Document:

exv10w14

 

Exhibit 10.14

ASSET PURCHASE AGREEMENT

by and between

W LAB ACQUISITION CORP.

as “Buyer,”

NEXTERA ENTERPRISES, INC.

as “Parent,”

WOODRIDGE LABS, INC.

as “Seller,”

JOSEPH J. MILLIN AND VALERIE MILLIN,

TRUSTEES OF THE MILLIN FAMILY LIVING TRUST DATED NOVEMBER 18, 2002.

JOSEPH J. MILLIN,

SCOTT J. WEISS AND DEBRA WEISS,

AS TRUSTEES OF THE SCOTT AND DEBRA WEISS LIVING TRUST

and

SCOTT J. WEISS

Dated:
March 9, 2006

 

 

ASSET PURCHASE AGREEMENT

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	ARTICLE I. DEFINITIONS	 	 	1	 
	 

	 	 	1.1	 	 	Defined Terms
	 	 	1	 
	 

	 	 	1.2	 	 	Other Defined Terms
	 	 	10	 
	ARTICLE II. PURCHASE AND SALE OF ASSETS	 	 	11	 
	 

	 	 	2.1	 	 	Transfer of Assets
	 	 	11	 
	 

	 	 	2.2	 	 	Assumption of Liabilities
	 	 	11	 
	 

	 	 	2.3	 	 	Excluded Liabilities
	 	 	12	 
	 

	 	 	2.4	 	 	Consideration
	 	 	13	 
	 

	 	 	2.5	 	 	Purchase Price Adjustments
	 	 	14	 
	 

	 	 	2.6	 	 	Earn-Out
	 	 	16	 
	 

	 	 	2.7	 	 	Closing Costs; Transfer Taxes and Fees
	 	 	17	 
	ARTICLE III. CLOSING	 	 	18	 
	 

	 	 	3.1	 	 	Closing
	 	 	18	 
	 

	 	 	3.2	 	 	Conveyances at Closing
	 	 	18	 
	ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER	 	 	20	 
	 

	 	 	4.1	 	 	Organization of Seller
	 	 	20	 
	 

	 	 	4.2	 	 	Subsidiaries
	 	 	20	 
	 

	 	 	4.3	 	 	Authorization
	 	 	20	 
	 

	 	 	4.4	 	 	Absence of Certain Changes or Events
	 	 	21	 
	 

	 	 	4.5	 	 	Assets
	 	 	22	 
	 

	 	 	4.6	 	 	Real Property
	 	 	22	 
	 

	 	 	4.7	 	 	Contracts and Commitments
	 	 	23	 
	 

	 	 	4.8	 	 	Permits
	 	 	25	 
	 

	 	 	4.9	 	 	No Conflict or Violation
	 	 	25	 
	 

	 	 	4.10	 	 	Consents and Approvals
	 	 	25	 
	 

	 	 	4.11	 	 	Financial Statements
	 	 	25	 
	 

	 	 	4.12	 	 	Books and Records
	 	 	26	 
	 

	 	 	4.13	 	 	Litigation
	 	 	26	 
	 

	 	 	4.14	 	 	Labor Matters
	 	 	26	 
	 

	 	 	4.15	 	 	Liabilities
	 	 	27	 
	 

	 	 	4.16	 	 	Compliance with Law
	 	 	27	 
	 

	 	 	4.17	 	 	Proprietary Rights
	 	 	27	 
	 

	 	 	4.18	 	 	Employee Plans
	 	 	28	 
	 

	 	 	4.19	 	 	Transactions with Certain Persons
	 	 	32	 
	 

	 	 	4.20	 	 	Tax Matters
	 	 	32	 
	 

	 	 	4.21	 	 	Insurance
	 	 	33	 
	 

	 	 	4.22	 	 	Accounts Receivable
	 	 	34	 
	 

	 	 	4.23	 	 	Inventory
	 	 	34	 

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	 	 	 	 	 	 	 	 	Page
	 

	 	 	4.24	 	 	Purchase Commitments and Outstanding Bids
	 	 	34	 
	 

	 	 	4.25	 	 	Payments
	 	 	34	 
	 

	 	 	4.26	 	 	Customers, Distributors and Suppliers
	 	 	35	 
	 

	 	 	4.27	 	 	Compliance With Environmental Laws
	 	 	35	 
	 

	 	 	4.28	 	 	Banking Relationships
	 	 	37	 
	 

	 	 	4.29	 	 	Investment
	 	 	37	 
	 

	 	 	4.30	 	 	Intentionally Omitted
	 	 	38	 
	 

	 	 	4.31	 	 	Solvency
	 	 	38	 
	 

	 	 	4.32	 	 	Safety/Product Testing
	 	 	39	 
	 

	 	 	4.33	 	 	No Brokers
	 	 	39	 
	 

	 	 	4.34	 	 	No Other Agreements to Sell the Assets
	 	 	39	 
	 

	 	 	4.35	 	 	Material Misstatements Or Omissions
	 	 	39	 
	ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER	 	 	40	 
	 

	 	 	5.1	 	 	Organization of Buyer Parties
	 	 	40	 
	 

	 	 	5.2	 	 	Authorization
	 	 	40	 
	 

	 	 	5.3	 	 	Capitalization of Parent
	 	 	40	 
	 

	 	 	5.4	 	 	Validity of Shares; Compliance with Securities Laws
	 	 	40	 
	 

	 	 	5.5	 	 	No Conflict or Violation; Consents
	 	 	41	 
	 

	 	 	5.6	 	 	No Brokers
	 	 	41	 
	 

	 	 	5.7	 	 	Qualification
	 	 	41	 
	 

	 	 	5.8	 	 	Capitalization of Buyer
	 	 	41	 
	 

	 	 	5.9	 	 	Parent SEC Reports
	 	 	42	 
	 

	 	 	5.10	 	 	Parent Financial Statements
	 	 	42	 
	 

	 	 	5.11	 	 	Changes in Parent’s Business
	 	 	42	 
	 

	 	 	5.12	 	 	Litigation
	 	 	42	 
	 

	 	 	5.13	 	 	No Reliance
	 	 	42	 
	 

	 	 	5.14	 	 	Other Activities
	 	 	42	 
	 

	 	 	5.15	 	 	Parent Common Stock Issuance
	 	 	42	 
	 

	 	 	5.16	 	 	Liabilities of Buyer
	 	 	43	 
	 

	 	 	5.17	 	 	Tax Matters
	 	 	43	 
	 

	 	 	5.18	 	 	Labor Matters
	 	 	43	 
	 

	 	 	5.19	 	 	Benefit Plans
	 	 	43	 
	 

	 	 	5.20	 	 	Contracts
	 	 	43	 
	 

	 	 	5.21	 	 	Material Misstatements Or Omissions
	 	 	43	 
	ARTICLE VI. COVENANTS OF SELLER AND BUYER	 	 	44	 
	 

	 	 	6.1	 	 	Non-Competition
	 	 	44	 
	 

	 	 	6.2	 	 	Employee Matters
	 	 	45	 
	 

	 	 	6.3	 	 	Piggyback Registrations
	 	 	46	 
	 

	 	 	6.4	 	 	Board Appointments
	 	 	47	 
	 

	 	 	6.5	 	 	Consents
	 	 	47	 
	 

	 	 	6.6	 	 	Reporting Company Status
	 	 	47	 
	 

	 	 	6.7	 	 	Termination of Seller’s Defined Benefit Pension Plan
	 	 	48	 
	 

	 	 	6.8	 	 	Termination of Seller’s 401(k) Profit-Sharing Plan
	 	 	49	 

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	 	 	 	 	 	 	 	 	Page
	 

	 	 	6.9	 	 	Reimbursement of Attorney Costs
	 	 	51	 
	ARTICLE VII. CONDITIONS TO SELLER’S OBLIGATIONS	 	 	51	 
	 

	 	 	7.1	 	 	Representations, Warranties and Covenants
	 	 	51	 
	 

	 	 	7.2	 	 	Consents; Regulatory Compliance and Approval
	 	 	51	 
	 

	 	 	7.3	 	 	No Actions or Court Orders
	 	 	52	 
	 

	 	 	7.4	 	 	Assumption
	 	 	52	 
	 

	 	 	7.5	 	 	Employment Agreements
	 	 	52	 
	 

	 	 	7.6	 	 	Escrow Agreement
	 	 	52	 
	 

	 	 	7.7	 	 	Opinion of Counsel
	 	 	52	 
	 

	 	 	7.8	 	 	Board Appointments
	 	 	52	 
	 

	 	 	7.9	 	 	Corporate Documents
	 	 	52	 
	ARTICLE VIII. CONDITIONS TO BUYER’S OBLIGATIONS	 	 	52	 
	 

	 	 	8.1	 	 	Representations, Warranties and Covenants
	 	 	52	 
	 

	 	 	8.2	 	 	Consents; Regulatory Compliance and Approval
	 	 	53	 
	 

	 	 	8.3	 	 	No Actions or Court Orders
	 	 	53	 
	 

	 	 	8.4	 	 	Opinion of Counsel
	 	 	53	 
	 

	 	 	8.5	 	 	Material Changes
	 	 	53	 
	 

	 	 	8.6	 	 	Corporate Documents
	 	 	53	 
	 

	 	 	8.7	 	 	Due Diligence Review
	 	 	53	 
	 

	 	 	8.8	 	 	Conveyancing Documents; Release of Encumbrances
	 	 	53	 
	 

	 	 	8.9	 	 	Permits
	 	 	54	 
	 

	 	 	8.10	 	 	Assignment
	 	 	54	 
	 

	 	 	8.11	 	 	Employment Agreements
	 	 	54	 
	 

	 	 	8.12	 	 	Rehired Employees
	 	 	54	 
	 

	 	 	8.13	 	 	Stock Pledge
	 	 	54	 
	 

	 	 	8.14	 	 	Sales Rep Agreements
	 	 	54	 
	 

	 	 	8.15	 	 	Consents of Weil & Company
	 	 	54	 
	 

	 	 	8.16	 	 	Fairness Opinion
	 	 	54	 
	 

	 	 	8.17	 	 	Nonforeign Affidavit
	 	 	54	 
	ARTICLE IX. ACTIONS BY SELLER AND BUYER AFTER THE CLOSING	 	 	55	 
	 

	 	 	9.1	 	 	Collection of Accounts Receivable and Letters of Credit
	 	 	55	 
	 

	 	 	9.2	 	 	Books and Records; Tax Matters
	 	 	55	 
	 

	 	 	9.3	 	 	Survival of Representations
	 	 	56	 
	 

	 	 	9.4	 	 	Indemnifications
	 	 	56	 
	 

	 	 	9.5	 	 	Indemnification Holdback Amount as Initial Source of Payment
	 	 	61	 
	 

	 	 	9.6	 	 	Release and Payment of Indemnification Holdback Amount and the Shares
	 	 	61	 
	 

	 	 	9.7	 	 	Bulk Sales
	 	 	63	 
	 

	 	 	9.8	 	 	Taxes
	 	 	63	 
	 

	 	 	9.9	 	 	Insurance
	 	 	63	 
	 

	 	 	9.10	 	 	No Solicitation of Rehired Employees
	 	 	63	 
	 

	 	 	9.11	 	 	Seller’s Change of Name
	 	 	64	 

iii

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	ARTICLE X. MISCELLANEOUS	 	 	64	 
	 

	 	 	10.1	 	 	Assignment
	 	 	64	 
	 

	 	 	10.2	 	 	Notices
	 	 	64	 
	 

	 	 	10.3	 	 	Choice of Law
	 	 	65	 
	 

	 	 	10.4	 	 	Entire Agreement; Amendments and Waivers
	 	 	65	 
	 

	 	 	10.5	 	 	Multiple Counterparts; Facsimile or Electronic Signatures
	 	 	65	 
	 

	 	 	10.6	 	 	Expenses
	 	 	66	 
	 

	 	 	10.7	 	 	Invalidity
	 	 	66	 
	 

	 	 	10.8	 	 	Titles; Gender
	 	 	66	 
	 

	 	 	10.9	 	 	Public Statements and Press Releases
	 	 	66	 
	 

	 	 	10.10	 	 	Confidential Information
	 	 	66	 
	 

	 	 	10.11	 	 	Remedies of Buyer Parties
	 	 	68	 
	 

	 	 	10.12	 	 	Attorneys’ Fees
	 	 	68	 
	 

	 	 	10.13	 	 	Arbitration
	 	 	68	 
	 

	 	 	10.14	 	 	Disclosure Schedule
	 	 	69	 

iv

 

EXHIBITS

	 	 	 	 	 
	Exhibit	 	 	 	 
	A

	 	Allocation of Purchase Price
	 	A-1
	 
	 	 	 	 
	B

	 	Bill of Sale
	 	B-1
	 
	 	 	 	 
	C

	 	Assignment and Assumption of Leases
	 	C-1
	 
	 	 	 	 
	D

	 	Assignment and Assumption of Contracts
	 	D-1
	 
	 	 	 	 
	E

	 	Assignment of Patents and Trademarks
	 	E-1
	 
	 	 	 	 
	F

	 	Escrow Agreement
	 	F-1
	 
	 	 	 	 
	G

	 	Subject Matter of Legal Opinion of Maron & Sandler
	 	G-1
	 
	 	 	 	 
	G

	 	Subject Matter of Legal Opinion of Latham & Watkins LLP
	 	G-2
	 
	 	 	 	 
	G

	 	Subject Matter of Legal Opinion of Jones, Kaufman & Ackerman LLP
	 	G-3
	 
	 	 	 	 
	H

	 	Form of Employment Agreement for Millin
	 	H-1
	 
	 	 	 	 
	H

	 	Form of Employment Agreement for Weiss
	 	H-2
	 
	 	 	 	 
	I

	 	Form of Stock Pledge and Security Agreement
	 	  I-1
	 
	 	 	 	 
	J

	 	Form of Weil & Company Consents
	 	  J-1

iv

 

ASSET PURCHASE AGREEMENT

This Asset
Purchase Agreement, dated as of March 9, 2006, is by and among W LAB ACQUISITION CORP.,
a Delaware corporation (“Buyer”), NEXTERA ENTERPRISES, INC., a Delaware corporation
(“Parent”, and together with Buyer, the “Buyer Parties”), WOODRIDGE LABS, INC., a
California corporation (“Seller”), JOSEPH J. MILLIN AND VALERIE MILLIN, TRUSTEES OF THE
MILLIN FAMILY LIVING TRUST DATED NOVEMBER 18, 2002 (“Millin Trust”), SCOTT J. WEISS AND
DEBRA WEISS, AS TRUSTEES OF THE SCOTT AND DEBRA WEISS LIVING TRUST (“Weiss Trust”), JOSEPH
J. MILLIN, an individual (“Millin”) and SCOTT J. WEISS, an individual (“Weiss” and
together with Seller, Millin Trust, Weiss Trust and Millin, the “Seller Parties”). The
Buyer Parties and the Seller Parties are referred to herein as the “Parties.”

RECITALS

          A. Seller owns certain assets which it uses in the conduct of the Business (as defined below).
Millin Trust and Weiss Trust are the sole shareholders of Seller.

          B. Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, such assets
upon the terms and subject to the conditions of this Agreement.

AGREEMENT

          NOW THEREFORE, in consideration of the respective covenants and promises contained herein and
for other good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Parties hereto agree as follows:

ARTICLE I.

DEFINITIONS

     1.1 Defined Terms. As used herein, the terms below shall have the following meanings.
Any of such terms, unless the context otherwise requires, may be used in the singular or plural,
depending upon the reference.

          “Action” shall mean any action, claim, suit, litigation, proceeding (judicial or
administrative), labor dispute, mediation, arbitral action, governmental audit, inquiry, criminal
prosecution, investigation or unfair labor practice, charge or complaint.

          “Affiliate” shall have the meaning set forth in the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder.

          “Assets” shall mean all of the right, title and interest in and to the business,
properties, assets and rights of every kind, nature and description, whether tangible or
intangible, real, personal or mixed, known or unknown, and constituting, or used or useful in
connection
with, or related to, the Business owned by Seller or in which Seller has any interest,
including

1

 

without limitation all of Seller’s right, title and interest in and to the following, but
excluding therefrom the Excluded Assets:

               (a) all accounts and notes receivable (whether current or noncurrent), refunds, deposits,
prepayments or prepaid expenses (including without limitation any prepaid insurance premiums) of
Seller;

               (b) all cash and cash equivalents held by Seller (either directly or in accounts with any
banking or similar institution);

               (c) all Assumed Contracts;

               (d) all Leases;

               (e) all Leasehold Estates;

               (f) all Leasehold Improvements;

               (g) all Fixtures and Equipment;

               (h) all Inventory;

               (i) all Books and Records;

               (j) all Proprietary Rights relating to or used in the Business;

               (k) all Permits that under applicable Regulations may be assigned to Buyer;

               (l) all computer hardware, software and firmware;

               (m) all available supplies, sales literature, promotional literature, customer, supplier and
distributor lists, art work, display units, telephone and fax numbers and purchasing records
related to the Business;

               (n) all rights under or pursuant to all warranties, representations and guarantees made by
suppliers in connection with the Assets or services furnished to Seller pertaining to the Business
or affecting the Assets;

               (o) all deposits and prepaid expenses of Seller;

               (p) all claims, causes of action, choses in action, rights of recovery and rights of set-off
of any kind, against any Person, including without limitation any liens, security interests,
pledges or other rights to payment or to enforce payment in connection with products delivered by
Seller on or prior to the Closing Date; and

               (q) all goodwill relating to the Business or the Assets.

2

 

          “Assumed Contracts” shall mean all of the Contracts, and Seller’s rights and
obligations thereunder, that are either (a) listed on Schedule 4.7(a) or (b) constitute outstanding
customer purchase orders for amounts less than $20,000.

          “Assumed Debt” shall mean that certain loan made to Seller by American Business Bank,
in a principal amount at the Closing not to exceed One Million Dollars ($1,000,000), and the
Promissory Note relating thereto.

          “Audited Financial Statements” shall mean the audited Balance Sheets dated December
31, 2003, December 31, 2004 and December 31, 2005, and the related audited statements of
operations, changes in shareholders’ equity and cash flow for the years ended December 31, 2003,
December 31, 2004 and December 31, 2005.

          “Balance Sheet” shall mean the balance sheet of Seller at the date indicated thereon,
together with the notes thereon.

          “Balance Sheet Date” shall mean December 31, 2005.

          “Books and Records” shall mean all books and records of Seller relating to the Assets
or the Business and all books and records of any Affiliate of Seller necessary to the operation of
the Business, including, without limitation, (a) all records and lists of Seller pertaining to the
Assets, (b) all records, lists and files pertaining to the Business, customers, suppliers or
personnel of Seller, (c) all product, business and marketing plans of Seller and (d) all books,
ledgers, files, reports, plans, data, manuals, drawings, and operating records of every kind
maintained by Seller, including in each case all computer software and data in computer readable
and/or human readable form used to maintain such Books and Records together with the media on which
such software and data are stored and all documentation related thereto, but excluding all of the
Excluded Records.

          “Business” shall mean the Seller’s business of researching, developing, designing,
manufacturing, distributing, marketing and selling personal care, healthcare or beauty products to
food, drug and discount stores, merchandisers and other retail channels (including, without
limitation, direct sales and web channels).

          “Business Day” shall mean a day other than Saturday, Sunday or any other day on which
commercial banks are authorized or required to close in New York, New York.

          “Code” shall mean the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.

          “Consents” shall mean any and all consents, approvals, authorizations or waivers of,
declarations or notices to, and filings and registrations with, any domestic or foreign public,
governmental or regulatory body or authority or any other Person that are (a) required in
connection with the execution, delivery and performance by any Seller Party of this Agreement and
the consummation of the transactions contemplated hereby or (b) necessary in order that the Buyer
Parties can conduct the Business after the Closing Date substantially in the same manner as the
Business was conducted by Seller before the Closing Date.

3

 

          “Contract” shall mean any agreement, contract, note, bond, loan, evidence of
indebtedness, purchase, order, letter of credit, mortgage, indenture, security or pledge agreement,
franchise agreement, undertaking, practice, covenant not to compete, employment agreement, license,
instrument, deed of trust, obligation or commitment to which Seller is a party or by which Seller
or any of the Assets is bound and which relates to the Business or the Assets, whether oral,
written or implied, but excluding all Leases.

          “Copyrights” shall mean registered copyrights, copyright applications, unregistered
copyrights, copyrightable works, mask works and mask work rights, including without limitation all
rights of authorship, use, publication, reproduction, distribution, performance, transformation,
moral rights and rights of ownership of copyrightable and mask works, all copyrights in website
content and in packaging and advertising materials used in the Business, and all rights to register
and obtain renewals and extensions of registrations, together with all other interests accruing by
reason of international copyright treaties.

          “Court Order” shall mean any judgment, decision, consent decree, injunction, ruling or
order of any federal, state or local court or governmental agency, department or authority that is
binding on any Person or its property under applicable law.

          “Credit
Agreement” shall mean the credit agreement dated as of March 9, 2006 by and
among the Buyer Parties, NewStar Financial, Inc. (as administrative agent) and the lenders party
thereto from time to time.

          “Current Assets” shall mean, without duplication, the sum of all of the line items set
forth on the applicable Balance Sheet to the extent that such items would be classified under GAAP
as current assets on the balance sheet of a company conducting a business the same or similar to
the Business, after deducting appropriate and adequate reserves therefrom (which reserves are
proper in accordance with GAAP), but excluding all Excluded Assets.

          “Current Liabilities” shall mean, without duplication, the sum of all of the line
items set forth on the applicable Balance Sheet to the extent that such items would be classified
under GAAP as current liabilities on the balance sheet of a company conducting a business the same
or similar to the Business, but excluding all Excluded Liabilities.

          “Customer Deductions” shall mean charges against sales customarily taken by Seller in
the ordinary course of business, such as customer returns, discounts, mark downs, promotional
allowances and other chargebacks.

          “Default” shall mean (a) a breach of or default under any Contract or Lease, (b) the
occurrence of an event that with the passage of time or the giving of notice or both would
constitute a breach of or default under any Contract or Lease, or (c) the occurrence of an event
that with or without the passage of time or the giving of notice or both would give rise to a right
of, or result in, termination, suspension or acceleration under or of any Contract or Lease.

          “Dermafreeze Lawsuit” shall mean Freeze 24/7 International LLC v. Woodridge Labs, Inc.
(Court Case No. 1:05-CV-03429 (JGK)).

4

 

          “Dermafreeze Liability” shall mean any and all Liabilities relating to the Dermafreeze
Lawsuit or any related Action brought by or against any Seller Party or against any Buyer Party.

          “Disclosure Schedule” shall mean a schedule executed and delivered by the Seller
Parties to the Buyer Parties as of the date hereof which sets forth the exceptions to and the
disclosures required by the representations and warranties contained in Article IV hereof and
certain other information called for by this Agreement. Unless otherwise specified, each reference
in this Agreement to any numbered schedule is a reference to that numbered schedule which is
included in the Disclosure Schedule.

          “Domain Names” shall mean all URL registrations for Internet websites.

          “Employment Agreement” shall mean each Employment Agreement to be entered into by and
between the Buyer Parties and each of Millin and Weiss and delivered at the Closing, substantially
in the forms attached as Exhibits H-1 and H-2 hereto, respectively.

          “Encumbrance” shall mean any claim, lien, pledge, option, charge, easement, security
interest, deed of trust, mortgage, right-of-way, encroachment, building or use restriction,
conditional sales agreement, encumbrance or other right of third parties, whether voluntarily
incurred or arising by operation of law, and includes, without limitation, any agreement to give
any of the foregoing in the future, and any contingent sale or other title retention agreement or
lease in the nature thereof.

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

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

          “Excluded Assets” shall mean any and all:

               (a) claims, causes of action, choses in action, rights of recovery and rights of set-off of
any kind, against any Person, including without limitation any liens, security interests, pledges
or other rights to payment or to enforce payment, in each case to the extent related to or arising
from the Excluded Liabilities or any other Excluded Asset;

               (b) insurance, warranty and condemnation proceeds with respect to damage, non-conformance of
or loss insofar as they relate to any Excluded Liability or any other Excluded Asset (but, with
respect to the Dermafreeze Lawsuit, only to the extent those proceeds relate to the reimbursement
of legal expenses incurred by Seller prior to the Closing);

               (c) Excluded Contracts;

               (d) Permits that under applicable Regulations may not be assigned to Buyer;

               (e) Excluded Records;

5

 

               (f) assets of the Employee Plans;

               (g) all refunds or credits of Taxes due Seller by reason of its ownership of the Assets or the
operation of the Business to the extent attributable to any taxable period ending on or prior to
the Closing Date and not included as part of the Current Assets on the Closing Balance Sheet; and

               (h) those items listed on Schedule 1.1(h).

          “Excluded Contracts” shall mean any and all:

               (a) employment contracts and severance agreements, including without limitation Contracts (A)
to employ or terminate executive officers or other personnel and other contracts with present or
former officers, directors or shareholders of Seller or (B) that will result in the payment by, or
the creation of any Liability to pay on behalf of Buyer or Seller any severance, termination,
“golden parachute” or other similar payments to any present or former personnel following
termination of employment or otherwise as a result of the consummation of the transactions
contemplated by this Agreement;

               (b) labor or union contracts;

               (c) Contracts solely between shareholders of Seller and Seller (including any buy-sell and
cross-indemnity agreements);

               (d) this Agreement and the rights of Seller under this Agreement, as well as Seller’s rights
and interests in and to all correspondence and documents, including confidentiality agreements,
entered into by the Buyer or any of its Affiliates for the benefit of Seller in connection with the
sale of the Business;

               (e) Employee Plans;

               (f) any Contracts between any of the Seller Parties and the Sage Group, LLC;

               (g) all Insurance Policies; and

               (h) promissory notes, loans, indentures, letters of credit, guarantees, or other similar
instruments relating to an obligation to pay money, between Seller and any of its Representatives,
other than the Promissory Note.

          “Excluded Records” shall mean any and all of Seller’s minute books, stock books,
personnel records (other than personnel records relating to the Rehired Employees), Tax returns and
related Tax records and files, other documents relating to the organization, maintenance and
existence of Seller as a corporate entity and Seller’s rights and interests in all information,
files, records, data, plans, contracts and recorded knowledge related to or used in connection with
the Business, in each case only to the extent that any of the foregoing (a) relate solely to the
Excluded Assets; or (b) relate to the Excluded Assets and can be easily separated from the Assets
and are privileged or are otherwise subject to third party privacy rights, including materials that

6

 

are protected by the attorney-client privilege or attorney work product doctrine, to the
extent such do not relate to the Assets, the Business or the Assumed Liabilities; or (c) are solely
written materials that Seller is required by law to retain and of which Seller shall have provided
a copy to Buyer.

          “Fixtures and Equipment” shall mean all of the furniture, fixtures, furnishings,
machinery, automobiles, trucks, spare parts, supplies, equipment, tooling, molds, patterns, dies,
computer hardware, spare parts and other tangible personal property owned by Seller and used in
connection with the Business, wherever located and including any such Fixtures and Equipment in the
possession of any of Seller’s suppliers, including all warranty rights with respect thereto.

          “Insurance Policies” shall mean the insurance policies related to the Assets, the
Business or its employees listed on Schedule 4.21.

          “Inventory” shall mean all of Seller’s inventory held for resale and all of Seller’s
raw materials, work in process, finished products, wrapping, supply and packaging items and similar
items with respect to the Business, in each case wherever the same may be located.

          “Leased Real Property” shall mean all real property leased or licensed to Seller, or
to which Seller has any other rights, under the Leases.

          “Leasehold Estates” shall mean all of Seller’s rights and obligations as lessee under
the Leases.

          “Leasehold Improvements” shall mean all leasehold improvements situated in or on the
Leased Real Property and owned by Seller.

          “Leases” shall mean all of the existing leases, subleases, licenses, occupancy
agreements, options, rights, concessions or other agreements or arrangements, written or oral, with
respect to real property to which Seller is a party or by which Seller or any of the Assets is
bound.

