Document:

Exhibit 10.20

    
      

    

     

    
      	
              

               

            	
               

            
	Confirmation
              of OTC Warrant Transaction	 

    

    

    

    
      	
              Date:

            	
              July
                19, 2006

            

    

    

    
      	
              To: 

            	
              New
                River Pharmaceuticals Inc. (“Counterparty”)

            

    

    

    
      	
              From: 

            	
              Merrill
                Lynch International (“MLI”)
                

            

    

    

    MLI
      Reference: 06816057

     

    
      
        

      

    

     

    Dear
      Sir
      / Madam:

    

    The
      purpose of this letter agreement (this “Confirmation”)
      is to
      confirm the terms and conditions of the above-referenced transaction entered
      into among Counterparty, MLI and
      Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Agent”
or
      “MLPFS”)
      on the
      Trade Date specified below (the “Transaction”).
      This
      Confirmation constitutes a “Confirmation” as referred to in the Agreement
      specified below.

    

    The
      definitions and provisions contained in the 2000 ISDA Definitions (the
“Swap
      Definitions”)
      and
      the 2002 ISDA Equity Derivatives Definitions (the “Equity
      Definitions”
and,
      together with the Swap Definitions, the “Definitions”),
      in
      each case as published by the International Swaps and Derivatives Association,
      Inc., are incorporated into this Confirmation. In the event of any inconsistency
      between the Swap Definitions and the Equity Definitions, the Equity Definitions
      will govern, and in the event of any inconsistency between the Definitions
      and
      this Confirmation, this Confirmation will govern. References herein to a
“Transaction” shall be deemed to be references to a “Share Option Transaction”
for the purposes of the Equity Definitions and to a “Swap Transaction” for the
      purposes of the Swap Definitions.
      For
      purposes of this Transaction, “Warrant Style”, “Warrant Type”, “Number of
      Warrants” and “Warrant Entitlement” (each as defined below) shall be used herein
      as if such terms were referred to as “Option Style”, “Option Type”, “Number of
      Options” and “Option Entitlement”, respectively, in the
      Definitions.

    

    This
      Confirmation evidences a complete binding agreement between you and us as to
      the
      terms of the Transaction to which this Confirmation relates. This Confirmation
      (notwithstanding anything to the contrary herein), shall be subject to an
      agreement in the 1992 form of the ISDA Master Agreement (Multicurrency Cross
      Border) (the “Master
      Agreement”
or
      “Agreement”)
      as if
      we had executed an agreement in such form (but without any Schedule and with
      elections specified in the “ISDA Master Agreement” Section of this Confirmation)
      on the Trade Date. In the event of any inconsistency between the provisions
      of
      that Agreement and this Confirmation, this Confirmation will prevail for the
      purpose of this Transaction. The parties hereby agree that the Transaction
      evidenced by this Confirmation shall be the only Transaction subject to and
      governed by the Agreement. 

    

    The
      terms
      of the particular Transaction to which this Confirmation relates are as
      follows:

    

    General
      Terms:

    

    
      	
              Trade
                Date:

            	
              July
                19, 2006

            

    

    

    
      	
              Effective
                Date:

            	
              July
                25, 2006 subject to cancellation of the OTC Warrant Transaction prior
                to
                5:00 p.m. (New York City time) on such date by the
                Counterparty.

            

    

    

    
      	
              Warrant
                Style:

            	
              European

            

    

    

    
      	
              Warrant
                Type:

            	
              Call

            

    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    
      	
              Seller:

            	
              Counterparty

            

    

    

    
      	
              Buyer:

            	
              MLI

            

    

    

    
      	
              Shares:

            	
              Shares
                of common stock, $0.001 par value, of Counterparty (Security Symbol:
                “NRPH”).

            

    

    

    
      	
              Number
                of Warrants:

            	
              3,635,042

            

    

    

    
      	
              Daily
                Number of Warrants:

            	
              For
                any day, the Number of Warrants on such day divided
                by
                the remaining number of Expiration Dates (including such day) and
                rounded
                down to the nearest whole number, with the balance of the Number
                of
                Warrants exercised on the final Expiration
                Date.

            

    

    

    
      	
              Warrant
                Entitlement:

            	
              One
                (1) Share per Warrant

            

    

    

    
      	
              Strike
                Price:

            	
              $41.27

            

    

    

    
      	
              Premium:

            	
              $26,750,000

            

    

    

    
      	
              Premium
                Payment Date:

            	
              The
                Effective Date; provided no cancellation of the OTC Warrant Transaction
                has occurred prior to 5:00 p.m. (New York City time) on such date
                by the
                Counterparty.

            

    

    

    
      	
              Exchange:

            	
              The
                NASDAQ Global Market.

            

    

    

    
      	
              Related
                Exchange(s):

            	
              All
                Exchanges

            

    

    

    
      	
              Full
                Exchange Business Day:

            	
              A
                Scheduled Trading Day that has a scheduled closing time for its regular
                trading session at 4:00 p.m. (New York City time) or the then standard
                closing time for regular trading on the Exchange and is not a Disrupted
                Day.

            

    

    

    Procedures
      for Exercise:

    

    
      	
              Expiration
                Time:

            	
              11:59
                p.m. (New York City time).

            

    

    

    
      	
              Expiration
                Dates:

            	
              The
                fifteen (15) consecutive Full Exchange Business Days beginning on
                and
                including October 30, 2013 each shall be an Expiration Date for a
                number
                of Warrants equal to the Daily Number of Warrants on such
                date.

            

    

    

    
      	
              Exercise
                Dates:

            	
              Each
                Expiration Date

            

    

    

    
      	
              Automatic
                Exercise:

            	
              Applicable;
                provided that Section 3.4(a) of the Equity Definitions shall apply
                to Cash
                Settlement and Net Physical Settlement; and provided further that,
                unless
                all Warrants have been previously exercised hereunder, a number of
                Warrants for each Expiration Date equal to the Daily Number of Warrants
                for such Expiration Date shall be deemed to be automatically
                exercised.

            

    

     

    
      	
               Counterparty’s
                Telephone

            	 	 	 	 
	
               Number
                and Telex and/or

            	 	 	 	 
	
              Facsimile
                Number and 

            	 	 	 	 
	
              
                Contact
                  Details for purpose of Giving Notice:

              

            	 	
               

            	 	
               

            
	 	 	
              Address:

            	 	
              
                New
                  River Pharmaceuticals Inc.

              

            
	 	 	 	 	
              
                1881
                  Grove Avenue

              

            
	 	 	 	 	
              Radford,
                Virginia 24141 

            
	 	 	
              Attention:

            	 	
              Clifton
                R. Herndon II

            
	 	 	 	 	
              V.P.,
                Finance and Controller

            
	 	 	
              Telephone
                No.:

            	 	
              540-633-7900

            
	 	 	
              Facsimile
                No.:

            	 	
              540-633-7939

            

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    Valuation:

    

    
      	
              Valuation
                Dates:

            	
              Each
                Exercise Date 

            

    

    

    Settlement
      Terms:

    

    
      	
              Cash
                Settlement:

            	
              Applicable.
                If Counterparty elects to settle the Transaction by Cash Settlement,
                Counterparty represents and agrees:

            

    

    

    
      	 	
              (i)
                that on the date of the Cash Settlement election, neither the Counterparty
                nor any of its affiliates is in possession of any material non-public
                information with respect to the Counterparty or the
                Shares;

            

    

    

    
      	 	
              (ii)
                that the Counterparty is not, on the date of the Cash Settlement
                election,
                and will not be, on any day during the period from and including
                the first
                Expiration Date to and including the final Expiration Date, engaged
                in a
                distribution, as such term is used in Regulation M under the Securities
                Exchange Act of 1934, as amended (the “Exchange
                Act”);
                and

            

    

    

    
      	 	
              (iii)
                that, during the period from and including the first Expiration Date
                to
                and including the final Expiration Date, without the prior written
                consent
                of MLI, the Counterparty shall not, and shall cause its affiliates
                and
                affiliated purchasers (each as defined in Rule 10b-18 under the Exchange
                Act) not to, directly or indirectly (including, without limitation,
                by
                means of a derivative instrument) purchase, offer to purchase, place
                any
                bid or limit order that would effect a purchase of, or commence any
                tender
                offer relating to, any Shares (or equivalent interest, including
                a unit of
                beneficial interest in a trust or limited partnership or a depository
                share) or any security convertible into or exchangeable for the
                Shares.

            

    

    

    
      	
              Settlement
                Currency:

            	
              USD

            

    

    

    
      	
              Settlement
                Price:

            	
              For
                each Valuation Date, the Volume Weighted Average Price of the Shares
                (“VWAP”) calculated from 9:45 a.m. to 3:45 p.m., as observed on the
                Bloomberg “VAP” Page.

            

    

    

    
      	
              Cash
                Settlement Payment Date:

            	
              With
                respect to each Valuation Date, three (3) Currency
                Business Days after the final Valuation
                Date.

            

    

    

    
      	
              Settlement
                Method Election:

            	
              Applicable
                with respect to Cash Settlement or Net Physical Settlement
                only.

            

    

    

    
      	
              Electing
                Party:

            	
              Counterparty

            

    

    

    
      	
              Settlement
                Method Election Date:

            	
              Ten
                (10) Business Days prior to the first Expiration
                Date.

            

    

    

    
      	
              Default
                Settlement Method:

            	
              Net
                Physical Settlement.

            

    

    

    
      	
              Net
                Physical Settlement:

            	
              In
                the event that the Counterparty elects to settle this Transaction
                by Net
                Physical Settlement, subject to “Conditions of Net Physical Settlement”
                below, Counterparty shall deliver to MLI on the Settlement Date a
                number
                of Shares (the “Delivered
                Shares”)
                equal to the Share Delivery Quantity, provided
                that in the event that the number of Shares calculated comprises
                any
                fractional Share, only whole Shares shall be delivered and an amount
                in
                cash equal to the value of such fractional share shall be payable
                by the
                Counterparty to MLI in lieu of such fractional
                Share.

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    
      	
              Share
                Delivery Quantity:

            	
              For
                each Exercise Date, a number of Shares, as calculated by the Calculation
                Agent, equal to the Net Physical Settlement Amount for such Exercise
                Date
                divided by the Settlement Price on the Valuation Date in respect
                of such
                Settlement Date plus an amount in cash in lieu of any fractional
                shares
                (based on the Settlement Price).

            

    

    

    
      	
              Net
                Physical Settlement Amount:

            	
              For
                any Exercise Date, an amount equal to the product of (i) the Number
                of
                Warrants being exercised on the relevant Exercise Date, (ii) the
                Strike
                Price Differential for such Exercise Date and (iii) the Warrant
                Entitlement.

            

    

    

    
      	
              Strike
                Price Differential:

            	
              For
                any Valuation Date, (i) if the Settlement Price is greater than the
                Strike
                Price, an amount equal to the excess of such Settlement Price over
                the
                Strike Price for such Valuation Date or (ii) if such Settlement Price
                is
                less than or equal to the Strike Price,
                zero.

            

    

    

    
      	
              Settlement
                Date:

            	
              Settlement
                with respect to each Exercise Date shall occur on the third (3rd)
                Full Exchange Business Day following the final Valuation Date, provided
                that MLI shall have to right to request by prior written notice to
                Counterparty a Settlement Date with respect to any Exercise Date
                and the
                related Share Delivery Quantity that is three (3) Full Exchange Business
                Days following such Exercise Date. Such request shall not unreasonably
                be
                denied.

            

    

    

    Conditions
      to Net 

    
      	
              Physical
                Settlement:

            	
              If,
                in connection with or six months following delivery of Shares hereunder,
                MLI notifies the Counterparty that MLI has reasonably determined
                after
                advice from counsel that there is a material risk that such Shares
                are
                subject to restrictions on transfer in the hands of MLI pursuant
                to the
                rules and regulations promulgated under the Securities Act of 1933,
                as
                amended (the “Securities
                Act”),
                then Counterparty shall either (i) deliver Shares that are covered
                by an
                effective registration statement of Counterparty for immediate resale
                by
                MLI or (ii) agree to deliver additional Shares so that the value
                of such
                Shares as determined by the Calculation Agent to reflect an appropriate
                liquidity discount, equals the value of the number of Shares that
                would
                otherwise be deliverable if such Shares were freely tradable upon
                receipt
                by MLI.

            

    

    

    
      	 	
              (A)
                If Counterparty elects to deliver Shares as described in above clause
                (i),
                then Counterparty shall 

            

    

    

    
      	 	
              (a)
                afford MLI a reasonable opportunity to conduct a due diligence
                investigation with respect to Counterparty that is customary in scope
                for
                underwritten offerings of equity securities that yields a result
                reasonably satisfactory to MLI; 

            

    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
      	 	
              (b)
                promptly make available to MLI an effective registration statement
                for
                immediate resale (the “Registration
                Statement”)
                in form and content reasonably satisfactory to MLI and filed pursuant
                to
                Rule 415 under the Securities Act, and such prospectuses as MLI may
                reasonably request to comply with the applicable prospectus delivery
                requirements (the “Prospectus”)
                for the resale by MLI of such number of Shares as MLI shall reasonably
                specify in accordance with this paragraph, such Registration Statement
                to
                be effective and Prospectus to be current until the earliest of the
                date
                on which (1) all Delivered Shares have been sold by MLI, (2) MLI
                has
                advised Counterparty that it no longer requires that such Registration
                Statement be effective, (3) all remaining Delivered Shares could
                be sold
                by MLI without registration pursuant to Rule 144 promulgated under
                the
                Securities Act (the “Registration
                Period”)
                or (4) Counterparty has provided a legal opinion in form and substance
                satisfactory to MLI (with customary assumptions and exceptions) that
                the
                Shares issuable upon exercise of these Warrants will be freely tradable
                under the Securities Act upon delivery to MLI and not subject to
                any
                legend restricting transferability. It is understood that the Registration
                Statement and Prospectus may cover a number of Shares equal to the
                aggregate number of Shares (if any) reasonably estimated by MLI to
                be
                potentially deliverable by Counterparty in connection with Net Physical
                Settlement hereunder (not to exceed the Maximum Deliverable Share
                Amount)
                and shall be subject to the same suspension of sales during “blackout
                dates” as provided in the following paragraph;
                and

            

    

    

    
      	 	
              (c)
                Counterparty will enter into a registration rights agreement with
                MLI in
                form and substance reasonably acceptable to MLI, which agreement
                will
                contain among other things, customary representations and warranties
                and
                indemnification, restrictions on sales during “blackout dates” as provided
                for in the registration rights agreement (the “Registration
                Rights Agreement”)
                entered into between Counterparty and the Initial Purchaser in connection
                with Counterparty’s 3.5% Convertible Subordinated Notes due 2013 (the
                “Convertible
                Notes”),
                provide for delivery of comfort letters and opinions of counsel and
                other
                rights relating to the registration of a number of Shares equal to
                the
                number of Delivered Shares and other Shares deliverable hereunder
                up to
                the Maximum Deliverable Share
                Amount.

            

    

    

    
      	 	
              (d)
                Counterparty shall promptly pay to MLI a $0.03 per Share fee with
                all
                Shares delivered in connection with Net Physical Settlement pursuant
                to a
                Registration Statement.

            

    

    

    (B)
      If
      Counterparty elects to deliver Shares as described in above clause (ii),
      then 

    

    
      	 	
              (a)
                Counterparty shall afford MLI and any potential institutional purchaser
                of
                any Shares identified by MLI a reasonable opportunity to conduct
                a due
                diligence investigation with respect to Counterparty that is customary
                in
                scope for private placements of equity securities subject to execution
                of
                any customary confidentiality
                agreements;

            

    

    

    
      	 	
              (b)
                Counterparty shall enter into an agreement (a “Private
                Placement Agreement”)
                with MLI on commercially reasonable terms in connection with the
                private
                placement of such Shares by Counterparty to MLI or an affiliate and
                the
                private resale of such shares by MLI or such affiliate, substantially
                similar to private placement purchase agreements customary for private
                placements of equity securities, in form and substance commercially
                reasonably satisfactory to MLI and Counterparty, which Private Placement
                Agreement shall include provisions relating to the indemnification
                of, and
                contribution in connection with the liability of, MLI and its affiliates,
                shall provide for the payment by Counterparty of all expenses in
                connection with such resale, including all reasonable and documented
                fees
                and expenses of counsel for MLI, shall contain representations, warranties
                and agreements of Counterparty reasonably necessary or advisable
                to
                establish and maintain the availability of an exemption from the
                registration requirements of the Securities Act for such resales,
                and
                shall use reasonable best efforts to provide for the delivery of
                accountants’ “comfort letters” to MLI or such affiliate with respect to
                the financial statements and certain financial information contained
                in or
                incorporated by reference into the offering memorandum prepared for
                the
                resale of such Shares;

            

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    
      	 	
              (c)
                MLI shall sell the Delivered Shares in a commercially reasonable
                manner
                until the amount received by MLI for the sale of the Shares (the
                “Proceeds Amount”)
                is equal to the Net Physical Settlement Amount. Any remaining Delivered
                Shares shall be returned to Counterparty. If the Proceeds Amount
                is less
                than the Net Physical Settlement Amount, Counterparty shall promptly
                deliver upon notice from MLI additional Shares to MLI until the dollar
                amount from the sale of such Shares by MLI equals the difference
                between
                the Net Physical Settlement Amount and the Proceeds Amount. In no
                event
                shall Counterparty be required to deliver to MLI a number of Shares
                greater than the Maximum Deliverable Share
                Amount.

            

    

    

    
      	 	
              (iv)
                In the event Counterparty fails to comply with any of the conditions
                set
                forth in “Conditions
                to Net Physical Settlement”
                herein, Counterparty shall settle the Transaction through Cash Settlement;
                provided,
                however,
                that notwithstanding the foregoing, if either (a) Counterparty does
                not
                provide for the sale of the Shares under the Registration Statement
                as
                provided in the Registration Rights Agreement, (b) some Shares cannot
                be
                registered under the Registration Statement due to Rule 415(a)(4)
                under
                the Securities Act, or (c) some or all of the Delivered Shares cannot
                be
                used to close out stock loans in the shares of Counterparty entered
                into
                to establish or maintain short positions by MLI in connection with
                this
                Transaction without a prospectus being required by applicable law
                to be
                delivered to such lender, then Counterparty may deliver unregistered
                or
                registered Shares. In the case of clauses (a) or (b) above, the value
                of
                any unregistered Shares so delivered shall be discounted to reflect
                their
                market value (calculated in a commercially reasonable manner). In
                the case
                of clause (c) above, the value of any such Delivered Shares shall
                reflect
                the cost (calculated in a commercially reasonable manner) to MLI
                of
                trading Shares in order to close out its hedge position if any, in
                all
                cases for purposes of calculating the Delivered Shares. In no event
                shall
                Counterparty be required to top-up the delivery in
                cash.

            

    

    

    Limitations
      on Net Physical

    
      	
              Settlement
                by Counterparty:

            	
              Notwithstanding
                anything herein or in the Agreement to the contrary, the number of
                Shares
                that may be delivered at settlement by Counterparty shall not exceed
                4,543,803 at any time (“Maximum
                Deliverable Share Amount”),
                as adjusted by MLI to account for any subdivision, stock-split,
                reclassification or similar dilutive event with respect to the
                Shares.

            

    

    

    
      	 	
              Counterparty
                represents and warrants that the number of Available Shares as of
                the
                Trade Date is greater than the Maximum Deliverable Share Amount.
                Counterparty covenants and agrees that Counterparty shall not take
                any
                action of corporate governance or otherwise to reduce the number
                of
                Available Shares below the Maximum Deliverable
                Share.

            

    

    

    
      	 	
              For
                this purpose, “Available
                Shares”
                means the number of Shares Counterparty currently has authorized
                (but not
                issued and outstanding) less the maximum number of Shares that may
                be
                required to be issued by Counterparty in connection with stock options,
                convertibles, and other commitments of Counterparty that may require
                the
                issuance or delivery of Shares in connection
                therewith.

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    Dividends:

    

    
      	
              Extraordinary
                Dividends:

            	
              Any
                and all dividends paid by the
                Issuer.

            

    

     

    Adjustments:

    

    
      	
              Method
                of Adjustment:

            	
              Calculation
                Agent Adjustment 

            

    

    

    Extraordinary
      Events: 

     

    
      	
              Consequences
                of Merger Events:

            	
              (a)
                Share-for-Share: Cancellation and Payment (Calculation Agent
                Determination)

            

    

    

    (b)
      Share-for-Other: Cancellation and Payment (Calculation Agent
      Determination)

    

    (c)
      Share-for-Combined: Cancellation and Payment (Calculation Agent
      Determination)

    

    
      	
              Tender
                Offer:

            	
              Applicable

            

    

    

    
      	
              Consequences
                of Tender Offers:

            	
              (a)
                Share-for-Share: Modified Calculation Agent
                Adjustment

            

    

    

    (b)
      Share-for-Other: Cancellation and Payment (Calculation Agent
      Determination)

    

    (c)
      Share-for-Combined: Component Adjustment (Calculation Agent
      Determination)

    

    With
      respect to any Extraordinary Events hereunder, upon the occurrence of
      Cancellation and Payment in whole or in part, the parties agree that the amount
      to be paid, in accordance with the Equity Definitions, shall constitute a
      Transaction Early Termination Amount, subject to satisfaction by the payment
      or
      delivery of Shares or cash as set forth in the Early Termination section below.
      

    

    Nationalization,
      Insolvency

    
      	
              or
                Delisting:

            	
              Cancellation
                and Payment (Calculation Agent Determination) (subject to satisfaction
                by
                payment or delivery of Shares or cash as set forth in “Early Termination”
                below)

            

    

    

    
      	
              Determining
                Party:

            	
              MLI

            

    

    

    Additional
      Disruption Events:

    

    
      	
              Change
                in Law:

            	
              Applicable

            

    

    

    
      	
              Failure
                to Deliver:

            	
              Not
                Applicable

            

    

    

    
      	
              Insolvency
                Filing:

            	
              Applicable

            

    

    

    
      	
              Hedging
                Disruption Event:

            	
              Applicable

            

    

    

    
      	
              Increased
                Cost of Hedging:

            	
              Not
                Applicable

            

    

    

    
      	
              Loss
                of Stock Borrow:

            	
              Applicable

            

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      	
              Maximum
                Stock Loan Rate:

            	
              3.00%

            

    

    

    
      	
              Increased
                Cost of Stock Borrow:

            	
              Applicable

            

    

    

    
      	
              Initial
                Stock Loan Rate:

            	
              0.40%

            

    

    

    
      	
              Hedging
                Party:

            	
              MLI

            

    

    

    
      	
              Determining
                Party:

            	
              MLI

            

    

    

    
      	
              Non-Reliance:

            	
              Applicable

            

    

    

    Agreements
      and

    Acknowledgments
      Regarding

    
      	
              Hedging
                Activities:

            	
              Applicable

            

    

    

    
      	
              Additional
                Acknowledgments:

            	
              Applicable

            

    

    

    Other
      Provisions:

    

    
      	
              Additional
                Agreements:

            	
              If
                due to the occurrence of an Extraordinary Event or otherwise Counterparty
                would be obligated to pay cash to MLI pursuant to the terms of this
                Agreement for any reason without having had the right (other than
                pursuant
                to this paragraph) to elect to deliver Shares in satisfaction of
                such
                payment obligation, then Counterparty may elect to deliver to MLI
                a number
                of Shares (whether registered or unregistered) having a cash value
                equal
                to the amount of such payment obligation (such number of Shares to
                be
                delivered to be determined by the Calculation Agent acting in a
                commercially reasonable manner to determine the number of Shares
                that
                could be sold by MLI over a reasonable period of time to realize
                the cash
                equivalent of such payment obligation taking into account any applicable
                discount (determined in a commercially reasonable manner) to reflect
                any
                restrictions on transfer as well as the market value of the Shares).
                Further, if Counterparty is delivering Shares as a result of a Merger
                Event, the Settlement Date will be immediately prior to the effective
                time
                of the Merger Event and the Shares will be deemed delivered at such
                time
                such that MLI will be a holder of the Shares prior to such effective
                time.
                Settlement relating to any delivery of Shares pursuant to this paragraph
                shall occur within a reasonable period of time. The number of Shares
                delivered pursuant to this paragraph shall not exceed the Maximum
                Deliverable Share Amount and shall be subject to the provisions under
                “Early Termination” hereof regarding Proceeds
                Amount.

            

    

    

    
      	
              Early
                Termination:

            	
              Notwithstanding
                any provision to the contrary, upon the designation of an Early
                Termination Date hereunder, Counterparty’s payment obligation in respect
                of this Transaction as determined in accordance with Second Method
                and
                Loss (the “Transaction
                Early Termination Amount”)
                may, at the option of Counterparty, be satisfied by the delivery
                of a
                number of Shares equal to the Transaction Early Termination Amount
                divided by
                the Termination Price (“Early
                Termination Stock Settlement”);
                provided,
                however,
                that Counterparty must notify MLI of its election of Early Termination
                Stock Settlement by the close of business on the day that is two
                Exchange
                Business Days following the day that the notice designating the Early
                Termination Date is effective. “Termination
                Price”
                means the closing price per Share on the Exchange on the Early Termination
                Date.

            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	 	
              A
                number of Shares calculated as being due in respect of any Early
                Termination Stock Settlement will be deliverable on the third Exchange
                Business Day following the date that notice pursuant to Section 6(d)(i)
                of
                the Agreement specifying the number of Shares deliverable is effective.
                Section 6(d)(i) of the Agreement is hereby amended by adding the
                following
                words after the word “paid” in the fifth line thereof: “or any delivery is
                to be made, as applicable.”

            

    

    

    
      	 	
              On
                or prior to the Early Termination Date (if Early Termination Stock
                Settlement is elected), if so requested by MLI upon advice of counsel,
                Counterparty shall enter into a registration rights agreement with
                MLI in
                form and substance reasonably acceptable to MLI which agreement will
                contain among other things, customary representations and warranties
                and
                indemnification, restrictions on sales during “blackout dates” as provided
                for in the Registration Rights Agreement and shall satisfy the conditions
                contained therein and Counterparty shall file and diligently pursue
                to
                effectiveness a Registration Statement pursuant to Rule 415 under
                the
                Securities Act. If and when such Registration Statement shall have
                been
                declared effective by the Securities and Exchange Commission, Counterparty
                shall have made available to MLI such Prospectuses as MLI may reasonably
                request to comply with the applicable prospectus delivery requirements
                for
                the resale by MLI of such number of Shares as MLI shall specify (or,
                if
                greater, the number of Shares that Counterparty shall specify). Such
                Registration Statement shall be effective and Prospectus shall be
                current
                until the earliest of the date on which (i) all Shares delivered
                by
                Counterparty in connection with an Early Termination Date, (ii) MLI
                has
                advised Counterparty that it no longer requires that such Registration
                Statement be effective or (iii) all remaining Shares could be sold
                by MLI
                without registration pursuant to Rule 144 promulgated under the Securities
                Act (the “Termination
                Registration Period”).
                It is understood that the Registration Statement and Prospectus will
                cover
                a number of Shares equal to the number of Shares plus the aggregate
                number
                of Shares (if any) reasonably estimated by MLI to be potentially
                deliverable by Counterparty in connection with Early Termination
                Stock
                Settlement hereunder, but in no event exceeding the Maximum Deliverable
                Share Amount. On each day during the Registration Period Counterparty
                shall represent that each of its filings under the Securities Act,
                the
                Exchange Act or other applicable securities laws that are required
                to be
                filed have been filed and that, as of the respective dates thereof
                and as
                of the date of this representation, they do not contain any untrue
                statement of a material fact or omission of a material fact required
                to be
                stated therein or necessary to make the statements made, in the light
                of
                the circumstances under which they were made, not misleading.
                

            

    

    

    
      	 	
              If
                Counterparty does not deliver Shares subject to an effective Registration
                Statement as set forth above, Counterparty may deliver unregistered
                Shares
                in an amount determined by MLI based upon MLI’s commercially reasonable
                judgment of the market value of such Shares. In no event shall
                Counterparty be required to deliver to MLI a number of Shares greater
                than
                the Maximum Deliverable Share
                Amount.

            

    

    

    If
      MLI
      receives Shares in connection with an Early Termination Stock Settlement that
      cannot be freely sold under the Securities Act or that are subject to any legend
      restricting transferability, MLI shall sell such Shares in a commercially
      reasonable manner until the amount received by MLI for the sale of such Shares
      (net of transaction costs, calculated in a commercially reasonable manner)
      (the
“Proceeds
      Amount”)
      is
      equal to the Transaction Early Termination Amount. Any remaining Shares shall
      be
      returned to Counterparty. If the Proceeds Amount is less than the Transaction
      Early Termination Amount, Counterparty shall promptly deliver additional Shares
      to MLI upon request until the dollar amount from the sale of such additional
      Shares by MLI (net of transaction costs, calculated in a commercially reasonable
      manner) equals the difference between the Transaction Early Termination Amount
      and the Proceeds Amount. In no event shall Counterparty be required to deliver
      to MLI a number of Shares greater than the Maximum Deliverable Share
      Amount.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	
              Compliance
                With Securities Laws:

            	
              Counterparty
                represents and agrees that it has complied, and will comply, in connection
                with this Transaction and all related or contemporaneous sales and
                purchases of Shares, with the applicable provisions of the Securities
                Act,
                the Exchange Act and the rules and regulations promulgated thereunder,
                including, without limitation, Rule 10b-5 and 13e and Regulation
                M under
                the Exchange Act.

            

    

    

    
      	 	
              Each
                party acknowledges that the offer and sale of the Transaction to
                it is
                intended to be exempt from registration under the Securities Act
                by virtue
                of Section 4(2) thereof. Accordingly, Counterparty represents and
                warrants
                to MLI that (i) it has the financial ability to bear the economic
                risk of
                its investment in the Transaction and is able to bear a total loss
                of its
                investment, (ii) it is an “accredited investor” as that term is defined in
                Regulation D as promulgated under the Securities Act and (iii) the
                disposition of the Transaction is restricted under this Confirmation,
                the
                Securities Act and state securities
                laws.

