Document:

STOCK
      PURCHASE AGREEMENT

     

    by
      and among

     

    THE
      STOCKHOLDERS OF

    KAUFMAN
      HOLDINGS CORPORATION,

     

    ALEX
      KAUFMAN

     

    and

     

    CHEMTURA
      CORPORATION

     

    Dated
      as of January 31, 2007

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
TABLE
      OF CONTENTS

    
 

    
      	 	 	
              Page

            
	 	 	 
	
              ARTICLE
                I

            	
              DEFINITIONS
                AND TERMS

            	
              1

            
	
              1.1

            	
              Specific
                Definitions

            	
              1

            
	
              1.2

            	
              Other
                Definitional Provisions

            	
              7

            
	
              ARTICLE
                II

            	
              PURCHASE
                AND SALE

            	
              8

            
	
              2.1

            	
              Purchase
                and Sale of Shares

            	
              8

            
	
              2.2

            	
              Purchase
                Price

            	
              8

            
	
              2.3

            	
              Working
                Capital Adjustment

            	
              8

            
	
              ARTICLE
                III

            	
              REPRESENTATIONS
                AND WARRANTIES OF KAUFMAN

            	
              9

            
	
              3.1

            	
              Ownership
                of Shares

            	
              9

            
	
              3.2

            	
              Authorization

            	
              10

            
	
              3.3

            	
              Binding
                Effect

            	
              10

            
	
              3.4

            	
              No
                Violations

            	
              10

            
	
              3.5

            	
              Consents
                and Approvals

            	
              10

            
	
              3.6

            	
              Brokers
                and Finders

            	
              11

            
	
              3.7

            	
              Proceedings

            	
              11

            
	
              ARTICLE
                IV

            	
              REPRESENTATIONS
                AND WARRANTIES OF KAUFMAN RELATING TO THE COMPANY

            	
              11

            
	
              4.1

            	
              Organization

            	
              11

            
	
              4.2

            	
              Capitalization;
                Subsidiaries

            	
              11

            
	
              4.3

            	
              Authorization

            	
              12

            
	
              4.4

            	
              No
                Violations

            	
              12

            
	
              4.5

            	
              Consents
                and Approvals

            	
              13

            
	
              4.6

            	
              Financial
                Statements

            	
              13

            
	
              4.7

            	
              Absence
                of Change

            	
              13

            
	
              4.8

            	
              Real
                Property

            	
              14

            
	
              4.9

            	
              Title
                to Assets; Condition and Sufficiency of Assets

            	
              14

            
	
              4.10

            	
              Personal
                Property

            	
              15

            
	
              4.11

            	
              Proceedings;
                Judgments; Compliance with Law

            	
              15

            
	
              4.12

            	
              Permits

            	
              15

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

      TABLE
        OF CONTENTS

      (continued)

       

      
        	
              	 	
                Page

              
	 	 	 

      

    

    
      	
              4.13

            	
              Environmental
                Matters

            	
              15

            
	
              4.14

            	
              Brokers
                and Finders

            	
              15

            
	
              4.15

            	
              Contracts

            	
              16

            
	
              4.16

            	
              Intellectual
                Property

            	
              16

            
	
              4.17

            	
              Taxes

            	
              16

            
	
              4.18

            	
              Labor
                and Employment Matters

            	
              18

            
	
              4.19

            	
              Employee
                Benefit Matters

            	
              18

            
	
              4.20

            	
              Customers
                and Suppliers

            	
              18

            
	
              4.21

            	
              Inventory

            	
              19

            
	
              4.22

            	
              Affiliate
                Transactions

            	
              19

            
	
              4.23

            	
              Long-Term
                Indebtedness

            	
              19

            
	
              ARTICLE
                V

            	
              REPRESENTATIONS
                AND WARRANTIES OF PURCHASER

            	
              19

            
	
              5.1

            	
              Organization

            	
              19

            
	
              5.2

            	
              Authorization

            	
              20

            
	
              5.3

            	
              Binding
                Effect

            	
              20

            
	
              5.4

            	
              No
                Violations

            	
              20

            
	
              5.5

            	
              Consents
                and Approvals

            	
              20

            
	
              5.6

            	
              Brokers
                and Finders

            	
              20

            
	
              5.7

            	
              Proceedings

            	
              21

            
	
              5.8

            	
              Investment
                Intent

            	
              21

            
	
              ARTICLE
                VI

            	
              COVENANTS

            	
              21

            
	
              6.1

            	
              Public
                Announcements

            	
              21

            
	
              6.2

            	
              Tax
                Matters

            	
              21

            
	
              6.3

            	
              Non-Competition

            	
              25

            
	
              6.4

            	
              Required
                Consents

            	
              27

            
	
              6.5

            	
              Employee
                Terminations

            	
              27

            
	
              6.6

            	
              Transition
                Period for Kaufman; Excluded Assets

            	
              27

            
	
              ARTICLE
                VII

            	
              CLOSING

            	
              27

            
	
              7.1

            	
              The
                Closing

            	
              27

            
	
              7.2

            	
              Sellers’
                Closing Deliveries

            	
              27

            
	
              7.3

            	
              Purchaser’s
                Closing Deliveries

            	
              28

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      
        TABLE
          OF CONTENTS

        (continued)

         

      

    

    
      	
            	 	
              Page

            
	 	 	 

 

    
      	
              ARTICLE
                VII

            	
              INDEMNIFICATION

            	
              29

            
	
              8.1

            	
              Indemnification
                by Kaufman

            	
              29

            
	
              8.2

            	
              Indemnification
                by Purchaser

            	
              29

            
	
              8.3

            	
              Indemnification
                Process

            	
              29

            
	
              8.4

            	
              Limitations
                on Indemnity Payments

            	
              31

            
	
              8.5

            	
              Survival

            	
              32

            
	
              8.6

            	
              Characterization
                of Indemnification Payments

            	
              32

            
	
              ARTICLE
                IX

            	
              GENERAL
                PROVISIONS

            	
              32

            
	
              9.1

            	
              Expenses

            	
              32

            
	
              9.2

            	
              Further
                Assurances

            	
              33

            
	
              9.3

            	
              Amendment

            	
              33

            
	
              9.4

            	
              Waiver

            	
              33

            
	
              9.5

            	
              Notices

            	
              33

            
	
              9.6

            	
              Headings
                and Schedules

            	
              34

            
	
              9.7

            	
              Applicable
                Law

            	
              35

            
	
              9.8

            	
              No
                Third Party Rights

            	
              35

            
	
              9.9

            	
              Counterparts

            	
              35

            
	
              9.10

            	
              Severability

            	
              35

            
	
              9.11

            	
              Confidentiality
                Agreement; Entire Agreement

            	
              35

            
	
              9.12

            	
              Consent
                to Jurisdiction; Waiver of Jury Trial

            	
              35

            
	
              9.13

            	
              Fair
                Construction

            	
              35

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Disclosure
      Memorandum Schedules

     

    
      	
              Schedule

            	 	
              Description

            
	
              1.1A

            	 	
              Financial
                Statements

            
	
              2.2(a)

            	 	
              Closing
                Date Wire Transfer Instructions

            
	
              3.1

            	 	
              Ownership
                of Shares

            
	
              3.5

            	 	
              Sellers
                and Kaufman Required Consents and Approvals

            
	
              4.1

            	 	
              Jurisdictions

            
	
              4.2(a)

            	 	
              Ownership
                of Shares

            
	
              4.2(b)

            	 	
              Capitalization
                and Ownership of Subsidiaries

            
	
              4.2(c)

            	 	
              Other
                Securities and Interests

            
	
              4.2(d)

            	 	
              Contractual
                Obligations Relating to Securities

            
	
              4.5

            	 	
              Company
                Required Consents and Approvals

            
	
              4.6

            	 	
              Undisclosed
                Liabilities

            
	
              4.7

            	 	
              Absence
                of Change

            
	
              4.8(a)

            	 	
              Owned
                Real Property

            
	
              4.8(b)

            	 	
              Leased
                Real Property

            
	
              4.10(a)

            	 	
              Fixed
                Assets Register

            
	
              4.10(b)

            	 	
              Leased
                Assets

            
	
              4.11(a)

            	 	
              Proceedings;
                Judgments

            
	
              4.11(b)

            	 	
              Compliance
                With Applicable Law

            
	
              4.12

            	 	
              Permits

            
	
              4.13(a)

            	 	
              Environmental
                Materials Made Available to Purchaser

            
	
              4.13(b)

            	 	
              Impairment
                of Indemnity Remedies

            
	
              4.15

            	 	
              Contracts

            
	
              4.16(a)

            	 	
              Intellectual
                Property Rights

            
	
              4.16(b)

            	 	
              Infringement
                of Intellectual Property Rights

            
	
              4.17

            	 	
              Tax
                Matters

            
	
              4.18(a)

            	 	
              Union
                Agreements

            
	
              4.18(b)

            	 	
              Pending
                Union Recognition; Labor Disputes

            
	
              4.18(c)

            	 	
              Employees

            
	
              4.19

            	 	
              Employee
                Benefit Matters

            
	
              4.20

            	 	
              Customers
                and Suppliers

            
	
              4.21

            	 	
              Inventory

            
	
              4.22(a)

            	 	
              Affiliate
                Transactions

            
	
              4.22(b)

            	 	
              Excluded
                Assets

            
	
              5.5

            	 	
              Purchaser
                Required Consents and Approvals

            
	
              6.2(c)

            	 	
              Estimated
                Make-Whole Amount

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    STOCK
      PURCHASE AGREEMENT

     

    This
      STOCK PURCHASE AGREEMENT, dated as of January 31, 2007, is by and among the
      holders of Shares listed on the signature pages hereto (collectively,
“Sellers”),
      Alex
      Kaufman (“Kaufman”)
      and
      Chemtura Corporation, a Delaware corporation (“Purchaser”).

     

    RECITALS

     

    WHEREAS,
      Sellers own all of the issued and outstanding shares of common stock, no par
      value per share (the “Shares”),
      of
      Kaufman Holdings Corporation, a Delaware corporation (the “Company”);
      and

     

    WHEREAS,
      based on the foregoing, and on the terms and subject to the conditions of this
      Agreement, Sellers desire to sell, and Purchaser desires to purchase, all of
      Sellers’ right, title and interest in and to the Shares.

     

    NOW,
      THEREFORE, in consideration of the foregoing and the representations,
      warranties, covenants and agreements contained herein, and for other good and
      valuable consideration the receipt and sufficiency of which is acknowledged,
      Sellers, Kaufman and Purchaser hereby agree as follows:

     

    ARTICLE
      I

    DEFINITIONS
      AND TERMS

     

    1.1 Specific
      Definitions.
      As used
      in this Agreement, the following terms have the following meanings:

     

    “ACE
      Policy”
means
      ACE Remediation Expense Containment and Premises Pollution Liability Insurance
      Policy, Policy No. PRM G23566047 001.

     

    “Affiliate”
means,
      with respect to any Person, any Person directly or indirectly controlling,
      controlled by or under common control with, such Person. For purposes of this
      definition, “control” (including, with correlative meaning, the terms
“controlling,” “controlled by” and “under common control with”) means the
      possession, directly or indirectly, of the power to direct or cause the
      direction of the management and policies of such Person through the ownership
      of
      more than 50% of such Person’s voting securities or equity. For clarification,
      the Company and the Subsidiaries are Affiliates of Kaufman prior to the Closing,
      and Affiliates of Purchaser subsequent to the Closing.

     

    “Affiliate
      Transactions”
has
      the
      meaning specified in Section
      4.22.

     

    “Agreement”
means
      this Stock Purchase Agreement, as the same may be amended or supplemented from
      time to time in accordance with its terms.

     

    “Allocation
      Schedule”
has
      the
      meaning specified in Section
      6.2(a)(iii).

     

    “Basket”
has
      the
      meaning specified in Section
      8.4(a).

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    “Business
      Day”
means
      any day other than a Saturday, a Sunday or a day on which banks in New York
      City
      are authorized or obligated by Law or executive order to close.

     

    “Claim
      Notice”
has
      the
      meaning specified in Section
      8.3(a).

     

    “Closing”
means
      the closing of the transactions contemplated by this Agreement.

     

    “Closing
      Date”
means
      January 31, 2007.

     

    “Closing
      Date Balance Sheet”
has
      the
      meaning specified in Section
      2.3(a).

     

    “Closing
      Debt Repayment Amount”
means
      the sum of the amounts reflected in the Pay-Off Letters.

     

    “Closing
      Sellers Amount”
has
      the
      meaning specified in Section 2.2(a).

     

    “Code”
means
      the U.S. Internal Revenue Code of 1986, as amended, and any successor Law and
      the Treasury regulations promulgated thereunder.

     

    “Company”
has
      the
      meaning specified in the recitals.

     

    “Confidentiality
      Agreement”
means
      the Confidentiality Agreement, dated May 22, 2006, between the Company and
      Purchaser.

     

    “Consent”
means
      any consent, waiver, approval, authorization, exemption, registration or
      declaration.

     

    “Contracts”
means
      all oral or written agreements, contracts, leases, purchase and sale orders,
      arrangements, commitments and licenses to which the Company or any Subsidiary
      is
      a party or is otherwise bound.

     

    “Counter
      Notice”
has
      the
      meaning specified in Section
      8.3(c).

     

    “Damages”
has
      the
      meaning specified in Section
      8.1.

     

    “Deferred
      Payment”
has
      the
      meaning specified in Section
      2.2(b).

     

    “Deferred
      Payment Amount”
has
      the
      meaning specified in Section
      2.2(b).

     

    “Designated
      Representations”
has
      the
      meaning specified in Section 8.4(a).

     

    “Direct
      Claim”
has
      the
      meaning specified in Section
      8.3(a).

     

    “Disclosure
      Memorandum”
means
      the schedules attached to this Agreement and referred to in Articles
      I,
      II,
      III,
      IV,
      V
      and
VI.

     

    “Enforceability
      Limitations”
means
      limitations on enforcement and other remedies imposed by or arising under or
      in
      connection with applicable bankruptcy, insolvency, fraudulent transfer,
      reorganization, moratorium and other similar Laws affecting creditors’ rights
      generally from time to time in effect or general principles of equity (including
      concepts of materiality, reasonableness, good faith and fair dealing with
      respect to those jurisdictions that recognize such concepts).

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

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

     

    “Financial
      Statements”
means
      (i) the audited consolidated balance sheets and statements of income,
      stockholders’ equity and cash flow as of and for the years ended
      December 31, 2004 and 2005 for the Company and the Subsidiaries and (ii)
      the unaudited consolidated balance sheet and statements of income, stockholders’
equity and cash flow as of and for the year ended December 31, 2006 (the
“Most
      Recent Financial Statements”)
      for
      the Company and the Subsidiaries, all of which are included in Schedule 1.1A.

     

    “fraud”
or
      “fraudulent
      misrepresentation”
means,
      with respect to Kaufman, Kaufman’s willful withholding from, or knowing
      misrepresentation to, Purchaser or its representatives of a material fact,
      and
      actual reliance by Purchaser on such withheld or misrepresented fact to
      Purchaser’s detriment. Notwithstanding the use of the words “willful” and
“knowing” in this definition, the requisite showing of scienter
      necessary for Purchaser to prove fraud or fraudulent misrepresentation shall
      be
      the scienter
      required
      to prove fraud under the laws of the State of New York. Purchaser shall bear
      the
      burden of proving fraud or fraudulent misrepresentation as required by
      applicable law. 

     

    “GAAP”
means
      U.S. generally accepted accounting principles as in effect from time to
      time.

     

    “Governmental
      Authority”
means
      any federal, state, local or foreign government or other political subdivision
      thereof or any entity, body, regulatory or administrative authority, agency,
      commission, court, tribunal or judicial body exercising executive, legislative,
      judicial, regulatory or administrative functions of or pertaining to
      government.

     

    “Hatco
      Settlement Agreement”
means
      the April 8, 2005 Settlement Agreement among Hatco Corporation, the New
      Jersey Department of Environmental Protection, W.R. Grace & Co. and
      Remedium Group, Inc.

     

    “HSR
      Act”
means
      the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
      amended.

     

    “Indemnified
      Party”
has
      the
      meaning specified in Section
      8.3.

     

    “Indemnified
      Taxes”
has
      the
      meaning specified in Section
      6.2(c)(i).

     

    “Indemnifying
      Party”
has
      the
      meaning specified in Section
      8.3.

     

    “Independent
      Accounting Firm”
has
      the
      meaning specified in Section
      2.3(a).

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    “Intellectual
      Property”
means,
      collectively, (i) all inventions, improvements, U.S., foreign and international
      design and utility patents and patent applications (including all reissues,
      divisions, continuations, continuations-in-part, and extensions of any patent
      or
      patent application), industrial designs and applications for registration of
      industrial designs, including all rights, to the extent permitted by law, to
      file corresponding applications in any country in the world; (ii) all trade
      secrets, know-how and confidential or proprietary information, whether
      patentable or unpatentable, including but not limited to, technologies in
      development, computer programs and other computer software (including software
      systems and applications), internet sites, domains, domain names and related
      software, user interfaces, topographies, source code, object code, algorithms,
      display screens, layouts, development tools, instructions, templates, evaluation
      software and hardware, formulae and information, manufacturing, engineering,
      and
      other drawings and manuals, recipes, technology, processes, designs, lab
      journals, notebooks, schematics, data, plans, blue prints, research and
      development reports, agency agreements, technical information, technical
      assistance, engineering data, design and engineering specifications, and similar
      materials recording or evidencing expertise or information, including those
      related to products under development, and further including any rights as
      permitted by law to obtain patents thereon in any country in the world; (iii)
      all trademarks, service marks and trade dress (whether registered, unregistered
      or existing at common law), internet domain names, business names and trade
      names, trademark registrations and applications, including the goodwill
      associated therewith, and copyrights (registered and unregistered); and (iv)
      all
      other intellectual property rights of any nature.

     

    “Intellectual
      Property Rights”
means
      registered or recorded patents, trademarks, service marks, copyrights, internet
      domain names relating to Intellectual Property, and applications relating to
      same.

     

    “Inventory”
means
      all supplies, materials and other inventories of raw materials,
      works-in-progress and finished goods owned by the Company or any of the
      Subsidiaries

     

    “IRS”
means
      the U.S. Internal Revenue Service.

     

    “ISRA”
means
      the New Jersey Industrial Site Remediation Act, N.J. Stat. Ann. §§ 13:1K-6
et
      seq.,
      as
      amended.

     

    “Italian
      Indebtedness”
means
      any indebtedness of Anderol Italia S.A., including accrued but unpaid interest
      thereon.

     

    “Judgments”
means
      any judgments, injunctions, orders, decrees, writs, rulings or awards of any
      court or other judicial authority or any Governmental Authority of competent
      jurisdiction.

     

    “Kaufman”
has
      the
      meaning specified in the preamble.

     

    “knowledge”
      means with respect to Kaufman, the actual knowledge of Kaufman as of the
      date hereof, without any duty of inquiry. Such term excludes imputed, inferred
      or constructive knowledge of a fact, or any fact of which Kaufman might acquire
      knowledge as a result of any level of inquiry, nor does it include any fact
      that
      Kaufman or the Sellers arguably should have known, but did not know, as a
      shareholder, trustee, officer, director or employee of the Company, its
      Subsidiaries, or any of his or their Affiliates.

     

    “Laws”
means
      any federal, state, local or foreign law, statute, ordinance, rule, regulation,
      order or decree.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    “Leased
      Real Property”
has
      the
      meaning specified in Section
      4.8(b).

     

    “Leases”
has
      the
      meaning specified in Section
      4.8(b).

     

    “Liens”
means
      all liens, mortgages, easements, charges, security interests, options or other
      encumbrances.

     

    “Make-Whole
      Amount”
has
      the
      meaning specified in Section
      6.2(c)(i).

     

    “Material
      Adverse Effect”
means
      any change, effect or circumstance that, individually or in the aggregate,
      is
      reasonably likely to have a material adverse effect on the business, operations,
      assets, liabilities, results of operations, cash flows, condition (financial
      or
      otherwise) of the Company and the Subsidiaries, taken as a whole.

     

    “Most
      Recent Financial Statements”
has
      the
      meaning specified in the definition of “Financial Statements.”

     

    “NRD
      Settlement Agreement”
means
      the Natural Resource Damages Settlement Agreement among the New Jersey
      Department of Environmental Protection, Weston Solutions, Inc., Hatco
      Corporation, W.R. Grace & Co. and Remedium Group,
      Inc.

     

    “Owned
      Real Property”
has
      the
      meaning specified in Section
      4.8(a).

     

    “Pay-Off
      Letters”
has
      the
      meaning specified in Section
      7.2(b).

     

    “Pending
      Amount”
has
      the
      meaning specified in Section
      2.2(b).

     

    “Permits”
means
      all permits, authorizations, approvals, registrations, licenses, certificates,
      variances, franchises, rights granted by or obtained from any Governmental
      Authority, as well as applications for any of the foregoing.

     

    “Permitted
      Liens”
means
      (i) Liens created by Purchaser, (ii) Liens for or in respect of Taxes,
      impositions, assessments, fees, water and sewer rents and other governmental
      charges levied or assessed or imposed against the Real Property which are not
      yet due and payable or are being contested in good faith by appropriate
      proceedings, (iii) Liens, and rights to Liens, of mechanics, warehousemen,
      carriers, repairmen and others arising by operation of law and incurred in
      the
      ordinary course of business, securing obligations not yet delinquent or being
      contested in good faith by appropriate proceedings and (iv) any conditions
      relating to the Owned Real Property disclosed on any title commitments, if
      any,
      made available to Purchaser.

     

    “Person”
means
      an individual, a corporation, a limited liability company, a partnership, an
      association, a trust or other entity or organization, including any Governmental
      Authority.

     

    “Plans”
has
      the
      meaning specified in Section
      4.19(a).

     

    “Pre-Closing
      Tax Period”
means
      (i) any Tax period ending on or before the close of business on the Closing
      Date
      and (ii) in the case of any Tax period which includes, but does not end on,
      the
      Closing Date, the portion of such period up to and including the Closing Date.
      

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    “Principal
      Subsidiaries”
means
      Hatco Corporation and Anderol, Inc.

     

    “Proceeding”
means
      any action, suit, demand, claim or legal, administrative, arbitration or other
      alternative dispute resolution proceeding, hearing, inquiry or
      investigation.

     

    “Purchase
      Price”
has
      the
      meaning specified in Section
      2.2.

     

    “Purchaser”
has
      the
      meaning specified in the preamble.

     

    “Purchaser
      Indemnified Party”
means
      Purchaser, Purchaser’s Affiliates and their respective directors, officers,
      shareholders, attorneys, accountants, representatives, agents and employees,
      and
      their respective heirs, successors and assigns.

     

    “Reference
      Balance Sheet”
means
      the balance sheet of the Company included within the Most Recent Financial
      Statements.

     

    “Related
      Agreements”
means
      any agreement or instrument that is to be entered into or delivered pursuant
      to
      this Agreement at the Closing.

