Document:

Exhibit 10.4 to IntriCon Corporation Form 8-K dated May 22, 2006

Exhibit 10.4

 

PATENT SECURITY AGREEMENT

THIS PATENT SECURITY AGREEMENT (this “Security Agreement”) is made as of this 22nd day of May, 2007, by RESISTANCE TECHNOLOGY, INC., a Minnesota corporation (the “Grantor”), in favor of LASALLE BANK NATIONAL ASSOCIATION, a national banking association (the “Bank”), with an office at 3500 IDS Center, 80 South 8th Street, Minneapolis, MN 55402.

RECITALS:

A.           The Grantor owns the patents and patent applications listed on Schedule A annexed hereto; and

B.            The Grantor, certain of its affiliates and the Bank are parties to a certain Loan and Security Agreement dated on or about the date hereof (as amended, amended and restated or otherwise modified from time to time, the “Loan Agreement”) and other related loan documents of even date herewith (collectively, with the Loan Agreement, and as each may be amended or otherwise modified from time to time, the “Loan Documents”), which Loan Documents provide for, among other things, (i) Bank from time to time to extend credit to or for the account of the Grantor, and (ii) the grant by Grantor to the Bank of a security interest in certain of Grantor’s assets, including,
without limitation, its patents and patent applications;

AGREEMENTS:

NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, Grantor agrees as follows:

1.            Incorporation of Loan Documents. The Loan Documents and the terms and provisions thereof are hereby incorporated herein in their entirety by this reference thereto. All terms capitalized but not otherwise defined herein shall have the same meanings herein as in the Loan Agreement.

2.            Grant of Security Interest. To secure the complete and timely payment and satisfaction of the Obligations, Grantor hereby grants to the Bank, and hereby reaffirms its prior grant pursuant to the Loan Documents of, a continuing security interest in all of Grantor’s right, title and interest in, to and under the following (all of the following items or types of property being herein collectively referred to as the “Patents”), whether presently existing or hereafter created or acquired:

(a)           each patent, patent application and license agreement (together with any renewals, continuations or extensions thereof) referred to in Schedule A annexed hereto; and

(b)           all proceeds of the foregoing and all proceeds associated with any claim by Grantor against third parties for past, present or future infringement thereof.

3.            Warranties and Representations. To induce the Bank to enter into the Loan Agreement and to extend the loans and other financial accommodations provided for therein, Grantor warrants and represents to Bank that:

 

 

(a)           no registered patent listed in Schedule A has been adjudged invalid or unenforceable by a court of competent jurisdiction nor has any such patent been cancelled, in whole or in part, and each such patent (unless listed as expired) is presently subsisting;

(b)           Grantor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to the Patents, free and clear of any liens, charges and encumbrances, including without limitation, shop rights and covenants by Grantor not to sue third persons; 

(c)           Grantor has no notice of any suits or actions commenced or threatened with reference to any Patents; and

(d)           Grantor has the unqualified right to execute and deliver this agreement and perform its terms.

4.            Restrictions on Future Agreements. Grantor agrees that until the Obligations shall have been satisfied in full and the Loan Documents shall have been terminated, Grantor shall not, without the prior written consent of Bank, sell or assign its interest in any of the Patents, or enter into any other agreement with respect to any Patents which would affect the validity or enforcement of the rights transferred to Bank under this Security Agreement.

5.            Royalties; Terms. The term of this Security Agreement shall extend until the earlier of (a) the expiration of each of the patents and patent applications constituting Patents, and (b) the payment in full of the Obligations and the termination of the Loan Agreement. Grantor that following the occurrence and during the continuance of an Event of Default under the Loan Agreement, the use by Bank (consistent with its role and rights as a secured party) of all Patents shall be without any liability for royalties or other related charges from Bank to Grantor.

6.            New Patents. Grantor represents and warrants that, based on a diligent investigation by Grantor, the Patents listed on Schedule A constitute all of the federally registered patents, and federal applications for registration of patents now owned by Grantor. If, before the Obligations shall have been satisfied in full or before the Loan Documents have been terminated, Grantor shall (a) become aware of any existing registered Patents of which Grantor has not previously informed the Bank, or (b) become entitled to the benefit of any registered Patents, which benefit is not in existence on the date hereof, the provisions of this Security Agreement above shall automatically apply thereto and Grantor shall
give to the Bank prompt written notice thereof. Grantor hereby authorizes the Bank to modify this Security Agreement by amending Schedule A to include any such Patents.

7.            Release of Security Agreement. This Security Agreement is made for collateral purposes only and effects no present transfer of title as to any Patents. Upon payment in full of the Obligations and termination of the Loan Agreement, Bank shall execute and deliver such documents and take such actions as may be reasonably necessary or proper to terminate the security interests created hereby and pursuant to the Loan Documents. 

8.            Expenses. All reasonable expenses incurred in connection with the performance of any of the agreements set forth herein shall be borne by Grantor. All reasonable fees, costs and expenses, of whatever kind or nature, including reasonable attorneys’ fees and legal expenses, incurred by Bank in connection with the filing or recording of any documents (including all taxes in connection therewith) in public offices, the payment or discharge of any taxes, reasonable counsel fees, maintenance fees, encumbrances or otherwise in protecting, maintaining or preserving the Patents or in defending or prosecuting any actions or proceedings arising out of or related to the Patents shall be borne by and paid by the Grantor.

 

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9.            Duties of Grantor. Grantor shall have the duty (a) to file and prosecute with commercially reasonable diligence any patent applications pending as of the date hereof or hereafter until the Obligations shall have been paid in full and the Loan Agreement has been terminated, (b) to preserve and maintain all rights in the Patents Collateral, as commercially reasonable, and (c) to ensure that the Patents is and remains enforceable. Any expenses incurred in connection with the obligations of Grantor under this Section 10 shall be borne by Grantor. 

10.          Bank’s Right to Sue. After the occurrence of an Event of Default that is continuing, Bank shall have the right, but shall in no way be obligated, to bring suit in its own name, or in the name of Grantor, to enforce the Patents and, if Bank shall commence any such suit, Grantor shall, at the request of Bank, do any and all lawful acts and execute any and all proper documents reasonably required by Bank in aid of such enforcement and the Grantor shall promptly, upon demand, reimburse and indemnify Bank for all costs and expenses incurred by Bank in the exercise of its rights under this Section 11.

11.          Waivers. No course of dealing between Grantor and Bank, nor any failure to exercise, nor any delay in exercising, on the part of Bank, any right, power or privilege hereunder or under the Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

12.          Severability. The provisions of this Security Agreement are severable, and if any clause or provision shall be held invalid and unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Security Agreement in any jurisdiction.

13.          Modification. This agreement cannot be altered, amended or modified in any way, except as specifically provided in Section 6 hereof or by a writing signed by the parties hereto.

14.          Cumulative Remedies; Power of Attorney; Effect on Loan Agreement. All of Bank’s rights and remedies with respect to the Patents, whether established hereby or by any other agreements or by law, shall be cumulative and may be exercised singularly or concurrently. Grantor hereby authorizes Bank after the occurrence of an Event of Default that is continuing, to make, constitute and appoint any officer or agent of Bank as Bank may select, in its sole discretion, as Grantor’s true and lawful attorney-in-fact, with power to (a) endorse Grantor’s name on all applications, documents, papers and instruments necessary or desirable for Bank in the use of the Patents, or (b) grant or issue any exclusive or non-exclusive license under the Patents to anyone,
or (c) assign, pledge, convey or otherwise transfer title in or dispose of the Patents to anyone. Grantor hereby ratifies all that such attorney shall lawfully do or cause to be done in accordance with the terms hereof, except for the gross negligence or willful misconduct of such attorney. This power of attorney shall be irrevocable until the Obligations shall have been paid in full and the Loan Documents have been terminated. Grantor acknowledges and agrees that this Security Agreement is not intended to limit or restrict in any way the rights and remedies of Bank under the Loan Documents, but rather is intended to facilitate the exercise of such rights and remedies. Bank shall have, in addition to all other rights and remedies given it by the terms of this Security Agreement and the Loan Documents, all rights and remedies allowed by law and the rights and remedies of a secured party under the Uniform Commercial Code as enacted in Illinois.

15.          Binding Effect; Benefits. This Security Agreement shall be binding upon be binding upon and shall inure to the benefit of Grantor and Bank, and their respective successors, nominees and assigns. 

 

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16.          Governing Law. This Security Agreement shall be governed by and construed in accordance with the laws of the State of Illinois and applicable federal law.

17.          Headings. Paragraph headings are used herein for convenience only and shall not modify the provisions which they precede.

18.          Further Assurances. Grantor agrees to execute and deliver such further agreements, instruments and documents, and to perform such further acts, as Bank shall reasonably request from time to time in order to carry out the purpose of this Security Agreement and agreements set forth herein.

19.          Survival of Representations. All representations and warranties of Grantor contained in this Security Agreement shall survive the execution and delivery of this agreement and shall be remade on the date of each borrowing under the Loan Agreement.

[Remainder of page intentionally left blank;

signature page follows]

 

4

IN WITNESS WHEREOF, Grantor has caused this Patent Security Agreement to be duly executed by its duly authorized officer thereunto as of this 22nd day of May, 2007.

 

	
             
 	
            RESISTANCE TECHNOLOGY, INC.

a Minnesota corporation 
 
	 
	
             
 	
            By:     
 	
            /s/   Scott Longval
 
	
             
 	
            Name:   
 	
            Scott Longval
 
	
             
 	
            Title: 
 	
            Chief Financial Officer
 

 

 

Agreed to and accepted

as of the date first written above:

 

LASALLE BANK NATIONAL ASSOCIATION, 

a national banking association,

 

	
            By:   
 	
            /s/   Peter L. Eaton
 
	
            Name:    
 	
            Peter L. Eaton
 
	
            Title:   
 	
            Senior Vice President
 

 

 

 

 

 

 

 

 

 

 

 

 

 

SIGNATURE PAGE TO PATENT SECURITY AGREEMENT 

SCHEDULE A

 

Patent Registrations and Applications

 

	
            Registrations:
 

	
            Serial
Number
  	
            Patent
Number
  	
Description of Patent Applied For
  	
Filing Date
  	
Issue Date

	 
	
            06/784331
 	
            4636768
 	
            COMPRESSION CONNECTION FOR POTENTIOMETER LEADS
 	
            October 4, 1985
 	
            January 13, 1987

 

 
 
	
            07/127446
 	
            4835833
 	
            METHOD OF MOUNTING A POTENTIOMETER
 	
            December 2, 1987
 	
            June 6, 1989

 

 
 
	
            07/332514
 	
            5001762
 	
            MINIATURE MODULAR VOLUME CONTROL AND INTEGRATED CIRCUIT ASSEMBLY FOR USE WITH A HEARING AID
 	
            March 31, 1989
 	
            March 19, 1991

 

 

 

 

 
 
	
            07/331646
 	
            5014037
 	
            POTENTIOMETER MOUNTING MECHANISM
 	
            March 10, 1989
 	
            May 7, 1991

 

 
 
	
            07/640052
 	
            5157371
 	
            POTENTIOMETER RETENTION MECHANISM AND METHOD OF MOUNTING
 	
            January 11, 1991
 	
            October 20, 1992

 

 

 
 
	
            08/287720
 	
            5500901
 	
            FREQUENCY RESPONSE ADJUSTING DEVICE
 	
            August 9, 1994
 	
            March 19, 1996

 

 
 
	
            08/476857
 	
            5784470
 	
            BATTERY DOOR AND FACEPLATE ARRANGEMENT FOR A COMPLETELY IN THE CANAL HEARING AID DEVICE
 	
            June 7, 1995
 	
            July 21, 1998

 

 

 

 
 
	
            08/514153
 	
            5687242
 	
            HEARING AID CONTROLS OPERABLE WITH BATTERY DOOR
 	
            August 11, 1995
 	
            November 11, 1997

 

 

 
 
	
            09/538699
 	
            6690806
 	
            VARIOUS DIRECTIONAL/OMNI-DIRECTIONAL HEARING AID MICROPHONE AND HOUSING STRUCTURES
 	
            March 30, 2000
 	
            February 10, 2004

 

 

 

 

 
 
	
            29/120266
 	
            D438860
 	
            MINIATURE MICROPHONE HOUSING AND SWITCH
 	
            March 16, 2000
 	
            March 13, 2001

 

 
 

 

 

 

	
            29/120267
 	
            D438196
 	
            MINIATURE MICROPHONE HOUSING AND SWITCH
 	
            March 16, 2000
 	
            February 27, 2001

 

 
 
	
            09/805585
 	
            6678386
 	
            PROGRAMMABLE MODULE
 	
            March 13, 2001
 	
            January 13, 2004

 
 
	
            29/234815
 	
            D525617
 	
            OVER THE EAR HEADSET
 	
            July 22, 2005
 	
            July 25, 2006

 
 
	
            29/234816
 	
            D527377
 	
            UNDER THE EAR HEADSET

 
 	
            July 22, 2005
 	
            August 29, 2006
 
	
            07034431
 	
            4743833
 	
            VOLTAGE REGULATOR

 
 	
            April 3, 1987
 	
            May 10, 1988
 
	
            08273200
 	
            5463692
 	
            SANDWICH SWITCH CONSTRUCTION FOR A HEARING AID

 
 	
            July 11, 1994
 	
            October 31, 1995
 
	
            08747757
 	
            5818324
 	
            WIRE COIL POTENTIOMETER WIPER

 
 	
            November 13, 1996
 	
            October 6, 1998
 
	
            09130039
 	
            6597793
 	
            DIRECTIONAL/OMNI-DIRECTIONAL HEARING AID MICROPHONE AND HOUSING

 
 	
            August 6, 1998
 	
            July 22, 2003
 

 

 

	
            Applications:
 

	
            Serial
Number
  	
Description of Patent Applied For
  	
Filing Date

	 
	
            10/931683
 	
            HEARING AID CIRCUIT REDUCING FEEDBACK

 
 	
            September 1, 2004
 
	
            09809744
 	
            ACOUSTIC SWITCH ELECTRONIC SWITCHING CAPABILITY

 
 	
            March 15, 2001
 
	
            09974732
 	
            HEARING AID

 
 	
            October 9, 2001
 
	
            11/274770
 	
            EARSET MICROPHONE [CONFIRM OWNERSHIP]
 	
