect and of which neither of Seller nor the Business is in material breach.

 

(f)                                    All consents, filings, and authorizations
by or with Governmental Entities or third parties necessary with respect to the
consummation of the Transactions, as they may affect the Intellectual Property,
have been obtained.

 

(g)                                 Neither Seller, nor the Business, has
entered into any consent, indemnification, forbearance to sue, settlement
agreement or cross-licensing arrangement with any Person relating to the
Intellectual Property or, to the Knowledge of Seller, any Intellectual Property
licensed by Seller or the Intellectual Property of any third party, except as
contained in any license agreements listed in Section 4.25(g) of the Disclosure
Schedule.

 

(h)                                 Neither Seller, nor the Business, is, nor
will be as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement, in breach of any license,
sublicense or other agreement relating to the Intellectual Property, as long as
the Required Consents set forth in Section 4.5 of the Disclosure Schedule are
obtained.

 

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Section 4.26                                Labor Matters.

 

(a)                                  There is no labor strike, dispute,
campaign, slowdown, stoppage or lockout actually pending, or to the Knowledge of
Seller, threatened against or affecting the Business or Seller, and during the
past five years there has not been any such action.

 

(b)                                 Except as set forth in Section 4.26 of the
Disclosure Schedule, neither Seller (with respect to the Business) nor the
Business is a party to or bound by any collective bargaining or similar
agreement with any labor organization or work rules or any practices agreed to
with any labor organization or employee association applicable to employees of
Seller or the Business.

 

(e)                                  No collective bargaining agreement which is
binding on Seller (with respect to the Business) or the Business restricts any
of them from relocating or closing any of their operations.

 

(f)                                    Except as set forth in Section 4.26(f) of
the Disclosure Schedule, the Business has not experienced any work stoppage or
other labor difficulty in the past 5 years.

 

(g)                                 A true and complete copy of each written
personnel policy, rule and procedure applicable to employees of the Business is
included in Section 4.26(g) of the Disclosure Schedule.

 

(h)                                 Each of Seller (with respect to the Acquired
Assets) and the Business is and has at all times been, in compliance, in all
material respects, with all Applicable Laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, and is not engaged in any unfair labor
practices, as defined in the National Labor Relations Act or other Applicable
Laws.

 

(i)                                     There is no unfair labor practice charge
or complaint against Seller (with respect to the Acquired Assets) or the
Business pending or, to the Knowledge of Seller, threatened before the National
Labor Relations Board or any similar state or foreign agency.

 

(j)                                     There is no presently pending grievance
arising out of any collective bargaining agreement or other grievance procedure.

 

(k)                                  To the Knowledge of Seller, no charge with
respect to or relating to the Business is pending before the Equal Employment
Opportunity Commission or any other agency responsible for the prevention of
unlawful employment practices.

 

(l)                                     Neither Seller (with respect to the
Business) nor the Business has received notice of the intent of any federal,
state, local or foreign agency responsible for the enforcement of labor or
employment laws to conduct an investigation with respect to or relating to the
Business, and no such investigation is in progress.

 

(m)                               There are no complaints, lawsuits or other
proceedings pending or, to the Knowledge of Seller, threatened in any forum by
or on behalf of any present or former employee of Seller or the Business, any
applicant for employment or classes of the foregoing alleging breach of any
express or

 

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implied contract of employment, any laws governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment relationship.

 

(n)                                 Since the enactment of the WARN Act, 
(i) neither Seller, nor the Business, has effectuated a “plant closing” (as
defined in the WARN Act) affecting any site of employment or one or more
facilities or operating units within any site of employment or facility of the
Business, (ii) there has not occurred a “mass layoff” (as defined in the WARN
Act) affecting any site of employment or facility of Business, (iii) the
Business has not been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state, local or foreign Law or regulation and (iv) none of Business’
employees has suffered an “employment loss” (as defined in the WARN Act) during
the six-month period prior to the date hereof.