     

    “Remediation
      Agreement”
means
      the April 2005 Remediation Agreement among Weston Solutions, Inc., Hatco
      Corporation, W.R. Grace & Co. Conn and Remedium Group,
      Inc.

     

    “Required
      Consents”
has
      the
      meaning specified in Section
      3.5.

     

    “RLI
      Agreement”
means
      the January 31, 1997 Asset Purchase and Sale Agreement by and between RLI
      Acquisition, Inc. and Royal Lubricants Company, Inc.

     

    “Section
      338 Forms”
has
      the
      meaning specified in Section
      6.2(a)(ii).

     

    “Section
      338(h)(10) Elections”
has
      the
      meaning specified in Section
      6.2(a)(i).

     

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

     

    “Seller
      Indemnified Parties”
means
      Sellers, Sellers’ Affiliates, Kaufman and (as applicable) their respective
      directors, officers, shareholders, partners, attorneys, accountants,
      representatives, agents and employees, and their respective heirs, successors
      and assigns.

     

    “Sellers”
has
      the
      meaning specified in the preamble.

     

    “Shares”
has
      the
      meaning specified in the recitals.

     

    “Short
      Tax Period”
has
      the
      meaning specified in Section
      6.2(b)(ii).

     

    “Significant
      Customers”
means
      the ten (10) largest customers of each of the Principal Subsidiaries (as
      measured by Dollar amounts of purchases of products or services from the
      Principal Subsidiaries) during each of the years ended December 31, 2005 and
      2006.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    “Significant
      Suppliers”
means
      the ten (10) largest suppliers of each of the Principal Subsidiaries (as
      measured by Dollar amounts paid by the Principal Subsidiaries for products
      and
      services) during each of the years ended December 31, 2005 and 2006

     

    “Subsidiaries”
mean
      the Persons other than the Company listed on Schedule 4.2(b).

     

    “Tax
      Returns”
means
      any report, return, declaration or other filing required to be supplied to
      any
      Taxing Authority or Person with respect to Taxes, including any amendments
      to
      such reports, returns, declarations or other filings.

     

    “Taxes”
means
      all taxes however denominated imposed by any Taxing Authority, including all
      net
      income, alternative or add-on minimum taxes, gross income, gross receipts,
      sales, use, goods and services, ad valorem, earnings, franchise, profits,
      license, withholding (including all obligations to withhold or collect for
      Taxes
      imposed on others), payroll, employment, excise, severance, stamp, occupation,
      premium, property, excess profit or windfall profit taxes, custom duty, value
      added or other taxes, governmental fees or other like assessments or charges
      of
      any kind whatsoever, together with any interest and any penalties or additions
      to such taxes.

     

    “Taxing
      Authority”
means
      the United States or any entity, body, instrumentality, division, bureau or
      department of any Governmental Authority, or any agent thereof, legally
      authorized to assess, lien, levy or otherwise collect, litigate or administer
      Taxes.

     

    “Territory”
means
      the United States, Brazil, Canada, Germany, Italy, Japan, The Netherlands and
      all other countries in which the Company or any Subsidiary has transacted
      business prior to the Closing Date.

     

    “Third
      Party Claim”
has
      the
      meaning specified in Section
      8.3(a).

     

    “Transition
      Period”
has
      the
      meaning specified in Section
      6.6.

     

    “United
      States”
and
      “U.S.”
means
      the United States of America, its territories and possessions, any state of
      the
      United States and the District of Columbia.

     

    “Working
      Capital”
means
      the sum of consolidated accounts receivable and Inventory of the Company and
      the
      Subsidiaries minus consolidated accounts payable of the Company and the
      Subsidiaries as of a given date, calculated and presented in a manner consistent
      with that reflected on the Reference Balance Sheet. 

     

    “Working
      Capital Adjustment”
has
      the
      meaning specified in Section
      2.3(b).

     

    1.2 Other
      Definitional Provisions.
      i)
      All
      underscored references to Articles and Sections are references to Articles
      and
      Sections of this Agreement. All underscored references to Schedules are
      references to Schedules of the Disclosure Memorandum.

     

    (b) Terms
      defined in the singular have a comparable meaning when used in the plural,
      and
      vice versa. The use of the masculine, feminine or neuter gender herein shall
      not
      limit any provision of this Agreement.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    (c) The
      words
“include,”
      “includes”
and
      “including”
are
      not
      limiting.

     

    (d) The
      terms
“dollars”
and
      “$”
mean
      U.S. dollars.

     

    ARTICLE
      II

    PURCHASE
      AND SALE

     

    2.1 Purchase
      and Sale of Shares.
      Upon
      the terms and subject to the conditions of this Agreement, at the Closing,
      Sellers shall sell, transfer, convey, assign and deliver to Purchaser, and
      Purchaser shall purchase, acquire and accept from Sellers, all of Sellers’
right, title and interest in and to the Shares, free and clear of all
      Liens.

     

    2.2 Purchase
      Price.
      As
      payment for the sale, transfer, conveyance, assignment and delivery of the
      Shares, Purchaser shall deliver or cause to be delivered to Sellers the
      following:

     

    (a) an
      aggregate amount (the “Closing
      Sellers Amount”)
      in
      cash, which shall be paid to Sellers at the Closing by wire transfer to the
      accounts and in the amounts set forth on Schedule
      2.2(a),
      equal
      to (i) $160,000,000, minus (ii) the Closing Debt Repayment Amount,
      minus (iii) an amount equal to fifty-one percent (51%) of the amount of Italian
      Indebtedness outstanding as of the Closing Date.

     

    (b) an
      aggregate amount (the “Deferred
      Payment Amount”)
      in
      cash, which shall be paid to Sellers on the second anniversary of the Closing
      Date (or, if such date is not a Business Day, on the first Business Day after
      the second anniversary of the Closing Date), by wire transfer to the accounts
      and in the amounts specified by Sellers in writing at least ten Business Days
      prior to the date such Deferred Payment Amount is to be paid, equal to
      (i) $5,000,000 (the “Deferred
      Payment”),
      minus
      (ii) the aggregate amount paid to Purchaser pursuant to Article
      VIII
      by means
      of a reduction to the amount of the Deferred Payment, minus (iii) any amount
      subject to a pending indemnification claim pursuant to Article
      VIII
      (the
“Pending
      Amount”).
      Purchaser shall pay to Sellers any portion of the Pending Amount remaining
      after
      the indemnification claims referred to in clause
      (iii)
      above
      have been finally determined within three (3) Business Days after the date
      of
      such final determination.

     

    The
      sum
      of the Closing Sellers Amount, the Closing Debt Repayment Amount, and the
      Deferred Payment Amount, together with any adjustments made pursuant to
Sections
      2.3
      and
6.2(c),
      is
      referred to herein as the “Purchase
      Price.”

     

    2.3 Working
      Capital Adjustment.
      ii)
      Within
      30 Business Days after the Closing Date, Purchaser shall prepare and deliver
      to
      Kaufman an unaudited balance sheet for the Company as of the close of business
      on the Closing Date (as it may be adjusted pursuant to Section
      2.3(b),
      the
“Closing
      Date Balance Sheet”).
      Kaufman shall cooperate with Purchaser and its outside accountants in the
      preparation of the Closing Date Balance Sheet. The Closing Date Balance Sheet
      shall (i) be prepared on a consistent basis and using categories,
      principles and policies consistent with those contained in the Reference Balance
      Sheet, with no changes in the method of application of the Company’s accounting
      policies or changes in the method of applying the Company’s use of estimates;
      (ii) include line items (including the constituent components of such line
      items) consistent with those in the Reference Balance Sheet, and (iii) reflect
      a
      value for Inventory as of December 31, 2006, equal to $32.568 million,
      which shall be adjusted solely to reflect additions and removals from inventory
      during the month of January 2007. On the Closing Date or, if not reasonably
      practicable to perform on the Closing Date, as promptly as practicable after
      the
      Closing Date, the parties shall perform a physical count of all inventory as
      of
      January 31, 2007 for purposes of calculating and verifying Working Capital
      as of
      the Closing Date in accordance with the immediately preceding sentence. Each
      of
      Kaufman and Purchaser shall have the right to have his or its representatives
      present at each such physical inventory. Kaufman and his representatives shall
      have the right to review all work papers and procedures of Purchaser and its
      outside accountants used to prepare the Closing Date Balance Sheet and shall
      have the right to perform any other reasonable procedures necessary to verify
      the accuracy of the Closing Date Balance Sheet. Unless Kaufman, within 25
      Business Days after delivery to Kaufman of the Closing Date Balance Sheet,
      notifies Purchaser in writing that Kaufman objects to the Closing Date Balance
      Sheet and specifies the basis for such objection, such Closing Date Balance
      Sheet shall become final and binding upon the parties for the purposes of this
      Section
      2.3.
      If
      Purchaser and Kaufman are unable to resolve all of Kaufman’s objections within
      25 Business Days after any such notification has been given to Purchaser, all
      remaining matters in dispute shall be submitted to a nationally recognized
      public accounting firm mutually agreed upon by Purchaser and Kaufman (an
“Independent
      Accounting Firm”).
      In
      the event Purchaser and Kaufman are unable to agree upon the selection of an
      Independent Accounting Firm within five Business Days after expiration of such
      25 Business Day period, an Independent Accounting Firm shall be appointed by
      the
      American Arbitration Association. The Independent Accounting Firm shall make
      a
      final determination as to all remaining matters in dispute that shall be
      conclusive and binding on Purchaser and Kaufman. Purchaser and Kaufman each
      shall bear one-half of the fees, costs and expenses of the Independent
      Accounting Firm retained to resolve any objection under this Section 2.3(a).

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    (b) Within
      5
      Business Days after the Closing Date Balance Sheet has been finally determined,
      the difference, if any, between $40 million and the Working Capital reflected
      on
      the Closing Date Balance Sheet (the “Working
      Capital Adjustment”)
      shall
      be paid (i) by Purchaser to Sellers, if the Working Capital reflected on the
      Closing Date Balance Sheet exceeds $40 million or (ii) by Kaufman to Purchaser,
      if the Working Capital reflected on the Closing Date Balance Sheet is less
      than
      $40 million. Payment of the Working Capital Adjustment shall be by wire transfer
      of immediately available funds to the account specified by the payee and shall
      include simple interest on such amount at a rate per annum equal to eight
      percent (8%), commencing on the Closing Date and continuing until the date
      of
      full payment. 

     

    (c) For
      the
      avoidance of doubt, the Company may liquidate all cash positions as of the
      close
      of business on the Closing Date, and Sellers intend that such liquidation
      occur.

     

    ARTICLE
      III

    REPRESENTATIONS
      AND WARRANTIES OF KAUFMAN

     

    Except
      as
      disclosed in the Disclosure Memorandum, Kaufman, on behalf of himself and
      Sellers, represents and warrants to Purchaser as follows:

     

    3.1 Ownership
      of Shares.
      Each
      Seller is the owner, beneficially and of record, of the number of Shares, free
      and clear of any and all Liens, set forth opposite such Seller’s name on
Schedule 3.1.
      The
      endorsed certificates, stock powers or other instruments of transfer delivered
      by each Seller to Purchaser at the Closing will be sufficient to transfer such
      Seller’s entire right, title and interest, legal and beneficial, in the Shares.
      Each Seller has, and on the Closing Date will have, full power and authority
      to
      convey good and marketable title to such Seller’s Shares, and upon transfer to
      Purchaser of the certificates representing such Shares, Purchaser will receive
      good and marketable title to such Shares, free and clear of all
      Liens.

     

    3.2 Authorization.
      Each
      Seller has the requisite trust or other power and authority to execute, deliver
      and perform this Agreement and its Related Agreements to which such Seller
      is a
      party, if any, and to consummate the transactions contemplated hereby and
      thereby. Kaufman has the requisite right, power and legal capacity to execute,
      deliver and perform this Agreement and the Related Agreements to which he is
      a
      party, if any, and to consummate the transactions contemplated hereby and
      thereby. The execution, delivery and performance of this Agreement and the
      Related Agreements by each Seller and the consummation by each Seller of the
      transactions contemplated hereby and thereby have been duly and validly
      authorized by all necessary corporate, trust or other action (if any) of each
      Seller, and no additional authorization on the part of any Seller or any
      beneficiary of any Seller is necessary in connection with the execution,
      delivery and performance by Sellers of this Agreement or the Related
      Agreements.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    3.3 Binding
      Effect.
      This
      Agreement has been duly executed and delivered by each Seller and by Kaufman
      and, assuming the due authorization, execution and delivery of this Agreement
      and the Related Agreements by Purchaser, this Agreement is, and each Related
      Agreement will after the Closing be, legal, valid and binding obligations of
      each Seller and Kaufman, enforceable against each Seller and Kaufman in
      accordance with their respective terms, subject to the Enforceability
      Limitations.

     

    3.4 No
      Violations.
      The
      execution, delivery and performance by each Seller and Kaufman of this Agreement
      and the Related Agreements and the consummation of the transactions contemplated
      by this Agreement and the Related Agreements do not and will not
      (a) conflict with or violate any provision of the agreement of trust or
      other organizational documents of any Seller, (b) to the knowledge of
      Kaufman, and subject to obtaining the Required Consents, conflict with, or
      result in the breach of, or constitute a default under, or permit or result
      in
      the termination, cancellation or acceleration of any right or obligation of
      any
      Seller or Kaufman under, or result in the creation of any Lien upon any of
      the
      assets of any Seller or Kaufman under, or result in or constitute a circumstance
      which would constitute any of the foregoing under, any contract or agreement
      to
      which any Seller or Kaufman is a party or to which any of Sellers’ or Kaufman’s
      assets or properties is subject or (c) to the knowledge of Kaufman, and
      subject to obtaining the Required Consents, violate or result in a breach of,
      or
      constitute a default under, any Law or Judgment applicable to any Seller or
      Kaufman or by which any Seller or Kaufman or any of its or his assets or
      properties is bound or affected, except, in the cases of clauses
      (b)
      and
(c),
      for any
      conflict, breach, default, termination, cancellation, acceleration or violation
      which, individually or in the aggregate, would not reasonably be expected to
      materially impair any Seller’s or Kaufman’s ability to effect the Closing and to
      perform their other obligations hereunder.

     

    3.5 Consents
      and Approvals.
      To the
      knowledge of Kaufman, except as set forth on Schedule
      3.5
      or as
      required by the HSR Act and any similar federal, state, local or foreign Laws
      or
      regulations or as required by ISRA (together with the Consents, notices and
      filings referred to in Sections
      4.5
      and
5.5
      and
Schedules
      4.5
      and
5.5,
      the
“Required
      Consents”),
      no
      Consent is required to be obtained by Sellers or Kaufman from, and no notice
      or
      filing is required to be given by Sellers or Kaufman to, or made by Sellers
      or
      Kaufman with, any Governmental Authority or other Person in connection with
      the
      execution, delivery and performance by Sellers or Kaufman of this Agreement
      and
      the Related Agreements, other than in all cases where the failure to obtain
      such
      Consent or to give or make such notice or filing would not, individually or
      in
      the aggregate, reasonably be expected to materially impair any Seller’s or
      Kaufman’s ability to effect the Closing and to perform their other obligations
      hereunder.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    3.6 Brokers
      and Finders.
      No
      investment banker, broker, finder or other intermediary (a) has been
      retained by, (b) is authorized to act on behalf of or (c) is entitled
      to any fee or commission from Sellers, Kaufman or any of their respective
      Affiliates in connection with the transactions contemplated by this
      Agreement.

     

    3.7 Proceedings.
      To the
      knowledge of Kaufman, there is no Proceeding pending or threatened against
      any
      Seller or Kaufman (a) with respect to which there is a reasonable likelihood
      of
      a determination which, individually or in the aggregate, would materially hinder
      or impair the consummation of the transactions contemplated by this Agreement
      or
      (b) which seeks to enjoin or obtain damages in respect of the consummation
      of
      the transactions contemplated by this Agreement.

     

    ARTICLE
      IV

    REPRESENTATIONS
      AND WARRANTIES OF

    KAUFMAN
      RELATING TO THE COMPANY

     

    Except
      as
      disclosed in the Disclosure Memorandum, Kaufman represents and warrants to
      Purchaser as follows:

     

    4.1 Organization.
      The
      Company and the Subsidiaries are duly organized, validly existing and in good
      standing under the laws of their respective jurisdictions of organization,
      with
      all requisite corporate or other power and authority to conduct their respective
      businesses as they are now being conducted and to own, lease and operate their
      respective properties where now conducted, owned, leased or operated. To the
      knowledge of Kaufman, the Company and the Subsidiaries are duly licensed or
      qualified to do business and are in good standing as foreign corporations (or
      other entities, as applicable) in each jurisdiction where such license or
      qualification is required to carry on their respective businesses as now
      conducted, except where the failure to be so qualified or licensed or in good
      standing, as the case may be, would not, individually or in the aggregate,
      reasonably be expected to result in a Material Adverse Effect. The jurisdictions
      in which the Company and each of the Subsidiaries are incorporated or licensed
      or qualified to do business as foreign corporations (or other entities, as
      applicable) are set forth on Schedule 4.1.
      

     

    4.2 Capitalization;
      Subsidiaries.
      iii)
      The
      authorized capital stock of the Company consists of 1,500 Shares, of which
      100
      Shares are issued and outstanding. All of the issued and outstanding Shares
      (i) have been duly authorized and are validly issued, fully paid and
      nonassessable, (ii) are, and when issued were, free of preemptive rights
      and (iii) are held beneficially and of record by Sellers as set forth on
Schedule
      4.2(a).
      There
      are no Shares held in the treasury of the Company, and no Shares are currently
      reserved for issuance for any purpose or upon the occurrence of any event or
      condition. 

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (b) The
      authorized, issued and outstanding capital stock of each Subsidiary, and the
      legal and beneficial ownership thereof, are accurately set forth on Schedule
      4.2(b).
      Except
      as set forth on Schedule 4.2(b),
      all of
      the outstanding shares of capital stock of each Subsidiary (i) have been
      duly authorized and are validly issued, fully paid and nonassessable,
      (ii) are, and when issued were, free of preemptive rights and
      (iii) are held beneficially and of record by the Company or another
      Subsidiary, free and clear of all Liens. Except as set forth on Schedule 4.2(b),
      the
      Company has no direct or indirect subsidiaries, either wholly- or
      partially-owned, and the Company does not hold any direct or indirect economic,
      voting or management interest in any Person or directly or indirectly own any
      security issued by any Person. 

     

    (c) Except
      for the Shares (with respect to the Company) and except as set forth on
Schedule
      4.2(c),
      there
      are no shares of capital stock or other securities (whether or not such
      securities have voting rights) of the Company or any Subsidiary issued or
      outstanding or any outstanding ownership, voting, economic or other interests
      in, or rights to participate in the management of, or receive information
      concerning, the Company or any Subsidiary. There are no outstanding or
      authorized purchase rights, subscriptions rights, options, warrants, calls,
      exchange rights, conversion rights, other rights or other contracts, agreements
      or commitments of any character (i) obligating the Company or any Subsidiary,
      (ii) obligating the Company to cause any Subsidiary, or (iii) obligating
      any Subsidiary to cause any other Subsidiary, in each case to issue, transfer
      or
      sell, or cause the issuance, transfer or sale of, or otherwise cause to become
      outstanding, any shares of capital stock or other securities (whether or not
      such securities have voting rights) of the Company or any Subsidiary. There
      are
      no outstanding or authorized stock appreciation, phantom stock, profit
      participation or similar rights with respect to the Company or any
      Subsidiary.

     

    (d) Except
      as
      set forth on Schedule
      4.2(d),
      there
      are no outstanding contractual obligations of Sellers, the Company or any
      Subsidiary which relate to the purchase, sale, issuance, repurchase, redemption,
      acquisition, transfer, disposition, holding or voting of any shares of capital
      stock or other securities of the Company or any Subsidiary or the management
      or
      operation of the Company or any Subsidiary. Except for Sellers’ rights as
      holders of Shares, no Person has any right to participate in, or receive any
      payment based on any amount relating to, the revenue, income, value or net
      worth
      of the Company and the Subsidiaries or any component or portion thereof, or
      any
      increase or decrease in any of the foregoing.

     

    4.3 Authorization.
      The
      transactions contemplated by this Agreement have been approved by all necessary
      corporate action (if any) of the Company. No additional authorization on the
      part of the Company or its stockholders is necessary in connection with the
      consummation of the transactions contemplated by this Agreement.

     

    4.4 No
      Violations.
      This
      Agreement and the transactions contemplated hereby do not and will not
      (a) conflict with or violate any provision of the certificate of
      incorporation, bylaws or other organizational documents of the Company or the
      Subsidiaries, (b) to the knowledge of Kaufman, and subject to obtaining the
      Required Consents, conflict with, or result in the breach of, or constitute
      a
      default under, or permit or result in the termination, cancellation or
      acceleration of any right or obligation of the Company or any Subsidiary under,
      or result in the creation of any Lien upon any of the assets of the Company
      or a
      Subsidiary under, or result in or constitute a circumstance which would
      constitute any of the forgoing under, any Contract, or (c) to the knowledge
      of Kaufman, and subject to obtaining the Required Consents, violate or result
      in
      a breach of or constitute a default under, any Law or Judgment, except, in
      the
      cases of clauses
      (b)
      and
(c),
      for any
      conflict, breach, default, termination, cancellation or acceleration which,
      individually or in the aggregate, would not reasonably be expected to result
      in
      a Material Adverse Effect.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    4.5 Consents
      and Approvals.
      To the
      knowledge of Kaufman, except as set forth in Schedule
      4.5
      or as
      required by the HSR Act and any similar federal, state, local or foreign Laws
      or
      regulations, or as required by ISRA, no Consent is required to be obtained
      by
      the Company or any Subsidiary from, and no notice or filing is required to
      be
      given by the Company or any Subsidiary to, or made by the Company or any
      Subsidiary with, any Governmental Authority or other Person in connection with
      the execution, delivery and performance by Sellers or Kaufman of this Agreement
      and the Related Agreements. All filings required to be made by Sellers, Kaufman,
      the Company or its Subsidiaries under the HSR Act and other similar Laws
      applicable to the transactions contemplated by this Agreement or under ISRA
      have
      been made, and any required waiting period under such Laws applicable to the
      transactions contemplated by this Agreement have expired or been earlier
      terminated.

     

    4.6 Financial
      Statements.
      iv)
      To the
      knowledge of Kaufman, the Financial Statements are in accordance with the books
      and records of the Company and the Subsidiaries, have been prepared in
      accordance with GAAP applied on a consistent basis throughout the periods to
      which they relate and present fairly and accurately, in all material respects,
      the consolidated financial condition of the Company and the Subsidiaries as
      of
      such dates and the consolidated results of operations and cash flows of the
      Company and the Subsidiaries for such periods; provided,
      however,
      that
      the Most Recent Financial Statements do not contain footnotes and are subject
      to
      normal year-end adjustments. 