            November 15, 2005

 
 
	
            29/263291
 	
            PUSH-TO-TALK COMMUNICATOR HOUSING [CONFIRM OWNERSHIP]
 	
            July 20, 2006

 

 
 
	
            09/472492
 	
            HEARING AID SYSTEM [CONFIRM OWNERSHIP]
 	
            December 17, 1999

 
 
	
            60/426243
 	
            MEMS MICROPHONE [CONFIRM OWNERSHIP]
 	
            November 14, 2002sec document

                                                                    Exhibit 10.1

--------------------------------------------------------------------------------

                            ASSET PURCHASE AGREEMENT

--------------------------------------------------------------------------------

                                 BY AND BETWEEN

                               LYNCH SYSTEMS, INC.
                                (AS THE "SELLER)

                                       AND

                       OLIVOTTO GLASS TECHNOLOGIES S.P.A.
                                (AS THE "BUYER")

                                  MAY 17, 2007

ARTICLE I.    ASSETS TO BE PURCHASED.........................................................1
   Section 1.1.  Description of Assets.......................................................1
   Section 1.2.  Non-Assignment of Certain Property..........................................2
ARTICLE II.   ASSUMPTION OF LIABILITIES AND OBLIGATIONS......................................3
ARTICLE III.  PURCHASE PRICE.................................................................3
   Section 3.1.  Purchase Price..............................................................3
   Section 3.2.  Deposit.....................................................................4
   Section 3.3.  Closing Payment.............................................................4
   Section 3.4.  Calculation of Estimated Closing Date Net Asset Value.......................4
   Section 3.5.  Allocation of Purchase Price................................................6
   Section 3.6.  Consignment of Certain Items................................................6
ARTICLE IV.   CLOSING........................................................................6
ARTICLE V.    REPRESENTATIONS AND WARRANTIES.................................................6
   Section 5.1.  Representations and Warranties of Buyer.....................................6
   Section 5.2.  Representations and Warranties of Seller....................................8
   Section 5.3.  Effect of Disclosures on Schedules.........................................17
   Section 5.4.  Disclaimer of Other Warranties.............................................17
   Section 5.5.  Closing Date Effect........................................................17
ARTICLE VI.   COVENANTS.....................................................................17
   Section 6.1.  Covenant Against Disclosure................................................17
   Section 6.2.  Covenant Against Competition...............................................17
   Section 6.3.  Injunctive Relief..........................................................17
   Section 6.4.  Access to Records..........................................................17
   Section 6.5.  Transition of Customers....................................................18
   Section 6.6.  Operate Business in the Ordinary Course....................................18
   Section 6.7.  Certain Negative Covenants.................................................18
   Section 6.8.  Update Disclosure..........................................................18
   Section 6.9.  Severability...............................................................18
   Section 6.10.  Further Assurances........................................................19
   Section 6.11.  Announcements.............................................................19
   Section 6.12.  Employees of Seller.......................................................19
ARTICLE VII.  CLOSING DELIVERIES............................................................19
   Section 7.1.  Deliveries by Seller.......................................................19
   Section 7.2.  Deliveries by Buyer........................................................20
ARTICLE VIII. CONDITIONS PRECEDENT TO CLOSING...............................................21
   Section 8.1.  Conditions to Obligation of Each Party to Effect the Transaction...........21
   Section 8.2.  Additional Conditions to Obligations of Buyer..............................21
   Section 8.3.  Additional Conditions to Obligations of Seller.............................22
ARTICLE IX.  TERMINATION, AMENDMENT AND WAIVER..............................................22
   Section 9.1.  Termination................................................................22
   Section 9.2.  Effect of Termination......................................................23
   Section 9.3.  Waiver.....................................................................23
ARTICLE X.    INDEMNIFICATION...............................................................23
   Section 10.1.  Survival of Representations, Warranties and Agreements....................23
   Section 10.2.  Indemnification...........................................................24
   Section 10.3.  Limitations on Indemnification............................................25

                                               i

   Section 10.4.  Procedure for Indemnification with Respect to Third-Party Claims..........26
   Section 10.5.  Procedure for Indemnification with Respect to Non-Third-Party Claims......27
   Section 10.6.  Cooperation in the Defense of Claims......................................27
ARTICLE XI.   MISCELLANEOUS PROVISIONS......................................................27
   Section 11.1.  Notices...................................................................27
   Section 11.2.  Entire Agreement..........................................................28
   Section 11.3.  Binding Effect; Assignment................................................28
   Section 11.4.  Captions..................................................................28
   Section 11.5.  Expenses of Transaction...................................................28
   Section 11.6.  Waiver; Consent...........................................................28
   Section 11.7.  No Third Party Beneficiaries..............................................29
   Section 11.8.  Counterparts..............................................................29
   Section 11.9.  Remedies of Buyer.........................................................29
   Section 11.10.  Bulk Sales Laws..........................................................29
   Section 11.11.  Governing Law; Consent to Jurisdiction...................................29
   Section 11.12.  Exhibits and Schedules...................................................30
   Section 11.13.  Knowledge................................................................30

                             TABLE OF DEFINED TERMS

Term                                                                                   Section
----                                                                                   -------

Accounts Payable........................................................................2.1(a)
Accrued Liabilities.....................................................................2.1(b)
Actual Closing Date Net Asset Value.....................................................3.4(b)
Adjusted Carrying Value.................................................................3.4(a)
Adjustment Report.......................................................................3.4(b)
Allocation Certificate.....................................................................3.5
Arbiter.................................................................................3.4(d)
Assignments and Assumptions.............................................................7.1(b)
Assumed Liabilities..........................................................................2
Business...............................................................Introductory Paragraphs
Business Day............................................................................3.4(a)
Buyer..................................................................Introductory Paragraphs
Certificate of Assumed Liabilities......................................................7.1(f)
Closing......................................................................................4
Closing Date.................................................................................4
Closing Payment............................................................................3.3
Code...............................................................................5.2(n)(iii)
Consigned Items............................................................................3.6
Contest Notice............................................................................10.5
Contracts...............................................................................1.1(f)
Contracts Liabilities...................................................................2.1(c)
Damages................................................................................10.2(a)
Deposit....................................................................................3.2
Employee Benefit Plans...............................................................5.2(n)(i)

                                              ii

Employee Severance Payments.............................................................5.2(t)
Encumbrances...............................................................................1.1
Environmental Laws..................................................................5.2(l)(ii)
Environmental Permits..............................................................5.2(l)(iii)
ERISA................................................................................5.2(n)(i)
Escrow Agent...............................................................................3.2
Escrow Agreement...........................................................................3.2
Estimated Closing Date Net Asset Value..................................................3.4(a)
Excluded Liabilities.........................................................................2
Execution Date.........................................................Introductory Paragraphs
Financial Statements....................................................................5.2(e)
GAAP....................................................................................3.4(a)
Governmental Authority..................................................................5.1(c)
Hazardous Material..................................................................5.2(l)(ii)
Indemnifiable Claim....................................................................10.2(a)
Indemnification Notice....................................................................10.4
Indemnified Party......................................................................10.3(d)
Indemnifying Party.....................................................................10.3(d)
Inventory...............................................................................1.1(g)
Knowledge................................................................................11.13
Lease...................................................................................7.1(i)
Losing Party............................................................................3.4(e)
Material Adverse Effect.................................................................5.2(a)
Miscellaneous Assets....................................................................1.1(i)
Non-Third Party Claim Indemnification Notice..............................................10.5
Objection Notice........................................................................3.4(c)
Permits.................................................................................1.1(c)
Personal Property.......................................................................1.1(a)
Preliminary Statement...................................................................3.4(a)
Prevailing Party........................................................................3.4(e)
Property...................................................................................1.1
Personal Property.......................................................................1.1(b)
Personal Property Leases................................................................1.1(e)
Premises................................................................................7.1(h)
Proprietary Rights......................................................................1.1(d)
Purchase Price.............................................................................3.1
Real Property..............................................................................1.1
Receivables.............................................................................1.1(b)
Seller.................................................................Introductory Paragraphs
Severance Contribution.....................................................................3.1
Warranty Liabilities....................................................................2.1(d)

                                           SCHEDULES

Schedule 1.1(a)  -    Personal Property
Schedule 1.1(b)  -    Receivables

                                              iii

Schedule 1.1(c)  -    Permits
Schedule 1.1(d)  -    Proprietary Rights
Schedule 1.1(e)  -    Personal Property Leases
Schedule 1.1(f)  -    Contracts
Schedule 1.1(g)  -    Inventory
Schedule 1.1(h)  -    Miscellaneous Assets
Schedule 1.1(l)  -    Excluded Assets
Schedule 1.1(m)  -    Real Property
Schedule 2.1(a)  -    Accounts Payable
Schedule 2.1(b)  -    Accrued Liabilities
Schedule 3.4(a)  -    Adjusted Carrying Value
Schedule 5.2(b)  -    Authorization
Schedule 5.2(c)  -    Conflicts
Schedule 5.2(f)  -    Changes
Schedule 5.2(g)  -    Liabilities
Schedule 5.2(h)  -    Taxes
Schedule 5.2(i)  -    Liens
Schedule 5.2(j)  -    Insurance
Schedule 5.2(k)  -    Litigation
Schedule 5.2(l)  -    Compliance with Laws
Schedule 5.2(n)  -    Employee Benefit Plans
Schedule 5.2(o)  -    Labor Matters
Schedule 5.2(p)  -    Encumbrances
Schedule 5.2(q)  -    Contracts and Commitments
Schedule 5.2(r)  -    Receivables
Schedule 5.2(s)  -    Non-GAAP Inventory
Schedule 5.2(t)  -    Employees

EXHIBITS

Exhibit A...Escrow Agreement
Exhibit B...Bill of Sale
Exhibit C...Assignments and Assumptions
Exhibit D...Assignment of Proprietary Rights
Exhibit E...Certificate of Assumed Liabilities
Exhibit F...Lease

                                       iv

                            ASSET PURCHASE AGREEMENT

            THIS AGREEMENT dated May 17, 2007 (the "Execution  Date"), is by and
between OLIVOTTO GLASS TECHNOLOGIES  S.P.A., an Italian  corporation  ("Buyer"),
and LYNCH SYSTEMS, INC., a South Dakota corporation ("Seller").

                              W I T N E S S E T H:

            WHEREAS,  Seller,  INTER ALIA, designs,  develops,  manufactures and
markets a broad range of manufacturing  equipment for the electronic display and
consumer glass industries (the "Business"); and

            WHEREAS,  Buyer  desires to  purchase,  and Seller  desires to sell,
certain of Seller's  operating  assets relating to the Business,  upon the terms
and subject to the conditions set forth in this Agreement.

            NOW,  THEREFORE,  in  consideration  of the  premises and the mutual
promises herein contained, Buyer and Seller hereby agree as follows:

                        ARTICLE I. ASSETS TO BE PURCHASED

            SECTION 1.1.  DESCRIPTION  OF ASSETS.  Upon the terms and subject to
the  conditions  set forth in this  Agreement,  Seller  hereby agrees to convey,
sell, transfer, assign and deliver to Buyer, and Buyer hereby agrees to purchase
from  Seller,  on the  Closing  Date (as defined  below),  free and clear of all
liens, security interests,  claims, pledges,  charges,  encumbrances,  equities,
rights of use, levies, taxes, imposts and restrictions (the "Encumbrances"), all
right, title and interest of Seller in and to the assets,  properties and rights
(contractual  or  otherwise)  of  Seller  that are used in  connection  with the
Business set forth below:

            (a) All machinery,  equipment, tooling, parts, furniture,  supplies,
      and other  tangible  personal  property  used in  conducting  the Business
      listed on Schedule 1.1(a) (the "Personal Property");

            (b)  All  accounts  receivable  relating  to or  arising  out of the
      operation of the Business listed on Schedule 1.1(b) (the "Receivables");

            (c) All franchises,  licenses,  permits,  consents,  authorizations,
      approvals and certificates of any  Governmental  Authority (as hereinafter
      defined) used in conducting  the Business  listed on Schedule  l.l(c) (the
      "Permits");

            (d) Subject to clause (xi) of the final  paragraph  of this  Section
      1.1,  all  patents,  inventions,  trade  secrets,  processes,  proprietary
      rights,  proprietary  knowledge,   know-how,  design  archives,   computer
      software, URLs, web sites including content and coding, trademarks, names,
      service marks, trade names,  copyrights,  symbols,  logos,  franchises and
      permits  owned by  Seller  and used in  conducting  the  Business  and all
      applications therefor,  registrations thereof and licenses, sublicenses or
      agreements in respect thereof, that Seller owns or has the right to use or
      to which Seller is a party and all filings,  registrations or issuances of

                                       1

      any of the  foregoing  with or by any  federal,  state,  local or  foreign
      Governmental  Authority and all related  goodwill as set forth on Schedule
      1.1(d) (collectively, the "Proprietary Rights");

            (e) All leases of equipment or other tangible personal property used
      in  conducting  the  Business  listed on Schedule  1.1(e)  (the  "Personal
      Property Leases");

            (f) All contracts,  agreements, contract rights, license agreements,
      third    party    guaranties,    indemnifications,    arrangements,    and
      understandings,  whether oral or written, to which Seller is a party which
      relate  to  the  License   Agreements   listed  on  Schedule  1.1(f)  (the
      "Contracts");

            (g) All  inventories of materials,  work-in-process,  finished goods
      and supplies listed on Schedule 1.1(g) (the "Inventory");

            (h) All security deposits,  prepaid expenses and other miscellaneous
      assets of the  Business  listed on  Schedule  1.1(h)  (the  "Miscellaneous
      Assets");

            (i) All books of  account,  customer  lists,  client  lists,  files,
      papers, records and telephone numbers used in conducting the Business;

            (j) All  rights  of  Seller  in, to and  under  express  or  implied
      warranties from suppliers of the Business with respect to the Property (as
      hereinafter defined); and

            (k) All goodwill relating to the Business.

            All of the assets, properties and rights (contractual and otherwise)
being conveyed,  sold, transferred,  assigned and delivered to Buyer pursuant to
subsections  (a) through (k) of this  Section 1.1 are  hereinafter  collectively
referred to as the "Property."