          “Liabilities” shall mean any direct or indirect liability, indebtedness, obligation,
commitment, expense, claim, deficiency, guaranty or endorsement of or by any Person of any type,
whether accrued, absolute, contingent, matured, unmatured or other.

          “Material Adverse Effect” shall mean with respect to the Business, the Assets or the
Assumed Liabilities, any material adverse effect or change in the financial condition, business,
properties, results of operations, assets, Liabilities or operations of the Business and/or the
Assets or on the ability of any of the Seller Parties to consummate the transactions contemplated
hereby, or any event or condition that could, with the passage of time, constitute any of the
foregoing, excluding, in each case, any change, effect or circumstance that directly results from
changes in (a) United States or global economic conditions that do not disproportionately impact
the Assets or the Business, (b) the industry in which the Business is operated which do not
disproportionately impact the Assets or the Business or (c) laws or accounting standards,
principles or interpretations of general application that do not disproportionately impact the
Assets or the Business.

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          “Most Recent Balance Sheet” shall mean the Balance Sheet as of the Balance Sheet Date.

          “ordinary course of business” or “ordinary course” or any similar phrase shall
mean the usual and ordinary course of the Business and consistent with Seller’s past custom and
practice.

          “Parent Common Stock” shall mean the Class A Common Stock, par value $0.001 per share,
and Class B Common Stock, par value $0.001 per share, of Parent.

          “Patents” shall mean all patents and patent applications (including, without
limitation, utility patents, utility models, design patents, certificates of invention and
applications for certificates of invention and related priority rights) and registered design and
registered design applications and all rights in connection therewith in any country, and
including, without limitation, all provisional applications, substitutions, continuations,
continuations-in-part, divisions, renewals, reissues, re-examinations and extensions thereof.

          “PBGC” shall mean the Pension Benefit Guaranty Corporation.

          “Permits” shall mean all licenses, permits, franchises, approvals, authorizations,
consents or orders of, or filings with, any governmental authority, whether foreign, federal, state
or local, or any other Person, necessary or desirable for the past or present conduct of, or
relating to the operation of the Business.

          “Permitted Encumbrances” shall mean (a) Encumbrances which in the aggregate are not
substantial in amount and do not materially detract from the value or transferability of the
property or assets subject thereto or interfere with the present use thereof, (b) Encumbrances
provided for in, or arising out of, any Assumed Contract and not related to any indebtedness for
borrowed money, (c) the Leasehold Estates, (d) Encumbrances arising under the Promissory Note with
respect to the Assumed Debt, (e) as to any Leased Real Property, any Encumbrances which arise out
of or are described in the related Leases, and (f) such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced, and
for which assessments or other charges are not yet due and payable or are due but not delinquent or
due but being contested in good faith by appropriate proceedings: (i) statutory liens for Taxes,
assessments or other governmental charges not yet due and payable; (ii) materialmen’s, mechanics’,
carriers’, workmen’s and repairmen’s liens and other similar liens imposed by Regulations arising
in the ordinary course of business securing obligations that are not overdue for a period of more
than thirty (30) calendar days; and (iii) pledges or deposits to secure obligations under workers’
compensation laws or similar legislation or to secure public or statutory obligations.

          “Person” shall mean any person or entity, whether an individual, trustee, corporation,
partnership, limited partnership, limited liability company, trust, unincorporated organization,
business association, firm, joint venture, governmental agency or authority.

          “Promissory Note” shall mean that certain Promissory Note and Security Agreement by
and between American Business Bank and Seller dated as of December 15, 2005.

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          “Pledge Agreement” shall mean the Stock Pledge and Security Agreement to be entered
into by and between Parent, Buyer and Seller and delivered at the Closing, substantially in the
form attached as Exhibit I hereto.

          “Proprietary Rights” shall mean all Copyrights, Domain Names, Patents, Trademarks,
technology rights and licenses, computer software (including without limitation any source or
object codes therefor or documentation relating thereto), trade secrets, franchises, know-how,
inventions reduced to practice, technology, designs, proprietary information, specifications
(including without limitation manufacturing and operating specifications), formulae, technical
data, plans, drawings and other intellectual property rights and intangible assets owned by Seller
or used by Seller in the Business, and including all rights (whether at law, in equity, by contract
or otherwise) to use or otherwise exploit any of the foregoing.

          “Regulations” shall mean any laws, statutes, ordinances, regulations, rules, notice
requirements, court decisions, agency guidelines, principles of law and orders of any foreign,
federal, state or local government and any other governmental department or agency, including
without limitation Environmental Laws, energy, motor vehicle safety, public utility, zoning,
building and health codes, occupational safety and health and laws respecting employment practices,
employee documentation, terms and conditions of employment and wages and hours.

          “Representative” shall mean any officer, director, principal, agent, employee or other
representative.

          “SEC” shall mean the Securities and Exchange Commission.

          “Securities Act” shall mean the Securities Act of 1933, as amended.

          “Seller’s Knowledge” or “To the Knowledge of Seller” or other terms of similar
import means the actual knowledge of Millin, Weiss and Lori Pesa, after reasonable inquiry by them
of all employees of Seller who could reasonably be expected to have knowledge or information with
respect to the matter in question.

          “Subsidiary” shall mean, with respect to any Person, any corporation, partnership,
joint venture, limited liability company or other business entity (a) of which shares of securities
or other ownership interests having ordinary voting power for the election of a majority of the
directors, managers or other members of its governing body (other than securities or interests
having such power only by reason of the happening of a contingency) are at the time beneficially
owned by such Person or (b) the management of which is otherwise controlled, directly, or
indirectly through one or more intermediaries, or both, by such Person.

          “Tax” shall mean any federal, state, local, foreign or other tax, levy, impost, fee,
assessment or other government charge, including without limitation income, estimated income,
business, occupation, franchise, property, payroll, personal property, sales, transfer, use,
employment, commercial rent, occupancy, franchise or withholding taxes, and any premium, including
without limitation interest, penalties and additions in connection therewith.

9

 

          “Trademarks” shall mean registered trademarks, registered service marks, trademark and
service mark applications, trade names and applications for trade names, unregistered trademarks
and service marks, slogans and trade dress.

          “Working Capital” shall mean Current Assets minus Current Liabilities.

          “Working Capital Ceiling” shall mean $2,850,000 (Two Million Eight Hundred Fifty
Thousand Dollars).

          “Working Capital Threshold” shall mean $2,450,000 (Two Million Four Hundred Fifty
Thousand Dollars).

     1.2 Other Defined Terms. The following terms shall have the meanings defined for such
terms in the Sections set forth below:

	 	 	 
	Term	 	Section
	401(k) Plan
	 	6.8(a)
	401(k) Plan Trust
	 	6.8(a)
	401(k) Plan Trustees
	 	6.8(a)
	Accounting Firm
	 	2.5(e)
	Adjustment Amount
	 	2.5(f)
	Adjustment Escrow Account
	 	2.4(d)
	Adjustment Holdback Amount
	 	2.4(c)
	Arbiter
	 	10.13(c)
	Assumed Liabilities
	 	2.2
	Buyer Indemnified Party
	 	9.4(a)
	Buyer Indemnity Cap
	 	9.4(f)(ii)
	Cash Payment
	 	2.4(a)
	CBS Standards
	 	2.5(a)
	Claim
	 	9.4(d)
	Claim Notice
	 	9.4(d)
	Closing
	 	3.1
	Closing Balance Sheet
	 	2.5(d)
	Closing Date
	 	3.1
	Closing Payment
	 	2.4(d)
	Closing Working Capital
	 	2.5(d)
	Confidential Information
	 	10.10(b)
	Damages
	 	9.4(a)
	Disputing Parties
	 	10.13(b)
	DOL
	 	6.7(c)
	Earn-Out Amount
	 	2.6
	Earn-Out Threshold
	 	2.6
	Employee Plans
	 	4.18(a)(ii)
	Environmental Conditions
	 	4.27(a)
	Environmental Laws
	 	4.27(a)
	Escrow Agent
	 	2.4(d)

10

 

	 	 	 
	Term	 	Section
	Escrow Agreement
	 	2.4(d)
	Estimated Closing Balance Sheet
	 	2.5(b)
	Estimated Closing Working Capital
	 	2.5(b)
	Estimated WC Shortfall
	 	2.5(c)
	Excluded Liabilities
	 	2.3(a)
	Expiration Date
	 	9.3
	GAAP
	 	2.5(b)
	Hazardous Substance
	 	4.27(a)
	Indemnification Holdback Amount
	 	2.4(c)
	Indemnification Escrow Release Date
	 	9.6(e)
	Indemnity Escrow Account
	 	2.4(d)
	Indemnity Shortfall
	 	9.6(c)
	Insurance Benefits
	 	9.4(h)
	IRS
	 	6.7(c)
	JAMS
	 	10.13(b)
	Parent SEC Reports
	 	5.14
	Parent Tax Returns
	 	5.19
	Pension Plan
	 	6.7(a)
	Pension Plan Trust
	 	6.7(a)
	Pension Plan Trustees
	 	6.7(a)
	Purchase Price
	 	2.4(a)
	Purchase Price Objection Notice
	 	2.5(e)
	Purchase Price Resolution Period
	 	2.5(e)
	Rehired Employees
	 	6.2(a)
	Release
	 	4.27(a)
	Released Shares
	 	9.6(c)
	SEC
	 	10.9
	Seller Indemnified Party
	 	9.4(b)
	Seller Indemnity Cap
	 	9.4(f)(ii)
	Shares
	 	2.4(a)
	Working Capital Schedule
	 	4.11

ARTICLE II.

PURCHASE AND SALE OF ASSETS

     2.1 Transfer of Assets. Upon the terms and subject to the conditions contained
herein, at the Closing, Seller will sell, convey, transfer, assign and deliver to Buyer, and Buyer
will acquire from Seller, the Assets, free and clear of all Encumbrances other than Permitted
Encumbrances.

     2.2 Assumption of Liabilities. Upon the terms and subject to the conditions contained herein, at the Closing Buyer shall
assume the following, and only the following, Liabilities of Seller (the “Assumed
Liabilities”):

               (a) all Liabilities accruing, arising out of, or relating to events or occurrences happening
from and after the Closing under the Assumed Contracts and the Leases

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set forth on Schedule 4.6,
but not including any Liability for any Default under any such Contract occurring on or prior to
the Closing;

               (b) all Current Liabilities set forth in the Closing Balance Sheet;

               (c) all Liabilities to the extent accruing, arising out of, or relating to events or
occurrences happening from and after the Closing insofar as they relate to the operation or
ownership of the Business or the Assets from and after the Closing;

               (d) all Liabilities for Customer Deductions to the extent (A) occurring within 120 days after
the Closing Date and for which adequate reserves have been provided for on the Closing Balance
Sheet in accordance with GAAP, (B) occurring at any time after the date which is 120 days after the
Closing Date or (C) relating solely to post-Closing activities, including promotional and marketing
activities (whether or not within said 120-day period); and

               (e) all Liabilities arising under the Promissory Note with respect to the Assumed Debt.

     2.3 Excluded Liabilities.

               (a) Notwithstanding any other provision of this Agreement, the Buyer Parties shall not assume,
or otherwise be responsible for, any Liabilities of the Seller Parties other than the Assumed
Liabilities, whether liquidated or unliquidated, or known or unknown, whether arising out of
occurrences prior to, at or after the date hereof (“Excluded Liabilities”), which Excluded
Liabilities include, without limitation, the following:

                  (i) any Liability whatsoever to or in respect of any employees or former employees of Seller
including without limitation (A) any employment agreement, whether or not written, between Seller
and any Person or the termination by Seller of the employment of any Person, (B) any claim of an
unfair labor practice, or any claim under any state unemployment compensation or worker’s
compensation law or regulation or under any federal or state employment discrimination law or
regulation, which shall have been asserted prior to the Closing or is based on acts or omissions
which occurred prior to the Closing and (C) any wages, vacation pay, other paid time off, severance
pay, overtime, bonuses, other incentive compensation, commissions, expense reimbursement, or any
compensation that was earned, accrued, or relates to any period prior to the Closing, or that
becomes payable as a result of the Closing;

                  (ii) any Liability under or relating to any Employee Plan at any time maintained, contributed
to or required to be contributed to by Seller or any ERISA Affiliate,
or under which Seller or any ERISA Affiliate has or may incur Liability, or any contributions,
benefits or Liabilities therefor, or any Liability with respect to Seller’s or any ERISA
Affiliate’s withdrawal or partial withdrawal from or termination of any Employee Plan;

                  (iii) any Liability of any Seller Party in respect of any Tax (other than as provided in
Section 2.7 below);

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                  (iv) any Liability arising from any injury to or death of any person or damage to or
destruction of any property, whether based on negligence, breach of warranty, strict liability,
enterprise liability or any other legal or equitable theory arising from defects in products
designed, manufactured, assembled, sold, distributed, delivered, installed or repaired, or from
services performed, by or on behalf of Seller or any other Person prior to the Closing;

                  (v) any Liability of any Seller Party arising out of or related to any Action against any
Seller Party (including, without limitation, the Dermafreeze Lawsuit) or any Action which adversely
affects the Assets and which shall have been asserted prior to the Closing or to the extent the
basis of which shall have arisen prior to the Closing;

                  (vi) any Liability of any Seller Party resulting from entering into, performing its or his
obligations pursuant to or consummating the transactions contemplated by, this Agreement (including
without limitation any Liability of any Seller Party pursuant to Article X hereof);

                  (vii) any Liability related to or arising from the Business and its operation prior to the
Closing;

                  (viii) any Liability for any occurrence or circumstance (whether known or unknown) which
occurs or exists prior to the Closing and which constitutes, or which by the lapse of time or
delivery of notice (or both) would constitute, a breach or default under any Contract, Lease or
Permit or a violation of the requirements of any governmental authority or agency or of the rights
of any Person;

                  (ix) any environmental Liabilities arising from events or occurrences which occurred prior to
the Closing;

                  (x) all Liabilities for Customer Deductions except to the extent described in Section 2.2(d);
and

                  (xi) any Liability of any Seller Party to another Seller Party or any of their respective
Affiliates.

               (b) Except as expressly set forth in Section 2.2 above, the Parties agree that Buyer shall not
be the successor to Seller. The Seller Parties shall retain, pay, perform and discharge the
Excluded Liabilities.

     2.4 Consideration

               (a) Purchase Price. Upon the terms and subject to the conditions contained herein, as
consideration for the sale, transfer, assignment, conveyance and delivery of the Assets and in full
payment therefor, Buyer shall pay or cause to be paid to Seller (the “Purchase Price”): (i)
$22,500,000 (Twenty-Two Million Five Hundred Thousand Dollars) (the “Cash Payment”),
subject to adjustments as set forth in Section 2.5, (ii) 8,467,410 shares of Class A Parent Common
Stock (the “Shares”), which represent twenty percent (20%) of the total Parent Common Stock
issued and outstanding immediately following the Closing Date and (iii)

13

 

the Earn-Out Amount, if
any, and Buyer shall assume the Assumed Liabilities as provided in Section 2.2. The Purchase Price
shall be allocated among the Assets in the manner required by Section 1060 of the Code. Exhibit A
attached hereto sets forth the amount of the Purchase Price allocable to the various Assets. Buyer
and Seller agree to each prepare and file on a timely basis with the Internal Revenue Service
substantially identical initial and supplemental Internal Revenue Service Forms 8594 “Asset
Acquisition Statements Under Section 1060” consistent with Exhibit A and which gives effect to any
Adjustment Amount determined in accordance with Section 2.5 hereof.

               (b) Closing Payment. At the Closing, upon the terms and subject to the conditions set
forth herein, (i) Buyer shall deliver or cause to be delivered to Seller an amount (such amount,
the “Closing Payment”) equal to the Cash Payment less the Estimated WC Shortfall,
if any, less the Adjustment Holdback Amount less the Indemnification Holdback
Amount, by wire transfer of immediately available funds to an account designated by Seller and (ii)
Parent shall issue to Seller the Shares.

               (c) The “Adjustment Holdback Amount” shall be an amount equal to $250,000 (Two Hundred
Fifty Thousand Dollars) and the “Indemnification Holdback Amount” shall be an amount equal
to $2,000,000 (Two Million Dollars).

               (d) On the Closing Date, Buyer and Seller shall enter into the escrow agreement (the
“Escrow Agreement”), substantially in the form of Exhibit F hereto, with City National
Bank, as escrow agent (the “Escrow Agent”). In accordance with the terms of the Escrow
Agreement, at the Closing, Buyer shall deposit by wire transfer the Adjustment Holdback Amount and
the Indemnity Holdback Amount into two separate accounts (the “Adjustment Escrow Account”
and the “Indemnity Escrow Account,” respectively) to be managed and paid out by the Escrow
Agent in accordance with the terms of the Escrow Agreement and this Agreement. Buyer, on the one
hand, and Seller, on the other hand, shall each bear fifty percent (50%) of the fees and cost
reimbursements payable to the Escrow Agent under the Escrow Agreement.

2.5 Purchase Price Adjustments

               (a) Estimated Closing Balance Sheet. On the date of this Agreement, Seller shall
deliver to the Buyer Parties an estimated Balance Sheet of Seller dated as of the Closing Date (the
“Estimated Closing Balance Sheet”) and a calculation of Seller’s estimated Working Capital
as of the Closing Date (the “Estimated Closing Working Capital”). Seller represents and
warrants that it prepared the Estimated Closing Balance Sheet in good faith in
accordance with generally accepted accounting principles in the United States (“GAAP”)
on a pro forma basis consistent with the Audited Financial Statements and calculated the Estimated
Closing Working Capital in good faith based on the Estimated Closing Balance Sheet in a manner
consistent with the Working Capital Schedule, subject, however, to the adjustments, policies and
procedures set forth on Schedule 2.5(a) (collectively, the “CBS Standards”). Following
delivery of the Estimated Closing Balance Sheet and Estimated Closing Working Capital, the Buyer
Parties shall have the right to make reasonable inquiries with respect thereto and Seller shall
provide the Buyer Parties with answers to such queries and such additional information as the Buyer
Parties may reasonably request.

14

 

               (b) Closing Adjustment. The “Estimated WC Shortfall” is the amount, if any,
by which the Working Capital Threshold exceeds the Estimated Closing Working Capital.

               (c) Closing Balance Sheet. As soon as practicable following the Closing Date, but in
any event within sixty (60) days thereafter, the Buyer Parties shall prepare and deliver to Seller
(i) the actual Balance Sheet of Seller as of the Closing Date (the “Closing Balance
Sheet”), which shall be prepared in accordance with the CBS Standards and (ii) a calculation of
Seller’s Working Capital as of the Closing Date based on the Closing Balance Sheet which shall also
be prepared in accordance with the CBS Standards (the “Closing Working Capital”).

               (d) Disputed Adjustment Amount. The Closing Balance Sheet and Closing Working Capital
shall be final, binding and conclusive unless Seller notifies the Buyer Parties in writing of any
disagreement therewith (a “Purchase Price Objection Notice”) within thirty (30) days after
its receipt thereof. If Seller does not deliver a Purchase Price Objection Notice within such
period, then within five (5) Business Days after the expiry of such period the Adjustment Holdback
Amount shall be released by the Escrow Agent and any additional amounts paid in the manner set
forth in Section 2.5(f). If Seller does deliver a Purchase Price Objection Notice within such
period, then for so long as any dispute set forth in a Purchase Price Objection Notice is
outstanding and unresolved, the Buyer Parties shall afford Seller and its Representatives with
reasonable access during normal business hours to the financial records of Buyer so as to enable
their review of the Closing Balance Sheet and Closing Working Capital. Seller and the Buyer
Parties shall attempt in good faith to resolve such dispute, and any resolution by them as to any
disputed amounts shall be final, binding and conclusive. If Seller and the Buyer Parties are
unable to resolve all disputes reflected in the Purchase Price Objection Notice within thirty (30)
days thereafter (or such longer period as the Buyer Parties and Seller may mutually agree upon)
(the “Purchase Price Resolution Period”), then Seller and the Buyer Parties shall jointly
select an independent auditor of recognized national standing (the “Accounting Firm”) to
resolve any remaining disagreements. The Buyer Parties and Seller shall use their best efforts to
cause the Accounting Firm to make its determination within thirty (30) calendar days of accepting
its selection. The determination by the Accounting Firm shall be final, binding and conclusive on
the Parties absent fraud. Seller and the Buyer Parties shall deliver to the Accounting Firm all
work papers and back-up materials relating to the unresolved disputes requested by the Accounting
Firm to the extent available to Seller, the Buyer Parties and their Representatives. Seller and
the Buyer Parties shall be afforded the opportunity to present to the Accounting Firm any material
related to the unresolved disputes and to discuss the issues with the Accounting Firm;
provided, however, that no such presentation or discussion shall occur
without the presence of a representative of both Seller and the Buyer Parties. The
determination of the Accounting Firm shall be limited to the disagreements submitted to the
Accounting Firm and shall be limited in scope as to whether: (i) the Closing Balance Sheet and
Closing Working Capital were prepared in accordance with the CBS Standards and (ii) there were any
mathematical errors in the calculation of the Closing Balance Sheet and Closing Working Capital.
Within five (5) Business Days after the date of determination of the Accounting Firm (or of any
earlier resolution by the Parties of all disputed issues), the Adjustment Holdback Amount shall be
released by the Escrow Agent and any additional amounts paid in the manner set forth in Section
2.5(f). The fees and expenses of the Accounting Firm shall be borne by the

15

 

Buyer Parties and
Seller in proportion to the amount of the disputed item with respect to which such Party’s claim
was unsuccessful.

               (e) Final Adjustment Amount. The “Adjustment Amount” shall be an amount equal
to the Working Capital Threshold minus the Closing Working Capital minus the
absolute value of the Estimated WC Shortfall (if any). A sample calculation of the calculation of
the Adjustment Amount, and the release of the Adjustment Holdback Amount pursuant to Section
2.5(f), is set forth on Schedule 2.5(e).

               (f) Release of Adjustment Holdback Amount.

                  (i) If the Adjustment Amount is equal to or greater than zero, but less than the Adjustment
Holdback Amount, the Escrow Agent shall pay to Buyer from the Adjustment Escrow Account the
Adjustment Amount and shall pay to Seller the balance of the Adjustment Holdback Amount. If the
Adjustment Amount is equal to or greater than zero and equals or exceeds the Adjustment Holdback
Amount, the Escrow Agent shall pay to Buyer the entire Adjustment Holdback Amount and Seller shall
pay to Buyer an amount equal to the Adjustment Amount less the Adjustment Holdback Amount.

                  (ii) If the Adjustment Amount is a negative number and the Closing Working Capital is less
than or equal to the Working Capital Ceiling, the Escrow Agent shall pay to Seller the entire
Adjustment Holdback Amount and Buyer shall pay to Seller an amount equal to the lesser of the
absolute value of the Estimated WC Shortfall and the absolute value of the Adjustment Amount.

                  (iii) If the Adjustment Amount is a negative number and the Closing Working Capital is greater
than the Working Capital Ceiling, the Escrow Agent shall pay to Seller the entire Adjustment
Holdback Amount and Buyer shall pay to Seller an amount equal to the sum of (a) the Estimated WC
Shortfall, if any, and (b) the amount by which the Closing Working Capital exceeds the Working
Capital Ceiling.

                  (iv) Interest earned under the Escrow Agreement on the Adjustment Escrow Account shall be paid
to Seller and/or to Buyer in proportion to the total amount of the Adjustment Holdback Amount paid
to such party as above provided.

     2.6 Earn-Out. In the event that Buyer EBITDA for the Measurement Period, calculated
in accordance with GAAP consistently applied, exceeds the Earn-Out Threshold, Buyer shall pay to
the Escrow Agent on or prior to the Earn-Out Payment Date, for deposit into the Indemnity
Escrow Account, an amount in immediately available funds (such amount, the “Earn-Out
Amount”) equal to $1.087 multiplied by the amount by which Buyer EBITDA exceeds the Earn-Out
Threshold, which Earn-Out Amount shall not exceed $2,500,000 (Two Million Five Hundred Thousand
Dollars). For the purposes of this Section 2.6 only, the following terms shall have the following
meanings:

               (a) “Buyer EBITDA” shall mean an amount equal to Net Income plus (i) the
following, to the extent deducted in calculating Net Income (without duplication): (A) Interest
Charges, (B) all federal, state, local and foreign income tax expense, (C) depreciation and
amortization expense, (D) non-cash impairment of assets (tangible and intangible) and

16

 

related
non-cash charges, (E) non-cash charges and expenses related to stock-based compensation awards and
(F) all inventory step-up expense recognized in conjunction with Purchase Price accounting
adjustments and minus (ii) the following to the extent included in calculating Net Income
(without duplication): (A) federal, state, local and foreign income tax credits and (B) all
non-cash items increasing Net Income, in each case with respect to the Measurement Period and
calculated on the basis of the audited balance sheet and statement of operations and cash flow of
Buyer (but excluding any Subsidiaries thereof).

               (b) “Earn-Out Payment Date” shall mean the earlier of (i) the date occurring fifteen
(15) days after the filing by Parent of its Annual Report on Form 10-K for the year ended December
31, 2006 (the “2006 10-K”) and (ii) April 30, 2007, unless Parent has not filed its 2006
10-K due to the failure of the independent registered public accounting firm to furnish its consent
to the filing of such 2006 10-K by such date or to any other circumstances beyond the reasonable
control of Parent and Buyer.

               (c) “Earn-Out Threshold” shall mean the product of (i) $5,200,000 (Five Million Two
Hundred Thousand Dollars) multiplied by (ii) the quotient obtained by dividing the total number of
days in the Measurement Period by 365.

               (d) “Interest Charges” shall mean, for the Measurement Period, the sum (without
duplication) of (i) all interest, premium payments, debt discount, fees, charges and related
expenses in connection with borrowed money (including capitalized interest) or in connection with
the deferred purchase price of assets, in each case to the extent treated as interest in accordance
with GAAP and (ii) the portion of rent expense with respect to such period under capitalized leases
that is treated as interest in accordance with GAAP, in each case, of Buyer (but excluding any
Subsidiaries thereof).

               (e) “Measurement Period” shall mean the period from the Closing Date through December
31, 2006 (inclusive).

               (f) “Net Income” shall mean, for the Measurement Period, the net income of Buyer (but
excluding any Subsidiaries thereof), without giving effect to (i) extraordinary gains or
extraordinary losses, (ii) any discretionary bonuses paid to Millin or Weiss pursuant to their
respective Employment Agreement or (iii) any material expenses incurred by Buyer that were not of a
type historically incurred by the Business prior to the Closing and are inconsistent with the
projected budget and business plan of the Business (entitled “Projection
2006 ver 6”) provided by Seller to the Buyer Parties on March 1, 2006. For the avoidance of
doubt, in determining the net income of Buyer, costs and expenses of Buyer shall include
allocations from Parent to the extent such allocations relate to costs and expenses either of a
type that were incurred by the Business prior to the Closing or that are consistent with the
projected budget and business plan of the Business provided by Seller to the Buyer Parties
(including, without limitation, expenses incurred pursuant to the Employment Agreements, costs and
expenses of administering Employee Plans with respect to employees of the Business, accounting and
legal fees, Taxes and insurance).

     2.7 Closing Costs; Transfer Taxes and Fees. Seller and Buyer shall be responsible, as
applicable, for any documentary and transfer taxes and any sales, use or other taxes imposed by

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reason of the transfers of Assets provided hereunder and any deficiency, interest or penalty
asserted with respect thereto, in accordance with applicable law. Buyer shall pay the fees and
costs of recording or filing all applicable conveyancing instruments described in Section 3.2(a).
Seller shall pay all costs of applying for new Permits and obtaining the transfer of existing
Permits which may be lawfully transferred.

ARTICLE III.

CLOSING

     3.1 Closing. The Closing of the transactions contemplated herein (the
“Closing”) shall be held at 10:00 a.m. local time at the offices of Latham & Watkins LLP,
633 West Fifth Street, Suite 4000, Los Angeles, California 90071 immediately following the
satisfaction or waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby or such other date and time as Buyer and Seller may mutually
determine (the “Closing Date”). Notwithstanding any later time of the Closing, the
Closing shall be deemed completed at 12:01 a.m. Pacific Standard Time on the Closing Date.

