Document:

ex10_25.htm

    
      
        
          

        

      

    

    Exhibit 10.25

     

    
      STOCK PURCHASE
AGREEMENT

       

      THIS STOCK PURCHASE AGREEMENT,
dated February 4, 2008, is entered into by and among FAAC Incorporated, a Michigan
corporation with its principal place of business located at 1229 Oak Valley
Drive, Ann Arbor, Michigan 48108 (the “Buyer”), Realtime Technologies, Inc., a
Michigan corporation with its principal place of business at 1523 North Main
Street, Royal Oak, Michigan 48067 (the “Company”), Richard Romano, an individual
residing at 712 Park Avenue, Royal Oak, Michigan 48067 (the “Stockholder”) and, as
guarantor with respect to Article II and Sections 6.2.10 and 7.2.2 only, Arotech Corporation, a
Delaware corporation with its principal place of business located at 1229 Oak
Valley Drive, Ann Arbor, Michigan 48108 (“Arotech”).

       

      W I T N E S S E T H
:

       

      WHEREAS, the Buyer has
proposed to purchase and the Stockholder has proposed to sell, on the terms and
conditions stated in this Agreement, all of the Stockholder’s outstanding shares
of Common Stock, no par value per share, issued by the Company as set forth on
Schedule 3.3.1 (the “Company Common Stock”),
constituting all of the issued and outstanding capital stock of the Company;
and

       

      WHEREAS, the Board of
Directors of the Company has determined that it is in the best interests of the
Company to consent to that purchase and sale (the “Purchase/Sale”).

       

      NOW, THEREFORE, the Buyer, the
Company and the Stockholder hereby agree as follows:

       

      ARTICLE I

       

      Definitions

       

      1.1.           Defined
Terms. For the purposes of this Agreement, the terms listed below shall
have the following meanings:

       

      1.1.1. 
“2008 Net Profit” shall
mean net profit (as defined by GAAP) realized by the Company during calendar
year 2008.

       

      1.1.2.  “Acquisition Proposal” shall
have the meaning defined in Section 5.7.

       

      1.1.3.   “Affiliate” shall mean, with
respect to any Person, any other Person who directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with, such Person. The term “control” means the possession, directly or
indirectly, 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 the terms “controlled” and “controlling” have
meanings correlative thereto. With respect to a Stockholder, any investment fund
or managed account that is managed on a discretionary basis by the same
investment manager as the Stockholder’s will be deemed to be an Affiliate of the
Stockholder. With respect to individuals, “Affiliate” includes first and second
degree relatives, whether related by blood or by marriage.

      
        
          
             

          

           

        

        
           

          
            

          

        

        
           

        

      

      1.1.4.  “Agreement” shall mean this
Stock Purchase Agreement, as it may be amended from time to time.

       

      1.1.5.  “Arotech” shall have the
meaning set forth in the preamble to this Agreement.

       

      1.1.6.  “Arotech Common Stock” shall
mean the Common Stock, no par value per share, of Arotech.

       

      1.1.7.  “Association” shall have the
meaning defined in Section 10.2.

       

      1.1.8.  “Benefit Arrangement” shall
mean each (i) employee benefit plan, as defined in Section 3(3) of ERISA; (ii)
employment contract and (iii) bonus, deferred compensation, incentive
compensation, performance compensation, stock purchase, stock option, stock
appreciation, restricted stock, phantom stock, saving and profit sharing,
severance or termination pay (other than statutory or the common law
requirements for reasonable notice), health or other medical, salary
continuation, cafeteria, dependent care, vacation, sick leave, holiday pay,
fringe benefit, reimbursement program, life insurance, disability or other
(whether insured or self-insured) insurance, a supplementary unemployment
benefit, pension retirement, supplementary retirement, welfare or other employee
plan, program, policy or arrangement, whether written or unwritten, formal or
informal, which any current or former employee, consultant or director of the
Company or any ERISA Affiliate participated or participates in or was or is
covered under, or was or is otherwise a party, and with respect to which the
Company or any ERISA Affiliate is or ever was a sponsor or participating
employer, or had or has an obligation to make contributions, or was or is
otherwise a party.

       

      1.1.9.  “Burdensome Condition” shall
have the meaning defined in Section 6.2.5.

       

      1.1.10.  “Business
Day” shall
mean any day other than Saturday, Sunday or other day on which commercial
banks in the City of New York are authorized or required by law to remain
closed.

       

      1.1.11.  “Buyer” shall have the meaning
set forth in the preamble to this Agreement.

       

      1.1.12.  “Buyer’s Accountant” shall mean
any member firm of BDO Seidman, LLP.

       

      1.1.13.  “Buyer Indemnified Parties”
shall have the meaning defined in Section 8.2.1.

      
        
           

        

        
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      1.1.14.  “Cash Consideration” shall have
the meaning defined in Section 2.4.1.

       

      1.1.15.  “Closing” shall have the
meaning defined in Section 7.1.

       

      1.1.16.  “Closing Consideration” shall
have the meaning defined in Section 2.4.

       

      1.1.17.  “Closing Date” shall have the
meaning defined in Section 7.1.

       

      1.1.18.  “Closing Stock Consideration”
shall have the meaning defined in Section 2.4.2.

       

      1.1.19.  “Code” shall mean the Internal
Revenue Code of 1986, as amended.

       

      1.1.20.  “Commission” shall mean the
United States Securities and Exchange Commission, and all subdivisions,
employees and agents thereof.

       

      1.1.21.  “Company” shall mean Realtime
Technologies, Inc., a Michigan corporation.

       

      1.1.22.  “Company’s Accountant” shall
mean Karen L. Andrusiak and/or K.A. Accounting.

       

      1.1.23.  “Company’s Customers” shall
mean customers of the Company with whom the Stockholder had business contacts
during the course of his employment with the Company.

       

      1.1.24.  “Company Common Stock” shall
have the meaning defined in the recitals to this Agreement.

       

      1.1.25.  “Company Financial Statements”
shall have the meaning defined in Section 3.14.

       

      1.1.26.  “Confidentiality Agreement”
shall have the meaning defined in Section 5.5.

       

      1.1.27.  “Damages” shall have the
meaning defined in Section 8.2.1.

       

      1.1.28.  “Disclosure Schedule” shall
have the meaning defined in Section 1.3.

       

      1.1.29.  “Dispute Notice” shall have the
meaning defined in Section 10.1.

       

      1.1.30.  “Earnout Consideration” shall have the meaning
defined in Section 2.5.

      
        
           

        

        
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      1.1.31.  “Environmental Laws” shall mean
means all Laws relating to pollution or protection of the environment, natural
resources or human health and safety, including laws relating to releases or
threatened releases of Hazardous Substances (including releases to ambient air,
surface water, groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
release, transport, disposal or handling of Hazardous Substances. “Environmental
Laws” include, without limitation, CERCLA, the Hazardous Materials
Transportation Act (49 U.S.C. §§ 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. §§ 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. §§ 1251 et seq.), the Clean Air Act
(42. U.S.C. §§ 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601 et seq.), the Oil Pollution
Act (33 U.S.C. §§ 2701 et
seq.), the Emergency Planning and Community Right-to-Know Act (42 U.S.C.
§§ 11001 et seq.), the
Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§ 136 et seq.), the Federal Food,
Drug and Cosmetic Act (21 U.S.C. §§ 301 et seq.), and all other
Governmental Authority laws analogous to any of the above, including without
limitation any laws of the State of Michigan analogous to any of the
above.

       

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

       

      1.1.33.  “ERISA Affiliate” shall mean,
with respect to the Company, any other Person that, together with the Company,
would be treated as a single employer under Section 414 of the
Code.

       

      1.1.34.  “Evaluation Date” shall have
the meaning defined in Section 3.34.

       

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

       

      1.1.36.  “GAAP” shall mean generally
accepted accounting principles in effect in the United States, consistently
applied and maintained throughout the periods indicated, and consistent with
prior financial practice (except for changes mandated by the Financial
Accounting Standards Board or any similar accounting authority of comparable
standing).

       

      1.1.37.  “Governmental Authority” shall
mean any nation, territory or government, foreign or domestic, any state, local
or other political subdivision thereof, and any court, bureau, tribunal, board,
commission, department, agency or other entity exercising executive,
legislative, judicial, regulatory or administrative functions of government,
including, without limitation, all taxing authorities.

       

      1.1.38.  “Governmental Permits” shall
mean all governmental permits and licenses, certificates of inspection,
approvals or other governmental authorizations.

      
        
           

        

        
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      1.1.39.  “Hazardous Substances” shall
mean:

       

      (a)           any
petrochemical or petroleum products, oil or coal ash, radioactive materials,
radon gas, asbestos in any form that is or could become friable, urea
formaldehyde foam insulation and transformers or other equipment that contain
dielectric fluid which may contain levels of polychlorinated
biphenyls;

       

      (b)           any
chemicals, materials or substances defined as or included in the definition of
“hazardous substances,” “hazardous wastes,” “hazardous materials,” “hazardous
constituents,” “pollutants,” “toxic pollutants” or words of similar meaning and
regulatory effect under any applicable Environmental Law; and

       

      (c)           any
other chemical, material or substance, the use, manufacture, distribution in
commerce, or exposure to which is prohibited, limited or regulated by any
applicable Environmental Law.

       

      1.1.40.  “Inbound Licenses” shall have
the meaning defined in Section 3.21.2.

       

      1.1.41.  “Indemnified Party” shall have
the meaning defined in Section 8.2.3.

       

      1.1.42.  “Indemnifying Party” shall have
the meaning defined in Section 8.2.3.

       

      1.1.43.  “Intellectual Property” shall
mean the following property of Company: (i) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all rights arising under or in connection with all Patents, (ii)
all Marks and domain names, (iii) all Trade Secrets and confidential business
information (including, without limitation, ideas, research, know-how,
techniques, methods, data, product drawings, training manuals, regulatory
strategies, and business and marketing plans and proposals) related to the
Company, (iv) all copyrights, moral rights and other rights of authorship,
including any registrations and applications for registration with respect to
any of the foregoing, (v) all computer software used by the Company, (vi) all
computer generated data and documentation related to or used by the Company,
(vii) all third party license rights held by the Company, (viii) all designs,
plans and documentation in whatever form related to products under development
or products subject to a change in design or composition, and (ix) all other
proprietary rights, formulas, specifications, processes, techniques, technical
data and other know-how, whether now existing or hereafter developed, in which
the Company has any rights.

       

      1.1.44.  “Interim Financial Statements”
shall have the meaning defined in Section 3.14.

      
        
           

        

        
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      1.1.45.  “IRS” shall mean the United
States Internal Revenue Service and, to the extent
relevant, the United States Department of the Treasury, and all
subdivisions, employees and agents thereof.

       

      1.1.46.  “Knowledge” with regard to the
Company means the actual knowledge of the Stockholder and the Company’s
President, Secretary, Treasurer and Board of Directors, in each case after
review of such person’s own files and inquiry of those executives of the Company
who would reasonably be expected to have knowledge of the specific matter at
issue. The term “Knowledge” with regard to the Stockholder means the actual
knowledge of the Stockholder, after review of the Stockholder’s own files and
inquiry of those executives of the Company who would reasonably be expected to
have knowledge of the specific matter at issue.

       

      1.1.47.  “Laws” shall mean any national,
federal, state, foreign, provincial or local law, statute, ordinance, rule,
regulation, code, ordinance, order, judgment, injunction or decree of any
country, foreign or domestic.

       

      1.1.48.  “Leased Property” shall have
the meaning defined in Section 3.26.2.

       

      1.1.49.  “Lien” shall mean any interest,
consensual or otherwise, in property, whether real, personal or mixed property
or assets, tangible or intangible, securing an obligation owed to, or a claim by
a third Person, or otherwise evidencing an interest of a Person other than the
owner of the property, whether such interest is based on common law, statute or
contract, and including, but not limited to, any security interest, security
title or lien arising from a mortgage, recordation of abstract of judgment, deed
of trust, deed to secure debt, encumbrance, restriction, charge, covenant,
restriction, claim, exception, encroachment, easement, right of way, license,
permit, incorporeal hereditament, pledge, conditional sale, option trust
(constructive or otherwise) or trust receipt or a lease, consignment or bailment
for security purposes and other title exceptions and encumbrances affecting the
property.

       

      1.1.50.  “Losses” shall have the meaning
defined in Section 8.1.

       

      1.1.51.  “Marks” shall mean all
trademarks, service marks, trade dress and trade names, including all
registrations, applications and renewals with respect thereto, and all works of
authorship, applications, copyrights, registrations and renewals thereof owned
by the Company or in which the Company has any rights or licenses.

       

      1.1.52.  “Material Adverse Change” shall
mean any material adverse change in the business (as now conducted or as
proposed to be conducted by the Company at the date hereof and at the Closing
Date), assets, financial condition, liabilities, operations or prospects of the
Company.

      
        
           

        

        
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      1.1.53.  “Material Adverse Effect” shall
mean any material adverse effect on the business (as now conducted or as
proposed to be conducted by the Company at the date hereof and at the Closing
Date), assets, financial condition, liabilities, operations or prospects of the
Company.

       

      1.1.54.  “Maximum Purchase Price” shall
have the meaning defined in Section 2.2.

       

      1.1.55.  “Net Worth” shall mean net
assets minus net liabilities, as determined in accordance with
GAAP.

       

      1.1.56.  “Organizational Documents”
shall mean a corporation’s Articles of Incorporation, Certificate of
Incorporation, By-Laws or equivalent organizational documents.

       

      1.1.57.  “Outbound Licenses” shall have
the meaning defined in Section 3.21.2.

       

      1.1.58.  “Owned Property” shall have the
meaning defined in Section 3.26.1.

       

      1.1.59.  “Patents” shall mean shall mean
the Company’s right, title and interest in and to all unexpired domestic and
foreign utility and design patents, patent applications, similar grants and
applications therefor, and any improvements, continuations,
continuations-in-part, divisionals, extensions, reissues, reexaminations or
substitutions thereof, and any and all inventions embodied within the
foregoing.

       

      1.1.60.  “Person” shall mean any
individual or any corporate or other entity, including without limitation
federal, state, local and foreign governmental agencies and all subdivisions
thereof.

       

      1.1.61.  “Plan” means any pension,
profit sharing, retirement, deferred compensation, welfare, insurance,
disability, bonus, vacation pay, severance pay or other similar plans, programs
or agreements, or any personnel policy, whether reduced to writing or not,
relating to any persons employed by the Company (as defined for purposes of
Section 414(b), (c) and (m) of the Code.

       

      1.1.62.  “Purchase Price” shall have the
meaning defined in Section 2.2.

       

      1.1.63.  “Purchase/Sale” shall have the
meaning defined in the recitals to this Agreement.

       

      1.1.64.  “Registration Rights Agreement”
shall have the meaning defined in Section 2.4.2.

       

      1.1.65.  “Requisite Regulatory Approval”
shall have the meaning defined in Section 6.1.2.

      
        
           

        

        
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      1.1.66.  “Resolution Notice” shall have the meaning
defined in Section 10.1.

       

      1.1.67.  “Review Notice” shall have the meaning
defined in Section 10.1.

       

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

       

      1.1.69.  “Seller Indemnified Parties”
shall have the meaning defined in Section 8.2.2.

       

      1.1.70.  “Service Provider” shall have
the meaning defined in Section 3.20.3.

       

      1.1.71.  “Short Sales” include, without
limitation, (i) all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act, whether or not against the box, and all
types of direct and indirect stock pledges, forward sale contracts, options,
puts, calls, short sales, swaps, “put equivalent positions” (as defined in Rule
16a-1(h) under the Exchange Act) and similar arrangements (including on a total
return basis), and (ii) sales and other transactions through non-U.S. broker
dealers or foreign regulated brokers.

       

      1.1.72.  “Stockholder” shall have the
meaning set forth in the preamble to this Agreement.

       

      1.1.73.  “Stockholder’s Accountant”
shall mean Karen L. Andrusiak and/or K.A. Accounting.

       

      1.1.74.  “Subchapter S Tax
Liability” shall mean the federal
and state income Taxes payable by the Stockholder with respect to the taxable
income realized by the Company in 2007 and/or 2008 that is allocated to the
Stockholder pursuant to Subchapter S of the Code, calculated for the Stockholder
upon the assumption that such allocated taxable income will be subject to income
tax at the highest marginal rate under the Code or other applicable taxing
statute.

       

      1.1.75.  “Subsidiary” means any entity in
which the Company, directly or indirectly, owns capital stock or holds an equity
or similar interest.

       

      1.1.76.  “Supplemental Financial
Information” shall have the meaning defined in Section 5.8.

       

      1.1.77.  “Tax” shall mean any federal,
state, local, or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code § 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax, assessment or levy of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not, and including any obligation to
indemnify or otherwise assume or succeed to the Tax liability of any other
Person.

      
        
           

        

        
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      1.1.78.  “Tax Return” shall mean any
federal, state, local or foreign return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

       

      1.1.79.  “Trade Secrets” shall mean
shall mean any and all proprietary technology, knowledge, formulas,
specifications, processes, techniques, technical data and other know-how,
whether now existing or hereafter developed, to which the Company has any
rights. Until such time as any particular patent has issued in accordance with
the terms of a patent application, the term “Trade Secrets” shall be deemed to
include all inventions claimed in such patent application. The term “Trade
Secrets” shall also include all proprietary technology, knowledge, formulas,
specifications, processes, techniques, technical data and other know-how
included in any patent application but which have not been included within an
allowed claim in any patent.

       

      1.1.80.  “Trading Affiliates” shall have
the meaning defined in Section 3.35.6.

       

      1.1.81.  “Unaffiliated Accountant” shall
have the meaning defined in Section 10.1.

       

      1.2.           Other
Definitional Matters. The provisions of Section 11.8 shall apply, mutatis mutandis, to the
terms defined above.

       

      1.3.           Disclosure
Standards. Immediately prior to the execution and delivery of this
Agreement, the Stockholder has delivered to the Buyer, and the Buyer has
delivered to the Stockholder, a schedule (“Disclosure Schedule”) setting
forth, among other things, on schedules corresponding to the Sections hereof,
items the disclosure of which is necessary or appropriate either in response to
an express disclosure requirement contained in a provision hereof or as an
exception to one or more of such party’s representations, warranties or
covenants contained in this Agreement, or that are necessary to make the
statements made in this Agreement and in the Disclosure Schedule, individually
and taken as a whole, not misleading.

       

      ARTICLE II

       

      Purchase/Sale and Transfer
of Company Common Stock

       

      2.1.           Purchase/Sale.
Subject to the terms and conditions of this Agreement, the Buyer shall purchase
and the Stockholder shall sell all of the issued and outstanding shares of
Company Common Stock at the Closing, effective as of the Closing Date, free and
clear of all Liens.

       

      2.2.           Purchase
Price. The aggregate purchase price (the “Purchase Price”) for all of
the issued and outstanding shares of the Company Common Stock is the sum of the
Closing Consideration established pursuant to Section 2.4 and the Earnout
Consideration established pursuant to Section 2.5; provided, however, that under no
circumstances shall the aggregate Purchase Price to be paid by the Buyer be in
excess of $1,600,000 (the “Maximum Purchase Price”), nor
shall the aggregate Purchase Price to be paid by the Buyer (in Cash
Consideration and in Closing Stock Consideration valued as provided in Section
2.4.2 below) be less than $1,350,000 (the “Minimum Purchase Price”).

      
        
           

        

        
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      2.3.           Transfer
of Shares. Stockholder directly owns all outstanding shares of the
Company Common Stock.  At the Closing, the Stockholder shall transfer
all of the shares of Company Common Stock registered in the Stockholder’s name
to the Buyer by endorsing (by means of an undated stock power executed in blank)
and delivering to the Buyer the original stock certificate(s) representing such
shares of Company Common Stock.

       

      2.4.           Closing
Consideration. The portion of the Purchase Price payable in cash at the
Closing (the “Closing
Consideration”) will be an amount equal to the following:

       

      2.4.1. 
$1,000,000 in cash (the “Cash
Consideration”).

       

      2.4.2.  At
the Closing, the Buyer shall cause Arotech to issue in the name of the
Stockholder and deliver to the Stockholder that number of shares of Arotech
Common Stock having a value, based upon the average closing price of such
Arotech Common Stock on the Nasdaq Global Market during the ten Business Days
prior to the signing of this Agreement, of $350,000 (the “Closing Stock Consideration”), to be registered
pursuant to the terms of a registration rights agreement in substantially the
form of Exhibit
2.4.2
hereto (the “Registration
Rights Agreement”).

       

      2.5.           Earnout
Consideration. The Stockholder, but only if the Stockholder is still
serving as CEO of the Company through December 31, 2008, shall receive an amount
equal to the Company’s 2008 Net Profit, up to a maximum of $250,000, as the
portion of the Purchase Price payable on the basis of the operations of the
Company following the Closing (the “Earnout Consideration”). Stockholder’s
Earnout Consideration in the event of a 2008 zero Net Profit or 2008 net loss
shall be zero.  In no event, shall the calculation of the
Stockholder’s Earnout Consideration serve to reduce the Purchase Price below the
Minimum Purchase Price.  The Buyer will cause the Buyer’s Accountants,
not later than March 15, 2009, to review and audit the financial statement of
the Company for its year ended December 31, 2008, and the Company and the Buyer
will, based on such audit, prepare and deliver to the Stockholder a computation
of the Company’s 2008 Net Profit based upon the information contained in that
financial statement and the Earnout Consideration payable to the Stockholder
based upon 2008 Net Profit. On or before April 15, 2009, or, if the amount of
the Earnout Consideration is not finally resolved as of that date pursuant to
Article X, within ten (10) Business Days after that amount is finally resolved,
the Buyer shall pay to the Stockholder, by cashier’s check or wire transfer of
funds, the amount specified as the Earnout Consideration. Any questions
regarding that computation of the Earnout Consideration shall be resolved in the
manner specified in Section 10.1.  Neither Buyer nor its agents,
affiliates, parents, successors or directors shall reorganize, dissolve, sell or
merge the Company or otherwise substantially alter its operations in the
ordinary course as in the same manner of prohibitions contained in Section
5.31.1(a)-(m) prior to December 31, 2008, unless Buyer first pays the
Stockholder the maximum Earnout Consideration ($250,000) without regard to any
Net Profit calculation otherwise called for by this Agreement, or unless
Stockholder provides prior written consent to the alteration of Ordinary Course
Operations.  The obligation to pay the Earnout Consideration to
Shareholder, wherever applicable, is the joint and several obligation of the
Company and the Buyer.

