Document:

Exhibit 4.01

 

	
  CUSIP NO. 52517PH38

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  REGISTERED

  	
   

  	
  PRINCIPAL AMOUNT:
  $8,000,000

  
	
  No. R-1

  	
   

  	
   

  

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTE, SERIES H

FX RANGE NOTE
DUE OCTOBER 27, 2006

 

THIS NOTE IS A GLOBAL SECURITY
WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED
IN THE NAME OF THE DEPOSITORY OR A NOMINEE OF THE DEPOSITORY.  UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW
YORK, NEW YORK) TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE
& CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.

UNLESS AND UNTIL IT IS
EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM (A “CERTIFICATED
NOTE”), THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY.

 

LEHMAN BROTHERS HOLDINGS
INC., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the “Company,” which term includes any successor
corporation under the Indenture referred to on the reverse hereof), for value
received, hereby promises to pay to CEDE & Co., or registered assigns, on
the Maturity Date, an amount equal to the Redemption Amount.

The
“Maturity Date” is October 27, 2006, or if such day is not a Business Day, on
the next following Business Day.

The “Redemption Amount” is the amount equal to the sum of the principal
amount of the Notes plus the Additional Amount.

The “Additional Amount” is a single U.S. Dollar payment calculated by
the calculation agent equal to the principal amount of the Notes multiplied by
(subject to the occurrence of a Disruption Event):

(A) 5.5%, if the Reference Exchange Rate has traded strictly within the
Reference Range (or on either of the Range Boundaries) from and including10:00
a.m. EST on the Start Date to but excluding 10:00 a.m. EST on the End Date, as
observed on the continuous trading EBS (Electronic Broking Service) Spot
Dealing System; or

(B) 0%, if the Reference Exchange Rate trades outside the Reference
Range from and including 10:00 a.m. EST on the Start Date to but excluding
10:00 a.m. EST on the End Date at 10:00 a.m. EST, as observed on the continuous
trading EBS Spot Dealing System.

The “Start Date” is April 21, 2006.

The “End Date” is October 23, 2006.

The “Reference Exchange Rate” is the spot exchange rate for the
Reference Currency quoted against the U.S. Dollar expressed as the number of
U.S. Dollars per unit of the Reference Currency.

The “Reference Currency” is the Euro (EUR).

The “Reference Range” is the
range from and including the Range Lower Boundary to and including the Range
Upper Boundary.

The “Range Lower Boundary”
is the Range Initial Fixing minus 0.05.

The “Range Upper Boundary”
is the Range Initial Fixing plus 0.07.

The “Range Initial Fixing”
is 1.2320, which is the Reference Exchange Rate observed in accordance with the
Settlement Rate Option on April 21, 2006.

A “Valuation Business Day” means any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which
commercial banks are authorized or required by 

2

 

law, regulation or executive
order to close (including for dealings in foreign exchange in accordance with
the practice of the foreign exchange market) in New York.

The “Settlement Rate Option”
is the U.S. Dollar/Euro official fixing rate, expressed as the amount of U.S.
Dollars per one Euro, for settlement in two business days reported by the
Federal Reserve Bank of New York which appears on Reuters Screen 1FED to the
right of the caption “EUR” at approximately 10:00 a.m. New York time, on the Start Date or such
other relevant date.

Upon the occurrence of a Disruption Event with respect to
the Reference Currency on any day during the term of the notes, the calculation
agent shall determine the Additional Amount payable on the Maturity Date in
good faith and in a commercially reasonable manner.

A “Disruption Event” means any of the following events
(other than a Price Source Unavailability Event), as determined in good faith
by the calculation agent:

(A)          the occurrence and/or existence of an event on any day that
has the effect of preventing or making impossible the conversion of the
Reference Currency into USD through customary legal channels;

(B)           the occurrence of any event causing the Reference Exchange
Rate to be split into dual or multiple currency exchange rates; or

(C)           the occurrence and/or existence of any event (other than those set
forth in (A) or (B) above or those constituting a Price Source Unavailability
Event) with respect to the Reference
Currency that prevents or makes impossible (x) the calculation agent’s ability
to calculate the Additional Amount, (y) the fulfilment of the Company’s
obligations under the notes, or (z) the ability of the Company or any of its
affiliates through which it hedges its position under the notes to hedge such
position or to unwind all or a material portion of such hedge.

Upon the occurrence of a Price Source Unavailability Event
on any day from and including the Start Date to and including the End Date and
for so long as such Price Source Unavailability Event is continuing, the
Reference Exchange Rate will be determined in accordance with the Fallback Rate
Observation Methodology.

A “Price Source Unavailability Event” means, as determined in good faith by the calculation agent, the Reference
Exchange Rate being unavailable, or the occurrence of an event
(other than an event constituting a Disruption Event) that generally makes it
impossible to obtain the Reference
Exchange Rate on any day from and
including 10.00 a.m. EST on the Start Date to but excluding 10.00
a.m. EST on the End Date  on the
EBS Spot Dealing System.

The “Fallback Rate Observation Methodology” means that, in
respect of a Price Source Unavailability Event occurring on any
day from and
including 10:00 a.m. EST on the Start Date to but excluding 10:00
a.m. EST on the End Date, the
Reference Exchange Rate will be determined on a daily basis in accordance with
the Settlement Rate Option on that day. 
If the Reference Exchange Rate is not available in accordance with the
Settlement Rate Option on such day, the Reference Exchange Rate will be
calculated daily on the basis of the arithmetic mean of 

3

 

the
applicable spot quotations received by the calculation agent at approximately
10:00 a.m., New York City time, on the Valuation Business Day next succeeding
that day for the purchase or sale for deposits in the Reference Currency by the
New York offices of three leading banks engaged in the interbank market
(selected in the sole discretion of the calculation agent) (the “Reference
Banks”).  If fewer than three Reference
Banks provide spot quotations, then the Reference Exchange Rate will be
calculated on the basis of the arithmetic mean of the applicable spot
quotations received by the calculation agent at approximately 10:00 a.m., New
York City time, on the relevant date from two Reference Banks (selected in the
sole discretion of the calculation agent), for the purchase or sale for
deposits in the Reference Currency.  If
these spot quotations are available from only one Reference Bank, then the
calculation agent, in its sole discretion, will determine which quotation is
available and reasonable to be used.  If
no spot quotation is available, then the Reference Exchange Rate will be
determined by the calculation agent in good faith and in a commercially
reasonable manner.

A “Business Day”, notwithstanding any
provision in the Indenture, is any day that is not is not a Saturday or Sunday
and that is not a day on which banking institutions in New York City generally
are authorized or obligated by law or executive order to be closed.

Except as provided below, the Additional Amount may, at the option of
the Company, be made by check mailed to the person entitled thereto at such
person’s address as it appears on the registry books of the Company.

Payment of the Additional Amount will be made in immediately available
funds in accordance with the normal procedures of the Trustee (or any duly
appointed Paying Agent).

The Company will pay any administrative costs imposed by banks in making payments in
immediately available funds, but any tax, assessment or governmental charge
imposed upon payments hereunder, including, without limitation, any withholding
tax, will be borne by the Holder hereof.

References herein
to “U.S. dollars” or “U.S.$” or “$” or “USD” are to the coin or currency of the
United States as at the time of payment is legal tender for the payment of
public and private debts.

REFERENCE
IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH ON THE REVERSE
HEREOF.  SUCH FURTHER PROVISIONS SHALL
FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

This Note shall
not be valid or become obligatory for any purpose until the certificate of
authentication hereon shall have been signed by the Trustee under the
Indenture.

 

4

 

IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has
caused this instrument to be signed by its Chairman of the Board, its
President, its Vice Chairman, its Chief Financial Officer, one of its Vice
Presidents or its Treasurer, by manual or facsimile signature under its
corporate seal, attested by its Secretary or one of its Assistant Secretaries
by manual or facsimile signature.

	
  Dated: April 27, 2006

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [SEAL]

  	
  LEHMAN BROTHERS
  HOLDINGS INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

TRUSTEE’S CERTIFICATE OF
AUTHENTICATION

 

This is one of the Securities of the series designated herein referred
to in the within-mentioned Indenture.

 

CITIBANK, N.A.

 as Trustee

 

	
  By:

  	
   

  
	
   

  	
  Authorized Officer

  

 

 

5

 

[REVERSE
OF NOTE]

 

 

LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES,
SERIES H

FX RANGE NOTE
DUE OCTOBER 27, 2006

 

Section 1.  General.  This Note is one of a duly authorized series
of Notes of the Company designated as the Medium-Term Notes, Series H, FX Range
Note (herein called the “Notes”).  The Notes are one of an indefinite
number of series of debt securities of the Company (collectively, the
“Securities”) issued or issuable under and pursuant to an indenture dated as of
September 1, 1987, as amended and supplemented (the “Indenture”), duly executed
and delivered by the Company and Citibank, N.A., as Trustee (herein called the
“Trustee”), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Securities. 
The separate series of Securities may be issued in various aggregate
principal amounts, may mature at different times, may bear interest (if any) at
different rates, may be subject to different redemption provisions or
repurchase rights (if any), may be subject to different sinking, purchase or
analogous funds (if any), may be subject to different covenants and Events of
Default and may otherwise vary as in the Indenture provided.

Section 2.  Principal
Amount for Indenture Purposes.  For
the purpose of determining whether Holders of the requisite amount of Notes of
this series outstanding under the Indenture have made a demand, given a notice
or waiver or taken any other action, the principal amount of this Note will be
deemed to be the principal amount of this Note then outstanding.

Section 3.  Modification
and Waivers.  The Indenture contains
provisions permitting the Company and the Trustee, with the consent of the
Holders of not less than 66-2/3% in aggregate principal amount of each series
of the Securities at the time Outstanding to be affected, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Securities of all such series; provided, however, that no such
supplemental indenture shall, among other things, (i) change the fixed maturity
of any Security, or reduce the Additional Amount or the principal amount
thereof, or reduce the rate or extend the time of payment of interest thereon
or reduce any premium or other amount payable on redemption, or make the
Additional Amount or the principal amount thereof, premium or other amount
payable, if any, or interest thereon payable in any coin or currency other than
that herein above provided, without the consent of the Holder of each Security
so affected, or (ii) change the place of payment on any Security, or impair the
right to institute suit for payment on any Security, or reduce the aforesaid
percentage of Securities, the holders of which are required to consent to any
such supplemental indenture, without the consent of the holders of each
Security so affected.  It is also
provided in the Indenture that, prior to any declaration accelerating the
maturity of any series of Securities, the holders of a majority in aggregate
principal amount of the Securities of such series Outstanding may on behalf of
the holders of all the Securities of such series waive any past 

 

 

default
or Event of Default under the Indenture with respect to such series and its
consequences, except a default in the payment of interest, if any, on the
Additional Amount or the principal amount, or premium, if any, on any of the
Securities of such series, or in the payment of any sinking fund installment or
analogous obligation with respect to Securities of such series.  Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
holders and owners of this Note and any Notes of this series which may be
issued in exchange or substitution herefor, irrespective of whether or not any
notation thereof is made upon this Note or such other Notes of this series.

Section 4.  Obligations
Unconditional.  No reference herein
to the Indenture and no provisions of this Note or of the Indenture shall alter
or impair the obligation of the Company, which is absolute and unconditional,
to pay the Additional Amount or the principal amount on this Note at the place,
at the respective times, at the rate, and in the coin or currency herein
prescribed.

Section 5.  Defeasance.  The Indenture contains provisions for the
discharge of the Indenture and defeasance at any time of the indebtedness on
this Note upon compliance by the Company with certain conditions set forth
therein, which provisions apply to this Note.

Section 6.  Authorized
Form and Denominations.  The Notes of
this series are issuable in registered form, without coupons.  Each Note will be issued initially as either
a Global Security or a Certificated Note, at the option of the Company, in
denominations of $1,000 or whole multiples of $1,000, either at the office or
agency to be designated and maintained by the Company for such purpose in the
Borough of Manhattan, New York City, pursuant to the provisions of the
Indenture or at any of such other offices or agencies as may be designated and
maintained by the Company for such purpose pursuant to the provisions of the
Indenture, and in the manner and subject to the limitations provided in the
Indenture, but without the payment of any service charge, except for any tax or
other governmental charges imposed in connection therewith.  Notes of this series are exchangeable for a
like aggregate principal amount of Notes of this series of a different
authorized denomination, except that Global Securities will not be exchangeable
for Certificated Notes of this series.

Section 7.  Registration
of Transfer.  As provided in the
Indenture and subject to certain limitations as therein set forth, the transfer
of this Note is registrable in the Security Register, upon surrender of this
Note for registration of transfer, at the Corporate Trust Office or agency in a
Place of Payment for this Note, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar requiring such written instrument of transfer duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.

If at any time the Depository notifies the Company
that it is unwilling or unable to continue as Depository or if at any time the
Depository shall no longer be eligible under the Indenture, the Company shall
appoint a successor Depository.  If a
successor Depository for the Notes of this series is not appointed by the
Company within 90 days after the Company receives such notice or becomes aware
of such ineligibility, the Company will issue, and the Trustee will 

 

 

authenticate
and deliver, Notes of this series in definitive form in an aggregate principal
amount equal to the principal amount of this Note.

No service charge shall
be made for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.

Prior to due presentment of this Note for registration
of transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the person in whose name this Note is registered as the owner hereof
for all purposes, and neither the Company nor the Trustee nor any agent of the
Company or of the Trustee shall be affected by any notice to the contrary.

Section 8.  Events
of Default.  If an Event of Default
with respect to Notes of this series shall occur and be continuing, the amount
that may be declared due and payable upon any acceleration of the notes will be
determined by the calculation agent and will equal, for each note, the
principal amount plus the Additional Amount (if any) deemed to have
accrued for the period from and including the Start Date to but excluding the
date of early repayment calculated on the basis of a 360-day year consisting of
12 months of 30 days each, and, in the case of an incomplete month, the number
of days elapsed.  If a bankruptcy proceeding is commenced in respect of
the Company, the claim of the beneficial owner of a note will be capped at the
principal amount plus the Additional Amount (if any) deemed to have
accrued for the period from and including the Start Date to but excluding the
date of early repayment calculated on the basis of a 360-day year consisting of
12 months of 30 days each, and, in the case of an incomplete month, the number
of days elapsed.

Section 9.  No
Recourse Against Certain Persons.  No
recourse for the payment of the Additional Amount or for any claim based hereon
or otherwise in respect hereof, and no recourse under or upon any obligation,
covenant or agreement of the Company in the Indenture or any Indenture
supplemental thereto or in any Note, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise,
all such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released.

Section 10.  Defined Terms.  All terms used but not defined in this Note
are used herein as defined in the Indenture.

Section 11.  GOVERNING LAW.  THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.Exhibit 10.1

 

CONFORMED COPY

STOCK PURCHASE AGREEMENT

 

BY AND AMONG

 

THE SHAREHOLDERS OF FEDERAL MARKETING CORP.,

 

d/b/a CREATIVE HOMEOWNER,

 

COURIER CORPORATION

 

as Buyer

 

AND

 

FEDERAL MARKETING CORP.,

 

d/b/a CREATIVE HOMEOWNER

 

April 27, 2006

 

 

STOCK PURCHASE AGREEMENT

 

THIS
STOCK PURCHASE AGREEMENT (this “Agreement”), entered into on April 27, 2006, is
by and among Courier Corporation, a Massachusetts corporation (the “Buyer”),
Allan R. Blair, an individual and resident of Connecticut (“A. Blair”),
Henry G. Toolan, an individual and resident of New Jersey (“H. Toolan”),
Brian H. Toolan, an individual and resident of New Jersey (“B. Toolan,
and together with A. Blair and H. Toolan, the “Shareholders”), and
Federal Marketing Corp., d/b/a Creative Homeowner, a New Jersey corporation
(the “Company”). The Buyer, the Shareholders and the Company are
referred to individually as a “Party” and collectively herein as the “Parties”.

 

This
Agreement contemplates a transaction in which the Buyer will purchase one hundred
percent (100%) of the issued and outstanding shares of capital stock of the
Company (the “Shares”) from the Shareholders (the “Acquisition”).

 

Now,
therefore, in consideration of the premises and the mutual promises herein
made, and in consideration of the representations, warranties and covenants
herein contained, the Parties agree as follows:

 

1. (a)  Definitions.

 

“Accounts
Receivable” has the meaning set forth in §3(k), below.

 

 “Acquisition” has the
meaning set forth in the preface, above.

 

 “Affiliate” has the meaning
set forth in Rule 12b-2 of the regulations promulgated under the Securities
Exchange Act.

 

“Agreement”
has the meaning set forth in the preface, above.

 

“Ancillary
Agreements” refers to any other agreements and instruments to
be executed and delivered in connection with this Agreement.

 

“Applicable
Limitation Date” has the meaning set forth in §9(e), below.