     

    (b) To
      the
      knowledge of Kaufman, the Financial Statements, including the notes thereto,
      make full and adequate disclosure of, and provision for, all material
      obligations and liabilities of the Company and the Subsidiaries as of the date
      thereof, and the Company and the Subsidiaries have no material liabilities,
      debts, claims or obligations (including “off-balance sheet” liabilities, debts,
      claims or obligations), whether accrued, absolute, contingent or otherwise,
      and
      whether due or to become due, other than (i) as set forth on Schedule
      4.6
      or in
      the Reference Balance Sheet and (ii) trade payables and accrued expenses
      incurred in the ordinary course of business since the date of the Reference
      Balance Sheet.

     

    4.7 Absence
      of Change.
      To the
      knowledge of Kaufman, except as disclosed on Schedule
      4.7
      and
      except to the extent arising out of or relating to the transactions contemplated
      by this Agreement, since January 1, 2006, (a) the Company and the Subsidiaries
      have been operated in the ordinary course in a manner consistent with past
      practice, (b) there has been no disposal of assets in an aggregate amount
      exceeding $100,000, (c) there has been no issuance of securities, and (d) there
      has not been any change in the business or financial condition of the Company
      or
      the Subsidiaries other than changes which, individually or in the aggregate,
      would not reasonably be expected to result in a Material Adverse
      Effect.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    4.8 Real
      Property.
      v) Schedule
      4.8(a)
      lists
      all real property owned by the Company or any Subsidiary (the “Owned
      Real Property”).
      Except as set forth on Schedule
      4.8(a),
      the
      Company or a Subsidiary has good and marketable fee title to the Owned Real
      Property, and all such properties and assets are free and clear of all Liens,
      except for Permitted Liens. To the knowledge of Kaufman, there are no leases,
      subleases, licenses, concessions or other agreements granting any Person the
      right to use or occupy any material portion of any Owned Real Property so as
      to
      materially adversely affect the Company’s or any Subsidiary’s use of such Owned
      Real Property in the ordinary course of business as currently
      conducted.

     

    (b) To
      the
      knowledge of Kaufman, (i) Schedule
      4.8(b)
      lists
      all real property held or used by the Company or any Subsidiary (the
“Leased
      Real Property”)
      under
      real property leases (the “Leases”),
      (ii)
      except as set forth on Schedule 4.8(b),
      each
      material Lease is a valid agreement, duly authorized and entered into, in full
      force and effect in all material respects, and (iii) neither the Company nor
      any
      Subsidiary has received or given a written notice of default under the Leases
      other than notices with respect to defaults which have either been cured or
      waived or with respect to defaults which, individually or in the aggregate,
      would not reasonably be expected to result in a Material Adverse Effect. True
      and complete copies of the Leases have been made available to Purchaser and,
      except as set forth on Schedule
      4.8(b),
      such
      Leases have not been amended or modified since that date.

     

    (c) The
      Owned
      Real Property and the Leased Real Property constitute all of the land owned,
      held or used by the Company and the Subsidiaries in the conduct of their
      respective businesses. The Company has made available to Purchaser copies of
      the
      most recent title insurance policies and surveys (if any) in the possession
      of
      the Company or any Subsidiary for the Owned Real Property and the Leased Real
      Property, together with copies of all reports (if any) of any engineers,
      environmental consultants or other consultants in its possession relating to
      any
      of the Owned Real Property or Leased Real Property. Kaufman makes no
      representation as to the accuracy of the information contained in such
      reports.

     

    (d) To
      the
      knowledge of Kaufman, except as set forth on Schedule
      4.8(a)
      or
(b),
      there
      is no pending, threatened or proposed Proceeding or governmental action to
      modify the zoning classification of, or to condemn or take by the power of
      eminent domain (or to purchase in lieu thereof), or to classify as a landmark,
      or to impose special assessments on, or otherwise to take or restrict in any
      way
      the right to use, develop or alter, all or any part of the Owned Real Property
      or the Leased Real Property.

     

    4.9 Title
      to Assets; Condition and Sufficiency of Assets.
      vi)
      Except
      for Intellectual Property, which is addressed in Section
      4.16,
      either
      the Company or a Subsidiary has good and valid record and marketable title
      to,
      and is the lawful owner of, all of the assets reflected on the balance sheet
      included in the December 31, 2005 Financial Statements or acquired after
      December 31, 2005 (other than assets disposed of since December 31, 2005
      that have been disclosed in Schedule
      4.7
      or fall
      within the exception set forth in clause
      (b)
      of
Section
      4.7),
      free
      and clear of any Lien other than Permitted Liens.

     

    (b) To
      the
      knowledge of Kaufman, no third party has asserted a claim against any of the
      assets, properties or rights of the Company or a Subsidiary that if successful
      would materially threaten the conduct of the business of the Company and the
      Subsidiaries as currently conducted.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    4.10 Personal
      Property.
      Schedule 4.10(a)
      sets
      forth the December 31, 2006 fixed assets register of the Company and its
      Subsidiaries. Schedule 4.10(b)
      sets
      forth the December 31, 2006 leased asset schedule of the Company and its
      Subsidiaries. The Company has made available to Purchaser true and complete
      copies of all the personal property leases with respect to the assets listed
      on
Schedule 4.10(b).

     

    4.11 Proceedings;
      Judgments; Compliance with Law.
      vii)
      To the
      knowledge of Kaufman, except as set forth on Schedule
      4.11(a),
      there
      are no material Proceedings pending or threatened, involving the Company or
      any
      of the Subsidiaries, neither the Company nor any Subsidiary is subject to any
      material Judgment, and neither the Company nor any Subsidiary has entered into
      any agreement to settle or compromise any material Proceeding pending or
      threatened against it which has involved any obligation other than the payment
      of money and for which it has any continuing obligation.

     

    (b) To
      the
      knowledge of Kaufman, except as set forth on Schedule
      4.11(b),
      the
      Company has not received any notice or claim that it is not in compliance with
      all applicable Laws and Judgments in all material respects.

     

    4.12 Permits.
      To the
      knowledge of Kaufman, Schedule
      4.12
      sets
      forth each material Permit affecting, or relating to, the businesses and
      operations of the Principal Subsidiaries. To the knowledge of Kaufman, except
      as
      set forth on Schedule
      4.12,
      (i)
      such Permits are valid and in full force and effect, (ii) the Principal
      Subsidiaries are in substantial compliance with all such Permits, and (iii)
      no
      condition exists that would cause the Principal Subsidiaries not to be in
      substantial compliance with all such Permits.

     

    4.13 Environmental
      Matters.
      viii)
      Due to
      their operations as chemical companies, the Company and its Subsidiaries use
      raw
      materials and processes that could cause concern, and they are subject to
      regulations under Laws relating to safety and protection of the environment.
      To
      the knowledge of Kaufman, the Company has made available to Purchaser and its
      representatives all reasonably available information concerning compliance
      by
      the Company and the Subsidiaries with such Laws relating to safety and
      protection of the environment. Schedule
      4.13(a)
      summarizes all such information that has been made available to
      Purchaser.

     

    (b) Except
      as
      set forth on Schedule
      4.13(b),
      to the
      knowledge of Kaufman, no fact, event or condition exists or has occurred that
      would reasonably be expected to prevent the Company or any Subsidiary from
      recovering under (i) any release, indemnity or other rights available to it
      pursuant to the Remediation Agreement, the RLI Agreement, the NRD Settlement
      Agreement, the Hatco Settlement Agreement or any other similar Contract; or
      (ii) the ACE Policy or any other similar applicable policy of insurance
      relating to pollution or the protection of the environment.

     

    4.14 Brokers
      and Finders.
      No
      investment banker, broker, finder or other intermediary (a) has been retained
      by, (b) is authorized to act on behalf of or (c) is entitled to any fee or
      commission from the Company or any Affiliate of the Company in connection with
      the transactions contemplated by this Agreement.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    4.15 Contracts.
      To the
      knowledge of Kaufman, Schedule
      4.15
      lists
      each of the following Contracts to which the Company or any Subsidiary is a
      party or is otherwise bound:

     

    (a) any
      Contract with or relating to any Significant Customer or Significant
      Supplier;

     

    (b) any
      Contract pursuant to which the Company or any Subsidiary has made or will make
      loans or advances, or has incurred, or is obligated to incur, indebtedness
      for
      borrowed money or has become a guarantor or surety or pledged its credit for
      or
      otherwise become responsible with respect to any undertaking of another Person
      (except for the negotiation or collection of negotiable instruments in
      transactions in the ordinary course of business);

     

    (c) any
      Contract involving a partnership, joint venture or other cooperative
      undertaking;

     

    (d) any
      employment Contract; and

     

    (e) any
      other
      material Contract of the Company or any Subsidiary.

     

    Except
      as
      disclosed on Schedule 4.15,
      to the
      knowledge of Kaufman, (i) each Contract listed on Schedule 4.15
      is a
      valid and binding agreement of the Company or a Subsidiary and is in full force
      and effect in all material respects and (ii) neither the Company nor any
      Subsidiary has received any claim that the Company or any Subsidiary is in
      material default under any such Contract.

     

    4.16 Intellectual
      Property.
      ix)
      To the
      knowledge of Kaufman, Schedule
      4.16(a)
      lists
      the Intellectual Property Rights belonging to the Company and/or the
      Subsidiaries, and any agreements in which the Company or any Subsidiary has
      granted licenses under any such Intellectual Property Rights to any third
      party.

     

    (b) Except
      as
      set forth on Schedule 4.16(b),
      to the
      knowledge of Kaufman, neither the Company nor any Subsidiary has received any
      claim that the use of all Intellectual Property as currently used by the Company
      or any Subsidiary infringes in any material respect the Intellectual Property
      of
      any other Person.

     

    4.17 Taxes.
      x)
      To the
      knowledge of Kaufman, except as set forth in Schedule
      4.17,
      (i) the
      Company is a small business corporation as defined in section 1361 of the Code,
      (ii) has had in effect for each taxable year that it has been in existence
      a
      valid election to be treated as a subchapter S corporation for federal income
      tax purposes under the Code and under the income Tax laws of each state in
      which
      the Company does business under which such an election is permitted, (iii)
      the
      Company would not be liable for any Tax under section 1374 of the Code if its
      assets were sold for their fair market value as of the Closing Date, and (iv)
      each Subsidiary of the Company has been a qualified subchapter S subsidiary
      since its formation or for a minimum of ten years, whichever period is
      shorter.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    (b) To
      the
      knowledge of Kaufman, (i) all Tax Returns required to be filed by or with
      respect to the Company or the Subsidiaries through the Closing Date have been
      or
      will be timely filed and the information provided in such Tax Returns is
      complete and accurate in all material respects; (ii) all Taxes of the Company
      and the Subsidiaries, to the extent due and payable as of the Closing Date,
      have
      been or will be timely paid, except for such Taxes as may be contested in good
      faith in appropriate proceedings; and (iii) adequate provision will be made
      on
      the Closing Date Balance Sheet for the payment of all Taxes, with respect to
      any
      Pre-Closing Tax Period of the Company, to the extent such Taxes are not due
      and
      payable as of the Closing Date.

     

    (c) To
      the
      knowledge of Kaufman, except as set forth in Schedule
      4.17,
      (i) no Tax Return has been audited by the IRS or any other Taxing Authority
      or if a Tax Return has been audited by the IRS or another Taxing Authority,
      such
      audit has been completed without the issuance of any notice of deficiency or
      similar notice of additional liability or (ii) the time for assessing or
      collecting income Tax with respect to a Tax Return for a taxable period of
      the
      Company and the Subsidiaries ending prior to the date of this Agreement has
      closed and such Tax Return is not subject to review by the IRS or any other
      Taxing Authority.

     

    (d) To
      the
      knowledge of Kaufman, except as set forth in Schedule
      4.17,
      there
      is no pending or threatened action, audit, proceeding or investigation by any
      Taxing Authority with respect to the assessment or collection of Taxes of the
      Company or any Subsidiary.

     

    (e) To
      the
      knowledge of Kaufman, all Taxes which the Company and each Subsidiary is
      required by law to withhold or collect, including sales and use taxes, and
      amounts required to be withheld for Taxes of employees, have been duly withheld
      or collected and, to the extent required, have been paid over to the proper
      Taxing Authority or are held in separate bank accounts for such
      purpose.

     

    (f) To
      the
      knowledge of Kaufman, there are no Tax sharing, Tax indemnity, Tax allocation
      or
      similar agreements, arrangements or understandings with respect to Taxes in
      effect to which the Company or a Subsidiary is a party.

     

    (g) To
      the
      knowledge of Kaufman, neither the Company nor any Subsidiary has extended or
      waived the application of any statute of limitations of any jurisdiction
      regarding the assessment or collection of any Tax.

     

    (h) To
      the
      knowledge of Kaufman, neither the Company nor any Subsidiary has received any
      notice from any Tax Authority in any jurisdiction in which the Company or a
      Subsidiary does not file a Tax Return that it may be subject to taxation by
      that
      jurisdiction.

     

    (i) To
      the
      knowledge of Kaufman, neither the Company nor any Subsidiary has not entered
      into any closing agreement (as defined in section 7121 of the Code) or any
      similar provision of any state, local or foreign Law that relates to Company
      or
      a Subsidiary.

     

    (j) To
      the
      knowledge of Kaufman, neither the Company nor any Subsidiary has ever been
      a
      member of an affiliated group within the meaning of section 1504(a) of the
      Code
      (or any similar or analogous group defined under a similar or analogous state,
      local or foreign Law) other than an affiliated group the common parent of which
      is the Company.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    (k) To
      the
      knowledge of Kaufman, neither the Company nor any Subsidiary has engaged in
      a
      transaction that would be reportable by or with respect to the Company or a
      Subsidiary pursuant to sections 6011, 6111 or 6112 of the Code. Neither the
      Company nor any Subsidiary has entered into any transactions that required
      or
      will require the filing of IRS Form 8886.

     

    4.18 Labor
      and Employment Matters.
      xi)
      Except
      as set forth on Schedule 4.18(a),
      neither
      the Company nor any Subsidiary is a party to, or bound by, any labor agreement,
      collective bargaining agreement, shop agreement, work rules or practices, or
      any
      other labor-related agreement or arrangement with any labor union, labor
      organization, trade union or works council.

     

    (b) To
      the
      knowledge of Kaufman, except as set forth on Schedule 4.18(b),
      (i) no labor union, labor organization, trade union, works council or group
      of employees of the Company or any Subsidiary has made a pending demand for
      recognition or certification, and there are no material representation or
      certification proceedings, or petitions seeking a material representation
      proceeding, presently pending or threatened in writing to be brought or filed
      with the National Labor Relations Board or any other labor relations tribunal
      or
      authority, and (ii) there currently are no material actual or threatened
      arbitrations, grievances, labor disputes, strikes, lockouts, slowdowns or work
      stoppages against the Company or any Subsidiary, nor has there been any of
      the
      foregoing during the three-year period before the date of this
      Agreement.

     

    (c) To
      the
      knowledge of Kaufman, Schedule 4.18(c)
      contains
      a complete and accurate list of the following information for each employee
      (including part time employees and temporary employees), independent contractor
      and consultant of the Company and the Subsidiaries as of January 1, 2007,
      including each employee, independent contractor and consultant on leave of
      absence or layoff status: name; job title; date of employment; current
      compensation and PTO balance.

     

    4.19 Employee
      Benefit Matters.
      xii)
      To the
      knowledge of Kaufman, Schedule 4.19
      lists
      each employee benefit plan, program, agreement, policy or arrangement, including
      each “employee benefit plan” (as defined in section 3(3) of ERISA), that the
      Company or any Subsidiary maintains, is a party to, participates in or has
      any
      liability under or with respect to (collectively, the “Plans”).
      The
      Company has made available to Purchaser true and complete copies of each Plan
      and, to the extent applicable, (i) the summary plan description, (ii) the
      most recent determination letter received from the IRS and (iii) the most recent
      Form 5500 Annual Report with respect to each Plan. To the knowledge of Kaufman,
      except as disclosed in Schedule
      4.19,
      none of
      the Plans is subject to title IV of ERISA and none of the Plans is a
      multiemployer plan (as defined in section 3(37) of ERISA).

     

    (b) Neither
      the Company nor any Subsidiary is obligated to make or, as a result of any
      event
      related to the transactions contemplated by this Agreement, will become
      obligated to make, any “excess parachute payment” within the meaning of
      section 280G of the Code, determined without regard to
      subsection (b)(4) of such section.

     

    4.20 Customers
      and Suppliers.
      To the
      knowledge of Kaufman, Schedule
      4.20
      sets
      forth a true, accurate and complete list of all Significant Customers and
      Significant Suppliers. Except as set forth on Schedule
      4.20,
      to the
      knowledge of Kaufman, (a) there is no material dispute between the Company
      or any of the Subsidiaries (on the one hand) and any Significant Customer or
      Significant Supplier (on the other hand), (b) no Significant Customer or
      Significant Supplier presently intends to terminate or cancel any Contract
      with
      the Company or any of the Subsidiaries or to materially reduce the amount of
      business presently done with the Company or any of the Subsidiaries, and (c)
      since December 31, 2005 through the date of this Agreement, no Significant
      Customer or Significant Supplier has materially reduced the level of business
      conducted with the Company or any of the Subsidiaries.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    4.21 Inventory.
      To the
      knowledge of Kaufman, (a) the Inventory reflected in the Financial Statements
      is
      fairly valued in accordance with GAAP; (b) the Inventory (i) is in saleable
      condition and not beyond its shelf life and (ii) taken as a whole, is in
      quantities reasonably sufficient for the operation of the business of the
      Company and the Subsidiaries in the ordinary course of business consistent
      with
      past practice; and (c) the inventory obsolescence policies of the Company and
      the Subsidiaries are appropriate for the nature of the products sold. To the
      knowledge of Kaufman, Schedule
      4.21
      sets
      forth a list of the locations where material inventories of the Company and
      the
      Subsidiaries were located as of December 31, 2006 and identifies, with
      respect to each such location, the Contract pursuant to which the Company or
      a
      Subsidiary stores Inventory at such location.

     

    4.22 Affiliate
      Transactions.
      Except
      as set forth on Schedule 4.22(a)
      (the
“Affiliate
      Transactions”),
      none
      of Sellers, Kaufman or any of their respective Affiliates is or within the
      past
      12 months has been a party to or otherwise bound by any Contract with the
      Company or any of the Subsidiaries. Except as set forth on Schedule 4.22(b)
      and
      except as contemplated by Section
      6.6,
      all
      Affiliate Transactions and all receivables and payables between the Company
      or
      any Subsidiary, on the one hand, and Kaufman,
      any Seller or any of their respective Affiliates,
      on the
      other hand, have been settled or terminated prior to the Closing. Except as
      set
      forth on Schedule 4.22(b)
      and
      except as contemplated by Section
      6.6,
      after
      the Closing, the Company and the Subsidiaries shall have no liabilities or
      obligations whatsoever to Kaufman, any Seller or any of their respective
      Affiliates. Except as set forth on Schedule 4.22(a),
      no
      Seller or any of their respective Affiliates owns any asset, tangible or
      intangible, which is used in the businesses of the Company and the
      Subsidiaries.

     

    4.23 Long-Term
      Indebtedness.
      Except
      for the indebtedness that will be repaid at Closing in the amounts set forth
      in
      the Pay-Off Letters and the Italian Indebtedness, the Company and the
      Subsidiaries have no long-term indebtedness.

     

    ARTICLE
      V

    REPRESENTATIONS
      AND WARRANTIES OF PURCHASER

     

    Except
      as
      disclosed in the Disclosure Memorandum, Purchaser represents and warrants to
      Sellers and Kaufman as follows:

     

    5.1 Organization.
      Purchaser is duly organized, validly existing and in good standing under the
      laws of the State of Delaware.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    5.2 Authorization.
      Purchaser has the requisite corporate power and authority to execute, deliver
      and perform this Agreement and its Related Agreements and to consummate the
      transactions contemplated hereby and thereby. The execution, delivery and
      performance of this Agreement and the Related Agreements and the consummation
      by
      Purchaser of the transactions contemplated hereby and thereby have been duly
      and
      validly authorized by all necessary corporate action of Purchaser, and no
      additional authorization on the part of Purchaser or its stockholders is
      necessary in connection with the execution, delivery and performance by
      Purchaser of this Agreement or the Related Agreements.

     

    5.3 Binding
      Effect.
      This
      Agreement has been duly executed and delivered by Purchaser and, assuming the
      due authorization, execution and delivery of this Agreement and the Related
      Agreements by Sellers and Kaufman, this Agreement is, and each Related Agreement
      will after the Closing be, legal, valid and binding obligations of Purchaser,
      enforceable against Purchaser in accordance with their respective terms, subject
      to the Enforceability Limitations.

     

    5.4 No
      Violations.
      The
      execution, delivery and performance by Purchaser of this Agreement and the
      Related Agreements and the consummation of the transactions contemplated by
      this
      Agreement and the Related Agreements do not and will not (a) conflict with
      or
      violate any provision of the certificate of incorporation, bylaws or other
      organizational documents of Purchaser, (b) subject to obtaining the Required
      Consents, conflict with, or result in the breach of, or constitute a default
      under, or permit or result in the termination, cancellation or acceleration
      (whether after the giving of notice or the lapse of time or both) of any right
      or obligation of Purchaser under, or result in the creation of any Lien upon
      any
      of the assets of Purchaser under, or result in or constitute a circumstance
      which, with or without notice or lapse of time or both, would constitute any
      of
      the foregoing under, any contract or agreement to which Purchaser is a party
      or
      to which or any of its assets of properties is subject or (c) subject to
      obtaining the Required Consents, violate or result in a breach of, or constitute
      a default under, any Law or Judgment applicable to Purchaser or by which
      Purchaser or any of its assets or properties is bound or affected, except,
      in
      the cases of clauses
      (b)
      and
(c),
      for any
      conflict, breach, default, termination, cancellation, acceleration or violation
      which, individually or in the aggregate, would not reasonably be expected to
      materially impair Purchaser’s ability to effect the Closing and to perform
      Purchaser’s other obligations hereunder.

     

    5.5 Consents
      and Approvals.
      Except
      as set forth on Schedule
      5.5
      or as
      required by the HSR Act and any other similar federal, state, local or foreign
      Laws or regulations or as required by ISRA, no Consent is required to be
      obtained by Purchaser from, and no notice or filing is required to be given
      by
      Purchaser to, or made by Purchaser with, any Governmental Authority or other
      Person in connection with the execution, delivery and performance by Purchaser
      of this Agreement or the Related Agreements. All filings required to be made
      by
      Purchaser under the HSR Act and other similar Laws applicable to the
      transactions contemplated by this Agreement or under ISRA have been made and
      any
      required waiting period under such Laws applicable to the transactions
      contemplated by this Agreement have expired or been earlier
      terminated.

