f8k021110ex10vi_paneltech.htm


    Exhibit
10.6

     

    
       

      SECURITIES
PURCHASE AGREEMENT

       

      This
Securities Purchase Agreement (this “Agreement”) is dated
as of December 23, 2009, between Charleston Basics Inc., a Delaware corporation
(the “Company”), Paneltech
Products, Inc., a Delaware corporation (“Paneltech Products”), and each
purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and
collectively, the “Purchasers”).

       

      WHEREAS,
the Company desires to raise up to $3,000,000 of gross proceeds from the
Purchasers party hereto, and Other Investors (defined hereafter), pursuant to
the terms of this Agreement and an additional Securities Purchase Agreement, if
applicable, substantially similar to this Agreement, in a private placement
offering of the Company’s securities (the “Offering”);
and

       

      WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and
Rule 506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, securities of the Company as more fully described in this
Agreement;

       

      NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and each Purchaser agree as
follows:

       

       

      ARTICLE
I

      DEFINITIONS

       

      1.1           Definitions.  In
addition to the terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to such terms in
the Certificate of Designations (as defined herein), and (b) the following terms
have the meanings set forth in this Section
1.1:

       

      “Accounts Receivable”
shall have the meaning ascribed to such term in Section
3.1(jj).

       

      “Action” shall have
the meaning ascribed to such term in Section
3.1(j).

       

       “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 405 under the Securities Act.

       

      “Board of Directors”
means the board of directors of the Company or of Paneltech Products, as
applicable.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      “Business Day” means
any day except Saturday, Sunday, any day which is a federal legal holiday in the
United States or any day on which banking institutions in the State of New York
are authorized or required by law or other governmental action to
close.

       

       “Certificate of
Designations” means the Certificate of Designations, Preferences and
other Rights and Qualifications of Series A Convertible Preferred Stock to be
filed prior to the Initial Closing by the Company with the Secretary of State of
Delaware, in the form of Exhibit A attached
hereto.

       

      “Closing” shall mean
either the Initial Closing or the Secondary Closing.

       

      “Closing Date” means
the Initial Closing Date or the Secondary Closing Date, as
applicable.

       

      “Closing Statement”
means a Closing Statement in the form Exhibit B attached
hereto.

       

      “Collins Timber” shall
have the meaning ascribed to that term in Section
4.15.

       

      “Collins Repurchase”
shall have the meaning ascribed to that term in Section
4.15.

       

      “Commission” means the
United States Securities and Exchange Commission.

       

      “Common Stock” means
the common stock of the Company, par value $0.0001 per share, and any other
class of securities into which such securities may hereafter be reclassified or
changed into.

       

      “Common Stock
Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive Common
Stock.

       

      “Company Charter
Documents” shall have the meaning ascribed to that term in Section
3.1(b).

       

      “Company Counsel”
means Olshan Grundman Frome Rosenzweig & Wolosky LLP, Park Avenue Tower, 65
East 55th
Street, New York, New York 10022.

       

      “Company Financial
Statements” shall have the meaning ascribed to that term in Section
3.1(h).

       

       “Disclosure Schedules”
shall have the meaning ascribed to such term in Section
3.1.

       

      “Escrow Agent” means
Feldman LLP.

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      “Escrow Agreement”
means the escrow agreement entered into prior to the date hereof, attached
hereto as Exhibit
C, by and among the Company, the Lead Investor and the Escrow Agent
pursuant to which the Purchasers shall each deposit their Subscription Amounts
with the Escrow Agent to be applied to the transactions contemplated
hereunder.

       

      “Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

      


      “GAAP” shall have the
meaning ascribed to such term in Section
3.1(h).

      


      “Indebtedness” shall
have the meaning ascribed to such term in Section
3.1(y).

      


      “Initial Closing”
means the closing of the Offering at which the Company raises the Initial
Proceeds from the Lead Investor and the Paragon Introduced
Investors.

       

      “Initial Closing Date”
means the date of the Initial Closing, which shall be on a Business Day and upon
which all of the Transaction Documents applicable to the Initial Closing have
been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the obligations of the Lead Investor and/or the
Paragon Introduced Investors to each pay their Subscription Amounts and (ii) the
Company’s obligations to deliver the Securities to be delivered at the Initial
Closing have been satisfied or waived.

       

      “Initial Proceeds”
means an aggregate of $1,500,000 to be raised by the Company from the Lead
Investor and/or the Paragon Introduced Investors.

       

      “Intellectual Property
Rights” shall have the meaning ascribed to such term in Section
3.1(o).

      


      “Investor Rights
Agreement” means the Investor Rights Agreement, in the form of Exhibit D attached
hereto, which contains certain rights applicable to the Purchasers and the Other
Investors in this Offering including, without limitation, certain registration
rights with respect to the Underlying Shares.

      


      “Lead Investor” means
Paragon Capital LP, a Delaware limited partnership, a Purchaser with offices at
110 East 59th
Street, New York, New York 10022.

      


      “Lead Investor
Counsel” means Feldman LLP with offices located at 420 Lexington Avenue,
Suite 2620, New York, New York 10170.

      


      “Legend Removal Date”
shall have the meaning ascribed to such term in Section
4.1(c).

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      
 

      “Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other charge or restriction.

      


      “Management Lock-Up
Agreements” means the Lock-Up Agreements by and among the Company and
each of the directors, officers and Collins Timber, in the form of Exhibit E attached
hereto, all of which shall commence on the Initial Closing Date and expire
twelve (12) months after the Secondary Closing Date (or twelve (12) months after
the Initial Closing Date if there is no Secondary Closing).

       

      “Material Adverse
Effect” shall have the meaning assigned to such term in Section
3.1(b).

      


      “Material Permits”
shall have the meaning ascribed to such term in Section
3.1(m).

      


      “Maximum Rate” shall
have the meaning ascribed to such term in Section
5.16.

      


      “Merger” shall have
the meaning ascribed to that term in Section
2.3(b).

      


      “Merger Agreement”
shall have the meaning ascribed to that term in Section
2.3(b).

      


      “Offering” means the
Company’s private placement offering of the Securities, as described in further
detail in this Agreement.

      


      “Other Investors”
means investors in the Offering other than the Purchasers party to this
Agreement, each of whom has entered into a Securities Purchase Agreement
substantially similar to this Agreement.

      


      “Paneltech Products”
means Paneltech Products, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company, having offices at 2999 John Stevens Way, Hoquiam,
Washington 98550.

      


      “Paneltech Products Financial
Statements” shall have the meaning ascribed to that term in Section
3.1(h).

       

      “Paragon Introduced
Investors” means the investors introduced by the Lead Investor who also
subscribe for Securities at the Initial Closing.999 John
Stevens Way Hoquiam, WA 98550

      “Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.

      


       “Preferred Stock”
means the 5,453,100 shares of the Company’s Series A Convertible Preferred
Stock, par value $0.0001 per share, authorized under and having the rights,
preferences and privileges set forth in the Certificate of Designations, in the
form of Exhibit
A attached hereto.

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      
 

       “Proceeding” means an
action, claim, suit, investigation or proceeding (including, without limitation,
an informal investigation or partial proceeding, such as a deposition), whether
commenced or threatened.

      


      “Purchaser Party”
shall have the meaning ascribed to such term in Section
4.9.

      


      “Required Approvals”
shall have the meaning ascribed to such term in Section
3.1(e).

      


      “Required Minimum”
means, as of any date, the maximum aggregate number of shares of Common Stock
then issued or potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon exercise in full of all
Warrants or conversion in full of all shares of Preferred Stock, ignoring any
conversion or exercise limits set forth therein.

       

      “Rule 144” means Rule
144 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

      


      “SEC Reports” shall
have the meaning ascribed to that term in Section
4.3.

      


      “Secondary Closing”
means the closing of the Offering at which the Company raises the Secondary
Proceeds.

       

      “Secondary Closing
Date,” if it shall occur, means the date of the Secondary Closing, which
may occur concurrent with the Initial Closing Date or anytime thereafter until
January 22, 2010.

       

      “Secondary Investors”
means investors in the Offering other than the Lead Investor or the Paragon
Introduced Investors.

       

      “Secondary Proceeds”
means up to an aggregate of $1,500,000 to be raised by the Company from
Secondary Investors.

       

      “Securities” means the
Preferred Stock, the Warrants and the Underlying Shares.