 

 

 “Best Efforts” means the
efforts that a prudent Person desirous of achieving a result would use in
similar circumstances to achieve that result as expeditiously as possible,
provided, however, that a Person required to use Best Efforts under this
Agreement will not be thereby required to take actions that would result in a
material adverse change in the benefits to such Person of this Agreement and
the Acquisition or to dispose of or make any change to its business, expend any
material funds or incur any other material burden.

 

“Business
Day” means a day other than (a) Saturday, (b) Sunday or (c) a
day on which banks are not required to be open or are authorized to close in
New York City, New York.

 

“Buyer”
has the meaning set forth in the preface, above.

 

“Buyer
Indemnitees” has the meaning set forth in §9(a), below.

 

“Cash
and Cash-Equivalents” means the Company’s (i) cash on hand,
in banks or other depositories, (ii) marketable securities, and (iii) any other
similar investments or accounts determined in accordance with GAAP.

 

“Claim
Notice” has the meaning set forth in §9(h), below.

 

“Closing”
has the meaning set forth in §2(c), below.

 

“Closing
Date” has the meaning set forth in §2(c), below.

 

“Closing
Date Designated Indebtedness” has the meaning set forth in
§8(a)(xii), below.

 

“Closing
Financial Statements” has the meaning set forth in §2(f),
below.

 

“Code”
means the Internal Revenue Code of 1986, as amended or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.

 

“Company”
has the meaning set forth in the preface, above.

 

“Company Contract”
means any Contract (a) under which the Company has or may acquire any rights or
benefits; (b) under which the Company has or may become subject to any
obligation or Liability; or (c) by which the Company or any of the assets owned
or used by the Company is or may become bound.

 

 “Company Intellectual Property”
has the meaning set forth in §3(h), below.

 

 “Competitive Activities” has
the meaning set forth in §6(d), below.

 

 “Contract” means any
agreement, contract, lease, consensual obligation, promise or undertaking
(whether written or oral).

 

 

 “Disclosure Schedule” has
the meaning set forth in §3, below.

 

“Employee
Benefit Plan” means each “employee benefit plan” (as defined
in §3(3) of ERISA) and each other employee benefit plan, program or
arrangement, including all stock option plans, stock purchase plans, bonus or
incentive award plans maintained or sponsored by the Company and each ERISA
Affiliate.

 

“Employees”
has the meaning set forth in §3(t), below.

 

“Encumbrances”
means any security interest, lien, pledge, charge, escrow, option, mortgage,
hypothecation, prior assignment, title retention agreement, indenture, security
agreement or any other encumbrance of any kind.

 

“Environmental
Claims” has the meaning set forth in §3(q), below.

 

“Environmental
Condition” means any condition involving Regulated Substances with respect
to surface or subsurface soil, ambient or indoor air, surface waters,
groundwater, leachate, run-off, stream or other sediments or similar
environmental medium, which condition has caused, or may cause, injury or
damage or requires investigation or remedial or corrective action or compliance
with permit requirements, standards, rules, regulations, ordinances or other
Environmental, Health, and Safety Requirements, as required, interpreted or
applied by governmental entities.

 

“Environmental,
Health, and Safety Requirements” shall mean any and all laws,
ordinances, statutes, codes, rules, regulations, orders, judicial decisions,
directives, guidance, permits or licenses or other Legal Requirements
addressing environmental, health or safety issues or requirements of or by
federal, state, local or other political subdivision exercising jurisdiction
over public health and safety, worker health and safety, and pollution or
protection of the environment, including all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous or toxic materials,
hazardous substances or hazardous and solid wastes, such as, but not limited
to, the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. 9601 et  seq. (“CERCLA”); the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et  seq. (“RCRA”); the Hazardous
Material Transportation Act, 49 U.S.C. 1801 et seq.; the Toxic
Substances Control Act, 15 U.S.C. 2601 et  seq., (“TSCA”); the
Clean Air Act, 42 U.S.C. 7401 et  seq.; the Federal Water
Pollution Control Act, 33 U.S.C. 1251 et  seq.; the Safe Drinking
Water Act, 42 U.S.C. 300f et  seq.; the Occupational Safety and
Health Act, 29 U.S.C. 651 et  seq. (“OSHA”) and all similar state
and local Legal Requirements, all as presently in effect.

 

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

 

“ERISA
Affiliate” means each entity that is treated as a single
employer with the Company for purposes of Code §414.

 

 

“Estimated Closing
Date Working Capital” has the meaning set forth in §2(f), below.

 

“Final Closing Date
Working Capital” has the meaning set forth in §2(f), below.

 

“Final Working Capital
Adjustment” has the meaning set forth in §2(f), below.

 

“Financial
Statements” has the meaning set forth in §3(e), below.

 

“GAAP”
means United States generally accepted accounting principles consistently
applied as in effect from time to time.

 

“Indebtedness”
means, with respect to any Person, (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person issued or assumed as the deferred purchase price of property, (d) all
conditional sale obligations and all obligations of such Person under any title
retention agreement (other than capital leases and trade payables incurred in
the Ordinary Course of Business), (e) all letters of credit, banker’s
acceptances or similar credit transactions (including reimbursement obligations
in respect thereof) issued on behalf of such Person, (f) all guarantees and
other contingent obligations of such Person in respect of indebtedness referred
to in clauses (a) through (e) above, (g) all indebtedness of another Person of
the type referred to in clauses (a) through (f) above which is secured by any
Encumbrance on any property of such Person and (h) all obligations under
hedging obligations of such Person.

 

“Indemnified
Party” has the meaning set forth in §9(h), below.

 

“Indemnifying
Party” has the meaning set forth in §9(h), below.

 

“Independent
Accountants” has the meaning set forth in §2(f), below.

 

“Initial Working
Capital Adjustment” has the meaning set forth in §2(f), below.

 

“Intellectual
Property” means any patent (including all reissues,
divisions, continuations and extensions thereof), patent application, patent
right, invention, trademark, trademark registration, trademark application,
service mark, trade name, business name, brand name, copyright, copyright
registration, design, design registration, know-how, trade secret, confidential
information, or any right to any of the foregoing.

 

“Inventories”
means all inventories of the Company wherever located, including all finished
goods, work in process, raw materials, spare parts and all other materials and
supplies to be used or consumed by the Company in the production of finished
goods.

 

“IRS”
means the United States Internal Revenue Service and, to the extent relevant,
the United States Department of the Treasury.

 

 

“Knowledge” - an
individual will be deemed to have “Knowledge” of a particular fact or other
matter if such individual is actually aware of such fact or other matter. The
Shareholders will be deemed to have “Knowledge” of a particular fact or other
matter if any Shareholder or Richard Weisman has, or at any time had, Knowledge
of such fact or other matter.

 

“Lease”
means that certain lease by and between the Company and Thomas Minor
Associates, LLC, in substantially the form attached hereto as Exhibit 1(a)
to be dated of as of the Closing Date.

 

“Legal
Requirement” means any federal, state, local, municipal or
other constitution, law, ordinance, principle of common law, code, regulation,
statute or treaty of the United States or any jurisdiction within the United
States.

 

“Liability”
means, with respect to any Person, any liability or obligation of such Person
of any kind, character or description, whether known or unknown, absolute or
contingent, accrued or unaccrued, disputed or undisputed, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, and
whether or not the same is required to be accrued on the financial statements
of such Person.

 

 “Losses” has the meaning set
forth in §9(b), below.

 

“Material
Adverse Effect” on or with respect to the Company means any
event or occurrence (any such item, an “Effect”) that (a) is materially
adverse to the assets, financial condition or results of operations of the
Company, other than an Effect to the extent resulting from changes (i)
affecting the United States of America’s economy in general, (ii) generally
affecting the industries in which the Company operates, except, in the case of
clauses (i) and (ii) above, if the Effect materially and disproportionately
impacts the Company, (iii) as a result of the announcement or pendency of the
Acquisition, or (iv) from compliance by the Company with the terms of, or the
taking of any action contemplated or permitted by, this Agreement; (b) prevents
or materially impedes or delays the consummation of the transactions
contemplated by this Agreement; or (c) has a material adverse effect on the
ability of the Company to perform its obligations under this Agreement and the
Ancillary Agreements. “Material Adverse Effect” on or with respect to
the Buyer means any Effect that (a) prevents or materially impedes or delays
the consummation of the transactions contemplated by this Agreement or (b) has
a material adverse effect on the ability of the Buyer to perform its
obligations under this Agreement and the Ancillary Agreements.

 

“Material
Contracts” has the meaning set forth in §3(i), below.

 

“Most
Recent Balance Sheet” has the meaning set forth in §3(e),
below.

 

“Most
Recent Financial Statements” has the meaning set forth in
§3(e), below.

 

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

 

 

“Net
Designated Indebtedness” shall mean the unpaid Indebtedness
of the Company under the VNB Loan and the Shareholder Loans, if any, reduced by
the amount of Cash and Cash-Equivalents.

 

 “Ordinary Course of Business”
means the ordinary course of business of the Company consistent with past
custom and practice.

 

“Party”
has the meaning set forth in the preface, above.

 

“Permits”
has the meaning set forth in §3(l), below.

 

“Permitted
Encumbrances” means (i) liens for Taxes, assessments and
other governmental charges not yet due and payable; (ii) mechanics’, workmen’s,
repairmen’s, warehousemen’s, carriers’ or other like liens arising or incurred
in the Ordinary Course of Business, and equipment leases with third parties
entered into in the Ordinary Course of Business; and (iii) with respect to any
real property leased by the Company: (a) easements, quasi-easements, licenses,
covenants, rights-of-way and other similar restrictions, including without
limitation any other agreements, conditions or restrictions, in each case,
which are a matter of public record, (b) any conditions that would be shown by
a current survey or physical inspection and (c) zoning, building and other
similar restrictions pursuant to any applicable Legal Requirements;

 

“Person”
means an individual, a general or limited or limited liability partnership, a
corporation, a limited liability company, an association, a joint stock
company, a trust, an estate, a joint venture, an unincorporated organization,
any other entity or a governmental entity (or any department, agency, or
political subdivision thereof).

 

“Pre-Closing Tax
Period” means any taxable period ending on or before the Closing Date and
the portion through the end of the Closing Date for any taxable period that
includes (but does not end on) the Closing Date.

 

“Post-Closing Tax
Period” means any taxable period beginning after the Closing Date and the
portion beginning on the day after the Closing Date for any taxable period that
includes (but does not end on) the Closing Date.

 

“Proceeding”
means any action, suit, litigation, arbitration, proceeding, prosecution,
contest, hearing, audit, inquiry, or investigation (whether civil, criminal,
administrative, investigative or appellate) that is or has been commenced,
brought, conducted or heard, at law or in equity, before any governmental
entity.

 

“Purchase
Price” has the meaning set forth in §2(b), below.

 

“Record”
means information that is inscribed on a tangible medium or that is stored in
an electronic or other medium and is retrievable in perceivable form.

 

 

“Regulated
Substance” means any hazardous substance, hazardous
material,  toxic substance, dangerous
substance, pesticide, pollutant, contaminant, chemical, gasoline, petroleum or
petroleum product, asbestos, PCBs, radioactive material (including by-product,
source, and/or special nuclear material), radon, urea-formaldehyde, flammable
material, explosive, solid waste, municipal waste, industrial waste and
hazardous waste or words of similar import that are defined as such or are
subject to regulation under any applicable Environmental, Health, and Safety
Requirement.

 

“Related Person”
means with respect to a particular individual:

 

1.             each
other member of such individual’s Family,

 

2.             any
Person that is directly or indirectly controlled by any one or more members of
such individual’s Family,

 

3.             any
Person in which members of such individual’s Family hold (individually or in
the aggregate) a Material Interest, and

 

4.             any
Person with respect to which one or more members of such individual’s Family
serves as a director, officer, partner, executor or trustee (or in a similar
capacity);

 

and, with respect to a
specified Person other than an individual:

 

5.             any
Person that directly or indirectly controls, is directly or indirectly
controlled by or is directly or indirectly under common control with such
specified Person,

 

6.             any
Person that holds a Material Interest in such specified Person,

 

7.             each
Person that serves as a director, officer, partner, executor or trustee of such
specified Person (or in a similar capacity),

 

8.             any
Person in which such specified Person holds a Material Interest, and

 

9.             any
Person with respect to which such specified Person serves as a general partner
or a trustee (or in a similar capacity).

 

For purposes of this
definition, (a) “control” (including “controlling,” “controlled by,” and “under
common control with”) means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise,
and shall be construed as such term is used in the rules promulgated under the
Securities Act; (b) the “Family” of an individual includes (i) the individual,
(ii) the individual’s spouse, (iii) any other natural person who is related to
the

 

 

individual or the
individual’s spouse within the second degree and (iv) any other natural person
who resides with such individual; and (c) “Material Interest” means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act) of voting securities or other voting interests representing at
least ten percent (10%) of the outstanding voting power of a Person or equity
securities or other equity interests representing at least ten percent (10%) of
the outstanding equity securities or equity interests in a Person.

 

“Securities
Act” means the Securities Act of 1933, as amended.

 

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

 

“Shareholder
Indemnitees” has the meaning set forth in §9(a), below.

 

“Shareholder
Loans” means the principal balance outstanding (together with
accrued and unpaid interest) as of the date of determination under those
certain loans (if any) made by the Shareholders to the Company to pay those
certain costs and expenses described in §11(k), each of which loans is
evidenced by a duly authorized, executed and delivered promissory note from the
Company in favor of such Shareholders.

 

“Shareholders”
has the meaning set forth in the preface, above.

 

“Straddle
Period” means any taxable period that begins on or before and
ends after the Closing Date.

 

“Subsidiary”
means any entity with respect to which a specified Person (or a Subsidiary thereof)
owns a majority of the ownership interest in or has the power to vote or direct
the voting of sufficient securities to elect a majority of the directors.

 

“Tangible
Personal Property” means all machinery, equipment, tools,
furniture, office equipment, computer hardware, supplies, materials, vehicles
and other items of tangible personal property (other than Inventories) of every
kind owned or leased by the Company (wherever located and whether or not
carried on the Company’s books and Records), together with any express or
implied warranty by the manufacturers or sellers or lessors of any item or
component part thereof and all maintenance records and other documents relating
thereto.

 

“Target
Working Capital” means $4,873,413.

 

“Tax(es)”
shall mean any federal, state, local, foreign or other tax, levy, impost, fee,
assessment or other government charge, including income, estimated income,
business, occupation, franchise, property, payroll, personal property, real
estate, sales, transfer, use, employment, commercial rent, occupancy, franchise
or withholding taxes and any premium, including interest, penalties and
additions in connection therewith.

 

“Tax
Claim” has the meaning set forth in §9(h), below.

 

 

“Tax
Proceeding” has the meaning set forth in §9(a), below.

 

“Tax
Return” shall mean any report, return, document, declaration,
amendment or other information or filing required to be supplied to any taxing
authority or jurisdiction (foreign or domestic) with respect to Taxes,
including information returns, any documents with respect to or accompanying
payments of estimated Taxes, or with respect to or accompanying requests for
the extension of time in which to file any such report, return, document,
declaration or other information.

 

“Third
Party Claim” has the meaning set forth in §9(h), below.

 

“VNB
Loan” means the principal balance outstanding (together with
accrued and unpaid interest) as of the date of determination of any and all
Indebtedness owing by the Company to Valley National Bank.

 

“Working
Capital” means, as of the date of determination, the amount equal to the
difference between the Company’s (a) Cash and Cash-Equivalents, accounts
receivable, inventories and other current assets (other than Tax assets and/or
Tax refunds) and (b) current liabilities (other than the Net Designated
Indebtedness and/or any current Tax liabilities), as determined in accordance
with GAAP. For the avoidance of doubt, the Parties agree and acknowledge that,
with respect to the foregoing definition, “current liabilities” shall not
include any liabilities described on §3(p) of the Disclosure Schedule relating
to the operational defects of the Plan (as defined in Exhibit 9(b)(iv);
provided that the Company shall be fully indemnified by the Shareholders for
all such liabilities as contemplated by §9(b)(iv).

 

 (b)          Exhibits
and Schedules; Interpretation. When a reference is made in this Agreement
to a Party or to an Article, Section, Exhibit or Schedule, such reference shall
be to a Party to, an Article or Section of, or an Exhibit or Schedule to, this
Agreement unless otherwise indicated. All Exhibits and Schedules annexed hereto
or referred to herein are hereby incorporated in and made part of this
Agreement as if set forth in full herein. Any table of contents and the headings
contained in this Agreement, or any Exhibit or Schedule to this Agreement, are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words “include”, “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation.”  The
words “hereof”, “herein” and “hereunder” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. “Dollars” and the sign “$” mean United
States Dollars; any foreign currency shall be converted into United States
Dollars using the prevailing exchange rates in effect as of the Closing Date.
All terms defined in this Agreement shall have the defined meaning when used in
any Exhibit or Schedule annexed hereto, or any certificate or other document
made or delivered pursuant hereto, unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms.