     

    5.6 Brokers
      and Finders.
      There
      is no investment banker, broker, finder or other intermediary which (a) has
      been
      retained by, (b) is authorized to act on behalf of or (c) is entitled
      to any fee or commission from Purchaser or any Affiliate of Purchaser in
      connection with the transactions contemplated by this Agreement.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    5.7 Proceedings.
      There
      is no Proceeding pending or, to the knowledge of Purchaser, threatened against
      Purchaser (a) with respect to which there is a reasonable likelihood of a
      determination which, individually or in the aggregate, would materially hinder
      or impair the consummation of the transactions contemplated by this Agreement
      or
      (b) which seeks to enjoin or obtain damages in respect of the consummation
      of
      the transactions contemplated by this Agreement.

     

    5.8 Investment
      Intent.
      Purchaser acknowledges that the Shares being purchased by Purchaser under this
      Agreement are not registered under the Securities Act or registered or qualified
      for sale under any state securities law and cannot be resold without
      registration under, or an exemption from, the Securities Act. Purchaser is
      acquiring the Shares for its own account for investment and not with a view
      toward the sale or distribution of the Shares. Purchaser has sufficient
      knowledge and experience in financial and business matters to enable it to
      evaluate the risks of investment in such Shares and has the ability to bear
      the
      economic risks of such investment.

     

    ARTICLE
      VI

    COVENANTS

     

    6.1 Public
      Announcements.
      Purchaser and Kaufman shall consult with each other before issuing any press
      release or otherwise making any public statement with respect to this Agreement
      or the transactions contemplated by this Agreement. None of Purchaser, Sellers
      or Kaufman shall issue any such press release or make any such public statement
      without the prior written approval of the other party to this Agreement, such
      approval not to be unreasonably withheld, except as may be required by Law
      or
      any securities exchange on which the securities of Purchaser or its Affiliates
      are then listed.

     

    6.2 Tax
      Matters.
      xiii) Section
      338(h)(10) Election.
      (i)
      Sellers and Purchaser shall (A) join in making an election under section
      338(h)(10) of the Code (and any election corresponding to section 338(h)(10)
      of
      the Code under foreign, state, or local laws) with respect to the purchase
      of
      the Shares (the “Section
      338(h)(10) Elections”);
      (B) provide to the other the necessary information to permit the Section
      338(h)(10) Elections to be made; and (C) take all actions necessary and
      appropriate (including filing any necessary forms, returns, elections, schedules
      and other documents) as may be required to effect and preserve timely the
      Section 338(h)(10) Election in accordance with the provisions of Treas. Reg.
      §1.338(h)(10)-1 (or any provisions comparable to section 338(h)(10) of state
      or
      local Tax Law).

     

    (ii) Purchaser
      shall be responsible for preparing drafts of all forms, attachments and
      schedules necessary to effectuate the Section 338(h)(10) Election (including
      IRS
      Forms 8023 and 8883 and any similar forms under applicable state or local income
      tax laws (the “Section
      338 Forms”)).
      The
      parties shall execute and deliver IRS Form 8023 no later than ten days following
      the Closing Date.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    (iii) The
      “aggregate deemed sales price” (as defined in Treas. Reg. §1.338-4) and the
“adjusted grossed-up basis” (as defined in Treas. Reg. §1.338-5) shall be
      allocated among the assets of the Company and the non-competition agreement
      as
      described in Section 6.3
      in
      accordance with Treas. Reg. §1.338-6. Within 90 days of Closing, Purchaser shall
      deliver to Sellers a schedule allocating the adjusted grossed-up basis among
      the
      assets of the Company and the non-competition agreement as described in
Section 6.3
      (the
“Allocation
      Schedule”).
      If
      Sellers dispute any item on the Allocation Schedule, Sellers and Purchaser
      shall
      cooperate in good faith to resolve any dispute. Should the parties fail to
      reach
      an agreement within 30 days after the Purchaser’s delivery of the Allocation
      Schedule, the determination of the allocation shall be made by an Independent
      Accounting Firm, whose decision shall be final and made within 90 days after
      the
      Closing Date. The Allocation Schedule shall be adjusted in accordance with
      the
      Independent Accounting Firm’s resolution of the dispute. Sellers and Purchaser
      shall file the Section 338 Forms in accordance with the Allocation Schedule.
      The
      parties agree not to take any position inconsistent with the Allocation Schedule
      for Tax reporting purposes.

     

    (b) Tax
      Returns. (i)
      The
      current accountants for the Company will prepare (at the Company’s expense), and
      the Company will file or cause to be filed when due, all federal, state and
      local income and franchise Tax Returns and other Tax Returns with respect to
      Company for taxable periods ending prior to the Closing Date, but which are
      not
      yet due as of the Closing Date. Sellers shall pay the U.S. federal and any
      applicable state income tax attributable to the Company’s taxable income for
      such return periods for which such Sellers would be liable individually assuming
      a valid election by the Company to be taxed as an S corporation for federal
      income tax purposes and for purposes of all state income taxes in those states
      which allow such elections, and shall also pay any entity-level Tax liability
      of
      the Company reflected on such Tax Returns if not reserved for on the Closing
      Date Balance Sheet.

     

    (ii) The
      current accountants for the Company will prepare, and the Company will file
      or
      cause to be filed when due, all federal, state and local income and franchise
      Tax Returns and other Tax Returns with respect to the Company and the
      Subsidiaries with respect to taxable periods ending on the Closing Date (the
      “Short
      Tax Period”).
      With
      respect to the Short Tax Period, (i) the Company and the Subsidiaries shall
      close their books as of the end of the Short Tax Period and compute taxable
      income or taxable loss for the Short Tax Period on the basis of the permanent
      books and records (including work papers) of the Company and the Subsidiaries
      for such Short Tax Period, taking into account the effect of the Section
      338(h)(10) Elections (and after applying the Next Day Rule under Treas. Reg.
      Section 1.338-1(d), to the extent applicable); (ii) the current accountants
      for
      the Company will prepare the necessary Tax Returns, in accordance with the
      Subchapter S requirements of the Code and in a manner consistent with the Tax
      Returns previously filed by the Company (but taking into account the effects
      of
      the Section 338(h)(10) Elections), and provide such information to Sellers
      and
      Purchaser for review and approval; (iii) such Tax Returns shall be filed by
      the
      Company by the due date of such Tax Returns (taking into account any
      extensions); and (iv) Sellers shall pay the federal and any applicable
      state income tax attributable to the Company’s taxable income for the Short Tax
      Period for which such Sellers would be liable individually assuming a valid
      election by the Company to be taxed as an S corporation for federal income
      tax
      purposes and for purposes of all state income taxes in those states which allow
      such elections, and shall also pay any entity-level Tax liability of Company
      reflected on such Tax Returns if not reserved for on the Closing Date Balance
      Sheet.

     

    
      
         

      

      
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    (c) Additional
      Purchase Price for Certain Taxes.
      (i)
      Except as otherwise provided in and subject to the terms of this Section
      6.2(c),
      Purchaser shall pay to Sellers additional consideration under this Section
      6.2(c)
      (the
“Make-Whole
      Amount”)
      equal
      to the excess of (A) the aggregate Taxes imposed on Sellers solely as a result
      of (x) the deemed transfer of the assets by the Company and the Subsidiaries
      contemplated by section 338(h)(10) of the Code and the deemed liquidation of
      the
      Company as contemplated by section 338(h)(10) of the Code (assuming for this
      purpose the distribution by the Company of the Purchase Price) and (y) the
      allocation of a portion of the Purchase Price to the non-competition agreement
      as described in Section 6.3,
      over
      (B) the aggregate amount of Taxes that would have been imposed on Sellers if
      Sellers had sold the stock of the Company to Purchaser in a fully taxable
      transaction outside the scope of section 338 of the Code under the same terms
      as
      are provided in this Agreement and without any allocation of a portion of the
      Purchase Price to the non-competition agreement as described in Section 6.3
      (such
      excess Taxes, “Indemnified
      Taxes”).
      In
      computing Indemnified Taxes with respect to any Seller (other than for purposes
      of calculating the Tax benefit resulting from the accrual or payment of an
      Indemnified Tax as provided below), it shall be assumed that the only tax items
      of such Seller are those that arise (or would have arisen) as a result of the
      transactions (or deemed transactions) described in clauses
      (A)
      and
(B)
      above,
      that Kaufman is an individual resident of Colorado, and that each other Seller
      is an individual resident of the state shown on Schedule
      3.1.
      The
      Make-Whole Amount will be increased so that Sellers, after receipt of the
      Make-Whole Amount, will have received on a net after-tax basis an amount equal
      to the Indemnified Taxes.

     

    (ii) Schedule
      6.2(c)
      contains
      the parties’ estimate of the Make-Whole Amount. Pursuant to the procedures
      outlined in Section
      6.2(c)(i),
      Purchaser shall cause any Make-Whole Amount resulting from the application
      of
      such procedures to be paid, subject to the procedures described herein, at
      least
      5 days prior to the filing of the appropriate Tax Return. Sellers and Purchaser
      agree to prepare their respective Tax Returns in a manner consistent with
Schedule
      6.2(c)
      and the
      determination of the Make-Whole Amount pursuant to Section
      6.2(c)(i)
      (and, if
      there is an adjustment to such amount by an Independent Accounting Firm pursuant
      to this Section
      6.2(c)(ii),
      consistent with that adjustment), and to not take any position inconsistent
      with
Schedule
      6.2(c)
      and any
      such determination (or, if applicable, adjustment). Subject to the next
      sentence, no additional Make-Whole Amount shall be payable unless there has
      been
      an audit or other inquiry described in Section
      6.2(c)(iii),
      and a
      final determination of additional Indemnified Taxes owing in accordance with
      the
      procedures set forth in Section
      6.2(c)(iii).
      Notwithstanding the foregoing, if at least 30 days prior to the time the Company
      is required to file its Tax Returns for the period that includes the Closing
      Date, either Sellers or Purchaser determine that a position inconsistent with
      the initial determination of the Make-Whole Amount pursuant to Section
      6.2(c)(i)
      is
      required by law, and such position would result in an increase or decrease
      in
      the Make-Whole Amount previously determined (or adjusted): (A) the party making
      such determination shall notify the other party no later than such time (failure
      to notify within such time shall result in a waiver of any right to an
      adjustment pursuant to this sentence unless such failure to notify within such
      time did not result in any prejudice to a party) and the parties shall attempt
      in good faith to resolve the matter and agree to any revised Make-Whole Amount
      within ten days of such notice; (B) if the parties are unable to so agree
      within such time, they shall submit the matter to an Independent Accounting
      Firm, (1) that shall be instructed to determine the proper treatment of the
      item
      in question consistent with Schedule
      6.2(c)
      and no
      later than five days prior to the due date for filing such Tax Return,
      (2) whose determination shall be final and binding on the parties, and (3)
      whose fees shall be borne equally by Sellers, on the one hand, and Purchaser,
      on
      the other, and (C) such Tax Return shall be prepared in a manner consistent
      with
      the determination by such Independent Accounting Firm. Any adjustment to the
      Make-Whole Amount shall be paid by Sellers (to the extent of a reduction in
      the
      Make-Whole Amount) or Purchaser (to the extent an increase in the Make-Whole
      Amount), as the case may be, no later than ten Business Days following the
      final
      determination thereof. 

     

    
      
         

      

      
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    (iii) Sellers
      shall notify Purchaser in writing of any audit or other inquiry of any of
      Sellers by any Taxing Authority that could result in a claim for additional
      Indemnified Taxes. Such notification shall be given as soon as reasonably
      practicable. Purchaser shall have sole control over all audits or other
      proceedings as the same pertain to items relevant to Indemnified Taxes, provided
      Sellers shall be entitled at any time to participate in such audits or other
      proceedings at their expense. Sellers shall cooperate as reasonably requested
      by
      Purchaser in order to enable Purchaser to control such proceedings. Sellers
      shall not submit information to any Taxing Authority (orally or otherwise)
      that
      could reasonably be expected to affect Purchaser’s liability for additional
      Indemnified Taxes without the prior written consent of Purchaser which shall
      be
      not unreasonably withheld or delayed. In its sole discretion, Purchaser may
      pursue or forego any and all administrative appeals, proceedings, hearings
      and
      conferences with the Taxing Authority in respect of Indemnified Taxes and may,
      at their sole option, either direct Sellers to pay the Indemnified Tax claimed
      and sue for a refund or contest the claim in any permissible manner, and Sellers
      agree to cooperate with Purchaser as reasonably requested in prosecuting such
      contest to a determination before any administrative tribunal, in a court of
      initial jurisdiction and in one or more appellate courts, as Purchaser shall
      determine; provided,
      however,
      that
      (A) if Purchaser directs Sellers to pay Indemnified Taxes and sue for a refund,
      Purchaser shall advance an amount equal to such Indemnified Taxes to Sellers,
      on
      an interest-free basis but not in excess of the maximum amount of Purchaser’s
      exposure for Indemnified Taxes hereunder, with Purchaser being entitled to
      any
      permitted refund of such amounts, (B) the right of Purchaser to control
      proceedings pursuant to this section (but not the obligation of Purchaser to
      indemnify Sellers as provided in this Agreement) shall terminate with respect
      to
      any such proceeding if Sellers reasonably determine that Purchaser is conducting
      such proceedings in manner that is unreasonable and that could reasonably be
      expected to cause a Material Adverse Effect on Sellers (provided, that in such
      case Sellers shall not consent to any settlement of any issue without the prior
      written consent of Purchaser, not to be unreasonably withheld or delayed),
      and
      (C) Purchaser shall not take or advocate (unless otherwise required by Law)
      any
      position that could reasonably be expected to have a Material Adverse Effect
      on
      or legally bind Sellers without obtaining the consent of Sellers, not to be
      unreasonably withheld or delayed.

     

    (iv) For
      purposes of this Section
      6.2(c),
      a
“final determination” with respect to any Indemnified Tax shall be deemed to
      occur upon the earliest of (A) the expiration of any period following which
      no right of appeal or any decision of a court exists, (B) the date upon
      which a closing agreement or similar agreement with respect to a claim for
      Indemnified Taxes is executed by Sellers and the Taxing Authority following
      written approval from Purchaser, such approval not to be unreasonably withheld
      or delayed, and (C) the receipt by Sellers of notice from Purchaser that they
      no
      longer seek to pursue a contest with respect to Indemnified Taxes.

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    (v) Amounts
      payable by Purchaser under this Section
      6.2(c)
      shall be
      allocated among the assets of the Company and the Subsidiaries in accordance
      with Treas. Reg. Section 1.338-6.

     

    (vi) Notwithstanding
      anything in this Section
      6.2(c)
      to the
      contrary, no Make-Whole Amount shall be payable:

     

    (A) to
      the
      extent of any additional federal income Tax payable if the Company failed to
      qualify as a “small business corporation” as defined in section 1361 of the Code
      or failed to have in effect a valid election to be treated as an “S corporation”
for federal income Tax purposes under the Code;

     

    (B) to
      the
      extent of any additional state or local income Tax of any Seller (with respect
      to its income pertaining to that Seller or its shares), if the Company failed
      to
      qualify as a “small business corporation” as defined in provisions of such state
      or local income Tax Law comparable to section 1361 of the Code or failed to
      have
      in effect a valid election to be treated as an “S corporation” for such state or
      local income Tax purposes;

     

    (C) to
      the
      extent of any additional federal, state or local income Tax imposed on any
      of
      the Subsidiaries if such Subsidiary (or its predecessor) failed to be treated
      as
      a “qualified subchapter S subsidiary” for purposes of such Tax;

     

    (D) to
      the
      extent of any Tax imposed by reason of section 1374 of the Code (or
      comparable provisions of state or local law);

     

    (E) without
      duplication of any reductions described in clauses
      (A)
      through
(D),
      to the
      extent the Make-Whole Amount exceeds the Make-Whole Amount that would have
      been
      payable had none of the circumstances described in clauses
      (A)
      through
(D)
      above
      (e.g., the Company not having in effect a valid election to be treated as an
“S
      corporation” or a Subsidiary failing to be treated as a “qualified subchapter S
      subsidiary”) occurred. For purposes of applying this clause
      (E),
      in
      computing the Make-Whole Amount that would have been so payable, it shall be
      assumed that each Seller received the after-tax proceeds from the transactions
      contemplated by this Agreement and the distribution of assets from Sellers
      that
      such Shareholder would have received had none of such circumstances occurred;
      and

     

    (F) to
      the
      extent the Indemnified Tax is attributable to fraud of a Seller.

     

    For
      the
      sake of clarity, there shall be no increase in the Make-Whole Amount by reason
      of a Seller receiving less after-tax proceeds from the Company as a result
      of a
      Tax that was the subject of a reduction described in this Section
      6.2(c).
      The
      reductions in clauses
      (A)
      through
(F)
      are not
      mutually exclusive.

     

    6.3 Non-Competition.
      xiv)
      Except
      as Purchaser may expressly agree in writing, Kaufman agrees that, from and
      after
      the date of this Agreement until five years after the Closing Date, Kaufman
      shall not, and shall not permit any of his post-Closing Affiliates, directly
      or
      indirectly:

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    (i)
      engage in, control, advise, manage, serve as a director, officer, or employee
      of, act as a consultant to, receive any economic benefit from or exert any
      influence upon, any business which conducts activities in the Territory similar
      to those conducted by the Company or any of the Subsidiaries;

     

    (ii)
      solicit, divert or attempt to solicit or divert any party who is, was, or was
      solicited to become, a customer or supplier of the Company or any of the
      Subsidiaries at any time prior to the Closing Date;

     

    (iii)
      employ, solicit for employment or encourage to leave their employment, any
      person who was during the two-year period prior to such employment, solicitation
      or encouragement or is an officer or employee of the Company or any of the
      Subsidiaries;

     

    (iv)
      avail himself of or invest in any business opportunity which is related to
      the
      activities conducted by the Company or any of the Subsidiaries, except as a
      passive investor in the stock of a publicly traded company;

     

    (v)
      disturb, or attempt to disturb, any business relationship between any third
      party and the Company or any of the Subsidiaries; or

     

    (vi)
      make
      any statement to any third party, including the press or media, likely to result
      in adverse publicity for the Company or any of the Subsidiaries.

     

    For
      purposes of this Section
      6.3(a),
      the
      term “directly or indirectly” shall include acts or omissions as proprietor,
      partner, joint venturer, employer, salesman, agent, employee, officer, director,
      lender or consultant of, or owner of any interest in, any Person. 

     

    (b) In
      the
      event of actual or threatened breach of the provisions of this Section 6.3,
      Purchaser, in addition to any other remedies available to it for such breach
      or
      threatened breach, including the recovery of damages, shall be entitled to
      an
      injunction restraining Kaufman from such conduct.

     

    (c) If
      at any
      time any of the provisions of this Section 6.3
      shall be
      determined to be invalid or unenforceable by reason of being vague or
      unreasonable as to duration, area, scope of activity or otherwise, then this
      Section 6.3
      shall be
      considered divisible (with the other provisions to remain in full force and
      effect) and the invalid or unenforceable provisions shall become and be deemed
      to be immediately amended to include only such time, area, scope of activity
      and
      other restrictions, as shall be determined to be reasonable and enforceable
      by
      the court or other body having jurisdiction over the matter, and Kaufman
      expressly agrees that this Section 6.3,
      as so
      amended, shall be valid and binding as though any invalid or unenforceable
      provision had not been included herein.

     

    (d) Nothing
      in this Section
      6.3
      is
      intended to impose any non-compete obligations on any employee of the Company
      or
      any Subsidiary other than Kaufman.

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    6.4 Required
      Consents.
      After
      the Closing, Sellers and Kaufman shall cooperate with Purchaser and use
      commercially reasonable efforts to assist Purchaser in obtaining any Required
      Consents not obtained prior to Closing.

     

    6.5 Employee
      Terminations.
      Subject
      to any individual arrangements with individual employees of the Company as
      disclosed in the Disclosure Memorandum, if any individual employed by the
      Company or any of its Subsidiaries as of the Closing Date is terminated by
      Purchaser during the first twelve (12) months after the Closing Date, for any
      reason except for good cause, such individual shall be entitled to receive
      the
      same severance benefits as such individual would have received as a result
      of
      such termination under the Company’s severance policy as in effect as of the
      date of this Agreement. For the avoidance of doubt, such severance policy
      provides for two (2) weeks of base pay for every full year of employment by
      the Company, subject to a maximum six (6) months of base pay, and continued
      medical and dental coverage during the same period.

     

    6.6 Transition
      Period for Kaufman; Excluded Assets.
      Purchaser shall give Kaufman up to thirty (30) days after the Closing Date
      (the
“Transition
      Period”)
      to
      remove his personal effects from the premises of the Company and its
      Subsidiaries and to arrange for support services previously provided to Kaufman
      by the Company. Notwithstanding the previous sentence, the Transition Period
      for
      the New York apartment (as referred to on Schedule
      4.22(b))
      shall
      extend to July 31, 2007, and the Transition Period for the NetJet lease
      arrangement (as referred to on Schedule
      4.22(b))
      shall
      extend to September 27, 2007. During the Transition Period, the Company and
      its
      Subsidiaries shall provide to Kaufman substantially the same support services
      as
      have been provided to Kaufman during the one-year prior to the date of this
      Agreement. Kaufman shall use commercially reasonable efforts to cause title
      to
      the assets listed on Schedule
      4.22(b)
      to be
      transferred from the Company and its Subsidiaries to Kaufman (or to a Person
      designated by Kaufman) effective on or prior to the expiration of the Transition
      Period. If title to any such asset is not transferred to Kaufman (or to a Person
      designated by Kaufman) prior to the expiration of the Transition Period, then
      Purchaser shall use commercially reasonable efforts to provide Kaufman with
      the
      same use of such asset after the Transition Period in accordance with the terms
      of any Contract related to the use or enjoyment of such asset, provided
      that
      Kaufman shall reimburse Purchaser for all out-of-pocket costs or expenses
      incurred by Purchaser or any of its Affiliates in connection
      therewith.

     

    ARTICLE
      VII

    CLOSING

     

    7.1 The
      Closing.
      The
      Closing, which shall be effective as of the close of business on the Closing
      Date, shall take place at the offices of Mayer, Brown, Rowe & Maw LLP, 1675
      Broadway, New York, New York 10019, on the date of this Agreement, concurrently
      with the execution hereof.

