**Exhibit 10.34**

**EXECUTION COPY**

**STOCK PURCHASE AGREEMENT**

This Stock Purchase Agreement (this “**Agreement**”) is entered into as of November 17, 2008 by and among each of theindividuals set forth on Annex I (each, a “**Seller**” and, collectively, the “**Sellers**”), NMC Group, Inc., a California corporation (the “**Company**”), and Esterline Technologies Corporation, a Delawarecorporation (the “**Buyer**”). 

**Introduction**

The Sellers own all of the issued and outstanding shares of capital stock of the Company (the “**Purchased Shares**”). The Sellers wish to sell, and the Buyer wishes to buy, all ofthe Purchased Shares on the terms and conditions set forth herein. 

An index of defined terms as used in this Agreement isset forth in Article 10. 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of whichare hereby acknowledged, the parties hereto agree as follows: 

**ARTICLE 1**

**PURCHASE AND SALE; CLOSING**

**1.1        Purchase and Sale.**  Subject to the terms and conditions hereof, at the Closing, the Sellers shall sell, transfer, assign and deliver to the Buyer, and the Buyer shallpurchase from the Sellers, all of the Purchased Shares. 

**1.2**        **Purchase Price; Payments at Closing.**

**(a)        **As used herein, the following terms shall have the following meanings: 

**“Closing Cash”** means, as of immediately prior to the Closing, all the cash, marketable securities and other cash equivalents, and deposits of the Company (other than customer advances), whereverlocated. 

“**Closing Indebtedness**” means any liability for (i) indebtedness forborrowed money, including interest thereon and prepayment or other penalties becoming due as a result of this transaction, created, issued or incurred by the Company, including the Debt Amount, (ii) all payment obligations of the Company forthe deferred purchase price for purchases of property outside the ordinary course of business arising in connection with transactions occurring prior to the Closing which are not evidenced by trade payables, (iii) the present value of allpayment obligations of the Company under leases in existence immediately prior to the Closing to which the Company is a party which are capital leases as of the Closing as determined in accordance GAAP, (iv) any payment obligations in respectof letters of credit, interest rate swaps, collars, caps, hedging obligations or other similar contingent obligations, (v) any indebtedness of the type referred to in clauses (i) through (iv) above of any Person other than the Companyin 

existence immediately prior to the Closing which is either guaranteed by, or secured by asecurity interest upon any property owned by, the Company. 

“**Closing Purchase Price**”means $89,500,000 (i) *plus* the aggregate amount of the Closing Cash, (ii) *minus*an amount equal to the Closing Indebtedness, and (iii) *plus* the amount, if any, by which the Closing Working Capital exceeds theTarget Working Capital Ceiling, or *minus* the amount, if any, by which the Closing Working Capital is less than the Target Working Capital Floor. 

“**Closing Working Capital**” means (i) the accounts receivable, inventory, prepaid expenses and other current assets (excluding deferred Tax assets, cash, marketable securitiesand cash equivalents, other than customer advances and similar prepaid amounts which will be retained in the Company) of the Company as of immediately prior to the Closing (net of all applicable reserves), minus (ii) the accounts payable,accrued expenses, accrued compensation, accrued Taxes and all other current liabilities of the Company as of immediately prior to the Closing, excluding for this purpose the items set forth on Schedule 1.2(a)(i) hereto, the Debt Amount, SaleBonuses and Sellers’ Expenses paid pursuant to Section 1.2(c). The Closing Working Capital shall be determined by reference to the accounts that were used to determine the Target Working Capital, which was determined in accordance withUnited States generally accepted accounting principles (“**GAAP**”) as set forth on Schedule 1.2(a)(ii) hereto. 

“**Credit Facility**” means that certain Loan Agreement by and among the Company and Community Bank, dated May 15, 2006, as amended and supplemented, which established a revolving credit line for theidentified Borrowers from the identified Lenders. 

“**Debt Amount**” means all outstandingprincipal, accrued interest, fees, expenses and other amounts owed by the Company immediately prior to the Closing in connection with the Credit Facility. 

“**Escrow Account**” means the account established by the Escrow Agent to hold the Escrow Amount and any earnings thereon pursuant to the Escrow Agreement. 

“**Escrow Agent**” means Wells Fargo, N.A. 

“**Escrow Agreement**” means the Escrow Agreement, substantially in the form of Exhibit A attachedhereto, to be entered into among the Buyer, the Representative and the Escrow Agent at the Closing. 

“**Escrow Amount**” means the amount in the Escrow Account at the time of determination. 

“**Estimated Closing Purchase Price**” means the Closing Purchase Price, determined using the estimate of the Closing Working Capital, the Closing Cash and the Closing Indebtedness set forth in the Estimated Closing PurchasePrice Certificate. 

 

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“**Retained Employee**” means each of Mark Balderrama,Thomas Mendez and Stephen Williams. 

“**Retention Amount**” means the following amounts foreach of the following Retained Employees: 

Mark Balderrama – $87,000 

Thomas Mendez – $180,620 

Stephen Williams – $36,000 

“**Retention Bonuses**”means the amount to be paid pursuant to Section 5.14. 

“**Sale Bonuses**” means theRetention Bonuses and all change of control, sale, and transaction bonuses, if any, payable to the employees of the Company in connection with or as a result of the transactions contemplated by this Agreement. 

“**Sellers’ Expenses**” means the fees and expenses incurred by the Sellers and/or the Company inconnection with the transactions contemplated by this Agreement including, without limitation, the fees and expenses of Houlihan Lokey Howard & Zukin Capital, Inc. and Paul, Hastings, Janofsky & Walker LLP, but specificallyexcluding any fees and expenses incurred by or for the benefit of the Buyer or any of its Affiliates. 

**“Target Working Capital”** means $5,600,000. 

**“Target Working CapitalCeiling”**means Target Working Capital plus $50,000. 

**“Target Working Capital Floor”**means Target Working Capital minus $50,000. 

**(b)        **Except wherethe context clearly requires to the contrary: (i) each reference in this Agreement to a designated “Section,” “Article,” “Schedule,” “Exhibit,” or “Annex” is to the corresponding Section,Article, Schedule, Exhibit or Annex of or to this Agreement; (ii) instances of gender or entity-specific usage (e.g., “his” “her” “its” “person” or “individual”) shall not beinterpreted to preclude the application of any provision of this Agreement to any individual or entity; (iii) the word “or” shall not be applied in its exclusive sense; (iv) “including” shall mean “including,without limitation”; (v) references to laws, regulations and other governmental rules, as well as to contracts, agreements and other instruments, shall mean such rules and instruments as in effect as of the date of this Agreement;(vi) references to “$” or “dollars” shall mean the lawful currency of the United States; (vii) references to “Federal” or “federal” shall be to laws, agencies or other attributes of the UnitedStates (and not to any State or locality thereof); (viii) the meaning of the terms “domestic” and “foreign” shall be determined by reference to the United States; (ix) references to “days” shall mean calendardays; references to “business days” shall mean any day other than Saturday, Sunday or any day on which commercial banks in Los Angeles, California are 

 

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authorized to close; (x) references to months or years shall be to the actual calendar months oryears at issue (taking into account the actual number of days in any such month or year); (xi) days, business days and times of day shall be determined by reference to local time in Los Angeles, California; and (xii) the English languageversion of this Agreement shall govern all questions of interpretation relating to this Agreement, notwithstanding that this Agreement may have been translated into, and executed in, other languages. 

**(c)        **At least two business days prior to the Closing, the Representative willfurnish to the Buyer (i) a certificate (the “**Estimated Closing Purchase Price Certificate**”) setting forth an estimate of the Closing Working Capital, the Closing Cash and the Closing Indebtedness and a calculation of theClosing Purchase Price based thereon, and (ii) a payoff letter from each holder of such outstanding Closing Indebtedness (A) indicating the amount required to discharge such Closing Indebtedness at Closing and (B) if such ClosingIndebtedness is secured by any liens, security interests, mortgages, restrictions or encumbrances (collectively, “**Liens**”), agreeing to release such Liens upon receipt of the payoff amount. The Estimated Closing Purchase PriceCertificate shall be reasonably acceptable to the Buyer, and the Representative and the Buyer shall cooperate in good faith to resolve any disputes raised by the Buyer with respect to items set forth in the Estimated Closing Purchase PriceCertificate and consider whether any modifications thereto are applicable prior to the Closing; provided that (i) if the Representative and the Buyer are unable to agree on the Estimated Closing Purchase Price Certificate notwithstanding suchgood faith efforts to resolve any such disputes prior to the Closing, then the estimate of the Closing Working Capital, the Closing Cash and the Closing Indebtedness reflected on the Estimated Closing Purchase Price Certificate, with anymodifications agreed to by the Representative and the Buyer, shall be used in the calculation of the Estimated Closing Purchase Price payable pursuant to Section 1.2(d) and (ii) no actions taken by the Buyer pursuant to thisSection 1.2(c) shall operate as a waiver of or otherwise affect or impair the Buyer’s ability to take any actions or assert any disagreement or other rights pursuant to Section 1.7. 

**(d)        **At the Closing, the Buyer shall make the following payments in an amount, inthe aggregate, equal to the Estimated Closing Purchase Price, by wire transfer of immediately available funds: 

**(i)        **first, to the respective holders of the Closing Indebtedness, if any, the amounts specified in the payoff letters delivered by the Representative to the Buyer pursuant toSection 1.2(c)(ii) above; 

**(ii)        **second, to suchpayees of the Sellers’ Expenses as directed in writing by the Representative prior to the Closing; 

**(iii)        **third, to an account established by the Company (the “**Payment Account**”), an amount equal to the aggregate amount of Sale Bonuses (and following the Closing, theCompany shall pay the Retention Bonuses in accordance with Section 5.14); 

**(iv)        **fourth, to the Escrow Agent pursuant to the Escrow Agreement, an amount equal to $8,500,000 (the “**Initial Escrow Amount**”) to be held in the Escrow Account anddisbursed in accordance with the terms of the Escrow Agreement; and 

 

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**(v)        **fifth, theremainder to or as directed by the Representative. 

**1.3        CashWithdrawal.  **Subject to the terms and conditions of this Agreement, including Section 5.2 hereof, between the date hereof, through and including the Closing Date, the Company shall have the right to distribute any portion of itscash and cash equivalents from time to time to the Sellers, other than such cash representing customer advance payments and other similar prepaid amounts which will be retained in Company accounts. 

**1.4        The Closing.  **The consummation of the transactions contemplatedhereby (the “**Closing**”) will take place at the offices of Paul, Hastings, Janofsky & Walker LLP, on (a) the day that is two (2) business days after the conditions set forth in Article 6 are satisfied(other than those conditions which by their nature are normally satisfied at the Closing) or waived, or (b) such later date that is agreed to in writing by the Sellers and the Buyer (the “**Closing Date**”). 

**1.5        Deliveries at Closing by the Sellers and the Company.  **At theClosing, and upon satisfaction or waiver of the conditions set forth in Section 6.2, the Sellers and the Company will deliver or cause to be delivered the instruments, consents, certificates and other documents required of them bySection 6.1. 

**1.6        Deliveries at Closing by theBuyer.  **At the Closing, and upon satisfaction or waiver of the conditions set forth in Section 6.1, the Buyer will deliver or cause to be delivered the instruments, consents, certificates and other documents required of it bySection 6.2. 

**1.7        Determination of Closing Purchase Price.**

**(a)        **Within 120 days after the Closing Date, the Buyer willdeliver to the Representative a certificate (the “**Closing Purchase Price Certificate**”) executed by the Buyer setting forth an itemized statement of the Closing Working Capital, the Closing Cash and the Closing Indebtedness and acalculation of the Closing Purchase Price. 

**(b)        **If theRepresentative delivers written notice (the “**Disputed Items Notice**”) to the Buyer within thirty (30) days after receipt by the Representative of the Closing Purchase Price Certificate, stating that the Representativeobjects to any items in the Closing Purchase Price Certificate, specifying in reasonable detail the basis for such objection and setting forth the Representative’s proposed modification to the Closing Purchase Price, the Buyer and theRepresentative shall use their commercially reasonable efforts to resolve and finally determine and agree upon the Closing Purchase Price as promptly as practicable. The Disputed Items Notice shall specify those items or amounts as to which theRepresentative disagrees, and the Representative shall be deemed to have agreed with (and the Independent Accountant, if any, shall be deemed to be bound by) all other items and amounts contained in the Closing Purchase Price Certificate deliveredpursuant to Section 1.7(a). 

**(c)        **If the Representative and theBuyer are unable to agree upon the Closing Purchase Price within thirty (30) days after delivery of the Disputed Items Notice, the Representative and the Buyer will select an accounting firm of nationally recognized standing, which shallin all cases be independent from the parties hereto (the “**Independent Accountant**”), to resolve the items set forth in the Disputed Items Notice (the “**Disputed Items**”). If the Buyer 

 

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and the Representative are unable to agree upon the selection of the Independent Accountant, either partymay petition a court to select the Independent Accountant. The Independent Accountant will (i) resolve the Disputed Items and (ii) make a determination of the Closing Purchase Price using the calculations set forth in the Closing PurchasePrice Certificate, as modified only by the Independent Accountant’s resolution of the Disputed Items. In making such calculation, the Independent Accountant shall consider only those items or amounts in the Closing Purchase Price Certificateand the calculation of the Closing Working Capital, Closing Cash and the Closing Indebtedness as to which the Representative has disagreed in the Disputed Items Notice and the Independent Accountant’s determination with respect to each disputeditem shall not be in excess of, nor less than, the greatest or lowest value, respectively, claimed for that particular item in the Closing Purchase Price Certificate or in the Disputed Items Notice. The determination of the Independent Accountantwill be made within sixty (60) days after being selected. Such determination shall be final and binding upon the Buyer and the Sellers, shall be deemed a final arbitration award that is binding on the Buyer and the Sellers, and none of theBuyer or the Sellers may seek further recourse to courts or other tribunals with respect thereto, other than to enforce such determination. The fees and expenses of the Independent Accountant shall be allocated to the Buyer, on the one hand, and theSellers, on the other, based upon the percentage that the portion of the contested amount not awarded to each party bears to the amount actually contested by such party, as determined by the Independent Accountant. 

**(d)        **If the Representative does not deliver the Disputed Item Notice to the Buyerwithin thirty (30) days after receipt by the Representative of the Closing Purchase Price Certificate, the Closing Purchase Price specified in the Closing Purchase Price Certificate will be conclusively presumed to be true and correct inall respects and will be final and binding upon the parties. 

**(e)        **Atsuch time as the Closing Purchase Price is finally determined, either (i) the Buyer shall pay the Representative (for payment to the Sellers) an aggregate amount equal to the excess, if any, of the Closing Purchase Price over the EstimatedClosing Purchase Price or (ii) the Representative shall instruct the Escrow Agent to pay the Buyer from the Escrow Account an aggregate amount equal to the excess, if any, of the Estimated Closing Purchase Price over the Closing Purchase Price.Any payment pursuant to this Section 1.7(e) shall be made within five business days after the Closing Purchase Price has been determined by wire transfer by the Buyer or the Escrow Agent, as the case may be, of immediately available funds tothe account of such other party as may be designated in writing by such other party. Except as set forth in this Section 1.7, the Buyer shall have no right to make any claim against any Seller in respect of the determination of the ClosingPurchase Price or the Closing Working Capital and, without limiting the generality of the foregoing, no adjustment to the Closing Purchase Price pursuant to this Section 1.7 shall be considered a breach of any representation, warranty or otherprovision of this Agreement. 