3.2 Conveyances at Closing

               (a) Deliveries by Seller to Buyer. To effect the sale and transfer referred to in
Section 2.1 hereof, Seller will, at the Closing, deliver to Buyer:

                  (i) one or more bills of sale executed by Seller in substantially the form attached hereto as
Exhibit B, conveying in the aggregate all of Seller’s owned personal property included in the
Assets;

                  (ii) Assignments and Assumptions of Contracts and Leases executed by Seller with respect to
each Contract and Lease, each in substantially the forms attached hereto as Exhibits C and D;

                  (iii) the Assignments of Patents and Trademarks and other Proprietary Rights executed by
Seller, each in substantially the form attached hereto as Exhibit E, in recordable form to the
extent necessary to assign such rights;

                  (iv) the Escrow Agreement executed by Seller in substantially the form attached hereto as
Exhibit F;

                  (v) an Employment Agreement executed by Millin in substantially the form attached hereto as
Exhibit H-1;

                  (vi) an Employment Agreement executed by Weiss in substantially the form attached hereto as
Exhibit H-2;

                  (vii) the Pledge Agreement executed by Seller in substantially the form attached hereto as
Exhibit I;

                  (viii) the consents signed by Weil & Company in substantially the forms attached hereto as
Exhibit J;

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                  (ix) a receipt with respect to the Closing Payment executed by Seller;

                  (x) all cash and cash equivalents of the Business, which cash and cash equivalents shall be
not less than $250,000 (Two Hundred Fifty Thousand Dollars) in amount;

                  (xi) the Books and Records;

                  (xii) all Permits and any other Consents required for the valid transfer of the Assets as
contemplated by this Agreement;

                  (xiii) the opinion and certificates required under Section 8; and

                  (xiv) such other instruments as shall be reasonably requested by Buyer to vest in Buyer title
in and to the Assets in accordance with the provisions hereof.

               (b) Deliveries by Buyer to Seller. Buyer will, at the Closing:

                  (i) execute and deliver to Seller the Assignments and Assumptions of Contracts and Leases in
substantially the forms attached hereto as Exhibits C and D, evidencing Buyer’s assumption,
pursuant to Section 2.2, of the Assumed Liabilities therein;

                  (ii) execute and deliver to Seller and to the Escrow Agent the Escrow Agreement in
substantially the form attached hereto as Exhibit F;

                  (iii) deliver to Seller the Closing Payment;

                  (iv) deliver to the Escrow Agent the Adjustment Holdback Amount and the Indemnity Holdback
Amount;

                  (v) deliver to Seller the Pledge Agreement executed by Parent and Buyer in substantially the
form attached hereto as Exhibit I;

                  (vi) deliver to Seller the opinions and certificates required under Section 7; and

                  (vii) cause Parent to issue to Seller one or more stock certificates representing the Shares,
which Shares shall be held by Parent pursuant to the Pledge Agreement.

               (c) Form of Instruments. To the extent that a form of any document to be delivered
hereunder is not attached as an Exhibit hereto, such documents shall be in form and substance, and
shall be executed and delivered in a manner, reasonably satisfactory to Buyer.

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ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF SELLER

          The Seller Parties, jointly and severally, hereby represent and warrant to the Buyer Parties
as follows, except as otherwise set forth on the Disclosure Schedule, which representations and
warranties are, as of the date hereof, and will be, as of the Closing Date, true and correct:

     4.1 Organization of Seller. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of California with full corporate power and
authority to conduct the Business as it is presently being conducted and to own and lease its
properties and assets. Seller is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the character of its properties owned or leased or the
nature of its activities make such qualification necessary, except where the failure to be so
qualified or in good standing would not have a Material Adverse Effect. Copies of the Articles of
Incorporation and Bylaws of Seller, and all amendments thereto, heretofore delivered to Buyer are
accurate and complete as of the date hereof. Seller is not qualified to do business as a foreign
corporation in any jurisdiction other than the State of California. Millin Trust and Weiss Trust
are the are the sole record and beneficial owners of all of the shares of Seller, and own shares of
Seller in the amounts set forth on Schedule 4.1. Other than the shares held by Millin Trust and
Weiss Trust, there are no shares of capital stock or other equity securities of Seller outstanding
and no outstanding options, warrants, subscription rights (including any preemptive rights), calls,
or commitments, or convertible notes or instruments of any character whatsoever to which Seller is
a party or is bound, requiring or which could require the issuance, sale or transfer by Seller of
any shares of capital stock of Seller, any securities convertible into or exchangeable or
exercisable for, or rights to purchase or otherwise acquire, any shares of capital stock of Seller.

     4.2 Subsidiaries. Seller does not have any Subsidiaries. Seller has no direct or
indirect stock or other equity or ownership interest (whether controlling or not) in any
corporation, association, partnership, joint venture or other entity.

     4.3 Authorization. Seller has all requisite corporate power and authority, and has taken all corporate action
necessary, to execute and deliver this Agreement, the Escrow Agreement and the Pledge Agreement, to
consummate the transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement by Seller and the
consummation by Seller of the transactions contemplated hereby have been duly approved by the board
of directors and shareholders of Seller. No other corporate proceedings on the part of Seller are
necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement
has, and the Escrow Agreement, the Pledge Agreement and the Employment Agreements at the Closing
will have, been duly executed and delivered by each of the Seller Parties party thereto and are the
legal, valid and binding obligations of each such Party enforceable against each such Party in
accordance with their terms, except that such enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to creditors’ rights generally,
and is subject to general principles of equity.

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     4.4 Absence of Certain Changes or Events. Since the Balance Sheet Date, there has not
been any:

               (a) Material Adverse Effect;

               (b) change in accounting methods, principles or practices by Seller affecting or with respect
to the Assets, its Liabilities or the Business;

               (c) revaluation by Seller of any of the Assets, including without limitation writing down the
value of inventory or writing off notes or accounts receivable;

               (d) damage, destruction or loss (whether or not covered by insurance) materially adversely
affecting the Assets or the Business;

               (e) except as set forth on Schedule 4.4(e), cancellation of any indebtedness or waiver or
release of any material right or claim of Seller relating to its activities or properties;

               (f) declaration, setting aside, or payment of dividends or distributions by Seller in respect
of the shares or any redemption, purchase or other acquisition of any of Seller’s securities,
except with respect to any declaration and payment of dividends to such shareholders in an amount
equal to their anticipated Liabilities for federal and state income Taxes (at the highest rates)
attributable to the taxable income of Seller for calendar year 2005, which amount, if any, is set
forth on Schedule 4.4(f);

               (g) increase in the rate of compensation payable or to become payable to any consultant or
Representative of Seller, including without limitation the making of any loan to, or the payment,
grant or accrual of any bonus, incentive compensation, service award or other similar benefit to,
any such Person, or the addition to, modification of, or contribution to any Employee Plan,
arrangement, or practice described in the Disclosure Schedule;

               (h) adverse change in employee relations which has or could reasonably be expected to have a
material adverse effect on the productivity, the financial
condition, results of operations or Business of Seller or the relationships between the
employees of Seller and the management of Seller;

               (i) amendment, cancellation or termination of any Contract, Lease, Permit or other instrument
relating to the Assets or the Business or entry into any Contract, Lease, Permit or other
instrument, including without limitation any employment or consulting agreements, which is not in
the ordinary course of business;

               (j) Encumbrance of any Assets, singly or in the aggregate, other than Permitted Encumbrances;

               (k) sale, assignment or transfer of any of the Assets, other than sales, assignments or
transfers from Inventory or non-material Assets in the ordinary course of business;

21

 

               (l) incurrence of indebtedness by Seller for borrowed money or commitment to borrow money
entered into by Seller, or loans made or agreed to be made by Seller, or indebtedness guaranteed by
Seller;

               (m) incurrence by Seller of Liabilities, except Liabilities incurred in the ordinary course of
business, or increase or change in any assumptions underlying or methods of calculating, any
doubtful account contingency or other reserves of Seller;

               (n) payment, discharge or satisfaction of any Liabilities of Seller other than the payment,
discharge or satisfaction in the ordinary course of business of Liabilities set forth or reserved
for on the Most Recent Balance Sheet or incurred in the ordinary course of business;

               (o) material capital expenditure by Seller or the incurring of any obligation by Seller to
make any material capital expenditure;

               (p) failure to pay or satisfy when due any material Liability of Seller;

               (q) failure of Seller to carry on the Business in the ordinary course so as to keep available
to Buyer the services of Seller’s employees, and to preserve for Buyer the Assets and the Business
intact and the goodwill of Seller’s suppliers, customers, distributors and others having business
relations with it;

               (r) disposition or lapsing of any Proprietary Rights or any disposition or disclosure to any
Person of any Proprietary Rights not theretofore a matter of public knowledge;

               (s) agreement by Seller to do any of the things described in the preceding clauses (a) through
(r) other than as expressly provided for herein; or

               (t) existence of any other event or condition which in any one case or in the aggregate has or
could reasonably be expected to have a Material Adverse Effect.

     4.5 Assets. Seller has and will transfer good and marketable title to the Assets and
upon the consummation of the transactions contemplated hereby, Buyer will acquire good and
marketable title to all of the Assets, free and clear of any Encumbrances, except for Permitted
Encumbrances. The Assets constitute all of the assets, rights and properties, tangible or
intangible, real or personal, which are sufficient for the conduct and operation of the Business as
presently conducted and operated. Schedule 4.5 contains accurate lists and summary descriptions of
all tangible Assets where the value of an individual item exceeds $5,000 or where an aggregate of
similar items exceeds $10,000. All tangible assets and properties which are part of the Assets are
in good operating condition and repair, subject to ordinary wear and tear and normal industry
practice with respect to maintenance, and are usable in the ordinary course of business and are in
conformity in all material respects with all applicable Regulations (including Environmental Laws)
relating to their construction, use and operation.

     4.6 Real Property. Seller does not own any fee interest in real property. Schedule
4.6 is a list of all Leases. Each Lease is in full force and effect, paid currently, and the
Leasehold

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Estates have not been materially impaired by any acts or omissions of Seller or any of
its Representatives. Seller enjoys peaceful and undisturbed possession of all the Leased Real
Property in the manner provided for in the Leases. Except as set forth on Schedule 4.6, no Lease
requires the consent of any other contracting party to the transactions contemplated by this
Agreement. With respect to each Lease, on the Closing Date the Leasehold Estates will be free and
clear of all Encumbrances other than Permitted Encumbrances and Encumbrances which are matters of
record in the county or other municipality in which the Leased Real Property is located. To the
Knowledge of Seller, there are no pending or threatened condemnation proceedings or other Actions
relating to any Leased Real Property. All approvals of governmental authorities (including without
limitation Permits and a certificate of occupancy or other similar certificate permitting lawful
occupancy thereof) of a material nature required in connection with the occupation and operation of
the Leased Real Property by Seller have been obtained and all of the Leased Real Property has been
operated and maintained in all material respects in accordance with applicable Regulations. The
improvements constructed on the Leased Real Property, including without limitation all Leasehold
Improvements, and all Fixtures and Equipment and other tangible assets owned, leased or used by
Seller thereon are (i) insured to the extent and in a manner customary in the industry, (ii) to the
Knowledge of Seller, free from any material defects, (iii) in good operating condition and repair,
subject to ordinary wear and tear and normal industry practice with respect to maintenance, (iv)
not in need of maintenance, repair or correction except for ordinary routine maintenance and
repair, the cost of which would not be material, (v) sufficient for the operation of the Business
as presently conducted and (vi) in conformity in all material respects with all applicable
Regulations. Seller has not received written notice of any special assessment relating to any
Leased Real Property or any portion thereof and to Seller’s Knowledge there is no pending or
threatened special assessment.

     4.7 Contracts and Commitments.

               (a) Contracts. Schedule 4.7(a) sets forth a complete and accurate list of all
Contracts other than the Excluded Contracts and customer purchase orders for amounts less than
$20,000, including without limitation all:

                  (i) Contracts not made in the ordinary course of business;

                  (ii) Contracts with a duration of one year or more;

                  (iii) manufacturing, distribution, franchise, license, technical assistance, sales,
commission, consulting, agency or advertising contracts related to the Assets or the Business;

                  (iv) licenses (express or implied) and covenants not to assert or other immunity from suit
granted to or by Seller;

                  (v) Contracts containing any rights pursuant to which Seller could use, make, offer for sale,
sell, import, or distribute any product;

                  (vi) options with respect to any property, real or personal, whether Seller shall be the
grantor or grantee thereunder;

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                  (vii) Contracts involving future expenditures or Liabilities, actual or potential, in excess
of $10,000 or otherwise material to the Business or the Assets;

                  (viii) Contracts or commitments relating to commission arrangements with others;

                  (ix) promissory notes, loans, agreements, indentures, evidences of indebtedness, letters of
credit, guarantees, or other instruments relating to an obligation to pay money, individually in
excess of or in the aggregate in excess of $5,000, whether Seller shall be the borrower, lender or
guarantor thereunder or whereby any Assets are pledged (excluding credit provided by Seller in the
ordinary course of business to purchasers of its products);

                  (x) Contracts containing covenants limiting the freedom of Seller or any officer, director,
shareholder or Affiliate of Seller, to engage in any line of business or compete with any Person;

                  (xi) any Contract with the United States, state or local government or any agency or
department thereof;

                  (xii) leases of personal property not cancelable (without Liability) within thirty (30)
calendar days; and

                  (xiii) settlement Contracts relating to the Business.

Seller has delivered to Buyer true, correct and complete copies of all of the written Assumed
Contracts, including all amendments and supplements thereto. With respect to oral or implied
Assumed Contracts, Schedule 4.7(a) also sets forth an accurate general summary of all of the
material terms of such Assumed Contracts.

               (b) Absence of Defaults. All of the Assumed Contracts and Leases are valid, binding
and enforceable in accordance with their terms, except that such enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating to creditors’ rights
generally, and is subject to general principles of equity. Seller has fulfilled, or taken all
action necessary to enable it to fulfill when due, all of its material obligations under each of
the Assumed Contracts and Leases. Seller has complied in all material respects with the provisions
of the Assumed Contracts and Leases and is not in Default thereunder. To the Knowledge of Seller,
all parties other than Seller to the Assumed Contracts and Leases have complied in all material
respects with the provisions thereof and no party is in Default thereunder. No notice of any claim
of Default has been given to Seller. To Seller’s Knowledge, there are no products and services
called for by any unfinished Assumed Contract that cannot be supplied in accordance with the terms
of such Assumed Contract, including time specifications, and Seller has no reason to believe that
any unfinished Assumed Contract will upon performance by Seller result in a loss to Seller. With
respect to any Leases, Seller has not received any notice of cancellation or termination under any
option or right reserved to the lessor, or any notice of Default, thereunder, and Seller has no
Knowledge of any intent by any party to any Lease to terminate or amend the terms thereof or to
refuse to renew any such Lease upon expiration of its term.

24

 

               (c) Product Warranty. No Seller Party has committed any act, and there has been no
omission, which may result in, and there has been no occurrence which may give rise to, product
liability or Liability for breach of warranty (whether covered by insurance or not) on the part of
Seller, with respect to products designed, manufactured, assembled, sold, distributed, delivered,
installed or repaired, or from services performed, by or on behalf of any Seller Party prior to the
Closing.

     4.8 Permits. Schedule 4.8 sets forth a complete list of all Permits used in the
operation of the Business or otherwise held by Seller, all of which are in full force and effect as
of the date hereof. Schedule 4.8 also sets forth which, if any, of such Permits are transferable
by Seller. Seller has, and at all times has had, all Permits of a material nature required under
any Regulation (including Environmental Laws) in the operation of its Business or in the ownership
of the Assets, and owns or possesses such Permits free and clear of all Encumbrances other than
Permitted Encumbrances. Seller is not in Default, nor has it received any notice of any claim of
Default, with respect to any such Permit, which Default could have a Material Adverse Effect.
Except as otherwise governed by law, all Permits used in the operation of the Business or otherwise
held by Seller are renewable by their terms or in the ordinary course of business without the need
to comply with any special qualification procedures or to pay any amounts other than routine filing
fees and will not be adversely affected by the completion of the transactions contemplated by this
Agreement. No present or former shareholder, director, officer or employee of Seller or any
Affiliate thereof, or any other Person, owns or has any proprietary, financial or other interest
(direct or indirect) in any Permit which Seller owns, possesses or uses. Except as disclosed on
Schedule 4.8 hereto, no notice to, declaration, filing or registration with,
or Permit from, any domestic or foreign governmental or regulatory body or authority, or any
other Person, is required to be made or obtained by Seller in connection with the execution,
delivery or performance of this Agreement and the consummation of the transactions contemplated
hereby.

     4.9 No Conflict or Violation. Neither the execution, delivery or performance of this
Agreement nor the consummation of the transactions contemplated hereby will (a) violate or conflict
with any provision of the Articles of Incorporation or Bylaws of Seller, (b) violate, conflict
with, or result in or constitute a Default under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination or acceleration under, any of the
terms, conditions or provisions of any Contract, Lease or Permit, except for such violation,
conflict, Default, termination or acceleration as would not have a Material Adverse Effect (c)
violate any Regulation or Court Order applicable to any Seller Party or (d) impose or result in the
creation of any Encumbrance (other than Permitted Encumbrances) on any of the Assets or the
Business.

     4.10 Consents and Approvals. Except as set forth on Schedule 4.10 hereto, no Consents
are required to be made or obtained by any Seller Party or their respective Affiliates.

     4.11 Financial Statements. Seller has heretofore delivered to the Buyer Parties true
and correct copies of the Audited Financial Statements. The Audited Financial Statements (a) are
complete in all material respects, (b) are in accordance with the Books and Records, (c) have been
prepared in accordance with GAAP consistently applied throughout the periods covered thereby and
(d) fairly and accurately present the assets (including the Assets and the Excluded

25

 

Assets),
Liabilities (including all reserves) and financial position of Seller as of the respective dates
thereof and the results of operations and changes in cash flows for the periods then ended. The
Audited Financial Statements have been examined by Weil & Company LLP, independent certified public
accountants, whose report thereon is included with such audited financial statements. At the
respective dates of the Audited Financial Statements, there were no Liabilities of Seller, which,
in accordance with GAAP, should have been set forth or reserved for in the Audited Financial
Statements or the notes thereto, which are not set forth or reserved for in the Audited Financial
Statements or the notes thereto. The Assets and Excluded Assets are presented at or below cost
less an adequate and proper depreciation charge. Seller has delivered to the Buyer Parties a
schedule of Seller’s consolidated Working Capital for each of the fiscal quarters between December
31, 2003 and December 31, 2005 (the “Working Capital Schedule”). The Working Capital
Schedule has been prepared by Seller in good faith, in accordance with GAAP on a pro forma basis
from the Books and Records for the time periods indicated.

     4.12 Books and Records. Seller has made and kept (and given Buyer access to) Books
and Records and accounts, which, in reasonable detail, accurately and fairly reflect the activities
of Seller. The copies of the minute books of Seller previously delivered to Buyer accurately
reflect all actions
previously taken by the shareholders, board of directors and committees of the board of
directors of Seller for which written minutes of meetings or board or shareholder consents were
prepared. The copies of the stock book records of Seller previously delivered to Buyer are true,
correct and complete in all material respects, and accurately reflect all transactions effected in
Seller’s stock through and including the date hereof. Seller has not engaged in any transaction,
maintained any bank account or used any corporate funds except for transactions, bank accounts and
funds which have been and are reflected in the Books and Records.

     4.13 Litigation. Schedule 4.13 sets forth all Actions which are pending or, to the
Knowledge of Seller, threatened or anticipated (a) against, related to or affecting (i) any Seller
Party, the Business or the Assets (including with respect to Environmental Laws), (ii) any officers
or directors of Seller in their capacity as such, or (iii) any shareholder of Seller in such
shareholder’s capacity as a shareholder of Seller, (b) seeking to delay, limit or enjoin the
transactions contemplated by this Agreement (c) that involve the risk of criminal liability by any
Seller Party, or (d) in which any Seller Party is a plaintiff, including any derivative suits
brought by or on behalf of Seller. No Seller Party is in Default with respect to or subject to any
Court Order, and there are no unsatisfied judgments against any Seller Party, the Business or the
Assets. To Seller’s Knowledge, there are no Court Orders or agreements with, or liens by, any
governmental authority or quasi-governmental entity relating to any Environmental Law which
regulate, obligate, bind or in any way affect any Seller Party, the Assets or the Business.

     4.14 Labor Matters. Seller is not a party to any labor agreement with respect to its
employees with any labor organization, union, group or association and there are no employee unions
(nor any other similar labor or employee organizations) under local statutes, custom or practice.
Seller has not experienced any attempt by organized labor or its representatives to make Seller
conform to demands of organized labor relating to its employees or to enter into a binding
agreement with organized labor that would cover the employees of Seller. There is no labor strike
or labor disturbance pending or, to the Seller’s Knowledge, threatened against Seller nor is any
grievance currently being asserted, and Seller has not experienced a work stoppage or

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other labor
difficulty, and is not and has not engaged in any unfair labor practice. Without limiting the
foregoing, Seller is in compliance with the Immigration Reform and Control Act of 1986 and
maintains a current Form I-9, as required by such Act, in the personnel file of each employee. No
Actions are pending or, to the Knowledge of Seller, threatened against Seller, by any current or
former employee of Seller, or any governmental agency responsible for enforcing employment
Regulations. Schedule 4.14 sets forth the names and current annual salary rates or current hourly
wages of all present employees of Seller, and also sets forth the earnings for each of such
employees as reflected on Form W-2 for the 2005 calendar year.

     4.15 Liabilities. Seller has no Liabilities due or to become due, except (a)
Liabilities which are set forth or reserved for on the Most Recent Balance Sheet and Liabilities
which in accordance with GAAP are not required to be set forth or reserved for on the Most Recent
Balance Sheet, (b)
Liabilities arising in the ordinary course of business under Contracts, Leases, Permits and
other business arrangements described in the Disclosure Schedule, and other Liabilities described
on Schedule 4.15 of the Disclosure Schedule (except to the extent such matters are, by the terms of
any specific monetary, time period or materiality threshold, expressly not required to be disclosed
therein), (c) Liabilities incurred since the Balance Sheet Date in the ordinary course of business
and in accordance with this Agreement (none of which relates to any Default under any Contract or
Lease, breach of warranty, tort, infringement or violation of any Regulation or Court Order or
arose out of any Action) and none of which, individually or in the aggregate, has or could have a
Material Adverse Effect and, to the extent not included in clauses (a) through (c) above, (d)
Excluded Liabilities.

     4.16 Compliance with Law. Seller and the conduct of the Business have not materially
violated and are in compliance in all material respects with all Regulations and Court Orders
relating to the Assets or the Business or operations of Seller. To Seller’s Knowledge, Seller has
not received any notice to the effect that, or otherwise been advised that, it is not in compliance
with any such Regulations or Court Orders.

4.17 Proprietary Rights. 

               (a) Proprietary Rights. Schedule 4.17 lists all of the Proprietary Rights owned by or
licensed to Seller or granting equivalent rights to Seller. Schedule 4.17 sets forth: (i) for
each Patent, the number, normal expiration date and subject matter for each country in which such
Patent has been issued, or, if applicable, the application number, date of filing and subject
matter for each country, (ii) for each Trademark, where applicable, the application serial number
or registration number, the class of goods covered and the expiration date for each country in
which a Trademark has been registered and (iii) for each Copyright, where applicable, the number
and date of filing for each country in which a Copyright has been filed. The Proprietary Rights
listed in the Disclosure Schedule are all those used by Seller in connection with the Business.
True and correct copies of all Patents (including and all pending applications) owned, controlled,
created or used by or on behalf of Seller or in which Seller has any interest whatsoever have been
provided to Buyer.

               (b) Royalties and Licenses. Except as set forth on Schedule 4.17(b), Seller does not
have any obligation to compensate any Person for the use of any such Proprietary

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Rights nor has
Seller granted to any Person any license, option or other rights to use in any manner any of its
Proprietary Rights, whether requiring the payment of royalties or not.

               (c) Ownership and Protection of Proprietary Rights. Seller owns or has a valid right
to use each of the Proprietary Rights, and the Proprietary Rights will not cease to be valid rights
of Seller by reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby (including, without limitation, the transfer
of such Proprietary Rights to Buyer pursuant to the terms hereof). All of the Patents, registered
Copyrights, Domain Names and registered Trademarks have been duly filed or registered (as
applicable) with the applicable governmental entities or authorities, and maintained, including
without limitation the submission of all necessary filings and fees in
accordance with the legal and administrative requirements or the appropriate jurisdictions,
and have not lapsed, expired or been abandoned. Seller has not received any notice of invalidity
or infringement of any rights of others with respect to the Trademarks. Seller has taken all
reasonable and prudent steps to protect the Proprietary Rights from infringement by any other
Person. No other Person (i), has the right to use any of the Trademarks on the goods on which they
are now being used either in identical form or in such near resemblance thereto as to be likely,
when applied to the goods of any such Person, to cause confusion with such Trademarks or to cause a
mistake or to deceive, (ii) has notified Seller that it is claiming any ownership of or right to
use such Proprietary Rights, or (iii) to Seller’s Knowledge, is infringing upon any such
Proprietary Rights in any way. Seller’s use of the Proprietary Rights does not and will not
conflict with, infringe upon or otherwise violate the valid rights of any third party in or to such
Proprietary Rights. No Action has been instituted against or notices received by Seller that are
presently outstanding alleging that Seller’s use of the Proprietary Rights infringes upon or
otherwise violates any rights of a third party in or to such Proprietary Rights. No Person has
challenged or, to Seller’s Knowledge, has threatened to challenge, nor is there any proceeding
pending or, to Seller’s Knowledge, threatened, nor has any claim or demand been made that
challenges Seller’s ownership interest in, to or under or right to use the Proprietary Rights, the
validity or enforceability of such Proprietary Rights or that could adversely affect Seller’s
ownership or right to use such Proprietary Rights, and there are no facts which could be expected
to give rise to any such challenge, proceeding, claim or demand. There are not, and, to Seller’s
Knowledge, it is reasonably expected that after the Closing there will not be, any restrictions on
Buyer’s right to sell products manufactured by or on behalf Buyer using the Proprietary Rights in
connection with the Business. Seller does not jointly own or claim any joint ownership interest
in, to or under any Proprietary Rights with any Person.

     4.18 Employee Plans.

               (a) Definitions. The following terms, when used in this Agreement, shall have the
following meanings. Any of these terms may, unless the context otherwise requires, be used in the
singular or the plural depending on the reference.

                  (i) Benefit Arrangement. “Benefit Arrangement” shall mean any employment, consulting,
severance parachute or change in control, or other similar contract, agreement, arrangement or
policy and each plan, arrangement (written or oral), program, agreement or commitment providing for
insurance coverage (including without limitation any self-insured arrangements), workers’
compensation, disability benefits, supplemental

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unemployment benefits, vacation benefits,
retirement benefits, life, health, disability or accident benefits (including without limitation
any “voluntary employees’ beneficiary association” as defined in Section 501(c)(9) of the Code
providing for the same or other benefits) or for deferred compensation, profit-sharing bonuses,
stock options, stock appreciation rights, stock purchases or other forms of incentive compensation
or post-retirement insurance, compensation or benefits which is not a Welfare Plan, Pension Plan or
Multiemployer Plan, and is entered into, maintained, contributed to or required to be contributed
to by Seller or an ERISA Affiliate or under which Seller or any ERISA Affiliate has or may incur
any liability or obligation.

                  (ii) Employee Plans. “Employee Plans” shall mean all Benefit Arrangements,
Multiemployer Plans, Pension Plans and Welfare Plans.

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

                  (iv) ERISA Affiliate. “ERISA Affiliate” shall mean any entity which is (or at any
relevant time was) a member of a “controlled group of corporations” with, under “common control”
with, or a member of an “affiliated service group” with, Seller, as defined in Section 414(b), (c),
(m) or (o) of the Code, or under “common control” with Seller, within the meaning of Section
4001(b)(1) of ERISA.