     

    7.2 Sellers’
      Closing Deliveries.
      At the
      Closing, Sellers and Kaufman shall deliver or cause to be delivered to Purchaser
      the following:

     

    (a) one
      or
      more stock certificates representing all of the Shares, endorsed in blank or
      accompanied by duly executed stock powers;

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    (b) pay-off
      letters in form and substance satisfactory to Purchaser (collectively, the
      “Pay-Off
      Letters”),
      duly
      executed by the lenders of all outstanding indebtedness of the Company and
      the
      Subsidiaries as of the date of this Agreement, other than the Italian
      Indebtedness, which set forth each such lender’s agreement that, upon payment of
      the amount specified in the applicable Pay-Off Letter, (i) the Company and
      its Subsidiaries shall have no further liabilities or obligations with respect
      to the indebtedness to which such Pay-Off Letter relates and (ii) all
      security interests (if any) in collateral securing such indebtedness shall
      be
      released by such lender; 

     

    (c) a
      letter,
      in form and substance satisfactory to Purchaser, duly executed by the lender
      of
      the Italian Indebtedness, that sets forth the aggregate amount of Italian
      Indebtedness outstanding as of the Closing Date;

     

    (d) a
      letter
      of resignation from each officer and member of the board of directors of the
      Company and the Subsidiaries resigning from such position as officer or director
      (but not employment, other than Kaufman) effective as of the
      Closing;

     

    (e) a
      copy of
      the agreement of trust for each Seller, certified by the trustee thereof that
      such copy is a true, accurate and complete copy of such agreement of trust
      as in
      effect as of the date this Agreement; 

     

    (f) certificates
      dated as of a recent date from (i) the Secretary of State of Delaware
      listing all charter documents of the Company then on file and certifying that
      the Company is in good standing under the Laws of Delaware and has paid all
      its
      franchise taxes, and (ii) the Treasurer of New Jersey listing all charter
      documents of the Principal Subsidiaries, respectively, then on file and
      certifying that the Principal Subsidiaries, respectively, are in good standing
      under the Laws of New Jersey and have filed all requisite annual reports;
      and

     

    (g) such
      other documents and instruments as may be required by any other provision of
      this Agreement or any Related Agreement or as may reasonably be required to
      consummate the transactions contemplated by this Agreement and the Related
      Agreements.

     

    7.3 Purchaser’s
      Closing Deliveries.
      At the
      Closing, Purchaser shall deliver or cause to be delivered to or on behalf of
      Sellers the following:

     

    (a) the
      Closing Sellers Amount, pursuant to the payment instructions set forth in
Schedule
      2.2(a);

     

    (b) the
      Closing Debt Repayment Amount, pursuant to the payment instructions set forth
      in
      the Pay-Off Letters;

     

    (c) a
      certificate of the secretary or an assistant secretary of Purchaser certifying
      resolutions of the board of directors of Purchaser, approving and authorizing
      the execution, delivery and performance by Purchaser of this Agreement and
      its
      Related Agreements and the consummation by Purchaser of the transactions
      contemplated hereby and thereby (together with an incumbency and signature
      certificate regarding the officer(s) signing on behalf of Purchaser);
      and

     

    
      
         

      

      
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    (d) such
      other documents and instruments as may be required by any other provision of
      this Agreement or any Related Agreement or as may reasonably be required to
      consummate the transactions contemplated by this Agreement and the Related
      Agreements.

     

    ARTICLE
      VIII

    INDEMNIFICATION

     

    8.1 Indemnification
      by Kaufman.
      From
      and after the Closing Date and subject to the provisions of this Article
      VIII
      (including the limitations set forth in Section
      8.4),
      Kaufman agrees to indemnify, hold harmless and defend each Purchaser Indemnified
      Party from and against any and all claims and/or liabilities, damages,
      penalties, Judgments, assessments, fines, losses, costs and expenses (including
      reasonable attorneys’ fees, interest expense (including pre-judgment interest)
      and expenses and costs of investigation) (collectively, “Damages”)
      arising out of or relating to:

     

    (a) any
      inaccuracy or breach of any representation or warranty of Kaufman contained
      in
      this Agreement; 

     

    (b) any
      fine,
      penalty or fee with respect to any Permit of the Company or any Subsidiary
      that
      is specified in a written fine or penalty notice received by the Company or
      any
      Subsidiary between January 1, 2007 and the Closing Date; or

     

    (c) any
      breach of any covenant or agreement of Sellers or Kaufman contained in this
      Agreement.

     

    8.2 Indemnification
      by Purchaser.
      From
      and after the Closing Date and subject to the provisions of this Article
      VIII,
      Purchaser agrees to, and agrees to cause the Company to, indemnify, hold
      harmless and defend each Seller Indemnified Party from and against any and
      all
      claims and/or Damages arising out of or relating:

     

    (a) any
      inaccuracy or breach of any representation or warranty of Purchaser contained
      in
      this Agreement; or

     

    (b) any
      breach of any covenant or agreement of Purchaser contained in this
      Agreement.

     

    8.3 Indemnification
      Process.
      The
      party or parties making a claim for indemnification under this Article
      VIII
      shall
      be, for the purposes of this Agreement, referred to as the “Indemnified
      Party”
and
      the
      party or parties against whom such claims are asserted under this Article
      VIII
      shall
      be, for the purposes of this Agreement, referred to as the “Indemnifying
      Party.”
All
      claims by any Indemnified Party under this Article
      VIII
      shall be
      asserted and resolved as follows:

     

    (a) In
      the
      event that (i) any claim, demand or Proceeding is asserted or instituted by
      any
      Person other than the parties to this Agreement or their Affiliates which could
      give rise to Damages for which an Indemnifying Party could be liable to an
      Indemnified Party under this Agreement (such claim, demand or Proceeding, a
      “Third
      Party Claim”)
      or
      (ii) any Indemnified Party under this Agreement shall have a claim to be
      indemnified by any Indemnifying Party under this Agreement which does not
      involve a Third Party Claim (such claim, a “Direct
      Claim”),
      the
      Indemnified Party shall with reasonable promptness send to the Indemnifying
      Party a written notice specifying the nature of such claim, demand or Proceeding
      and the amount or estimated amount of such claim, demand or Proceeding (which
      amount or estimated amount shall not be conclusive of the final amount, if
      any,
      of such claim, demand or Proceeding) (a “Claim
      Notice”);
      provided,
      however,
      that a
      delay in notifying the Indemnifying Party shall not relieve the Indemnifying
      Party of its obligations under this Agreement except to the extent that (and
      only to the extent that) such failure shall have caused the Damages for which
      the Indemnifying Party is obligated to be greater than such Damages would have
      been had the Indemnified Party given the Indemnifying Party proper
      notice.

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

    (b) In
      the
      event of a Third Party Claim, the Indemnifying Party shall control the defense
      of, and shall be entitled to appoint counsel of the Indemnifying Party’s choice
      at the expense of the Indemnifying Party to represent the Indemnified Party
      and
      any others the Indemnifying Party may reasonably designate in connection with,
      such claim, demand or Proceeding (in which case the Indemnifying Party shall
      not
      thereafter be responsible for the fees and expenses of any separate counsel
      retained by any Indemnified Party except as set forth below); provided,
      however,
      that
      such counsel is reasonably acceptable to the Indemnified Party. Notwithstanding
      an Indemnifying Party’s election to appoint counsel to represent an Indemnified
      Party in connection with a Third Party Claim, an Indemnified Party shall have
      the right to employ separate counsel, and the Indemnifying Party shall bear
      the
      reasonable fees, costs and expenses of such separate counsel if (i) the use
      of
      counsel selected by the Indemnifying Party to represent the Indemnified Party
      would present such counsel with a conflict of interest, (ii) the
      Indemnified Party shall reasonably conclude, based upon advice of counsel,
      that
      (A) there is a conflict of interest between the Indemnifying Party and the
      Indemnified Party in the conduct of the defense of such Third Party Claim or
      (B) there are specific defenses available to the Indemnified Party which
      are different from or additional to those available to the Indemnifying Party
      and which could be materially adverse to the Indemnifying Party or
      (iii) the Indemnifying Party shall not have employed counsel to represent
      the Indemnified Party within a reasonable time after notice of the institution
      of such Third Party Claim; provided,
      however,
      that
      the Indemnifying Party shall continue to control the defense of such Third
      Party
      Claim. If requested by the Indemnifying Party, the Indemnified Party agrees
      to
      cooperate with the Indemnifying Party and its counsel in contesting any claim,
      demand or Proceeding which the Indemnifying Party defends or, if appropriate
      and
      related to the claim, demand or Proceeding in question, in making any
      counterclaim against the Person asserting the Third Party Claim or any
      cross-complaint against any Person. No Third Party Claim may be settled or
      compromised (1) by the Indemnified Party without the prior written consent
      of the Indemnifying Party or (2) to the extent the Indemnified Party would
      not be entitled to indemnification with respect to such Third Party Claim under
      this Article
      VIII,
      by the
      Indemnifying Party without the prior written consent of the Indemnified Party.
      In the event any party settles or compromises or consents to the entry of any
      Judgment with respect to any Third Party Claim without the prior written consent
      of the other parties, such party shall be deemed to have waived all rights
      against the other parties for indemnification under this Article
      VIII.
      Notwithstanding anything in this Section 8.3(b)
      to the
      contrary, the Indemnified Party shall have the right to employ separate counsel
      at the Indemnified Party’s expense and to control the defense of any Third Party
      Claim that relates to pollution or the protection of the environment, including
      any cleanup, removal, treatment or remediation of hazardous substances, or
      that
      could reasonably be expected, if adversely decided against the Indemnified
      Party, to materially adversely affect any of the Indemnified Party’s other
      business operations.

     

    (c) In
      the
      event of a Direct Claim, the Indemnifying Party shall notify the Indemnified
      Party within 30 Business Days of receipt of a Claim Notice whether or not the
      Indemnifying Party disputes such claim. If the Indemnifying Party gives timely
      notice disputing any claim (a “Counter
      Notice”),
      the
      Indemnifying Party shall promptly pay to Indemnified Party all non-disputed
      amounts and the parties shall attempt in good faith to agree on resolution
      of
      the disputed amount. Any amount mutually agreed upon or awarded to the
      Indemnified Party under a final and non-appealable Judgment shall be paid by
      the
      Indemnifying Party within five Business Days following execution of such
      agreement or the entering of such Judgment, as applicable, subject to the
      limitations set forth in Section
      8.4.
      If no
      Counter Notice is received by the Indemnified Party within the 30 Business
      Days,
      then the dollar amount of the Claim as set forth in the original notice shall
      be
      deemed established for purposes of this Agreement and, at the end of such
      30-Business Day period, the Indemnifying Party shall make a payment to the
      Indemnified Party in the dollar amount claimed in the Indemnified Party’s
      notice, subject to the limitations set forth in Section
      8.4.

     

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    (d) From
      and
      after the delivery of a Claim Notice under this Agreement, at the reasonable
      request of the Indemnifying Party, each Indemnified Party shall grant the
      Indemnifying Party and its representatives all reasonable access to the books,
      records and properties of such Indemnified Party to the extent reasonably
      related to the matters to which the Claim Notice relates. All such access shall
      be granted during normal business hours and shall be granted under conditions
      that will not unreasonably interfere with the business and operations of such
      Indemnified Party. The Indemnifying Party shall not, and shall require that
      its
      representatives do not, use (except in connection with such Claim Notice) or
      disclose to any third Person other than the Indemnifying Party’s representatives
      (except as may be required by applicable Law or in connection with a Claim,
      in
      which case the Indemnifying Party will use its commercially reasonable efforts
      to obtain an appropriate protective order) any information obtained pursuant
      to
      this Section
      8.3(d)
      which is
      designated as confidential by an Indemnified Party.

     

    8.4 Limitations
      on Indemnity Payments.
      xv)
      No claim
      for indemnification under Section 8.1(a)
      may be
      made by the Purchaser Indemnified Parties, and no payment in respect of a claim
      for indemnification shall be required from Kaufman, unless and only to the
      extent that the aggregate amount of Damages against which the Purchaser
      Indemnified Parties are entitled to be indemnified exceeds $500,000 (the
“Basket”);
      provided,
      however,
      that
      the Basket shall not apply to, and the Purchaser Indemnified Parties shall
      be
      entitled to indemnification without regard to the Basket with respect to,
      (i) claims for fraud or fraudulent misrepresentation and (ii) claims
      for breach of any representation or warranty made in Section 3.1,
      3.2,
      3.3,
      3.6,
      4.2,
      4.3,
      4.9(a)
      (other
      than for Liens arising out of claims of vendors or tradesmen in the ordinary
      course of business), 4.14,
      4.22
      or
4.23
      (collectively, the “Designated
      Representations”)

     

    (b) The
      maximum aggregate amount of Damages against which the Purchaser Indemnified
      Parties shall be entitled to be indemnified under Section
      8.1(a)
      with
      respect to all claims thereunder shall be equal to $5,000,000; provided,
      however,
      that
      the foregoing indemnification cap shall not apply to, and the Purchaser
      Indemnified Parties shall be entitled to indemnification without regard to
      the
      foregoing indemnification cap with respect to, (i) claims for fraud or
      fraudulent misrepresentation and (ii) claims for breach of any Designated
      Representation.

     

    (c) The
      right
      to indemnification pursuant to this Article
      VIII
      shall be
      the exclusive remedy for any and all claims arising under this Agreement
      following the Closing, other than claims for fraud or fraudulent
      misrepresentation. Any payment required to be made to a Purchaser Indemnified
      Party under Section 8.1
      shall be
      made (i) first, by means of a dollar-for-dollar reduction to the Deferred
      Payment Amount to be paid by Purchaser to Sellers on the two-year anniversary
      of
      the date of the Agreement and (ii) second, in the case of any payment with
      respect to which the cap set forth in Section
      8.4(b)
      does not
      apply or the Deferred Payment Amount has been either reduced to zero pursuant
      to
clause
      (i)
      above or
      already paid to Sellers, by Kaufman.

     

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

    8.5 Survival.
      The
      representations and warranties of Kaufman and Purchaser contained in this
      Agreement shall survive the Closing for a period of two years after the Closing
      Date; provided,
      however,
      that
      the representation and warranties contained in Sections
      3.1
      and
4.2(a)
      shall
      survive for six years after the Closing Date. The covenants of Sellers, Kaufman
      and Purchaser contained in this Agreement shall survive the Closing for the
      period specified therein, or if no survival period is specified therein for
      a
      period of two years after the Closing Date. Any and all claims and causes of
      action for indemnification under this Article VIII
      arising
      out of the inaccuracy or breach of any representation or warranty of Kaufman
      or
      Purchaser, or the breach of any covenant by Sellers, Kaufman or Purchaser,
      must
      be made prior to the termination of the applicable survival period; it being
      understood that in the event notice of any claim for indemnification under
      Section 8.1
      or
8.2
      shall
      have been given within the applicable survival period, the representations,
      warranties and covenants that are the subject of such indemnification claim
      shall survive until such time as such claim is finally resolved.

     

    8.6 Characterization
      of Indemnification Payments.
      Purchaser and Sellers agree to treat any payment made under this Article
      VIII
      as an
      adjustment to the Purchase Price. If, contrary to the intent of Purchaser and
      Sellers as expressed in the preceding sentence, any payment made pursuant to
      this Article
      VIII
      is
      treated as taxable income of an Indemnified Party, then the Indemnifying Party
      shall indemnify and hold harmless the Indemnified Party from any liability
      for
      Taxes attributable to the receipt of such payment.

     

    ARTICLE
      IX

    GENERAL
      PROVISIONS

     

    9.1 Expenses.
      Each
      party to this Agreement shall pay all fees and expenses incurred by it in
      connection with this Agreement and the transactions contemplated by this
      Agreement. The parties to this Agreement agree that all applicable excise,
      sales, transfer, documentary, filing, recordation and other similar Taxes,
      levies, fees and charges, if any (including all real estate transfer Taxes
      and
      conveyance and recording fees, if any), that may be imposed upon, or payable
      or
      collectible or incurred in connection with, this Agreement and the transactions
      contemplated by this Agreement shall be borne by the party on which such Taxes,
      levies, fees or charges are imposed by operation of Law. Each party to this
      Agreement agrees to file all necessary documentation (including all Tax Returns)
      with respect to such Taxes in a timely manner.

     

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

    9.2 Further
      Assurances.
      From
      time to time after the Closing and without further consideration, each of the
      parties, upon the request of the other party and at such other party’s expense,
      shall execute and deliver such documents and instruments as such other party
      may
      reasonably request in order to consummate more effectively the terms of this
      Agreement (including the purchase and sale of the Shares as contemplated by
      this
      Agreement and the vesting in Purchaser of title to the Shares transferred under
      this Agreement).

     

    9.3 Amendment.
      This
      Agreement may not be amended except by an instrument in writing signed by
      Purchaser, Sellers and Kaufman. Notwithstanding the foregoing, Purchaser may
      assign its rights to purchase the Shares and its obligations under this
      Agreement without Sellers’ or Kaufman’s consent to one or more direct or
      indirect majority-owned subsidiaries of Purchaser; provided,
      however,
      that no
      such assignment shall relieve Purchaser of its obligations under this
      Agreement.

     

    9.4 Waiver.
      Either
      Purchaser (on the one hand) or Sellers and Kaufman (on the other hand) may
      (a)
      extend the time for the performance of any of the obligations or other acts
      of
      the other, (b) waive any inaccuracies in the representations and warranties
      of
      the other contained in this Agreement or in any document delivered by the other
      pursuant to this Agreement or (c) waive compliance with any of the agreements,
      or satisfaction of any of the conditions, contained in this Agreement by the
      other. Any agreement on the part of a party to this Agreement to any such
      extension or waiver shall be valid only if set forth in an instrument in writing
      signed by such party.

     

    9.5 Notices.
      Any
      notices or other communications required or permitted under, or otherwise in
      connection with, this Agreement shall be in writing and shall be deemed to
      have
      been duly given when delivered in person or upon confirmation of receipt when
      transmitted by facsimile transmission or upon receipt after dispatch by
      registered or certified mail, postage prepaid, addressed as
      follows:

     

    
      	
              If
                to Sellers:

            
	 	
               

              Alex
                Kaufman

              0715
                Willoughby Way

              Aspen,
                Colorado 81612

              Facsimile:
                970.920.3248

            
	 	 
	
              With
                a copy to:

            
	 	
               

              Norris
                McLaughlin & Marcus, P.C.

              P.O.
                Box 1018

              Somerville,
                New Jersey 08876

              Attention: G.
                Robert Marcus

              Facsimile: 908.722.0755

            
	 	 

    

     

    
      
         

      

      
        33

        
          

        

      

      
         

      

       

      
        	
                
                  If
                    to Kaufman:

                

              
	 	
                 

                
                  Alex
                    Kaufman

                  0715
                    Willoughby Way

                  Aspen,
                    Colorado 81612

                  Facsimile:
                    970.920.3248 

                

              
	 	 
	
                With
                  a copy to:

              
	 	
                
                  Norris
                    McLaughlin & Marcus, P.C.

                  P.O.
                    Box 1018

                  Somerville,
                    New Jersey 08876

                  Attention: G.
                    Robert Marcus

                  Facsimile: 908.722.0755

                

              

      

      
        	
                           

                        

                

                If
                  to Purchaser or the Company to:

              
            
            	 	
                 

                
                  Chemtura
                    Corporation

                  199
                    Benson Road

                  Middlebury,
                    Connecticut 06749

                  Attention: Lynn
                    A. Schefsky

                  Senior
                    Vice President and General Counsel

                  Facsimile: 203.573.4301

                

              
	 	 
	
                
                  With
                    a copy to:

                

              
	 	
                
                  Mayer,
                    Brown, Rowe & Maw LLP

                  71
                    South Wacker Drive

                  Chicago,
                    Illinois 60606

                  Attention: Scott
                    J. Davis

                  D.
                    Michael Murray

                  Facsimile: 312.701.7711

                

              

 

    
    or
      such
      other address as the Person to whom notice is to be given has furnished in
      writing to the other party. A notice of change in address shall not be deemed
      to
      have been given until received by the addressee.

     

    9.6 Headings
      and Schedules.
      The
      descriptive headings of the Articles and Sections of this Agreement are inserted
      for convenience only and do not constitute a part of this Agreement. The
      disclosure or inclusion of any matter or item on any Schedule of the Disclosure
      Memorandum shall not be deemed an acknowledgment or admission that any such
      matter or item is required to be disclosed or is material for purposes of the
      representations and warranties set forth in this Agreement. A representation
      or
      warranty shall not be deemed to be qualified by any item disclosed or described
      in any schedule of the Disclosure Memorandum (other than the schedule
      corresponding to such representation or warranty) unless it is reasonably
      apparent (by cross-reference or otherwise) that such item is also applicable
      to
      such other representation or warranty.

     

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

    9.7 Applicable
      Law.
      THIS
      AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
      LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS
      OF
      LAWS THEREOF OR OF ANY OTHER JURISDICTION, AND THE OBLIGATIONS, RIGHTS AND
      REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE
      WITH SUCH LAWS. 

     

    9.8 No
      Third Party Rights.
      Except
      as specifically provided in Article
      VIII,
      this
      Agreement is intended to be solely for the benefit of the parties to this
      Agreement and is not intended to confer any benefits upon, or create any rights
      in favor of, any Person other than the parties to this Agreement.

     

    9.9 Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute a single
      instrument.

     

    9.10 Severability.
      If any
      provision of this Agreement shall be held invalid, illegal or unenforceable,
      the
      validity, legality or enforceability of the other provisions of this Agreement
      shall not be affected and there shall be deemed substituted for the provision
      or
      provisions at issue a valid, legal and enforceable provision as similar as
      possible to the provision at issue.

     

    9.11 Confidentiality
      Agreement; Entire Agreement.
      Effective upon the execution of this Agreement, the Confidentiality Agreement
      shall automatically terminate without any further action by the parties hereto.
      This Agreement (including the documents and instruments referred to in this
      Agreement) sets forth the entire understanding and agreement among the parties
      as to the matters covered in this Agreement and supersedes and replaces any
      prior understanding, agreement or statement of intent, in each case, written
      or
      oral, of any and every nature with respect to such understanding, agreement
      or
      statement including the Confidentiality Agreement. 

     

    9.12 Consent
      to Jurisdiction; Waiver of Jury Trial.
      Each of
      the parties hereto (a) consents to submit itself to the personal
      jurisdiction of any federal court sitting in the State of New York or any New
      York state court, in either case, located in New York, New York, if any dispute
      arises out of this Agreement or any of the transactions contemplated hereby,
      (b)
      agrees that it will not attempt to deny or defeat the jurisdiction of such
      courts by motion or other request for leave from any such court, (c) waives
      any
      claim that such proceedings have been brought in an inconvenient forum, and
      (d)
      agrees that it will not bring any action relating to this Agreement in any
      court
      other than a federal court sitting in the State of New York or a New York state
      court, in either case, located in New York, New York. THE PARTIES HEREBY WAIVE
      ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO ANY CLAIMS MADE IN
      CONNECTION WITH THIS AGREEMENT.

     

    9.13 Fair
      Construction.
      This
      Agreement shall be deemed to be the joint work product of Purchaser, Sellers
      and
      Kaufman without regard to the identity of the draftsperson, and any rule of
      construction that a document shall be interpreted or construed against the
      drafting party shall not be applicable.

     

    *
      * * * * * * *

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

    

    Each
      of
      the parties to this Agreement has caused this Agreement to be executed as of
      the
      day and year first above written.