**(f)        **The Sellers and their accountants,lawyers and other representatives will be given full access at all reasonable times to (and shall be allowed to make copies of) the relevant books and records of the Company and to any personnel of the Company reasonably requested by such persons,in each case in connection with the final determination of the Closing Purchase Price or any dispute relating thereto. 

 

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**1.7.2        ****Withholding.**  The Buyer shall be entitled to deduct and withhold from the Closing Purchase Price otherwise deliverable to the Sellers under this Agreement, andfrom any other payments to the Sellers otherwise required pursuant to this Agreement, any amounts the Buyer is required to deduct and withhold with respect to any such deliveries and payments under the Internal Revenue Code of 1986, as amended (the“**Code**”) or any provision of state, local, provincial or foreign Tax law. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been delivered and paid to theSellers in respect of which such deduction and withholding was made. 

**ARTICLE 2**

**REPRESENTATIONS AND WARRANTIES**

**CONCERNING THE SELLERS**

Each Seller hereby, severally and not jointly, represents and warrants to the Buyerthat each of the statements contained in this Article 2, with respect to himself or herself, when read together with and qualified by the Disclosure Schedule delivered by the Sellers to the Buyer in connection with and prior to the execution ofthis Agreement (the “**Disclosure Schedule**”) is true and correct as of the date hereof. 

**2.1        Title.  **Except as set forth on **Schedule 2.1**of the Disclosure Schedule, such Seller owns, and has good title to, the Purchased Shares set forth opposite his orher name on Annex I attached hereto (the percentage of such Purchased Shares owned being his or her “**Pro Rata Share**”). At the Closing, such Seller will transfer his or her Purchased Shares to the Buyer free and clear of all Liens,other than restrictions under applicable securities laws. Upon the consummation of the transactions contemplated by this Agreement, the Buyer will own such Purchased Shares, free and clear of all Liens, other than restrictions imposed underapplicable securities law. 

**2.2        Power and Authority.**  SuchSeller has the requisite capacity to execute and deliver and to carry out the terms of this Agreement and the other agreements, instruments and documents to be executed and delivered by such Seller as contemplated hereby. 

**2.3        No-Conflict.**  Except as set forth on **Schedule 2.3**of theDisclosure Schedule, such Seller’s execution, delivery and performance of this Agreement and the other agreements, instruments and documents to be executed and delivered by such Seller as contemplated hereby will not result in any materialviolation of, be in material conflict with or constitute a material default under any law, statute, regulation, rule, ordinance, contract, agreement or instrument, judgment, decree or order to which such Seller is a party or by which such Seller orhis or her assets is bound. 

**2.4        Consents andApprovals.**  Except for any applicable filings under the HSR Act or as set forth on **Schedule 2.4**of the Disclosure Schedule, no consent, order, approval, authorization, declaration or filing from or with any governmentalauthority or third party is required on the part of such Seller to permit such Seller to fulfill all of such Seller’s obligations under this Agreement and the other agreements, instruments and documents of such Seller contemplated hereby.

 

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**2.5        Validity andEnforceability.  **Assuming the valid execution and delivery by the other parties hereto and thereto, this Agreement is, and each of the other agreements, instruments and documents to be executed and delivered by such Seller ascontemplated hereby will be when executed and delivered by such Seller, the valid and binding obligations of such Seller, enforceable against such Seller in accordance with their respective terms, subject, however, to applicable bankruptcy,insolvency and other laws affecting the rights and remedies of creditors and to general equitable principles. 

**ARTICLE 3**

**REPRESENTATIONS AND WARRANTIES**

**CONCERNING THE COMPANY**

The Company represents and warrants to the Buyer that each of the statementscontained in this Article 3 when read together with and qualified by the Disclosure Schedule is true and correct as of the date hereof. 

**3.1        Organization, Power and Standing.**  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State ofCalifornia. The Company has full corporate power and authority to own, lease and operate its properties and to carry on its business as such business is conducted on the date hereof. The copies of the articles of incorporation and by-laws of theCompany, each as amended through the date hereof (the “**Company Charter Documents**”), that have been made available to the Buyer by the Company are complete and correct copies thereof. 

**3.2        Power and Authority.**  The Company has the corporate power andauthority and has taken all required corporate action on its part necessary to permit it to execute and deliver and to carry out the terms of this Agreement and the other agreements, instruments and documents to be executed and delivered by theCompany as contemplated hereby. 

**3.3        Validity andEnforceability.**  Assuming the valid execution and delivery by the other parties hereto and thereto, this Agreement is, and each of the other agreements, instruments and documents to be executed and delivered by the Company ascontemplated hereby will be when executed and delivered by the Company, the valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject, however, to applicable bankruptcy,insolvency and other laws affecting the rights and remedies of creditors and to general equitable principles. 

**3.4        Subsidiaries.**  The Company has no subsidiaries and does not own or have the right to acquire any equity interest in any corporation, limited liability company, partnership,joint venture, trust or other business organization. 

**3.5        ForeignQualifications.**  **Schedule 3.5**of the Disclosure Schedule sets forth a complete and accurate list of all jurisdictions in which the Company is qualified to do business as a foreign entity. There are no otherjurisdictions in which the Company is required to qualify to do business as a foreign entity, except for any jurisdiction(s) in which the failure to so qualify would not have a Company Material Adverse Effect. 

 

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As used herein, the term “**Company Material Adverse Effect**” shall meanany event, circumstance, or condition which has had or reasonably could be expected to have, a material adverse effect on the assets, liabilities, properties, results of operations or financial condition of the Company, taken as a whole;provided, however, that in no event shall any of the following be taken into account in the determination of whether a Company Material Adverse Effect has occurred: (a) any change in any Legal Requirement or GAAP; (b) anychange resulting from conditions affecting any of the industries in which the Company operates or from changes in general business, financial, political, capital market or economic conditions (including any change resulting from any hostilities, waror military or terrorist attack), so long as the Company is not disproportionately affected thereby; (c) any change resulting from the announcement or pendency of the transactions contemplated by this Agreement or attributable to the fact thatthe Buyer or any of its Affiliates are the prospective owners of the Company; (d) any event, condition or other matter described on the Disclosure Schedule that has not materially changed since the date of such disclosure; or (e) anychange resulting from the compliance by the Company with the terms of, or the taking of any action by the Company contemplated or permitted by, this Agreement. 

**3.6        Capitalization.**  **Schedule 3.6**of the Disclosure Schedule sets forth a complete and accurate list of alloutstanding shares of capital stock of the Company and the record holders thereof. Such shares are duly authorized, validly issued, fully paid and nonassessable. There are no outstanding options, warrants, convertible or exchangeable securities orother rights that would obligate the Company to issue shares of its capital stock or other equity securities. Except as set forth on **Schedule 3.6**of the Disclosure Schedule, there are no agreements, written or oral, to which the Companyis a party relating to the acquisition, disposition, voting or registration under applicable securities laws of any equity security of the Company. Except as set forth on **Schedule 3.6**of the Disclosure Schedule, there are no outstandingor authorized stock appreciation, phantom stock or other similar rights with respect to the Company. 

**3.7        Financial Statements.**  **(a)** The Sellers have delivered to the Buyer (i) an audited balance sheet of the Company as of each of December 31, 2006and 2007, and audited statements of income, stockholders’ equity and cash flows for the fiscal years then ended, and (ii) an unaudited balance sheet of the Company (the “**Balance Sheet**”) as of June 30, 2008 (the“**Balance Sheet Date**”) and an unaudited statement of income for the six-month period then ended. Such financial statements and the notes thereto, if any, fairly present, in all material respects, the financial condition of theCompany for the periods then ended, and were prepared in accordance with the books and records of the Company in conformity with GAAP (except as set forth on **Schedule 3.7(a)**of the Disclosure Schedule or in the case of unauditedfinancial statements for the omission of footnotes and subject to year-end adjustments). 

**(b)        **Except as set forth on **Schedule 3.7(b)** of the Disclosure Schedule, each accrual reflected on the Balance Sheet is adequate to meet the liability underlying such accrualand the reserve provided for doubtful accounts reflected on the Balance Sheet is adequate given the Company’s history and current knowledge of the account. 

**(c)        **The Company has no liabilities, contingent or otherwise that are not reflected on the Balance Sheet, including the notes thereto, otherthan liabilities arising in the 

 

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ordinary course of business, liabilities incurred in connection with the transactions contemplated herebyand liabilities which are not material to the Company. Except as reflected on the Balance Sheet and Schedule **3.7(c)(i)** of the Disclosure Schedule, the Company has no indebtedness for money borrowed or for the deferred purchase price ofproperty or services, capital lease obligations, conditional sale or other title retention agreements relating to the Company’s assets or business. Except as set forth in Schedule **3.7(c)(ii)** of the Disclosure Schedule, the Companyis not a guarantor or otherwise liable for any liability or obligation or any other person for any matter which relates to or affects the Company or its assets or business. 

**(d)        **All accounts receivable of the Company reflected in the Balance Sheet or existing as of the Closing Date, are bona fide accountsreceivables and are or will be valid and enforceable against the account debtor, subject to the allowance for doubtful accounts set forth on the Balance Sheet or in the books and records of the Company, as the case may be. 

**(e)        **All inventories of finished products consist of items of a quality andquantity that are saleable in the ordinary course of business as currently conducted by the Company, and all inventories of raw materials, work in process, supplies, parts and packaging and labeling materials consist of items of a quality andquantity that are useable in the ordinary course of business as currently conducted by the Company. To the knowledge of the Company, there is no adverse condition affecting the quality or supply of raw materials, intermediates, supplies, parts andother materials available to the Company that are necessary to manufacture, package or label its products. 

**3.8        Absence of Certain Changes.**  Since the Balance Sheet Date, except as set forth on **Schedule 3.8**of the Disclosure Schedule and except for transactionscontemplated by this Agreement, (a) the Company has conducted its business in all material respects in the ordinary course, (b) no Lien has been placed upon any of the Company’s assets, other than Permitted Liens, (c) the Companyhas not acquired or disposed of any material assets, except in the ordinary course of business, (d) there has been no material damage, destruction or casualty loss (other than those covered by insurance the proceeds of which will be used toreplace or repair the subject assets prior to Closing) with respect to any of the assets or properties of the Company, (e) the Company has not cancelled, compromised or waived any material right or claim, (f) the Company has notaccelerated, terminated, modified or cancelled any material agreement, contract, lease or license related to the Company’s business, and (g) to the Company’s knowledge, there has been no event or circumstance relating specifically tothe Company that has caused or could reasonably be expected to cause a Company Material Adverse Effect. 

**3.9        Taxes.**

**(a)        **The representations and warranties set forth in this Section 3.9 are subject in all respects to the qualifications and disclosures set forth on **Schedule 3.9**of theDisclosure Schedule. 

 

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**(b)        **For purposes of thisAgreement, the following definitions shall apply: 

**(i)        **“**Pre-Closing Tax Period**” means all taxable periods ending on or before the Closing Date and the portion of a Straddle Period ending on and including the ClosingDate. 

**(ii)        **“**Pre-Closing Taxes**”means any and all Taxes of the Company that are attributable to a Pre-Closing Tax Period, relate to an event or transaction occurring on or before the Closing Date, or arise out of or result from the transactions contemplated by this Agreement(including any transfer, documentary, sales, use, stamp, registration and other such Taxes and fees, and any interest, fines, assessments, penalties or additions to tax imposed in connection therewith or with respect thereto). 

**(iii)        **“**Straddle Period**” means a Tax period thatincludes, but does not end on, the Closing Date 

**(iv)        **“**Tax**” or “**Taxes**” means (a) any and all federal, state, provincial, local, foreign and other taxes, levies, fees, imposts, duties and similargovernmental charges (including any interest, fines, assessments, penalties or additions to tax imposed in connection therewith or with respect thereto), whether computed on a separate or consolidated, unitary or combined basis or in any othermanner, including, without limitation, (A) taxes imposed on, or measured by, income, franchise, profits or gross receipts, and (B) ad valorem, value added, capital gains, sales, goods and services, use, real or personal property, capitalstock, license, branch, payroll, estimated, withholding, employment, social security (or similar), unemployment, compensation, utility, severance, production, excise, stamp, occupation, premium, windfall profits, transfer and gains taxes, andcustoms duties; (b) liability for the payment of any amounts of the type described in clause (a) arising as a result of being (or ceasing to be) a member of any affiliated, consolidated, unitary or similar group; or (c) liability forthe payment of any amounts of the type described in clause (a) or (b) as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other Person. 

**(v)        **“**Tax Returns**” means all reports, estimates,declarations of estimated Tax, information statements and returns relating to Taxes and any schedules attached to or amendments of any of the foregoing. 

**(c)        **The Company has made a valid election, effective as of May 1, 1988 to be treated as an S corporation within the meaning of Sections 1361 and 1362 of theCode and under any corresponding state or local tax provision. For federal and applicable state and local income Tax purposes, the Company has properly qualified as an S corporation since the effective date of its election through the date of thisAgreement, and will properly qualify as an S corporation through and until the Closing Date in all applicable jurisdictions in which it is subject to Tax. Since the effective date of its election, the Company has not been subject to income Tax as aC corporation within the meaning of Section 1361(a) of the Code (or comparable provision of state or local law). 

 

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**(d)        **The Company will not beobligated to pay Tax under Section 1374 of the Code (or comparable provision of state or local law) in connection with the transactions contemplated by this Agreement. The Company has not, in the past 10 years acquired assets from anothercorporation in a transaction in which the Company’s Tax basis for the acquired assets was determined, in whole or in part, by reference to the Tax basis of the acquired assets (or any other property) in the hands of the transferor. 

**(e)        **The Company has made available to the Buyer true and correct copies of theTax Returns of the Company for the 2005, 2006 and 2007 taxable years. 

**(f)        **Except as set forth on **Schedule 3.9(f)**of the Disclosure Schedule, the Company has duly and timely filed all Tax Returns that were required to be filed by it and all suchTax Returns are true, correct and complete in all material respects. The Company has paid when due all Taxes required to be paid by it (whether or not shown or required to be shown to be due on any Tax Return). The Company does not have anycurrently effective agreement or waiver that would have the effect of extending any applicable statute of limitations in respect of any of its Tax liabilities. No power of attorney has been granted by the Company with respect to any Tax matter whichis currently in force. There are no unpaid assessments against the Company of any Taxes for any fiscal period or pending or, to the knowledge of the Company, threatened tax examinations or audits by any foreign, federal, state or local taxingauthority. No governmental authority has given notice to the Company of any intention to assert any deficiency or claim for additional Taxes against the Company. All Taxes that the Company is required by law to withhold or to collect for paymenthave been duly withheld and collected and, to the extent required, paid to the proper governmental entity. There are no Tax Liens pending or, to the knowledge of the Company, threatened against the Company or its assets or property, other thanPermitted Liens. 