                  (v) Multiemployer Plan. “Multiemployer Plan” shall mean any “multiemployer plan,” as
defined in Section 3(37) or 4001(a)(3) of ERISA, which Seller or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or has maintained, administered,
contributed to or was required to contribute to, or under which Seller or any ERISA Affiliate has
or may incur any liability or obligation.

                  (vi) Pension Plan. “Pension Plan” shall mean any “employee pension benefit plan” as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which Seller or any ERISA
Affiliate maintains, administers, contributes to or is required to contribute to, or, has
maintained, administered, contributed to or was required to contribute to, or under which Seller or
any ERISA Affiliate has or may incur any liability or obligation.

                  (vii) Welfare Plan. “Welfare Plan” shall mean any “employee welfare benefit plan” as
defined in Section 3(1) of ERISA, which Seller or any ERISA Affiliate maintains, administers,
contributes to or is required to contribute to, or under which Seller or any ERISA Affiliate has or
may incur any liability or obligation.

               (b) Disclosure; Delivery of Copies of Relevant Documents and Other Information.
Schedule 4.18 contains a complete list of Employee Plans. True and complete copies of each of the
following documents have been delivered by Seller to Buyer: (i) each Employee Plan (and, if
applicable, related trust agreements) and all amendments thereto, all written interpretations
thereof and written descriptions thereof which have been distributed to Seller’s employees and all
trust agreements, annuity contracts or other funding instruments relating thereto, and a complete
description of any Employee Plan which is not in writing, (ii) the most recent determination or
opinion letter issued by the Internal Revenue Service with respect to each Pension Plan, (iii) the
actuarial reports prepared for the last three plan years for each

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Pension Plan, (iv) the annual
reports on Form 5500 series filed for the last three plan years for each Pension Plan and each
Welfare Plan, and (v) the latest summary plan description for each Pension Plan and each Welfare
Plan.

               (c) Representations.

                  (i) Pension Plans. The funding method used in connection with each Pension Plan which
is subject to the minimum funding requirements of ERISA is acceptable and the actuarial assumptions
used in connection with funding each such plan are reasonable. As of the last day of the last plan
year of each Pension Plan and as of the Closing Date, the “amount of unfunded benefit liabilities”
as defined in Section 4001(a)(18) of ERISA (but excluding from the definition of “current value” of
“assets” of such Pension Plan, accrued
but unpaid contributions) did not and will not exceed zero. No “accumulated funding
deficiency” (for which an excise tax is due or would be use in the absence of a waiver) as defined
in Section 412 of the Code or as defined in Section 302(a)(2) of ERISA, whichever may apply, has
been incurred with respect to any Pension Plan with respect to any plan year, whether or not
waived. Neither Seller nor any ERISA Affiliate has failed to pay when due any “required
installment,” within the meaning of Section 412(m) of the Code and Section 302(e) of ERISA,
whichever may apply, with respect to any Pension Plan. Neither Seller nor any ERISA Affiliate is
subject to any lien imposed under Section 412(n) of the Code or Section 302(f) of ERISA, whichever
may apply, with respect to any Pension Plan. Neither Seller nor any ERISA Affiliate has any
liability for unpaid contributions with respect to any Pension Plan. Neither Seller nor any ERISA
Affiliate is required to provide security to a Pension Plan under Section 401(a)(29) of the Code.
Each Pension Plan and each related trust agreement, annuity contract or other funding instrument is
qualified and tax-exempt under the provisions of Code Sections 401(a) and 501(a) and has been so
qualified during the period from its adoption to date. Each Pension Plan, each related trust
agreement, annuity contract or other funding instrument presently complies and has been maintained
in compliance with its terms and, both as to form and in operation, with the requirements
prescribed by any and all statutes, orders, rules and regulations which are applicable to such
plans, including without limitation ERISA and the Code. Seller has paid all premiums (and interest
charges and penalties for late payment, if applicable) due the PBGC with respect to each Pension
Plan for each plan year thereof for which such premiums are required. Neither Seller nor any ERISA
Affiliate has engaged in, or is a successor or parent corporation to an entity that has engaged in,
a transaction described in Section 4069 of ERISA. There has been no “reportable event” (as defined
in Section 4043(c) of ERISA and the PBGC regulations under such Section) with respect to any
Pension Plan and neither Seller nor any ERISA Affiliate is subject to Section 4043(b) of ERISA. No
filing has been made by Seller or any ERISA Affiliate with the PBGC, and no proceeding has been
commenced by the PBGC, to terminate any Pension Plan. No condition exists and no event has
occurred that could constitute grounds for the involuntary termination of any Pension Plan by the
PBGC. Neither Seller nor any ERISA Affiliate has, at any time, (1) ceased operations at a facility
so as to become subject to the provisions of Section 4062(e) of ERISA, (2) withdrawn as a
substantial employer so as to become subject to the provisions of Section 4063 of ERISA, or (3)
ceased making contributions on or before the Closing Date to any Pension Plan subject to Section
4064(a) of ERISA to which Seller or any ERISA Affiliate made contributions during the six years
prior to the Closing Date.

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                  (ii) Multiemployer Plans. There are no Multiemployer Plans. Neither Seller nor any
ERISA Affiliate has, at any time, withdrawn from a Multiemployer Plan in a “complete withdrawal” or
a “partial withdrawal” as defined in Sections 4203 and 4205 of ERISA, respectively, so as to result
in a liability, contingent or otherwise (including without limitation the obligations pursuant to
an agreement entered into in accordance with Section 4204 of ERISA), of Seller or any ERISA
Affiliate. Neither Seller nor any ERISA Affiliate has engaged in, or is a successor or parent
corporation to an entity that has engaged in, a transaction described in Section 4212(c) of ERISA.

                  (iii) Welfare Plans. Each Welfare Plan has been maintained in compliance with its
terms and, both as to form and operation, with the requirements prescribed by any and all statutes,
orders, rules and regulations which are applicable to such Welfare Plan, including without
limitation ERISA and the Code. None of Seller, any ERISA Affiliate or any
Welfare Plan has any present or future obligation to make any payment to, or with respect to
any present or former employee of Seller or any ERISA Affiliate pursuant to, any retiree medical
benefit plan, or other retiree Welfare Plan, and no condition exists which would prevent Seller
from amending or terminating any such benefit plan or Welfare Plan. Each Welfare Plan which is a
“group health plan,” as defined in Section 607(1) of ERISA, has been operated in compliance with
provisions of Part 6 of Title I, Subtitle B of ERISA and Section 4980B of the Code at all times.
Neither Seller nor any ERISA Affiliate has incurred any liability with respect to any Welfare Plan
that is a “multiemployer plan,” as defined in Section 3(37) of ERISA, under the terms of such
Welfare Plan, any collective bargaining agreement or otherwise resulting from any cessation of
contributions, cessation of obligation to make contributions or other form of withdrawal from such
Welfare Plan. Any Welfare Plan (or Benefit Arrangement) that is intended to be a “cafeteria plan”
under Section 125 of the Code satisfies the requirements of Section 125 of the Code and the
regulations thereunder.

                  (iv) Benefit Arrangements. Each Benefit Arrangement has been maintained in compliance
with its terms and with the requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such Benefit Arrangement, including without limitation the
Code.

                  (v) Fiduciary Duties and Prohibited Transactions. Neither Seller nor any plan
fiduciary of any Welfare Plan or Pension Plan, has engaged in any transaction in violation of
Sections 404 or 406 of ERISA or any “prohibited transaction,” as defined in Section 4975(c)(1) of
the Code, for which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of
the Code, or has otherwise violated the provisions of Part 4 of Title I, Subtitle B of ERISA.
Seller has not knowingly participated in a violation of Part 4 of Title I, Subtitle B of ERISA by
any plan fiduciary of any Welfare Plan or Pension Plan and has not been assessed any civil penalty
under Section 502(l) of ERISA.

                  (vi) Litigation. There is no action, order, writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding, arbitral action, governmental audit or
investigation relating to or seeking benefits under any Employee Plan that is pending, threatened
or anticipated against Seller, any ERISA Affiliate or any Employee Plan.

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                  (vii) Unpaid Contributions. Neither Seller nor any ERISA Affiliate has any liability
for unpaid contributions, reserves or premiums with respect to any Employee Plan under the terms of
such Employee Plan (including any related funding arrangement) or Section 515 of ERISA.

                  (viii) Excise Taxes. Neither Seller nor any ERISA Affiliate has incurred any excise
tax under Chapter 43 of the Code.

     4.19 Transactions with Certain Persons. Except as set forth on Schedule 4.19, no
officer, director, shareholder or employee of Seller nor any member of any such person’s immediate
family is presently, or within the last two (2) years has been, a party to any transaction with
Seller, including without limitation, any contract, agreement or other arrangement (a) providing
for the furnishing of
services by, (b) providing for the rental of real or personal property from, or (c) otherwise
requiring payments to (other than for services as officers, directors or employees of Seller) any
such person or corporation, partnership, trust or other entity in which any such person has an
interest as a shareholder, officer, director, trustee or partner.

     4.20 Tax Matters.

               (a) Filing of Tax Returns. Seller (and any affiliated group of which Seller is now or
has been a member) has timely filed with the appropriate taxing authorities all returns (including
without limitation information returns and other material information) in respect of Taxes required
to be filed through the date hereof and will timely file any such returns required to be filed on
or prior to the Closing Date. The returns and other information filed are complete and accurate in
all material respects. Except as specified in Schedule 4.20, neither Seller, nor any group of
which Seller now or was a member, has requested any extension of time within which to file returns
(including without limitation information returns) in respect of any Taxes. Seller has delivered
to Buyer complete and accurate copies of Seller’s federal, state and local Tax returns for the
years 2002 through 2004. All Taxes required to be collected or withheld by Seller have been duly
collected or withheld and, to the extent required when due, have been or will be duly paid to the
proper taxing authority.

               (b) Payment of Taxes. All Taxes due and payable by Seller for periods ending prior to
or on the Closing Date have been timely paid or will be timely paid. No deficiency for any amount
of Tax has been claimed, asserted or assessed by a Tax or other governmental authority against
Seller and Seller has no Knowledge that any assessment or assertion of a Tax Liability will be
made.

               (c) Audits, Investigations or Claims. Except as set forth on Schedule 4.20, the
consolidated federal income tax returns of Seller have been audited by the Internal Revenue Service
for all periods to and including those set forth in the Disclosure Schedule. There are no pending
or, to Seller’s Knowledge, threatened audits, investigations or claims or other administrative
proceedings for or relating to any material additional Liability in respect of Taxes, and there are
no matters under discussion between Seller and any governmental authorities with respect to Seller,
or any Taxes or Tax returns of Seller, that in the reasonable judgment of Seller is likely to
result in a material additional Liability for Taxes. Audits of

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federal, state, and local returns
for Taxes by the relevant taxing authorities have been completed for each period as set forth in
the Disclosure Schedule and, except as set forth in the Disclosure Schedule, Seller has not been
notified that any taxing authority intends to audit a return for any period. Seller has not
requested or been granted any extension of time within which to file a Tax return nor has granted
any waiver or comparable consents regarding the application of the statute of limitations with
respect to any Taxes or Tax returns. Seller has not granted to any Person any power of attorney
that is currently in force concerning any Tax matter. No Tax sharing or other agreement or
arrangements relating to the allocation or sharing of Taxes exists between Seller and any other
Person or is otherwise binding on Seller.

               (d) Lien. There are no liens for Taxes (other than for current Taxes not yet due and
payable) on the Assets.

               (e) Safe Harbor Lease Property. None of the Assets is property that is required to be
treated as being owned by any other Person pursuant to the so-called safe harbor lease provisions
of former Section 168(f)(8) of the Code.

               (f) Security for Tax-Exempt Obligations. None of the Assets directly or indirectly
secures any debt the interest on which is tax-exempt under Section 103(a) of the Code.

               (g) Tax-Exempt Use Property. None of the Assets is “tax-exempt use property” within
the meaning of Section 168(h) of the Code.

               (h) Foreign Person. Seller is not a Person other than a “United States person” within
the meaning of the Code.

               (i) No Withholding. The transaction contemplated herein is not subject to the tax
withholding provisions of Section 3406 of the Code, or of Subchapter A of Chapter 3 of the Code or
of any other provision of law.

     4.21 Insurance. Schedule 4.21 contains a complete and accurate list of all policies
or binders of fire, liability, title, worker’s compensation, employment practices liability,
product liability and other forms of insurance (showing as to each policy or binder the carrier,
policy number, coverage limits, expiration dates, annual premiums, a general description of the
type of coverage provided, loss experience history by line of coverage) maintained by Seller on the
Assets, the Business or its employees. All insurance coverage applicable to Seller, the Business
and the Assets is in full force and effect, insures Seller in reasonably sufficient amounts against
all risks usually insured against by Persons operating similar businesses or properties of similar
size in the localities where such businesses or properties are located, provides coverage as may be
required by applicable Regulation and by any and all Contracts to which Seller is a party and has
been issued by insurers of recognized responsibility. There is no Default under any such coverage
nor to Seller’s Knowledge has there been any failure to give notice or present any claim under any
such coverage in a due and timely fashion. There are no outstanding unpaid premiums except in the
ordinary course of business and no notice of cancellation or nonrenewal of any such coverage has
been received. There are no provisions in such insurance policies for retroactive or retrospective
premium adjustments. All products liability, general liability and workers’

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compensation insurance
policies maintained by Seller have been occurrence policies and not claims made policies. All
employment practices liability insurance policies maintained by Seller have been claims made
policies. There are no outstanding performance bonds covering or issued for the benefit of the
Seller. No insurer has advised Seller that it intends to reduce coverage, increase premiums or
fail to renew existing policy or binder.

     4.22 Accounts Receivable. The accounts receivable set forth on the Most Recent
Balance Sheet, and all accounts receivable arising since the Balance Sheet Date and to be set forth
on the Closing Balance Sheet, represent bona fide claims of Seller against debtors for sales,
services performed or other charges arising on or before the date hereof, and all the goods
delivered and services
performed which gave rise to said accounts were delivered or performed in accordance with the
applicable orders, Contracts or customer requirements. Said accounts receivable are subject to no
defenses, counterclaims or rights of setoff and are fully collectible in the ordinary course of
business without cost in collection efforts therefor, except (i) to the extent of the appropriate
reserves for bad debts on accounts receivable as set forth on the Most Recent Balance Sheet and, in
the case of accounts receivable arising since the Balance Sheet Date, to the extent of a reasonable
reserve rate for bad debts on accounts receivable which is not greater than the rate reflected by
the reserve for bad debts on the Most Recent Balance Sheet, and (ii) for Customer Deductions.

     4.23 Inventory. Schedule 4.23 contains a complete and accurate list of all Inventory
set forth on the Most Recent Balance Sheet and the addresses at which the Inventory is located.
The Inventory as set forth on the Most Recent Balance Sheet or arising since the Balance Sheet Date
and to be set forth on the Closing Balance Sheet was acquired and has been maintained in accordance
with the regular business practices of Seller, consists of new and unused items of a quality and
quantity usable or saleable in the ordinary course of business, and is valued at reasonable amounts
based on the normal valuation policy of Seller at prices equal to the lower of cost or market value
on a first-in-first-out basis. None of such Inventory is obsolete, unusable, slow-moving, damaged
or unsalable in the ordinary course of business, except for such items of Inventory which have been
written down to realizable market value.

     4.24 Purchase Commitments and Outstanding Bids. Schedule 4.24 sets forth (i) a list
of accepted and unfulfilled orders for the sale of merchandise entered into by Seller as of the
date of this Agreement, and (ii) a list of orders or commitments for the purchase of supplies by
Seller as of the date of this Agreement, which lists are accurate and complete in all material
respects. All such orders and commitments were made in the ordinary course of business. As of the
date of this Agreement, to Seller’s Knowledge and except for Customer Deductions, there are no
claims against Seller to return merchandise by reason of alleged over-shipments, defective
merchandise or otherwise, or of merchandise in the hands of customers under an understanding that
such merchandise would be returnable. No outstanding purchase or outstanding lease commitment of
Seller presently is in excess of the normal, ordinary and usual requirements of the Business or was
made at any price in excess of the now current market price or contains terms and conditions more
onerous than those usual and customary in the Business. There is no outstanding bid, proposal,
Contract or unfilled order which relates to the Assets which will or could, if accepted, have a
Material Adverse Effect.

     4.25 Payments. Seller has not, directly or indirectly, paid or delivered any fee,

34

 

commission or other sum of money or item or property, however characterized, to any finder, agent,
client, customer, supplier, government official or other party, in the United States or any other
country, which is in any manner related to the Business, Assets or operations of Seller, which is,
or may be with the passage of time or discovery, illegal under any federal, state or local laws of
the United States (including without limitation the U.S. Foreign Corrupt Practices’ Act) or any
other
country having jurisdiction; and Seller has not participated, directly or indirectly, in any
boycotts or other similar practices affecting any of its actual or potential customers and has at
all times done business in an open and ethical manner.

     4.26 Customers, Distributors and Suppliers. Schedule 4.26 sets forth a complete and
accurate list of the names and addresses of Seller’s (i) ten largest customers, distributors and
other agents and representatives during Seller’s last fiscal year, showing the approximate total
sales in dollars by Seller to each such customer during such fiscal year; and (ii) ten largest
suppliers during Seller’s last fiscal year, showing the approximate total purchases in dollars by
Seller from each such supplier during such fiscal year. Since the Balance Sheet Date, there has
been no adverse change in the business relationship of Seller with any customer, distributor or
supplier named on Schedule 4.26. Seller has not received any communication from any customer,
distributor or supplier named on Schedule 4.26 of any intention to terminate or materially reduce
purchases from or supplies to Seller.

     4.27 Compliance With Environmental Laws.

               (a) Definitions. The following terms, when used in this Section 4.27, shall have the
following meanings. Any of these terms may, unless the context otherwise requires, used in the
singular or the plural depending on the reference.

                  (i) “Seller”. For purposes of this Section only, the term “Seller” shall
include (i) all Affiliates of Seller, (ii) all partnerships, joint ventures and other entities or
organizations in which Seller was at any time or is a partner, joint venturer, member or
participant and (iii) all predecessor or former corporations, partnerships, joint ventures,
organizations, businesses or other entities, whether in existence as of the date hereof or at any
time prior to the date hereof, the assets or obligations of which have been acquired or assumed by
Seller or to which Seller has succeeded.

                  (ii) “Release” shall mean and include any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the
environment or the workplace of any Hazardous Substance, and otherwise as defined in any
Environmental Law.

                  (iii) “Hazardous Substance” shall mean any pollutant, contaminant, chemical, waste and
any toxic, infectious, carcinogenic, reactive, corrosive, ignitible or flammable chemical or
chemical compound or hazardous substance, material or waste, whether solid, liquid or gas,
including, without limitation, any quantity of asbestos in any form, urea formaldehyde, PCB’s,
radon gas, crude oil or any fraction thereof, all forms of natural gas, petroleum products or
by-products or derivatives, radioactive substance or material, pesticide waste waters, sludges,
slag and any other substance, material or waste that is subject to regulation, control or
remediation under any Environmental Laws.

35

 

                  (iv) “Environmental Laws” shall mean all Regulations which regulate or relate to the
protection or clean-up of the environment, the use, treatment, storage, transportation, generation,
manufacture, processing, distribution, handling or disposal of, or
emission, discharge or other release or threatened release of, Hazardous Substances or
otherwise dangerous substances, wastes, pollution or materials (whether, gas, liquid or solid), the
preservation or protection of waterways, groundwater, drinking water, air, wildlife, plants or
other natural resources, or the health and safety of persons or property, including without
limitation protection of the health and safety of employees. Environmental Laws shall include,
without limitation, the Federal Insecticide, Fungicide, Rodenticide Act, Resource Conservation &
Recovery Act, Clean Water Act, Safe Drinking Water Act, Atomic Energy Act, Occupational Safety and
Health Act, Toxic Substances Control Act, Clean Air Act, Comprehensive Environmental Response,
Compensation and Liability Act, Emergency Planning and Community Right-to-Know Act, Hazardous
Materials Transportation Act and all analogous or related federal, state or local law, each as
amended.

                  (v) “Environmental Conditions” means the introduction into the environment or
workplace of any pollution, including, without limitation, any contaminant, irritant or pollutant
or other Hazardous Substance (whether or not upon any Leased Real Property or other property and
whether or not such pollution constituted at the time thereof a violation of any Environmental Law
as a result of any Release of any kind whatsoever of any Hazardous Substance) as a result of which
Seller has or may become liable to any Person or by reason of which any Leased Real Property or any
of the Assets may suffer or be subjected to any lien.

               (b) Compliance. All Leased Real Property is, and at all times has been, operated by
Seller in compliance with all Environmental Laws and in a manner that will not give rise to any
Liability under any Environmental Laws. Without limiting the foregoing, (i) Seller has not used,
generated, treated, stored, transported, disposed of or handled any Hazardous Substance on, under
or about any Leased Real Property, except for quantities of any such Hazardous Substances stored or
otherwise held on, under or about any such Leased Real Property in full compliance with all
Environmental Laws and necessary for the operation of the Business, (ii) Seller has at all times
used, generated, treated, stored, transported, disposed of or otherwise handled its Hazardous
Substances in compliance in all material respects with all Environmental Laws and in a manner that
will not result in Liability of Seller under any Environmental Law, (iii) Seller does not
manufacture or distribute any product in the State of California which requires the warning
mandated by the California Safe Drinking Water and Toxic Enforcement Act of 1986 (“Proposition
65”), and (iv) Seller has not made and has never been required to make any filing under the New
Jersey Industrial Site Recovery Act or any other state law of similar effect.

               (c) Notice of Violation. Seller has not received any written notice of alleged,
actual or potential responsibility for, or any inquiry or investigation regarding, (i) any Release
or threatened Release of any Hazardous Substance at any Leased Real Property or (ii) a violation of
or non-compliance with the conditions of any Permit required under any Environmental Law or the
provisions of any Environmental Law with respect to any Leased Real Property. Seller has not
received any written notice of any other claim, demand or Action by any Person alleging any actual
or threatened injury or damage to any Person, property, natural

36

 

resource or the environment arising
from or relating to any Release or threatened Release of any Hazardous Substances at, on, under,
in, to or from any Leased Real Property, or in connection with any operations or activities of
Seller.

               (d) Environmental Conditions. To Seller’s Knowledge, there are no present or past
Environmental Conditions in any way relating to the Business.

               (e) Environmental Audits or Assessments. True, complete and correct copies of the
written reports, and all parts thereof, including any drafts of such reports if such drafts are in
the possession or control of Seller, of all environmental audits or assessments which have been
conducted at any Leased Real Property within the past five years, either by Seller or any attorney,
environmental consultant or engineer engaged for such purpose by Seller, have been delivered to the
Buyer Parties and a list of all such reports, audits and assessments and any other similar report,
audit or assessment of which Seller has Knowledge is included on the Disclosure Schedule.

               (f) Indemnification Agreements. Except as provided in the Leases, Seller is not a
party, whether as a direct signatory or as successor, assign or third party beneficiary, or
otherwise bound, to any Lease or other Contract (excluding the Insurance Policies) under which
Seller is obligated by or entitled to the benefits of, directly or indirectly, any representation,
warranty, indemnification, covenant, restriction or other undertaking concerning environmental
conditions.

               (g) Releases or Waivers. Seller has not released any other Person from any claim
under any Environmental Law or waived any rights concerning any Environmental Condition.

               (h) Notices, Warnings and Records. Seller has given all notices and warnings, made
all reports and filings, and has kept and maintained all records required by and in material
compliance with all Environmental Laws.

     4.28 Banking Relationships. Schedule 4.28 sets forth a complete and accurate
description of all arrangements that Seller has with any banks, savings and loan associations or
other financial institutions providing for checking accounts, safe deposit boxes, borrowing
arrangements, and certificates of deposit or otherwise, indicating in each case account numbers, if
applicable, and the Person or Persons authorized to act or sign on behalf of Seller in respect of
any of the foregoing.

     4.29 Investment.

               (a) Seller is acquiring the Shares for investment for its own account for the purpose of
investment and not as nominee or agent, and not with a view to the resale or distribution of any
part thereof. Seller has no present intention of selling, granting any participation in, or
otherwise distributing any of the Shares.

               (b) Seller has been given the opportunity to obtain any information and documents relating to,
and to ask questions and receive answers about, the Buyer Parties and the business and prospects of
the Buyer Parties which it deems necessary to evaluate the merits and

37

 

risks related to its
investment in the Shares and to verify the information received, and its knowledge and experience
in financial and business matters are such that it is capable of evaluating the merits and risks of
its acquisition of the Shares.

               (c) Seller’s financial condition is such that it can afford to bear the economic risk of
holding the Shares for an indefinite period of time and has adequate means for providing for its
current needs and contingencies and to suffer a complete loss of its investment in such Shares.

               (d) Seller is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act.

               (e) Seller has been advised that (i) Parent’s issuance of such Shares to Seller has not been
registered under the Securities Act by reason of a specific exemption depending on the bona fide
nature of Seller’s investment intent, (ii) such Shares may need to be held indefinitely, and Seller
must continue to bear the economic risk of the investment in such Shares when they are subsequently
registered under the Securities Act or an exemption from such registration is available, (iii)
there may not be a public market for such Shares, (iv) when and if such Shares may be disposed of
without registration in reliance on Rule 144 promulgated under the Securities Act, such disposition
can be made only in limited amounts in accordance with the terms and conditions of such Rule, (iv)
if the Rule 144 exemption is not available, public sale without registration will require
compliance with some other exemption under the Securities Act and (vi) a restrictive legend in the
following form shall be placed on the certificates representing such Shares:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR
QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS (THE “STATE ACTS”), HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, PLEDGED HYPOTHECATED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND QUALIFICATION UNDER THE STATE ACTS OR EXEMPTIONS FROM SUCH
REGISTRATION OR QUALIFICATION REQUIREMENTS (INCLUDING IN THE CASE OF THE
SECURITIES ACT, THE EXEMPTION AFFORDED BY RULE 144). UNLESS WAIVED BY
ISSUER, ISSUER SHALL BE FURNISHED WITH AN OPINION OF COUNSEL OPINING AS TO
THE AVAILABILITY OF EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION AS A
PRECONDITION TO ANY SUCH TRANSFER.

THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN PLEDGED TO NEXTERA
ENTERPRISES, INC. AND W LAB ACQUISITION CORP. TO SECURE CERTAIN
OBLIGATIONS OF THE HOLDER NAMED ON THE REVERSE SIDE HEREOF PURSUANT
TO A STOCK PLEDGE AND SECURITY AGREEMENT DATED AS OF MARCH 9, 2006, A
COPY OF WHICH WILL BE FURNISHED UPON REQUEST WITHOUT CHARGE. ANY
SALE, TRANSFER OR OTHER DISPOSITION OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED AS SET FORTH IN THE STOCK PLEDGE AND
SECURITY AGREEMENT.

     4.30 Intentionally Omitted.

     4.31 Solvency.

               (a) Seller is not now insolvent and will not be rendered insolvent by the transactions
contemplated by this Agreement. As used in this section, “insolvent” means that the sum of the
Liabilities of Seller exceeds the present fair market value of Seller’s assets.

               (b) Immediately after giving effect to the consummation of the transactions contemplated by
this Agreement: (i) Seller will be able to pay its Liabilities as they

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become due in the ordinary
course of its business; (ii) Seller will not have unreasonably small capital with which to conduct
its present or proposed business; and (iii) taking into account all
pending and threatened Actions, final judgments against Seller in actions for money damages
are not reasonably anticipated to be rendered at a time when, or in amounts such that, Seller will
be unable to satisfy any such judgments in accordance with their terms (taking into account the
maximum probable amount of such judgments in any such actions and the earliest reasonable time at
which such judgments might be rendered) as well as all other obligations of Seller.

     4.32 Safety/Product Testing. Except for cosmetic products which bear on their labels
the safety substantiation warning required by 21 CFR 740.10, to Seller’s Knowledge, each of the
Business’ products, and/or their individual ingredients, has been adequately substantiated by (a)
appropriate toxicological testing, (b) a published safety review of the Cosmetic Ingredient Review,
or (c) such other information that reasonably establishes the safety of the products and their
individual ingredients. The only information that Seller has with respect to clause (c) of this
Section is attached as Schedule 4.32 hereto. None of the products of the Business contain
detectable quantities of the phthalates DBP or DEHP.