            Notwithstanding  the  foregoing,  there shall be  excluded  from the
Property the following  assets and  properties  of Seller  related to or used in
connection with the Business:  (i) all cash and cash  equivalents;  (ii) all tax
refunds  of any kind paid or  payable  to  Seller;  (iii) all  assets  listed on
Schedule 1.1(l), (iv) the PT Kedaung accounts receivable, the gearless tablewear
shear  and the show  machine;  (v) the real  property  of Seller  identified  on
Schedule 1.1(m) (the "Real  Property");  (vi) all corporate minute books,  stock
records,  tax returns,  checkbooks,  books of original entry and bank statements
and  supporting  materials  of Seller  for all  periods,  all of which  shall be
subject to Buyer's  right to inspect  and copy;  (vii) all  insurance  policies;
(viii) all  claims,  causes of and choses in action of any sort that  Seller may
have, including,  without limitation,  under any of Seller's insurance policies,
against any of the officers,  directors and/or shareholders of Seller and/or the
parents,  spouses and lineal  descendants  of any such  persons;  (ix) rights of
set-off,   counterclaim   and/or   recoupment   respecting  any  liabilities  or
obligations  of  Seller  not  included   within  the  Assumed   Liabilities  (as
hereinafter defined);  and (x) the Closing Payment (as hereinafter defined); and
(xi) all rights in and to the name "Lynch" for all uses other than in connection
with the products manufactured in the Business on the Closing Date.

            SECTION 1.2.  NON-ASSIGNMENT OF CERTAIN PROPERTY. To the extent that
the  assignment  hereunder of any of the Permits,  Personal  Property  Leases or
Contracts would require the consent of any other party (or in the event that any

                                       2

of the same shall be nonassignable), neither this Agreement nor any action taken
pursuant to its  provisions  shall  constitute  an assignment or an agreement to
assign if such  assignment  or attempted  assignment  would  constitute a breach
thereof or result in the loss or diminution thereof; provided,  however, that in
each such case,  Seller shall use its best efforts to obtain the consents of any
such other party to an  assignment  to Buyer.  If such consent is not  obtained,
subject to the provisions of Section  7.1(b),  Seller shall cooperate with Buyer
in any reasonable arrangement designed to provide for Buyer the full benefits of
any  such  Permit,  Personal  Property  Lease  or  Contract  including,  without
limitation,  enforcement,  for the account and benefit of Buyer,  of any and all
rights of Seller  against  any other  person  with  respect to any such  Permit,
Personal Property Lease or Contract.

            ARTICLE II. ASSUMPTION OF LIABILITIES AND OBLIGATIONS

            Buyer hereby agrees, on the terms and conditions contained herein to
assume the following liabilities and obligations of Seller:

            (a) All  liabilities  with  respect to the  accounts  payable of the
      Business listed on Schedule 2.1(a) (the "Accounts Payable");

            (b) All liabilities  with respect to the accrued  liabilities of the
      Business listed on Schedule 2.1(b) (the "Accrued Liabilities");

            (c) All liabilities with respect to post-Closing obligations arising
      under the Contracts (the "Contracts Liabilities");

            (d) All liabilities with respect to post-Closing obligations arising
      under the Seller's  warranty policies with respect to items sold by Seller
      prior  to the  Closing  Date  to  customers  other  than  PT  Kedaung  and
      Owens-Illinois do Brasil (Cisper); and

            (e) All liabilities with respect to post-Closing obligations arising
      under the Personal Property Leases.

            All  of  the   liabilities   being  assumed  by  Buyer  pursuant  to
subsections (a) through (e) of this Section 2.1 are  hereinafter  referred to as
the "Assumed Liabilities."

            Notwithstanding  the foregoing,  Buyer is not assuming any liability
for any Excluded  Liability (as  hereinafter  defined) and it is understood  and
agreed that, as between Seller and Buyer, Seller shall remain solely responsible
for the payment, discharge and satisfaction of all Excluded Liabilities. As used
herein,  "Excluded Liabilities" means all liabilities of Seller and the Business
of any kind, liquidated or contingent, asserted or unasserted, known or unknown,
other  than  the  Assumed  Liabilities,   including  but  not  limited  to,  all
liabilities to PT Kedaung or  Owens-Illinois  do Brasil (Cisper)  arising out of
transactions  between  Seller and such party which occurred prior to the Closing
Date.

                           ARTICLE III. PURCHASE PRICE

            SECTION 3.1. PURCHASE  PRICE.  Upon the  terms  and  subject  to the
conditions set forth in this Agreement, in consideration for the Property and in
full payment therefor (the "Purchase Price"):

                                       3

                  (i) Buyer is assuming the Assumed Liabilities;

                  (ii)  Buyer is making the  Closing  Payment  reflected  in the
            Preliminary Statement (as hereinafter defined),  which is subject to
            adjustment as provided in Sections 3.4 and 3.5; and

                  (iii)  Buyer is making a payment to Seller  with  respect to a
            portion of the Employee  Severance Payment (as hereinafter  defined)
            in the amount of $117,637.15 (the "Severance Contribution").

            Buyer is paying the cash portion of the  Purchase  Price as provided
below.

            SECTION 3.2. DEPOSIT.  Concurrently  herewith Buyer is delivering by
wire transfer of immediately available funds the sum of $500,000 (the "Deposit")
to Olshan  Grundman  Frome  Rosenzweig & Wolosky LLP (the "Escrow  Agent") to be
held in escrow and  disbursed in  accordance  with the  provisions of the escrow
agreement in the form of Exhibit A hereto (the "Escrow Agreement")  executed and
delivered by Buyer, Seller and the Escrow Agent concurrently herewith.

            SECTION 3.3. CLOSING  PAYMENT.  On the Closing Date, Buyer shall pay
the Closing Payment to Seller by wire transfer of immediately available funds to
an account  designated  by Seller not later than two (2) Business  Days prior to
the Closing Date. As used herein,  the "Closing  Payment"  means the  difference
between (a) the Estimated Closing Date Net Asset Value (as hereinafter  defined)
and (b) the Deposit.

            SECTION 3.4. CALCULATION OF ESTIMATED CLOSING DATE NET ASSET VALUE.

            (a) Not later than  three (3)  Business  Days  prior to the  Closing
      Date,  Seller and Buyer  shall  execute a  certificate  (the  "Preliminary
      Statement")  setting forth the Estimated  Closing Date Net Asset Value. As
      used herein,  the "Estimated  Closing Date Net Asset Value" means the good
      faith  estimate of the positive  difference as of the Closing Date between
      (i) the aggregate carrying value of the Property as reflected on the books
      and  records  of  Seller  determined  in  accordance  with  United  States
      generally accepted accounting  principles  consistently  applied ("GAAP"),
      adjusted  consistent  with the  methodology  set forth on Schedule  3.4(a)
      hereto (the "Adjusted  Carrying  Value") and (ii) the aggregate  amount of
      the Assumed  Liabilities  as  reflected on the books and records of Seller
      determined in accordance  with GAAP. As used herein,  "Business Day" means
      any  day  that  is not a  Saturday,  Sunday  or  legal  holiday  on  which
      federally-chartered banks are required or authorized to be closed.

            (b) As soon as  reasonably  practical  after the Closing,  but in no
      event more than forty five (45)  calendar  days  thereafter,  Seller shall
      prepare and deliver to Buyer a schedule (the "Adjustment  Report") showing
      the computation of the Actual Closing Date Net Asset Value (as hereinafter
      defined). As used herein,  "Actual Closing Date Net Asset Value" means the
      positive  difference  as of the  Closing  Date  between  (i) the  Adjusted
      Carrying  Value  of the  Property  and (ii) the  aggregate  amount  of the
      Assumed  Liabilities  as  reflected  on the  books and  records  of Seller
      determined in accordance with GAAP.

                                       4

            (c) Within thirty (30) calendar days after receipt of the Adjustment
      Report,  Buyer may, by written notice to Seller,  object thereto. If Buyer
      shall not object  thereto in writing  within such thirty (30) calendar day
      period,  the calculations on the Adjustment  Report shall become final and
      shall not be subject to further  review,  challenge or  adjustment  absent
      fraud or manifest error.  Buyer may in good faith object to the Adjustment
      Report within such thirty (30) calendar day period by delivering a written
      notice of its objection (the  "Objection  Notice") to Seller:  (i) setting
      forth  the  items  being  disputed  and the  reasons  therefor,  and  (ii)
      specifying Buyer's calculation of the figures on the Adjustment Report. In
      connection  with  the  preparation  of  the  Objection   Notice  (and  any
      subsequent  submissions  to the Arbiter (as  defined  below)),  each party
      shall grant the other party and its accountants and other representatives'
      reasonable access to all of the books and records of such party. Any delay
      in  granting  access to all such books and records  shall  correspondingly
      extend such thirty (30)  calendar day period for delivery of the Objection
      Notice.

            (d) For thirty (30)  calendar  days after  delivery of the Objection
      Notice,  Buyer and Seller shall  attempt to resolve all  disputes  between
      them regarding the Adjustment  Report.  If Buyer and Seller cannot resolve
      all such  disputes  within such  thirty  (30) day  period,  the matters in
      dispute  shall be  determined  by an  accounting  firm selected by them to
      resolve the remaining objections (the "Arbiter").  If Buyer and Seller are
      unable  to  jointly  select  an  accounting   firm,  they  will  select  a
      nationally-recognized   accounting  firm  by  lot  after  excluding  their
      respective  regular outside accounting firms. Any advance retainer and any
      periodic  payments to the Arbiter  shall be advanced  equally by Buyer and
      Seller.  Promptly,  but not later  than  forty-five  (45)  days  after the
      acceptance of its  appointment,  the Arbiter shall determine (based solely
      on presentations by Buyer and Seller to the Arbiter and not by independent
      review)  only those items in dispute  and shall  render a report as to its
      resolution of such items and the resulting  calculation  of the Adjustment
      Report.  For purposes of the  Arbiter's  determination,  the amounts to be
      included shall be the amounts from the Adjustment  Report as to items that
      are not in dispute, and the amounts determined by the Arbiter, as to items
      that are  submitted  for  resolution  by the  Arbiter.  In  resolving  any
      disputed  item,  the Arbiter must select the amount of the  disputed  item
      proffered by Buyer or the amount of the disputed item  proffered by Seller
      (and cannot substitute the Arbiter's own judgment) based upon the position
      the  Arbiter  determines  to be closest to the correct  amount.  Buyer and
      Seller shall  cooperate with the Arbiter in making its  determination  and
      such determination shall be conclusive and binding upon Buyer and Seller.

            (e) The fees and expenses of the Arbiter  shall be paid by the party
      (the "Losing  Party") whose  calculation  of Actual Closing Date Net Asset
      Value  is  further  from  the  Actual  Closing  Date  Net  Asset  Value as
      determined by the Arbiter. If the other party (the "Prevailing Party") has
      advanced or provided a portion of the Arbiter's fees and costs as provided
      above in Section  3.2(d),  the Losing Party shall reimburse the Prevailing
      Party for such fees and costs  within  ten (10)  Business  Days  after the
      Arbiter's final decision.

            (f) Within five (5)  Business  Days after the  determination  of the
      Actual Closing Date Net Asset Value:

                                       5

                  (i) If the Actual Closing Date Net Asset Value is greater than
            the Estimated  Closing Date Net Asset Value, then Buyer shall pay to
            Seller the amount by which the Actual  Closing  Date Net Asset Value
            exceeds the Estimated Closing Date Net Asset Value.

                  (ii) If the Estimated  Closing Date Net Asset Value is greater
            than the Actual Closing Date Net Asset Value,  then Seller shall pay
            to Buyer the amount by which the  Estimated  Closing  Date Net Asset
            Value exceeds the Actual Closing Date Net Asset Value.

            SECTION 3.5.  ALLOCATION OF PURCHASE PRICE.  The aggregate  purchase
price of the Property  shall be allocated for purposes of this Agreement and for
federal,  state and local tax purposes as set forth on an allocation certificate
("Allocation Certificate") to be agreed upon by Seller and Buyer at such time as
they  execute  the  Preliminary  Statement.  The  allocation  shall  reflect the
respective  book value of the assets sold to  liabilities  assumed by the Buyer,
and shall be adjusted if necessary, in accordance with Section 3.2 hereof. Buyer
and  Seller  shall file all  federal,  state,  local and  foreign  tax  returns,
including  Internal  Revenue Form 8594, in accordance  with the  allocation  set
forth in such Allocation Certificate.

            SECTION 3.6.  CONSIGNMENT OF CERTAIN ITEMS. For a period of eighteen
(18) months following the Closing Date the gearless tablewear shear and the show
machine (the "Consigned  Items") shall be held on consignment by Buyer. If Buyer
receives  any offers to purchase any of the  Consigned  Items from a third party
during such  eighteen-month  period Buyer shall  promptly  notify  Seller and if
Seller  accepts  such  offered  terms the  proceeds of such sale shall be shared
equally  between Seller and Buyer.  If the Consigned Items have not been so sold
by the end of such  eighteen-month  period Buyer shall deliver possession of the
Consigned Items to Seller.

                             ARTICLE IV. CLOSING

            The closing of the transactions  contemplated by this Agreement (the
"Closing")  shall  take place at 10:00 a.m.  at the  offices of Olshan  Grundman
Frome  Rosenzweig & Wolosky LLP,  Park Avenue  Tower,  65 East 55th Street,  New
York,  New York,  on the later  of:  (i) the day on which all of the  conditions
precedent set forth in Article VIII have been satisfied or waived,  or (ii) June
1,  2007.  Such time and date are  herein  referred  to as the  "Closing  Date."
Subject to the  provisions  of Article IX  hereof,  failure to  consummate  such
transactions  on the date and the time  determined  pursuant to this  Article IV
shall not result in the  termination of this Agreement and shall not relieve any
party of any obligation under this Agreement.

                    ARTICLE V. REPRESENTATIONS AND WARRANTIES

            SECTION 5.1. REPRESENTATIONS   AND   WARRANTIES   OF  BUYER.   Buyer
represents and warrants to Seller that:

            (a)  CORPORATE  EXISTENCE.  Buyer is a corporation  duly  organized,
      validly existing and in good standing under the laws of Italy.