     

    SELLERS:

    

    ALEX
      KAUFMAN REVOCABLE LIVING

    TRUST
      DATED OCTOBER 20, 2000

    

    

    By:
      ________________________

    Name: Alex
      Kaufman

    Title: Trustee

    

    

    BERNICE
      KAUFMAN AND IRENE KAUFMAN, CO-TRUSTEES UNDER AGREEMENT OF TRUST DATED AUGUST
      2,
      1996, FOR BENEFIT OF MARK KAUFMAN

    

    

    By: 
      ________________________

    Name: Bernice
      Kaufman

    Title: Co-Trustee

    

    

    By: 
      ________________________

    Name: Irene
      Kaufman

    Title: Co-Trustee

    

    

    BERNICE
      KAUFMAN AND IRENE KAUFMAN, CO-TRUSTEES UNDER AGREEMENT OF TRUST DATED AUGUST
      2,
      1996, FOR BENEFIT OF IRENE KAUFMAN

    

    

    By: 
      ________________________

    Name: Bernice
      Kaufman

    Title: Co-Trustee

    

    

    By: 
      ________________________

    Name: Irene
      Kaufman

    Title: Co-Trustee

    

    

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

    BERNICE
      KAUFMAN AND IRENE KAUFMAN, CO-TRUSTEES UNDER AGREEMENT OF 

    TRUST
      DATED AUGUST 2, 1996, FOR BENEFIT OF BERNICE KAUFMAN

    

    

    By: 
      ________________________

    Name: Bernice
      Kaufman

    Title: Co-Trustee

    

    

    By: 
      ________________________

    Name: Irene
      Kaufman

    Title: Co-Trustee

     

    

    KAUFMAN:

    

    ALEX
      KAUFMAN

    

     ________________________

    

    

    PURCHASER:

    

    CHEMTURA
      CORPORATION

    

    

    By: 
      ________________________

    Name: 
      ________________________

    Title: 
      ________________________

    

    
      
         

      

        37SECURITIES PURCHASE AGREEMENT

      This Securities Purchase Agreement (this "Agreement") is dated as of
January 30, 2007, among Drinks Americas Holdings, Ltd., a Delaware corporation
(the "Company"), and each purchaser identified on the signature pages hereto
(each, including its successors and assigns, a "Purchaser" and collectively the
"Purchasers").

      WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.

      NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:

                                   ARTICLE I.
                                   DEFINITIONS

      1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:

            "Action" shall have the meaning ascribed to such term in Section
      3.1(j).

            "Affiliate" means any Person that, directly or indirectly through
      one or more intermediaries, controls or is controlled by or is under
      common control with a Person as such terms are used in and construed under
      Rule 144 under the Securities Act. With respect to a Purchaser, any
      investment fund or managed account that is managed on a discretionary
      basis by the same investment manager as such Purchaser will be deemed to
      be an Affiliate of such Purchaser.

            "Business Day" means any day except Saturday, Sunday, any day which
      shall be a federal legal holiday in the United States or any day on which
      banking institutions in the State of New York are authorized or required
      by law or other governmental action to close.

            "Closing" means the closing of the purchase and sale of the
      Securities pursuant to Section 2.1.

            "Closing Date" means the Trading Day when all of the Transaction
      Documents have been executed and delivered by the applicable parties
      thereto, and all conditions precedent to (i) the Purchasers' obligations
      to pay the Subscription Amount and (ii) the Company's obligations to
      deliver the Securities have been satisfied or waived.

            "Commission" means the Securities and Exchange Commission.

                                       1
<PAGE>

            "Common Stock" means the common stock of the Company, par value
      $0.001 per share, and any other class of securities into which such
      securities may hereafter be reclassified or changed into.

            "Common Stock Equivalents" means any securities of the Company or
      the Subsidiaries which would entitle the holder thereof to acquire at any
      time Common Stock, including, without limitation, any debt, preferred
      stock, rights, options, warrants or other instrument that is at any time
      convertible into or exercisable or exchangeable for, or otherwise entitles
      the holder thereof to receive, Common Stock.

            "Company Counsel" means Eaton & Van Winkle LLP, with offices located
      at 3 Park Avenue, 16th Floor, New York, New York 10016.

            "Disclosure Schedules" means the Disclosure Schedules of the Company
      delivered concurrently herewith.

            "Effective Date" means the date that the initial Registration
      Statement filed by the Company pursuant to the Registration Rights
      Agreement is first declared effective by the Commission.

            "Escrow Agent" means Signature Bank, a New York State chartered
      bank, with offices located at 261 Madison Avenue, New York, New York
      10016.

            "Escrow Deposit Agreement" means the Escrow Deposit Agreement, dated
      as of January 11, 2007, by and among the Company, Midtown and the Escrow
      Agent pursuant to which the Purchasers shall deposit Subscription Amounts
      with the Escrow Agent to be held by the Escrow Agent in a non-interest
      bearing account to be applied to the transactions contemplated hereunder,
      substantially in the Form of Exhibit D attached hereto.

             "Evaluation Date" shall have the meaning ascribed to such term in
      Section 3.1(r).

            "Exchange Act" means the Securities Exchange Act of 1934, as
      amended, and the rules and regulations promulgated thereunder.

            "Exempt Issuance" means the issuance of (a) shares of Common Stock
      or options to employees, officers or directors of the Company pursuant to
      any stock or option plan duly adopted for such purpose, by a majority of
      the non-employee members of the Board of Directors of the Company or a
      majority of the members of a committee of non-employee directors
      established, (b) securities upon the exercise or exchange of or conversion
      of any Securities issued hereunder and/or other securities exercisable or
      exchangeable for or convertible into shares of Common Stock issued and
      outstanding on the date of this Agreement, provided that such securities
      have not been amended since the date of this Agreement to increase the
      number of such securities or to decrease the exercise, exchange or
      conversion price of such securities, (c) securities issued pursuant to
      acquisitions or strategic transactions approved by a majority of the
      disinterested directors of the Company, provided that any such issuance
      shall only be to a Person which is, itself or through its subsidiaries, an
      operating company in a business synergistic with the business of the
      Company and in which the Company receives benefits in addition to the
      investment of funds, but shall not include a transaction in which the
      Company is issuing securities primarily for the purpose of raising capital
      or to an entity whose primary business is investing in securities, (d) for
      purposes of Sections 4.14 only, issuances of Common Stock and Common Stock
      Equivalents to officers, directors and 10% or more shareholders of the
      Company in exchange for new cash consideration, provided that such
      issuances shall have no registration rights of any kind (e) the Placement
      Agent Warrant and the Placement Agent Shares, (f) for purposes of Sections
      4.14 only, up to an amount of Common Stock and Common Stock Equivalents
      equal to the difference between $10,000,000 and the aggregate Subscription
      Amounts hereunder in exchange for new cash consideration, provided that
      such issuances shall have no registration rights of any kind, (g) up to,
      in the aggregate, 41,666 shares of Common Stock (subject to adjustment for
      reverse and forward stock splits and the like) paid for in full as of the
      date hereof but not yet issued and (h) up to, in the aggregate, 560,000
      shares of Common Stock (subject to adjustment for reverse and forward
      stock splits and the like) which may be issued in connection with the
      acquisition of the license of the Rheingold name and certain related
      assets.

                                       2
<PAGE>

             "FWS" means Feldman Weinstein & Smith LLP with offices located at
      420 Lexington Avenue, Suite 2620, New York, New York 10170-0002.

            "GAAP" shall have the meaning ascribed to such term in Section
      3.1(h).

            "Indebtedness" shall have the meaning ascribed to such term in
      Section 3.1(aa).

             "Intellectual Property Rights" shall have the meaning ascribed to
      such term in Section 3.1(o).

            "Legend Removal Date" shall have the meaning ascribed to such term
      in Section 4.1(c).

            "Liens" means a lien, charge, security interest, encumbrance, right
      of first refusal, preemptive right or other restriction.

            "Lock-up Agreement" means the Lock-up Agreement, dated as of the
      date hereof, in the form of Exhibit E attached hereto.

            "Material Adverse Effect" shall have the meaning assigned to such
      term in Section 3.1(b).

            "Material Permits" shall have the meaning ascribed to such term in
      Section 3.1(m).

            "Midtown" shall mean Midtown Partners & Co., LLC, a Florida limited
      liability company.

            "Per Share Purchase Price" equals $1.80, subject to adjustment for
      reverse and forward stock splits, stock dividends, stock combinations and
      other similar transactions of the Common Stock that occur after the date
      of this Agreement.

                                       3
<PAGE>

            "Person" means an individual or corporation, partnership, trust,
      incorporated or unincorporated association, joint venture, limited
      liability company, joint stock company, government (or an agency or
      subdivision thereof) or other entity of any kind.

            "Placement Agent Shares" means the aggregate number of shares of
      Common Stock underlying the Placement Agent Warrants.

            "Placement Agent Warrants" shall have the meaning ascribed to such
      term in Section 2.2(a)(v).

            "Proceeding" means an action, claim, suit, investigation or
      proceeding (including, without limitation, an investigation or partial
      proceeding, such as a deposition), whether commenced or threatened.

            "Prohibition Period" shall have the meaning ascribed to such term in
      Section 4.14(a).

            "Purchaser Party" shall have the meaning ascribed to such term in
      Section 4.9.

            "Registration Rights Agreement" means the Registration Rights
      Agreement, dated the date hereof, among the Company and the Purchasers, in
      the form of Exhibit A attached hereto.

            "Registration Statement" means a registration statement meeting the
      requirements set forth in the Registration Rights Agreement and covering
      the resale by the Purchasers of the Shares and the Warrant Shares.

            "Required Approvals" shall have the meaning ascribed to such term in
      Section 3.1(e).

            "Rule 144" means Rule 144 promulgated by the Commission pursuant to
      the Securities Act, as such Rule may be amended from time to time, or any
      similar rule or regulation hereafter adopted by the Commission having
      substantially the same effect as such Rule.

            "SEC Reports" shall have the meaning ascribed to such term in
      Section 3.1(h).

            "Securities" means the Shares, the Warrants, the Warrant Shares, the
      Placement Agent Warrant and the Placement Agent Shares.

            "Securities Act" means the Securities Act of 1933, as amended, and
      the rules and regulations promulgated thereunder.

                                       4
<PAGE>

            "Shares" means the shares of Common Stock issued or issuable to each
      Purchaser pursuant to this Agreement.

            "Short Sales" means all "short sales" as defined in Rule 200 of
      Regulation SHO under the Exchange Act (but shall not be deemed to include
      the location and/or reservation of borrowable shares of Common Stock).

             "Subscription Amount" means, as to each Purchaser, the aggregate
      amount to be paid for Shares and Warrants purchased hereunder as specified
      below such Purchaser's name on the signature page of this Agreement and
      next to the heading "Subscription Amount", in United States dollars and in
      immediately available funds.

            "Subsidiary" means any subsidiary of the Company as set forth on
      Schedule 3.1(a).

             "Trading Day" means a day on which the Common Stock is traded on a
      Trading Market.

            "Trading Market" means the following markets or exchanges on which
      the Common Stock is listed or quoted for trading on the date in question:
      the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global
      Market, the Nasdaq Global Select Market, the New York Stock Exchange or
      the OTC Bulletin Board.

            "Transaction Documents" means this Agreement, the Warrants, the
      Registration Rights Agreement, the Escrow Deposit Agreement and any other
      documents or agreements executed in connection with the transactions
      contemplated hereunder.

            "Transfer Agent" means National Stock Transfer, Inc., with a mailing
      address of 1512 South 1100 East, Suite B, Salt Lake City, UT 84105-2425,
      and a facsimile number of (801) 466-6877, and any successor transfer agent
      of the Company.

            "VWAP" means, for any date, the price determined by the first of the
      following clauses that applies: (a) if the Common Stock is then listed or
      quoted on a Trading Market, the daily volume weighted average price of the
      Common Stock for such date (or the nearest preceding date) on the Trading
      Market on which the Common Stock is then listed or quoted for trading as
      reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New
      York City time) to 4:02 p.m. (New York City time); (b) if the OTC Bulletin
      Board is not a Trading Market, the volume weighted average price of the
      Common Stock for such date (or the nearest preceding date) on the OTC
      Bulletin Board; (c) if the Common Stock is not then quoted for trading on
      the OTC Bulletin Board and if prices for the Common Stock are then
      reported in the "Pink Sheets" published by Pink Sheets, LLC (or a similar
      organization or agency succeeding to its functions of reporting prices),
      the most recent bid price per share of the Common Stock so reported; or
      (d) in all other cases, the fair market value of a share of Common Stock
      as determined by an independent appraiser selected in good faith by the
      Holder and reasonably acceptable to the Company, the fees and expenses of
      which shall be paid by the Company.

                                       5
<PAGE>

            "Warrants" means, collectively, the Common Stock purchase warrants
      delivered to the Purchasers at the Closing in accordance with Section
      2.2(a) hereof, which Warrants shall be first exercisable on the six month
      anniversary of the Issue Date and shall have a term of exercise equal to 5
      years, in the form of Exhibit C attached hereto.

            "Warrant Shares" means the shares of Common Stock issuable upon
      exercise of the Warrants.

                                   ARTICLE II.
                                PURCHASE AND SALE

      2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company agrees to sell,
and each Purchaser, severally and not jointly, agrees to purchase, an aggregate
of, up to $8,000,000 of Shares and Warrants. Each Purchaser shall deliver to the
Escrow Agent, via wire transfer or a certified check, immediately available
funds equal to its Subscription Amount and the Company shall deliver to each
Purchaser its respective Shares and a Warrant as determined pursuant to Section
2.2(a), and the Company and each Purchaser shall deliver the other items set
forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the
conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the
offices of FWS or such other location as the parties shall mutually agree.

      2.2   Deliveries.

            (a) On or prior to the Closing Date, the Company shall deliver or
      cause to be delivered to each Purchaser the following:

                  (i) this Agreement duly executed by the Company;

                  (ii) a legal opinion of Company Counsel, in the form of
            Exhibit B attached hereto;

                  (iii) a copy of the irrevocable instructions to the Transfer
            Agent instructing the Transfer Agent to deliver, on an expedited
            basis, a certificate evidencing a number of Shares equal to such
            Purchaser's Subscription Amount divided by the Per Share Purchase
            Price, registered in the name of such Purchaser;

                  (iv) a Warrant registered in the name of such Purchaser to
            purchase up to a number of shares of Common Stock equal to 85% of
            such Purchaser's Shares, with an exercise price equal to $3.00,
            subject to adjustment therein;

                  (v) a warrant(s) registered in the name of Midtown Partners &
            Co., LLC, or its designees, to purchase up to a number of shares of
            Common Stock equal to 10% of the Shares issued hereunder, subject to
            adjustment therein, with an exercise price equal to $3.00, subject
            to adjustment therein, on substantially the same terms as the
            Warrants provided that Section 3(b) of the Warrant shall not be
            available in such warrants (such Warrant, the "Placement Agent
            Warrant");

                                       6
<PAGE>

                  (vi) the Escrow Deposit Agreement duly executed by the Company
            and Midtown;

                  (vii) the Lock-up Agreement duly executed by the Company and
            Fred Shulman (as to 700,000 shares) and Pat Kenny (as to
            10,000,000)(both subject to adjustment for reverse and forward stock
            splits the like); and

                  (viii) the Registration Rights Agreement duly executed by the
            Company.

            (b) On or prior to the Closing Date, each Purchaser shall deliver or
      cause to be delivered to the Company the following:

                  (i) this Agreement duly executed by such Purchaser;

                  (ii) such Purchaser's Subscription Amount by certified check
            or wire transfer to the Escrow Agent; and

                  (iii) the Registration Rights Agreement duly executed by such
            Purchaser.

      2.3   Closing Conditions.

            (a) The obligations of the Company hereunder in connection with the
      Closing are subject to the following conditions being met:

                  (i) the accuracy in all material respects when made and on the
            Closing Date of the representations and warranties of the Purchasers
            contained herein;

                  (ii) all obligations, covenants and agreements of the
            Purchasers required to be performed at or prior to the Closing Date
            shall have been performed; and

                  (iii) the delivery by the Purchasers of the items set forth in
            Section 2.2(b) of this Agreement.

            (b) The respective obligations of the Purchasers hereunder in
      connection with the Closing are subject to the following conditions being
      met:

                  (i) the accuracy in all material respects on the Closing Date
            of the representations and warranties of the Company contained
            herein;

                  (ii) all obligations, covenants and agreements of the Company
            required to be performed at or prior to the Closing Date shall have
            been performed;

                  (iii) the delivery by the Company of the items set forth in
            Section 2.2(a) of this Agreement;

                  (iv) there shall have been no Material Adverse Effect with
            respect to the Company since the date hereof; and

                                       7
<PAGE>

                  (v) from the date hereof to the Closing Date, trading in the
            Common Stock shall not have been suspended by the Commission or the
            Company's principal Trading Market (except for any suspension of
            trading of limited duration agreed to by the Company, which
            suspension shall be terminated prior to the Closing), and, at any
            time prior to the Closing Date, trading in securities generally as
            reported by Bloomberg L.P. shall not have been suspended or limited,
            or minimum prices shall not have been established on securities
            whose trades are reported by such service, or on any Trading Market,
            nor shall a banking moratorium have been declared either by the
            United States or New York State authorities nor shall there have
            occurred any material outbreak or escalation of hostilities or other
            national or international calamity of such magnitude in its effect
            on, or any material adverse change in, any financial market which,
            in each case, in the reasonable judgment of each Purchaser, makes it
            impracticable or inadvisable to purchase the Shares at the Closing.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

      3.1 Representations and Warranties of the Company. Except as set forth in
the Disclosure Schedules, which Disclosure Schedules shall be deemed a part
hereof and shall qualify any representation or warranty made herein to the
extent of the disclosure contained in the corresponding section of the
Disclosure Schedules, the Company hereby makes the following representations and
warranties to each Purchaser:

            (a) Subsidiaries. All of the direct and indirect subsidiaries of the
      Company are set forth on Schedule 3.1(a). The Company owns, directly or
      indirectly, all of the capital stock or other equity interests of each
      Subsidiary free and clear of any Liens, and all of the issued and
      outstanding shares of capital stock or membership interests of each
      Subsidiary are validly issued and are fully paid, non-assessable and free
      of preemptive and similar rights to subscribe for or purchase securities.
      If the Company has no subsidiaries, then all other references to the
      Subsidiaries or any of them in the Transaction Documents shall be
      disregarded.

            (b) Organization and Qualification. The Company and each of the
      Subsidiaries is an entity duly incorporated or otherwise organized,
      validly existing and in good standing under the laws of the jurisdiction
      of its incorporation or organization (as applicable), with the requisite
      power and authority to own and use its properties and assets and to carry
      on its business as currently conducted. Neither the Company nor any
      Subsidiary is in violation or default of any of the provisions of its
      respective certificate or articles of incorporation, bylaws or other
      organizational or charter documents. Each of the Company and the
      Subsidiaries is duly qualified to conduct business and is in good standing
      as a foreign corporation or other entity in each jurisdiction in which the
      nature of the business conducted or property owned by it makes such
      qualification necessary, except where the failure to be so qualified or in
      good standing, as the case may be, could not have or reasonably be
      expected to result in (i) a material adverse effect on the legality,
      validity or enforceability of any Transaction Document, (ii) a material
      adverse effect on the results of operations, assets, business, prospects
      or condition (financial or otherwise) of the Company and the Subsidiaries,
      taken as a whole, or (iii) a material adverse effect on the Company's
      ability to perform in any material respect on a timely basis its
      obligations under any Transaction Document (any of (i), (ii) or (iii), a
      "Material Adverse Effect") and no Proceeding has been instituted in any
      such jurisdiction revoking, limiting or curtailing or seeking to revoke,
      limit or curtail such power and authority or qualification.

                                       8
<PAGE>

            (c) Authorization; Enforcement. The Company has the requisite
      corporate power and authority to enter into and to consummate the
      transactions contemplated by each of the Transaction Documents and
      otherwise to carry out its obligations hereunder and thereunder. The
      execution and delivery of each of the Transaction Documents by the Company
      and the consummation by it of the transactions contemplated hereby and
      thereby have been duly authorized by all necessary action on the part of
      the Company and no further action is required by the Company, its board of
      directors or its stockholders in connection therewith other than in
      connection with the Required Approvals. Each Transaction Document has been
      (or upon delivery will have been) duly executed by the Company and, when
      delivered in accordance with the terms hereof and thereof, will constitute
      the valid and binding obligation of the Company enforceable against the
      Company in accordance with its terms except (i) as limited by general
      equitable principles and applicable bankruptcy, insolvency,
      reorganization, moratorium and other laws of general application affecting
      enforcement of creditors' rights generally, (ii) as limited by laws
      relating to the availability of specific performance, injunctive relief or
      other equitable remedies and (iii) insofar as indemnification and
      contribution provisions may be limited by applicable law.

            (d) No Conflicts. The execution, delivery and performance of the
      Transaction Documents by the Company, the issuance and sale of the Shares
      and the consummation by the Company of the other transactions contemplated
      hereby and thereby do not and will not (i) conflict with or violate any
      provision of the Company's or any Subsidiary's certificate or articles of
      incorporation, bylaws or other organizational or charter documents, or
      (ii) conflict with, or constitute a default (or an event that with notice
      or lapse of time or both would become a default) under, result in the
      creation of any Lien upon any of the properties or assets of the Company
      or any Subsidiary, or give to others any rights of termination, amendment,
      acceleration or cancellation (with or without notice, lapse of time or
      both) of, any agreement, credit facility, debt or other instrument
      (evidencing a Company or Subsidiary debt or otherwise) or other
      understanding to which the Company or any Subsidiary is a party or by
      which any property or asset of the Company or any Subsidiary is bound or
      affected, or (iii) subject to the Required Approvals, conflict with or
      result in a violation of any law, rule, regulation, order, judgment,
      injunction, decree or other restriction of any court or governmental
      authority to which the Company or a Subsidiary is subject (including
      federal and state securities laws and regulations), or by which any
      property or asset of the Company or a Subsidiary is bound or affected;
      except in the case of each of clauses (ii) and (iii), such as could not
      have or reasonably be expected to result in a Material Adverse Effect.

                                       9
<PAGE>

            (e) Filings, Consents and Approvals. The Company is not required to
      obtain any consent, waiver, authorization or order of, give any notice to,
      or make any filing or registration with, any court or other federal,
      state, local or other governmental authority or other Person in connection
      with the execution, delivery and performance by the Company of the
      Transaction Documents, other than (i) filings required pursuant to Section
      4.4 of this Agreement, (ii) the filing with the Commission of the
      Registration Statement, (iii) application(s) to each applicable Trading
      Market for the listing of the Securities for trading thereon in the time
      and manner required thereby and (iv) the filing of Form D with the
      Commission and such filings as are required to be made under applicable
      state securities laws (collectively, the "Required Approvals").

            (f) Issuance of the Securities. The Securities are duly authorized
      and, when issued and paid for in accordance with the applicable
      Transaction Documents, will be duly and validly issued, fully paid and
      nonassessable, free and clear of all Liens imposed by the Company other
      than restrictions on transfer provided for in the Transaction Documents.
      The Warrant Shares, when issued in accordance with the terms of the
      Transaction Documents, will be validly issued, fully paid and
      nonassessable, free and clear of all Liens imposed by the Company. The
      Company has reserved from its duly authorized capital stock the maximum
      number of shares of Common Stock issuable pursuant to this Agreement and
      the Warrants.

