Document:

Agreement and Plan of Merger

     

    
      

      

    

     

    

    

    

    Agreement
      and Plan of Merger

    

    

    By
      And Among

    

    

    Buckeye
      Ventures, Inc.

    

    EK
      Acquisition Corp.

    

    Energy
      King, Inc.

    

    And

    

    The
      Stockholders of Energy King, Inc.

    

    
 

    

    

    

    Dated
      as of September 28, 2006

    

     

     

    
 

    
      

      

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    AGREEMENT
      AND PLAN OF REORGANIZATION

     

    This
      Agreement and Plan of Merger is made as of September 28, 2006, by and among
      Buckeye Ventures, Inc., a Michigan corporation (“Buckeye”), EK Acquisition
      Corp., a Delaware corporation (the “Acquisition Sub”), Energy King, Inc., a
      California corporation (the “Company”), and Alan Hardwick, Varin Larson and
      Deanna Larson (collectively, the “Stockholders”).

     

    WHEREAS,
      the
      Acquisition Sub is a wholly-owned subsidiary of Buckeye;

     

    WHEREAS,
      the
      respective Boards of Directors of the Acquisition Sub and the Company (which
      corporations are hereinafter collectively referred to as “Constituent
      Corporations”) have deemed it advisable and in the best interests of the
      Constituent Corporations and their respective stockholders that the Acquisition
      Sub merge with and into the Company pursuant to this Agreement and the
      applicable provisions of the laws of the State of Delaware and the State of
      California;

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and of the mutual agreements, representations,
      warranties, provisions and covenants herein contained, and other good and
      valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the parties hereto hereby agree as follows:

     

    ARTICLE
      1

    DEFINITIONS

     

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

     

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

     

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

     

    “Agreement”
      means this Agreement and Plan of Reorganization, including all Exhibits and
      Schedules attached hereto, as the same may be supplemented, modified or
      otherwise amended from time to time.

     

    “Articles
      of Merger” means those Articles or Certificates of Merger with respect to the
      Merger in substantially the forms attached as Exhibit
      A-1
      and
Exhibit
      A-2
      or with
      such other changes therein as may be required by applicable state
      laws.

     

    “Buckeye
      Stock” means any common stock of Buckeye to be received by the Stockholders
      pursuant to or in connection with this Agreement or any of the other agreements
      or documents executed and/or delivered in connection with this Agreement,
      including without limitation the Promissory Notes and the capital stock of
      Buckeye which may be issued in payment of or upon the conversion of any portion
      of the Promissory Notes.

     

    “Code”
      means the Internal Revenue Code of 1986, as amended.

     

    “Delaware
      GCL” means the General Corporation Law of the State of Delaware, as
      amended.

     

    “Due
      Diligence Date” means February 28, 2006.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Effective
      Time of the Merger” means the time as of which the Merger becomes effective
      under both the Delaware GCL and the corporate law of the State of
      California.

     

    “EPA”
      means the Environmental Protection Agency.

     

    “EPA
      Action” means the pending enforcement action against the Company by the
      Environmental Protection Agency as a result of the activities alleged to occur
      at the premises leased by the Company, including the release of certain
      refrigerants, proposed to be resolved by the EPA pursuant to the drafts of
      a
      Stipulation for Final Judgment and Final Judgment received by the Company and
      delivered by the Company to Buckeye prior to the Closing, which are attached
      as
      part of Schedule 4.12 and have been approved by Buckeye (the “Proposed EPA
      Settlement Documents”).

     

    “EPA
      Penalty” means the amount, not to exceed $100,000, required to be paid to the
      EPA to settle and finally resolve the EPA Action (whether in respect of
      reimbursement of costs of investigation, civil penalties or
      otherwise).

     

    “Expiration
      Date” means, (a) with respect to the representations and warranties contained in
      Article 4
      (other
      than Sections 4.3,
      4.4, 4.12, 4.20, 4.21, 4.22(b)(v) and 4.30),
      and
      the confirmations of such representations and warranties on the Closing Date,
      the date which is eighteen months from the Closing Date, (b) with respect to
      the
      representations and warranties contained in Article 6,
      and the
      confirmations of such representations and warranties on the Closing Date, the
      date which is eighteen months from the Closing Date, and (c) with respect to
      any
      other representations and warranties under this Agreement (including those
      in
Sections 4.3,
      4.4, 4.12, 4.20, 4.21, 4.22(b)(v) and 4.30
      and
      those in Article
      5),
      and
      the confirmations of such representations and warranties on the Closing Date,
      the date on which a suit against the Company or the Surviving Corporation with
      respect to any breach thereof would be barred by the applicable statute of
      limitations.

     

    “Former
      Stockholder Debt” means the indebtedness owed by the Company pursuant to that
      certain Installment Note & Security Agreement dated July 1, 2001 in the
      initial principal amount of $300,000 made by the Company in favor of the Floyd
      Pedersen and Jean Pedersen, as Co-Trustees of the Pedersen Family Trust, and
      which indebtedness was approximately $255,000 on June 30, 2006.

     

    “Hazardous
      Materials” means any wastes, substances or materials (whether solids, liquids or
      gases) that are deemed hazardous, toxic, pollutants or contaminants, including
      substances defined as “hazardous wastes,” “hazardous substances,” “toxic
      substances,” “radioactive materials” or other similar designations in, or
      otherwise subject to regulation under, any Environmental Laws. “Hazardous
      Materials” includes polychlorinated biphenyls (PCBs), asbestos, lead-based
      paints and petroleum and petroleum products (including crude oil or any fraction
      thereof).

     

    “Merger”
      means the merger of the Acquisition Sub with and into the Company pursuant
      to
      this Agreement and the applicable provisions of the laws of the State of
      Delaware and the State of California.

     

    “PBGC”
      means the Pension Benefit Guaranty Corporation or its successors.

     

    “Phoenix
      Systems” means the heating, ventilating and air conditioning and related
      equipment previously sold, installed and serviced by the Company or its
      predecessors, based upon an ice storage technology and/or sometimes referred
      to
      as a Phoenix System, including without limitation any express or implied
      warranties provided in connection therewith.

     

    
      
         

      

      
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    “Pledge
      Agreement” means a Pledge Agreement made by Buckeye in substantially the form
      attached as Exhibit
      C.

     

    “Promissory
      Notes” mean each Promissory Note Secured by Pledge Agreement, in substantially
      the form attached as Exhibit
      B,
      issued
      in connection with the Merger.

     

    “Returns”
      means any returns, reports or statements (including any information returns)
      required to be filed for purposes of a particular Tax.

     

    “Schedule”
      means each Schedule attached hereto, which shall reference the relevant sections
      of this Agreement, on which parties hereto disclose information as part of
      their
      respective representations, warranties and covenants.

     

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

     

    “Specified
      Marks” shall mean the trademarks, trade names, logos and other proprietary
      rights set forth on Schedule 1.1.

     

    “Surviving
      Corporation” means the Company as the surviving corporation in the
      Merger.

     

    “Tax”
or
      “Taxes” means all federal, state, local or foreign net or gross income, gross
      receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank
      shares, withholding, payroll, employment, excise, property, deed, stamp,
      alternative or add on minimum, or other taxes, assessments, duties, fees, levies
      or other governmental charges of any nature whatever, whether disputed or not,
      together with any interest, penalties, additions to tax or additional amounts
      with respect thereto.

     

    1.2 Other
      Definitions.
      The
      following indicates the location in this Agreement of other terms defined
      herein:

     

    
      	
              Defined
                Term

            	
              Location

            
	 	 
	
              Acquisition
                Sub

            	
              Introduction

            
	
              Additional
                Amount

            	
              Sec.
                10.5

            
	
              Additional
                Capital

            	
              Sec.
                10.5

            
	
              Affiliates

            	
              Sec.
                4.7

            
	
              Aggregate
                Consideration Amount

            	
              Schedule
                2.4

            
	
              Authorizations

            	
              Sec.
                4.11

            
	
              Buckeye

            	
              Introduction

            
	
              Charter
                Documents

            	
              Sec.
                6.1

            
	
              Closing

            	
              Sec.
                3.1

            
	
              Closing
                Balance Sheet

            	
              Schedule
                2.4

            
	
              Closing
                Date

            	
              Sec.
                3.1

            
	
              Company

            	
              Introduction

            
	
              Company
                Charter Documents

            	
              Sec.
                4.1

            
	
              Company
                Financial Statements

            	
              Sec.
                4.8

            
	
              Company
                Material Documents

            	
              Sec.
                4.22

            
	
              Company
                Stock

            	
              Sec.
                2.4

            
	
              Constituent
                Corporations

            	
              Recitals

            
	
              Debt

            	
              Schedule
                2.4

            
	
              Debt
                Amount

            	
              Schedule
                2.4

            
	
              Dispute

            	
              Sec.
                14.1(a)

            
	
              EBIT

            	
              Sec.
                10.3(d)

            

    

     

    
      
         

      

      
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              EBIT
                Deficit

            	
              Sec.
                10.3(d)

            
	
              EBIT
                Target

            	
              Sec.
                10.3(d)

            
	
              Environmental
                Laws

            	
              Sec.
                4.12

            
	
              ERISA

            	
              Sec.
                4.18(a)

            
	
              Extension
                Notice

            	
              Sec.
                10.3(b)

            
	
              First
                Measurement Period

            	
              Sec.
                10.3(d)

            
	
              Indemnified
                Party

            	
              Sec.
                11.3(a)

            
	
              Indemnifying
                Party

            	
              Sec.
                11.3(a)

            
	
              Intellectual
                Property

            	
              Sec.
                4.28

            
	
              Measurement
                Period

            	
              Sec.
                10.3(d)

            
	
              Minimum
                Working Capital Amount

            	
              Schedule
                2.4

            
	
              Permitted
                Debt

            	
              Schedule
                2.4

            
	
              Plans

            	
              Sec.
                4.18(a)

            
	
              Purchase
                Price Adjustment Amount

            	
              Sec.
                10.3(d)

            
	
              Purchase
                Price Adjustment Objection Notice

            	
              Sec.
                10.3(b)

            
	
              Qualified
                Plans

            	
              Sec.
                4.19

            
	
              Second
                Measurement Period

            	
              Sec.
                10.3(d)

            
	
              Section
                10.3 Accountant

            	
              Sec.
                10.3(b)

            
	
              Stockholders

            	
              Introduction

            
	
              Stockholders’
                Representative

            	
              Sec.
                15.18

            
	
              Third
                Person

            	
              Sec.
                11.3(a)

            
	
              Working
                Capital

            	
              Schedule
                2.4

            
	
              Working
                Capital Adjustment Amount

            	
              Schedule
                2.4

            
	
              Transfer
                Taxes

            	
              Sec.
                15.6

            

    

    

     

    1.3 Other
      Definitional Provisions.
      All
      terms defined in this Agreement in the singular shall have comparable meanings
      when used in the plural and vice-versa. The words “hereof,” “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
      to this Agreement as a whole and not to any particular provision of this
      Agreement. Underlined references to Articles, Sections, Schedules and Exhibits
      shall refer to those portions of this Agreement. The use of the masculine,
      feminine or neuter gender herein shall not limit any provision of this
      Agreement. The use of the terms “including” or “include” shall in all cases
      herein mean “including, without limitation” or “include, without limitation,”
respectively. For purposes of this Agreement, “knowledge” will be deemed to be
      present with respect to a corporation, when the matter in question was brought
      to the attention of or, if due diligence had been exercised, would have been
      brought to the attention of, any officer or manager of such
      corporation.

     

    ARTICLE
      2

    THE
      MERGER

     

    2.1 Delivery
      and Filing of Articles of Merger.
      The
      Constituent Corporations will cause the Articles of Merger to be duly executed
      and filed with the Secretary of State of the State of Delaware and the Secretary
      of State of the State of California on the Closing Date.

     

    2.2 Merger.
      Subject
      to the terms and conditions of this Agreement, at the Effective Time of the
      Merger, the Acquisition Sub shall be merged with and into the Company in
      accordance with the Articles of Merger, the separate existence of the
      Acquisition Sub shall cease and the Company shall be the surviving party in
      the
      Merger.

     

    
      
         

      

      
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    2.3 Certificate
      of Incorporation, By-Laws and Board of Directors of Surviving
      Corporation.
      At the
      Effective Time of the Merger:

     

    (a) the
      articles of incorporation of the Company then in effect shall be the articles
      of
      incorporation of the Surviving Corporation until it shall thereafter be duly
      amended;

     

    (b) the
      by-laws of the Company then in effect shall be the by-laws of the Surviving
      Corporation until they shall thereafter be duly amended;

     

    (c) the
      Board
      of Directors of the Surviving Corporation shall consist of the persons who
      are
      on the Board of Directors of the Acquisition Sub immediately prior to the
      Effective Time of the Merger; and subsequent to the Effective Time of the
      Merger, the members of the Board of Directors of the Surviving Corporation
      shall
      hold such positions until their respective successors shall have been duly
      elected or appointed and qualified or until their earlier death, resignation
      or
      removal in accordance with the provisions of the corporate law of the State
      of
      California and of the certificate of incorporation and by-laws of the Surviving
      Corporation; and

     

    (d) the
      officers of the Surviving Corporation shall consist of the persons who are
      identified on Schedule 2.3; and subsequent to the Effective Time of the Merger,
      such officers shall serve in such capacities until their respective successors
      shall have been duly elected or appointed and qualified or until their earlier
      death, resignation or removal in accordance with the provisions of the corporate
      law of the State of California and the certificate of incorporation and by-laws
      of the Surviving Corporation.

     

    2.4 Manner
      of Conversion.
      As of
      the Effective Time of the Merger, without any action on the part of any holder
      of any capital stock of the Company (“Company Stock”):

     

    (a) each
      share of Company Stock issued and outstanding immediately prior to the Effective
      Time of the Merger, by virtue of the Merger and without any action on the part
      of the holder thereof, automatically shall be deemed to represent the right
      to
      receive a Promissory Note in the initial principal amount determined pursuant
      to
Schedule
      2.4,
      without
      interest (except as provided in the Promissory Note after the Merger);
      and

     

    (b) all
      shares of Company Stock that are held by the Company as treasury stock shall
      be
      canceled and retired and no shares of capital stock of Buckeye, cash or other
      consideration shall be delivered or paid in exchange therefor.

     

    2.5 Acquisition
      Sub Capital Stock.
      As of
      the Effective Time of the Merger, each share of issued and outstanding common
      stock of the Acquisition Sub, without any action on the part of the holder
      thereof, shall be converted into and become one outstanding share of common
      stock of the Surviving Corporation.