                                       6

            (b)  AUTHORIZATION;  VALIDITY.  Buyer  has all  requisite  power and
      authority  to enter  into  this  Agreement,  to  perform  its  obligations
      hereunder and to consummate  the  transactions  contemplated  hereby.  All
      necessary  action has been taken by Buyer with  respect to the  execution,
      delivery and  performance by it of this Agreement and the  consummation of
      the  transactions  contemplated  hereby.  Assuming the due  execution  and
      delivery of this Agreement by Seller, this Agreement is a legal, valid and
      binding obligation of Buyer,  enforceable against Buyer in accordance with
      its terms, subject to applicable  bankruptcy,  insolvency,  reorganization
      and moratorium  laws and other laws of general  application  affecting the
      enforcement of creditors'  rights  generally,  and the fact that equitable
      remedies or relief (including,  but not limited to, the remedy of specific
      performance)  are subject to the  discretion  of the court from which such
      relief may be sought.

            (c)  LITIGATION.  There  is  no  claim,  litigation,  action,  suit,
      proceeding,  investigation or inquiry, administrative or judicial, pending
      or, to the  knowledge of Buyer,  threatened  against  Buyer,  at law or in
      equity,  before any foreign,  federal,  state or local agency,  authority,
      board,   bureau,   court,   instrumentality  or  other  entity  exercising
      executive,  legislative,  judicial,  taxing,  regulatory or administrative
      powers  (each,  a  "Governmental  Authority"),  that might have an adverse
      effect on Buyer's  ability to perform  any of its  obligations  under this
      Agreement or to consummate the transactions contemplated hereby.

            (d) NO BREACH OF STATUTE OR  CONTRACT.  Neither  the  execution  and
      delivery of this Agreement by Buyer,  nor the consummation by Buyer of the
      transactions  contemplated hereby, nor compliance by Buyer with any of the
      provisions  hereof,  will  violate  or cause a default  under any  statute
      (domestic or foreign),  judgment,  order, writ, decree, rule or regulation
      of any Governmental  Authority  applicable to Buyer or any of its material
      properties;  breach  or  conflict  with any of the  terms,  provisions  or
      conditions of the  organization  documents of Buyer; or violate,  conflict
      with or breach any agreement, contract, mortgage, instrument, indenture or
      license to which Buyer is party or by which  Buyer is or may be bound,  or
      constitute  a  default  (in and of itself  or with the  giving of  notice,
      passage  of time  or  both)  thereunder,  or  result  in the  creation  or
      imposition of any Encumbrance upon, or give to any other party or parties,
      any  claim,  interest  or  right,   including  rights  of  termination  or
      cancellation in, or with respect to any of Buyer's properties.

            (e) BROKERS.  Buyer has not entered into any agreement,  arrangement
      or understanding  with any party as to which Seller may have any liability
      for a finder's fee,  brokerage  commission,  advisory fee or other similar
      payment.

            (f) SUFFICIENT  FUNDS.  Buyer has sufficient  funds available to it,
      without  requiring  the prior  consent,  approval  or other  discretionary
      action of any third party,  to make the payments  required  under  Article
      III, to pay all fees and expenses to be paid by Buyer in  connection  with
      the  transactions  contemplated by this Agreement and to satisfy any other
      payment  obligations  that may arise in connection  with the  transactions
      contemplated by this Agreement.

                                       7

            (g) CLOSING DATE EFFECT. All of the  representations  and warranties
      of Buyer are true and correct as of the  Execution  Date and shall be true
      and correct on and as of the  Closing  Date with the same force and effect
      as if such  representations  and  warranties  were  made by  Buyer  on the
      Closing Date.

            SECTION  5.2.  REPRESENTATIONS  AND  WARRANTIES  OF  SELLER.  Seller
represents and warrants to Buyer that:

            (a) CORPORATE  EXISTENCE.  Seller is a corporation  duly  organized,
      validly existing and in good standing under the laws of the State of South
      Dakota and has the corporate  power to own,  operate or lease the Property
      and to carry on the Business as now being conducted.  Complete and correct
      copies of the  Articles  of  Incorporation  of Seller  and all  amendments
      thereto, certified by the Secretary of State of the State of South Dakota,
      and of the By-Laws of Seller, and all amendments thereto,  previously have
      been  delivered  to Buyer.  Seller is duly  qualified  to do business as a
      foreign  corporation,  and is in good standing in each jurisdiction  where
      the  character of the  properties  owned,  leased or operated by it or the
      nature of its activities makes such qualification necessary,  except where
      the  failure  to be so duly  qualified  and in  good  standing  would  not
      reasonably be expected to have a Material Adverse Effect. For the purposes
      of this  Agreement,  "Material  Adverse Effect" means any effect or change
      that would be materially  adverse to the Business or Property of Seller on
      one hand or Buyer on the other hand,  or on the ability of either party to
      consummate timely the transactions contemplated hereby.

            (b)  AUTHORIZATION;  VALIDITY.  Seller has all  requisite  corporate
      power  and  authority  to  enter  into  this  Agreement,  to  perform  its
      obligations  hereunder and to  consummate  the  transactions  contemplated
      hereby  without  the  approval  of any  third  party,  except as listed on
      Schedule 5.2(b).  All necessary  corporate action has been taken by Seller
      with respect to the execution,  delivery and performance by Seller of this
      Agreement and the consummation by Seller of the transactions  contemplated
      hereby.  Assuming  the due  execution  and  delivery of this  Agreement by
      Buyer, this Agreement is a legal,  valid and binding obligation of Seller,
      enforceable  against  Seller in  accordance  with its  terms,  subject  to
      applicable bankruptcy, insolvency,  reorganization and moratorium laws and
      other laws of general application  affecting the enforcement of creditors'
      rights  generally,   and  the  fact  that  equitable  remedies  or  relief
      (including,  but not limited to, the remedy of specific  performance)  are
      subject to the  discretion  of the court  from  which  such  relief may be
      sought.

            (c) NO  BREACH  OF  STATUTE  OR  CONTRACT.  Except  as set  forth on
      Schedule 5.2(c),  neither the execution and delivery of this Agreement nor
      the consummation by Seller of the transactions  contemplated  hereby,  nor
      compliance  by Seller with any of the  provisions  hereof will  violate or
      cause a default under any statute (domestic or foreign),  judgment, order,
      writ, decree, rule or regulation of any Governmental  Authority applicable
      to Seller or any of its  properties;  breach or  conflict  with any of the
      terms,  provisions  or  conditions  of the  Articles of  Incorporation  or
      By-Laws of Seller;  or  violate,  conflict  with or breach any  agreement,
      contract, mortgage, instrument,  indenture or license to which Seller is a
      party or by which  Seller is or may be bound with  respect to the Property

                                       8

      or the  Business,  or  constitute  a default (in and of itself or with the
      giving of notice,  passage of time or both)  thereunder,  or result in the
      creation or imposition of any Encumbrance upon, or give to any other party
      or parties any claim,  interest or right,  including rights of termination
      or cancellation in, or with respect to, the Property.

            (d) SUBSIDIARIES.  Seller has no subsidiaries or equity  investments
      in any other corporation, association, partnership, joint venture or other
      entity that carries on the Business.

            (e)  FINANCIAL  STATEMENTS.  The following  financial  statements of
      Seller  (collectively,   the  "Financial  Statements"),  which  have  been
      furnished  previously to Buyer by Seller,  have been prepared from and are
      in accordance with the books and records of Seller in conformity with GAAP
      applied on a consistent basis throughout the periods involved,  and fairly
      present the  financial  condition of Seller as at the dates stated and the
      results of operations of Seller for the periods then ended:  balance sheet
      of Seller at December 31, 2005 and the income  statement for the year then
      ended, including footnotes (audited);  balance sheet of Seller at December
      31,  2006 and  income  statement  for the  period  then  ended,  including
      footnotes (audited);  balance sheet of Seller at March 31, 2007 and income
      statement for the period then ended (unaudited).

            (f) ABSENCE OF CERTAIN  CHANGES  AND EVENTS.  Except as set forth on
      Schedule  5.2(f),  since December 31, 2006 there has not been with respect
      to the Business:

                  (i) Any  material  adverse  change in its  operations  (as now
            conducted  or  as  presently  proposed  to  be  conducted),  assets,
            properties   or  rights,   prospects  or  condition   (financial  or
            otherwise);

                  (ii) Other than in the  ordinary and usual course of business,
            any  material  increase  in amounts  payable by Seller to or for the
            benefit of or  committed  to be paid by Seller to or for the benefit
            of any officer,  consultant,  agent or employee of Seller engaged in
            the Business,  in any capacity, or in any benefits granted under any
            bonus, stock option, profit sharing, pension,  retirement,  deferred
            compensation,  insurance,  or other direct or indirect  benefit plan
            with respect to any such person;

                  (iii) Any  material  transaction  entered  into or carried out
            other  than  in the  ordinary  and  usual  course  of  its  business
            including,  without  limitation,  any  transaction  resulting in the
            incurrence of liabilities or obligations;

                  (iv) Any material change made in the methods of doing business
            or in the  accounting  principles  or  practices  or the  method  of
            application of such principles or practices;

                  (v) Any Encumbrance imposed or agreed to be imposed on or with
            respect to the  Property  that will not be  discharged  prior to the
            Closing;

                  (vi) Any modification,  waiver,  change,  amendment,  release,
            rescission  or  termination  of, or  accord  and  satisfaction  with
            respect to any term,  condition or provision of any Contract,  other

                                       9

            than any  satisfaction  by performance in accordance  with the terms
            thereof in the ordinary and usual course of its business; or

                  (vii) Any damage,  destruction or similar loss, whether or not
            covered by insurance, adversely affecting the Business.

            (g) LIABILITIES.  Except as set forth on Schedule 5.2(g), Seller has
      no   liability  or   obligation   of  any  nature   (whether   liquidated,
      unliquidated,  accrued, absolute,  contingent or otherwise and whether due
      or to become due) in respect of the Business except:

                  (i) those set forth or reflected in the  Financial  Statements
            that have not been paid or discharged since the date thereof;

                  (ii)  those  arising  under  agreements  or other  commitments
            listed on any  Schedule  hereto  including,  but not limited to, the
            Permits, Personal Property Leases and Contracts;

                  (iii)  current  liabilities  arising in the ordinary and usual
            course of the  Business  subsequent  to  December  31, 2006 that are
            accurately reflected on its books and records in a manner consistent
            with past practice; and

                  (iv)   ordinary   course   warranty   and  product   liability
            obligations and liabilities for product returns and allowances.

            (h) TAXES. Except as set forth on Schedule 5.2(h):

                  (i)  Seller  has duly  filed  all  federal,  state,  local and
            foreign tax returns and tax reports  required to be filed by it. All
            such  returns  and reports  are true,  correct  and  complete in all
            material  respects,  none of  such  returns  and  reports  has  been
            amended,  and all taxes,  assessments,  fees and other  governmental
            charges due with respect to the periods  covered by such returns and
            reports have been fully paid;

                  (ii)  Schedule  5.2(h) sets forth the dates and results of any
            and all audits of federal,  state,  local and foreign tax returns of
            Seller  performed  by  federal,   state,  local  or  foreign  taxing
            authorities.  No waivers of any  applicable  statutes of limitations
            are outstanding. All deficiencies proposed as a result of any audits
            have  been  paid or  settled.  There is no  pending  or to  Seller's
            Knowledge  threatened federal,  state, local or foreign tax audit of
            Seller and no agreement  with any federal,  state,  local or foreign
            tax authority  that may affect the  subsequent  tax  liabilities  of
            Seller;

                  (iii)  Seller has no  liabilities  for taxes  other than those
            that are not yet due and payable,  and no federal,  state,  local or
            foreign tax authority is now asserting or  threatening to assert any
            deficiency  or  assessment  for  additional  taxes  with  respect to
            Seller.

                                       10

            (i) REGISTERED  PROPRIETARY  RIGHTS.  Schedule 1.1(d) sets forth all
      issued  patents;  registered  URLs;  registrations  and  applications  for
      trademarks, service marks, and trade names; registrations and applications
      for  copyrights;  and all licenses,  sublicenses  or agreements in respect
      thereof  that Seller owns or has the right to use or to which  Seller is a
      party except for the off the shelf software licenses.  Except as set forth
      on Schedule 5.2(i),  Seller is the owner of all right,  title and interest
      or otherwise has valid  license  rights in and to all  Proprietary  Rights
      free and clear of all Encumbrances whatsoever. To the Knowledge of Seller,
      the Business as conducted  immediately prior to the Closing,  and the sale
      by Seller and  ownership  by Buyer of any of the  Property is not and will
      not be in  contravention  of any  patent,  trademark,  copyright  or other
      proprietary right of any third party.

            Except as listed on Schedule 5.2(i),  none of the Proprietary Rights
      has been hypothecated,  sold,  assigned or licensed by Seller to any other
      person,  corporation,  firm or other legal entity;  or to the Knowledge of
      Seller,  infringes  upon or  violates  the  rights  of any  person,  firm,
      corporation,  or other legal entity.  Except as listed on Schedule 5.2(i),
      and except in the  ordinary  course  pursuant  to Article 2 of the Uniform
      Commercial  Code,  to the  Knowledge  of Seller,  Seller has not given any
      indemnification against patent,  trademark or copyright infringement as to
      any equipment, materials, products, services or supplies that Seller uses,
      license  or sells;  there is not  pending or to the  Knowledge  of Seller,
      threatened  any  claim to sell,  engage  in or  employ  any such  product,
      process, method or operation.

            (j)  INSURANCE.  Schedule  5.2(j)  lists all  policies of  property,
      casualty,  liability and other forms of insurance  currently owned or held
      by Seller  relating to the Business and all such policies are currently in
      full force and effect.  Since January 1, 2005, Seller has not received any
      notice from any insurer thereunder with respect to the cancellation of any
      such insurance,  other than notice of cancellation for non-payment,  which
      non-payment has been cured.  All premiums due and payable on such policies
      have been paid or are being financed by the applicable insurer.

            (k) LITIGATION. Except as set forth on Schedule 5.2(k), there are no
      claims,  actions,  suits or  proceedings  pending or, to the  Knowledge of
      Seller,  threatened against or affecting Seller or any officer or director
      of Seller in  connection  with the  Business or the  Property,  before any
      federal, state, local or foreign court or Governmental  Authority.  Seller
      is not subject to or in default with respect to any judgment, order, writ,
      injunction  or decree  that is binding  upon  Seller  with  respect to the
      Business.