            (g) Capitalization. The capitalization of the Company is as set
      forth on Schedule 3.1(g). The Company has not issued any capital stock
      since its most recently filed periodic report under the Exchange Act,
      other than pursuant to the exercise of employee stock options under the
      Company's stock option plans, the issuance of shares of Common Stock to
      employees pursuant to the Company's employee stock purchase plan and
      pursuant to the conversion or exercise of Common Stock Equivalents
      outstanding as of the date of the most recently filed periodic report
      under the Exchange Act. No Person has any right of first refusal,
      preemptive right, right of participation, or any similar right to
      participate in the transactions contemplated by the Transaction Documents.
      Except as a result of the purchase and sale of the Securities, there are
      no outstanding options, warrants, script rights to subscribe to, calls or
      commitments of any character whatsoever relating to, or securities, rights
      or obligations convertible into or exercisable or exchangeable for, or
      giving any Person any right to subscribe for or acquire, any shares of
      Common Stock, or contracts, commitments, understandings or arrangements by
      which the Company or any Subsidiary is or may become bound to issue
      additional shares of Common Stock or Common Stock Equivalents. The
      issuance and sale of the Securities will not obligate the Company to issue
      shares of Common Stock or other securities to any Person (other than the
      Purchasers) and will not result in a right of any holder of Company
      securities to adjust the exercise, conversion, exchange or reset price
      under any of such securities. All of the outstanding shares of capital
      stock of the Company are validly issued, fully paid and nonassessable,
      have been issued in compliance with all federal and state securities laws,
      and none of such outstanding shares was issued in violation of any
      preemptive rights or similar rights to subscribe for or purchase
      securities. No further approval or authorization of any stockholder, the
      Board of Directors of the Company or others is required for the issuance
      and sale of the Securities. There are no stockholders agreements, voting
      agreements or other similar agreements with respect to the Company's
      capital stock to which the Company is a party or, to the knowledge of the
      Company, between or among any of the Company's stockholders.

                                       10
<PAGE>

            (h) SEC Reports; Financial Statements. The Company has filed all
      reports, schedules, forms, statements and other documents required to be
      filed by the Company under the Securities Act and the Exchange Act,
      including pursuant to Section 13(a) or 15(d) thereof, for the two years
      preceding the date hereof (or such shorter period as the Company was
      required by law or regulation to file such material) (the foregoing
      materials, including the exhibits thereto and documents incorporated by
      reference therein, being collectively referred to herein as the "SEC
      Reports") on a timely basis or has received a valid extension of such time
      of filing and has filed any such SEC Reports prior to the expiration of
      any such extension. As of their respective dates, the SEC Reports complied
      in all material respects with the requirements of the Securities Act and
      the Exchange Act, as applicable, and none of the SEC Reports, when filed,
      contained any untrue statement of a material fact or omitted to state a
      material fact required to be stated therein or necessary in order to make
      the statements therein, in the light of the circumstances under which they
      were made, not misleading. The financial statements of the Company
      included in the SEC Reports comply in all material respects with
      applicable accounting requirements and the rules and regulations of the
      Commission with respect thereto as in effect at the time of filing. Such
      financial statements have been prepared in accordance with United States
      generally accepted accounting principles applied on a consistent basis
      during the periods involved ("GAAP"), except as may be otherwise specified
      in such financial statements or the notes thereto and except that
      unaudited financial statements may not contain all footnotes required by
      GAAP, and fairly present in all material respects the financial position
      of the Company and its consolidated subsidiaries as of and for the dates
      thereof and the results of operations and cash flows for the periods then
      ended, subject, in the case of unaudited statements, to normal,
      immaterial, year-end audit adjustments.

            (i) Material Changes; Undisclosed Events, Liabilities or
      Developments. Since the date of the latest audited financial statements
      included within the SEC Reports, except as specifically disclosed in a
      subsequent SEC Report filed prior to the date hereof, (i) there has been
      no event, occurrence or development that has had or that could reasonably
      be expected to result in a Material Adverse Effect, (ii) the Company has
      not incurred any liabilities (contingent or otherwise) other than (A)
      trade payables and accrued expenses incurred in the ordinary course of
      business consistent with past practice and (B) liabilities not required to
      be reflected in the Company's financial statements pursuant to GAAP or
      disclosed in filings made with the Commission, (iii) the Company has not
      altered its method of accounting, (iv) the Company has not declared or
      made any dividend or distribution of cash or other property to its
      stockholders or purchased, redeemed or made any agreements to purchase or
      redeem any shares of its capital stock and (v) the Company has not issued
      any equity securities to any officer, director or Affiliate, except
      pursuant to existing Company stock option plans. The Company does not have
      pending before the Commission any request for confidential treatment of
      information. Except for the issuance of the Securities contemplated by
      this Agreement or as set forth on Schedule 3.1(i), no event, liability or
      development has occurred or exists with respect to the Company or its
      Subsidiaries or their respective business, properties, operations or
      financial condition, that would be required to be disclosed by the Company
      under applicable securities laws at the time this representation is made
      that has not been publicly disclosed at least 1 Trading Day prior to the
      date that this representation is made.

                                       11
<PAGE>

            (j) Litigation. There is no action, suit, inquiry, notice of
      violation, proceeding or investigation pending or, to the knowledge of the
      Company, threatened against or affecting the Company, any Subsidiary or
      any of their respective properties before or by any court, arbitrator,
      governmental or administrative agency or regulatory authority (federal,
      state, county, local or foreign) (collectively, an "Action") which (i)
      adversely affects or challenges the legality, validity or enforceability
      of any of the Transaction Documents or the Securities or (ii) could, if
      there were an unfavorable decision, have or reasonably be expected to
      result in a Material Adverse Effect. Neither the Company nor any
      Subsidiary, nor any director or officer thereof, is or has been the
      subject of any Action involving a claim of violation of or liability under
      federal or state securities laws or a claim of breach of fiduciary duty.
      There has not been, and to the knowledge of the Company, there is not
      pending or contemplated, any investigation by the Commission involving the
      Company or any current or former director or officer of the Company. The
      Commission has not issued any stop order or other order suspending the
      effectiveness of any registration statement filed by the Company or any
      Subsidiary under the Exchange Act or the Securities Act.

            (k) Labor Relations. No material labor dispute exists or, to the
      knowledge of the Company, is imminent with respect to any of the employees
      of the Company which could reasonably be expected to result in a Material
      Adverse Effect. None of the Company's or its Subsidiaries' employees is a
      member of a union that relates to such employee's relationship with the
      Company, and neither the Company or any of its Subsidiaries is a party to
      a collective bargaining agreement, and the Company and its Subsidiaries
      believe that their relationships with their employees are good. No
      executive officer, to the knowledge of the Company, is, or is now expected
      to be, in violation of any material term of any employment contract,
      confidentiality, disclosure or proprietary information agreement or
      non-competition agreement, or any other contract or agreement or any
      restrictive covenant, and the continued employment of each such executive
      officer does not subject the Company or any of its Subsidiaries to any
      liability with respect to any of the foregoing matters. The Company and
      its Subsidiaries are in compliance with all U.S. federal, state, local and
      foreign laws and regulations relating to employment and employment
      practices, terms and conditions of employment and wages and hours, except
      where the failure to be in compliance could not, individually or in the
      aggregate, reasonably be expected to have a Material Adverse Effect.

            (l) Compliance. Neither the Company nor any Subsidiary (i) is in
      default under or in violation of (and no event has occurred that has not
      been waived that, with notice or lapse of time or both, would result in a
      default by the Company or any Subsidiary under), nor has the Company or
      any Subsidiary received notice of a claim that it is in default under or
      that it is in violation of, any indenture, loan or credit agreement or any
      other agreement or instrument to which it is a party or by which it or any
      of its properties is bound (whether or not such default or violation has
      been waived), (ii) is in violation of any order of any court, arbitrator
      or governmental body, or (iii) is or has been in violation of any statute,
      rule or regulation of any governmental authority, including without
      limitation all foreign, federal, state and local laws applicable to its
      business and all such laws that affect the environment, except in each
      case as could not have or reasonably be expected to result in a Material
      Adverse Effect.

                                       12
<PAGE>

            (m) Regulatory Permits. The Company and the Subsidiaries possess all
      certificates, authorizations and permits issued by the appropriate
      federal, state, local or foreign regulatory authorities necessary to
      conduct their respective businesses as described in the SEC Reports,
      except where the failure to possess such permits could not have or
      reasonably be expected to result in a Material Adverse Effect ("Material
      Permits"), and neither the Company nor any Subsidiary has received any
      notice of proceedings relating to the revocation or modification of any
      Material Permit.

            (n) Title to Assets. The Company and the Subsidiaries have good and
      marketable title in fee simple to all real property owned by them that is
      material to the business of the Company and the Subsidiaries and good and
      marketable title in all personal property owned by them that is material
      to the business of the Company and the Subsidiaries, in each case free and
      clear of all Liens, except for Liens as do not materially affect the value
      of such property and do not materially interfere with the use made and
      proposed to be made of such property by the Company and the Subsidiaries
      and Liens for the payment of federal, state or other taxes, the payment of
      which is neither delinquent nor subject to penalties. Any real property
      and facilities held under lease by the Company and the Subsidiaries are
      held by them under valid, subsisting and enforceable leases with which the
      Company and the Subsidiaries are in compliance.

            (o) Patents and Trademarks. The Company and the Subsidiaries have,
      or have rights to use, all patents, patent applications, trademarks,
      trademark applications, service marks, trade names, trade secrets,
      inventions, copyrights, licenses and other intellectual property rights
      and similar rights necessary or material for use in connection with their
      respective businesses as described in the SEC Reports and which the
      failure to so have could have a Material Adverse Effect (collectively, the
      "Intellectual Property Rights"). Neither the Company nor any Subsidiary
      has received a notice (written or otherwise) that the Intellectual
      Property Rights used by the Company or any Subsidiary violates or
      infringes upon the rights of any Person. To the knowledge of the Company,
      all such Intellectual Property Rights are enforceable and there is no
      existing infringement by another Person of any of the Intellectual
      Property Rights. The Company and its Subsidiaries have taken reasonable
      security measures to protect the secrecy, confidentiality and value of all
      of their intellectual properties, except where failure to do so could not,
      individually or in the aggregate, reasonably be expected to have a
      Material Adverse Effect.

            (p) Insurance. The Company and the Subsidiaries are insured by
      insurers of recognized financial responsibility against such losses and
      risks and in such amounts as are prudent and customary in the businesses
      in which the Company and the Subsidiaries are engaged, including, but not
      limited to, directors and officers insurance coverage at least equal to
      the aggregate Subscription Amount. Neither the Company nor any Subsidiary
      has any reason to believe that it will not be able to renew its existing
      insurance coverage as and when such coverage expires or to obtain similar
      coverage from similar insurers as may be necessary to continue its
      business without a significant increase in cost.

                                       13
<PAGE>

            (q) Transactions With Affiliates and Employees. Except as set forth
      in the SEC Reports, none of the officers or directors of the Company and,
      to the knowledge of the Company, none of the employees of the Company is
      presently a party to any transaction with the Company or any Subsidiary
      (other than for services as employees, officers and directors), including
      any contract, agreement or other arrangement providing for the furnishing
      of services to or by, providing for rental of real or personal property to
      or from, or otherwise requiring payments to or from any officer, director
      or such employee or, to the knowledge of the Company, any entity in which
      any officer, director, or any such employee has a substantial interest or
      is an officer, director, trustee or partner, in each case in excess of
      $60,000 other than (i) for payment of salary or consulting fees for
      services rendered, (ii) reimbursement for expenses incurred on behalf of
      the Company and (iii) for other employee benefits, including stock option
      agreements under any stock option plan of the Company.

            (r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in
      material compliance with all provisions of the Sarbanes-Oxley Act of 2002
      which are applicable to it as of the Closing Date. The Company and the
      Subsidiaries maintain 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 accountability,
      (iii) access to assets is permitted only in accordance with management's
      general or specific authorization, and (iv) the recorded accountability
      for assets is compared with the existing assets at reasonable intervals
      and appropriate action is taken with respect to any differences. The
      Company has established disclosure controls and procedures (as defined in
      Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed
      such disclosure controls and procedures to ensure that information
      required to be disclosed by the Company in the reports it files or submits
      under the Exchange Act is recorded, processed, summarized and reported,
      within the time periods specified in the Commission's rules and forms. The
      Company's certifying officers have evaluated the effectiveness of the
      Company's disclosure controls and procedures as of the end of the period
      covered by the Company's most recently filed periodic report under the
      Exchange Act (such date, the "Evaluation Date"). The Company presented in
      its most recently filed periodic report under the Exchange Act the
      conclusions of the certifying officers about the effectiveness of the
      disclosure controls and procedures based on their evaluations as of the
      Evaluation Date. Since the Evaluation Date, there have been no changes in
      the Company's internal control over financial reporting (as such term is
      defined in the Exchange Act) that has materially affected, or is
      reasonably likely to materially affect, the Company's internal control
      over financial reporting.

            (s) Certain Fees. Other than the fees payable to Midtown which are
      set forth on Schedule 3.1(s) attached hereto, no brokerage or finder's
      fees or commissions are or will be payable by the Company to any broker,
      financial advisor or consultant, finder, placement agent, investment
      banker, bank or other Person with respect to the transactions contemplated
      by the Transaction Documents. The Purchasers shall have no obligation with
      respect to any fees or with respect to any claims made by or on behalf of
      other Persons for fees of a type contemplated in this Section that may be
      due in connection with the transactions contemplated by the Transaction
      Documents.

                                       14
<PAGE>

            (t) Private Placement. Assuming the accuracy of the Purchasers
      representations and warranties set forth in Section 3.2, no registration
      under the Securities Act is required for the offer and sale of the
      Securities by the Company to the Purchasers as contemplated hereby. The
      issuance and sale of the Securities hereunder does not contravene the
      rules and regulations of the Trading Market.

            (u) Investment Company. The Company is not, and is not an Affiliate
      of, and immediately after receipt of payment for the Securities, will not
      be or be an Affiliate of, an "investment company" within the meaning of
      the Investment Company Act of 1940, as amended. The Company shall conduct
      its business in a manner so that it will not become subject to the
      Investment Company Act of 1940, as amended.

            (v) Registration Rights. Other than each of the Purchasers, no
      Person has any right to cause the Company to effect the registration under
      the Securities Act of any securities of the Company.

            (w) Listing and Maintenance Requirements. The Company's Common Stock
      is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and
      the Company has taken no action designed to, or which to its knowledge is
      likely to have the effect of, terminating the registration of the Common
      Stock under the Exchange Act nor has the Company received any notification
      that the Commission is contemplating terminating such registration. The
      Company has not, in the 12 months preceding the date hereof, received
      notice from any Trading Market on which the Common Stock is or has been
      listed or quoted to the effect that the Company is not in compliance with
      the listing or maintenance requirements of such Trading Market. The
      Company is, and has no reason to believe that it will not in the
      foreseeable future continue to be, in compliance with all such listing and
      maintenance requirements.

            (x) Application of Takeover Protections. The Company and its Board
      of Directors have taken all necessary action, if any, in order to render
      inapplicable any control share acquisition, business combination, poison
      pill (including any distribution under a rights agreement) or other
      similar anti-takeover provision under the Company's Certificate of
      Incorporation (or similar charter documents) or the laws of its state of
      incorporation that is or could become applicable to the Purchasers as a
      result of the Purchasers and the Company fulfilling their obligations or
      exercising their rights under the Transaction Documents, including without
      limitation as a result of the Company's issuance of the Securities and the
      Purchasers' ownership of the Securities.

                                       15
<PAGE>

            (y) Disclosure. Except with respect to the material terms and
      conditions of the transactions contemplated by the Transaction Documents,
      the Company confirms that neither it nor any other Person acting on its
      behalf has provided any of the Purchasers or their agents or counsel with
      any information that it believes constitutes or might constitute material,
      non-public information. The Company understands and confirms that the
      Purchasers will rely on the foregoing representation in effecting
      transactions in securities of the Company. All disclosure furnished by or
      on behalf of the Company to the Purchasers regarding the Company, its
      business and the transactions contemplated hereby, including the
      Disclosure Schedules to this Agreement, is true and correct and does not
      contain any untrue statement of a material fact or omit to state any
      material fact necessary in order to make the statements made therein, in
      light of the circumstances under which they were made, not misleading. The
      press releases disseminated by the Company during the twelve months
      preceding the date of this Agreement taken as a whole do not contain any
      untrue statement of a material fact or omit to state a material fact
      required to be stated therein or necessary in order to make the
      statements, in light of the circumstances under which they were made and
      when made, not misleading. The Company acknowledges and agrees that no
      Purchaser makes or has made any representations or warranties with respect
      to the transactions contemplated hereby other than those specifically set
      forth in Section 3.2 hereof.

            (z) No Integrated Offering. Assuming the accuracy of the Purchasers'
      representations and warranties set forth in Section 3.2, neither the
      Company, nor any of its Affiliates, nor any Person acting on its or their
      behalf has, directly or indirectly, made any offers or sales of any
      security or solicited any offers to buy any security, under circumstances
      that would cause this offering of the Securities to be integrated with
      prior offerings by the Company for purposes of the Securities Act or any
      applicable shareholder approval provisions of any Trading Market on which
      any of the securities of the Company are listed or designated.

            (aa) Solvency. Based on the financial condition of the Company as of
      the Closing Date, after giving effect to the receipt by the Company of the
      proceeds from the sale of the Securities hereunder, (i) the fair saleable
      value of the Company's assets exceeds the amount that will be required to
      be paid on or in respect of the Company's existing debts and other
      liabilities (including known contingent liabilities) as they mature; (ii)
      the Company's assets do not constitute unreasonably small capital to carry
      on its business as now conducted and as proposed to be conducted including
      its capital needs taking into account the particular capital requirements
      of the business conducted by the Company, and projected capital
      requirements and capital availability thereof; and (iii) the current cash
      flow of the Company, together with the proceeds the Company would receive,
      were it to liquidate all of its assets, after taking into account all
      anticipated uses of the cash, would be sufficient to pay all amounts on or
      in respect of its liabilities when such amounts are required to be paid.
      The Company does not intend to incur debts beyond its ability to pay such
      debts as they mature (taking into account the timing and amounts of cash
      to be payable on or in respect of its debt). The Company has no knowledge
      of any facts or circumstances which lead it to believe that it will file
      for reorganization or liquidation under the bankruptcy or reorganization
      laws of any jurisdiction within one year from the Closing Date. Schedule
      3.1(aa) sets forth as of the dates thereof all outstanding secured and
      unsecured Indebtedness of the Company or any Subsidiary, or for which the
      Company or any Subsidiary has commitments. For the purposes of this
      Agreement, "Indebtedness" shall mean (a) any liabilities for borrowed
      money or amounts owed in excess of $50,000 (other than trade accounts
      payable incurred in the ordinary course of business), (b) all guaranties,
      endorsements and other contingent obligations in respect of Indebtedness
      of others, whether or not the same are or should be reflected in the
      Company's balance sheet (or the notes thereto), except guaranties by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in the ordinary course of business; and (c) the present value
      of any lease payments in excess of $50,000 due under leases required to be
      capitalized in accordance with GAAP. Neither the Company nor any
      Subsidiary is in default with respect to any Indebtedness.

                                       16
<PAGE>

            (bb) Tax Status. Except for matters that would not, individually or
      in the aggregate, have or reasonably be expected to result in a Material
      Adverse Effect, the Company and each Subsidiary has filed all necessary
      federal, state and foreign income and franchise tax returns and has paid
      or accrued all taxes shown as due thereon, and the Company has no
      knowledge of a tax deficiency which has been asserted or threatened
      against the Company or any Subsidiary.

            (cc) No General Solicitation. Neither the Company nor any person
      acting on behalf of the Company has offered or sold any of the Securities
      by any form of general solicitation or general advertising. The Company
      has offered the Securities for sale only to the Purchasers and certain
      other "accredited investors" within the meaning of Rule 501 under the
      Securities Act.

            (dd) Foreign Corrupt Practices. Neither the Company, nor to the
      knowledge of the Company, any agent or other person acting on behalf of
      the Company, has (i) directly or indirectly, used any funds for unlawful
      contributions, gifts, entertainment or other unlawful expenses related to
      foreign or domestic political activity, (ii) made any unlawful payment to
      foreign or domestic government officials or employees or to any foreign or
      domestic political parties or campaigns from corporate funds, (iii) failed
      to disclose fully any contribution made by the Company (or made by any
      person acting on its behalf of which the Company is aware) which is in
      violation of law, or (iv) violated in any material respect any provision
      of the Foreign Corrupt Practices Act of 1977, as amended.

            (ee) Accountants. The Company's accounting firm is set forth on
      Schedule 3.1(ee) of the Disclosure Schedule. To the knowledge and belief
      of the Company, such accounting firm (i) is a registered public accounting
      firm as required by the Exchange Act and (ii) shall express its opinion
      with respect to the financial statements to be included in the Company's
      Annual Report on Form 10-KSB for the year ending April 30, 2007.

            (ee) No Disagreements with Accountants and Lawyers. There are no
      disagreements of any kind presently existing, or reasonably anticipated by
      the Company to arise, between the Company and the accountants and lawyers
      formerly or presently employed by the Company and the Company is current
      with respect to any fees owed to its accountants and lawyers.

            (ff) Acknowledgment Regarding Purchasers' Purchase of Securities.
      The Company acknowledges and agrees that each of the Purchasers is acting
      solely in the capacity of an arm's length purchaser with respect to the
      Transaction Documents and the transactions contemplated thereby. The
      Company further acknowledges that no Purchaser is acting as a financial
      advisor or fiduciary of the Company (or in any similar capacity) with
      respect to the Transaction Documents and the transactions contemplated
      thereby and any advice given by any Purchaser or any of their respective
      representatives or agents in connection with the Transaction Documents and
      the transactions contemplated thereby is merely incidental to the
      Purchasers' purchase of the Securities. The Company further represents to
      each Purchaser that the Company's decision to enter into this Agreement
      and the other Transaction Documents has been based solely on the
      independent evaluation of the transactions contemplated hereby by the
      Company and its representatives.