 

(o)                                 Section 4.26(o) of the Disclosure
Schedule sets forth a true and complete list of all employees and independent
contractors of Seller, and includes the current annual salary being paid to each
employee and independent contractor and the bonus to which each such employee or
independent contractor is entitled to for the 2004 year, and the expected
payment date of such bonus.

 

Section 4.27                                Brokers or Finders.  No agent,
broker, investment banker, financial advisor or other firm or Person is or will
be entitled to any broker’s or finder’s fee or any other commission or similar
fee in connection with any of the Transactions.

 

Section 4.28                                Full Disclosure.  No representation
or warranty by Seller contained in this Agreement and no statement contained in
any document (including, without limitation, financial statements and the
Disclosure Schedule), certificate, or other writing furnished or to be furnished
by Seller to Purchaser or any of its representatives (excluding financial
forecasts, and other forward looking projections or information) pursuant to the
provisions hereof or in connection with the Transactions, contains or will
contain any untrue statement of material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was made,
in order to make the statements herein or therein not misleading.  None of
Seller, its managers or the Members is aware of any fact that may, either alone
or in combination with any other fact, cause a Material Adverse Effect.

 

ARTICLE V- REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser represents and warrants to Seller that:

 

Section 5.1                                      Organization.  Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of Utah, and has all requisite corporate or other power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority, and
governmental approvals would not have, individually or in the aggregate, a
material adverse effect on the ability of Purchaser to consummate the
Transactions.

 

Section 5.2                                      Authorization; Validity of
Agreement; Necessary Action.  Purchaser has full corporate power and authority
to execute and deliver this Agreement and to consummate the Transactions.  The
execution, delivery and performance by Purchaser of this Agreement and the
consummation of the Transactions have been duly authorized by Purchaser’s board
of directors, and no other corporate action on the part of Purchaser is
necessary to authorize the execution and delivery by

 

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Purchaser of this Agreement or the consummation of the Transactions.  No vote
of, or consent by, the holders of any class or series of stock is necessary to
authorize the execution and delivery by Purchaser of this Agreement or the
consummation by it of the Transactions.  This Agreement has been duly executed
and delivered by Purchaser, and, assuming due and valid authorization, execution
and delivery hereof by Seller and Members, is a valid and binding obligation of
Purchaser, enforceable against it in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws of general application affecting
enforcement of creditors’ rights generally, and (ii) the availability of the
remedy of specific performance or injunctive or other forms of equitable relief
may be subject to equitable defenses and would be subject to the discretion of
the court before which any proceeding therefore may be brought.

 

Section 5.3                                      Consents and Approvals; No
Violations.  Except as set forth in Section 5.3 of the Disclosure Schedule, none
of the execution, delivery or performance of this Agreement by Purchaser, the
consummation by it of the Transactions or compliance by it with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of its articles of incorporation or bylaws, (ii) require any filing
with, or permit, authorization, consent or approval of, any Governmental Entity,
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Purchaser is a party or by
which it or any of its respective properties or assets may be bound, or
(iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Purchaser, or any of its properties or assets, excluding from the
foregoing clauses (ii), (iii) and (iv) such violations, breaches or defaults
which would not, individually or in the aggregate, have a material adverse
effect on the ability of Purchaser to consummate the Transactions or which arise
from the regulatory status of Seller.

 

Section 5.4                                      Brokers or Finders.  None of
Purchaser nor any of its Affiliates has entered into any agreement or
arrangement entitling any agent, broker, investment banker, financial advisor or
other firm or Person to any broker’s or finder’s fee or any other commission or
similar fee in connection with any of the Transactions.

 

ARTICLE VI- COVENANTS

 

Section 6.1                                      Subsequent Actions.