      
        
           

        

        
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      ARTICLE III

       

      Representations and
Warranties of the Company and the Stockholder

       

      The
Company and the Stockholder hereby jointly and severally represent and warrant
to the Buyer and, in the case of Section 3.35, to Arotech, that:

       

      3.1.           Organization.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Michigan and has all requisite corporate
power and authority to own and lease its properties, to carry on its business as
presently conducted and as proposed to be conducted and to carry out the
transactions contemplated hereby. The Company is also registered to do business
in the States of Colorado and Utah, and the Company is not, by the manner in
which it conducts its business or owns or leases its property, required to be
registered to do business in any other jurisdictions. The Disclosure Schedule
contains a true, complete and accurate copy of each of the Organizational
Documents of the Company.

       

      3.2.           Organizational
Documents; Corporate Records. The Company has heretofore made available
to the Buyer a complete and correct copy of its Organizational Documents, each
as amended to date. Such Organizational Documents are in full force and effect.
The Company is not in violation of any provision of its Organizational
Documents. The minute books of the Company, which have heretofore been made
available in their entirety to the Buyer, contain in all material respects true
and correct records of all meetings held or true and complete records of all
other corporate actions taken at any time by written consent or otherwise by its
stockholders or Board of Directors or by any committee of the Board of
Directors.

       

      3.3.           Capitalization.

       

      3.3.1  The
authorized capital stock of the Company consists of sixty thousand (60,000)
shares of Company Common Stock. As of the date hereof and as of the Closing Date
and the Closing, five thousand (5,000) shares of Company Common Stock are issued
and outstanding to the Stockholder, all of which are duly authorized, validly
issued in compliance with all applicable laws, and are fully paid and
nonassessable and free of preemptive or similar rights created by statute, the
Organizational Documents of the Company, or any other agreement to which the
Company or the Stockholder is a party or by which it or he is
bound.

       

      3.3.2  Except
as set forth in Schedule 3.3.2, (i) there are
no outstanding subscriptions, options, warrants, calls, preemptive or other
rights, agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of the Company or obligating the Company to
issue or sell any shares of capital stock of, or other equity interests in, the
Company and (ii) there are no outstanding contractual obligations of the Company
to repurchase, redeem or otherwise acquire any shares of capital stock of, or
other equity interests in, the Company or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
other entity. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock or the direction
of the business operation or conduct of the Company.

      
        
           

        

        
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      3.4.           Ownership
of Company Common Stock. The Stockholder owns, of record, the shares of
Company Common Stock set forth on Schedule 3.3.1, free and clear
of all Liens of any nature whatsoever, and no other shares of Company Common
Stock are issued or outstanding.

       

      3.5.           Authority.

       

      3.5.1. The
Stockholder has the requisite legal capacity, power and authority to enter into
and to perform his obligations under this Agreement and this Agreement has been
duly and validly executed and delivered by the Stockholder and constitutes the
valid and binding obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general applicability relating to or affecting creditors’ rights
generally and by the application of general principles of equity.

       

      3.5.2. The
Company has full corporate power and authority (i) to execute and deliver this
Agreement; (ii) to perform its obligations under this Agreement and (iii) to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly approved by the board of directors and
stockholders of the Company and no other corporate or other proceedings on the
part of the Company are necessary to approve this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
applicability relating to or affecting creditors’ rights generally and by the
application of general principles of equity.

       

      3.6.           No
Conflict.

       

      3.6.1.  Except
as provided in Schedule 3.6, neither the
execution, delivery and performance of this Agreement by the Company, nor the
consummation by the Company of the transactions contemplated hereby, nor
compliance by the Company with any of the terms or provisions hereof or thereof,
will (i) conflict with, violate or result in a breach of any provision of the
Organizational Documents of the Company, (ii) conflict with, violate or result
in a breach of any statute, code, ordinance, rule, regulation, order, writ,
judgment, injunction or decree applicable to the Company, or by which any
property or asset of the Company is bound or affected, or (iii) conflict with,
violate or result in a breach of any provisions of or the loss of any benefit
under, constitute a default (or an event, which, with notice or lapse of time,
or both, would constitute a default) under, or, except as set forth in Schedule 3.6, give to others
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien, pledge, security interest, charge or other
encumbrance on any property or asset of the Company pursuant to any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party, or by which the
Company is bound.

      
        
           

        

        
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      3.6.2.  Except
as provided in Schedule 3.6, neither the
execution, delivery nor performance of this Agreement by the Stockholder, nor
the consummation of the transactions contemplated hereby, nor compliance by the
Stockholder with any of the terms and conditions hereof, will (i) conflict with,
violate or result in the breach of any provision of any statute, code,
ordinance, rule, regulation, order, writ, judgment, injunction or decree
applicable to the Company or to the Stockholder or by which the Company Common
Stock held by the Stockholder is bound or (ii) conflict with, violate or result
in the breach of any provision of or constitute a default (or an event, which,
with notice of lapse of time or both, will constitute a default) under or result
in the creation of a Lien, pledge, security interest, charge or any other
encumbrance on any Company Common Stock owned by the Stockholder, pursuant to
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, contract, agreement, lease, license, permit, franchise
or other instrument or other obligation to which the Stockholder is
party.

       

      3.6.3.  Except
as provided in Schedule 3.6, neither the
execution, delivery and performance of this Agreement by the Company or the
Stockholder, nor the consummation by the Company or the Stockholder of the
transactions contemplated hereby, nor compliance by the Company or the
Stockholder with any of the terms or provisions hereof or thereof, will result
the cancellation or termination of, or give any party the right to cancel,
modify or amend (i) any security clearance held by the Stockholder or any
current employee of the Company and used for useful in connection with its
business, or (ii)  any agreement for the sale of materials, products,
services or supplies or qualification authorizing or permitting the Company to
sell materials, products, services or supplies or qualification to any
person.

       

      3.7.           Consents
and Approvals. Except as provided in Schedule 3.7, the execution,
delivery and performance of this Agreement by the Company or the Stockholder
does not require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Authority or with any third party.
Neither the Company nor the Stockholder is aware of any reason why the
approvals, consents and waivers referred to herein should not be
obtained.

       

      3.8.           Absence
of Certain Payments. Neither the Company, nor any director, officer,
agent, employee or other person acting on behalf of the Company, has used any
funds of the Company for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, or made any direct or indirect
unlawful payments to government officials or employees from corporate funds, or
established or maintained any unlawful or unrecorded funds, or violated any
provisions of the Foreign Corrupt Practices Act of 1977 or any rules or
regulations promulgated thereunder.

      
        
           

        

        
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      3.9.           Compliance.
The Company has secured and maintained all material licenses, franchises,
permits or authorizations for the lawful conduct of its business. Schedule 3.9 sets forth all
such material licenses, franchises, permits or authorizations issued or granted
to the Company. All such licenses, franchises, permits and authorizations are
validly held by the Company, and the Company has complied in all material
respects with all terms and conditions thereof. The Company has in all material
respects complied with and is not in material conflict with, or in default or
material violation of, (i) any statute, code, ordinance, law, rule, regulation,
order, writ, judgment, injunction or decree, published policies and guidelines
of any Governmental Authority, applicable to the Company or by which any
property or asset of the Company is bound or affected or (ii) any note, bond,
mortgage, indenture, deed of trust, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company is a party or
by which the Company or any property or asset of the Company is bound or
affected.

       

      3.10.        Taxes and
Tax Matters.

       

      3.10.1.  The
Company has filed all Tax Returns that it has been required to file under
applicable tax laws and regulations. All such Tax Returns were correct and
complete in all respects when filed. All such Tax Returns were filed on the
basis that the Company was an electing corporation under Subchapter S of the
Code. All Taxes owed by the Company (whether or not shown on any Tax Return)
have been paid. Except for Taxes payable with respect to the Company’s operation
in 2007 that are not yet due and payable, all Taxes owed by the Stockholder with
respect to the income of the Company (whether or not shown on any Tax Return)
have been paid. The Company is not currently the beneficiary of any extension of
time within which to file any Tax Return. The Company is not required to file
Tax Returns in any jurisdiction where the Company does not file Tax Returns. No
claim has ever been made by a Governmental Authority in a jurisdiction where the
Company does not file Tax Returns that the Company is or may be subject to
taxation by that jurisdiction. There are no Liens on any of the assets of the
Company that arose in connection with any failure (or alleged failure) to pay
any Tax.

       

      3.10.2.  The
Company has withheld and paid all Taxes required to be withheld or paid by the
Company in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.

       

      3.10.3.  There
is no dispute or claim concerning any Tax liability of the Company (i) claimed
or raised by any Governmental Authority in writing or (ii) as to which any of
the Company and the directors and officers (and employees responsible for Tax
matters) of the Company has Knowledge based upon personal contact with any agent
of such authority. No foreign, federal, state or local Tax audits or
administrative or judicial Tax proceedings are pending or being conducted with
respect to the Company. The Company has delivered to the Buyer correct and
complete copies of all federal, state and local income Tax Returns filed by the
Company since January 1, 2000, none of which has been the subject of any
examination reports, or statements of deficiencies.

      
        
           

        

        
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      3.10.4.  The
Company has not waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or
deficiency.

       

      3.10.5.   The
Company (and any predecessor) has been a validly electing S corporation within
the meaning of Code Sections 1361 and 1362 at all times during its existence and
will be an S corporation up to and including the Closing Date. The Company shall
not be liable for any Tax under Code Section 1374 in connection with the deemed
sale of assets caused by an election under Code Section 338(h)(10). The Company
has not, in the past ten years, acquired assets from another corporation in a
transaction in which the Company’s basis for the acquired assets was determined,
in whole or in part, by reference to the Tax basis of the acquired assets in the
hands of the transferor.

       

      3.10.6.  The
Company is not a party to any agreement, contract, arrangement, or plan that has
resulted or could result, separately or in the aggregate, in the payment of (i)
any “excess parachute payment” within the meaning of Code Section 280G (or any
corresponding provision of state, local, or foreign Tax law) and (ii) any amount
that will not be fully deductible as a result of Code Section 162(m) (or any
corresponding provision of state, local, or foreign Tax law). The Company has
not been a United States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). The Company is not a party to or bound by any Tax allocation
or sharing agreement. The Company (A) has not been a member of an “affiliated
group” within the meaning of Code Section 1504(a) filing a consolidated federal
income Tax Return or (B) does not have any liability for the Taxes of any Person
(other than the Company) under Treas. Reg. § 1.1502-6 (or any similar provision
of state, local or foreign law), as a transferee or a successor, by contract, or
otherwise. The Company has not been a party to any distribution in which the
parties to such distribution treated such distribution as one to which Section
355 of the Code applied. The Company 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.
The Company has not participated in a “reportable transaction” within the
meaning of Treasury Regulation Section 1.6011-4(b). The Company does not have a
“qualified subchapter S subsidiary” within the meaning of Code Section
1361(b)(3)(B).

       

      3.10.7.  The
Company will not be required to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any: (A) change in
accounting method; (B) “closing agreement” as described in Code Section 7121 (or
any corresponding provision of state, local or foreign law) executed on or prior
tot eh Closing Date; (C) installment sale or open transaction disposition made
on or prior to the Closing Date; or (D) prepaid amount received on or prior to
the Closing Date.

      
        
           

        

        
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      3.11.        Assets.
The Company has good and marketable title to all of the assets it purports to
own, and owns all of such assets free and clear of any Liens, other than (i)
statutory liens securing current taxes and other obligations that are not yet
delinquent, (ii) minor imperfections of title and encumbrances that do not
materially detract from or interfere with the present use or value of such
properties and (iii) liens disclosed in Schedule
3.11. The Company has good and
valid title to, or in the case of leased assets valid leasehold interests in,
all of its tangible assets, real, personal and mixed, used or held for use in
its business, including all such assets reflected in the Company’s
balance sheet dated as of September 30,
2007, other
than those used, consumed or disposed of in
the ordinary course of business after such date, free of all
Liens, other than (i) statutory liens securing current taxes and other
obligations that are not yet delinquent, (ii) minor imperfections of title and
encumbrances that do not materially detract from or interfere with the present
use or value of such properties and (iii) liens disclosed in Schedule 3.11. The assets that
the Company owns are all of the assets necessary for the continued conduct of
the Company’s business in the manner in which it has heretofore been conducted
and proposed to be conducted. The Company does not have any leased property
(real or personal) except as disclosed in Schedule 3.11.

       

      3.12.         Condition
of Assets. All material assets of the Company, including all assets
leased or licensed to the Company, are in good operating condition, regularly
and properly maintained, and fit for the operation in the ordinary course of the
Company’s business (subject to normal wear and tear) with no defects that could
interfere with the conduct of normal operations of the Company, and are suitable
for the purposes of which they are currently being used.

       

      3.13.         Equity
Investments. Except as set forth in Schedule 3.13, the Company
does not currently own any capital stock or other proprietary interest, directly
or indirectly, in any corporation, limited liability company, association,
trust, partnership, joint venture or other entity.

       

      3.14.  
      Financial
Statements. The balance sheets and related statements of operations and
cash flows of the Company prepared by the Company’s Accountant as of and for the
fiscal years ended December 31, 2006 and 2005 (the “Company Financial
Statements”), and the internally prepared balance sheet and related
statement of operations of the Company as of and for the three and nine months
ended September 30, 2007 (the “Interim Financial
Statements”), that are included as Exhibit 3.14 fairly present
in all material respects the financial position of the Company as at such dates
and the results of its operations for the periods then ended in accordance with
GAAP (except as specified in Schedule 3.14), subject to, in
the case of the Interim Financial Statements, adjustments required in the normal
course upon review or audit for the three and nine months ended September 30,
2007. The unaudited financial statements of the Company for the twelve months
ended December 31, 2007 will reflect net income of not less than $185,000 and
net worth (net assets minus net liabilities) of not less than $500,000, as
agreed between the Buyer’s Chief Financial Officer and the Company’s Accountant.
Since the date of the Interim Financial Statements, there has been no Material
Adverse Change. The Stockholder has made available to Buyer certain financial
forecasts with respect to the Company’s business which forecasts were prepared
based upon the assumptions reflected therein. The Stockholder makes no
representation or warranty regarding the accuracy of such forecasts or as to
whether such forecasts will be achieved or otherwise, except that the
Stockholder represents and warrants that such forecasts were prepared in good
faith and are based on assumptions believed by him to be reasonable and
accurate. Since September 30, 2007, the Company has made no distributions to the
Stockholder, except for the amounts reflected in Schedule 5.3.

      
        
           

        

        
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      3.15.        Absence
of Undisclosed Liabilities. Except as set forth in the Interim Financial
Statements, the Company has no liabilities of any nature (matured or unmatured,
accrued, fixed or contingent, including, without limitation, any liabilities for
unpaid taxes), except as have accrued in the ordinary course of business from
the date of the Interim Financial Statements to the date of this Agreement and
to the Closing Date.

       

      3.16.         Events
Subsequent to Last Fiscal Year.

       

      3.16.1.  Since
December 31, 2006, there has been no event or condition that has had or
reasonably could be expected to have a Material Adverse Effect, and there has
been no impairment, damage, destruction, loss or claim, whether or not covered
by insurance, or condemnation or other taking adversely affecting in any respect
any of the material assets of the Company.

       

      3.16.2.  Since
December 31, 2006, the Company has conducted its business only in the ordinary
course. Without limiting the generality of the foregoing, since December 31,
2006, and except as set forth in Schedule 3.16.2, the Company
has not:

       

      (a)           
issued, delivered or agreed (conditionally or unconditionally) to issue or
deliver, or granted any option, warrant or other right to purchase, any shares
of common stock or other equity interest or any security convertible into shares
of common stock or other equity interest;

       

      (b)         
  other than in the ordinary course of business, issued, delivered or
agreed (conditionally or unconditionally) to issue or deliver any bonds, notes
or other debt securities, or borrowed or agreed to borrow any funds or entered
into any lease the obligations of which, in accordance with GAAP, would be
capitalized;

       

       (c)        
   paid any obligation or liability (absolute or contingent)
other than current liabilities reflected in the Company Financial Statements and
current liabilities incurred since December 31, 2006 in the ordinary course of
business;

       

       (d)           declared
or made, or agreed to declare or make, any payment of dividends or distributions
to its stockholders or purchased or redeemed, or agreed to purchase or redeem,
any capital stock or any equity interest;

      
        
           

        

        
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      (e)           undertaken
or committed to undertake capital expenditures exceeding $50,000 for any single
project or related series of projects;

       

       (f)           except
in the ordinary course of business, made or permitted any material amendment or
termination of any agreement to which the Company is a party;

       

      (g)           sold,
leased (as lessor), transferred or otherwise disposed of, mortgaged or pledged,
or imposed or suffered to be imposed any Lien on, any of the assets reflected on
the Company Financial Statements or any assets acquired by the Company after
December 31, 2006, except for inventory and personal property sold or otherwise
disposed of for fair value in the ordinary course of business;

       

      (h)           canceled
any debts owed to it or claims held by it (including the settlement of any
claims or litigation) other than in the ordinary course of
business;

       

       (i)      
     accelerated or delayed collection of accounts
receivable in advance of or beyond their regular due dates or the dates when the
same would have been collected except in the ordinary course of
business;

       

       (j)         
  delayed or accelerated payment of any account payable or other
liability beyond or in advance of its due date or the date when such liability
would have been paid except in the ordinary course of business;

       

      (k)           entered
into or become committed to enter into any other transaction except in the
ordinary course of business;

       

       (l)         
  allowed the levels of supplies or other materials included in the
inventory of the Company to vary materially from the levels customarily
maintained in accordance with past practice; 

       

      (m)           except
for increases in the ordinary course of business, instituted any increase in any
compensation payable to any employee of the Company, amended any Plan or
modified any other benefits made available to any such employees; 

       

      (n)           made
any change in the accounting principles or made any material change in the
accounting practices used by the Company from those applied in the preparation
of the Company Financial Statements; or 

      
        
           

        

        
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       (o)           taken
any of the actions which, under the terms of this Agreement, the Company is
prohibited from taking between the date hereof and the Closing Date.

       

      3.17.         No
Bonuses or Other Payments to Employees or Stockholder. There are no
accrued and unpaid dividends or distributions with respect to the Company Common
Stock. Since December 31, 2006, except in the ordinary course of business or as
set forth in Schedule3.17, the Company has
not (i) paid or agreed to pay any bonus or any other increase in the
compensation payable or to become payable or (ii) granted or agreed to grant any
bonus, severance or termination pay, or entered into any contract or arrangement
to grant any bonus, severance or termination pay, to any stockholder, officer or
employee of the Company.

       

      3.18.         Absence
of Litigation. Neither the Company nor the Stockholder is a party to any,
nor are there any pending, or to the Knowledge of the Company or the
Stockholder, threatened, legal, administrative, arbitral or other claims,
actions, proceedings or investigations of any nature, against the Company or any
property or asset of the Company, before any Governmental Authority and no facts
or circumstances have come to the Company’s or the Stockholder’s attention which
have caused them to believe that a material claim, action, proceeding or
investigation against or affecting the Company could reasonably be expected to
occur. Neither the Company, nor any property or asset of the Company, is subject
to any order, writ, judgment, injunction, decree, determination or award which
restricts its ability to conduct business in any area in which it presently does
business or has or could reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect.

       

      3.19.     
  Employee
Benefits.

       

      3.19.1.  To
the Company’s Knowledge, and except as disclosed on Schedule 3.19.1,
(i) neither the Company nor any of its ERISA Affiliates maintains or
sponsors, or has any liability, contingent or otherwise, with respect to, any
Benefit Arrangement, (ii) no Benefit Arrangement provides or has ever provided
post-retirement medical or health benefits or severance benefits, except to the
extent required by Part 6 of Title I of ERISA or similar state laws, and
(iii) no Benefit Arrangement is or has ever been a “welfare benefit fund,”
as defined in Section 419(e) of the Code, or an organization described in
Sections 501(c)(9) or 501(c)(20) of the Code. The Company has delivered to Buyer
true and complete copies of: (i) each written Benefit Arrangement document
and a description of each unwritten Benefit Arrangement, (ii) the most recent
summary plan description relating to any Benefit Arrangement, (iii) each trust,
insurance or other funding contract or agreement relating to any Benefit
Arrangement, (iv) each administrative services contract or agreement relating to
any Benefit Arrangement, (v) the three most recent annual reports (Forms 5500)
for each Benefit Arrangement (including all related schedules), if applicable,
and (vi) the most recent IRS determination letter, opinion, notification or
advisory letter (as the case may be) for each Benefit Arrangement which is
intended to constitute a qualified plan under Section 401 of the Code. Neither
the Company nor any ERISA Affiliate has any obligation or commitment to
establish, maintain, operate or administer any new Benefit Arrangement or to
amend any Benefit Arrangement so as to increase benefits thereunder or
otherwise.

      
        
           

        

        
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      3.19.2.  Neither
the Company nor any ERISA Affiliate has or has ever had any liability with
respect to any Benefit Arrangement that is subject to Title IV of ERISA,
including a “multiemployer plan,” as defined in Section 3(37) of ERISA or a
“single employer plan” within the meaning of Section 4001(a)(15) of ERISA.
Neither the Company nor any ERISA Affiliate has terminated a Benefit Arrangement
with respect to which any liability remains outstanding.

       

      3.19.3.  To
the Company’s Knowledge, each Benefit Arrangement conforms to, and has been
operated and administered in compliance with, its terms and all applicable laws,
including ERISA and the Code, and including, but not limited to the requirements
of ERISA Sections 601 et
seq. and 701 et
seq. and Sections 4980B, 9801 and 9802 of the Code. Each Benefit
Arrangement intended to be qualified under Section 401(a) of the Code is so
qualified and is the subject of a currently effective favorable determination
letter issued by the IRS with respect to the qualification of such Benefit
Arrangement under the Code. No event has occurred, and no condition exists,
which could adversely affect the tax-qualified status of any such Benefit
Arrangement. Neither the Company nor any ERISA Affiliate has incurred or is
subject to a tax under Section 4979 of the Code. No Benefit Arrangement has
assets that include securities issued by the Company or any ERISA
Affiliate.