            

    

    

    
      	 	
              Counterparty
                further represents and warrants
                that:

            

    

    

    
      	 	
              (a)
                Counterparty is not entering into this Transaction to create actual
                or
                apparent trading activity in the Shares (or any security convertible
                into
                or exchangeable for Shares) or to raise or depress or otherwise manipulate
                the price of the Shares (or any security convertible into or exchangeable
                for Shares);

            

    

    

    
      	 	
              (b)
                Counterparty represents and acknowledges that as of the date hereof
                and
                without limiting the generality of Section 13.1 of the Equity Definitions,
                MLI is not making any representations or warranties with respect
                to the
                treatment of the Transaction under FASB Statements 149 or 150, EITF
                Issue
                No. 00-19 (or any successor issue statements) or under FASB’s Liabilities
                & Equity Project.

            

    

    

    Account
      Details: Account
      for payments to Counterparty: 

     

    ABA
      # 021
      001 033

    Bankers
      Trust / Deutsche Bank Trust Co America

    Bankers
      Trust Plaza

    New
      York,
      NY

    Account
      #
      008 10 775

    For
      account of Merrill Lynch

    For
      sub-account # 171-08A45

    Account
      of: New River Pharmaceuticals Inc.

    

    

    Account
      for payments to MLI:  

    

    Chase
      Manhattan Bank, New York 

    ABA#:
      021-000-021 

    FAO:
      ML
      Equity Derivatives

    A/C:
      066213118

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

    
      	
              Agreement
                Regarding Shares:

            	
              Counterparty
                agrees that, in respect of any Shares delivered to MLI, such Shares
                shall
                be, upon such delivery, duly and validly authorized, issued and
                outstanding, fully paid and non-assessable and subject to no adverse
                claims of any other party. The issuance of such Shares does not and
                will
                not require the consent, approval, authorization, registration or
                qualification of any government authority, except such as shall have
                been
                obtained on or before the delivery date of any Shares or in connection
                with any Registration Statement filed with respect to any
                Shares.

            

    

     

    
      	
              Bankruptcy
                Rights:

            	
              In
                the event of Counterparty’s bankruptcy, MLI’s rights in connection with
                this Transaction shall not exceed those rights held by common
                shareholders. For the avoidance of doubt, the parties acknowledge
                and
                agree that MLI’s rights with respect to any other claim arising from this
                Transaction prior to Counterparty’s bankruptcy shall remain in full force
                and effect and shall not be otherwise abridged or modified in connection
                herewith.

            

    

     

    
      
        	
                Set-Off:

              	
                Upon
                  the occurrence of an Event of Default or Termination Event with
                  respect to
                  Counterparty as the Defaulting Party or the Affected Party (“X”), MLI
                  (“Y”) will have the right (but not be obliged) without prior notice
                  to X
                  or any other person to set-off or apply any obligation of X under
                  an
                  Equity Contract owed to Y (or any Affiliate of Y) (whether or not
                  matured
                  or contingent and whether or not arising under this Agreement,
                  and
                  regardless of the currency, place of payment or booking office
                  of the
                  obligation) against any obligation of Y (or any Affiliate of Y)
                  under an
                  Equity Contract owed to X (whether or not matured or contingent
                  and
                  whether or not arising under this Agreement, and regardless of
                  the
                  currency, place of payment or booking office of the obligation).
                  Y will
                  give notice to the other party of any set-off effected under this
                  section.

              

      

      

      
        	 	
                “Equity
                  Contract”
                  shall mean for purposes of this section any Transaction relating
                  to Shares
                  between X and Y that qualifies as ‘equity’ under applicable accounting
                  rules other than the Confirmation of OTC Convertible Note Hedge,
                  dated
                  July 19, 2006, by and between Counterparty and MLI and any other
                  substantially similar transaction entered into between Counterparty
                  and
                  MLI relating to an exercise of an over-allotment option. Amounts
                  (or the
                  relevant portion of such amounts) subject to set-off may be converted
                  by Y
                  into the Termination Currency at the rate of exchange at which
                  such party
                  would be able, acting in a reasonable manner and in good faith,
                  to
                  purchase the relevant amount of such
                  currency.

              

      

      

      
        	 	
                If
                  any obligation is unascertained, Y may in good faith estimate that
                  obligation and set-off in respect of the estimate, subject to the
                  relevant
                  party accounting to the other when the obligation is ascertained.
                  Nothing
                  in this section shall be effective to create a charge or other
                  security
                  interest. This section shall be without prejudice and in addition
                  to any
                  right of set-off, combination of accounts, lien or other right
                  to which
                  any party is at any time otherwise entitled (whether by operation
                  of law,
                  contract or otherwise).

              

      

      

      
        	 	
                Notwithstanding
                  any provision of the Agreement as incorporated in any Confirmation
                  or any
                  other existing or future agreement, Counterparty hereby waives
                  any and all
                  rights to set-off, whether arising under any agreement, applicable
                  law, or
                  otherwise, except as provided
                  herein.

              

      

      

      
        	 	
                In
                  the event of Counterparty’s bankruptcy, MLI waives any and all rights to
                  set-off it has, whether arising under any agreement, applicable
                  law or
                  otherwise.

              

      

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	
              Transfer:

            	
              Counterparty
                may transfer its rights and delegate its obligations under this
                Transaction in accordance with Section 7 of the Master Agreement.
                MLI may
                assign its rights and delegate its obligations hereunder, in whole
                or in
                part, to any other person (an “Assignee”)
                without the prior consent of the Counterparty, effective (the
                “Transfer
                Effective Date”)
                upon delivery to Counterparty of an executed acceptance and assumption
                by
                the Assignee (an “Assumption”)
                of the transferred obligations of MLI under this Transaction (the
                “Transferred
                Obligations”).
                Notwithstanding any other provision in this Confirmation to the contrary
                requiring or allowing MLI to purchase, sell, receive or deliver any
                Shares
                or other securities to or from Counterparty, MLI may designate any
                of its
                affiliates to purchase, sell, receive or deliver such Shares or other
                securities and otherwise to perform MLI’s obligations in respect of this
                Transaction and any such designee may assume such obligations. MLI
                shall
                be discharged of its obligations to Counterparty to the extent of
                any such
                performance.

            

    

    

    
      	
              Regulation:

            	
              MLI
                is regulated by The Securities and Futures Authority
                Limited.

            

    

    

    
      	
              Indemnity:

            	
              Seller
                agrees to indemnify MLI, its Affiliates and their respective directors,
                officers, agents and controlling parties (each such person being
                an
                “Indemnified
                Party”)
                from and against any and all losses, claims, damages and liabilities,
                joint and several, to which such Indemnified Party may become subject
                because of a breach of any representation or covenant hereunder,
                in the
                Agreement or any other Agreement relating to the Agreement or Transaction
                and will reimburse Indemnified Party for all reasonable expenses
                (including reasonable legal fees and expenses) as they are incurred
                in
                connection with the investigation of, preparation for, or defense
                of, any
                pending or threatened claim or any action or proceeding arising therefrom,
                whether or not such Indemnified Party is a party thereto. Seller
                will not
                be liable under the foregoing Indemnity provision to the extent that
                any
                loss, claim, damage, liability or expense is found in a final judgment
                by
                a court to have resulted from MLI’s gross negligence or willful
                misconduct.

            

    

    

    Additional
      Agreements, Representations and Covenants of Counterparty,
      Etc.:

    

    
      	
              (a)

            	
              Counterparty
                hereby represents and warrants to MLI, on each day from the Trade
                Date to
                and including the earlier of (i) August 19, 2006, and (ii) the date
                by
                which MLI is able to initially complete a hedge of its position created
                by
                this Transaction, that:

            

    

    

    
      	 	
              (1)

            	
              it
                will not, and will not permit any person or entity subject to its
                control
                to, bid for or purchase Shares during such period except as disclosed
                in
                the Offering Memorandum relating to the Convertible Notes;
                and

            

    

    

    
      	 	
              (2)

            	
              it
                has publicly disclosed all material information necessary for it
                to be
                able to purchase or sell Shares in compliance with applicable federal
                securities laws and that it has publicly disclosed all material
                information with respect to its condition (financial or
                otherwise).

            

    

    

    
      	
              (b)

            	
              No
                collateral shall be required by either party for any reason in connection
                with this Transaction.

            

    

    

    
      	
              (c)

            	
              MLI
                shall not be entitled to exercise any Warrant hereunder and Automatic
                Exercise shall not apply with respect to any Warrant to the extent
                (but
                only to the extent) that the receipt of any Shares upon the exercise
                of
                such Warrant would result in MLI, or its ultimate parent entity becoming,
                directly or indirectly, the beneficial owner (as such term is defined
                for
                purposes of Section 13(d) of the Exchange Act) at any time of more
                than
                8.0 percent of the class of the Counterparty’s
                outstanding equity securities that is comprised of the Shares (an
                “Excess
                Share Owner”).

            

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

    MLI
      shall
      provide prior notice to Counterparty
      if the
      exercise of any Warrant hereunder would cause MLI to become directly or
      indirectly, an Excess Share Owner;
      provided
      that the
      failure of MLI to provide such notice shall not alter the effectiveness of
      the
      provisions set forth in the preceding sentence and any purported exercise or
      delivery in violation of such provisions shall be void and have no
      effect.

    

    If
      MLI is
      not entitled to exercise any Warrant because such exercise would cause MLI
      to
      become, directly or indirectly, an Excess Share Owner and MLI thereafter
      disposes of Shares owned by it or any action is taken that would then permit
      MLI
      to exercise such Warrant without such exercise causing it to become, directly
      or
      indirectly, an Excess Share Owner, then MLI shall provide notice of the taking
      of such action to Counterparty
      and such
      Warrant shall then become exercisable by MLI to the extent such Warrant is
      otherwise or had otherwise become exercisable hereunder. In such event, the
      Expiration Date with respect to such Warrant shall be the date on which
Counterparty
      receives
      such notice from MLI, and the related Settlement Date shall be as soon as
      reasonably practicable after receipt of such notice but no more than three
      (3)
      Exchange Business Days thereafter (but in no event shall the Settlement Date
      occur prior to the date on which it would have otherwise occurred but for the
      provisions of this subsection); provided
      that the
      related Net Physical Settlement Amount shall be the same as the Net Physical
      Settlement Amount but for the provisions of this subsection. In addition, within
      30 calendar days of the Settlement Date, Counterparty shall use its reasonable
      efforts to refrain from activities that could reasonably be expected to result
      in MLI’s ownership of Shares exceeding 10% of all issued and outstanding
      Shares.

     

    Matters
      Relating to Agent:

     

    
      	
              1.

            	
              MLPFS
                will be responsible for the operational aspects of the Transactions
                effected through it, such as record keeping, reporting, and confirming
                Transactions to Counterparty and
                MLI;

            

    

    

    
      	
              2.

            	
              Unless
                MLI is a “major U.S. institutional investor,” as defined in Rule 15a-6 of
                the Exchange Act, neither Counterparty not MLI will contact the other
                without the direct involvement of
                MLPFS;

            

    

    

    
      	
              3.

            	
              MLPFS’s
                sole role under this Agreement and with respect to any Transaction
                is as
                an agent of Counterparty and MLI on a disclosed basis and MLPFS shall
                have
                no responsibility or liability to Counterparty or MLI hereunder except
                for
                gross negligence or willful misconduct in the performance of its
                duties as
                agent. MLPFS is authorized to act as agent for MLI, but only to the
                extent
                expressly required to satisfy the requirements of Rule 15a-6 under
                the
                Exchange Act in respect of the Options described hereunder. MLPFS
                shall
                have no authority to act as agent for Counterparty generally or with
                respect to transactions or other matters governed by this Agreement,
                except to the extent expressly required to satisfy the requirements
                of
                Rule 15a-6 or in accordance with express instructions from
                Counterparty.

            

    

    

    ISDA
      Master Agreement:

    

    With
      respect to the Agreement, MLI and Counterparty each agree as
      follows:

    

    “Specified
      Entity”
means
      in relation to Seller and in relation to Counterparty for purposes of this
      Transaction: Not applicable.

     

    “Specified
      Transaction”
will
      have the meaning specified in Section
      14
      of this
      Agreement.

    

    The
      “Cross
      Default”
      provisions of Section
      5(a)(vi)
      of the
      Agreement will not apply to Seller and will not apply to
      Counterparty.

    

    The
      “Credit
      Event Upon Merger”
      provisions of Section
      5(b)(iv)
      of the
      Agreement will not apply to MLI and Counterparty.

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

    The
      “Automatic
      Early Termination”
      provision of Section
      6(a)
      of the
      Agreement will not apply to MLI or to Counterparty.

    

    Payments
      on Early Termination.
      For the
      purpose of Section
      6(e)
      of the
      Agreement: (i) Loss shall apply; and (ii) the Second Method shall
      apply.

    

    “Termination
      Currency”
means
      USD.

    

    Tax
      Representations.

    

    
      	
              (I)

            	
              Payer
                Representations. For
                the purpose of Section 3(e) of the Agreement, each party represents
                to the
                other party that it is not required by any applicable law, as modified
                by
                the practice of any relevant governmental revenue authority, of any
                Relevant Jurisdiction to make any deduction or withholding for or
                on
                account of any Tax from any payment (other than interest under Section
                2(e), 6(d)(ii), or 6(e) of the Agreement) to be made by it to the
                other
                party under the Agreement. In making this representation, each party
                may
                rely on (i) the accuracy of any representations made by the other
                party
                pursuant to Section 3(f) of the Agreement, (ii) the satisfaction
                of the
                agreement contained in Section 4(a)(i) or 4(a)(iii) of the Agreement,
                and
                the accuracy and effectiveness of any document provided by the other
                party
                pursuant to Section 4(a)(i) or 4(a)(iii) of the Agreement, and (iii)
                the
                satisfaction of the agreement of the other party contained in Section
                4(d)
                of the Agreement; provided
                that it will not be a breach of this representation where reliance
                is
                placed on clause (ii) above and the other party does not deliver
                a form or
                document under Section 4(a)(iii) of the Agreement by reason of material
                prejudice to its legal or commercial position.

            

    

    

    
      	
              (II)

            	
              Payee
                Representations. For
                the purpose of Section 3(f) of the Agreement, each party makes the
                following representations to the other
                party:

            

    

    

    
      	 	
              (i)

            	
              MLI
                represents that it is a corporation organized under the laws of England
                and Wales.

            

    

    

    
      	 	
              (ii)

            	
              Counterparty
                represents that it is a corporation incorporated
                in the Commonwealth of Virginia.

            

    

    

    Delivery
      Requirements.
      For the
      purpose of Sections
      4(a)(i)
      and
(ii)
      of the
      Agreement, each party agrees to deliver the following documents:

    

    
      	
              (a)

            	
              Tax
                forms, documents or certificates to be delivered
                are:

            

    

    

    Each
      party agrees to complete (accurately and in a manner reasonably satisfactory
      to
      the other party), execute, and deliver to the other party, United States
      Internal Revenue Service Form W-9 or W-8 BEN, or any successor of such form(s):
      (i) before the first payment date under this agreement; (ii) promptly upon
      reasonable demand by the other party; and (iii) promptly upon learning that
      any such form(s) previously provided by the other party has become obsolete
      or
      incorrect.

    

    
      	
              (b)

            	
              Other
                documents to be delivered:

            

    

     

    
      
        
          	
                  Party
                    Required to Deliver Document

                	
                  Document
                    Required to be Delivered

                	
                  When
                    Required

                	
                  Covered
                    by Section 3(d) Representation

                
	
                  Counterparty

                	
                  Evidence
                    of the authority and true signatures of each official or representative
                    signing this Confirmation

                	
                  Upon
                    or before execution and delivery of this Confirmation

                	
                  Yes

                
	
                  Counterparty

                	
                  Certified
                    copy of the resolution of the Board of Directors or equivalent
                    document
                    authorizing the execution and delivery of this Confirmation and
                    such other
                    certificate or certificates as MLI shall reasonably
                    request

                	
                  Upon
                    or before execution and delivery of this Confirmation

                	
                  Yes

                
	
                  MLI

                	
                  Guarantee
                    of its Credit Support Provider, substantially in the form of
                    Exhibit A
                    attached hereto, together with evidence of the authority and
                    true
                    signatures of the signatories, if applicable

                	
                  Upon
                    or before execution and delivery of this Confirmation

                	
                  Yes

                

        

      

    

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    Addresses
      for Notices:
      For the
      purpose of Section
      12(a)
      of the
      Agreement:

    

    Address
      for notices or communications to MLI for all purposes:

    

    
      	 	
              Address:

            	 	
              Merrill
                Lynch International 

            
	 	 	 	
              Merrill
                Lynch Financial Centre

            
	 	 	 	
              2
                King Edward Street

            
	 	 	 	
              London
                EC1A 1HQ

            
	 	
              Attention:
                

            	 	
              Manager,
                Fixed Income Settlements

            
	 	
              Facsimile
                No.:

            	 	
              44
                207 995 2004

            
	 	
              Telephone
                No.:

            	 	
              44
                207 995 3769

            

    

    

    Address
      for notices or communications to Counterparty for all purposes:

    

    
      	 	
              Address:

            	 	
              New
                River Pharmaceuticals Inc.

            
	 	 	 	
              1881
                Grove Avenue

            
	 	 	 	
              Radford,
                Virginia 24141 

            
	 	
              Attention:
                

            	 	
              Clifton
                R. Herndon II

            
	 	 	 	
              V.P.,
                Finance and Controller

            
	 	
              Telephone
                No.:

            	 	
              540-633-7900

            
	 	
              Facsimile
                No.:

            	 	
              540-633-7939

            

    

    

    Process
      Agent:
      For the
      purpose of Section 13(c) of the Agreement, MLI appoints as its process agent:
      

    

    
      	 	
              Address:

            	 	
              Merrill
                Lynch, Pierce, Fenner & Smith Incorporated

            
	 	 	 	
              222
                Broadway, 16th
                Floor 

            
	 	 	 	
              New
                York, New York 10038

            
	 	
              Attention:

            	 	
              Litigation
                Department

            
	 	 	 	 
	 	 Counterparty
              does not appoint a Process
              Agent.

    

     

    Multibranch
      Party.
      For the
      purpose of Section
      10(c)
      of the
      Agreement: Neither MLI nor Counterparty is a Multibranch Party.

    

    Calculation
      Agent.  The
      Calculation Agent is MLI.

    

    Credit
      Support Document. 

    

    MLI:
      Guarantee of ML & Co. in the form attached hereto as Exhibit A.

    

    Counterparty:
      Not Applicable

    

    Credit
      Support Provider.

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    

    With
      respect to MLI: ML & Co. 

    

    With
      respect to Counterparty: Not Applicable.

    

    Governing
      Law. This
      Confirmation will be governed by, and construed in accordance with, the laws
      of
      the State of New York.

    

    Waiver
      of Jury Trial.
      Each
      party waives, to the fullest extent permitted by applicable law, any right
      it
      may have to a trial by jury in respect of any suit, action or proceeding
      relating to this Transaction. Each party (i) certifies that no representative,
      agent or attorney of the other party has represented, expressly or otherwise,
      that such other party would not, in the event of such a suit, action or
      proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that
      it
      and the other party have been induced to enter into this Transaction, as
      applicable, by, among other things, the mutual waivers and certifications
      provided herein.

    

    Netting
      of Payments.
      The
      provisions of Section
      2(c)
      of the
      Agreement shall not be applicable to this Transaction.

    

    Basic
      Representations.  Section
      3(a)
      of the
      Agreement is hereby amended by the deletion of “and” at the end of Section
      3(a)(iv);
      the
      substitution of a semicolon for the period at the end of Section
      3(a)(v)
      and the
      addition of Sections
      3(a)(vi),
      as
      follows:

    

    Eligible
      Contract Participant; Line of Business. Each
      party agrees and represents that it is an “eligible contract participant” as
      defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended
      (“CEA”),
      this
      Agreement and the Transaction thereunder are subject to individual negotiation
      by the parties and have not been executed or traded on a “trading facility” as
      defined in Section 1a(33) of the CEA, and it has entered into this Confirmation
      and this Transaction in connection with its business or a line of business
      (including financial intermediation), or the financing of its
      business.

    

    Amendment
      of Section 3(a)(iii). Section
      3(a)(iii) of the Agreement is modified to read as follows:

    

    No
      Violation or Conflict.
      Such
      execution, delivery and performance do not materially violate or conflict with
      any law known by it to be applicable to it, any provision of its constitutional
      documents, any order or judgment of any court or agency of government applicable
      to it or any of its assets or any material contractual restriction relating
      to
      Specified Indebtedness binding on or affecting it or any of its assets.

    

    Amendment
      of Section
      3(a)(iv).
       Section
      3(a)(iv) of the Agreement is modified by inserting the following at the
      beginning thereof:

    

    “To
      such
      party’s best knowledge,”

    

    Acknowledgements:

    

    
      	
              (a)

            	
              The
                parties acknowledge and agree that there are no other representations,
                agreements or other undertakings of the parties in relation to this
                Transaction, except as set forth in this
                Confirmation.

            

    

     

    
      
        	
                (b)

              	
                The
                  parties hereto intend for:

              

      

    

    

    
      	 	
              (i)

            	
              this
                Transaction to be a “securities contract” as defined in Section 741(7) of
                Title 11 of the United States Code (the “Bankruptcy
                Code”),
                qualifying for the protections under Section 555 of the Bankruptcy
                Code;

            

    

    

    
      	 	
              (ii)

            	
              a
                party’s right to liquidate this Transaction and to exercise any other
                remedies upon the occurrence of any Event of Default under the Agreement
                with respect to the other party to constitute a “contractual right” as
                defined in the Bankruptcy Code;

            

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    

    
      	 	
              (iii)

            	
              all
                payments for, under or in connection with this Transaction, all payments
                for the Shares and the transfer of such Shares to constitute “settlement
                payments” as defined in the Bankruptcy
                Code.

            

    

    

    
      	
              (c)

            	
              The
                parties acknowledge and agree that in the event of an Early Termination
                Date as a result of an Event of Default, the amount payable under
                the
                Agreement will be a cash amount calculated as described therein and
                that
                any delivery specified in this Transaction will no longer be
                required.

            

    

    

    Amendment
      of Section
      6(d)(ii).
      Section
      6(d)(ii) of
      the
      Agreement is
      modified by deleting the words “on the day” in the second line thereof and
      substituting therefor “on the day that is three Local Business Days after the
      day”. Section
      6(d)(ii)
      is
      further modified by deleting the words “two Local Business Days” in the fourth
      line thereof and substituting therefor “three Local Business Days.”

    

    Amendment
      of Definition of Reference Market-Makers.
      The
      definition of “Reference Market-Makers” in Section
      14
      is
      hereby amended by adding in clause (a) after the word “credit” and before the
      word “and” the words “or to enter into transactions similar in nature to the
      Transactions.”

    

    Consent
      to Recording.
      Each
      party consents to the recording of the telephone conversations of trading and
      marketing personnel of the parties and their Affiliates in connection with
      this
      Confirmation. To the extent that one party records telephone conversations
      (the
“Recording Party”) and the other party does not (the “Non-Recording Party”), the
      Recording Party shall in the event of any dispute, make a complete and unedited
      copy of such party’s tape of the entire day’s conversations with the
      Non-Recording Party’s personnel available to the Non-Recording Party. The
      Recording Party’s tapes may be used by either party in any forum in which a
      dispute is sought to be resolved and the Recording Party will retain tapes
      for a
      consistent period of time in accordance with the Recording Party’s policy unless
      one party notifies the other that a particular transaction is under review
      and
      warrants further retention.

    

    Disclosure.
      Each
      party hereby
      acknowledges and agrees that MLI has authorized Counterparty to disclose this
      Transaction and any related hedging transaction between the parties if and
      to
      the extent that Counterparty reasonably determines (after consultation with
      MLI)
      that such disclosure is required by law or by the rules of The NASDAQ Global
      Market or any securities exchange.

    

    Severability.
      If any
      term, provision, covenant or condition of this Confirmation, or the application
      thereof to any party or circumstance, shall be held to be invalid or
      unenforceable in whole or in part for any reason, the remaining terms,
      provisions, covenants, and conditions hereof shall continue in full force and
      effect as if this Confirmation had been executed with the invalid or
      unenforceable provision eliminated, so long as this Confirmation as so modified
      continues to express, without material change, the original intentions of the
      parties as to the subject matter of this Confirmation and the deletion of such
      portion of this Confirmation will not substantially impair the respective
      benefits or expectations of parties to this Agreement; provided,
      however,
      that
      this severability provision shall not be applicable if any provision of
Section
      2,
      5,
      6
      or
13
      of the
      Agreement (or any definition or provision in Section
      14
      to the
      extent that it relates to, or is used in or in connection with any such Section)
      shall be so held to be invalid or unenforceable.

    

    Affected
      Parties.
      For
      purposes of Section
      6(e)
      of the
      Agreement, each party shall be deemed to be an Affected Party in connection
      with
      Illegality and any Tax Event. 

    

    [Signatures
      follow on separate page]

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    Please
      confirm that the foregoing correctly sets forth the terms of our agreement
      by
      executing the copy of this Confirmation enclosed for that purpose and returning
      it to us.

    

    
      	 	
              Very
                truly yours,

            
	 	 	 	
            
	 	
              MERRILL
                LYNCH INTERNATIONAL

            
	 	 	 	
            
	 	 	 	
            
	 	
              By:
                

            	
               /s/

            	
               Fran
                Jacobson

            
	 	
              Name:
                

            	 Fran
              Jacobson

    

     

    Confirmed
      as of the date first above written:

    

    NEW
      RIVER PHARMACEUTICALS INC.

    

    

    
      	
              By:
                

            	
               /s/ 

            	Krish
              S. Krishnan
	Name:	Krish S. Krishnan
	
              Title:

            	Chief Operating Officer,
              Chief
	 	 	Financial Officer and
              Secretary

    

     

     

    Acknowledged
      and agreed as to matters to the Agent:

    MERRILL
      LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

    Solely
      in
      its capacity as Agent hereunder

     

    

    
      	
              By:

            	
               /s/
                

            	
               Rhonda
                Garguito 

            
	
              Name:
                

            	
               Rhonda
                Garguito

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    

    GUARANTEE
      OF MERRILL LYNCH & CO., INC.

    

    FOR
      VALUE
      RECEIVED, receipt of which is hereby acknowledged, MERRILL LYNCH & CO.,
      INC., a corporation duly organized and existing under the laws of the State
      of
      Delaware (“ML & Co.”), hereby unconditionally guarantees to New River
      Pharmaceuticals Inc. (the “Company”), the due and punctual payment of any and
      all amounts payable by Merrill Lynch International, a company organized under
      the laws of England and Wales (“ML”), under the terms of the Confirmation of OTC
      Warrant Transaction between the Company and ML (ML as Buyer), dated as of July
      19, 2006 (the “Confirmation”), including, in case of default, interest on any
      amount due, when and as the same shall become due and payable, whether on the
      scheduled payment dates, at maturity, upon declaration of termination or
      otherwise, according to the terms thereof. In case of the failure of ML
      punctually to make any such payment, ML & Co. hereby agrees to make such
      payment, or cause such payment to be made, promptly upon demand made by the
      Company to ML & Co.; provided, however that delay by the Company in giving
      such demand shall in no event affect ML & Co.’s obligations under this
      Guarantee. This Guarantee shall remain in full force and effect or shall be
      reinstated (as the case may be) if at any time any payment guaranteed hereunder,
      in whole or in part, is rescinded or must otherwise be returned by the Company
      upon the insolvency, bankruptcy or reorganization of ML or otherwise, all as
      though such payment had not been made.

    

    ML
&
      Co. hereby agrees that its obligations hereunder shall be unconditional,
      irrespective of the validity, regularity or enforceability of the Confirmation;
      the absence of any action to enforce the same; any waiver or consent by the
      Company concerning any provisions thereof; the rendering of any judgment against
      ML or any action to enforce the same; or any other circumstances that might
      otherwise constitute a legal or equitable discharge of a guarantor or a defense
      of a guarantor. ML covenants that this guarantee will not be discharged except
      by complete payment of the amounts payable under the Confirmation. This
      Guarantee shall continue to be effective if ML merges or consolidates with
      or
      into another entity, loses its separate legal identity or ceases to
      exist.

    

    ML
&
      Co. hereby waives diligence; presentment; protest; notice of protest,
      acceleration, and dishonor; filing of claims with a court in the event of
      insolvency or bankruptcy of ML; all demands whatsoever, except as noted in
      the
      first paragraph hereof; and any right to require a proceeding first against
      ML.

    

    ML
&
      Co. hereby certifies and warrants that this Guarantee constitutes the valid
      obligation of ML & Co. and complies with all applicable laws.

    

    This
      Guarantee shall be governed by, and construed in accordance with, the laws
      of
      the State of New York.

    

    This
      Guarantee may be terminated at any time by notice by ML & Co. to the Company
      given in accordance with the notice provisions of the Confirmation, effective
      upon receipt of such notice by the Company or such later date as may be
      specified in such notice; provided, however, that this Guarantee shall continue
      in full force and effect with respect to any obligation of ML under the
      Confirmation.

    

    This
      Guarantee becomes effective concurrent with the effectiveness of the
      Confirmation, according to its terms.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, ML & Co. has caused this Guarantee to be executed in its
      corporate name by its duly authorized representative.

    

    
      	 	
              MERRILL
                LYNCH & CO., INC.

            
	 	
            	
            	
            
	 	
              By:
                

            	 /s/
	
               Patricia
                Kropiewnicki

            
	 	
            	
            	
               Name:
                Patricia Kropiewnicki

            
	 	
            	
            	
               Title:
                Designated Secretary

            
	 	
            	
            	
               Date:
                July 19, 2006ASSET
      PURCHASE AGREEMENT

     

    This
      Asset Purchase Agreement (“Agreement”) is dated May 24, 2006, by and among
      Freundlich Supply Company, Inc., a New York corporation (“Seller” or the
“Company”); and Michael Freundlich, a resident of New York (“Freundlich” or the
“Shareholder”); and Delaware Fastener Acquisition Corporation, a Delaware
      corporation (“Buyer”).

     

    RECITALS

     

    The
      Company is engaged in the business of selling a broad range of nut products
      used
      primarily for aerospace and military applications.