     4.33 No Brokers. None of the Seller Parties nor any of their Representatives or
Affiliates has employed or made any agreement with any broker, finder or similar agent or any
Person which will result in the obligation of Buyer or any of its Affiliates to pay any finder’s
fee, brokerage fees or commission or similar payment in connection with the transactions
contemplated hereby.

     4.34 No Other Agreements to Sell the Assets. None of the Seller Parties nor any of
Seller’s Representatives or Affiliates have any commitment or legal obligation, absolute or
contingent, to any other Person other than the Buyer Parties to sell, assign, transfer or effect a
sale of any of the Assets (other than Inventory in the ordinary course of business), to sell or
effect a sale of the capital stock of Seller, to effect any merger, consolidation, liquidation,
dissolution or other reorganization of Seller, or to enter into any agreement or cause the entering
into of an agreement with respect to any of the foregoing.

     4.35 Material Misstatements Or Omissions. No representations or warranties by any of
the Seller Parties in this Agreement, nor any agreement, document, exhibit, statement,
certificate, schedule, furnished to the Buyer Parties pursuant hereto, including without limitation
the Disclosure Schedule, contains or will contain any untrue statement of a material fact, or omits
or will omit to state any material fact necessary to make the statements or facts contained therein
not misleading. Seller has furnished or caused to be furnished to Buyer or its representatives for
review complete and correct copies of all agreements and documents set forth on the Disclosure
Schedule.

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ARTICLE V.

REPRESENTATIONS AND WARRANTIES OF BUYER

          The Buyer Parties, jointly and severally, hereby represent and warrant to the Seller Parties
as follows, which representations and warranties are, as of the date hereof, and will be, as of the
Closing Date, true and correct:

     5.1 Organization of Buyer Parties. Each of the Buyer Parties is a corporation duly
organized, validly existing and in good standing under the laws of the State of Delaware.

     5.2 Authorization. Each of the Buyer Parties has all requisite corporate power and
authority, and has taken all corporate action necessary, to execute and deliver this Agreement, the
Escrow Agreement and the Pledge Agreement to consummate the transactions contemplated hereby and
thereby and to perform its obligations hereunder and thereby. The execution and delivery of this
Agreement by the Buyer Parties and the consummation by the Buyer Parties of the transactions
contemplated hereby have been duly approved by the board of directors of each of the Buyer Parties.
No other corporate proceedings on the part of the Buyer Parties are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has, and the Escrow Agreement,
the Pledge Agreement and the Employment Agreements will at the Closing have, been duly executed and
delivered by each of the Buyer Parties party thereto and are legal, valid and binding obligations
of each such Party, enforceable against each such Party in accordance with its terms, except that
such enforceability may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to creditors’ rights generally, and is subject to general principles of
equity.

     5.3 Capitalization of Parent. As of the date hereof, the authorized capital stock of
Parent consists of 95,000,000 shares of Class A Parent Common Stock, 4,300,000 shares of Class B
Parent Common Stock and 10,000,000 shares of Series A preferred stock. Class A Parent Common Stock
has the rights, preferences, privileges and restrictions set forth in Parent’s Certificate of
Incorporation. As of the date hereof, 30,025,441 shares of Class A Parent Common Stock, 3,844,200
shares of Class B Parent Common Stock and 48,906 shares of Series A preferred stock are issued and
outstanding. All such issued and outstanding shares have been duly authorized and validly issued,
are fully paid and non-assessable. As of the date hereof, there are 5,402,267 shares of Class A
Parent Common Stock subject to outstanding options. Except for the shares and options disclosed in
the preceding sentences, the Shares and the options contemplated by the Employment Agreements,
there are no shares of capital stock or other equity securities of Parent outstanding and no
outstanding options, warrants, subscription rights (including any preemptive rights), calls, or
commitments, or convertible notes or instruments of any character whatsoever to which Parent is a
party or is bound, requiring or which could require the issuance, sale or transfer by Parent of any
shares of capital stock of Parent or any securities convertible into or
exchangeable or exercisable for, or rights to purchase or otherwise acquire, any shares of
capital stock of Parent. There are no stock appreciation or similar rights relating to Parent.

     5.4 Validity of Shares; Compliance with Securities Laws. The Shares, when issued and
delivered in accordance with the terms of this Agreement and Parent’s Certificate of

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Incorporation,
(i) will be duly and validly issued, fully paid and non-assessable, (ii) will be free and clear of
any Encumbrances relating to Parent other than pursuant to the Pledge Agreement and (iii) subject
to the accuracy of the Seller Parties’ representations in Section 4.29 hereof, will be issued in
compliance with applicable federal and state securities laws; provided however that the
Shares may be subject to restrictions on transfer under federal and state securities laws.

     5.5 No Conflict or Violation; Consents. Neither the execution, delivery or
performance of this Agreement nor the consummation of the transactions contemplated hereby will (a)
violate or conflict with any provision of the Certificate of Incorporation or Bylaws of any of the
Buyer Parties, (b) violate any Regulation or Court Order applicable to any Buyer Party or (c)
require any consent, approval, authorization or waiver of, notice or declaration to, filing or
registration with, any domestic or foreign public, governmental or regulatory body or authority or
any other Person except for (i) filings under federal or state securities or “blue sky” laws (which
have been or will be made) and (ii) such as would not have a material adverse effect on the Buyer
Parties. The execution and delivery by Parent and Buyer of this Agreement does not, and the
consummation of the transactions contemplated thereby will not constitute or result in a breach of
or default (or an event which with notice or lapse of time, or both, would constitute a default)
under, or result in the termination or suspension of, or accelerate the performance required by, or
result in a right of termination, cancellation or acceleration of any material note, bond,
mortgage, indenture, deed of trust, lease, franchise agreement, license, agreement or other
instrument or obligation to which Parent is a party or to which the properties or assets of Parent
or Buyer are subject except as would not have a material adverse effect on the Buyer Parties.

     5.6 No Brokers. Neither Buyer Party nor any of their Representatives or Affiliates
has employed or made any agreement with any broker, finder or similar agent or any Person which
will result in the obligation of Seller or any of its respective Affiliates to pay any finder’s
fee, brokerage fees or commission or similar payment in connection with the transactions
contemplated hereby.

     5.7 Qualification. Parent is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the properties owned or leased
by it makes such qualification or licensing necessary, except as would not have a material adverse
effect on the Buyer Parties.

     5.8 Capitalization of Buyer. As of the date hereof, the authorized capital of Buyer consists of 1,000 shares of common
stock, $0.001 par value per share, of which all 1,000 shares are issued and outstanding and held by
Parent. Other than such outstanding shares and except as contemplated by the Credit Agreement,
there are no shares of capital stock or other equity securities of Buyer outstanding and no
outstanding options, warrants, subscription rights (including any preemptive rights), calls, or
commitments, or convertible notes or instruments of any character whatsoever to which Parent or
Buyer is a party or is bound, requiring or which could require the issuance, sale or transfer by
Parent or Buyer of any shares of capital stock of Buyer, any securities convertible into or
exchangeable or exercisable for, or rights to purchase or otherwise acquire, any shares of capital
stock of Buyer. There are no stock appreciation or similar rights relating to Buyer.

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     5.9 Parent SEC Reports. Except as set forth on Schedule 5.9, Parent has timely filed
all forms, reports, schedules and other documents required to be filed by Parent with the SEC under
the Securities Act and the Exchange Act since December 31, 2002 (collectively, the “Parent SEC
Reports”). The Parent SEC Reports (i) at the time filed, complied in all material respects
with the applicable requirements of the Securities Act and the Exchange Act, as the case may be,
and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue statement of a material
fact or omit to state a material fact required to be stated in such Parent SEC Reports or necessary
in order to make the statements in such Parent SEC Reports, in light of the circumstances under
which they were made, not misleading.

     5.10 Parent Financial Statements. Each of the consolidated financial statements
(including, in each case, any related notes thereto), contained in the Parent SEC Reports,
complied, as of its respective date, in all material respects with all applicable accounting
requirements and the published rules and regulations of the SEC with respect thereto applicable to
reporting companies under the Exchange Act, was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in the notes thereto
or in the Parent SEC Reports) and fairly presented the consolidated financial position of Parent
and its subsidiaries as at the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments and do not contain all
of the footnote disclosures required by GAAP.

     5.11 Changes in Parent’s Business. Between January 1, 2004 and the date hereof,
except as disclosed in the Parent SEC Reports, there has not been any change in the business or
operations of the Parent that has had or reasonably would be expected to have a material adverse
effect on Parent, its business or financial results or condition.

     5.12 Litigation. As of the date hereof and except as set forth on Schedule 5.12, there are no material
Actions pending or, to the knowledge of Parent, threatened in writing against Parent or Buyer, or
any outstanding order, judgment, writ, injunction or decree of any governmental authority.

     5.13 No Reliance. Notwithstanding anything contained in any other provision of this
Agreement to the contrary, Buyer acknowledges and agrees that the Seller Parties make no
representation or warranty, express or implied, written or oral, beyond those expressly given by
the Seller Parties in this Agreement or in any document, exhibit, statement, certificate or
schedule furnished to Buyer pursuant hereto.

     5.14 Other Activities. Except for Buyer and as set forth on Schedule 5.14 or as
contemplated by the Credit Agreement, Parent (i) does not, directly or indirectly, own any interest
in any corporation, partnership, joint venture, limited liability company, or other Person and (ii)
is not subject to any obligation or requirement to provide funds to or to make any investment (in
the form of a loan, capital contribution or otherwise) in or to any Person.

     5.15 Parent Common Stock Issuance. All of the shares of Parent Common Stock issued
and outstanding immediately prior to the Closing Date (i) have been issued in compliance with

42

 

applicable federal and state securities Regulations in reliance on exemptions from registration or
qualification thereunder, and (ii) except for shares held by affiliates, are freely tradeable and
eligible for resale in the public market without registration or qualification under federal
securities laws.

     5.16 Liabilities of Buyer. As of the date hereof and as of the Closing, except for
Liabilities incurred pursuant to this Agreement, the Credit Agreement and any other agreements or
arrangements contemplated hereby or thereby, Buyer has not engaged in any business activities and
has conducted its operations solely as contemplated by this Agreement.

     5.17 Tax Matters. Except as set forth on Schedule 5.17, Parent has timely filed all
Tax returns and reports required to be filed by it (after giving effect to any filing extension
properly granted by a governmental entity having authority to do so) (“Parent Tax Return”) since
December 31, 2002. Each such Parent Tax Return is true, correct and complete in all material
respects. Except as set forth on Schedule 5.17, Parent has paid, within the time and manner
prescribed by law, all material taxes that are due and payable since December 31, 2002. No Parent
Tax Return is the subject of any investigation, audit or other proceeding by any federal, state or
local tax authority.

     5.18 Labor Matters. Except as set forth on Schedule 5.18, neither Parent nor Buyer has any employees. No
unfair labor practice, or race, sex, age, disability or other discrimination, complaint is pending,
nor is any such complaint, to the knowledge of Parent, threatened against Parent before the
National Labor Relations Board, Equal Employment Opportunity Commission or any other governmental
authority, and no grievance is pending, nor is any grievance, to the knowledge of Parent,
threatened against Parent or Buyer.

     5.19 Benefit Plans. Schedule 5.19 sets forth all bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase, stock option,
phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical
or other employee benefit plan, arrangement or understanding (whether or not legally binding) under
which benefits are currently provided by a Buyer Party to any current or former employee, officer
or director of a Buyer Party under Section 414(b), (c), (m) or (o) of the Code.

     5.20 Contracts. Neither Parent nor Buyer is in Default of any material Contract to
which it is a party or by which it or its assets are bound. There does not exist any event or
condition that, after notice or lapse of time or both, would constitute a Default under any
material Contract on the part of Parent or Buyer or, to the knowledge of Parent, any other party
thereto or would permit the modification, cancellation or termination of any material Contract or
result in the creation of any lien upon, or any Person acquiring any right to acquire, any material
assets of Parent or Buyer, other than pursuant to the Credit Agreement or as contemplated by this
Agreement. Neither Parent nor Buyer has received in writing any claim or threat that Parent or
Buyer is in Default under any of the terms and conditions of any material Contract to which either
of them is a party or by which either of them is bound.

     5.21 Material Misstatements Or Omissions. No representations or warranties by Parent
or Buyer in this Agreement, nor any document, exhibit, statement, certificate or schedule furnished
to the Seller Parties pursuant hereto, contains or will contain any untrue statement of a

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material
fact, or omits or will omit to state any material fact necessary to make the statements or facts
contained therein not misleading.

ARTICLE VI.

COVENANTS OF SELLER AND BUYER

          The Seller Parties and the Buyer Parties each covenant with the other as follows

     6.1 Non-Competition

               (a) Restricted Conduct. Each of the Seller Parties covenants and agrees that, other
than (i) as provided in Section 6.3(c) below or (ii) in the capacity as an employee or officer of a
Buyer Party, it or he shall not, for the Restricted Period, directly or indirectly
(including by licensing or other partial rights transfers), through an affiliated or
controlled Person, on its or his own behalf or as a partner, consultant, proprietor, principal,
agent, creditor, director, officer, employee, security holder (except by ownership of five percent
(5%) or less of the outstanding stock of any publicly held corporation), trustee or in any other
capacity, own, manage, operate, finance, control, invest, participate or engage in, lend its or his
name to, lend credit to, render services or advice to, or devote any material endeavor or effort
to, any business that is the same as, substantially similar to, or in competition with, the
Business, in the United States, Canada or in any other country in which the products of the
Business are marketed (including via the internet), distributed or sold. For the purposes of this
Section 6.1, the “Restricted Period” shall mean:

                  (i) with respect to Seller, Millin Trust and Weiss Trust, the period of five (5) years from
and after the Closing Date; and

                  (ii) with respect to each of Millin and Weiss, the period from and after the Closing Date
until the fifth anniversary of the date of termination of their respective employment with the
Buyer Parties, provided that if such termination arises because (A) the Buyer Parties elect
not to renew the Employment Agreement of Millin or Weiss upon the expiry of its term and such
person is otherwise willing and able to renew his Employment Agreement, (B) the Buyer Parties
terminate the employment of Millin or Weiss under their respective Employment Agreement other than
for Cause (as such term is defined therein) or (C) Millin or Weiss terminates his employment under
his Employment Agreement for Good Reason (as such term is defined therein), such period shall
expire on the second anniversary of the date of termination of the employment of such person.

               (b) Enforceability. The terms of this Section 6.1 are a material inducement to the
Buyer Parties to enter into this Agreement and to consummate the transactions contemplated
hereunder. The Parties acknowledge and agree that the restrictive covenants contained herein are
reasonable under the circumstances and further agree that the covenants contained in this Section
6.1 should be interpreted in such a manner as to be effective and valid under applicable law. In
the event any portion of this Section 6.1 shall be held to be illegal or unenforceable, the
remainder of this Section 6.1 shall remain in full force and effect. If any of the restrictions
contained in this Section 6.1 shall for any reason be held to be excessively broad

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as to duration, geographical scope, activity or subject, such provision shall be construed by limiting or reducing
it so as to be enforceable to the maximum extent compatible with applicable law.

               (c) Weiss Accountancy Corporation. Notwithstanding the provisions of Section 6.1(a)
above:

                    (i) Weiss, in his capacity as a Certified Public Accountant, may provide solely accounting,
tax and consulting services to, but only to, Persons, who are not in competition with the Business,
and the provision of such services shall not be deemed a violation of Section 6.1(a) above; and

                    (ii) for as long as Weiss is an officer or director of Buyer or Parent, Weiss shall use his
commercially reasonable efforts to ensure that Weiss Accountancy
Corporation (or any successor thereto in which Weiss, directly or indirectly, owns at least
twenty percent (20%) of the equity or membership interests) does not provide any services to any
Person who is in competition with the Business, provided, that tax services that both (A)
are provided by Weiss Accountancy Corporation only with respect to fiscal years ending on or prior
to December 31, 2005 and (B) are not provided, directly or indirectly, by Weiss, shall not be
deemed a violation of Section 6.1(a) above or this Section 6.1(c)(ii).

     6.2 Employee Matters.

               (a) Buyer shall offer at-will employment to all employees currently employed by Seller listed
on Schedule 6.2 attached hereto. Seller will use commercially reasonable efforts to assist Buyer
in the hiring of such employees. Upon execution of this Agreement, Seller shall notify each
employee listed on Schedule 6.2 in writing that, by reason of the sale of the Business, their
employment with Seller is terminated as of the Closing Date and that Buyer is offering such
employees employment. Any such employees actually employed by Buyer or its Affiliates immediately
following the Closing are referred to in this Agreement as “Rehired Employees.” To the extent that
service is relevant for purposes of eligibility and vesting (and, in order to calculate the amount
of any vacation, sick days, severance, layoff and similar benefits, but not for purposes of pension
benefit accruals) under any retirement plan, employee benefit plan, program or arrangement
established or maintained by Buyer or any of its Affiliates for the benefit of the Buyer’s
employees, such plan, program or arrangement, shall, to the extent permitted by the terms and
conditions thereof, credit such Rehired Employees for service earned on and prior to the Closing
Date with Seller, in addition to service earned with Buyer or any of Buyer’s Affiliates after the
Closing Date. In addition to the foregoing, as of the Closing Date, the Buyer Parties shall
provide each Rehired Employee, at the time of hiring, with initial compensation (but excluding
benefits and any incentive or equity-based compensation) at least as favorable as the compensation
(but excluding benefits and any incentive or equity-based compensation) provided to such employees
by Seller as of the date of this Agreement. Seller shall issue to each terminated employee
(including, without limitation, all Rehired Employees) a final paycheck on the Closing Date,
containing their salary through the Closing, all accrued, unused vacation or other paid time off,
and any other wages, overtime, severance pay, bonuses, other incentive compensation, commissions,
expense reimbursement, or any compensation that was earned, accrued, or payable prior to or as a
result of the Closing.

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               (b) Notwithstanding anything to the contrary contained herein, Seller shall be solely
responsible for all of the Employee Plans and all obligations and liabilities thereunder. Buyer
shall not assume any of the Employee Plans or any obligation or liability thereunder. The Seller
Parties and their respective Affiliates (other than any Buyer Party) shall hold the Buyer Parties,
its Affiliates and their assigns harmless from and against any and all obligations to employees
relating to their employment in connection with the operation of the Business prior to the Closing.
The Seller Parties shall take all necessary and appropriate action, if any, to comply on or prior
to the Closing Date with any state and federal laws regarding termination of the employees.

               (c) Nothing contained in this Agreement shall confer upon any Rehired Employee any right with
respect to continuance of employment by Buyer, nor shall anything herein interfere with the right
of Buyer to terminate the employment of any of the Rehired
Employees at any time, with or without cause, or restrict Buyer in the exercise of its
independent business judgment in modifying any of the terms and conditions of the employment of the
Rehired Employees.

               (d) No provision of this Agreement shall create any third party beneficiary rights in any
Rehired Employee, any beneficiary or dependents thereof, or any collective bargaining
representative thereof, with respect to the compensation, terms and conditions of employment and
benefits that may be provided to any Rehired Employee by Buyer or under any benefit plan which
Buyer may maintain.

     6.3 Piggyback Registrations.

               (a) Parent shall notify Seller at least thirty (30) days prior to filing any registration
statement under the Securities Act for purposes of effecting a public offering of securities of
Parent (including, but not limited to, a registration statement relating to a secondary offering of
securities of Parent, but excluding registration statements relating to any employee
benefit plan or a corporate reorganization or a merger, acquisition or similar transaction) and
will afford Seller an opportunity to include in such registration statement all or any part of the
Shares (up to a maximum percentage of the offering equal to the percentage of total outstanding
Parent Common Stock held by Seller at that time). If Seller desires to include in any such
registration statement all or any part of the Shares, Seller shall, within twenty (20) days after
receipt of the above-described notice from Parent, notify Parent in writing, and in such notice
shall inform Parent of the number of Shares Seller wishes to include in such registration
statement; provided that the proceeds of any Shares sold as part of such registration
statement prior to the date of termination of the Pledge Agreement shall be paid into the Indemnity
Escrow Account. If Seller decides not to include all of its Shares in any registration statement
thereafter filed by Parent, Seller shall nevertheless continue to have the right to include any of
the Shares in any subsequent registration statement or registration statements as may be filed by
Parent with respect to offerings of its securities, all upon the terms and conditions set forth
herein.

               (b) If a registration statement for which Parent gives notice under this Section 6.3 is for an
underwritten offering, then Parent shall so advise Seller. In such event, the right of Seller to
include the Shares in a registration pursuant to this Section 6.3 shall be conditioned upon
Seller’s participation in such underwriting and the inclusion of Seller’s Shares

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in the underwriting to the extent provided herein. If Seller proposes to distribute its Shares through
such underwriting, it shall enter into an underwriting agreement in customary form with the
managing underwriter or underwriter(s) selected for such underwriting. Notwithstanding any other
provision of this Agreement, if the managing underwriter(s) determine(s) in good faith that
marketing factors require a limitation of the number of shares to be underwritten, then the
managing underwriter(s) may exclude shares (including the Shares) from the registration and the
underwriting, and the number of shares that may be included in the registration and the
underwriting shall be allocated, first, to Parent, and second, to Seller and to
each other participating stockholder of Parent on a pro rata basis. If Seller disapproves of the
terms of any such underwriting, Seller may elect to withdraw therefrom by written notice to Parent
and the underwriter, delivered at least ten (10) Business Days prior to the effective date of the
registration statement. Any Shares excluded or withdrawn from such underwriting shall be excluded
and withdrawn from the registration.

               (c) All selling expenses (other than underwriting discounts, selling commissions and stock
transfer taxes and all legal fees and expenses of legal counsel of Seller and any other
participating stockholder) incurred in connection with a registration pursuant to this Section 6.3
shall be borne by Parent. If Seller participates in a registration pursuant to this Section 6.3,
Seller shall bear its proportionate share (based on the total number of shares sold in such
registration other than for the account of Parent) of all underwriting discounts, selling
commissions and stock transfer taxes incurred in connection with a registration pursuant to this
Section 6.3. Seller shall furnish Parent, in writing, all information that Parent may request or
as may be required by the SEC or applicable law concerning the plan and method of distribution by
Seller.

     6.4 Board Appointments. Parent shall use reasonable efforts to cause each of Millin
and Weiss to be nominated for election by the stockholders of Parent to the board of directors of
Parent at each annual stockholders’ meeting during the term of their respective Employment
Agreement.

     6.5 Consents. If the consent of any Person required for the assignment of any Assumed
Contract, Lease, Permit or any claim or right or any benefit arising thereunder or resulting
therefrom that is being assigned to Buyer hereunder is not obtained prior to the Closing, or if an
attempted assignment thereof would be ineffective or would affect the rights thereunder so that
Buyer would not receive all such rights, the Seller Parties will cooperate with the Buyer Parties,
in all reasonable respects, to provide to Buyer the benefits under any such Assumed Contract,
Lease, Permit or any claim or right, including without limitation enforcement for the benefit of
Buyer of any and all rights of the Seller Parties against a third party thereto arising out of the
Default or cancellation by such third party or otherwise.

     6.6 Reporting Company Status. For a period until the earlier of (a) the third
anniversary of the Closing Date and (b) a Change in Control of Parent, Parent shall file with the
SEC all reports required to be filed pursuant to the Exchange Act and refrain from terminating its
status as an issuer required by the Exchange Act to file reports thereunder even if the Exchange
Act or the rules and regulations thereunder would permit such termination. For the purposes of
this Section 6.6, a “Change in Control” shall mean any transaction or series of transactions,
circumstance or event, pursuant to which any Person after the Closing Date obtains the

47

 

possession, directly or indirectly, of the de facto or de jure power to direct or cause the direction of
management policies of Parent, whether through the ownership of voting securities, by contract or
otherwise.

     6.7 Termination of Seller’s Defined Benefit Pension Plan

               (a) Seller is the sole employer maintaining, and the sole contributing sponsor of, the
Woodridge Labs, Inc. Defined Benefit Pension Plan (the “Pension Plan”). Seller is the “plan
administrator,” as defined in Section 414(g) of the Code, and the “administrator,” as defined in
Section 3(16) of ERISA, of the Pension Plan. Weiss and Millin are the trustees (the “Pension
Plan Trustees”) of the trust maintained in connection with the Pension Plan (the
“Pension Plan Trust”). The Pension Plan and the Pension Plan Trust are intended to
constitute a qualified defined benefit pension plan and a tax-exempt trust under the Code and are
subject to Titles I and IV of ERISA.

               (b) Seller shall: (i) terminate the Pension Plan with a termination date of not later than
December 31, 2007, (ii) amend the Pension Plan to cease all benefit accruals thereunder as of the
termination date, and (iii) amend the Pension Plan as necessary to maintain the qualification and
tax-exemption of the Pension Plan and the Pension Plan Trust and comply with the requirements of
ERISA and other applicable law. Seller shall terminate the Pension Plan in a standard termination
under Section 4041(b) of ERISA. Seller shall take all actions required in connection with the
termination of the Pension Plan in accordance with requirements of Section 4041 of ERISA and the
regulations thereunder and as soon as reasonably practicable after the termination date (and in any
event not later than 270 days following the termination date). Promptly following the Closing,
Seller shall provide for the distribution of the benefits of all of the employees of Seller
participating in the Pension Plan, other than Weiss, Millin and their respective spouses. Such
distributions shall be made in accordance with the Pension Plan, ERISA and the Code and Seller
shall take such actions as are reasonably appropriate to ensure that such distributions are
completed not later than the first anniversary of the Closing, to the extent permitted by the
Pension Plan, ERISA and the Code.

               (c) Seller shall distribute on a timely basis all notices and disclosures required in
connection with the termination of the Pension Plan and the cessation of benefit accruals under the
Pension Plan. Seller shall submit on a timely basis all filings required to be made to the
Internal Revenue Service (the “IRS”), the U.S. Department of Labor (the “DOL”) or
the PBGC in connection with the Pension Plan and the termination thereof.

               (d) Seller shall file with the IRS a request for a favorable determination letter with respect
to the qualification and tax-exemption of the Pension Plan and the Pension Plan Trust (including
the continued qualification and tax-exemption of the Pension Plan and the Pension Plan Trust upon
the termination thereof), and Seller shall adopt such amendments to the Pension Plan and the trust
agreement with respect to the Pension Plan Trust and take such other actions as are necessary to
obtain such favorable determination letter.

               (e) Seller shall, and shall cause the Plan Trustees to, administer the Pension Plan and the
Pension Plan Trust, and the termination thereof, in accordance with the

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terms of the Pension Plan and the Pension Plan Trust and the requirements of the Code, ERISA and other applicable law.

               (f) Seller shall make all contributions required to be made to the Pension Plan on a timely
basis and in accordance with the requirements of Section 412 of the Code and Section 302 of ERISA.
Seller shall make such contributions to the Pension Plan as are necessary in connection with the
standard termination of the Pension Plan in accordance with Section 4041 of ERISA. Seller shall
pay on a timely basis all premiums required to be paid to the PBGC with respect to the Pension
Plan.

               (g) Seller shall promptly provide Buyer with copies of all documents, notices, disclosures,
filings or other information relating to the Pension Plan or the Pension Plan
Trust, or the termination thereof, as are reasonably requested by Buyer. Seller shall
promptly provide Buyer with copies of all notices, letters or written communications received from
the IRS, the DOL or the PBGC relating to the Pension Plan or the Pension Plan Trust or the
termination thereof.