       

      3.19.4.  There
are no pending or, to the Knowledge of the Company, threatened actions, suits,
claims, trials, arbitrations, investigations or other proceedings by any Person
or Governmental Authority, including any present or former participant or
beneficiary under any Benefit Arrangement (or any beneficiary of any such
participant or beneficiary) involving any Benefit Arrangement or any rights or
benefits under any Benefit Arrangement other than ordinary and usual claims for
benefits by participants or beneficiaries thereunder. No event has occurred and
no condition exists that could subject the Company or the fund of any Benefit
Arrangement to the imposition of any tax or penalty with respect to any Benefit
Arrangement, whether by way of indemnity or otherwise. All contributions
required to have been made or remitted and all expenses required to have been
paid by the Company to or under any Benefit Arrangement under the terms of any
such plan, any agreement or any applicable law have been paid within the time
prescribed by any such plan, agreement or law. All contributions to or under any
Benefit Arrangement have been currently deductible under the Code when made. No
“prohibited transaction” (as defined in ERISA Section 406) or breach of
fiduciary responsibility has occurred with respect to any Benefit Arrangement
for which a tax, penalty or other liability of whatever nature could be incurred
by the Company, whether by way of indemnity or otherwise.

       

      3.19.5.  To
the Company’s Knowledge (other than with respect to any contract, agreement or
benefit arrangement covering the Stockholder, as to which this representation is
make without a Knowledge exception), there is no contract, agreement or benefit
arrangement covering any current or former employee or director of the Company
or any ERISA Affiliate which, individually or in the aggregate, could be
expected to give rise to the payment of any amount which would constitute an
“excess parachute payment” (as defined in Section 280G of the Code) or be
nondeductible under Section 162(m) of the Code. Neither the execution of this
Agreement nor the consummation of any of the transactions contemplated hereby
will, either alone or in conjunction with any other event (including the
termination of an employee’s employment) (i) result in any obligation or
liability (with respect to accrued benefits or otherwise) on the part of the
Company or any ERISA Affiliate under any Benefit Arrangement, or to any present
or former employee, director, officer, stockholder, contractor or consultant of
the Company or any ERISA Affiliate, (ii) be a trigger event under any
Benefit Arrangement that will result in any payment (whether of severance pay or
otherwise) becoming due to any such present or former employee, officer,
director, stockholder, contractor, or consultant, or (iii) accelerate the
time of payment or vesting, or increase the amount, of any compensation
theretofore or thereafter due or granted to any employee, officer, director,
stockholder, contractor, or consultant of the Company or any ERISA
Affiliate.

      
        
           

        

        
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      3.19.6.  Each
Benefit Arrangement may be amended or terminated unilaterally by the Company at
any time without liability or expense to the Company or any ERISA Affiliate as a
result thereof (other than for benefits accrued through the date of termination
or amendment and reasonable administrative expenses related thereto) and no plan
documentation or agreement, summary plan description or other written
communication restricts or prohibits the Company or any ERISA Affiliate from
amending or terminating any such Benefit Arrangement.

       

      3.19.7.  No
Benefit Arrangement is required to comply with the provisions of any foreign
law.

       

      3.19.8.  Based
on the Company’s good faith interpretation of the provisions of Section 409A of
the Code and the guidance issued thereunder, any Benefit Arrangement that is a
“nonqualified deferred compensation plan” within the meaning of Section 409A of
the Code has been operated in accordance with the requirements of Section 409A
(including the notices issued by the IRS thereunder).

       

      3.19.9.  All
contributions (including all employer contributions and employee salary
reduction contributions) or premium payments required to have been made under
the terms of any Benefit Arrangement, and in accordance with applicable Law
(including pursuant to 29 C.F.R. Section 2510.3-102), as of the date hereof have
been timely made or reflected on the Company’s financial statements in
accordance with GAAP.

       

      3.20.         Employee;
Employment Matters.

       

      3.20.1.  Schedule 3.20.1 lists (i) the
names and titles of, and current annual compensation and the two most recent
annual bonuses for, each current employee of the Company, (ii) the names of each
director of the Company, (iii) the name of each Person who currently provides,
or who has within the prior twelve month period provided, services to the
Company as an independent contractor, and (iv) the names of each employee or
independent contractor of the Company who is a party to a non-competition
agreement with the Company. The Company has delivered to the Buyer a copy of
each employment, consulting or independent contractor agreement,
confidentiality/assignment of inventions agreement and/or non-competition
agreement entered into with an employee or service provider of the Company. All
of the agreements referenced in the preceding sentence will continue to be
legal, valid, binding and enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing. Except as disclosed in Schedule 3.20.1, the Company
is not a party to any written or oral agreement with any current or former
employee of the Company providing for any term of employment or compensation
guarantee extending for a period longer than one year from the date hereof or
for the payment of compensation in excess of $100,000 per annum. To the
Knowledge of the Company, no employee of the Company is in violation of any term
of any patent disclosure agreement, non-competition agreement or any restrictive
covenant (i) to the Company, or (ii) to a former employer relating to the right
of any such employee to be employed because of the nature of the business
conducted by the Company or the use of trade secrets or proprietary information
of others. To the Knowledge of the Company, no person has any plans to terminate
employment or service with the Company.

      
        
           

        

        
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      3.20.2.  There
are no material personnel policies applicable to the employees of the Company,
other than employee manuals, copies of which have previously been delivered to
the Buyer and a list of which is attached as Schedule 3.20.2.

       

      3.20.3.  Except
as set forth on Schedule 3.20.3, with respect
to current and former employees and service providers of the Company (each a
“Service
Provider”):

       

      (a)           the
Company is and has been in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including any laws respecting
minimum wage and overtime payments, employment discrimination, workers’
compensation, family and medical leave, immigration, and occupational safety and
health requirements, and has not and is not engaged in any unfair labor
practice;

       

      (b)           to
the Company’s Knowledge, there is no basis for any claim by any Service Provider
that such Service Provider was subject to a wrongful discharge or any employment
discrimination by the Company, or their respective management, arising out of
or relating to such Service Provider’s race, sex, age, religion, national
origin, ethnicity, handicap or any other protected characteristic under
applicable laws;

      
        
           

        

        
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      (c)           there
is not now, nor within the past six years has there been, any actions, suits,
claims, labor disputes or grievances pending, or, to the Knowledge of the
Company, threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Service Provider, including charges of
unfair labor practices or discrimination complaints, which, if adversely
determined, would, individually or in the aggregate, result in any liability to
the Company;

       

      (d)           the
Service Providers of the Company are not and have never been represented by any
labor union, no collective bargaining agreement is binding and in force against
the Company or currently being negotiated by the Company, and to the Company’s
Knowledge, no union organization campaign is in progress with respect to any of
the Service Providers, and no question concerning representation exists
respecting such Service Providers;

       

      (e)           the
Company has not entered into any agreement, arrangement or understanding
restricting its ability to terminate the employment of any or all of its Service
Providers at any time, for any lawful or no reason, without penalty or
liability;

       

       (f)           each
Service Provider classified by the Company as an independent contractor
satisfies and has satisfied the requirements of any applicable law to be so
classified, and the Company has fully and accurately reported such independent
contractors’ compensation on IRS Forms 1099 when required to do so;

       

      (g)           the
Company does not have any liability for any payment to any trust or other fund
governed by or maintained by or on behalf of any Governmental Authority with
respect to unemployment compensation benefits, social security or (to the
Company’s knowledge) other benefits or obligations for Service Providers (other
than routine payments to be made in the normal course of business and consistent
with past practice); and

       

      (h)           there
are no pending, threatened or reasonably anticipated claims or actions against
the Company under any worker’s compensation policy or long-term disability
policy.

       

      3.20.4.  No
“mass layoff,” “plant closing” or similar event as defined by the Worker
Adjustment and Retraining Notification Act with respect to the Company has
occurred.

      
        
           

        

        
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      3.21.         Intellectual
Property Rights.

       

      3.21.1.  Schedule 3.21
contains a complete and accurate list, and indicates the ownership of (i) all
Patents which are used or held for use by Company in its business, (ii) all
Marks which are used or held for use by Company in its business which are
unregistered and material to the business or for which registrations have been
obtained or applications therefor have been filed by the Company, (iii) all
rights in Internet web sites and Internet domain names which are presently used
or held for use by the Company in its business, and (iv) all proprietary
software of the Company that is material to the Company’s business.

       

      3.21.2.  Except
for (A) Persons to whom the Company has granted licenses pursuant to the
agreements listed on Schedule 3.21.2(a)
(the “Outbound Licenses”) and (B) Persons who have granted licenses to the
Company pursuant to the agreements list on Schedule 3.21.2(b)
(the “Inbound Licenses”), no Person other than the Company has the right or
license to practice or otherwise use any of the Intellectual Property. The
Company has all right, title and interest to all Intellectual Property, without
any conflict with the rights of others, and, except for rights granted to
Company pursuant to the Inbound Licenses, there are no intellectual property
rights owned or controlled by any third party necessary to practice or otherwise
use the Intellectual Property or otherwise necessary for Company to operate its
business.

       

      3.21.3.  The
Company has complied with its obligation under 37 CFR § 1.56(a) to disclose
to the United States Patent and Trademark Office, during the pendency of any
United States patent application included in the Intellectual Property, any
information known to Company to be material to the patentability of the pending
claims in such application.

       

      3.21.4.  Documentation
and necessary payments for the continuance of registration and applications for
registration in the United States, Canada and in all other countries outside of
the United States and Canada have been timely filed with the appropriate
authorities for the Marks included in the Intellectual Property.

       

      3.21.5.  All
necessary documentation and payments have been timely filed with and made to the
appropriate authorities in the United States, Canada and any country for which
patent protection has been sought, for the applications for the patent
applications, and maintenance of, all Patents included in the Intellectual
Property.

       

      3.21.6.  To
the Company’s knowledge, no products, services, software, technologies, business
processes or operations of the Company infringe, misappropriate, violate or
otherwise interfere with, any patent, copyright, trade secret, trade name,
trademark, service mark or other intellectual property or contractual right of
another, and no such right which might be so infringed, misappropriated,
violated or otherwise interfered with has been applied for by another. None of
the Intellectual Property is or has been legally declared invalid or is the
subject of a pending or threatened action or proceeding for opposition or
cancellation, or any reexamination, opposition or interference proceeding or any
form of proceeding for a declaration of invalidity, or other proceeding or
action to invalidate or limit any of Company’s rights in the Intellectual
Property, and no such proceeding is being threatened with respect to any of the
Intellectual Property. None of the Intellectual Property has been infringed by
the activities of any third party.

      
        
           

        

        
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      3.21.7.  Except
for the Inbound Licenses, the Company does not have any licenses to use any
patents, copyrights, trademarks, trade names, service marks and other
intellectual property of others. All Inbound Licenses are in full force and
effect and are valid, binding and enforceable in accordance with their terms and
there are no existing defaults or events which, with the giving of notice or the
lapse of time or both, would constitute a default thereunder by the Company, and
Company has the right and authority to assign Company’s rights in such licenses
to Buyer.

       

      3.21.8.  The
Company has, through the Intellectual Property, all patents, copyrights,
trademarks, trade names, service marks, copyrights, software, rights to data,
Internet web sites and Internet domain names and other intellectual property
necessary or appropriate to conduct its business as conducted as of the date
hereof, and as it has been conducted for the past five years.

       

      3.21.9.  The
Company has required all professional and technical employees, independent
contractors and consultants who provided services to the Company in connection
with the business, including, but not limited to, with respect to the creation
or development of any Intellectual Property, to execute agreements under which
such employees, contractors and consultants were required to convey to the
Company ownership of all inventions and developments conceived or created by
them in the course of their employment with or service to the Company, and none
of the activities of the Company’s professional and technical employees,
independent contractors or consultants who have provided services to the Company
in connection with the Intellectual Property has violated any agreement between
any such persons and any third party. A list of all of such agreements, copies
of which have previously been delivered to the Buyer, is appended hereto as
Schedule 3.21.9.

       

      3.21.10.  All
of the Outbound Licenses are assignable or otherwise transferable by the Company
without the consent of the respective licensee.

       

      3.21.11.  The
Company has taken all necessary security measures to protect the secrecy,
confidentiality and value of the Company’s Trade Secrets.

       

      3.22.        Proprietary
Information of Third Parties. To the Company’s knowledge, no Person
employed by or otherwise providing services to the Company has (i) violated any
of the terms or conditions of his employment, non-competition, non-disclosure or
inventions agreement with the Company, (ii) disclosed or utilized any trade
secret of or licensed by the Company or (iii) interfered in the employment
relationship between the Company and any of its present or former
employees.

      
        
           

        

        
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      3.23.         Environmental
Liability. Except as disclosed in Schedule 3.23:

       

      3.23.1.  The
operations of the Company as they have been in the past and are presently
conducted comply with all applicable Environmental Laws now in
effect.

       

      3.23.2.  The
Company has obtained all environmental, health, and safety Governmental Permits
necessary for the conduct of its operations as they have been in the past and
are presently conducted, and all such Governmental Permits are in good standing
and the Company is in compliance with all terms and conditions of such permits
now in effect.

       

      3.23.3.  The
Company is not subject to any ongoing investigation by, order from or agreement
with any Person relating to (i) any Environmental Law, or (ii) any remedial
action arising from the release of a Hazardous Substance into the
environment.

       

      3.23.4.  The
Company has filed all notices required to be filed under any Environmental Law
indicating past or present treatment, storage, or disposal of a Hazardous
Substance or reporting of a spill or release of a Hazardous Substance into the
environment.

       

      3.23.5.  The
Company has not received any written notice or other claim to the effect that it
is or may be liable to any Person as a result of the release or threatened
release of a Hazardous Substance.

       

      3.23.6.  The
Purchase/Sale does not require any filing or registration with, notice to, or
approval or consent by, any Governmental Authority under any Environmental
Law.

       

      3.24.        Competing
Interests. Except as set forth in Schedule 3.23.13.24, neither the
Company, nor any stockholder, officer or director thereof, nor any affiliate or
immediate family member of any of the foregoing, (i) owns, directly or
indirectly, an interest in any entity that is a competitor, customer or supplier
of the Company or that otherwise has material business dealings with the Company
or (ii) is a party to, or otherwise has any direct or indirect interest opposed
to the Company under, any agreement or other business relationship or
arrangement material to the Company, provided that the foregoing will not apply
to any investment in publicly traded securities constituting less than 2% of the
outstanding securities in such class.

       

      3.25.        No
Investment Banker. No broker, finder or investment banker is entitled to
any brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or the Stockholder.

      
        
           

        

        
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      3.26.         Real
Property.

       

      3.26.1.  Schedule 3.26 sets forth a
complete list of all real property owned in fee by the Company (individually, an
“Owned Property”) and
identifies any material reciprocal easement or operating agreements relating
thereto. The Company has delivered to the Buyer copies of the deeds and other
instruments (as recorded) by which the Company acquired such real property and
interests, and copies of all title insurance policies, opinions, abstracts, and
surveys in the possession of the Company and relating to such property or
interests. Neither the whole nor any portion of the Owned Property is subject to
any governmental decree or order to be sold nor have any proceedings for the
condemnation, expropriation or other taking of all or any portion of the Owned
Property been instituted or, to the Knowledge of the Company or the Stockholder,
threatened by any Governmental Authority, with or without payment therefor. All
facilities on the Owned Property have received all approvals of Governmental
Authorities (including licenses and permits) required in connection with the
ownership or current operation thereof and have been operated and maintained in
accordance with applicable laws, ordinances, rules and regulations. There are no
contracts granting to any party or parties the right of use or occupancy of any
portion of the Owned Property. There are no outstanding options or rights of
first refusal to purchase the Owned Property, or any portion thereof or interest
therein.

       

      3.26.2.  Schedule 3.26 sets forth a
complete list of all real property leased by the Company (individually, a “Leased Property”) and
identifies any material base leases and reciprocal easements or operating
agreements relating thereto.

       

      3.26.3.  Except
as set forth in Schedule 3.26, the Company has
good marketable and insurable fee title to all Owned Property and good and valid
leasehold estates or interests in all Leased Property, in each case free and
clear of all Liens, none of which impairs the utility, value or (in the case of
Owned Property) marketability of such property.

       

      3.27.         Contracts.
Schedule 3.27 lists the
following contracts and other agreements to which the Company is a party on the
date of this Agreement:

       

      (a)           any
agreement (or group of related agreements) for the lease of personal property to
or from any Person providing for lease payments in excess of $10,000 per
annum;

       

      (b)           any
agreement (or group of related agreements) for the purchase or sale of raw
materials, commodities, supplies, products, or other personal property, or for
the furnishing or receipt of services (including maintenance), the performance
of which will extend over a period of more than one year or involve
consideration in excess of $25,000 per annum;

       

      (c)           any
agreement concerning a partnership or joint venture;

      
        
           

        

        
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      (d)           any
agreement (or group of related agreements) under which it has created, incurred,
assumed, or guaranteed any indebtedness for borrowed money, or any capitalized
lease obligation, in excess of $10,000 or under which it has imposed a Lien on
any of its assets, tangible or intangible or any agreement under which it is a
guarantor or otherwise is liable for any liability or obligation (including
indebtedness) of any other Person;

       

      (e)           any
agreement concerning non-competition or any other similar agreement or
obligation which purports to limit the manner, industry, line of business or the
localities in which the business of the Company is conducted, or which limits
the customers or prospective customers that the Company may serve;

       

       (f)           any
profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance, or other plan or arrangement for the benefit of its
current or former directors, officers, and employees;

       

      (g)           any
collective bargaining agreement;

       

      (h)           any
agreement for the employment of any individual on a full-time, part-time,
consulting, or other basis providing annual compensation in excess of $25,000 or
providing severance or change of control benefits;

       

      (i)           any
agreement under which it has advanced or loaned any amount to any of its
shareholders, directors, officers, or employees (A) outside the ordinary course
of the Company’s business, or (B) in the ordinary course of the Company’s
business but involving an aggregate amount in excess of $10,000;

       

      (j)           any
agreement under which the consequences of a default or termination could have a
Material Adverse Effect;

       

      (k)           each
written distributorship, sales agency, sales representative, reseller or
marketing, value added reseller, original equipment manufacturing, technology
transfer, source code license or other license or other agreement containing the
right to license or sublicense software, technology and/or any other
intellectual property, in each case, to which the Company is a party (whether as
licensee or licensor);

       

      (l)           each
agreement, option or commitment or right with, or held by, any third party to
acquire any assets or properties, or any interest therein, of the Company,
having a value in excess of $10,000, except for contracts for the sale of
inventory, machinery or equipment in the ordinary course of the Company’s
business; or

      
        
           

        

        
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      (m)           any
other agreement (or group of related agreements) the performance of which
involves consideration or creates an obligation on the part of the Company in
excess of $25,000.

       

      The
Company has provided the Buyer with access to a correct and complete copy of
each written agreement listed in Schedule 3.27 and a written
summary setting forth the terms and conditions of each oral agreement referred
to in Schedule
3.27.
With respect to any such agreement: (i) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (ii) the agreement will continue to
be legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (iii)
no party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (iv) no party has
repudiated any provision of the agreement.

       

      3.28.         Government
Contracts.

       

      3.28.1.  In
regard to any written or oral agreement that the Company has entered into with a
Governmental Authority regarding the supply of goods or services (a “Government Contract”) in the
seven year period ending as of the Closing Date, the Company has
not:

       

      (a)           been
terminated for default;

       

      (b)           been
subject to formal cure notices or show cause notices;

       

      (c)           been
subject to breach of contract or other claims by its customers, prime
contractors or subcontractors or vendors;

       

      (d)           been
subject to any stop work or suspension of work notices;

       

      (e)           been
subject to any notices of proposed debarment or suspension actions;
or

       

       (f)           operated
under any administrative compliance or corporate integrity
agreement.

       

      3.28.2. As
of the date hereof and as of the Closing Date, in regards to any Government
Contract:

       

      (a)           there
are no open audits or pending notices of disallowance or offsets or
withholdings; and

       

      (b)           there
are no audits or investigations regarding compliance with the Buy American Act
and the Trade Agreements Act, requirements promulgated by the Equal Employment
Opportunity Commission or export control laws.

      
        
           

        

        
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      3.28.3.  No
Government Contract contains clearance requirements that would implicate the
requirements of the United States Department of Defense 5220.22-M, National
Industrial Security Program Operating Manual.

       

      3.29.        Customers
and Suppliers. Since January 1, 2007, none of the customers of the
Company that individually accounted for more than 5% of the Company’s
consolidated gross revenues during the twelve-month period ended December 31,
2006 has terminated or indicated that it intends to terminate any agreement with
the Company. Since January 1, 2007, no material supplier of the Company has
indicated that it will stop, or decrease the rate of, supplying materials,
products or services to the Company. The Company does not purchase any material
item from a sole source which, if such sole source terminated doing business
with the Company, could not be replaced without a Material Adverse
Effect.

       

      3.30.        Bank
Accounts, Letters of Credit and Powers of Attorney. Schedule 3.30 lists (a) all
bank accounts, lock boxes and safe deposit boxes relating to the business and
operations of the Company (including the name of the bank or other institution
where such account or box is located and the name of each authorized signatory
thereto), (b) all outstanding letters of credit issued by financial institutions
for the account of the Company (setting forth, in each case, the financial
institution issuing such letter of credit, the maximum amount available under
such letter of credit, the terms (including the expiration date) of such letter
of credit and the party or parties in whose favor such letter of credit was
issued), and (c) the name and address of each Person who has a power of attorney
to act on behalf of the Company. The Company has heretofore delivered to the
Buyer true, correct and complete copies of each letter of credit and each power
of attorney described in Schedule 3.30.

       

      3.31.         Accounts
Receivable and Inventory.

       

      3.31.1.  All
accounts receivable of the Company (i) are properly included in the Interim
Financial Statements in accordance with GAAP, (ii) have arisen from bona fide
transactions by the Company in the ordinary course of business and represent and
will represent bona fide claims against debtors for sales and other charges and
(iii) are not subject to any counterclaims or discounts (except for those for
which adequate reserves have been established in accordance with GAAP
consistently applied). All such accounts receivable reflected in the Interim
Financial Statements are good and collectible in the ordinary course of business
at the aggregate recorded amounts thereof and within 90 days of the issuance
date of invoices, net of any applicable allowance for doubtful accounts
reflected in the latest balance sheet included therein.

       

      3.31.2.  The
inventories (and any reserves established with respect thereto) of the Company
as of September 30, 2007 are described in Schedule 3.31. All such
inventories (net of any such reserves) are (i) properly included in the Interim
Financial Statements in accordance with GAAP, (ii) are of such quality as to be
useable and saleable in the ordinary course of business (subject in the case of
work in process inventory to completion in the ordinary course of business) and
(iii) are reflected in the books and records of the Company at the lower of cost
or market value. Such inventories are located at the locations set forth in
Schedule 3.31 and the Company
has good and marketable title to all of such inventory, free and clear of any
Liens.