**(g)        **The Company is not now, nor has it previouslybeen, a member of an affiliated group filing a consolidated, combined, unitary or similar Tax Return. The Company has no liability for Taxes of any Person (other than itself) under Treasury Regulation Section 1.1502-6 (or any similar provisionof state, local or foreign law), as a transferee or successor, by contract, or otherwise. 

**(h)        **No claim has ever been made by a taxing authority in a jurisdiction where the Company does not file Tax Returns that the Company is or may be subject to taxation by thatjurisdiction. 

**(i)        **No withholding is required underSection 1445 of the Code in connection with the consummation of the transactions contemplated by this Agreement. 

**(j)        **The Company is not now, nor has it previously been, a party to a “reportable transaction” within the meaning of Section 1.6011-4(b) of the Treasury Regulations.

**(k)        **The Company has not distributed stock of another Person nor hashad its stock distributed by another Person in a transaction that was purported or intended to be governed in whole or in part by Sections 354, 355 or 361 of the Code. 

 

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**(l)        **Each “nonqualifieddeferred compensation plan” (as such term is defined in Section 409A(d)(1) of the Code) sponsored or maintained by the Company since January 1, 2005 has been operated since that date in good faith compliance with Section 409A ofthe Code, the final or proposed regulations thereunder, and any other Internal Revenue Service guidance issued with respect thereto, to the extent applicable to such plan. No deferred compensation plan existing prior to January 1, 2005, whichwould otherwise not be subject to Section 409A of the Code, has been “materially modified” at any time after October 3, 2004. 

**3.10        Personal Property.**  The Company has valid title to or a valid leasehold, license or other similar interest in all tangible personal property, freeand clear of all Liens, except for Permitted Liens, used by the Company in its business, except for any tangible personal property disposed of in the ordinary course of the business after the date hereof. The equipment and other tangible operatingassets of the Company, taken as a whole, are in adequate condition to conduct the business of the Company as the same is conducted on the date hereof, normal wear and tear excepted. 

As used herein, “**Permitted Liens**” means (a) such imperfections of title, easements, encumbrances, liens orrestrictions which (i) are of record and (ii) do not materially impair the current use of the Company’s assets, (b) materialmen’s, mechanics’, carriers’, workmen’s, warehousemen’s, repairmen’s,landlords’, and other like Liens arising in the ordinary course of business, or deposits to obtain the release of such Liens for amounts which are not yet due and payable, (c) Liens for Taxes not yet due and payable, or being contested ingood faith, (d) purchase money Liens incurred in the ordinary course of business, (e) Liens created as a result of any action taken by or through the Buyer or any of its Affiliates, or (f) Liens securing the Debt Amount which will beremoved at the Closing assuming compliance by Buyer with its obligations hereunder. 

**3.11**        **Real Property.**

**(a)        **The Company does not own any real property. 

**(b)        Schedule 3.11**of the Disclosure Schedule describes each interest in real property leased by the Company, including the lessor of such leased property, and identifies eachlease or any other arrangement under which such property is leased. The Company enjoys peaceful and quiet possession of its leased premises and has not received any written notice from any landlord asserting the existence of a default under any suchlease or been informed in writing that the lessor under any such lease has taken action or, to the knowledge of Company, threatened to terminate the lease before the expiration date specified in the lease. Except as set forth on**Schedule 3.11** of the Disclosure Schedule, each lease of real property is valid and binding against the Company and, to the knowledge of the Company, against the counterparty thereto, and is in full force and effect, and has not beenamended from the version provided to the Buyer. No security deposit or portion thereof deposited with respect to any real property lease has been applied with respect of a breach of default under such lease which has not been redeposited in full.Except as set forth on **Schedule 3.11**of the Disclosure Schedule, the Company has not subleased, licensed or otherwise granted to any person or entity the right to use or occupy any of the leased real property or any portion thereof.Except as shown on 

 

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**Schedule 3.11** of the Disclosure Schedule, the transactions contemplated by this Agreementwill not be the basis for any lessor to terminate its lease prior to the expiration date of the lease. 

**3.12        Intellectual Property.**

**(a)        **As used herein “**Intellectual Property**” means all (i) patents, provisional patents, patent applications, continuations, continuations in part, extensions andpatent disclosures, (ii) trademarks and service marks (registered and unregistered), and registrations and applications for registration thereof together, to the extent applicable, with all of the goodwill associated therewith (iii) tradedress, trade names and corporate names (iv) copyrights (registered or unregistered) and copyrightable works and registrations and applications for registration thereof, (v) computer software, data, data bases and documentation thereof,(vi) trade secrets and other confidential information (including, without limitation, ideas, formulae, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, manufacturing and productionprocesses and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, financial and marketing plans and customer and supplier lists and information), and (vii) Uniform ResourceLocators (a.k.a. “URLs” or “domain names”). As used herein “**Company Intellectual Property**” means Intellectual Property owned by the Company. 

**(b)        Schedule 3.12(b)**of the Disclosure Schedule contains a list of allCompany Intellectual Property included in clauses (i), (ii) and (vii) of the definition of Intellectual Property, and all Company Intellectual Property included in clause (iv) thereof that is material to the conduct of the business ascurrently conducted. The Company has paid all necessary registration, maintenance and renewal fees for the purpose of maintaining such Company Intellectual Property. 

**(c)        Schedule 3.12(c)** of the Disclosure Schedule contains a list of all Intellectual Property licensed to the Company by any third partythat is used in the Company’s business, excluding “off-the-shelf” or “shrink wrap” products licensed to the Company which are licensed in the ordinary course of business and as to which the Company has adequate site, user orother applicable licenses. 

**(d)        Schedule 3.12(d)**of theDisclosure Schedule also contains a description of all licenses granted by the Company to any third party with respect to any Company Intellectual Property material to the Company’s business as currently conducted. 

**(e)        **Except as set forth on **Schedule 3.12**of the Disclosure Schedule,(i) to the Company’s knowledge, the Company is not infringing or otherwise violating any Intellectual Property of any other Person and it is in material compliance with the terms of any license related to Intellectual Property licensed tothe Company and (ii) to the Company’s knowledge, no third party is infringing on any Company Intellectual Property. 

**(f)        **The Company has taken reasonable steps to protect its rights in, and (to the extent confidential) the confidentiality of, (i) the Company Intellectual Property and (ii) anyIntellectual Property provided by any other Person to the Company, each material to the Company’s business as currently conducted. 

 

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**3.13        MaterialContracts.**  Set forth on **Schedule 3.13** of the Disclosure Schedule is a list of all Material Contracts of the Company, showing the parties thereto. Each Material Contract is in full force and effect and the Company, and, tothe knowledge of the Company, each other party thereto has performed all material obligations required to be performed by them thereunder. The Company is not in default under any material provision of any Material Contract. To the knowledge of theCompany, no third party is in default under any material provision of any Material Contract. 

As used herein, the term“**Material Contract**” shall mean each written contract or agreement to which the Company is a party involving (i) aggregate consideration payable to or by the Company of $100,000 other than those contracts or agreements whichwill be terminated at or prior to the Closing or are terminable by notice of not more than thirty (30) days without material liability to the Company), (ii) any agreement, contract or commitment relating to the disposition oracquisition of assets or any interest in any business enterprise relating directly or indirectly to the Company, its current or historic business which contain any obligation of the Company which will continue after the Closing, (iii) anymortgages, indentures, loans, security agreements or other instruments relating to the borrowing of money by the Company or under which any party has imposed or may, with notice or the lapse of time impose, a lien on any of the Company’sassets, (iv) any distribution, joint marketing, development, partnership or joint venture agreement of the business of the Company, (v) any employment, severance, bonus, noncompetition or nonsolicitation agreement with any employee of theCompany, (vi) any agreement, contract or commitment containing any covenant limiting in any respect the right of the Company or any of its Affiliates to engage in any line of business or to compete with any person, (vii) any agreement thatprovides for the payment or receipt by the Company of an ongoing license fee or royalty payment in excess of $100,000, (viii) any agreement or lease under which the Company is a lessee of or holds or operates any personal property owned by anyother party that is used in the Company’s business, (ix) any agreement involving a commitment to make capital expenditures in excess of $100,000, or (x) any agreement related to hazardous waste disposal, solid waste disposal, wastewater management, investigation of environmental matters, environmental remediation or any other material environmental obligation, liability or agreement. 

**3.14        Litigation.**  Except as disclosed on **Schedule 3.14**of the Disclosure Schedule, there is no action, arbitration,litigation, proceeding or governmental investigation pending or, to the knowledge of the Company, threatened against the Company. 

**3.15        No-Conflict; Required Consents and Approvals.**  Except as set forth on **Schedule 3.15** of the Disclosure Schedule and except for applicable filings under the HSRAct, the Company’s execution, delivery and performance of this Agreement and the other agreements, instruments and documents of the Company contemplated hereby will not result in any material violation of, be in material conflict with orconstitute a material default under the Company Charter Documents, any Material Contract, any Authorization or any Legal Requirement. Except as set forth on **Schedule 3.15** of the Disclosure Schedule and except for applicable filings andapprovals under the HSR Act, no material consent, order, approval, authorization, declaration or filing with or from any governmental authority or any party to a Material Contract is required on the part of the Company for or in connection with the

 

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execution and delivery of this Agreement or the consummation of the transactions contemplated hereby bythe Company. 

**3.16        Licenses andPermits.**  **Schedule 3.16** of the Disclosure Schedule sets forth a list of all licenses, permits and authorizations of governmental authorities held by the Company which are material to the business of the Company as it iscurrently conducted (except for licenses, permits and authorizations relating to Environmental Laws, as to which Section 3.22 only applies) (collectively, the “**Authorizations**”). The Authorizations are in full force and effect.The Company is in material compliance with the Authorizations. To the knowledge of the Company, no governmental authority has threatened the amendment, suspension or cancellation of any Authorization, except where such threatened suspension orcancellation relates to such items of noncompliance that the Company had previously remedied or will remedy within the applicable cure periods. 

**3.17        Compliance with Laws.**  The Company is in material compliance with all Legal Requirements (except as to Taxes, as to which Section 3.9 onlyapplies, to Benefit Plans, as to which Section 3.19 only applies, and to Environmental Laws, as to which Section 3.22 only applies). As used herein, the term “**Legal Requirements**” means, with respect to any Person, allforeign, federal, state, and local statutes, laws, ordinances, judgments, decrees, and orders and all governmental rules and regulations applicable to such Person. 

**3.18        Employees and Compensation.  Schedule 3.18** of the Disclosure Schedule sets forth (i) a true and correct list of thename and current annual salary of each officer or employee of the Company whose annual base salary exceeds $75,000 and (ii) any other form of compensation (other than salary, bonuses or customary benefits) paid or payable by the Company to eachsuch officer or employee for the most recent fiscal year. Except as contemplated by Section 6.1(i), to the Company’s knowledge no employee identified on **Schedule 3.18** has any present intention to terminate his or her employmentwith the Company within the next 12 months or is bound by any confidentiality agreement, non-competition agreement or other contract that may reasonably be expected to have an adverse effect on such employee’s participation in theCompany’s business. The Company has complied in all material respects with all provisions of all Legal Requirements relating to employment and employment practices, terms and condition of employment, wage and hours and similar matters.

**3.19        Benefit Plans.**

**(a)        Schedule 3.19(a)** of the Disclosure Schedule sets forth all materialemployee benefit plans, programs, policies, practices, agreements and arrangements (including, but not limited to, all plans described in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended(“**ERISA**”)) maintained or contributed to by the Company for the benefit of any of its current or former officers, employees, directors or independent contractors, or with respect to which the Company has (or reasonably could beexpected to have) any obligation or liability (including, but not limited to, liabilities arising from affiliation under Section 414(b), (c), (m) or (o) of the Code, or Section 4001 of ERISA) (each, a “**BenefitPlan**” and collectively, the “**Benefit Plans**”). Except as disclosed on **Schedule 3.19**of the Disclosure Schedule, there has been no amendment or announcement (written or oral) by the Company relating to a change inparticipation or coverage under, any Benefit Plan that could reasonably be 

 

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expected to materially increase the expense of maintaining such Benefit Plan above the level of expenseincurred with respect thereto for the most recent fiscal year included in the financial statements provided pursuant to Section 3.7. Each Benefit Plan can be terminated by the Company at any time without material liability or expense (otherthan for any benefits accrued thereunder at the time of such termination). None of the rights of the Company under any Benefit Plan will be impaired in any way by the consummation of the transactions contemplated by this Agreement. 

**(b)        **With respect to each Benefit Plan, the Company has made available to the Buyer(to the extent applicable to such Benefit Plan) true and complete copies of: (i) all documents embodying such Benefit Plan (including all amendments thereto) or, if such Benefit Plan is not in writing, a written description of such BenefitPlan; (ii) the last three annual reports (Form 5500 series and all schedules and financial statements attached thereto) filed with respect to such Benefit Plan; (iii) the most recent summary plan description, and all summaries ofmaterial modifications related thereto, distributed with respect to such Benefit Plan; (iv) all contracts and agreements (and any amendments thereto) relating to such Benefit Plan, including, without limitation, all trust agreements, investmentmanagement agreements, annuity contracts, insurance contracts, bonds, indemnification agreements and service provider agreements; (v) the most recent determination letter issued by the Internal Revenue Service (the “**IRS**”) withrespect to such Benefit Plan; (vii) all written communications to employees or beneficiaries, generally (A) in which the provisions of such Benefit Plan, as set forth or described therein, differ materially from such provisions as setforth or described in the other information or materials furnished under this subsection (b), or (B) relating to the amendment, creation or termination of such Benefit Plan, or to an increase or decrease in benefits, acceleration of payments orvesting or any other event with respect to such Benefit Plan that could result in a material liability to the Company; (viii) all material correspondence to or from any governmental entity or agency relating to such Benefit Plan sent orreceived in the past three (3) years; and (ix) all coverage, nondiscrimination, top heavy and Code Section 415 tests performed with respect to such Benefit Plan for the three most recently completed plan years. 

**(c)        **Except as set forth on **Schedule 3.19**of the Disclosure Schedule,with respect to each Benefit Plan: (i) such Benefit Plan is, and at all times since inception has been, maintained, operated, administered and funded in accordance with its terms and all Legal Requirements in all material respects;(ii) the Company and each other Person (including, without limitation, all fiduciaries) have, at all times and in all material respects, properly performed all of their duties and obligations under or with respect to such Benefit Plan;(iii) all returns, reports, notices, statements and other disclosures relating to such Benefit Plan required to be filed with any governmental authority or distributed to any participant therein have been properly prepared and duly filed ordistributed in a timely manner; (iv) all contributions, premiums and other payments due or required to be paid to (or with respect to) such Benefit Plan have been timely paid, or, if not yet due, have been accrued as a liability on the BalanceSheet; (v) no breach of fiduciary duty has occurred with respect to any Benefit Plan(vi) no “prohibited transaction” (within the meaning of either Section 4975(c) of the Code or Section 406 or 407 of ERISA) hasoccurred with respect to such Benefit Plan; and (vii) the Company has not incurred, and there exists no condition or set of circumstances in connection with which the Company or Buyer could incur, directly or indirectly, any material liabilityor expense (except for routine contributions and benefit payments) under ERISA, the Code or any other applicable Legal 

 

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Requirement or pursuant to any indemnification or similar agreement, with respect to such Benefit Plan.