     

    2.6 Effect
      of Merger.
      At the
      Effective Time of the Merger, the effect of the Merger shall be as provided
      in
      the applicable provisions of the Delaware GCL and the applicable provisions
      of
      the corporate law of the State of California. Except as herein specifically
      set
      forth, the identity, existence, purposes, powers, objects, franchises,
      privileges, rights and immunities of the Company shall continue unaffected
      and
      unimpaired by the Merger and the corporate franchises, existence and rights
      of
      the Acquisition Sub shall be merged with and into the Company, and the Company,
      as the Surviving Corporation, shall be fully vested therewith. At the Effective
      Time of the Merger, the separate existence of the Acquisition Sub shall cease
      and, in accordance with the terms of this Agreement, the Delaware GCL and the
      corporate law of the State of California, the Surviving Corporation shall
      possess all the rights, privileges, immunities and franchises, of a public,
      as
      well as of a private, nature, and all property, real, personal and mixed, and
      all debts due on whatever account, including subscriptions to shares, and all
      taxes, including those due and owing and those accrued, and all other choses
      in
      action, and all and every other interest of or belonging to or due to the
      Company and the Acquisition Sub shall be taken and deemed to be transferred
      to,
      and vested in, the Surviving Corporation without further act or deed; and all
      property, rights and privileges, powers and franchises and all and every other
      interest shall be thereafter as effectually the property of the Surviving
      Corporation as they were of the Company and the Acquisition Sub; and the title
      to any real estate, or interest therein, whether by deed or otherwise, vested
      in
      the Company and the Acquisition Sub, shall not revert or be in any way impaired
      by reason of the Merger. Except as otherwise provided herein, the Surviving
      Corporation shall thenceforth be responsible and liable for all the liabilities
      and obligations of the Company and the Acquisition Sub and any claim existing,
      or action or proceeding pending, by or against the Company or the Acquisition
      Sub may be prosecuted as if the Merger had not taken place, or the Surviving
      Corporation may be substituted in their place.

     

    
      
         

      

      
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    ARTICLE
      3

    CLOSING;
      CLOSING DELIVERIES

     

    3.1 Closing.
      Subject
      to the terms and conditions of this Agreement, the closing of the Merger (the
      “Closing”) shall take place on the date on which the last of the conditions set
      forth in Article
      8
      and
Article
      9
      is
      satisfied or, if permissible, waived (the “Closing Date”), at the offices of
      Buckeye or the Company, unless another date or place is agreed to in writing
      by
      the parties hereto, or if elected by Buckeye by the exchange by overnight
      courier or facsimile of executed counterpart signature pages and other documents
      required to be delivered pursuant to this Agreement at the Closing.

     

    3.2 Closing
      Deliveries.
      At the
      Closing, the Stockholders, who immediately prior to the Merger shall be the
      holders beneficially and of record of all of the outstanding shares of Company
      Stock, shall deliver to Buckeye all of the certificates formerly representing
      Company Stock, all of which shall be registered in the name of the Stockholders
      and be duly endorsed in blank by each respective Stockholder, or accompanied
      by
      duly executed stock powers in blank, and with all necessary transfer tax and
      other revenue stamps, acquired at such Stockholder’s expense, affixed; and, in
      exchange therefor, each Stockholder shall receive a
      Promissory Note in the applicable principal amount into which the Stockholder’s
      shares of Company Stock were converted as a result of the Merger.

     

    ARTICLE
      4

    REPRESENTATIONS
      AND WARRANTIES OF

    THE
      COMPANY AND THE STOCKHOLDERS

     

    The
      Company and each Stockholder, jointly and severally, represent and warrant
      as
      follows:

     

    4.1 Due
      Organization.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of California, and has the requisite corporate
      power
      and authority to carry on its business as it is now being conducted. The Company
      is duly qualified to do business and is in good standing in each jurisdiction
      in
      which the nature of its business or the ownership or leasing of its properties
      makes such qualification necessary. Schedule
      4.1
      sets
      forth the jurisdiction in which the Company is incorporated and lists all
      jurisdictions in which the Company is qualified to do business. True, complete
      and correct copies of the certificate or articles of incorporation (including
      amendments thereto) and by-laws (including amendments thereto) of the Company
      (collectively, the “Company Charter Documents”) have been delivered to Buckeye
      prior to the date of this Agreement. The minutes (including actions by written
      consent without meetings) of the Board of Directors, committees of the Board
      of
      Directors and the stockholders of the Company which have been delivered to
      Buckeye are all of the minutes (and actions by written consent) of the Board
      of
      Directors, committees of the Board of Directors and the stockholders of the
      Company and correct and complete copies thereof in all respects.

     

    
      
         

      

      
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    4.2 Authorization;
      Execution; Enforceability.
      The
      Company has the full legal right, power and authority to enter into this
      Agreement, to perform its obligations under this Agreement and to consummate
      the
      transactions contemplated herein. The execution and delivery of this Agreement
      by the Company, the performance by the Company of its obligations herein and
      the
      consummation of the transactions contemplated herein have been duly authorized
      by all necessary corporate action on the part of the Company, including all
      necessary approvals by stockholders. This Agreement has been duly executed
      and
      delivered by the Company and constitutes a legal, valid and binding obligation
      of the Company, enforceable against the Company in accordance with its
      terms.

     

    4.3 Capital
      Stock of the Company.
      The
      authorized, issued and outstanding capital stock of the Company is as set forth
      on Schedule
      4.3.
      No
      shares of capital stock of the Company are held in treasury by the Company.
      All
      of the issued and outstanding shares of the capital stock of the Company are
      owned beneficially and of record by the Stockholders in the amounts set forth
      in
Schedule
      4.3
      and
      further, except as set forth on Schedule
      4.3
      (all of
      which with respect to the Company Stock shall be terminated and released at
      or
      prior to the Closing), are owned free and clear of all liens, security
      interests, charges, voting trusts, restrictions, encumbrances and claims of
      every kind. All of the issued and outstanding shares of the capital stock of
      the
      Company have been duly authorized and validly issued, are fully paid and
      nonassessable and were offered, issued, sold and delivered by the Company in
      compliance with all applicable state and federal laws concerning the issuance
      of
      securities. Further, none of such shares were issued in violation of any
      preemptive or similar rights of any past or present stockholder or other person
      or entity.

     

    4.4 Transactions
      in Equity Securities.
      Except
      as set forth on Schedule
      4.4,
      (a) no
      subscription, option, warrant, call, conversion right or commitment of any
      kind
      exists which obligates the Company to issue any of its authorized but unissued
      equity securities or transfer any of the shares held by the Company in treasury,
      (b) the Company does not have any obligation (contingent or otherwise) to
      purchase, redeem or otherwise acquire any of its equity securities or any
      interests therein or to pay any dividend or make any distribution in respect
      thereof, and (c) neither the voting stock structure of the Company nor the
      relative ownership of shares among any of its stockholders has been altered
      or
      changed in contemplation of the Merger.

     

    4.5 Subsidiaries.
      The
      Company has no subsidiaries. The Company does not own, of record or
      beneficially, or control, directly or indirectly, any capital stock, securities
      convertible into capital stock or any other equity interest in any corporation,
      association or business entity nor is the Company, directly or indirectly,
      a
      participant in any joint venture, partnership or other non-corporate
      entity.

     

    4.6 Predecessor
      Status; Etc.
      Set
      forth on Schedule
      4.6
      is a
      listing of all prior corporate names of the Company, and all names of all
      predecessor companies of the Company, including the names of any entities
      acquired by the Company (by stock purchase, merger or otherwise) or owned by
      the
      Company or from whom the Company previously acquired material assets. Except
      as
      disclosed on Schedule
      4.6,
      the
      Company has not been a subsidiary or division of another
      corporation.

     

    
      
         

      

      
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    4.7 Spin-Off
      by the Company.
      Except
      as set forth on Schedule
      4.7,
      there
      has not been any sale, spin-off or split-up of assets of the Company or any
      other person or entity that directly, or indirectly through one or more
      intermediaries, controls, or is controlled by, or is under common control with,
      the Company (as used herein with respect to the Company, or with respect to
      any
      other person or entity, “Affiliates”) since January 1, 1996.

     

    4.8 Financial
      Statements.
      Copies
      of the financial statements of the Company listed on Schedule
      4.8
      have
      been delivered to Buckeye prior to the date of this Agreement (collectively,
      together with the financial statements to be delivered pursuant to Schedule
      2.4
      and
Section
      7.8,
      the
“Company Financial Statements”). To the knowledge of the Company and the
      Stockholders, the Company Financial Statements have been prepared in accordance
      with generally accepted accounting principles applied on a consistent basis
      (except as noted on Schedule
      4.8).
      To the
      knowledge of the Company and the Stockholders, except as set forth on
Schedule
      4.8,
      each
      balance sheet presents fairly in all material respects the financial position
      of
      the Company as of the date indicated thereon, and each statement of income,
      shareholders’ equity and cash flows presents fairly in all material respects the
      results of operations of the Company for the periods indicated
      thereon.
      There
      has been no net adverse change in the Company from August 31, 2006 to the
      Closing Date and if financial statements for the Company were prepared for
      the
      period to and as of the Closing Date, there would be no net adverse change
      reflected in such financial statements from the Company Financial Statements
      prepared as of August 31, 2006, when all changes, both positive and negative,
      are considered in the aggregate.

     

    4.9 Liabilities
      and Obligations.
      Schedule
      4.9
      sets
      forth, as of the Due Diligence Date, (a) all liabilities of the Company (if
      any)
      which are not reflected on the balance sheet of the Company at the Due Diligence
      Date, and (b) all loan agreements, financing agreements, reimbursement
      agreements for bonds, surety arrangements, letters of credit or indebtedness
      for
      borrowed money, indemnity agreements, guaranty agreements, bonds, promissory
      notes, mortgages, indentures, pledge agreements, security agreements or similar
      agreements to which the Company is a party or by which the Company is bound
      or
      its property is subject. Except as set forth on Schedule
      4.9,
      since
      the Due Diligence Date the Company has not incurred any liabilities of any
      kind,
      character and description, whether accrued, absolute, secured or unsecured,
      contingent or otherwise, other than liabilities incurred in the ordinary course
      of business consistent with past practice (none of which is for breach of
      contract, breach of warranty, tort, infringement or violation of law). In the
      case of those contingent liabilities related to pending or threatened
      litigation, or other liabilities which are not fixed or otherwise accrued,
      Schedule
      4.9
      sets
      forth a good faith and reasonable estimate of the maximum amount which the
      Company reasonably expects will be payable. If no estimate is provided on
Schedule
      4.9,
      the
      estimate shall for purposes of this Agreement be deemed to be zero.
      Except
      for interest which has accrued in the ordinary course of business on the
      existing Debt of the Company, there has been no increase in any Debt of the
      Company from August 31, 2006 to the Closing Date.

     

    4.10 Accounts
      and Notes Receivable.
      Schedule
      4.10
      lists
      all of the accounts, notes and other receivables of the Company, including
      any
      which are not reflected in the Company Financial Statements, and including
      receivables from and advances to directors, officers, employees and agents
      of
      the Company, any Stockholder, relatives of any Stockholder and Affiliates of
      the
      Company or any Stockholder; provided,
      however,
      that
      such listing shall not be required to include those receivables of the Company
      arising after the date set forth as the date of such list on Schedule 4.10
      as a
      result of sales in the ordinary course of business to persons or entities who
      are not Affiliates or otherwise affiliated with any of the Stockholders or
      the
      Company. To the knowledge of the Company and the Stockholders, except to the
      extent of the reserve for bad debt expense reflected on Schedule
      4.10,
      all
      accounts, notes and other receivables of the Company are and will be collectible
      within 90 days of the date created in the amounts shown on Schedule
      4.10
      (or in
      the case of receivables not required to be so listed on Schedule
      4.10
      in their
      face amount), in the ordinary course of business.

     

    
      
         

      

      
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    4.11 Authorizations.
      The
      Company holds all licenses, franchises, permits and other governmental
      authorizations and approvals (collectively, the “Authorizations”) necessary to
      operate its business in the manner in which it is conducted. Schedule
      4.11
      lists
      all such Authorizations (it being understood and agreed that a list of all
      environmental Authorizations is set forth on Schedule
      4.12).
      The
      Authorizations listed on Schedule
      4.11
      and
Schedule
      4.12
      are
      valid, and neither the Company nor any Stockholder has received any notice
      that
      any governmental authority intends to cancel, terminate or not renew any such
      Authorization. The Company has conducted and is conducting its business in
      compliance with the requirements, standards, criteria and conditions set forth
      in the Authorizations listed on Schedule
      4.11
      and
Schedule
      4.12
      and is
      not in violation of any of the foregoing.

     

    4.12 Environmental
      Matters.
      Except
      as set forth on Schedule
      4.12:

     

    (a) the
      Company has complied with and is in compliance with all federal, state and
      local
      laws, statutes, ordinances, regulations, rules, orders, writs, injunctions
      and
      decrees relating to environmental protection (collectively “Environmental Laws”)
      binding or applicable to the Company or the Company’s properties, including
      Environmental Laws relating to air, water, land and the generation, storage,
      use, handling, transportation, treatment or disposal of Hazardous
      Materials;

     

    (b) the
      Company has obtained and adhered to all Authorizations necessary to treat,
      transport, store, dispose of and otherwise handle Hazardous Materials, a list of
      which Authorizations are set forth on Schedule
      4.12,
      and has
      reported to the appropriate authorities, to the extent required by all
      Environmental Laws, all past and present sites owned and operated by the Company
      where Hazardous Materials have been treated, stored, disposed of or otherwise
      handled;

     

    (c) there
      have been no releases or threats of releases (as defined in Environmental Laws)
      at, from, in or on any property owned or operated by the Company which were,
      or
      which were required to be, reported under any Environmental Law, and the Company
      has no contingent liabilities in connection with any release of any Hazardous
      Material into the environment; and

     

    (d) neither
      the Company nor any Stockholder knows of any on-site or off-site location to
      which the Company has transported or disposed of Hazardous Materials or arranged
      for the transportation of Hazardous Materials at a site which is the subject
      of
      any federal, state or local enforcement action or any other investigation which
      may lead to any claim against the Company, or as a result of the transactions
      contemplated in this Agreement, against Buckeye or the Acquisition Sub, for
      any
      clean-up cost, fines, remedial work, recovery for damage to natural resources,
      property damage or personal injury, including, but not limited to, any claim
      under the Comprehensive Environmental Response, Compensation and Liability
      Act
      of 1980, as amended.

     

    (e) The
      Stockholders and the Company are in the process of negotiating a settlement
      of
      the EPA Action and true, correct and complete copies of the Proposed EPA
      Settlement Documents have been delivered to Buckeye. The Company and the
      Stockholders have fully responded to all requests and provided all documents
      and
      other information requested in connection with the investigation of the EPA
      Action, have not been notified and are not aware of any further responses,
      documents or information that have been requested or are requested to be
      provided, currently are not in violation of the provisions of the laws, statutes
      or regulations alleged to be violated in the EPA Action and currently are in
      compliance with all applicable Environmental Laws. Apart from obligations set
      forth in the Proposed EPA Settlement Documents or such more favorable
      obligations as may be negotiated by the Stockholders and the Company in the
      final settlement documents, the Company shall have no further liability or
      obligations to any Person, and there is no basis for any further claims against
      the Company and the Company shall not incur or be required to incur any further
      costs or expenses, with respect to the EPA Action or the matters which formed
      or
      which were alleged to form the basis of the EPA Action.