      
        
           

        

        
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      3.32.         Insurance.
Schedule 3.32 sets forth a
list and brief description (including nature of coverage, limits, deductibles,
premiums and the loss experience for the past five years with respect to each
type of coverage) of all policies of insurance maintained, owned or held by the
Company during the period up to and including the date hereof. The Company shall
use all reasonable best efforts to keep such insurance or comparable insurance
in full force and effect through the Closing Date. The Company has complied in
all material respects with each such insurance policy to which it is a party and
has not failed to give any notice or present any claim thereunder in a due and
timely manner. The full policy limits (subject to deductibles provided in such
policies) are available and unimpaired under each such policy and, to the
Knowledge of the Company or the Stockholder, no insurer under any of such
policies has a basis to void such policy on grounds of non-disclosure on the
part of the Company or the Stockholder thereunder. Each such policy is in full
force and effect and will not in any way be affected by or terminate or lapse by
reason of the transactions contemplated by this Agreement.

       

      3.33.         Export
Control Laws. The Company has conducted its export transactions in
accordance with applicable provisions of United States export control laws and
regulations, including but not limited to the Export Administration Act and
implementing Export Administration Regulations. Without limiting the foregoing,
the Company represents and warrants that:

       

      (a)           To
the Company’s Knowledge, the Company has obtained all export licenses and other
approvals required for its exports of products and technologies from the United
States except where the failure to obtain such export licenses and other
approvals would not subject the Company to penalties other than fines not to
exceed $5,000 in the aggregate;

       

      (b)           To
the Company’s Knowledge, the Company is in compliance with the terms of all
applicable export licenses or other approvals;

       

      (c)           There
are no pending or, to the Company’s Knowledge, threatened claims against the
Company with respect to such export licenses or other approvals;

       

      (d)           To
the Company’s Knowledge, there are no actions, conditions or circumstances
pertaining to the Company’s export transactions that may give rise to any future
claims; and

       

      (e)           To
the Comapny’s Knowledge, no consents or approvals for the transfer of export
licenses to the Buyer are required, or such consents and approvals can be
obtained expeditiously without material cost.

       

      3.34.        Internal
Accounting Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any differences.

      
        
           

        

        
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      3.35.   
    Acquisition
of Arotech Common Stock. In connection with and to the extent that the
Stockholder receives shares of Arotech Common Stock, the Stockholder represents
as follows.

       

      3.35.1.  The
Stockholder understands that the shares of Arotech Common Stock are “restricted
securities” and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Arotech Common Stock as
principal for his own account and not with a view to, or for distributing or
reselling such Shares or any part thereof in violation of the Securities Act or
any applicable state securities laws; provided, however, that by making the
representations herein, the Stockholder does not agree to hold any of the Shares
for any minimum period of time and reserves the right, subject to the provisions
of this Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such shares of Arotech Common Stock
pursuant to an effective registration statement under the Securities Act or
under an exemption from such registration and in compliance with applicable
federal and state securities laws. The Stockholder is acquiring the shares of
Arotech Common Stock hereunder in the ordinary course. The Stockholder does not
presently have any agreement, plan or understanding, directly or indirectly,
with any Person to distribute or effect any distribution of any of the shares of
Arotech Common Stock (or any securities which are derivatives thereof) to or
through any person or entity; the Stockholder is not a registered broker-dealer
under Section 15 of the Exchange Act or an entity engaged in a business that
would require him to be so registered as a broker-dealer.

       

      3.35.2.  At
the time the Stockholder was offered shares of Arotech Common Stock, he was, and
at the date hereof he is an “accredited investor” as defined in Rule 501(a)
under the Securities Act.

       

      3.35.3.  The
Stockholder is not purchasing the shares of Arotech Common Stock as a result of
any advertisement, article, notice or other communication regarding the shares
of Arotech Common Stock published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general advertisement.

       

      3.35.4.  The
Stockholder, either alone or together with his representatives, has such
knowledge, sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective investment
in the shares of Arotech Common Stock, and has so evaluated the merits and risks
of such investment. The Stockholder is able to bear the economic risk of an
investment in the shares of Arotech Common Stock and, at the present time, is
able to afford a complete loss of such investment.

      
        
           

        

        
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      3.35.5.  The
Stockholder acknowledges that he has been afforded (i) the opportunity to ask
such questions as he has deemed necessary of, and to receive answers from,
representatives of Arotech concerning the terms and conditions of the offering
of the shares of Arotech Common Stock and the merits and risks of investing in
such shares of Arotech Common Stock; (ii) access to information about Arotech
and its financial condition, results of operations, business, properties,
management and prospects sufficient to enable him to evaluate his investment;
and (iii) the opportunity to obtain such additional information that Arotech
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of the Stockholder or his representatives or counsel shall modify,
amend or affect the Stockholder’s right to rely on the truth, accuracy and
completeness of the Buyer’s representations and warranties contained in this
Agreement. The Stockholder has sought such accounting, legal and tax advice as
he has considered necessary to make an informed decision with respect to his
acquisition of the shares of Arotech Common Stock.

       

      3.35.6.  Other
than with respect to the transactions contemplated herein, since the earlier to
occur of (1) the time that the Stockholder was first contacted by the Buyer or
any other Person regarding the transactions contemplated hereby and (2) the
tenth (10th) day
prior to the date of this Agreement, no Stockholder nor any Affiliate of the
Stockholder which (x) had Knowledge of the transactions contemplated hereby, (y)
has or shares discretion relating to the Stockholder’s investments or trading or
information concerning the Stockholder’s investments, including in respect of
the shares of Arotech Common Stock, and (z) is subject to the Stockholder’s
review or input concerning such Affiliate’s investments or trading
(collectively, “Trading
Affiliates”) has directly or indirectly, nor has any Person acting on
behalf of or pursuant to any understanding with any the Stockholder or Trading
Affiliate, effected or agreed to effect any transactions in the securities of
Arotech (including, without limitation, any Short Sales involving Arotech’s
securities). Notwithstanding the foregoing, in the case of a Stockholder and/or
Trading Affiliate that is, individually or collectively, a multi-managed
investment vehicle whereby separate portfolio managers manage separate portions
of the Stockholder’s or Trading Affiliate’s assets and the portfolio managers
have no direct knowledge of the investment decisions made by the portfolio
managers managing other portions of the Stockholder’s or Trading Affiliate’s
assets, the representation set forth above shall apply only with respect to the
portion of assets managed by the portfolio manager that have knowledge about the
financing transaction contemplated by this Agreement. Other than to other
Persons party to this Agreement, the Stockholder has maintained the
confidentiality of all disclosures made to him in connection with this
transaction (including the existence and terms of this
transaction).

      
        
           

        

        
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      3.35.7.  The
Stockholder has independently evaluated the merits of his decision to purchase
shares of Arotech Common Stock pursuant to this Agreement, and the Stockholder
confirms that he has not relied exclusively on the advice of Arotech’s business
and/or legal counsel in making such decision. The Stockholder understands that
nothing in this Agreement or any other materials presented by or on behalf of
the Buyer or Arotech to the Stockholder in connection with the purchase of the
shares of Arotech Common Stock constitutes legal, tax or investment advice. The
Stockholder has consulted such legal, tax and investment advisors as he, in his
sole discretion, has deemed necessary or appropriate in connection with his
purchase of Arotech Common Stock.

       

      3.35.8.  The
Stockholder understands that the shares of Arotech Common Stock are being
offered and sold to him in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that Arotech
is relying in part upon the truth and accuracy of, and the Stockholder’s
compliance with, the representations, warranties, agreements, acknowledgements
and understandings of the Stockholder set forth herein in order to determine the
availability of such exemptions and the eligibility of the Stockholder to
acquire the shares of Arotech Common Stock.

       

      3.35.9.  The
Stockholder understands that no United States federal or state agency or any
other government or governmental agency has passed on or made any recommendation
or endorsement of the shares of Arotech Common Stock or the fairness or
suitability of the investment in the shares of Arotech Common Stock nor have
such authorities passed upon or endorsed the merits of the offering of the
shares of Arotech Common Stock.

       

      3.35.10.  The
Stockholder is aware that the anti-manipulation rules of Regulation M under the
Exchange Act may apply to sales of Arotech Common Stock and other activities
with respect to the Arotech Common Stock by the Stockholder.

       

      3.35.11.  The
Stockholder’s principal residence is in the jurisdiction set forth in the
preamble to this Agreement.

       

      3.35.12.  The
purchase by the Stockholder of the shares of Arotech Common Stock issuable to
him under this Agreement will not result in the Stockholder (individually or
together with any other Person with whom the Stockholder has identified, or will
have identified, itself as part of a “group” in a public filing made with the
Commission involving Arotech’s securities) acquiring, or obtaining the right to
acquire, in excess of 19.999% of the outstanding shares of Arotech Common Stock
or the voting power of Arotech on a post transaction basis that assumes that the
Closing shall have occurred. None of the Stockholder presently intends to, alone
or together with others, make a public filing with the Commission to disclose
that he has (or that he together with such other Persons have) acquired, or
obtained the right to acquire, as a result of the Closing (when added to any
other securities of Arotech that he or they then own or have the right to
acquire), in excess of 19.999% of the outstanding shares of Arotech Common Stock
or the voting power of Arotech on a post transaction basis that assumes that the
Closing shall have occurred.

      
        
           

        

        
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      3.36.         Disclosure.
No representation or warranty of the Company or the Stockholder contained in
this Agreement, and no statement contained in any Schedule, certificate, list or
other writing furnished to the Buyer pursuant to the provisions hereof, contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements herein or
therein, in light of the circumstances in which they are made, not misleading.
No information believed by the Company or the Stockholder to be material to the
Purchase/Sale and which is necessary to make the representations and warranties
of the Company and of the Stockholder herein contained, taken as a whole, not
misleading, to the Knowledge of the Company or the Stockholder, has been
intentionally withheld from, or has not been delivered in writing to, the
Buyer.

       

      ARTICLE IV

       

      Representations and
Warranties of Buyer

       

      The Buyer
represents and warrants to the Stockholder that, except as set forth in the
appropriately numbered Disclosure Schedule delivered by the Buyer to the
Stockholder:

       

      4.1.           Organization.
The Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Michigan and has all requisite corporate power
and authority to own and lease its properties, to carry on its business as
presently conducted and as proposed to be conducted and to carry out the
transactions contemplated hereby.

       

      4.2.           Authority.
The Buyer has full corporate power and authority (i) to execute and deliver all
documents to be executed by the Buyer in connection with or pursuant to this
Agreement; (ii) to perform its obligations under this Agreement and (iii) to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly approved by the board of directors of the
Buyer or a duly authorized committee thereof and no other corporate proceedings
on the part of the Buyer are necessary to approve this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Buyer and constitute the valid and
binding obligation of the Buyer, enforceable against the Buyer in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
applicability relating to or affecting creditors’ rights generally and by the
application of general principles of equity.

       

      4.3.           No
Conflict. Neither the execution, delivery and performance of this
Agreement by the Buyer, nor the consummation by the Buyer of the transactions
contemplated hereby, nor compliance by the Buyer with any of the terms or
provisions hereof, will (i) conflict with, violate or result in a breach of any
provision of the Organizational Documents of the Buyer, (ii) conflict with,
violate or result in a breach of any statute, code, ordinance, rule, regulation,
order, writ, judgment, injunction or decree applicable to the Buyer, or by which
any property or asset of the Buyer is bound or affected, or (iii) conflict with,
violate or result in a breach of any provisions of or the loss of any benefit
under, constitute a default (or an event, which, with notice or lapse of time,
or both, would constitute a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien, pledge, security interest, charge or other encumbrance on
any property or asset of the Buyer pursuant to any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Buyer is a party, or by which the Buyer is bound or
affected.

      
        
           

        

        
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      4.4.           Consents
and Approvals. The execution, delivery and performance of this Agreement
by the Buyer does not require any consent, approval, authorization or permit of,
or filing with or notification to any Governmental Authority or with any third
party, except for filings with the Securities and Exchange Commission and the
Nasdaq Stock Market. The Buyer is not aware of any reason why the approvals,
consents and waivers of Governmental Authorities referred to herein should not
be obtained.

       

      4.5.           Validly
Issued. The Arotech Common Stock, when issued under this Agreement, will
be duly authorized, validly issued in compliance with all applicable Laws and
fully paid and non assessable.

       

      4.6.           Disclosure.
No representation or warranty contained in this Agreement, and no statement
contained in any schedule, certificate, list or other writing furnished by the
Buyer to the Stockholder pursuant to the provisions hereof, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements herein or therein, in
light of the circumstances in which they are made, not misleading. No
information believed by the Buyer to be material to the Purchase/Sale and which
is necessary to make the representations and warranties of the Buyer herein
contained, taken as a whole, not misleading, to the Knowledge of the Buyer, has
been withheld from, or has not been delivered in writing to, the
Stockholder.

       

      ARTICLE V

       

      Covenants of the
Parties

       

      5.1.           Legal
Conditions to Purchase/Sale. Each of the Buyer, the Stockholder and the
Company shall use commercially reasonable best efforts (i) to take, or cause to
be taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements which may be imposed on such parties with respect to the
Purchase/Sale and, subject to the conditions set forth in Article VI, to
consummate the transactions contemplated by this Agreement and (ii) to obtain
(and to cooperate with the other party to obtain) any consent, authorization,
order or approval of, or any exemption by, any Governmental Authority and any
other third party which is required to be obtained in connection with the
Purchase/Sale and the other transactions contemplated by this
Agreement.

       

      5.2.           Additional
Agreements. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, or to vest
the Buyer with full title to the Company Common Stock, each party to this
Agreement shall take all such necessary action as may be reasonably requested by
the Buyer.

      
        
           

        

        
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      5.3.           Ordinary
Course Operations. Except as contemplated by this Agreement or to the
extent that the Buyer otherwise consents in writing, which consent will not be
unreasonably conditioned, delayed or withheld, during the period from the date
of this Agreement to the Closing, the Company will conduct its operations in its
ordinary course of business, consistent with historical practice (including with
respect to quantity and frequency), and the Company will use commercially
reasonable efforts to preserve intact in all material respects its business
organizations, to maintain in all material respects its present business and to
maintain in all material respects satisfactory relationships with customers,
suppliers and others having business relationships with it. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in or
contemplated by this Agreement, prior to the Closing the Company will not,
without the prior written consent of the Buyer, which consent will not be
unreasonably conditioned, delayed or withheld:

       

      (a)           amend
or otherwise change its certificate of incorporation or bylaws;

       

      (b)           sell,
transfer, license or dispose of, or authorize the sale, transfer or disposition
of, (i) any equipment or other capital assets or (ii) any other assets of the
Company, except for sales under this clause (i) in the Company’s ordinary course
of business consistent with historical practice (including with respect to
quantity and frequency);

       

      (c)           acquire
(including without limitation by merger, consolidation or acquisition of stock
or assets) any corporation, partnership, limited liability company, other
business organization or any division thereof, or all or a material portion of
the assets of any corporation, partnership, limited liability company, other
business organization or any division thereof;

       

      (d)           increase
(except in the ordinary course of business consistent with historical practice
(including with respect to quantity and frequency)) the compensation payable or
to become payable to its officers or employees or grant (except in the ordinary
course of business consistent with historical practice (including with respect
to quantity and frequency)) any bonus, severance or termination pay to, or enter
into any employment or severance agreement with any director, officer or other
employee of the Company, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or
employee;

      
        
           

        

        
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      (e)           make
any change with respect to the Company’s accounting policies, principles,
methods or procedures, including, without limitation, revenue recognition
policies;

       

      (f)           make
any loan to any officer, director, employee, consultant, agent or shareholder of
the Company other than advances to such Persons in the ordinary course of
business consistent with historical practice (including with respect to quantity
and frequency in connection with bona fide business expenses);

       

      (g)           pay,
discharge or satisfy any claims, liabilities or obligations in excess of $10,000
(whether absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction of claims, liabilities or
obligations in the ordinary course of business consistent with historical
practice (including with respect to quantity and frequency);

       

      (h)           issue,
deliver, sell, pledge, dispose of, grant or transfer, or authorize the issuance,
delivery, sale, pledge, disposition, grant or transfer of, any shares of capital
stock of the Company of any class, or securities convertible into or
exchangeable or exercisable for any shares of such capital stock, or any
options, warrants or other rights of any kind to acquire any shares of such
capital stock;

       

      (i)           make
any capital expenditures other than those which are made in the ordinary course
of business consistent with historical practice (including with respect to
quantity and frequency) or are necessary to maintain existing assets in good
repair;

       

      (j)           create,
amend or terminate or give notice of a proposed renewal, amendment or
termination of, any contract disclosed in Schedule 3.27, other than
actions in the Company’s ordinary course of business consistent with historical
practice (including with respect to quantity and frequency);

       

      (k)           solicit
any offers for, respond to any unsolicited offers for, or enter into or conduct
any negotiations in respect of any of the foregoing;

       

      (l)           in
any way assist or encourage any person in connection with any proposed
acquisition of any Company Common Stock or any assets of the Company (other than
sales of its products in the ordinary course of business). authorize, or enter
into any formal or informal agreement or otherwise make any commitment to do,
any of the foregoing; or

      
        
           

        

        
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      (m)           take
any action which would make any of the representations or warranties of the
Company contained in this Agreement untrue, incomplete or incorrect, other than
any such action which would not have a Material Adverse Effect;

       

      provided, however, that in the event
that the Company would be prohibited from taking any action by reason of this
Section 5.3 without the prior written consent of the Buyer, such action may
nevertheless be taken without such consent if the Company is required to do so
by law and the Company prior to taking such action informs the Buyer in writing
of such requirement.

       

      The Buyer
acknowledges that the Company, prior to the Closing, will authorize and pay
distributions to the Stockholder of an amount reasonably estimated to fund the
Subchapter S Tax Liabilities of the Stockholder and for an income distribution
from the Company for 2007, on the dates, in the amounts and in respect of the
periods set forth in Schedule 5.3 hereto, all of
which payments shall not exceed any amount necessary for the Stockholder and
Company to comply with the 2007 net income (not less than $185,000) and net
worth (not less than $500,000) requirements set forth in Section
3.14.

       

      5.4.           Post-Closing
Tax Matters. The following provisions shall govern the allocation of
responsibility as between the Buyer and the Stockholder for certain tax matters
following the Closing Date:

       

      5.4.1.   The
Stockholder shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns for the Company for all periods ending on or prior to the
Closing Date. The Buyer shall provide the Stockholder with all access reasonably
required to the financial records of the Company to prepare such Tax Returns.
The Stockholder shall permit the Buyer to review and approve of each such Tax
Return described in the preceding sentence prior to filing, which approval shall
not be unreasonably withheld or delayed. The Stockholder confirms that the
amounts specified in Schedule 5.4.1 have prior to
the date of this Agreement been distributed by the Company to the Stockholder to
fund the Stockholder’s Subchapter S Tax Liabilities with respect to the income
realized by the Company in 2007. Other than as set forth in Section 5.3 above,
the Stockholder agrees that any further distributions that are made to him by
the Company from the date of this Agreement to the Closing will be limited to
the amounts that the Stockholder estimates will be necessary, to fully fund the
Stockholder’s Subchapter S Tax Liabilities for the period from January 1, 2008
through and including the Closing Date. If, based upon the Tax Returns prepared
for the Company by the Stockholder and approved by the Buyer for the period from
January 1, 2008 through and including the Closing Date, the amounts payable by
the Stockholder as Subchapter S Tax Liabilities are more or less than the sum of
all distributions made by the Company to the Stockholder to fund such Subchapter
S Tax Liabilities, then (i) if the amounts distributed exceed such Subchapter S
Tax Liabilities, the Stockholder shall immediately refund such excess to the
Company and (ii) if the amounts distributed are less than such Subchapter S Tax
Liabilities, the Company shall immediately make a distribution of such
deficiency to the Stockholder. In either instance, the amount paid by or to the
Stockholder shall be recorded as a correcting adjustment to the amounts
distributed by the Company to the Stockholder, while he continued to be the
holder of the Company Common Stock. Any dispute regarding the computation of the
Company Tax Liabilities of the Stockholder shall be resolved in the manner
described in Section 10.1. The amount payable under this Section shall be in
addition to all other amounts payable by the Buyer under this Agreement. Except
as expressly provided in this Section, the Stockholder shall be solely
responsible for the payment of Taxes due under such Tax Returns (whether or not
shown in those Tax Returns) and shall indemnify and hold the Company and the
Buyer harmless from any liability for any Taxes of the Company for all Taxable
periods (or portions thereof) ending on or prior to the Closing
Date.

      
        
           

        

        
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      5.4.2.   The
Buyer shall cause the Company to prepare or cause to be prepared and file or
cause to be filed all Tax Returns for the Company for all periods ending after
the Closing Date.

       

      5.4.3.   At
Buyer’s option, upon written request the Stockholder shall join with the Buyer
in making an election under Section 338(h)(10) of the Code (and any other
corresponding election under state, local, or foreign law) with respect to the
transactions contemplated by this Agreement, and the Stockholder shall cooperate
in good faith with Buyer in making that election. The Stockholder shall include
any income, gain, loss, deduction or other tax item resulting from the election
under Section 338(h)(10) on his Tax Returns to the extent required by applicable
law. As a condition to the agreement and cooperation of the Stockholder in
making the election under Section 338(h)(10), Buyer agrees to reimburse
Stockholder for all additional federal and state income tax incurred by
Stockholder (or the Company prior to the Closing Date) as a result of making
that election. If a Code Section 338(h)(10) election is made, the Purchase Price
and the liabilities of the Company (plus other relevant items) will be allocated
to the assets of the Company for all purposes in a manner consistent with Code
Sections 338 and 1060 and the Treasury Regulations thereunder, as determined by
the Buyer in its sole discretion. The Buyer, the Company, and the Stockholder
shall file all Tax Returns (including amended returns and claims for refund) and
information reports in a manner consistent with such allocation. The Stockholder
shall cause the Stockholder’s Accountant, as soon as reasonably possible after
the Stockholder receives the written request from the Buyer regarding an
election under 338(h)(10), to prepare and to provide to the Buyer a written
determination of all such additional taxes and such amount shall be payable by
the Buyer to the Stockholder not later than twenty days before such taxes will
be payable by the Stockholder. Any dispute regarding the computation of the
taxes payable by the Stockholder as a result of the election under Section
338(h)(10) shall resolved in the manner described in Section 10.1. The amount
payable under this Section shall be in addition to all other amounts payable by
the Buyer under this Agreement.