 

 

2. Basic Transaction.

 

(a)           Purchase
and Sale of Shares. On and subject to the terms and conditions of this
Agreement, Buyer agrees to purchase from each of the Shareholders and each of
the Shareholders agrees to sell, convey, assign, transfer and deliver to Buyer
at the Closing, free and clear of any Encumbrances, all right, title and
interest in and to the Shares held by such Shareholder.

 

(b)           Purchase
Price; Payment of Indebtedness. (i) Subject to the Working Capital
Adjustment as provided in §2(f) below, the Buyer agrees to pay to the
Shareholders at the Closing an aggregate purchase price of THIRTY SEVEN MILLION
AND NO/100 Dollars ($37,000,000.00) less the Net Designated Indebtedness
determined as of the Closing Date (the “Purchase Price”) by delivery of
the Purchase Price by wire transfer or delivery of other immediately available
funds to such accounts as the Shareholders shall designate in written notices
delivered to the Buyer not less than two (2) Business Days prior to the Closing
Date. The Purchase Price shall be allocated among the Shareholders as follows:
(A) 50% to A. Blair; (B) 40% to H. Toolan, and (C) 10% to B. Toolan. (ii) At
the Closing, the Buyer shall remit and pay in full the Closing Date Designated
Indebtedness pursuant to instructions issued by the Company.

 

(c)           The
Closing. The closing of the transactions contemplated by this Agreement
(the “Closing”) shall take place at the offices of Goodwin Procter LLP
in New York City, New York, on April 27, 2006, commencing at 10:00 a.m. local
time, or such earlier date following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other date and time
as the Parties may mutually determine and the actual effective time of the
Closing shall be 11:59 p.m. (New York Time) on the date of the Closing (the “Closing
Date”).

 

(d)           Deliveries
at the Closing. At the Closing, (i) the Shareholders and the Company (as
applicable) will deliver to the Buyer the various certificates, instruments and
documents referred to in §8(a) below; (ii) the Buyer will deliver to the Shareholders
and the Company (as applicable) the various certificates, instruments and
documents referred to in §8(b) below; (iii) the Shareholders and the Company
(as applicable) will execute, acknowledge (if appropriate) and deliver to the
Buyer (A) certificates representing the Shares, duly endorsed in blank or
accompanied by stock powers, duly endorsed in blank by or on behalf of each
Shareholder; (B) a certificate of non-foreign status pursuant to Treasury
Regulations Section 1.1445-2(b)(2) from each Shareholder, substantially in the
form of the sample certification contained in Treasury Regulations Section
1.1445-2(b)(2)(iv), certifying that each such Shareholder is not a foreign
person, (C) with respect to the Company, an IRS Form 8023 (and any comparable
state or local Tax form) reflecting a Section 338(h)(10) election for the
Company duly executed by each Shareholder, and (D) such other instruments of
sale, transfer, conveyance and assignment with respect to the Shares as the
Buyer and its counsel may reasonably request consistent with the terms of this
Agreement and in order for Buyer to realize the full benefit of the
transactions contemplated hereby; and (iv) the Buyer will execute, acknowledge
(if appropriate) and deliver

 

 

to the Shareholders (A) the Purchase Price specified
in §2(b) above and (B) such other instruments as the Shareholders may
reasonably request consistent with the terms of this Agreement and in order for
the Shareholders to realize the full benefit of the transactions contemplated
hereby.

 

(e)           Purchase
Price Allocation for  Tax Purposes. The Shareholders, the Company and
the Buyer agree to allocate the Purchase Price (which, for purposes of this
§2(e) shall include all amounts treated as consideration for federal income tax
purposes) in accordance with the following provisions of this §2(e). Except as
otherwise required pursuant to a determination under Section 1313(a) of the
Code (or any similar provision of state or local Legal Requirement), the
Shareholders, the Company and Buyer shall adopt and utilize for all Tax
purposes the asset values based upon the provisions of Exhibit 2(e) for
all Class I, II, III, IV and V assets of the Company and any remaining amounts
of Purchase Price shall be allocated towards goodwill, intangibles and other
Class VI and VII assets (the “Remaining Allocation”). Subject to the foregoing,
the buyer shall be permitted to allocate portions of the Remaining Allocation
towards various Class VI and VII assets (the “Appraised Assets”) as determined
by an appraiser selected by Buyer, pursuant to an appraisal of the Appraised
Assets conducted after the Closing Date. Such appraisal of the Appraised Assets
shall be performed in accordance with the provisions of Sections 338(h)(10) and
1060 of the Code, and the Treasury Regulations thereunder, and at the Buyer’s
sole cost and expense. In any Tax Proceeding, none of the Shareholders, the
Company or the Buyer shall contend or represent that such allocation is not a
correct allocation. References herein to Class I, II, III, IV, V, VI and VII
assets shall be defined in accordance with the “Instructions for Form 8883”
published by the IRS.

 

(f)            Working
Capital Adjustment.

 

(i)            The
Shareholders shall estimate in good faith the Company’s Working Capital
immediately prior to the Closing (the “Estimated Closing Date Working
Capital”). In the event the Estimated Closing Date Working Capital is less than
Target Working Capital, the Purchase Price to be paid by the Buyer at the
Closing shall be adjusted downwards by the amount of such difference (the
“Initial Working Capital Adjustment”).

 

(ii) Following the
Closing Date, Buyer shall prepare financial statements (“Closing Financial
Statements”) of the Company as of the Closing Date prepared in accordance with
GAAP and in a manner consistent with the Company’s 2005 Financial Statements.
Buyer shall then determine the Working Capital as of the Closing Date (the
“Final Closing Date Working Capital”) based upon the Closing Financial
Statements. Within one hundred twenty (120) days following the Closing Date,
Buyer shall deliver to the Shareholders the Closing Financial Statements and
its determination of the Final Closing Date Working Capital (and, in the event
that the Final Closing Date Working Capital is less than or greater than the
Estimated Closing Date Working Capital, (x) the amount by which the Final
Closing Date Working Capital is less than the lesser of the Target Working
Capital or the Estimated Closing Date Working

 

 

Capital, or (y) the amount by which the Final Closing
Date Working Capital is greater than the Estimated Closing Date Working
Capital, as the case may be (provided that for the purposes of the calculation
in clause (y), the Final Closing Date Working Capital shall not be greater than
the Target Working Capital.)  The amount
of such shortfall or excess shall be referred to herein as the “Final Working
Capital Adjustment”.

 

(iii)          If,
within thirty (30) days following delivery of the Closing Financial Statements
and the Final Closing Date Working Capital and Final Working Capital Adjustment
calculations, the Shareholders have not given Buyer written notice of their
objection as to the Final Closing Date Working Capital calculation or Final
Working Capital Adjustment calculation (which notice shall state the basis of
Shareholders’ objections), then the Final Closing Date Working Capital and the
Final Working Capital Adjustment, if any, calculated by Buyer shall be final,
binding and conclusive on the Parties.

 

(iv)          If
the Shareholders duly give Buyer such notice of objection, and if the
Shareholders and Buyer fail to resolve the issues outstanding with respect to
the Closing Financial Statements and the calculation of the Final Closing Date
Working Capital and the Final Working Capital Adjustment, if any, within thirty
(30) days of Buyer’s receipt of the Shareholders’ objection notice, the
Shareholders and Buyer shall submit the issues remaining in dispute to
Ernst & Young LLP, independent public accountants, or such other
independent public accountants as to which the Buyer and the Shareholders
mutually agree (the “Independent Accountants”) for resolution. If issues are
submitted to the Independent Accountants for resolution, (i) the Shareholders
and Buyer shall furnish or cause to be furnished to the Independent Accountants
such work papers and other documents and information relating to the disputed
issues as the Independent Accountants may request and are available to that
party or its agents and shall be afforded the opportunity to present to the
Independent Accountants any material relating to the disputed issues and to
discuss the issues with the Independent Accountants; (ii) the determination by
the Independent Accountants, as set forth in a notice to be delivered by the
Independent Accountants to the Shareholders and Buyer within sixty (60) days of
the submission to the Independent Accountants of the issues remaining in
dispute, shall be final, binding and conclusive on the Parties and shall be
used in the calculation of the Final Closing Date Working Capital and the Final
Working Capital Adjustment; if any, and (iii) the Shareholders, on the one
hand, and Buyer, on the other hand, will each bear fifty percent (50%) of the
fees and costs of the Independent Accountants for such determination.

 

(iv)          If
the Final Working Capital Adjustment results in an amount due to the Buyer, on
the one hand, or the Shareholders, on the other hand, then the Part(ies)
responsible for the payment of the Final Working Capital Adjustment shall pay
the amounts due by wire transfer of immediately available United States funds
to an account specified by Buyer, or to the accounts previously designated by
the Shareholders pursuant to §2(b) and in accordance with the allocations set
forth therein. The foregoing payments shall be made within three (3) business
days after the calculation of the Final Closing Date Working Capital and the
Final Working Capital Adjustment, if any, together with interest at the rate of
six percent (6%) per annum,

 

 

which interest shall begin accruing on the Closing Date
and end on the date that the payment(s) are made.

 

3. Representations and
Warranties of the Shareholders. Except as set forth in the disclosure
schedule accompanying this Agreement (the “Disclosure Schedule”), the
Shareholders jointly and severally represent and warrant to the Buyer as
follows:

 

(a)           Organization
and Standing of the Company. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of New
Jersey. The Company has full corporate power and authority to own and operate
its properties, and to conduct its business as currently conducted. The Company
is qualified to do business in each jurisdiction in which the nature of its
business or the ownership of its properties makes such qualification necessary.
A list of the jurisdictions in which the Company is so qualified is set forth
on §3(a) to the Disclosure Schedule. The Company has made available to Buyer
complete and correct copies of its organizational documents, amended to date,
the corporate minute books containing the records of meetings of the
stockholders and board of directors, the stock certificate books of the Company
and each outstanding stock certificate. The stock certificate books of the
Company made available to Buyer are complete and correct in all respects and
accurately reflect the ownership of all of the outstanding equity securities of
the Company.

 

(b) Authority;
Execution and Delivery; Enforceability. (i) The Company has full corporate
power and authority to execute this Agreement and each of the Ancillary
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Company of
this Agreement and the Ancillary Agreements to which it is a party have been
duly authorized by all necessary action on the part of the Company. The Company
has duly executed and delivered this Agreement and at the Closing will have
duly executed and delivered each Ancillary Agreement to which it is a party,
and this Agreement constitutes, and each Ancillary Agreement to which it is a
party will after the execution thereof constitute, its legal, valid and binding
obligation. (ii) Each of the Shareholders has full legal capacity to execute
this Agreement and each of the Ancillary Agreements to which such Shareholder
is a party and to consummate the Acquisition and the other transactions
contemplated hereby and thereby. The execution and delivery by each Shareholder
of this Agreement and the Ancillary Agreements to which each such Shareholder
is a party has been duly authorized by all necessary action on the part of each
Shareholder. Each Shareholder has duly executed and delivered this Agreement
and at the Closing will have duly executed and delivered each Ancillary
Agreement to which such Shareholder is a party, and this Agreement constitutes,
and each Ancillary Agreement to which such Shareholder is a party will after
the execution thereof constitute, such Shareholder’s legal, valid and binding
obligation.

 

(c)           Capitalization;
Other Agreements as to Shares; Ownership of Securities; Subsidiaries. (i)
All of the Shares of the Company are owned beneficially and of record by the
Shareholders as set forth in §3(c) of the Disclosure Schedule. The Shares to be
purchased by the Buyer constitute all of the equity securities of the Company.
(ii) There are no outstanding options, warrants, rights, subscriptions, stock
appreciation rights, phantom stock rights, calls,

 

 

puts, restrictions, agreements, contracts,
commitments, understandings, arrangements or other rights of any kind to
acquire, or obligations to issue, sell, purchase or otherwise acquire or retire
any shares of capital stock in the Company or by which the Company or the
Shareholders are bound, or outstanding securities convertible into or
exchangeable or exercisable for any shares of capital stock of or other equity
interest in the Company. All of the issued and outstanding Shares are duly
authorized, validly issued, fully paid and nonassessable. None of the Company
or the Shareholders is a party to any: (A) voting trusts, proxies or other
Contracts, arrangements or understandings with respect to the voting of any
Shares; (B) Contracts, arrangements or understandings restricting the sale or
transfer of any Shares; (C) preemptive or anti-dilutive rights or rights of
first offer or first refusal or “tag-along”, “drag-along” or similar rights
with respect to any Shares; or (D) rights with respect to registration under
securities laws with respect to any Shares. There are no dividends or other
distributions on any of the Shares that have been declared but remain unpaid.
(iii) The Shareholders are, and at Closing will be, the owners, lawfully,
beneficially and of record, of the Shares, free and clear of any Encumbrances.
(iv) Except as set forth on §3(c) of the Disclosure Schedule, the Company has
never had nor currently has any Subsidiaries.

 

(d)           No
Conflicts; Consents. Neither the execution and the delivery of this
Agreement or any Ancillary Agreement, nor the consummation of the transactions
contemplated hereby or thereby (including the transfer of the Shares), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other Legal Requirement or restriction of any
government, governmental agency, or court to which the Shareholders or the
Company is subject or any provision of the certificate of incorporation or
bylaws of the Company or (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Shareholders or the Company is a party or by which they are bound or to
which any of their respective assets is subject (or result in the imposition of
any Encumbrance (other than a Permitted Encumbrance)) upon any of their
respective assets. None of the Shareholders or the Company needs to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement or any Ancillary
Agreements (including the transfer of the Shares).

 

(e)           Financial
Statements; Undisclosed Liabilities; Funded Debt. (i) Attached hereto as Exhibit
3(e) are the following financial statements (collectively the “Financial
Statements”): (a) the audited balance sheets and statements of income,
changes in stockholders’ equity and cash flow as of and for the fiscal years
ended December 31, 2003, December 31, 2004 and December 31, 2005 (the December
31, 2005 audited balance sheet being herein sometimes called the “Audited
Balance Sheet”) of the Company, in each case together with the unqualified
report of the Company’s independent public accountants for such respective
periods; and (b) the unaudited balance sheet (the “Most Recent Balance Sheet”)
and statement of income as of and for the three (3) month(s) ended March
31,  2006 of the Company (the Financial
Statements in this clause (b) being referred to collectively as the “Most
Recent Financial Statements”). The Financial

 

 

Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and present fairly the financial condition of the
Company as of such dates and the results of operations of the Company for such
periods; provided, however, that the Most Recent Financial Statements
are subject to normal year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse) and lack footnotes
(that, if presented, would not differ materially from those included in the
Audited Balance Sheet). The Financial Statements have been prepared from and
are in accordance with the accounting Records of the Company. Attached hereto
as Exhibit 3(e) are true and complete copies of all letters from the
Company’s auditors to the Company’s Board of Directors during the thirty-six
(36) months preceding the execution of this Agreement, together with copies of
all responses thereto.

 

                (ii)           The
Company does not have any liabilities of a nature and type required to be set
forth on a balance sheet prepared in accordance with GAAP or in the footnotes
thereto, except (A) as disclosed, reflected or reserved against in the Most
Recent Balance Sheet, or (B) for liabilities that have arisen since the date of
the Most Recent Balance Sheet in the Ordinary Course of Business and are
reflected in the Company’s accounting Records.

 

                (iii)          As
of the Closing Date, except for Closing Date Designated Indebtedness, the
Company will have no term or funded debt or bank loans or any other loans or
advances to any of the Shareholders, all of which Closing Date Designated
Indebtedness will be paid in full by Buyer in connection with the Closing.

 

(f)            Assets
Other than Real Property Interests. The Company has good and valid title to
(or with respect to assets that are leased, a valid leasehold interest in), the
assets reflected on the Most Recent Balance Sheet, other than those disposed of
since the date of the Most Recent Balance Sheet in the Ordinary Course of
Business, free and clear of all Encumbrances (other than Permitted Encumbrances).
Notwithstanding the foregoing, this §3(f) does not relate to matters with
respect to (and no representation or warranty is made hereunder in respect of)
(1) real property or interests in real property, which are the subject of
§3(g), or (ii) Intellectual Property, which is the subject of §3(h).

 

(g)           Real
Property. The Company owns no real property. §3(g) of the Disclosure
Schedule lists all real property leased or subleased by the Company. The
Company has delivered to the Buyer correct and complete copies of the leases
and subleases listed in §3(g) of the Disclosure Schedule. Except as set forth
on §3(g) of the Disclosure Schedule, each lease and sublease listed in §3(g) of
the Disclosure Schedule is in full force and effect.