     

    
      
         

      

      
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    4.13 Personal
      Property; Inventory.

     

    (a) Schedule
      4.13
      lists,
      in reasonable detail, all vehicles owned or leased by the Company, regardless
      of
      value, and all other personal property owned by the Company with an individual
      book value or market value in excess of $10,000, all leased personal property
      and all leases in respect of personal property, and further indicates which
      such
      assets, if any, are currently owned, or were formerly owned, by any Stockholder,
      relatives of any Stockholder or Affiliates of the Company or any Stockholder.
      Except as set forth on Schedule
      4.13:

     

    (i) the
      Company has good and marketable title (except for property leased by the Company
      pursuant to a lease or agreement set forth on Schedule
      4.13)
      to all
      personal property, whether tangible or intangible (including its rights in
      its
      leases and agreements with respect to any leased property), used by the Company
      in its business, free and clear of all liens, security interests, charges and
      other encumbrances of any kind;

     

    (ii) all
      of
      the tangible personal property (other than inventory) owned by the Company
      or
      leased by the Company pursuant to any lease listed on Schedule
      4.13
      is in
      good working order and condition, ordinary wear and tear excepted, and in the
      case of leased property is in the condition required by the applicable lease;
      and

     

    (iii) all
      leases included on Schedule
      4.13
      are in
      full force and effect and constitute legal, valid and binding agreements of
      the
      parties (and their successors) thereto in accordance with their respective
      terms.

     

    (b) All
      inventory of the Company is saleable or useable in the ordinary course of
      business consistent with past practice and all damaged, obsolete or slow moving
      inventory or inventory in excess of the amount reasonably required for the
      operation of its business has been written off or down to its net realizable
      value on the Company Financial Statements and the books and records of the
      Company.

     

    4.14 Significant
      Customers; Material Contracts and Commitments.

     

    (a) Schedule
      4.14(a)
      lists
      all significant customers of the Company, it being understood and agreed that
      a
“significant customer,” for purposes of this Section
      4.14,
      means a
      customer (or person or entity) the sales to which represented 5% or more of
      the
      Company’s revenues for the consecutive twelve month period ending on the Due
      Diligence Date. Except to the extent set forth on Schedule
      4.14(a),
      none of
      the Company’s significant customers have canceled or reduced by more than five
      percent (5%) or, to the knowledge of the Company or any Stockholder, are
      currently attempting or threatening to cancel or reduce by more than five
      percent (5%) their utilization of the products or services provided by the
      Company. Buckeye and Acquisition Sub understand and agree that the Company
      bids
      for work on a project by project basis and that no warranty can be provided
      as
      to the likelihood for successful bids in the future.

     

    
      
         

      

      
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    (b) Schedule
      4.14(b)
      lists
      all material agreements, contracts, instruments or commitments to which the
      Company is a party or by which it or any of its properties are bound (including
      contracts with significant customers, joint venture or partnership agreements,
      contracts with any labor organizations, strategic alliances and options to
      purchase land), other than agreements listed on Schedule
      4.9, 4.13
      or
4.15.

     

    4.15 Real
      Property.
      The
      Company does not own any real property. Schedule
      4.15
      lists
      all real property leased, subleased, used or otherwise occupied by the Company
      in the conduct of its business and all leases or other agreements in respect
      of
      such real property, and further indicates which such properties, if any, are
      currently owned, or were formerly owned, by any Stockholder, relatives of any
      Stockholder or Affiliates of the Company or any Stockholder and the annual
      rentals and other amounts paid under each such lease or other agreement during
      each of the last three years. Except as set forth on Schedule
      4.15,
      (a) the
      Company’s rights in such leases and other agreements are free and clear of all
      liens, security interests, charges and other encumbrances of any kind, (b)
      all
      leased property is in the condition required by the applicable lease and (c)
      all
      leases and other agreements included on Schedule
      4.15
      are in
      full force and effect and constitute legal, valid and binding agreements of
      the
      parties (and their successors) thereto in accordance with their respective
      terms.

     

    4.16 Insurance.
      The
      Company has delivered to Buckeye as of a recent date an accurate list of all
      insurance loss runs or workers’ compensation claims received by it for the past
      three policy years, and true, complete and correct copies of all insurance
      policies currently in effect. The Company maintains, and since January 1,
      1996 has maintained, insurance (a) written by insurance companies reasonably
      believed by the Company to be financially sound and reputable, (b) that is
      sufficient for compliance by the Company with all of its contracts, agreements,
      instruments and other commitments and with all applicable laws, and (c) that
      insures against risks of the kind customarily insured against and in amounts
      customarily carried by companies similarly situated and provides adequate
      insurance coverage for the business and assets of the Company. Schedule
      4.16
      lists
      and summarizes the property and casualty and liability insurance programs
      maintained by the Company. To the extent that the Company has a policy of
      maintaining self-insurance coverage of any kind, such policy is described on
      Schedule
      4.16,
      the
      Company has maintained reserves which are reasonable and adequate for the risks
      so self-insured and all such reserves are reflected in the Company Financial
      Statements. Except as set forth on Schedule
      4.16,
      since
      January 1, 1996, (x) no insurance maintained by the Company or with respect
      to the business conducted by the Company has been canceled by the insurer nor
      has the Company applied for and been refused coverage by any insurer, (y) the
      Company has not received any notice of any pending or threatened termination
      of
      any policies of insurance, nor has any insurer suggested any alteration of
      any
      tangible asset, the purchase of additional assets or modification of any methods
      of doing business, and (z) all insurance maintained by or for the benefit of
      the
      Company can be terminated by the Company without the need for any additional
      payments of any kind from the Company or any other person or entity on account
      of the policies.

     

    4.17 Compensation;
      Employment Agreements; Organized Labor Matters.

     

    (a) Schedule
      4.17(a)
      sets
      forth the names and titles of all directors, officers and other salaried
      employees of the Company, listing all employment agreements with such directors,
      officers and other salaried employees and the rate of compensation (and the
      portions thereof attributable to salary, bonus and other compensation,
      respectively) of each such person as of the date hereof. Since the Due Diligence
      Date, there have been no increases in the compensation payable or any bonuses
      to
      any director, officer or other salaried employee, except ordinary salary
      increases implemented on a basis consistent with past practices.

     

    
      
         

      

      
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    (b) Except
      as
      set forth on Schedule
      4.17(b),
      during
      the past three years (i) the Company has not been and is not currently bound
      by
      or subject to (and none of its assets or properties is bound by or subject
      to)
      any arrangement or agreement with any labor union, (ii) no employees of the
      Company have been or are currently represented by any labor union or covered
      by
      any collective bargaining agreement, (iii) to the knowledge of the Company
      and
      each Stockholder, no campaign to establish such representation has been
      commenced or is currently in progress, and (iv) there has not been nor is there
      currently any pending or, to the knowledge of the Company or any Stockholder,
      threatened labor dispute involving the Company and any group of its employees
      nor has the Company experienced any labor interruptions. The Company believes
      its relationship with employees to be good.

     

    4.18 Employee
      Plans.

     

    (a) Schedule
      4.18
      lists
      all employee benefit plans of the Company (the “Plans”), including all
      employment agreements and other agreements or arrangements containing “golden
      parachute” (as defined under Section 280G of the Code) or other similar
      provisions, and deferred compensation agreements. True, complete and correct
      copies of the Plans, agreements and any trusts related thereto, and
      classifications of employees covered thereby have been delivered to Buckeye.
      Except for the Plans described on Schedule
      4.18,
      the
      Company does not sponsor, maintain or contribute to any plan, program, fund
      or
      arrangement that constitutes an “employee pension benefit plan,” nor has the
      Company any obligation to contribute to or accrue or pay any benefits under
      any
      deferred compensation or retirement funding arrangement on behalf of any
      employee or employees (such as, for example, and without limitation, any
      individual retirement account or annuity, any “excess benefit plan” (within the
      meaning of Section 3(36) of the Employee Retirement Income Security Act of
      1974,
      as amended (“ERISA”)) or any non-qualified deferred compensation arrangement).
      For the purposes of this Agreement, the term “employee pension benefit plan”
shall have the same meaning as is given that term in Section 3(2) of ERISA.
      The
      Company has not sponsored, maintained or contributed to any employee pension
      benefit plan other than the Plans set forth on Schedule
      4.18,
      nor is
      the Company required to contribute to any retirement plan pursuant to the
      provisions of any collective bargaining agreement establishing the terms and
      conditions or employment of any of the Company’s employees.

     

    (b) The
      Company is not now, nor can as a result of its past activities become, liable
      to
      the PBGC or to any multiemployer employee pension benefit plan under the
      provisions of Title IV of ERISA.

     

    (c) All
      employee benefit plans listed on Schedule
      4.18
      and the
      administration thereof are in compliance with their terms and all applicable
      provisions of ERISA and the regulations issued thereunder, as well as with
      all
      other applicable federal, state and local statutes, ordinances and
      regulations.

     

    (d) All
      accrued contribution obligations of the Company with respect to any Plan listed
      on Schedule
      4.18
      have
      either been fulfilled in their entirety or are fully reflected on the most
      recent balance sheet of the Company included in the Company Financial
      Statements.

     

    
      
         

      

      
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    4.19 Compliance
      with ERISA.
      All of
      the Plans listed on Schedule
      4.18
      that are
      intended to qualify under Section 401(a) of the Code (the “Qualified Plans”)
      are, and have been so qualified and have been determined by the Internal Revenue
      Service to be so qualified, and true, correct and complete copies of such
      determination letters have been delivered to Buckeye. Except as disclosed on
      Schedule
      4.19,
      all
      reports and other documents required to be filed with any governmental agency
      or
      distributed to plan participants or beneficiaries (including, but not limited
      to, actuarial reports, audits or tax returns) have been timely filed or
      distributed, and true, correct and complete copies thereof have been delivered
      to Buckeye. Neither any Stockholder, any Plan listed in Schedule
      4.18
      nor the
      Company has engaged in any transaction prohibited under the provisions of
      Section 4975 of the Code or Section 406 of ERISA. No Plan listed in Schedule
      4.18
      has
      incurred an accumulated funding deficiency, as defined in Section 412(a) of
      the
      Code and Section 302(1) of ERISA; and the Company has not incurred and does
      not
      have any liability for excise tax or penalty due to the Internal Revenue Service
      nor any liability to the PBGC. In addition:

     

    (a) there
      have been no terminations, partial terminations or discontinuance of
      contributions to any such Qualified Plan intended to qualify under Section
      401(a) of the Code without notice to and approval by the Internal Revenue
      Service;

     

    (b) no
      Plan
      listed in Schedule
      4.18
      subject
      to the provisions of Title IV of ERISA has been terminated;

     

    (c) there
      have been no “reportable events” (as that phrase is defined in Section 4043 of
      ERISA) with respect to any Plan listed in Schedule
      4.18;

     

    (d) the
      Company has not incurred and does not have any liability under Section 4062
      of
      ERISA; and

     

    (e) no
      circumstances exist pursuant to which the Company could have any direct or
      indirect liability whatsoever (including, but not limited to, any liability
      to
      any multiemployer plan or the PBGC under Title IV of ERISA or to the Internal
      Revenue Service for any excise tax or penalty, or being subject to any statutory
      lien to secure payment of any such liability) with respect to any plan now
      or
      heretofore maintained or contributed to by any entity other than the Company
      that is, or at any time was, a member of a “controlled group” (as defined in
      Section 412(n)(6)(B) of the Code) that includes the Company.

     

    4.20 Litigation;
      Compliance with Law.
      Except
      to the extent set forth on Schedule
      4.20,
      there
      are no actions, suits or proceedings (or, to the knowledge of the Company or
      any
      Stockholder, investigations or claims) pending or, to the knowledge of the
      Company or any Stockholder, threatened against or affecting, the Company, the
      Merger or the other transactions contemplated in this Agreement, at law or
      in
      equity, or before or by any arbitrator, court or any governmental department,
      commission, board, bureau, agency or instrumentality, and no notice of any
      such
      claim, action, suit, proceeding or investigation, whether pending or threatened,
      has been received by the Company or any Stockholder. The Company has conducted
      and is conducting its business in compliance with the requirements, standards,
      criteria and conditions set forth in all laws, statutes, ordinances,
      regulations, rules, judgments, orders, writs, injunctions and decrees binding
      upon or applicable to the Company and its property and is not in violation
      of
      any of the foregoing.

     

    
      
         

      

      
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    4.21 Taxes.
      The
      Company has timely filed all requisite federal, state and other Returns for
      all
      fiscal periods ended on or before the date of this Agreement on or before the
      date such Returns are required to be filed (or the date to which such filing
      date may have been properly extended); and except as set forth on Schedule
      4.21,
      to the
      knowledge of the Company and the Stockholders there are no examinations in
      progress or claims against the Company for Taxes (including penalties and
      interest) for any period or periods and no notice of any claim for Taxes,
      whether pending or threatened, has been received. All Taxes, including interest
      and penalties (whether or not shown on any Return), owed by the Company or
      any
      member of an affiliated or consolidated group which includes or included the
      Company have been paid, including any estimated tax payments. The amounts shown
      as accruals for Taxes on the most recent balance sheet included in the Company
      Financial Statements which is other than the Closing Balance Sheet are
      sufficient for the payment of all Taxes (including penalties and interest)
      for
      all fiscal periods ended on or before the date of such balance sheet. The
      amounts shown as accruals for Taxes on the Closing Balance Sheet are sufficient
      for the payment of all Taxes (including penalties and interest) for all fiscal
      periods ended on or before the Closing Date. True, correct and complete copies
      of all (a) tax examinations, (b) extensions of statutory limitations, and (c)
      the federal, state and local income tax returns and franchise tax returns of
      the
      Company for its last three (3) fiscal years, or such shorter period of time
      as
      the Company shall have existed, have been delivered to Buckeye prior to the
      date
      of this Agreement. Except as set forth on Schedule
      4.21,
      the
      Company has a taxable year ended December 31 and has not made an election to
      retain a fiscal year other than December 31 under Section 444 of the Code.
      The
      Company’s methods of accounting have not changed in the past six years. The
      Company is not an investment company as defined in Section 368(a)(2)(F) of
      the
      Code. 

     

    4.22 No
      Violations.

     

    (a) Except
      as
      set forth in Schedule
      4.22(a),
      neither
      the Company nor, to the knowledge of the Company or any Stockholder, any other
      party thereto, is in material default under any Authorization, lease, agreement,
      contract or commitment or other document set forth on Schedule
      4.9, 4.11, 4.12, 4.13, 4.14(b)
      or
4.15
      to which
      the Company is a party or by which the Company or its properties are bound
      (collectively, the “Company Material Documents”).