            (l) COMPLIANCE WITH LAWS. Except as listed on Schedule 5.2(l),

                  (i) Seller is in compliance in all material  respects with all
            laws, ordinances,  regulations and orders applicable to the Business
            and the Property  and has no notice or knowledge of any  violations,
            whether  actual,   claimed  or  alleged,   thereof.   The  foregoing
            representation shall not apply to Environmental Laws (as hereinafter
            defined).

                                       11

                  (ii) Seller has  complied  and is  compliance  in all material
            respects with all federal, state and local laws,  ordinances,  rules
            and regulations and other  provisions  having the force or effect of
            law  pertaining  to pollution  or  protection  of the  environmental
            matters  including,  without  limitation,  all those relating to the
            presence,  use, production,  generation,  handling,  transportation,
            treatment,  storage,  disposal,   distribution,   labeling,  testing
            processing,  discharge,  release,  threatened  release,  control  or
            cleanup of any solid waste  disposal,  toxic  substances,  hazardous
            substances,  hazardous materials,  hazardous waste, toxic chemicals,
            pollutants,  contaminants  (collectively,  "Hazardous Material") and
            air, water, ground or subsurface pollution and to the storage,  use,
            handling, transportation,  discharge, and disposal (including spills
            and  leaks)  of  gaseous,  liquid,  semi-solid  or  solid  materials
            (collectively,  "Environmental  Laws").  There  has  been no on site
            disposal or discharge by Seller of  Hazardous  Material,  chemicals,
            oil or solid wastes on the Real Property.

                  (iii)  Seller has not  received a  summons,  citation,  order,
            letter or other  oral or  written  communication  from any  federal,
            state or local  Governmental  Authority  regarding actual or alleged
            violation  by Seller  of  Environmental  Laws or a permit  issued to
            Seller pursuant to Environmental Laws (the "Environmental  Permits")
            relating to the Real Property, nor has Seller received any notice of
            an  administrative  investigation,  or a civil or  criminal  action,
            suit,  summon,  citation,  complaint,  claim,  notice of  violation,
            demand,  judgment,  order  or  hearing  based  on any  Environmental
            Permit,  or any Environmental Law relating to the Real Property from
            any Governmental Authority under any of the Environmental Laws.

                  (iv) To the Knowledge of Seller,  neither  Seller nor the Real
            Property,  in whole  or in  part,  is the  subject  of any  order or
            directive  of any  federal,  state or local  Governmental  Authority
            relating to asbestos-containing material.

                  (v) To the  Knowledge  of  Seller,  there  are no  underground
            storage tanks (either  regulated or unregulated),  incinerators,  or
            waste  treatment,  storage or disposal  units,  landfills,  disposal
            areas or surface impoundments on, under or within the Real Property.

                  (vi) Schedule 1.1(c) lists all franchises,  licenses, permits,
            consents,   authorizations,   approvals  and   certificates  of  any
            Governmental Authority used in conducting the Business.  Each of the
            Permits  is  currently  valid and in full  force and  effect and the
            Permits  constitute all  franchises,  licenses,  permits,  consents,
            authorizations,  approvals,  and  certificates  of any  Governmental
            Authority necessary to the conduct of the Business. Seller is not in
            violation  of any of the  Permits.  There is no  pending  or, to the
            Knowledge of Seller,  threatened proceeding that could result in the
            revocation or cancellation  of, or inability of Seller to renew, any
            Permit.

                                       12

            (m) BROKERS. Seller has not entered into any agreement,  arrangement
      or  understanding  with any party as to which Buyer may have any liability
      for a finder's fee,  brokerage  commission,  advisory fee or other similar
      payment.

            (n) EMPLOYEE BENEFIT PLANS.

                  (i) Set  forth on  Schedule  5.2(n)  is a true,  accurate  and
            complete list of all pension, retirement,  profit-sharing,  deferred
            compensation,  bonus, stock option or other incentive plan, or other
            employee benefit program,  arrangement,  agreement or understanding,
            or medical,  vision,  dental or other health plan, or life insurance
            or disability plan, or any other employee benefit plan as defined in
            Section 3(3) of the Employee Retirement Income Security Act of 1974,
            as amended  ("ERISA"),  (whether  or not any such  employee  benefit
            plans are otherwise exempt from the provisions of ERISA,  whether or
            not  legally   binding),   adopted,   established,   maintained   or
            contributed  to by Seller  or under  which it would  otherwise  be a
            party  or  have  liability  and  under  which  employees  or  former
            employees  (whether  or not retired  employees)  of Seller (or their
            beneficiaries)  are  eligible  to  participate  or  derive a benefit
            (collectively,   the  "Employee  Benefit  Plans").  There  shall  be
            included within the meaning of Seller,  for this purpose and for the
            purpose  of  the   representations   in  this  Section  5.2(n),  all
            "affiliates,"  whether or not  incorporated,  within the  meaning of
            Section 407(d)(7) of ERISA.

                  (ii) Full  payment has been made of all amounts that Seller is
            required, under applicable law or under any Employee Benefit Plan or
            any agreement relating to any Employee Benefit Plan to which it is a
            party,  to have  paid as  contributions  to or  benefits  under  any
            Employee  Benefit Plan as of the last day of the most recent  fiscal
            year of such  Employee  Benefit  Plan ended  prior to the  Execution
            Date.

                  (iii)  Seller has  performed  all  obligations  required to be
            performed by it under the  Employee  Benefit  Plans.  Seller has not
            engaged in any  transaction  with  respect to the  Employee  Benefit
            Plans that would subject it or Buyer to a tax,  penalty or liability
            for a prohibited  transaction  under  Sections 406, 407 or 502(i) of
            ERISA  or  Section  4975  of the  Internal  Revenue  Code of 1986 as
            amended  (the  "Code"),  nor  have  Seller's  directors,   officers,
            employees  or  agents,  to  the  extent  they  or any  of  them  are
            fiduciaries under Title I of ERISA. Excepting only changes necessary
            to preserve  an  Employee  Benefit  Plan's  tax-qualified  or exempt
            status  under  the  Code  or to  otherwise  comply  with  applicable
            provisions of ERISA and the Code (and in each case effective only as
            of the date necessary to do so), Seller will not, and has no plan or
            commitment, whether formal or informal, written or oral, and whether
            or not legally  binding,  to modify or change any  Employee  Benefit
            Plan in any material  manner  prior to the  Closing.  Seller and any
            "administrator(s)"  (as  described in Section  3(16)(A) of ERISA) of
            the Employee  Benefit Plans have  complied in all material  respects
            with the applicable  requirements  of ERISA,  the Code and all other
            statutes,  orders,  rules or  regulations,  specifically  including,
            without  limitation,  material  compliance  with all  reporting  and
            disclosure  requirements  of Part 1 of Title 1 of  ERISA  and of the

                                       13

            Code in a timely and accurate manner,  and no penalties have been or
            will be imposed,  nor is Seller or any administrator  liable for any
            penalties  imposed,  under ERISA, the Code or otherwise with respect
            to the Employee  Benefit Plans or any related trusts.  Seller is not
            delinquent in the payment of any federal,  state or local taxes with
            respect  to  the  Employee  Benefit  Plans.   There  is  no  pending
            litigation,  arbitration, or disputed claim, settlement adjudication
            or  proceeding  with  respect to the  Employee  Benefit  Plans,  and
            neither  Seller  nor any  administrator  is aware of any  threatened
            litigation,  arbitration or disputed claim, adjudication proceeding,
            or any  governmental  or other  proceeding,  or  investigation  with
            respect  to the  Employee  Benefit  Plans  or  with  respect  to any
            fiduciary or administrator thereof (in their capacities as such), or
            any party-in-interest thereto (with respect to their relationship as
            such).  There is no  multiemployer  plan to which  Seller has been a
            party or has been required to make any contributions at any time.

                  (iv) Seller has  delivered  or caused to be delivered to Buyer
            true and  complete  copies of the  following,  if and to the  extent
            applicable  to the Business (A) all Employee  Benefit  Plans and any
            related   trust   agreements,   custodial   agreements,   investment
            management   agreements,   insurance  contracts  or  policies,   and
            administrative  service contracts,  all as in effect,  together with
            all amendments  thereto that will become  effective at a later date;
            (B) the  latest  Summary  Plan  Description  and  any  modifications
            thereto for each Employee  Benefit Plan  requiring same under ERISA;
            (C)  the  latest  Internal  Revenue  Service   determination  letter
            obtained  with respect to any such Employee  Benefit Plan  qualified
            under Section 401 or 501 of the Code;  (D) the Summary Annual Report
            for the current and prior  fiscal  years for each  Employee  Benefit
            Plan requiring same under ERISA;  (E) each Form 5500 and/or Form 990
            series   filing   (including   required   schedules   and  financial
            statements) for the current and prior fiscal years for each Employee
            Benefit  Plan  required  to file such form;  and (F) the most recent
            actuarial  evaluation,  analysis or other report issued with respect
            to any  Employee  Benefit  Plan.  From the  date of the most  recent
            actuarial  evaluation to the Closing, for each defined benefit plan,
            there has been no increase in the unfunded actuarial liability under
            any  such  defined  benefit  plan,  assuming  the  years of the same
            actuarial   assumptions  as  used  in  the  most  recent  applicable
            actuarial  evaluation.  Neither  Seller  nor any  officer,  employee
            representative  or  agent  thereof,  has made  any  written  or oral
            representations  or statements  to any current or former  employees,
            dependents, participants or beneficiaries or other persons which are
            inconsistent  in any material  manner with the  provisions  of these
            documents.

                  (v) With respect to any of Seller's employee welfare plans (as
            defined  in  Section  3(1) of ERISA  and  including  those  Employee
            Benefits  Plans that qualify as such) that are "group  health plans"
            under Section 162(k) or Section 4980B of the Code and Section 607(1)
            of  ERISA  and  related   regulations   (relating   to  the  benefit
            continuation  rights  imposed  by  COBRA),  there  has  been  timely
            compliance in all material  respects with all  requirements  imposed
            thereunder, as and when applicable to such plans, so that Seller has
            no (and will not  incur  any)  loss,  assessment,  penalty,  loss of

                                       14

            federal income tax deduction or other  sanction,  arising on account
            of or in respect of any  failure  to comply  with any COBRA  benefit
            continuation  requirement,  that is  capable  of being  assessed  or
            asserted  directly or indirectly  against Seller or against Buyer or
            any of its subsidiaries or other member of Buyer's corporate control
            group, with respect to any such plan.

            (o) LABOR MATTERS. Seller has not received any notice from any labor
      union or  group  that it  represents  or  intends  to  represent  Seller's
      employees.   Seller  has  complied  in  all  material  respects  with  all
      applicable laws affecting employment and employment  practices,  terms and
      conditions of employment and wages and hours.  Seller has not received any
      notice  of and  there is no  complaint  alleging  unfair  labor  practices
      against Seller pending,  or to the Knowledge of Seller,  threatened before
      the National  Labor  Relations  Board or any other  charges or  complaints
      pending,  or to the  Knowledge  of  Seller,  threatened  before  the Equal
      Employment  Opportunity  Commission,  any  state  or  local  Human  Rights
      Commission or any other state or local agency against Seller in respect of
      labor or employment  matters.  Except as set forth on Schedule 5.2(o),  no
      labor  strike,  material  dispute,  slowdown or stoppage has occurred with
      respect  to  Seller's  employees  and there is no labor  strike,  material
      dispute,  slowdown or stoppage pending or to Seller's Knowledge threatened
      with respect to Seller's employees. Schedule 5.2(o) sets forth all pending
      grievances or arbitration proceedings against Seller relating to labor and
      employee matters.

            (p) TITLE TO PROPERTY.  (a) Seller has good and marketable  title to
      all  Property  owned by it and valid  leasehold  interests in all Property
      leased  by it in the  operation  of the  Business,  free and  clear of all
      Encumbrances,  except as listed on Schedule  5.2(p) hereto,  and excluding
      (i) liens for taxes, fees, levies, imposts, duties or governmental charges
      of any kind that are not yet  delinquent  or are being  contested  in good
      faith by appropriate  proceedings that suspend the collection  thereof; or
      (ii) liens for mechanics,  materialmen,  laborers, employees, suppliers or
      others that are not yet delinquent or are being contested in good faith by
      appropriate proceedings. All of such owned or leased Property is listed on
      Schedule  5.2(p)  hereto.  Seller  is not in  violation  of any  covenant,
      condition,  restriction,  easement,  agreement, order or regulation of any
      Governmental  Authority  having  jurisdiction  over any such Property that
      affects such Property or the use thereof.

            Except as listed on Schedule  5.2(p),  no financing  statement under
      the Uniform  Commercial  Code or similar  law naming  Seller as debtor has
      been filed in any  jurisdiction in respect of the Property,  and Seller is
      not  a  party  to  or  bound  under  any  agreement  or  legal  obligation
      authorizing any party to file any such financing statement.

            Schedule  1.1(a)  contains  a  complete  and  accurate  list  of all
      machinery,  equipment,  tooling,  parts,  furniture,  supplies  and  other
      tangible  personal  property owned or used by Seller in the conduct of the
      Business.

            (q) CONTRACTS AND COMMITMENTS.  Schedules 1.1(e) and 1.1(f) list all
      Personal  Property  Leases and  Contracts.  Each of the Personal  Property
      Leases and the  Contracts is valid and  binding,  in full force and effect
      and  enforceable in accordance with its respective  provisions.  Except as

                                       15

      set forth on Schedule 5.2(q), Seller has not assigned, mortgaged, pledged,
      encumbered,  or otherwise hypothecated any of its right, title or interest
      under the Personal  Property Leases or the Contracts.  Except as set forth
      on Schedule  5.2(q),  neither Seller nor, to the Knowledge of Seller,  any
      other party thereto is in material violation of, in default in respect of,
      nor, to  Knowledge  of Seller,  has there  occurred an event or  condition
      which,  with the  passage  of time or giving of notice  (or  both),  would
      constitute  a material  violation  or a default of any  Personal  Property
      Lease or Contract. No notice has been received by Seller claiming any such
      default by Seller or indicating the desire or intention of any other party
      thereto to amend, modify, rescind or terminate any Personal Property Lease
      or Contract.