      


      “Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

      


      “Stated Value” means
the price per share of the Preferred Stock.

       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      
 

      “Subscription Amount”
shall mean, as to each Purchaser, the aggregate amount to be paid for the
Preferred Stock and Warrants purchased hereunder as specified below such
Purchaser’s name on the signature page of this Agreement and next to the heading
“Subscription Amount,” in United States dollars and in immediately available
funds.

      


      “Subsidiary” means any
other direct or indirect subsidiary of the Company as set forth on Schedule 3.1(a)
attached hereto, and shall, where applicable, also include any direct or
indirect subsidiary of the Company formed or acquired after the date
hereof.

      


      “Trading Day” means a
day on which the principal Trading Market is open for trading.

      


       “Trading Market” means
any of the following markets or exchanges on which the Common Stock is listed or
quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital
Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the NYSE
Euronext or the OTC Bulletin Board (or any successors to any of the
foregoing).

      


      “Transaction
Documents” means this Agreement, the Certificate of Designations, the
Warrants, the Escrow Agreement, the Management Lock-Up Agreements, the Investor
Rights Agreement, all schedules and exhibits thereto and hereto, and any other
documents or agreements executed and/or delivered in connection with the
transactions contemplated hereunder.

      


      “Transfer Agent” means
Island Stock Transfer or any successor transfer agent for the Common Stock as
may be engaged by the Company.

      


      “Underlying Shares”
means the shares of Common Stock issued and issuable upon (i) conversion of the
Preferred Stock, in accordance with the terms of the Certificate of Designations
and (ii) exercise of the Warrants.

      


      “Variable Rate
Transaction” shall have the meaning ascribed to such term in Section 4.12
hereafter.

       

      “VWAP” means, for any
date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a Trading Market, the daily
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from
9:30 a.m. (New York City time) to 4:02 p.m. (New York City time); (b)  if
the OTC Bulletin Board is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on the
OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are then
reported in the “Pink Sheets” published by Pink OTC Markets Inc. (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported; or (d) in
all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Lead Investor and
reasonably acceptable to the Company, the fees and expenses of which shall be
paid by the Company.

       

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      “Warrants” means the
Series A Common Stock purchase warrants, in the form of Exhibit F attached
hereto, delivered to the Purchasers at each Closing in accordance with Section 2.2(a)
hereof, which Warrants shall have a term of exercise equal to seven (7) years,
commencing six (6) months after the Secondary Closing Date (provided, however, that if
there is no Secondary Closing then commencing six (6) months after the Initial
Closing Date) at an initial exercise price of $0.12, subject to adjustment, as
provided therein.

      


      


      ARTICLE
II

      PURCHASE
AND SALE

       

      2.1 Closings.

       

      (a) Initial
Closing.  On the Initial Closing Date, upon the terms and
subject to the conditions set forth herein, substantially concurrent with the
execution and delivery of this Agreement by the Lead Investor and/or the Paragon
Introduced Investors, the Company agrees to sell, and the Lead Investor and/or
the Paragon Introduced Investors agree, severally and not jointly, to purchase
for an aggregate purchase price of $1,500,000: (i) shares of Preferred Stock
with an aggregate Stated Value equal to such Purchaser's Subscription Amount and
(ii) Warrants as determined pursuant to Section
2.2(a).  The aggregate number of shares of Preferred Stock sold
at the Initial Closing shall be 2,726,550 shares.  At or prior to the
Initial Closing, the Lead Investor and/or each of the Paragon Introduced
Investors, as applicable, shall deliver to the Escrow Agent, via wire transfer or a
certified check, immediately available funds equal to its Subscription Amount
and the Company shall deliver to the Escrow Agent, shares of Preferred Stock and
Warrants as determined pursuant to Section 2.2(a), and
the Company, on the one hand, and the Lead Investor and/or each of the Paragon
Introduced Investors, as applicable, on the other hand, shall deliver the other
items set forth in Section 2.2
deliverable at the Initial Closing.  Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and
2.3, the
Initial Closing shall occur at the offices of the Lead Investor Counsel or such
other location as the parties shall mutually agree and the Company and the Lead
Investor shall deliver to the Escrow Agent the Escrow Release Notice (as defined
in the Escrow Agreement), duly executed.

       

      (b) Secondary
Closing.  In the event that the Initial Closing is consummated,
the Company may hold the Secondary Closing for the purpose of raising the
Secondary Proceeds.  The aggregate number of shares of Preferred Stock
that may be sold at the Secondary Closing shall be up to 2,726,550
shares.  On the Secondary Closing Date, if applicable, upon the terms
and subject to the conditions set forth herein, substantially concurrent with
the execution and delivery of this Agreement by the Secondary Investors,


       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

         

        the
Company agrees to sell, and the Secondary Investors agree, severally and not
jointly, to purchase for an aggregate purchase price of up to $1,500,000: (i)
shares of Preferred Stock with an aggregate Stated Value equal to such
Purchaser's Subscription Amount and (ii) Warrants as determined pursuant to
Section
2.2(a).  Each of the Secondary Investors, as applicable, shall
deliver to the Company, via wire transfer or a certified check, immediately
available funds equal to its Subscription Amount and the Company shall deliver
to each such Secondary Investor, as applicable, shares of Preferred Stock and
Warrants as determined pursuant to Section 2.2(a), and
the Company, on the one hand, and the Secondary Investors, as applicable, on the
other hand, shall deliver the other items set forth in Section 2.2
deliverable at the Secondary Closing.  Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and
2.3, the
Secondary Closing shall occur at the offices of the Company Counsel or such
other location as the parties shall mutually agree.

      

       

      
        	
                2.2  

              	
                Deliveries.

              


      

       

      (a) On or
prior to the applicable Closing Date, the Company shall deliver or cause to be
delivered to each Purchaser (or such other Person, as specifically provided
below) the following:

       

      (i) 
this
Agreement duly executed by the Company;

       

      (ii) a legal
opinion of Company Counsel, in substantially the form of Exhibit G attached
hereto;

       

      (iii) a
certificate evidencing a number of shares of Preferred Stock equal to such
Purchaser’s Subscription Amount divided by the Stated Value, registered in the
name of such Purchaser;

       

      (iv) the
Management Lock-Up Agreements;

       

      (v) a Warrant
registered in the name of such Purchaser to purchase up to such number of shares
of Common Stock as shall be equal to one-third (1/3) of the number of shares of
Common Stock into which the shares of Preferred Stock issued to such Purchaser
in the Offering could be converted on the applicable Closing Date;

       

      (vi) the
Escrow Release Notice to the Escrow Agent, with respect to the Initial Closing
only;

       

      (vii) evidence
of the filing of the Certificate of Designations with the Secretary of State of
Delaware;

       

      (viii) an
officer’s certificate from the President of the Company, dated as of the
applicable Closing Date certifying that the representations and warranties of
the Company are true and correct as of such date and that the Company has
satisfied all of the conditions to the applicable Closing;

       

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      (ix) a
certificate from the Secretary of the Company, dated as of the applicable
Closing Date, certifying and setting forth (A) the Company’s certificate of
incorporation, Certificate of Designations and by-laws; (B) the names,
signatures and positions of the Persons authorized to execute this Agreement and
any other Transaction Documents to which the Company is a party; and (C) a copy
of the resolutions of the Company authorizing the execution, delivery and
performance of this Agreement and the other Transaction Documents, as
applicable; and

       

      (x) the
Investor Rights Agreement duly executed by the Company.

       

      (b) On or
prior to the applicable Closing Date, each Purchaser (or such other Person, as
specifically provided below) shall deliver or cause to be delivered to the
Company (or such other Person, as specifically provided below) the
following:

       

      
        	
                (i)
        

              	
                this
      Agreement duly executed by such
Purchaser;

              


      

       

      
        	
                (ii)
        

              	
                such
      Purchaser’s Subscription Amount by wire transfer or certified check to the
      Escrow Agent, with respect to the Initial Closing, or to the Company, with
      respect to the Secondary Closing, if
applicable;

              


      

       

      
        	
                (iii)
        

              	
                the
      Escrow Release Notice to the Escrow Agent, to be delivered by the
      Lead Investor with respect to the Initial Closing only;
  and

              


      

       

      
        	
                (iv) 
       

              	
                the
      Investor Rights Agreement duly executed by such
  Purchaser.