     

    (b) Except
      as
      set forth on Schedule
      4.22(b),
      the
      execution and delivery of this Agreement by the Company, the performance by
      the
      Company of its obligations hereunder and the consummation of the transactions
      contemplated hereby (i) do not and will not conflict with or violate any
      provision of the Company Charter Documents, (ii) do not and will not result
      in
      any violation or breach of, constitute a default or give rise to any right
      to
      terminate, cancel or accelerate or loss of any right or benefit under, or result
      in the imposition of any security interest, lien or other encumbrance on any
      property of the Company under, any of the terms or provisions of any
      Authorization, any Company Material Document or any other agreement, contract,
      instrument or commitment to which the Company is a party or by which it or
      any
      of its properties are bound, (iii) do not and will not conflict with or violate
      any law, statute, ordinance, regulation, rule, judgment, order, writ, injunction
      or decree binding upon or applicable to the Company or any of its properties,
      (iv) do not and will not require any consent, waiver, authorization or
      declaration of, filing or registration with or other action by any governmental
      department, commission, board, bureau, agency or instrumentality or any other
      third party (other than the filings referred to in Section
      2.1),
      and
      (v) do not and will not trigger any right of first refusal on the part of any
      other person to acquire any shares of Company Stock or any assets of the
      Company.

     

    (c) Except
      as
      set forth on Schedule
      4.22(c),
      no
      Company Material Document and no other agreement, contract, instrument or
      commitment to which the Company is a party or by which the Company or its
      properties are bound (i) prohibits the use or publication by the Company,
      Buckeye, the Surviving Corporation or the Acquisition Sub of the name of any
      other party to such Company Material Document, agreement, contract, instrument
      or commitment, (ii) prohibits or restricts the Company from freely providing
      goods and services to any person or entity, or (iii) restricts the types of
      businesses or the geographical territory in which any businesses may be engaged
      by the Company, Buckeye, the Surviving Corporation or the Acquisition
      Sub.

     

    
      
         

      

      
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    4.23 Government
      Contracts.
      Except
      as set forth on Schedule
      4.23,
      the
      Company is not a party to or otherwise bound by any agreement, contract,
      instrument or commitment with any governmental department, commission, board,
      bureau, agency or instrumentality.

     

    4.24 Absence
      of Changes.
      Since
      the Due Diligence Date, except as set forth on Schedule
      4.24,
      there
      has not been with respect to the Company:

     

    (a) any
      material adverse change in the business, operations, properties, assets,
      prospects or condition (financial or otherwise) of the Company;

     

    (b) any
      damage, destruction or loss (whether or not covered by insurance) materially
      and
      adversely affecting the properties or business of the Company;

     

    (c) any
      change in the authorized capital of the Company or its outstanding securities
      or
      any change in its ownership interests or any grant of any subscriptions,
      options, warrants, calls, conversion rights or commitments;

     

    (d) any
      declaration or payment of any dividend or distribution in respect of the
      Company’s capital stock or any direct or indirect purchase, or redemption or
      other acquisition or retirement of any of the capital stock of the
      Company;

     

    (e) any
      increase in the compensation, bonus, sales commissions or fees payable or to
      become payable by the Company to any of its directors, officers, employees,
      consultants or agents or to any Stockholder, except for ordinary and customary
      bonuses and salary increases for employees (which are other than officers,
      directors, consultants or agents) in accordance with past practice;

     

    (f) any
      work
      interruptions, labor grievances or claims filed;

     

    (g) any
      sale
      or transfer, or any agreement to sell or transfer, any material assets, property
      or rights of the Company to any person or entity, including any Stockholder,
      relatives of any Stockholder or Affiliates of the Company or any Stockholder
      (other than the sales of inventory in the ordinary course of
      business);

     

    (h) any
      cancellation, or agreement to cancel, any indebtedness or other obligation
      owing
      to the Company, including any indebtedness or obligation of any Stockholder,
      relatives of any Stockholder or Affiliates of the Company or any Stockholder,
      other than the negotiation and adjustment of bills made by the Company in the
      course of good faith disputes with customers in the ordinary course of business
      and in a manner consistent with past practice;

     

    (i) any
      plan,
      agreement or arrangement granting any preferential rights to purchase or acquire
      any interest in any of the assets, property or rights of the Company or
      requiring consent of any party to the transfer and assignment of any such
      assets, property or rights;

     

    
      
         

      

      
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    (j) any
      purchase or acquisition of, or agreement, plan or arrangement to purchase or
      acquire, any property, rights or assets outside of the ordinary course of the
      Company’s business;

     

    (k) any
      waiver of any material rights or claims of the Company, other than the
      negotiation and adjustment of bills, client invoices, accounts payable and
      accounts receivable in the ordinary course of business and in a manner
      consistent with past practice;

     

    (l) any
      amendment or termination of any material contract, agreement, license, permit
      or
      other right to which the Company is a party, except in the ordinary course
      of
      business;

     

    (m) any
      transaction by the Company outside the ordinary course of its
      business;

     

    (n) any
      cancellation or termination of a material contract with a customer or client
      prior to the scheduled termination date; or

     

    (o) any
      other
      distribution of property or assets by the Company other than in the ordinary
      course of business.

     

    4.25 Deposit
      Accounts; Powers of Attorney.
      Set
      forth on Schedule
      4.25
      with
      respect to the Company is (a) the name of each financial institution in which
      the Company has accounts or safe deposit boxes, (b) the names in which the
      accounts or boxes are held, (c) the type of account and account number, and
      (d)
      the name of each person or entity authorized to draw thereon or have access
      thereto. Schedule
      4.25
      also
      sets forth the name of each person or entity holding a general or special power
      of attorney from or otherwise binding upon the Company and a description of
      the
      terms of such power.

     

    4.26 Relations
      with Governments.
      The
      Company has not made, offered or agreed to offer anything of value to any
      governmental official, political party or candidate for government office in
      violation of any law, statute, ordinance, rule or regulation, nor has the
      Company otherwise taken any action which would cause the Company to be in
      violation of the Foreign Corrupt Practices Act of 1977, as amended, or any
      law
      of similar effect.

     

    4.27 Prohibited
      Activities.
      Except
      as set forth on Schedule
      4.27,
      the
      Company has not, since the Due Diligence Date, taken any of the actions set
      forth in Section
      7.3.

     

    4.28 Intellectual
      Property.
      Except
      as set forth on Schedule
      4.28,
      the
      Company owns or possesses valid and binding licenses or other rights to use
      all
      intangible and intellectual property used in or related to the business
      conducted by the Company (collectively, the “Intellectual Property”), including
      all patents, trademarks, service marks, trade names, trade styles, copyrights,
      logos, trade secrets and proprietary information and all registrations and
      applications for any of the foregoing and all pricing manuals and other manuals
      and policies. Schedule
      4.28
      sets
      forth (a) all trademarks, service marks, trade names, trade styles, copyrights
      and all registrations or applications therefor, (b) all patents, inventions
      and
      all registrations or applications therefor, and (c) all licenses, sublicenses
      and other agreements to which the Company is a party or otherwise bound, either
      as licensee or licensor or otherwise, related to any of the Intellectual
      Property. To the knowledge of the Company and the Stockholders, the Company
      has
      not engaged in any conduct or omitted to perform any necessary act, the result
      of which would invalidate, abandon or otherwise render the Company’s rights to
      any Intellectual Property unenforceable. To the best knowledge of the Company
      and the Stockholders, the Company and the Company’s Intellectual Property,
      including the mark ENERGY KING and certain derivatives of the ENERGY KING mark,
      do not infringe, misappropriate or violate any trade name, trademark or other
      intellectual property or proprietary rights of any other Person and no claim
      has
      been made or threatened concerning the invalidity, unenforceability or
      infringement, misappropriation or violation by the Company or the Company’s
      Intellectual Property of any trade name, trademark or other intellectual
      property or proprietary rights of any other Person. Trademark applications
      for
      the trademark ENERGY KING and certain derivatives of the ENERGY KING mark have
      been filed with the United States Patent and Trademark Office. Schedule 4.28
      sets forth the status of each such application. The Company is not required
      to
      pay any royalty, license, fee or other similar compensation with respect to
      the
      Intellectual Property in connection with the current or prior conduct of the
      business conducted by the Company. To the knowledge of the Company and each
      Stockholder, no person or entity is engaged in any activity which would
      constitute infringement of the Company’s rights in the Intellectual Property.
      The Company is not a party to or otherwise bound by any agreement to indemnify
      any other person or entity against any charge of infringement of any proprietary
      right.

     

    
      
         

      

      
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    4.29 Related
      Party Agreements.
      Except
      as set forth on Schedule
      4.29,
      the
      Company is not a party to or otherwise bound by any agreement with any
      Stockholder or any relative or Affiliate of any Stockholder.

     

    4.30 Warranty
      and Sales Return Claims.
      Schedule
      4.30
      accurately describes all warranty, sales return or allowance and similar
      policies related to the business conducted by the Company. No failure on the
      part of the Company to perform any work in accordance with all plans and
      specifications and in a good and workman-like fashion, individually or in the
      aggregate, will result in losses, damages, liabilities, costs or expenses which
      are not either fully covered by insurance or the reserves shown on Schedule
      4.30
      (and
      which reserves will be reflected on the Closing Balance Sheet). Except as set
      forth on Schedule 4.30,
      neither
      the Company nor any Stockholder has received any notice or are otherwise aware
      of, and there is no basis for any claim by any customer or any other person
      or
      entity against the Company based in any way on or related to any theory of
      product liability or any material defect or problem with respect to any of
      goods
      or services provided by the Company at any time during the past three years.
      Each such matter set forth on Schedule 4.30
      is
      (except as otherwise expressly indicated on Schedule
      4.30)
      adequately covered by insurance. No warranty adjustments, sales returns or
      allowances or warranty services will be required with respect to goods or
      services provided by the Company prior to the Closing in excess of the reserves
      shown on Schedule 4.30,
      which
      reserves will be reflected on the Closing Balance Sheet.
      The
      Company has no liabilities or obligations to any Person, there is no basis
      for
      any claim against the Company and the Company shall not incur or be required
      to
      incur any further costs or expenses with respect to or alleged to be with
      respect to Phoenix Systems, including without limitation any liabilities or
      obligations with respect to any express or implied warranties provided with
      respect thereto (except any costs and expenses covered by the Company’s
      occurrence based insurance policies), and all express and implied warranties
      with respect to the Phoenix Systems have expired. 

     

    4.31 Names.
      No
      person or entity has been granted the right to use the name “Energy King” or any
      variation of either thereof by the Company or any of the Stockholders. To the
      knowledge of the Company and the Stockholders, no Person has the right to use
      or
      uses the name or mark ENERGY KING, except as set forth in Schedule
      4.31.

     

    4.32 Disclosure.
      No
      representation or warranty of any Stockholder or the Company in this Agreement
      contains an untrue statement of a material fact with respect to any Stockholder
      or the Company or omits to state a material fact necessary to make the
      statements therein with respect to any Stockholder or the Company, in light
      of
      the circumstances under which they were made, not misleading. True, correct
      and
      complete copies of each document or agreement listed or described on any
      Schedule have been delivered to Buckeye and the Acquisition Sub and there are
      no
      amendments or modifications thereto, except as expressly noted in the Schedule
      on which such agreement or document is referenced.

     

    
      
         

      

      
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    ARTICLE
      5

    REPRESENTATIONS
      AND WARRANTIES OF THE STOCKHOLDERS

     

    Each
      Stockholder, jointly and severally, represents and warrants as
      follows:

     

    5.1 Authority;
      Enforceability; Ownership.
      Each
      Stockholder has the full legal capacity, right, power and authority to enter
      into this Agreement, to perform his obligations under this Agreement and to
      consummate the transactions contemplated herein. This Agreement has been duly
      executed and delivered by each Stockholder and constitutes a legal, valid and
      binding obligation of such Stockholder, enforceable against such Stockholder
      in
      accordance with its terms. Each Stockholder owns beneficially and of record
      all
      of the shares of capital stock of the Company identified on Schedule
      4.3
      as being
      owned by such Stockholder, and, except as set forth on Schedule
      4.3
      (all of
      which with respect to the Company Stock shall be terminated or released at
      or
      prior to the Closing), such capital stock is owned free and clear of all liens,
      security interests, charges, voting trusts, restrictions, encumbrances and
      claims of every kind.

     

    5.2 No
      Violation.
      The
      execution and delivery of this Agreement by each Stockholder, the performance
      by
      each Stockholder of his obligations hereunder and the consummation of the
      transactions contemplated hereby (a) do not and will not result in any violation
      or breach of, constitute a default or give rise to any right to termination,
      cancellation or acceleration or loss of any right or benefit under, or result
      in
      the imposition of any security interest, lien or other encumbrance on any stock
      owned by such Stockholder under, any of the terms or provisions of any
      agreement, contract, instrument or commitment to which such Stockholder is
      a
      party or by which such Stockholder or his property is bound, (b) do not and
      will
      not conflict with or violate any applicable law, statute, ordinance, regulation,
      rule, judgment, order, writ, injunction or decree binding upon or applicable
      to
      such Stockholder or his property, (c) except as set forth on Schedule
      5.2,
      do not
      require any consent, waiver, authorization, or declaration of, filing or
      registration with or other action by any governmental department, commission,
      board, bureau, agency or instrumentality or any other third party (other than
      the filings referred to in Section
      2.1),
      and
      (d) do not and will not trigger any right of first refusal on the part of any
      other person to acquire any shares of Company Stock or any assets of the
      Company.

     

    5.3 Preemptive
      Rights.
      No
      Stockholder has, and each Stockholder hereby waives, any preemptive or other
      right to acquire shares of capital stock of the Company, the Acquisition Sub
      or
      Buckeye that such Stockholder has or may have had, other than the rights of
      the
      Stockholders to acquire the Buckeye Stock pursuant to or in connection with
      the
      Promissory Notes.

     

    5.4 No
      Intention to Dispose of Buckeye Stock.
      No
      Stockholder is under any binding agreement or commitment or has any present
      plan, intention or arrangement to sell, exchange or otherwise dispose of any
      shares of Buckeye Stock that may be received pursuant to or in connection with
      this Agreement or any of the other agreements or documents executed and/or
      delivered in connection with this Agreement (including without limitation any
      of
      the Promissory Notes) or the transactions contemplated hereby or
      thereby.