 

(h)           Intellectual
Property. (i)  §3(h) of the
Disclosure Schedule sets forth (A) all patented and registered Intellectual
Property (or applications for patents or registrations thereof) owned, used, or
held for use by the Company, other than so-called “shrink-wrap” or other similar
license agreements relating to “off-the-shelf” commercially available computer
software licensed to the Company in the Ordinary Course of Business; (B) the
details of all unregistered trademarks, service marks, copyrights and trade
names owned, used or held for use by the

 

 

Company; and (C) all exclusive and non-exclusive
license agreements with respect to Intellectual Property to which the Company
is a party, other than licenses with an aggregate annual fee of less than
$10,000, other than so-called “shrink-wrap” or other similar license agreements
relating to “off-the-shelf” commercially available computer software licensed
to the Company in the Ordinary Course of Business (such Intellectual Property,
the “Company Intellectual Property”).

 

                (ii)           Except
as set forth in §3(h) of the Disclosure Schedule, the Company exclusively owns
or possesses the right to use, without payment to any other Person, all of the
Intellectual Property necessary for the operation of the business of the
Company as currently conducted, free and clear of any and all Encumbrances. To
the Knowledge of the Shareholders, the Company Intellectual Property is valid
and enforceable. No license of any kind has been granted with respect to use of
Company Intellectual Property. The Company is not bound by or a party to any
option, license, Contract or similar agreement relating to the Intellectual
Property of any other Person for the use of such Intellectual Property in the
conduct of the business of the Company, except for so-called “shrink-wrap” or
other similar license agreements relating to “off-the-shelf” commercially
available computer software licensed to the Company in the Ordinary Course of
Business. The Company Intellectual Property and the conduct of the business of
the Company as currently conducted does not violate, conflict with or infringe
the Intellectual Property of any other Person. Except as set forth in §3(h) of
the Disclosure Schedule, the Shareholders and the Company have received no
notice from a Person that would indicate that the Company Intellectual Property
is invalid and/or unenforceable. No claims are pending or, to the Knowledge of
the Shareholders, threatened against the Company by any Person with respect to
the ownership, validity, enforceability, effectiveness or use of any Company
Intellectual Property by the Company. To the Knowledge of the Shareholders,
there is no, nor has there been any, infringement or violation by any Person of
any of the Company Intellectual Property or the Company’s rights therein.

 

(i)            Contracts;
No Defaults.

 

§3(i) of the Disclosure
Schedule contains an accurate and complete list, and the Company has made
available to Buyer accurate and complete copies, of:

 

(1)           each
Company Contract that involves performance of services or delivery of goods or
materials by the Company of an amount or value in excess of twenty-five
thousand dollars ($25,000);

 

(2)           each
Company Contract that involves performance of services or delivery of goods or
materials to the Company of an amount or value in excess of twenty-five
thousand dollars ($25,000);

 

(3)           each
Company Contract that was not entered into in the Ordinary Course of Business
and that involves expenditures or receipts of the Company in excess of
twenty-five thousand dollars ($25,000);

 

 

(4)           each
Company Contract affecting the ownership of, leasing of, title to, use of or
any leasehold or other interest in any real or personal property (except
personal property leases and installment and conditional sales agreements
having a value per item or aggregate payments of less than twenty-five thousand
dollars ($25,000) and with a term of less than one year and any titles not
currently in print);

 

(5)           each
Company Contract with any labor union or other employee representative of a
group of employees relating to wages, hours and other conditions of employment;

 

(6)           each
Company Contract (however named) involving a sharing of , or payments based
upon, sales, purchases, profits, losses, costs or liabilities by the Company
with any other Person, excluding, however, any rebates, volume purchase
discounts, and other similar matters in the Ordinary Course of Business;

 

(7)           each
Company Contract containing covenants that in any way purport to restrict the
freedom of the Company to engage in any line of business or to compete with any
Person;

 

(8)           each
power of attorney of the Company that is currently effective and outstanding;

 

(9)           each
Company Contract entered into other than in the Ordinary Course of Business
that contains or provides for an express undertaking by the Company to be
responsible for consequential damages;

 

(10)         each
Company Contract for capital expenditures in excess of twenty-five thousand
dollars ($25,000);

 

(11)         each
Company Contract not denominated in U.S. dollars in excess of ten thousand
dollars ($10,000);

 

(12)         each
written warranty, guaranty and/or other similar undertaking with respect to
contractual performance extended by the Company other than in the Ordinary
Course of Business;

 

(13)         each
oral or written Company Contract relating to employment, severance or any
related matters; and

 

(14)         each
amendment, supplement and modification (whether oral or written) in respect of
any of the foregoing.

 

§3(i) of the Disclosure
Schedule sets forth reasonably complete details concerning such Contracts (herein,
the “Material Contracts”), including the parties to the Contracts, the amount
of

 

 

the remaining commitment
of the Company under the Contracts and the location of the Company’s office
where details relating to the Contracts are located.

 

Except as set forth in
§3(i) of the Disclosure Schedule, no Shareholder has or may acquire any rights
under, and no Shareholder has or may become subject to any Liability under, any
Contract that relates to the business of the Company.

 

Except as set forth in
§3(i) of the Disclosure Schedule:

 

(1)           each
Contract identified or required to be identified in §3(i) of the Disclosure
Schedule is in full force and effect and is valid and enforceable in accordance
with its terms, subject to (i) limitations imposed by bankruptcy,
reorganization, moratorium, insolvency and other Legal Requirements of general
application relating to or affecting the enforceability of contracts,
including, without limitation, limitations as to enforceability that may be
imposed under Section 548 of the United States Bankruptcy Code (the “Bankruptcy
Code”) and debtor/creditor Legal Requirements or other provisions of law
relating to fraudulent transfers and obligations; and (ii) equitable principles
limiting the availability of equitable remedies and otherwise limiting the
enforceability of other general terms and provisions; regardless as to any of
the above, whether the proceeding to enforce a Contract is at law or in equity;
and

 

(2)           each
Contract identified or required to be identified in §3(i) of the Disclosure
Schedule does not require the consent of any Person prior to or in connection
with the consummation of the Acquisition.

 

Except as set forth in
§3(i) of the Disclosure Schedule:

 

(1)           The
Company is, and at all times since January 1, 2003, has been, in compliance
with all applicable terms and requirements of each Company Contract;

 

(2)           each
other Person that has or had any obligation or Liability under any Company
Contract is, and at all times since January 1, 2005, has been, in compliance with
all applicable terms and requirements of such Company Contract;

 

(3)           to
the Knowledge of the Shareholders, no event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene, conflict with or
result in a breach of, or give the Company or other Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or
performance of, or payment under, or to cancel, terminate or modify, any
Company Contract; and

 

(4)           no
event has occurred or circumstance exists under or by virtue of any Contract
that (with or without notice or lapse of time) would cause the creation of any
Encumbrance (other than a Permitted Encumbrance) affecting any of the Company’s
assets.

 

There are no
renegotiations of, attempts to renegotiate or outstanding rights to renegotiate
any amounts paid or payable to the Company under current or completed Company

 

 

Contracts with any Person having the contractual or
statutory right to demand or require such renegotiation and no such Person has
made written demand for such renegotiation.

 

Each Contract relating to
the sale, design, manufacture or provision of products or services by the
Company has been entered into in the Ordinary Course of Business of the Company
and has been entered into without the commission of any act alone or in concert
with any other Person, or any consideration having been paid or promised, that
is or would be in violation of any Legal Requirement.

 

(j)            Inventories.
§3(j) of the Disclosure Schedule sets forth a list of the Company’s
Inventories as of the date hereof. The quantity and quality of the Company’s
Inventories and its current Inventories practices are adequate for the Company
to carry on its business as currently conducted. Such Inventories do not
include items that are obsolete or damaged, except for which reserves have been
established in accordance with GAAP.

 

(k)           Accounts
Receivable. All accounts receivable, notes receivable and other receivables
that are reflected on the Most Recent Balance Sheet or on the accounting
Records of the Company as of the Closing Date (collectively, the “Accounts
Receivable”) represent valid and enforceable obligations arising from sales
actually made or services actually performed by the Company in the Ordinary Course
of Business, and are subject to the reserves shown on the Most Recent Balance
Sheet (which reserves are adequate and established in accordance with GAAP);
provided, however that no representation or warranty is made by the
Shareholders as to the collectibility of any of the Accounts Receivable of the
Company. There is no contest, claim, defense or right of setoff, other than
returns and setoffs in the Ordinary Course of Business of the Company, under
any Contract relating to the amount or validity of such Accounts Receivable.
§3(k) of the Disclosure Schedule contains a complete and accurate list of all
Accounts Receivable as of the date hereof, which list sets forth the aging of
each such Account Receivable.

 

(l)            Permits.
§3(l) of the Disclosure Schedule sets forth all certificates, licenses,
permits, authorizations and approvals (collectively, the “Permits”)
issued or granted to the Company. The Company possesses all Permits necessary
to own or operate its properties and to conduct its business as currently
conducted None of such Permits will be subject to suspension, modification,
revocation or nonrenewal as a result of the execution and delivery of this
Agreement or the consummation of the Acquisition. Notwithstanding the
foregoing, this §3(l) does not relate to (and no representation or warranty is
made under this §3(l) in respect of) environmental, health or safety matters,
which are the subject of §3(q).

 

(m)          Legal
Compliance. The Company has complied with all applicable Legal Requirements
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings and charges thereunder) of federal, state and local
governments (and all agencies thereof). Notwithstanding the foregoing, this
§3(m) does not relate to matters with respect to (and no representation or
warranty is made under this §3(m) in respect of) (i) Taxes, which are the
subject of §3(n), (ii) employee benefit matters, which are the subject of
§3(p), (iii)

 

 

environmental, health or safety matters, which are the
subject of §3(q) and (iv) employee matters which are the subject of §3(t).

 

(n)           Tax
Matters.

 

(i)            The
Company has timely filed or will file or cause to be timely filed all Tax
Returns required by applicable Legal Requirement to be filed by it prior to or
as of the Closing Date, and all such Tax Returns are, or will be at the time of
filing, complete and accurate in all respects. The Company has caused to be
delivered to the Buyer correct and complete copies of all Tax Returns filed by
the Company.

 

(ii)           The
Company has paid or, where payment is not yet due, has established or will
establish or cause to be established in accordance with GAAP on or before the
Closing Date, an adequate accrual for the payment of, all Taxes due by the
Company with respect to any period ending prior to or as of the Closing Date.

 

(iii)          There
are no Tax claims pending against the Company and, to the Knowledge of the
Shareholders, there are no threatened claims for Tax deficiencies, and there is
not now in force any waiver or agreement by the Company for the extension of
time for the assessment of any Tax, nor has any such waiver or agreement been
requested in writing by any taxing authority. The Company does not have any
Liability with respect to any United States federal, state, local, foreign or
other Taxes of any corporation or entity other than the Company.

 

(iv)          There
are no liens for Taxes on the Company or its assets other than for Taxes not
yet due and payable.

 

(v)           There
is no action, suit, investigation, audit, claim or assessment pending with
respect to Taxes of the Company.

 

(vi)          All
amounts required to be withheld or collected for payment by the Company have
been timely collected or withheld and paid to the appropriate taxing authority.

 

(vii)         The
Company is not a party to any tax sharing, tax allocation or tax
indemnification agreement or has any Liability for Taxes of another Person.

 

(viii)        The
Company has never been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.

 

(ix)           The
Company (and any predecessor of the Company) has been a validly electing S
corporation within the meaning of Sections 1361 and 1362 of the Code (and any
similar provisions of state and local Legal Requirement) at all times since
July 1, 1987 and will continue to be a validly electing S corporation up to the
time of the Closing. The Company will not be liable for any Tax under Section
1374 or Section 1375 of the Code in connection with the deemed sale of the
Company’s assets caused by the Section 338(h)(10) election.

 

 

(x)            The
Company has not in the past 10 years acquired assets from another corporation
in a transaction in which the Company’s Tax basis for the acquired assets was
determined, in whole or in part, by reference to the Tax basis of the acquired
assets (or any other property) in the hands of the transferor.

 

(xi)           The
taxable year of the Company for federal and state income tax purposes is the
fiscal year ended December 31st, and the Company uses the accrual method of
accounting in keeping its books and in computing its taxable income.

 

(xii)          The
Company has provided Buyer with copies of all private letter rulings,
determination letters, closing agreements and other correspondence issued by or
received from the IRS or any other governmental entity with respect to Tax
matters, including without limitation the Company’s status as an S corporation.

 

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

 

(xiv)        All
consideration received by the Shareholders pursuant to this Agreement (including
amounts due to the Shareholders under §2(b), §7 and §9) with respect to their
Shares has been determined pursuant to “arm’s length negotiations” with the
Buyer within the meaning of Treasury Regulations Section 1.1361-1(l)(2)(v).

 

(o)           Proceedings.
§3(o) of the Disclosure Schedule sets forth a list of each pending or, to the
Knowledge of the Shareholders, threatened Proceeding with respect to which the
Company has been contacted in writing by counsel for the plaintiff or claimant
against the Company and that (i) relates to or involves more than $25,000, (ii)
seeks any injunctive relief or (iii) may give rise to any legal restraint on or
prohibition against the Acquisition or the transactions contemplated by this
Agreement. Notwithstanding the foregoing, this §3(o) does not relate to (and no
representation or warranty is made under this §3(o) in respect of)
environmental, health or safety matters, which are the subject of §3(q) or
employee matters which are subject to §3(t).

 

(p)           Employee
Benefits.

 

(i)            §3(p)
of the Disclosure Schedule lists each Employee Benefit Plan which has ever been
maintained by the Company or any ERISA Affiliate at any time during the
six-year period ending on the date hereof. The Company has delivered to the
Buyer complete and correct copies of, as applicable, (i) each Employee Benefit
Plan, (ii) the two most recent annual reports on Form 5500 (including all
schedules and attachments thereto) filed with the IRS with respect to each
Employee Benefit Plan (if any such report was required by applicable Legal
Requirement), (iii) the most recent summary plan description (or similar
document) for each Employee Benefit Plan for which such a summary plan
description is required by applicable Legal Requirement or was otherwise
provided to plan participants or beneficiaries, (iv) each trust

 

 

agreement or annuity
contract in effect as of the date hereof and relating to any Employee Benefit
Plan, and (v) the most recent determination letter issued by the IRS.

 

(ii)           Except
as provided in §3(p) of the Disclosure Schedule, each Employee Benefit Plan has
been maintained, funded and administered in all respects in accordance with its
terms and with applicable Legal Requirements, including ERISA and the Code. To
the Knowledge of the Shareholders, there are no investigations by any
governmental entity or other claims (except routine claims for benefits),
suits, threatened suits or Proceedings against any Employee Benefit Plan or
asserting any rights or claims to benefits under any Employee Benefit Plan that
could reasonably be expected to give rise to any Liability.

 

(iii)          All
contributions to, and payments from, the Employee Benefit Plans that have been
required to be made in accordance with the terms of the Employee Benefit Plans,
and, when applicable, Section 302 of ERISA or Section 412 of the Code, have
been timely made.

 

(iv)          Each
Employee Benefit Plan intended to be qualified under Section 401(a) of the
Code, has received a favorable determination letter from the IRS as to its
qualification under Section 401(a) the Code. The Company has not received any
notice revoking any such determination letter and, to the Knowledge of the
Shareholders, no such revocation has been threatened.

 

(v)           Except
as provided in §3(p) of the Disclosure Schedule, no event or omission has
occurred which would cause any Employee Benefit Plan to lose its qualification
or otherwise fail to satisfy the relevant requirements to provide tax-favored
benefits under the applicable Code Section. Each asset held under any such
Employee Benefit Plan may be liquidated or terminated without the imposition of
any redemption fee, surrender charge or comparable Liability. No partial
termination (within the meaning of Section 411(d)(3) of the Code) has occurred
with respect to any Employee Benefit Plan.

 

(vi)          The
Company is not required to contribute to any Multiemployer Plan or any Employee
Benefit Plan subject to Section 412 of the Code, no Employee Benefit Plan is a
Multiemployer Plan or subject to Section 412 of the Code, and no Employee Benefit
Plan has been terminated within the six years prior to the date hereof, the
Liabilities of which have not been satisfied in full.

 

(vii)         With
respect to any Employee Benefit Plan ever maintained by the Company or any
ERISA Affiliate, there has been no (1) “prohibited transaction,” as defined in
Section 406 of ERISA or Code Section 4975, (2) failure to comply with any
provision of ERISA, other applicable Legal Requirement, or any agreement, or
(3)  non-deductible contribution, which,
in the case of any of (1), (2), or (3), could subject the Company or any ERISA
Affiliate to Liability either directly or indirectly (including, without
limitation, through any obligation of indemnification or contribution) for any
damages, penalties, or taxes, or any other loss or expense.