    

    Shareholder
      owns one hundred (100) shares of the common stock of Seller, no par value per
      share, which constitutes one hundred percent (100%) of the issued and
      outstanding shares of capital stock of Seller. Seller desires to sell, and
      Buyer
      desires to purchase, the Assets of Seller for the consideration and subject
      to
      the terms set forth in this Agreement. 

     

    The
      parties, intending to be legally bound, agree as follows: 

     

    SECTION
      1

    DEFINITIONS
      AND USAGE

     

    1.1
      DEFINITIONS 

     

    For
      purposes of this Agreement, the following terms and variations thereof have
      the
      meanings specified or referred to in this Section 1.1: 

     

    “Accounts
      Receivable”-- (a) all trade accounts receivable and other rights to payment from
      customers of Seller and the full benefit of all security for such accounts
      or
      rights to payment, including all trade accounts receivable representing amounts
      receivable in respect of goods shipped or products sold or services rendered
      to
      customers of Seller, (b) all other accounts or notes receivable of Seller and
      the full benefit of all security for such accounts or notes and (c) any claim,
      remedy or other right related to any of the foregoing. 

    

    “Accounts
      Receivable Assignment” - as defined in Section 2.11.

     

    “Adjustment
      Amount”-- as defined in Section 2.8. 

    

    “Agreed
      Working Capital”-- as defined in Section 2.9(b). 

    

    “Allocation
      of Purchase Price” -- the agreed values of the Assets and Assumed Liabilities to
      be transferred from Seller to Buyer hereunder, which allocation shall be used
      by
      the parties for all Tax purposes and in all filings, declarations and reports
      with the IRS in respect thereof, including the reports required to be filed
      under Section 1060 of the Code. 

     

    “Assets”--
      as defined in Section 2.1. 

    
      
        
        

      

      
        -
          1
          -

        
          

        

      

      
        
        

      

    

    

     

    “Assignment
      and Assumption Agreement”-- as defined in Section 2.7(a)(ii). 

     

    “Assumed
      Liabilities”-- as defined in Section 2.4(a). 

     

    “Balance
      Sheet”-- as defined in Section 3.4. 

     

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

     

    “Bill
      of
      Sale”-- as defined in Section 2.7(a)(i). 

     

    “Breach”--
      any breach of, or any material inaccuracy in, any representation or warranty
      or
      any breach of, or failure to perform or comply with, any covenant or obligation,
      in or of this Agreement or any other Contract, or any event which with the
      passing of time or the giving of notice, or both, would constitute such a
      breach, inaccuracy or failure. 

     

    “Bulk
      Sales Laws”-- as defined in Section 5.10. 

    

    “Business
      of the Seller” - Seller is
      a
      stocking distributor of internally-threaded fasteners, focusing on high-quality,
      domestically-manufactured nut products. The Company’s nut products are used
      primarily for aerospace and military applications and for industrial/commercial
      applications that require a high level of certified/assured quality.

     

    “Business
      Day”-- any day other than (a) Saturday or Sunday or (b) any other day on which
      banks in New York are permitted or required to be closed. 

     

    “Buyer”--
      as defined in the first paragraph of this Agreement. 

     

    “Buyer
      Indemnified Persons”-- as defined in Section 11.2. 

     

    “Closing”--
      as defined in Section 2.6. 

     

    “Closing
      Date”-- the date on which the Closing actually takes place. 

     

    “Closing
      Financial Statements”-- as defined in Section 3.9. 

     

    “Closing
      Working Capital”-- as defined in Section 2.9(c). 

     

    “COBRA”--
      as defined in Section 3.14(f). 

     

    “Code”--
      the Internal Revenue Code of 1986. 

    
      
        
        

      

      
        -
          2
          -

        
          

        

      

      
        
        

      

    

    

     

    “Confidential
      Information”-- as defined in Section 12.1. 

     

    “Consent”--
      any approval, consent, ratification, waiver or other authorization.

    

    “Consulting
      Agreement”-- as defined in Section 2.7(a)(v). 

     

    “Contemplated
      Transactions”-- all of the transactions contemplated by this Agreement.

     

    “Contract”--
      any agreement, contract, Lease, consensual obligation, promise or undertaking
      (whether written or oral and whether express or implied), whether or not legally
      binding. 

     

    “Copyrights”--
      as defined in Section 3.23(a)(iii). 

     

    “Damages”--
      as defined in Section 11.2. 

     

    “Employee
      Plans”-- as defined in Section 3.14(a). 

     

    “Encumbrance”--
      any charge, claim, community or other marital property interest, condition,
      equitable interest, lien, option, pledge, security interest, mortgage, right
      of
      way, easement, encroachment, servitude, right of first option, right of first
      refusal or similar restriction, including any restriction on use, voting (in
      the
      case of any security or equity interest), transfer, receipt of income or
      exercise of any other attribute of ownership. 

     

    “Environment”--
      soil, land surface or subsurface strata, surface waters (including navigable
      waters and ocean waters), groundwaters, drinking water supply, stream sediments,
      ambient air (including indoor air), plant and animal life and any other
      environmental medium or natural resource. 

     

    “Environmental,
      Health and Safety Liabilities”-- any cost, damages, expense, liability,
      obligation or other responsibility arising from or under any Environmental
      Law
      or Occupational Safety and Health Law, including those consisting of or relating
      to: 

     

    a. any
      environmental, health or safety matter or condition (including on-site or
      off-site contamination, occupational safety and health and regulation of any
      chemical substance or product); 

    b. any
      fine,
      penalty, judgment, award, settlement, legal or administrative proceeding,
      damages, loss, claim, demand or response, remedial or inspection cost or expense
      arising under any Environmental Law or Occupational Safety and Health Law;
      

    c. financial
      responsibility under any Environmental Law or Occupational Safety and Health
      Law
      for cleanup costs or corrective action, including any cleanup, removal,
      containment or other remediation or response actions (“Cleanup”) required by any
      Environmental Law or Occupational Safety and Health Law (whether or not such
      Cleanup has been required or requested by any Governmental Body or any other
      Person) and for any natural resource damages; or 

    
      
        
        

      

      
        -
          3
          -

        
          

        

      

      
        
        

      

    

    

    d. any
      other
      compliance, corrective or remedial measure required under any Environmental
      Law
      or Occupational Safety and Health Law. 

     

    The
      terms
“removal,” “remedial” and “response action” include the types of activities
      covered by the United States Comprehensive Environmental Response, Compensation
      and Liability Act of 1980 (CERCLA). 

     

    “Environmental
      Law”-- any Legal Requirement that requires or relates to: 

     

    a. advising
      appropriate authorities, employees or the public of intended or actual Releases
      of pollutants or hazardous substances or materials, violations of discharge
      limits or other prohibitions and the commencement of activities, such as
      resource extraction or construction, that could have significant impact on
      the
      Environment; 

    b. preventing
      or reducing to acceptable levels the Release of pollutants or hazardous
      substances or materials into the Environment; 

    c. reducing
      the quantities, preventing the Release or minimizing the hazardous
      characteristics of wastes that are generated; 

    d. assuring
      that products are designed, formulated, packaged and used so that they do not
      present unreasonable risks to human health or the Environment when used or
      disposed of; 

    e. protecting
      resources, species or ecological amenities; 

    f. reducing
      to acceptable levels the risks inherent in the transportation of hazardous
      substances, pollutants, oil or other potentially harmful substances;

    g. cleaning
      up pollutants that have been Released, preventing the Threat of Release or
      paying the costs of such clean up or prevention; or 

    h. making
      responsible parties pay private parties, or groups of them, for damages done
      to
      their health or the Environment or permitting self-appointed representatives
      of
      the public interest to recover for injuries done to public assets. 

     

    “ERISA”--
      the Employee Retirement Income Security Act of 1974.

    

    “Escrow
      Agent”-- as defined in Section 2.3(b)

    

    “Escrow
      Deposit” -- as defined in Section 2.3(b).

    

    “Exchange
      Act”-- the Securities Exchange Act of 1934. 

     

    “Excluded
      Assets”-- as defined in Section 2.2. 

     

    “Facilities”--
      any real property, leasehold or other interest in real property currently owned
      or operated by Seller, including the Tangible Personal Property used or operated
      by Seller. Notwithstanding the foregoing, for purposes of the definitions of
      “Hazardous Activity” and “Remedial Action” and Sections 3.20 and 11.3,
“Facilities” shall mean any real property, leasehold or other interest in real
      property currently or formerly owned or operated by Seller, including the
      Tangible Personal Property used or operated by Seller at the Facilities
      specified in Section 3.8. 

     

    
      
        
        

      

      
        -
          4
          -

        
          

        

      

      
        
        

      

    

    

    “GAAP”--
      generally accepted accounting principles for financial reporting in the United
      States, applied on a basis consistent with the basis on which the Balance Sheet
      and the other financial statements referred to in Section 3.4 were prepared.
      

     

    “Governing
      Documents”-- with respect to any particular entity, (a) if a corporation, the
      articles or certificate of incorporation and the bylaws; (b) if a general
      partnership, the partnership agreement and any statement of partnership; (c)
      if
      a limited partnership, the limited partnership agreement and the certificate
      of
      limited partnership; (d) if a limited liability company, the articles of
      organization and operating agreement; (e) if another type of Person, any other
      charter or similar document adopted or filed in connection with the creation,
      formation or organization of the Person; (f) all equityholders’ agreements,
      voting agreements, voting trust agreements, joint venture agreements,
      registration rights agreements or other agreements or documents relating to
      the
      organization, management or operation of any Person or relating to the rights,
      duties and obligations of the equityholders of any Person; and (g) any amendment
      or supplement to any of the foregoing. 

     

    “Governmental
      Authorization”-- any Consent, license, registration or permit issued, granted,
      given or otherwise made available by or under the authority of any Governmental
      Body or pursuant to any Legal Requirement. 

     

    “Governmental
      Body”-- any: 

     

    a. nation,
      state, county, city, town, borough, village, district or other jurisdiction;
      

    b. federal,
      state, local, municipal, foreign or other government; 

    c. governmental
      or quasi-governmental authority of any nature (including any agency, branch,
      department, board, commission, court, tribunal or other entity exercising
      governmental or quasi-governmental powers); 

    d. multinational
      organization or body; 

    e. body
      exercising, or entitled or purporting to exercise, any administrative,
      executive, judicial, legislative, police, regulatory or taxing authority or
      power; or 

    f. official
      of any of the foregoing. 

     

    “Hazardous
      Activity”-- the distribution, generation, handling, importing, management,
      manufacturing, processing, production, refinement, Release, storage, transfer,
      transportation, treatment or use (including any withdrawal or other use of
      groundwater) of Hazardous Material in, on, under, about or from any of the
      Facilities or any part thereof into the Environment and any other act, business,
      operation or thing that increases the danger, or risk of danger, or poses an
      unreasonable risk of harm, to persons or property on or off the Facilities.
      

     

    “Hazardous
      Material”-- any substance, material or waste which is or will foreseeably be
      regulated by any Governmental Body, including any material, substance or waste
      which is defined as a “hazardous waste,” “hazardous material,” “hazardous
      substance,” “extremely hazardous waste,” “restricted hazardous waste,”
“contaminant,” “toxic waste” or “toxic substance” under any provision of
      Environmental Law, and including petroleum, petroleum products, asbestos,
      presumed asbestos-containing material or asbestos-containing material, urea
      formaldehyde and polychlorinated biphenyls. 

    
      
        
        

      

      
        -
          5
          -

        
          

        

      

      
        
        

      

    

    

     

    “Improvements”--
      all buildings, structures, fixtures and improvements located on the Land or
      included in the Assets, including those under construction. 

    

    “Income
      Tax Refunds”—as defined in Section 2.1(j)

     

    “Indemnified
      Person”-- as defined in Section 11.9. 

     

    “Indemnifying
      Person”-- as defined in Section 11.9. 

     

    “Intellectual
      Property Assets”-- as defined in Section 3.23(a). 

     

    “Interim
      Balance Sheet”-- as defined in Section 3.4. 

     

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

     

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

     

    “Knowledge”--
      an individual will be deemed to have Knowledge of a particular fact or other
      matter if: 

     

    a. that
      individual is actually aware of that fact or matter; or 

    b. a
      prudent
      individual could be expected to discover or otherwise become aware of that
      fact
      or matter in the course of conducting a reasonably comprehensive investigation
      regarding the accuracy of any representation or warranty contained in this
      Agreement. 

     

    A
      Person
      (other than an individual) will be deemed to have Knowledge of a particular
      fact
      or other matter if any individual who is serving, or who has at any time served,
      as a director, officer, partner, executor or trustee of that Person (or in
      any
      similar capacity) has, or at any time had, Knowledge of that fact or other
      matter (as set forth in (a) and (b) above), and any such individual (and any
      individual party to this Agreement) will be deemed to have conducted a
      reasonably comprehensive investigation regarding the accuracy of the
      representations and warranties made herein by that Person or individual.

    

    “Lease”
-
      as defined in Section 2.7(a)(iv).

     

    “Legal
      Requirement”-- any federal, state, local, municipal, foreign, international,
      multinational or other constitution, law, ordinance, principle of common law,
      code, regulation, statute or treaty. 

     

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

    
      
        
        

      

      
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          6
          -

        
          

        

      

      
        
        

      

    

    

     

    “Marks”--
      as defined in Section 3.23(a)(i). 

     

    “Material
      Consents”-- as defined in Section 7.3. 

     

    “Occupational
      Safety and Health Law”-- any Legal Requirement designed to provide safe and
      healthful working conditions and to reduce occupational safety and health
      hazards, including the Occupational Safety and Health Act, and any program,
      whether governmental or private (such as those promulgated or sponsored by
      industry associations and insurance companies), designed to provide safe and
      healthful working conditions. 

     

    “Order”--
      any order, injunction, judgment, decree, ruling, assessment or arbitration
      award
      of any Governmental Body or arbitrator. 

     

    “Ordinary
      Course of Business”-- an action taken by a Person will be deemed to have been
      taken in the Ordinary Course of Business only if that action: 

     

    (a) is
      consistent in nature, scope and magnitude with the past practices of such Person
      and is taken in the ordinary course of the normal, day-to-day operations of
      such
      Person; 

    (b) does
      not
      require authorization by the board of directors or Shareholder of such Person
      (or by any Person or group of Persons exercising similar authority) and does
      not
      require any other separate or special authorization of any nature; and

    (c) is
      similar in nature, scope and magnitude to actions customarily taken, without
      any
      separate or special authorization, in the ordinary course of the normal,
      day-to-day operations of other Persons that are in the same line of business
      as
      such Person. 

      

    “Patents”--
      as defined in Section 3.23(a)(ii). 

     

    “Permitted
      Encumbrances”-- as defined in Section 3.7. 

     

    “Person”--
      an individual, partnership, corporation, business trust, limited liability
      company, limited liability partnership, joint stock company, trust,
      unincorporated association, joint venture or other entity or a Governmental
      Body. 

     

    “Proceeding”--
      any action, arbitration, audit, hearing, investigation, litigation or suit
      (whether civil, criminal, administrative, judicial or investigative, whether
      formal or informal, whether public or private) commenced, brought, conducted
      or
      heard by or before, or otherwise involving, any Governmental Body or arbitrator.
      

     

    “Purchase
      Price”-- as defined in Section 2.3. 

     

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

     

    
      
        
        

      

      
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          7
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    “Related
      Person”-- 

    With
      respect to a particular individual: 

     

    a. each
      other member of such individual’s Family; 

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

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

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

     

    With
      respect to a specified Person other than an individual: 

     

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

    b. any
      Person that holds a Material Interest in such specified Person; 

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

    d. any
      Person in which such specified Person holds a Material Interest; and

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

     

    For
      purposes of this definition, (a) “control” (including “controlling,” “controlled
      by,” and “under common control with”) means the possession, direct or indirect,
      of the power to direct or cause the direction of the management and policies
      of
      a Person, whether through the ownership of voting securities, by contract or
      otherwise, and shall be construed as such term is used in the rules promulgated
      under the Securities Act; (b) the “Family” of an individual includes (i) the
      individual, (ii) the individual’s spouse, (iii) any other natural person who is
      related to the individual or the individual’s spouse within the second degree
      and (iv) any other natural person who resides with such individual; and (c)
      “Material Interest” means direct or indirect beneficial ownership (as defined in
      Rule 13d-3 under the Exchange Act) of voting securities or other voting
      interests representing at least ten percent (10%) of the outstanding voting
      power of a Person or equity securities or other equity interests representing
      at
      least ten percent (10%) of the outstanding equity securities or equity interests
      in a Person. 

     

    “Release”--
      any release, spill, emission, leaking, pumping, pouring, dumping, emptying,
      injection, deposit, disposal, discharge, dispersal, leaching or migration on
      or
      into the Environment or into or out of any property. 

     

    “Remedial
      Action”-- all actions, including any capital expenditures, required or
      voluntarily undertaken (a) to clean up, remove, treat or in any other way
      address any Hazardous Material or other substance; (b) to prevent the Release
      or
      Threat of Release or to minimize the further Release of any Hazardous Material
      or other substance so it does not migrate or endanger or threaten to endanger
      public health or welfare or the Environment; (c) to perform pre-remedial studies
      and investigations or post-remedial monitoring and care; or (d) to bring all
      Facilities and the operations conducted thereon into compliance with
      Environmental Laws and environmental Governmental Authorizations.

    
      
        
        

      

      
        -
          8
          -

        
          

        

      

      
        
        

      

    

    

     

    “Representative”--
      with respect to a particular Person, any director, officer, manager, employee,
      agent, consultant, advisor, accountant, financial advisor, legal counsel or
      other representative of that Person. 

     

    “Retained
      Liabilities”-- as defined in Section 2.4(b). 

     

    “SEC”--
      the United States Securities and Exchange Commission. 

    

    “Secured
      Subordinated Promissory Note”-- as defined in Section 2.7(b)(ii). 

     

    “Securities
      Act”-- as defined in Section 3.3. 

    

    “Security
      Agreement” - as defined in Section 2.7(b)(ii).

     

    “Seller”--
      as defined in the first paragraph of this Agreement. 

     

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

     

    “Shareholder”--
      as defined in the first paragraph of this Agreement. 

     

    “Software”--
      all computer software and subsequent versions thereof, including source code,
      object, executable or binary code, objects, comments, screens, user interfaces,
      report formats, templates, menus, buttons and icons and all files, data,
      materials, manuals, design notes and other items and documentation related
      thereto or associated therewith. 

     

    “Subsidiary”--
      with respect to any Person (the “Owner”), any corporation or other Person of
      which securities or other interests having the power to elect a majority of
      that
      corporation’s or other Person’s board of directors or similar governing body, or
      otherwise having the power to direct the business and policies of that
      corporation or other Person (other than securities or other interests having
      such power only upon the happening of a contingency that has not occurred),
      are
      held by the Owner or one or more of its Subsidiaries. 

     

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

     

    
      
        
        

      

      
        -
          9
          -

        
          

        

      

      
        
        

      

    

    

    “Tax”--
      any income, gross receipts, license, payroll, employment, excise, severance,
      stamp, occupation, premium, property, part environmental, windfall profit,
      customs, vehicle, airplane, boat, vessel or other title or registration, capital
      stock, franchise, employees’ income withholding, foreign or domestic
      withholding, social security, unemployment, disability, real property, personal
      property, sales, use, transfer, value added, alternative, add-on minimum and
      other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever
      and any interest, penalty, addition or additional amount thereon imposed,
      assessed or collected by or under the authority of any Governmental Body or
      payable under any tax-sharing agreement or any other Contract. 

     

    “Tax
      Return”-- any return (including any information return), report, statement,
      schedule, notice, form, declaration, claim for refund or other document or
      information filed with or submitted to, or required to be filed with or
      submitted to, any Governmental Body in connection with the determination,
      assessment, collection or payment of any Tax or in connection with the
      administration, implementation or enforcement of or compliance with any Legal
      Requirement relating to any Tax. 

     

    “Third
      Party”-- a Person that is not a party to this Agreement. 

     

    “Third-Party
      Claim”-- any claim against any Indemnified Person by a Third Party, whether or
      not involving a Proceeding. 

     

    “Threat
      of Release”-- a reasonable likelihood of a Release that may require action in
      order to prevent or mitigate damage to the Environment that may result from
      such
      Release. 

     

    “WARN
      Act”-- as defined in Section 3.21(d). 

     

    1.2
      USAGE

     

    a. Interpretation.
      In this Agreement, unless a clear contrary intention appears: 

     

    (i) the
      singular number includes the plural number and vice versa; 

    (ii) reference
      to any Person includes such Person’s successors and assigns but, if applicable,
      only if such successors and assigns are not prohibited by this Agreement, and
      reference to a Person in a particular capacity excludes such Person in any
      other
      capacity or individually; 

    (iii) reference
      to any gender includes each other gender; 

    (iv) reference
      to any agreement, document or instrument means such agreement, document or
      instrument as amended or modified and in effect from time to time in accordance
      with the terms thereof; 

    (v) reference
      to any Legal Requirement means such Legal Requirement as amended, modified,
      codified, replaced or reenacted, in whole or in part, and in effect from time
      to
      time, including rules and regulations promulgated thereunder, and reference
      to
      any section or other provision of any Legal Requirement means that provision
      of
      such Legal Requirement from time to time in effect and constituting the
      substantive amendment, modification, codification, replacement or reenactment
      of
      such section or other provision; 

    
      
        
        

      

      
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          10
          -

        
          

        

      

      
        
        

      

    

    

    (vi) “hereunder,”
      “hereof,” “hereto,” and words of similar import shall be deemed references to
      this Agreement as a whole and not to any particular Article, Section or other
      provision hereof; 

    (vii) “including”
      (and with correlative meaning “include”) means including without limiting the
      generality of any description preceding such term; 

    (viii) “or”
is
      used in the inclusive sense of “and/or”; 

    (ix) with
      respect to the determination of any period of time, “from” means “from and
      including” and “to” means “to and including;” and 

    (x) references
      to documents, instruments or agreements shall be deemed to refer as well to
      all
      addenda, exhibits, schedules or amendments thereto. 

     

    b. Accounting
      Terms and Determinations. Unless otherwise specified herein, all accounting
      terms used herein shall be interpreted and all accounting determinations
      hereunder shall be made in accordance with GAAP. 

    

    c. Legal
      Representation of the Parties. This Agreement was negotiated by the parties
      with
      the benefit of legal representation, and any rule of construction or
      interpretation otherwise requiring this Agreement to be construed or interpreted
      against any party shall not apply to any construction or interpretation hereof.
      

     

    SECTION
      2

    SALE
      AND TRANSFER OF ASSETS; CLOSING

     

    2.1
      ASSETS TO BE SOLD 

     

    Upon
      the
      terms and subject to the conditions set forth in this Agreement, at the Closing,
      Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer
      shall purchase and acquire from Seller, free and clear of any Encumbrances
      other
      than Permitted Encumbrances, all of Seller’s right, title and interest in and to
      all of Seller’s personal property and assets, tangible and intangible, of every
      kind and description, wherever located, including the following (but excluding
      the Excluded Assets): 

     

    a. all
      Tangible Personal Property, including those items described in Exhibit 2.1(a);
      

    b. all
      Inventories; 

    c. all
      Accounts Receivable; 

    d. all
      Seller Contracts, including those listed in Exhibit 3.18(a), and all outstanding
      offers or solicitations made by or to Seller to enter into any Contract;

    e. all
      Governmental Authorizations and all pending applications therefor or renewals
      thereof, in each case to the extent transferable to Buyer, including those
      listed in Exhibit 3.15(b); 

    f. all
      data
      and Records related to the operations of Seller, including client and customer
      lists and Records, referral sources, research and development reports and
      Records, production reports and Records, service and warranty Records, equipment
      logs, operating guides and manuals, financial and accounting Records, creative
      materials, advertising materials, promotional materials, studies, reports,
      correspondence and other similar documents and Records and, subject to Legal
      Requirements, copies of all personnel Records and other Records described in
      Section 2.2(g) and certification documentation for the Inventory;

    
      
        
        

      

      
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          11
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    g. all
      of
      the intangible rights and property of Seller, including Intellectual Property
      Assets, going concern value, goodwill, telephone, telecopy and e-mail addresses
      and listings and those items listed in Exhibits 3.23(d), (e) and (f);

    h. all
      insurance benefits, including rights and proceeds, arising from or relating
      to
      the Assets or the Assumed Liabilities prior to the Closing, unless expended
      in
      accordance with this Agreement; 

    i. all
      claims of Seller against third parties relating to the Assets, whether choate
      or
      inchoate, known or unknown, contingent or noncontingent, including all such
      claims listed in Exhibit 2.1(j); and 

    j. all
      rights of Seller relating to deposits and prepaid expenses, claims for refunds
      and rights to offset in respect thereof that are not listed in Exhibit 2.2(e).
      As reflected in Exhibit 2.2(e), Seller and the Shareholder may be entitled
      to
      certain Income Tax Refunds relating to the operations of Seller. Such Income
      Tax
      Refunds are not included in the Assets.

     

    All
      of
      the property and assets to be transferred to Buyer hereunder are herein referred
      to collectively as the “Assets.” 

     

    Notwithstanding
      the foregoing, the transfer of the Assets pursuant to this Agreement shall
      not
      include the assumption of any Liability related to the Assets unless Buyer
      expressly assumes that Liability pursuant to Section 2.4(a). 

     

    2.2
      EXCLUDED ASSETS 

     

    Notwithstanding
      anything to the contrary contained in Section 2.1 or elsewhere in this
      Agreement, the following assets of Seller (collectively, the “Excluded Assets”)
      are not part of the sale and purchase contemplated hereunder, are excluded
      from
      the Assets and shall remain the property of Seller after the Closing:

     

    a. all
      cash,
      cash equivalents and short-term investments; 

    b.
       all
      minute books, stock Records and corporate seals; 

    c.
       the
      shares of capital stock of Seller held in treasury; 

    d.
       all
      rights of Seller under this Agreement, the Bill of Sale, the Assignment and
      Assumption Agreement, the Secured Subordinated Promissory Note, the Security
      Agreement and all other documents to be delivered in connection with the
      Contemplated Transactions; and 

    e.
       the
      property and assets expressly designated in Exhibit 2.2(e), including but not
      limited to the Income Tax Refunds and real property owned by Seller or its
      affiliates. 

     

    2.3
      CONSIDERATION 

    

    a. The
      consideration for the Assets (the “Purchase Price”) will be (a) Five million
      dollars ($5,000,000.00) plus or minus the Adjustment Amount and (b) the
      assumption of the Assumed Liabilities. In accordance with Section 2.7(b), at
      the
      Closing, the Purchase Price, prior to adjustment on account of the Adjustment
      Amount, shall be delivered by Buyer to Seller as follows: (a) Four million
      two
      hundred fifty thousand dollars ($4,250,000.00) by certified check or other
      immediately available funds, net of the Escrow Deposit; and (b) Seven hundred
      fifty thousand dollars ($750,000.00) payable in the form of the Secured
      Subordinated Promissory Note. The security for the Secured Subordinated
      Promissory Note is defined in Section 2.7(b)(ii). The Adjustment Amount shall
      be
      paid in accordance with Section 2.8. 

    
      
        
        

      

      
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          12
          -

        
          

        

      

      
        
        

      

    

    

    b. The
      Escrow Deposit, in the initial amount of $25,000.00, shall be paid by Buyer
      to
      Howard J. Kerker, Esquire, attorney for Seller, (the “Escrow Agent”)
      contemporaneous with execution of this Agreement. The Escrow Deposit shall
      be
      held in an interest bearing account. The full amount of the Escrow Deposit,
      together will all interest earned thereon, will be credited against the cash
      consideration to be paid by Buyer at Closing, subject to the provisions of
      Sections 9.2(b) and 9.2(c). 

     

    2.4
      LIABILITIES 

     

    a. Assumed
      Liabilities. On the Closing Date, but effective as of the Closing, Buyer shall
      assume and agree to discharge only the following Liabilities of Seller (the
      “Assumed Liabilities”): 

     

    (i) any
      trade
      account payable reflected on the Interim Balance Sheet (other than a trade
      account payable to any Shareholder or a Related Person of Seller or any
      Shareholder) that remains unpaid at and is not delinquent as of the Closing;
      

    (ii) any
      trade
      account payable (other than a trade account payable to any Shareholder or a
      Related Person of Seller or any Shareholder) incurred by Seller in the Ordinary
      Course of Business between the date of the Interim Balance Sheet and the Closing
      that remains unpaid at and is not delinquent as of the Closing; 

    (iii) any
      Liability to Seller’s customers incurred by Seller in the Ordinary Course of
      Business for nondelinquent orders outstanding as of the Closing reflected on
      Seller’s books (other than any Liability arising out of or relating to a Breach
      that occurred prior to the Closing); and

    (iv) any
      liability to Seller’s suppliers for unfilled purchase orders, provided that such
      unfilled purchase orders shall be for a quantity of parts that will be sold
      in
      the Ordinary Course of Business for a cost consistent with prevailing market
      cost.