     

    
      
         

      

      
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    ARTICLE
      6

    REPRESENTATIONS
      OF BUCKEYE AND THE ACQUISITION SUB

     

    Buckeye
      and the Acquisition Sub, jointly and severally, represent and warrant as
      follows:

     

    6.1 Organization.
      Buckeye
      and the Acquisition Sub are each corporations duly organized, validly existing
      and in good standing under the laws of the State of Delaware, and each has
      the
      requisite corporate power and authority to carry on its business as it is now
      being conducted. Buckeye and the Acquisition Sub are each qualified to do
      business and in good standing in each jurisdiction in which the nature of its
      business or the ownership or leasing of its properties makes such qualification
      necessary, except where the failure to be so qualified would not have a material
      adverse effect on the business, properties or financial condition of Buckeye
      and
      its subsidiaries, taken as a whole. True, complete and correct copies of the
      certificate of incorporation (including amendments thereto) and by-laws
      (including amendments thereto) of Buckeye and the Acquisition Sub (collectively,
      the “Charter Documents”) as in effect on the date hereof have been delivered to
      the Stockholders prior to the date of this Agreement.

     

    6.2 Authorization.
      Buckeye
      and the Acquisition Sub have the full legal right, power and authority to enter
      into this Agreement, to perform their respective obligations under this
      Agreement and to consummate the transactions contemplated herein. The execution
      and delivery of this Agreement by Buckeye and the Acquisition Sub, the
      performance by Buckeye and the Acquisition Sub of their respective obligations
      herein and the consummation of the transactions contemplated herein have been
      duly authorized by all necessary corporate action on the part of Buckeye and
      the
      Acquisition Sub. This Agreement has been duly executed and delivered by Buckeye
      and the Acquisition Sub and constitutes a legal, valid and binding obligation
      of
      Buckeye and the Acquisition Sub, enforceable against each such corporation
      in
      accordance with its terms.

     

    6.3 No
      Violations.
      The
      execution and delivery of this Agreement by Buckeye and the Acquisition Sub,
      the
      performance by Buckeye and the Acquisition Sub of their respective obligations
      hereunder and the consummation of the transactions contemplated hereby (a)
      do
      not and will not conflict with or violate any provision of the Charter
      Documents, (b) do not and will not result in any violation or breach of,
      constitute a default or give rise to any right to termination, cancellation
      or
      acceleration or loss of any right or benefit under, any of the terms or
      provisions of any Authorization, or any agreement, contract, instrument or
      commitment to which Buckeye or the Acquisition Sub is a party or by which
      Buckeye or the Acquisition Sub or their properties are bound which would,
      individually or in the aggregate, have a material adverse effect on the
      business, properties or financial condition of Buckeye and its subsidiaries,
      taken as a whole, (c) do not and will not conflict with or violate any law,
      statute, ordinance, regulation, rule, judgment, order, writ, injunction or
      decree binding upon or applicable to Buckeye or the Acquisition Sub or any
      of
      their respective properties which would, individually or in the aggregate,
      have
      a material adverse effect on the business, properties or financial condition
      of
      Buckeye and its subsidiaries, taken as a whole, and (d) do not and will not
      require any consent, waiver, authorization or declaration of, filing or
      registration with or other action by any governmental department, commission,
      board, bureau, agency or instrumentality or any other third party (other than
      the filings referred to in Section
      2.1
      and
      filings of notices required by any applicable securities laws).

     

    6.4 Buckeye
      Stock.
      Upon
      the issuance thereof pursuant to the terms of the Promissory Notes, the Buckeye
      Stock to be delivered to the Stockholders pursuant to or in connection with
      the
      Promissory Notes will be duly authorized and validly issued and fully paid
      and
      nonassessable. The shares of Buckeye Stock to be issued to the Stockholders
      pursuant to this Agreement will not have been registered under the 1933
      Act.

     

    
      
         

      

      
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    6.5 Securities
      Law Compliance.
      For the
      sole purpose of demonstrating compliance with applicable securities laws and
      without affecting in any respect any representations or warranties made by
      any
      Stockholder or the Company in this Agreement, Buckeye and the Acquisition Sub
      represent that they have had an adequate opportunity to review the properties,
      books and records of the Company and ask questions and receive answers from
      the
      officers of the Company concerning all matters relating to the Company,
      including the background and experience of the current officers of the Company,
      and all such questions have been answered to their satisfaction.

     

    ARTICLE
      7

    COVENANTS
      PRIOR TO CLOSING

     

    7.1 Access
      and Cooperation; Due Diligence; Confidentiality.

     

    (a) Between
      the date of this Agreement and the Closing Date, the Company will, and the
      Stockholders will and will cause the Company to, afford to the officers and
      authorized representatives of Buckeye and the Acquisition Sub access to all
      of
      the Company’s sites, properties, books and records upon reasonable notice and
      during normal business hours and will furnish Buckeye and the Acquisition Sub
      with such additional financial and operating data and other information as
      to
      the business and properties of the Company as Buckeye or the Acquisition Sub
      may
      from time to time reasonably request. The Company and the Stockholders will
      cooperate with Buckeye and the Acquisition Sub, and their respective
      representatives, auditors and counsel, in the preparation of any documents
      or
      other material which may be required in connection with any documents or
      materials required by this Agreement.

     

    (b) Between
      the date of this Agreement and the Closing Date, Buckeye will afford to the
      officers and authorized representatives of the Company and the Stockholders
      access to all of Buckeye’s and the Acquisition Sub’s sites, properties, books
      and records upon reasonable notice and during normal business hours and will
      furnish the Company and the Stockholders with such additional financial and
      operating data and other information as to the business and properties of
      Buckeye and the Acquisition Sub as the Company or any Stockholder may from
      time
      to time reasonably request. Buckeye and the Acquisition Sub will cooperate
      with
      the Company and the Stockholders, and their representatives, auditors and
      counsel, in the preparation of any documents or other material which may be
      required in connection with any documents or materials required by this
      Agreement.

     

    (c) All
      information obtained by any of the parties hereto from any of the other parties
      hereto under this Agreement (including pursuant to this Section
      7.1
      or
Section
      10.1(c))
      or
      otherwise in connection with the transactions contemplated hereby will be held
      in strict confidence by the receiving party, and the receiving party will not
      use such information or disclose it to others (other than counsel, accountants
      and other representatives of the receiving party engaged in connection with
      this
      transaction, who will be subject to the provisions of this Section
      7.1(c)),
      except
      with written permission of the disclosing party; provided that the foregoing
      restrictions will not apply to any information (i) that is or becomes in the
      public domain by publication or otherwise through no action of the receiving
      party or any of its representatives, (ii) that was known to the receiving party
      prior to the time of disclosure by the disclosing party, (iii) that is
      rightfully obtained by the receiving party from a third party that has the
      legal
      right to disclose such information, or (iv) that the receiving party is required
      by law or any legal process or proceeding to disclose. The restrictions in
      this
Section
      7.1(c)
      shall
      cease to apply to Buckeye or the Acquisition Sub from and after the Closing
      Date
      with respect to information received from the Stockholders or the
      Company.

     

    
      
         

      

      
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    7.2 Conduct
      of Business Pending Closing.
      Between
      the date of this Agreement and the Closing Date, the Company will, except as
      set
      forth on Schedule
      7.2:

     

    (a) carry
      on
      its business in substantially the same manner as it has heretofore and not
      introduce any material new method of management, operation or
      accounting;

     

    (b) maintain
      its properties and facilities, including those held under leases, in as good
      working order and condition as at present, ordinary wear and tear
      excepted;

     

    (c) perform
      in all material respects all of its obligations under agreements relating to
      or
      affecting its assets, properties or rights;

     

    (d) keep
      in
      full force and effect present insurance policies or other comparable insurance
      coverage;

     

    (e) use
      its
      reasonable efforts to maintain and preserve its business organization intact,
      retain its present salaried employees and maintain its relationships with
      suppliers, customers and others having business relations with the
      Company;

     

    (f) comply
      with all permits, laws, statutes, ordinances, regulations and rules, and
      judgments, orders and decrees of any court or other governmental department,
      commission, board, bureau, agency or instrumentality having jurisdiction over
      it; and

     

    (g) maintain
      and comply with the terms of its present debt and lease instruments and not
      enter into any amendments thereto or any new debt or lease instruments, without
      the prior written consent of Buckeye (which consent shall not be unreasonably
      withheld).

     

    7.3 Prohibited
      Activities.
      Except
      as set forth in Schedule
      7.3,
      between
      the date hereof and the Closing Date, the Company will not, without prior
      written consent of Buckeye:

     

    (a) make
      any
      change in the Company Charter Documents;

     

    (b) issue
      any
      securities, subscriptions, options, warrants, calls, conversion rights or
      commitments relating to its securities of any kind;

     

    (c) declare
      or pay any dividend, or make any distribution in respect of its capital stock
      or
      directly or indirectly purchase, redeem or otherwise acquire or retire for
      value
      any shares of its capital stock;

     

    (d) enter
      into any contract or commitment (including without limitation any vehicle lease)
      or incur or agree to incur any liability or make any capital expenditures,
      except if it is in the normal course of business consistent with past practice,
      does not involve the purchase or lease of additional vehicles, and involves
      an
      amount not in excess of $25,000;

     

    (e) create,
      assume or permit to exist any mortgage, pledge or other lien or encumbrance
      upon
      any of its assets or properties whether now owned or hereafter acquired, except
      (i) liens for taxes either not yet due or being contested in good faith and
      by
      appropriate proceedings (and for which contested taxes adequate reserves have
      been established and are being maintained), or materialmen’s, mechanics’,
      workers’, repairmen’s or other like liens arising by operation of law and
      securing amounts not yet due or being contested in good faith by appropriate
      proceedings (and for which contested amounts adequate reserves have been
      established and are being maintained) in the ordinary course of business, or
      (ii) liens set forth on Schedule
      4.13;

     

    
      
         

      

      
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    (f) sell,
      assign, lease or otherwise transfer or dispose of any property or equipment
      except in the normal course of business;

     

    (g) negotiate
      or enter into any agreement for the acquisition of any business or the start-up
      of any new business (except with Buckeye and its Affiliates);

     

    (h) merge
      or
      consolidate or agree to merge or consolidate with or into any other corporation
      or other entity (except as contemplated by this Agreement);

     

    (i) waive
      any
      material rights or claims of the Company, provided that the Company may
      negotiate and adjust bills, client invoices, accounts payable and accounts
      receivable in the ordinary course of business and in a manner consistent with
      past practice;

     

    (j) increase
      present salaries and commission levels for any officer, director, employee
      or
      agent except for ordinary and customary salary increases for employees (but
      not
      officers, directors or agents) in accordance with past practices;

     

    (k) make
      any
      loans or advances to, or capital contributions or investments in, any person
      or
      entity;

     

    (l) commit
      a
      material breach or amend or terminate any material agreement or instrument,
      Authorization or other right of the Company;

     

    (m) enter
      into any agreement with any Stockholder or any relative or Affiliate of any
      Stockholder; or

     

    (n) enter
      into any other transaction outside the ordinary course of its business or
      prohibited hereunder.

     

    7.4 No
      Shop.
      Neither
      any Stockholder, the Company, nor any agent, employee, officer, director,
      trustee or any representative of any of the foregoing will, during the period
      commencing on the date of this Agreement and ending with the earlier to occur
      of
      the Closing Date or the termination of this Agreement in accordance with its
      terms, directly or indirectly, solicit or initiate the submission of proposals
      or offers from any person or entity for, participate in any discussions
      pertaining to, or furnish any information to any person or entity other than
      Buckeye, the Acquisition Sub or their authorized agents relating to, any
      acquisition or purchase of all or a material amount of the assets of, or any
      equity interest in, the Company or any merger, consolidation or business
      combination of or involving the Company.

     

    7.5 Agreements
      to be Terminated.
      The
      Stockholders and the Company shall terminate, on or prior to the Closing Date
      (a) any stockholders agreements, voting agreements, voting trusts,
      subscriptions, options, warrants, calls, conversion rights or commitments of
      any
      kind which obligate the Company to issue any securities or purchase, redeem
      or
      otherwise acquire any securities or any interests therein and all employment
      agreements between the Company and any employee (but not any non-competition,
      non-solicitation or non-disclosure provisions contained therein), and (b) any
      existing agreement between the Company and any Stockholder or any of its
      Affiliates (except as set forth on Schedule
      9.11).
      The
      Company and the Stockholders shall provide Buckeye with proof of the
      terminations required pursuant to this Section 7.5.

     

    
      
         

      

      
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    7.6 Notification
      of Certain Matters.
      From
      and after the date of this Agreement until the Closing, each party hereto shall
      promptly notify the other parties hereto of (a) any representation or warranty
      made by it in connection with this Agreement was untrue or inaccurate when
      made,
      (b) the occurrence or non-occurrence of any event the occurrence or
      non-occurrence of which would be likely to cause any condition to the
      obligations of any party to effect the Merger or the other transactions
      contemplated by this Agreement not to be satisfied, or (c) the failure of the
      Company or the Stockholders, on the one hand, or Buckeye or the Acquisition
      Sub,
      on the other hand, as the case may be, to comply with or satisfy any covenant,
      condition or agreement to be complied with or satisfied by it pursuant to this
      Agreement which would be likely to result in any condition to the obligations
      of
      any party to effect the Merger or the other transactions contemplated by this
      Agreement not to be satisfied.

     

    7.7 Interim
      Financial Statements.
      The
      Stockholders shall cause the Company to, and the Company shall, not later than
      ten days after the last day of each month which ends following the execution
      of
      this Agreement and in any event sufficiently in advance of the Closing Date
      to
      enable Buckeye sufficient time for review, provide to Buckeye the unaudited
      balance sheets of the Company as of the end of such month and the unaudited
      statements of income, shareholders’ equity and cash flows of the Company for
      such month and for the period from the beginning of the fiscal year of the
      Company to the end of such month. The Stockholders and the Company covenant
      that
      such financial statements shall be prepared in accordance with generally
      accepted accounting principles applied on a consistent basis and such financial
      statements will in the case of balance sheets present fairly in all material
      respects the financial position of the Company as of the dates indicated and
      in
      the case of statements present fairly in all material respects the results
      of
      operations of the Company for the periods indicated therein.

     

    7.8 Further
      Assurances.
      The
      parties hereto agree to execute and deliver, or cause to be executed and
      delivered, such further instruments or documents or take such other action
      as
      may be reasonably necessary or convenient to carry out the transactions
      contemplated hereby.

     

    ARTICLE
      8

    CONDITIONS
      PRECEDENT TO OBLIGATIONS OF

    THE
      STOCKHOLDERS AND THE COMPANY

     

    The
      obligations of the Stockholders and the Company with respect to actions to
      be
      taken on the Closing Date are subject to the satisfaction or waiver on or prior
      to the Closing Date of all of the following conditions. If, as of the Closing
      Date, any of such conditions has not been satisfied, the Stockholders and the
      Company shall have the right to terminate this Agreement or, in the alternative,
      waive any condition not so satisfied. Notwithstanding the foregoing, the
      consummation of the Merger shall constitute a waiver of any conditions not
      so
      satisfied. However, no such waiver shall be deemed to affect the survival of
      the
      representations and warranties of Buckeye and the Acquisition Sub contained
      in
Article
      6.