                                       17
<PAGE>

            (gg) Acknowledgement Regarding Purchaser's Trading Activity.
      Anything in this Agreement or elsewhere herein to the contrary
      notwithstanding (except for Sections 3.2(f) and 4.15 hereof), it is
      understood and acknowledged by the Company (i) that none of the Purchasers
      have been asked to agree, nor has any Purchaser agreed, to desist from
      purchasing or selling, long and/or short, securities of the Company, or
      "derivative" securities based on securities issued by the Company or to
      hold the Securities for any specified term; (ii) that past or future open
      market or other transactions by any Purchaser, including Short Sales, and
      specifically including, without limitation, Short Sales or "derivative"
      transactions, before or after the closing of this or future private
      placement transactions, may negatively impact the market price of the
      Company's publicly-traded securities; (iii) that any Purchaser, and
      counter-parties in "derivative" transactions to which any such Purchaser
      is a party, directly or indirectly, presently may have a "short" position
      in the Common Stock, and (iv) that each Purchaser shall not be deemed to
      have any affiliation with or control over any arm's length counter-party
      in any "derivative" transaction. The Company further understands and
      acknowledges that (a) one or more Purchasers may engage in hedging
      activities at various times during the period that the Securities are
      outstanding, including, without limitation, during the periods that the
      value of the Warrant Shares deliverable with respect to Securities are
      being determined and (b) such hedging activities (if any) could reduce the
      value of the existing stockholders' equity interests in the Company at and
      after the time that the hedging activities are being conducted. The
      Company acknowledges that such aforementioned hedging activities do not
      constitute a breach of any of the Transaction Documents.

            (hh) Regulation M Compliance. The Company has not, and to its
      knowledge no one acting on its behalf has, (i) taken, directly or
      indirectly, any action designed to cause or to result in the stabilization
      or manipulation of the price of any security of the Company to facilitate
      the sale or resale of any of the Securities, (ii) sold, bid for,
      purchased, or, paid any compensation for soliciting purchases of, any of
      the Securities, or (iii) paid or agreed to pay to any Person any
      compensation for soliciting another to purchase any other securities of
      the Company, other than, in the case of clauses (ii) and (iii),
      compensation paid to the Company's placement agent in connection with the
      placement of the Securities.

      3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

                                       18
<PAGE>

            (a) Organization; Authority. Such Purchaser is an entity duly
      organized, validly existing and in good standing under the laws of the
      jurisdiction of its organization with full right, corporate or partnership
      power and authority to enter into and to consummate the transactions
      contemplated by the Transaction Documents and otherwise to carry out its
      obligations hereunder and thereunder. The execution, delivery and
      performance by such Purchaser of the transactions contemplated by this
      Agreement have been duly authorized by all necessary corporate or similar
      action on the part of such Purchaser. Each Transaction Document to which
      it is a party has been duly executed by such Purchaser, and when delivered
      by such Purchaser in accordance with the terms hereof, will constitute the
      valid and legally binding obligation of such Purchaser, enforceable
      against it in accordance with its terms, except (i) as limited by general
      equitable principles and applicable bankruptcy, insolvency,
      reorganization, moratorium and other laws of general application affecting
      enforcement of creditors' rights generally, (ii) as limited by laws
      relating to the availability of specific performance, injunctive relief or
      other equitable remedies and (iii) insofar as indemnification and
      contribution provisions may be limited by applicable law.

            (b) Own Account. Such Purchaser understands that the Securities are
      "restricted securities" and have not been registered under the Securities
      Act or any applicable state securities law and is acquiring the Securities
      as principal for its own account and not with a view to or for
      distributing or reselling such Securities or any part thereof in violation
      of the Securities Act or any applicable state securities law, has no
      present intention of distributing any of such Securities in violation of
      the Securities Act or any applicable state securities law and has no
      direct or indirect arrangement or understandings with any other persons to
      distribute or regarding the distribution of such Securities (this
      representation and warranty not limiting such Purchaser's right to sell
      the Securities pursuant to the Registration Statement or otherwise in
      compliance with applicable federal and state securities laws) in violation
      of the Securities Act or any applicable state securities law. Such
      Purchaser is acquiring the Securities hereunder in the ordinary course of
      its business.

            (c) Purchaser Status. At the time such Purchaser was offered the
      Securities, it was, and at the date hereof it is, and on each date on
      which it exercises any Warrants, it will be either: (i) an "accredited
      investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8)
      under the Securities Act or (ii) a "qualified institutional buyer" as
      defined in Rule 144A(a) under the Securities Act. Such Purchaser is not
      required to be registered as a broker-dealer under Section 15 of the
      Exchange Act.

            (d) Experience of Such Purchaser. Such Purchaser, either alone or
      together with its 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
      Securities, and has so evaluated the merits and risks of such investment.
      Such Purchaser is able to bear the economic risk of an investment in the
      Securities and, at the present time, is able to afford a complete loss of
      such investment.

            (e) General Solicitation. Such Purchaser is not purchasing the
      Securities as a result of any advertisement, article, notice or other
      communication regarding the Securities published in any newspaper,
      magazine or similar media or broadcast over television or radio or
      presented at any seminar or any other general solicitation or general
      advertisement.

                                       19
<PAGE>

            (f) Short Sales and Confidentiality Prior To The Date Hereof. Other
      than the transaction contemplated hereunder, such Purchaser has not, nor
      has any Person acting on behalf of or pursuant to any understanding with
      such Purchaser, directly or indirectly executed any transaction, including
      Short Sales, in the securities of the Company during the period commencing
      from the time that such Purchaser first received a term sheet (written or
      oral) from the Company or any other Person setting forth the material
      terms of the transactions contemplated hereunder until the date hereof
      ("Discussion Time"). Notwithstanding the foregoing, in the case of a
      Purchaser that is a multi-managed investment vehicle whereby separate
      portfolio managers manage separate portions of such Purchaser's assets and
      the portfolio managers have no direct knowledge of the investment
      decisions made by the portfolio managers managing other portions of such
      Purchaser's assets, the representation set forth above shall only apply
      with respect to the portion of assets managed by the portfolio manager
      that made the investment decision to purchase the Securities covered by
      this Agreement. Other than to other Persons party to this Agreement, such
      Purchaser has maintained the confidentiality of all disclosures made to it
      in connection with this transaction (including the existence and terms of
      this transaction).

                                   ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

      4.1   Transfer Restrictions.

            (a) The Securities may only be disposed of in compliance with state
      and federal securities laws. In connection with any transfer of Securities
      other than pursuant to an effective registration statement or Rule 144, to
      the Company or to an Affiliate of a Purchaser or in connection with a
      pledge as contemplated in Section 4.1(b), the Company may require the
      transferor thereof to provide to the Company an opinion of counsel
      selected by the transferor and reasonably acceptable to the Company, the
      form and substance of which opinion shall be reasonably satisfactory to
      the Company, to the effect that such transfer does not require
      registration of such transferred Securities under the Securities Act. As a
      condition of transfer, any such transferee shall agree in writing to be
      bound by the terms of this Agreement and shall have the rights of a
      Purchaser under this Agreement and the Registration Rights Agreement.

            (b) The Purchasers agree to the imprinting, so long as is required
      by this Section 4.1, of a legend on any of the Securities in the following
      form:

            THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND
            EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
            RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
            ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
            MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
            AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
            REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
            WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
            OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
            OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS
            SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
            ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
            FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
            RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
            SECURITIES.

                                       20
<PAGE>

            The Company acknowledges and agrees that a Purchaser may from time
      to time pledge pursuant to a bona fide margin agreement with a registered
      broker-dealer or grant a security interest in some or all of the
      Securities to a financial institution that is an "accredited investor" as
      defined in Rule 501(a) under the Securities Act and who agrees to be bound
      by the provisions of this Agreement and the Registration Rights Agreement
      and, if required under the terms of such arrangement, such Purchaser may
      transfer pledged or secured Securities to the pledgees or secured parties.
      Such a pledge or transfer would not be subject to approval of the Company
      and no legal opinion of legal counsel of the pledgee, secured party or
      pledgor shall be required in connection therewith. Further, no notice
      shall be required of such pledge. At the appropriate Purchaser's expense,
      the Company will execute and deliver such reasonable documentation as a
      pledgee or secured party of Securities may reasonably request in
      connection with a pledge or transfer of the Securities, including, if the
      Securities are subject to registration pursuant to the Registration Rights
      Agreement, the preparation and filing of any required prospectus
      supplement under Rule 424(b)(3) under the Securities Act or other
      applicable provision of the Securities Act to appropriately amend the list
      of Selling Stockholders thereunder.

            (c) Certificates evidencing the Shares and Warrant Shares shall not
      contain any legend (including the legend set forth in Section 4.1(b)), (i)
      while a registration statement (including the Registration Statement)
      covering the resale of such security is effective under the Securities
      Act, or (ii) following any sale of such Shares or Warrant Shares pursuant
      to Rule 144, or (iii) if such Shares or Warrant Shares are eligible for
      sale under Rule 144(k), or (iv) if such legend is not required under
      applicable requirements of the Securities Act (including judicial
      interpretations and pronouncements issued by the staff of the Commission).
      If all or any portion of a Warrant is exercised at a time when there is an
      effective registration statement to cover the resale of the Warrant
      Shares, such Warrant Shares shall be issued free of all legends. The
      Company agrees that following the Effective Date or at such time as such
      legend is no longer required under this Section 4.1(c), it will, no later
      than three Trading Days following the delivery by a Purchaser to the
      Company or the Transfer Agent of a certificate representing Shares or
      Warrant Shares, as the case may be, issued with a restrictive legend (such
      third Trading Day, the "Legend Removal Date"), deliver or cause to be
      delivered to such Purchaser a certificate representing such shares that is
      free from all restrictive and other legends. The Company may not make any
      notation on its records or give instructions to any Transfer Agent of the
      Company that enlarge the restrictions on transfer set forth in this
      Section. Certificates for Securities subject to legend removal hereunder
      shall be transmitted by the Transfer Agent of the Company to the
      Purchasers by crediting the account of the Purchaser's prime broker with
      the Depository Trust Company System.

                                       21
<PAGE>

            (d) In addition to such Purchaser's other available remedies, the
      Company shall pay to a Purchaser, in cash, as partial liquidated damages
      and not as a penalty, for each $1,000 of Shares or Warrant Shares (based
      on the VWAP of the Common Stock on the date such Securities are submitted
      to the Transfer Agent) delivered for removal of the restrictive legend and
      subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per
      Trading Day five (5) Trading Days after such damages have begun to accrue)
      for each Trading Day after the Legend Removal Date until such certificate
      is delivered without a legend. Nothing herein shall limit such Purchaser's
      right to pursue actual damages for the Company's failure to deliver
      certificates representing any Securities as required by the Transaction
      Documents, and such Purchaser shall have the right to pursue all remedies
      available to it at law or in equity including, without limitation, a
      decree of specific performance and/or injunctive relief.

            (e) Each Purchaser, severally and not jointly with the other
      Purchasers, agrees that the removal of the restrictive legend from
      certificates representing Securities as set forth in this Section 4.1 is
      predicated upon the Company's reliance that the Purchaser will sell any
      Securities pursuant to either the registration requirements of the
      Securities Act, including any applicable prospectus delivery requirements,
      or an exemption therefrom, and that if Securities are sold pursuant to a
      Registration Statement, they will be sold in compliance with the plan of
      distribution set forth therein.

      4.2 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, to the extent required from time to time to
enable such Person to sell such Securities without registration under the
Securities Act within the requirements of the exemption provided by Rule 144.

      4.3 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.

                                       22
<PAGE>

      4.4 Securities Laws Disclosure; Publicity. The Company shall (i) by 8:30
a.m. New York City time on the Trading Day immediately following the date
hereof, issue a press release disclosing the material terms of the transactions
contemplated hereby and (ii) by 8:30 a.m. New York City on the fourth Trading
Day immediately following the date hereof, issue a Current Report on Form 8-K,
disclosing the material terms of the transactions contemplated hereby, and
filing the Transaction Documents as exhibits thereto. The Company and each
Purchaser shall consult with each other in issuing any other press releases with
respect to the transactions contemplated hereby, and neither the Company nor any
Purchaser shall issue any such press release or otherwise make any such public
statement without the prior consent of the Company, with respect to any press
release of any Purchaser, or without the prior consent of each Purchaser, with
respect to any press release of the Company, which consent shall not
unreasonably be withheld or delayed, except if such disclosure is required by
law, in which case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except (i) as required by federal securities law in connection with
(A) any registration statement contemplated by the Registration Rights Agreement
and (B) the filing of final Transaction Documents (including signature pages
thereto) with the Commission and (ii) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under this
subclause (ii).

      4.5 Shareholder Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that any
Purchaser is an "Acquiring Person" under any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or similar anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.

      4.6 Non-Public Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it nor any other Person acting on its
behalf will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing representations
in effecting transactions in securities of the Company.

      4.7 Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and shall not use such proceeds for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
or to redeem any Common Stock, or Common Stock Equivalents or to settle any
outstanding litigation.

                                       23
<PAGE>

      4.8 Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any other stockholder), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement, except if such claim arises primarily from a breach of such
Purchaser's representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser may have with any
such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by such Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance.

      4.9 Indemnification of Purchasers. Subject to the provisions of this
Section 4.9, the Company will indemnify and hold each Purchaser and its
directors, officers, shareholders, members, partners, employees and agents (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser's representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or malfeasance).
If any action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing reasonably
acceptable to the Purchaser Party. Any Purchaser Party shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Purchaser Party except to the extent that (i) the employment thereof has
been specifically authorized by the Company in writing, (ii) the Company has
failed after a reasonable period of time to assume such defense and to employ
counsel or (iii) in such action there is, in the reasonable opinion of such
separate counsel, a material conflict on any material issue between the position
of the Company and the position of such Purchaser Party, in which case the
Company shall be responsible for the reasonable fees and expenses of no more
than one such separate counsel. The Company will not be liable to any Purchaser
Party under this Agreement (i) for any settlement by a Purchaser Party effected
without the Company's prior written consent, which shall not be unreasonably
withheld or delayed; or (ii) to the extent, but only to the extent that a loss,
claim, damage or liability is attributable to any Purchaser Party's breach of
any of the representations, warranties, covenants or agreements made by such
Purchaser Party in this Agreement or in the other Transaction Documents.

                                       24
<PAGE>

      4.10 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.

      4.11 Listing of Common Stock.(a) The Company hereby agrees to use best
efforts to maintain the listing of the Common Stock on a Trading Market, and as
soon as reasonably practicable following the Closing (but not later than the
earlier of the Effective Date and the first anniversary of the Closing Date) to
list all of the Shares and Warrant Shares on such Trading Market. The Company
further agrees, if the Company applies to have the Common Stock traded on any
other Trading Market, it will include in such application all of the Shares and
Warrant Shares, and will take such other action as is necessary to cause all of
the Shares and Warrant Shares to be listed on such other Trading Market as
promptly as possible. The Company will take all action reasonably necessary to
continue the listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Trading Market.

      4.12 Equal Treatment of Purchasers. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat for the Company the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.

      4.13  [INTENTIONALLY DELETED]

      4.14  Subsequent Equity Sales.

            (a) From the date hereof until the earlier of (i) 90 days after the
      Effective Date and (ii) the 14 month anniversary of the date hereof
      ("Prohibition Period"), neither the Company nor any Subsidiary shall issue
      shares of Common Stock or Common Stock Equivalents; provided, however, the
      90 day period set forth in this Section 4.14 shall be extended for the
      number of Trading Days during such period in which (i) trading in the
      Common Stock is suspended by any Trading Market, or (ii) following the
      Effective Date, the Registration Statement is not effective or the
      prospectus included in the Registration Statement may not be used by the
      Purchasers for the resale of the Shares and Warrant Shares.

                                       25
<PAGE>

            (b) From the date hereof until the date that is the 2 year
      anniversary of the Closing Date, the Company shall be prohibited from
      effecting or entering into an agreement to effect any Subsequent Financing
      involving a Variable Rate Transaction. The term "Variable Rate
      Transaction" means a transaction in which the Company issues or sells (i)
      any debt or equity securities that are convertible into, exchangeable or
      exercisable for, or include the right to receive additional shares of
      Common Stock either (A) at a conversion, exercise or exchange rate or
      other price that is based upon and/or varies with the trading prices of or
      quotations for the shares of Common Stock at any time after the initial
      issuance of such debt or equity securities, or (B) with a conversion,
      exercise or exchange price that is subject to being reset at some future
      date after the initial issuance of such debt or equity security or upon
      the occurrence of specified or contingent events directly or indirectly
      related to the business of the Company or the market for the Common Stock
      or (ii) enters into any agreement, including, but not limited to, an
      equity line of credit, whereby the Company may sell securities at a future
      determined price. Any Purchaser shall be entitled to obtain injunctive
      relief against the Company to preclude any such issuance, which remedy
      shall be in addition to any right to collect damages.

            (c) Notwithstanding the foregoing, this Section 4.14 shall not apply
      in respect of (i) an Exempt Issuance, except that no Variable Rate
      Transaction shall be an Exempt Issuance or (ii) an issuance of shares of
      Common Stock or Common Stock Equivalents that are issued with either no
      registration rights or registration rights that do not require or cause
      the filing of a registration statement prior to the expiration of the
      Prohibition Period.

      4.15 Short Sales and Confidentiality After The Date Hereof. Each Purchaser
severally and not jointly with the other Purchasers covenants that neither it
nor any Affiliate acting on its behalf or pursuant to any understanding with it
will execute any Short Sales during the period commencing at the Discussion Time
and ending at the time that the transactions contemplated by this Agreement are
first publicly announced as described in Section 4.4. Each Purchaser, severally
and not jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company as described in Section 4.4, such Purchaser will maintain the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction). Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser, that the Commission currently takes the position that coverage of
short sales of shares of the Common Stock "against the box" prior to the
Effective Date of the Registration Statement with the Securities is a violation
of Section 5 of the Securities Act, as set forth in Item 65, Section A, of the
Manual of Publicly Available Telephone Interpretations, dated July 1997,
compiled by the Office of Chief Counsel, Division of Corporation Finance.
Notwithstanding the foregoing, no Purchaser makes any representation, warranty
or covenant hereby that it will not engage in Short Sales in the securities of
the Company after the time that the transactions contemplated by this Agreement
are first publicly announced as described in Section 4.4. Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser's
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such
Purchaser's assets, the covenant set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.

                                       26
<PAGE>

      4.16 Delivery of Securities After Closing. The Company shall deliver, or
cause to be delivered, the respective Securities purchased by each Purchaser to
such Purchaser within 3 Trading Days of the Closing Date.

      4.17 Form D; Blue Sky Filings. The Company agrees to timely file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof, promptly upon request of any Purchaser. The Company shall take
such action as the Company shall reasonably determine is necessary in order to
obtain an exemption for, or to qualify the Securities for, sale to the
Purchasers at the Closing under applicable securities or "Blue Sky" laws of the
states of the United States, and shall provide evidence of such actions promptly
upon request of any Purchaser.

      4.18 Capital Changes. Until the one year anniversary of the Effective
Date, the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of the
Purchasers holding a majority in interest of the Shares.

      4.19 Most Favored Nation Provision. From the date hereof until the date
that is the 24 month anniversary of the Closing Date, upon any issuance by the
Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents
at an effective price per share (of Common Stock assuming exercise or conversion
in full) of less than $2.00 (subject to adjustment for reverse and forward stock
splits, stock dividends, stock combinations and other similar transactions of
the Common Stock that occur after the date of this Agreement) (a "Subsequent
Financing"), each Purchaser may elect, in its sole discretion, to exchange all
or some of the Shares (but not the Warrants) then held by such Purchaser for
additional securities (including any additional securities issued as part of a
unit with such security) of the same type issued in such Subsequent Financing
(such exchange to be made at the same time as the closing of such Subsequent
Financing), on the same terms and conditions as the Subsequent Financing, based
on the Per Share Purchase Price multiplied by the number of Shares being
exchanged. By way of example, if the Company undertakes a Subsequent Financing
of convertible debentures and warrants, each Purchaser shall have the right to
participate in such Subsequent Financing and use the exchange of its Shares as
consideration, on a $1 for $1 basis, in lieu of cash consideration. The Company
shall provide each Purchaser at least 5 Trading Days' prior written notice of
any such Subsequent Financing. Notwithstanding the foregoing, this Section 4.19
shall not apply in respect of an Exempt Issuance.

                                       27
<PAGE>

                                   ARTICLE V.
                                  MISCELLANEOUS

      5.1 Termination. This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers, by written notice
to the other parties, if the Closing has not been consummated on or before
January 31, 2007; provided, however, that no such termination will affect the
right of any party to sue for any breach by the other party (or parties).

      5.2 Fees and Expenses. At the Closing, the Company has agreed to reimburse
Midtown the non-accountable sum of $25,000, for its legal fees and expenses,
$10,000 of which has been paid prior to the Closing. Except as expressly set
forth in the Transaction Documents to the contrary, each party shall pay the
fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied
in connection with the delivery of any Securities to the Purchasers.

      5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

      5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the 2nd Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

      5.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and Purchasers holding at least 67% of the then outstanding
Securities or, in the case of a waiver, by the party against whom enforcement of
any such waived provision is sought. No waiver of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.

                                       28
<PAGE>

      5.6 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

      5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser (other than by merger). Any
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such Purchaser assigns or transfers any Securities, provided such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to the
"Purchasers" (which, for purposes of clarity, includes the representations and
warranties in Section 3.2 herein as to such transferee).

      5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.9.

      5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or is an inconvenient venue for such proceeding. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner permitted by law. The parties hereby waive
all rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys' fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.

                                       29
<PAGE>

      5.10 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery of the Shares and Warrant Shares.

      5.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission or by e-mail delivery of a ".pdf" format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or ".pdf" signature page were an original
thereof.

      5.12 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

      5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever any Purchaser exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in
whole or in part without prejudice to its future actions and rights; provided,
however, in the case of a rescission of an exercise of a Warrant, the Purchaser
shall be required to return any shares of Common Stock delivered in connection
with any such rescinded exercise notice.

      5.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof (in the case of mutilation), or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction. The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (and provide customary indemnity)
associated with the issuance of such replacement Securities.

      5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.

                                       30
<PAGE>

      5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

      5.17 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. For reasons of administrative convenience only, Purchasers and their
respective counsel have chosen to communicate with the Company through FWS. FWS
does not represent any of the Purchasers but only Midtown as placement agent.
The Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.

      5.18 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled,
converted, transferred or for any other reason are no longer outstanding.

      5.19 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

                            (Signature Pages Follow)

                                       31
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

DRINKS AMERICAS HOLDINGS, LTD.                    Address for Notice:
                                                  -------------------

By:__________________________________________     372 Danbury Road
     Name:                                        Wilton, CT 06897
     Title:                                       Facsimile: ___________
                                                  Attention: ___________
With a copy to (which shall not constitute notice):

Eaton & Van Winkle LLP
3 Park Avenue, 16th Floor
New York, NY 10016
Facsimile: (212) 779-9928
Attention: Joseph L. Cannella, Esq.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                    SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                       32
<PAGE>

         [PURCHASER SIGNATURE PAGES TO DKAM SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

Name of Purchaser: ________________________________________________________
Signature of Authorized Signatory of Purchaser: ________________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Email Address of Purchaser:________________________________________________
Fax Number of Purchaser: ________________________________________________
Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as above):

Subscription Amount:
$:
Shares:
#:
Warrant Shares:
#:
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

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