      
        
           

        

        
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      5.4.4.   The
Buyer, the Company and the Stockholder shall cooperate fully, as and to the
extent reasonably requested by the other parties, in connection with the filing
of Tax Returns pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes, with the Stockholder having the right and
responsibility to conduct and resolve (and to indemnify the Buyer and the
Company from any liability with respect to) the audit of any returns filed
pursuant to Section 5.4.1 and with the Buyer having the right and responsibility
to conduct and resolve (and to indemnify the Stockholder from any liability with
respect to) the audit of any returns filed pursuant to Section 5.4.2. Such
cooperation shall include the retention and (upon the other party’s request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. The Company and the Stockholder agree (i) to
retain all books and records with respect to Tax matters pertinent to the
Company relating to any Tax period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by Buyer,
any extensions thereof) of the respective Tax periods, and to abide by all
record retention agreements entered into with any taxing authority, and (ii) to
give the other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests,
the Company and the Stockholder, as the case may be, shall allow the other party
to take possession of such books and records.

       

      5.4.5.   All
transfer, documentary, sales, use, stamp, registration and other such Taxes and
fees (including any penalties and interest) incurred in connection with this
Agreement shall be paid when due by the Person to whom or which such Taxes are
assessed under applicable law and each Person will, at such Person’s own
expense, file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other Taxes
and fees, and, if required by applicable law, all other Persons will, and will
cause its affiliates to, join in the execution of any such Tax Returns and other
documentation.

       

      5.5.           Full
Access. The Company and the Stockholder will permit representatives of
the Buyer to have full access during normal business hours to all premises,
properties, personnel, books, records (including tax records), contracts, and
documents of or pertaining to the Company. The Buyer will treat and hold and use
as such any confidential information it receives in the course of the reviews
contemplated by this Section 5.5, solely in accordance with the terms of the
confidentiality agreement, dated May 31, 2007 (the “Confidentiality Agreement”),
between the Buyer and the Stockholder and, if this Agreement is terminated for
any reason whatsoever, agrees to destroy or return to the Company all tangible
embodiments (and all copies) thereof which are in its possession in accordance
with the terms of the Confidentiality Agreement.

       

      5.6.           Notice of
Developments. Each party will give prompt written notice to the others of
any development (i) causing a breach of any of its own representations and
warranties in Articles III and IV above and (ii) any development which would
cause a breach of such representations and warranties if such representations
and warranties were required to be correct and complete on each day from the
date of this Agreement to the Closing Date. No disclosure by any party pursuant
to this Section 5.6, however, shall be deemed to amend or supplement the
Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.

      
        
           

        

        
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      5.7.           No
Solicitation. Neither the Company nor the Stockholder shall, nor shall
either of them authorize or permit any of their Affiliates or any officer,
director, employee, investment banker, attorney or other adviser or
representative of them or any of their Affiliates, to (a) solicit, initiate, or
encourage the submission of, any Acquisition Proposal (as hereinafter defined),
(b) enter into any agreement or understanding with respect to any Acquisition
Proposal or (c) participate in any discussions or negotiations regarding, or
furnish to any Person any information for the purpose of facilitating the making
of, or take any other action to facilitate any inquiries or the making of, any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal. Without limiting the foregoing, it is understood that any
violation, of which the Company, the Stockholder or any of their respective
Affiliates had Knowledge at the time of such violation, of the restrictions set
forth in the immediately preceding sentence by any officer, director, employee,
investment banker, attorney, employee, or other adviser or representative of the
Company or any of its Affiliates, whether or not such Person is purporting to
act on behalf of the Company or any of its Affiliates or otherwise, shall be
deemed to be a breach of this Section 5.7 by the Company and its Affiliates. The
Company and the Stockholder shall notify the Buyer in accordance with the notice
provisions of this Agreement in writing and orally within 24 hours after receipt
of any Acquisition Proposal or receipt of any inquiries with respect to any
Acquisition Proposal, such notice to include the identity of the Person making
such proposal, offer, inquiry or contact, and the terms of such Acquisition
Proposal. The Company and the Stockholder immediately shall cease and cause to
be terminated in all respects all existing discussions or negotiations with any
parties conducted heretofore with respect to an Acquisition Proposal. Neither
the Company nor the Stockholder shall release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which it is a
party. “Acquisition
Proposal” means any proposal for a merger or other business combination
involving the Company or any of its Affiliates or any proposal or offer to
acquire in any manner, directly or indirectly, an equity interest in the Company
or any of its Affiliates, any voting securities of the Company or any of its
Affiliates or a substantial portion of the assets of the Company (other than
sales of the Company’s products in the ordinary course of business consistent
with past practice).  This obligation shall terminate automatically
if, for any reason, Closing is not consummated on or before February 19, 2008 as
set forth in Section 7.1.

       

      5.8.           Noncompetition.

       

      5.8.1.   Commencing
on the date hereof and ending two years after the termination of the
Stockholder’s employment with the Company (irrespective of the reason for such
termination), the Stockholder shall not, directly or indirectly, except on
behalf and at the request of the Company: (i) control, manage, be employed or
engaged by, provide services to or otherwise be connected with – whether as an
individual proprietor, partner, officer, director, employee, consultant, 3% or
greater shareholder, broker, finder, joint venturer or otherwise – any company
or other entity which competes or intends to compete with the business then
being conducted by the Company; (ii) sell, license, lease or otherwise transfer
– or offer to sell, license, lease or otherwise transfer – any competitive
products (i.e.,
products similar to and/or competing with those then being offered by the
Company) to any of the Company’s Customers, or (iii) render any services to any
of the Company’s Customers of the type rendered by the Company to its customers
generally or to any of its customers. This restrictive covenant is of the
essence of this Agreement, and the Stockholder understands that the Buyer would
not be purchasing the Company were the Stockholder not willing to make this
commitment.

      
        
           

        

        
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      5.8.2.  Commencing
on the date hereof and ending two years after the termination of the
Stockholder’s employment with the Company (irrespective of the reason for such
termination), the Stockholder shall not solicit nor in any manner encourage
other employees of the Company to leave its employ. The Stockholder further
agrees that during that two-year period he will not offer, or cause to be
offered, employment to any person who was employed by the Company at any time
during the three months prior to the termination of his employment with the
Company.

       

      5.8.3.  The
Stockholder acknowledges that the provisions set forth in this Section 5.8 are
fair and reasonable. The Stockholder further acknowledges that the Company will
be irreparably harmed if the Stockholder’s obligations under this Section 5.8
are not specifically enforced and that the Company would not have an adequate
remedy at law in the event of an actual or threatened violation by the
Stockholder of the Stockholder’s obligations hereunder. Therefore, and in
addition to any and all other remedies to which it may be entitled, the Company
shall be entitled to an injunction or any appropriate decree of specific
performance for any actual or threatened violations or breach by the Stockholder
without the necessity of the Company showing actual damages or that monetary
damages would not afford an adequate remedy, and without posting a
bond.

       

      5.8.4.  The
provisions of this Section 5.8 shall survive the expiration or termination of
this Agreement regardless of the reasons therefor. Furthermore, the period of
time during which the restrictions set forth in Sections 5.8.1 and 5.8.2 above
shall be in effect shall be extended by the length of time during which the
Stockholder is in breach of any of the terms of such respective subsections. The
Company shall be a third-party beneficiary of the provisions of this Section
5.8.

       

      5.9.           Supplemental
Financial Information. The Company and the Stockholder shall deliver to
the Buyer, without charge, the following financial information (the “Supplemental Financial
Information”): (i) within forty days after each fiscal quarter ending
after the date hereof and prior to the Closing Date, the unaudited balance sheet
of the Company as of the end of such quarter and the unaudited statements of
income, stockholders’ equity and cash flows of the Company for such quarter and
for the portion of the fiscal year then completed, (ii) within seventy-five days
after each fiscal year ending after the date hereof and prior to the Closing
Date, the audited balance sheet of the Company as of the end of such year and
the audited statements of income, stockholders’ equity and cash flows of the
Company for such year, in each case prepared in a manner consistent with prior
years, certified by the Company’s Accountant, and (iii) promptly upon the
reasonable request by the Buyer, such additional financial information as may be
required in connection with any filing by the Buyer pursuant to the requirements
of federal or state securities laws. Such Supplemental Financial Information
shall present fairly, in all material respects, the financial position of the
Company for the period covered, subject, in the case of unaudited financials, to
normal year-end adjustments.

       

      
        
           

        

        
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      ARTICLE VI

       

      Conditions to
Closing

       

      6.1.           Conditions
to Obligations of All Parties. The respective obligations of each party
under this Agreement shall be subject to the fulfillment at or prior to the
Closing of the following conditions, none of which may be waived:

       

      6.1.1.  No
order, injunction or decree (whether temporary, preliminary or permanent) issued
by any Governmental Authority of competent jurisdiction or other legal restraint
or prohibition preventing the consummation of the Purchase/Sale or any of the
other transactions contemplated by this Agreement shall be in effect and no
proceeding initiated by any Governmental Authority seeking an such injunction,
decree, restraint or prohibition shall be pending. No statute, rule, regulation,
order, injunction or decree (whether temporary, preliminary or permanent) shall
have been enacted, entered, promulgated or enforced by any Governmental
Authority of competent jurisdiction, which prohibits, restricts or makes illegal
the consummation of the Purchase/Sale or any of the other transactions
contemplated by this Agreement.

       

      6.1.2.  Any
filings with and notifications to, and all approvals and authorizations of,
third parties (including, without limitation, Governmental Authorities) required
for the consummation of the transactions contemplated by this Agreement,
including any necessary assignments, shall have been made or obtained and all
such approvals and authorizations (the “Requisite Regulatory
Approvals”) obtained shall be effective and shall not have been
suspended, revoked or stayed by action of any Governmental
Authority.

       

      6.2.           Conditions
to Obligations of the Buyer. The obligations of the Buyer under this
Agreement are, at the option of the Buyer, subject to the fulfillment of all of
the following conditions on the dates specified below:

       

      6.2.1.  The
Buyer shall be satisfied with its business, customer, legal, environmental, and
accounting due diligence.

       

      6.2.2.  The
Company and the Stockholder shall have demonstrated to the Buyer’s satisfaction
that the unaudited financial statements of the Company for the twelve months
ended December 31, 2007 reflect net income of not less than $185,000 and net
worth (net assets minus net liabilities) of not less than $500,000.

       

      6.2.3.  The
board of directors of the Buyer shall have approved the Closing of the
transactions contemplated by this Agreement.

      
        
           

        

        
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      6.2.4.  Since
January 1, 2007, there shall not have occurred any distributions to the
Stockholder other than the distributions set forth in Sections 5.3, 5.4 and
Schedules 3.17,
5.3 and 5.4.1
hereto.

       

      6.2.5.  As
of the Closing, none of the Requisite Regulatory Approvals shall impose any
term, condition or restriction upon the Buyer or any of its subsidiaries that
the Buyer reasonably determines would materially impair the value of the Company
to the Buyer or be materially burdensome (a “Burdensome
Condition”).

       

      6.2.6.  As
of the Closing, the Company shall not, in the Buyer’s sole judgment, have
suffered any Material Adverse Change since the date of this
Agreement.

       

      6.2.7.  As
of the Closing, the Stockholder shall have delivered to the Buyer a written
notice confirming that (i) each of the conditions to the Stockholder’s
obligations under this Agreement that are specified in Section 6.3 have been
satisfied or waived by the Stockholder, (ii) each of the representations and
warranties of the Stockholder and the Company in this Agreement is true and
correct in all material respects on and as of the Closing Date, and (iii) on and
as of the Closing Date, the representations of the Company and of the
Stockholder contained in Section 3.36 of this Agreement are true and correct in
all respects.

       

      6.2.8.  As
of the Closing, each of the representations and warranties of the Stockholder
and the Company in this Agreement shall be true and correct in all material
respects, in each case as of the date of this Agreement, as applicable, and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date.

       

      6.2.9.  On
or prior to the Closing, the Stockholder and the Company shall have performed in
all material respects all obligations and complied in all material respects with
all agreements or covenants of the Stockholder and the Company to be performed
or complied with by the Stockholder or the Company at or prior to the Closing
under this Agreement.

       

      6.2.10.  On
or prior to the Closing, the Company shall have entered into an employment
agreement in the form of Exhibit 6.2.10 with
Richard Romano as a full-time employee for a term ending four years after the
date of Closing and guaranteed by Arotech and Buyer. 

       

      6.2.11.  On
or prior to the Closing, the Buyer shall have received the opinion of Cardelli,
Lanfear & Buikema, dated as of the Closing Date, with respect to the matters
set forth in Schedule
6.2.11.

       

      6.2.12.  At
the Closing, the members of the board of directors of the Company will, at the
option of the Buyer, deliver their resignations to the Buyer.

      
        
           

        

        
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      6.2.13.  At
the Closing, the Stockholder and all signatories on the Company’s bank accounts
will, at the option of the Buyer, sign all papers necessary to replace such
signatories with designees of the Buyers.

       

      6.2.14.  At
the Closing, the Stockholder will deliver to the Buyer a general release,
substantially in the form of Exhibit 6.2.14,
releasing the Company from any and all man­ner of actions, causes of action,
suits, debts, covenants, contracts, controversies, agreements, promises, claims
and demands whatsoever, which the Stockholder ever had, has, or may have,
against the Company, excepting those obligations created by this
Agreement.

       

      6.2.15.  As
of the Closing, neither the Company nor the Stockholder shall have taken any
action or made any payments that would result, either individually or in the
aggregate, in the payment of an “excess parachute payment” within the meaning of
Section 280G of the Code or that would result, either individually or in the
aggregate, in payments that would be nondeductible pursuant to Section 162(m) of
the Code.

       

      6.2.16.  At
the Closing, the Company shall deliver to the Buyer an affidavit, under
penalties of perjury, stating that the Company is not and has not been a United
States real property holding corporation, dated as of the Closing Date and in
form and substance required under Treasury Regulations § 1.897-2(h) so that the
Buyer is exempt from withholding any portion of the Closing Consideration
thereunder.

       

      6.3.           Conditions
to Obligations of the Company and the Stockholder. The obligations of the
Company and the Stockholder under this Agreement are, at the option of the
Company and the Stockholder, subject to the fulfillment or written waiver by the
Stockholder of all of the following conditions on or before the dates specified
below:

       

      6.3.1.  As
of the Closing, the Buyer shall have delivered to the Stockholder a written
notice confirming that (i) each of the conditions to the Buyer’s obligations
under this Agreement that are specified in Section 6.2 have been satisfied or
waived by the Buyer, (ii) each of the representations and warranties of the
Buyer in this Agreement is true and correct in all material respects as of the
Closing Date, and (iii) on and as of the Closing Date, the representations of
the Buyer contained in Section 4.5 of this Agreement are true and correct in all
respects.

       

      6.3.2.  As
of the Closing, each of the representations and warranties of the Buyer in this
Agreement shall be true and correct in all material respects, in each case as of
the date of this Agreement, as applicable, and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date.

       

      6.3.3.  On
or prior to the Closing, the Buyer shall have performed in all material respects
all obligations and complied in all material respects with all of the respective
agreements or covenants to be performed or complied with by the Buyer at or
prior to the Closing under this Agreement.

      
        
           

        

        
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      6.3.4.  On
or prior to the Closing, the Stockholder shall have received the opinions of
Hooper, Hathaway, Price, Beuche & Wallace and of Yaakov Har-Oz, Esq., dated
as of the Closing Date, with respect to the matters set forth in Schedules 6.3.4(a) and 6.3.4(b).

       

      ARTICLE VII

       

      The
Closing

       

      7.1.           Closing.
Subject to the terms and conditions of this Agreement, the closing of the
Purchase/Sale (the “Closing”) will take place at
10:00 a.m. on or before February 19, 2008, or at such other date as is mutually
approved by the Company and the Buyer (the “Closing Date”), at the offices
of the Company in Royal Oak, Michigan, or at such other time and place as the
Buyer and the Stockholder may otherwise agree in writing.

       

      7.2.           Deliveries
at Closing. Subject to satisfaction of the conditions precedent set forth
in this Agreement, at the Closing the parties will deliver the
following:

       

      7.2.1.  The
Buyer shall pay to the Stockholder by wire transfer of funds, to an account to
be specified by the Stockholder in writing and transmitted to the Buyer as set
forth in Section 11.2 hereof at least two (2) business days prior to the Closing
Date, the Cash Consideration specified in Section 2.4.1.

       

      7.2.2.  The
Buyer shall cause Arotech to issue and deliver to the Stockholder an original
stock certificate representing the shares of Arotech Common Stock issuable to
the Stockholder as the Closing Stock Consideration specified in Section
2.4.2.

       

      7.2.3.  The
Stockholder shall deliver to the Buyer (i) the original stock certificate(s)
representing all of the shares of Company Common Stock, and (ii) such other
instruments of sale, transfer, conveyance and assignment, including without
limitation an undated stock power executed in blank, as Buyer and its counsel
may reasonably request to effect the transactions contemplated
hereby.

       

      7.2.4.  The
parties shall exchange all other documents that the Company or the Buyer may
reasonably request be delivered at the Closing so as effectively to consummate
the transactions contemplated hereby.

       

      ARTICLE VII

       

      Indemnification and
Remedies

       

      8.1.           Survival
of Representations and Warranties. The representations and warranties of
the parties contained in this Agreement and any other agreement or certificate
delivered pursuant to this Agreement shall survive the Closing for a period of
five (5) years immediately following the Closing Date, except that (i) the
Stockholder’s representations and warranties contained in Sections 3.10, 3.18,
3.19, 3.21 and 3.23 shall survive until the statute of limitations applicable to
the matters set out therein has expired, (ii) the Stockholder’s representations
and warranties contained in Sections 3.36, 3.3, 3.4, 3.5, 3.14, 3.15, 3.26, and
3.34 shall survive without limitation as to time, and (iii) the Buyer’s
representations and warranties contained in Section 4.5 shall survive without
limitation as to time. Each of the covenants set forth in this Agreement will
survive the Closing.

      
        
           

        

        
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      8.2.           Indemnified
Claims.

       

      8.2.1.  The
Stockholder shall indemnify and hold harmless the Buyer, affiliates of the
Buyer, the officers, directors, agents and employees of the Buyer and of any of
the Buyer’s affiliates, and the Company, and their respective personal
representatives, successors and assigns (collectively, the “Buyer Indemnified Parties”),
against and in respect of any and all claims, suits, actions, assessments,
costs, expenses, damages, liabilities, losses and deficiencies, including,
without limitation, reasonable counsel fees and other costs and expenses
incident to investigating or defending any claims, suit, or action commenced or
threatened, any interest or penalties, and any and all amounts paid in
settlement of any claim, suit or action (“Damages”) arising out of,
resulting from or incurred in connection with (i) any inaccuracy in any
representation or the breach of any warranty made by the Company or the
Stockholder in this Agreement, (ii) the breach by the Stockholder of any
covenant, agreement or other obligation to be performed, or complied with, by
the Stockholder under this Agreement or (iii) the breach by the Company of any
covenant, agreement or other obligation to be performed, or complied with, by
the Company under this Agreement on or prior to the Closing Date. 

       

      8.2.2.  The
Buyer shall indemnify and hold harmless the Stockholder and his personal
representatives, successors, and assigns (collectively, the “Seller Indemnified Parties”),
against and in respect of any and all Damages arising out of, resulting from or
incurred in connection with (i) any inaccuracy in any representation or the
breach of any warranty made by the Buyer in this Agreement and (ii) the breach
by the Buyer of any covenant, agreement or other obligation to be performed by
or complied with the Buyer hereunder.

       

      8.2.3.  Any
Person providing indemnification pursuant to the provisions of this Section 8.2
is hereinafter referred to as an “Indemnifying Party” and any
Person entitled to be indemnified pursuant to the provisions of this Section 8.2
is hereinafter referred to as an “Indemnified
Party.”

       

      8.2.4.  The
provisions of Section 8.2.1 and Section 8.2.2 constitute the sole remedy of any
Indemnified Party for Damages arising out of, resulting from or incurred in
connection with any inaccuracy in any representation or the breach of any
warranty made by the Buyer, the Company or the Stockholder in this Agreement
subject to the terms and conditions of this Article VIII.

       

      8.2.5.  All
claims for indemnification by any Buyer Indemnified Party or Seller Indemnified
Party, as the case may be, will be determined net of the amount of any insurance
proceeds, indemnification payments, contribution payments or reimbursements
directly or indirectly received by such Person or any of such Person’s
affiliates in connection with such claim or the circumstances giving rise
thereto. The Company, each Buyer Indemnified Party and each Seller Indemnified
Party agrees to use commercially reasonable efforts to pursue such insurance
proceeds and any third party payments in good faith and in recognition of the
interests of the Buyer. The parties agree that for purposes of the preceding
sentence it shall not be commercially reasonable to refrain from making a claim
under an insurance policy solely because the payment of the claim may result in
increased insurance premiums in the future.

      
        
           

        

        
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      8.2.6.  In
the case of any claim for indemnification arising from a claim of a third party,
an Indemnified Party shall give prompt written notice, following such
Indemnified Party’s receipt of such claim or demand, to the Indemnifying Party
of any claim or demand of which such Indemnified Party has knowledge and as to
which it may request indemnification hereunder; provided, however, that failure to give
such notice will not affect such Indemnified Party’s rights furnished hereunder
unless, and then solely to the extent that, the rights of the parties from whom
indemnity is sought are materially prejudiced as a result of such failure. The
Indemnifying Party shall have the right to defend and to direct the defense
against any such claim or demand, in its name or in the name of the Indemnified
Party, as the case may be, at the expense of the Indemnifying Party, and with
counsel selected by the Indemnifying Party, unless (i) such claim or demand
seeks an order, injunction or other equitable relief against the Indemnified
Party, (ii) upon the request of the Indemnifying Party, the Indemnifying Party
is unable to provide reasonable evidence to the Indemnified Party of its
financial ability to satisfy its indemnification obligations, (iii) such claim
or demand relates to the Indemnified Party’s customer, supplier, employee or
sales representative relationships or otherwise implicates the ongoing operation
of the Indemnified Party’s business, or (iv) the Indemnified Party shall have
reasonably concluded that (x) there is a conflict of interest between the
Indemnified Party and the Indemnifying Party in the conduct of the defense of
such claim or demand or (y) the Indemnified Party has one or more defenses not
available to the Indemnifying Party. Notwithstanding anything in this Agreement
to the contrary, the Indemnified Party shall, at the expense of the Indemnifying
Party, cooperate with the Indemnifying Party, and keep the Indemnifying Party
fully informed, in the defense of such claim or demand. The Indemnified Party
shall have the right to participate in the defense of any claim or demand with
counsel employed at its own expense; provided, however, that, in the case of
any claim or demand described in clauses (i), (ii), (iii) or (iv) of the second
preceding sentence or as to which the Indemnifying Party shall not in fact have
employed counsel to assume the defense of such claim or demand, the reasonable
fees and disbursements of such counsel shall be at the expense of the
Indemnifying Party. The Indemnifying Party shall have no indemnification
obligations with respect to any such claim or demand which shall be settled by
the Indemnified Party without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably conditioned, delayed or withheld.
The Indemnifying Party shall not settle any such claim without the prior written
consent of the Indemnified Party, unless such claim solely involves a claim for
monetary Damages and such settlement is accompanied by a document releasing the
Indemnified Party from all liability with respect to the matter in
controversy.