     

    8.1 Representations
      and Warranties; Performance of Obligations.
      All
      representations and warranties of Buckeye and the Acquisition Sub contained
      in
Article 6
      shall be
      true and correct as of the date of this Agreement and, if the Closing Date
      is
      other than the date of this Agreement, shall be true and correct in all material
      respects as of the Closing Date as though such representations and warranties
      had been made on and as of that date, except that those representations and
      warranties which address matters only as of a particular date only shall be
      required to be true and correct as of such date; all of the terms, covenants
      and
      conditions of this Agreement to be complied with and performed by Buckeye and
      the Acquisition Sub on or before the Closing Date shall have been duly complied
      with and performed in all material respects; and certificates to the foregoing
      effect dated the Closing Date and signed by an officer of Buckeye and the
      Acquisition Sub shall have been delivered to the Stockholders.

     

    
      
         

      

      
        -23-

        
          

        

      

      
         

      

    

    8.2 No
      Litigation.
      No
      action or proceeding before a court or any other governmental agency or body
      shall have been instituted or threatened which seeks to restrain or prohibit
      the
      Merger or which seeks to recover substantial damages relating to the Merger,
      and
      no governmental agency or body shall have taken any other action or made any
      request of the Company relating to the Merger or the other transactions
      contemplated by this Agreement as a result of which the Company deems it
      inadvisable to proceed with the transactions hereunder.

     

    8.3 Consents
      and Approvals.
      All
      necessary consents of and filings with any governmental authority or agency
      relating to the consummation of the transaction contemplated herein shall have
      been obtained and made.

     

    8.4 No
      Material Adverse Change.
      No
      event or circumstance shall have occurred with respect to Buckeye or any of
      its
      subsidiaries which would constitute a material adverse effect on the business,
      properties or financial condition of Buckeye and its subsidiaries, taken as
      a
      whole.

     

    8.5 Certificates
      of Incorporation; Good Standing Certificates.
      Buckeye
      and the Acquisition Sub each shall have delivered to the Company copies of
      their
      respective certificates of incorporation (including amendments thereto),
      certified as of a recent date by the Secretary of State of Delaware, and a
      certificate, dated as of a recent date, duly issued by the Secretary of State
      of
      Delaware and the Secretary of State (or other appropriate governmental
      authority) in each other state in which the Acquisition Sub is authorized to
      do
      business, showing that each of Buckeye and the Acquisition Sub is in good
      standing and authorized to do business in such jurisdiction.

     

    8.6 Secretary’s
      Certificate.
      The
      Company shall have received a certificate or certificates, dated the Closing
      Date and signed by the Secretary or an Assistant Secretary of Buckeye and of
      the
      Acquisition Sub, certifying as to the completeness and correctness of attached
      copies of Buckeye’s and the Acquisition Sub’s respective articles or
      certificates of incorporation (including amendments thereto), by-laws (including
      amendments thereto), and resolutions of the Boards of Directors and, if
      required, the stockholders of Buckeye and the Acquisition Sub approving
      Buckeye’s and the Acquisition Sub’s entering into this Agreement and the
      consummation of the transactions contemplated hereby.

     

    8.7 Pledge
      Agreement.
      The
      Stockholders shall have received a counterpart of the Pledge Agreement executed
      by Buckeye (the “Pledge Agreement”) and the stock certificate evidencing the
      stock of the Company being pledged pursuant to the Pledge
      Agreement.

     

    8.8 [Intentionally
      Omitted] 

     

    8.9 Employment
      Agreements.
      Each of
      the persons listed on Schedule
      8.9
      shall
      have been afforded the opportunity to enter into an employment agreement in
      substantially the form attached as Exhibit
      D.

     

    8.10 [Intentionally
      Omitted]

     

    
      
         

      

      
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    8.11 EPA
      Action and Former Stockholder Debt.
      The
      Proposed EPA Settlement Documents shall be in a form, and the state of the
      negotiations with the EPA shall be at such a point, where the Company and the
      Stockholders believe the EPA Action can be settled in a manner and upon terms
      that are acceptable to the Company and the Stockholders. Buckeye and the obligor
      under and the holder of the Former Stockholder Debt shall have agreed upon
      the
      manner in which the Former Shareholder Debt will be repaid by Buckeye and
      Buckeye shall make or cause the Company to make any initial payment that may
      be
      required to be made pursuant to such payoff arrangement at the time of the
      Closing.

     

    8.12 Closing
      Deliveries.
      The
      Stockholders shall have received the deliveries required to be made by Buckeye
      pursuant to Section 3.2.

     

    8.13 Satisfaction.
      All
      actions, proceedings, instruments and documents required to carry out the
      transactions contemplated by this Agreement or incidental hereto and all other
      related legal matters shall be reasonably satisfactory to the Company and its
      counsel.

     

    ARTICLE
      9

    CONDITIONS
      PRECEDENT TO OBLIGATIONS OF

    BUCKEYE
      AND THE ACQUISITION SUB

     

    The
      obligations of Buckeye and the Acquisition Sub with respect to actions to be
      taken on the Closing Date are subject to the satisfaction or waiver on or prior
      to the Closing Date of all of the following conditions. If, as of the Closing
      Date, any of such conditions has not been satisfied, Buckeye and the Acquisition
      Sub shall have the right to terminate this Agreement or, in the alternative,
      waive any condition not so satisfied. Notwithstanding the foregoing, the
      consummation of the Merger shall constitute a waiver of any conditions not
      so
      satisfied. However, no such waiver shall be deemed to affect the survival of
      the
      representations and warranties of the Company or the Stockholders contained
      in
      this Agreement.

     

    9.1 Representations
      and Warranties; Performance of Obligations.
      All the
      representations and warranties of the Stockholders and the Company contained
      in
      this Agreement shall be true and correct as of the date of this Agreement and,
      if the Closing Date is other than the date of this Agreement, shall be true
      and
      correct in all material respects as of the Closing Date as though such
      representations and warranties had been made on and as of such date, except
      that
      those representations and warranties which address matters only as of a
      particular date only shall be required to be true and correct as of such date;
      all of the terms, covenants and conditions of this Agreement to be complied
      with
      or performed by the Stockholders and the Company on or before the Closing Date
      shall have been duly performed or complied with in all material respects; and
      certificates to the foregoing effect dated the Closing Date and signed by the
      Stockholders and by the President of the Company shall have been delivered
      to
      Buckeye.

     

    9.2 No
      Litigation.
      No
      action or proceeding before a court or any other governmental agency or body
      shall have been instituted or threatened which seeks to restrain or prohibit
      the
      Merger or which seeks to recover substantial damages relating to the Merger,
      and
      no governmental agency or body shall have taken any other action or made any
      request of Buckeye or the Acquisition Sub relating to the Merger or the other
      transactions contemplated by this Agreement as a result of which Buckeye or
      the
      Acquisition Sub deems it inadvisable to proceed with the transactions
      hereunder.

     

    9.3 Consents
      and Approvals.
      All
      necessary consents of and filings with any governmental authority or agency
      relating to the consummation of the transactions contemplated herein shall
      have
      been obtained and made, and all consents and approvals of third parties listed
      on Schedule
      4.22(b)
      and
Schedule
      5.2
      shall
      have been obtained.

     

    
      
         

      

      
        -25-

        
          

        

      

      
         

      

    

    9.4 No
      Material Adverse Effect.
      No
      event or circumstance shall have occurred with respect to the Company which
      would constitute a material adverse effect on the business, properties,
      operations, condition (financial or otherwise) or prospects of the Company,
      and
      the Company shall not have suffered any material change, loss or damage to
      any
      of its properties or assets, whether or not covered by insurance, which change,
      loss or damage materially affects or impairs the ability of the Company to
      conduct its business.

     

    9.5 Charters
      and Good Standing Certificates.
      The
      Company shall have delivered to Buckeye copies of its certificate or articles
      of
      incorporation (including amendments thereto) certified as of a recent date
      by
      the appropriate governmental authority in the Company’s state of incorporation,
      and a certificate, dated as of a recent date, duly issued by the appropriate
      governmental authority in the Company’s state of incorporation and in each state
      in which the Company is authorized to do business, showing the Company is in
      good standing and authorized to do business in such jurisdiction.

     

    9.6 Secretary’s
      Certificate.
      Buckeye
      shall have received a certificate, dated the Closing Date and signed by the
      Secretary or an Assistant Secretary of the Company, certifying as to the
      completeness and correctness of attached copies of the Company’s certificate or
      articles of incorporation (including amendments thereto), by-laws (including
      amendments thereto), and resolutions of the Board of Directors and the
      Stockholders approving the Company’s entering into this Agreement and the
      consummation of the transactions contemplated hereby.

     

    9.7 [Intentionally
      Omitted]

     

    9.8 Pledge
      Agreement.
      Buckeye
      shall have received a counterpart of the Pledge Agreement dated as of the
      Closing Date executed by each of the other parties thereto.

     

    9.9 Employment
      Agreements.
      Each of
      the persons listed on Schedule
      9.9
      shall
      have entered into an employment agreement in substantially the form attached
      as
Exhibit D.

     

    9.10 Stockholders’
      Release.
      Each
      Stockholder shall have delivered to Buckeye an instrument, in form and substance
      satisfactory to Buckeye, dated the Closing Date, releasing the Company, Buckeye,
      the Acquisition Sub and the Surviving Corporation from any and all claims of
      such Stockholder against the Company, and any and all obligations of the Company
      to such Stockholder.

     

    9.11 Termination
      of Related Party and Other Agreements.
      Except
      for the agreements set forth on Schedule
      9.11,
      Buckeye
      shall have received satisfactory evidence (a) that all existing agreements
      between the Company and any Stockholder, any relative of any Stockholder and
      any
      Affiliates of any Stockholder shall have been canceled effective prior to or
      as
      of the Closing Date, and (b) that the terminations required by Section
      7.6
      shall
      have been obtained.

     

    9.12 Debt.
      The
      terms of the payoff arrangements for the Former Stockholder Debt and the
      repayment and other terms of the other Debt of the Company shall be, or shall
      have been amended and modified to be, acceptable to Buckeye and will not be
      able
      to be accelerated as a result of the Merger or the other transactions
      contemplated to occur in connection with this Agreement. Except as set forth
      in
Schedule
      9.12,
      each
      Stockholder shall have repaid or caused to have been repaid, or shall repay
      or
      cause to be repaid at the Closing, all indebtedness of such Stockholder or
      his
      Affiliates owing to the Company, whether or not then due or
      matured.

     

    
      
         

      

      
        -26-

        
          

        

      

      
         

      

    

    9.13 [Intentionally
      Omitted]

     

    9.14 Non-Competition
      and Confidentiality Agreement.
      Buckeye
      shall have received the Non-Competition and Confidentiality Agreement executed
      by each Stockholder in substantially the form attached as Exhibit
      E.

     

    9.15 Transfer
      Restriction Agreement.
      Buckeye
      shall have received a Transfer Restriction Agreement executed by each
      Stockholder in the form provided to the Stockholders by Buckeye.

     

    9.16 EPA
      Action.
      The
      Proposed EPA Settlement Documents shall be in a form, and the state of the
      negotiations with the EPA shall be at such a point, where Buckeye and the
      Acquisition Sub believes the EPA Action can be settled in a manner and upon
      terms that are acceptable to Buckeye and the Acquisition Sub.

     

    9.17 Closing
      Deliveries.
      Buckeye
      shall have received the deliveries required to be made by the Stockholders
      and
      the Company pursuant to Schedule
      2.4
      and
Section
      3.2.

     

    9.18 Due
      Diligence Review.
      Buckeye
      shall be satisfied with the results of its due diligence investigation and
      review of the Company with respect to, among other matters, the business,
      operations, assets, contracts, legal compliance, non-recurring expenses and
      future prospects of the Company. 

     

    9.19 Approval
      of the Stockholders.
      Each
      Stockholder shall have voted all of his shares of Company Stock in favor of
      the
      Merger and Buckeye shall have been provided with a copy of a unanimous written
      consent to such effect executed by all of the Stockholders.

     

    9.20 Lien
      Search Reports.
      Buckeye
      shall have received Uniform Commercial Code lien search reports and such other
      lien search reports as it may require and such search reports shall not disclose
      any unpermitted liens which are not terminated on or before the
      Closing.

     

    9.21 Satisfaction.
      All
      actions, proceedings, instruments and documents required to carry out the
      transactions contemplated by this Agreement or incidental hereto and all other
      related legal matters shall have been approved by counsel to
      Buckeye.

     

    ARTICLE
      10

    COVENANTS
      OF BUCKEYE AND THE STOCKHOLDERS

    AFTER
      CLOSING

     

    10.1 Preparation
      and Filing of Tax Returns.

     

    (a) Buckeye
      shall, if possible, file or cause the Company to be filed all separate Returns
      (other than Returns for income Taxes) of the Company for all taxable periods
      that end on or after September 1, 2006 (and which are not required to be
      filed prior to the Closing Date) and shall pay or cause to be paid all Tax
      liabilities shown by such Returns to be due, provided that such payment shall
      not affect in any manner any rights that Buckeye, the Acquisition Sub or the
      Surviving Corporation may have to indemnification as provided in Article
      11.
      The
      Stockholders shall prepare and file or cause to be prepared and filed (at the
      Stockholders’ expense) all federal, state and local Tax Returns for the Company
      for all taxable periods that end on or before September 1, 2006 and all federal
      state and local income Tax Returns for the Company for all taxable periods
      that
      end on or before the Closing Date (including any stub period Tax Returns for
      the
      period ending on the Closing Date). All such Returns shall be prepared on a
      basis that is consistent with past practice and shall be reasonably acceptable
      to Buckeye. At least twenty business days before filing any such Return, the
      Stockholders’ Representative shall submit the Return to Buckeye for review and
      approval (which approval shall not be unreasonably withheld and such Returns
      shall be deemed to have been approved unless Buckeye notifies the Stockholders’
Representative that Buckeye objects to the Return within ten business days
      of
      Buckeye’s receipt of the Return). Buckeye shall pay or cause to be paid all Tax
      liabilities (in excess of all amounts already paid with respect thereto) that
      are shown to be due on such Returns, provided that any such payments shall
      not
      affect in any manner any rights that Buckeye, the Acquisition Sub or the
      Surviving Corporation may have to indemnification as provided in Article
      11.

     

    
      
         

      

      
        -27-

        
          

        

      

      
         

      

    

    (b) Buckeye
      shall file or cause to be filed all separate Returns of, or that include, the
      Surviving Corporation for all taxable periods ending after the Closing
      Date.