              


      

       

      
        	
                2.3  

              	
                Closing
      Conditions.

              


      

       

      (a) The
obligations of the Company hereunder in connection with each applicable Closing
are subject to the following conditions being met:

       

      (i) the
accuracy in all material respects on the applicable Closing Date, of the
representations and warranties of the Purchasers contained herein;

       

      (ii) all
obligations, covenants and agreements of each Purchaser required to be performed
at or prior to the applicable Closing Date, shall have been performed or
waived;

       

      (iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b) of
this Agreement; and

       

      (iv) with
respect to the Initial Closing, the minimum aggregate Subscription Amount
hereunder shall be not less than $1,500,000.

       

      (b) The
respective obligations of the Purchasers hereunder in connection with the
applicable Closing are subject to the following conditions being
met:

       

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      (i) the
accuracy in all material respects when made and on the applicable Closing Date,
of the representations and warranties of the Company and Paneltech Products
contained herein;

       

      (ii) all
obligations, covenants and agreements of the Company and Paneltech Products
required to be performed at or prior to the applicable Closing Date, shall have
been performed or waived;

       

      (iii) except
for any items specifically permitted to be delivered by the Company after the
applicable Closing Date, the delivery by the Company of the items set forth in
Section 2.2(a)
of this Agreement;

       

      (iv) prior to
the Initial Closing, the Company shall have completed the acquisition of all the
membership interests of Paneltech Products, whether through reverse merger,
securities exchange or other means (the “Merger”) pursuant to
the Merger Agreement attached hereto as Exhibit H (the “Merger
Agreement”);

       

      (v) on and as
of the applicable Closing Date, there shall not exist any Material Adverse
Effect with respect to the Company or Paneltech Products; and

       

      (vi) on and as
of the applicable Closing Date, a banking moratorium shall not have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable to
purchase the Securities at the applicable Closing.

       

       

      ARTICLE
III

      REPRESENTATIONS
AND WARRANTIES

       

      3.1           Representations and
Warranties of the Company and Paneltech Products.  Except as
set forth in the information schedules attached hereto, which correspond with
the applicable Sections of this Agreement (the “Disclosure
Schedules”, which Disclosure Schedules shall be deemed a part hereof and
shall qualify any representation or otherwise made herein to the extent of the
disclosure contained in the corresponding section of the Disclosure Schedules,
the Company and Paneltech Products hereby jointly and severally make the
following representations and warranties to and covenants with each
Purchaser.  For the purposes of this Section 3.1,
Paneltech Products shall be deemed to be a Subsidiary of the
Company.

       

      (a) Subsidiaries.  All
of the direct and indirect Subsidiaries of the Company are set forth on Schedule 3.1(a)
attached hereto.  The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and clear of any
Liens, and all of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities.  If the Company has no subsidiaries, all other references
to the subsidiaries or any of them in the Transaction Documents shall be
disregarded.

       

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (b) Organization and
Qualification.  The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation or
default of any of the provisions of its respective certificate or articles of
incorporation, certificate of formation, by-laws, limited liability company
operating agreement or other organizational or charter documents (collectively,
the “Company Charter
Documents”).  Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
would not have or reasonably be expected to result in: (i) a material adverse
effect on the legality, validity or enforceability of any Transaction Document,
(ii) a material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole, or (iii) a material adverse effect on the Company’s and Paneltech
Products’ ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.

       

      (c) Authorization;
Enforcement.  The Company and Paneltech Products each has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder.  The execution and
delivery of each of the Transaction Documents by the Company and Paneltech
Products and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part of the
Company and Paneltech Products and no further action is required by the Company,
Paneltech Products or either of their Boards of Directors or stockholders, in
connection therewith other than in connection with the Required
Approvals.  Each Transaction Document to which it is a party has been
(or upon delivery will have been) duly executed by the Company or Paneltech
Products, as applicable, and, when delivered in accordance with the terms hereof
and thereof, will constitute the valid and binding obligation of the Company or
Paneltech Products, as applicable, enforceable against such party in accordance
with its terms, except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      (d) No
Conflicts.  The execution, delivery and performance by the
Company and Paneltech Products, as applicable, of the Transaction Documents, the
issuance and sale of the Securities by the Company, and the consummation by each
of them of the other transactions contemplated hereby and thereby, as
applicable, do not and will not conflict with or violate any provision of the
Company Charter Documents.  Additionally, subject to the Required
Approvals and subject to the accuracy of the representations and warranties of
the Company provided in Section 4.5 of the Merger Agreement (which limitation
shall only be applicable to the Company), the Transaction Documents, the
issuance and sale of the Securities by the Company, and the consummation by each
of them of the other transactions contemplated hereby and thereby, as
applicable, do not and will not (i) constitute a default (or an event that with
notice or lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the Company or any
Subsidiary, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the Company or any
Subsidiary is a  party or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) subject to the Required
Approvals, conflict with or result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or any Subsidiary is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or any Subsidiary is bound or affected; except
in the case of each of clauses (ii) and (iii), such as would not have or
reasonably be expected to result in a Material Adverse Effect.

       

      (e) Filings, Consents and
Approvals.  Except as set forth on Schedule 3.1(e)
attached hereto, neither the Company nor Paneltech Products is required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company and Paneltech Products of the
Transaction Documents, other than the filing of a Form D Notice of Exempt
Offering of Securities (“Form D”) with the
Commission and such filings as are required to be made under applicable
state  securities laws (collectively, the “Required
Approvals”).

       

      (f) Issuance of the
Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company, on or after the closing of the Merger, or
Paneltech Products, at anytime, other than restrictions on transfer provided for
in the Transaction Documents or otherwise by law.  The Underlying
Shares, when issued in accordance with the terms of the Transaction Documents,
will be validly issued, fully paid and nonassessable, free and clear of all
Liens imposed by the Company, on or after the closing of the Merger, or
Paneltech Products, at anytime, other than restrictions on transfer provided for
in the Transaction Documents or otherwise by law.  The Company has
reserved from its duly authorized capital stock a number of shares of Common
Stock for issuance of the Underlying Shares at least equal to the Required
Minimum on the date hereof.

       

       

      
        
          
          

        

        
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      (g)  Capitalization.  The
capitalization of the Company immediately prior to the Initial Closing and the
Collins Repurchase, but giving full effect to the Merger, is as set forth on
Schedule 3.1(g)
attached hereto, which Schedule 3.1(g) shall
also include the number of shares of Common Stock owned beneficially, and of
record, by Affiliates of the Company as of such date.  Except with
respect to the Purchasers and the Other Investors in the Offering, no Person has
any right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by the Transaction
Documents.  Except as a result of the purchase and sale of the
Securities, or as otherwise set on Schedule 3.1(g) there
are no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common
Stock, Common Stock Equivalents or other equity ownership including, without
limitation, any securities of Paneltech Products. The issuance and sale of the
Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Purchasers and Other Investors),
nor will it result in the obligation of Paneltech Products to issue any
securities, and will not result in a right of any holder of the Company’s
securities to adjust the exercise, conversion, exchange or reset price under any
of such securities. All of the outstanding shares of capital stock of the
Company are validly issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of such
outstanding shares of capital stock were issued in violation of any preemptive
rights or similar rights to subscribe for or purchase securities.  All
of the outstanding shares of capital stock of Paneltech Products are validly
issued, fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, and none of such of shares of capital stock
were issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities. No further approval or authorization of any
stockholder, the Board of Directors or others, including without limitation any
director or stockholder of Paneltech Products, is required for the issuance and
sale of the Securities.  There are no stockholder agreements, voting
agreements or other similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s stockholders, other than the Investor
Rights Agreement to be entered into in connection with the Initial
Closing.

       

      (h) Financial
Statements.  Subject to the accuracy of the representations and
warranties of the Company provided in Section 4.6(b) of the Merger Agreement,
the financial statements of the Company contained in its periodic reports filed
with the Commission (the “Company Financial
Statements”) comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing.  The Company Financial
Statements have been prepared in accordance with 

       

      
        
          
          

        

        
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        generally
accepted accounting principles applicable in the United States of America
(“GAAP”),
except as may be otherwise specified in the Company Financial Statements or the
notes thereto, and fairly present in all material respects the assets,
liabilities, financial position and results of operations of the Company as of
and for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.  The Company Financial
Statements, which were audited, were audited by an auditing firm which is a
member in good standing of the US Public Company Accounting Oversight
Board.