    

    b. Retained
      Liabilities. The Retained Liabilities shall remain the sole responsibility
      of
      and shall be retained, paid, performed and discharged solely by Seller.
“Retained Liabilities” shall mean every Liability of Seller other than the
      Assumed Liabilities, including: 

     

    (i) any
      Liability arising out of or relating to products of Seller sold prior to the
      Closing other than to the extent assumed under Section 2.4(a)(iii);

    (ii) any
      Liability under any Contract assumed by Buyer pursuant to Section 2.4(a) that
      arises after the Closing but that arises out of or relates to any Breach that
      occurred prior to the Closing; 

    (iii) any
      Liability for Taxes, including (A) any Taxes arising as a result of Seller’s
      operation of its business or ownership of the Assets prior to the Closing,
      (B)
      any Taxes that will arise as a result of the sale of the Assets pursuant to
      this
      Agreement and (C) any deferred Taxes of any nature;    

    
      
        
        

      

      
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          13
          -

        
          

        

      

      
        
        

      

    

    

    (iv) any
      Liability under any Contract not assumed by Buyer under Section 2.4(a),
      including any Liability arising out of or relating to Seller’s credit facilities
      or any security interest related thereto; 

    (v) any
      Environmental, Health and Safety Liabilities arising out of or relating to
      the
      operation of Seller’s business or Seller’s leasing, ownership or operation of
      real property; 

    (vi) any
      Liability under the Employee Plans or relating to payroll, vacation, sick leave,
      workers’ compensation, unemployment benefits, pension benefits, employee stock
      option or profit-sharing plans, health care plans or benefits or any other
      employee plans or benefits of any kind for Seller’s employees or former
      employees or both; 

    (vii) any
      Liability under any employment, severance, retention or termination agreement
      with any employee of Seller or any of its Related Persons; 

    (viii) any
      Liability arising out of or relating to any employee grievance whether or not
      the affected employees are hired by Buyer; 

    (ix) any
      Liability of Seller to any Shareholder or Related Person of Seller or any
      Shareholder; 

    (x) any
      Liability to indemnify, reimburse or advance amounts to any officer, director,
      employee or agent of Seller; 

    (xi) any
      Liability to distribute to Shareholder or otherwise apply all or any part of
      the
      consideration received hereunder; 

    (xii) any
      Liability arising out of any Proceeding pending as of the Closing; 

    (xiii) any
      Liability arising out of any Proceeding commenced after the Closing and arising
      out of or relating to any occurrence or event happening prior to the Closing;
      

    (xiv) any
      Liability arising out of or resulting from Seller’s compliance or noncompliance
      with any Legal Requirement or Order of any Governmental Body; 

    (xv) any
      Liability of Seller under this Agreement or any other document executed in
      connection with the Contemplated Transactions; and 

    (xvi) any
      Liability of Seller based upon Seller’s acts or omissions occurring after the
      Closing. 

     

    2.5
      ALLOCATION 

     

    The
      Purchase Price shall be allocated as shall be agreed at Closing. After the
      Closing, the parties shall make consistent use of the allocation, fair market
      value and useful lives as agreed for all Tax purposes and in all filings,
      declarations and reports with the IRS in respect thereof, including the reports
      required to be filed under Section 1060 of the Code. Buyer shall prepare and
      deliver IRS Form 8594 to Seller within forty-five (45) days after the Closing
      Date to be filed with the IRS. In any Proceeding related to the determination
      of
      any Tax, neither Buyer nor Seller or Shareholder shall contend or represent
      that
      such allocation is not a correct allocation. 

     

    2.6
      CLOSING 

     

    The
      purchase and sale provided for in this Agreement (the “Closing”) will take place
      at the offices of Sichenzia Ross Friedman Ference LLP, 1065 Avenue of the
      Americas, 21st
      Floor,
      New York, NY 10018, on or before June 30, 2006, unless Buyer and Seller
      otherwise agree. Subject to the provisions of Article 9, failure to consummate
      the purchase and sale provided for in this Agreement on the date and time and
      at
      the place determined pursuant to this Section 2.6 will not result in the
      termination of this Agreement and will not relieve any party of any obligation
      under this Agreement. In such a situation, the Closing will occur as soon as
      practicable, subject to Article 9. 

    
      
        
        

      

      
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          14
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    2.7
      CLOSING OBLIGATIONS 

     

    In
      addition to any other documents to be delivered under other provisions of this
      Agreement, at the Closing: 

     

    a. Seller
      and Shareholder, as the case may be, shall deliver to Buyer, together with
      funds
      sufficient to pay (i) one-half of all sales taxes, and (ii) all other Taxes
      necessary for the transfer, filing or recording thereof: 

     

    (i) a
      bill of
      sale for all of the Assets that are Tangible Personal Property in the form
      of
      Exhibit 2.7(a)(i) (the “Bill of Sale”) executed by Seller; 

    (ii) assignments
      of all Intellectual Property Assets and separate assignments of all registered
      Marks, Patents and Copyrights in the form of Exhibit 2.7(a)(ii) executed by
      Seller; 

    (iii) such
      other deeds, bills of sale, assignments, certificates of title, documents and
      other instruments of transfer and conveyance as may reasonably be requested
      by
      Buyer, each in form and substance satisfactory to Buyer and its legal counsel
      and executed by Seller; 

    (iv) the
      lease
      for the Premises in the form of Exhibit 2.7(a)(iv) (the “Lease”);

    (v) a
      certificate executed by Seller and the Shareholder as to the accuracy of their
      representations and warranties as of the date of this Agreement and as of the
      Closing in accordance with Section 7.1 and as to their compliance with and
      performance of their covenants and obligations to be performed or complied
      with
      at or before the Closing in accordance with Section 7.2 (Exhibit 2.7(a)(v));
      

    (vi) an
      opinion of counsel for the Seller and the Shareholder in form and substance
      satisfactory to Buyer and its legal counsel (Exhibit 2.7(a)(vi)) ; 

    (vii) a
      certificate of the Secretary of Seller certifying, as complete and accurate
      as
      of the Closing (Exhibit 2.7(a)(vii)), attached copies of the Governing Documents
      of Seller, certifying and attaching all requisite resolutions or actions of
      Seller’s board of directors and Shareholder approving the execution and delivery
      of this Agreement and the consummation of the Contemplated Transactions and
      the
      change of name contemplated by Section 5.9 and certifying to the incumbency
      and
      signatures of the officers of Seller executing this Agreement and any other
      document relating to the Contemplated Transactions and accompanied by the
      requisite documents for amending the relevant Governing Documents of Seller
      required to effect such change of name in form sufficient for filing with the
      appropriate Governmental Body;

    (viii) the
      Consulting Agreement in the form of Exhibit 2.7(b)(v);

    (ix) an
      assignment of all of the Assets that are intangible personal property in the
      form of Exhibit 2.7(a)(ix), which assignment shall also contain Buyer’s
      undertaking and assumption of the Assumed Liabilities (the “Assignment and
      Assumption Agreement”) executed by Seller; and

    (x) the
      Allocation of Purchase Price, in the form of Exhibit 2.7(a)(x). 

    
      
        
        

      

      
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    b. Buyer
      shall deliver to Seller and Shareholder, as the case may be, together with
      funds
      sufficient to pay one-half of all sales taxes necessary for the transfer, filing
      or recording thereof:

     

    (i) Four
      million two hundred fifty thousand dollars ($4,250,000.00) by certified check
      or
      other immediately available funds, net of the Escrow Deposit; 

    (ii) a
      promissory note executed by Buyer and payable to Seller in the principal amount
      of Seven hundred fifty thousand dollars ($750,000.00) in the form of Exhibit
      2.7(b)(ii) (the “Secured Subordinated Promissory Note”). The Secured
      Subordinated Promissory Note shall be secured with a subordinated lien on the
      Assets, which subordinated lien will be evidenced by the Security Agreement.
      The
      Seller will agree to execute a commercially reasonable subordination agreement
      proffered by lenders to Buyer either contemporaneous with or subsequent to
      the
      Closing, and will execute whatever documents may be reasonably necessary to
      make
      Seller’s security interest in the Assets subordinate to Buyer’s
      lenders;

    (iii) the
      Security Agreement (Exhibit 2.7(b)(iii)) and Financing Statement necessary
      to
      perfect Seller’s security interest in the Assets, subject to the limitations in
      Section 2.7(b)(ii);

    (iv) the
      Assignment and Assumption Agreement, as such term is defined in Section
      2.7(a)(ix) above; 

    (v)
       the
      Consulting Agreement in the form of Exhibit 2.7(b)(v);

    (vi) a
      certificate executed by Buyer as to the accuracy of its representations and
      warranties as of the date of this Agreement and as of the Closing in accordance
      with Section 8.1 and as to its compliance with and performance of its covenants
      and obligations to be performed or complied with at or before the Closing in
      accordance with Section 8.2 (Exhibit 2.7(b)(vi)); 

    (vii) an
      opinion of counsel for the Buyer in form and substance satisfactory to Seller
      and Stockholder (Exhibit 2.7(b)(vii)); 

    (viii) a
      certificate of the Secretary of Buyer certifying, as complete and accurate
      as of
      the Closing (Exhibit 2.7(b)(viii)), attached copies of the Governing Documents
      of Buyer and certifying and attaching all requisite resolutions or actions
      of
      Buyer’s board of directors approving the execution and delivery of this
      Agreement and the consummation of the Contemplated Transactions and certifying
      to the incumbency and signatures of the officers of Buyer executing this
      Agreement and any other document relating to the Contemplated
      Transactions;

                   
      (ix) the
      executed Lease; and

    (x) the
      Allocation of Purchase Price, in the form of Exhibit 2.7(a)(x).

     

    2.8
      ADJUSTMENT AMOUNT AND PAYMENT 

     

    The
      “Adjustment Amount” (which may be a positive or negative number) will be equal
      to the amount determined by subtracting the Closing Working Capital from the
      Agreed Working Capital. If the Adjustment Amount is positive, the Adjustment
      Amount shall be subtracted from the cash consideration to be paid at Closing.
      If
      the Adjustment Amount is negative, the Adjustment Amount shall be added to
      the
      cash consideration to be paid at Closing. 

     

    

    
      
        
        

      

      
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    2.9
      ADJUSTMENT PROCEDURE 

     

    a. “Working
      Capital” as of a given date shall mean the amount calculated by subtracting the
      Assumed Liabilities as of that date from the sum of (i) all Accounts Receivable,
      regardless of the aging thereof, and (ii) Inventory included in the Assets
      as of
      that date. 

    b. The
      Agreed Working Capital Amount is $2,280,000.00. 

    c.
       The
      day
      before Closing, Seller shall deliver to Buyer (i) a list of its Accounts
      Receivable as of that date showing the aging thereof, (ii) a statement of its
      Inventory value as of that date, and (iii) a list of the Assumed Liabilities
      as
      of that date. Buyer shall then determine the Working Capital as of the Closing
      by subtracting the Assumed Liabilities as of that date from the sum of the
      Accounts Receivable as of that date and the Inventory as of that date (the
      “Closing Working Capital”). 

    d. The
      Adjustment Amount shall be determined by subtracting the Closing Working Capital
      from the Agreed Working Capital.

     

    2.10
      CONSENTS 

     

    a. If
      there
      are any Material Consents that have not yet been obtained (or otherwise are
      not
      in full force and effect) as of the Closing, in the case of each Seller Contract
      as to which such Material Consents were not obtained (or otherwise are not
      in
      full force and effect) (the “Restricted Material Contracts”), Buyer may waive
      the closing conditions as to any such Material Consent and either: 

     

    (i) elect
      to
      have Seller continue its efforts to obtain the Material Consents; or

    (ii) elect
      to
      have Seller retain that Restricted Material Contract and all Liabilities arising
      therefrom or relating thereto, on a cost neutral basis to Seller.

     

    If
      Buyer
      elects to have Seller continue its efforts to obtain any Material Consents
      and
      the Closing occurs, notwithstanding Sections 2.1 and 2.4, neither this Agreement
      nor the Assignment and Assumption Agreement nor any other document related
      to
      the consummation of the Contemplated Transactions shall constitute a sale,
      assignment, assumption, transfer, conveyance or delivery or an attempted sale,
      assignment, assumption, transfer, conveyance or delivery of the Restricted
      Material Contracts, and following the Closing, the parties shall use Best
      Efforts, and cooperate with each other, to obtain the Material Consent relating
      to each Restricted Material Contract as quickly as practicable. Pending the
      obtaining of such Material Consents relating to any Restricted Material
      Contract, the parties shall cooperate with each other in any reasonable and
      lawful arrangements designed to provide to Buyer the benefits of use of the
      Restricted Material Contract for its term (or any right or benefit arising
      thereunder, including the enforcement for the benefit of Buyer of any and all
      rights of Seller against a third party thereunder). Once a Material Consent
      for
      the sale, assignment, assumption, transfer, conveyance and delivery of a
      Restricted Material Contract is obtained, Seller shall promptly assign,
      transfer, convey and deliver such Restricted Material Contract to Buyer, and
      Buyer shall assume the obligations under such Restricted Material Contract
      assigned to Buyer from and after the date of assignment to Buyer pursuant to
      a
      special-purpose assignment and assumption agreement substantially similar in
      terms to those of the Assignment and Assumption Agreement (which special-purpose
      agreement the parties shall prepare, execute and deliver in good faith at the
      time of such transfer, all at no additional cost to Buyer). 

    
      
        
        

      

      
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    b. If
      there
      are any Consents not listed on Exhibit 7.3 necessary for the assignment and
      transfer of any Seller Contracts to Buyer (the “Nonmaterial Consents”) which
      have not yet been obtained (or otherwise are not in full force and effect)
      as of
      the Closing, Buyer shall elect at the Closing, in the case of each of the Seller
      Contracts as to which such Nonmaterial Consents were not obtained (or otherwise
      are not in full force and effect) (the “Restricted Nonmaterial Contracts”),
      whether to: 

     

    (i) accept
      the assignment of such Restricted Nonmaterial Contract, in which case, as
      between Buyer and Seller, such Restricted Nonmaterial Contract shall, to the
      maximum extent practicable and notwithstanding the failure to obtain the
      applicable Nonmaterial Consent, be transferred at the Closing pursuant to the
      Assignment and Assumption Agreement as elsewhere provided under this Agreement;
      or 

    (ii) reject
      the assignment of such Restricted Nonmaterial Contract, in which case,
      notwithstanding Sections 2.1 and 2.4, (A) neither this Agreement nor the
      Assignment and Assumption Agreement nor any other document related to the
      consummation of the Contemplated Transactions shall constitute a sale,
      assignment, assumption, conveyance or delivery or an attempted sale, assignment,
      assumption, transfer, conveyance or delivery of such Restricted Nonmaterial
      Contract, and (B) Seller shall retain such Restricted Nonmaterial Contract
      and
      all Liabilities arising therefrom or relating thereto. 

    

    
      	2.11  	
              ASSIGNMENT
                OF ACCOUNTS RECEIVABLE FROM BUYER TO
                SELLER

            

    

    

    In
      the
      event that Buyer shall not receive payment of any of the Accounts Receivable
      within 90 days of Closing, Buyer may assign such uncollected Accounts Receivable
      to Seller at any time within 180 days after Closing (an “Accounts Receivable
      Assignment”), provided, however, that if Buyer shall assign any of such Accounts
      Receivable to Seller after 120 days after Closing but before 180 days after
      Closing, Buyer shall provide Seller with whatever assistance Seller may
      reasonably request in the collection of such Accounts Receivable. Upon the
      occurrence of an Accounts Receivable Assignment, Buyer shall reduce the amount
      of its next payments due under the Secured Subordinated Promissory Note by
      the
      total amount of the Accounts Receivable assigned. This reduction shall not
      be
      subject to the escrow provisions of Section 11.8 regarding items proposed to
      be
      set off by Buyer against its liability to Seller, but shall be deemed to be
      agreed to by Seller. 

     

    SECTION
      3

    REPRESENTATIONS
      AND WARRANTIES OF SELLER AND SHAREHOLDER

     

    Seller
      and the Shareholder represent and warrant, jointly and severally, to Buyer
      as
      follows: 

     

    
      
        
        

      

      
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    3.1
      ORGANIZATION AND GOOD STANDING 

     

    a. Exhibit
      3.1(a) contains a complete and accurate list of Seller’s jurisdiction of
      incorporation and any other jurisdictions in which it is qualified to do
      business as a foreign corporation. Seller is a corporation duly organized,
      validly existing and in good standing under the laws of its jurisdiction of
      incorporation, with full corporate power and authority to conduct its business
      as it is now being conducted, to own or use the properties and assets that
      it
      purports to own or use, and to perform all its obligations under the Seller
      Contracts. Seller is duly qualified to do business as a foreign corporation
      and
      is in good standing under the laws of each state or other jurisdiction in which
      either the ownership or use of the properties owned or used by it, or the nature
      of the activities conducted by it, requires such qualification. 

    b. Complete
      and accurate copies of the Governing Documents of Seller, as currently in
      effect, are attached to Exhibit 3.1(b). 

    c. Seller
      has no Subsidiary and, except as disclosed in Exhibit 3.1(c), does not own
      any
      shares of capital stock or other securities of any other Person. 

     

    3.2
      ENFORCEABILITY; AUTHORITY; NO CONFLICT 

     

    a. This
      Agreement constitutes the legal, valid and binding obligation of Seller and
      each
      Shareholder, enforceable against each of them in accordance with its terms.
      Upon
      the execution and delivery by Seller and Shareholder of the Consulting
      Agreement, the Noncompetition Agreement and each other agreement to be executed
      or delivered by any or all of Seller and Shareholder at the Closing
      (collectively, the “Seller’s Closing Documents”), each of Seller’s Closing
      Documents will constitute the legal, valid and binding obligation of each of
      Seller and the Shareholder, enforceable against each of them in accordance
      with
      its terms. Seller has the absolute and unrestricted right, power and authority
      to execute and deliver this Agreement and the Seller’s Closing Documents to
      which it is a party and to perform its obligations under this Agreement and
      the
      Seller’s Closing Documents, and such action has been duly authorized by all
      necessary action by the Shareholder and board of directors. Each Shareholder
      has
      all necessary legal capacity to enter into this Agreement and the Seller’s
      Closing Documents to which such Shareholder is a party and to perform his
      obligations hereunder and thereunder. 

    b. Except
      as
      set forth in Exhibit 3.2(b), neither the execution and delivery of this
      Agreement, nor the consummation or performance of any of the Contemplated
      Transactions will, directly or indirectly (with or without notice or lapse
      of
      time): 

     

    (i) Breach
      (A) any provision of any of the Governing Documents of Seller or (B) any
      resolution adopted by the board of directors or the Shareholder; 

    (ii) Breach
      or
      give any Governmental Body or other Person the right to challenge any of the
      Contemplated Transactions or to exercise any remedy or obtain any relief under
      any Legal Requirement or any Order to which Seller or the Shareholder, or any
      of
      the Assets, may be subject; 

    (iii) contravene,
      conflict with or result in a violation or breach of any of the terms or
      requirements of, or give any Governmental Body the right to revoke, withdraw,
      suspend, cancel, terminate or modify, any Governmental Authorization that is
      held by Seller or that otherwise relates to the Assets or to the business of
      Seller; 

    (iv) cause
      Buyer to become subject to, or to become liable for the payment of, any Tax,
      other than one-half of all sales taxes necessary for the transfer, filing or
      recording of and of the Assets; 

    
      
        
        

      

      
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    (v) Breach
      any provision of, or give any Person the right to declare a default or exercise
      any remedy under, or to accelerate the maturity or performance of, or payment
      under, or to cancel, terminate or modify, any Seller Contract; 

    (vi) result
      in
      the imposition or creation of any Encumbrance upon or with respect to any of
      the
      Assets; or 

    (vii) result
      in
      any shareholder of the Seller having the right to exercise dissenters’ appraisal
      rights. 

     

    c. Except
      as
      set forth in Exhibit 3.2(c), neither Seller nor the Shareholder is required
      to
      give any notice to or obtain any Consent from any Person in connection with
      the
      execution and delivery of this Agreement or the consummation or performance
      of
      any of the Contemplated Transactions. 

     

    3.3
      CAPITALIZATION 

     

    The
      authorized equity securities of Seller consist of two hundred (200) shares
      of
      common stock, no par value per share, of which one hundred (100) shares are
      issued and outstanding, and all of which are owned by the Shareholder.
      Shareholder is and will be on the Closing Date the record and beneficial owner
      and holder of the shares owned by him, free and clear of all Encumbrances.
      There
      are no Contracts relating to the issuance, sale or transfer of any equity
      securities or other securities of Seller. None of the outstanding equity
      securities of Seller was issued in violation of the Securities Act of 1933,
      as
      amended (the “Securities Act”), or any other Legal Requirement. 

     

    3.4
      FINANCIAL STATEMENTS 

     

    Seller
      has delivered to Buyer: (a) an unaudited balance sheet of Seller as at December
      31, 2005 (the “Balance Sheet”), and the related unaudited statement of income
      for the year then ended; (b) unaudited balance sheets of Seller as at December
      31 in each of the fiscal years 2001 through 2004, and the related unaudited
      statement of income for each of the fiscal years then ended; and (c) an
      unaudited balance sheet of Seller as at March 31, 2006, (the “Interim Balance
      Sheet”) and the related unaudited statement of income for the two (2) months
      then ended. Such financial statements fairly present (and the financial
      statements delivered pursuant to Section 5.8 will fairly present) the financial
      condition and the results of operations of Seller as at the respective dates
      of
      and for the periods referred to in such financial statements. The financial
      statements referred to in this Section 3.4 and delivered pursuant to Section
      5.8
      reflect and will reflect the consistent application of accounting principles
      throughout the periods involved, except as disclosed in the notes to such
      financial statements. The financial statements have been and will be prepared
      from and are in accordance with the accounting Records of Seller. 

     

    
      
        
        

      

      
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    3.5
      BOOKS
      AND RECORDS 

     

    The
      books
      of account and other financial Records of Seller, all of which have been made
      available to Buyer, are complete and correct and represent actual, bona fide
      transactions and have been maintained in accordance with sound business
      practices and maintenance of an adequate system of internal controls. The minute
      books of Seller, all of which have been made available to Buyer, contain
      accurate and complete Records of all meetings held of, and corporate action
      taken by, the Shareholder, the board of directors and committees of the board
      of
      directors of Seller, and no meeting of the Shareholder, board of directors
      or
      committee has been held for which minutes have not been prepared or are not
      contained in such minute books. 

     

    3.6
      SUFFICIENCY OF ASSETS 

     

    Except
      as
      set forth in Exhibit 3.6, the Assets (a) constitute all of the assets, tangible
      and intangible, of any nature whatsoever, necessary to operate Seller’s business
      in the manner presently operated by Seller and (b) include all of the operating
      assets of Seller. 

     

    3.7
      TITLE
      TO ASSETS; ENCUMBRANCES 

     

    Seller
      owns good and transferable title to all of the Assets free and clear of any
      Encumbrances other than those described in Exhibit 3.7 (“Encumbrances”). Seller
      warrants to Buyer that, at the time of Closing, all Assets shall be free and
      clear of all Encumbrances other than those identified on Exhibit 3.7 as
      acceptable to Buyer (“Permitted Encumbrances”). 

     

    3.8
      CONDITION OF FACILITIES 

     

    a. Use
      of
      the Facilities for the various purposes for which it is presently being used
      is
      permitted as of right under all applicable zoning legal requirements and is
      not
      subject to “permitted nonconforming” use or structure classifications. All
      Improvements are in compliance with all applicable Legal Requirements, including
      those pertaining to zoning, building and the disabled, are in good repair and
      in
      good condition, ordinary wear and tear excepted, and are free from latent and
      patent defects. No part of any Improvement encroaches on any real property
      not
      included in the Facilities, and there are no buildings, structures, fixtures
      or
      other Improvements primarily situated on adjoining property which encroach
      on
      any part of the Land. The Land for each owned Facility abuts on and has direct
      vehicular access to a public road or has access to a public road via a
      permanent, irrevocable, appurtenant easement benefiting such Land and comprising
      a part of the Facilities, is supplied with public or quasi-public utilities
      and
      other services appropriate for the operation of the Facilities located thereon
      and is not located within any flood plain or area subject to wetlands regulation
      or any similar restriction. To Seller’s knowledge, after reasonable
      investigation, there is no existing or proposed plan to modify or realign any
      street or highway or any existing or proposed eminent domain proceeding that
      would result in the taking of all or any part of any Facility or that would
      prevent or hinder the continued use of any Facility as heretofore used in the
      conduct of the business of Seller. 

    b. Each
      item
      of Tangible Personal Property is in repair and operating condition, ordinary
      wear and tear excepted, is suitable for immediate use in the Ordinary Course
      of
      Business and is free from latent and patent defects. No item of Tangible
      Personal Property is in need of repair or replacement other than as part of
      routine maintenance in the Ordinary Course of Business. Except as disclosed
      in
      Exhibit 3.8(b), all Tangible Personal Property used in Seller’s business is in
      the possession of Seller. 

     

     

    
      
        
        

      

      
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    3.9
      ACCOUNTS RECEIVABLE 

     

    All
      Accounts Receivable that are reflected on the Balance Sheet or the Interim
      Balance Sheet or on the accounting Records of Seller as of the Closing Date
      represent or will represent valid obligations arising from sales actually made
      or services actually performed by Seller in the Ordinary Course of Business.
      Except to the extent paid prior to the Closing Date, such Accounts Receivable
      are or will be as of the Closing Date current and collectible net of the
      respective reserves shown on the Balance Sheet or the Interim Balance Sheet
      or
      as included in the Closing Working Capital (which reserves are adequate and
      calculated consistent with past practice and, in the case of the reserve in
      the
      Accounts Receivable included in the Closing Working Capital, will not represent
      a greater percentage of the Accounts Receivable reflected in the Accounts
      Receivable included in the Closing Working Capital than the reserve reflected
      on
      the Interim Balance Sheet represented of the Accounts Receivable reflected
      thereon and will not represent a material adverse change in the composition
      of
      such Accounts Receivable in terms of aging). Subject to such reserves, each
      of
      such Accounts Receivable either has been or will be collected in full, without
      any setoff, within ninety (90) days after the day on which it first becomes
      due
      and payable. There is no contest, claim, defense or right of setoff, other
      than
      returns in the Ordinary Course of Business of Seller, under any Contract with
      any account debtor of an Account Receivable relating to the amount or validity
      of such Account Receivable. Exhibit 3.9 contains a complete and accurate list
      of
      all Accounts Receivable as of the date of the Interim Balance Sheet, which
      list
      sets forth the aging of each such Account Receivable. 

     

    3.10
      INVENTORIES 

     

    All
      items
      included in the Inventories consist of a quality saleable in the Ordinary Course
      of Business of Seller except for items of below-standard quality, all of which
      have been written off or written down to net realizable value in the Balance
      Sheet or the Interim Balance Sheet or on the accounting Records of Seller as
      of
      the Closing Date, as the case may be. Seller is not in possession of any
      inventory not owned by Seller, including goods already sold. Inventories now
      on
      hand that were purchased after the date of the Balance Sheet or the Interim
      Balance Sheet were purchased in the Ordinary Course of Business of Seller at
      a
      cost not exceeding market prices prevailing at the time of purchase. All items
      of Inventory meet the original quality specifications of the respective
      manufacturers. The Seller has on file, and such information is included in
      the
      Assets, proper certification documentation for the Inventory. 

     

    3.11
      NO
      UNDISCLOSED LIABILITIES 

     

    Except
      as
      set forth in Exhibit 3.11, Seller has no Liability except for Liabilities
      reflected or reserved against in the Balance Sheet or the Interim Balance Sheet
      and current liabilities incurred in the Ordinary Course of Business of Seller
      since the date of the Interim Balance Sheet. 

     

    
      
        
        

      

      
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    3.12
      TAXES 

     

    a. Tax
      Returns Filed and Taxes Paid. Seller has filed or caused to be filed on a timely
      basis all Tax Returns and all reports with respect to Taxes that are or were
      required to be filed pursuant to applicable Legal Requirements. All Tax Returns
      and reports filed by Seller are true, correct and complete, subject to
      amendments thereof in connection with the Income Tax Refunds. Seller has paid,
      or made provision for the payment of, all Taxes that have or may have become
      due
      for all periods covered by the Tax Returns or otherwise, or pursuant to any
      assessment received by Seller, except such Taxes, if any, as are listed in
      Exhibit 3.12(a) and are being contested in good faith and as to which adequate
      reserves (determined in accordance with GAAP) have been provided in the Balance
      Sheet and the Interim Balance Sheet. Except as provided in Exhibit 3.12(a),
      Seller currently is not the beneficiary of any extension of time within which
      to
      file any Tax Return. No claim has ever been made or is expected to be made
      by
      any Governmental Body in a jurisdiction where Seller does not file Tax Returns
      that it is or may be subject to taxation by that jurisdiction. There are no
      Encumbrances on any of the Assets that arose in connection with any failure
      (or
      alleged failure) to pay any Tax, and Seller has no Knowledge of any basis for
      assertion of any claims attributable to Taxes which, if adversely determined,
      would result in any such Encumbrance. 

    b. Delivery
      of Tax Returns and Information Regarding Audits and Potential Audits. Seller
      has
      delivered or made available to Buyer copies of, and Exhibit 3.12(b) contains
      a
      complete and accurate list of, all Tax Returns filed since 2002. 

    c. Proper
      Accrual. The charges, accruals and reserves with respect to Taxes on the Records
      of Seller are adequate (determined in accordance with GAAP) and are at least
      equal to Seller’s liability for Taxes. There exists no proposed tax assessment
      or deficiency against Seller except as disclosed in the Balance Sheet or in
      Exhibit 3.12(c). 

    d. Specific
      Potential Tax Liabilities and Tax Situations. 

     

    (i) Withholding.
      All Taxes that Seller is or was required by Legal Requirements to withhold,
      deduct or collect have been duly withheld, deducted and collected and, to the
      extent required, have been paid to the proper Governmental Body or other Person.
      

    (ii) Tax
      Sharing or Similar Agreements. There is no tax sharing agreement, tax allocation
      agreement, tax indemnity obligation or similar written or unwritten agreement,
      arrangement, understanding or practice with respect to Taxes (including any
      advance pricing agreement, closing agreement or other arrangement relating
      to
      Taxes) that will require any payment by Seller. 

    (iii) Consolidated
      Group. Seller (A) has not been a member of an affiliated group within the
      meaning of Code Section 1504(a) (or any similar group defined under a similar
      provision of state, local or foreign law) and (B) has no liability for Taxes
      of
      any person (other than Seller and its Subsidiaries) under Treas. Reg. sect.
      1.1502-6 (or any similar provision of state, local or foreign law), as a
      transferee or successor by contract or otherwise. 

    (iv) S
      Corporation. Seller is an S corporation as defined in Code Section 1361, and
      Seller is not and has not been subject to either the built-in-gains tax under
      Code Section 1374 or the passive income tax under Code Section 1375. Exhibit
      3.12(d)(iv) lists all the states and localities with respect to which Seller
      is
      required to file any corporate, income or franchise tax returns and sets forth
      whether Seller is treated as the equivalent of an S corporation by or with
      respect to each such state or locality. Seller has properly filed Tax Returns
      with and paid and discharged any liabilities for taxes in any states or
      localities in which it is subject to Tax. 

     

    (v) Substantial
      Understatement Penalty. Seller has disclosed on its federal income Tax Returns
      all positions taken therein that could give rise to a substantial understatement
      of federal income Tax within the meaning of Code Section 6662, if
      any.