 

 

(viii)        Neither
the Company nor any ERISA Affiliate has ever provided health care or any other
non-pension benefits to any employees after their employment is terminated
(other than as required by part 6 of subtitle B of title I of ERISA or state
health continuation Legal Requirements) or has ever promised to provide such
post-termination benefits.

 

(ix)           Each
Employee Benefit Plan may be amended, terminated, or otherwise modified by the
Company to the greatest extent permitted by applicable Legal Requirement,
including the elimination of any and all future benefit accruals under any
Employee Benefit Plan and no employee communications or provision of any
Employee Benefit Plan document has failed to effectively reserve the right of
the Company or the ERISA Affiliate to so amend, terminate or otherwise modify
such Employee Benefit Plan.

 

(x)            Each
Employee Benefit Plan ever maintained by the Company or an ERISA Affiliate has
complied with the applicable notification and other applicable requirements of
the Consolidated Omnibus Budget Reconciliation Act of 1985, Health Insurance
Portability and Accountability Act of 1996, the Newborns’ and Mothers’ Health
Protection Act of 1996, the Mental Health Parity Act of 1996, and the Women’s
Health and Cancer Rights Act of 1998.

 

(xi)           Each
Employee Benefit Plan that is a “nonqualified deferred compensation plan” (as
defined in Section 409A(d)(1) of the Code) is set forth and so-identified on
§3(p) of the Disclosure Schedule and has been operated since January 1,
2005 in good faith compliance with Section 409A of the Code and the guidance
promulgated thereunder.

 

(xii)          No
amount required to be paid (whether in cash or property or the vesting of
property) in connection with any of the transactions contemplated by this
Agreement to any employee, officer or director of the Company who is a
“disqualified individual” (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or Employee Benefit Plan currently in
effect or in effect as of the Closing Date will be characterized as an “excess
parachute payment” (as such term is defined in Section 280G(b)(1) of the Code).

 

(q)           Environmental,
Health and Safety Matters.

 

(i)            The
Company is in compliance with applicable Environmental, Health and Safety
Requirements, and the Company has in effect all permits, approvals,
registrations and the like required for the operations of its business pursuant
to applicable Environmental, Health and Safety Requirements.

 

(ii)           The
Company has not received any written notice, report, order, claim or other
information regarding any actual or alleged violation of Environmental, Health
and Safety Requirements (“Environmental Claims”), or any Liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, relating to the Company or
its facilities arising under Environmental, Health and Safety Requirements, except
to the extent that the Company has fully resolved such

 

 

Environmental Claim or
Liability without the requirement of any payment, cost or other obligation
which would be required to be fulfilled after the date hereof.

 

(iii) There has been no
release, discharge or disposal of any Regulated Substance at or from any
facility owned or operated by the Company in amounts or concentrations that
violate, require reporting or require any response action pursuant to
applicable Environmental, Health and Safety Requirements, nor is there any
Environmental Condition at any such facility.

 

(iv) No consent,
approval, authorization, registration, notification, waiver, or filing is
required under any applicable Environmental, Health and Safety Requirements in
connection with the transaction contemplated by this Agreement including,
without limitation, any consent, approval, authorization, registration,
notification, waiver or filing in connection with the Industrial Site Recovery
Act of the State of New Jersey (“ISRA”); provided, however, that the Company
submitted an application containing accurate information to the New Jersey
Department of Environmental Protection (the “NJDEP”) for a determination with
respect to the applicability of ISRA, and has received and provided to the
Buyer the NJDEP’s response dated April 20, 2006.

 

(v) The Company has
provided to Buyer true and complete copies of all reports, analyses, site
assessments, audits, permits, 
correspondence with regulatory agencies and similar documents in the Company’s
custody or control relating to actual or potential releases of Regulated
Substances, Environmental Conditions or compliance with Environmental, Health
and Safety Requirements of the Company’s facilities and operations.

 

(vi)          This
§3(q) contains the sole and exclusive representations and warranties of the
Company with respect to any matters arising under or related to any
Environmental, Health and Safety Requirements, Regulated Substances and
Environmental Conditions.

 

(r)            Certain
Business Relationships with the Company. Except as disclosed in §3(r) of
the Disclosure Schedule, none of the Company, the Shareholders or, to the
Knowledge of the Shareholders, any Related Person of any of them, has, or since
January 1, 2003, has had, any interest in any property (whether real, personal
or mixed and whether tangible or intangible) used in or pertaining to the
Company’s business. None of the Company, the Shareholders or, to the Knowledge
of the Shareholders, any Related Person of any of them owns, or since January
1, 2003, has owned, of record or as a beneficial owner, an equity interest or
any other financial or profit interest in any Person that has (a) had business
dealings or a financial interest in any transaction with the Company other than
business dealings or transactions disclosed in, §3(r) of the Disclosure
Schedule, each of which has been conducted in the Ordinary Course of Business
with the Company at substantially prevailing market prices and on substantially
prevailing market terms or (b) engaged in competition with the Company with
respect to any line of the products or services of the Company (a “Competing
Business”) in any market presently served by the Company, except for ownership
of less than one percent (1%) of the outstanding capital stock of any Competing
Business that is publicly traded on any recognized exchange or in the
over-the-counter market. Except as set forth in §3(r) of the Disclosure
Schedule, neither the

 

 

Company nor any Shareholder nor, to the Knowledge of
the Shareholders, any Related Person of any of them, is a party to any Contract
with, or has any claim or right against, the Company. §3(r) of the Disclosure
Schedule lists all business arrangements or relationships in which the
Company’s Affiliates or, to the Knowledge of the Shareholders, any Related
Person of any Shareholder have been involved with the Company within the past
12 months. Except as set forth in §3(r), all Liabilities with respect to any
such arrangements listed on §3(r) will be terminated and paid-in-full and fully
discharged at or prior to the Closing. Except as set forth in §3(r) of the
Disclosure Schedule, none of the Company’s Affiliates or, to the Knowledge of
the Shareholders, any such Related Person owns or licenses any asset, tangible
or intangible, which is used in the business of the Company.

 

(s)           Insurance.
§3(s) of the Disclosure Schedule sets forth a list of each insurance policy
(other than the Employee Benefit Plans) currently in effect where the Company
is the beneficiary. Such schedule lists the name, policy coverage, coverage
amounts and premiums payable. All premiums due and payable under all such
policies have been paid. The Shareholders have no Knowledge of any threatened
termination of, or premium increase with respect to, any of such policies.

 

(t)            Employment
Matters. §3(t) of the Disclosure Schedule sets forth a list showing the
names of all officers and employees performing services for the Company in
connection with its business and the rate of hourly, monthly or annual
compensation (as the case may be), whether classified as exempt or non-exempt
for purposes of the Fair Labor Standards Act paid or to be paid to each such
person in 2006, any accrued sick leave or vacation and any bonus or similar
arrangement and the total amount of bonus, severance and other amounts to be
paid to such employee at the Closing or otherwise in connection with the
transactions contemplated hereby (“Employees”). §3(t) of the Disclosure
Schedule also contains a complete and accurate list of all of the independent
contractors, consultants, temporary employees, leased employees or other
servants or agents employed or used with respect to the operation of the
business of the Company and classified by the Company as other than employees
or compensated other than through wages paid by the Company through its payroll
department and reported on a form W-4 (“Contingent Workers”), showing
for each Contingent Worker such individual’s role in the business, fee or
compensation arrangements and other contractual terms with the Company.

 

(i)            Except
as contemplated by this Agreement or as set forth on §3(t) of the Disclosure
Schedule, to the Knowledge of the Shareholders, no senior executive employee,
or group of Employees or Contingent Workers has expressed any plans to terminate
his or her employment or service arrangement with the Company prior to or in
connection with the Closing.

 

(ii)           The
Company is not experiencing nor is the subject of any strike, slowdown,
picketing, work stoppage, or employee grievance process by any labor union. The
Company does not have any duty to bargain with any union or labor organization
or other person purporting to act as exclusive bargaining representative
(“Union”) of any Employees or Contingent Workers with respect to their
respective wages, hours or other terms and conditions

 

 

of employment. To the Company’s and Shareholders’
Knowledge, no Union claims or demands to represent any Employee or Contingent
Worker, there are no organizational campaigns in progress with respect to any
of the Employees or Contingent Workers and no question concerning
representation of such individuals exists. There is no collective bargaining
agreement or other contract with any Union, or work rules or practices agreed
to with any Union, binding on the Company with respect to any of the Company’s
operations or any Employee or Contingent Worker.

 

(iii)          The
Company is in compliance with all applicable Legal Requirements and regulations
respecting labor and employment practices, including, without limitation, all
fair employment practices Legal Requirements, wage and hour Legal Requirements,
and the New Jersey Conscientious Employee Protection Act. The Company is not
delinquent in any payments to any Employee or Contingent Worker for any wages,
salaries, commissions, bonuses, fees or other direct compensation due with
respect to any services performed for it or amounts required to be reimbursed
to such Employees or Contingent Workers. There are not asserted, pending or, to
the Knowledge of the Shareholders, threatened, and within the last three (3)
years there have not been any Proceedings, or formal or informal grievances,
complaints or charges with respect to employment or labor matters (including,
without limitation, allegations of employment discrimination, retaliation or
unfair labor practices) against the Company in any judicial, regulatory or
administrative forum, under any private dispute resolution procedure or
internally. None of the employment policies or practices of the Company is
currently being audited or investigated or, to the Knowledge of the
Shareholders, subject to imminent audit or investigation by any governmental
authority.

 

(iv)          The
Company, Shareholders or officers or senior managers of the Company are not,
and within the last three (3) years (or such lesser period as they may have
been employed by the Company), have not been, subject to any order, decree,
injunction or judgment by any governmental authority or private settlement
contract in respect of any labor or employment matters. All Employees are
employed at-will and no Employee is subject to any contract for a term with the
Company.

 

(v)           The
Company is not subject to any affirmative action obligations under any Legal
Requirement, including without limitation, Executive Order 11246, and is not a
government contractor or subcontractor for purposes of any Legal Requirement
with respect to the terms and conditions of employment, including without
limitation, the Service Contracts Act or prevailing wage Legal Requirements. To
the extent that any Contingent Workers are used, the Company has properly
classified and treated them in accordance with applicable Legal Requirements
and for purposes of all employee benefit plans and perquisites.

 

(vi)          No
representative of the Company or any Shareholder has made any representation,
promise or guarantee, express or implied, to any Employee or Contingent Worker
regarding (i) whether the Buyer intends to retain or offer to retain such
individual, or (ii) terms and conditions pursuant to which the Buyer may retain
or offer to retain such individual.

 

 

(u)  Accounts, Safe Deposit Boxes and Powers of
Attorney. §3(u) of the Disclosure Schedule sets forth (i) a list of all
bank and savings accounts, certificates of deposit and safe deposit boxes of
the Company and those Persons authorized to sign thereon and (ii) a list of all
powers of attorney granted by the Company that will remain in effect after the
Closing.

 

(v)           Absence
of Certain Changes. Except as set forth in §3(v) of the Disclosure
Schedule, since January 1, 2006, the Company has conducted its business only in
the Ordinary Course of Business and there has not been any:

 

(i)            amendment
to the charter documents of the Company;

 

(ii)           payment
(except in the Ordinary Course of Business) or increase by the Company of any
bonuses, salaries or other compensation to any shareholder, director, officer
or employee or entry into any employment, severance or similar Contract with
any director, officer or employee;

 

(iii)          adoption
of, amendment to or increase in the payments to or benefits under, any Employee
Benefit Plan;

 

(iv)          damage
to or destruction or loss of any asset of the Company having a fair market
value of more than $25,000, whether or not covered by insurance;

 

(v)           entry
into, termination of or receipt of notice of termination of (i) any license,
distributorship, dealer, sales representative, joint venture, credit or similar
Contract to which the Company is a party, or (ii) any Contract involving a
total remaining commitment by the Company of at least $50,000;

 

(vi)          sale
(other than sales of Inventories in the Ordinary Course of Business), lease or
other disposition of any asset of the Company having a fair market value of
more than $25,000 (including the Intellectual Property Assets) or the creation
of any Encumbrance (other than a Permitted Encumbrance) on any asset of the
Company having a fair market value of more than $25,000;

 

(vii)         cancellation
or waiver of any claims or rights with a value to the Company in excess of
$25,000;

 

(viii)        written
notice by any customer or supplier of an intention to discontinue or change the
terms of its relationship with the Company;

 

(ix)           change
in the accounting methods used by the Company;

 

(x)            incurrence
of debt for borrowed money, or the incurrence of any other obligation or Liability
out of the Ordinary Course of Business;

 

(xi)           any
Contract by the Company to do any of the foregoing, or

 

 

(xii)          any
strike, lockout, labor trouble or any event or condition of any character
adversely affecting the business or operations of the Company.

 

(w)          Brokers’
Fees. There is no Liability or obligation to pay any fees or commissions to
any broker, finder or agent with respect to the Acquisition or the transactions
contemplated hereby, other than as named in §3(w) of the Disclosure Schedule,
all of which will be paid by the Shareholders.

 

(x)            Closing
Date Designated Indebtedness; Net Designated Indebtedness. As of the date
hereof, each of the calculations being delivered to Buyer pursuant to
§8(a)(xii) are true and correct in all respects.

 

(y)           Benefits
of Shareholders. §3(y) of the Disclosure Schedule sets forth the amounts
required to be paid (whether in cash or property or the vesting of property) as
of the Closing Date (and the amounts of any payments (estimated in good faith)
that may be required to be paid at any time following the Closing Date) in
connection with any of the transactions contemplated by this Agreement to each
Shareholder pursuant to any employment, severance or termination agreement or
Employee Benefit Plan.

 

4. Representations and
Warranties of the Buyer. Except as set forth in the Disclosure Schedule,
the Buyer represents and warrants to the Shareholders as follows:

 

(a)           Organization
and Standing. The Buyer is a corporation duly organized, validly existing
and in good standing under the Legal Requirements of the jurisdiction in which
it is organized. The Buyer has full corporate power and authority to own and
operate its properties, and to conduct its business as currently conducted. The
Buyer is qualified to do business in each jurisdiction in which the nature of
its business or the ownership of its properties makes such qualification necessary.

 

(b)           Authority;
Execution and Delivery; Enforceability. The Buyer has full corporate power
and authority to execute this Agreement and each of the Ancillary Agreements to
which it is a party and to consummate the Acquisition and the other transactions
contemplated hereby and thereby. The execution and delivery by the Buyer of
this Agreement and the Ancillary Agreements to which it is a party have been
duly authorized by all necessary action on the part of the Buyer. The Buyer has
duly executed and delivered this Agreement and at the Closing will have duly
executed and delivered each Ancillary Agreement to which it is a party, and
this Agreement constitutes, and each Ancillary Agreement to which it is a party
will after the execution thereof constitute, its legal, valid and binding
obligation.

 

(c)           No
Conflicts; Consents. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the transfer of the Shares referred to in §2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter,

 

 

bylaws or other governing certificates and agreements
or (ii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which the Buyer
is a party or by which it is bound or to which any of its assets is subject.
The Buyer does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement (including the transfer of the Shares referred to in §2 above).

 

(d)           Brokers’
Fees. The Buyer has no Liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the Acquisition or
the transactions contemplated hereby.

 

(e)           Financing.
As of the date hereof, the Buyer has sufficient funds currently available
to it in an aggregate amount sufficient to fund the Purchase Price and
consummate the transactions contemplated by this Agreement.

 

5. Pre-Closing
Covenants. The Parties agree as follows with respect to the period between
the execution of this Agreement and the Closing:

 

(a)           General.
Each of the Parties will use its Best Efforts to take all action and to do all
things necessary, proper, or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including satisfaction
of the closing conditions set forth in §8 below).

 

(b)           Notices
and Consents. The Company will give any notices to third parties and the
Company will use its Best Efforts to obtain any third party consents, that the
Buyer reasonably may request in connection with the matters referred to in
§3(d) above. Each of the Parties will give any notices to, make any filings
with and use its reasonable best efforts to obtain any authorizations, consents
and approvals of governments and governmental agencies in connection with the
matters referred to in §3(d) and §4(c) above.