      

       

      (ii)           The
audited financial statements of Paneltech Products (including its predecessors)
for the years ended December 31, 2007 and 2008 and the unaudited interim
financial statements for the nine (9) month period ended September 30, 2009 are
attached to Schedule
3.1(h) hereto (the “Paneltech Products Financial
Statements”), which Paneltech Products Financial Statements are in final
draft form and have been prepared in connection with the Merger. The Paneltech Products
Financial Statements have been prepared in accordance GAAP, except as may be
otherwise specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of
Paneltech Products and its consolidated subsidiaries, as applicable, as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal
year-end audit adjustments.

      


      (i) Material Changes.
Since September 30, 2009 (solely with respect to Paneltech Products) and since
the closing of the Merger (solely with respect to the Company), except as specifically
disclosed on Schedule
3.1(i): (i) there has been no event, occurrence or development that has
had or that would reasonably be expected to result in a Material Adverse Effect,
(ii) neither the Company nor Paneltech Products has incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice (B)
liabilities incurred as a result of this transaction and (C) liabilities not
required to be reflected in the Company Financial Statements or the Paneltech
Products Financial Statements, as applicable, and in each case pursuant to GAAP
or disclosed in filings made with the Commission, (iii) neither the Company nor
Paneltech Products has altered its method of accounting, (iv) neither the
Company nor Paneltech Products has declared or made any dividend or distribution
of cash or other property to its stockholders, or purchased, redeemed or made
any agreements to purchase or redeem any shares of its capital stock and (v)
neither the Company nor Paneltech Products has issued any equity securities to
any officer, director, member, manager or Affiliate, except pursuant to existing
Company stock option plans.

       

      (j) Litigation.  Subject
to the accuracy of the representations and warranties provided by the Company
pursuant to Section 4.13 of the Merger Agreement (which limitation shall only be
applicable to the Company), there is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company and/or Paneltech 

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

         

        Products,
threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect.  Neither the Company, since the closing of the Merger,
nor any Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary
duty.  There has not been, and to the knowledge of the Company and/or
Paneltech Products, there is not pending or contemplated, any investigation by
the Commission, since the closing of the Merger, involving the Company, or at
anytime, with respect to Paneltech Products or any current director or officer
of the Company or Paneltech Products.

      

       

      (k) Labor
Relations.  No labor dispute exists or, to the knowledge of the
Company and/or Paneltech Products, is imminent with respect to any of the
employees of the Company or any of its Subsidiaries which would reasonably be
expected to result in a Material Adverse Effect.  None of the
Company’s or any Subsidiaries’ employees is a member of a union that relates to
such employee’s relationship with the Company or any such Subsidiary, and
neither the Company nor any Subsidiary is a party to a collective bargaining
agreement, and the Company and the Subsidiaries believe that their relationships
with their employees are good.  No executive officer, to the knowledge
of the Company and/or Paneltech Products, is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement, or
any other contract or agreement or any restrictive covenant in favor of any
third party, and the continued employment of each such executive officer does
not subject the Company or any Subsidiary to any liability with respect to any
of the foregoing matters.  The Company and the Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and regulations
relating to employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in compliance
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

       

      (l) Compliance.  Except
as set forth on Schedule 3.1(l),
neither the Company (but only to the extent that such event first occurred after
the closing of the Merger) nor any Subsidiary: (i) is in default under or in
violation of (and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company (after the closing of the Merger) or any
Subsidiary received written notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any order of any court, arbitrator or governmental body
or (iii) is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws applicable to its business and all such laws that affect the
environment, except in each case as would not have or reasonably be expected to
result in a Material Adverse Effect.

       

       

      
        
          
          

        

        
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      (m) Regulatory
Permits.  Paneltech Products possesses all certificates,
authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct its business, except where
the failure to possess such permits would not reasonably be expected to result
in a Material Adverse Effect (“Material Permits”),
and PanelTech Products has not received any written notice of proceedings
relating to the revocation or modification of any Material Permit.

       

      (n) Title to
Assets.  The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company, and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties.  Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company and the Subsidiaries
are in compliance.

       

      (o) Intellectual Property
Rights.  The Company and the Subsidiaries have, or have rights
to use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights, licenses and
other intellectual property rights and similar rights necessary or material for
use in connection with their respective businesses and which the failure to so
have could have a Material Adverse Effect (collectively, the “Intellectual Property
Rights”).  Neither the Company, nor any Subsidiary has received
a written notice that any of the Intellectual Property Rights used by the
Company or any Subsidiary currently violate or infringe upon the rights of any
Person. Except as set forth on Schedule 3.1(o), to
the knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights.  The Company and the Subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties that represent their
confidential information or trade secrets, except where failure to do so would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

       

      (p) Insurance.  The
Company, since the closing of the Merger, and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. Except as set forth on Schedule 3.1(p),
neither the Company nor any Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business without a significant increase in cost.

       

       

      
        
          
          

        

        
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      (q) Transactions With Affiliates
and Employees.  Except as set forth on Schedule 3.1(q)
attached hereto, none of the current officers or directors of the Company or
Paneltech Products and, to the knowledge of the Company and Paneltech Products,
none of the current employees of the Company or Paneltech Products is presently
a party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $120,000 other than for: (i) payment of
salary, director fees or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and (iii) other
employee benefits, including stock option agreements under any stock option plan
of the Company.

       

      (r) Internal Accounting
Controls.  The Company, since the closing of the Merger, and
the Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that: (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

       

      (s) Certain
Fees.  Except as set forth on Schedule 3.1(s), no
brokerage or finder’s fees or commissions are or will be payable by the Company
or Paneltech Products to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by the Transaction Documents.  The
Purchasers shall have no obligation with respect to any fees or with respect to
any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by the Transaction Documents.

       

      (t) Private Placement.
Assuming the accuracy of the Purchasers’ representations and warranties set
forth in Section
3.2, no registration under the Securities Act or the securities laws of
any state is required for the offer and sale of the Securities by the Company to
the Purchasers as contemplated hereby.

       

      (u) Investment Company.
Neither the Company nor Paneltech Products is, nor is either an Affiliate of,
and immediately after receipt of payment for the Securities, will not be or be
an Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.  The Company shall conduct its
business in a manner so that it will not become subject to the Investment
Company Act of 1940, as amended.

       

       

      
        
          
          

        

        
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      (v) Registration
Rights.  Except as provided to the Purchasers and the Other
Investors in the Offering, under the provisions of the Investor Rights
Agreement, and as otherwise set forth on Schedule 3.1(v), no
Person has any registration rights under the Securities Act with respect to any
securities of the Company or Paneltech Products.

       

      (w) Disclosure.  All
disclosure furnished by or on behalf of Paneltech Products to the Purchasers
regarding Paneltech Products, its business, and the transactions contemplated
hereby, included in this Agreement and the Disclosure Schedules, is true and
correct and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made and when made, not
misleading.  The press releases disseminated by Paneltech Products
during the twelve (12) months preceding the date of this Agreement taken as a
whole do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made and
when made, not misleading.  The Company and Paneltech Products each
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2
hereof.

       

      (x) No Integrated
Offering. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither
the Company, Paneltech Products nor any of their respective Affiliates, nor any
Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause the Offering to be integrated with prior
offerings by the Company for purposes of the Securities Act which would require
the registration of any such securities under the Securities Act.

       

      (y) Solvency.  Subject
to the accuracy of the representations and warranties of the Company provided in
Section 4.6(b) of the Merger Agreement (which limitation shall only be
applicable to the Company), and that there have been no material changes in the
Company Financial Statements from October 1, 2009 through and until the closing
of the Merger, based on the consolidated financial condition of the Company as
of the applicable Closing Date after giving effect to the receipt by the Company
of the proceeds from the sale of the Securities hereunder and after giving
effect to the Merger: (i) the fair saleable value of the Company’s consolidated
assets exceeds the amount that will be required to be paid on or in respect of
the Company’s existing consolidated debts and other consolidated liabilities
(including known contingent liabilities) as they mature, (ii) the Company’s
consolidated assets do not constitute unreasonably small capital to carry on its
business as now conducted and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of the business
conducted by the Company and Paneltech Products, and projected capital
requirements and capital availability thereof, and (iii) the current
consolidated cash flow of the Company, together with 

       

      
        
          
          

        

        
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        the
proceeds the Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its consolidated liabilities when such
amounts are required to be paid. Neither the Company nor Paneltech Products
intends to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in
respect of its debt).  Neither the Company nor Paneltech Products has
any knowledge of any facts or circumstances which lead it to believe that it
will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one (1) year from the Initial
Closing Date.  Schedule 3.1(y) sets
forth as of the date hereof exceptions and qualifications to this Section 3.1(y) and
all outstanding secured and unsecured Indebtedness of PanelTech Products, or for
which Paneltech Products has commitments.  For the purposes of this
Agreement, “Indebtedness” means
(x) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.  Neither the Company, since the
closing of the Merger, nor any Subsidiary, is in default with respect to any
Indebtedness.