**(d)        **Each Benefit Plan that is intended to be qualified underSection 401(a) of the Code is so qualified and each trust and group annuity contract related thereto is exempt from taxation under Section 501(a) of the Code. Each such Benefit Plan (i) is the subject of an unrevoked favorabledetermination letter from the IRS with respect to such Benefit Plan’s qualified status under the Code, as amended by that legislation commonly referred to as “GUST” and “EGTRRA” and all subsequent legislation, (ii) hasremaining a period of time under the Code or applicable Treasury regulations or IRS pronouncements in which to request, and make any amendments necessary to obtain, such a letter from the IRS, or (iii) is a prototype plan or volume submitterplan entitled, under applicable IRS guidance, to rely on the favorable opinion or advisory letter issued by the IRS to the sponsor of such prototype or volume submitter plan. To the Company’s knowledge, nothing has occurred, or is reasonablyexpected by the Company or any Seller to occur, that could adversely affect the qualification or exemption of any such Benefit Plan or any trust or group annuity contract related thereto. The Company has been informed by the relevant third partyadministrators that no such Benefit Plan is a “top-heavy plan,” as defined in Section 416 of the Code. 

**(e)        **The Company is not, and has not within the past six (6) years been, a member of (i) a controlled group of corporations, within the meaning of Section 414(b) of theCode, (ii) a group of trades or businesses under common control, within the meaning of Section 414(c) of the Code, (iii) an affiliated service group, within the meaning of Section 414(m) of the Code, or (iv) any other groupof Persons treated as a single employer under Section 414(o) of the Code. 

**(f)        **The Company does not sponsor, maintain or contribute to, and has not previously sponsored, maintained or contributed to (or been obligated to sponsor, maintain or contribute to),(a) a “multiemployer plan,” as defined in Section 3(37) or 4001(a)(3) of ERISA or 414(f) of the Code, (b) a multiple employer plan within the meaning of Section 4063 or 4064 of ERISA or Section 413(c) of the Code,(c) an employee benefit plan that is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code, or (d) a “multiple employer welfare arrangement,” as defined in Section 3(40) ofERISA. 

**(g)        **Neither the Company nor any Benefit Plan provides or hasany obligation to provide (or contribute toward the cost of) life insurance, medical benefits or any other welfare benefits (within the meaning of Section 3(1) of ERISA) with respect to any current or former officer, employee, director, agentor independent contractor of the Company after his or her retirement or other termination of service for any reason, except to the extent required by Part 6 of Subtitle B of Title I of ERISA and Section 4980B(f) of the Code. 

**(h)        **There are no lawsuits or claims (other than routine claims for benefits)pending or, to the knowledge of the Company, threatened with respect to (or against the assets of) any Benefit Plan, nor, to the Company’s knowledge is there a basis for any such lawsuit or claim. The Company has not been notified that anyBenefit Plan is currently under investigation, audit or review, directly or indirectly, by the IRS, the Department of Labor or any other government authority. 

 

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**(i)        Schedule 3.19** of theDisclosure Schedule sets forth a complete and accurate list of all “nonqualified deferred compensation plans” (within the meaning of Section 409A of the Code) sponsored or maintained by the Company (or to which the Company is (or was)a party), and in which any of their current or former officers, employees, agents, directors or independent contractors participated at any time since January 1, 2005. Each such plan has been operated and administered sinceJanuary 1, 2005 in good faith compliance with Section 409A of the Code and any guidance issued by the United States Treasury Department or the IRS thereunder (including, without limitation, IRS Notice 2005-1, the proposedTreasury regulations issued on September 29, 2005, and the final Treasury regulations issued on April 10, 2007), to the extent applicable to such plan. No such plan has been “materially modified” (within the meaning of IRS Notice2005-1 or Proposed Treasury Regulation Section 1.409A-6(a)(4)) at any time after October 3, 2004. 

**(j)        **Except as set forth on **Schedule 3.19** of the Disclosure Schedule, neither the execution of this Agreement nor the consummation of the transactions contemplated by thisAgreement will (i) result in any benefit or right becoming established or increased, or accelerate the time of payment or vesting, under any Benefit Plan, (ii) increase the amount of compensation due to any individual or forgive anyindebtedness owed by any individual, or (iii) entitle any individual to severance pay, unemployment compensation or any other payment from the Company, Seller or any Benefit Plan. 

**3.20        Insurance.**  The Company is insured under the insurance policieslisted on **Schedule 3.20** of the Disclosure Schedule. The Company is in compliance in all material respects with the terms and provisions of such insurance policies. Except as disclosed on **Schedule 3.20** of the DisclosureSchedule, as of the date hereof, there are no pending claims under any such insurance policy as to which the respective insurers have denied coverage, or provided the Company notice that a defense will be afforded with reservation of rights. Theinsurance policies maintained by the Company are of the type and in amounts customarily carried by persons conducting businesses similar to those of the Company in the jurisdiction in which the Company operates. 

**3.21        Brokers.**  Except as set forth on **Schedule 3.21**of theDisclosure Schedule, the Company has not engaged any broker, finder or similar agent with respect to the transactions contemplated by this Agreement, and the Company is not under any obligation to pay any broker’s fee, finder’s fee orcommission in connection with the consummation of the transactions contemplated by this Agreement as a result of any agreement of the Company. 

**3.22        Compliance with Environmental Laws.**  Each of the representations and warranties set forth in this Section 3.22 is subject in all respects tothe further qualifications and disclosures set forth on **Schedule 3.22** of the Disclosure Schedule. 

**(a)        **For purposes of this Agreement, the following definitions shall apply: 

**(i)        **“**Environment**” shall mean soil, surface waters, sediments, groundwaters, land, surface, subsurface strata, ambient air, fish, plant, wildlife,habitat and any other environmental medium or natural resources. 

 

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**(ii)        **“**Environmental Claim**” shall mean any litigation, proceeding, order, claim, demand, directive, summons, notice, cause of action, complaint or citation, relating toEnvironmental Laws or Hazardous Substances. 

**(iii)        **“**Environmental Laws**” shall mean all foreign, federal, state and local statutes, regulations, rules and ordinances relating to pollution or the protection of theEnvironment, Hazardous Substances or the discharge of materials into the Environment. 

**(iv)        **“**Hazardous Substances**” shall mean any substance which is a “hazardous substance,” “hazardous waste,” “toxic substance,” “toxicwaste,” “pollutant,” “contaminant” or words of similar import under any Environmental Law including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §9601 etseq.), the Resource Conservation and Recovery Act (42 U.S.C. §6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. §1251 et seq.), and the Clean Air Act (42 U.S.C. §7401 et seq.), and including, without limitation, whichcontains polychlorinated biphenyl, asbestos, or gasoline, diesel fuel or other petroleum hydrocarbons or volatile organic compounds. 

**(b)        **The operations of the Company have at all times been and are in material compliance with all applicable Environmental Laws. 

**(c)        **The Company has at all times possessed and currently possesses all materialpermits, licenses and authorizations required under applicable Environmental Laws, and the operations of the Company have at all times been and are in material compliance with the terms and conditions of such required permits, licenses andauthorizations. 

**(d)        **There are no pending or, to the knowledge ofthe Company, threatened Environmental Claims against the Company. 

**(e)        **The Company’s operations have not resulted in a spill or release of Hazardous Substances into the Environment that would be reasonably likely to give rise to remediation costsin excess of $100,000. Except as set forth on Schedule 3.22(e), the Company has no knowledge of any spills or releases of Hazardous Substances at, from, onto or under any real property leased or operated by the Company. 

**(f)        **None of the following exists at any property or facility owned or operated bythe Company: (i) underground storage tanks; (ii) friable asbestos-containing materials; (iii) materials or equipment containing polychlorinated biphenyls; or (iv) landfills, surface impoundments or hazardous waste disposal areas.

**(g)        **The Company has not either expressly or by operation of law,assumed or undertaken any liability, including without limitation any material obligation for corrective or remedial action, of any other Person related to any Environmental Laws. 

**(h)        **The Company has provided Buyer with complete and accurate copies of allenvironmental assessments and reports in its possession that relate to the operations of the Company or any real property leased by the Company. 

 

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**3.23        AffiliateTransactions.**  Except for employment relationships and the payment of compensation and benefits in the ordinary course of business or as disclosed on **Schedule 3.23**of the Disclosure Schedule, the Company is not a party toany Material Contract or other arrangement with any stockholder, officer, director or Affiliate of the Company. As used herein, the term “**Affiliate**” shall have the meaning given to it under Rule 405 promulgated under theSecurities Act of 1933, as amended. 

**3.24        Customers andSuppliers**.  To the knowledge of the Company no Major Customer or Major Supplier has notified the Company that it intends to terminate or modify its relationship with the Company. Except as set forth on **Schedule 3.24**of theDisclosure Schedule, no Major Customer or Major Supplier of the Company has during the last twelve months materially decreased or limited, or threatened to materially decrease or limit, its purchase of the Company’s products, or its supply ofmaterials or services to the Company, as the case may be. **Schedule 3.24** of the Disclosure Schedule lists the ten largest customers of the Company by sales during the period from January 1, 2006 through June 30, 2008 (each a“**Major Customer**”). **Schedule 3.24** of the Disclosure Schedule also lists the ten largest suppliers of the Company by expenses of the Company for materials or services purchased during the period from January 1, 2006through June 30, 2008 (each a “**Major Supplier**”). 

**3.25        ****Absence of Questionable Payments**.  None of the Company or, to the knowledge of the Company, any director, officer, agent, employee or other person acting on behalfof the Company has used, any of the Company’s funds for unlawful contributions, payments, gifts or entertainment, or made any unlawful expenditures relating to political activity to any government official or other person. None of the Companyor, to the knowledge of the Company, any officer, director, agent, employee other person acting on behalf of the Company has accepted or received any unlawful contributions, payments, gifts, or expenditures in connection with the operation of theCompany’s business. 

**3.26        Product Warranties; Defects;Liabilities**.  Each product manufactured, sold, licensed, leased or delivered by the Company has been in material conformity with all applicable contractual commitments and all expressed and implied warranties. The Company does not haveany material liability (and to the knowledge of the Company, as of the date of this Agreement, there is no current reasonable basis for any present action, suit, proceeding, hearing, investigation, charge, complaint or claim against the Companyrelating to any product giving rise to any material liability) for replacement or repair thereof or any damages in connection therewith. No product manufactured, sold, licensed, leased or delivered by the Company is subject to any guaranty, warrantyor other indemnity beyond the applicable standard terms and conditions of sale, license or lease or beyond that implied or imposed by applicable law or to any current recall whether initiated due to the action of any governmental authority, privateparty or otherwise. 

**3.27        Government Contracts**.  TheCompany is not now, nor has it previously been, suspended or debarred from bidding on contracts or subcontracts for any agency of the United States government or any foreign government, nor to the knowledge of the Company has such a suspension ordebarment been threatened or action for suspension or debarment been commenced. The Company has not been nor is it currently being audited, except in the ordinary course of business or as is customary in the industry or as provided by the Federal

 

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Acquisition Regulations or, to the knowledge of the Company, investigated by any agency of the UnitedStates government or any foreign government nor to the knowledge of the Company has such audit or investigation been threatened. To the knowledge of the Company, there is no valid basis for the Company’s suspension or debarment from bidding oncontracts or subcontracts for any agency of the United States government or any foreign government and, to the knowledge of the Company, there is no valid basis for a claim pursuant to an audit or investigation by any agency of the United Statesgovernment or any foreign government, or any prime contractor with any such governmental authority. The Company has not had a contract or subcontract terminated for default by the Company by any agency of the United States government or any foreigngovernment. The Company does not have any outstanding agreements, contracts or commitments that require it to obtain or maintain a government security clearance. 

**ARTICLE 4**

**REPRESENTATIONS AND WARRANTIES OF THE BUYER**

The Buyer hereby represents and warrants to the Sellers and the Company that each of the statements contained in this Article 4 istrue and correct as of the date hereof. 

**4.1        Organization, Power andStanding.**  The Buyer is a Delaware duly organized, validly existing and in good standing under the laws of the State of Delaware, with all requisite power and authority to own, lease and operate its properties and to carry on itsbusiness as such business is conducted on the date hereof. 

**4.2        Power andAuthority; No-Conflict.**  The Buyer has full power and authority and has taken all required action necessary to permit it to execute and deliver and to carry out the terms of this Agreement and all other agreements, instruments anddocuments to be executed and delivered by the Buyer as contemplated hereby and none of such actions will result in any violation of, be in conflict with or constitute a default under any charter, by-law, organizational document, Legal Requirement,contract, agreement or instrument to which the Buyer is a party or by which the Buyer or its assets are bound. 

**4.3        Consents and Approvals.**  Except for any applicable filings under the HSR Act, no consent, order, approval, authorization, declaration or filing from or with anygovernmental authority or third party is required on the part of the Buyer for or in connection with the execution, delivery and performance of this Agreement or any other agreement, instrument or document contemplated hereby by the Buyer and theconsummation by the Buyer of any of the transactions contemplated herein or therein. 

**4.4        Validity and Enforceability.  **Assuming the valid execution and delivery by the other parties hereto and thereto, this Agreement constitutes, and each other agreement,instrument and document of the Buyer contemplated hereby will be when executed and delivered by the Buyer, the valid and legally binding obligation of the Buyer, enforceable against it in accordance with their respective terms, subject, however, toapplicable bankruptcy, insolvency and other laws affecting the rights and remedies of creditors and to general equitable principles. 

 

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**4.5        Brokers.**  The Buyerhas not engaged any broker, finder or similar agent with respect to the transactions contemplated by this Agreement, and the Buyer is not under any obligation to pay any broker’s fee, finder’s fee, commission or similar amount inconnection with the consummation of the transactions contemplated by this Agreement. 

**4.6        Investment Representations.**

**(a)        **The Buyer is acquiring the Purchased Shares for its own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Purchased Sharesin violation of the Securities Act of 1933, as amended (the “**Securities Act**”), any rule or regulation under the Securities Act, or any state securities laws. 

**(b)        **The Buyer has had such opportunity as it has deemed adequate to obtain from management of the Company such information about the businessand affairs of the Company as is necessary to permit the Buyer to evaluate the merits and risks of its investment in the Company. 

**(c)        **The Buyer has sufficient experience in business, financial and investment matters to be able to evaluate the merits and risks involved in the purchase of the Purchased Shares and tomake an informed investment decision with respect to such purchase. 