 

(a)                                  If at any time after the Closing Purchaser
will consider or be advised that any deeds, bills of sale, instruments of
conveyance, assignments, assurances or any other actions or things are necessary
or desirable to vest, perfect or confirm ownership (of record or otherwise) in
Purchaser its right, title or interest in, to or under any or all of the
Acquired Assets or otherwise to carry out this Agreement, Seller and Members
shall execute and deliver all deeds, bills of sale, instruments of conveyance,
powers of attorney, assignments and assurances and take and do all such other
actions and things as may be reasonably requested by Purchaser in order to vest,
perfect or confirm any and all right, title and interest in, to and under such
rights, properties or assets in Purchaser or otherwise to carry out this
Agreement.

 

(b)                                 After the Closing, each of Purchaser, Seller
and Members shall:

 

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(i)                                     make available to the other parties and
to any taxing authority as reasonably requested all information and documents
relating to Taxes of the Seller or any Taxes imposed on the Business or Acquired
Assets for which the party may have liability;

 

(ii)                                  provide timely notice to the other parties
in writing of any pending or threatened Tax Audit, assessments or litigation of
any manner with respect to Seller or the Business for which the other party may
have liability under this Agreement; and

 

(iii)                               furnish the others with copies of all
correspondence received from any taxing authority in connection with any Tax
Audit or information request with respect to any taxable period for which the
other may have liability under this Agreement.

 

(c)                                  In case at any time after the Closing Date
any further action is necessary, proper or advisable to carry out the purposes
of this Agreement, as soon as reasonably practicable, each party hereto shall
take, or cause its proper officers, directors, Member and managers to take, all
such necessary, proper or advisable actions.

 

Section 6.2                                      Publicity.  The initial press
release and any subsequent public disclosures regarding the transactions
contemplated hereby, if any, with respect to the execution of this Agreement
shall be as determined by Purchaser.  Neither Seller nor Members shall make any
public announcement regarding this Agreement or the transaction contemplated
hereby without the prior written approval of Purchaser.

 

Section 6.3                                      Waiver of Bulk Sales
Requirement.  Each party waives compliance with any applicable bulk sales laws,
including without limitation the Uniform Commercial Code Bulk Transfer
provisions.  Seller and Members, jointly and severally, agree to pay and
discharge in due course and will indemnify and save harmless Purchaser from and
against all claims made by creditors of Seller, including expenses and
attorneys’ fees incurred by Purchaser in defending against such claims, except
those expressly assumed by Purchaser pursuant hereto.

 

Section 6.4                                      Completion of Non-assignable
Contracts.  Seller and Members shall use their commercially reasonable efforts
to obtain any consent, approval or amendment required to negotiate and/or assign
any contract or agreement included in the Acquired Assets, or any other Acquired
Asset to be assigned to Purchaser hereunder and Purchaser shall use all
commercially reasonable efforts to fulfill Seller’s obligations under such
contracts.  Seller shall keep Purchaser reasonably informed from time to time of
the status of the foregoing and Purchaser shall cooperate with Seller in this
regard.  To the extent that the rights of Seller under any contract or agreement
included in the Acquired Assets, or under any other asset to be assigned to
Purchaser hereunder, may not be assigned without the consent of another Person
which has not been obtained prior to the Closing, this Agreement shall not
constitute an agreement to assign the same if an attempted assignment would be
unlawful.  If any such consent has not been obtained or if any attempted
assignment would be ineffective or would impair Purchaser’s rights under the
instrument in question so that Purchaser would not acquire the benefit of all
such rights, then Seller, to the maximum extent permitted by Applicable Law and
the instrument, shall act as Purchaser’s agent in order to obtain for Purchaser
the benefits thereunder and shall cooperate, to the maximum extent permitted by
Applicable Law and the instrument, with Purchaser in any other reasonable
arrangement designed to provide such benefits to Purchaser (including, without
limitation, by entering into an equivalent arrangement).

 

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Section 6.5                                      Tax Matters.  With respect to
any ad valorem or other property taxes imposed upon or assessed with respect to
any of the Acquired Assets for the tax year in which Closing occurs, Seller
shall pay the portion of such taxes that relate to the period ending on the
Closing Date (determined on a daily pro rated basis).