               (h) Seller shall continue to serve as the “plan administrator,” as defined in Section 414(g)
of the Code, and the “administrator,” as defined in Section 3(16) of ERISA, of the Pension Plan,
and Weiss and Millin shall continue to serve as the Plan Trustees, until all benefits under the
Pension Plan have been distributed in connection with the termination of the Pension Plan, all
assets of the Pension Plan Trust have been distributed in accordance with the terms of the Pension
Plan and the Pension Plan Trust, all filings relating to the Pension Plan required by the Code,
ERISA and other applicable law have been made and Seller has received a favorable determination
letter with respect to the Pension Plan and the Pension Plan Trust from the IRS. Seller and the
Plan Trustees shall maintain all records, documents and other information relating to the Pension
Plan and the Pension Plan Trust in accordance with the Code, ERISA and other applicable law.

               (i) Neither Parent nor Buyer shall maintain, or be a contributing sponsor of, the Pension
Plan. Neither Parent nor Buyer, nor any of their affiliates, shall have or assume any liability or
obligation under or relating to the Pension Plan or the Pension Plan Trust or the termination
thereof. Neither Parent nor Buyer, nor any of their officers, directors, employees, agents,
attorneys or affiliates shall be fiduciaries of the Pension Plan or the Pension Plan Trust or have
any authority, responsibility or control over the Pension Plan or the Pension Plan Trust; provided,
however, that Weiss and Millin shall remain fiduciaries of the Pension Plan solely in their
capacities as Pension Plan Trustees.

               (j) The Selling Parties shall retain, pay, perform, discharge and satisfy any and all
liabilities under or relating to the Pension Plan and the Pension Plan Trust (and the termination
thereof).

     6.8 Termination of Seller’s 401(k) Profit-Sharing Plan

               (a) Seller is the sole employer maintaining, and the sole contributing sponsor of, the
Woodridge Labs, Inc. Retirement Trust Plan (the “401(k) Plan”). Seller is the “plan
administrator,” as defined in Section 414(g) of the Code, and the “administrator,” as

49

 

defined in Section 3(16) of ERISA, of the 401(k) Plan. Weiss and Millin are the trustees (the “401(k)
Plan Trustees”) of the trust maintained in connection with the 401(k) Plan (the “401(k)
Plan Trust”). The 401(k) Plan and the 401(k) Plan Trust are intended to constitute a qualified
profit-sharing plan and a tax-exempt trust under the Code and are subject to Title I of ERISA. The
401(k) Plan includes a cash or deferred arrangement that is intended to be qualified under Section
401(k) of the Code.

               (b) Not later than the Closing, Seller shall: (i) terminate the 401(k) Plan with a
termination date before the Closing, (ii) amend the 401(k) Plan to cease all deferrals of
compensation and contributions thereunder as of the termination date, and (iii) amend the 401(k)
Plan as necessary to maintain the qualification and tax-exemption of the 401(k) Plan and the 401(k)
Plan Trust and comply with the requirements of ERISA and other applicable law.

               (c) Seller shall distribute on a timely basis all notices and disclosures required in
connection with the termination of the 401(k) Plan and the cessation of deferrals of compensation
and contributions under the 401(k) Plan. Seller shall submit on a timely basis all filings
required to be made to the IRS and the DOL in connection with the 401(k) Plan and the
termination thereof.

               (d) Seller shall file with the IRS a request for a favorable determination letter with respect
to the qualification and tax-exemption of the 401(k) Plan and the 401(k) Plan Trust (including the
continued qualification and tax-exemption of the 401(k) Plan and the 401(k) Plan Trust upon the
termination thereof), and Seller shall adopt such amendments to the 401(k) Plan and the trust
agreement with respect to the 401(k) Plan Trust and take such other actions as are necessary to
obtain such favorable determination letter.

               (e) Seller shall, and shall cause the Plan Trustees to, administer the 401(k) Plan and the
401(k) Plan Trust, and the termination thereof, in accordance with the terms of the 401(k) Plan and
the 401(k) Plan Trust and the requirements of the Code, ERISA and other applicable law.

               (f) Seller shall make all contributions required to be made to the 401(k) Plan on a timely
basis.

               (g) Seller shall promptly provide Buyer with copies of all documents, notices, disclosures,
filings or other information relating to the 401(k) Plan or the 401(k) Plan Trust, or the
termination thereof, as are reasonably requested by Buyer. Seller shall promptly provide Buyer
with copies of all notices, letters or written communications received from the IRS or the DOL
relating to the 401(k) Plan or the 401(k) Plan Trust or the termination thereof.

               (h) Seller shall continue to serve as the “plan administrator,” as defined in Section 414(g)
of the Code, and the “administrator,” as defined in Section 3(16) of ERISA, of the 401(k) Plan, and
Weiss and Millin shall continue to serve as the 401(k) Plan Trustees, until all benefits under the
401(k) Plan have been distributed in connection with the termination of the 401(k) Plan, all assets
of the 401(k) Plan Trust have been distributed in accordance with the terms of the 401(k) Plan and
the 401(k) Plan Trust, all filings relating to the 401(k) Plan required by the Code, ERISA and
other applicable law have been made and Seller has received a

50

 

favorable determination letter with respect to the 401(k) Plan and the 401(k) Plan Trust from the IRS. Seller and the 401(k) Plan
Trustees shall maintain all records, documents and other information relating to the 401(k) Plan
and the 401(k) Plan Trust in accordance with the Code, ERISA and other applicable law.

               (i) Neither Parent nor Buyer shall maintain, or be a contributing sponsor of, the 401(k) Plan.
Neither Parent nor Buyer, nor any of their affiliates, shall have or assume any liability or
obligation under or relating to the 401(k) Plan or the 401(k) Plan Trust or the termination
thereof. Neither Parent nor Buyer, nor any of their officers, directors, employees, agents,
attorneys or affiliates shall be fiduciaries of the 401(k) Plan or the 401(k) Plan Trust or have
any authority, responsibility or control over the 401(k) Plan or the 401(k) Plan Trust; provided,
however, that Weiss and Millin shall remain fiduciaries of the 401(k) Plan solely in their
capacities as 401(k) Plan Trustees.

               (j) The Selling Parties shall retain, pay, perform, discharge and satisfy any and all
liabilities under or relating to the 401(k) Plan and the 401(k) Plan Trust (and the termination
thereof).

     6.9 Reimbursement of Attorney Costs. In the event that any Buyer Party incurs any
legal (including, without limitation, attorney) costs, expenses and disbursements after the Closing
Date with respect to counsel for Seller directly relating to any Action constituting a Dermafreeze Liability, Seller shall promptly, and in any event within thirty (30) days after the incurrence
thereof, reimburse such Buyer Party in full for such costs, expenses and disbursements.

ARTICLE VII.

CONDITIONS TO SELLER’S OBLIGATIONS

          The obligations of the Seller Parties to consummate the transactions provided for hereby are
subject, in the discretion of the Seller Parties, to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, any of which may be waived by the Seller Parties in
writing:

     7.1 Representations, Warranties and Covenants. All representations and warranties of
the Buyer Parties contained in this Agreement shall be true and correct (without regard to
materiality qualifiers contained in such representations and warranties) in all material respects
at and as of the date of this Agreement and at and as of the Closing Date, except as and to the
extent that the facts and conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and each of the Buyer Parties
shall have performed and satisfied in all material respects all agreements and covenants required
hereby to be performed by it prior to or on the Closing Date.

     7.2 Consents; Regulatory Compliance and Approval. All Consents shall have been
obtained. All approvals required under any Regulations to carry out the transactions contemplated
by this Agreement shall have been obtained and that the Parties shall have complied with all
Regulations applicable to the transactions contemplated by this Agreement.

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     7.3 No Actions or Court Orders. There shall be no pending or threatened Action by any
Person against any Buyer Party or Seller Party or the Assets for the purpose of enjoining or
preventing the consummation of the transactions contemplated hereby or otherwise claiming that the
consummation this Agreement is illegal or invalid. No federal, state, or local governmental
authority or instrumentality shall have issued any law or decision or taken any other action then
in effect, which restrains, enjoins or otherwise prohibits or makes illegal the consummation of the
transactions contemplated hereby; provided, however, that the Parties hereto shall use
their commercially reasonable efforts to have any such restraint, injunction or prohibition removed
or vacated. There shall not be any Regulation or Court Order that makes the purchase and sale of
the Business or the Assets contemplated hereby illegal or otherwise prohibited.

     7.4 Assumption . Buyer shall have executed the Assignments and Assumptions of
Contracts and Leases in substantially the form attached hereto as Exhibits C and D.

     7.5 Employment Agreements. The Buyer Parties shall have executed and delivered an
Employment Agreement with each of Millin and Weiss in substantially the forms attached hereto as
Exhibits H-1 and H-2, respectively.

     7.6 Escrow Agreement. The Buyer Parties shall have executed the Escrow Agreement in
substantially the form attached hereto as Exhibit F.

     7.7 Opinion of Counsel. Buyer shall have delivered to Seller an opinion of Maron &
Sandler and of Latham & Watkins LLP, counsel to Buyer and Parent, dated as of the Closing Date,
addressing the matters set forth on Exhibits G-1 and G-2, respectively, attached hereto, subject to
customary exceptions and qualifications.

     7.8 Board Appointments. Seller shall have received from Parent resolutions adopted by
the board of directors of Parent effective as of, and subject to, the Closing (a) increasing the
number of members of the board of directors of Parent from seven (7) to nine (9) and (b) approving
the appointment of Millin and Weiss to fill the vacancies on the board of directors of Parent,
certified by Parent’s corporate secretary.

     7.9 Corporate Documents. Seller shall have received from Buyer and Parent (a)
resolutions adopted by the board of directors of Buyer and Parent approving this Agreement and the
transactions contemplated hereby and (b) a copy of the certificate of incorporation and bylaws of
Buyer and Parent, certified by Buyer’s and Parent’s corporate secretary, as applicable.

ARTICLE VIII.

CONDITIONS TO BUYER’S OBLIGATIONS

          The obligations of the Buyer Parties to consummate the transactions provided for hereby are
subject, in the discretion of the Buyer Parties, to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, any of which may be waived by the Buyer Parties in
writing:

     8.1 Representations, Warranties and Covenants. All representations and warranties of
the Seller Parties contained in this Agreement shall be true and correct (without regard to

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materiality qualifiers contained in such representations and warranties) in all material respects
at and as of the date of this Agreement and at and as of the Closing Date, except as and to the
extent that the facts and conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof, and each of the Seller Parties
shall have performed and satisfied in all material respects all agreements and covenants required
hereby to be performed by each such Party prior to or on the Closing Date.

     8.2 Consents; Regulatory Compliance and Approval. All Consents shall have been
obtained. All approvals required under any Regulations to carry out the transactions contemplated
by this Agreement shall have been obtained and that the Parties shall have complied with all
Regulations applicable to the transactions contemplated by this Agreement.

     8.3 No Actions or Court Orders. There shall be no pending or threatened Action by any
Person against any Buyer Party or Seller Party or the Assets for the purpose of enjoining or
preventing the consummation of the transactions contemplated hereby or otherwise claiming that the
consummation this Agreement is illegal or invalid. No federal, state, or local governmental
authority or instrumentality shall have issued any law or decision or taken any other action then
in effect, which restrains, enjoins or otherwise prohibits or makes illegal the consummation of the
transactions contemplated hereby; provided, however, that the Parties hereto shall use
their commercially reasonable efforts to have any such restraint, injunction or prohibition removed
or vacated. There shall not be any Regulation or Court Order that makes the purchase and sale of
the Business or the Assets contemplated hereby illegal or otherwise prohibited.

     8.4 Opinion of Counsel. Seller shall have delivered to Buyer an opinion of Jones,
Kaufman & Ackerman LLP, counsel to Seller, dated as of the Closing Date, addressing the matters set
forth on Exhibit G-3 attached hereto, subject to customary exceptions and qualifications.

     8.5 Material Changes. Since the Balance Sheet Date, there shall not have been any Material Adverse Effect with
respect to the Business or the Assets.

     8.6 Corporate Documents. Buyer shall have received from Seller resolutions adopted by
the board of directors and shareholders of Seller approving this Agreement and the transactions
contemplated hereby, certified by Seller’s corporate secretary.

     8.7 Due Diligence Review. Buyer and its Representatives shall have conducted a due
diligence review of Seller’s Books and Records, Audited Financial Statements, and other records and
accounts of the Business, and in the sole discretion of Buyer, Buyer shall be satisfied as to the
results of such review and that there has been no breach of the representations and warranties or
the pre-closing covenants of Seller made pursuant to this Agreement. Such review shall have no
effect whatsoever on the Liability of Seller to Buyer under this Agreement or otherwise for breach
of any representations, warranties, or covenants of Seller or hereunder.

     8.8 Conveyancing Documents; Release of Encumbrances. Seller shall have executed and
delivered each of documents described in Section 3.2 hereof so as to effect the transfer and
assignment to Buyer of all right, title and interest in and to the Assets and Seller shall have
filed

53

 

(where necessary) and delivered to Buyer all documents necessary to release the Assets from
all Encumbrances, which documents shall be in a form reasonably satisfactory to Buyer’s counsel.

     8.9 Permits. Buyer shall have obtained or been granted the right to use all Permits
necessary to its operation of the Business.

     8.10 Assignment. Seller shall have executed and delivered the Assignments and
Assumptions of Contracts and Leases with respect to each Contract and Lease, and the Assignments of
Patents and Trademarks, in substantially the form attached hereto as Exhibits C, D and E.

     8.11 Employment Agreements. Millin and Weiss shall each have executed and delivered
an Employment Agreement with the Buyer Parties in substantially the forms attached hereto as
Exhibits H-1 and H-2, respectively.

     8.12 Rehired Employees. Buyer shall have entered into such other employment
agreements, arrangements or understandings concerning the employment of the Rehired Employees as
shall be satisfactory to Buyer in its sole discretion (but otherwise consistent with the provisions of Section 6.2
above), which employment agreements, arrangements or understandings shall be in full force and
effect as of the Closing.

     8.13 Stock Pledge. Seller shall have executed and delivered the Pledge Agreement in
substantially the form attached hereto as Exhibit I.

     8.14 Sales Rep Agreements. The Persons listed on Schedule 8.14 shall have executed
and delivered a sales representative agreement or manufacturer’s representative agreement with
Buyer in a form reasonably satisfactory to Buyer.

     8.15 Consents of Weil & Company. Buyer shall have received the consents of Weil &
Company in substantially the form attached hereto as Exhibit J.

     8.16 Fairness Opinion. The Buyer Parties shall have received a written opinion of
Cogent Valuation, financial advisor to the Buyer Parties, dated the date hereof, to the effect
that, as of the date hereof, the Purchase Price is fair to the Buyer Parties from a financial point
of view.

     8.17 Nonforeign Affidavit. Seller shall furnish Buyer an affidavit, stating, under
penalty of perjury, the transferor’s United States taxpayer identification number and that the
transferor is not a foreign person, pursuant to Section 1445(b)(2) of the Code.

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ARTICLE IX.

ACTIONS BY SELLER AND BUYER

AFTER THE CLOSING

     9.1 Collection of Accounts Receivable and Letters of Credit. On the Closing Date, the
Buyer Parties will acquire hereunder, and thereafter the Buyer Parties or their designee shall have
the right and authority to collect for Buyer’s or its designee’s account, all receivables, letters
of credit and other items which constitute a part of the Assets, and Seller shall within
forty-eight (48) hours after receipt of any payment in respect of any of the foregoing, properly
endorse, remit and deliver to Buyer any letters of credit, documents, EDI payments, cash or checks
received on account of or otherwise relating to any such receivables, letters of credit or other
items. Seller shall promptly transfer or deliver to
Buyer or its designee any cash or other property that Seller may receive in respect of any
deposit, prepaid expense, claim, contract, license, lease, commitment, sales order, purchase order,
letter of credit or receivable of any character, or any other item, constituting a part of the
Assets.

     9.2 Books and Records; Tax Matters.

               (a) Books and Records. Each Party agrees that it will cooperate with and make
available to the other Parties, during normal business hours, all Books and Records, Excluded
Records, information and employees (without substantial disruption of employment) retained and
remaining in existence after the Closing which are necessary or useful in connection with any Tax
inquiry, audit, investigation or dispute, any litigation or investigation or any other matter
requiring any such Books and Records, information or employees for any reasonable business purpose.
The Party requesting any such Books and Records, information or employees shall bear all of the
out-of-pocket costs and expenses (including without limitation attorneys’ fees, but excluding
reimbursement for salaries and employee benefits) reasonably incurred in connection with providing
such Books and Records, information or employees. All information received pursuant to this
Section 9.2(a) shall be subject to the terms of Section 10.10.

               (b) Cooperation and Records Retention. The Seller Parties and the Buyer Parties shall
(i) each provide the other with such assistance as may reasonably be requested by any of them in
connection with the preparation of any return, audit, or other examination by any taxing authority
or judicial or administrative proceedings relating to Liability for Taxes, (ii) each retain and
provide the other with any records or other information that may be relevant to such return, audit
or examination, proceeding or determination, and (iii) each provide the other with any final
determination of any such audit or examination, proceeding, or determination that affects any
amount required to be shown on any tax return of the other for any period. Without limiting the
generality of the foregoing, the Seller Parties and the Buyer Parties shall each retain, until the
applicable statutes of limitations (including any extensions) have expired, copies of all tax
returns, supporting work schedules, and other records or information that may be relevant to such
returns for all tax periods or portions thereof ending on or before the Closing Date and shall not
destroy or otherwise dispose of any such records without first providing the other Parties with a
reasonable opportunity to review and copy the same.

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               (c) Payment of Liabilities. Following the Closing Date, Seller shall pay all of the
Excluded Liabilities and the Buyer shall pay all of the Assumed Liabilities; provided, however,
this covenant shall not apply to that portion (or all) of any Liabilities that a Party is
contesting in good faith.

     9.3 Survival of Representations. All of the representations and warranties made by
each Party in this Agreement or in any attachment, Exhibit, the Disclosure Schedule, certificate,
document or list delivered by any such Party pursuant hereto shall survive the Closing until the
date eighteen (18) months following the Closing Date (the “Expiration Date”),
provided, however, that (i) the representations and warranties set forth in Sections 4.17
and 4.5 (first sentence only and only insofar as it relates to a third party claim constituting an
Encumbrance) shall survive the Closing until the date forty-two (42) months following the Closing
Date, (ii) the representations and
warranties set forth in Sections 4.7(c), 4.18, 4.20, 4.27, 4.29, 4.31, 4.33, 5.6 and 5.17
shall survive until the expiration of their applicable statutes of limitations (with extensions)
and (iii) the representations and warranties contained in Sections 4.1, 4.2, 4.3, 4.5 (first
sentence only, and except as provided in clause (i) above), 4.9, 5.1, 5.2, 5.3, 5.4, 5.5 and 5.8
shall survive indefinitely. Each Party hereto shall be entitled to rely upon the representations
and warranties of the other Parties set forth in this Agreement, and no investigation made by any
of the Parties hereto shall in any way limit the representations and warranties of the Parties.
The termination of the representations and warranties provided herein shall not affect the rights
of a Party in respect of any Claim, provided that all Claims shall be made in a writing
received by the other Parties prior to the expiration of the applicable survival period provided
herein.

     9.4 Indemnifications.

               (a) By Seller Parties. The Seller Parties, jointly and severally, shall indemnify,
save and hold harmless the Buyer Parties, and their respective Affiliates and Representatives (each
a “Buyer Indemnified Party”), from and against any and all costs, losses, Taxes,
Liabilities, obligations, damages, lawsuits, deficiencies, claims, demands, and expenses (whether
or not arising out of third-party claims), including without limitation interest, penalties, costs
of mitigation, losses in connection with any Environmental Law (including without limitation any
clean-up or remedial action), losses resulting from any shutdown or curtailment of operations,
damages to the environment, costs and expenses incurred in connection with the exercise of the
Buyer Parties’ rights under the Pledge Agreement, attorneys’ fees and all amounts paid in
investigation, defense or settlement of any of the foregoing, but excluding in all events lost
profits, lost opportunities, diminution in value, consequential, punitive, treble or other special
damages regardless of the legal theory (herein, “Damages”), incurred in connection with,
arising out of, resulting from or incident to (i) any breach or inaccuracy of any representation or
warranty made by any of the Seller Parties in or pursuant to this Agreement or the Pledge
Agreement; (ii) any breach of any covenant or agreement made by any of the Seller Parties in or
pursuant to this Agreement or the Pledge Agreement; (iii) any Excluded Liability (including,
without limitation, any Damages relating to a Dermafreeze Liability); or (iv) any Liability imposed
upon Buyer by reason of a Buyer Party’s status as transferee of the Business or Assets (including,
without limitation, any Damages relating to a Dermafreeze Liability).

          The term “Damages” as used in this Section 9.4 is not limited to matters asserted by third
parties against a Seller Indemnified Party or a Buyer Indemnified Party, but includes

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Damages incurred or sustained by a Seller Indemnified Party or a Buyer Indemnified Party in the absence of
third party claims. Payments by a Buyer Indemnified Party of amounts for which such Buyer
Indemnified Party is indemnified hereunder, and payments by a Seller Indemnified Party of amounts
for which such Seller Indemnified Party is indemnified, shall not be a condition precedent to
recovery. The Seller Parties’ obligation to indemnify the Buyer Indemnified Parties, and the Buyer
Parties’ obligation to indemnify the Seller Indemnified Parties, shall not limit any other rights,
including without limitation rights of contribution which any Party may have under statute or
common law.

               (b) By Buyer Parties. The Buyer Parties, jointly and severally, shall indemnify and
save and hold harmless the Seller Parties, and their respective Affiliates (other than a Buyer
Party) and Representatives (each a “Seller Indemnified Party”), from and against
any and all Damages incurred in connection with, arising out of, resulting from or incident to
(i) any breach or inaccuracy of any representation or warranty made by any of the Buyer Parties in
or pursuant to this Agreement or the Pledge Agreement; (ii) any breach of any covenant or agreement
made by any of the Buyer Parties in or pursuant to this Agreement or the Pledge Agreement; (iii)
from and after the Closing, any Assumed Liability; or (iv) in the event of a registration of any of
the Shares under the Securities Act pursuant to this Agreement, any untrue statement or alleged
untrue statement of any material fact contained in any registration statement under which such
Shares were registered under the Securities Act pursuant to this Agreement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement thereof, or the
omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that the Buyer Parties
will not be liable in any such case under this sub-part (iv) if and to the extent that (A) such
untrue statement or alleged untrue statement or omission or alleged omission was based upon
information furnished by or on behalf of the Seller Parties in writing specifically for use in any
such document or (B) such untrue statement or alleged untrue statement or omission or alleged
omission was made in any preliminary prospectus and the final prospectus corrected such untrue
statement or alleged untrue statement or omission or alleged omission or (C) such untrue statement
or alleged untrue statement or omission or alleged omission was corrected in an amendment or
supplement to the prospectus that was furnished to Seller prior to the sale of Shares to the Person
who is asserting the claim.

               (c) Cooperation. The indemnified party shall cooperate in all reasonable respects
with the indemnifying party and such attorneys in the investigation, trial and defense of such
lawsuit or action and any appeal arising therefrom; provided, however, that the
indemnified party may, at its own cost, participate in the investigation, trial and defense of such
lawsuit or action and any appeal arising therefrom. The Parties shall cooperate with each other in
any notifications to insurers.

               (d) Defense of Claims. If a claim for Damages (a “Claim”) is to be made by a
Person entitled to indemnification hereunder against the indemnifying party, the Person claiming
such indemnification shall give written notice (a “Claim Notice”) to the indemnifying party
promptly after the Person entitled to indemnification becomes aware of any fact, condition or event
which may give rise to Damages for which indemnification may be sought under this Section 9.4. If
any lawsuit or enforcement action is filed against any Person entitled to the benefit of indemnity
hereunder, written notice thereof shall be given promptly to

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the indemnifying party (and in any event within fifteen (15) calendar days after the service of the citation or summons). The failure
of any indemnified party to give timely notice hereunder shall not affect rights to indemnification
hereunder, except to the extent that the indemnifying party demonstrates actual prejudice or damage
caused by such failure. After such notice, if the indemnifying party shall acknowledge in writing
to the indemnified party that the indemnifying party shall be obligated under the terms of its
indemnity hereunder in connection with such lawsuit or action, then the indemnifying party shall be
entitled, if it so elects at its own cost, risk and expense, (i) to take control of the defense and
investigation of such lawsuit or action where such lawsuit or action involves only money damages
and does not seek injunctive or other equitable relief, (ii) to employ and engage attorneys of its
own choice to handle and defend the same, and (iii) to compromise or settle such claim, which
compromise or settlement shall be made only with the written consent of the indemnified party, such
consent not to be unreasonably
withheld. Notwithstanding the foregoing, the indemnified party shall have the right to employ
separate counsel at the indemnifying party’s expense and to control its own defense of such lawsuit
or action to the extent that there are reasonable legal defenses available to such indemnified
party or to other indemnified parties that are of a material benefit to such indemnified party and
are different from or additional to those available to the indemnifying party; provided, however,
that the indemnifying party shall not be required to pay for more than one such additional counsel
for all indemnified parties in connection with any Claim. If the indemnifying party fails to
assume the defense of such claim within thirty (30) calendar days after receipt of the Claim
Notice, the indemnified party against which such claim has been asserted will (upon delivering
notice to such effect to the indemnifying party) have the right to undertake, at the indemnifying
party’s cost and expense, the defense, compromise or settlement of such claim on behalf of and for
the account and risk of the indemnifying party; provided, however, that such Claim
shall not be compromised or settled without the written consent of the indemnifying party, which
consent shall not be unreasonably withheld. In the event the indemnified party assumes the defense
of the claim, the indemnified party will keep the indemnifying party reasonably informed of the
progress of any such defense, compromise or settlement. The indemnifying party shall be liable for
any settlement of any action effected pursuant to and in accordance with this Section 9.4 and for
any final judgment (subject to any right of appeal), and the indemnifying party agrees to indemnify
and hold harmless an indemnified party from and against any Damages by reason of such settlement or
judgment. If the indemnified party refuses its consent under clause (iii) above of this Section
9.4(d) to a bona fide offer of settlement which the indemnifying party wishes to accept, where the
terms and conditions of such settlement (x) include a release in form and substance reasonably
satisfactory to the indemnified party from all liability in respect of such Claim and (y) do not,
in the reasonable judgment of the indemnified party, impose any burden, restraint, cost, liability,
duty or other obligation on or otherwise adversely affect or have the potential to adversely affect
the indemnified party, the indemnified party may continue to pursue such matter, free of any
participation by the indemnifying party, at the sole expense of the indemnified party. In such
event, the obligation of the indemnifying party to the indemnified party shall be equal to the
lesser of (A) the amount of the offer of settlement which the indemnified party refused to accept
plus the costs and expenses of the indemnified party prior to the date the indemnifying party
notified the indemnified party of the offer of settlement, and (B) the actual out-of-pocket amount
the indemnified party is obligated to pay as a result of the indemnified party’s continuing to
pursue such matter. The indemnifying party shall be entitled to recover from the indemnified

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party any additional expenses incurred by the indemnifying party as a result of the decision of the
indemnified party to pursue such matter.

               (e) Buyer Parties’ Right of Offset. Anything in this Agreement to the contrary
notwithstanding, but subject to Section 9.6, in the event that any Seller Party is obligated to
indemnify any Buyer Indemnified Party pursuant to any provision of this Section 9.4, the Buyer
Parties may, in addition to any other right or remedy, receive, withhold, purchase or repurchase,
sell or foreclose on, as applicable, the following, and set off such amounts or property so
received or withheld by the Buyer Parties against such indemnification obligation, in the following
order of priority:

          FIRST, the entire amount (including the Earn-Out Amount, to the extent then accrued and
paid to the Escrow Agent, but not including any interest or other earnings on funds held in the
Indemnity Escrow Account) in the Indemnity Escrow Account; and

          SECOND, the Shares, pursuant to the Pledge Agreement, and/or any other amounts otherwise
due Seller from a Buyer Party, provided that the Buyer Indemnified Parties shall have
the right, but not the obligation, to require Seller to indemnify any Buyer Indemnified Party,
in whole or in part, in cash prior to exercising any rights with respect to any or all of the
Shares.

               (f) Limitations.

