Exhibit
10.1


 




 





STOCK PURCHASE
AGREEMENT


 


Dated


 


April 12, 2004


 


BY AND AMONG


 


RAUCH ACQUISITION CORPORATION


 (“Purchaser”)


 


SYRATECH CORPORATION


(“Seller”)


 


AND


 


RAUCH INDUSTRIES, INC.


(the “Company”)




 





 

















 


TABLE OF CONTENTS


 


	
  ARTICLE 1

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  
	
  Section 1.1

  	
  Certain
  Definitions

  	
   

  
	
   

  	
   

  
	
  ARTICLE 2

  	
  PURCHASE AND SALE

  	
   

  
	
   

  	
   

  
	
  Section 2.1

  	
  Purchase and
  Sale

  	
   

  
	
  Section 2.2

  	
  Retained
  Seller Liabilities

  	
   

  
	
  Section 2.3

  	
  Purchase
  Price

  	
   

  
	
  Section 2.4

  	
  Company Cash
  and Working Capital Adjustment

  	
   

  
	
  Section 2.5

  	
  The Closing

  	
   

  
	
   

  	
   

  
	
  ARTICLE 3

  	
  REPRESENTATIONS AND WARRANTIES OF SELLER

  	
   

  
	
   

  	
   

  
	
  Section 3.1

  	
  Corporate
  Status of Seller and the Company

  	
   

  
	
  Section 3.2

  	
  Capitalization;
  Ownership of Shares

  	
   

  
	
  Section 3.3

  	
  No
  Encumbrance on Shares

  	
   

  
	
  Section 3.4

  	
  Other Rights
  to Acquire Capital Stock

  	
   

  
	
  Section 3.5

  	
  Subsidiaries

  	
   

  
	
  Section 3.6

  	
  Due
  Authorization; No Conflicts

  	
   

  
	
  Section 3.7

  	
  Financial
  Statements

  	
   

  
	
  Section 3.8

  	
  Conduct of
  Business; Certain Actions

  	
   

  
	
  Section 3.9

  	
  Properties

  	
   

  
	
  Section 3.10

  	
  Licenses
  and Permits

  	
   

  
	
  Section 3.11

  	
  Intellectual
  Property Rights

  	
   

  
	
  Section 3.12

  	
  Compliance
  with Laws

  	
   

  
	
  Section 3.13

  	
  Employee
  Benefit Matters

  	
   

  
	
  Section 3.14

  	
  Contracts and
  Agreements

  	
   

  
	
  Section 3.15

  	
  Claims and
  Proceedings

  	
   

  
	
  Section 3.16

  	
  Taxes

  	
   

  
	
  Section 3.17

  	
  Bank
  Accounts

  	
   

  
	
  Section 3.18

  	
  Certain
  Consents

  	
   

  
	
  Section 3.19

  	
  Brokers

  	
   

  
	
  Section 3.20

  	
  Environmental
  Matters

  	
   

  
	
  Section 3.21

  	
  Insurance

  	
   

  
	
  Section 3.22

  	
  Controlled
  Group Liability

  	
   

  
	
  Section 3.23

  	
  Insolvency

  	
   

  
	
   

  	
   

  
	
  ARTICLE 4

  	
  REPRESENTATIONS AND
  WARRANTIES OF PURCHASER

  	
   

  
	
   

  	
   

  
	
  Section 4.1

  	
  Status of
  Purchaser

  	
   

  
						



 


ii

















 


	
  Section 4.2

  	
  Authority

  	
   

  
	
  Section 4.3

  	
  Capitalization;
  Ownership of Shares

  	
   

  
	
  Section 4.4

  	
  Brokers,
  Finders

  	
   

  
	
   

  	
   

  
	
  ARTICLE 5

  	
  COVENANTS OF SELLER

  	
   

  
	
   

  	
   

  
	
  Section 5.1

  	
  Licenses,
  Permits and Approvals

  	
   

  
	
  Section 5.2

  	
  Inspection

  	
   

  
	
  Section 5.3

  	
  Compliance

  	
   

  
	
  Section 5.4

  	
  Satisfaction
  of All Conditions Precedent

  	
   

  
	
  Section 5.5

  	
  Exclusivity

  	
   

  
	
  Section 5.6

  	
  Information
  Technology Transfer

  	
   

  
	
  Section 5.7

  	
  Overseas
  Sourcing Operations

  	
   