 

Section 6.6                                      Further Assurances.  Each party
shall cooperate with the other, and execute and deliver, or use its commercially
reasonable efforts to cause to be executed and delivered, all such other
instruments, including instruments of conveyance, assignment and transfer, and
to make all filings with and to obtain all consents (including Required
Consents), approvals or authorizations of any Governmental Entity or other
regulatory authority or any other Person under any Permit, agreement, indenture
or other instrument, and take all such other actions as such party may
reasonably be requested to take by the other party hereto from time to time,
consistent with the terms of this Agreement, in order to effectuate the
provisions and purposes of this Agreement and the transactions contemplated
hereby.

 

Section 6.7                                      Restrictions on Transfer of
Warrant and Shares Underlying Warrant.

 

(a)                                  The Warrant and the common stock issuable
upon exercise of the Warrant (collectively with the Warrant, the “Securities”)
are being acquired for investment for Seller’s own account, not as nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and Seller has no present intention of selling, granting any participation in or
otherwise distributing the same.  Seller is familiar with the phrase “acquired
for investment and not with a view to distribution” as it relates to the
Securities Act of 1933, as amended (the “Securities Act”) and state securities
laws and the special meaning given to such term by the Securities and Exchange
Commission (the “SEC”).  Seller does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to the
Securities.

 

(b)                                 Seller understands that the Securities are
being issued without registration under the Securities Act on the ground that
the Transactions and the issuance of Securities hereunder is exempt from
registration under the Securities Act under one or more exemptions available
thereunder, including, without limitation, Regulation D, and that Purchaser’s
reliance on such exemption is predicated on Seller’s representations, warranties
and covenants set forth herein.  Seller realizes that the basis for the
exemption may not be present if, notwithstanding such representations,
warranties and covenants, Seller has in mind merely acquiring the Securities or
any portion thereof for a fixed or determinable period in the future, or for a
market rise, or for sale if the market does not rise.  Seller does not have any
such intention.  Seller acknowledges that Purchaser is not required to rely on
such exemption and may rely on any other exemption available to it at the time
of such issuance.  Seller shall provide such additional representations,
warranties and covenants as Purchaser may require in connection the reliance on
any other exemption.

 

(c)                                  Seller has reviewed all of the public
filings made by Purchaser with the SEC, and any other information that Seller
considers necessary or appropriate for deciding whether to purchase the
Securities.  Seller has had an opportunity to ask questions and receive answers
from Purchaser regarding the business, properties, prospects and financial
condition of Purchaser and to obtain additional information necessary to verify
the accuracy of any information furnished to Seller or to which Seller had
access.  Seller has received no, and is not relying upon any, representations,
written or oral, from Purchaser, or its officers, directors, employees,
attorneys or agents.  In making the decision to accept the

 

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Warrant as part of the consideration for the Transactions, Seller has relied
solely upon independent investigations made by Seller or its representatives
without assistance of Purchaser or its officers, directors, employees, attorneys
or agents.  None of the following information has ever been represented,
guaranteed or warranted to Seller, expressly or by implication, by any person:

 

(i)                                     The approximate or exact length of time
that Seller will be required to hold the Securities;

 

(ii)                                  The percentage of profit and/or amount of
or type of consideration, profit or loss to be realized, if any, as a result of
an investment in Purchaser; or

 

(iii)                               The possibility that the past performance or
experience on the part of Purchaser or any affiliate, officer, director,
employee or agent of Purchaser, might in any way indicate or predict the results
of ownership of the Securities or the potential success of Purchaser’s
operations.

 

(d)                                 Seller and Members are experienced in
evaluating and investing in private placement transactions of securities of
companies in a similar stage as Purchaser and acknowledges that each are able to
fend for himself or itself, to bear the economic risk of an investment in the
Securities and each has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
in the Securities.