            (r) ACCOUNTS  RECEIVABLE.  All Receivables  included in the Property
      are  subsisting;  arose in the ordinary and usual course of the  Business;
      and are not and will not be subject to any  Encumbrance.  Since January 1,
      2007,  except as set forth on Schedule  5.2(r),  no customers of Seller in
      respect of the Business have notified Seller,  orally or in writing,  that
      they  intend to return any  products,  or assert any right to a  discount,
      allowance or chargeback with respect to any products.

            (s)  INVENTORY.  Except as set forth on Schedule  5.2(s),  inventory
      reflected  on  the  Financial  Statements  as  of  the  date  thereof  was
      determined in accordance with GAAP  consistently  applied,  stated,  on an
      aggregate  basis,  at the lower of cost (based on the  last-in,  first-out
      method)  or market  value and  consists  solely of  merchandise  usable or
      salable in the  ordinary  course of  business at not less than gross cost.
      The inventory conforms to customary trade standards for marketable goods.

            (t) OFFICERS, EMPLOYEES AND COMPENSATION. Schedule 5.2(t) lists each
      salaried  employee of Seller employed by or engaged in connection with the
      Business  during the period  January 1, 2005 through the  Execution  Date.
      Schedule 5.2(t) also lists and describes as of December 31, 2006, the base
      salary,  fringe  benefits and  perquisites of each such employee of Seller
      whose total current base salary exceeds or exceeded in any of the last two
      years $25,000  annually and the severance amount payable by Seller to each
      employee of Seller  employed in the Business upon the  termination of such
      employee's  employment by Seller immediately prior to the Closing pursuant
      to Section 6.12 (the "Employee Severance  Payments").  Except as disclosed
      on  Schedule  5.2(t),  there are no other  forms of  compensation  paid by
      Seller to any such  employee.  There has been no material  increase  since
      December 31, 2006 in the rate of  compensation  or other  benefits paid to
      any such  employee.  No  shareholder  or director or any person related to
      such person by blood or marriage  holds any position or office with or has
      any material  financial  interest,  direct or indirect,  in any  supplier,
      customer or account  of, or other  outside  business  that has had or will
      have  material  transactions  with  Seller.  Seller has no  agreements  or
      understandings  with any  officer,  employee or  representative  of Seller
      employed or engaged in the Business  that would  influence any such person
      not to become  associated  with Buyer from and after the Execution Date or
      from serving Buyer in a capacity similar to the capacity currently held.

            (u) BOOKS OF ACCOUNT; RECORDS. The general ledgers, books of account
      and other  records of Seller in respect of the  Business  are complete and
      correct in all material respects,  have been maintained in accordance with

                                       16

      good   business   practices   and  the  matters   contained   therein  are
      appropriately and accurately reflected in the Financial Statements.

            SECTION  5.3.  EFFECT  OF  DISCLOSURES  ON  SCHEDULES.   Information
disclosed  by Seller on any  Schedule  to this  Agreement  shall be deemed to be
disclosed on any other Schedule to this  Agreement as to which such  information
would be reasonably applicable.

            SECTION  5.4.  DISCLAIMER  OF  OTHER  WARRANTIES.   Except  for  the
representations  and warranties set forth in this Agreement and in the documents
and  instruments  delivered  in  accordance  with the  terms of this  Agreement,
Seller,  nor any  person  acting  on its  behalf,  makes any  representation  or
warranty  relating  to Seller,  the  Business  or the  Property.  Seller  hereby
disclaims  any  implied  warranty  with  respect  to it,  the  Business  and the
Property, including, without limitation, any implied warranty of merchantability
or fitness for a particular purpose.

            SECTION 5.5.  CLOSING DATE EFFECT.  All of the  representations  and
warranties  of Seller are true and  correct  as of the date  hereof and shall be
true and correct on and as of the Closing Date with the same force and effect as
if such  representations  and  warranties  were  made by Buyer to  Seller on the
Closing Date.

                              ARTICLE VI. COVENANTS

            SECTION 6.1.  COVENANT  AGAINST  DISCLOSURE.  Other than to Seller's
officers, directors,  accountants, legal advisors or other such advisors, Seller
shall not (a) disclose to any person,  association,  firm,  corporation or other
entity (other than Buyer or those designated in writing by Buyer) in any manner,
directly or  indirectly,  any  confidential  information or data relevant to the
Business,  whether of a technical or commercial nature, or (b) use, or permit or
assist, by acquiescence or otherwise, any person, association, firm, corporation
or other entity  (other than Buyer or those  designated  in writing by Buyer) to
use,  in any manner,  directly  or  indirectly,  any such  information  or data,
excepting only use of such data or information as is at the time generally known
to the public  and that did not become  generally  known  through  any breach by
Seller of any  provision  of this Section 6.1 and data and  information  that is
disclosed  pursuant  to  applicable  law or to enforce  the  provisions  of this
Agreement.  The  foregoing  provision  shall not limit or prevent  disclosure by
Seller's parent corporation in order to comply with applicable provisions of the
Federal securities laws.

            SECTION 6.2.  COVENANT  AGAINST  COMPETITION.  For a period of three
years after the Closing Date Seller shall not, directly or indirectly, engage in
any business activity that competes with the Business.

            SECTION 6.3. INJUNCTIVE RELIEF.  Seller acknowledges and agrees that
Buyer's  remedy  at law for any  breach  of any of  Seller's  obligations  under
Section 6.1 or 6.2 hereof  would be  inadequate,  and agrees and  consents  that
temporary and permanent  injunctive  relief may be granted in a proceeding  that
may be brought to enforce  any  provision  of  Section  6.1 or 6.2  without  the
necessity of proof of actual damage.

            SECTION 6.4. ACCESS TO RECORDS. For a period of five years after the
Execution  Date (i) Seller shall  preserve  those of Seller's  books and records

                                       17

relating to the Business as are not delivered to Buyer  hereunder and shall make
available  to Buyer  for  inspection  and  copying  such  books and  records  as
reasonably  required  by  Buyer  for all  purposes  reasonably  related  to this
Agreement or any of the documents and  instruments  delivered in accordance with
its terms;  and (ii) Buyer shall preserve those of Seller's books and records as
are  delivered  to Buyer  hereunder  and shall  make  available  to  Seller  for
inspection and copying such books and records as reasonably required by them for
all purposes  reasonably  related to this  Agreement or any of the documents and
instruments delivered in accordance with its terms.

            SECTION  6.5. TRANSITION   OF   CUSTOMERS.   Seller  shall  use  its
reasonable commercial efforts to insure the smooth transfer from Seller to Buyer
of all of Seller's present customers who, prior to the Execution Date, purchased
the  products  of the  Business.  Seller  shall  not be  required  to  make  any
expenditures in furtherance of the foregoing undertaking.

            SECTION 6.6.  OPERATE BUSINESS IN THE ORDINARY  COURSE.  Between the
date hereof and the Closing Date,  Seller shall operate its Business only in the
ordinary course consistent with past practices.

            SECTION 6.7.  CERTAIN  NEGATIVE  COVENANTS.  Except as  specifically
contemplated by this Agreement, until the Closing Date, Seller shall not without
Buyer's prior written consent:

            (a) make any capital expenditure;

            (b)  liquidate,  sell,  dispose of, or encumber any Property,  other
      than  the sale of  spare  parts on  normal  terms  and  conditions  in the
      ordinary and usual course of the Business; or

            (c)  enter   into  any   negotiations   with  any  third   party  in
      contemplation  of  agreements  to sell any  Property  to or to perform any
      service for such third party;

            SECTION 6.8.  UPDATE  DISCLOSURE.  From and after the Execution Date
until the Closing  Date,  Seller and Buyer shall  update each other on a regular
basis by written  notice to the other  party to reflect  any  matters  that have
occurred  from and after the  Execution  Date,  that if existed on the Execution
Date,  would have been required to be described under this Agreement.  After the
execution of this  Agreement but prior to the Closing,  Seller shall (i) provide
Buyer with the individual customer names related to the Receivables disclosed on
Schedule 1.1(b) hereof (as updated pursuant to Section  7.1(g)),  (ii) conduct a
physical  count of the  Inventory  listed on Schedule  1.1(g) hereof (as updated
pursuant to Section  7.1(g))  and  provide the results of such count,  including
individual  part numbers,  to Buyer and (iii) provide Buyer with the  individual
customer  names related to the customer  deposits  disclosed on Schedule  2.1(b)
hereof (as updated pursuant to Section 7.1(g)).

            SECTION 6.9.  SEVERABILITY.  With  respect to any  provision of this
Article  VI  finally  determined  by a court  of  competent  jurisdiction  to be
unenforceable,  such court shall have  jurisdiction  to reform such provision so
that it is enforceable  to the maximum extent  permitted by law, and the parties
shall abide by such court's  determination.  In the event that any  provision of
this Article VI cannot be reformed, such provision shall be deemed to be severed
from this  Agreement,  but every other provision of Article VI of this Agreement
shall remain in full force and effect.

                                       18

            SECTION 6.10.  FURTHER ASSURANCES.  On and after the Execution Date,
Seller shall prepare,  execute and deliver,  at Seller's  expense,  such further
instruments of conveyance, sale, assignment or transfer, and shall take or cause
to be taken such other or further  action as Buyer's  counsel  shall  reasonably
request  at any  time or from  time to time in  order  to  perfect,  confirm  or
evidence in Buyer title to all or any part of the Property or to consummate,  in
any other manner,  the terms and conditions of this Agreement.  On and after the
Execution Date,  Buyer shall prepare,  execute and deliver,  at Buyer's expense,
such  further  instruments,  and shall  take or cause to be taken  such other or
further action as Seller's counsel shall reasonably  request at any time or from
time to time in order to confirm or evidence  Buyer's  assumption of the Assumed
Liabilities or to consummate,  in any other manner,  the terms and conditions of
this Agreement.

            SECTION  6.11. ANNOUNCEMENTS.  Except as  required  by law,  neither
party to this  Agreement  shall  issue any  press  releases  or make any  public
announcements  with respect to this Agreement or the  transactions  contemplated
hereby  without the written  consent of the other party  hereto,  which  consent
shall not be  unreasonably  withheld  or  delayed.  Prior to  issuing  any press
release or making any public announcements,  the disclosing party shall give the
other party a copy of the text of their  proposed  disclosure  and a  reasonable
opportunity  to comment on it.  Subject to the  obligations  of Seller's  parent
company under  applicable  securities laws, Buyer and Seller shall jointly agree
on  the  press  release  or  other  public  announcement  with  respect  to  the
transactions  contemplated by this Agreement which will be disseminated promptly
following the execution and delivery hereof.

            SECTION 6.12.  EMPLOYEES   OF  SELLER.   Seller   shall  retain  and
discharge when due all liabilities  and obligations to its employees,  including
but not limited to,  liabilities and obligations with respect to wages,  salary,
termination pay, severance pay, sick pay, vacation pay,  unemployment  benefits,
pension or welfare  benefits to which such  employees  are entitled by virtue of
their  employment  by Seller  or  termination  of their  employment  by  Seller.
Immediately  prior to Closing,  Seller shall  terminate the employment of all of
its employees.  Immediately after the Closing,  Seller shall apply the Severance
Contribution received from Buyer pursuant to Section 3.1 above to discharge,  in
part, the Employee Severance Payments and Seller shall be solely responsible for
the  payment of the  balance of the  Employee  Severance  Payments to its former
employees.

                         ARTICLE VII. CLOSING DELIVERIES

            SECTION 7.1.   DELIVERIES  BY SELLER.  Seller shall deliver to Buyer
at Closing the following:

            (a) An executed  counterpart of the General  Conveyance,  Assignment
      and Bill of Sale conveying,  selling,  transferring and assigning to Buyer
      title to all of the Property,  free and clear of all Encumbrances,  in the
      form of Exhibit B hereto.

            (b) Executed  counterparts  of  Assignments  and  Assumptions of the
      Permits,  the Personal Property Leases and the Contracts which include the
      written  consents  of all parties (in  particular  the  consents of Emhart
      Glass  S.A.  and The  Eldrid  Company,  Inc.)  necessary  in order to duly
      transfer  all of  Seller's  rights  thereunder  to  Buyer,  in the form of
      Exhibit C hereto (the "Assignments and Assumptions").

                                       19

            (c) An executed  counterpart  of the  Assignment of the  Proprietary
      Rights  conveying,  transferring  and assigning to Buyer,  all of Seller's
      right, title and interest in and to the Proprietary Rights, free and clear
      of all Encumbrances, in the form of Exhibit D hereto.

            (d)  Resolutions  of the Board of Directors and sole  shareholder of
      Seller  adopted at meetings or by consent  authorizing  the  execution and
      delivery  of  this  Agreement  by  Seller  and  the   performance  of  its
      obligations hereunder, certified by the Secretary of Seller.

            (e) A certificate of the Secretary of State of South Dakota dated as
      of a recent date as to the good standing of Seller in such state.

            (f)  An  executed   counterpart   of  the   Certificate  of  Assumed
      Liabilities in the form of Exhibit E hereto (the  "Certificate  of Assumed
      Liabilities").

            (g) Updated versions of Schedules 1.1(a),  1.1(b),  1.1(c),  1.1(d),
      1.1(e),   1.1(f),  1.1(g),  1.1(h),  2.1(a),  2.2(b),  2.2(c)  and  2.2(d)
      reflecting  the  information  required  to be set forth  therein as of the
      Business Day immediately prior to the Closing Date.

            (h) A  certificate  of the Secretary of State of Indiana dated as of
      the a recent date as to the good  standing of The LGL Group,  Inc. in such
      state.

            (i) An  executed  counterpart  of the  Lease in favor of Buyer  with
      respect to the Real Property in the form of Exhibit F hereto (the "Lease")
      which will have a term of up to six months  from  Closing;  provide for no
      payment  by Buyer to Seller  other  than a pro rata  share of real  estate
      taxes and  insurance  costs based upon portion  occupied;  and will permit
      Seller to market and show  premises  to  potential  purchasers  during the
      term.

            (j) Such other separate  bills of sale,  assignments or documents of
      transfer that Buyer may reasonably  deem necessary or appropriate in order
      to perfect, confirm or evidence title to all or any part of the Property.

            SECTION 7.2.   DELIVERIES BY BUYER. Buyer shall deliver to Seller at
Closing the following:

            (a) Payment of the Closing Payment.

            (b) Executed counterparts of the Assignments and Assumptions.