  
	
  Section 5.8

  	
  Payroll
  Expenses

  	
   

  
	
  Section 5.9

  	
  Consolidated
  Tax Returns

  	
   

  
	
   

  	
   

  
	
  ARTICLE 6

  	
  CONDITIONS
  PRECEDENT TO THE OBLIGATIONS OF PURCHASER

  	
   

  
	
   

  	
   

  
	
  Section 6.1

  	
  Truth of Representations
  and Warranties

  	
   

  
	
  Section 6.2

  	
  No
  Litigation Threatened

  	
   

  
	
  Section 6.3

  	
  Performance

  	
   

  
	
  Section 6.4

  	
  Consents and
  Approvals

  	
   

  
	
  Section 6.5

  	
  Permits and
  Licenses

  	
   

  
	
  Section 6.6

  	
  Closing
  Deliveries of Seller

  	
   

  
	
   

  	
   

  
	
  ARTICLE 7

  	
  CONDITIONS
  PRECEDENT TO THE OBLIGATIONS OF SELLER

  	
   

  
	
   

  	
   

  
	
  Section 7.1

  	
  Truth of
  Representations and Warranties

  	
   

  
	
  Section 7.2

  	
  Performance

  	
   

  
	
  Section 7.3

  	
  No Litigation
  Threatened

  	
   

  
	
  Section 7.4

  	
  Consents and
  Approvals

  	
   

  
	
  Section 7.5

  	
  Closing
  Deliveries of Purchaser

  	
   

  
	
   

  	
   

  
	
  ARTICLE 8

  	
  CLOSING CONDITIONS

  	
   

  
	
   

  	
   

  
	
  Section 8.1

  	
  Conditions to
  Obligations of Purchaser

  	
   

  
	
  Section 8.2

  	
  Conditions to
  Obligations of Seller

  	
   

  
	
   

  	
   

  
	
  ARTICLE 9

  	
  TERMINATION

  	
   

  
	
   

  	
   

  
	
  Section 9.1

  	
  Termination

  	
   

  
	
  Section 9.2

  	
  Effect of
  Termination

  	
   

  
	
   

  	
   

  
							



 


iii

















 


	
  ARTICLE 10

  	
  FURTHER
  AGREEMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.1

  	
  Expenses of
  Sale

  	
   

  
	
  Section 10.2

  	
  Consents

  	
   

  
	
  Section 10.3

  	
  Third Party
  Reliance on Seller Representations and Warranties

  	
   

  
	
  Section 10.4

  	
  Post
  Closing Insurance Claims

  	
   

  
	
  Section 10.5

  	
  Public
  Announcement

  	
   

  
	
  Section 10.6

  	
  Tax Matters

  	
   

  
	
   

  	
   

  
	
  ARTICLE 11

  	
  REPRESENTATIONS
  AND INDEMNIFICATION

  	
   

  
	
   

  	
   

  
	
  Section 11.1

  	
  Survival of
  Representations and Warranties

  	
   

  
	
  Section 11.2

  	
  Indemnification
  by Seller

  	
   

  
	
  Section 11.3

  	
  Indemnification
  by Purchaser

  	
   

  
	
  Section 11.4

  	
  Environmental
  Insurance and Indemnification

  	
   

  
	
  Section 11.5

  	
  Defense of
  Third-Party Claims

  	
   

  
	
  Section 11.6

  	
  Direct
  Claims

  	
   

  
	
   

  	
   

  
	
  ARTICLE 12

  	
  AMENDMENT AND
  WAIVER

  	
   

  
	
   

  	
   

  
	
  Section 12.1

  	
  Amendment

  	
   

  
	
  Section 12.2

  	
  Waiver

  	
   

  
	
   

  	
   

  
	
  ARTICLE 13

  	
  MISCELLANEOUS PROVISIONS

  	
   

  
	
   

  	
   

  
	
  Section 13.1

  	
  Notices

  	
   

  
	
  Section 13.2

  	
  Further
  Assurance

  	
   

  
	
  Section 13.3

  	
  Counterpart
  Executions; Facsimiles

  	
   

  
	
  Section 13.4

  	
  Binding
  Effect

  	
   

  
	
  Section 13.5

  	
  Headings

  	
   

  
	
  Section 13.6

  	
  Effectiveness

  	
   

  
	
  Section 13.7

  	
  Invalid
  Provisions

  	
   

  
	
  Section 13.8

  	
  Miscellaneous

  	
   

  
	
  Section 13.9

  	
  Attorneys’
  Fees and Costs

  	
   

  
	
  Section 13.10

  	
  Attachments

  	
   

  
				



 


iv

















 


STOCK PURCHASE AGREEMENT


 


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


 


WITNESSETH:


 


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


 


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


 


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


 


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


 


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


 


ARTICLE 1


 


DEFINITIONS


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


2

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


3

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


4

















 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE 2


 


PURCHASE AND SALE


 


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


 


Section 2.2.                                   Retained
Seller Liabilities.