      
        
           

        

        
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      8.3.           Setoff.
Notwithstanding any other provisions herein to the contrary, to the extent that
the Buyer shall be entitled to recover Losses pursuant to Section 8.2 or any
amounts are due to the Buyer pursuant to the terms of this Agreement, then the
Buyer shall be entitled to setoff such Losses or amounts owed against (i) any
funds remaining in the Indemnity any Earnout Consideration payable to the
Stockholder pursuant to Section 2.5.

       

      8.4.           No
Circular Recovery. The Stockholder hereby agrees that he will not make
any claim for indemnification against the Buyer or the Company by reason of the
fact that the Stockholder was a controlling person, director, employee or
representative of the Company or was serving as such for another Person at the
request of the Buyer or the Company (whether such claim is for Losses of any
kind or otherwise and whether such claim is pursuant to any Law, Organizational
Document, contractual obligation or otherwise) with respect to any claim brought
by the Buyer or the Company against the Stockholder relating to this Agreement
or any of the transactions contemplated hereby. With respect to any claim
brought by the Buyer or the Company against the Stockholder relating to this
Agreement and any of the transactions contemplated hereby, the Stockholder
expressly waives any right of subrogation, contribution, advancement,
indemnification or other claim against the Company with respect to any amounts
owed by the Stockholder pursuant to this Article VIII.

       

      ARTICLE IX

       

      Termination and
Expenses

       

      9.1.           Termination.
This Agreement may be terminated and the Purchase/Sale and the other
transactions contemplated by this Agreement may be abandoned at any time prior
to the Closing, notwithstanding any requisite approval and adoption of this
Agreement and the transactions contemplated in this Agreement by the board of
directors of the Buyer and the Stockholder of the Company, under the following
circumstances:

       

      9.1.1.  By
mutual written consent duly authorized by the board of directors of the Buyer
and the Company;

       

      9.1.2.  By
either the Buyer or the Stockholder if the Closing shall not have occurred on or
before February 19, 2008 or such later date as the parties may have agreed upon
in writing; provided, however, that the right to terminate this Agreement under
this Section 9.1.2 shall not be available to any party whose failure to fulfill
any material obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date; or

       

      9.1.3.  By
either the Buyer or the Stockholder (provided that the terminating party is not
then in material breach of any representation, warranty, covenant or other
agreement contained herein) if there shall have been a material breach of any of
the representations or warranties set forth in this Agreement on the part of the
other party, which breach by its nature cannot be cured prior to the earlier of
the Closing or within thirty days following receipt by the breaching party of
written notice of such breach from the other party hereto.

      
        
           

        

        
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      9.2.           Effect of
Termination; Expenses.

       

      9.2.1.  In
the event of the termination of this Agreement pursuant to Section 9.1, this
Agreement shall forthwith terminate, and there shall be no liability on the part
of any party hereto, except as otherwise provided below.

       

      9.2.2.  If
this Agreement is terminated by the Stockholder in accordance with Section 9.1.3
or by the Buyer for any reason other than the reasons set forth in Section
9.1.3, then the Stockholder shall have the right to seek and secure recovery
from the Buyer for (i) all damages permitted or required under applicable law as
a result of any breach of this Agreement by the Buyer, and (ii) an amount equal
to (i) $25,000, less (ii) any amounts paid by the Buyer in respect of the
expense of having the Company’s financial statements audited and/or
reviewed.

       

      9.2.3.  If
this Agreement is terminated by the Buyer for the reasons set forth in Section
9.1.3 or by the Stockholders for any reason other than in accordance with
Section 9.1.3, then the Buyer shall have the right to seek and secure recovery
from the Stockholder and the Company for all damages permitted or required under
applicable law as a result of any breach of this Agreement by the Stockholder or
the Company.

       

      9.2.4.  If
this Agreement is terminated by the Buyer for the reasons set forth in Section
9.1.3 or by the Stockholders for any reason other than in accordance with
Section 9.1.3, and at any time prior to October 23, 2008 any third party shall
acquire, either through a stock acquisition, asset purchase, merger or other
business combination, a majority interest in the Company or its assets, then in
addition to any amounts payable to the Buyer pursuant to the operation of
Section 9.2.3, the Stockholders shall at the closing of such sale pay to the
Buyer, in cash, an amount equal to all out-of-pocket costs and expenses (but in
no event in an amount in excess of $75,000), including, without limitation, the
reasonable fees and expenses of lawyers, accountants and investment bankers,
incurred by the Buyer in connection with the entering into of this Agreement and
the carrying out of any and all acts contemplated hereunder.

       

      ARTICLE X

       

      Arbitration

       

      10.1.         Computation
of the Purchase Price. If the Stockholder disputes the Buyer’s
computation of the Earnout Consideration pursuant to Section 2.5, then the
Stockholder shall have thirty days from the date of delivery of the written
notice advising the Stockholder of that computation to notify the Buyer that the
Stockholder disputes the computation. If the Stockholder shall not have
delivered a written notice advising of a dispute (the “Dispute Notice”) within such
thirty day period, then the computation specified in the written notice
delivered by the Buyer shall be final and the payment shall be made by the Buyer
pursuant to that computation. If the Stockholder has delivered a Dispute Notice
within such thirty day period, then the Stockholder’s Accountant and the Buyer’s
Accountant shall attempt to resolve the dispute regarding the disputed
computation within twenty days after the date of delivery of the Dispute Notice
and, if they are able to agree upon a resolution, to deliver within such twenty
day period a written notice (the “Resolution Notice”) to the
Buyer and the Stockholder, and the computation confirmed in that Resolution
Notice shall be final and if based upon such Resolution Notice any additional
amount is payable by the Buyer, such party shall pay such amount within five
business days after the date that the Resolution Notice is delivered to the
Stockholder. If the Stockholder’s Accountant and the Buyer’s Accountant have not
delivered a Resolution Notice within such twenty day period, then the
Stockholder’s Accountant and the Buyer’s Accountant, within such twenty day
period, by written notice delivered to the Buyer and the Stockholder, shall
select an independent accounting firm of nationally recognized standing (the
“Unaffiliated Accountant”) to review the
review and resolve the disputed computation based upon the principles stated in
this Agreement and, to the extent not inconsistent with the principles stated in
this Agreement, GAAP. The Unaffiliated Accountant shall, as soon thereafter as
is possible, complete its review and make its determination of the appropriate
computation of the disputed computation and shall deliver written notice (the
“Review Notice”) to the
Buyer and Stockholder specifying that computation. The determination of the
computation made by the Unaffiliated Accountant shall be final and if based upon
such Review Notice any additional amount is payable by the Buyer, the Buyer
shall pay such amount within five Business Days after the date that the Review
Notice is delivered to the Buyer and the Stockholder. The fees of the Buyer’s
Accountant shall be paid by the Buyer. The fees of the Stockholder’s Accountant
shall be paid by the Stockholder. The fees of the Unaffiliated Accountant shall
be paid one-half by the Buyer and one-half by the Stockholder.

      
        
           

        

        
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      10.2.         Arbitration.
Except as provided in Section 10.1 with respect to dispute over the computation
of the Purchase Price, any dispute between the Buyer and the Stockholder with
respect to this Agreement, including, without limitation, any dispute regarding
any Claim for indemnity under Article VIII, must be submitted to and resolved by
arbitration through the American Arbitration Association (the “Association”). The arbitration
will be conducted through the offices of the Association in Southfield,
Michigan. The arbitration will be implemented under the rules and procedures of
the Association for commercial disputes. The decision of the arbitrator(s) will
be conclusive and binding upon the Buyer and the Stockholder and will not be
subject to any challenge or appeal. The decision of the arbitrator will be
enforceable by either party through the order of any court of competent
jurisdiction.

       

      ARTICLE  XI

       

      Miscellaneous

       

      11.1.         Assignment.
Except as provided below, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.

       

      11.2.         Notices.
All notices, requests, claims, demands and other communications hereunder shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, by e-mail (with a delivery receipt), fax
(with confirmation of receipt), guaranteed overnight delivery service (with a
delivery confirmation) or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 11.2):

      
        
           

        

        
          - 52
-

          
            

          

        

        
           

        

      

      If to the
Company, to:

       

      Realtime
Technologies, Inc.

      1523
North Main Street

      Royal
Oak, Michigan 48067

      Attention:      Dean
Krutty

      Telephone:    1-248-548-4876

      Fax:                 1-248-548-6036

      E-mail:            dean@faac.com

       

      With a
copy to:

       

      Yaakov
Har-Oz, Esq.

      Vice
President and General Counsel

      Arotech
Corporation

      c/o
Electric Fuel Ltd.

      One
HaSolela Street, Western Industrial Zone

      Beit
Shemesh 99000, Israel

      Telephone:  
  011-972-2-990-6623

      Fax:                  011-972-2-990-6688

      E-mail:             yaakovh@arotech.com

       

      If to the
Stockholder, to:

       

      Richard
Romano

      712 Park
Avenue

      Royal
Oak, Michigan 48067

      Telephone:    1-248-591-7079

      Fax:                 1-248-548-6036

      E-mail:             romano@simcreator.com

       

      With a
copy to:

       

      Eric A.
Buikema, Esq

      Cardelli,
Lanfear & Buikema

      332 West
Lincoln

      Royal
Oak, Michigan 48067

      Telephone:    1-248-544-1100

      Fax:                 1-248-544-1191

      E-mail:             ebuikema@cardellilaw.com

      
        
           

        

        
          - 53
-

          
            

          

        

        
           

        

      

      If to
Buyer, to:

       

      FAAC
Incorporated

      1229 Oak
Valley Drive

      Ann
Arbor, Michigan 48108

      Attention:      Chairman
and CEO

      Telephone:    1-734-761-5836

      Fax:                 1-734-761-5368

      E-mail:            
ehrlich@arotech.com

       

      With a
copy to:

       

      Yaakov
Har-Oz, Esq.

      Vice
President and General Counsel

      Arotech
Corporation

      c/o
Electric Fuel Ltd.

      One
HaSolela Street, Western Industrial Zone

      Beit
Shemesh 99000, Israel

      Telephone: 
   011-972-2-990-6623

      Fax:              
   011-972-2-990-6688

      E-mail:             yaakovh@arotech.com

       

      And a
copy to:

       

      James R.
Beuche, Esq.

      Hooper,
Hathaway, Price, Beuche & Wallace

      126 South
Main Street

      Ann
Arbor, Michigan 48104

      Telephone:    1-734-662-4426

      Fax:            
    1-734-662-9559

      E-mail:             jbeuche@hooperhathaway.com

       

      or at
such other address for a party as shall be specified by like
notice.

       

      11.3.     
   Expenses.
Subject to the provisions of Section 9.2, each party hereto shall pay its own
expenses in connection with the transactions contemplated hereby, whether or not
they are completed; provided, however, that the Stockholder shall be required to
reimburse the Company for (i) any fees or other expenses payable by the Company
to any investment banker or other financial advisor for services rendered in
connection with the transactions contemplated by this Agreement and (ii) any
expenses incurred by the Company in connection with the transactions
contemplated by this Agreement. In the event of any conflict between this
provision and the indemnification or termination provisions of this Agreement,
the indemnification or termination provisions, as the case may be, shall
control.

       

      11.4.         Press
Releases and Public Announcements. The parties will consult with respect
to the appropriate public disclosure to be made with respect to the transactions
contemplated hereby, and will make no such disclosure without reasonable notice
to the other party prior to such disclosure. Notwithstanding the foregoing, the
Company understands that the federal securities laws and applicable stock
exchange listing agreements require Buyer to make certain disclosures of
material events, including without limitation the execution of this Agreement.
Buyer will use reasonable efforts to consult with the Company before providing
any information about this Agreement or the Company in accordance with such
requirements.

      
        
           

        

        
          - 54
-

          
            

          

        

        
           

        

      

      11.5.   
     Parties
in Interest. This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other person any right, benefit or
remedy of any nature whatsoever under or by reason of this
Agreement.

       

      11.6.         Governing
Law and Disputes. This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws of State of Michigan, without
giving effect to its conflict of laws rules thereof. Disputes under this
Agreement are to be resolved as provided in Article X above. Any dispute with
respect to the validity or applicability of the arbitration provisions of this
Agreement or any other dispute that for any reason shall be claimed not to be
subject to the arbitration provisions of this Agreement shall be litigated
exclusively in the state or federal courts sitting in Washtenaw County,
Michigan, and each of the parties hereby irrevocably consents to the exclusive
jurisdiction of such courts and waives and agrees not to assert any objection to
the jurisdiction or convenience thereof.

       

      11.7.        Counterparts.
This Agreement may be executed in two or more counterparts, all of which shall
be considered one and the same agreement and shall become effective when two or
more counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.

       

      11.8.     
   Descriptive
Headings; Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement. Whenever required by the context, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine, or neuter forms, and the singular form of nouns, pronouns, and verbs
shall include the plural and vice versa. The use of the word “including” in this
Agreement shall be by way of example rather than by limitation. Reference to any
agreement, document, or instrument means such agreement, document, or instrument
as amended or otherwise modified from time to time in accordance with the terms
thereof, and if applicable hereof. Without limiting the generality of the
immediately preceding sentence, no amendment or other modification to any
agreement, document, or instrument that requires the consent of any Person
pursuant to the terms of this Agreement or any other agreement will be given
effect hereunder unless such Person has consented in writing to such amendment
or modification. Wherever required by the context, references to a year shall
refer to a portion thereof. The use of the words “or,” “either,” and “any” shall
not be exclusive. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement. Wherever a conflict exists between
this Agreement and any other agreement, this Agreement shall control but solely
to the extent of such conflict.

      
        
           

        

        
          - 55
-

          
            

          

        

        
           

        

      

      11.9.         Further
Assurances.

       

      11.9.1.  Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby. Each of the Company, the
Stockholder and the Buyer will use their respective best efforts to obtain all
Requisite Regulatory Approvals prior to the Closing Date.

       

      11.9.2.  In
the event that following the Closing Date, the Buyer becomes aware that there
are Requisite Regulatory Approvals that were not obtained prior to the Closing
Date, the Stockholder shall promptly take, or cause to be taken, without any
further consideration, all such actions necessary to obtain such Requisite
Regulatory Approvals within ninety (90) days from the date upon which the Buyer
or the Company notifies the Stockholder of the need for such Requisite
Regulatory Approvals.

       

      11.10.       Entire
Agreement. This Agreement (including the Disclosure Schedule and the
other documents referred to herein) and the Confidentiality Agreement constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, whether written
or oral, among the parties, or any of them, in connection with such subject
matter.

       

      [Signature
Page Follows]

       

      
        
          
             

          

          
            - 56
-

            
              

            

          

          
             

          

        

      

      

      IN WITNESS WHEREOF, the
parties have executed this Stock Purchase Agreement under seal as of the day and
year first above written.

       

      

       

      
        	
                BUYER:

              	
                FAAC
      Incorporated

              
	 
      	 
      	 
      
	 
      	
                By:

              	 
      
	 
      	 
      	
                Dean
      Krutty, Chairman and President

              
	 	 	 
	
                COMPANY:

              	
                Realtime
      Technologies, Inc.

              
	 
      	 
      	 
      
	 
      	
                By:

              	 
      
	 
      	 
      	
                Richard
      Romano, President

              
	
                STOCKHOLDER:

              	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                Richard
      Romano

              
	
                GUARANTOR
      (with respect to Article II and Sections 6.2.10 and 7.2.2
      only):

              	
                Arotech
      Corporation

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                By:

              	 
      
	 
      	 
      	
                Steven
      Esses, President and COO

              

      

       

       

      [Signature page to Stock Purchase
Agreement]ex10_1.htm

    
      
        

      

    

    Exhibit
10.1

      LEASE

      
 

      GEORGIA,
CATOOSA COUNTY.

      

      This
Lease, made this 2nd day of
June 1970, by and between Catoosa Enterprises, Inc. hereinafter called “Lessor,”
and Shop-Rite, Inc. and American Consumers, Inc., hereinafter jointly called
“Lessee.”

      

      WITNESSETH:

      

      

      PREMISES

      

      The
Lessor, for and in consideration of the rents, covenants, agreements, and
stipulations hereinafter mentioned, reserved, and contained, to be paid, kept
and performed by the Lessee, has leased and rented, and by these presents does
lease and rent, unto the said Lessee, and said Lessee hereby agrees to lease and
take upon the terms and conditions which hereinafter appear, the following
described property, hereinafter called “Premises:”  12,000 square feet
of floor space in the City of Ringgold, Catoosa County, Georgia, described as
follows:

      

      All that
tract or parcel of land lying and being in Land Lots Nos. 170 and 191 in the
28th
District and 3rd Section
of Catoosa County, Georgia, and described as follows:  BEGINNING at
the point located south 1 degree 25 minutes west 62 feet, south 88 degrees 35
minutes east 29 feet, and south 1 degree 25 minutes west 150 feet from the point
on the south side of LaFayette Street which is located north 83 degrees 29
minutes east 442.1 feet from the southeast corner of the intersection of
LaFayette Street and Nance Lane; thence south 88 degrees 35 minutes east 100
feet; thence south 1 degree 25 minutes west 120 feet; thence north 88 degrees 35
minutes west 100 feet; thence north 1 degree 25 minutes east 120 feet,
containing 12,000 square feet.

      

      TOGETHER
with an easement for drive and parking area which is described as
follows:  BEGINNING at a point on the south side of LaFayette Street
277.5 feet north 83 degrees 29 minutes east from the southeast corner of the
intersection of LaFayette Street and Nance Lane; thence north 83 degrees 29
minutes east along the south side of LaFayette Street 164.6 feet; thence south 1
degree 25 minutes west 150 feet; thence south 88 degrees 35 minutes east 29
feet; thence south 1 degree 25 minutes west 182 feet; thence north 88 degrees 35
minutes west 192 feet; thence north 1 degree 35 minutes east 271 feet to the
point of beginning, said easement being for the common use of all present and
future tenants of the property of Lessor, having been designated by it as
Ringgold Plaza Shopping Center, and the drive and parking areas being more fully
shown on plat of the property herein described prepared by N. B. DeLoach,
Surveyor, and recorded in Plat Book ______, page _____, in the Office of the
Clerk of the Superior Court of Catoosa County, Georgia.

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      No
easement for light or air is included in the premises.

      

      II

      

      TERM

      

      The term
of this lease shall be fifteen (15) years, beginning on the date that said
premises are ready for occupancy and opening for business by Lessee, said
commencement date to be noted in a memorandum agreement which Lessor and Lessee
shall execute and which shall be attached to this lease shall become a part
hereof.

      

      III

      

      RENTAL

      

      Lessee
agrees to pay Lessor a monthly rental of One Thousand, Seven Hundred Fifty
Dollars ($1,750) in advance on the first day of each month from the commencement
of the term of this lease, said monthly installment being a minimum guaranteed
rental.  In addition thereto, Lessee agrees to pay to Lessor a
percentage rental equal to One and One-fourth percent (1-1/4%) of the Lessee’s
gross sales made from the demised premises in excess of ONE MILLION, SIX HUNDRED
EIGHTY THOUSAND DOLLARS ($1,680,000) for each twelve (12) months’ period
computed from the commencement of the term of this lease.  The term
“gross sales” as used herein is hereby defined to mean and shall be the total
amount of the dollar value of all sales of merchandise and services by or for
the account of Lessee, both on cash and on credit.  The amount of the
dollar value of bona fide refunds or credit granted for return of merchandise
and all state sales or federal excise taxes and uncollected credit accounts
shall be charged as a credit in reduction of the gross amount of sales for the
period within which such refunds or credits shall have been made.

      

      IV

      

      RECORD OF
SALES

      

      Lessee,
during the term of this lease, shall maintain and keep, or cause to be
maintained and kept, at said premises or such other location agreeable to Lessor
a full, complete, and accurate permanent record and account of all sales of
merchandise and services and all sums of money paid or payable for or on account
of or arising out of the business and all business transactions conducted at or
from said premises by or for the account of Lessee, for each day of the term
thereof.  Lessee shall furnish to Lessor so much of an annual
certified audit as reflects the foregoing; and following receipt of said audit
annually, Lessor and its duly authorized agents or representatives shall be
entitled to inspect such records and accounts and supporting records at
reasonable times during ordinary business hours where such records are
located.  Lessee shall keep and preserve or cause to be kept and
preserved said records for not less than twelve (12) months after the due date
and payment of any percentage rental due under the terms
thereof.

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      V

      

      REPORTS

      

      On or
before the end of the second month following the close of each fiscal year of
Lessee and annually thereafter until termination of this lease, Lessee, at the
place where the rent herein reserved shall be payable, shall deliver to Lessor,
or the person, firm or corporation to whom such rent shall be payable, a
complete written statement showing in all reasonable detail the gross amount of
sales for the preceding month, including therein a statement of the total amount
of state sales taxes and federal excise taxes paid or payable on account thereof
and the number and dollar amount of all refunds and credits for return of
merchandise, if any, made during such period.  Each such statement
shall be signed by one of the principal officers of Lessee, and if so required
by Lessor, such statements shall be signed under oath.  Lessee shall,
concurrently with the delivery of such statement, pay to the Lessor all
percentage rental payments then due hereunder.

      

      VI

      

      USE OF
PREMISES

      

      Premises
shall be used for the retail sale of groceries, meat, poultry, produce, dairy
products and related items ordinarily and customarily sold by supermarkets, and
no other.  Premises shall not be used for any illegal purposes; nor in
any manner to create any nuisance or trespass; nor in any manner to vitiate the
insurance or increase the rate of insurance on premises.

      

      VII

      

      ABANDONMENT OF LEASED
PREMISES

      

      Lessee
agrees not to abandon or vacate leased premises during the term of this
lease.