            (c)  Resolutions of the Board of Directors of Buyer  authorizing the
      execution and delivery of this  Agreement by Buyer and the  performance of
      its obligations hereunder, certified by the Secretary of Buyer.

            (d)  An  executed   counterpart   of  the   Certificate  of  Assumed
      Liabilities.

            (e) An executed counterpart of the Lease.

                                       20

            (f) Such other separate  instruments  of assumption  that Seller may
      reasonably  deem  necessary or appropriate in order to confirm or evidence
      Buyer's assumption of the Assumed Liabilities.

                  ARTICLE VIII. CONDITIONS PRECEDENT TO CLOSING

            SECTION 8.1.  CONDITIONS  TO  OBLIGATION OF EACH PARTY TO EFFECT THE
TRANSACTION.  The respective obligations of Seller and Buyer, as applicable,  to
effect the transactions contemplated herein shall be subject to the satisfaction
at or prior to the Closing Date of the following conditions:

            (a) NO  ORDER.  No  federal  or  state  governmental  or  regulatory
      authority  or other  agency or  commission,  or federal or state  court of
      competent jurisdiction, shall have enacted, issued, promulgated,  enforced
      or  entered  any  statute,  rule,  regulation,  executive  order,  decree,
      injunction or other order  (whether  temporary,  preliminary or permanent)
      that has the effect of restricting in any material respect,  preventing or
      prohibiting   consummation  of  the  transactions   contemplated  by  this
      Agreement.

            (b) NO CHALLENGE. There shall not be a pending action, proceeding or
      investigation before any court or administrative agency or by a government
      agency  (i)   challenging  or  seeking  damages  in  connection  with  the
      transactions  contemplated  by this Agreement or (ii) seeking to restrain,
      prohibit or limit the exercise of full rights of ownership or operation by
      Buyer of all or any portion of the  Business or  Property,  that in either
      case would reasonably be expected to have a Material Adverse Effect.

            SECTION 8.2.  ADDITIONAL  CONDITIONS TO  OBLIGATIONS  OF BUYER.  The
obligations of Buyer to effect the  transactions  contemplated by this Agreement
are also subject to the following conditions:

            (a) REPRESENTATIONS AND WARRANTIES.  Each of the representations and
      warranties  of  Seller  in  this   Agreement  that  are  qualified  as  to
      materiality shall be true and correct, and those not so qualified shall be
      true and correct in all material  respects,  without  giving effect to any
      update or notice to Buyer,  as of the  Execution  Date and  (except to the
      extent such  representations  and warranties speak as of a certain date or
      period and except as permitted or  contemplated  by this  Agreement) as of
      the Closing Date as though made on and as of the Closing Date.

            (b)  AGREEMENTS  AND  COVENANTS.  Seller  shall  have  performed  or
      complied  in all  material  respects  with all  agreements  and  covenants
      required by this  Agreement to be  performed or complied  with by it on or
      prior to Closing Date.

            (c) NO MATERIAL  ADVERSE  EFFECT.  Since the Execution  Date,  there
      shall not have been any  change in the  financial  condition,  results  of
      operations   Business  or  Property,   taken  as  a  whole,  which  either
      individually or in the aggregate,  would  reasonably be expected to have a
      Material Adverse Effect.

                                       21

            (d) OFFICER'S  CERTIFICATE.  Buyer shall have received a certificate
      of the Chief  Executive  Officer of Seller with respect to the  conditions
      set forth in Sections 8.2(a), (b) and (c).

            (e) AUDITED 2006 FINANCIAL  STATEMENTS.  Buyer shall have received a
      copy of the  audited  balance  sheet of Seller at  December  31,  2006 and
      Seller's  income  statement  for the period then ended,  together with the
      audit  report  of  Seller's   auditors  with  respect  to  such  financial
      statements.

            SECTION 8.3.  ADDITIONAL  CONDITIONS TO OBLIGATIONS  OF Seller.  The
obligations of Seller to effect the transactions  contemplated by this Agreement
are also subject to the following conditions:

            (a) REPRESENTATIONS AND WARRANTIES.  Each of the representations and
      warranties of Buyer in this Agreement that are qualified as to materiality
      shall be true and correct,  and those not so  qualified  shall be true and
      correct in all material  respects,  without giving effect to any update or
      notice to Seller,  as of the Execution Date and (except to the extent such
      representations  and  warranties  speak as of a certain date or period and
      except as permitted or  contemplated  by this Agreement) as of the Closing
      Date as though made on and as of the Closing Date.

            (b) AGREEMENTS AND COVENANTS. Buyer shall have performed or complied
      in all material  respects with all  agreements  and covenants  required by
      this  Agreement  to be  performed  or  complied  with by it on or prior to
      Closing Date.

            (c) OFFICER'S CERTIFICATE.  Seller shall have received a certificate
      of the Chief Executive Officer of Buyer with respect to the conditions set
      forth in Sections 8.3(a) and (b).

                  ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER

            SECTION 9.1.  TERMINATION.  This  Agreement  may  be  terminated  as
provided below:

            (a) by mutual written consent of Buyer and Seller;

            (b) Buyer may terminate  this  Agreement by giving written notice to
      Seller at any time prior to the Closing if Seller is in material breach of
      any  representation,  warranty,  or covenant  contained in this  Agreement
      provided  that:  (i) Buyer has  notified  Seller of the  breach,  (ii) the
      breach has  continued  without cure for a period of thirty (30) days after
      Buyer notified Seller, or by its nature,  the breach cannot be cured prior
      to  the   Closing   Date  and  (iii)   Buyer  is  not  in  breach  of  any
      representation, warranty, or covenant contained in this Agreement.

            (c) Seller may terminate  this Agreement by giving written notice to
      Buyer at any time prior to the Closing if Buyer is in  material  breach of
      any  representation,  warranty,  or covenant  contained in this  Agreement
      provided  that:  (i) Seller has  notified  Buyer of the  breach,  (ii) the

                                       22

      breach has  continued  without cure for a period of thirty (30) days after
      Seller notified Buyer, or by its nature,  the breach cannot be cured prior
      to  the  Closing   Date  and  (iii)   Seller  is  not  in  breach  of  any
      representation, warranty, or covenant contained in this Agreement.

            (d) by either Buyer or Seller if any permanent injunction preventing
      the   consummation   of  the  purchase  and  sale  has  become  final  and
      nonappealable;

            (e) by either Buyer or Seller if the Closing has not occurred (other
      than through the failure of any party seeking to terminate  this Agreement
      to  comply  in all  material  respects  with its  obligations  under  this
      Agreement) on or before June 8, 2007;

            (f) by  Buyer  if any of the  conditions  in  Sections  8.1  and 8.2
      applicable  to it have not been  satisfied  as of the  Closing  Date or if
      satisfaction  of such a  condition  is or becomes  impossible  (other than
      through  the failure of Buyer to comply  with its  obligations  under this
      Agreement)  and Buyer  has not  waived  such  condition  on or before  the
      Closing Date; or

            (g) by Seller,  if any of the conditions in Article Sections 8.1 and
      8.3  applicable  to it have not be  satisfied as of the Closing Date or if
      satisfaction  of such a  condition  is or becomes  impossible  (other than
      through the failure of Seller to comply  with its  obligations  under this
      Agreement)  and  Seller  has not waived  such  condition  on or before the
      Closing Date.

            SECTION 9.2.  EFFECT OF TERMINATION. In the event of the termination
of this Agreement pursuant to Section 9.1, this Agreement shall forthwith become
void and,  subject to the provisions of the Escrow Agreement with respect to the
Deposit, all rights and obligations of any party shall cease except that nothing
herein shall relieve any party from  liability for any breach of this  Agreement
or any  representation,  warranty,  covenant  or  agreement  contained  in  this
Agreement or shall restrict either party's rights in the case thereof.

            SECTION  9.3. WAIVER.  At any time prior to the  Closing  Date,  the
parties may (i) extend the time for the performance of any of the obligations or
other  acts  of  the  other   party,   (ii)  waive  any   inaccuracies   in  the
representations  and warranties  contained  herein or in any document  delivered
pursuant  hereto  and  (iii)  waive  compliance  with any of the  agreements  or
conditions contained herein. Any such extension or waiver shall be valid only if
set forth in a written  instrument  signed  on  behalf of such  party,  but such
extension,  waiver or failure to insist on strict compliance with an obligation,
covenant,  agreement or condition  shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.

                           ARTICLE X. INDEMNIFICATION

            SECTION 10.1. SURVIVAL   OF    REPRESENTATIONS,    WARRANTIES    AND
AGREEMENTS.

            Subject  to  the  limitations  set  forth  in  this  Article  X  and
notwithstanding  any investigation  conducted at any time with regard thereto by
or on behalf of Buyer or Seller, all representations,  warranties, covenants and
agreements of Buyer and Seller in this Agreement shall survive the Closing.  All
statements  contained  in  any  Schedule  or  Exhibit  hereto  shall  be  deemed

                                       23

representations and warranties of Buyer or Seller, as the case may be, set forth
in this Agreement for the purposes of this Article.

            SECTION 10.2. INDEMNIFICATION.

            (a) Subject to the  limitations  set forth in this Article X, Seller
      shall  indemnify  and hold  harmless  Buyer from and  against  any and all
      losses,  liabilities,  damages, demands, claims, suits, actions, judgments
      or causes of action,  assessments,  costs and expenses including,  without
      limitation,  interest, penalties,  reasonable attorneys' fees, any and all
      reasonable  expenses  incurred in  investigating,  preparing  or defending
      against any litigation,  commenced or threatened, or any claim whatsoever,
      and any and all  amounts  paid in  settlement  of any claim or  litigation
      (collectively,  "Damages"),  asserted against, resulting to, imposed upon,
      or incurred or suffered by Buyer,  directly or indirectly,  as a result of
      or arising from the following  (individually an "Indemnifiable  Claim" and
      collectively  "Indemnifiable  Claims" when used in the context of Buyer as
      the Indemnified Party (as hereinafter defined)):

                  (i) Any inaccuracy in or breach of any of the representations,
            warranties  or  agreements  made in this  Agreement by Seller or the
            non-performance  of any  covenant or  obligation  to be performed by
            Seller;

                  (ii) Any Excluded  Liability or other  liability  imposed upon
            Buyer as  transferee  of the  Business  or the  Property,  including
            without limitation,  any such liability as may be imposed upon Buyer
            under  applicable  bulk sales and other  similar  laws, or otherwise
            relating to the conduct of the Business  prior to the Closing  Date,
            except  to the  extent  such  liability  has been  assumed  by Buyer
            pursuant to Article II hereof;

                  (iii)  Seller's  failure to comply with the bulk transfer laws
            of any state or its  misapplication  of the proceeds of the Purchase
            Price of the Property in fraud of its creditors.

            (b) Subject to the  limitations  set forth in this  Article X, Buyer
      shall  indemnify  and hold  harmless  Seller  from and against any and all
      Damages  asserted  against,  resulting  to,  imposed  upon, or incurred or
      suffered by Seller, directly or indirectly, as a result of or arising from
      the following:

                  (i) Any inaccuracy in or breach of any of the representations,
            warranties  or  agreements  made by Buyer in this  Agreement  or the
            non-performance  of any  covenant or  obligation  to be performed by
            Buyer;

                  (ii) Any liability  imposed upon Seller as a result of Buyer's
            conduct of the Business after the Closing Date; or

                  (iii) The  nonperformance or nonpayment by Buyer of any of the
            Assumed Liabilities.

                                       24

            (c) For  purposes of this  Article X, all Damages  shall be computed
      net of any  insurance  coverage  with  respect  thereto  that  reduces the
      Damages that would otherwise be sustained;  provided, however, that in all
      cases,  the timing of the receipt or  realization  of  insurance  proceeds
      shall be taken into  account in  determining  the amount of  reduction  of
      Damages.

            (d)  Notwithstanding  anything  to the  contrary  contained  in this
      Agreement, in no event shall any party hereto have any liability hereunder
      to any other  party  hereto  for  consequential,  indirect  or  incidental
      damages of any kind or nature or lost profits.

            (e) If Buyer has Knowledge at or before the Closing of any breach or
      non-fulfillment  of a  representation,  warranty,  covenant  or  agreement
      herein by  Seller,  and Buyer  nevertheless  proceeds  to  consummate  the
      transaction  contemplated  hereby, then without further act on the part of
      any party hereto,  Buyer shall be deemed to have waived its rights to such
      indemnification  with respect to such breach or  non-fulfillment  (but not
      without respect to any other breach or non-fulfillment).

            SECTION 10.3. LIMITATIONS    ON    INDEMNIFICATION.     Rights    to
indemnification hereunder are subject to the following limitations:

            (a) As to Seller and Buyer,  the  obligation  of indemnity  provided
      herein with respect to the  representations  and  warranties  made by them
      herein  shall  survive the Closing  Date and shall  continue  for a period
      equal  to 18  months  following  the  Closing  Date  at  which  time  such
      representations  and  warranties  shall  expire and become  null and void,
      except as to any matters with  respect to which a bona fide written  claim
      shall have been made  before  such date,  in which  event  survival  shall
      continue (but only with respect to, and to the extent of, such claim).

            (b) An  Indemnified  Party  shall  be  entitled  to  indemnification
      hereunder  with  respect  to a  breach  by the  Indemnifying  Party of any
      representation  or  warranty  only to the  extent  that the  amount of all
      Damages suffered by the Indemnified Party as a result of the breach by the
      Indemnifying Party of one or more  representations  and warranties exceeds
      in the aggregate $50,000,  whereupon all amounts in excess of an aggregate
      of $50,000 shall be subject to indemnification. In no event shall Buyer be
      entitled to indemnification hereunder with respect to one or more breaches
      by the Seller of its  representations or warranties in an aggregate amount
      that exceeds the Purchase Price.

            (c) As to Seller and Buyer,  the  obligation  to indemnify  provided
      herein with respect to any matter other than a representation and warranty
      made by them herein shall survive the Closing Date until the expiration of
      the applicable statute of limitations.

            (d) If, prior to the  termination  of any obligation to indemnify as
      provided for herein,  written  notice of a claimed  breach is given by the
      party seeking indemnification  including in detail the basis therefor (the
      "Indemnified Party") to the party from whom indemnification is sought (the
      "Indemnifying  Party") or a suit or action based upon a claimed  breach is
      commenced  against the Indemnified  Party, the Indemnified Party shall not
      be precluded from pursuing such claimed breach or suit or action,  or from

                                       25

      recovering  from the  Indemnifying  Party  (whether  through the courts or
      otherwise)  on the  claim,  suit or action,  by reason of the  termination
      otherwise provided for above.