      

       

      (z) Tax
Status.  Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and neither the Company nor Paneltech Products has
knowledge of any tax deficiency which has been asserted or threatened against
the Company or any Subsidiary.

       

      (aa) No General
Solicitation.  Neither the Company, Paneltech Products nor any
person acting on behalf of either of them has offered or sold any of the
Securities by any form of general solicitation or general
advertising.  The Company has offered the Securities for sale only to
the Purchasers and the Other Investors, all of which are “accredited investors”
within the meaning of Rule 501 under the Securities
Act.  Notwithstanding the foregoing, with respect to the Company only,
the representations and warranties contained in this Section 3.1(aa) are limited
to events occurring after the closing of the Merger.

       

      (bb) Foreign Corrupt
Practices.  Neither the Company, Paneltech Products, nor to the
knowledge of the Company and/or Paneltech Products, any agent or other person
acting on either of their behalves, has: (i) directly or indirectly, used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to
any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose 

       

      
        
          
          

        

        
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        fully any
contribution made by the Company or Paneltech Products (or made by any person
acting on its behalf of which the Company or Paneltech Products is aware) which
is  in violation of law or (iv) violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1977, as
amended.  Notwithstanding the foregoing, the representations and
warranties contained in this Section 3.1(bb), with
respect to the Company, are limited to those of which any of the Company’s
current officers or directors have actual knowledge.

      

       

      (cc) Accountants.  Paneltech
Products’ accounting firm is set forth on Schedule 3.1(cc)
attached hereto.  To the knowledge and belief of the Company and
Paneltech Products, such accounting firm, which the Company expects will express
its opinion with respect to the audited Paneltech Products Financial Statements,
is an independent public accounting firm.

       

      (dd) Seniority.  Except
as set forth on Schedule 3.1(dd), as
of the applicable Closing Date, no Indebtedness or other claim against the
Company or Paneltech Products is senior to or pari passu with the Preferred
Stock in right of payment, whether with respect to interest or upon liquidation
or dissolution, or otherwise, other than indebtedness secured by purchase money
security interests (which is senior only as to underlying assets covered
thereby) and capital lease obligations (which is senior only as to the property
covered thereby).  Notwithstanding the foregoing, the representations
and warranties contained in this Section 3.1(dd), with
respect to the Company, are limited to those of which any of the Company’s
current officers or directors have actual knowledge.

       

      (ee) No Disagreements with
Accountants and Lawyers.  There are currently no disagreements
of any kind presently existing, or reasonably anticipated by the Company or
Paneltech Products to arise, between the Company or Paneltech Products and the
accountants and lawyers formerly or presently employed by the Company or
Paneltech Products, as applicable, and each of the Company and Paneltech
Products is current with respect to any fees owed to its accountants and lawyers
which could affect the Company’s and/or Paneltech Products’ ability to perform
any of its obligations under any of the Transaction
Documents.  Notwithstanding the foregoing, the representations and
warranties contained in this Section 3.1(ee), with
respect to the Company, are limited to those of which any of the Company’s
current officers or directors have actual knowledge.

       

      (ff) Corporate Documents; Minute
Books. Copies of the Company Charter Documents (except the minute books
of the Company) have been furnished to the Purchasers, and, subject to the
accuracy of the representations and warranties of the Company provided in
Section 4.2 of the Merger Agreement (which limitation shall only be applicable
to the Company) such copies are accurate and complete as of the date
hereof.  Subject to the accuracy of the representations and warranties
of the Company provided in Section 4.2 of the Merger Agreement (which limitation
shall only be applicable to the Company), the minute books of the Company’s
Subsidiaries are current, contain the minutes of all meetings of Paneltech
Products’ Board of Directors and stockholders from its date of formation to the
date of this Agreement, and adequately reflect all material actions taken by
Paneltech Products’ Board of Directors and stockholders.

       

       

      
        
          
          

        

        
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      (gg) Acknowledgment Regarding
Purchasers’ Purchase of Securities.  The Company and Paneltech
Products each acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm’s length purchaser with respect to the
Transaction Documents and the transactions contemplated
thereby.  Except as set forth on Schedule 3.1(gg)
attached hereto, the Company and Paneltech Products each further acknowledges
that no Purchaser is acting as a financial advisor or fiduciary of the Company
or Paneltech Products (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and any advice
given by any Purchaser or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
thereby is merely incidental to the Purchasers’ purchase of the
Securities.  The Company and Paneltech Products each further
represents to each Purchaser that the decision by each of the Company and
Paneltech Products to enter into this Agreement and the other Transaction
Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company, Paneltech Products and their
respective representatives. The Company and Paneltech Products also each
acknowledges that principals of the Lead Investor, immediately prior to the
Merger, owned a substantial majority of the Company’s Common Stock and therefore
had effective control over its business and decision making, but that the terms
of the Offering of the Securities had been negotiated between the Lead Investor
and Paneltech Products, whose members acquired control of the Company upon the
consummation of the Merger.

       

      (hh) Manufacturing and Marketing
Rights.  Except as set forth on Schedule 3.1(hh)
attached hereto, neither the Company, after the closing of the Merger, nor any
Subsidiary has granted rights to manufacture, produce, assemble, license,
market, or sell its products or services to any other Person and is not bound by
any agreement that affects the Company’s or any Subsidiary’s exclusive right to
develop, manufacture, assemble, distribute, market or sell its respective
products or services, subject to the actual knowledge of any of the Company’s
current officers or directors, with respect to the Company.

       

      (ii) Obligations of
Management. Each officer and key employee of the Company and the
Subsidiaries is currently devoting substantially all of his or her business time
to the conduct of business of the Company and/or any
Subsidiary.  Neither the Company nor any Subsidiary is aware that any
officer or key employee of the Company or any Subsidiary is planning to work
less than full time at the Company or any Subsidiary, as applicable, in the
future.  No officer or key employee is currently working or, to the
Company’s or Paneltech Products’ knowledge, plans to work for a competitive
enterprise, whether or not such officer or key employee is or will be
compensated by such enterprise.

       

      (jj) Accounts
Receivable.  Subject to the accuracy of the representations and
warranties of the Company provided in Section 4.6(b) of the Merger Agreement
(which limitation shall only be applicable to the Company), all accounts
receivable of the Company and its Subsidiaries that are reflected on the
Company’s and its Subsidiaries’ balance sheets or interim balance 

       

      
        
          
          

        

        
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        sheets or
on the accounting records of the Company and its Subsidiaries on a consolidated
basis as of the applicable Closing Date and giving effect to the Merger
(collectively, the “Accounts Receivable”)
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. Unless paid
prior to the applicable Closing Date, the Accounts Receivable are or will be as
of such date current and collectible net of the respective reserves shown on the
balance sheet or interim balance sheet or on the accounting records of the
Company and its Subsidiaries as of the applicable Closing Date (which reserves
are adequate and calculated consistent with past practice).  Except as
set forth on Schedule
3.1(jj), there is no contest, claim, or right of set-off, other than
returns in the ordinary course of business, under any agreement and/or contract
with any obligor of an Accounts Receivable relating to the amount or validity of
such Accounts Receivable. Schedule 3.1(jj)
attached hereto contains a complete and accurate list of all Accounts Receivable
as of the date indicated, which list sets forth the aging of such Accounts
Receivable.  The representations and warranties set forth in the three
sentences immediately preceding are limited to the actual knowledge of any of
the current officers or directors of the Company, with respect to the
Company.