    
      
        
        

      

      
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    3.13
      NO
      MATERIAL ADVERSE CHANGE 

     

    Since
      the
      date of the Balance Sheet, there has not been any material adverse change in
      the
      business, operations, prospects, assets, results of operations or condition
      (financial or other) of Seller, and, to Seller’s Knowledge, after reasonable
      investigation, no event has occurred or circumstance exists that may result
      in
      such a material adverse change. 

     

    3.14
      EMPLOYEE BENEFITS 

     

    a. Set
      forth
      in Exhibit 3.14(a) is a complete and correct list of all “employee benefit
      plans” as defined by Section 3(3) of ERISA, all specified fringe benefit plans
      as defined in Section 6039D of the Code, and all other bonus,
      incentive-compensation, deferred-compensation, profit-sharing, stock-option,
      stock-appreciation-right, stock-bonus, stock-purchase, employee-stock-ownership,
      savings, severance, change-in-control, supplemental-unemployment, layoff,
      salary-continuation, retirement, pension, health, life-insurance, disability,
      accident, group-insurance, vacation, holiday, sick-leave, fringe-benefit or
      welfare plan, and any other employee compensation or benefit plan, agreement,
      policy, practice, commitment, contract or understanding (whether qualified
      or
      nonqualified, currently effective or terminated, written or unwritten) and
      any
      trust, escrow or other agreement related thereto that (i) is maintained or
      contributed to by Seller or any other corporation or trade or business
      controlled by, controlling or under common control with Seller (within the
      meaning of Section 414 of the Code or Section 4001(a)(14) or 4001(b) of ERISA)
      (“ERISA Affiliate”) or has been maintained or contributed to in the last six (6)
      years by Seller or any ERISA Affiliate, or with respect to which Seller or
      any
      ERISA Affiliate has or may have any liability, and (ii) provides benefits,
      or
      describes policies or procedures applicable to any current or former director,
      officer, employee or service provider of Seller or any ERISA Affiliate, or
      the
      dependents of any thereof, regardless of how (or whether) liabilities for the
      provision of benefits are accrued or assets are acquired or dedicated with
      respect to the funding thereof (collectively the “Employee Plans”). Exhibit
      3.14(a) identifies as such any Employee Plan that is (w) a “Defined Benefit
      Plan” (as defined in Section 414(l) of the Code); (x) a plan intended to meet
      the requirements of Section 401(a) of the Code; (y) a “Multiemployer Plan” (as
      defined in Section 3(37) of ERISA); or (z) a plan subject to Title IV of ERISA,
      other than a Multiemployer Plan. Also set forth on Exhibit 3.14(a) is a complete
      and correct list of all ERISA Affiliates of Seller during the last six (6)
      years. 

    b. Seller
      has delivered to Buyer true, accurate and complete copies of (i) the documents
      comprising each Employee Plan (or, with respect to any Employee Plan which
      is
      unwritten, a detailed written description of eligibility, participation,
      benefits, funding arrangements, assets and any other matters which relate to
      the
      obligations of Seller or any ERISA Affiliate); (ii) all trust agreements,
      insurance contracts or any other funding instruments related to the Employee
      Plans; (iii) all rulings, determination letters, no-action letters or advisory
      opinions from the IRS, the U.S. Department of Labor, the Pension Benefit
      Guaranty Corporation (“PBGC”) or any other Governmental Body that pertain to
      each Employee Plan and any open requests therefor; (iv) the most recent
      actuarial and financial reports (audited and/or unaudited) and the annual
      reports filed with any Government Body with respect to the Employee Plans during
      the current year and each of the three preceding years; (v) all collective
      bargaining agreements pursuant to which contributions to any Employee Plan(s)
      have been made or obligations incurred (including both pension and welfare
      benefits) by Seller or any ERISA Affiliate, and all collective bargaining
      agreements pursuant to which contributions are being made or obligations are
      owed by such entities; (vi) all securities registration statements filed with
      respect to any Employee Plan; (vii) all contracts with third-party
      administrators, actuaries, investment managers, consultants and other
      independent contractors that relate to any Employee Plan, (viii) with respect
      to
      Employee Plans that are subject to Title IV of ERISA, the Form PBGC-1 filed
      for
      each of the three most recent plan years; and (ix) all summary plan
      descriptions, summaries of material modifications and memoranda, employee
      handbooks and other written communications regarding the Employee Plans.

    
      
        
        

      

      
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    c. Except
      as
      disclosed in Exhibit 3.14(c), full payment has been made of all amounts that
      are
      required under the terms of each Employee Plan to be paid as contributions
      with
      respect to all periods prior to and including the last day of the most recent
      fiscal year of such Employee Plan ended on or before the date of this Agreement
      and all periods thereafter prior to the Closing Date, and no accumulated funding
      deficiency or liquidity shortfall (as those terms are defined in Section 302
      of
      ERISA and Section 412 of the Code) has been incurred with respect to any such
      Employee Plan, whether or not waived. The value of the assets of each Employee
      Plan exceeds the amount of all benefit liabilities (determined on a plan
      termination basis using the actuarial assumptions established by the PBGC as
      of
      the Closing Date) of such Employee Plan. Seller is not required to provide
      security to an Employee Plan under Section 401(a)(29) of the Code. The funded
      status of each Employee Plan that is a Defined Benefit Plan is disclosed on
      Exhibit 3.14(c) in a manner consistent with the Statement of Financial
      Accounting Standards No. 87. Seller has paid in full all required insurance
      premiums, subject only to normal retrospective adjustments in the ordinary
      course, with regard to the Employee Plans for all policy years or other
      applicable policy periods ending on or before the Closing Date. 

    d. Except
      as
      disclosed in Exhibit 3.14(d), no Employee Plan, if subject to Title IV of ERISA,
      has been completely or partially terminated, nor has any event occurred nor
      does
      any circumstance exist that could result in the partial termination of such
      Employee Plan. The PBGC has not instituted or threatened a Proceeding to
      terminate or to appoint a trustee to administer any of the Employee Plans
      pursuant to Subtitle 1 of Title IV of ERISA, and no condition or set of
      circumstances exists that presents a material risk of termination or partial
      termination of any of the Employee Plans by the PBGC. None of the Employee
      Plans
      has been the subject of, and no event has occurred or condition exists that
      could be deemed, a reportable event (as defined in Section 4043 of ERISA) as
      to
      which a notice would be required (without regard to regulatory monetary
      thresholds) to be filed with the PBGC. Seller has paid in full all insurance
      premiums due to the PBGC with regard to the Employee Plans for all applicable
      periods ending on or before the Closing Date. 

    e. Neither
      Seller nor any ERISA Affiliate has any liability or has Knowledge of any facts
      or circumstances that might give rise to any liability, and the Contemplated
      Transactions will not result in any liability, (i) for the termination of or
      withdrawal from any Employee Plan under Sections 4062, 4063 or 4064 of ERISA,
      (ii) for any lien imposed under Section 302(f) of ERISA or Section 412(n) of
      the
      Code, (iii) for any interest payments required under Section 302(e) of ERISA
      or
      Section 412(m) of the Code, (iv) for any excise tax imposed by Section 4971
      of
      the Code, (v) for any minimum funding contributions under Section 302(c)(11)
      of
      ERISA or Section 412(c)(11) of the Code or (vi) for withdrawal from any
      Multiemployer Plan under Section 4201 of ERISA. 

    
      
        
        

      

      
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    f. Seller
      has, at all times, complied, and currently complies, in all material respects
      with the applicable continuation requirements for its welfare benefit plans,
      including (1) Section 4980B of the Code (as well as its predecessor provision,
      Section 162(k) of the Code) and Sections 601 through 608, inclusive, of ERISA,
      which provisions are hereinafter referred to collectively as “COBRA” and (2) any
      applicable state statutes mandating health insurance continuation coverage
      for
      employees. 

    g. The
      form
      of all Employee Plans is in compliance with the applicable terms of ERISA,
      the
      Code, and any other applicable laws, including the Americans with Disabilities
      Act of 1990, the Family Medical Leave Act of 1993 and the Health Insurance
      Portability and Accountability Act of 1996, and such plans have been operated
      in
      compliance with such laws and the written Employee Plan documents. Neither
      Seller nor any fiduciary of an Employee Plan has violated the requirements
      of
      Section 404 of ERISA. All required reports and descriptions of the Employee
      Plans (including Internal Revenue Service Form 5500 Annual Reports, Summary
      Annual Reports and Summary Plan Descriptions and Summaries of Material
      Modifications) have been (when required) timely filed with the IRS, the U.S.
      Department of Labor or other Governmental Body and distributed as required,
      and
      all notices required by ERISA or the Code or any other Legal Requirement with
      respect to the Employee Plans have been appropriately given. 

    h. Each
      Employee Plan that is intended to be qualified under Section 401(a) of the
      Code
      has received a favorable determination letter from the IRS, and Seller has
      no
      Knowledge of any circumstances that will or could result in revocation of any
      such favorable determination letter. Each trust created under any Employee
      Plan
      has been determined to be exempt from taxation under Section 501(a) of the
      Code,
      and Seller is not aware of any circumstance that will or could result in a
      revocation of such exemption. Each Employee Welfare Benefit Plan (as defined
      in
      Section 3(1) of ERISA) that utilizes a funding vehicle described in Section
      501(c)(9) of the Code or is subject to the provisions of Section 505 of the
      Code
      has been the subject of a notification by the IRS that such funding vehicle
      qualifies for tax-exempt status under Section 501(c)(9) of the Code or that
      the
      plan complies with Section 505 of the Code, unless the IRS does not, as a matter
      of policy, issue such notification with respect to the particular type of plan.
      With respect to each Employee Plan, no event has occurred or condition exists
      that will or could give rise to a loss of any intended tax consequence or to
      any
      Tax under Section 511 of the Code. 

    i. There
      is
      no material pending or threatened Proceeding relating to any Employee Plan,
      nor
      is there any basis for any such Proceeding. Neither Seller nor any fiduciary
      of
      an Employee Plan has engaged in a transaction with respect to any Employee
      Plan
      that, assuming the taxable period of such transaction expired as of the date
      hereof, could subject Seller or Buyer to a Tax or penalty imposed by either
      Section 4975 of the Code or Section 502(l) of ERISA or a violation of Section
      406 of ERISA. The Contemplated Transactions will not result in the potential
      assessment of a Tax or penalty under Section 4975 of the Code or Section 502(l)
      of ERISA nor result in a violation of Section 406 of ERISA. 

    j. Seller
      has maintained workers’ compensation coverage as required by applicable state
      law through purchase of insurance and not by self-insurance or otherwise except
      as disclosed to Buyer on Exhibit 3.14(j). 

    k. Except
      as
      required by Legal Requirements and as provided in Section 10.1(d), the
      consummation of the Contemplated Transactions will not accelerate the time
      of
      vesting or the time of payment, or increase the amount, of compensation due
      to
      any director, employee, officer, former employee or former officer of Seller.
      There are no contracts or arrangements providing for payments that could subject
      any person to liability for tax under Section 4999 of the Code.

    
      
        
        

      

      
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    l. Except
      for the continuation coverage requirements of COBRA, Seller has no obligations
      or potential liability for benefits to employees, former employees or their
      respective dependents following termination of employment or retirement under
      any of the Employee Plans that are Employee Welfare Benefit Plans. 

    m.
       None
      of
      the Contemplated Transactions will result in an amendment, modification or
      termination of any of the Employee Plans. No written or oral representations
      have been made to any employee or former employee of Seller promising or
      guaranteeing any employer payment or funding for the continuation of medical,
      dental, life or disability coverage for any period of time beyond the end of
      the
      current plan year (except to the extent of coverage required under COBRA).
      No
      written or oral representations have been made to any employee or former
      employee of Seller concerning the employee benefits of Buyer. 

    n. With
      respect to any Employee Plan that is a “multiemployer plan” within the meaning
      of Section 4001(a)(3) of ERISA (“Multiemployer Plan”), and any other
      Multiemployer Plan to which Seller has at any time had an obligation to
      contribute: 

     

    (i) all
      contributions required by the terms of such Multiemployer Plan and any
      collective bargaining agreement have been made when due; and 

    (ii) Seller
      would not be subject to any withdrawal liability under Part 1 of Subtitle E
      of
      Title IV of ERISA if, as of the date hereof, Seller were to engage in a
“complete withdrawal” (as defined in ERISA Section 4203) or a “partial
      withdrawal” (as defined in ERISA Section 4205) from such Multiemployer Plan.

     

    3.15
      COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS 

     

    a. Except
      as
      set forth in Exhibit 3.15(a): 

     

    (i) Seller
      is, and at all times since January 1, 2001, has been, in full compliance with
      each Legal Requirement that is or was applicable to it or to the conduct or
      operation of its business or the ownership or use of any of its assets;

    (ii) no
      event
      has occurred or circumstance exists that (with or without notice or lapse of
      time) (A) may constitute or result in a violation by Seller of, or a failure
      on
      the part of Seller to comply with, any Legal Requirement or (B) may give rise
      to
      any obligation on the part of Seller to undertake, or to bear all or any portion
      of the cost of, any remedial action of any nature; and 

    (iii) Seller
      has not received, at any time since January 1, 2001, any notice or other
      communication (whether oral or written) from any Governmental Body or any other
      Person regarding (A) any actual, alleged, possible or potential violation of,
      or
      failure to comply with, any Legal Requirement or (B) any actual, alleged,
      possible or potential obligation on the part of Seller to undertake, or to
      bear
      all or any portion of the cost of, any remedial action of any nature.

     

    b. Exhibit
      3.15(b) contains a complete and accurate list of each Governmental Authorization
      that is held by Seller or that otherwise relates to Seller’s business or the
      Assets. Each Governmental Authorization listed or required to be listed in
      Exhibit 3.15(b) is valid and in full force and effect. Except as set forth
      in
      Exhibit 3.15(b): 

     

    
      
        
        

      

      
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    (i) Seller
      is, and at all times since January 1, 2001, has been, in full compliance with
      all of the terms and requirements of each Governmental Authorization identified
      or required to be identified in Exhibit 3.15(b); 

    (ii) no
      event
      has occurred or circumstance exists that may (with or without notice or lapse
      of
      time) (A) constitute or result directly or indirectly in a violation of or
      a
      failure to comply with any term or requirement of any Governmental Authorization
      listed or required to be listed in Exhibit 3.15(b) or (B) result directly or
      indirectly in the revocation, withdrawal, suspension, cancellation or
      termination of, or any modification to, any Governmental Authorization listed
      or
      required to be listed in Exhibit 3.15(b); 

    (iii) Seller
      has not received, at any time since January 1, 2001, any notice or other
      communication (whether oral or written) from any Governmental Body or any other
      Person regarding (A) any actual, alleged, possible or potential violation of
      or
      failure to comply with any term or requirement of any Governmental Authorization
      or (B) any actual, proposed, possible or potential revocation, withdrawal,
      suspension, cancellation, termination of or modification to any Governmental
      Authorization; and 

    (iv) all
      applications required to have been filed for the renewal of the Governmental
      Authorizations listed or required to be listed in Exhibit 3.15(b) have been
      duly
      filed on a timely basis with the appropriate Governmental Bodies, and all other
      filings required to have been made with respect to such Governmental
      Authorizations have been duly made on a timely basis with the appropriate
      Governmental Bodies. 

     

    The
      Governmental Authorizations listed in Exhibit 3.15(b) collectively constitute
      all of the Governmental Authorizations necessary to permit Seller to lawfully
      conduct and operate its business in the manner in which it currently conducts
      and operates such business and to permit Seller to own and use its assets in
      the
      manner in which it currently owns and uses such assets. 

     

    3.16
      LEGAL PROCEEDINGS; ORDERS 

     

    a. Except
      as
      set forth in Exhibit 3.16(a), there is no pending or, to Seller’s Knowledge,
      threatened Proceeding: 

     

    (i) by
      or
      against Seller or that otherwise relates to or may affect the business of,
      or
      any of the assets owned or used by, Seller; or 

    (ii) that
      challenges, or that may have the effect of preventing, delaying, making illegal
      or otherwise interfering with, any of the Contemplated Transactions.

     

    To
      the
      Knowledge of Seller, no event has occurred or circumstance exists that is
      reasonably likely to give rise to or serve as a basis for the commencement
      of
      any such Proceeding. Seller has delivered to Buyer copies of all pleadings,
      correspondence and other documents relating to each Proceeding listed in Exhibit
      3.16(a). There are no Proceedings listed or required to be listed in Exhibit
      3.16(a) that could have a material adverse effect on the business, operations,
      assets, condition or prospects of Seller or upon the Assets. 

     

    

    
      
        
        

      

      
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    b. Except
      as
      set forth in Exhibit 3.16(b): 

     

    (i) there
      is
      no Order to which Seller, its business or any of the Assets is subject; and
      

    (ii) to
      the
      Knowledge of Seller, no officer, director, agent or employee of Seller is
      subject to any Order that prohibits such officer, director, agent or employee
      from engaging in or continuing any conduct, activity or practice relating to
      the
      business of Seller. 

     

    c. Except
      as
      set forth in Exhibit 3.16(c): 

     

    (i) Seller
      is, and, at all times since January 1, 2001, has been in compliance with all
      of
      the terms and requirements of each Order to which it or any of the Assets is
      or
      has been subject; 

    (ii) no
      event
      has occurred or circumstance exists that is reasonably likely to constitute
      or
      result in (with or without notice or lapse of time) a violation of or failure
      to
      comply with any term or requirement of any Order to which Seller or any of
      the
      Assets is subject; and 

    (iii) Seller
      has not received, at any time since January 1, 2001, any notice or other
      communication (whether oral or written) from any Governmental Body or any other
      Person regarding any actual, alleged, possible or potential violation of, or
      failure to comply with, any term or requirement of any Order to which Seller
      or
      any of the Assets is or has been subject. 

     

    3.17
      ABSENCE OF CERTAIN CHANGES AND EVENTS 

     

    Except
      as
      set forth in Exhibit 3.17, since the date of the Balance Sheet, Seller has
      conducted its business only in the Ordinary Course of Business and there has
      not
      been any: 

     

    a. change
      in
      Seller’s authorized or issued capital stock, grant of any stock option or right
      to purchase shares of capital stock of Seller or issuance of any security
      convertible into such capital stock; 

    b. amendment
      to the Governing Documents of Seller; 

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

    d. adoption
      of, amendment to or increase in the payments to or benefits under, any Employee
      Plan; 

    e. damage
      to
      or destruction or loss of any Asset, whether or not covered by insurance;

    f. entry
      into, termination of or receipt of notice of termination of (i) any license,
      distributorship, dealer, sales representative, joint venture, credit or similar
      Contract to which Seller is a party, or (ii) any Contract or transaction
      involving a total remaining commitment by Seller;

    g. sale
      (other than sales of Inventories in the Ordinary Course of Business), lease
      or
      other disposition of any Asset or property of Seller (including the Intellectual
      Property Assets) or the creation of any Encumbrance on any Asset; 

    h. cancellation
      or waiver of any claims or rights with a value to Seller;  

    
      
        
        

      

      
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    i. indication
      by any customer or supplier of an intention to discontinue or change the terms
      of its relationship with Seller; 

    j. material
      change in the accounting methods used by Seller; or 

    k. Contract
      by Seller to do any of the foregoing. 

     

    3.18
      CONTRACTS; NO DEFAULTS 

     

    a. Exhibit
      3.18(a) contains an accurate and complete list, and Seller has delivered to
      Buyer accurate and complete copies, of: 

     

    (i) each
      Seller Contract that involves performance of services or delivery of goods
      or
      materials by Seller; 

    (ii) each
      Seller Contract that involves performance of services or delivery of goods
      or
      materials to Seller; 

    (iii) each
      Seller Contract that was not entered into in the Ordinary Course of Business
      and
      that involves expenditures or receipts of Seller; 

    (iv) each
      Seller Contract affecting the ownership of, leasing of, title to, use of or
      any
      leasehold or other interest in any real or personal; 

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

    (vi) each
      Seller Contract (however named) involving a sharing of profits, losses, costs
      or
      liabilities by Seller with any other Person; 

    (vii) each
      Seller Contract containing covenants that in any way purport to restrict
      Seller’s business activity or limit the freedom of Seller to engage in any line
      of business or to compete with any Person; 

    (viii) each
      Seller Contract providing for payments to or by any Person based on sales,
      purchases or profits, other than direct payments for goods; 

    (ix) each
      power of attorney of Seller that is currently effective and outstanding;

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

    (xi) each
      Seller Contract for capital expenditures; 

    (xii) each
      Seller Contract not denominated in U.S. dollars; 

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

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

     

    Exhibit
      3.18(a) sets forth reasonably complete details concerning such Contracts,
      including the parties to the Contracts, the amount of the remaining commitment
      of Seller under the Contracts and the location of Seller’s office where details
      relating to the Contracts are located. 

     

    
      
        
        

      

      
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    b. Except
      as
      set forth in Exhibit 3.18(b), Shareholder does not have nor may he acquire
      any
      rights under, and Shareholder does not have nor may he become subject to any
      obligation or liability under, any Contract that relates to the business of
      Seller or any of the Assets. 

    c. Except
      as
      set forth in Exhibit 3.18(c): 

     

    (i) each
      Contract identified or required to be identified in Exhibit 3.18(a) and which
      is
      to be assigned to or assumed by Buyer under this Agreement is in full force
      and
      effect and is valid and enforceable in accordance with its terms; 

    (ii) each
      Contract identified or required to be identified in Exhibit 3.18(a) and which
      is
      being assigned to or assumed by Buyer is assignable by Seller to Buyer without
      the consent of any other Person; and 

    (iii) to
      the
      Knowledge of Seller, no Contract identified or required to be identified in
      Exhibit 3.18(a) and which is to be assigned to or assumed by Buyer under this
      Agreement will upon completion or performance thereof have a material adverse
      affect on the business, assets or condition of Seller or the business to be
      conducted by Buyer with the Assets. 

     

    d. Except
      as
      set forth in Exhibit 3.18(d): 

     

    (i) Seller
      is, and at all times since January 1, 2001, has been, in compliance with all
      applicable terms and requirements of each Seller Contract which is being assumed
      by Buyer; 

    (ii) each
      other Person that has or had any obligation or liability under any Seller
      Contract which is being assigned to Buyer is, and at all times since January
      1,
      2001, has been, in full compliance with all applicable terms and requirements
      of
      such Contract; 

    (iii) no
      event
      has occurred or circumstance exists that (with or without notice or lapse of
      time) may contravene, conflict with or result in a Breach of, or give Seller
      or
      other Person the right to declare a default or exercise any remedy under, or
      to
      accelerate the maturity or performance of, or payment under, or to cancel,
      terminate or modify, any Seller Contract that is being assigned to or assumed
      by
      Buyer; 

    (iv) no
      event
      has occurred or circumstance exists under or by virtue of any Contract that
      (with or without notice or lapse of time) would cause the creation of any
      Encumbrance affecting any of the Assets; and 

    (v) Seller
      has not given to or received from any other Person, at any time since January
      1,
      2001, any notice or other communication (whether oral or written) regarding
      any
      actual, alleged, possible or potential violation or Breach of, or default under,
      any Contract which is being assigned to or assumed by Buyer. 

     

    e. There
      are
      no renegotiations of, attempts to renegotiate or outstanding rights to
      renegotiate any material amounts paid or payable to Seller under current or
      completed Contracts with any Person having the contractual or statutory right
      to
      demand or require such renegotiation and no such Person has made written demand
      for such renegotiation. 

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

    
      
        
        

      

      
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    3.19
      INSURANCE 

     

    a. Seller
      has delivered to Buyer: 

     

    (i) accurate
      and complete copies of all policies of insurance (and correspondence relating
      to
      coverage thereunder) to which Seller is a party or under which Seller is
      covered, a list of which is included in Exhibit 3.19(a); and

    (ii) accurate
      and complete copies of all pending applications by Seller for policies of
      insurance. 

     

    b. Exhibit
      3.19(b) describes: 

     

    (i) any
      self-insurance arrangement by or affecting Seller, including any reserves
      established thereunder; 

    (ii) any
      Contract or arrangement, other than a policy of insurance, for the transfer
      or
      sharing of any risk to which Seller is a party or which involves the business
      of
      Seller; and 

    (iii) all
      obligations of Seller to provide insurance coverage to Third Parties (for
      example, under Leases or service agreements) and identifies the policy under
      which such coverage is provided. 

     

    c. Except
      as
      set forth in Exhibit 3.19(c): 

     

    (i) all
      policies of insurance to which Seller is a party or that provide coverage to
      Seller: 

     

    (A) are
      valid, outstanding and enforceable; 

    (B) are
      issued by an insurer that is financially sound and reputable; 

    (C) taken
      together, provide adequate insurance coverage for the Assets and the operations
      of Seller for all risks normally insured against by a Person carrying on the
      same business or businesses as Seller in the same location; and 

    (D) are
      sufficient for compliance with all Legal Requirements and Seller Contracts;
      

     

    (ii) Seller
      has not received (A) any refusal of coverage or any notice that a defense will
      be afforded with reservation of rights or (B) any notice of cancellation or
      any
      other indication that any policy of insurance is no longer in full force or
      effect or that the issuer of any policy of insurance is not willing or able
      to
      perform its obligations thereunder; 

    (iii) Seller
      has paid all premiums due, and has otherwise performed all of its obligations,
      under each policy of insurance to which it is a party or that provides coverage
      to Seller; and 

    (iv) Seller
      has given notice to the insurer of all claims that may be insured thereby.
      

    
      
        
        

      

      
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    3.20
      ENVIRONMENTAL MATTERS 

     

    Except
      as
      disclosed in Exhibit 3.20: 

     

    a. Seller
      is, and at all times has been, in full compliance with, and has not been and
      is
      not in violation of or liable under, any Environmental Law. Neither Seller
      nor
      the Shareholder has any basis to expect, nor has any of them or any other Person
      for whose conduct they are or may be held to be responsible received, any actual
      or threatened order, notice or other communication from (i) any Governmental
      Body or private citizen acting in the public interest or (ii) the current or
      prior owner or operator of any Facilities, of any actual or potential violation
      or failure to comply with any Environmental Law, or of any actual or threatened
      obligation to undertake or bear the cost of any Environmental, Health and Safety
      Liabilities with respect to any Facility or other property or asset (whether
      real, personal or mixed) in which Seller has or had an interest, or with respect
      to any property or Facility at or to which Hazardous Materials were generated,
      manufactured, refined, transferred, imported, used or processed by Seller or
      any
      other Person for whose conduct it is or may be held responsible, or from which
      Hazardous Materials have been transported, treated, stored, handled,
      transferred, disposed, recycled or received. 

    b. There
      are
      no pending or, to the Knowledge of Seller, threatened claims, Encumbrances,
      or
      other restrictions of any nature resulting from any Environmental, Health and
      Safety Liabilities or arising under or pursuant to any Environmental Law with
      respect to or affecting any Facility or any other property or asset (whether
      real, personal or mixed) in which Seller has or had an interest. 

    c. Neither
      Seller nor the Shareholder has any Knowledge of or any basis to expect, nor
      has
      any of them, or any other Person for whose conduct they are or may be held
      responsible, received, any citation, directive, inquiry, notice, Order, summons,
      warning or other communication that relates to Hazardous Activity, Hazardous
      Materials, or any alleged, actual, or potential violation or failure to comply
      with any Environmental Law, or of any alleged, actual, or potential obligation
      to undertake or bear the cost of any Environmental, Health and Safety
      Liabilities with respect to any Facility or property or asset (whether real,
      personal or mixed) in which Seller has or had an interest, or with respect
      to
      any property or facility to which Hazardous Materials generated, manufactured,
      refined, transferred, imported, used or processed by Seller or any other Person
      for whose conduct it is or may be held responsible, have been transported,
      treated, stored, handled, transferred, disposed, recycled or received.

    d. Neither
      Seller nor any other Person for whose conduct it is or may be held responsible
      has any Environmental, Health and Safety Liabilities with respect to any
      Facility or, to the Knowledge of Seller, with respect to any other property
      or
      asset (whether real, personal or mixed) in which Seller (or any predecessor)
      has
      or had an interest or at any property geologically or hydrologically adjoining
      any Facility or any such other property or asset. 

    e. There
      are
      no Hazardous Materials present on or in the Environment at any Facility or,
      to
      Seller’s Knowledge, after reasonable investigation, at any geologically or
      hydrologically adjoining property, including any Hazardous Materials contained
      in barrels, aboveground or underground storage tanks, landfills, land deposits,
      dumps, equipment (whether movable or fixed) or other containers, either
      temporary or permanent, and deposited or located in land, water, sumps, or
      any
      other part of the Facility or such adjoining property, or incorporated into
      any
      structure therein or thereon. Neither Seller nor any Person for whose conduct
      it
      is or may be held responsible, or to the Knowledge of Seller, any other Person,
      has permitted or conducted, or is aware of, any Hazardous Activity conducted
      with respect to any Facility or any other property or assets (whether real,
      personal or mixed) in which Seller has or had an interest except in full
      compliance with all applicable Environmental Laws. 

    
      
        
        

      

      
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    f. There
      has
      been no Release or, to the Knowledge of Seller, Threat of Release, of any
      Hazardous Materials at or from any Facility or at any other location where
      any
      Hazardous Materials were generated, manufactured, refined, transferred,
      produced, imported, used, or processed from or by any Facility, or from any
      other property or asset (whether real, personal or mixed) in which Seller has
      or
      had an interest, or to the Knowledge of Seller any geologically or
      hydrologically adjoining property, whether by Seller or any other Person.

    g. Seller
      has delivered to Buyer true and complete copies and results of any reports,
      studies, analyses, tests, or monitoring possessed or initiated by Seller
      pertaining to Hazardous Materials or Hazardous Activities in, on, or under
      the
      Facilities, or concerning compliance, by Seller or any other Person for whose
      conduct it is or may be held responsible, with Environmental Laws. 