**(d)        **The Buyer is an “accredited investor” within the meaning of Rule 501 promulgated under the Securities Act. 

**(e)        **The Buyer understands that the Purchased Shares have not been registered underthe Securities Act or any other securities laws and are therefore “restricted securities” within the meaning of Rule 144 under the Securities Act, and the Purchased Shares cannot be sold, transferred or otherwise disposed of unless theyare subsequently registered under the Securities Act and applicable securities laws, or an exemption from registration is then available. 

**4.7        Financial Ability.**  The Buyer has, and will have at the Closing, the financial capability to consummate the transactions contemplated by thisAgreement, and the Buyer understands that under the terms of this Agreement the Buyer’s obligations hereunder are not in any way contingent or otherwise subject to (a) the Buyer’s consummation of any financing arrangements or theBuyer’s obtaining any financing or (b) the availability of any financing to the Buyer. 

**4.8        No Other Agreements.**  Except for the agreements expressly contemplated hereby, neither the Buyer nor any of its Affiliates has any other agreements, arrangements orunderstandings with any director, officer, employee, consultant, stockholder or Affiliate of the Company in respect of the transactions contemplated hereby. 

**4.9        No Other Representations or Warranties of the Sellers or the Company.  **The Buyer has been provided access and an opportunity toreview information in respect of the business of the Company requested by the Buyer. In entering into this Agreement, Buyer is exclusively relying on the representations and warranties made by each Seller to the Buyer expressly set forth inArticle 2 of this Agreement (as modified by the Disclosure Schedule), the representations and warranties made by the Company to the Buyer expressly set forth in 

 

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Article 3 of this Agreement (as modified by the Disclosure Schedule) and the covenants andagreements set forth in this Agreement. 

**ARTICLE 5**

**COVENANTS**

**5.1        Access toInformation; Confidentiality.**

**(a)        **If reasonably requested bythe Buyer, the Sellers and the Company shall permit the Buyer and its counsel, accountants and other representatives access, upon reasonable notice and during normal business hours throughout the period prior to the Closing, to the properties, booksand records of the Company. Any such access shall be managed by and conducted through those representatives of the Company identified by the Company, and shall be subject to such additional limitations as the Company may reasonably require toprevent disclosure of the transactions contemplated hereby, the disruption of the business of the Company and/or the disclosure of any confidential or legally privileged information. While it is contemplated that Buyer will contact theCompany’s material customers and suppliers as part of its confirmatory due diligence investigation, neither the Buyer nor any of its Affiliates or representatives shall, directly or indirectly, contact any customer, dealer, distributor, vendor,supplier or service provider of the Company concerning the Company or the transactions contemplated by this Agreement without first obtaining the Company’s written consent. 

**(b)        **The confidentiality agreement between the Company (or its financial advisor)and the Buyer or an Affiliate of the Buyer dated June 18, 2008 (the “**Confidential Agreement**”) shall remain in full force and effect and shall be applicable to the Buyer and its Affiliates and representatives. 

**5.2        Conduct of Business.**  Between the date of this Agreement and theClosing or earlier termination of this Agreement, unless the Buyer shall otherwise consent in writing (such consent not to be unreasonably withheld, delayed or conditioned) and except as set forth on **Schedule 5.2** of the DisclosureSchedule, as otherwise contemplated by this Agreement or as required by any Legal Requirement: 

**(a)        Required Actions.**  The Company shall: 

**(i)        **maintain its legal existence; 

**(ii)        **conduct its business only in the ordinary course; and 

**(iii)        **use reasonable efforts to operate in such a manner as to assure that the representations and warranties of the Company set forth in this Agreement will betrue and correct in all material respects as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of the Closing Date. 

**(b)        Prohibited Actions.**  The Company shall not do any of the following:

**(i)        **effect any material change to the CompanyCharter Documents; 

 

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**(ii)        **acquire ordispose of any material properties or assets, except in the ordinary course of business; 

**(iii)        **incur any indebtedness for borrowed money, other than in the ordinary course of business; 

**(iv)        **subject any of its properties or assets to any Lien, other than Permitted Liens; 

**(v)        **make any non-cash dividend or distribution on its shares ofstock; 

**(vi)        **modify or amend in any material respector cancel or terminate any Material Contract, other than in the ordinary course of business; 

**(vii)        **make any material change in its Tax or accounting practices, other than any change required by applicable law or GAAP; 

**(viii)        **make any material change to any Tax election or Tax Return,other than any change required by law; 

**(ix)        **acquireany business, whether by merger or consolidation, purchase of substantial assets or equity interests or any other manner; 

**(x)        **make any material increase in the cash compensation of any employee, other than salary increases and other changes in compensation in the ordinary course ofbusiness and any payments (including Sale Bonuses) to employees from the Closing Purchase Price; 

**(xi)        **make any material change to any of the Benefit Plans, except to the extent required by the terms of such Benefit Plan or applicable law; or 

**(xii)        **commit to do any of the foregoing. 

**5.3        Exclusivity.**  From the date of this Agreement until the Closing Dateor the earlier termination of this Agreement, neither the Company nor any of the Sellers will, directly or indirectly, solicit any competing offers for the acquisition of the Company, or the sale of all or substantially all of the assets or businessof the Company, or negotiate with respect to any unsolicited offer or indication of interest with respect to any such acquisition or sale. 

**5.4        Consents and Approvals.**  From the date of this Agreement until the Closing Date or the earlier termination of this Agreement, the parties shallcooperate and use all reasonable efforts to obtain all third party, governmental and regulatory consents, approvals and actions necessary to consummate the transactions contemplated hereby which are required to be obtained by any Legal Requirementor Material Contract. 

**5.5        HSR Act Filings.**  To the extentrequired in connection with the transactions contemplated by this Agreement, within five (5) business days following the date of execution of this Agreement the parties shall promptly make or cause to be made any and all required

 

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filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “**HSRAct**”), and will request early termination of the waiting period required under the HSR Act. The parties agree to cooperate and promptly respond to any inquiries or investigations initiated by the Federal Trade Commission or the Departmentof Justice in connection with any such filings. 

**5.6        ReasonableEfforts.  **From the date of this Agreement until the Closing Date or the earlier termination of this Agreement, the parties agree to act in good faith and use reasonable efforts to satisfy the conditions specified in this Agreementnecessary to consummate the transactions contemplated hereby. 

**5.7        TaxMatters.**

**(a)        Tax Indemnification.  **Each Seller,severally and not jointly, agrees to indemnify the Buyer and hold it harmless against and in respect of (i) any and all Pre-Closing Taxes and related Losses; and (ii) any and all Taxes and related Losses incurred by the Buyer or theCompany that arise or result from the failure of the Company or the Sellers to perform any of their covenants or agreements contained in this Section 5.7, in each case, except to the extent such Taxes and related Losses were reflected on thestatement of the Closing Working Capital and taken into account in the calculation of the Closing Purchase Price. Notwithstanding anything to the contrary in this Agreement, Seller’s indemnification obligations under this Section 5.7(a)shall not be subject to the limitations and conditions set forth in Section 7.2(b). 

**(b)        Tax Refunds.**  After the Closing, all refunds received or receivable by the Buyer or the Company in respect of Taxes paid prior to the Closing or in respect of anyPre-Closing Tax Period shall be paid by the Buyer or the Company to each applicable Seller promptly upon receipt, except to the extent such refunds were reflected on the statement of the Closing Working Capital and taken into account in thecalculation of the Closing Purchase Price. Neither the Buyer nor the Company shall amend the Tax Returns of the Company in respect of Taxes paid prior to the Closing or in respect of any Pre-Closing Tax Period in a manner which would increase theSellers’ tax liability without the prior written consent of the Sellers (such consent not to be unreasonably withheld, delayed or conditioned). 

**(c)        Tax Returns**. 

**(i)        **The Company shall prepare or cause to be prepared, and timely file, all Tax Returns required to be filed by the Company, the due date of which (taking account extensions) occurs onor before the Closing Date, and the Company shall pay all Taxes due with respect to any such Tax Returns. Prior to the due date for filing such Tax Returns, the Company shall make available to the Buyer a draft of such Tax Returns as the Companyproposes to file. The Representative shall prepare of cause to be prepared all federal, state, local and foreign income and franchise Tax Returns of the Company for the Pre-Closing Tax Period required to be filed by the Company, the due date ofwhich (taking account extensions) occurs after the Closing Date, and will make available to the Buyer drafts of such returns for its review and approval prior to filing (such approval not to be unreasonably withheld, delayed or conditioned). TheBuyer shall prepare or cause to be prepared, and timely file, all other Tax Returns of the Company for the Pre-Closing Tax 

 

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Period. All Tax Returns of the Company for any Pre-Closing Tax Period shall be preparedin a manner consistent with the past practice of the Company, except as required by law. 

**(ii)        **For purposes of this Agreement, in the case of any Taxes that are payable for a Straddle Period, the portion of such Tax attributable to the Pre-Closing Tax Period shall (A) inthe case of any Taxes other than Taxes based upon or related to income, sales, gross receipts, wages, capital expenditures or expenses, be deemed to be the amount of such Tax for the Straddle Period multiplied by a fraction the numerator of which isthe days in the Pre-Closing Tax Period and the denominator of which is the number of days in the Straddle Period, and (B) in the case of any Tax based upon or related to income, sales, gross receipts, wages, capital expenditures or expenses, bedeemed to equal to the amount which would be payable if the Pre-Closing Tax Period ended on the Closing Date. 

**(d)        Section 338(h)(10) Election.**

**(i)        **The Sellers shall join with the Buyer in making an election under Section 338(h)(10) of the Code (and any comparable election under state, local or foreign law) (the“**Section 338 Elections**”) with respect to the purchase and sale of the Purchased Shares. Sellers shall prepare and deliver at the Closing (or such other times as Buyer may request or as required by the Code in order to effectuate theSection 338 Elections) an executed Form 8023 (and any corresponding or similar forms under state, local or foreign law). 

**(ii)        **The Buyer and the Sellers agree to cooperate fully with each other in the making of the Section 338 Elections. Except as provided inSection 5.7(d)(i) and Section 6.1(l), in connection with making the Section 338 Elections under applicable law, the Sellers shall prepare a complete set of forms and any additional data or materials (including any allocation ofpurchase price as required under the Code or regulations) required to be filed (the “**Section 338 Forms**”) for the Buyer’s review and approval at least 30 days prior to the due date for filing such forms, approval not to beunreasonably withheld. The Buyer and the Sellers shall file all Tax Returns in a manner consistent with the Section 338 Elections and the Section 338 Forms. 

**(iii)        **The Sellers shall be responsible for and shall pay any andall Taxes attributable to the purchase and sale of the Purchased Shares and the making of the Section 338 Elections (including, without limitation, any Taxes imposed on the Company under Section 1374 of the Code, and any comparableprovision under state, local or foreign law, or otherwise). 

**(iv)        **Neither the Company nor the Sellers shall take or allow any action that could result in the inability of the Sellers and the Buyer to make valid Section 338 Elections.

**(e)        Tax Audits**.  The Buyer shall promptly notify theRepresentative in writing with respect of any matter which may give rise to a claim for indemnification against the Sellers pursuant to Section 5.7(a) (each, a “**Tax Matter**”) upon learning of such claim or the facts constitutingsuch claim, describing the claim in reasonable detail, the amount thereof, and the 

 

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basis therefor; provided, however, that failure of the Buyer to give Sellers notice asprovided herein will not relieve Sellers of their indemnification obligations hereunder, except to the extent that Sellers are prejudiced by the Buyer’s failure to give such prompt notice. The Representative shall have the right, as to any TaxMatter, if the Representative notifies the Buyer that he or she will defend such Tax Matter within ten (10) days after receipt of such notice and commences the defense of such Tax Matter and the Sellers agree that the Sellers are obligated toindemnify the Buyer with respect to the full amount in dispute in such Tax Matter, (i) to control, in whole or in part, any Tax audit, examination, contest or proceedings, (ii) to resolve and defend against any assessment, notice ofdeficiency, or other adjustment or proposed adjustment, (iii) to consent to any extension or waiver of the limitations period applicable to any Tax Matter, (iv) to initiate any claim for refund of Taxes related to a Pre-Closing Tax Period,and (v) to amend any Tax Return related to a Pre-Closing Tax Period only upon a final settlement or a Tax Matter, in each case solely to the extent relating to Taxes attributable to a Pre-Closing Tax Period or Taxes otherwise attributable to aTax Matter; provided, however, Representative shall not enter into any settlement of or otherwise compromise any such Tax Matter to the extent that it can reasonably be expected to adversely affect the Tax liability of the Buyer or anyaffiliate thereof for any taxable period ending after the Closing Date without the prior written consent of the Buyer (such consent not to be unreasonably withheld, delayed or conditioned), and providedfurther, the Buyer mayparticipate in any such audit, examination, contest or proceedings with counsel of its choice at its own expense. In the event of a conflict between the provisions of this Section 5.7(e) and Section 7.4, the provisions of thisSection 5.7(e) shall control. 

**(f)        Cooperation in TaxMatters.**  Each party to this Agreement (a “Party,” or collectively, the “**Parties**”) shall provide the other Parties with such assistance as may be reasonably requested by such Party in connection with thepreparation of any Tax Return, any audit or other examination by any taxing authority, or any judicial or administration contest or proceedings relating to liability for Taxes, and shall provide the other Parties with any available records orinformation that may be relevant to such Tax Return, audit, examination, contest, proceedings or determination. Such assistance shall include making employees available on a mutually convenient basis to provide additional information and explanationof any material provided hereunder and shall include providing copies of any relevant Tax Return and supporting work schedules. The Party requesting assistance hereunder shall reimburse the other Parties for reasonable out-of-pocket expensesincurred in providing such assistance. 

**(g)        SElection.**  The Company and the Sellers shall not revoke the Company’s election to be treated as an S corporation within the meaning of Sections 1361 and 1362 of the Code (and any corresponding state or local tax provision), andshall not take or allow any action that could result in the termination of the Company’s status as a validly electing S corporation. 

**5.8        Directors’ and Officers’ Indemnification**

**(a)        **In the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative (each, a“**Proceeding**”), in which any Person who is now, or has been at any time prior to the Closing, a director, officer, employee or Affiliate of the Company (the “**Indemnified Persons**”) is, or is threatened to be, made aparty thereto based in whole or in part on the fact that such Person is or was a director, officer, employee or Affiliate of the Company, whether in any case asserted or arising before, on or after 

 

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the Closing, the Company shall, to the fullest extent permitted by law, indemnify and hold harmless suchIndemnified Person from and against any and all losses, claims, damages, liabilities, costs, expenses (including reasonable attorneys’ fees and expenses in advance of the final disposition of any Proceeding to each Indemnified Person to thefullest extent permitted by law), judgments, fines and amounts paid in settlement incurred in connection with or arising out of such Proceeding. 