 

(c)           Operation
of Business. Between the date of this Agreement and the Closing, except as
set forth on Exhibit 5(c) attached hereto, the Company shall (and the
Shareholders shall cause the Company to):

 

(i)            conduct
its business only in the Ordinary Course of Business; provided, however, that
the Company shall have the right, prior to the Closing, to borrow money
pursuant to the Shareholders Loans and make the payments described in §11(k)
herein;

 

(ii)           use
its Best Efforts to preserve intact its current business organization, keep
available the services of its officers, employees and agents and maintain its
relations and good will with suppliers, customers, landlords, creditors,
employees, agents and others having business relationships with it;

 

 

(iii)          confer
with Buyer prior to implementing operational decisions of a material nature;

 

(iv)          otherwise
report periodically to Buyer concerning the status of its business, operations
and finances;

 

(v)           make
no material changes in management personnel without prior consultation with
Buyer;

 

(vi)          maintain
the Company’s assets in a state of repair and condition in a manner consistent
with the Company’s past practices;

 

(vii)         keep
in full force and effect, without amendment, all material rights relating to
the Company’s business;

 

(viii)        comply
with all Legal Requirements and contractual obligations applicable to the
operations of the Company’s business;

 

(ix)           continue
in full force and effect the insurance coverage under the policies set forth in
§3(s) of the Disclosure Schedule or substantially equivalent policies;

 

(x)            except
as required to comply with ERISA or to maintain qualification under Section
401(a) of the Code, not amend, modify or terminate any Employee Benefit Plan
without the express written consent of Buyer;

 

(xi)           cooperate
with Buyer and assist Buyer in identifying the governmental authorizations (if
any) required by Buyer to operate the business from and after the Closing Date;

 

(xii)          upon
request from time to time, execute and deliver all documents, make all truthful
oaths, testify in any Proceedings and do all other acts that may be reasonably
necessary or desirable in the opinion of Buyer to consummate the Acquisition,
all without further consideration;

 

(xiii)         maintain
all books and Records of the Company relating to the Company’s business in the
Ordinary Course of Business;

 

(xiv)        amend
the organizational documents of the Company; and

 

(xv)         not
revoke the Company’s election to be taxed as an S corporation within the
meaning of Sections 1361 and 1362 of the Code or otherwise take or allow any
action that would result in the termination of the Company’s status as a
validly electing S corporation.

 

(d)           Full
Access. The Company will permit representatives of the Buyer to have full
access at all reasonable times, and in a manner so as not to interfere with the
normal business operations of the Company, to (1) all premises, properties,
executive officers, books, records,

 

 

contracts and documents of or pertaining to the
Company, and (2), upon the consent of the Company (which consent shall not be
unreasonably withheld), other personnel of the Company and/or any customers or
suppliers of the Company. The Buyer will treat and hold as such any confidential
information it receives from (or on behalf of) the Company or the Shareholders
in the course of the reviews contemplated by this §5(d), and will not use any
of the confidential information except in connection with this Agreement. If
this Agreement is terminated for any reason whatsoever, the Buyer will return
to the Company all tangible embodiments (and all copies) of the confidential
information which are in its possession.

 

(e)           Notice
of Developments.    Between the date of this
Agreement and the Closing Date, each Shareholder will promptly notify Buyer in
writing if such Shareholder or the Company becomes aware of any fact or
condition that causes or constitutes a material breach of any of the
Shareholders’ representations and warranties as of the date of this Agreement,
or if such Shareholder or the Company becomes aware of the occurrence after the
date of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. Should any such
fact or condition require any change in the Disclosure Schedule if the
Disclosure Schedule were dated the date of the occurrence or discovery of any
such fact or condition, Shareholders will promptly deliver to Buyer a
supplement to the Disclosure Schedule specifying such change. During the same
period, each Shareholder will promptly notify Buyer of the occurrence of any
breach of any covenant of Shareholders in this Agreement or of the occurrence
of any event that may make the satisfaction of the conditions in §8(a)
impossible or unlikely.

 

(f)            Exclusivity.
None of the Company nor the Shareholders shall, and shall not authorize or
permit any officer, director or employee of or any investment banker, attorney,
accountant or other representative retained by such Parties, to (i) solicit,
initiate or encourage any other bid, (ii) enter into any agreement with respect
to any other bid, or (iii) participate in any discussions or negotiations
regarding, or furnish to any Person any information with respect to, or take
any other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any other bid. Each of
the Company and the Shareholders shall promptly advise the Buyer of any other
bid or any inquiry with respect to or which could lead to any other bid and the
identity of the Person making any such other bid or inquiry. As used in this
§5(f), “other bid” means any proposal for a merger, sale of securities, sale of
substantial assets or similar transaction involving the Company, the Shares
and/or the Shareholders, other than the acquisition of the Company’s
Inventories in the Ordinary Course of Business.

 

(g) Insurance. The
Company shall use commercially reasonable efforts to keep, or cause to be kept,
all insurance policies set forth on §3(s) to the Disclosure Schedule or
suitable replacements therefor, in full force and effect through the close of
business on the Closing Date.

 

 

6. Post-Closing
Covenants. The Parties agree as follows with respect to the period
following the Closing:

 

(a)           General.
In case at any time after the Closing any further action is necessary to
carry out the purposes of this Agreement, each of the Parties will take such
further action (including the execution and delivery of such further
instruments and documents) as the other Parties reasonably may request, all at
the sole cost and expense of the requesting Party (unless the requesting Party
is entitled to indemnification therefor under §9 below).

 

(b)           Cooperation.         For
a period of ninety (90) days after the Closing Date, the Shareholders will
reasonably cooperate with Buyer (subject to their reasonable availability and
without any specific minimum time commitment) in its efforts to continue and
maintain the business relationships of the Company existing prior to the
Closing, including relationships with lessors, employees, regulatory
authorities, licensors, customers, suppliers and others. None of the
Shareholders shall make any remarks disparaging the name or business of the
Company, Buyer or any Affiliates of Buyer.

 

(c)           Litigation
Support. In the event and for so long as any Party actively is contesting
or defending against any action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date
involving the Company, each of the other Parties shall cooperate with it and
its counsel in the defense or contest, make available their personnel, and
provide such testimony and access to their books and records as shall be
necessary in connection with the defense or contest, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under §9 below).

 

(d)           Restrictive
Covenants. The Shareholders understand that the Buyer shall be entitled to
protect and preserve the going concern value of the business of the Company
purchased by the Buyer to the extent permitted by law and that the Buyer would
not have entered into this Agreement absent the provisions of this §6(d) and,
therefore, for a period of three (3) years from the Closing, the Shareholders
shall not, directly or indirectly:

 

(i)            engage
in activities or businesses, or establish any new businesses, that are in
competition with the business engaged in by the Company at the time of Closing
(“Competitive Activities”), including (A) selling goods or services of the type
now or previously sold by the Company, (B) soliciting any past, present or
prospective customer of the Company to purchase any goods or services sold by
the Company at the time of Closing, from anyone other than the Buyer and (C)
assisting any Person in any way to do, or attempt to do, anything prohibited by
clause (A) or (B) above; and

 

(ii)           soliciting,
recruiting or hiring any employee of the Company and who is hired by the Buyer
at Closing, (B) soliciting or encouraging any employee of the Company who

 

 

has been hired by the
Buyer at Closing to leave the employment of the Buyer and (C) disclosing or
furnishing to anyone any Company Confidential Information (as defined below)
relating to the Company that has been purchased by the Buyer pursuant to this
Agreement, or otherwise using such Company Confidential Information for their
own benefit or the benefit of any other Person.

 

This §6(d) shall be
deemed not breached as a result of the ownership by any of the Shareholders of
less than an aggregate of 5% of any class of stock (listed on a national
securities exchange) of a Person engaged, directly or indirectly, in
Competitive Activities. Notwithstanding any other provision of this Agreement,
it is understood and agreed that the remedy of indemnity payments pursuant to
§9 and other remedies at law would be inadequate in the case of any breach of
the covenants contained in this §6(d). Accordingly, the Buyer shall be entitled
to seek equitable relief, including the remedy of specific performance, with respect
to any breach of such covenants.

 

(e)  Confidentiality. (i)  The Company, the Shareholders and their
affiliates, will hold, and will use their Best Efforts to cause their
respective officers, directors, employees, accountants, counsel, consultants,
advisors and agents to hold, in confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law, all
confidential documents and information concerning Buyer furnished to the
Company, or to the Shareholders or their affiliates, in connection with the
transactions contemplated by this Agreement, and after the Closing Date all
confidential documents and information concerning the Company, except to the
extent that such information can be shown to have been (i) previously
known on a nonconfidential basis by the Shareholders, (ii) in the public
domain through no fault of any Shareholder or (iii) later lawfully
acquired by the Shareholders from sources other than the Company or Buyer
(“Company Confidential Information”); provided that the Shareholders may
disclose such information to their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents in connection with the
transactions contemplated by this Agreement so long as such persons are
informed by the Shareholders of the confidential nature of such information and
are directed by the Shareholders to treat such information confidentially in
accordance with this Agreement. The obligation of the Company, and the
Shareholders and their affiliates, to hold any such information in confidence
shall be satisfied if they exercise the same care with respect to such
information as they would take to preserve the confidentiality of their own
similar information. If this Agreement is terminated, the Company, and the
Shareholders and their affiliates, will, and will use their Best Efforts to
cause their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to Buyer, upon request,
all documents and other materials, and all copies thereof, obtained by the
Company, and the Shareholders and their affiliates, or on their behalf
concerning Buyer in connection with this Agreement that are subject to such
confidence.

 

(ii)  Prior to the Closing Date and after any
termination of this Agreement, Buyer and its affiliates will hold, and will use
their Best Efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
Company furnished to Buyer or its

 

 

affiliates in connection
with the transactions contemplated by this Agreement, except to the extent that
such information can be shown to have been (i) previously known on a
nonconfidential basis by Buyer, (ii) in the public domain through no fault of
Buyer or (iii) later lawfully acquired by Buyer from sources other than the
Company or the Shareholders; provided that Buyer may disclose such information
to its officers, directors, employees, accountants, counsel, consultants,
advisors and agents in connection with the transactions contemplated by this
Agreement and to its financing sources in connection with obtaining the
financing for the transactions contemplated by this Agreement so long as such
Persons are informed by Buyer of the confidential nature of such information
and are directed by Buyer to treat such information confidentially in
accordance with this Agreement. The obligation of Buyer and its affiliates to
hold any such information in confidence shall be satisfied if they exercise the
same care with respect to such information as they would take to preserve the
confidentiality of their own similar information. If this Agreement is
terminated, Buyer and its affiliates will, and will use their Best Efforts to
cause their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to the Company, upon
request, all documents and other materials, and all copies thereof, obtained by
Buyer or its affiliates or on their behalf concerning Shareholders and the
Company in connection with this Agreement that are subject to such confidence.

 

7. Tax Matters.

 

(a)  Section 338(h)(10) Elections. Subject
to §2(e), Buyer, the Company and the Shareholders shall (i) jointly make a
timely and irrevocable election under Section 338(h)(10) of the Code (and any
corresponding election under state or local Legal Requirement) with respect to
the purchase and sale of the Shares of the Company (the “Section 338(h)(10)
Election”) and (ii) report the purchase and sale of Shares consistent with such
Section 338(h)(10) Election unless and to the extent otherwise required
pursuant to a determination as defined in Section 1313(a) of the Code (or any
similar provision of state or local Legal Requirement). On the Closing Date,
the Shareholders shall deliver to the Buyer an executed pro-forma IRS Form 8023
(subject to §2(e)). Subject to §2(e), Buyer shall be responsible for the
preparation and filing of all forms (including IRS Form 8023 and IRS Form 8883)
and documents required to effectuate the Section 338(h)(10) Election and will
provide the Shareholders a copy of such filings. The Shareholders shall file a
copy of the IRS Form 8883 described above with the Company’s IRS Form 1120S for
the taxable year ending on the Closing Date and shall include any income, gain,
loss, deduction, or other Tax item resulting from the Section 338(h)(10)
Election on their Tax Returns to the extent required by applicable Legal
Requirement and shall pay any Taxes attributable thereto.

 

(b)           Filing
of Tax Returns.

 

(i)            Return
Filings. For any taxable period of the Company that ends on or before the
Closing Date, the Shareholders shall timely prepare and file with the
appropriate authorities all Tax Returns required to be filed, and, consistent
with §9(a), shall pay all Taxes due with respect to such Tax Returns. Buyer
shall have the opportunity to review and comment on such Tax Returns and the
Shareholders shall make such changes as are reasonably requested,

 

 

provided such changes do
not materially increase the Shareholders’ Liability for Taxes for any such
taxable period. For any taxable period of the Company that begins after the
Closing Date, Buyer shall timely prepare and file, or cause to be timely
prepared and filed, with the appropriate authorities all Tax Returns required
to be filed and shall pay (or cause the Company) to pay all Taxes due with
respect to such Tax Returns. For any taxable period of the Company that
constitutes a Straddle Period, Buyer shall timely prepare and file, or cause to
be timely prepared and filed, with the appropriate authorities, all Tax Returns
required to be filed for such Straddle Period, and the Taxes due with respect
to such Tax Returns shall be allocated in accordance with §9(a)(iv) hereof.
Buyer shall permit the Shareholders to review and comment on such Tax Returns
prior to filing and the Buyer shall in such cases make such revisions as are
reasonably requested by the Shareholders provided such changes do not
materially increase Buyer’s Liability for Taxes for any taxable period. The
Shareholders shall assist the Buyer in timely obtaining any required signatures
or other filing requirements in respect to Tax Returns prepared by Buyer for a
Straddle Period.

 

(ii)           Cooperation.
Buyer and the Shareholders shall reasonably cooperate, and shall cause their
respective Affiliates, officers, managers, employees, agents, auditors and
representatives reasonably to cooperate, in preparing and filing all Tax
Returns and other Tax administration matters, including maintaining and making
available to each other all records necessary in connection with Taxes and in
resolving all disputes and audits with respect to all taxable periods relating
to Taxes. Each of the parties may need access, from time to time, after the
Closing Date, to certain accounting and Tax records and information held by
other Parties; therefore, each Party shall, and in the case of Buyer shall
cause the Company to, (i) use commercially reasonable best efforts to properly
retain and maintain such Records until such time as the other Parties agree
that such retention and maintenance is no longer necessary and (ii) to allow
the other Parties and their agents and representatives (and agents and
representatives of any of their Affiliates), at times and dates mutually
acceptable to the Parties, to inspect, review and make copies of such records
as such other Parties may deem necessary or appropriate from time to time, such
activities to be conducted during normal business hours.

 

(iii)          Refunds
and Credits. Buyer shall pay to the Shareholders as additional Purchase
Price (in proportion to the allocation of Purchase Price set forth in §2(b)) an
amount equal to any refund or credit of Taxes of the Company for a Pre-Closing
Tax Period. Any payment described in the preceding sentence shall be paid to
the Shareholders within twenty (20) days of the Buyer’s or Company’s receipt of
the refund or credit with respect to which such payment is to be made.

 

(c)           Transfer
Taxes. The Shareholders shall be responsible for any and all sales, use,
registration, transfer, stamp, value added, goods and services or other similar
Taxes (collectively, “Transfer Taxes”) that may be imposed upon, payable,
collectible or incurred in connection herewith and the transactions
contemplated hereby, regardless of the Person liable for such Taxes under applicable
Legal Requirements. The Shareholders and Buyer shall cooperate in the
preparation and filing of any Tax Returns, affidavits or other documents
relating to Transfer Taxes.

 

 

8. Conditions to
Obligation to Close.

 

(a) Conditions to Obligation of the Buyer. The
obligation of the Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:

 

(i)            All
of the Shareholders’ representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement, and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Schedule;

 

(ii)           Each
of the Shareholders’ representations and warranties in §3(c) must have been
accurate in all respects as of the date of this Agreement, and must be accurate
in all respects as of the Closing Date as if made on the Closing Date, without
giving effect to any supplement to the Disclosure Schedule.

 

(iii)          All
of the covenants and obligations that Shareholders are required to perform or
to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects;

 

(iv)          there
shall not be any injunction, judgment, order, decree, ruling, or charge in
effect preventing consummation of any of the transactions contemplated by this
Agreement;

 

(v)           the
Company and the Shareholders shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in §8(a)(i)-(iv) is
satisfied in all respects;

 

(vi)          The
Shareholders and the Company must have delivered each of the documents required
to be delivered by them pursuant to §2(d) ;

 

(vii)         the
Company and the Buyer shall have received all authorizations, consents and
approvals set forth on §8(a)(vii) of the Disclosure Schedule;

 

(viii)        the
Shareholders shall deliver to Buyer a non-foreign person affidavit dated as of
the Closing Date, sworn under penalty of perjury and substantially in form and
substance required under the Treasury Regulations Section 1.1445-2(b);

 

(ix)           there
shall not have occurred any Material Adverse Effect with respect to the
Company;

 

(x)            the
Company and the Shareholders, as applicable, shall have furnished to the Buyer
an opinion of counsel from Riker Danzig Scherer Hyland & Perretti LLP in
substantially the form of Exhibit 8(a)(x) attached hereto and an
executed copy of each Ancillary Agreement to which they are parties including,
without limitation, the Lease and the Termination Agreement; ;

 

 

 (xi)          Each
Shareholder shall deliver to Buyer a duly executed release, dated as of the
Closing Date, in substantially the form attached hereto as Exhibit 8(a)(xi);

 

(xii)          The
Company and the Shareholders shall deliver to Buyer, in writing and in form and
substance reasonably satisfactory to Buyer, (a) a calculation of the unpaid
Indebtedness of the Company under the VNB Loan and Shareholder Loans, if any,
determined as of the Closing Date in a manner consistent with the Company’s
past practices (such calculation, the “Closing Date Designated Indebtedness”)
and (b) a calculation of the Net Designated Indebtedness determined as of the
Closing Date;

 

(xiii)         Buyer
shall have received duly executed resignations from each officer and/or
director of the Company, in substantially the form attached hereto as Exhibit
8(a)(xiii), such resignations to be effective as of the Closing Date; and

 

(xiv)        The
Company and the Shareholders shall deliver to Buyer a duly executed termination
letter that terminates all prior lease arrangements between the Company and
Thomas Minor Associates, LLC, in substantially the form attached hereto as Exhibit
8(a)(xiv) (the “Termination Agreement”), such termination to be effective
as of the Closing Date..