 


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


 


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


 


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


 


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


 


5

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


6

















 


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


 


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


 


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


 


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


 


7

















 


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


 


(c)                                  Disputes.



 


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


 


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


 


8

















 


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


 


9

















 


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


 


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


 


ARTICLE 3


 


REPRESENTATIONS AND WARRANTIES OF
SELLER 


 


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


 


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


 


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


 


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


 


10

















 


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


 


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


 


Section 3.5.                                   Subsidiaries.  The Company has no
Subsidiaries.


 


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


 


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


 


(a)                                  balance sheets and statements of
income and cash flow of the Company as of and for each of the years ended
December 31, 2002, 2001, and 2000.


 


(b)                                 the 12/31 Balance Sheet, 12/31
Net Working Capital Statement and statements of income and cash flow of the
Company as of and for the year ended December 31, 2003 (collectively with
(a) above and (c) below, the “Financial Statements”).


 


(c)                                  the Estimated Closing Date
Balance Sheet.


 


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


 


11

















 


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


 


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


 


Section 3.9.                                   Properties.


 


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


 


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


 


12

















 


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


 


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


 


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


 


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


 


Section 3.13.                             Employee Benefit Matters.


 


(a)                                  Welfare Benefit Plans.  Attached hereto as Schedule 3.13(a) is a list of each
“employee benefit plan,” as defined in section 3(1) of the Employee
Retirement Income Security Act of 1974 (and any sections of the Internal
Revenue Code of 1986, as amended (the “Code”),


 


13

















 


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


 


(b)                                 Pension Benefit Plans.  Attached hereto as Schedule 3.13(b) is a list of each
“employee pension benefit plan” (as defined in section 3(2) of ERISA) with
respect to which the Company has any obligation or liability (contingent or
otherwise), including any multiemployer plan (as defined in
section 3001(a)(3) of ERISA) (such employee pension benefit plans being
hereinafter collectively referred to as the “Pension Benefit Plans”).  With respect to each Pension Benefit Plan,
including an “individual account plan” (as defined in section 3(34) of
ERISA), Schedule 3.13(b) attached hereto accurately sets forth (x)
the amount of and liability of the Company for contributions due with respect
to such Pension Benefit Plan as of March 31, 2004, and (y) the amount of
any contribution paid with respect to such Pension Benefit Plan as of
March 31, 2004.


 


(c)                                  Benefit Plan Compliance.  To the Knowledge of Seller, all of the Welfare Benefit Plans and
Pension Benefit Plans and any related trust agreements or annuity contracts (or
any other funding instruments) currently comply with the provisions of ERISA,
the Code (including section 410(b) of the Code relating to coverage where
required in order to be tax-qualified under section 401(a) or 403(a) of
the Code) and all other applicable laws and regulations.  Each Pension Benefit Plan that is intended
to be qualified under Section 401 of the Code is so qualified.


 


(d)                                 No Prohibited Transactions.  To the Knowledge of Seller, neither the Company nor any of its
respective agents or representatives have engaged in any transaction in
violation of section 406(a) or (b) of ERISA (for which no exemption exists
under section 408 of ERISA) or any “prohibited transaction” (as defined in
section 4975(c)(1) of the Code) for which no exemption exists under
section 4975(c)(2) or (d) of the Code with respect to any Welfare Benefit
Plan or Pension Benefit Plan.


 


(e)                                  Effect of
Consummation.  To the Knowledge
of Seller, except as set forth on Schedule 3.13(e), the
consummation of the transactions contemplated by this Agreement will not: (i)
entitle any current employee of the Company to severance pay or unemployment
compensation, to the Knowledge of Seller, no former employee, has any written
agreement with the Company entitling him or her to any such payment, or (ii)
otherwise accelerate the time of payment or vesting, or increase the amount of
any compensation due to any current employee.