      

       

      (kk) Employee
Benefits.  Except as set forth on Schedule 3.1(kk)
attached hereto, neither the Company nor any Subsidiary has (nor for the two (2)
years preceding the date hereof has had) any plans which are subject to
ERISA.  “ERISA” means the
Employee Retirement Income Security Act of 1974 or any successor law and the
regulations and rules issued pursuant to that act or any successor
law.

       

      3.2     Representations and
Warranties of the Purchasers.  Each Purchaser, for itself and
for no other Purchaser, hereby represents and warrants as of the date hereof and
as of the applicable Closing Date to the Company as follows:

       

      (a)           Organization;
Authority.  Such Purchaser, if not an individual, is an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership power
and authority to enter into and to consummate the transactions contemplated by
the Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of the Transaction Documents and
performance by such Purchaser of the transactions contemplated by the
Transaction Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as applicable, on the
part of such Purchaser.  Each Transaction Document to which it is a
party has been duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.

       

       

      
        
          
          

        

        
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      (b)           Own
Account.  Such Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
(this representation and warranty not limiting such Purchaser’s right to sell
the Securities pursuant in compliance with applicable federal and state
securities laws) in violation of the Securities Act or any applicable state
securities law.  Such Purchaser is acquiring the Securities hereunder
in the ordinary course of its business.

       

       (c)           Purchaser
Status.  At the time such Purchaser was offered the Securities,
it was, and as of the date hereof it is, and on each date on which it converts
any shares of Preferred Stock or exercises any Warrants, it will be either: (i)
an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as
defined in Rule 144A(a) under the Securities Act.  Such Purchaser is
not required to be registered as a broker-dealer under Section 15 of the
Exchange Act.

       

      (d)           Experience of Such
Purchaser.  Such Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment.  Such Purchaser is able to bear the
economic risk of an investment in the Securities and, at the present time, is
able to afford a complete loss of such investment.

       

      (e) General
Solicitation.  Such Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media
or broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

       

      (f) Certain
Fees.  No brokerage or finder’s fees or commissions are or will
be payable by the Company or Paneltech Products to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by the Transaction Documents as a
result of any action taken by such Purchaser.

       

      (g) Access to
Information. Such Purchaser has been afforded the opportunity to examine
all material books, records, and agreements of the Company and Paneltech
Products and to ask questions of the Company’s and Paneltech Products’ senior
management and to obtain additional information necessary to verify the accuracy
of the information supplied or to which the Purchaser had
access.  Such Purchaser has also been afforded the opportunity to ask
questions of the Company’s and Paneltech Products’ senior management to obtain
any further 

       

      
        
          
          

        

        
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        information
reasonably available to the Company or Paneltech Products, which such Purchaser
has requested in connection with its decision to purchase the
Securities.   Such Purchaser has conducted what it deems to be an
adequate investigation of the business, finances, and prospects of the Company
and its Subsidiaries, and it is satisfied with the results of its
investigation.

      

       

             (h) Professional
Advice.  Such Purchaser acknowledges that the Purchaser has had
the opportunity to and has been encouraged to consult with tax advisors and
legal counsel of such Purchaser’s own choosing, and that such Purchaser is not
relying on the Com­pany’s tax advisors or legal counsel in connection with
this Agreement or the purchase of the Securities.

       

      ARTICLE
IV.

      OTHER
AGREEMENTS OF THE PARTIES

       

      4.1           Transfer
Restrictions.

       

      (a) The
Securities may only be disposed of in compliance with state and federal
securities laws.  In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an Affiliate of a Purchaser or in connection with a pledge as contemplated
in Section
4.1(b), the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act.  As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and the Investor Rights
Agreement and shall have the rights of a Purchaser under this Agreement and the
Investor Rights Agreement.

       

      (b) The
Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a
legend on any of the Securities in the following form:

       

       [NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
[CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.

       

       

      
        
          
          

        

        
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      (c) Certificates
evidencing the Underlying Shares shall not contain any legend (including the
legend set forth in Section 4.1(b)
hereof): (i) while a registration statement  covering the resale of
such security is effective under the Securities Act, (ii) following any sale of
such Underlying Shares pursuant to Rule 144, (iii) if such Underlying Shares are
eligible for sale under Rule 144, without the requirement for the Company to be
in compliance with the current public information required under Rule 144 as to
such Underlying Shares and without volume or manner-of-sale restrictions or (iv)
if such legend is not required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued by the staff
of the Commission). The Company shall cause its counsel to issue a legal opinion
to the Transfer Agent promptly after the effective date of any registration
statement relating to the Underlying Shares (the “Effective Date”), if
required by the Transfer Agent to effect the removal of the legend hereunder. If
all or any shares of Preferred Stock are converted or any portion of a Warrant
is exercised at a time when there is an effective registration statement to
cover the resale of the Underlying Shares, or if such Underlying Shares may be
sold under Rule 144, without the requirement for the Company to be in compliance
with the current public information required under Rule 144 as to such
Underlying Shares and without volume or manner-of-sale restrictions or if such
legend is not otherwise required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued by the staff
of the Commission) then such Underlying Shares shall be issued free of all
legends.  The Company agrees that following the Effective Date or at
such time as such legend is no longer required under this Section 4.1(c), it
will, no later than three (3) Trading Days following the delivery by a Purchaser
to the Company or the Transfer Agent of a certificate representing Underlying
Shares, as applicable, issued with a restrictive legend (such third Trading Day,
the “Legend Removal
Date”), deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and other
legends.  The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section
4.1.  Certificates for Underlying Shares subject to legend
removal hereunder shall be transmitted by the Transfer Agent or the Company to
the Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System as directed by such Purchaser or by delivery of
a certificate representing such shares to the Purchaser.

       

      (d) In
addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on the
date such Securities are submitted to the Transfer Agent) delivered for removal
of the restrictive legend and subject to Section 4.1(c), $3
per Trading Day (increasing to $6 per Trading Day five (5) Trading Days after
such damages have begun to accrue) for each Trading Day after the second Trading
Day after the Legend Removal Date until such certificate is delivered without a
legend.  Nothing herein shall limit such Purchaser’s right to pursue
actual damages for the Company’s failure to deliver certificates representing
any Securities as required by the Transaction Documents, and such Purchaser
shall have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.

       

       

      
        
          
          

        

        
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      (e) Each
Purchaser, severally and not jointly with the other Purchasers, agrees that such
Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are sold
pursuant to a registration statement, they will be sold in compliance with the
plan of distribution set forth therein, and acknowledges that the removal of the
restrictive legend from certificates representing Securities as set forth in
this Section
4.1 is predicated upon the Company’s reliance upon this
understanding.

       

      4.2           Acknowledgment of
Dilution.  The Company acknowledges that the issuance of the
Securities may result in dilution of the outstanding shares of Common Stock,
which dilution may be substantial under certain market
conditions.  The Company and Paneltech Products each further
acknowledges that its respective obligations under the Transaction Documents,
including, without limitation, the Company’s obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute
and, other than in connection with a breach of this Agreement by a Purchaser
(and with respect to such Purchaser only), not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim the Company or Paneltech Products may have against any Purchaser
and regardless of the dilutive effect that such issuance may have on the
ownership of the other stockholders of the Company.

       

      4.3           Furnishing of Information;
Public Information; Registration of Common Stock under the Exchange
Act.  As long as any Purchaser owns Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act (“SEC Reports”). The
Company acknowledges that as of the Initial Closing Date none of the Company’s
securities have been registered under the Exchange Act and it is therefore not
obligated to file SEC Reports.  Notwithstanding the foregoing, the
Company covenants that it (i) will register its shares of Common Stock under
Section 12(g) or Section 12(b) of the Exchange Act, as applicable, within ninety
(90) days after the Initial Closing Date and (ii) shall continue voluntarily to
timely file all SEC Reports until its Common Stock has become registered under
the Exchange Act.

       

      4.4           Integration.  The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities to the
Purchasers in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.

       

       

      
        
          
          

        

        
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      4.5           Conversion and Exercise
Procedures.  Each of the form of Notice of Exercise included in
the Warrants and the form of Notice of Conversion included in the Certificate of
Designations set forth the totality of the procedures required of the Purchasers
in order to exercise the Warrants or convert the Preferred Stock.  No
additional legal opinion, other information or instructions shall be required of
the Purchasers to exercise their Warrants or convert their Preferred
Stock.  The Company shall honor exercises of the Warrants and
conversions of the Preferred Stock and shall deliver Underlying Shares in
accordance with the terms, conditions and time periods set forth in the
Transaction Documents.