                    (i) Neither the Buyer Parties nor the Seller Parties shall be liable to the other under this
Section 9.4 for any Damages until either any individual amount otherwise due the indemnified party
exceeds $17,500 (Seventeen Thousand Five Hundred Dollars) or the aggregate amount otherwise due to
the indemnified party exceeds an accumulated total of $150,000 (One Hundred Fifty Thousand
Dollars), in which case the indemnifying party shall, subject to Section 9.4(f)(ii), be liable for
all Damages in excess of $75,000 (Seventy-Five Thousand Dollars); provided,
however, that these limitations shall not apply with respect to Damages arising out of a
breach of representation or warranty contained in Sections 4.1, 4.2, 4.3, 4.5 (first sentence),
4.9, 4.18, 4.20, 4.27, 4.29, 4.31, 4.33 and 5.6, for which the indemnifying party shall, subject to
Section 9.4(f)(ii), be liable for all Damages, and shall apply only to the extent the indemnified
party is entitled to indemnification exclusively under Section 9.4(a)(i) or Section 9.4(b)(i).

                    (ii) Subject to Section 9.4(f)(iii) but notwithstanding anything else to the contrary set
forth in this Agreement (A) the Seller Parties shall not be liable hereunder to the Buyer
Indemnified Parties for Damages to the extent that the amount of Damages paid to the Buyer
Indemnified Parties shall exceed $20,000,000 (Twenty Million Dollars) (the “Seller Indemnity
Cap”); provided that the amount of the Seller Indemnity Cap shall be reduced on the
first anniversary of the Closing Date to $12,500,000 (Twelve Million Five Hundred Thousand Dollars)
plus the aggregate amount claimed under any and all Claim Notices, if any, delivered by the
Buyer Indemnified Parties prior to the first anniversary of the Closing Date, provided that
the Seller Indemnity Cap shall not exceed $20,000,000 (Twenty Million Dollars); and
provided further, that the foregoing limitation shall not apply to Damages in connection
with any indemnification relating to any representations and warranties of Seller Parties in this
Agreements pertaining to title to assets, authority to consummate the transactions contemplated

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hereby, Tax matters, ERISA matters or environmental matters or to any Excluded Liability; provided
further, however, that in no event shall the Seller Parties be liable hereunder to the Buyer
Indemnified Parties for Damages in an aggregate amount in excess of the Purchase Price; and (B) the
Buyer Parties shall not be liable hereunder to the Seller Indemnified Parties for Damages to the
extent that the amount of Damages paid to the Seller Indemnified Parties shall exceed a cash amount
of $6,000,000 (Six Million Dollars) (the “Buyer Indemnity Cap”); provided that the
amount of the Buyer Indemnity Cap shall be reduced on the first anniversary of the Closing Date to
$4,000,000 (Four Million Dollars) plus the aggregate amount claimed under any and all Claim
Notices, if any, delivered by the Seller Indemnified Parties prior to the first anniversary of the
Closing Date, provided that the Buyer Indemnity Cap shall not exceed $6,000,000 (Six
Million Dollars).

                    (iii) Notwithstanding anything to the contrary in this Agreement, nothing set forth in this
Agreement shall limit the rights, remedies or claims of any party (or the liability of any party)
for fraud or willful breach of any covenants, agreements or undertakings under Section 6.1.

               (g) Miscellaneous Indemnity Provisions.

                    (i) The indemnifying parties’ indemnities herein are intended solely for the benefit of the
indemnified parties, and are in no way intended to, nor shall they, constitute an agreement for the
benefit of, or be enforceable by, any other Person.

                    (ii) Any payment by the Seller Parties of any Damages of the Buyer Indemnified Parties shall
be deemed to be a reduction in the Purchase Price.

                    (iii) In determining the amount of any Damages payable by an indemnifying party pursuant to
this Article IX, such amount shall be reduced by the amount of any refund received by the
indemnified parties of Taxes paid by them, to the extent such refund relates solely to the Damages
or to the payments made pursuant to such Damages. In the event an indemnifying party has paid for
any Damages which is later subject to reduction due to the receipt of a Tax refund relating solely
to the Damages, the indemnified parties shall promptly pay the amount of such Tax refund to
indemnifying party at the time actually received by the relevant indemnifying party.

                    (iv) With respect to any indemnification obligation of the Seller Parties pursuant to any
Damages related to the failure to collect accounts receivable of Seller which constituted a breach
of Section 4.22 above, Buyer shall deliver and assign, on the date any such Damages are satisfied
by a related payment of Damages to a member of the Buyer Indemnified Parties, without any further
payment or consideration, such uncollected accounts receivable of Seller to which the Damages
relates.

                    (v) For purposes of determining the amount of any Damages under Section 9.4(a) above, such
amount shall be reduced by the amount of any insurance proceeds actually received by the
indemnified party in respect of the Damages (net of any deductible amounts or associated
incremental premiums that the indemnified party reasonably expects to incur as a result of the
claim). In the event the indemnifying party has paid for any

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Damages which later the indemnified party receives any insurance proceeds with respect thereto, the indemnified party shall promptly
pay the amount of such insurance proceeds to the indemnifying party at the time actually received
by the indemnified party (net of any deductible amounts or associated incremental premiums that the
indemnified party reasonably expects to incur as a result of the claim) up to the amount of the
Damages for which the indemnifying party has paid.

                    (vi) Prior to any indemnification by the Seller Parties for any Damages related to the
provisions of Section 4.22 above or otherwise in respect of the accounts receivable of Seller,
Buyer shall (i) apply all collections for accounts receivable against the accounts receivable of a
particular payor existing on the Closing Date on a first-billed, first-paid basis so that such
collections are first applied against the earliest-date receivable of the
applicable payor; provided, however, that if the payor designated a specific invoice or
invoices to be paid or if Buyer otherwise reasonably determines that the payor intended a different
application of the payment where the payment amount matches a specific outstanding invoice, then
the payment shall be applied to the specific invoice or invoices so designated or intended; and
(ii) use reasonable efforts to collect its accounts receivable, including the sending of demand
letters and other similar practices (Seller, upon request, shall be entitled to a written
description of all steps taken to collect an account receivable).

     9.5 Indemnification Holdback Amount as Initial Source of Payment. The Parties agree
and acknowledge that the Indemnification Holdback Amount shall not be the Buyer Indemnified
Parties’ exclusive method of receiving indemnification from the Seller Parties pursuant to this
Article IX, but that no amount shall be payable by the Seller Parties to any Buyer Indemnified
Party respecting indemnification from the Seller Parties until there are no further funds remaining
in the Indemnity Escrow Account following disbursements therefrom in accordance with Section 9.6
below.

     9.6 Release and Payment of Indemnification Holdback Amount and the Shares. Escrow
Agent shall hold and pay the Indemnification Holdback Amount and the Earn-Out Amount (to the extent
paid into the Indemnity Escrow Account) pursuant to the Escrow Agreement, Article IX and this
Section 9.6. The Indemnification Holdback Amount and the Earn-Out Amount shall be used to satisfy
indemnification claims by a Buyer Indemnified Party pursuant to any Claim Notice delivered by a
Buyer Indemnified Party on or prior to the Expiration Date that are finally determined by (i)
mutual written agreement of Parent and Seller or (ii) a final order of a court of competent
jurisdiction or an Arbiter, and shall be disbursed in accordance with the procedures set forth in
the Escrow Agreement, prior to recourse against the Seller Parties directly or to the Shares
pursuant to the Pledge Agreement.

               (a) If no Buyer Indemnified Party has delivered a Claim Notice to any Seller Party on or
before the Expiration Date or no Claim Notice has been delivered by a Buyer Indemnified Party that
is pending or unresolved, (i) all of the funds contained in the Indemnity Escrow Account shall be
paid promptly to Seller, (ii) the security interest granted under the Pledge Agreement shall
terminate and (iii) Parent shall deliver the stock certificate(s) for the Shares (less any Shares
with respect to which the Buyer Parties have exercised their rights under the Pledge Agreement) to
Seller.

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               (b) From time to time prior to the Expiration Date, within one (1) Business Day of the final
resolution of any particular indemnity claim by a Buyer Indemnified Party, either by (i) mutual
written agreement of Parent and Seller or (ii) a final order of a court of competent jurisdiction
or an Arbiter, Parent and Seller shall give joint written instructions to the Escrow Agent to pay
to Buyer or Parent, as applicable, an amount equal to the Damages in respect of such claim to which
such Buyer Indemnified Parties shall have been determined to be entitled. If the amount of Damages
exceeds the funds contained in the Indemnity Escrow Account, the Buyer Parties shall be entitled to
have recourse against the Seller Parties or to the Shares pursuant to the Pledge Agreement to
recover the balance of such Damages. The foregoing shall not be deemed to be or construed as a
waiver or election of remedies by the Buyer Parties.

               (c) If, as of the Expiration Date, a Buyer Indemnified Party has delivered a Claim Notice that
is pending or unresolved, Parent and Seller shall give joint written instructions to the Escrow
Agent to (i) retain an amount equal to the lesser of (A) the balance, if any, of the funds in the
Indemnity Escrow Account and (B) the amounts asserted in writing by Parent to be claimed to be
owing to the Buyer Indemnified Parties under this Article IX and (ii) pay to Seller the funds in
the Indemnity Escrow Account, if any, in excess of the amounts so asserted in writing. If the
amounts asserted in writing by Parent to be claimed to be owing to the Buyer Indemnified Parties
under this Article IX exceed the balance, if any, of the funds in the Indemnity Escrow Account
(such shortfall, the “Indemnity Shortfall”), the Buyer Parties shall be entitled to
continue to hold Shares with a current fair market value (as determined by the board of directors
of Parent) equal to the Indemnity Shortfall (rounded up to the nearest whole share) pursuant to the
Pledge Agreement, and shall deliver to Seller one or more stock certificate(s) representing the
remainder of the Shares (the “Released Shares”), and the security interest granted under
the Pledge Agreement shall terminate with respect to the Released Shares.

               (d) Within one (1) Business Day after the final resolution of a particular indemnity Claim
brought prior to and pending or unresolved as of the Expiration Date by (x) mutual written
agreement of Parent and Seller or (y) a final order of a court of competent jurisdiction or an
Arbiter, Parent and Seller shall give joint written instructions to the Escrow Agent to (i) pay to
Parent or Buyer, as applicable, an amount equal to the Damages in respect of a Claim to which the
Buyer Indemnified Parties shall have been determined to be entitled and (ii) pay to Seller the
amount, if any, by which the remaining balance in the Indemnity Escrow Account exceeds the amounts
asserted in writing by Parent to be claimed to be owing to the Buyer Indemnified Parties under this
Article IX in respect of all Claims that remain unresolved. If the amount of the Damages in
respect of a Claim to which the Buyer Indemnified Parties shall have been determined to be entitled
exceeds the balance, if any, of the funds in the Indemnity Escrow Account, the Buyer Parties shall
be entitled to have recourse against the Seller Parties or to the Shares pursuant to the Pledge
Agreement to recover the balance of such Damages. The foregoing shall not be deemed to be or
construed as a waiver or election of remedies by the Buyer Parties.

               (e) Upon the date of final resolution of all Claims brought and pending or unresolved as of
the Expiration Date by (A) mutual written agreement of Parent and Seller or (B) a final order of a
court of competent jurisdiction or an Arbiter (such date, the “Indemnification Escrow Release
Date”), Parent and Seller shall give joint written instruction to the Escrow Agent to (i) pay
to Parent or Buyer, as applicable, to the Damages in

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respect of such claims to which the Buyer Indemnified Parties shall have been determined to be entitled and (ii) pay to
Seller the remaining balance, if any, of the funds in the Indemnity Escrow Account. If the amount
of the Damages in respect of a Claim to which the Buyer Indemnified Parties shall have been
determined to be entitled exceeds the balance, if any, of the funds in the Indemnity Escrow
Account, the Buyer Parties shall be entitled to have recourse against the Seller Parties or to the
Shares pursuant to the Pledge Agreement to recover the balance of such Damages. The foregoing shall
not be deemed to be or construed as a waiver or election of remedies by the Buyer Parties. Upon
payment and satisfaction in full of the Damages in respect of all Claims pursuant to all Claim
Notices delivered by any Buyer Indemnified Party on or prior to the Expiration Date to which the
Buyer Indemnified Parties shall have been determined to be entitled pursuant to this Section
9.6(e), Parent shall deliver to Seller one or more stock
certificate(s) representing the remainder of the Shares, if any, held by Parent and the Pledge
Agreement shall terminate.

     9.7 Bulk Sales. It may not be practicable to comply or attempt to comply with the
procedures of the “Bulk Sales Act” or similar law of any or all of the states in which the Assets
are situated or of any other state which may be asserted to be applicable to the transactions
contemplated hereby. Accordingly, to induce Buyer to waive any requirements for compliance with
any or all of such laws, Seller hereby agrees that the indemnity provisions of Section 9.4 hereof
shall apply to any Damages of Buyer or any institution providing financing to Buyer arising out of
or resulting from the failure of Seller or Buyer to comply with any such laws.

     9.8 Taxes. Subject to Section 2.7, Seller shall pay, or cause to be paid, when due
all Taxes for which Seller is or may be liable or that are or may become payable with respect to
all taxable periods ending on or prior to the Closing Date.

     9.9 Insurance. Seller shall continue to maintain, at its sole cost and expense,
employment practices liability insurance providing substantially the same coverage as in effect on
the date hereof and Seller shall cause the Buyer Parties to be named as additional insureds on such
policy for a one (1) period commencing on the current expiration date of such policy. Seller shall
deliver to the Buyer Parties certificates of insurance or binders reasonably satisfactory to the
Buyer Parties, issued by one or more insurance carriers reasonably satisfactory to the Buyer
Parties, evidencing fully paid and non-cancelable employment practices liability coverage with
respect to claims arising out of events or occurrences on or prior to the Closing Date (whether or
not reported) in amounts not less than the amounts maintained by Seller on the date of this
Agreement.

     9.10 No Solicitation of Rehired Employees. None of the Seller Parties nor any of
their respective Affiliates shall, other than in their capacity as an officer or employee of a
Buyer Party, for a period of two (2) years from and after the Closing Date or, with respect to
Millin and Weiss, until the second anniversary of the date of termination of their employment with
the Buyer Parties if later in time, directly or indirectly (i) hire or offer employment to or seek
to hire any Rehired Employee or any other employee of any Buyer Party or any successor or Affiliate
thereof which is engaged in the Business, unless such Buyer Party first terminates the employment
of such employee or gives its written consent to such employment or offer of employment or (ii)
solicit or encourage any such Rehired Employee to leave the employ of his or her employer.
Notwithstanding the foregoing, the Seller Parties and their respective Affiliates

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shall not be prohibited from hiring any person that is hired in response to any general solicitation seeking
employees made on a local, regional or national basis, provided the Seller Parties and their
respective Affiliates are otherwise in compliance with this Section 9.10.

     9.11 Seller’s Change of Name. Within five (5) days after the Closing Date, the Seller
Parties shall file an amendment to Seller’s Articles of Incorporation and shall amend all other
future corporate documents to eliminate therefrom the word “Woodridge Labs” or any other name or
mark that has such a near resemblance thereto as may be likely to cause confusion or mistake to the
public, or to otherwise deceive the public, and from and after the Closing Date, Seller and all of
its Affiliates shall cease all use of that name.

ARTICLE X.

MISCELLANEOUS

     10.1 Assignment. Neither this Agreement nor any of the rights or obligations
hereunder may be assigned by any Party without the prior written consent of the other Parties;
except that any Buyer Party may, without such consent, assign all such rights to any lender as
collateral security and assign all such rights and obligations to a wholly owned Subsidiary (or a
partnership controlled by a Buyer Party) or Subsidiaries of a Buyer Party or a party controlling a
Buyer Party or to a successor in interest to such Buyer Party which shall assume all obligations
and Liabilities of such Buyer Party under this Agreement (provided, however, regardless of any such
assignment, Parent shall retain the obligation to issue the Shares). Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their
respective successors and permitted assigns and, except as specifically provided in Section 9.4
(solely with respect to parties indemnified), no other Person shall have any right, benefit or
obligation under this Agreement as a third party beneficiary or otherwise.

     10.2 Notices. All notices, requests, demands and other communications which are
required or may be given under this Agreement shall be in writing and shall be deemed to have been
duly given when received if personally delivered; when transmitted if transmitted by telecopy,
electronic or digital transmission method; the day after it is sent, if sent for next day delivery
to a domestic address by recognized overnight delivery service (e.g., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested. In each case
notice shall be sent to:

If to a Seller Party, addressed to:

c/o Weiss Accountancy Corporation

16217 Kittridge Street

Van Nuys, CA 91406

Fax (818) 786-4271

Attention: Scott J. Weiss, C.P.A.

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With a copy to:

Jones, Kaufman & Ackerman LLP

10960 Wilshire Boulevard, Suite 1225

Los Angeles, CA 90024

Fax (310) 477-8768

Attention: Donald H. Jones, Esq.

If to a Buyer Party, addressed to:

Nextera Enterprises, Inc.

One Exeter Plaza

699 Boylston Street

Boston, MA 02116

Fax: (617) 262-7105

Attention: Mr. Michael Muldowney

With a copy to:

Maron & Sandler

1250 Fourth Street, Suite 550

Santa Monica, CA 90401

Fax: (310) 570-4901

Attention: Richard V. Sandler, Esq.

          or to such other place and with such other copies as either Party may designate as to itself
by written notice to the others.

     10.3 Choice of Law. This Agreement shall be construed, interpreted and the rights of
the Parties determined in accordance with the laws of the State of California (without reference to
applicable principles of choice of law).

     10.4 Entire Agreement; Amendments and Waivers. This Agreement and the Employment
Agreements, together with all exhibits and schedules hereto (including the Disclosure Schedule)
constitutes the entire agreement among the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the Parties hereto. No amendment, supplement, modification or waiver
of this Agreement shall be binding unless executed in writing by the Party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.

     10.5 Multiple Counterparts; Facsimile or Electronic Signatures . This Agreement may
be executed in one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement may also be executed
by the exchange of facsimile or electronically transmitted signatures to identical counterparts
with the same effect as if executed on the same instrument; provided, however,

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originally signed counterparts shall be exchanged and delivered among the parties within five (5) Business Days after
the date of execution by the Parties by facsimile or electronic transmission.

     10.6 Expenses. Except as otherwise specified in this Agreement, each Party hereto
shall pay its own legal, accounting, out-of-pocket and other expenses incident to this Agreement
and to any action taken by such Party in preparation for carrying this Agreement into effect.

     10.7 Invalidity. In the event that any one or more of the provisions contained in
this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such
invalidity, illegality or unenforceability shall not affect any other provision of this Agreement
or any other such instrument.

     10.8 Titles; Gender. The titles, captions or headings of the Articles and Sections
herein, and the use of a particular gender, are for convenience of reference only and are not
intended to be a part of or to affect or restrict the meaning or interpretation of this Agreement.

     10.9 Public Statements and Press Releases. The Parties hereto covenant and agree
that, except as provided for hereinbelow, each will not from and after the date hereof make, issue
or release any public announcement, press release, statement or acknowledgment of the existence of,
or reveal publicly the terms, conditions and status of, the transactions provided for herein,
without the prior written consent of the other Parties as to the content and time of release of and
the media in which such statement or announcement is to be made; provided, however, that in the
case of announcements, statements, acknowledgments or revelations which a Party is required, by
applicable law or the rules or regulations of the SEC or any relevant stock exchange or market or
by order or decree of a court or regulatory body having jurisdiction over such Party or in
connection with such Party’s or its agents’ or Affiliates’ enforcement of any rights it may have at
law or equity, to make, issue or release, the making, issuing or releasing of any such
announcement, statement, acknowledgment or revelation by the Party so required to so do so shall
not constitute a breach of this Agreement if such Party shall have given, to the extent reasonably
possible, not less than two (2) calendar days prior notice to the other Parties, and shall have
attempted, to the extent reasonably possible, to clear such announcement, statement, acknowledgment
or revelation with
the other Parties. Each Party hereto agrees that it will not unreasonably withhold or delay
any such consent or clearance.

     10.10 Confidential Information

               (a) No Disclosure. The Parties acknowledge that the transaction described herein is
of a confidential nature and shall not be disclosed except to consultants, advisors and Affiliates,
or as required by applicable Regulations of the SEC or any relevant stock exchange or market or by
order or decree of a court or regulatory body having jurisdiction over such Party or in connection
with such Party’s or its agent’s or Affiliate’s enforcement of any rights it may have at law or
equity, until such time as the Parties make a public announcement regarding the transaction as
provided in Section 10.10.

               (b) Preservation of Confidentiality. In connection with the negotiation of this
Agreement, the preparation for the consummation of the transactions contemplated

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hereby, and the performance of obligations hereunder, each of the Buyer Parties and the Seller Parties (a
“receiving party”) acknowledges that it will have access to confidential information relating to
the Seller Parties or the Buyer Parties, respectively (a “disclosing party”), including without
limitation technical, manufacturing or marketing information, ideas, methods, developments,
inventions, improvements, business plans, trade secrets, scientific or statistical data, diagrams,
drawings, specifications or other proprietary information relating thereto, together with all
analyses, compilations, studies or other documents, records or data prepared by the disclosing
party or its Representatives which contain or otherwise reflect or are generated from such
information (“Confidential Information”). The term “Confidential Information” does not
include information received by a receiving party in connection with the transactions contemplated
hereby which (i) is or becomes generally available to the public other than as a result of a
disclosure by a receiving party or its Representatives, (ii) was within a receiving party’s
possession prior to its being furnished to such receiving party by or on behalf of the disclosing
party in connection with the transactions contemplated hereby, provided that the source of such
information was not known by such receiving party to be bound by a confidentiality agreement with
or other contractual, legal or fiduciary obligation of confidentiality to the disclosing party or
any other Person with respect to such information or (iii) becomes available to such receiving
party on a non-confidential basis from a source other than a disclosing party or any of its
respective Representatives, provided that such source is not bound by a confidentiality agreement
with or other contractual, legal or fiduciary obligation of confidentiality to the disclosing party
or any other Person with respect to such information.

               (c) Each receiving party shall treat all Confidential Information as confidential, preserve
the confidentiality thereof and not disclose any Confidential Information, except to its
Representatives, attorneys and Affiliates who need to know such Confidential Information in
connection with the transactions contemplated hereby. Each receiving party shall use all
reasonable efforts to cause its Representatives to treat all Confidential Information as
confidential, preserve the confidentiality thereof and not disclose any Confidential Information.
Each receiving party shall be responsible for any breach of this Agreement by any of its
Representatives. If, however, Confidential Information is disclosed, the receiving party shall
immediately notify the disclosing party in writing and take all reasonable steps required to
prevent further disclosure.

               (d) If a receiving party or any of its Representatives or Affiliates is requested or required
(by oral questions, interrogatories, requests for information or documents in legal proceedings,
subpoena, civil investigative demand or other similar process) or is required by operation of law
to disclose any Confidential Information, such receiving party shall provide the disclosing party
with prompt written notice of such request or requirement, which notice shall, if practicable, be
at least 48 hours prior to making such disclosure, so that the disclosing party may seek a
protective order or other appropriate remedy and/or waive compliance with the provisions of this
Agreement. If, in the absence of a protective order or other remedy or the receipt of such a
waiver, the receiving party or any of its Representatives is nonetheless, in the opinion of
counsel, legally compelled to disclose Confidential Information, then the receiving party may
disclose that portion of the Confidential Information which such counsel advises is legally
required to be disclosed, provided that the receiving party uses its reasonable efforts to preserve
the confidentiality of the Confidential Information, whereupon such disclosure shall not constitute
a breach of this Agreement.

67

 

     10.11 Remedies of Buyer Parties. The Seller Parties acknowledge and agree that the
Assets are unique and not readily available, and that remedies at law, including monetary damages,
will be inadequate in the event of a breach by any of the Seller Parties in the performance of its
obligations under this Agreement. Accordingly, the Seller Parties acknowledge that, in addition to
all other remedies to which the Buyer Parties are entitled under Article IX hereof, the Buyer
Parties shall be entitled to enforce the terms of this Agreement by a decree of specific
performance pursuant to which the breaching Party is ordered to affirmatively carry out its
obligations under this Agreement. The foregoing shall not be deemed to be or construed as a waiver
or election of remedies by the Buyer Parties, and the Buyer Parties expressly reserve any and all
rights and remedies available to each of them under Article IX hereof, which rights and remedies
shall be cumulative and the exercise of one or more rights or remedies shall not prejudice or
impair the concurrent or subsequent exercise of other rights or remedies. Except as provided in
this Section 10.11, the indemnification provisions and procedures contained in Article IX shall
constitute the sole and exclusive monetary recourse and remedy of the Parties hereto with respect
to any Damages resulting from, arising out of or in connection with the failure of any of the
representations and warranties contained in this Agreement to be true and correct or the breach of
any covenants, agreements or undertaking contained in this Agreement, other than with respect to
fraud or willful breach of any covenants, agreements or undertakings under Section 6.1.

     10.12 Attorneys’ Fees. If any Party to this Agreement brings an action to enforce its
rights under this Agreement, the prevailing Party shall be entitled to recover its costs and
expenses, including without limitation reasonable attorneys’ fees, incurred in connection with such
action, including any appeal of such action.

     10.13 Arbitration.

               (a) If any dispute or controversy shall arise among the parties hereto as to any matter
arising out of or in connection with this Agreement, the parties shall attempt in
good faith to resolve such controversy by mutual agreement. If such dispute or controversy
cannot be so resolved, it shall be resolved solely in accordance with the provisions of this
Section 10.13.

               (b) Any dispute, controversy or claim between or among the parties to this Agreement (the
“Disputing Parties”) arising out of or related to this Agreement, or the breach thereof,
shall be submitted before JAMS/Endispute (“JAMS”) in accordance with the then existing JAMS
Arbitration Rules as modified by this Section 10.13. Such arbitration shall be administered by
JAMS only if one (or more) of the Disputing Parties requests such administration. Arbitration
shall be the exclusive remedy for determining any such dispute, regardless of its nature. Unless
mutually agreed by the parties otherwise, any arbitration shall take place in Los Angeles County,
California.

               (c) The arbitrator (the “Arbiter”) shall be selected by the Disputing Parties within
fifteen (15) days after demand for arbitration is made by a Disputing Party. If the parties
disagree on the arbitrator, the parties shall jointly request JAMS to furnish a list of five (5)
available arbitrators. After receipt of such list and an opportunity to consider the names, each
party may designate in writing to JAMS not more than two (2) names to be eliminated from the

68

 

selection process. If more than one (1) name remains after such eliminations are made, the
selection of the arbitrator shall be made by lot from the remaining names. The Arbiter shall be an
attorney licensed in the State of California and shall possess substantive legal experience with
respect to the principal issues on dispute.

               (d) This agreement to resolve any disputes by binding arbitration shall extend to claims
against any parent, subsidiary or affiliate of each party, and when acting within such capacity,
any officer, director, shareholder, employee or agent of each party, or of any of the above, and
shall apply as well to claims arising out of state and federal statutes and local ordinances as
well as to claims arising under the common law. In the event of a dispute subject to this
paragraph the Disputing Parties shall be entitled to reasonable discovery subject to the discretion
of the Arbiter. The remedial authority of the Arbiter shall be the same as, but no greater than,
would be the remedial power of a court having jurisdiction over the parties and their dispute.

               (e) Except as may otherwise be agreed to in writing by the Disputing Parties or as ordered by
the Arbiter upon substantial justification, the hearings of the dispute shall be held and concluded
within ninety (90) days of submission of the dispute to arbitration. The Arbiter shall render its
final award within thirty (30) days following closing of the record. The Arbiter shall state the
factual and legal basis for the award. The decision of the Arbiter shall be final and binding, and
no appeal shall be permitted therefrom. Final judgment may be entered upon such an award in state
or federal court having the arbitration jurisdiction thereof, but entry of such judgment shall not
be required to make such award effective.

               (f) Any filing or administration fees shall be borne initially by the Disputing Party
requesting administration by JAMS. If more than one Disputing Party requests such administration,
the fees shall be borne initially by the party incurring such fees as provided by the rules of
JAMS. The initial fees and costs of the Arbiter shall be borne equally between the Disputing
Parties. The prevailing party in such arbitration, as determined by the Arbiter, and
in any enforcement or other court proceedings, shall be entitled to the extent permitted by
law, to reimbursement from the other party for all of the prevailing party’s costs (including but
not limited to the Arbiter’s compensation), expenses, and attorneys’ fees.