 


Section 3.14.                             Contracts and Agreements.  Attached hereto as Schedule 3.14
is a list of all written contracts, commitments, leases, and other agreements
(including, without limitation, promissory notes, loan agreements, and other
evidences of indebtedness) to which the Company is a party or by which the
Company or its properties are bound, pursuant to which the obligations
thereunder of either party thereto are, or are contemplated as being, in
respect of any such individual contracts, commitments, leases, or other
agreements during the term thereof, Twenty Five Thousand Dollars ($25,000.00)
or greater, or which are otherwise material to the business of the
Company.  To the Knowledge of Seller,
each such contract, commitment, lease and other


 


14

















 


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


 


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


 


Section 3.16.                             Taxes.


 


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


 


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


 


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


 


15

















 


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


 


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


 


Section 3.19.                             Brokers.  Neither the Company nor Seller has engaged,
or caused any liability to be incurred to, any finder, broker, or sales agent
in connection with the execution, delivery, or performance of this Agreement or
the transactions contemplated hereby.


 


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


 


16

















 


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


 


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


 


Section 3.22.                             Controlled Group Liability.  To the Knowledge of Seller, the Company is
not and will not be subject to any liability on account of the Company and
Seller having been affiliated, prior to the Closing Date, directly or indirectly,
with any other entity or person under Code Section 414, ERISA
Section 4001 or any similar foreign law.


 


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


 


ARTICLE 4


 


REPRESENTATIONS AND WARRANTIES OF
PURCHASER


 


Purchaser represents and
warrants to, Seller that:


 


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


 


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


 


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


 


17

















 


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


 


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


 


ARTICLE 5


 


COVENANTS OF SELLER 


 


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


 


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


 


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


 


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


 


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


 


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


 


18

















 


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


 


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


 


Section 5.7.                                   Overseas
Sourcing Operations.


 


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


 


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


 


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


 


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


 


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


 


19

















 


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


 


ARTICLE 6


 


CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF PURCHASER


 


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


 


Section 6.1.                                   Truth of Representations and
Warranties. The
representations and warranties of each of Seller and the Company contained in
this Agreement shall be true and correct at and as of the Closing Date with the
same effect as through such representations and warranties had been made on and
as of the Closing Date; each of Seller and the Company shall have performed and
complied with all agreements required by this Agreement to be performed or
complied with by each of Seller and the Company at or prior to the Closing
Date; and Purchaser shall have received a certificate, dated as of the Closing
Date, signed by Seller and the Company to the foregoing effect.


 


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


 


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


 


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


 


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


 


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


 


20

















 


ARTICLE 7


 


CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF SELLER


 


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


 


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


 


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


 


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


 


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


 


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


 


21

















 


ARTICLE 8


 


CLOSING CONDITIONS


 


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


 


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


 


 (b)                              Injunctions.  No action or proceeding shall have been instituted or threatened
for the purpose or with the possible effect of enjoining or preventing the
consummation of this Agreement and the transactions contemplated hereby or
seeking damages on account thereof.


 


(c)                                  The Certificates for the Shares.  Purchaser shall have received from Seller or his duly appointed
agent and attorney-in-fact the stock certificate or certificates representing
all of the Shares owned by Seller, free and clear of any Encumbrances, duly
endorsed for transfer or accompanied by stock powers duly executed in blank.


 


 (d)                              Release from Encumbrances.  The Company shall have received (and delivered to Purchaser) a
release from Seller and a consent from any existing lender(s) or secured
parties of all respective Encumbrances it or they has against the Company, in
form and substance reasonably satisfactory to Purchaser.


 


(e)                                  Good Standing and Closing
Certificates.  Seller and the Company shall have delivered good standing
certificates, officer’s certificates, and similar documents and certificates as
counsel for Purchaser shall have reasonably requested prior to the Closing
Date.


 


(f)                                    Assumption Agreement.  Seller shall have executed the Assumption Agreement in accordance
with Section 2.2 and substantially in the form of Exhibit A
attached hereto.


 


(g)                                 Closing Date Cash and Company
Bank Account.  Seller shall have returned or contributed
the amount of the Closing Date Cash into the Company Bank Account.


 


(h)                                 No Negative Bank Book Balances.  The Company shall provide a certificate certifying that there are
no then open Company bank accounts with negative book (general ledger) balances
as of the Closing Date.