      

      VIII

      

      UTILITY
BILLS

      

      Lessee
shall pay water, gas, electricity, fuel, light, heat, and power bills for leased
premises, or used by Lessee in connection therewith.  If Lessee does
not pay the same, Lessor may pay the same and such payment shall be added to the
rental pf the premises.

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      IX

      

      REPAIRS BY
LESSOR

      

      Lessor
agrees to keep in good order the roof, exterior walls, paved parking areas,
exclusive of all glass, including plate glass, and water, sewer, and sprinkler
systems, but not fixtures pertaining to such systems.  Lessor gives to
Lessee exclusive control of premises and shall be under no obligation to inspect
said premises.  Lessee shall at once report in writing to Lessor any
defective condition known to it which Lessor is required to repair, and failure
to do so report such defects shall make Lessee responsible to Lessor for any
liability incurred by Lessor by reason of such defect.

      

      X

      

      REPAIRS BY
LESSEE

      

      Lessee
will accept the leased premises when completed in accordance with plans and
specifications agreed upon by Lessor and Lessee, which are attached hereto and
made a part hereof by reference.  In accepting the same, Lessee
covenants that the premises have been completed in accordance with such plans
and specifications, and that the premises are suited for the uses intended by
Lessee.  Lessee shall, at its own expense, keep and maintain the said
premises and appurtenances and every part thereof, in good order and repair,
except portions of premises to be repaired by Lessor under the terms of
paragraph 9 hereof.  Lessee agrees also to keep all fixtures
pertaining to heating, air conditioning, water, sewer, electrical and sprinkler
systems in good order and repair; and agrees also that it is liable for any
damage to such heating, air conditioning, water, sewer, electrical and sprinkler
systems if such damage is due to negligence of Lessee.  Lessee agrees
to return said premises to Lessor at the expiration of this lease in as good
condition and repair as when first received, natural wear and tear, damage by
storm, fire, lighting, earthquake, or other casualty alone
excepted.  Lessor agrees to assign to Lessee all warranties on
fixtures pertaining to heating, air conditioning, water, sewer, electrical and
sprinkler systems issued to it, including all 1-year service warranties and
5-year parts warranties.

      

      XI

      

      SIGNS

      

      Lessee
shall install and maintain electric, or other artistic signs capable of being
illuminated, advertising its business or products sold in the demised premises;
and Lessee shall obtain the necessary permits from municipal authorities for the
erection and maintenance of said signs.  All such signs are subject to
the approval of Lessor and Lessee must obtain such approval in writing prior to
installation.

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      XII

      

      RUBBISH
REMOVAL

      

      The
Lessee shall keep the premises clean, both inside and outside, at its own
expense, and will remove the ashes, garbage, excelsior, straw and other refuse
from said premises.  The Lessee shall not burn any materials or
rubbish of any description upon said premises unless the same is burned in
incinerators of such structure, design and capacity as may be approved by
Lessor.  The Lessee also agrees to keep the parking area immediately
adjacent to said store free from rubbish, dirt, ashes, garbage, excelsior, straw
and other refuse.  Lessee agrees to keep all accumulated rubbish in
covered containers and to have same removed regularly.  In the event
the Lessee fails to keep the demised premises and other portions heretofore
described in the proper condition, the Lessor may cause the same to be done for
the Lessee and the Lessee hereby agrees to pay the expenses thereof on demand as
additional rent.

      

      XIII

      

      SIDEWALKS

      

      The
Lessee shall neither encumber nor obstruct the sidewalks adjoining said premises
nor allow the same to be obstructed or encumbered in any manner except in normal
course of business, and keep said sidewalks free of ice, snow, rubbish, and
dirt.  The Lessee shall not place, nor cause to be placed, any
merchandise, vending machines or anything on the sidewalk or exterior of
premises without prior written consent of the Lessor.

      

      XIV

      

      PARKING AREA AND LIGHTING
FACILITIES

      

      Lessor
will keep the parking area in repair and provide lighting facilities, but not
electricity, therefor, which shall be mutually acceptable to the parties for
such purposes.  The Lessee shall pay to the Lessor monthly as billed
its prorate share of the cost of the electricity and providing traffic direction
at request of Lessee by uniformed police, if necessary, for the parking area
during reasonable hours, such expense to be considered as additional rent
reserved hereunder.  The Lessor shall, on behalf of the Lessee and
other tenants of Lessor, which shall include present drugstore and Shop-Rite,
Inc., keep the parking areas, driveways, and landscaped areas if any, in a neat
and orderly condition, including the removal of snow, ice and rubbish
therefrom.  The Lessee agrees hereunder to pay its prorata share of
cost thereof as additional rent when billed.  The Lessee’s prorate
share of any cost or expense shall be in the proportion that its front foot
occupancy bears to the front foot occupancy of the entire frontage of tenants of
Lessor, including existing buildings occupied by the drugstore, occupying other
portions of the tract of land owned by Lessor of which the leased premises are a
part.  Lessee shall have the right to inspect Lessor’s records of any
such charges annually for purpose of determining accuracy
thereof.

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      XV

      

      DESTRUCTION OF OR DAMAGE TO
PREMISES

      

      If
premises are totally destroyed by storm, fire, lightning, earthquake or other
casualty, this lease shall terminate as of the date of such destruction, and
rental shall be accounted for as between Lessor and Lessee as of that
date.  If premises are damaged but not wholly destroyed by any such
casualties, rental shall abate in such proportion as use of premises has been
destroyed and Lessor shall restore premises to substantially the same condition
as before damaged as speedily as practicable, whereupon full rental shall
recommence.

      

      XVI

      

      INDEMNITY

      

      Lessee
agrees to indemnify and save harmless the Lessor against all claims for damages
to persons or property by reason of the use or occupancy of the leased premises,
excluding common areas, and all expenses incurred by Lessor on account thereof,
including attorney’s fees and court costs.

      

      XVII

      

      GOVERNMENTAL
ORDERS

      

      Lessee
agrees at is own expense, to promptly comply with all requirements of any
legally constituted public authority made necessary by reason of Lessee’s
occupancy of said premises.  Lessor agrees to promptly comply with any
such requirements if not made necessary by reason of Lessee’s
occupancy.  It is mutually agreed, however, between Lessor and Lessee,
that if in order to comply with such requirements, the cost to Lessor or Lessee,
as the case may be, shall exceed a sum equal to one year’s rent, then Lessor or
Lessee, whichever is obligated to comply with such requirements is privileged to
terminate this lease by giving written notice of termination to the other party
by registered or certified mail, which termination shall become effective sixty
days after receipt of such notice, and which notice shall eliminate the
necessity of compliance with such requirement by party giving such notice unless
party receiving such notice of termination shall, before termination becomes
effective, pay to party giving notice all costs of compliance in excess of one
year’s rent, or secure payment of said sum in manner satisfactory to party
giving notice.

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      XVIII

      

      CONDEMNATION

      

      If the
whole of the leased premises, or such portion thereof as will make premises
unuseable for the purposes herein leased, be condemned by any legally
constituted authority for any public use or purpose, then in either of said
events the term hereby granted shall cease from the time when possession thereof
is taken by public authorities, and rental shall be accounted for as between
Lessor and Lessee as of that date.  Such termination, however, shall
be without prejudice to the rights of either Lessor or Lessee to recover
compensation and damage caused by condemnation from the condemnor.  It
is further understood and agreed that neither the Lessee nor Lessor shall have
any rights in any award made to the other by any condemnation
authority.

      

      

      XVIX

      

      ASSIGNMENT AND
SUBLETTING

      

      Lessee
may sublease portions of the leased premises to other provided sublessee’s
operation is a part of the general operation of Lessee and under the supervision
and control of Lessee, and provided such operation is within the purposes for
which said premises shall be used.  Except as provided in the
preceding sentence, Lessee shall not, without the prior written consent of
Lessor endorsed hereon, assign this lease or any interest hereunder, or sublet
premises or any part thereof, or permit the use of premises by any party other
than Lessee.  Lessor covenants that such consent shall not be
unreasonably withheld.  Consent to any assignment or sublease shall
not destroy this provision, and all later assignments or subleases shall be made
likewise only on the prior written consent of Lessor.  Assignee of
Lessee, at the option of Lessor, shall become directly liable to Lessor for all
obligations of Lessee hereunder, but no sublease or assignment by Lessee shall
relieve Lessee of any liability hereunder.

      

      XX

      

      REMOVAL OF
FIXTURES

      

      Lessee
may, if not in default hereunder, prior to the expiration of this lease or any
extension thereof, remove all fixtures and equipment which it has placed in
premises, provided Lessee repairs all damage to the premises caused by such
removal.

      

      XXI

      

      CANCELLATION OF LEASE BY
LESSOR

      

      It is
mutually agreed that in the event the Lessee shall default in the payment of
rent herein reserved when due and fails to cure default with five days after
written notice thereof from Lessor; or if Lessee shall be in default in
performing any of the terms or provisions of this lease other than the provision
requiring the payment of rent and fails to cure such default within thirty days
after the date of receipt of written notice of default from Lessor; or if
Lessee, or either Lessee, is adjudicated bankrupt; or if a permanent receiver is
appointed for Lessee’s, or either Lessee’s, property and such receiver is not
removed within sixty days after the written notice from Lessor to such Lessee to
obtain such removal; or if, whether voluntarily or involuntarily, Lessee, or
either Lessee, takes advantage of any debtor relief proceedings under any
present or future law, whereby the rent or any part thereof is, or is proposed
to be, reduced or payment thereof deferred; or if Lessee, or either Lessee,
makes an assignment for benefit of creditors; or if Lessee’s, or either Lessee’s
effects shall be levied upon or attached under process against such Lessee, not
satisfied or dissolved within thirty days after written notice from Lessor to
such Lessee to obtain satisfaction thereof; then, and in any of said events,
Lessor at its option may at once, or within six months thereafter, but only
during continuance of such default or condition, terminate this lease by written
notice to Lessee; whereupon this lease shall end.  After an authorized
assignment or subletting of the entire premises covered by this lease, the
occurring of any of the foregoing defaults or events shall effect this lease
only if caused by, or happening to, the assignee or sublessee.  Any
notice provided in this paragraph may be given by Lessor or its
attorney.  Upon such termination by Lessor, Lessee will at once
surrender possession of the premises to Lessor and remove all of the Lessee’s
effects therefrom; and Lessor may forthwith re-enter the premises and repossess
itself thereof, and remove all persons and effects therefrom, using such force
as may be necessary without being guilty of trespass, forcible entry or detainer
or other tort.

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      XXII

      

      RELETTING BY
LESSOR

      

      Lessor,
as Lessee’s agent, without terminating this lease, upon Lessee’s breaching this
contract, may at Lessor’s option enter upon and rent premises at the best price
obtainable by reasonable effort, without advertisement and by private
negotiations and for any term Lessor deems proper.  Lessee shall be
liable to Lessor for the deficiency, if any, between Lessee’s rent hereunder and
the price obtained by Lessor on reletting.

      

      XXIII

      

      ENTRY FOR CARDING,
ETC.

      

      Lessor
may card premises “For Sale” at any time and “For Rent” thirty days before the
termination of this lease.  Lessor may enter the premises at
reasonable hours to exhibit same to prospective purchasers or tenants and to
make repairs required of Lessor under the terms hereof, or to make repairs to
Lessor’s adjoining property.

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      XXIV

      

      EFFECT OF TERMINATION OF
LEASE

      

      No
termination of this lease prior to the normal ending thereof, by lapse of time
or otherwise, shall affect Lessor’s right to collect rent for the period prior
to termination thereof.

      

      XXV

      

      MORTGAGEE’S
RIGHTS

      

      Lessee’s
rights shall be subject to any bona fide mortgage or deed to secure debt which
is now, or may hereafter be, placed upon the premises by Lessor.

      

      XXVI

      

      NO ESTATE IN
LAND

      

      This
contract shall create the relationship of landlord and tenant between Lessor and
Lessee; no estate shall pass out of Lessor; Lessee has only a usufruct, not
subject to levy and sale, and not assignable by Lessee except as provided in
paragraph 20 hereof.

      

      XXVII

      

      HOLDING
OVER

      

      If Lessee
remains in possession of premises after expiration of the term hereof, with
Lessor’s acquiescence and without any express agreement of parties, Lessee shall
be a tenant at will at rental rate in effect at end of lease; and there shall be
no renewal of this lease by operation of law.

      

      XXVIII

      

      ATTORNEY’S FEES AND
HOMESTEAD

      

      If any
rent owing under this lease is collected by or through an attorney-at law,
Lessee agrees to pay ten percent (10%) thereof as attorney’s fees.

      

      XXVIX

      

      SERVICE OF
NOTICE

      

      Lessee
hereby appoints as its agent to receive service of all dispossessory or
distraint proceedings and notices thereunder, and all notices required under
this lease, the person in charge of leased premises at the time, or occupying
said premises, and if no person is in charge of, or occupying said premises,
then such service or notice may be made by attaching the same on the main
entrance of said premises.  A copy of all notices under this lease
shall also be sent to Lessee’s last known address if different from said
premises.  All notices and payments required by Lessee to Lessor
hereunder shall be made to Lessor at 1012 Burleyson Drive, Dalton, Georgia,
30720, until written notice of a change of address is given by Lessor to
Lessee.

      

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      XXX

      

      WAIVER OF
RIGHTS

      

      No
failure of Lessor to exercise any power given Lessor hereunder, or to insist
upon strict compliance by Lessee with its obligations hereunder, and no practice
or custom of the parties at variance with the terms hereof constitute a waiver
of Lessor’s right to demand exact compliance with the terms hereof.

      

      XXXI

      

      TAXES

      

      Lessor
agrees to pay all ad valorem taxes assessed against the premises during the term
of this lease; provided, however, Lessee shall pay all ad valorem taxes assessed
against its fixtures, equipment, inventory and other merchandise or personal
effects.  Lessee covenants and agrees to pay as additional rent
hereunder, when billed, its prorata share of any increase in ad valorem taxes
assessed against the tract of land owned by Lessor on which leased premises are
situated over the amount of such ad valorem taxes assessed for the first year
after completion of the leased premises used by Lessee exclusively and common
areas.  The Lessee’s prorata share of such taxes shall be in
proportion that its square foot occupancy bears to the square foot occupancy of
the entire respective areas occupied by tenants of Lessor situated on said tract
of land owned by Lessor upon which the leased premises are
situated.

      

      XXXII

      

      CONSTRUCTION AND COMPLETION
OF PREMISES

      

      Lessor
shall construct the premises in accordance with the plans and specifications
attached hereto and made a part hereof.  Lessor shall furnish and
install all lighting fixtures, heating, and air conditioning systems in
accordance with such plans and specifications.  Upon commencement of
construction, Lessor covenants to complete the same as speedily as practicable
and to make the premises available to Lessee.  This lease is expressly
made subject to Lessor’s ability to obtain a loan from a source, and on such
terms and conditions, as may be satisfactory to it, and Lessor is under no
obligation to commence construction until a commitment for such financing is
obtained.  If construction has not commenced within 90 days from this
date, Lessee may, at its option, terminate this lease without further
liability.

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      XXXIII

      

      EMPLOYEE
PARKING

      

      Lessee
covenants and agrees that all its employees shall use employee parking spaces as
designated by Lessor.  If a complaint is made from any other tenant of
Lessor as to a violation of this provision, Lessor shall immediately notify
Lessee of such violation and Lessee agrees to promptly have such employee or
employees remove their vehicle to the employee parking location.  In
the event that Lessee fails to comply with such warning, Lessee shall be charged
the sum of $5.00 per day per vehicle occupying space in violation of this
provision.  Lessor covenants and agrees to promptly enforce this
provision upon receipt of notice from any tenant of Lessor and upon its failure
to do so it shall be responsible to Lessee for the penalty provided
herein.  Such notice required hereunder shall be given to the person
in charge of the leased premises.  Lessee covenants and agrees that
upon receipt from Lessor of notice of a violation of this provision, it will
continue to enforce said provision as to such employee violating the same and no
further notice of a violation of this provision by the same employee shall be
required.

      

      XXXIV

      

      RIGHTS
CUMULATIVE

      

      All
rights, powers, and privileges conferred hereunder upon parties hereto shall be
cumulative, but not restrictive to those given by law.

      

      XXXV

      

      TIME OF
ESSENCE

      

      Time is
of the essence of this agreement.

      

      XXXVI

      

      DEFINITIONS

      

      “Lessor”
as used in this lease shall include first party, its assigns and successors in
title to the premises.  “Lessee” shall include second parties, their
respective successors or assigns, and, if this lease shall be validly assigned
or sublet, shall include also Lessee’s assignees or sublessees, as to premises
covered by such assignment or sublease.  The obligations of Lessee
hereunder shall be deemed to be the joint and several obligations of each of the
second parties, and the default of either of said second parties of any of the
terms and provisions of this lease, shall be deemed to be a default of
both.  Any notices required to be given to Lessee hereunder, except
notice as to conditions of default applying only to American Consumers, Inc.,
shall be given to Shop-Rite, Inc.  This lease contains the entire
agreement of the parties hereto and no representations, inducements, promises,
or agreements, oral or otherwise, between the parties not embodied herein shall
be of any force or effect.

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      IN
WITNESS WHEREOF, the parties herein have hereunto set their hands and seals, in
triplicate, the day and year first above written.

       

      
        
          	
                  Signed,
      sealed and delivered

                	 
      	
                  CATOOSA
      ENTERPRISES, INC.

                
	
                  as
      to Lessor, in the presence

                	 
      	 
      	 
      
	
                  of:

                	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	
                  /s/ W.W. Fincher, Jr.

                
	 
      	 
      	 
      	
                  PRESIDENT

                
	
                  /s/ L. Hugh Kemp

                	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	
                  /s/ Earl T. McGee

                
	 
      	 
      	 
      	
                  SECRETARY-TREASURER

                
	
                  /s/ Geneva Hanes

                	 
      	 
      	 
      
	
                  NOTARY
      PUBLIC

                	 
      	 
      	 
      
	
                  My
      Commission Expires August 26, 1971

                	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                  Signed,
      sealed and delivered

                	 
      	
                  SHOP-RITE,
      INC.

                
	
                  as
      to Shop-Rite, Inc., Lessee,

                	 
      	 
      	 
      
	
                  in
      the presence of:

                	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	
                  /s/ Zuma Richardson, Jr.

                
	 
      	 
      	 
      	 
      
	
                  /s/ June Ottway

                	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	
                  /s/ Roger Howard, Sr.

                
	 
      	 
      	 
      	 
      
	
                  /s/ Herbert S. Wilbanks

                	 
      	 
      	 
      
	
                  NOTARY
      PUBLIC

                	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                  Signed,
      sealed and delivered

                	 
      	
                  AMERICAN
      CONSUMERS, INC.

                
	
                  as
      to American Consumers, Inc.,

                	 
      	 
      	 
      
	
                  Lessee,
      in the presence of:

                	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	
                  /s/ Zuma Richardson, Jr.

                
	 
      	 
      	 
      	 
      
	
                  /s/ June Ottway

                	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	
                  /s/ Roger Howard, Sr.

                
	 
      	 
      	 
      	 
      
	
                  /s/ Herbert S. Wilbanks

                	 
      	 
      	 
      
	
                  NOTARY
      PUBLIC

                	 
      	 
      	 
      

        

      

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      FIRST AMENDMENT TO
LEASE

      

      THIS
FIRST AMENDMENT TO LEASE (“First Amendment”) is entered into this 15th day of
October, 1981, by and between CATOOSA ENTERPRISES, INC., (hereinafter referred
to as “Lessor”) and SHOP-RITE, INC. and AMERICAN CONSUMERS, INC., (collectively
hereinafter referred to as “Lessee”).

       

      W I T N E
S S E T H:

       

      WHEREAS,
Lessor and Lessee entered into a Lease dated June 2, 1970 for 12,000 square feet
of floor space in Ringgold Plaza Shopping Center, Ringgold, Catoosa County,
Georgia, a copy of which is marked Exhibit “A”, attached hereto, and by
reference incorporated herein; and

       

      WHEREAS,
it is the desire of the Lessor and Lessee to amend the attached Lease by
changing the term of the Lease, the annual rental, and, the gross sales base for
the payment of percentage rental.

       

      NOW,
THEREFORE, for and in consideration of the payment by the Lessee to the Lessor
of Ten ($10.00) Dollars in cash, the receipt and sufficiency of which are hereby
acknowledged, and the further consideration of the terms and conditions
contained herein, the parties agree as follows:

       

      1.

       

      Article
II of the attached Lease that is entitled “TERM” is deleted in its entirety and
inserted in lieu thereof is the following Article II entitled
“TERM”:

       

      “The term
of this Lease shall be from October 15, 1981 to and through midnight November
30, 1992.”

       

      2.

       

      Article
III entitled “RENTAL” of the attached Exhibit “A” is modified as
follows:

       

      (a) The
monthly rental of $1,750.00 appearing in the first and second lines from the top
of said Article is deleted and inserted in lieu thereof is a new monthly rental
of $2,500.00;

       

      (b) The
amount of $1,680,000.00 appearing in the 7th and 8th lines from the top of said
Article III is deleted and inserted in lieu thereof is the amount of
$2,400,000.00.

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      3.

       

      Except as
modified by this First Amendment, all other terms and provisions of the attached
Lease shall remain unchanged.  All the terms and provisions of this
First Amendment and the Lease shall be binding upon and inure to the benefit of
the parties hereto, their successors and assigns.  This First
Amendment shall be interpreted under the Laws of the State of
Georgia.

       

      IN
WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals, in
triplicate, the day and year first above written.

      

      
        	 
      	
                LESSOR:

              
	 
      	 
      	 
      
	 
      	
                CATOOSA
      ENTERPRISES, INC.

              
	 
      	 
      	 
      
	 
      	
                BY:

              	
                /s/
      Phillip S.
      Lawes(SEAL)

              
	 
      	 
      	
                PHILLIP
      S. LAWES, PRESIDENT

              

      

      

      
        	
                Signed,
      sealed and delivered

              	 
      	 
      	 
      
	
                in
      the presence of:

              	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                /s/
      F. Lamar Lewis

              	 
      	 
      	 
      
	
                Witness

              	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                /s/
      [signature indiscernible on original]

              	 
      	 
      	 
      
	
                Notary
      Public

              	 
      	 
      	 
      
	 
      	 
      	
                LESSEE:

              
	 
      	 
      	 
      	 
      
	 
      	 
      	
                SHOP-RITE

              
	 
      	 
      	 
      	 
      
	 
      	 
      	
                BY:

              	
                /s/ Zuma Richardson, Jr.
      (SEAL)

              
	 
      	 
      	 
      	
                ZUMA
      RICHARDSON, JR., President

              
	 
      	 
      	 
      	 
      
	 
      	 
      	
                ATTEST:

              	
                /s/
      Terry Cross

              
	 
      	 
      	 
      	
                Terry
      Cross, Secretary

              
	 
      	 
      	 
      	 
      
	 
      	 
      	AMERICAN
      CONSUMERS, INC.
	 