 

(e)                                  Seller understands that neither the
Securities nor any portion thereof may be sold, transferred or otherwise
disposed of without registration under the Securities Act or an exemption
therefrom, and that in the absence of an effective registration statement
covering the Securities (or such portion thereof) or an available exemption from
registration under the Securities Act, the Securities and each portion thereof
must be held indefinitely.  Seller is aware that neither the Securities nor any
portion thereof may be sold pursuant to Rule 144 promulgated under the
Securities Act unless all of the conditions of Rule 144 are met.

 

(f)                                    To the extent applicable, each
certificate or other document evidencing any of the Securities may be endorsed
with the legends substantially in the form set forth below:

 

The following legends under the Securities Act:

 

NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
UNDER ANY STATE SECURITIES LAWS.  THIS WARRANT AND SAID SHARES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND NEITHER THIS WARRANT, SAID SHARES
OR ANY INTEREST THEREIN MAY BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
THERETO UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

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Purchaser may endorse such certificates with each legend imposed or required by
its articles of incorporation, bylaws or applicable state securities laws.

 

Section 6.8                                      Registration of Stock
Underlying Warrant.  Purchaser shall use its commercially reasonable efforts to
(i) promptly following the Closing, but no later than sixty (60) days
thereafter, prepare and file with the Securities and Exchange Commission one
Registration Statement on Form S-3 to effect a registration covering the resale
of the shares of common stock issuable upon exercise of the Warrant, and
(ii) have such registration statement declared effective as soon as practicable.

 

Section 6.9                                      Warranty Responsibility.  From
and after the Closing Date, Seller covenants to accept the liability and
responsibility of any warranty, replacement or similar claims related to
Products existing as of Closing.

 

Section 6.10                                Licenses, Contracts, Etc.  Seller
and Members hereby covenant and agree to use their best efforts to assist
Purchaser in obtaining the necessary licenses to operate the Business.

 

Section 6.11                                Consulting and Employment
Agreements.  In connection with the Closing, Purchaser and each of Hale, Long
and Kazee shall enter into consulting or employment agreements in forms
substantially similar to those set forth as Exhibit E hereto in the case of
Hale, Exhibit F hereto in the case of Long, and Exhibit G hereto in the case of
Kazee.  Each of Hale, Long and Kazee hereby acknowledge and agree that Purchaser
would not have entered into this Agreement but for each of Hale, Long and Kazee
agreeing to the terms set forth in each of their respective consulting or
employment agreements attached hereto, and in particular, to the agreement by
each of Hale, Long and Kazee to the terms thereof related to covenants not to
compete and similar matters.

 

Section 6.12                                Transition of Employee Benefit
Plans.  Except for those Plans listed on Section 6.23 of the Disclosure
Schedule (“Assumed Plans”), Purchaser is not assuming and shall have no
Liability under or with respect to any Plans.  In the case of any Assumed Plans,
Purchaser’s and Seller’s Liability shall be apportioned as follows: Purchaser
shall be liable for obligations arising after the Closing and Seller shall be
responsible for all obligations arising on or prior to the Closing.  From and
after the date hereof, Seller shall remain responsible for offering and
providing continuing group health plan coverage under COBRA to all “M&A
qualified beneficiaries” within the meaning of Treasury Regulation
Section 54.4980B-9 and to any other Persons entitled to such COBRA coverage with
respect to the Plans, and shall not take or allow any action that would transfer
Liability for such COBRA continuation coverage to Purchaser.

 

Section 6.13                                Member Representative.  Each of the
Members acknowledge and agree that the Member Representative shall represent all
Members, and each of the Members hereby designate and empower the Member
Representative to act for all of the Members with respect to any matters related
to this Agreement and the transactions contemplated hereby following the
Closing, including, without limitation, all matters relating to notices, the
Warrant, the Escrow Agreement and any related matters.  Any such act by the
Member Representative shall be binding upon and enforceable against each of the
Members.

 

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ARTICLE VII- INDEMNIFICATION

 

Section 7.1                                      Indemnification; Remedies.

 

(a)                                  Seller and Members, jointly and severally,
shall indemnify, defend and hold harmless the Purchaser Indemnified Persons from
and against and in respect of all Purchaser Losses and all Retained Liabilities.