     

    3.21
      EMPLOYEES 

     

    a. Exhibit
      3.21(a) contains a complete and accurate list of the following information
      for
      each employee, director, independent contractor, consultant and agent of Seller,
      including each employee on leave of absence or layoff status: name; job title;
      date of hiring or engagement; current compensation paid or payable and any
      change in compensation since January 1, 2003; sick and vacation leave that
      is
      accrued but unused; and service credited for purposes of vesting and eligibility
      to participate under any Employee Plan, or any other employee or director
      benefit plan. 

    b. Exhibit
      3.21(b) contains a complete and accurate list of the following information
      for
      each retired employee or director of Seller, or their dependents, receiving
      benefits or scheduled to receive benefits in the future: name; pension benefits;
      pension option election; retiree medical insurance coverage; retiree life
      insurance coverage; and other benefits. 

    c. Exhibit
      3.21(c) states the number of employees terminated by Seller since July 1, 2005,
      and contains a complete and accurate list of the following information for
      each
      employee of Seller who has been terminated or laid off, or whose hours of work
      have been reduced by more than fifty percent (50%) by Seller, in the six (6)
      months prior to the date of this Agreement: (i) the date of such termination,
      layoff or reduction in hours; and (ii) the reason for such termination, layoff
      or reduction in hours. 

    d. Seller
      has not violated the Worker Adjustment and Retraining Notification Act (the
      “WARN Act”) or any similar state or local Legal Requirement. Seller has
      terminated no employees during the ninety (90) day period prior to the date
      of
      this Agreement. 

    e. To
      the
      Knowledge of Seller, no officer, director, agent, employee, consultant, or
      contractor of Seller is bound by any Contract that purports to limit the ability
      of such officer, director, agent, employee, consultant, or contractor (i) to
      engage in or continue or perform any conduct, activity, duties or practice
      relating to the business of Seller or (ii) to assign to Seller or to any other
      Person any rights to any invention, improvement, or discovery. No former or
      current employee of Seller is a party to, or is otherwise bound by, any Contract
      that in any way adversely affected, affects, or will affect the ability of
      Seller or Buyer to conduct the business as heretofore carried on by Seller.
      

    
      
        
        

      

      
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    3.22
      LABOR DISPUTES; COMPLIANCE 

     

    a. Seller
      has complied in all respects with all Legal Requirements relating to employment
      practices, terms and conditions of employment, equal employment opportunity,
      nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
      the payment of social security and similar Taxes and occupational safety and
      health. Seller is not liable for the payment of any Taxes, fines, penalties,
      or
      other amounts, however designated, for failure to comply with any of the
      foregoing Legal Requirements. 

    b. Except
      as
      disclosed in Exhibit 3.22(b), (i) Seller has not been, and is not now, a party
      to any collective bargaining agreement or other labor contract; (ii) there
      has
      not been, there is not presently pending or existing, and to Seller’s Knowledge
      there is not threatened, any strike, slowdown, picketing, work stoppage or
      employee grievance process involving Seller; (iii) to Seller’s Knowledge no
      event has occurred or circumstance exists that could provide the basis for
      any
      work stoppage or other labor dispute; (iv) there is not pending or, to Seller’s
      Knowledge, threatened against or affecting Seller any Proceeding relating to
      the
      alleged violation of any Legal Requirement pertaining to labor relations or
      employment matters, including any charge or complaint filed with the National
      Labor Relations Board or any comparable Governmental Body, and there is no
      organizational activity or other labor dispute against or affecting Seller
      or
      the Facilities; (v) no application or petition for an election of or for
      certification of a collective bargaining agent is pending; (vi) no grievance
      or
      arbitration Proceeding exists that might have an adverse effect upon Seller
      or
      the conduct of its business; (vii) there is no lockout of any employees by
      Seller, and no such action is contemplated by Seller; and (viii) to Seller’s
      Knowledge there has been no charge of discrimination filed against or threatened
      against Seller with the Equal Employment Opportunity Commission or similar
      Governmental Body. 

     

    3.23
      INTELLECTUAL PROPERTY ASSETS 

     

    a. The
      term
“Intellectual Property Assets” means all intellectual property owned or licensed
      (as licensor or licensee) by Seller in which Seller has a proprietary interest,
      including: 

     

    (i) Seller’s
      name, all assumed fictional business names, trade names, registered and
      unregistered trademarks, service marks and applications (collectively, “Marks”);

    

    (ii) all
      patents, patent applications and inventions and discoveries that may be
      patentable (collectively, “Patents”); 

    

    (iii) all
      registered and unregistered copyrights in both published works and unpublished
      works (collectively, “Copyrights”); 

    

    (iv) all
      rights in mask works; 

    

    (v) all
      know-how, trade secrets, confidential or proprietary information, customer
      lists, Software, technical information, data, process technology, plans,
      drawings and blue prints (collectively, “Trade Secrets”); and 

    
      
        
        

      

      
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    (vi) all
      rights in internet web sites and internet domain names presently used by Seller
      (collectively “Net Names”). 

     

    b. Exhibit
      3.23(b) contains a complete and accurate list and summary description, including
      any royalties paid or received by Seller, and Seller has delivered to Buyer
      accurate and complete copies, of all Seller Contracts relating to the
      Intellectual Property Assets, except for any license implied by the sale of
      a
      product and perpetual, paid-up licenses for commonly available Software programs
      under which Seller is the licensee. There are no outstanding and, to Seller’s
      Knowledge, no threatened disputes or disagreements with respect to any such
      Contract. 

    

    c. Except
      as
      set forth in Exhibit 3.23(c), the Intellectual Property Assets are all those
      necessary for the operation of Seller’s business as it is currently conducted.
      Seller is the owner or licensee of all right, title and interest in and to
      each
      of the Intellectual Property Assets, free and clear of all Encumbrances, and
      has
      the right to use without payment to a Third Party all of the Intellectual
      Property Assets, other than in respect of licenses listed in Exhibit 3.23(c).
      

    

    d. Marks

    

    (i) Exhibit
      3.23(d) contains a complete and accurate list and summary description of all
      Marks. 

    

    (ii) Except
      as
      identified in Exhibit 3.23(d), all Marks have been registered with the United
      States Patent and Trademark Office, are currently in compliance with all formal
      Legal Requirements (including the timely post-registration filing of affidavits
      of use and incontestability and renewal applications), are valid and enforceable
      and are not subject to any maintenance fees or taxes or actions falling due
      within ninety (90) days after the Closing Date. 

    

    (iii) No
      Mark
      has been or is now involved in any opposition, invalidation or cancellation
      Proceeding and, to Seller’s Knowledge, no such action is threatened with respect
      to any of the Marks. 

    

    (iv) To
      Seller’s Knowledge, there is no potentially interfering trademark or trademark
      application of any other Person. 

    

    (v) No
      Mark
      is infringed or, to Seller’s Knowledge, has been challenged or threatened in any
      way. None of the Marks used by Seller infringes or is alleged to infringe any
      trade name, trademark or service mark of any other Person. 

    

    (vi) All
      products and materials containing a Mark bear the proper federal registration
      notice where permitted by law. 

     

    e. Trade
      Secrets

    

    (i) With
      respect to each Trade Secret, the documentation relating to such Trade Secret,
      if any, is current, accurate and sufficient in detail and content to identify
      and explain it and to allow its full and proper use without reliance on the
      knowledge or memory of any individual. 

    
      
        
        

      

      
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          -

        
          

        

      

      
        
        

      

    

    

    

    (ii) Seller
      has taken all reasonable precautions to protect the secrecy, confidentiality
      and
      value of all Trade Secrets (including the enforcement by Seller of a policy
      requiring each employee or contractor to execute proprietary information and
      confidentiality agreements substantially in Seller’s standard form, and all
      current and former employees and contractors of Seller have executed such an
      agreement). 

    

    (iii) Seller
      has good title to and an absolute right to use the Trade Secrets. The Trade
      Secrets are not part of the public knowledge or literature and, to Seller’s
      Knowledge, have not been used, divulged or appropriated either for the benefit
      of any Person (other than Seller) or to the detriment of Seller. No Trade Secret
      is subject to any adverse claim or has been challenged or threatened in any
      way
      or infringes any intellectual property right of any other Person. 

     

    f. Net
      Names

    

    (i) Exhibit
      3.23(f) contains a complete and accurate list and summary description of all
      Net
      Names. 

    

    (ii) All
      Net
      Names have been registered in the name of Seller and are in compliance with
      all
      formal Legal Requirements. 

    

    (iii) No
      Net
      Name has been or is now involved in any dispute, opposition, invalidation or
      cancellation Proceeding and, to Seller’s Knowledge, no such action is threatened
      with respect to any Net Name. 

    

      (iv) To
      Seller’s Knowledge, there is no domain name application pending of any other
      person which would or would potentially interfere with or infringe any Net
      Name.

    

      (v) No
      Net
      Name is infringed or, to Seller’s Knowledge, has been challenged, interfered
      with or threatened in any way. No Net Name infringes, interferes with or is
      alleged to interfere with or infringe the trademark, copyright or domain name
      of
      any other Person. 

     

    3.24
      COMPLIANCE WITH THE FOREIGN CORRUPT PRACTICES ACT AND EXPORT CONTROL AND
      ANTIBOYCOTT LAWS 

     

    a. Seller
      and its Representatives have not, to obtain or retain business, directly or
      indirectly offered, paid or promised to pay, or authorized the payment of,
      any
      money or other thing of value (including any fee, gift, sample, travel expense
      or entertainment with a value in excess of one hundred dollars ($100.00) in
      the
      aggregate to any one individual in any year) or any commission payment, to:
      

     

    (i) any
      person who is an official, officer, agent, employee or representative of any
      Governmental Body or of any existing or prospective customer (whether government
      owned or nongovernment owned); 

    
      
        
        

      

      
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    (ii) any
      political party or official thereof; 

    (iii) any
      candidate for political or political party office; or 

    (iv) any
      other
      individual or entity; 

     

    while
      knowing or having reason to believe that all or any portion of such money or
      thing of value would be offered, given, or promised, directly or indirectly,
      to
      any such official, officer, agent, employee, representative, political party,
      political party official, candidate, individual, or any entity affiliated with
      such customer, political party or official or political office. 

     

    b. Except
      as
      set forth in Exhibit 3.24(b), Seller has made all payments to Third Parties
      by
      check mailed to such Third Parties’ principal place of business or by wire
      transfer to a bank located in the same jurisdiction as such party’s principal
      place of business. 

    c. Each
      transaction is properly and accurately recorded on the books and Records of
      Seller, and each document upon which entries in Seller’s books and Records are
      based is complete and accurate in all respects. Seller maintains a system of
      internal accounting controls adequate to insure that Seller maintains no
      off-the-books accounts and that Seller’s assets are used only in accordance with
      Seller’s management directives. 

    d. Seller
      has at all times been in compliance with all Legal Requirements relating to
      export control and trade embargoes. No product sold or service provided by
      Seller during the last five (5) years has been, directly or indirectly, sold
      to
      or performed on behalf of Cuba, Iraq, Iran, Libya or North Korea. 

    e. Except
      as
      set forth in Exhibit 3.24(e), Seller has not violated the antiboycott
      prohibitions contained in 50 U.S.C. sect. 2401 et seq. or taken any action
      that
      can be penalized under Section 999 of the Code. Except as set forth in Exhibit
      3.24(e), during the last five (5) years, Seller has not been a party to, is
      not
      a beneficiary under and has not performed any service or sold any product under
      any Seller Contract under which a product has been sold to customers in Bahrain,
      Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi Arabia, Sudan, Syria,
      United Arab Emirates or the Republic of Yemen. 

    

    3.25
      RELATIONSHIPS WITH RELATED PERSONS 

     

    Except
      as
      disclosed in Exhibit 3.25, neither Seller nor the Shareholder nor any Related
      Person of any of them has, or has had, any interest in any property (whether
      real, personal or mixed and whether tangible or intangible) used in or
      pertaining to Seller’s business. Neither Seller, Shareholder nor any Related
      Person of any of them owns, or has owned, of record or as a beneficial owner,
      an
      equity interest or any other financial or profit interest in any Person that
      has
      (a) had business dealings or a material financial interest in any transaction
      with Seller other than business dealings or transactions disclosed in Exhibit
      3.25, each of which has been conducted in the Ordinary Course of Business with
      Seller at substantially prevailing market prices and on substantially prevailing
      market terms or (b) engaged in competition with Seller with respect to any
      line
      of the products or services of Seller (a “Competing Business”) in any market
      presently served by Seller, except for ownership of less than one percent (1%)
      of the outstanding capital stock of any Competing Business that is publicly
      traded on any recognized exchange or in the over-the-counter market. Except
      as
      set forth in Exhibit 3.25, neither Seller, Shareholder nor any Related Person
      of
      either of them is a party to any Contract with, or has any claim or right
      against, Seller. 

    
      
        
        

      

      
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    3.26
      BROKERS OR FINDERS 

     

    Neither
      Seller nor any of its Representatives have incurred any obligation or liability,
      contingent or otherwise, for brokerage or finders’ fees or agents’ commissions
      or other similar payments in connection with the sale of Seller’s business or
      the Assets or the Contemplated Transactions, except the liability of Seller
      to
      Pinnacle Capital Corporation. Seller and the Shareholder indemnify Buyer, its
      Shareholder, directors, officers, employees and agents from any liability for
      payment of the fee and related costs payable to Pinnacle Capital Corporation.
      

     

    3.27
      SECURITIES LAW MATTERS 

     

    Seller
      is
      acquiring the Secured Subordinated Promissory Note for its own account and
      not
      with a view to its distribution within the meaning of Section 2(11) of the
      Securities Act. 

    

    3.28
      SOLVENCY 

     

    a. Seller
      is
      not now insolvent and will not be rendered insolvent by any of the Contemplated
      Transactions. As used in this section, “insolvent” means that the sum of the
      debts and other probable Liabilities of Seller exceeds the present fair saleable
      value of Seller’s assets. 

    b. Immediately
      after giving effect to the consummation of the Contemplated Transactions: (i)
      Seller will be able to pay its Liabilities as they become due in the usual
      course of its business; (ii) Seller will not have unreasonably small capital
      with which to conduct its present or proposed business; (iii) Seller will have
      assets (calculated at fair market value) that exceed its Liabilities; and (iv)
      taking into account all pending and threatened litigation, 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 promptly 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. The cash available to Seller, after taking
      into account all other anticipated uses of the cash, will be sufficient to
      pay
      all such debts and judgments promptly in accordance with their terms.

     

    3.29
      DISCLOSURE 

     

    a. No
      representation or warranty or other statement made by Seller or the Shareholder
      in this Agreement, any Exhibit hereto, the certificates delivered pursuant
      to
      Section 2.7(a) or otherwise in connection with the Contemplated Transactions
      contains any untrue statement or omits to state a material fact necessary to
      make any of them, in light of the circumstances in which it was made, not
      misleading. 

    b. Seller
      does not have Knowledge of any fact, after reasonable investigation, that has
      specific application to Seller (other than general economic or industry
      conditions) and that may materially adversely affect the assets, business,
      prospects, financial condition or results of operations of Seller that has
      not
      been set forth in this Agreement. 

     

    

    
      
        
        

      

      
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    SECTION
      4

    REPRESENTATIONS
      AND WARRANTIES OF BUYER

     

    Buyer
      represents and warrants to Seller and Shareholder as follows: 

     

    4.1
      ORGANIZATION AND GOOD STANDING 

     

    Buyer
      is
      a corporation duly organized, validly existing and in good standing under the
      laws of the State of Delaware, with full corporate power and authority to
      conduct its business as it is now conducted. 

     

    4.2
      AUTHORITY; NO CONFLICT 

     

    a. This
      Agreement constitutes the legal, valid and binding obligation of Buyer,
      enforceable against Buyer in accordance with its terms. Upon the execution
      and
      delivery by Buyer of the Assignment and Assumption Agreement, the Consulting
      Agreement, the Secured Subordinated Promissory Note, the Security Agreement,
      the
      Lease and each other agreement to be executed or delivered by Buyer at Closing
      (collectively, the “Buyer’s Closing Documents”), each of the Buyer’s Closing
      Documents will constitute the legal, valid and binding obligation of Buyer,
      enforceable against Buyer in accordance with its respective terms. Buyer has
      the
      absolute and unrestricted right, power and authority to execute and deliver
      this
      Agreement and the Buyer’s Closing Documents and to perform its obligations under
      this Agreement and the Buyer’s Closing Documents, and such action has been duly
      authorized by all necessary corporate action. 

    b. Neither
      the execution and delivery of this Agreement by Buyer nor the consummation
      or
      performance of any of the Contemplated Transactions by Buyer will give any
      Person the right to prevent, delay or otherwise interfere with any of the
      Contemplated Transactions pursuant to: 

     

    (i) any
      provision of Buyer’s Governing Documents; 

    (ii) any
      resolution adopted by the board of directors or the Shareholder of Buyer;

    (iii) any
      Legal
      Requirement or Order to which Buyer may be subject; or 

    (iv) any
      Contract to which Buyer is a party or by which Buyer may be bound. 

     

    Buyer
      is
      not and will not be required to obtain any Consent from any Person in connection
      with the execution and delivery of this Agreement or the consummation or
      performance of any of the Contemplated Transactions. 

     

    4.3
      CERTAIN PROCEEDINGS 

     

    There
      is
      no pending Proceeding that has been commenced against Buyer and that challenges,
      or may have the effect of preventing, delaying, making illegal or otherwise
      interfering with, any of the Contemplated Transactions. To Buyer’s Knowledge, no
      such Proceeding has been threatened. 

     

    
      
        
        

      

      
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    4.4
      BROKERS OR FINDERS 

     

    Neither
      Buyer nor any of its Representatives have incurred any obligation or liability,
      contingent or otherwise, for brokerage or finders’ fees or agents’ commissions
      or other similar payment in connection with the Contemplated Transactions.
      

     

    SECTION
      5

    COVENANTS
      OF SELLER PRIOR TO CLOSING

     

    5.1
      ACCESS AND INVESTIGATION 

     

    Between
      the date of this Agreement and the Closing Date, and upon reasonable advance
      notice received from Buyer, Seller shall (and Shareholder shall cause Seller
      to)
      (a) afford Buyer and its Representatives and prospective lenders and their
      Representatives (collectively, “Buyer Group”) full and free access, during
      regular business hours, to Seller’s personnel, properties (including subsurface
      testing), Contracts, Governmental Authorizations, books and Records and other
      documents and data, such rights of access to be exercised in a manner that
      does
      not unreasonably interfere with the operations of Seller; (b) furnish Buyer
      Group with copies of all such Contracts, Governmental Authorizations, books
      and
      Records and other existing documents and data as Buyer may reasonably request;
      (c) furnish Buyer Group with such additional financial, operating and other
      relevant data and information as Buyer may reasonably request; and (d) otherwise
      cooperate and assist, to the extent reasonably requested by Buyer, with Buyer’s
      investigation of the properties, assets and financial condition related to
      Seller. In addition, Buyer shall have the right to have the Real Property and
      Tangible Personal Property inspected by Buyer Group, at Buyer’s sole cost and
      expense, for purposes of determining the physical condition and legal
      characteristics of the Real Property and Tangible Personal Property. In the
      event subsurface or other destructive testing is recommended by any of Buyer
      Group, Buyer shall be permitted to have the same performed. Buyer shall restore
      the Real Property as close to its pre-test condition as is reasonably
      practicable.

     

    5.2
      OPERATION OF THE BUSINESS OF SELLER 

     

    Between
      the date of this Agreement and the Closing, Seller shall (and Shareholder shall
      cause Seller to): 

     

    a. conduct
      its business only in the Ordinary Course of Business; 

    b. except
      as
      otherwise directed by Buyer in writing, and without making any commitment on
      Buyer’s behalf, use its Best Efforts to preserve intact its current business
      organization, keep available the services of its officers, employees and agents
      and maintain its relations and good will with suppliers, customers, landlords,
      creditors, employees, agents and others having business relationships with
      it;

    c. confer
      with Buyer prior to implementing operational decisions of a material nature,
      other than in the Ordinary Course of Business; 

    d. otherwise
      report periodically to Buyer concerning the status of its business, operations
      and finances; 

    
      
        
        

      

      
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    e. make
      no
      material changes in management personnel without prior consultation with Buyer;
      

    f. maintain
      the Assets in a state of repair and condition that complies with Legal
      Requirements and is consistent with the requirements and normal conduct of
      Seller’s business; 

    g. keep
      in
      full force and effect, without amendment, all material rights relating to
      Seller’s business; 

    h. comply
      with all Legal Requirements and contractual obligations applicable to the
      operations of Seller’s business; 

    i. continue
      in full force and effect the insurance coverage under the policies set forth
      in
      Exhibit 3.19 or substantially equivalent policies; 

    j. except
      as
      required to comply with ERISA or to maintain qualification under Section 401(a)
      of the Code, not amend, modify or terminate any Employee Plan without the
      express written consent of Buyer, and except as required under the provisions
      of
      any Employee Plan, not make any contributions to or with respect to any Employee
      Plan without the express written consent of Buyer, provided that Seller shall
      contribute that amount of cash to each Employee Plan necessary to fully fund
      all
      of the benefit liabilities of such Employee Plan on a plan-termination basis
      as
      of the Closing Date; 

    k. cooperate
      with Buyer and assist Buyer in identifying the Governmental Authorizations
      required by Buyer to operate the business from and after the Closing Date and
      either transferring existing Governmental Authorizations of Seller to Buyer,
      where permissible, or obtaining new Governmental Authorizations for Buyer;
      

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

    m. maintain
      all books and Records of Seller relating to Seller’s business in the Ordinary
      Course of Business. 

     

    5.3
      NEGATIVE COVENANT 

     

    Except
      as
      otherwise expressly permitted herein, between the date of this Agreement and
      the
      Closing Date, Seller shall not, and Shareholder shall not permit Seller to,
      without the prior written Consent of Buyer, (a) take any affirmative action,
      or
      fail to take any reasonable action within its control, as a result of which
      any
      of the changes or events listed in Sections 3.13 or 3.17 would be likely to
      occur; (b) make any modification to any material Contract or Governmental
      Authorization, other than in the Ordinary Course of Business; (c) allow the
      levels of finished goods, supplies or other materials included in the
      Inventories to vary materially from the levels customarily maintained; or (d)
      enter into any compromise or settlement of any litigation, proceeding or
      governmental investigation relating to the Assets, the business of Seller or
      the
      Assumed Liabilities. 

     

    
      
        
        

      

      
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    5.4
      REQUIRED APPROVALS 

     

    As
      promptly as practicable after the date of this Agreement, Seller shall make
      all
      filings required by Legal Requirements to be made by it in order to consummate
      the Contemplated Transactions. Seller and Shareholder also shall cooperate
      with
      Buyer and its Representatives with respect to all filings that Buyer elects
      to
      make or, pursuant to Legal Requirements, shall be required to make in connection
      with the Contemplated Transactions. Seller and Shareholder also shall cooperate
      with Buyer and its Representatives in obtaining all Material Consents (including
      taking all actions requested by Buyer to cause early termination of any
      applicable waiting period under the HSR Act). 

     

    5.5
      NOTIFICATION 

     

    Between
      the date of this Agreement and the Closing, Seller and Shareholder shall
      promptly notify Buyer in writing if any of them becomes aware of (a) any fact
      or
      condition that causes or constitutes a Breach of any of Seller’s representations
      and warranties made as of the date of this Agreement or (b) the occurrence
      after
      the date of this Agreement of any fact or condition that would or be reasonably
      likely to (except as expressly contemplated by this Agreement) cause or
      constitute a Breach of any such representation or warranty had that
      representation or warranty been made as of the time of the occurrence of, or
      Seller’s or the Shareholder’s discovery of, such fact or condition. Such
      delivery shall not affect any rights of Buyer under Section 9.2 and Article
      11.
      During the same period, Seller and Shareholder also shall promptly notify Buyer
      of the occurrence of any Breach of any covenant of Seller or Shareholder in
      this
      Article 5 or of the occurrence of any event that may make the satisfaction
      of
      the conditions in Article 7 impossible or unlikely. 

     

    5.6
      NO
      NEGOTIATION 

     

    Until
      such time as this Agreement shall be terminated pursuant to Section 9.1, neither
      Seller nor the Shareholder shall directly or indirectly solicit, initiate,
      encourage or entertain any inquiries or proposals from, discuss or negotiate
      with, provide any nonpublic information to or consider the merits of any
      inquiries or proposals from any Person (other than Buyer) relating to any
      business combination transaction involving Seller, including the sale by
      Shareholder of Seller’s stock, the merger or consolidation of Seller or the sale
      of Seller’s business or any of the Assets (other than in the Ordinary Course of
      Business). Seller and Shareholder shall notify Buyer of any such inquiry or
      proposal within twenty-four (24) hours of receipt or awareness of the same
      by
      Seller or the Shareholder. 

     

    5.7
      BEST
      EFFORTS 

     

    Seller
      and Shareholder shall use their Best Efforts to cause the conditions in Article
      7 and Section 8.3 to be satisfied. 

     

    5.8
      INTERIM FINANCIAL STATEMENTS 

     

    Until
      the
      Closing Date, Seller shall deliver to Buyer within ten (10) days after the
      end
      of each month a copy of the balance sheet and income statement for such month
      prepared in a manner and containing information consistent with Seller’s current
      accountant-prepared, unaudited financial statements. 

     

    
      
        
        

      

      
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    5.9
      CHANGE OF NAME 

     

    On
      or
      before the Closing Date, Seller shall (a) amend its Governing Documents and
      take
      all other actions necessary to change its name to one sufficiently dissimilar
      to
      Seller’s present name, in Buyer’s judgment, to avoid confusion and (b) take all
      actions requested by Buyer to enable Buyer to change its name to Seller’s
      present name. In the event that Seller shall assume from the Buyer an
      uncollectible account receivable and then collect such account receivable,
      Buyer
      shall cooperate with Seller to enable it to negotiate for Seller’s benefit a
      check that may be payable to “Freundlich Supply Company, Inc.” or similar
      name.

     

    5.10
      PAYMENT OF LIABILITIES 

     

    Seller
      shall pay or otherwise satisfy in the Ordinary Course of Business all of its
      Liabilities and obligations. Buyer and Seller hereby waive compliance with
      the
      bulk-transfer provisions of the Uniform Commercial Code (or any similar law)
      (“Bulk Sales Laws”) in connection with the Contemplated Transactions.

     

    SECTION
      6

    COVENANTS
      OF BUYER PRIOR TO CLOSING

     

    6.1
      REQUIRED APPROVALS 

     

    As
      promptly as practicable after the date of this Agreement, Buyer shall make,
      or
      cause to be made, all filings required by Legal Requirements to be made by
      it to
      consummate the Contemplated Transactions. Buyer also shall cooperate, and cause
      its Related Persons to cooperate, with Seller (a) with respect to all filings
      Seller shall be required by Legal Requirements to make and (b) in obtaining
      all
      Consents identified in Exhibit 3.2(c), provided, however, that Buyer shall
      not
      be required to dispose of or make any change to its business, expend any
      material funds or incur any other burden in order to comply with this Section
      6.1. 

     

    6.2
      BEST
      EFFORTS 

     

    Buyer
      shall use its Best Efforts to cause the conditions in Article 8 and Section
      7.3
      to be satisfied. 

     

    SECTION
      7

    CONDITIONS
      PRECEDENT TO BUYER’S OBLIGATION TO CLOSE

     

    Buyer’s
      obligation to purchase the Assets and to take the other actions required to
      be
      taken by Buyer at the Closing is subject to the satisfaction, at or prior to
      the
      Closing, of each of the following conditions (any of which may be waived by
      Buyer, in whole or in part): 

     

    
      
        
        

      

      
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    7.1
      ACCURACY OF REPRESENTATIONS 

     

    a. All
      of
      Seller’s and Shareholder’s representations and warranties in this Agreement
      (considered collectively), and each of these representations and warranties
      (considered individually), shall have been accurate in all material respects
      as
      of the date of this Agreement, and shall be accurate in all material respects
      as
      of the time of the Closing as if then made. 

    b. Each
      of
      the representations and warranties in Sections 3.2(a) and 3.4, and each of
      the
      representations and warranties in this Agreement that contains an express
      materiality qualification, shall have been accurate in all respects as of the
      date of this Agreement, and shall be accurate in all respects as of the time
      of
      the Closing as if then made. 

     

    7.2
      SELLER’S PERFORMANCE 

     

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

     

    7.3
      CONSENTS 

     

    Each
      of
      the Consents identified in Exhibit 7.3 (the “Material Consents”) shall have been
      obtained and shall be in full force and effect. 

     

    7.4
      ADDITIONAL DOCUMENTS 

     

    Seller
      and Shareholder shall have caused the documents and instruments required by
      Section 2.7(a) and the following documents to be delivered (or tendered subject
      only to Closing) to Buyer: 

     

    a. an
      opinion of Howard J. Kerker, Esquire, dated the Closing Date, in the form of
      Exhibit 7.4(a); 

    b. The
      articles of incorporation and all amendments thereto of Seller, duly certified
      as of a recent date by the Secretary of State of the jurisdiction of Seller’s
      incorporation (Exhibit 7.4(b)); 

    c. If
      requested by Buyer, any Consents or other instruments that may be required
      to
      permit Buyer’s qualification in each jurisdiction in which Seller is licensed or
      qualified to do business as a foreign corporation under the name “Freundlich
      Supply Company” or any derivative thereof; 

    c. Releases
      of all Encumbrances on the Assets, other than Permitted Encumbrances;

    d. Certificates
      dated as of a date not earlier than the third business day prior to the Closing
      as to the good standing of Seller and payment of all applicable State Taxes
      by
      Seller, executed by the appropriate officials of the State of New York and
      each
      jurisdiction in which Seller is licensed or qualified to do business as a
      foreign corporation as specified in Exhibit 3.1(a); and 

    e. Such
      other documents as Buyer may reasonably request for the purpose of:

     

    (i) evidencing
      the accuracy of any of Seller’s representations and warranties; 

    (ii) evidencing
      the performance by Seller or the Shareholder of, or the compliance by Seller
      or
      the Shareholder with, any covenant or obligation required to be performed or
      complied with by Seller or such Shareholder; 

    
      
        
        

      

      
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    (iii) evidencing
      the satisfaction of any condition referred to in this Article 7; or

    (iv) otherwise
      facilitating the consummation or performance of any of the Contemplated
      Transactions. 