       

      4.6           Securities Laws Disclosure;
Publicity.  The Company shall, within four (4) Business Days
after the Initial Closing Date, file a Current Report on Form 8-K (the “Form 8-K”) with the
Commission which shall summarize the transactions consummated pursuant to the
Transaction Documents.  Additionally, the Company shall use its best
efforts to file with the Commission, within thirty (30) days after the Initial
Closing Date, but in any event no later than February 11, 2010, an amendment to
the Form 8-K (the “Form 8-K Amendment”)
for the purpose of filing with the Commission the Paneltech Products Financial
Statements, including any applicable pro forma financial information, along with
updated information on the Company reflecting changes resulting from the Merger
and the Offering including, without limitation (i) the change of the Company’s
business; (ii) the change of beneficial ownership of the Company’s Common Stock;
(iii) the change of the Company’s management; and (iv) any other material
non-public information provided to the Purchasers and the Other Investors, in
connection with the Offering. The Company, Paneltech Products and each Purchaser
shall consult with each other in issuing any other press releases with respect
to the transactions contemplated hereby, and neither the Company, Paneltech
Products nor any Purchaser shall issue any press release or otherwise make any
public statement without the prior consent of the Company, with respect to any
press release of any Purchaser, or without the prior consent of the Lead
Investor, with respect to any press release of the Company or Paneltech
Products, which consent shall not unreasonably be withheld or delayed, except if
such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or
communication.  Notwithstanding the foregoing, neither the Company nor
Paneltech Products shall publicly disclose the name of any Purchaser, or include
the name of any Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of such Purchaser,
except (i) as required by federal securities law in connection with any
registration statement contemplated by the Investor Rights Agreement and (ii) to
the extent such disclosure is required by any law or Trading Market regulations,
in which case the Company shall provide the Purchasers with prior notice of such
disclosure permitted under this clause (ii).

       

      4.7           Non-Public
Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents or
pursuant to Section
4.3, the Company and Paneltech Products each covenants and agrees that
neither it, nor any other Person acting on its behalf, will provide any
Purchaser or its agents or counsel with any information that the Company or
Paneltech Products believes constitutes material non-public information, unless
prior thereto such Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information.  Notwithstanding the
foregoing, the Company or Paneltech Products may supply non-public information
to any person elected or appointed as a director of the Company pursuant to the
Investor Rights Agreement.  The Company understands and confirms that
each Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.

       

       

      
        
          
          

        

        
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      4.8           Use of
Proceeds.  Except as set forth on Schedule 4.8 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder only for (a) working capital purposes (b) to pay for the shares being
purchased by the Company pursuant to the Collins Repurchase; and (c) to make
certain tax distributions to the members of Paneltech International, LLC, the
predecessor to Paneltech Products.  The Company may not use such
proceeds for: (a) the satisfaction of any portion of the Company’s debt (other
than payment of trade payables in the ordinary course of the Company’s business
and prior practices or costs incident to this transaction), (b) the redemption
of any Common Stock or Common Stock Equivalents (except for the Collins
Repurchase) or (c) the settlement of any outstanding litigation.

       

      4.9           Indemnification of
Purchasers.   Subject to the provisions of this Section 4.9, each of
the Company and Paneltech Products, jointly and severally, will indemnify and
hold each Purchaser and its directors, managers, officers, stockholders,
members, partners, employees and agents (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, managers, officers, stockholders, agents,
members, partners or employees (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such
title or any other title) of such controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company or Paneltech Products in this
Agreement or in the other Transaction Documents or (b) any action instituted
against a Purchaser in any capacity, or any of them or their respective
Affiliates, by any stockholder of the Company or Paneltech Products who is not
an Affiliate of such Purchaser, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon a
breach of such Purchaser’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings such Purchaser may
have with any such stockholder or any violations by the Purchaser of state or
federal securities laws or any conduct by such Purchaser which constitutes
fraud, gross negligence, willful misconduct or malfeasance).  If any
action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing reasonably
acceptable to the Purchaser Party.  Any Purchaser Party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the employment
thereof and the assumption of such fees has been specifically authorized by the
Company in writing, (ii) the Company has failed after a reasonable period of
time to assume such defense and to employ counsel or (iii) in such action there
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        conflict
on any material issue between the position of the Company and the position of
such Purchaser Party, in which case the Company shall be responsible for the
reasonable fees and expenses of no more than one such separate
counsel.  The Company will not be liable to any Purchaser Party under
this Agreement (y) for any settlement by a Purchaser Party effected without the
Company’s prior written consent, which shall not be unreasonably withheld or
delayed; or (z) to the extent, but only to the extent that a loss, claim, damage
or liability is attributable to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by such Purchaser
Party in this Agreement or in the other Transaction
Documents.

      

       

      4.10           Reservation of
Securities.

       

      (a) The
Company shall maintain a reserve from its duly authorized shares of Common Stock
for issuance pursuant to the Transaction Documents in such amount as may then be
required to fulfill its obligations in full under the Transaction
Documents.

       

      (b) If, on
any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than (i) the Required Minimum on such date,
minus (ii) the number of shares of Common Stock previously issued pursuant to
the Transaction Documents, then the Board of Directors shall use commercially
reasonable efforts to amend the Company’s certificate of incorporation to
increase the number of authorized but unissued shares of Common Stock to at
least the Required Minimum at such time (minus the number of shares of Common
Stock previously issued pursuant to the Transaction Documents), as soon as
possible and in any event not later than the 75th day
after such date; provided that the Company will not be required at any time to
authorize a number of shares of Common Stock greater than the maximum remaining
number of shares of Common Stock that could possibly be issued after such time
pursuant to the Transaction Documents.

      


      4.11 Additional Rights of
Purchasers.  The Purchasers also shall have any and all
additional rights as provided under the terms of the Investor Rights Agreement,
and a breach of the Company's obligations thereunder shall be deemed a breach of
its obligations hereunder.

       

      4.12           Variable Rate
Transactions.  From the date hereof until the Preferred Stock
is no longer outstanding, the Company shall be prohibited from effecting or
entering into an agreement to effect any Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company issues or sells (i)
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion, exercise or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the
shares of Common Stock at any time after the initial issuance of such debt or
equity securities, or (B) with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the shares of Common Stock or (ii) enters into any agreement, including, but not
limited to, an equity line of credit, whereby the Company may sell securities at
a future determined price.  A Variable Rate Transaction shall not
include any adjustment of a conversion price or an exercise price of any
convertible security, option, or warrant in connection with any Common Stock
split, combination, or dividend, any reorganization, recapitalization, merger,
or similar event by the Company, or the operation of any anti-dilution provision
in such convertible security, option, or warrant.

       

       

      
        
          
          

        

        
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      4.13 Equal Treatment of
Purchasers.  No consideration (including any modification of
any Transaction Document) shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all of the parties to
the Transaction Documents.  For clarification purposes, this provision
constitutes a separate right granted to each Purchaser and Other Investor by the
Company and negotiated separately by each Purchaser and Other Investor, and is
intended for the Company to treat the Purchasers and the Other Investors as a
class and shall not in any way be construed as the Purchasers and the Other
Investors acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.

       

      4.14 Form D; Blue Sky
Filings.  The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D promulgated under the
Securities Act and to provide a copy thereof, promptly upon request of any
Purchaser. The Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the
Securities for, sale to the Purchasers at each applicable Closing under
applicable securities or “Blue Sky” laws of the states of the United States, and
shall provide evidence of such actions promptly upon request of any
Purchaser.

       

      4.15 Collins
Repurchase.  Concurrent with the Initial Closing, the Company
shall purchase (the “Collins Repurchase”)
from Collins Timber Company LLC (“Collins Timber”) such
number of shares of Common Stock so that immediately after such purchase,
Collins Timber’s ownership interest in the Company shall be reduced to ten
percent (10%) of the total number of shares of Common Stock outstanding,
immediately prior to the Initial Closing, including the consideration of the
following in making such determination: (a) it shall be assumed that the maximum
amount of $3,000,000 is raised in the Offering and such determination shall give
effect to the conversion of 5,453,100 shares of Preferred Stock into 27,265,500
shares of Common Stock; but (b) such determination shall not give effect to (i)
the exercise of any of the Warrants or (ii) the exercise of any other warrants
or securities convertible into Common Stock, issued in connection with the
Offering .  The specific terms and conditions of the Collins
Repurchase are set forth in the form of purchase agreement attached hereto as
Exhibit
I.