 

(b)                                 Purchaser shall indemnify and hold Seller
Indemnified Persons harmless from and against Seller Losses.

 

Section 7.2                                      Notice of Claim; Defense. 
Purchaser on one hand and Seller and Members on the other hand shall give each
other prompt notice of any third-party claim that may give rise to any
indemnification obligation under this Article XII, together with the estimated
amount of such claim, and Seller shall have the right to assume the defense (at
Seller’s expense) of any such claim through counsel of Seller’s own choosing by
so notifying Purchaser within 30 days of the first receipt by Seller of such
notice from Purchaser; provided, however, that any such counsel shall be
reasonably satisfactory to Purchaser.  Failure to give such notice shall not
affect the indemnification obligations hereunder in the absence of actual and
material prejudice.  If, under applicable standards of professional conduct, a
conflict with respect to any significant issue between any Purchaser Indemnified
Person and Seller exists in respect of such third-party claim, Seller shall pay
the reasonable fees and expenses of such additional counsel as may be required
to be retained in order to eliminate such conflict.  Seller shall be liable for
the fees and expenses of counsel employed by Purchaser for any period during
which Seller has not assumed the defense of any such third-party claim (other
than during any period in which Purchaser will have failed to give notice of the
third-party claim as provided above).  If Seller assumes such defense, Purchaser
shall have the right to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by Seller, it
being understood that Seller shall control such defense.  If Seller chooses to
defend or prosecute a third-party claim, Purchaser shall cooperate in the
defense or prosecution thereof, which cooperation shall include, to the extent
reasonably requested by Seller, the retention, and the provision to Seller, of
records and information reasonably relevant to such third-party claim, and
making employees of the Business available on a mutually convenient basis to
provide additional information and explanation of any materials provided
hereunder.  If Seller chooses to defend or prosecute any third-party claim,
Purchasers shall agree to any settlement, compromise or discharge of such
third-party claim that Seller may recommend and that, by its terms, discharges
Purchaser and any of its Affiliates from the full amount of liability in
connection with such third-party claim; provided, however, that, Seller shall
not consent to, and Purchaser shall not be required to agree to, the entry of
any judgment or enter into any settlement that (i) provides for injunctive or
other non-monetary relief affecting Purchaser or any of its Affiliates or
(ii) does not include as an unconditional term thereof the giving of a release
from all liability with respect to such claim by each claimant or plaintiff to
each Purchaser Indemnified Person that is the subject of such third-party claim.

 

Section 7.3                                      Survival of Indemnification
Claims.  The indemnification obligations set forth in this Article XII shall
survive the Closing.

 

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Section 7.4                                      Tax Effect of Indemnification
Payments.  All indemnity payments made by Seller to Purchaser Indemnified
Persons, or by Purchaser Indemnified Persons to Seller, pursuant to this
Agreement shall be treated for all Tax purposes as adjustments to the
consideration paid with respect to the Acquired Assets.

 

Section 7.5                                      Effect of Investigation.  The
right to indemnification, payment of Purchaser Losses or for other remedies
based on any representation, warranty, covenant or obligation of Seller and
Members contained in or made pursuant to this Agreement shall not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant or obligation.  The
waiver of any condition to the obligation of Purchaser to consummate the
Transactions, where such condition is based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, shall not affect the right to indemnification, payment
of Purchaser Losses, or other remedy based on such representation, warranty,
covenant or obligation.

 

Section 7.6                                      Survival of Covenants,
Representations and Warranties.  Except for the representations and warranties
set forth in Section 4.1, Section 4.2, Section 4.12, Section 4.16, Section 4.24,
Section 4.27 and Section 6.5, each of which shall survive forever, the remaining
representations and warranties of Seller and Members made herein or in any other
documentation delivered pursuant to this Agreement and the covenants and
agreements to be performed on or prior to the Closing Date shall survive until
the date two years following the Closing Date; provided, that (a) expiration of
a representation, warranty, covenant or agreement shall not affect the
obligations of a party with respect to claims for indemnification for which
notice has been given to the indemnifying party in accordance with this
Article XII prior to such expiration and (b) all covenants, agreements and
indemnification matters that contemplate or may involve actions to be taken or
obligations in effect after the Closing shall survive the Closing Date.