     

    7.5
      NO
      PROCEEDINGS 

     

    Since
      the
      date of this Agreement, there shall not have been commenced or threatened
      against Buyer, or against any Related Person of Buyer, any Proceeding (a)
      involving any challenge to, or seeking Damages or other relief in connection
      with, any of the Contemplated Transactions or (b) that may have the effect
      of
      preventing, delaying, making illegal, imposing limitations or conditions on
      or
      otherwise interfering with any of the Contemplated Transactions. 

     

    7.6
      NO
      CONFLICT 

     

    Neither
      the consummation nor the performance of any of the Contemplated Transactions
      will, directly or indirectly (with or without notice or lapse of time),
      contravene or conflict with or result in a violation of or cause Buyer or any
      Related Person of Buyer to suffer any adverse consequence under (a) any
      applicable Legal Requirement or Order or (b) any Legal Requirement or Order
      that
      has been published, introduced or otherwise proposed by or before any
      Governmental Body, excluding Bulk Sales Laws. 

     

    7.7
      GOVERNMENTAL AUTHORIZATIONS 

     

    Buyer
      shall have received such Governmental Authorizations as are necessary or
      desirable to allow Buyer to operate the Assets from and after the Closing.
      

     

    7.8
      ENVIRONMENTAL REPORT 

     

    Buyer
      shall have received an environmental site assessment report with respect to
      Seller’s Facilities, which report shall be acceptable in form and substance to
      Buyer in its sole discretion. 

     

    7.9
      WARN
      ACT NOTICE PERIODS AND EMPLOYEES 

     

    a. All
      requisite notice periods under the Warn Act shall have expired. 

    b. Substantially
      all employees of Seller shall be available for hiring by Buyer, in its sole
      discretion, on and as of the Closing Date. 

     

    

    SECTION
      8

    CONDITIONS
      PRECEDENT TO SELLER’S OBLIGATION TO CLOSE

     

    Seller’s
      obligation to sell the Assets and to take the other actions required to be
      taken
      by Seller at the Closing is subject to the satisfaction, at or prior to the
      Closing, of each of the following conditions (any of which may be waived by
      Seller in whole or in part): 

     

    
      
        
        

      

      
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    8.1
      ACCURACY OF REPRESENTATIONS 

     

    All
      of
      Buyer’s representations and warranties in this Agreement (considered
      collectively), and each of these representations and warranties (considered
      individually), shall have been accurate in all material respects as of the
      date
      of this Agreement and shall be accurate in all material respects as of the
      time
      of the Closing as if then made. 

     

    8.2
      BUYER’S PERFORMANCE 

     

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

     

    8.3
      CONSENTS 

     

    Each
      of
      the Consents identified in Exhibit 8.3 shall have been obtained and shall be
      in
      full force and effect. 

     

    8.4
      ADDITIONAL DOCUMENTS 

     

    Buyer
      shall have caused the documents and instruments required by Section 2.7(b)
      and
      the following documents to be delivered (or tendered subject only to Closing)
      to
      Seller and Shareholder: 

     

    a. an
      opinion of Sichenzia Ross Friedman Ference LLP, dated the Closing Date, in
      the
      form of Exhibit 2.7(b)(vii); and 

    b. such
      other documents as Seller may reasonably request for the purpose of

     

    (i) evidencing
      the accuracy of any representation or warranty of Buyer, 

    (ii) evidencing
      the performance by Buyer of, or the compliance by Buyer with, any covenant
      or
      obligation required to be performed or complied with by Buyer or 

    (iii) evidencing
      the satisfaction of any condition referred to in this Article 8. 

     

    8.5
      NO
      INJUNCTION 

     

    There
      shall not be in effect any Legal Requirement or any injunction or other Order
      that (a) prohibits the consummation of the Contemplated Transactions and (b)
      has
      been adopted or issued, or has otherwise become effective, since the date of
      this Agreement. 

     

    
      
        
        

      

      
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    SECTION
      9

    TERMINATION

     

    9.1
      TERMINATION EVENTS 

     

    By
      notice
      given prior to or at the Closing, subject to Section 9.2, this Agreement may
      be
      terminated as follows: 

     

    a. by
      Buyer
      if a material Breach of any provision of this Agreement has been committed
      by
      Seller or Shareholder and such Breach has not been waived by Buyer;

    b. by
      Seller
      if a material Breach of any provision of this Agreement has been committed
      by
      Buyer and such Breach has not been waived by Seller; 

    c. by
      Buyer
      if any condition in Article 7 has not been satisfied as of the date specified
      for Closing in the first sentence of Section 2.6 or if satisfaction of such
      a
      condition by such date is or becomes impossible (other than through the failure
      of Buyer to comply with its obligations under this Agreement), and Buyer has
      not
      waived such condition on or before such date; 

    d. by
      Seller
      if any condition in Article 8 has not been satisfied as of the date specified
      for Closing in the first sentence of Section 2.6 or if satisfaction of such
      a
      condition by such date is or becomes impossible (other than through the failure
      of Seller or the Shareholder to comply with their obligations under this
      Agreement), and Seller has not waived such condition on or before such date;
      

    e. by
      mutual
      consent of Buyer and Seller; 

    f. by
      Buyer
      if the Closing has not occurred on or before June 30, 2006, or such later date
      as the parties may agree upon, unless the Buyer is in material Breach of this
      Agreement; or 

    g. by
      Seller
      if the Closing has not occurred on or before June 30, 2006, or such later date
      as the parties may agree upon, unless the Seller or Shareholder are in material
      Breach of this Agreement. 

     

    9.2
      EFFECT OF TERMINATION 

     

    a. Each
      party’s right of termination under Section 9.1 is in addition to any other
      rights it may have under this Agreement or otherwise, and the exercise of such
      right of termination will not be an election of remedies. If this Agreement
      is
      terminated pursuant to Section 9.1, all obligations of the parties under this
      Agreement will terminate, except that the obligations of the parties in this
      Section 9.2 and Articles 12 and 13 (except for those in Section 13.5) will
      survive, provided, however, that, if this Agreement is terminated because of
      a
      Breach of this Agreement by the nonterminating party or because one or more
      of
      the conditions to the terminating party’s obligations under this Agreement is
      not satisfied as a result of the party’s failure to comply with its obligations
      under this Agreement, the terminating party’s right to pursue all legal remedies
      will survive such termination unimpaired. 

    

    b. In
      the
      event the Agreement shall be terminated by Buyer under Sections 9.1(a) or
      9.1(c), the Escrow Deposit, and all interest earned thereon, shall be returned
      to Buyer. In this event, all obligations of the Escrow Agent shall
      cease.

    
      
        
        

      

      
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    c. In
      the
      event the Agreement shall be terminated for any other reason, the Escrow
      Deposit, and all interest earned thereon, shall be paid to Seller as liquidated
      damages. In this event, all obligations of the Escrow Agent shall
      cease.

     

    SECTION
      10

    ADDITIONAL
      COVENANTS

     

    10.1
      EMPLOYEES AND EMPLOYEE BENEFITS 

     

    a. Information
      on Active Employees. For the purpose of this Agreement, the term “Active
      Employees” shall mean all employees employed on the Closing Date by Seller for
      its business who are: 

     

    (i) bargaining
      unit employees currently covered by a collective bargaining agreement; or

    (ii) employed
      exclusively in Seller’s business as currently conducted, including employees on
      temporary leave of absence, including family medical leave, military leave,
      temporary disability or sick leave, but excluding employees on long-term
      disability leave. 

     

    b. Employment
      of Active Employees by Buyer. 

     

    (i) Buyer
      is
      not obligated to hire any Active Employee but may interview all Active
      Employees. Buyer will provide Seller with a list of Active Employees to whom
      Buyer has made an offer of employment that has been accepted to be effective
      on
      the Closing Date (the “Hired Active Employees”). Subject to Legal Requirements,
      Buyer will have reasonable access to the Facilities and personnel Records
      (including performance appraisals, disciplinary actions, grievances and medical
      Records) of Seller for the purpose of preparing for and conducting employment
      interviews with all Active Employees and will conduct the interviews as
      expeditiously as possible prior to the Closing Date. Access will be provided
      by
      Seller upon reasonable prior notice during normal business hours. Effective
      immediately before the Closing, Seller will terminate the employment of all
      of
      its Hired Active Employees. 

    (ii) Neither
      Seller nor the Shareholder nor their Related Persons shall solicit the continued
      employment of any Active Employee (unless and until Buyer has informed Seller
      in
      writing that the particular Active Employee will not receive any employment
      offer from Buyer) or the employment of any Hired Active Employee after the
      Closing. Buyer shall inform Seller promptly of the identities of those Active
      Employees to whom it will not make employment offers, and Seller shall assist
      Buyer in complying with the WARN Act as to those Active Employees. 

    (iii) It
      is
      understood and agreed that (A) Buyer’s expressed intention to extend offers of
      employment as set forth in this section shall not constitute any commitment,
      Contract or understanding (expressed or implied) of any obligation on the part
      of Buyer to a post-Closing employment relationship of any fixed term or duration
      or upon any terms or conditions other than those that Buyer may establish
      pursuant to individual offers of employment, and (B) employment offered by
      Buyer
      is “at will” and may be terminated by Buyer or by an employee at any time for
      any reason (subject to any written commitments to the contrary made by Buyer
      or
      an employee and Legal Requirements). Nothing in this Agreement shall be deemed
      to prevent or restrict in any way the right of Buyer to terminate, reassign,
      promote or demote any of the Hired Active Employees after the Closing or to
      change adversely or favorably the title, powers, duties, responsibilities,
      functions, locations, salaries, other compensation or terms or conditions of
      employment of such employees. 

    
      
        
        

      

      
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    c. Salaries
      and Benefits. 

     

    (i) Seller
      shall be responsible for (A) the payment of all wages and other remuneration
      due
      to Active Employees with respect to their services as employees of Seller
      through the close of business on the Closing Date, including pro rata bonus
      payments and all vacation pay earned prior to the Closing Date; (B) the payment
      of any termination or severance payments and the provision of health plan
      continuation coverage in accordance with the requirements of COBRA and Sections
      601 through 608 of ERISA; and (C) any and all payments to employees required
      under the WARN Act. 

    (ii) Seller
      shall be liable for any claims made or incurred by Active Employees and their
      beneficiaries through the Closing Date under the Employee Plans. For purposes
      of
      the immediately preceding sentence, a charge will be deemed incurred, in the
      case of hospital, medical or dental benefits, when the services that are the
      subject of the charge are performed and, in the case of other benefits (such
      as
      disability or life insurance), when an event has occurred or when a condition
      has been diagnosed that entitles the employee to the benefit. 

     

    c. Seller’s
      Retirement Plans. All Hired Active Employees who are participants in Seller’s
      retirement plans shall retain their accrued benefits under Seller’s retirement
      plans as of the Closing Date, and Seller (or Seller’s retirement plans) shall
      retain sole liability for the payment of such benefits as and when such Hired
      Active Employees become eligible therefor under such plans. All Hired Active
      Employees shall become fully vested in their accrued benefits under Seller’s
      retirement plans as of the Closing Date, and Seller will so amend such plans
      if
      necessary to achieve this result. Seller shall cause the assets of each Employee
      Plan to equal or exceed the benefit liabilities of such Employee Plan on a
      plan-termination basis as of the Closing. 

    

    d. No
      Transfer of Assets. Neither Seller nor Shareholder nor their respective Related
      Persons will make any transfer of pension or other employee benefit plan assets
      to Buyer. 

     

    e. General
      Employee Provisions. 

     

    (i) Seller
      and Buyer shall give any notices required by Legal Requirements and take
      whatever other actions with respect to the plans, programs and policies
      described in this Section 10.1 as may be necessary to carry out the arrangements
      described in this Section 10.1. 

    (ii) Seller
      and Buyer shall provide each other with such plan documents and summary plan
      descriptions, employee data or other information as may be reasonably required
      to carry out the arrangements described in this Section 10.1. 

    (iii) If
      any of
      the arrangements described in this Section 10.1 are determined by the IRS or
      other Governmental Body to be prohibited by law, Seller and Buyer shall modify
      such arrangements to as closely as possible reflect their expressed intent
      and
      retain the allocation of economic benefits and burdens to the parties
      contemplated herein in a manner that is not prohibited by law. 

    
      
        
        

      

      
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    (iv) Seller
      shall provide Buyer with completed I-9 forms and attachments with respect to
      all
      Hired Active Employees, except for such employees as Seller certifies in writing
      to Buyer are exempt from such requirement. 

    (v) Buyer
      shall not have any responsibility, liability or obligation, whether to Active
      Employees, former employees, their beneficiaries or to any other Person, with
      respect to any employee benefit plans, practices, programs or arrangements
      (including the establishment, operation or termination thereof and the
      notification and provision of COBRA coverage extension) maintained by Seller.
      

     

    10.2
      PAYMENT OF ALL TAXES RESULTING FROM SALE OF ASSETS BY SELLER 

     

    Seller
      shall pay in a timely manner all Taxes resulting from or payable in connection
      with the sale of the Assets pursuant to this Agreement, regardless of the Person
      on whom such Taxes are imposed by Legal Requirements, except that Buyer shall
      pay one-half of all sales taxes imposed on the transfer of the Assets.

     

    10.3
      PAYMENT OF OTHER RETAINED LIABILITIES 

     

    In
      addition to payment of Taxes pursuant to Section 10.2, Seller shall pay, or
      make
      adequate provision for the payment, in full all of the Retained Liabilities
      and
      other Liabilities of Seller under this Agreement. If any such Liabilities are
      not so paid or provided for, or if Buyer reasonably determines that failure
      to
      make any payments will impair Buyer’s use or enjoyment of the Assets or conduct
      of the business previously conducted by Seller with the Assets, Buyer may,
      at
      any time after the Closing Date, elect to make all such payments directly (but
      shall have no obligation to do so) and set off and deduct the full amount of
      all
      such payments from the first maturing installments of the unpaid principal
      balance of the Secured Subordinated Promissory Note pursuant to Section 11.8.
      Buyer shall receive full credit under the Secured Subordinated Promissory Note
      and this Agreement for all payments so made. 

     

    10.4
      REMOVING EXCLUDED ASSETS 

     

    On
      or
      before the Closing Date, Seller shall remove all Excluded Assets from all
      Facilities and other Real Property to be occupied by Buyer. Such removal shall
      be done in such manner as to avoid any damage to the Facilities and other
      properties to be occupied by Buyer and any disruption of the business operations
      to be conducted by Buyer after the Closing. Any damage to the Assets or to
      the
      Facilities resulting from such removal shall be paid by Seller at the Closing.
      Should Seller fail to remove the Excluded Assets as required by this Section,
      Buyer shall have the right, but not the obligation, (a) to remove the Excluded
      Assets at Seller’s sole cost and expense; (b) to store the Excluded Assets and
      to charge Seller all storage costs associated therewith; (c) to treat the
      Excluded Assets as unclaimed and to proceed to dispose of the same under the
      laws governing unclaimed property; or (d) to exercise any other right or remedy
      conferred by this Agreement or otherwise available at law or in equity. Seller
      shall promptly reimburse Buyer for all costs and expenses incurred by Buyer
      in
      connection with any Excluded Assets not removed by Seller on or before the
      Closing Date. 

    
      
        
        

      

      
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    10.5
      REPORTS AND RETURNS 

     

    Seller
      shall promptly after the Closing prepare and file all reports and returns
      required by Legal Requirements relating to the business of Seller as conducted
      using the Assets, to and including the Closing. 

     

    10.6
      ASSISTANCE IN PROCEEDINGS 

     

    Seller
      will cooperate with Buyer and its counsel in the contest or defense of, and
      make
      available its personnel and provide any testimony and access to its books and
      Records in connection with, any Proceeding involving or relating to (a) any
      Contemplated Transaction or (b) any action, activity, circumstance, condition,
      conduct, event, fact, failure to act, incident, occurrence, plan, practice,
      situation, status or transaction on or before the Closing Date involving Seller
      or its business or the Shareholder. 

     

    10.7
      NONCOMPETITION, NONSOLICITATION AND NONDISPARAGEMENT 

     

    a. Noncompetition.
      For a period of five (5) years after the Closing Date, neither Seller nor
      Shareholder shall, anywhere in the United States, directly or indirectly invest
      in, own, manage, operate, finance, control, advise, render services to or
      guarantee the obligations of any Person engaged in or planning to become engaged
      in the Business of the Seller (“Competing Business”), provided, however, that
      Seller may purchase or otherwise acquire up to (but not more than) five percent
      (5%) of any class of the securities of any Person (but may not otherwise
      participate in the activities of such Person) if such securities are listed
      on
      any national or regional securities exchange or have been registered under
      Section 12(g) of the Exchange Act. 

    b. Nonsolicitation.
      For a period of five (5) years after the Closing Date, neither Seller nor
      Shareholder shall, directly or indirectly: 

     

    (i) solicit
      the business of any Person who is a customer of Buyer; 

    (ii) cause,
      induce or attempt to cause or induce any customer, supplier, licensee, licensor,
      franchisee, employee, consultant or other business relation of Buyer to cease
      doing business with Buyer, to deal with any competitor of Buyer or in any way
      interfere with its relationship with Buyer; 

    (iii) cause,
      induce or attempt to cause or induce any customer, supplier, licensee, licensor,
      franchisee, employee, consultant or other business relation of Seller on the
      Closing Date or within the year preceding the Closing Date to cease doing
      business with Buyer, to deal with any competitor of Buyer or in any way
      interfere with its relationship with Buyer; or 

    (iv) hire,
      retain or attempt to hire or retain any employee or independent contractor
      of
      Buyer or in any way interfere with the relationship between Buyer and any of
      its
      employees or independent contractors. 

     

    c. Nondisparagement.
      After the Closing Date, neither Seller nor Shareholder shall disparage Buyer
      or
      any of Buyer’s shareholders, directors, officers, employees or agents.

    
      
        
        

      

      
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    d. Modification
      of Covenant. If a final judgment of a court or tribunal of competent
      jurisdiction determines that any term or provision contained in Section 10.7(a)
      through (c) is invalid or unenforceable, then the parties agree that the court
      or tribunal will have the power to reduce the scope, duration or geographic
      area
      of the term or provision, to delete specific words or phrases or to replace
      any
      invalid or unenforceable term or provision with a term or provision that is
      valid and enforceable and that comes closest to expressing the intention of
      the
      invalid or unenforceable term or provision. This Section 10.7 will be
      enforceable as so modified after the expiration of the time within which the
      judgment may be appealed. This Section 10.7 is reasonable and necessary to
      protect and preserve Buyer’s legitimate business interests and the value of the
      Assets and to prevent any unfair advantage conferred on Seller. 

     

    10.8
      CUSTOMER AND OTHER BUSINESS RELATIONSHIPS 

     

    After
      the
      Closing, Seller and Shareholder will cooperate with Buyer in its efforts to
      continue and maintain for the benefit of Buyer those business relationships
      of
      Seller existing prior to the Closing and relating to the business to be operated
      by Buyer after the Closing, including relationships with lessors, employees,
      regulatory authorities, licensors, customers, suppliers and others, and Seller
      will satisfy the Retained Liabilities in a manner that is not detrimental to
      any
      of such relationships. Seller and Shareholder will refer to Buyer all inquiries
      relating to such business. Neither Seller nor any of its officers, employees,
      agents or the Shareholder shall take any action that would tend to diminish
      the
      value of the Assets after the Closing or that would interfere with the business
      of Buyer to be engaged in after the Closing, including disparaging the name
      or
      business of Buyer. 

     

    10.9
      RETENTION OF AND ACCESS TO RECORDS 

     

    After
      the
      Closing Date, Buyer shall retain for a period consistent with Buyer’s
      record-retention policies and practices those Records of Seller delivered to
      Buyer. Buyer also shall provide Seller and Shareholder and their Representatives
      reasonable access thereto, during normal business hours and on at least three
      days’ prior written notice, to enable them to prepare financial statements or
      tax returns or deal with tax audits. After the Closing Date, Seller shall
      provide Buyer and its Representatives reasonable access to Records that are
      Excluded Assets, during normal business hours and on at least three days’ prior
      written notice, for any reasonable business purpose specified by Buyer in such
      notice. 

     

    10.10
      FURTHER ASSURANCES 

     

    Subject
      to the proviso in Section 6.1, the parties shall cooperate reasonably with
      each
      other and with their respective Representatives in connection with any steps
      required to be taken as part of their respective obligations under this
      Agreement, and shall (a) furnish upon request to each other such further
      information; (b) execute and deliver to each other such other documents; and
      (c)
      do such other acts and things, all as the other party may reasonably request
      for
      the purpose of carrying out the intent of this Agreement and the Contemplated
      Transactions. 

     

    
      
        
        

      

      
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    SECTION
      11

    INDEMNIFICATION;
      REMEDIES

     

    11.1
      SURVIVAL 

     

    All
      representations, warranties, covenants and obligations in this Agreement, the
      certificates delivered pursuant to Section 2.7 and any other certificate or
      document delivered pursuant to this Agreement shall survive the Closing and
      the
      consummation of the Contemplated Transactions, subject to Section 11.7. The
      right to indemnification, reimbursement or other remedy based upon such
      representations, warranties, covenants and obligations shall not be affected
      by
      any investigation (including any environmental investigation or assessment)
      conducted with respect to, or any Knowledge acquired (or capable of being
      acquired) at any time, whether before or after the execution and delivery of
      this Agreement or the Closing Date, with respect to the accuracy or inaccuracy
      of or compliance with any such representation, warranty, covenant or obligation.
      The waiver of any condition based upon the accuracy of any representation or
      warranty, or on the performance of or compliance with any covenant or
      obligation, will not affect the right to indemnification, reimbursement or
      other
      remedy based upon such representations, warranties, covenants and obligations.
      

     

    11.2
      INDEMNIFICATION AND REIMBURSEMENT BY SELLER AND SHAREHOLDER 

     

    Seller
      and each Shareholder, jointly and severally, will indemnify and hold harmless
      Buyer, and its Representatives, shareholders, subsidiaries and Related Persons
      (collectively, the “Buyer Indemnified Persons”), and will reimburse the Buyer
      Indemnified Persons for any loss, liability, claim, damage, expense (including
      costs of investigation and defense and reasonable attorneys’ fees and expenses)
      or diminution of value, whether or not involving a Third-Party Claim
      (collectively, “Damages”), arising from or in connection with: 

     

    a. any
      Breach of any representation or warranty made by Seller or the Shareholder
      in
      (i) this Agreement (ii) the certificates delivered pursuant to Section 2.7
      (for
      this purpose, each such certificate will be deemed to have stated that Seller’s
      and the Shareholder’s representations and warranties in this Agreement fulfill
      the requirements of Section 7.1 as of the Closing Date as if made on the Closing
      Date), (iii) any transfer instrument or (iv) any other certificate, document,
      writing or instrument delivered by Seller or the Shareholder pursuant to this
      Agreement; 

    b. any
      Breach of any covenant or obligation of Seller or the Shareholder in this
      Agreement or in any other certificate, document, writing or instrument delivered
      by Seller or the Shareholder pursuant to this Agreement; 

    c. any
      Liability arising out of the ownership or operation of the Assets prior to
      the
      Closing other than the Assumed Liabilities; 

    d. any
      brokerage or finder’s fees or commissions or similar payments based upon any
      agreement or understanding made, or alleged to have been made, by any Person
      with Seller or the Shareholder (or any Person acting on their behalf) in
      connection with any of the Contemplated Transactions; 

    e. any
      product or component thereof manufactured by or shipped, or any services
      provided by, Seller, in whole or in part, prior to the Closing Date;

    
      
        
        

      

      
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    f. any
      noncompliance with any Bulk Sales Laws or fraudulent transfer law in respect
      of
      the Contemplated Transactions; 

    g. any
      liability under the WARN Act or any similar state or local Legal Requirement
      that may result from an “Employment Loss”, as defined by 29 U.S.C. sect.
      2101(a)(6), caused by any action of Seller prior to the Closing or by Buyer’s
      decision not to hire previous employees of Seller; 

    h. any
      Employee Plan established or maintained by Seller; or 

    i. any
      Retained Liabilities. 

     

    11.3
      INDEMNIFICATION AND REIMBURSEMENT BY SELLER-- ENVIRONMENTAL MATTERS

     

    In
      addition to the other indemnification provisions in this Article 11, Seller
      and
      each Shareholder, jointly and severally, will indemnify and hold harmless Buyer
      and the other Buyer Indemnified Persons, and will reimburse Buyer and the other
      Buyer Indemnified Persons, for any Damages (including costs of cleanup,
      containment or other remediation) arising from or in connection with:

     

    a. any
      Environmental, Health and Safety Liabilities arising out of or relating to:
      (i)
      the ownership or operation by any Person at any time on or prior to the Closing
      Date of any of the Facilities, Assets or the business of Seller, or (ii) any
      Hazardous Materials or other contaminants that were present on the Facilities
      or
      Assets at any time on or prior to the Closing Date; or 

    b. any
      bodily injury (including illness, disability and death, regardless of when
      any
      such bodily injury occurred, was incurred or manifested itself), personal
      injury, property damage (including trespass, nuisance, wrongful eviction and
      deprivation of the use of real property) or other damage of or to any Person
      or
      any Assets in any way arising from or allegedly arising from any Hazardous
      Activity conducted by any Person with respect to the business of Seller or
      the
      Assets prior to the Closing Date or from any Hazardous Material that was (i)
      present or suspected to be present on or before the Closing Date on or at the
      Facilities (or present or suspected to be present on any other property, if
      such
      Hazardous Material emanated or allegedly emanated from any Facility and was
      present or suspected to be present on any Facility, on or prior to the Closing
      Date) or (ii) Released or allegedly Released by any Person on or at any
      Facilities or Assets at any time on or prior to the Closing Date. 

     

    Buyer
      will be entitled to control any Remedial Action, any Proceeding relating to
      an
      Environmental Claim and, except as provided in the following sentence, any
      other
      Proceeding with respect to which indemnity may be sought under this Section
      11.3. The procedure described in Section 11.9 will apply to any claim solely
      for
      monetary damages relating to a matter covered by this Section 11.3.

     

    11.4
      INDEMNIFICATION AND REIMBURSEMENT BY BUYER 

     

    Buyer
      will indemnify and hold harmless Seller, and will reimburse Seller, for any
      Damages arising from or in connection with: 

     

    
      
        
        

      

      
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    a. any
      Breach of any representation or warranty made by Buyer in this Agreement or
      in
      any certificate, document, writing or instrument delivered by Buyer pursuant
      to
      this Agreement; 

    b. any
      Breach of any covenant or obligation of Buyer in this Agreement or in any other
      certificate, document, writing or instrument delivered by Buyer pursuant to
      this
      Agreement; 

    c. any
      claim
      by any Person for brokerage or finder’s fees or commissions or similar payments
      based upon any agreement or understanding alleged to have been made by such
      Person with Buyer (or any Person acting on Buyer’s behalf) in connection with
      any of the Contemplated Transactions; 

    d. any
      Assumed Liabilities; or

    e. any
      liability arising out of the ownership or operation of the Assets after the
      Closing, other than the Retained Liabilities

     

    11.5
      LIMITATIONS ON AMOUNT-- SELLER AND SHAREHOLDER 

     

    Seller
      and Shareholder shall have no liability (for indemnification or otherwise)
      with
      respect to claims under Section 11.2(a) until the total of all Damages with
      respect to such matters exceeds twenty-five thousand dollars ($25,000). Total
      damages shall not exceed the Purchase Price. However, this Section 11.5 will
      not
      apply to claims under Section 11.2(c) through (i) or to matters arising in
      respect of Sections 3.14, 3.20, 3.29, or to any Breach of any of Seller’s and
      Shareholder’s representations and warranties of which the Seller had Knowledge,
      after reasonable investigation, at any time prior to the date on which such
      representation and warranty is made or any intentional Breach by Seller or
      the
      Shareholder of any covenant or obligation, and Seller and the Shareholder will
      be jointly and severally liable for all Damages with respect to such Breaches.
      

     

    11.6
      LIMITATIONS ON AMOUNT-- BUYER 

     

    Buyer
      will have no liability (for indemnification or otherwise) with respect to claims
      under Section 11.4(a) until the total of all Damages with respect to such
      matters exceeds twenty-five thousand dollars ($25,000). However, this Section
      11.6 will not apply to claims under Section 11.4(c), 11.4(d), 11.4(e) or matters
      arising in respect of Section 4.4 or to any Breach of any of Buyer’s
      representations and warranties of which Buyer had Knowledge at any time prior
      to
      the date on which such representation and warranty is made or any intentional
      Breach by Buyer of any covenant or obligation, and Buyer will be liable for
      all
      Damages with respect to such Breaches. 

     

    11.7
      TIME
      LIMITATIONS 

     

    (a) If
      the
      Closing occurs, Seller and Shareholder will have liability (for indemnification
      or otherwise) with respect to any Breach of (i) a covenant or obligation to
      be
      performed or complied with prior to the Closing Date (other than those in
      Sections 2.1 and 2.4(b) and Articles 10 and 12, as to which a claim may be
      made
      at any time) or (ii) a representation or warranty, only if Buyer notifies Seller
      or Shareholder on or before May 31, 2009 of a claim specifying the factual
      basis
      of the claim in reasonable detail to the extent then known by Buyer.

    
      
        
        

      

      
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    (b) If
      the
      Closing occurs, Buyer will have liability (for indemnification or otherwise)
      with respect to any Breach of (i) a covenant or obligation to be performed
      or
      complied with prior to the Closing Date (other than those in Article 12, as
      to
      which a claim may be made at any time) or (ii) a representation or warranty,
      only if Seller or Shareholder notify Buyer on or before May 31, 2009 of a claim
      specifying the factual basis of the claim in reasonable detail to the extent
      then known by Seller or the Shareholder. 

     

    11.8
      RIGHT OF SETOFF 

     

    Upon
      notice to Seller specifying in reasonable detail the basis therefor, Buyer
      may
      propose to set off any amount to which it may be entitled under this Article
      11
      against amounts otherwise payable under the Secured Subordinated Promissory.
      Any
      amount so proposed shall be deposited by Buyer into an escrow account maintained
      by its attorney until such claim is agreed to by the parties or otherwise
      finally determined. The proposal to exercise such right of setoff by Buyer
      in
      good faith, whether or not ultimately determined to be justified, will not
      constitute an event of default under the Secured Subordinated Promissory Note
      or
      any instrument securing the Secured Subordinated Promissory Note. Neither the
      exercise of nor the failure to exercise such right of setoff or to give a notice
      of a claim will constitute an election of remedies or limit Buyer in any manner
      in the enforcement of any other remedies that may be available to it.