       

      


       

      ARTICLE
V

      MISCELLANEOUS

       

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

      
 

      5.1           Termination. 
This Agreement may be terminated at any time prior to the applicable Closing
Date (a) (i) by mutual agreement between the Company, Paneltech Products and the
Lead Investor, if the Purchasers under this Agreement are the Lead Investor
and/or the Paragon Introduced Investors or (ii) by mutual agreement of the
Company, Paneltech Products and a majority of the Purchasers, if the Purchasers
under this Agreement are Secondary Investors; (b) (i) by the Lead Investor or
(ii) by a majority of the Secondary Investors, as applicable, if there has been
a material breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of the Company or Paneltech Products;
provided, however, that
the Company or Paneltech Products, as applicable, shall have the right to cure
any breach that was not willful within ten (10) days of the receipt of written
notice of the breach; or (c) (i) by written notice to the Company from the Lead
Investor, with respect to the Initial Closing, if the Initial Closing has not
been consummated on or before December 31, 2009 or (ii) if the Initial Closing
has been consummated, then with respect to the Secondary Closing, by a majority
of the Secondary Investors if the Secondary Closing has not been consummated by
January 22, 2009; provided, however, that such
termination, other than with respect to clause (a), will not affect the right of
any party to sue for any breach by the other party.  In addition to
the foregoing, the Company also shall have the right to terminate this
Agreement, with respect to any specific Purchaser, if there has been a material
breach of any representation, warranty, covenant or agreement contained in this
Agreement on the part of such Purchaser; provided, however, that such
Purchaser shall have the right to cure any breach that was not willful within
ten (10) days of the receipt of written notice of the breach.

       

      5.2           Fees and
Expenses.  The Company has previously paid the Lead Investor a
non-accountable sum of $10,000 for its legal fees and disbursements related to
the Offering.  At the Initial Closing, the Company has agreed to pay
the Lead Investor an additional non-accountable sum of $50,000 for its legal
fees and expenses relating to the Merger.  The Company shall deliver
to each Purchaser, prior to the applicable Closing on such Purchaser’s
Subscription Amount, a completed and executed copy of the Closing Statement, in
the form of Exhibit
B attached hereto.  Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this
Agreement.  The Company shall pay all Transfer Agent fees, stamp taxes
and other taxes and duties levied in connection with the delivery of any
Securities to the Purchasers.

       

      5.3           Entire
Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.

       

      5.4           Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of: (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a
Business Day, (b) the next Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Business Day
or later than 5:30 p.m. (New York City time) on any Business Day, (c) the second
Business Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service or (d) upon actual receipt by the party to
whom such notice is required to be given.  The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

       

       

      
        
          
          

        

        
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      5.5           Amendments;
Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company, Paneltech Products and the Lead Investor,
and in the case of a waiver, by the party against whom enforcement of any such
waived provision is sought.  No waiver of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.

       

      5.6           Headings.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

       

      5.7           Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns.  Neither the Company nor Paneltech Products may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Lead Investor (other than by merger).  Any Purchaser
may assign any or all of its rights under this Agreement to any Person to whom
such Purchaser assigns or transfers any Securities, provided that such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to such
Purchaser and such assignment or transfer is not in violation of Regulation D
promulgated under the Securities Act.

       

      5.8           No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section
4.10.

       

      5.9           Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York.  Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an  inconvenient venue for such
proceeding.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with 

       

      
        
          
          

        

        
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        evidence
of delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law.  If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.

      

       

      5.10           Survival.  The
representations and warranties contained herein shall survive each applicable
Closing and the delivery of the Securities for the applicable statute of
limitations.

       

      5.11           Execution.  This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart.  In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.

       

      5.12           Severability.  If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

       

      5.13           Replacement of
Securities.  If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction.  The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.

       

      5.14           Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchasers and the Company will
be entitled to specific performance under the Transaction
Documents.  The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.

       

       

      
        
          
          

        

        
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      5.15           Payment Set Aside. To
the extent that the Company makes a payment or payments to any Purchaser
pursuant to any Transaction Document or a Purchaser enforces or exercises its
rights thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

       

      5.16           Usury.  To
the extent it may lawfully do so, the Company hereby agrees not to insist upon
or plead or in any manner whatsoever claim, and will resist any and all efforts
to be compelled to take the benefit or advantage of, usury laws wherever
enacted, now or at any time hereafter in force, in connection with any claim,
action or proceeding that may be brought by any Purchaser in order to enforce
any right or remedy under any Transaction Document.  Notwithstanding
any provision to the contrary contained in any Transaction Document, it is
expressly agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and,
without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate.  It is agreed that if
the maximum contract rate of interest allowed by law and applicable to the
Transaction Documents is increased or decreased by statute or any official
governmental action subsequent to the date hereof, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law.  If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner of handling
such excess to be at such Purchaser’s election.

       

      5.17           Independent Nature of
Purchasers’ Obligations and Rights.  The obligations of each
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document.  Nothing contained herein or
in any other Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents.  Each Purchaser shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of the other
Transaction

       

      
        
          
          

        

        
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      Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.  Each Purchaser
has been represented by its own separate legal counsel in their review and
negotiation of the Transaction Documents.  For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through Lead Investor
Counsel.  Lead Investor Counsel does not represent all of the
Purchasers but only the Lead Investor. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the convenience of
the Company and not because it was required or requested to do so by the
Purchasers.

       

      5.18           Liquidated
Damages.  The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been
canceled.

       

      5.19           Saturdays, Sundays,
Holidays, etc.  If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein shall not be a
Business Day, then such action may be taken or such right may be exercised on
the next succeeding Business Day.

       

      5.20           Construction. The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.

       

      5.21           Force Majeure. No
party hereto shall be liable to any other party hereto for any failure or delay
in performance caused by reasons beyond its reasonable control, including but
not limited to restrictions of law, regulations, orders, or other governmental
directives, labor disputes, acts of God, adverse weather conditions, acts of
terrorism, third-party mechanical failure or other equipment breakdowns, fire,
explosions, interruption or failure of telecommuni­cation or digital
transmission links, Internet failures and delays, or other similar
events.

       

      5.22           WAIVER OF
JURY TRIAL.  IN ANY ACTION, SUIT, OR
PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE
PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY
APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY
WAIVES FOREVER TRIAL BY JURY.

       

      


       

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      IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

       

      


      
        	
                CHARLESTON
      BASICS, INC.

                 

                 

                 

              	
                Address for Notice:

                2999
      John Stevens Way

                Hoquiam,
      WA  98550

              
	
                By:__________________________________________

                     Name:

                     Title:

                 

              	
                Fax: (360) 538-1510

              
	
                PANELTECH
      PRODUCTS, INC.

              	
                Address for Notice:

                2999
      John Stevens Way

                Hoquiam,
      WA  98550

                 

              
	
                By:__________________________________________

                     Name:

                     Title:

                 

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

              	
                Fax: (360) 538-1510

              
	
                 

                Olshan
      Grundman Frome Rosenzweig & Molosky LLP

                Park
      Avenue Tower

                65
      East 55th
      Street

                New
      York, NY 10022

                Attn:
      Kenneth A. Schlesinger, Esq.

                 

              	 
      


      

      


      


      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

      SIGNATURE
PAGE FOR PURCHASERS FOLLOW]

       

       

       

       

      
        
          
          

        

        
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      [PURCHASER
SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

      


      IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.

       

      Name of
Purchaser: ____________________________________________________

       

      Signature of Authorized Signatory of
Purchaser: __________________________

       

      Name of
Authorized Signatory: ____________________________________

       

      Title of
Authorized Signatory: _____________________________________

       

      Email
Address of Authorized Signatory:
___________________________________________

       

      Fax
Number of Authorized Signatory:
_________________________________________

      


      Address
for Notice of Purchaser:

      


      


      


      


      Address
for Delivery of Securities for Purchaser (if not same as address for
notice):

      


      


      


      


      


      Subscription
Amount:____________

       

      Shares of
Preferred Stock:____________

       

      Warrant
Shares:________________

       

      EIN
Number:  [PROVIDE
THIS UNDER SEPARATE COVER]

      


      


      [SIGNATURE
PAGES CONTINUE]