**(b)        **An Indemnified Person shall notify the Company of the existence of a Proceeding for which such Indemnified Person is entitled to indemnification hereunder aspromptly as reasonably practicable after such Indemnified Person learns of such Proceeding; provided, that the failure to so notify shall not affect the obligations of the Company under this Section 5.8 except to the extent such failureto notify actually prejudices the Company. The Company, at its expense, shall have the right to control the defense of the Proceeding with counsel selected by the Company and reasonably acceptable to the Indemnified Person. The Indemnified Personand the Company shall cooperate fully with each other in connection with the defense of any Proceeding. No settlement of a Proceeding may be made by the Company without the Indemnified Person’s consent which consent will not be unreasonablywithheld, delayed or conditioned, except for a settlement which requires no more than a monetary payment for which the Indemnified Person is fully indemnified and which does not require the admission of liability. No settlement of a Proceeding maybe made by an Indemnified Person without the consent of the Company, unless such consent is unreasonably withheld, delayed or conditioned. 

**(c)        **The provisions of this Section 5.8 are intended to be for the benefit of, and enforceable by, each Indemnified Person and such Indemnified Person’sestate, heirs and representatives, and nothing herein shall affect any indemnification rights that any Indemnified Person or such Indemnified Person’s estate, heirs and representatives may have under the Company Charter Documents, any LegalRequirements, any contract or otherwise. 

**(d)        **The obligations of theCompany under this Section 5.8 shall continue in full force and effect for a period commencing as of the Closing and ending as of the later of (i) the six (6) year anniversary of the Closing and (ii) the date that allapplicable statute of limitation periods have expired for any claim or claims for which an Indemnified Person may be entitled to indemnification under this Section 5.8; provided, that all rights to indemnification in respect of any claimfor indemnification under this Section 5.8 asserted or made within such period shall continue until the final disposition of such claim. 

**5.9        Books and Records.**  From and after the Closing, the Buyer will cause the Company to maintain a reasonable records retention policy. After theClosing, the Sellers and their accountants, lawyers and other representatives shall be entitled at all reasonable times to have access to and to make copies of the books and records and other information of the Company for the period prior to theClosing for the preparation of Tax Returns and the defense of litigation related to the Sellers’ ownership of the Company or otherwise related to Sellers’ obligation to provide indemnification pursuant to this Agreement. In the event ofany litigation or threatened litigation between the parties relating to this Agreement or the transactions contemplated hereby, the covenants contained in this Section 5.9 shall not be considered a waiver by any party of any right to assert theattorney-client privilege. 

 

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**5.10        WARN Act.**  Neitherthe Buyer nor the Company will, at any time prior to one hundred eighty (180) days after the Closing Date, effectuate a “plant closing” or “mass layoff” as those terms are defined in the Worker Adjustment and RetrainingNotification Act or any similar termination or reduction in force under any Legal Requirement including, without limitation, California Labor Code Section 1400 *et. seq*. 

**5.11        Noncompete.  **Following the Closing Date, for a period of five(5) years (the “**Restricted Period**”), each of the Sellers covenants that it will not and will cause its Affiliates to not, directly or indirectly acquire, own, participate or engage in, or be employed by, an entity (other thanthe Company) anywhere in the United States that designs, manufactures, distributes or provides products or services related to fasteners and/or hydraulic, air, fuel, fluid, mechanical and electrical line management solutions used in the aerospaceindustry and custom molding for automotive, medical and consumer markets; provided, however, that, for purposes of this Section 5.11, ownership of securities having less than five percent (5%) of the outstanding voting power of anycompetitor which are listed on any national securities exchange shall not be deemed to be in violation of this Section 5.11 as long as the Seller owning such securities has no other connection or relationship with such competitor; and, providedfurther, that the employment of Douglas P. Stephen Jr. by Precision Tube Bending and any successor shall not be deemed to be in violation of this Section 5.11; provided that Precision Tube Bending continues to offer products and servicessubstantially similar to those currently offered and that it does not expand its business to being directly competitive with the Company’s products and services. With respect to the Company’s executive, managerial, technical and salespersonnel (“**Key Employees**”) and any of the Company’s customers and suppliers (such customers and suppliers, together with the Key Employees, being “**Company Contacts**”), each Seller covenants that such Sellerwill not directly or indirectly, without Buyer’s prior written consent, solicit or otherwise interfere with the relationship between the Company and any Company Contact during the Restricted Period for as long as such Company Contact maintainsits relationship with the Company; provided, however, that if any Key Employee responds to a general solicitation to the public or other general advertising conducted by any Seller during the Restricted Period, such general solicitation or generaladvertising shall not be deemed to be a violation of this Section 5.11 provided that Seller does not hire such Key Employee during the Restricted Period. In addition, each of the Sellers agrees that, during the Restricted Period, it will not,without Buyer’s prior written consent, hire any Key Employee formerly employed by the Company within six months of the termination of such Key Employee’s relationship with the Company in substantially the same capacity as such terminatedemployee was employed by the Company. 

**5.12        Transition Period for AgFastCorporation.**  For a period of sixty days after the Closing Date, Buyer hereby agrees, on the same terms and conditions as currently in effect, to continue: (a) to grant a license to AgFast Corporation to continue accessing andusing the same office and warehouse space currently used by it and (b) providing to AgFast Corporation the same level of accounting and customer service support. 

**5.13        Inventory Repurchase Covenant.**

**(a)        **Within 90 days of the first anniversary of the Closing Date, the Buyer may provide the Representative a written notice (the “**InventoryNotice**”) that identifies: (i) (A) any 

 

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line of finished goods by SKU that existed as of the Closing Date for which the Company has had no salesin the year following the Closing Date; or (B) any type of component parts that comprise any finished goods for which the Company has either had no sales or for which no units of such component parts have been consumed in the creation of anyfinished goods in the year following the Closing Date (an “**Unsold Inventory Line**”); (ii) the number of units comprising one hundred percent of such Unsold Inventory Line held by the Company; and (iii) the standard cost perunit for such Unsold Inventory Line reflected in the books and records of the Company as of the Closing Date (the “**Standard Cost**”). In no event shall the Buyer be entitled to deliver an Inventory Notice to purchase less than onehundred percent of the units comprising the Unsold Inventory Line held by the Company. If Buyer elects to deliver an Inventory Notice to the Representative, the Representative will be granted reasonable access to the Company’s books and recordsto confirm the information contained in the Inventory Notice. 

**(b)        **If the Representative does not object to the information contained in the Inventory Notice by providing written notice of objection within twenty (20) days of receipt,specifying in reasonable detail the amount and basis of their objection, each Seller will purchase from the Buyer its Pro Rata Share of, and the Buyer will deliver to the Representative, one hundred percent of the units comprising the UnsoldInventory Line held by the Company at a per unit price equal to the Standard Cost contained in the Inventory Notice. 

**(c)        **If the Sellers dispute the information contained in the Inventory Notice, and the parties cannot resolve such dispute through good faith negotiations during the thirty (30) daysfollowing receipt of the dispute notice from the Representative, then either the Buyer or the Representative may present the dispute to the Independent Accountant in accordance with the procedures described in Section 1.7(c). In the event thatthe Independent Accountant determines that the Sellers must purchase an Unsold Inventory Line and the Standard Cost for such Unsold Inventory Line, each Seller will purchase from the Buyer its Pro Rata Share of, and the Buyer will deliver to theRepresentative, one hundred percent of the units comprising the Unsold Inventory Line held by the Company at a per unit price equal to the Standard Cost determined by the Independent Accountant. 

**(d)        **In the event that the Sellers purchase an Unsold Inventory Line pursuant tothis Section 5.13 and the Buyer subsequently wishes to repurchase any or all of the units in such Unsold Inventory Line, then the Representative shall be entitled to set the number of units to be sold and the purchase price for such units inits sole and absolute discretion. 

**5.14        Payment of SalesBonuses.**  Within seven days after the six-month anniversary of the Closing Date, the Buyer shall cause the Company to pay in cash, by check or by wire transfer of immediately available funds, the Retention Bonuses in the followingmanner: 

**(a)        **In the event that a Retained Employee has beencontinuously employed by the Company through the six-month anniversary of the Closing Date, the Buyer shall cause the applicable Retention Amount to be paid from the Payment Account to such Retained Employee, net of any required payroll withholdingobligations and, concurrently with such payment, the Buyer shall pay to the Representative for disbursement to the Sellers, 20% of each such Retention Amount paid to the Retained Employees. For the avoidance of doubt, any payment 

 

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from the Payment Account to the Representative pursuant to Section 5.14(a) shall be deemed to be anadjustment to the Closing Purchase Price. 

**(b)        **In the event that aRetained Employee has not been continuously employed by the Company through the six-month anniversary of the Closing Date, the Buyer shall cause such Retained Employee’s Retention Amount to be paid from the Payment Account to the Representativefor disbursement to the Sellers. For the avoidance of doubt, any payment from the Payment Account to the Representative pursuant to Section 5.14(b) shall be deemed to be an adjustment to the Closing Purchase Price. 

**5.15        Waiver of Buy-Sell Arrangement**.  Each of the Sellers and the Companyhereby: (a) waive any rights or notice requirements under that certain NMC Group, Inc. Stockholders Buy-Sell Agreement executed and accepted as of January 1, 2001 by and among the Company, Thomas V. Stephen, Douglas P. Stephen, Jr.,Michael J. Stephen, Susan M. Stephen-Ellersick, Robert M. Stephen, Lesley Stephen, Michelle Stephen, Jacqui Stephen, Michael Ellersick and Jennifer Stephen (the “Buy-Sell Agreement”) arising in connection with this Agreement, including,but not limited to, any rights to purchase the Purchased Shares of any other Seller and (b) agree that the Buy-Sell Agreement shall be terminated upon the consummation of the Closing. 

**ARTICLE 6**

**CONDITIONS TO CLOSING**

**6.1        Conditions Precedent to the Buyer’s Obligations.**  The obligationof the Buyer to purchase the Purchased Shares and to consummate the other transactions contemplated by this Agreement is expressly subject to the fulfillment or express written waiver of the following conditions on or prior to the Closing Date:

**(a)        Representations and Warranties True.**  Each of therepresentations and warranties contained in Articles 2 and 3 shall be true and correct in all material respects (other than representations and warranties which are qualified by materiality which shall be true and correct in all respects) at and asof the Closing (except as a result of any event or circumstance contemplated, or any action or inaction required, by this Agreement or otherwise approved in writing by the Buyer, and except for any representation or warranty that expressly relatesto an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date). 

**(b)        Covenants Performed.**  Each Seller and the Company shall each have performed in all material respects, on or before the Closing Date, all obligations contained in thisAgreement which by the terms hereof are required to be performed by them on or before the Closing Date. 

**(c)        Compliance Certificate.**  The Buyer shall have received a certificate signed by the Representative on behalf of each Seller and by the Company certifying as to the mattersset forth in Sections 6.1(a) and (b) above. 

 

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**(d)        No Injunction,Etc.**  There shall not be any order of any court of competent jurisdiction or governmental agency restraining or invalidating the material transactions which are the subject of this Agreement. 

**(e)        HSR Act.**  The waiting period under the HSR Act applicable to thetransactions contemplated by this Agreement shall have expired or been terminated. 

**(f)        Required Consents.**  All of the approvals, consents and licenses listed on **Schedule 6.1(f)**of the Disclosure Schedule shall have been obtained. 

**(g)        Escrow Agreement.**  The Sellers and the Escrow Agent shall haveexecuted and delivered the Escrow Agreement. 

**(h)        ShareCertificates**.  The Sellers shall have delivered original stock certificates representing the Purchased Shares, together with assignments separate from such certificates executed by the applicable Seller with respect to such PurchasedShares. 

**(i)        Resignations**.  All officers and directors ofthe Company shall have delivered resignations from such positions to the Buyer. 

**(j)        Lease Amendment.**  The Company shall have delivered a Lease Amendment to the Buyer with respect to the Company’s principal facility in substantially the form attachedhereto as Exhibit B. 

**(k)        Royalty Agreement**.  The Companyshall have executed and delivered a royalty agreement substantially in the form of Exhibit C attached hereto (the “**Royalty Agreement**”). 

**(l)        Section 338 Elections**.  The Sellers shall have delivered to the Buyer an executed Form 8023 (and any corresponding or similar forms under state,local or foreign law) in accordance with Section 5.7(d)(i). 

**(m)        FIRPTA Affidavit**.****  Each Seller shall have delivered to the Buyer a non-foreign affidavit, in form and substance reasonably satisfactory to the Buyer. 

**(n)        Related Party Indebtedness; Pay-off Letters.**  The Buyer shall havereceived evidence reasonably acceptable to it that all loans, advances and other indebtedness owed to or payable by the Company with respect to any of the Sellers, MJS Fastening Systems, or any Affiliate, shareholder or director of the foregoing hasbeen satisfied in full. The Buyer shall have received evidence that the Company has been released from its guaranty of its landlord’s mortgage. All indebtedness owed to the lender under the Credit Facility shall have been paid in full and allLiens evidencing such indebtedness shall have been released (or in each case provided for as contemplated by Section 1.2(c)(ii) and Section 1.2(d)(i). 

**(o)        Funds Flow Statement**.  The Representative and the Buyer shall have agreed upon a closing flow of funds statement, in form andsubstance reasonably satisfactory to the Buyer and the Representative, with respect to the payments to be made on the Closing Date. 

 

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**6.2        Conditions Precedent to eachSeller’s Obligations.**  The obligation of each Seller to consummate the transactions contemplated by this Agreement is expressly subject to the fulfillment or express written waiver of the following conditions on or prior to theClosing Date: 

**(a)         Representations and WarrantiesTrue.  **Each of the representations and warranties of the Buyer contained in Article 4 shall be true and correct in all material respects at and as of the Closing. 

**(b)        Obligations Performed.**  The Buyer shall have performed in allmaterial respects, on or before the Closing Date, all obligations contained in this Agreement which by the terms hereof are required to be performed by the Buyer on or before the Closing Date. 

**(c)        Compliance Certificate.  **The Representative, on behalf of theSellers, shall have received a certificate signed by an authorized officer of the Buyer certifying as to the matters set forth in Sections 6.2(a) and (b). 

**(d)        No Injunction, Etc.**  There shall not be any order of any court of competent jurisdiction or governmental agency restraining orinvalidating the material transactions which are the subject of this Agreement. 

**(e)        Closing Payments.**  The Buyer shall have made the payments contemplated by Section 1.2. 

**(f)        HSR Act.**  The waiting period under the HSR Act applicable to the transactions contemplated by this Agreement shall have expiredor been terminated. 

**(g)        Escrow Agreement.  **The Buyer andthe Escrow Agent shall have executed and delivered the Escrow Agreement. 

**(h)        Royalty Agreement**.  The Buyer shall have executed and delivered the Royalty Agreement. 

**(i)        Lease Amendment.**  The Buyer shall have delivered a Lease Amendment to the Sellers with respect to the Company’s principalfacility in substantially the form attached hereto as Exhibit B. 

**(j)        Funds Flow Statement**.  The Representative and the Buyer shall have agreed upon a closing flow of funds statement, in form and substance reasonably satisfactory to the Buyerand the Representative, with respect to the payments to be made on the Closing Date. 