 

The
Buyer may waive any condition specified in this §8(a) if it executes a writing
so stating at or prior to the Closing.

 

 (b) Conditions
to Obligation of the Company and the Shareholders. The obligation of the
Company and the Shareholders to consummate the transactions to be performed by
them in connection with the Closing is subject to satisfaction of the following
conditions:

 

(i)            All
of the Buyer’s representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement, and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date;

 

(ii)           All
of the covenants and obligations that Buyer is required to perform or to comply
with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), must have been performed and complied with in all material
respects;

 

(iii)          there
shall not be any injunction, judgment, order, decree, ruling, or charge in
effect preventing consummation of any of the transactions contemplated by this
Agreement;

 

(iv)          the
Buyer shall have delivered to the Shareholders, as applicable, a certificate to
the effect that each of the conditions specified above in §8(b)(i)-(iii) is
satisfied in all respects;

 

 

(v)           Buyer
must have delivered each of the documents required to be delivered by Buyer
pursuant to §2(d) ;

 

(vi)          the
Company and the Buyer shall have received all authorizations, consents and
approvals set forth on §8(a)(vii) of the Disclosure Schedule;

 

(vii)         there
shall not have occurred any Material Adverse Effect with respect to the Buyer;
and

 

(viii)        the
Buyer shall have furnished to the Shareholders an opinion of counsel from
Goodwin Procter LLP in substantially the form of Exhibit 8(b)(viii)
attached hereto and an executed copy of each Ancillary Agreement to which they
are parties including, without limitation, the Lease.

 

The
Company and the Shareholders may waive any condition specified in this §8(b) if
it executes a writing so stating at or prior to the Closing.

 

9. Indemnification.

 

(a) Tax
Indemnification.

 

(i)            From
and after the Closing, the Shareholders shall jointly and severally indemnify
the Company, the Buyer and their stockholders, members, partners, directors,
officers, managers, employees, agents and representatives (collectively, the
“Buyer Indemnitees”) against and hold them harmless from all liability for (i)
Taxes (or the non-payment thereof) of the Company for all Pre-Closing Tax
Periods, (ii) Taxes of any member of an affiliated, consolidated, combined, or
unitary group of which the Company (or any predecessor of any of the foregoing)
is or was a member on or prior to the Closing Date, including pursuant to
Treasury Regulations Section 1.1502-6 or any analogous or similar state, local,
or foreign Legal Requirement or regulation, (iii) Taxes of any person (other
than the Company) imposed on the Company as a transferee or successor, by
contract or pursuant to any Legal Requirement, rule or regulation, which Taxes
relate to an event or transaction occurring before the Closing, (iv) any Losses
resulting from a breach of the representations and warranties contained in
§3(n), (v) any Taxes of the Company resulting from the Section 338(h)(10)
Election, and (vi) all Liability for reasonable legal fees, costs and expenses
for any item attributable to any of the foregoing.

 

(ii)           From
and after the Closing, Buyer shall indemnify the Shareholders, and each of
their respective agents and representatives (collectively, the “Shareholder
Indemnitees”) against and hold them harmless from all liability for Taxes of
the Buyer and/or the Company for all Post-Closing Tax Periods and all liability
for reasonable legal fees, costs and expenses attributable to any such
liability.

 

(iii)          Any
indemnity payment to be made under this §9(a) shall be paid within ten days
after the Indemnified Party (as hereinafter defined) makes written demand upon
the Indemnifying Party (as hereinafter defined), or, if later, on or before the
date that is five Business

 

 

Days prior to the date on
which the relevant Taxes are required to be paid to the relevant taxing
authority (including estimated Tax payments).

 

(iv)          For
purposes of §9(a)(i) and §9(a)(ii), in the case of any Straddle Period, the
amount of Taxes that is allocable to the Pre-Closing Tax Period or the
Post-Closing Tax Period shall (i) in the case of Taxes that are imposed on a
periodic basis (such as real property Taxes), be deemed to be the amount of
such Taxes for the entire period (or in the case of such Taxes determined on an
arrears basis, the amount of such Taxes for the immediately preceding period)
multiplied by a fraction the numerator of which is the number of calendar days
in the Pre-Closing Tax Period or the Post-Closing Tax Period, as the case may
be, and the denominator of which is the number of calendar days in the entire
relevant Straddle Period and (ii) in the case of Taxes that are not described
in clause (i) above (such as income Taxes, Taxes imposed in connection with any
sale or other transfer or assignment of property, and payroll and similar
Taxes), be deemed to be equal to the amount that would have been payable if the
taxable year or period of the Company ended on the Closing Date; provided,
that, in determining such amount, exemptions, allowances or deductions that are
calculated on a periodic basis, such as the deduction for depreciation, shall
be taken into account on a pro-rated basis in the manner described in clause
(i) above.

 

(v)           The
Shareholders shall, at their own expense, control audits, examinations or other
proceedings (each, a “Tax Proceeding”) with respect to Tax Returns of the Company
for Pre-Closing Tax Periods (whether or not such Tax Returns are filed before
or after the Closing Date); provided, however, that Buyer and its counsel shall
be allowed at Buyer’s sole cost and expense to participate in any such Tax
Proceeding, and provided further that Shareholders shall not settle any such
Tax Proceeding without the prior written consent of Buyer, which consent shall
not be unreasonably withheld. Buyer or such Company shall promptly notify the
Shareholders of the commencement of any such Tax Proceeding (or any Tax
Proceeding with respect to a Straddle Period). Buyer shall, at its own expense,
control Tax Proceedings with respect to any Tax Returns relating to the Company
for any Straddle Period; provided, however, that the Shareholders and their
counsel shall be allowed to participate in such Tax Proceedings at the
Shareholders’ sole cost and expense. Buyer shall not settle any such Tax
Proceeding without the Shareholders’ consent, which shall not be unreasonably
withheld, unless such settlement will not have the effect of creating or
increasing the indemnification obligations of the Shareholders hereunder.

 

(vi)          Any
Tax Return pertaining to Taxes for which Buyer may seek indemnification
pursuant to this Agreement shall be prepared in a manner consistent with past
practices of the Company, in each case except to the extent not permitted under
applicable Legal Requirements.

 

(b)           Indemnification
by the Shareholders. From and after the Closing, each of the Shareholders,
jointly and severally, shall be liable for, and indemnify the Buyer Indemnitees
against, and hold them harmless from, any loss, liability, claim, damage or
expense, including reasonable legal fees and expenses (collectively, “Losses”)
suffered or incurred by the Buyer

 

 

Indemnitees (without
duplication for any indemnification provided for in §9(a)) arising from,
relating to or otherwise in respect of:

 

(i)            any
breach of any representation or warranty made by the Shareholders in this
Agreement (including the Disclosure Schedule) or in any certificate or document
delivered pursuant to this Agreement;

 

(ii)           any
breach of any covenant of the Company or the Shareholders contained in this
Agreement or in any certificate delivered pursuant hereto;

 

(iii)          any
fees, expenses or other payments incurred or owed by the Company or the
Shareholders to any agent, broker, investment banker or other firm or Person as
any broker’s or finder’s fees or any other commission or similar fee in
connection with the transactions contemplated by this Agreement; and

 

(iv)          any
matter set forth in Exhibit 9(b)(iv).

 

(c)           Deductible;
Cap. The Shareholders shall not be required to indemnify and hold harmless
the Buyer Indemnitees:

 

(i)            under
clause (i) of §9(b) unless the aggregate of all Losses for which the
Shareholders would, but for this clause (i), be liable thereunder exceeds on a
cumulative basis an amount equal to $500,000, and then only to the extent of
any such excess; and

 

(ii)           for
any Losses under clause (i) of §9(b) once the aggregate amount of indemnification
payments made by the Shareholders pursuant to §9(b)(i) exceeds an amount equal
to fifteen percent (15%) of the Purchase Price, as adjusted by any and all
payments of the Final Working Capital Adjustment in accordance with §2(f).

 

(iii)          Notwithstanding
anything contained in this Agreement to the contrary and without limiting the
provisions of §§9(c)(i) and (ii), the limitations set forth in clauses (i) and
(ii) of this §9(c) shall not apply with respect to any Loss arising from or
related to a breach of (a) any covenants of the Company or any Shareholder or
(b) the representations and warranties set forth in §3(a) (Organization and
Standing of the Company), §3(b) (Authority; Execution and Delivery;
Enforceability), §3(c) (Capitalization; Other Agreements as to Shares;
Ownership of Securities; Subsidiaries), §3(n) (Taxes),  §3(w) (Brokers’ Fees), §3(x) (Closing
Date Designated Indebtedness; Net Designated Indebtedness) and  §3(y) (Benefits of Shareholders).

 

(d)           Indemnification
by the Buyer. From and after the Closing, the Buyer, shall be liable for,
and shall indemnify the Shareholder Indemnitees (or any one or more of them)
against, and hold them harmless from, any Loss suffered or incurred by such
Shareholder Indemnitees arising from, relating to or otherwise in respect of:

 

(i)            any
breach of any representation or warranty of the Buyer which survives the
Closing or in any certificate delivered pursuant hereto;

 

 

(ii)           any
fees, expenses or other payments incurred or owed by the Buyer to any agent,
broker, investment banker or other firm or Person as any broker’s or finder’s
fees or any other commission or similar fee in connection with the transactions
contemplated by this Agreement; and

 

(iii)          any
breach of any covenant of the Buyer contained in this Agreement or in any
certificate delivered pursuant thereto.

 

 (e)          Survival
of Representations and Warranties. All representations, warranties,
covenants, and obligations in this Agreement, the Disclosure Schedule, and any
certificate or document delivered pursuant to this Agreement will survive the
Closing. Notwithstanding the foregoing, no Party shall be entitled to recover
for any Loss pursuant to §§9(a), 9(b) or 9(d) unless written notice of a claim
thereof is delivered to the other Party on or prior to the Applicable
Limitation Date. For purposes of this Agreement, the term “Applicable
Limitation Date” shall mean the 12-month anniversary of the Closing Date;
provided that the Applicable Limitation Date with respect to the following
Losses shall be as follows: (i) with respect to any Loss arising from or
related to a breach of the representations and warranties of the Company set
forth in §3(n) (Taxes), §3(p) (Employee Benefits) or §3(q) (Environmental,
Health and Safety Matters), the Applicable Limitation Date shall be the 60th
day after expiration of the applicable statute of limitations (including any
extensions thereto to the extent that such statute of limitations may be
tolled), (ii) with respect to any Loss arising from or related to a breach of
the representations and warranties of the Shareholders set forth in §3(a)
(Organization and Standing), §3(b) (Authorization; Execution and Delivery;
Enforceability), §3(c) (Capitalization; Other Agreements as to Shares;
Ownership of Securities; Subsidiaries), §3(w) (Brokers’ Fees), there shall be
no Applicable Limitation Date (i.e., such representations and warranties shall
survive forever) and (iii) with respect to any Loss arising from or related to
a breach of the representations and warranties of Buyer set forth in §4(a)
(Organization and Standing), §4(b) (Authority; Execution and Delivery;
Enforceability) or §4(d) (Brokers’ Fees), there shall be no Applicable
Limitation Date (i.e., such representations and warranties shall survive
forever). The covenants (as opposed to representations and warranties) of each
Party set forth in this Agreement shall survive forever. Notwithstanding the
foregoing, the obligations to indemnify and hold harmless any Party (i)
pursuant to §9(b)(i) or §9(d)(i) shall not terminate with respect to any item
as to which the Person to be indemnified shall have, on or before the
respective Applicable Limitation Date, previously made a claim by delivering a
notice of such claim (stating in reasonable detail the basis of such claim) pursuant
to §9(h) to the Party to be providing the indemnification, and (ii) pursuant to
the other clauses of §9(b) and §9(d) shall not terminate.

 

(f)            Special
Rule for Fraud. Notwithstanding anything in this §9 to the contrary, in the
event any Party to this Agreement perpetrates a fraud on another Party hereto,
any Party that suffers any Loss by reason thereof shall be entitled to seek
recovery therefor against the Person or Persons who perpetrated such fraud
without regard to any limitation set forth in this Agreement (whether a
temporal limitation, a dollar limitation or otherwise).

 

 

(g)           Risk
Allocation. The representations, warranties, covenants and agreements made
herein, as modified by the Disclosure Schedules, together with the
indemnification provisions herein, are intended among other things to allocate
the economic cost and the risks inherent in the transactions contemplated
hereby between the Parties and, accordingly, the right to indemnification,
payment of Losses or other remedy based on such representations, warranties,
covenants, and obligations will not be affected by any investigation conducted
with respect to, or any knowledge acquired (or capable of being acquired) at
any time, whether before or after the execution and delivery of this Agreement
or the Closing Date, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant, or obligation.

 

(h)           Procedures.

 

(i)            Third
Party Claims. All claims for indemnification by any Indemnified Party under
§9 shall be asserted and resolved as set forth in §9(h). In order for a Person
(the “Indemnified Party”) to be entitled to any indemnification provided for
under §9(b) or §9(d) in respect of, arising out of or involving a claim made by
any Person against the Indemnified Party (a “Third Party Claim”), such
Indemnified Party must notify the Party obligated hereunder to indemnify such
Indemnified Party (the “Indemnifying Party”) in writing of the Third Party
Claim promptly following receipt by such Indemnified Party of written notice of
the Third Party Claim (such notice, a “Claim Notice”), which writing shall also
include the amount or the estimated amount of such Third Party Claim, to the
extent such amount is reasonably determinable; provided, however, that failure
to so give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
and materially prejudiced as a result of such failure. Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, promptly following
the Indemnified Party’s receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the
Third Party Claim unless such notices and documents shall have also been
addressed to the Indemnifying Party.

 

(ii)           Assumption.
If a Third Party Claim is made against an Indemnified Party, the Indemnifying
Party shall be entitled to participate in the defense thereof and, if it so
chooses, to assume the defense thereof with counsel selected by the
Indemnifying Party; provided, however, that such counsel is not reasonably
objected to by the Indemnified Party. Should the Indemnifying Party so elect to
assume the defense of a Third Party Claim, the Indemnifying Party shall not be
liable to the Indemnified Party for any legal expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof. If the
Indemnifying Party assumes such defense, the Indemnified Party shall have the right
to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the Indemnifying Party, it being
understood that the Indemnifying Party shall control such defense. The
Indemnifying Party shall be liable for the fees and expenses of counsel
employed by the Indemnified Party in the defense of such Third Party Claim for
any period during which the Indemnifying Party has not assumed the defense
thereof. If the Indemnifying Party assumes the defense of a Third Party Claim,
the Indemnified Party shall not admit any Liability with respect

 

 

to, or settle, compromise
or discharge, such Third Party Claim without the Indemnifying Party’s prior
written consent (which consent shall not be unreasonably withheld). If the
Indemnifying Party assumes the defense of a Third Party Claim, (i) no
compromise or settlement of such claims may be effected by the Indemnifying
Party without the Indemnified Party’s consent (which shall not be unreasonably
withheld or delayed) unless (A) there is no finding or admission of any
violation by any Indemnified Party of any Legal Requirement or any violation by
any Indemnified Party of the rights of any Person, and (B) the sole relief
provided is monetary damages that are paid in full by the Indemnifying Party;
(ii) the Indemnifying Party will have no Liability with respect to any
compromise or settlement of such Third Party Claim effected without the
Indemnifying Party’s consent (which shall not be unreasonably withheld or
delayed); and (iii) the Indemnified Party will cooperate as the Indemnifying
Party may reasonably request in investigating, defending and (subject to clause
(i)) settling such action or proceeding. To the extent the Indemnifying Party
shall control or participate in the defense, settlement or compromise of a
Third Party Claim, the Indemnified Party shall reasonably cooperate with the
Indemnifying Party by providing records and other information on a timely basis
that are reasonably relevant to such Third Party Claim.