      	 
      	 
      	 
      
	 
      	 
      	
                BY:

              	
                /s/ Zuma Richardson, Jr.
      (SEAL)

              
	 
      	 
      	 
      	
                ZUMA
      RICHARDSON, JR., President

              
	 
      	 
      	 
      	 
      
	 
      	 
      	
                ATTEST:

              	
                /s/
      Terry Cross

              
	 
      	 
      	 
      	
                TERRY
      CROSS, ITS SECRETARY

              

      

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      

      
        	
                Signed,
      sealed and delivered

              	 
      	 
      
	
                in
      the presence of:

              	 
      	 
      
	 
      	 
      	 
      
	
                /s/ F. Lamar Lewis

              	 
      	 
      
	
                Witness

              	 
      	 
      
	 
      	 
      	 
      
	
                [signature indiscernible on
      original]

              	 
      	 
      
	
                Notary
      Public

              	 
      	 
      

      

      

      

      As the
holder of the first priority Note and Deed to Secure Debt on Ringgold Plaza
Shopping Center the undersigned, Southeast Federal Savings and Loan Association,
formerly known as Rossville Federal Savings and Loan Association, consents to
this First Amendment to the attached Lease.

       

      This 15th
day of October, 1981.

      

      
        	 
      	
                SOUTHEAST
      FEDERAL SAVINGS & LOAN ASSOCIATION

              
	 
      	
                FORMERLY
      KNOWN AS ROSSVILLE FEDERAL SAVINGS

              
	 
      	
                &
      LOAN ASSOCIATION

              
	 
      	 
      	 
      
	 
      	
                BY:

              	
                /s/ K. Lamar Thomas

              
	 
      	 
      	
                K.
      LAMAR THOMAS, VICE PRESIDENT

              

      

      

      

      
        	
                Signed,
      sealed and delivered

              	 
      
	
                in
      the presence of:

              	 
      
	 
      	 
      
	
                /s/ F. Lamar Lewis

              	 
      
	
                Witness

              	 
      
	 
      	 
      
	
                /s/ [signature indiscernible on
      original]

              	 
      
	
                Notary
      Public

              	 
      

      

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

      October
15, 1981

      

      

      
        	 
      	
                Re:

              	
                Ringgold
      Plaza Shopping Center

              
	 
      	 
      	
                Ringgold,
      Georgia

              

      

      

      Mr. Zuma
Richardson

      c/o Shop
Rite

      Battlefield
Parkway

      Fort
Oglethorpe, GA 31068

      

      Gentlemen:

      

      The undersigned, all of the
stockholders of Catoosa Enterprises, Inc., your landlord, have this day sold
their stock to Southern Atlantic Associates, Inc. Employee Pension Plan, 359
East Paces Ferry Road, Suite 3-D, Atlanta, Georgia 30305. You are to make all
future payments under your lease to Southern Atlantic Associates, Inc. Employee
Pension Plan until you are notified to
the contrary by it.

      

      
        	 
      	
                Yours
      truly,

              
	 
      	 
      	 
      
	 
      	
                CATOOSA
      ENTERPRISES, INC.

              
	 
      	
                WORLD
      ENTERPRISES, INC.

              
	 
      	 
      	 
      
	 
      	
                BY:

              	
                /s/ W.W. Fincher

              
	 
      	 
      	
                W.W.
      FINCHER, PRESIDENT

              
	 
      	 
      	 
      
	 
      	
                BY:

              	
                /s/ Earl T. Mghee

              
	 
      	 
      	
                EARL
      T. MGHEE

              
	 
      	 
      	 
      
	 
      	
                BY:

              	
                /s/ R. L. McNew

              
	 
      	 
      	
                R.L.
      MCNEW

              
	 
      	 
      	 
      
	 
      	
                BY:

              	
                /s/ Janice McNew

              
	 
      	 
      	
                JANICE
      MCNEW

              

      

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

      SECOND AMENDMENT TO
LEASE

      

      THIS
SECOND AMENDMENT TO LEASE (“Second Amendment”) is entered into this 1st day of
April, 1987, by and between RINGGOLD INVESTORS, LTD., (hereinafter referred to
as “Lessor”) and SHOP-RITE and AMERICAN CONSUMERS, INC., (collectively
hereinafter referred to as “Lessee”).

      

      W I T N E
S S E T H:

       

      WHEREAS,
Lessor and Lessee entered into a Lease dated June 2, 1970 and amended October
15, 1981, for 12,000 square feet of floor space in Ringgold Plaza Shopping
Center, Ringgold, Catoosa County, Georgia, copies of which are marked Exhibit
“A”, attached hereto, and by reference incorporated herein; and

       

      WHEREAS,
it is the desire of the Lessor and Lessee to amend the attached Lease as amended
by changing the annual rental, the gross sales base for the payment of
percentage rental and adding renewal options to the lease;

       

      NOW,
THEREFORE, for and in consideration of the payment by the Lessee to the Lessor
of Ten ($10.00) Dollars in cash, the receipt and sufficiency of which are hereby
acknowledged, and the further consideration of the terms and conditions
contained herein, the parties agree as follows:

       

      1.

       

      Article
II of the attached Lease that is entitled “TERM” is deleted in its entirety and
inserted in lieu thereof is the following Article II entitled
“TERM”:

       

      “The term
of this Lease shall be from April 1, 1987 to and through midnight November 30,
1992.”

       

      2.

       

      Article
III entitled “RENTAL” of the attached Exhibit “A” is modified as
follows:

       

      (a) The
monthly rental of $1,750.00 amended to be $2,500.00 appearing in the first and
second lines from the top of said Article is deleted and inserted in lieu
thereof is a new monthly rental of $3,500.00;

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

      (b) The
amount of $1,680,000.00 appearing in the 7th and 8th lines from the top of said
Article III amended to be $2,400,000.00 is deleted and inserted in lieu thereof
is the amount of $2,880,000.00.

       

      3.

       

      Lessee
shall have the option to renew the lease under the same terms and conditions
except as amended by the First Amendment and the Second Amendment for two
consecutive five year options. The first five year period to begin December 1,
1992 and the second five year period to begin December 1, 1997.

       

      4.

       

      Except as
modified by this Second Amendment, all other terms and provisions of the
attached Lease and First Amendment shall remain unchanged. All the terms and
provisions of this Second Amendment and the Lease shall be binding upon and
inure to the benefit of the parties hereto, their successors and assigns. This
Second Amendment shall be interpreted under the Laws of the State of
Georgia.

       

      IN
WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals, in
triplicate, the day and year first above written.

      

      
        	 
      	
                LESSOR:

              
	 
      	 
      	 
      
	 
      	
                RINGGOLD
      INVESTORS, LTD.

              
	 
      	 
      	 
      
	 
      	
                BY:

              	
                /s/ Richard K. Taylor

              
	 
      	 
      	
                Richard
      K. Taylor, General Partner

              

      

      

      
        	
                Signed,
      sealed and delivered

              	 
      
	
                in
      the presence of:

              	 
      
	 
      	 
      
	
                /s/ [signature indiscernible on
      original]

              	 
      
	
                Witness

              	 
      
	 
      	 
      
	
                /s/ Kathleen Billings

              	 
      
	
                Notary
      Public

              	 
      
	
                Notary
      Public, Dekalb County, Georgia

              	 
      
	
                My
      Commission Expires April 30, 1990

              	 
      

      

      

      
        	 
      	
                LESSEE:

              
	 
      	 
      	 
      
	 
      	
                SHOP-RITE

              
	 
      	 
      	 
      
	 
      	
                BY:

              	
                /s/ Michael A.
Richardson

              
	 
      	 
      	
                Michael
      A. Richardson, President

              
	 
      	 
      	 
      
	 
      	
                ATTEST:

              	
                /s/ Reba Southern

              
	 
      	 
      	
                Reba
      Southern, Assistant Secretary

              
	 
      	 
      	 
      
	 
      	
                AMERICAN
      CONSUMERS, INC.

              
	 
      	 
      	 
      
	 
      	
                BY:

              	
                /s/ Michael A.
Richardson

              
	 
      	 
      	
                Michael
      A. Richardson, President

              
	 
      	 
      	 
      
	 
      	
                ATTEST:

              	
                /s/ Reba Southern

              
	 
      	 
      	
                Reba
      Southern, Assistant Secretary

              

      

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

      

      
        	
                Signed,
      sealed and delivered

              	 
      
	
                in
      the presence of:

              	 
      
	 
      	 
      
	
                /s/ Deborah R. Holden

              	 
      
	
                Witness

              	 
      
	 
      	 
      
	
                /s/ C. Eugene Rominger 

              	 
      
	
                Notary
      Public

              	 
      
	
                My
      Commission Expires November 3, 1989

              	 
      

      

      

      As the
holder of the first priority Note and Deed to Secure Debt on Ringgold Plaza
Shopping Center the undersigned, United Companies Financial Corporation,
consents to this Second Amendment to the attached Lease.

      

      This
20th
day of March, 1987.

      
        	 
      	
                UNITED
      COMPANIES FINANCIAL

              
	 
      	
                CORPORATION

              
	 
      	
                By: /s/ [signature indiscernible on
      original]

              

      

      

      
        	
                Signed,
      sealed and delivered

              	 
      
	
                in
      the presence of:

              	 
      
	 
      	 
      
	
                /s/ Elsie M. Thompson

              	 
      
	
                Witness

              	 
      
	 
      	 
      
	
                [no signature on original]

              	 
      
	
                Notary
      Public

              	 
      

      

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

      THIRD AMENDMENT TO
LEASE

      

      THIS
THIRD AMENDMENT TO LEASE (“Third Amendment”) is entered into this 1st day of
February, 1992, by and between RINGGOLD INVESTORS, LTD., (hereinafter referred
to as “Lessor”) and SHOP-RITE and AMERICAN CONSUMERS, INC., (collectively
hereinafter referred to as “Lessee”).

      

      W I T N E
S S E T H:

       

      WHEREAS,
Lessor and Lessee entered into a Lease dated June 2, 1970 and amended October
15, 1981, and April 1, 1987, for 12,000 square feet of floor space in Ringgold
Plaza Shopping Center, Ringgold, Catoosa County, Georgia, copies of which are
marked Exhibit “A”,
attached hereto, and by reference incorporated herein; and

       

      WHEREAS,
it is the desire of the Lessor and Lessee to amend the attached Lease as amended
by increasing the square footage, changing the annual rental, the gross sales
base for the payment of percentage rental and adding renewal options to the
lease;

       

      NOW,
THEREFORE, for and in consideration of the payment by the Lessee to the Lessor
of Ten ($10.00) Dollars in cash, the receipt and sufficiency of which are hereby
acknowledged, and the further consideration of the terms and conditions
contained herein, the parties agree as follows:

       

      1.

       

      Article I
of the attached lease that is entitled “PREMISES” shall be amended to add 2,400
square feet of additional space contiguous to the existing 12,000 square feet
for a total of 14,400 square feet;

       

      2.

       

      Article
III entitled “RENTAL” of the attached Exhibit “A” is modified as
follows:

      

      (a) The
monthly rental of $1,750.00 amended to be $2,500.00 and the $3,500.00 appearing
in the first and second lines from the top of said Article as amended is deleted
and inserted in lieu thereof is a new monthly rental of $4,200.00;

       

      (b)  The
amount of $1,680,000.00 appearing in the 7th and 8th lines from the top of said
Article III amended to be $2,400,000.00 and then $2,880,000.00 is deleted and
inserted in lieu thereof is the amount of $3,456,000.00. Notwithstanding the
above, this change will not take effect until the cost of the improvements (not
equipment) to the new 2,400 square feet of space has been amortized against the
overage revenue generated using $2,880,000 as the base sales.

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

      3.

       

      Lessee
shall have the option to renew the lease under the same terms and conditions
except as amended for three consecutive five year options. The first five year
period to begin December 1, 1992, the second five year period to begin
December
1, 1997, and the third five year period to begin December 1, 2002.

       

      4.

       

      Article
XXXI of the attached lease that is entitled “Taxes” shall be amended to delete
the last sentence and add the following: The Lessee's prorata share of such
taxes shall be in proportion that its original 12,000 square foot occupancy
bears to the square foot occupancy of the entire respective areas occupied by
tenants of Lessor situated on said tract of land owned by Lessor upon which the
leased premises are situated plus the Lessee's prorata share of the increase in
taxes using 1992 as the base year in proportion that its 2,400 square foot
occupancy bears to the square foot occupancy of the entire 

      center.

       

      5.

       

      Except as
modified by this Third Amendment, all other terms and provisions of the attached
Lease and First and Second Amendments shall remain unchanged. All the terms and
provisions of this Third Amendment and the Lease shall be binding upon and inure
to the benefit of the parties hereto, their successors and assigns. This Third
Amendment shall be interpreted under the Laws of the State of
Georgia.

      

      IN
WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals, in
triplicate, the day and year first above written.

      

      
        	 
      	
                LESSOR:

              
	 
      	 
      	 
      
	 
      	
                RINGGOLD
      INVESTORS, LTD.

              
	 
      	 
      	 
      
	 
      	
                BY:

              	
                /s/ Richard K.
  Taylor

              

      

      
        
           

        

        
          21

          
            

          

        

        
           

        

      

      

      
        	
                Signed,
      sealed and delivered

              	 
      
	
                in
      the presence of:

              	 
      
	 
      	 
      
	
                /s/ Heidi Ann Boring

              	 
      
	
                Witness

              	 
      
	 
      	 
      
	
                /s/ Helen Patricia Jones

              	 
      
	
                Notary
      Public

              	 
      

      

      

      
        	 
      	
                LESSEE:

              
	 
      	 
      	 
      
	 
      	
                AMERICAN
      CONSUMERS, INC.

              
	 
      	 
      	 
      
	 
      	
                BY:

              	
                /s/ Michael A.
  Richardson

              

      

      

      

      
        	
                Signed,
      sealed and delivered

              	 
      
	
                in
      the presence of:

              	 
      
	 
      	 
      
	
                [no signature on original]

              	 
      
	
                Witness

              	 
      
	 
      	 
      
	
                /s/ Jean P. Brandenburg

              	 
      
	
                Notary
      Public

              	 
      

      

      
        
           

        

        
          22

          
            

          

        

        
           

        

      

      FOURTH AMENDMENT TO
LEASE

      

      THIS
FOURTH AMENDMENT TO LEASE (“Fourth Amendment”) is entered into this 1st day of
December 1997, by and between RINGGOLD INVESTORS, LTD., (hereinafter referred to
as “Lessor”) and SHOP-RITE and AMERICAN CONSUMERS, INC., (collectively
hereinafter referred to as “Lessee”).

      

      WITNESSETH:

      

      WHEREAS,
Lessor and Lessee entered into a lease dated June 2, 1970 and amended October
15, 1981, April 1, 1987 and February 1, 1992 for 12,000 square feet increased to
14,400 square feet of floor space in Ringgold Plaza Shopping Center, Ringgold,
Catoosa County, Georgia, copies of which are marked Exhibit “A”, attached
hereto, and by reference incorporated herein; and

      

      WHEREAS,
it is the desire of Lessor and Lessee to amend the attached lease as amended by
extending the term for five years and increasing the monthly rental and related
overage rent clause;

      

      NOW,
THEREFORE, for and in consideration of the payment by the Lessee to the Lessor
of Ten Dollars ($10.00) in cash, the receipt and sufficiency of which are hereby
acknowledged, and the further consideration of the terms and conditions
contained herein, the parties agree as follows:

      

      1.

       

      Article
III entitled “Rental” of the attached Exhibit “A” is modified as
follows:

      

      (a)           The
monthly rental of $4,200 as amended is deleted and inserted in lieu thereof is a
new monthly rental of $4,500;

       

      (b)           The
amount of $2,880,000 is deleted along with all references to amortization of
costs of improvements and in lieu thereof is inserted
$3,456,000;

      
        
           

        

        
          23

          
            

          

        

        
           

        

      

      2.

       

      Except as
modified by this Fourth Amendment, all other terms and provisions of the
attached lease and First, Second, and Third Amendments shall remain unchanged.
All the terms and provisions of this Fourth Amendment and the Lease shall be
binding upon and inure to the benefit of the parties hereto, their successors
and assigns. This Fourth Amendment shall be interpreted under the laws of the
State of Georgia.

      

      IN
WITNESS WHEREOF, the parties hereto have set their hands and seals in
triplicate, the day and year first above written.

      

      
        	 
      	
                LESSOR:

              
	 
      	
                RINGGOLD
      INVESTORS, LTD.

              
	 
      	 
      	 
      
	 
      	
                BY:

              	
                  /s/ Richard K.
      Taylor

              

      

      

      

      
        	
                SIGNED,
      SEALED AND DELIVERED

              	 
      
	
                IN
      THE PRESENCE OF:

              	 
      
	 
      	 
      
	
                /s/ Heidi Boring

              	 
      
	
                Witness

              	 
      
	 
      	 
      
	
                /s/ Stephanie Matthews

              	 
      
	
                Notary
      Public

              	 
      
	
                Notary
      Public, Paulding County, Georgia

              	 
      
	
                My
      Commission Expires January 20, 2001

              	 
      

      

      

      
        	 
      	
                LESSEE:

              
	 
      	
                AMERICAN
      CONSUMERS, INC.

              
	 
      	 
      	 
      
	 
      	
                BY:

              	
                /s/ Michael A.
Richardson

              
	 
      	 
      	
                October
      10, 1997

              

      

      

      
        	
                SIGNED,
      SEALED AND DELIVERED

              	 
      
	
                IN
      THE PRESENCE OF:

              	 
      
	 
      	 
      
	
                /s/ Reba Southern

              	 
      
	
                Witness

              	 
      
	 
      	 
      
	
                /s/ Terrye L. Farr

              	 
      
	
                Notary
      Public

              	 
      
	
                My
      Commission Expires April 18, 1988

              	 
      

      

      
        
           

        

        
          24

          
            

          

        

        
           

        

      

      FIFTH
AMENDMENT TO LEASE

      

      THIS
FIFTH AMENDMENT TO LEASE (“Fifth Amendment”) is entered into on the date below,
by and between MARSHALL M. BANDY, JR. d/b/a R & M JOINT VENTURES, LLC
(“Lessor”) and AMERICAN CONSUMERS, INC d/b/a SHOP-RITE (“Lessee”).

      

      WITNESSETH

      

      WHEREAS,
Lessor, through its predecessors in title, and Lessee entered into a lease dated
June 2, 1970 and amended October 15, 1981, April 1, 1987 and February 1, 1992
for 12,000 square feet increased to 14,400 square feet of floor space in
Ringgold Plaza Shopping Center, Ringgold, Catoosa County, Georgia, and December
1, 1997 copies of which are marked Exhibit “A”, attached hereto, and by
reference incorporated herein; and

      

      WHEREAS,
it is the desire of Lessor and Lessee to amend the attached Lease with terms and
rental as follows:

      

      
        	
                First
      term

              	 
      	
                December
      1, 2007 through November 30, 2008

              	 
      	
                $
      54,000.00

              
	
                Second
      term

              	 
      	
                December
      1, 2008 through November 30, 2009

              	 
      	
                64,800.00

              
	
                Third
      term

              	 
      	
                December
      1, 2009 through November 30. 2010

              	 
      	
                64,800.00

              
	
                Fourth
      term

              	 
      	
                December
      1, 2010 through November 30, 2011

              	 
      	
                64,800.00

              
	
                Fifth
      term

              	 
      	
                December
      1, 2011 through November 30, 2012

              	 
      	
                64,800.00

              

      

      

      NOW
THEREFORE, and in consideration of the payment by the Lessee to the Lessor of
Ten Dollars ($10.00) in cash, the receipt and sufficiency of which are hereby
acknowledged, and the further consideration of the terms and conditions
contained herein, the parties agree as follows:

      

      Article
II entitled “Rental” of the attached Exhibit “A” is modified as
follows:

      

      
        	
                 
      

              	
                A)

              	
                The
      monthly rental shall be as described
above.

              

      

      
        	
                 
      

              	
                B)

              	
                The
      annual base for computing overage shall remain at $3,456,000.00 for year
      one and increase to $3,700,000.00 for the second through the fifth term
      and the rate of 1.25% shall be in effect for all
  periods.

              

      

      
        	
                 
      

              	
                C)

              	
                In
      the event the parties shall agree or Tenant demand a new roof be
      installed, the parties agree to each pay fifty percent (50%) of the cost
      of the roof covering the Shop-Rite leases
space.

              

      

      
        	
                 
      

              	
                D)

              	
                Ninety
      (90) days written notice shall be required should the Lessee or Lessor
      desire not to renew for the second through the fifth
  terms.

              

      

      
        	
                 
      

              	
                E)

              	
                The
      base for determining taxes due by the Lessor shall remain the same for the
      First Term and shall be reset based on the 2007
  taxes.

              

      

      

      Except as
modified by this Fifth Amendment, all other terms and provisions of the attached
lease and First, Second, Third and Fourth Amendments shall remain unchanged. All
the terms and provisions of this Fifth Amendment and the Lease shall be binding
upon and inure to the benefit of the parties hereto, their successors and
assigns. This Fifth Amendment shall be interpreted under the laws of the State
of Georgia.

      
        
           

        

        
          25

          
            

          

        

        
           

        

      

      IN
WITNESS WHEREOF, the parties hereto have set their hands and seals in
triplicate, the day and year first written below.

      

      
        	
                LESSOR:

              	 
      	
                WITNESS:

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                2/18/08

              	 
      	 
      
	
                Date

              	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                /s/ Marshall M. Bandy, Jr.

              	 
      	
                /s/ Margie E. Sisson

              
	
                Marshall
      M. Bandy, Jr. d/b/a

              	 
      	
                Notary
      Public

              
	
                R&M
      Joint Ventures, LLC

              	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                LESSEE:

              	 
      	
                WITNESS:

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                2/15/08

              	 
      	 
      
	
                Date

              	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                /s/ Michael A. Richardson

              	 
      	
                /s/ Joan Creekmore

              
	
                Michael
      A. Richardson, President

              	 
      	
                Notary
      Public

              
	
                American
      Consumers, Inc.

              	 
      	 
      

      

      
 

    

     26

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