**ARTICLE 7**

**SURVIVAL; INDEMNIFICATION**

**7.1        Survival.**  The representations and warranties contained in this Agreement and in any certificate delivered at the Closing pursuant to this Agreement shall survive theClosing until the eighteen-month anniversary of the Closing (the “**Cut-Off Date**”); *provided however* that representations and warranties: in (a) Sections 2.1 (Title), 3.1 (Organization, Power and 

 

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Standing), 3.2 (Power and Authority), 3.3 (Validity and Enforceability),3.6 (Capitalization) and 4.9 (No Other Representations) shall survive indefinitely, (b) Sections 3.9 (Taxes), 3.19 (Benefit Plans) and 3.22 (Compliance with Environmental Laws) shall survive until the end of theapplicable statute of limitations plus thirty days (or in the event of an audit, investigation, litigation or other action that has been commenced with respect to such matters, until the conclusion of such action) and (c) Section 3.12(e)(Intellectual Property Infringement) (the “**IP Representation**”) shall survive until the fifth anniversary of the Closing Date. All representations or warranties that survive for a period beyond the Cut-Off Date, other than the IPRepresentation, are referred to as “**Fundamental Representations**.” Except with respect to the Fundamental Representations and the IP Representation, no claim for breach of any representation, warranty, pre-Closing covenant orpre-Closing agreement may be brought after the Cut-Off Date, except for claims (a) of which the Representative has been notified in writing with reasonable specificity by the Buyer prior to the Cut-Off Date, (b) of which the Buyer has beennotified in writing with reasonable specificity by a Seller or the Representative prior to the Cut-Off Date. The post-Closing covenants and post-Closing agreements contained in this Agreement shall survive in accordance with their respective terms.

**7.2        Indemnification of the Buyer.**

**(a)        **Subject to the other terms of this Article 7, from and after the Closing,each Seller agrees to indemnify the Buyer and hold it harmless against and in respect of any and all damages, losses, expenses, costs, obligations and liabilities, including without limitation reasonable attorney’s fees (collectively,“**Losses**”), (i) in an amount equal to his or her Pro Rata Share of the Losses, incurred by the Buyer that arise or result from (as determined by an order of a court of competent jurisdiction or by written agreement of theRepresentative and the Buyer) (1) any breach of any of the representations or warranties contained in Article 3 (as modified by the Disclosure Schedule, (2) the failure of the Company or the Sellers to perform any of their covenants oragreements contained herein, or (3) associated with correcting any material documentary deficiencies associated with the Company’s 401(k) employee benefit plan, and (ii) severally and not jointly, in an amount equal to the Lossesincurred by the Buyer that arise or result from (as determined by an order of a court of competent jurisdiction or by written agreement of the applicable Seller and the Buyer) any breach of any of the representations or warranties contained inArticle 2 (as modified by the Disclosure Schedule) by such Seller, it being understood, that, for the avoidance of doubt, the indemnification obligations set forth in this Section 7.2(a)(ii) for a breach of any of the representations orwarranties contained in Article 2 shall only apply to the Seller who committed such breach. 

**(b)        **Each Seller’s indemnification obligations under this Agreement with regard to breaches of representations, warranties, pre-Closing covenants, and pre-Closing agreements,however, shall be subject to the following limitations and conditions: 

**(i)        **except as otherwise provided herein, no claim shall be made unless, and only to the extent that, the cumulative amount of Losses incurred by the Buyer exceeds one-half of one percent(0.5%) of the Closing Purchase Price (the “**Deductible**”); 

 

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**(ii)        **theDeductible will not apply to claims under Section 7.2(a)(i)(3) and the cumulative amount of Losses recoverable by the Buyer under Section 7.2(a)(i)(3) will be capped at a maximum of $25,000. 

**(iii)        **the Sellers’ cumulative liability for indemnificationpayments under Section 7.2(a)(i)(1) (other than those that may be required with respect to Fundamental Representations and the IP Representation) shall not exceed, in the aggregate, an amount equal to the Initial Escrow Amount deposited in theEscrow Account *minus*any amount paid to the Buyers by the Escrow Agent in accordance with Section 1.7(e) and the Sellers’ obligation to make indemnification payments under Section 7.2(a)(i)(1) (other than those that may berequired with respect to Fundamental Representations and the IP Representation) shall be solely from the funds available in the Escrow Account; 

**(iv)        **the Sellers’ cumulative liability for Losses associated with, arising from or related to any breach of the IP Representation willbe limited as follows (1) no claim for such Losses will be made unless, and only to the extent that the cumulative amounts of Losses incurred by the Buyer exceed $500,000 and any such recovery shall only be had to the extent that such Lossesexceed $500,000, (2) the aggregate cap on claims to recover such Losses will be ten percent (10%) of the Closing Purchase Price and (3) such claims will be paid by each Seller personally in accordance with its Pro Rata Share and willnot be paid from the Escrow Account. For the avoidance of doubt, the Buyer acknowledges that the Seller’s indemnity obligation with respect to the Company’s representations relating to the non-infringement of the Intellectual Property ofany other Person is limited to infringement claims based on products commercialized by the Company prior to the Closing, and that the Sellers shall have no such obligation to indemnify to the extent any infringement claim is based on anymodification to such products made subsequent to the Closing; 

**(v)        **without affecting any other limitations on a Seller’s liability for indemnification set forth herein, no Seller’s cumulative liability for indemnification payments pursuantto this Article VII shall exceed such Seller’s proceeds for the sale of his or her Purchased Shares; 

**(vi)        **no claim shall be made with respect to Losses arising out of any breach of the representations or warranties contained in Article 3 as modified by the Disclosure Schedule tothe extent a corresponding reserve for such Losses has been made on the Company’s financial statements or to the extent that there has been a corresponding reduction in the calculation of Closing Working Capital; 

**(vii)        **no claim shall be made for punitive, exemplary or specialdamages; and 

**(viii)        **no claim shall be made withrespect to any matter excluded by Section 1.7(e). 

**(c)        **Indetermining the foregoing thresholds and in otherwise determining the amount of any Losses for which the Buyer is entitled to assert a claim for indemnification 

 

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hereunder, the amount of any such Losses shall be determined after deducting therefrom the amount of anyinsurance proceeds actually received (after giving effect to any applicable deductible or retention) and other third party recoveries actually received by the Buyer or the Company in respect of such Losses (which proceeds and recoveries the Buyeragrees to use, or to cause the Company to use, commercially reasonable efforts to obtain). If an indemnification payment is received by the Buyer, and the Buyer or the Company later receives insurance proceeds or other third party recoveries inrespect of the related Losses, the Buyer shall immediately pay to the indemnifying Sellers a sum equal to the lesser of (y) the actual amount of such insurance proceeds other third party recoveries or (z) the actual amount of theindemnification payment previously paid by such Sellers with respect to such Losses. The Buyer shall use commercially reasonable efforts to mitigate the amount of Losses for which it may be entitled to indemnification hereunder. 

**7.3        Indemnification of Sellers.**  Subject to the other terms of thisArticle 7, from and after the Closing, the Buyer and the Company agree to indemnify each Seller and hold each Seller harmless from all Losses incurred by any Seller that arise or result from (a) any breach of any of the Buyer’srepresentations and warranties, (b) the failure of the Buyer to perform any of its covenants or agreements set forth herein or (c) the failure of the Company to perform any covenant or agreement set forth herein which by its terms is to beperformed after the Closing. 

**7.4        Procedure for Indemnification.**

**(a)        **Any party entitled to make a claim for indemnificationhereunder shall promptly notify the indemnifying party of the claim in writing upon learning of such claim or the facts constituting such claim, describing the claim in reasonable detail, the amount thereof, and the basis therefor. The indemnifyingparty will be relieved of its indemnification obligations hereunder only to the extent that it is prejudiced by the indemnified party’s failure to give such prompt notice. The party from whom indemnification is sought shall respond to each suchclaim within twenty (20) days of receipt of such notice. No action shall be taken pursuant to the provisions of this Agreement or otherwise by the party seeking indemnification (unless reasonably necessary to protect the rights of the partyseeking indemnification) until the later of (i) the expiration of the 20-day response period, or (ii) thirty (30) days following the expiration of the 20-day response period if a response, received within such 20-day period bythe party seeking indemnification, requests an opportunity to cure the matter giving rise to indemnification (and, in such event, the amount of such claim for indemnification shall be reduced to the extent so cured). 

**(b)        **If a claim for indemnification hereunder is based on a claim by a third party,the indemnifying party shall have the right to assume the entire control of the defense thereof, including at its own expense, employment of counsel reasonably satisfactory to the indemnified party, and, in connection therewith, the party claimingindemnification shall reasonably cooperate with the indemnifying party and make available to the indemnifying party all pertinent requested information under its control; provided, that the indemnified party may participate in any proceedingwith counsel of its choice at its own expense. In such event, the indemnifying party shall have the right to settle or resolve any such claim by a third party; provided, that any such settlement or resolution contemplated by the Sellers orthe Representative, as the indemnifying party, that involves any action by the Buyer other than the 

 

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payment of an amount of money that is less than the remaining Escrow Amount shall not be concludedwithout the prior written approval of the Buyer, unless such approval is unreasonably withheld, delayed or conditioned; and, provided further, that any such settlement or resolution contemplated by the Buyer, as the indemnifying party, thatinvolves any action by the Sellers other than the payment of money shall not be concluded without the prior written approval of each of the indemnified Sellers, which approval shall not be unreasonably withheld, delayed or conditioned. Withoutlimiting the generality of the foregoing, the Buyer will, and the Buyer will cause the employees of the Buyer and the Company to, cooperate fully with the Representative and each Seller in connection with any matter for which any Seller is theindemnifying party. Such cooperation shall include, without limitation, (i) assisting in the collection and preparation of discovery materials, (ii) meeting with (and making employees available to meet with) the indemnifying Sellers and/ortheir counsel to prepare for and/or appear as witnesses at depositions, court proceedings and/or trial, and (iii) providing to the indemnifying Sellers and/or their counsel all information under the control of the Buyer or the Company that isdeemed necessary by the indemnifying Sellers and/or their counsel for the defense or prosecution of such matter. Sellers will reimburse Buyer for its reasonable out of pocket expenses incurred with respect to Buyer’s cooperation pursuant tothis Section 7.4(b). 

**(c)**        (i) Notwithstanding theforegoing, if (A) the indemnifying party does not give written notice to the indemnified party within the period specified in Section 7.4(a) stating that the indemnifying party has elected to assume defense of such third-party claim,(B) at any time the indemnifying party shall fail to carry out such defense or handling diligently and in such manner as is reasonable under the circumstances, (C) the third-party claim involves such matters as in the good faith judgmentof the Buyer may result in a material adverse impact on the business, obligations, assets, liabilities (absolute, accrued, contingent or otherwise), condition (financial or otherwise), material customer or supplier relationships or prospects of theBuyer or its Affiliates or (D) the indemnified party has reasonably determined, upon advice of counsel, that having common counsel with the indemnifying party would present such counsel with a conflict of interest or that, upon advice ofcounsel, there may be legal defenses available to such indemnified party which are different from or in addition to those available to the indemnifying party, then the provisions of Section 7.4(c)(ii) below shall govern. 

(ii)        The indemnified party may, at the indemnifying party’s expense, select counselreasonably satisfactory to the indemnifying party to defend or handle such third-party claim in a manner that is reasonable under the circumstances; provided, however, that the indemnified party shall keep the indemnifying party timely apprised ofthe status of such third-party claim. The indemnified party shall not settle such third-party claim without the prior written consent of the indemnifying party (which consent shall not be unreasonably withheld, conditioned or delayed). If theindemnified party defends or handles such third-party claim, the indemnifying party shall cooperate with the indemnified party and shall be entitled to participate in the defense of handling of such third-party claim with its own counsel and at theindemnifying party’s expense. In addition, in the event that the indemnifying party is not permitted to assume the defense of the third-party claim solely by virtue of clause (D) of subparagraph (c)(i) above, then the indemnifyingparty shall be permitted to pursue, at its own expense, settlement discussions directly with any other parties involved in such third-party claim. Notwithstanding the preceding sentence, the indemnifying party shall not, without the prior writtenconsent of the indemnified party agree to a settlement of any third-party claim, unless (A) the settlement is for monetary 

 

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damages only for amounts which the Sellers agree to pay, and with respect to claims by any indemnifiedparty provides an unconditional release and discharge of the indemnified parties, and the indemnified party has no reasonable good faith objection to the form or substance of such discharge and release and (B) the indemnified party shall nothave reasonably objected to any such settlement on the grounds that the circumstances surrounding the settlement could adversely impact the business, operations, assets, liabilities (absolute, accrued, contingent or otherwise), condition, financialor otherwise, material or customer or supplier relationships of the Buyer or its Affiliates or could establish or contribute to a precedential customer practice which could have a material adverse effect on the continuing business interest of theBuyer or its Affiliates. 

**7.5        Remedies Exclusive.**  Theremedies provided in this Article 7 shall be the exclusive remedies of the parties hereto and their heirs, successors, and assigns after the Closing with respect to this Agreement and the transactions contemplated by this Agreement, includingwithout limitation any breach or non-performance of any representation, warranty, covenant or agreement contained herein, except in the case of actual fraud, in which case the defrauded party shall have all rights and remedies available under thisAgreement and available under the law against the party that committed such actual fraud. No party may bring or commence any claim, suit, action or proceeding with respect to this Agreement or the transactions contemplated hereby, whether incontract, tort or otherwise, except to (a) bring a claim for actual fraud against the party that committed such fraud and (b) enforce such party’s express rights under this Agreement. The provisions of this Article 7 constitutean integral part of the consideration given pursuant to this Agreement and were specifically bargained for and reflected in the total amount of the Closing Purchase Price payable to the Sellers. 

**7.6        Tax Treatment of Indemnity Payments.  **To the maximum extent permittedby law, it is the intention of the parties to treat any indemnity payment made under this Agreement as an adjustment to the purchase price for all federal, state, local and foreign Tax purposes, and the parties agree to file their Tax Returnsaccordingly. 

**ARTICLE 8**

**TERMINATION**

**8.1        Termination.**  Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated at any time prior to the Closing: 

**(a)        **by mutual written consent of the Representative and the Buyer; 

**(b)        **by the Buyer, if (i) any of the representations and warranties of theSellers or the Company set forth in this Agreement shall not be true and correct to the extent set forth in Section 6.1(a), or any Seller shall have breached or failed to perform any of its obligations, covenants or agreements under thisAgreement to the extent set forth in Section 6.1(b), and (ii) such breach, failure or misrepresentation is not cured within fifteen (15) days after the Buyer gives the Sellers and the Company written notice identifying inreasonably detail such breach, failure or misrepresentation; 

 

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**(c)        **by the Representative, if(i) any of the representations and warranties of the Buyer set forth in this Agreement shall not be true and correct to the extent set forth in Section 6.2(a), or if the Buyer shall have breached or failed to perform any of itsobligations, covenants or agreements under this Agreement to the extent set forth in Section 6.2(b), and (ii) such breach, failure or misrepresentation is not cured within fifteen (15) days after the Sellers give the Buyerwritten notice identifying in reasonable detail such breach, failure or misrepresentation; 

**(d)        **by either the Sellers or the Buyer, if any court or governmental authority has issued a final and non-appealable order, decree or ruling permanently restraining, enjoining orotherwise prohibiting the consummation of the sale and purchase of the Purchased Shares contemplated by this Agreement; or 

**(e)        **by either the Representative or the Buyer, if the Closing has not occurred by January 31, 2009 or such other date, if any, as the Representative and the Buyer may agree inwriting; provided, that the right to terminate this Agreement under this Section 8.1(e) shall not be available to the party whose willful and knowing failure to fulfill any obligation under this Agreement has contributed materiallyto the failure of the Closing to occur on or before such date. 