 

ARTICLE VIII- MISCELLANEOUS

 

Section 8.1                                      Fees and Expenses.  All costs
and expenses incurred in connection with this Agreement and the consummation of
the Transactions shall be paid by the party incurring such expenses, except as
specifically provided to the contrary in this Agreement.  Seller and Members are
expressly responsible for the payment of all Transfer Taxes arising from the
transactions contemplated hereunder.

 

Section 8.2                                      Amendment and Modification. 
This Agreement may be amended, modified and supplemented in any respect, but
only by a written instrument signed by all of the parties hereto expressly
stating that such instrument is intended to amend, modify or supplement this
Agreement.

 

Section 8.3                                      Notices.  All notices and other
communications hereunder shall be in writing and shall be deemed given when
delivered personally, sent by first-class mail with return receipt or sent by an
overnight courier service, such as Federal Express, to the parties at the
following addresses (or at such other address for a party as shall be specified
by such party by like notice):

 

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If to Purchaser, to:

 

Merit Medical Systems, Inc.

Attn: President

1600 West Merit Parkway

South Jordan, Utah 84095

 

with a copy (which shall not constitute notice) to:

 

Parr Waddoups Brown Gee & Loveless

Attn:  Scott W. Loveless

185 South State Street, Suite 1300

Salt Lake City, Utah 84111

Telecopy:  (801) 532-7750

 

and

 

If to Seller, to:

 

MedSource Packaging Concepts, LLC

C/o Robert E. Hale

14121 Helmsley Road

Midlothian, VA 23113

Attention: Manager or Members

Telecopy: (804) 267-1875

 

with a copy (which shall not constitute notice) to:

 

Gordon D. Fronk, Esq.

Suite 700 Nottingham Centre

502 Washington Avenue

Towson, Maryland 21204

Telecopy: (410) 823-0451

 

If to the Member Representative, to:

 

Robert E. Hale

14121 Helmsley Road

Midlothian, VA 23113

Telecopy:  (801) 379-7575

 

or to such other address as a party may from time to time designate in writing
in accordance with this section.  Each notice or other communication given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been received (a) on the business day it is received, if sent by

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personal delivery, or (b) on the first business day after sending, if sent
priority overnight by a nationally recognized overnight courier, properly
addressed and prepaid, or (c) upon receipt, if sent by mail (regular, certified
or registered); provided, however, that notice of change of address shall be
effective only upon receipt.

 

Section 8.4                                      Counterparts.  This Agreement
may be executed in one or more counterparts, all of which shall be considered
one and the same agreement and shall become effective when two or more
counterparts have been signed by each of the parties and delivered to the other
parties.

 

Section 8.5                                      Entire Agreement; No Third
Party Beneficiaries.  This Agreement, the Disclosure Schedule and other
schedules, annexes, and exhibits hereto (a) constitute the entire agreement and
supercede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof and thereof and supersede
and cancel all prior agreements, negotiations, correspondence, undertakings,
understandings and communications of the parties, oral and written, with respect
to the subject matter hereof, and (b) are not intended to confer upon any Person
other than the parties hereto and thereto any rights or remedies hereunder.

 

Section 8.6                                      Severability.  Any term or
provision of this Agreement that is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.  If the
final judgment of a court of competent jurisdiction or other authority declares
that any term or provision hereof is invalid, void or unenforceable, the parties
agree that the court making such determination shall have the power to reduce
the scope, duration, area or applicability of the term or provision, to delete
specific words or phrases, or to replace any invalid, void or unenforceable term
or provision with a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision.

 

Section 8.7                                      Governing Law.  This Agreement
shall be governed by and construed in accordance with the laws of the State of
Utah without giving effect to the principles of conflicts of law thereof.