 

(iii)          Other
Claims. In the event any Indemnified Party should have a claim against any
Indemnifying Party under §9(b) or §9(d) that does not involve a Third Party
Claim being asserted against or sought to be collected from such Indemnified
Party, the Indemnified Party shall deliver notice of such claim and an estimate
of the amount of the applicable Loss (if reasonably determinable) with
reasonable promptness to the Indemnifying Party. Subject to §9(e), the failure
by any Indemnified Party so to notify the Indemnifying Party shall not relieve
the Indemnifying Party from any Liability that it may have to such Indemnified
Party under §9(b) or §9(d), except to the extent that the Indemnifying Party
demonstrates that it has been actually and materially prejudiced by such
failure. If the Indemnifying Party does not notify the Indemnified Party within
60 calendar days following its receipt of such notice that the Indemnifying
Party disputes its Liability to the Indemnified Party under §9(b) or §9(d),
such claim specified by the Indemnified Party in such notice shall be
conclusively deemed a Liability of the Indemnifying Party under §9(b) or §9(d)
and, subject to §9(c), the Indemnifying Party shall pay the amount of such
Liability to the Indemnified Party on demand or, in the case of any notice in
which the amount of the claim (or any portion thereof) is estimated, on such
later date when the amount of such claim (or such portion thereof) becomes
finally determined.

 

(iv)          Procedures
Relating to Indemnification of Tax Claims. Notwithstanding any other
provision hereof, if a claim shall be made by any taxing authority which, if
successful, might result in an indemnity payment to any Indemnified Party
hereunder, the Indemnified Party shall promptly notify the Indemnifying
Party(ies) in writing of such claim (a “Tax Claim”). At its (or their)
election, the Indemnifying Party(ies) shall control the portion of any
proceedings and actions in connection with such Tax Claim for which the
Indemnifying Party(ies) may have to indemnify the Indemnified Party hereunder
but shall first consult with the Indemnified Party in good faith before taking
any action with respect to the conduct of such proceedings and shall not settle
any Tax Claim without the prior written consent of the Indemnified Party, which
consent shall not be unreasonably withheld.

 

 

(v)           Procedures
Relating to Indemnification Claims Pursuant to §9(b)(iv). In connection
with the obligations of the Shareholders pursuant to §9(b)(iv), the Parties
agree and acknowledge that the Company shall engage the services of Joy M.
Mercer, P.C. (“JMM”) and Abar Pension Services, Inc. (“APS” and, together with
JMM and any other service providers (e.g., accountants, etc.) selected by the
Company to provide services in connection with the Shareholders’ obligations
pursuant to §9(b)(iv), the “Benefits Professionals”) to facilitate the
resolution of such matters. The Parties agree and acknowledge that the matters
set forth in Exhibit 9(b)(iv) are to be resolved in good faith in the
most expeditious and cost-efficient manner reasonably possible, subject to the
Company’s fiduciary duties to the plan participants. Notwithstanding the
foregoing, the Buyer and the Company shall keep the Shareholders (acting by and
through Brian Toolan) apprised of the status and progress of their efforts
pursuant to this §9(h)(v) and
shall (i) provide Brian Toolan copies of any and all correspondence, filings
and other documentation in connection with their efforts pursuant to this this
§9(h)(v), and (b) Buyer shall permit the Shareholders (acting by and through
Brian Toolan) to review and comment on any documents to be filed with the IRS
and/or the Department of Labor (or other regulatory agency) prior to such
filing and the Buyer shall in such cases make such revisions as are reasonably
requested by the Shareholders (acting by and through Brian Toolan). Buyer
agrees, upon the request of the Shareholders (acting by and through Brian
Toolan), to cause the Company to assign to the Shareholders any and all claims,
causes of actions and/or other rights of the Company against Westmont Pension
Services, a division of National Associates Metro, Inc..

 

(i)        Sole Remedy; Waiver. Notwithstanding
anything herein or in any Ancillary Agreement to the contrary, in the event the
Closing occurs, the remedies provided for in this §9 shall be the sole and
exclusive remedies of the Parties, the Buyer Indemnitees and the Shareholder
Indemnitees with respect to the subject matter of this Agreement (except with
respect to claims of fraud or willful misconduct and except for equitable
remedies (including specific performance) and except for the remedies set forth
in §2(f)) and shall control and determine the rights and obligations of such
Parties, the Buyer Indemnitees and the Shareholder Indemnitees with respect to
all claims, demands and Losses arising in connection herewith and, in
furtherance of the foregoing, all other remedies available to such Parties, the
Buyer Indemnitees and the Shareholder Indemnitees (whether at law or otherwise)
are hereby waived and shall be of no force and effect.

 

(j)            Tax Effect And
Insurance. The Shareholders and Buyer agree that any payment made under §9
hereof will be treated by the parties on their Tax Returns as an adjustment to
the Purchase Price. In the event an Indemnified Party actually receives any
insurance proceeds with respect to Losses for which the Indemnified Party has
made a claim prior to the date on which the Indemnifying Party is required
pursuant to this §9 to pay such claim, the claim shall be reduced by an amount
equal to such insurance proceeds received by the Indemnified Party less all
costs incurred by the Indemnified Party in obtaining such insurance proceeds.
If such insurance proceeds are actually received by the Indemnified Party after
the date on which the Indemnifying Party is required pursuant to this §9 to pay
such claim, the Indemnified Party shall, no later than thirty (30) days after
the receipt of such insurance proceeds, reimburse the

 

 

Indemnifying Party in an amount equal to such insurance proceeds (but
in no event in an amount greater than the Losses theretofore paid to the
Indemnified Party by the Indemnifying Party) less all costs incurred by the
Indemnified Party in obtaining such insurance proceeds. In either case, the
Indemnifying Party shall compensate the Indemnified Party for all costs
incurred by the Indemnified Party subsequent to either the reduction of any
claim as provided above, or the delivery of any such insurance proceeds to the
Indemnifying Party as provided above, as the case may be, as a result of any
such insurance, including, but not limited to, retrospective premium
adjustments, experience-based premium adjustments (whether retroactive or
prospective) and indemnification or surety obligations of the Indemnified Party
to any insurer relating to or occasioned by Losses caused by an Indemnifying
Party. A claim for such costs shall be made by an Indemnified Party by delivery
of a written notice to the Indemnifying Party requesting compensation and specifying
this §9(j) as the basis on which compensation for such costs is sought, and the
Indemnifying Party shall pay such costs no later than thirty (30) days after
receiving the written notice requesting such compensation. Notwithstanding the
foregoing, the Indemnitee is not required to pursue a recovery from an insurer
as a precondition to the Indemnifying Party’s obligation to pay any claim as
required by this §9 or otherwise and the Indemnifying Party shall not be
entitled to delay any payment beyond the respective payment dates for any claim
referred to in this §9 for the purpose of awaiting receipt of insurance
proceeds or credits therefor as provided herein.

 

(k)           Limitation
on Damages. No Indemnifying Party shall be liable or otherwise responsible
to any Indemnified Party for consequential, incidental or punitive damages that
arise out of or relate, directly or indirectly, to this Agreement, the
Ancillary Agreements, the performance or breach hereof or thereof, any
transactions contemplated hereby or thereby, or any Liability retained or
assumed hereunder or thereunder.

 

10. Termination.

 

(a)           Termination
of Agreement. The Parties may terminate this Agreement as provided below:

 

(i)            the
Buyer, the Company and the Shareholders may terminate this Agreement by mutual
written consent at any time prior to the Closing;

 

(ii)           the
Buyer may terminate this Agreement by giving written notice to the Company and
the Shareholders at any time prior to the Closing in the event (A) the
Shareholders have within the then previous 5 Business Days given the Buyer any
notice pursuant to §5(e), above and (B) it contains a statement acknowledging
that the Buyer may terminate the Agreement as contemplated by §9(b)(i);

 

(iii)          the
Buyer may terminate this Agreement by giving written notice to the Company and
the Shareholders at any time prior to the Closing (A) in the event the
Shareholders or the Company have breached any material representation,
warranty, or covenant contained in this Agreement in any material respect, the
Buyer has notified the Shareholders and the Company of the breach and the
breach has continued without cure for a period of 30 days after

 

 

the notice of breach or
(B) if the Closing shall not have occurred on or before April 27, 2006, by
reason of the failure of any condition precedent under §8(a) hereof (unless the
failure results primarily from the Buyer itself breaching any representation,
warranty, or covenant contained in this Agreement); and

 

(iv)          the
Company and the Shareholders may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (A) in the event the Buyer
has breached any representation, warranty, or covenant contained in this
Agreement in any material respect, the Company and the Shareholders have
notified the Buyer of the breach and the breach has continued without cure for
a period of 30 days after the notice of breach or (B) if the Closing shall not
have occurred on or before April 27, 2006, by reason of the failure of any
condition precedent under §8(b) hereof (unless the failure results primarily
from the Company or the Shareholders breaching any representation, warranty, or
covenant contained in this Agreement).

 

(b)           Effect
of Termination. If any Party terminates this Agreement pursuant to §10(a)
above, all rights and obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach); provided, however, that the
confidentiality provisions contained in §5(d) above shall survive termination.

 

11. Miscellaneous.

 

(a)           Press
Releases and Public Announcements. No Party shall issue any press release
or make any public announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of the other
Parties; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable Legal Requirement or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its reasonable best efforts to advise the
other Parties prior to making the disclosure).

 

(b)           No
Third-Party Beneficiaries. This Agreement shall not confer any rights or
remedies upon any Person other than the Parties and their respective successors
and permitted assigns.

 

(c)           Entire
Agreement. This Agreement (including the documents referred to herein),
together with the Confidentiality Agreement (the “Pre-Closing Confidentiality
Agreement”) dated February 23, 2006 between the Buyer and the Company,
constitutes the entire agreement between the Parties and supersedes any prior
or contemporaneous understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they relate in any way to the
subject matter hereof; provided, however, that if the transactions contemplated
hereby are consummated, then on and after the Closing Date, the Pre-Closing
Confidentiality Agreement shall be deemed terminated and of no effect ab initio

 

(d)           Succession
and Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties named herein and their respective successors and
permitted assigns. No

 

 

Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties; provided, however, that the Buyer may (i) assign
any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).

 

(e)           Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original but all of which together will constitute one and the
same instrument. The exchange of copies of this Agreement and the Ancillary
Agreements and certificates and of signature pages by facsimile transmission or
pdf format through electronic transmission shall constitute effective execution
and delivery of this Agreement and such Ancillary Agreements and certificates
as to the Parties and may be used in lieu of the original Agreement and such
Ancillary Agreements and certificates for all purposes. Signatures of the
Parties transmitted by facsimile or pdf format through electronic transmission
shall be deemed to be their original signatures for all purposes.

 

(f)            Headings.
The section headings contained in this Agreement are inserted for convenience
only and shall not affect in any way the meaning or interpretation of this
Agreement.

 

(g)           Notices.
All notices, requests, demands, claims and other communications hereunder will
be in writing. Any notice, request, demand, claim, or other communication
hereunder shall be deemed duly given if (and then two Business Days after) it
is sent by registered or certified mail, return receipt requested, postage
prepaid and addressed to the intended recipient as set forth below:

 

If to the Company (prior
to the Closing):

 

Federal Marketing Corp.
d/b/a

Creative Homeowner

24 Park Way

Upper Saddle River, NJ
07458

Attn: Brian Toolan

 

If to the Company (after
the Closing):

c/o Buyer

 

in each case with a copy
to:

 

Harold S. Atlas, Esq.

Riker Danzig Scherer Hyland
& Perretti LLP

One Speedwell Avenue

Morristown, NJ 07962

 

 

Phone: (973) 538-0800

Fax: (973) 538-1984

 

If to the Shareholders:

 

Henry G. Toolan

12 Glenwood Drive

Saddle River, NJ 07458

Phone:
(201) 825-7386

 

Brian H. Toolan

12 Glenwood Drive

Saddle River, NJ 07458

Phone:
(917) 545-1051

 

Allan
R. Blair

126 River Road

Essex, CT 06426

Phone: (860) 767-5006

 

If to the Buyer:

 

Courier Corporation

15 Wellman Avenue

North Chelmsford, MA
01863

ATTN: James F. Conway
III, Chief Executive Officer

 

with a copy to:

 

Goodwin Procter LLP

Exchange Place

Boston, MA 02109

Attn: F. Beirne Lovely,
Jr., Esq.

 

Any Party may send any
notice, request, demand, claim, or other communication hereunder to the
intended recipient at the address set forth above using any other means
(including personal delivery, expedited courier, messenger service, telecopy,
telex, ordinary mail, or electronic mail), but no such notice, request, demand,
claim, or other communication shall be deemed to have been duly given unless
and until it actually is received by the intended recipient. Any Party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.

 

 

(h)           Governing
Law. This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of New York without giving effect to any choice
or conflict of law provision or rule (whether of the State of New York or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York. The Parties hereby irrevocably
and unconditionally consent to submit to the exclusive jurisdiction of the
courts of the State of New York and of the United States of America located in
the Southern District of New York for any actions, suits or proceedings arising
out of or relating to this Agreement and the transactions contemplated hereby
(and the Parties agree not to commence any action, suit or proceeding relating
thereto except in such courts). The Parties hereby irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in the courts of the State of New York or the United States of America
located in the Southern District of New York, and hereby further irrevocably
and unconditionally waive and agree not to plead or claim in any such court
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.

 

(i)            Amendments
and Waivers. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by the Buyer, the Company and
the Shareholders. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.

 

(j)            Severability.
Any term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or enforceability
of the offending term or provision in any other situation or in any other
jurisdiction.

 

(k)           Expenses.
Each of the Buyer, the Company and the Shareholders will bear their own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby. Notwithstanding the
foregoing, the Parties agree and acknowledge that the Company and the
Shareholders may cause the Company to pay certain employee bonuses relating to
the Acquisition out of the Company’s funds to the extent they constitute
Shareholder Loans as of the Closing Date as provided herein and, in such an
event, such costs and expenses shall be deemed to have been paid by the Company
immediately prior to the Closing.

 

(l)            Construction.
The Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state or local Legal Requirement shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word “including” shall mean including without
limitation.

 

 

(m)          Variations
in Pronouns. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the identity of the
Person or Persons may require.

 

(n)           Shareholder
Obligations.    The Liability of each
Shareholder hereunder shall be joint and several with the other Shareholders.
Without limiting the generality of the foregoing, the Shareholders shall be
jointly and severally liable with one another for the indemnities set forth in
§9.

 

 (o)          Waivers.
Neither any failure nor any delay by any party in exercising any right,
power or privilege under this Agreement or any of the documents referred to in
this Agreement will operate as a waiver of such right, power or privilege, and
no single or partial exercise of any such right, power or privilege will
preclude any other or further exercise of such right, power or privilege or the
exercise of any other right, power or privilege. To the maximum extent
permitted by applicable Legal Requirement, (a) no claim or right arising out of
this Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by the other party; (b) no waiver
that may be given by a party will be applicable except in the specific instance
for which it is given; and (c) no notice to or demand on one party will be
deemed to be a waiver of any obligation of that party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.

 

(p)           Disclosure
Schedule.

 

(i)            The
information in the Disclosure Schedule constitutes (i) exceptions to particular
representations, warranties, covenants and obligations of Seller and Shareholders
as set forth in this Agreement or (ii) descriptions or lists of assets and
liabilities and other items referred to in this Agreement. If there is any
inconsistency between the statements in this Agreement and those in the
Disclosure Schedule (other than an exception expressly set forth as such in the
Disclosure Schedule with respect to a specifically identified representation or
warranty), the statements in this Agreement will control.

 

(ii)           The
disclosure of any item, explanation, exception or qualification in the
Disclosure Schedule relates only to the provisions of the corresponding
numbered section or subsection of the Agreement to which it expressly relates
and not to any other section or subsection of the Agreement.

 

[Signatures on Following Page]

 

 

IN
WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date
first above written.

 

	
  COURIER
  CORPORATION

  	
  SHAREHOLDERS

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/ James F. Conway, III

  	
   

  	
  /s/
  Henry G. Toolan

  	
   

  
	
  Name:
  

  	
  James
  F. Conway, III

  	
   

  	
  Henry
  G. Toolan, an individual

  
	
  Title:
  

  	
  Chairman,
  Pres., CEO

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Brian H. Toolan

  	
   

  
	
  FEDERAL
  MARKETING CORP.,

  	
  Brian
  H. Toolan, an individual

  
	
  d/b/a
  CREATIVE HOMEOWNER

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Allan R. Blair

  	
   

  
	
   

  	
  Allan
  R. Blair, an individual

  
	
   

  	
   

  
	
  By: 

  	
  /s/
  Henry G. Toolan

  	
   

  	
   

  
	
  Name:
  

  	
  Henry
  G. Toolan

  	
   

  	
   

  
	
  Title:
  

  	
  President

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