**8.2        Effect of Termination.**

**(a)        **If this Agreement is terminated as provided above, the parties shall have no further obligations hereunder (including, without limitation, for costs and expenses incurred by otherparties in connection with this Agreement and the transactions contemplated hereby), except as provided below and except that each party shall be liable for its breach of this Agreement and the other parties hereto shall be entitled to all rightsand remedies provided by law in respect of such breach. 

**(b)        **Theobligations of the Buyer under Section 5.1(b) shall survive the termination of this Agreement. 

**ARTICLE 9**

**MISCELLANEOUS**

**9.1        Notices.**  Any notices, demands and communications to a party hereunder shall be in writing and shall be deemed to have been duly given and received (a) if deliveredpersonally or actually received, as of the date received, (b) if delivered by certified mail, return receipt requested, two (2) business days after being mailed, (c) if delivered by a nationally recognized overnight deliveryservice, one (1) business day after being sent to such delivery service, or (d) if sent via facsimile, electronic mail or similar electronic transmission, as of the date received, to such party at its address set forth below (orsuch other address as it may from time to time designate in writing to the other parties hereto): 

If to the Sellers, theRepresentative or the Company prior to the Closing, to: 

NMC Group, Inc. 

2755 Thompson Creek Road 

 

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Pomona, CA 91767 

Attn: Mr. Robert M. Stephen 

Facsimile: (909) 593-8309 

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

Paul, Hastings, Janofsky & Walker LLP 

515 South Flower Street 

Los Angeles, California 90071 

Attn: RobertA. Miller, Jr., Esq. 

Facsimile: (213) 627-0705 

If to the Sellers or the Representative after the Closing, to: 

Robert M. Stephen

16912 Marina Bay Drive 

Huntington Beach, CA 92649 

Facsimile: (562) 592-7856 

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

Paul, Hastings, Janofsky & Walker LLP 

515 South Flower Street 

Los Angeles, California 90071 

Attn: RobertA. Miller, Jr., Esq. 

Facsimile: (213) 627-0705 

If to the Buyer or, after the Closing, the Company, to: 

Esterline TechnologiesCorporation 

500 108th Avenue NE, Suite 1500 

Bellevue, WA 98004 

Attn: Stephen R. Larson 

Facsimile: (425) 453-2916 

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

Perkins Coie LLP 

1201 Third Avenue, 48th Floor 

Seattle, WA98101 

Attn: Troy Hickman 

Facsimile: (206) 359-7356 

**9.2        No Waiver.**  Nofailure of any party to exercise and no delay in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or remedy hereunder preclude any other or furtherexercise thereof or the exercise of any other right, power or remedy hereunder. 

 

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**9.3        Amendments andWaivers.**  This Agreement may be modified, amended or waived only by a writing signed by the party against whom enforcement thereof is sought. 

**9.4        Choice of Law; Forum.  **This Agreement shall be governed by and construed in accordance with the internal laws of the State ofCalifornia, without regard to the choice of law provisions thereof. Any proceeding arising out of or relating to this Agreement shall be brought in the courts of the State of California, County of Los Angeles, or, if it has or can acquirejurisdiction, in the United States District Court for the Central District of California. This provision may be filed with any court as written evidence of the knowing and voluntary irrevocable agreement between the parties to waive any objectionsto jurisdiction, venue or convenience of forum. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY ANDUNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONSCONTEMPLATED HEREBY OR THEREBY. 

**9.5        Binding Effect andBenefits.**  This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective heirs, successors and assigns, but may not be assigned by any party without the prior written consent of theRepresentative in the case of a purported assignment by the Buyer, or by the Buyer in the case of a purported assignment by any Seller. 

**9.6        Integration; Schedules.**  This writing, the annexes, exhibits and schedules attached hereto and the Disclosure Schedule, embody the entire agreementand understanding among the parties with respect to this transaction and supersede all prior discussions, understandings and agreements concerning the matters covered hereby, except as set forth in Section 5.1(b). Information set forth on theDisclosure Schedule shall be deemed to qualify each section of this Agreement to which such information is applicable (regardless of whether or not such other section is qualified by reference to the Disclosure Schedule), so long as application tosuch section is reasonably discernible from the reading of such disclosure. No information set forth on any schedule to the Disclosure Schedule shall be deemed to broaden in any way the scope of any Seller’s or the Company’srepresentations and warranties. The inclusion of an item on any schedule to the Disclosure Schedule is not evidence of the materiality of such item for purposes of this Agreement or otherwise, or that such item is a disclosure required under theAgreement. No disclosure in any schedule to the Disclosure Schedule relating to any possible breach or violation of any agreement, Authorization or Legal Requirement shall be construed as an admission or indication that any such breach or violationexists or has actually occurred, or shall constitute an admission of liability to any third party. 

**9.7        Counterparts.**  This Agreement may be executed in two or more counterparts, and with counterpart signature pages, each of which shall be an original, but all of whichtogether shall constitute one and the same Agreement, binding on all of the parties hereto notwithstanding that all such parties have not signed the same counterpart. Counterpart signature pages to this Agreement transmitted by facsimiletransmission, by electronic mail in 

 

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“portable document format” (“.pdf”) form, or by any other electronic means intendedto preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature. 

**9.8        Limitation on Scope of Agreement.**  If any provision of this Agreement is unenforceable or illegal, such provision shall beenforced to the fullest extent permitted by law and the remainder of the Agreement shall remain in full force and effect. 

**9.9        Sellers’ Representative.**

**(a)        **Each Seller hereby appoints Robert M. Stephen as his or her representative (the “**Representative**”), to be his or her true and lawful attorney-in-fact for all mattersin connection with this Agreement, including without limitation, the compromise of any disputes between the Buyer and any Seller relating to the transactions contemplated by this Agreement and to take any other action contemplated to be taken by theRepresentative hereof. The power of attorney granted to the Representative appointed hereunder is coupled with an interest and will continue in full force and effect notwithstanding the subsequent death or incapacity of a Seller. The Representativeappointed hereunder will have the power to act on behalf of the Sellers with respect to all matters requiring action by the Sellers under this Agreement, including, without limitation, the execution and delivery of any documents contemplated hereby.Robert M. Stephen hereby accepts such appointment. In the event of the death, or the incapacity to serve or resignation as the Representative by Robert M. Stephen, a successor Representative will promptly be appointed by the Sellers constituting theformer holders of a majority of the Purchased Shares and the Sellers will jointly notify the Buyer of such appointment. The Buyer will be entitled to rely on any communication received from the Representative or his successor without investigation.

**(b)        **The Representative shall not be liable to the Sellers for anyact taken or omitted by him as permitted under this Agreement and the transactions contemplated hereby, except if such act is taken or omitted in bad faith or by willful misconduct. The Representative shall also be fully protected against theSellers in relying upon any written notice, demand, certificate or document that he in good faith believes to be genuine. 

**(c)        **The Sellers agree, severally but not jointly, to indemnify the Representative for, and to hold the Representative harmless against Losses, in an amount equal to his or her Pro RataShare of the Losses, incurred without willful misconduct or bad faith on the part of the Representative, arising out of or in connection with the Representative’s carrying out its duties under this Agreement and the transactions contemplatedhereby, including costs and expenses of successfully defending the Representative against any claim of liability with respect thereto. The Representative may consult with counsel of its own choice and will have full and complete authorization andprotection for any action taken and suffered by it in good faith and in accordance with the opinion of such counsel. 

**9.10        Headings.**  The headings of Articles and Sections herein are inserted for convenience of reference only and shall be ignored in the construction or interpretationhereof. 

 

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**9.11        Expenses.**  All legaland other costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, except as otherwise expressly provided herein. 

**9.12        No Third Party Beneficiaries.**  Except as otherwise expressly setforth in this Agreement, including Section 5.8 hereof, nothing in this Agreement will be construed as giving any third party, any right, remedy or claim under or in respect of this Agreement or any provision hereof. No employee of the Companyshall be a third-party beneficiary or entitled to rely on Section 5.10. 

**9.13    FurtherAssurances.**  Following the Closing, the parties shall execute and deliver to each other such documents and take such other actions as may reasonably be requested in order to consummate more effectively the transactions contemplatedhereby. 

**9.14        “Knowledge” Defined.**  As usedherein, “to the knowledge of the Company,” “to the Company’s knowledge” or any other similar phrase shall mean the actual knowledge of Robert M. Stephen, Mark Balderraama, Tom Mendez, Doug Stephen and Stephen Williams.

**9.15        Publicity.**  Pending the Closing, no party shall issuea press release or make any other public announcement concerning the transactions contemplated by this Agreement without the prior written consent of the Representative and the Buyer, except to the extent required by law, in which case the otherparties hereto shall have the opportunity to review and comment prior to disclosure. 

**9.16        No Strict Construction.**  The parties hereto have participated jointly in the negotiation and drafting of this Agreement and the other agreements and documents contemplatedherein. In the event an ambiguity or question of intent or interpretation arises under any provision of this Agreement or any other agreement or documents contemplated herein, this Agreement and such other agreements or documents shall be construedas if drafted jointly by the parties thereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of authoring any of the provisions of this Agreement or any other agreements or documents contemplatedherein. 

**ARTICLE 10**

**DEFINITIONS**

The following terms, as used in this Agreement, have the meanings given to them in the sectionor place indicated below: 

 

**Term:**
  
**Section or Place**

**Where Defined:**

Affiliate
  Section 3.23
Agreement
  Preamble
Authorizations
  Section 3.16
Balance Sheet
  Section 3.7
Balance Sheet Date
  Section 3.7
Benefit Plans
  Section 3.19
 

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**Term:**
  
**Section or Place**

**Where Defined:**

Buyer
  Preamble
Closing
  Section 1.4
Closing Cash
  Section 1.2
Closing Date
  Section 1.4
Closing Indebtedness
  Section 1.2
Closing Purchase Price
  Section 1.2
Closing Purchase Price Certificate
  Section 1.7
Closing Working Capital
  Section 1.2
Code
  Section 3.9
Company
  Preamble
Company Charter Documents
  Section 3.1
Company Contacts
  Section 5.11
Company Intellectual Property
  Section 3.12
Company Material Adverse Effect
  Section 3.5
Confidential Agreement
  Section 5.1
Credit Facility
  Section 1.2
Cut-Off Date
  Section 7.1
Debt Amount
  Section 1.2
Deductible
  Section 7.2
Disclosure Schedule
  Article 2
Disputed Items
  Section 1.7
Disputed Items Notice
  Section 1.7
Environment
  Section 3.22
Environmental Claim
  Section 3.22
Environmental Laws
  Section 3.22
ERISA
  Section 3.19
Escrow Account
  Section 1.2
Escrow Agent
  Section 1.2
Escrow Agreement
  Section 1.2
Escrow Amount
  Section 1.2
Estimated Closing Purchase Price
  Section 1.2
Estimated Closing Purchase Price Certificate
  Section 1.2
Fundamental Representations
  Section 7.1
GAAP
  Section 1.2
HSR Act
  Section 5.5
Hazardous Substances
  Section 3.22
Indemnified Persons
  Section 5.9
Independent Accountant
  Section 1.7
Initial Escrow Amount
  Section 1.2
Intellectual Property
  Section 3.12
Inventory Notice
  Section 5.13
IP Representation
  Section 7.1
IRS
  Section 3.19
 

-45- 

**Term:**
  
**Section or Place**

**Where Defined:**

Key Employees
  Section 5.11
Knowledge
  Section 9.14
Legal Requirements
  Section 3.17
License Agreement
  Section 6.1
Liens
  Section 1.2
Losses
  Section 7.2
Major Customer
  Section 3.24
Major Supplier
  Section 3.24
Material Contract
  Section 3.13
Parties
  Section 5.7
Payment Account
  Section 1.2
Permitted Liens
  Section 3.10
Pre-Closing Taxes
  Section 3.9
Pre-Closing Tax Period
  Section 3.9
Proceeding
  Section 5.9
Pro Rata Share
  Section 2.1
Purchased Shares
  Introduction
Representative
  Section 9.9
Restricted Activities
  Section 5.11
Restricted Period
  Section 5.11
Retained Employee
  Section 1.2
Retention Amount
  Section 1.2
Retention Bonuses
  Section 1.2
Sale Bonuses
  Section 1.2
Section 338 Elections
  Section 5.8
Section 338 Forms
  Section 5.8
Securities Act
  Section 4.6
Seller
  Preamble
Sellers
  Preamble
Seller’s Expenses
  Section 1.2
Standard Cost
  Section 5.13
Straddle Period
  Section 3.9
Target Working Capital
  Section 1.2
Target Working Capital Ceiling
  Section 1.2
Target Working Capital Floor
  Section 1.2
Tax or Taxes
  Section 3.9
Tax Matter
  Section 5.7
Tax Returns
  Section 3.9
Unsold Inventory Line
  Section 5.13
 

-46- 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of thedate first above written. 

 
**NMC GROUP, INC.**
By:
 
/s/    Robert M. Stephen

Name:
 
Robert M. Stephen
 
Title:
 
President

 
**SELLERS:**
/s/    Douglas P. Stephen

Douglas P. Stephen, Co-Trustee of The

Stephen Family Trust

/s/    Barbara M. Stephen

Barbara M. Stephen, Co-Trustee of The

Stephen Family Trust

/s/    Douglas P. Stephen, Jr.

Douglas P. Stephen, Jr.

/s/    Robert M. Stephen

Robert M. Stephen

/s/    Michael J. Stephen

Michael J. Stephen

/s/    Susan M. Stephen Ellersick

Susan M. Stephen Ellersick

/s/    Thomas V. Stephen

Thomas V. Stephen

[Signature Page to the Stock Purchase Agreement] 

**ESTERLINE TECHNOLOGIES**

**CORPORATION**

By:
 
/s/    Robert W. Cremin

Name:
 
Robert W. Cremin

Title:
 
Chairman, Pres & CEO

[Signature Page to the Stock Purchase Agreement] 

**ANNEX I**

**SHAREHOLDERS**

 
**Shareholder** 
**Shares of Series A**

**Voting Common**

**Stock**
 
**Shares of Series B**

**Non-Voting**

**Common Stock**
 
**Pro Rata Shareof**

**Outstanding Shares**
Douglas P. Stephen