     

    11.9
      THIRD-PARTY CLAIMS 

     

    a. Promptly
      after receipt by a Person entitled to indemnity under Section 11.2, 11.3 (to
      the
      extent provided in the last sentence of Section 11.3) or 11.4 (an “Indemnified
      Person”) of notice of the assertion of a Third-Party Claim against it, such
      Indemnified Person shall give notice to the Person obligated to indemnify under
      such Section (an “Indemnifying Person”) of the assertion of such Third-Party
      Claim, provided that the failure to notify the Indemnifying Person will not
      relieve the Indemnifying Person of any liability that it may have to any
      Indemnified Person, except to the extent that the Indemnifying Person
      demonstrates that the defense of such Third-Party Claim is prejudiced by the
      Indemnified Person’s failure to give such notice. 

    b. If
      an
      Indemnified Person gives notice to the Indemnifying Person pursuant to Section
      11.9(a) of the assertion of a Third-Party Claim, the Indemnifying Person shall
      be entitled to participate in the defense of such Third-Party Claim and, to
      the
      extent that it wishes (unless (i) the Indemnifying Person is also a Person
      against whom the Third-Party Claim is made and the Indemnified Person determines
      in good faith that joint representation would be inappropriate or (ii) the
      Indemnifying Person fails to provide reasonable assurance to the Indemnified
      Person of its financial capacity to defend such Third-Party Claim and provide
      indemnification with respect to such Third-Party Claim), to assume the defense
      of such Third-Party Claim with counsel satisfactory to the Indemnified Person.
      After notice from the Indemnifying Person to the Indemnified Person of its
      election to assume the defense of such Third-Party Claim, the Indemnifying
      Person shall not, so long as it diligently conducts such defense, be liable
      to
      the Indemnified Person under this Article 11 for any fees of other counsel
      or
      any other expenses with respect to the defense of such Third-Party Claim, in
      each case subsequently incurred by the Indemnified Person in connection with
      the
      defense of such Third-Party Claim, other than reasonable costs of investigation.
      If the Indemnifying Person assumes the defense of a Third-Party Claim, (i)
      such
      assumption will conclusively establish for purposes of this Agreement that
      the
      claims made in that Third-Party Claim are within the scope of and subject to
      indemnification, and (ii) no compromise or settlement of such Third-Party Claims
      may be effected by the Indemnifying Person without the Indemnified Person’s
      Consent unless (A) there is no finding or admission of any violation of Legal
      Requirement or any violation of the rights of any Person; (B) the sole relief
      provided is monetary damages that are paid in full by the Indemnifying Person;
      and (C) the Indemnified Person shall have no liability with respect to any
      compromise or settlement of such Third-Party Claims effected without its
      Consent. If notice is given to an Indemnifying Person of the assertion of any
      Third-Party Claim and the Indemnifying Person does not, within ten (10) days
      after the Indemnified Person’s notice is given, give notice to the Indemnified
      Person of its election to assume the defense of such Third-Party Claim, the
      Indemnifying Person will be bound by any determination made in such Third-Party
      Claim or any compromise or settlement effected by the Indemnified Person.

    
      
        
        

      

      
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    c. Notwithstanding
      the foregoing, if an Indemnified Person determines in good faith that there
      is a
      reasonable probability that a Third-Party Claim may adversely affect it or
      its
      Related Persons other than as a result of monetary damages for which it would
      be
      entitled to indemnification under this Agreement, the Indemnified Person may,
      by
      notice to the Indemnifying Person, assume the exclusive right to defend,
      compromise or settle such Third-Party Claim, but the Indemnifying Person will
      not be bound by any determination of any Third-Party Claim so defended for
      the
      purposes of this Agreement or any compromise or settlement effected without
      its
      Consent (which may not be unreasonably withheld). 

    d. Notwithstanding
      the provisions of Section 13.4, Seller and each Shareholder hereby consent
      to
      the nonexclusive jurisdiction of any court in which a Proceeding in respect
      of a
      Third-Party Claim is brought against any Buyer Indemnified Person for purposes
      of any claim that a Buyer Indemnified Person may have under this Agreement
      with
      respect to such Proceeding or the matters alleged therein and agree that process
      may be served on Seller and Shareholder with respect to such a claim anywhere
      in
      the world. 

    e. With
      respect to any Third-Party Claim subject to indemnification under this Article
      11: (i) both the Indemnified Person and the Indemnifying Person, as the case
      may
      be, shall keep the other Person fully informed of the status of such Third-Party
      Claim and any related Proceedings at all stages thereof where such Person is
      not
      represented by its own counsel, and (ii) the parties agree (each at its own
      expense) to render to each other such assistance as they may reasonably require
      of each other and to cooperate in good faith with each other in order to ensure
      the proper and adequate defense of any Third-Party Claim. 

    f. With
      respect to any Third-Party Claim subject to indemnification under this Article
      11, the parties agree to cooperate in such a manner as to preserve in full
      (to
      the extent possible) the confidentiality of all Confidential Information and
      the
      attorney-client and work-product privileges. In connection therewith, each
      party
      agrees that: (i) it will use its Best Efforts, in respect of any Third-Party
      Claim in which it has assumed or participated in the defense, to avoid
      production of Confidential Information (consistent with applicable law and
      rules
      of procedure), and (ii) all communications between any party hereto and counsel
      responsible for or participating in the defense of any Third-Party Claim shall,
      to the extent possible, be made so as to preserve any applicable attorney-client
      or work-product privilege. 

     

    

    
      
        
        

      

      
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    11.10
      OTHER CLAIMS 

    

     

    A
      claim
      for indemnification for any matter not involving a Third-Party Claim may be
      asserted by notice to the party from whom indemnification is sought and shall
      be
      paid promptly after such notice. 

     

    SECTION
      12

    CONFIDENTIALITY

     

    12.1
      DEFINITION OF CONFIDENTIAL INFORMATION 

     

    a. As
      used
      in this Article 12, the term “Confidential Information” includes any and all of
      the following information of Seller, Buyer or Shareholder that has been or
      may
      hereafter be disclosed in any form, whether in writing, orally, electronically
      or otherwise, or otherwise made available by observation, inspection or
      otherwise by either party (Buyer on the one hand or Seller and Shareholder,
      collectively, on the other hand) or its Representatives (collectively, a
“Disclosing Party”) to the other party or its Representatives (collectively, a
“Receiving Party”): 

     

    (i) all
      information that is a trade secret under applicable trade secret or other law;
      

    (ii) all
      information concerning product specifications, data, know-how, formulae,
      compositions, processes, designs, sketches, photographs, graphs, drawings,
      samples, inventions and ideas, past, current and planned research and
      development, current and planned manufacturing or distribution methods and
      processes, customer lists, current and anticipated customer requirements, price
      lists, market studies, business plans, computer hardware, Software and computer
      software and database technologies, systems, structures and architectures;
      

    (iii) all
      information concerning the business and affairs of the Disclosing Party (which
      includes historical and current financial statements, financial projections
      and
      budgets, tax returns and accountants’ materials, historical, current and
      projected sales, capital spending budgets and plans, business plans, strategic
      plans, marketing and advertising plans, publications, client and customer lists
      and files, contracts, the names and backgrounds of key personnel and personnel
      training techniques and materials, however documented), and all information
      obtained from review of the Disclosing Party’s documents or property or
      discussions with the Disclosing Party regardless of the form of the
      communication; and 

    (iv) all
      notes, analyses, compilations, studies, summaries and other material prepared
      by
      the Disclosing Party to the extent containing or based, in whole or in part,
      upon any information included in the foregoing. 

     

    b. Any
      trade
      secrets of a Disclosing Party shall also be entitled to all of the protections
      and benefits under applicable trade secret law and any other applicable law.
      If
      any information that a Disclosing Party deems to be a trade secret is found
      by a
      court of competent jurisdiction not to be a trade secret for purposes of this
      Article 12, such information shall still be considered Confidential Information
      of that Disclosing Party for purposes of this Article 12 to the extent included
      within the definition. In the case of trade secrets, each of Buyer, Seller
      and
      Shareholder hereby waives any requirement that the other party submit proof
      of
      the economic value of any trade secret or post a bond or other security.

     

    
      
        
        

      

      
        -
          59
          -

        
          

        

      

      
        
        

      

    

    

    12.2
      RESTRICTED USE OF CONFIDENTIAL INFORMATION 

     

    a. Each
      Receiving Party acknowledges the confidential and proprietary nature of the
      Confidential Information of the Disclosing Party and agrees that such
      Confidential Information (i) shall be kept confidential by the Receiving Party;
      (ii) shall not be used for any reason or purpose other than to evaluate and
      consummate the Contemplated Transactions; and (iii) without limiting the
      foregoing, shall not be disclosed by the Receiving Party to any Person, except
      in each case as otherwise expressly permitted by the terms of this Agreement
      or
      with the prior written consent of an authorized representative of Seller with
      respect to Confidential Information of Seller or Shareholder (each, a “Seller
      Contact”) or an authorized representative of Buyer with respect to Confidential
      Information of Buyer (each, a “Buyer Contact”). Each of Buyer and Seller and
      Shareholder shall disclose the Confidential Information of the other party
      only
      to its Representatives who require such material for the purpose of evaluating
      the Contemplated Transactions and are informed by Buyer, Seller or Shareholder,
      as the case may be, of the obligations of this Article 12 with respect to such
      information. Each of Buyer, Seller and Shareholder shall (iv) enforce the terms
      of this Article 12 as to its respective Representatives; (v) take such action
      to
      the extent necessary to cause its Representatives to comply with the terms
      and
      conditions of this Article 12; and (vi) be responsible and liable for any breach
      of the provisions of this Article 12 by it or its Representatives. 

    b. Unless
      and until this Agreement is terminated, Seller and each Shareholder shall
      maintain as confidential any Confidential Information (including for this
      purpose any information of Seller or Shareholder of the type referred to in
      Sections 12.1(a)(i), (ii) and (iii), whether or not disclosed to Buyer) of
      the
      Seller or Shareholder relating to any of the Assets or the Assumed Liabilities.
      Notwithstanding the preceding sentence, Seller may use any Confidential
      Information of Seller before the Closing in the Ordinary Course of Business
      in
      connection with the transactions permitted by Section 5.2. 

    c. From
      and
      after the Closing, the provisions of Section 12.2(a) above shall not apply
      to or
      restrict in any manner Buyer’s use of any Confidential Information of the Seller
      or Shareholder relating to any of the Assets or the Assumed Liabilities.

     

    12.3
      EXCEPTIONS 

     

    Sections
      12.2(a) and (b) do not apply to that part of the Confidential Information of
      a
      Disclosing Party that a Receiving Party demonstrates (a) was, is or becomes
      generally available to the public other than as a result of a breach of this
      Article 12 or the Confidentiality Agreement by the Receiving Party or its
      Representatives; (b) was or is developed by the Receiving Party independently
      of
      and without reference to any Confidential Information of the Disclosing Party;
      or (c) was, is or becomes available to the Receiving Party on a nonconfidential
      basis from a Third Party not bound by a confidentiality agreement or any legal,
      fiduciary or other obligation restricting disclosure. Neither Seller nor the
      Shareholder shall disclose any Confidential Information of Seller or Shareholder
      relating to any of the Assets or the Assumed Liabilities in reliance on the
      exceptions in clauses (b) or (c) above. 

     

    

    
      
        
        

      

      
        -
          60
          -

        
          

        

      

      
        
        

      

    

    

    12.4
      LEGAL PROCEEDINGS 

     

    If
      a
      Receiving Party becomes compelled in any Proceeding or is requested by a
      Governmental Body having regulatory jurisdiction over the Contemplated
      Transactions to make any disclosure that is prohibited or otherwise constrained
      by this Article 12, that Receiving Party shall provide the Disclosing Party
      with
      prompt notice of such compulsion or request so that it may seek an appropriate
      protective order or other appropriate remedy or waive compliance with the
      provisions of this Article 12. In the absence of a protective order or other
      remedy, the Receiving Party may disclose that portion (and only that portion)
      of
      the Confidential Information of the Disclosing Party that, based upon advice
      of
      the Receiving Party’s counsel, the Receiving Party is legally compelled to
      disclose or that has been requested by such Governmental Body, provided,
      however, that the Receiving Party shall use reasonable efforts to obtain
      reliable assurance that confidential treatment will be accorded by any Person
      to
      whom any Confidential Information is so disclosed. The provisions of this
      Section 12.4 do not apply to any Proceedings between the parties to this
      Agreement. 

     

    12.5
      RETURN OR DESTRUCTION OF CONFIDENTIAL INFORMATION 

     

    If
      this
      Agreement is terminated, each Receiving Party shall (a) destroy all Confidential
      Information of the Disclosing Party prepared or generated by the Receiving
      Party
      without retaining a copy of any such material; (b) promptly deliver to the
      Disclosing Party all other Confidential Information of the Disclosing Party,
      together with all copies thereof, in the possession, custody or control of
      the
      Receiving Party or, alternatively, with the written consent of a Seller Contact
      or a Buyer Contact (whichever represents the Disclosing Party) destroy all
      such
      Confidential Information; and (c) certify all such destruction in writing to
      the
      Disclosing Party, provided, however, that the Receiving Party may retain a
      list
      that contains general descriptions of the information it has returned or
      destroyed to facilitate the resolution of any controversies after the Disclosing
      Party’s Confidential Information is returned. 

     

    12.6
      ATTORNEY-CLIENT PRIVILEGE 

     

    The
      Disclosing Party is not waiving, and will not be deemed to have waived or
      diminished, any of its attorney work product protections, attorney-client
      privileges or similar protections and privileges as a result of disclosing
      its
      Confidential Information (including Confidential Information related to pending
      or threatened litigation) to the Receiving Party, regardless of whether the
      Disclosing Party has asserted, or is or may be entitled to assert, such
      privileges and protections. The parties (a) share a common legal and commercial
      interest in all of the Disclosing Party’s Confidential Information that is
      subject to such privileges and protections; (b) are or may become joint
      defendants in Proceedings to which the Disclosing Party’s Confidential
      Information covered by such protections and privileges relates; (c) intend
      that
      such privileges and protections remain intact should either party become subject
      to any actual or threatened Proceeding to which the Disclosing Party’s
      Confidential Information covered by such protections and privileges relates;
      and
      (d) intend that after the Closing the Receiving Party shall have the right
      to
      assert such protections and privileges. No Receiving Party shall admit, claim
      or
      contend, in Proceedings involving either party or otherwise, that any Disclosing
      Party waived any of its attorney work-product protections, attorney-client
      privileges or similar protections and privileges with respect to any
      information, documents or other material not disclosed to a Receiving Party
      due
      to the Disclosing Party disclosing its Confidential Information (including
      Confidential Information related to pending or threatened litigation) to the
      Receiving Party. 

     

    
      
        
        

      

      
        -
          61
          -

        
          

        

      

      
        
        

      

    

    

    SECTION
      13

    GENERAL
      PROVISIONS

     

    13.1
      EXPENSES 

     

    Except
      as
      otherwise provided in this Agreement, each party to this Agreement will bear
      its
      respective fees and expenses incurred in connection with the preparation,
      negotiation, execution and performance of this Agreement and the Contemplated
      Transactions, including all fees and expense of its Representatives. If this
      Agreement is terminated, the obligation of each party to pay its own fees and
      expenses will be subject to any rights of such party arising from a Breach
      of
      this Agreement by another party. 

     

    13.2
      PUBLIC ANNOUNCEMENTS AND DISCLOSURES

     

    Any
      public announcement, press release or similar publicity with respect to this
      Agreement or the Contemplated Transactions will be issued, if at all, at such
      time and in such manner as Buyer determines. Except with the prior consent
      of
      Buyer or as permitted by this Agreement, neither Seller, Shareholder nor any
      of
      their Representatives shall disclose to any Person (a) the fact that any
      Confidential Information of Seller or Shareholder has been disclosed to Buyer
      or
      its Representatives, that Buyer or its Representatives have inspected any
      portion of the Confidential Information of Seller or Shareholder, that any
      Confidential Information of Buyer has been disclosed to Seller, Shareholder
      or
      their Representatives or that Seller, Shareholder or their Representatives
      have
      inspected any portion of the Confidential Information of Buyer or (b) any
      information about the Contemplated Transactions, including the status of such
      discussions or negotiations, the execution of any documents (including this
      Agreement) or any of the terms of the Contemplated Transactions or the related
      documents (including this Agreement). Seller and Buyer will consult with each
      other concerning the means by which Seller’s employees, customers, suppliers and
      others having dealings with Seller will be informed of the Contemplated
      Transactions, and Buyer will have the right to be present for any such
      communication. Buyer retains the right to disclose this Agreement in its
      entirety in public filings with the U.S. Securities and Exchange
      Commission.

     

    13.3
      NOTICES 

     

    All
      notices, Consents, waivers and other communications required or permitted by
      this Agreement shall be in writing and shall be deemed given to a party when
      (a)
      delivered to the appropriate address by hand or by nationally recognized
      overnight courier service (costs prepaid); (b) sent by facsimile or e-mail
      with
      confirmation of transmission by the transmitting equipment; or (c) received
      or
      rejected by the addressee, if sent by certified mail, return receipt requested,
      in each case to the following addresses, facsimile numbers or e-mail addresses
      and marked to the attention of the person (by name or title) designated below
      (or to such other address, facsimile number, e-mail address or person as a
      party
      may designate by notice to the other parties): 

    
      
        
        

      

      
        -
          62
          -

        
          

        

      

      
        
        

      

    

    

     

    Seller
      (before the Closing):      Freundlich
      Supply Company, Inc.

    2200
      Arthur Kill Road

    Staten
      Island, NY 10309 

    Attention:
      Michael Freundlich 

    Fax
      no.:
      (718) 356-3661 

    E-mail
      address: inspector1492@aol.com 

     

    with
      a
      mandatory copy to:       
 Howard
      J.
      Kerker, Esquire

    600
      Madison Avenue

    22nd
      Floor

    New
      York,
      NY 10022

    Fax
      no.:
      (212) 758-1747 

    E-mail
      address: hjkpc@aol.com 

     

    Seller
      (after the Closing):     
Freundlich
      Supply Company, Inc.

    2200
      Arthur Kill Road

    Staten
      Island, NY 10309 

    Attention:
      Michael Freundlich 

    Fax
      no.:
      (718) 356-3661 

    E-mail
      address: inspector1492@aol.com

     

    with
      a
      mandatory copy to:        
Howard
      J.
      Kerker, Esquire

    600
      Madison Avenue

    22nd
      Floor

    New
      York,
      NY 10022

    Fax
      no.:
      (212) 758-1747

    E-mail
      address: hjkpc@aol.com 

     

    Shareholder:        Michael
      Freundlich

    2200
      Arthur Kill Road

    Staten
      Island, NY 10309 

    Fax
      no.:
      (718) 356-3661 

    E-mail
      address: inspector1492@aol.com

     

    with
      a
      mandatory copy to:        
Howard
      J.
      Kerker, Esquire

    600
      Madison Avenue

    22nd
      Floor

    New
      York,
      NY 10022

    Fax
      no.:
      (212) (212) 758-1747

    E-mail
      address: hjkpc@aol.com

     

    
      
        
        

      

      
        -
          63
          -

        
          

        

      

      
        
        

      

    

    

    

    Buyer:         Delaware
      Fastener Acquisition Corporation

    P.
      O. Box
      2127

    Jenkintown,
      PA 19046

    Attention:
      Alex Katz

    Fax
      no.:
      (215) 885-6281

    E-mail
      address: katza@comcast.net

     

    with
      a
      mandatory copy to:        
Sichenzia
      Ross Friedman Ference LLP

    1065
      Avenue of the Americas

    New
      York,
      NY 10018

    Attention:
      Darrin M. Ocasio, Esq.

    Fax
      no.:
      (212) 930-9725

    E-mail
      address: dmocasio@srff.com

     

    13.4
      JURISDICTION; SERVICE OF PROCESS 

     

    Any
      Proceeding arising out of or relating to this Agreement or any Contemplated
      Transaction may be brought in the courts of the State of New York, County of New
      York, or, if it has or can acquire jurisdiction, in the United States District
      Court for the Southern District of New York, and each of the parties irrevocably
      submits to the exclusive jurisdiction of each such court in any such Proceeding,
      waives any objection it may now or hereafter have to venue or to convenience
      of
      forum, agrees that all claims in respect of the Proceeding shall be heard and
      determined only in any such court and agrees not to bring any Proceeding arising
      out of or relating to this Agreement or any Contemplated Transaction in any
      other court. The parties agree that either or both of them may file a copy
      of
      this paragraph with any court as written evidence of the knowing, voluntary
      and
      bargained agreement between the parties irrevocably to waive any objections
      to
      venue or to convenience of forum. Process in any Proceeding referred to in
      the
      first sentence of this section may be served on any party anywhere in the world.
      

     

    13.5
      ENFORCEMENT OF AGREEMENT 

     

    Buyer,
      Seller and Shareholder acknowledge and agree that each respective party would
      be
      irreparably damaged if any of the provisions of this Agreement are not performed
      in accordance with their specific terms and that any Breach of this Agreement
      by
      either party could not be adequately compensated in all cases by monetary
      damages alone. Accordingly, in addition to any other right or remedy to which
      a
      party hereto may be entitled, at law or in equity, it shall be entitled to
      enforce any provision of this Agreement by a decree of specific performance
      and
      to temporary, preliminary and permanent injunctive relief to prevent Breaches
      or
      threatened Breaches of any of the provisions of this Agreement, without posting
      any bond or other undertaking. 

     

    
      
        
        

      

      
        -
          64
          -

        
          

        

      

      
        
        

      

    

    

    13.6
      WAIVER; REMEDIES CUMULATIVE 

     

    The
      rights and remedies of the parties to this Agreement are cumulative and not
      alternative. Neither any failure nor any delay by any party in exercising any
      right, power or privilege under this Agreement or any of the documents referred
      to in this Agreement will operate as a waiver of such right, power or privilege,
      and no single or partial exercise of any such right, power or privilege will
      preclude any other or further exercise of such right, power or privilege or
      the
      exercise of any other right, power or privilege. To the maximum extent permitted
      by applicable law, (a) no claim or right arising out of this Agreement or any
      of
      the documents referred to in this Agreement can be discharged by one party,
      in
      whole or in part, by a waiver or renunciation of the claim or right unless
      in
      writing signed by the other party; (b) no waiver that may be given by a party
      will be applicable except in the specific instance for which it is given; and
      (c) no notice to or demand on one party will be deemed to be a waiver of any
      obligation of that party or of the right of the party giving such notice or
      demand to take further action without notice or demand as provided in this
      Agreement or the documents referred to in this Agreement. 

     

    13.7
      ENTIRE AGREEMENT AND MODIFICATION 

     

    This
      Agreement supersedes all prior agreements, whether written or oral, between
      the
      parties with respect to its subject matter (including any letter of intent
      and
      any confidentiality agreement between Buyer and Seller) and constitutes (along
      with the Exhibits and other documents delivered pursuant to this Agreement)
      a
      complete and exclusive statement of the terms of the agreement between the
      parties with respect to its subject matter. This Agreement may not be amended,
      supplemented, or otherwise modified except by a written agreement executed
      by
      the party to be charged with the amendment. 

     

    13.8
      ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS 

     

    No
      party
      may assign any of its rights or delegate any of its obligations under this
      Agreement without the prior written consent of the other parties, except that
      Buyer may assign any of its rights and delegate any of its obligations under
      this Agreement to any Subsidiary of Buyer and may collaterally assign its rights
      hereunder to any financial institution providing financing in connection with
      the Contemplated Transactions. Subject to the preceding sentence, this Agreement
      will apply to, be binding in all respects upon and inure to the benefit of
      the
      successors and permitted assigns of the parties. Nothing expressed or referred
      to in this Agreement will be construed to give any Person other than the parties
      to this Agreement any legal or equitable right, remedy or claim under or with
      respect to this Agreement or any provision of this Agreement, except such rights
      as shall inure to a successor or permitted assignee pursuant to this Section
      13.9. 

     

    13.9
      SEVERABILITY 

     

    If
      any
      provision of this Agreement is held invalid or unenforceable by any court of
      competent jurisdiction, the other provisions of this Agreement will remain
      in
      full force and effect. Any provision of this Agreement held invalid or
      unenforceable only in part or degree will remain in full force and effect to
      the
      extent not held invalid or unenforceable. 

     

     

    
      
        
        

      

      
        -
          65
          -

        
          

        

      

      
        
        

      

    

    

    

    13.10
      CONSTRUCTION 

     

    The
      headings of Articles and Sections in this Agreement are provided for convenience
      only and will not affect its construction or interpretation. All references
      to
“Articles” and “Sections” refer to the corresponding Articles and Sections of
      this Agreement. 

     

    13.11
      TIME OF ESSENCE 

     

    With
      regard to all dates and time periods set forth or referred to in this Agreement,
      time is of the essence. 

     

    13.12
      GOVERNING LAW 

     

    This
      Agreement will be governed by and construed under the laws of the State of
      New
      York without regard to conflicts-of-laws principles that would require the
      application of any other law. 

     

    13.13
      EXECUTION OF AGREEMENT 

     

    This
      Agreement may be executed in one or more counterparts, each of which will be
      deemed to be an original copy of this Agreement and all of which, when taken
      together, will be deemed to constitute one and the same agreement. The exchange
      of copies of this Agreement and of signature pages by facsimile transmission
      shall constitute effective execution and delivery of this Agreement as to the
      parties and may be used in lieu of the original Agreement for all purposes.
      Signatures of the parties transmitted by facsimile shall be deemed to be their
      original signatures for all purposes. 

     

    13.14
      SHAREHOLDER OBLIGATIONS 

     

    The
      liability of each Shareholder hereunder shall be joint and several with Seller
      and with the other Shareholder. Where in this Agreement provision is made for
      any action to be taken or not taken by Seller, Shareholder jointly and severally
      undertake to cause Seller to take or not take such action, as the case may
      be.
      Without limiting the generality of the foregoing, Shareholder shall be jointly
      and severally liable with Seller for the indemnities set forth in Article 11.
      

     

    13.15
      REPRESENTATIVE OF SELLER AND SHAREHOLDER 

     

    a. Seller
      hereby constitutes and appoints Shareholder as its representative (“Selling
      Parties’ Representative”) and its true and lawful attorney in fact, with full
      power and authority in its name and on its behalf: 

     

    (i) to
      act in
      the absolute discretion of the Selling Parties Representative, but only with
      respect to the following provisions of this Agreement, with the power to: (A)
      designate the accounts for payment of the Purchase Price pursuant to Section
      2.7(b)(i); (B) act pursuant to Section 2.9 with respect to any Purchase Price
      adjustment; (C) consent to the assignment of rights under this Agreement in
      accordance with Section 13.9; (D) give and receive notices pursuant to Section
      13.3; (E) terminate this Agreement pursuant to Section 9.1 or waive any
      provision of this Agreement pursuant to Article 8, Section 9.1 and Section
      13.6;
      (F) accept service of process pursuant to Section 13.4; and (G) act in
      connection with any matter as to which Seller and the Shareholder, jointly
      and
      severally, have obligations, or are Indemnified Persons, under Article 11;
      and

    
      
        
        

      

      
        -
          66
          -

        
          

        

      

      
        
        

      

    

    

    (ii) in
      general, to do all things and to perform all acts, including executing and
      delivering all agreements, certificates, receipts, instructions and other
      instruments contemplated by or deemed advisable to effectuate the provisions
      of
      this Section 13.15. 

     

    This
      appointment and grant of power and authority is coupled with an interest and
      is
      in consideration of the mutual covenants made herein and is irrevocable and
      shall not be terminated by any act of either of the Shareholder or Seller or
      by
      operation of law, whether by the death or incapacity of the Shareholder or
      by
      the occurrence of any other event. Each Shareholder and Seller hereby consents
      to the taking of any and all actions and the making of any decisions required
      or
      permitted to be taken or made by the Selling Parties Representative pursuant
      to
      this Section 13.15. Each of the Shareholder and Seller agree that the Selling
      Parties Representative shall have no obligation or liability to any Person
      for
      any action or omission taken or omitted by the Selling Parties Representative
      in
      good faith hereunder, and each of the Shareholder shall, on a proportionate
      basis in accordance with his or her ownership interest in the Seller, indemnify
      and hold the Selling Parties Representative harmless from and against any and
      all loss, damage, expense or liability (including reasonable counsel fees and
      expenses) which the Selling Parties Representative may sustain as a result
      of
      any such action or omission by the Selling Parties Representative hereunder.
      

     

    b. Buyer
      shall be entitled to rely upon any document or other paper delivered by the
      Selling Parties Representative as (i) genuine and correct and (ii) having been
      duly signed or sent 

    
      
        
        

      

      
        -
          67
          -

        
          

        

      

      
        
        

      

    

    by
      the
      Selling Parties Representative, and the Buyer shall not be liable to either
      the
      Shareholder or Seller for any action taken or omitted to be taken by Buyer
      in
      such reliance. 

    

    

     

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

     

     

    
      	 	
              FREUNDLICH
                SUPPLY COMPANY, INC.

              

               

              by: 
                /s/ Michael
                Freundlich                                 
                

              Michael
                Freundlich, President

              

              

               

              

              SHAREHOLDER

               

              /s/
                Michael
                Freundlich                                        
                

              Michael
                Freundlich

              

               

              
 

              DELAWARE
                FASTENER ACQUISITION CORPORATION

              
 

              by: 
                /s/ Alex
                Katz                                                 
                

              Name:
                Alex Katz

              Title:
                President

              

              

              ESCROW
                AGENT

               

              

              

              /s/
                Howard J.
                Kerker                                           
                

              Howard
                J. Kerker, Esquire, with regard to

              Sections
                2.3(b), 9.2(b) and 9.2(c)
                only

            

    

     

    

    
      
        
        

      

      
        -
          68
          -

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