     

    (c) Each
      party hereto shall, and shall cause its subsidiaries and Affiliates to, provide
      to each of the other parties hereto such cooperation and information as any
      of
      them reasonably may request in filing any Return, amended Return or claim for
      refund, determining a liability for Taxes or a right to refund of Taxes or
      in
      conducting any audit or other proceeding in respect of Taxes. Such cooperation
      and information shall include providing copies of all relevant portions of
      relevant Returns, together with relevant accompanying schedules and relevant
      work papers, relevant documents relating to rulings or other determinations
      by
      taxing authorities and relevant records concerning the ownership and Tax basis
      of property, which such party may possess. Each party shall make its employees
      reasonably available on a mutually convenient basis at its cost to provide
      explanation of any documents or information so provided. Subject to the
      preceding sentence, each party required to file Returns pursuant to this
      Agreement shall bear all costs of filing such Returns.

     

    10.2 Preservation
      of Employee Benefit Plans.
      Following the Closing Date, Buckeye shall not terminate any health insurance
      or
      401(k) plan in effect at the Company immediately prior to the Merger until
      such
      time as Buckeye is able to replace such plan with a plan that is applicable
      to
      the Surviving Corporation, provided that Buckeye shall have no obligation to
      provide replacement plans that have the same terms and provisions as the
      existing plans.

     

    10.3 Purchase
      Price Adjustment.
      

     

    (a) On
      or
      prior to April 30, 2008, and if the Stockholder’s Representative elects to have
      the Purchase Price Adjustment Amount calculated based only upon the Second
      Measurement Period as provided in this Section, on or prior to April 30, 2009,
      Buckeye may deliver to the Stockholders' Representative a written notice setting
      forth the Purchase Price Adjustment Amount. If Buckeye fails to deliver a notice
      of the Purchase Price Adjustment Amount on or prior to April 30, 2008 or, in
      the
      event the Stockholder’s Representative elects to have the Purchase Price
      Adjustment Amount measured based upon the Second Measurement Period, on or
      prior
      to April 30, 2009 the Purchase Price Adjustment Amount shall be deemed to be
      zero.

     

    (b) If
      Buckeye delivers a notice pursuant to Section 10.3(a), the Stockholders'
      Representative shall have thirty (30) days from the date such notice is given
      to
      give written notice to Buckeye stating that (i) the Stockholders object to
      Buckeye's determination of the Purchase Price Adjustment Amount and specifying
      in detail the basis for such objection (a "Purchase Price Adjustment Objection
      Notice") or (ii) in the case of the notice given on or prior to April 30, 2008,
      the Stockholders elect to extend the extend the “Maturity Date” as defined in
      the Promissory Notes from September 30, 2008 to September 30, 2009 and
      to have the Purchase Price Adjustment Amount calculated based only upon the
      Second Measurement Period (rather than the First Measurement Period) (an
“Extension Notice”). If the Stockholders' Representative fails to give a
      Purchase Price Adjustment Objection Notice or, if permitted, an Extension Notice
      within such thirty (30) day period, the final determination of the Purchase
      Price Adjustment Amount shall be as stated in the notice given by Buckeye
      barring manifest error. If the Stockholders' Representative gives an Extension
      Notice the Purchase Price Adjustment Amount shall be calculated based upon
      the
      Second Measurement Period (and not the First Measurement Period) and the
      Maturity Date of each Promissory Note shall be extended automatically to
      September 30, 2009 (from September 30, 2008). If the Stockholders'
      Representative gives a Purchase Price Adjustment Objection Notice within such
      thirty (30) day period and the Stockholders' Representative and Buckeye are
      unable to resolve and finally determine such disputed items within a period
      of
      fifteen (15) days after delivery of the Purchase Price Adjustment Objection
      Notice, an independent certified public accountant selected by Buckeye and
      reasonably acceptable to the Stockholders' Representative (the "Section 10.3
      Accountant") will review the computation and shall make a determination as
      to
      the Purchase Price Adjustment Amount as promptly as practical and shall endeavor
      to make such determination within thirty (30) days of the submission of the
      dispute to the Section 10.3 Accountant. The determination of the Section 10.3
      Accountant shall be in lieu of arbitration pursuant to Article 14 and will
      be
      conclusive and binding upon the parties. The costs of the Section 10.3
      Accountant will be paid fifty percent (50%) by the Stockholders (jointly and
      severally) and fifty percent (50%) by Buckeye.

     

    
      
         

      

      
        -28-

        
          

        

      

      
         

      

    

    (c) Within
      five (5) days after the final determination of the Purchase Price Adjustment
      Amount, the amount of the Purchase Price Adjustment Amount shall be applied
      to
      reduce the unpaid principal amounts of the Promissory Notes and any unpaid
      and
      accrued interest on the Promissory Notes. The total Purchase Price Adjustment
      Amount shall not exceed the aggregate initial principal amount of the Promissory
      Notes that is not permitted to be converted at the election of the holders
      into
      Buckeye Stock pursuant to the terms of the Promissory Notes. The Stockholders
      acknowledge that, since any Purchase Price Adjustment is to be deducted from
      and
      offset against the Promissory Notes, any payments otherwise due under the
      Promissory Notes may be withheld pending the resolution of any disputed items
      with respect to the Purchase Price Adjustment Amount. If a Purchase Price
      Adjustment Amount is required to be paid, then the interest accruing on the
      Promissory Notes since the date they were issued shall be recalculated as if
      the
      Purchase Price Adjustment Amount was never part of the principal amount of
      the
      Promissory Notes and the amount of the Purchase Price Adjustment Amount and
      any
      such excess interest that was paid to the holders of the Promissory Notes may
      be
      set off and offset by Buckeye against either the principal amount of the
      Promissory Notes or any future payments of interest due and payable on the
      Promissory Notes; provided, however, that if any such set off or offset is
      made
      or proposed to be made for the Purchase Price Adjustment Amount prior to the
      time the Purchase Price Adjustment Amount has been agreed upon or finally
      determined pursuant to this Section, the amount set off or offset by Buckeye
      shall be limited to the estimated amount of the Purchase Price Adjustment
      Amount, and shall not include any such excess interest until the earliest of
      the
      date the Purchase Price Adjustment Amount is agreed to by the parties or finally
      determined pursuant to his Section or the date the Promissory Notes
      mature.

     

    (d) As
      used
      in this Agreement, the following terms shall have the following
      meanings:

     

    (i) "EBIT"
      shall mean an amount equal to:

     

    (A) the
      net
      income of the Surviving Corporation during the applicable Measurement Period
      (excluding interest income and any extraordinary gains or gains from the sale
      of
      assets (other than inventory sold in the ordinary course of business));
      plus

     

    (B) any
      amount subtracted in determining the Surviving Corporation’s net income for such
      period for interest and taxes;

     

    calculated
      in each case in accordance with generally accepted accounting principles, but
      allocating to the Surviving Corporation in a manner reasonably determined by
      Buckeye in accordance with Buckeye’s standard practices on a non-discriminatory
      basis the Surviving Corporation’s share of expenses incurred or paid by Buckeye
      or its affiliates which benefit or are for the benefit of the Surviving
      Corporation, which relate to or are otherwise incurred as a result of the
      existence, activities or operations of the Surviving Corporation (including
      without limitation any such expenses for insurance, employee benefits,
      accounting services and legal services for the Surviving Corporation) or which
      are otherwise specifically allocable to the Surviving Corporation (but not
      any
      general overhead or other expenses which do not relate to and are not incurred
      as a result of the existence, activities or operations of the Surviving
      Corporation). In calculating EBIT for purposes of Section 10.3, the amount
      up to
      $100,000 that Buckeye is required to be pay or cause to be paid as the EPA
      Penalty pursuant to the Proposed EPA Settlement Documents and the interest
      and
      principal paid by Buckeye or the Surviving Corporation on the Former Shareholder
      Debt shall not be included as expenses.

    

    
      
         

      

      
        -29-

        
          

        

      

      
         

      

    

     

    (ii) “EBIT
      Deficit” shall mean (A) $0, if EBIT equals or exceeds the EBIT Target or if the
      EBIT Target exceeds EBIT by $35,000 or less, or (B) an amount equal to the
      EBIT
      Target minus EBIT, if the EBIT Target exceeds EBIT by more than
      $35,000.

     

    (iii) "EBIT
      Target" shall mean $700,000, provided that in the event that the operations
      of
      any other business are combined with those of the Surviving Corporation (whether
      the result of an acquisition or otherwise) prior to the end of the applicable
      Measurement Period, such amount shall be increased by an amount equal to the
      projected EBIT for the business operations to be combined with those of the
      Surviving Corporation (prorated on a reasonable basis to reflect the projected
      increased EBIT through the end of each applicable Measurement Period), as
      mutually agreed upon by the Stockholders and Buckeye in good faith ; provided,
      however, that the no such operations shall be combined with those of the
      Surviving Corporation prior to the end of the applicable Measurement Period
      unless the Stockholders and the Buckeye have agreed upon the amount of the
      adjustment, if any, to be made to the EBIT Target as a result of such
      combination.

     

    (iv) “Measurement
      Period” means the period from January 1, 2007 to December 31, 2007 (the “First
      Measurement Period”) or the period from January 1, 2008 to December 31, 2008
      (the “Second Measurement Period”), as applicable.

     

    (v) “Purchase
      Price Adjustment Amount” shall mean an amount equal to the product of the EBIT
      Deficit for the First Measurement Period or the Second Measurement Period,
      as
      the case may be, multiplied by five (5); provided, however, that the Purchase
      Price Adjustment Amount shall not exceed the aggregate initial principal amount
      of the Promissory Notes that is not permitted to be converted at the election
      of
      the holders into Buckeye Stock pursuant to the terms of the Promissory
      Notes.

     

    The
      Stockholders acknowledge and agree that Buckeye may, but is not required to,
      provide the Surviving Company with any Additional Capital during the Measurement
      Period, whether or not requested by the Stockholders, and Buckeye shall not
      be
      required to adjust the EBIT Target or the EBIT of the Surviving Corporation
      if
      Buckeye elects not to provide any Additional Capital to the Surviving
      Corporation, whether or not requested by the Stockholders.

     

    10.4 EPA
      Action Settlement.
      The
      Stockholders shall use their best efforts to cause the EPA Action to be promptly
      and finally settled and resolved on terms not less favorable to the Company
      and
      the Stockholders than are currently set forth in the Proposed EPA Settlement
      Documents and to cause the termination of any ongoing or continuing covenants
      applicable to the Company under the final EPA settlement documents (other than
      the obligation to pay any unpaid installments or payments of up to the EPA
      Penalty) as a result of the closing of the transactions contemplated by this
      Agreement. Buckeye shall pay, or cause the Company to pay, the installments
      required to be paid under the final EPA settlement documents as the EPA Penalty
      up to, but not exceeding $100,000 in the aggregate. The Stockholders jointly
      and
      severally agree to pay or reimburse Buckeye or the Surviving Corporation
      immediately upon demand for any and all other amounts, including without
      limitation any investigation costs, civil penalties, attorneys’ fees, compliance
      costs or other fees, costs, expenses and amounts, that may be required to be
      paid by the Company or the Stockholders in connection with the EPA Action or
      the
      activities alleged to have occurred in the EPA Action in excess of such $100,000
      aggregate amount and shall indemnify, defend, protect and hold harmless Buckeye
      and the Surviving Corporation from any such costs, penalties, attorneys’ fees,
      compliance costs or other fees, expenses, costs or amounts in excess of such
      $100,000 aggregate amount and any other obligations, liabilities, losses,
      damages, liabilities actions, suits proceedings, demands, assessments,
      adjustments, costs and expenses (including reasonable attorneys’ fees and costs
      of investigation) resulting or arising from the EPA Action or the activities
      alleged to have occurred in the EPA Action, including without limitation any
      enhanced penalties that may result from the failure to obtain the termination
      of
      the ongoing covenants of the Company under the final settlement documents or
      the
      failure of the Stockholders to settle the EPA Action on terms not less favorable
      to the Company than those contemplated above.

     

    
      
         

      

      
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    10.5 Payment
      for Additional Working Capital.
      The
      Stockholders acknowledge that Buckeye has agreed to utilize a reduced Minimum
      Working Capital Amount for purposes of calculating, pursuant to Schedule
      2.4,
      the
      consideration to be paid to the Stockholders upon the Merger and that the use of
      a larger Minimum Working Capital Amount would have reduced the consideration
      that would have been paid to the Stockholders. Buckeye may (but shall not be
      obligated to) provide further or additional funds or working capital to the
      Surviving Corporation, whether on a temporary or permanent basis, whether
      through advances, capital contributions, the incurrence of additional
      indebtedness from Buckeye or third parties or otherwise (“Additional Capital”),
      and, if Buckeye elects in its discretion to provide the Surviving Corporation
      with or permit the Surviving Corporation to obtain any Additional Capital,
      Buckeye shall determine the manner in which any such Additional Capital will
      be
      provided; it being acknowledged that such funds may be provided in the form
      of
      interest bearing debt. The Stockholders jointly and severally agree that in
      the
      event the Surviving Corporation obtains any Additional Capital prior to the
      end
      of the applicable Measurement Period and there exists at the end of the
      applicable Measurement Period more than $50,000 of such Additional Capital
      (the
      aggregate amount above $50,000 being referred to as the “Additional Amount”)
      that has not been repaid with funds generated through the ordinary business
      operations of the Surviving Corporation, then within thirty (30) days after
      the
      end of the applicable Measurement Period and notification from Buckeye of any
      Additional Amount, the Stockholders jointly and severally shall pay such
      Additional Amount to Buckeye by reducing the principal amount of the Promissory
      Notes that is not permitted to be converted at the election of the holders
      into
      Buckeye Stock pursuant to the terms of the Promissory Notes (or if such
      Promissory Notes have been paid, by paying cash up to the amounts actually
      received pursuant to the Promissory Notes with respect to the portion of the
      principal amount thereof that was not permitted to be converted into Buckeye
      Stock by the holders). Notwithstanding the foregoing, in the event that
      following a request by the Stockholders’ Representative for Additional Capital
      for the Surviving Corporation the Stockholders’ Representative and Buckeye,
      after considering the financial condition, cash flow and expected sources and
      uses of cash of the Surviving Corporation, mutually agree that Additional
      Capital is necessary to enable the Surviving Corporation to meet its then
      current obligations during the applicable Measurement Period during which EBIT
      is to be measured pursuant to Section 10.3, Buckeye shall use reasonable efforts
      to provide or cause to be provided to the Surviving Corporation the Additional
      Capital required within 60 days of such mutual agreement, either in the form
      of
      debt or additional equity as determined by Buckeye; provided, however, that
      in
      no event shall Buckeye be required to provide such Additional Capital or cause
      such Additional Capital to be provided if and to the extent, after giving effect
      thereto, the aggregate amount of Additional Capital provided or caused to be
      provided to the Surviving Corporation and not repaid or returned would exceed
      $50,000 in the aggregate.