 


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


 


22

















 


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


 


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


 


Section 8.2.                                   Conditions to Obligations of Seller. The obligations of Seller to consummate the
transactions contemplated hereby are subject to the fulfillment of the
following conditions:


 


(a)                                  Purchase Price.  Purchaser shall have delivered to Seller the Purchase Price in
accordance with Section 2.3.


 


(b)                                 Good Standing and Closing
Certificates.  Purchaser shall have delivered to Seller
such good standing certificates, officer’s certificates, and similar documents
and certificates as counsel for Seller shall have reasonably requested prior to
the Closing Date.


 


ARTICLE 9


 


TERMINATION


 


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


 


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


 


23

















 


ARTICLE 10


 


FURTHER AGREEMENTS


 


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


 


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


 


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


 


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


 


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


 


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


 


24

















 


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


 


ARTICLE 11


 


REPRESENTATIONS AND INDEMNIFICATION


 


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


 


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


 


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


 


25

















 


Section 11.4.                             Environmental Insurance and Indemnification.


 


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


 


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


 


26

















 


Section 11.5.                             Defense of Third-Party Claims.  Each respective Indemnified Party shall, and
Purchaser and Seller agree to use their reasonable best efforts to cause each
respective Indemnified Party to, give prompt written notice to the other
Indemnified Party (each an “Indemnifying Party”) of the commencement or
assertion of any action, proceeding, demand, or claim by a third party
(collectively, a “Third-Party Action”) in respect of which such Indemnified
Party shall seek indemnification hereunder. 
Subject to the last sentence of this Section 11.5, any failure so
to notify the Indemnifying Party shall not relieve such Indemnifying Party from
any liability that it may have to such Indemnified Party under this
Article 11 unless and to the extent the failure to give such notice
materially and adversely prejudices such Indemnifying Party. The Indemnifying
Party shall have the right to assume control of the defense of, settle, or
otherwise dispose of such Third-Party Action on such terms as they deem
appropriate; provided, however, that:


 


(a)                                  The Indemnified Party shall be
entitled, at his, her, or its own expense, to participate in the defense of
such Third-Party Action;


 


(b)                                 The Indemnifying Party shall
obtain the prior written approval of the Indemnified Party before entering into
or making any settlement, compromise, admission, or acknowledgment in respect
of the validity of such Third-Party Action or any liability in respect thereof
if, pursuant to or as a result of such settlement, compromise, admission, or
acknowledgment, injunctive or other equitable relief could be imposed against
the Indemnified Party or if, in the reasonable opinion of the Indemnified
Party, such settlement, compromise, admission, or acknowledgment could have a
material adverse effect on its business or, in the case of an Indemnified Party
who is a natural person, on his or her assets or interests;


 


(c)                                  No Indemnifying Party shall
consent to the entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by each claimant or
plaintiff to each Indemnified Party of a release from all liability in respect
of such Third-Party Action unless such Third-Party Action is initiated by a
Governmental Authority; and


 


(d)                                 The Indemnifying Party shall not
be entitled to control (but shall be entitled to participate at its or their
own expense in the defense of), and the Indemnified Party shall be entitled to
have sole control over, the defense or settlement, compromise, admission, or
acknowledgment of any Third-Party Action (i) as to which the Indemnifying Party
fails to assume the defense thereof within a reasonable length of time or (ii)
to the extent the Third-Party Action seeks an order, injunction, or other
equitable relief against the Indemnified Party which, if successful, would
materially adversely affect the business, operations, assets, or financial
condition of the Indemnified Party.


 


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


 


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


 


27

















 


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


 


ARTICLE 12


 


AMENDMENT AND WAIVER


 


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


 


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


 


ARTICLE 13


 


MISCELLANEOUS PROVISIONS


 


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


 


	
  If to Purchaser:

  	
   

  	
  Rauch Acquisition
  Corporation

  
	
   

  	
   

  	
  1775 Eye Street, NW

  
	
   

  	
   

  	
  8th Floor

  
	
   

  	
   

  	
  Washington, DC  20006

  
	
   

  	
   

  	
  Attention:  Murry N. Gunty

  
	
   

  	
   

  	
  Facsimile: (202)
  367-3001

  



 


28

















 


	
  With a copy to:

  	
   

  	
  Rauch Industries, Inc.