 

Section 8.8                                      Enforcement; Venue.  The
parties agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached.  It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States located in the State of Utah or in
Utah state court, this being in addition to any other remedy to which they are
entitled at law or in equity.  In addition, each of the parties hereto
(a) consents to submit itself to the personal jurisdiction of any Federal court
located in Salt Lake County in the State of Utah or any Utah state court located
in Salt Lake County in the event any dispute arises out of this Agreement or any
of the Transactions, (b) agrees that it shall not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (c) agrees that it shall not bring any action relating to this Agreement or
any of the Transactions in any court other than as set forth above.

 

Section 8.9                                      Election of Remedies.  Neither
the exercise of nor the failure to exercise a right of set-off or to give notice
of a claim under this Agreement will constitute an election of remedies or limit

 

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Purchaser or any of the Purchaser Indemnified Persons on the one hand, or Seller
or any of the Seller Indemnified Persons on the other hand, in any manner in the
enforcement of any other remedies that may be available to any of them, whether
at law or in equity.

 

Section 8.10                                Assignment.  Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written content of the other parties, except that Purchaser may assign, in
their sole discretion, any or all of their rights and interests hereunder to any
Affiliate of Purchaser.  Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.

 

Section 8.11                                Headings.  The article, section,
paragraph and other headings contained in this Agreement are inserted for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.

 

Section 8.12                                Attorneys’ Fees.  If a legal action
or other proceeding is brought for enforcement of this Agreement because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys’ fees and costs incurred, both before
and after judgment, in addition to any other relief to which they may be
entitled.

 

 

[remainder of page intentionally left blank; signature page follows]

 

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IN WITNESS WHEREOF, Purchaser, Seller, Members and the Member Representative
have executed this Agreement or caused this Agreement to be executed by their
respective officers, members or managers thereunto duly authorized as of the
date first written above.

 

 

PURCHASER:

 

 

 

Merit Medical Systems, Inc.,

 

a Utah corporation

 

 

 

By:

 

 

 

 

Fred P. Lampropoulos

 

 

 

President and CEO

 

 

 

 

 

 

SELLER:

 

 

 

MEDSOURCE PACKAGING CONCEPTS, LLC,

 

a Virginia limited liability company

 

 

 

By:

 

 

 

 

Robert E. Hale

 

 

 

President

 

 

 

 

 

 

MEMBERS:

 

 

 

 

 

 

Robert E. Hale,

 

an individual resident of the Commonwealth of Virginia

 

 

 

 

 

 

Charles Long,

 

an individual resident of the Commonwealth of Virginia

 

 

 

 

 

 

Gary W. Kazee,

 

an individual resident of the Commonwealth of Virginia

 

 

 

 

 

 

Willis P. Blackwood,

 

an individual resident of the Commonwealth of Virginia

 

 

 

 

 

 

Robert C. Walker,

 

an individual resident of the Commonwealth of Virginia

 

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Tommy J. West,

 

an individual resident of the Commonwealth of Virginia

 

 

 

 

 

 

David T. Richardson,

 

an individual resident of the Commonwealth of Virginia

 

 

 

MEMBER REPRESENTATIVE:

 

 

 

 

 

 

Robert E. Hale

 

an individual resident of the Commonwealth of Virginia

 

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EXHIBIT A

 

 

Seller’s Liabilities

 

 

[see attached]

 

43

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EXHIBIT B

 

 

Form of Warrant

 

 

[SEE ATTACHED]

 

44

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EXHIBIT C

 

 

Form of Escrow Agreement

 

 

[see attached]

 

45

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EXHIBIT D

 

 

Purchase Price Allocation

 

 

[see attached]

 

46

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EXHIBIT E

 

 

[Hale Agreement]

 

 

[see attached]

 

47

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EXHIBIT F

 

 

[Long Agreement]

 

 

[see attached]

 

48

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EXHIBIT G

 

 

[Kazee Agreement]

 

 

[see attached]

 

49

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