               (g) Nothing in this Section 10.13 shall limit any right that any party may otherwise have to
seek to obtain (i) preliminary injunctive relief in order to preserve the status quo pending the
disposition of any such arbitration proceeding or (ii) temporary or permanent injunctive relief
from any breach of any provision of this Agreement.

     10.14 Disclosure Schedule. The inclusion of any item in any section of the Disclosure
Schedule shall not constitute an admission that a violation, right of termination, Default,
Liability or other obligation of any kind exists with respect to such item, but rather is intended
only to respond to certain representations and warranties in this Agreement and to set forth other
information required by this Agreement. Also, the inclusion of any matter in the Disclosure
Schedule does not constitute an admission as to its materiality as it relates to any provision of
this Agreement. Information disclosed in or for one section of the Disclosure Schedule shall be
deemed disclosed in all other sections to the extent applicable if it is clear from the disclosure
in the section where such information appears that such information is relevant to such other

69

 

section. Except as expressly set forth in the Disclosure Schedule, the definitions contained in
this Agreement are incorporated into the Disclosure Schedule.

[SIGNATURE PAGE FOLLOWS]

70

 

          IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed on their
respective behalf, by themselves or their respective officers thereunto duly authorized, all as of
the day and year first above written.

	 	 	 	 	 	 	 	 	 	 	 
	PARENT	 	 	 	 	 	BUYER	 	 
	NEXTERA ENTERPRISES, INC.	 	 	 	W LAB ACQUISITION CORP.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Michael P. Muldowney
	 	 
	 	By
	 	/s/ Michael P. Muldowney	 	 
	Name:

	 	 

Michael P. Muldowney
	 	 	 	Name:
	 	 

Michael P. Muldowney
	 	 
	Its:

	 	President and CFO
	 	 	 	Its:
	 	CEO	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	SELLER	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	WOODRIDGE LABS, INC.	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Joseph Millin	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Name:

	 	Joseph Millin	 	 	 	 	 	 	 	 
	Its:

	 	President	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 
	JOSEPH MILLIN

	 	 	 	SCOTT J. WEISS	 	 
	 
	 	 	 	 	 	 
	/s/ Joseph Millin

	 	 	 	/s/ Scott J. Weiss	 	 
	 

Joseph Millin

	 	 
	 	 

Scott J. Weiss
	 	 
	 
	 	 	 	 	 	 
	SHAREHOLDERS OF SELLER
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Joseph J. Millin

	 	 	 	/s/ Scott J. Weiss	 	 
	 

	 	 	 	 	 	 
	Joseph Millin, Trustee of
the Millin Family Living Trust

	 	 	 	Scott J. Weiss, Trustee of the Scott and
Debra Weiss Living Trust	 	 
	Dated November 18, 2002
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Valerie Millin

	 	 	 	/s/ Debra Weiss	 	 
	 

	 	 	 	 	 	 
	Valerie Millin, Trustee of
the Millin Family Living Trust

	 	 	 	Debra Weiss, Trustee of the Scott and
Debra Weiss Living Trust	 	 
	Dated November 18, 2002
	 	 	 	 	 	 

71exv10w15

 

Exhibit 10.15

FORM OF STOCK PLEDGE AND SECURITY AGREEMENT

     This Stock Pledge and Security Agreement (this “Pledge Agreement”) dated as of March
9, 2006, by and among NEXTERA ENTERPRISES, INC., a Delaware corporation (“Parent”), W LAB
ACQUISITION CORP., a Delaware corporation (“Buyer” and, together with Parent, the
“Buyer Parties”), and WOODRIDGE LABS, INC., a California corporation (“Pledgor”).
The Buyer Parties are hereby entering into this Pledge Agreement for themselves and as joint agents
for the Buyer Indemnified Parties. Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Agreement (as defined below).

RECITALS

     A. Pursuant to the terms of that certain Asset Purchase Agreement (the “Agreement”),
dated as of March 9, 2006, by and among Parent, Buyer, Pledgor, Joseph J. Millin and Valerie
Millin, Trustees of the Millin Family Living Trust Dated November 18, 2002, Scott J. Weiss and
Debra Weiss, as Trustees of the Scott and Debra Weiss Living Trust, Joseph J. Millin, and Scott J.
Weiss, Pledgor has agreed to sell, convey, transfer, assign and deliver to Buyer, and Buyer has
agreed to acquire from Pledgor, the Assets described therein (the “Purchase”).

     B. In partial consideration for the Purchase, Parent has agreed to issue to Pledgor 8,467,410
shares of Class A Common Stock of Parent, as specified on Schedule I hereto (the
“Pledged Securities”).

     C. Pursuant to Section 9.4(a) of the Agreement, Pledgor is obligated to indemnify, save and
hold harmless the Buyer Indemnified Parties from and against certain Damages. All such Damages to
which the Buyer Indemnified Parties are entitled pursuant to Section 9.4 of the Agreement, for
which a Claim Notice has been delivered to Seller prior to the Expiration Date, are referred to
herein as “Obligations.”

     D. In order to secure payment performance, satisfaction and discharge of the Obligations, the
Buyer Parties and Pledgor are executing this Pledge Agreement to evidence security interests
granted by Pledgor to the Buyer Parties in the Pledged Securities, for themselves and as joint
agents for, and for the benefit of, the Buyer Indemnified Parties.

     E. Pursuant to the terms of that certain Escrow Agreement (the “Escrow Agreement”),
dated as of the date hereof, by and among Parent, Buyer, Pledgor and City National Bank (the
“Escrow Agent”), Parent, Buyer and Pledgor have agreed to deposit certain amounts payable
to Pledgor in an Indemnity Escrow Account to secure payment of the Obligations.

     F. Pledgor has duly authorized the execution, delivery and performance of this Pledge
Agreement.

 

 

AGREEMENT

     NOW THEREFORE, in consideration of the mutual covenants and promises contained in the
Agreement, and for good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, agree and covenant as follows:

     SECTION 1. Pledge. As security for the payment, performance, satisfaction and
discharge, as the case may be, in full of all Obligations, Pledgor hereby pledges and grants to the
Buyer Parties and their respective successors and assigns, for themselves and as joint agents for,
and for the benefit of, the Buyer Indemnified Parties, a first-priority lien upon and security
interest in all of Pledgor’s right, title and interest in, to and under the Pledged Securities;
subject, however, to the terms, covenants and conditions hereinafter set forth.

     SECTION 2. Delivery of the Pledged Securities. (a) On the date of this Pledge
Agreement, Pledgor shall deliver or cause to be delivered to Parent, for the benefit of the Buyer
Indemnified Parties, any and all Pledged Securities, accompanied by a stock power, duly executed in
blank, in the form attached hereto as Exhibit A and such other instruments of transfer or
documents as Parent may reasonably request.

     SECTION 3. Representations, Warranties and Covenants. Pledgor hereby represents,
warrants and covenants, as to itself and the Pledged Securities pledged by it hereunder, to and
with the Buyer Parties that:

     (a) except for the security interest granted hereunder, Pledgor (i) is and will at all times
continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on
Schedule I, (ii) holds the same free and clear of all Encumbrances, other than the Encumbrances
arising hereunder, and (iii) will make no assignment, pledge, hypothecation or transfer of, or
create or permit to exist any security interest in or other Encumbrance on, the Pledged Securities,
other than pursuant hereto;

     (b) Pledgor (i) has the power and authority to pledge the Pledged Securities in the manner
hereby done or contemplated and (ii) will defend its title or interest thereto or therein against
any and all Encumbrances of all Persons whomsoever, however arising, other than Encumbrances
arising hereunder;

     (c) no consent of any other Person (including shareholders or creditors of Pledgor) and no
consent or approval of any governmental authority was or is necessary to the validity of the pledge
effected hereby;

     (d) by virtue of the execution and delivery by Pledgor of this Pledge Agreement, upon delivery
to Parent of the Pledged Securities, certificates or other documents representing or evidencing the
Pledged Securities in accordance with this Pledge Agreement, Parent will have a valid and perfected
first-priority lien upon and security interest in such Pledged Securities as security for the
payment and performance of the Obligations;

     (e) the pledge effected hereby is effective to vest in the Buyer Parties the rights of the
Buyer Parties, for themselves and as joint agents for, and for the benefit of, the Buyer
Indemnified Parties, in the Pledged Securities as set forth herein; and

2

 

     (f) all Pledged Securities, stock certificates, stock powers executed in blank and other
documents representing or evidencing the Pledged Securities have been delivered to Parent, for the
benefit of the Buyer Indemnified Parties, in accordance with Section 2.

     SECTION 4. Registration in Nominee Name; Denominations. Parent has the right (in its
sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name
of its nominee (as pledgee or as joint or sub-agent) or the name of Pledgor, endorsed or assigned
in blank or in favor of any Buyer Indemnified Party. Parent shall at all times have the right to
exchange the certificates representing Pledged Securities for certificates of smaller or larger
denominations for any purpose consistent with this Pledge Agreement, if and to the extent that
Pledgor has the right to effect, or cause to be effected, any such exchange.

     SECTION 5. Voting Rights; Dividends and Interest, etc.

     (a) Until the sooner to occur of (A) the Indemnification Escrow Release Date (as defined in
the Agreement) or (B) an event or circumstance giving rise to any Obligation for which a Buyer
Indemnified Party has recourse against the Pledged Securities pursuant to the Agreement:

     (i) Pledgor shall be entitled to exercise any and all voting and/or other consensual
rights and powers inuring to an owner of the Pledged Securities or any part thereof for any
purpose consistent with the terms of this Pledge Agreement and the Agreement.

     (ii) Parent shall execute and deliver to Pledgor, or cause to be executed and delivered
to Pledgor, all such proxies, powers of attorney and other instruments as Pledgor may
reasonably request for the purpose of enabling Pledgor to exercise the voting and/or
consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above
and to receive the cash dividends it is entitled to receive pursuant to subparagraph (iii)
below.

     (iii) Any and all cash dividends, interest and principal paid on the Pledged Securities
shall be paid into the Indemnity Escrow Account (as defined in the Escrow Agreement). All
noncash dividends, interest and principal, and all dividends, interest and principal paid or
payable in cash or otherwise in connection with a partial or total liquidation or
dissolution, return of capital, capital surplus or paid-in surplus, and all other
distributions (other than distributions referred to in the preceding sentence) made on or in
respect of the Pledged Securities, whether paid or payable in cash or otherwise, whether
resulting from a subdivision, combination or reclassification of the outstanding capital
stock of the Parent of any Pledged Securities or received in exchange for Pledged Securities
or any part thereof, or in redemption thereof, or as a result of any merger, consolidation,
acquisition or other exchange of assets to which Parent may be a party or otherwise, shall
be and become part of the Pledged Securities, and, if received by Pledgor, shall not be
commingled by Pledgor with any of its other funds or property but shall be held separate and
apart therefrom, shall be held in trust for the benefit of the Buyer Indemnified Parties and
shall be forthwith delivered to the Buyer Indemnified Parties in the same form as so
received (with any necessary endorsement).

3

 

     SECTION 6. Remedies upon Occurrence of an Event Giving Rise to Obligations. Upon the
occurrence of an event or circumstances giving rise to Obligations for which any of the Buyer
Indemnified Parties has recourse against the Pledged Securities as set forth in, and subject to,
Sections 9.4 and 9.6 of the Agreement, either Buyer Party may (but shall not be required to) take
any or all of the following actions simultaneously or in any order that it may choose:

     (a) Either Buyer Party may from time to time take whatever action at law or in equity may
appear necessary or desirable with respect to the Pledged Securities or to foreclose this Pledge
Agreement in order to collect the monies payable pursuant to the Obligations and secured hereby
hereunder or to enforce performance and observance of any obligation, agreement or covenant
hereunder. Without limiting the foregoing, either Buyer Party may exercise any remedies available
to a secured party under the California Uniform Commercial Code (the “UCC”) regardless of
whether or not the UCC actually applies.

     (b) Either Buyer Party may foreclose its security interest in any of the Pledged Securities in
any way permitted by applicable law; and either Buyer Party may thereupon, or at any time
thereafter, in its sole discretion, without notice or demand (except such notice as may be
specifically required by applicable law) and with or without having the Pledged Securities at the
time or place of sale, repurchase or purchase, as the case may be, sell, repurchase, purchase or
otherwise dispose of the Pledged Securities, or any part thereof, at one or more public or private
sales, at any time or place, at such price or prices and upon such terms, either for cash, credit
or future delivery, as such Buyer Party may elect. In the exercise of such remedy, either Buyer
Party may repurchase or purchase, as the case may be, or sell all of the Pledged Securities as a
unit even though the sales price thereof may be in excess of the amounts remaining unpaid on the
Obligations. To the extent not prohibited by applicable law, either Buyer Party is authorized at
any sale or other disposition of the Pledged Securities, if it deems it advisable so to do, to
restrict the prospective bidders or purchasers thereof to Persons who will represent and agree that
they are purchasing for their own account for investment, and not with a view to the distribution
or resale of any of the Pledged Securities. Pledgor acknowledges that a private sale in accordance
with the foregoing may result in prices and other terms less favorable to Pledgor than if such sale
were a public sale, but agrees that such a private sale shall be deemed to have been made in a
commercially reasonable manner. Any sale or sales may be held without demand of performance,
notice of intention to sell, the time or place of sale or any other matter, except for such notice
as may be specifically required by applicable law; and the purchaser at any such sale or other
disposition shall thereafter hold the Pledged Securities sold absolutely free from any claim or
right of Pledgor of whatsoever kind, including any right of redemption of Pledgor, all such rights
being hereby expressly waived and released by Pledgor to the extent permitted by applicable law.

     (c) Either Buyer Party may sell all or any portion of the Pledged Securities in any
commercially reasonable manner in any one or more public or private sales, at its sole discretion,
or proceed by an action or actions at law or in equity to recover the Obligations. Pledgor agrees
that any sale of all or any portion of the Pledged Securities in the public market, in compliance
with applicable federal and state securities laws and regulations, shall be conclusively presumed
to be commercially reasonable. The Pledged Securities or any interest therein may be sold upon
such terms and in as many lots as such Buyer Party may, in its sole discretion, elect. No
readvertisements of any sale shall be required if the sale is adjourned by announcement, at the

4

 

time or place set therefor, of the date, time or place to which the same is to be adjourned.
Each Buyer Party shall also have the right and option to purchase all or any portion of the Pledged
Securities from Pledgor at a price equal to the “Fair Market Value” of such Pledged Securities.
The “Fair Market Value” per share of Class A Common Stock of Parent shall be equal to the average
of the closing price (or last trading price, as applicable) per share of Class A Common Stock of
Parent as reported by The Nasdaq Stock Market’s National Market System or such other securities
exchange, market, quotation system or other trading mechanism on which Class A Common Stock of
Parent is then listed for trading, quoted or traded on each of the ten (10) trading days prior to
the date of purchase.

     (d) It is understood and agreed that the Pledged Securities are of a kind that is customarily
sold on a recognized market and that accordingly, among other things, the Buyer Indemnified Parties
may purchase the Pledged Securities at any private sale or other disposition.

     (e) Either Buyer Party may repurchase, sell or otherwise dispose of the Pledged Securities or
any portion thereof pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver. Pledgor hereby assents to
the passage of a decree for the repurchase, purchase or sale of any of the Pledged Securities by
any court having jurisdiction. In any action hereunder, either Buyer Party shall be entitled to
the appointment of a receiver without notice, to peaceably take possession of all or any portion of
the Pledged Securities and to exercise such powers as the court shall confer upon the receiver.

     (f) Either Buyer Party may, to the extent not prohibited by applicable law, exercise any and
all rights of conversion, exchange or subscription and any other rights, privileges or options
pertaining to any of the Pledged Securities, as if such Buyer Party were the absolute owner
thereof.

     (g) Either Buyer Party may commence and prosecute an action, at law or in equity, in any court
of competent jurisdiction, seeking money damages, injunctive or declaratory relief or any other
relief available under applicable law, and take all such actions as may be necessary or desirable
to enforce any order or judgment entered in connection with such action.

     (h) After delivery of notice to Pledgor of its election to exercise its rights hereunder, such
Buyer Party may vote or otherwise exercise any rights accruing to the owner of the Pledged
Securities without further notice to or consent of Pledgor.

     (i) The Buyer Parties may exercise any other remedies afforded to it pursuant to the terms of
this Pledge Agreement.

     All of the Buyer Parties’ rights and remedies hereunder, under the Agreement, and under any
other agreement entered into pursuant to the Agreement, shall be cumulative and not exclusive, and
shall be enforceable alternatively, successively or concurrently as the Buyer Parties may, in their
sole discretion, deem expedient, provided that the Buyer Parties shall not exercise its rights
under this Section 6 unless and until there are no funds available in the Indemnity Escrow Account
for the payment and satisfaction in full of the relevant Obligations.

5

 

The Buyer Parties shall not have any obligation to preserve rights in the Pledged Securities or
marshal any of the Pledged Securities for the benefit of any Person.

     SECTION 7. Notice Requirement. Prior to exercising its rights hereunder to purchase,
repurchase, sell or otherwise dispose of, or foreclose on its security interest in, as the case may
be, any of the Pledged Securities, a Buyer Party, acting for the benefit of the Buyer Indemnified
Parties, shall give Pledgor not less than twenty-one (21) days’ notice of its intention to so
exercise its rights. The Buyer Parties shall not have recourse against the Pledged Securities
hereunder in the event that, within such twenty-one (21) day period, Pledgor pays, performs,
satisfies and discharges in full in immediately available funds the Obligations giving rise to the
Buyer Parties’ right of recourse against the Pledged Securities.

     SECTION 8. Application of Proceeds of Sale. The Buyer Parties shall apply the
proceeds of any collection or sale or other disposal of all or any portion of the Pledged
Securities, as follows:

     FIRST, to the payment of all costs and expenses incurred by the Buyer Parties in
connection with the exercise of any right or remedy under this Pledge Agreement or the
Agreement or with respect to any of the Obligations, including all court costs and the
reasonable fees and expenses of their agents and legal counsel;

     SECOND, to the payment in full of the relevant Obligations; and

     THIRD, (a) if prior to the Indemnification Escrow Release Date, to the Escrow Agent, to
be held by the Escrow Agent as part of the Indemnity Escrow Account in accordance with the
terms of the Escrow Agreement, or (b) if after the Indemnification Escrow Release Date, to
Pledgor.

     The Buyer Parties shall have absolute discretion as to the time of application of any such
proceeds, moneys or balances in accordance with this Pledge Agreement. The Buyer Parties may fix a
record date and payment date for any payment pursuant to this Section 8.

     SECTION 9. Waivers; Amendment.

     (a) No failure or delay of any Buyer Party in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other
or further exercise thereof or the exercise of any other right or power. The rights and remedies
of the Buyer Parties hereunder are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provisions of this Pledge Agreement or consent to any
departure by Pledgor therefrom shall in any event be effective unless the same shall be permitted
by paragraph (b) below, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or demand on Pledgor in any case shall
entitle Pledgor to any other or further notice or demand in similar or other circumstances.

6

 

     (b) Neither this Pledge Agreement nor any provision hereof may be waived, amended or modified
except pursuant to a written agreement entered into among the Buyer Parties and Pledgor with
respect to which such waiver, amendment or modification is to apply.

     SECTION 10. Security Interest Absolute. All rights of the Buyer Parties hereunder,
the grant of a security interest in the Pledged Securities and all obligations of Pledgor
hereunder, shall be absolute and unconditional irrespective of any lack of validity or
enforceability of the Agreement, any other agreement entered into pursuant to the Agreement, any
agreement with respect to any of the Obligations or any other agreement or instrument relating to
any of the foregoing or any other circumstance that might otherwise constitute a defense available
to, or a discharge of, Pledgor in respect of the Obligations or in respect of this Pledge Agreement
(other than the indefeasible payment in full of all the Obligations).

     SECTION 11. Term, Release and Termination.

     (a) On the first anniversary of the date hereof, the Buyer Parties shall release the security
interests granted hereby with respect to shares of Pledged Securities equal to thirty seven and a
half percent (37.5%) of the Pledged Securities then held by Parent hereunder (rounded down to the
nearest whole share); provided that, if Designated Claim Notices have been delivered by the
Buyer Indemnified Parties prior to the first anniversary of the date hereof claiming an aggregate
amount of at least $1,000,000 (One Million Dollars), the number of shares of Pledged Securities
released under this paragraph (a) shall be reduced by the number of shares of Pledged Securities
(rounded up to the nearest whole share) with an aggregate fair market value (determined by the
board of directors of the Parent Company as of the date of such release) equivalent to the
aggregate amount claimed in any and all such Designated Claim Notices. For the purposes of this
paragraph (a), “Designated Claim Notices” shall mean any and all Claim Notices that, as of the
first anniversary of the date hereof, either (i) have not been resolved either by mutual written
agreement of Parent and Seller or through a final order of a court of competent jurisdiction or an
Arbiter or (ii) have been resolved by mutual written agreement of Parent and Seller or through a
final order of a court of competent jurisdiction or an Arbiter, where the Buyer Indemnified Parties
shall have been determined to be entitled to Damages, which Damages have not been paid in full in
cash by the Seller Parties (without recourse to the Indemnity Escrow Account or the Pledged Shares)
prior to the first anniversary of the date hereof.

     (b) If no Buyer Indemnified Party has delivered a Claim Notice to any Seller Party on or
before the Expiration Date, this Pledge Agreement and the security interests granted hereby shall
terminate on the Expiration Date.

     (c) If a Buyer Indemnified Party has delivered a Claim Notice to any Seller Party on or before
the Expiration Date, this Pledge Agreement and the security interests granted hereby shall
terminate on the later of (i) the Indemnification Escrow Release Date or, if no Claim Notice is
pending or unresolved, the Expiration Date and (ii) payment in full of all Obligations to which any
Buyer Indemnified Party shall have been determined to be entitled pursuant to the Agreement.

     (d) The security interests granted hereby with respect to any Pledged Securities that
constitute Released Shares shall terminate as contemplated by Section 9.6(c) of the Agreement.

7

 

     (e) Upon termination of the security interest in any Pledged Securities pursuant to this
Section 11, Parent shall return the Pledged Securities no longer subject to the security interest
to Pledgor and shall execute and deliver to Pledgor, at Parent’s expense, any documents reasonably
necessary to evidence such termination. Any execution and delivery of documents pursuant to this
Section 11 shall be without recourse to or warranty by Parent.

     SECTION 12. Power of Attorney. From and after (a) a Claim Notice has been delivered
and continuing until such time as both the Claim Notice has been finally resolved in accordance
with the provisions of the Agreement and any Obligations arising from such Claim Notice have been
paid, satisfied and discharged in full or (b) the failure of Pledgor to take any action required by
this Pledge Agreement after a written request by a Buyer Party to do so and such failure is not
cured by Pledgor within five (5) Business Days after receipt of such written request, Pledgor
hereby irrevocably constitutes and appoints Parent as its agent and attorney-in-fact, with full
power of substitution, to endorse, execute or sign Pledgor’s name on any assignments, stock powers
or other instruments of transfer in connection with the Pledged Securities.

     SECTION 13. Notices. All communications and notices hereunder shall be in writing and
given as provided in Section 10.02 of the Agreement.

     SECTION 14. Further Assurances. Pledgor agrees to do such further acts and things,
and to execute and deliver such additional conveyances, assignments, agreements and instruments, as
Parent may at any time reasonably request in connection with the administration and enforcement of
this Pledge Agreement or with respect to the Pledged Securities or any part thereof or in order to
better assure and confirm unto Parent its rights and remedies hereunder.

     SECTION 15. Binding Effect; Several Agreement; Assignments. Whenever in this Pledge
Agreement any of the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements by or on behalf of
Pledgor that are contained in this Pledge Agreement shall bind and inure to the benefit of its
successors and assigns. This Pledge Agreement shall become effective as to Pledgor when a
counterpart hereof executed on behalf of Pledgor shall have been delivered to Parent and a
counterpart hereof shall have been executed on behalf of Parent, and thereafter shall be binding
upon Pledgor, Parent and their respective successors and assigns, and shall inure to the benefit of
Pledgor, Parent and their respective successors and assigns, except that Pledgor shall not have the
right to assign its rights hereunder or any interest herein or in the Pledged Securities (and any
such attempted assignment shall be void).

     SECTION 16. Survival of Pledge Agreement; Severability.

     (a) All covenants, agreements, representations and warranties made by Pledgor herein and in
the certificates or other instruments prepared or delivered in connection with or pursuant to this
Pledge Agreement or the Agreement shall be considered to have been relied upon by Parent and shall
continue in full force and effect until the termination of this Pledge Agreement.

8

 

     (b) In the event any one or more of the provisions contained in this Pledge Agreement should
be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability
of the remaining provisions contained herein shall not in any way be affected or impaired thereby
(it being understood that the invalidity of a particular provision in a particular jurisdiction
shall not in and of itself affect the validity of such provision in any other jurisdiction). The
parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.

     SECTION 17. Governing Law. This Pledge Agreement shall be governed by and construed
in accordance with the laws of the State of California (without application of principles of
conflicts of law).

     SECTION 18. Counterparts. This Pledge Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Pledge Agreement may also be executed by the exchange of
facsimile or electronically transmitted signatures to identical counterparts with the same effect
as if executed on the same instrument; provided, however, originally signed counterparts shall be
exchanged and delivered among the parties within five (5) Business Days after the date of execution
by the parties by facsimile or electronic transmission.

     SECTION 19. Section Headings. Section headings used herein are for convenience of
reference only, are not part of this Pledge Agreement and are not to affect the construction of, or
to be taken into consideration in interpreting this Pledge Agreement.

     SECTION 20. Dispute Resolution. Disputes under this Pledge Agreement will be resolved
in accordance with Section 10.13 (Arbitration) of the Agreement, which section is incorporated
herein by reference.

     SECTION 21. Effectiveness. This Pledge Agreement shall be effective as of the time
and date of the Closing.

[SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, the parties hereto have duly executed this Pledge Agreement as of the day
and year first above written.

	 	 	 	 	 
	 	PLEDGOR

WOODRIDGE LABS, INC.

 	 
	 	By:  	/s/  Joseph J. Millin
 	 
	 	 	Name:  	Joseph  Millin 	 
	 	 	Title:  	President 	 
	 
	 	PARENT

NEXTERA ENTERPRISES, INC.

 	 
	 	By:  	/s/ Michael P. Muldowney
 	 
	 	 	Name:  	Michael P. Muldowney 	 
	 	 	Title:  	President and CFO 	 
	 
	 	BUYER

W LAB ACQUISITION CORP.

 	 
	 	By:  	/s/ Michael P. Muldowney
 	 
	 	 	Name:  	Michael P. Muldowney 	 
	 	 	Title:  	CEO 	 

10

 

	 	 	 	 	 

Exhibit A

to Stock Pledge and Security Agreement

STOCK POWER

     FOR VALUE RECEIVED, Woodridge Labs, Inc. hereby sells, assigns and transfers unto
                                                             ,                                         shares of Class A Common Stock, par value $0.001 per share, of
Nextera Enterprises, Inc., a Delaware corporation (the “Company”), standing in the name of
the undersigned on the books of said Company represented by Certificate No.                                          and
do hereby irrevocably constitute and appoint                                                              , to transfer said stock on the
books of the Company with full power of substitution.

Dated:                                         , 200                    

	 	 	 	 	 
	 	WOODRIDGE LABS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

11

 

	 	 	 	 	 

Schedule I

to Stock Pledge and Security Agreement

PLEDGED SECURITIES

	 	 	 	 	 	 	 
	 	 	Number of Stock	 	 	 	Number and Class of
	Parent	 	Certificate	 	Registered Owner	 	Shares
	Nextera
Enterprises, Inc.

	 	NE 0937	 	Woodridge Labs, Inc.
	 	8,467,410 shares of
Class A Common
Stock, par value
$0.001 per share

12

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