            (e) The right of any party  hereto to  commence or assert an action,
      suit,  claim or  proceeding  for  Damages  in  respect  of the breach of a
      representation  or warranty  contained  herein shall terminate at the same
      time that the obligation of  indemnification  provided herein with respect
      to such breach shall terminate.

            (f)  Notwithstanding  anything  contained  in this  Agreement to the
      contrary,  the  parties  hereto  acknowledge  and  agree  that,  except as
      hereinafter  provided,  the  indemnification  set forth in this Article X,
      subject to the limitations  contained in this Article X, shall be the sole
      and exclusive  remedy of the  Indemnified  Party for any breach,  default,
      inaccuracy or failure of any of the  representations and warranties of the
      Indemnifying  Party  contained in this  Agreement  and in any document and
      instrument delivered in connection herewith,  whether based upon contract,
      tort or upon any other theory of law.  The  preceding  sentence  shall not
      affect the availability to Buyer of equitable  remedies in respect of this
      Agreement and the transactions  contemplated  hereby,  including,  without
      limitation,  the  remedies of  injunction  and  specific  performance,  or
      remedies  in respect of fraud by Seller that may  hereafter  be alleged by
      Buyer.

            (g) Notwithstanding anything else contained in this Agreement to the
      contrary,  the sum of  $250,000,  constituting  the portion of the Deposit
      remaining  after the partial  release  contemplated by Section 3(a) of the
      Escrow Agreement shall be the sole source for  reimbursement to Buyer with
      respect to any Receivables  that are not collected in full by Buyer within
      90 days after the Closing Date.

            SECTION 10.4. PROCEDURE   FOR   INDEMNIFICATION   WITH   RESPECT  TO
THIRD-PARTY CLAIMS.

            The  Indemnified  Party  shall give the  Indemnifying  Party  prompt
written notice of any third party claim, demand, assessment,  suit or proceeding
to which the  indemnity  set forth in Section 10.2  applies,  which notice to be
effective  must describe such claim in reasonable  detail (the  "Indemnification
Notice").  Notwithstanding  the foregoing,  the Indemnified Party shall not have
any obligation to give any notice of any assertion of liability by a third party
unless such assertion is in writing and the rights of the  Indemnified  Party to
be  indemnified  hereunder  in respect  of any third  party  claim  shall not be
adversely  affected  by its failure to give  notice  pursuant  to the  foregoing
unless and, if so, only to the extent that, the Indemnifying Party is materially
prejudiced  thereby.  The Indemnifying Party shall have the right to control the
defense or settlement  of any such action  subject to the  provisions  set forth
below,  but the  Indemnified  Party may,  at its  election,  participate  in the
defense of any action or  proceeding  at its sole cost and  expense.  Should the
Indemnifying  Party fail  timely to defend any such  action  (except for failure
resulting   from  the   Indemnified   Party's   failure   to  timely   give  the
Indemnification  Notice), then, in addition to any other remedy, the Indemnified
Party may settle or defend such action or proceeding  through counsel of its own
choosing  and may  recover  from  the  Indemnifying  Party  the  amount  of such
settlement, demand, or any judgment or decree and all of its costs and expenses,
including reasonable fees and disbursements of counsel.

                                       26

            SECTION 10.5. PROCEDURE   FOR   INDEMNIFICATION   WITH   RESPECT  TO
NON-THIRD-PARTY  CLAIMS.  In the event that the  Indemnified  Party  asserts the
existence of an  Indemnifiable  Claim (but excluding  claims  resulting from the
assertion of liability by third parties), it shall give prompt written notice to
the Indemnifying  Party specifying in reasonable  detail and to the extent known
to it the nature and amount of the claim  asserted (the  "Non-Third  Party Claim
Indemnification  Notice").  If the Indemnifying  Party,  within 30 days (or such
greater time as may be necessary for the Indemnifying  Party to investigate such
Indemnifiable  Claim not to exceed 60 days), after receiving the Non-Third Party
Claim Indemnification  Notice from the Indemnified Party, shall not give written
notice to the Indemnified  Party announcing its intent to contest such assertion
of the Indemnified Party (the "Contest Notice"),  such assertion shall be deemed
accepted  and the amount of claim shall be deemed a valid  Indemnifiable  Claim.
During the time  period set forth in the  preceding  sentence,  the  Indemnified
Party  shall  cooperate  fully  with the  Indemnifying  Party in respect of such
Indemnifiable Claim. In the event, however, that the Indemnifying Party contests
the  assertion of a claim by giving a Contest  Notice to the  Indemnified  Party
within said period,  then if the parties  hereto,  acting in good faith,  cannot
reach  agreement  with  respect to such claim  within 10 days after such notice,
such parties may seek any remedy available thereto at law or in equity.

            SECTION 10.6. COOPERATION  IN THE  DEFENSE OF  CLAIMS.  In the event
that  an  Indemnifiable  Claim  is  asserted,  the  Indemnifying  Party  and the
Indemnified  Party shall each  cooperate  in all  reasonable  respects  with the
other.  Such  cooperation  shall include making  available on reasonable  notice
during normal business hours at the cost of the Indemnifying Party such business
records as relate to the  Business  and the  transactions  contemplated  by this
Agreement and suitable personnel with knowledge of the foregoing.

                      ARTICLE XI. MISCELLANEOUS PROVISIONS

            SECTION 11.1. NOTICES. All notices and other communications required
or permitted  under this  Agreement  shall be deemed to have been duly given and
made if in writing and if served  either by  personal  delivery to the party for
whom  intended  (which  shall  include  delivery  by Federal  Express or similar
responsible   overnight   service)   when  received  or  if  sent  by  facsimile
transmission,  with a copy by  personal  delivery,  Federal  Express  or similar
responsible  overnight service) on the same day, when transmitted and receipt is
confirmed by telephone, bearing the address shown in this Agreement for, or such
other address as may be designated in writing hereafter by, such party:

      If to Seller:     c/o The LGL Group, Inc.
                        140 Greenwich Avenue, 4th Floor
                        Greenwich, Connecticut 06830
                        Attention: Chief Executive Officer
                        Facsimile No.: (203) 622-1360

      with a copy to:   Olshan Grundman Frome Rosenzweig & Wolosky LLP
                        Park Avenue Tower
                        65 East 55th Street
                        New York, New York 10022
                        Attention: David J. Adler, Esq.
                        Facsimile No.: (212) 451-2222

                                       27

      If to Buyer:      Olivotto Glass Technologies SpA
                        Viale Gandhi 22
                        10051 Avigliana (TO)
                        Italy
                        Attention:  Giulio Napoli, President
                        Facsimile No.: 011 39011 9343500

      with a copy to:   Patterson Belknap Webb & Tyler LLP
                        1133 Avenue of the Americas
                        New York, New York
                        10036-6710
                        Attention: Jeffrey E. LaGueux, Esq.
                        Facsimile No.: (212) 336-2222

            SECTION 11.2. ENTIRE AGREEMENT. This Agreement and Schedules hereto,
and  the  documents   referred  to  herein  embody  the  entire   agreement  and
understanding  of the parties  hereto with respect to the subject matter hereof,
and supersede all prior and contemporaneous agreements and understandings,  oral
or written, relative to said subject matter.

            SECTION 11.3. BINDING  EFFECT;  ASSIGNMENT.  This  Agreement and the
various rights and obligations  arising  hereunder shall inure to the benefit of
and be  binding  upon  Buyer and  Seller  and their  respective  successors  and
permitted  assigns.  Neither this Agreement nor any of the rights,  interests or
obligations  hereunder  shall be transferred or assigned (by operation of law or
otherwise) by any of the parties hereto without the prior written consent of the
other  parties.  Any transfer or assignment  of any of the rights,  interests or
obligations  hereunder  in violation of the terms hereof shall be void and of no
force or effect.  Notwithstanding  the  foregoing,  Buyer shall be  permitted to
assign all of its rights to acquire the Property and to delegate its obligations
to assume the Assumed  Liabilities  arising  under this  Agreement to any entity
which  is  wholly-owned  by  Buyer  or  Olivotto  Industries,  S.p.A.  ("Buyer's
Assignee") prior to the Closing.  Any such assignment shall not release Buyer or
Olivotto Industries, S.p.A from its liabilities and obligations hereunder.

            SECTION 11.4. CAPTIONS.  The Article  and  Section  headings of this
Agreement are inserted for  convenience  only and shall not constitute a part of
this Agreement in construing or interpreting any provision hereof.

            SECTION 11.5. EXPENSES OF  TRANSACTION.  Buyer and Seller shall each
pay its own costs and expenses  incurred by it in connection with this Agreement
and the transactions  contemplated  hereby. The liability for sales, real estate
transfer  and/or  documentary  taxes,  if any,  (but not income or similar  type
taxes) in  connection  with the sale and delivery of the  Property  shall be the
responsibility of Seller.

            SECTION 11.6. WAIVER;  CONSENT.  This  Agreement may not be changed,
amended,  terminated,   augmented,   rescinded  or  discharged  (other  than  by
performance),  in whole or in part,  except by a writing executed by each of the

                                       28

parties  hereto,  and no waiver of any of the  provisions  or conditions of this
Agreement  or any of the rights of a party  hereto shall be effective or binding
unless such waiver  shall be in writing and signed by the party  claimed to have
given or  consented  thereto.  Except to the extent that a party hereto may have
otherwise agreed to in writing, no waiver by that party of any condition of this
Agreement   or  breach  by  any   other   party  of  any  of  its   obligations,
representations  or warranties  hereunder  shall be deemed to be a waiver of any
other  condition  or  subsequent  or  prior  breach  of the  same  or any  other
obligation  or  representation  or warranty by such other  party,  nor shall any
forbearance by the first party to seek a remedy for any  noncompliance or breach
by such  other  party be deemed to be a waiver by the first  party of its rights
and remedies with respect to such noncompliance or breach.

            SECTION 11.7.  NO  THIRD  PARTY   BENEFICIARIES.   Nothing   herein,
expressed  or implied,  is intended or shall be construed to confer upon or give
to any person, firm, corporation or legal entity, other than the parties hereto,
any rights, remedies or other benefits under or by reason of this Agreement.

            SECTION 11.8.  COUNTERPARTS.  This  Agreement  may  be  executed  in
multiple  counterparts,  each of which shall be deemed an  original,  but all of
which taken together shall constitute one and the same instrument.

            SECTION 11.9.  REMEDIES  OF BUYER.  The  Property  is unique and not
readily  available.  Accordingly,  Seller  acknowledges that, in addition to all
other remedies to which Buyer is entitled, Buyer shall have the right to enforce
the terms of this Agreement by a decree of specific performance,  provided Buyer
is not in material default hereunder.

            SECTION 11.10. BULK SALES LAWS. Buyer hereby waives  compliance with
any and all applicable bulk sales and other similar laws.

            SECTION 11.11. GOVERNING LAW; CONSENT TO JURISDICTION.

            (a) This Agreement,  and all other agreements and related  documents
executed and delivered pursuant hereto including, without limitation, the Escrow
Agreement,  shall be governed by and construed in  accordance  with the domestic
laws of the State of New York without giving effect to any choice or conflict of
law  provision  or  rule  (whether  of the  State  of  New  York  or  any  other
jurisdiction)  that would cause the application of the laws of any  jurisdiction
other than the State of New York.

            (b) Each of the parties  hereto  hereby  irrevocably  submits to the
exclusive  jurisdiction  of any New  York  state  court,  or the  United  States
District  Court,  Southern  District  of New York,  in each case  sitting in the
County of New York over any action or  proceeding  arising out of or relating to
this  Agreement  and  the  transactions  contemplated  hereby  and by the  other
agreements  and  related  documents  executed  and  delivered  pursuant  hereto,
including,  without  limitation,  the Escrow Agreement,  and each of the parties
hereto  hereby  irrevocably  agrees that all claims in respect of such action or
proceeding  shall be heard  and  determined  in such New York  state or  Federal
court.  Each of the parties  hereto hereby  irrevocably  waives,  to the fullest
extent legally possible, the defense of an inconvenient forum to the maintenance
of such action or proceeding.

                                       29

            SECTION 11.12. EXHIBITS  AND  SCHEDULES.   Each  reference  in  this
Agreement to an Exhibit or Schedule shall mean an Exhibit or Schedule annexed to
this Agreement and shall be incorporated into this Agreement by such reference.

            SECTION 11.13. KNOWLEDGE.  All references  herein to the "Knowledge"
of Seller or words of similar  import  shall mean the actual  knowledge of Brian
Fabacher and Janet Grimsley.  All references  herein to the "Knowledge" of Buyer
or words of similar import shall mean the actual knowledge of Giulio Napoli.

                            [SIGNATURE PAGE FOLLOWS]

                                       30

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

                                         BUYER:

                                         OLIVOTTO GLASS TECHNOLOGIES S.P.A.

                                         By: /s/ Giulio Napoli
                                             -----------------------------------
                                             Name:  Giulio Napoli
                                             Title: President

                                         SELLER:

                                         LYNCH SYSTEMS, INC.

                                         By: /s/ Jeremiah M. Healy
                                             -----------------------------------
                                             Name:  Jeremiah M. Healy
                                             Title: Chief Executive Officer

      The  liabilities  and  obligations  of each of Buyer and Buyer's  Assignee
under  and  pursuant  to the  foregoing  Agreement  are  hereby  unconditionally
guaranteed by the undersigned. This is a guaranty of payment and performance and
not of collection.

                                         OLIVOTTO INDUSTRIES, SPA

                                         By: /s/ Giulio Napoli
                                             -----------------------------------
                                             Name:  Giulio Napoli
                                             Title: President

      The  liabilities  and  obligations  of Seller  under and  pursuant  to the
foregoing  Agreement are hereby  unconditionally  guaranteed by the undersigned.
This is a guaranty of payment and performance and not of collection.

                                         THE LGL GROUP, INC.

                                         By: /s/ Jeremiah M. Healy
                                             -----------------------------------
                                             Name:  Jeremiah M. Healy
                                             Title: Chief Executive Officer

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