  
	
   

  	
   

  	
  2408 Forbes Road

  
	
   

  	
   

  	
  Gastonia, North
  Carolina 28056

  
	
   

  	
   

  	
  Attention:  Steven R. Hufft

  
	
   

  	
   

  	
  Facsimile: (704)
  868-4105

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Patton Boggs LLP

  
	
   

  	
   

  	
  2550 M Street, NW

  
	
   

  	
   

  	
  Washington, DC  20037

  
	
   

  	
   

  	
  Attention:  Douglas C. Boggs

  
	
   

  	
   

  	
  Facsimile:  (202) 457-6315

  
	
   

  	
   

  	
   

  
	
  If to Seller:

  	
   

  	
  Syratech Corporation

  
	
   

  	
   

  	
  175 McClellan Highway

  
	
   

  	
   

  	
  East Boston, MA  02128

  
	
   

  	
   

  	
  Attention: 

  	
  Gregory W. Hunt

  
	
   

  	
   

  	
   

  	
  Vice President and CFO

  
	
   

  	
   

  	
  Facsimile:  (617) 568-8178

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Faye A. Florence, Esq.

  
	
   

  	
   

  	
  Vice President and
  General Counsel

  
	
   

  	
   

  	
  Syratech Corporation

  
	
   

  	
   

  	
  175 McClellan Highway

  
	
   

  	
   

  	
  East Boston, MA  02128

  
	
   

  	
   

  	
  Facsimile:  (617) 568-1361

  



 


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


 


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


 


29

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


30

















 


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


 


SCHEDULES


 


	
  Schedule 2.2

  	
   

  	
  Retained Seller
  Liabilities

  
	
  Schedule 2.4

  	
   

  	
  Company’s
  December 31, 2003 balance sheet

  
	
  Schedule 2.4(a)

  	
   

  	
  Estimated Closing Date
  Balance Sheet

  
	
  Schedule 3.1

  	
   

  	
  List of qualification
  states of the Company

  
	
  Schedule 3.7

  	
   

  	
  Financial Statements of
  the Company

  
	
  Schedule 3.8

  	
   

  	
  Conduct of Business;
  Certain Actions

  
	
  Schedule 3.9(a)

  	
   

  	
  List of real property
  owned by the Company

  
	
  Schedule 3.9(b)

  	
   

  	
  List of personal
  properties owned by the Company

  
	
  Schedule 3.10

  	
   

  	
  List of licenses,
  certificates & permits of Company

  
	
  Schedule 3.11

  	
   

  	
  List of Intellectual
  Property owned by the Company

  
	
  Schedule 3.13(a)

  	
   

  	
  List of Employee
  Benefit Plans

  
	
  Schedule 3.13(b)

  	
   

  	
  List of Employee
  Pension Benefit Plans

  
	
  Schedule 3.13(e)

  	
   

  	
  Effect of Consummation

  
	
  Schedule 3.14

  	
   

  	
  List of all written
  contracts and other agreements

  
	
  Schedule 3.15

  	
   

  	
  List litigation
  affecting the Company

  
	
  Schedule 3.16

  	
   

  	
  Taxes

  
	
  Schedule 3.17

  	
   

  	
  Bank Accounts

  
	
  Schedule 3.18

  	
   

  	
  Certain Consents

  
	
  Schedule 3.20

  	
   

  	
  Environmental Matters

  
	
  Schedule 5.6

  	
   

  	
  Information Technology
  Transfer

  



 


EXHIBITS


 


	
  Exhibit A

  	
   

  	
  Form of Assumption Agreement

  
	
  Exhibit B

  	
   

  	
  Form of Resignation

  
	
  Exhibit C

  	
   

  	
  Environmental Insurance Policy

  
	
  Exhibit C-1

  	
   

  	
  Confirmation of Coverage Evidencing the
  Environmental Site Liability Policy

  



 


 


[Signatures Appear on Following Page]


 


31

















 


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


 


 


	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  RAUCH
  ACQUISITION CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven R. Hufft

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Steven R. Hufft

  
	
   

  	
   

  	
  Title:

  	
  President and Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  SYRATECH
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Gregory W. Hunt

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Gregory W. Hunt

  
	
   

  	
   

  	
  Title:

  	
  Vice President and
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  RAUCH
  INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Gregory W. Hunt

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Gregory W. Hunt

  
	
   

  	
   

  	
  Title:

  	
  Vice President and
  Chief Financial Officer