     

    10.6 Specified
      Marks. Subject
      to the provisions of this Section, the parties hereby acknowledge and agree
      that
      as a result of the transactions contemplated by this Agreement and certain
      transfers contemplated to occur thereafter, the Specified Marks may be
      transferred and owned after the Closing by Buckeye or an affiliate of Buckeye
      and Buckeye or such affiliate shall have all rights of ownership with respect
      thereto, including the right to use, license and sublicense the use of the
      Specified Marks throughout the United States. In the event that through the
      exercise of the Stockholders’ rights under the Pledge Agreement, the
      Stockholders become the owners of the Surviving Corporation, Buckeye shall
      license on a perpetual and royalty free basis the rights to use the Specified
      Marks in Sacramento, Placer, Eldorado, Yolo, Solano, Yuba, and San Joaquin
      counties in California (the “Sacramento Area”) to the Surviving Corporation
      pursuant to a mutually acceptable license agreement and Buckeye and its
      affiliates shall retain all rights with respect to the Specified Marks in all
      other parts of the United States. Notwithstanding the foregoing, in the event
      the Stockholders become the owners of the Surviving Corporation as a result
      of
      the exercise of their rights under the Pledge Agreement, the Stockholders also
      may elect simultaneously to reacquire or have the Surviving Corporation
      reacquire all rights in the Specified Marks acquired by Buckeye in connection
      with the transactions contemplated by this Agreement provided that the
      Stockholders return all of the Buckeye Stock, if any, issued pursuant to this
      Agreement and/or any of the agreements or documents executed and/or delivered
      in
      connection with this Agreement (including without limitation the Promissory
      Notes) or the transactions contemplated hereby or thereby; provided, however,
      that in the event the Stockholders or the Surviving Corporation reacquire the
      Specified Marks, the Stockholders or the Surviving Corporation, as applicable,
      shall simultaneously enter into (i) a mutually acceptable license agreement
      for
      Buckeye and its affiliates to continue using the Specified Marks in territories
      which are other than the Sacramento Area and providing for the payment of
      certain mutually agreed upon reasonable royalties for such license or (ii)
      if
      the parties are unable to agree upon a license agreement, a license agreement
      for a transitional term of three (3) years which shall permit Buckeye and its
      affiliates to continue to use such marks in the general areas in which they
      then
      are being used on an exclusive and royalty-free basis while Buckeye and its
      affiliates transition to other marks.

     

    
      
         

      

      
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    10.7 Release
      from Guarantees; Indemnity.
      A list
      of certain personal guaranties of Company obligations made by the Stockholders
      is set forth on Schedule
      10.7
      and the
      Stockholders shall notify Buckeye and the Surviving Company of any other similar
      personal guaranties of Company obligations made by the Stockholders prior to
      the
      Closing. The Stockholders, Buckeye and the Surviving Corporation shall cooperate
      and use commercially reasonable efforts to have the Stockholders released from
      any and all of Company obligations that the Stockholders so personally
      guaranteed. In the event Buckeye and the Surviving Company are unable to obtain
      the release of such guaranties, Buckeye and the Surviving Company shall
      indemnify, defend, protect and hold harmless the Stockholders from and against
      any and all losses, damages, liabilities, actions, suits, claims, proceedings,
      demands, assessments, adjustments, costs and expenses, including reasonable
      attorneys' fees, incurred by the Stockholders as a result of, arising from
      or
      connected with the failure to obtain the release of the aforesaid personal
      guarantees. 

     

    

    ARTICLE
      11

    INDEMNIFICATION

     

    The
      Stockholders, Buckeye and the Acquisition Sub each make the following covenants
      that are applicable to them, respectively:

     

    11.1 Indemnification
      by the Stockholders.
      Each
      Stockholder, jointly and severally, covenants and agrees that he will indemnify,
      defend, protect and hold harmless Buckeye, the Acquisition Sub and the Surviving
      Corporation from and against all losses, damages, liabilities, actions, suits,
      proceedings, demands, assessments, adjustments, costs and expenses (including
      reasonable attorneys’ fees and expenses of investigation) incurred by Buckeye,
      the Acquisition Sub or the Surviving Corporation as a result of or arising
      from
      (a) any breach of the representations and warranties of any of the Stockholders
      or the Company set forth in this Agreement or in any certificates delivered
      in
      connection herewith, or (b) any breach of any covenant or agreement on the
      part
      of any of the Stockholders or the Company under this Agreement, or (c) any
      matters identified on Schedule
      4.20.
      The
      obligation to indemnify Buckeye, the Acquisition Sub and the Surviving
      Corporation pursuant to this Section
      11.1
      shall
      apply only to the extent that notice of the claim for indemnification pursuant
      to this Section
      11.1
      is given
      in good faith to the Stockholders on or prior to the applicable Expiration
      Date.

     

    11.2 Indemnification
      by Buckeye.
      Each of
      Buckeye and the Acquisition Sub, jointly and severally, covenants and agrees
      that it will indemnify, defend, protect and hold harmless the Stockholders
      from
      and against all losses, damages, liabilities, actions, suits, proceedings,
      demands, assessments, adjustments, costs and expenses (including reasonable
      attorneys’ fees and expenses of investigation) incurred by the Stockholders as a
      result of or arising from (a) any breach of the representations and warranties
      of Buckeye or the Acquisition Sub set forth in this Agreement or in any
      certificates delivered in connection herewith or (b) any breach of any covenant
      or agreement on the part of Buckeye or the Acquisition Sub under this Agreement.
      The obligation to indemnify the Stockholders pursuant to this Section
      11.2
      shall
      apply only to the extent that notice of the claim for indemnification pursuant
      to this Section
      11.2
      is given
      in good faith to Buckeye on or prior to the applicable Expiration
      Date.

     

    
      
         

      

      
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    11.3 Third
      Person Claims.

     

    (a) Promptly
      after any party hereto (the “Indemnified Party”) receives notice of or has
      knowledge of any claim by a person or entity not a party to this Agreement
      (“Third Person”), or the commencement of any action or proceeding by a Third
      Person, for which the Indemnified Party intends to make a claim against any
      party obligated to provide indemnification pursuant to Section
      11.1
      or
Section
      11.2
      (the
“Indemnifying Party”), the Indemnified Party shall give the Indemnifying Party
      written notice of such claim or the commencement of such action or proceeding,
      provided that the failure to give such prompt notice shall not affect the
      Indemnifying Party’s obligation to indemnify absent a showing of actual
      prejudice to the Indemnifying Party. Such notice shall state the nature and
      the
      basis of such claim and, to the extent determinable, a reasonable estimate
      of
      the amount thereof.

     

    (b) The
      Indemnifying Party shall have the right to defend and settle, at its own expense
      and by its own counsel, any such matter so long as the Indemnifying Party
      pursues the same in good faith and diligently, provided that the Indemnifying
      Party shall not settle any criminal matter, without the written consent of
      the
      Indemnified Party, or any other matter, without the written consent of the
      Indemnified Party which in the case of matters which are not criminal matters
      will not be unreasonably withheld or delayed. If the Indemnifying Party
      undertakes to defend or settle, it shall promptly notify the Indemnified Party
      of its intention to do so, and the Indemnified Party shall cooperate with the
      Indemnifying Party and its counsel in the defense thereof and, subject to the
      preceding sentence, in any settlement thereof. Such cooperation shall include,
      but shall not be limited to, furnishing the Indemnifying Party with any books,
      records or information reasonably requested by the Indemnifying Party that
      are
      in the Indemnified Party’s possession or control. In the event that counsel to
      the Indemnifying Party shall have a conflict of interest that prevents counsel
      for the Indemnifying Party from representing the Indemnified Party, or in the
      event that the Indemnified Party is not reasonably satisfied with the counsel
      selected by the Indemnifying Party, the Indemnified Party shall have the right
      to participate in such matter through counsel of its own choosing and the
      Indemnifying Party will reimburse the Indemnified Party for the reasonable
      expenses of its counsel. After the Indemnifying Party has notified the
      Indemnified Party of its intention to undertake to defend or settle any such
      asserted liability, and for so long as the Indemnifying Party diligently pursues
      such defense, the Indemnifying Party shall not be liable for any additional
      legal expenses incurred by the Indemnified Party in connection with any defense
      or settlement of such asserted liability, except (i) as set forth in the
      preceding sentence, and (ii) to the extent such participation is requested
      by
      the Indemnifying Party, in which event the Indemnified Party shall be reimbursed
      by the Indemnifying Party for reasonable additional legal expenses and
      out-of-pocket expenses. If the Indemnifying Party notifies the Indemnified
      Party
      of its intention to undertake to defend any claim by a Third Person, the
      Indemnifying Party shall be conclusively presumed to have agreed to indemnify
      and hold the Indemnified Party harmless with respect thereto and, subject only
      to the limitations set forth in Section
      11.5,
      the
      Indemnified Party shall be entitled to be indemnified for all losses, damages,
      liabilities, actions, suits, proceedings, demands, assessments, adjustments,
      costs and expenses (including without limitation reasonable attorneys fees
      and
      expenses of investigation) with respect to such claim.

     

    (c) If
      the
      Indemnifying Party does not undertake to defend such matter to which the
      Indemnified Party is entitled to indemnification hereunder, or fails diligently
      to pursue such defense, the Indemnified Party may undertake such defense through
      counsel of its choice, at the cost and expense of the Indemnifying Party, and
      the Indemnified Party may settle such matter, and the Indemnifying Party shall
      reimburse the Indemnified Party for the amount paid in such settlement and
      any
      other liabilities or expenses incurred by the Indemnified Party in connection
      therewith; provided,
      however,
      that
      under no circumstances shall the Indemnified Party settle any such matter
      without the written consent of the Indemnifying Party, which consent shall
      not
      be unreasonably withheld or delayed.

     

    
      
         

      

      
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    11.4 Exclusive
      Remedy.
      The
      indemnification provided for in this Article
      11
      shall
      (except as prohibited by law) be the exclusive remedy in any action seeking
      damages or any other form of monetary relief brought by any party to this
      Agreement against another party for any breach or violation of any
      representation or warranty in this Agreement or any covenant or agreement to
      be
      performed pursuant to this Agreement on or before the Closing; provided,
      however,
      that
      nothing herein shall be construed to limit the right of a party, in a proper
      case, to seek specific performance or other injunctive relief for any such
      breach.

     

    11.5 Limitations
      on Indemnification.

     

    (a) Buckeye,
      the Acquisition Sub and the Surviving Corporation shall not assert any claim
      for
      indemnification hereunder against any Stockholder with respect to any breach
      or
      violation of any representation or warranty in this Agreement or any covenant
      or
      agreement to be performed on or before the Closing until such time as the
      aggregate amount of all claims which such parties may have against the
      Stockholders, whether individually or collectively, shall exceed $50,000, at
      which point Buckeye, the Acquisition Sub and the Surviving Corporation may
      assert a claim for indemnification for all claims in excess of the initial
      $50,000; provided,
      however,
      that the
      foregoing limitation shall not apply to any claims with respect to the
      representations and warranties contained in Section
      4.9,
      Section
      4.10,
      Section
      4.21,
      Section
      4.22(b)(v),
      or
Article
      5
      or any
      confirmation thereof, or matters relating or alleged to relate to the EPA Action
      (other than amounts up to the $100,000 aggregate amount to be paid by or to
      be
      caused to be paid by Buckeye as the EPA Penalty, but including any amounts
      required to be paid in connection with the EPA Action in excess of the $100,000
      aggregate amount to be paid or to be caused to be paid by Buckeye as the EPA
      Penalty) or warranty claims with respect to the Phoenix Systems (which are
      not
      claims for damage to other property or personal injury). No Stockholder shall
      assert any claim for indemnification hereunder against Buckeye or the
      Acquisition Sub with respect to any breach or violation of any representation
      or
      warranty in this Agreement or any covenant or agreement to be performed on
      or
      before the Closing until such time as the aggregate of all claims which the
      Stockholders may have against Buckeye and/or the Acquisition Sub, whether
      individually or collectively, shall exceed $50,000, at which point the
      Stockholders may assert a claim for indemnification for all claims in excess
      of
      the initial $50,000.

     

    (b) No
      Stockholder shall be entitled to indemnification under this Article
      11
      if and
      to the extent that such Stockholder’s claim for indemnification is directly or
      indirectly related to a breach by the Company or any Stockholder of any
      representation, warranty, covenant or other agreement set forth in this
      Agreement. None of Buckeye, the Acquisition Sub or the Surviving Corporation
      shall be entitled to indemnification under this Article
      11
      if and
      to the extent that such party’s claim for indemnification is directly or
      indirectly related to a breach by Buckeye or the Acquisition Sub of any
      representation, warranty, covenant or other agreement set forth in this
      Agreement.

     

    (c) Notwithstanding
      any other term of this Agreement, the Stockholders (collectively) shall not
      be
      liable under this Article
      11
      with
      respect to any breach or violation of any representation or warranty in this
      Agreement or covenant or agreement to be performed pursuant to this Agreement
      on
      or before the Closing for an amount which exceeds the Aggregate Consideration
      Amount.

     

    
      
         

      

      
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    (d) It
      is
      hereby understood and agreed that if a Stockholder has converted a portion
      of
      its Promissory Note into Buckeye Stock such Stockholder may, but is not required
      to, satisfy an indemnification obligation under Section 11.1 for a breach of
      a
      representation or warranty through payment of a combination of Buckeye Stock
      and
      cash; provided,
      however,
      that if
      any Stockholder elects to do so, such Stockholder will provide Buckeye Stock
      and
      cash such that the portion provided in Buckeye Stock is not greater than the
      percentage of the principal amount of the Promissory Note of such Stockholder
      that has been converted into Buckeye Stock, with any shares of Buckeye Stock
      so
      surrendered to satisfy any such indemnification obligation to be valued at
      their
      Fair Market Value.

     

    ARTICLE
      12

    TERMINATION
      OF AGREEMENT

     

    12.1 Termination.
      This
      Agreement may be terminated at any time prior to the Closing Date
      solely:

     

    (a) by
      mutual
      consent of Buckeye, the Stockholders and the Company;

     

    (b) by
      the
      Stockholders or the Company, on the one hand, or by Buckeye, on the other hand,
      if the transactions contemplated by this Agreement to take place at the Closing
      shall not have been consummated by September 30, 2006; provided,
      however,
      that (i)
      none of the Stockholders nor the Company shall be entitled to terminate this
      Agreement pursuant to this Section
      12.1(b)
      if the
      failure of such transactions to be consummated is due to the willful failure
      of
      the Company or any Stockholder to perform any of their respective obligations
      under this Agreement required to be performed by any of them prior to or on
      the
      Closing Date and (ii) Buckeye shall not be entitled to terminate this Agreement
      pursuant to this Section
      12.1(b)
      if the
      failure of such transactions to be consummated is due to the willful failure
      of
      the Acquisition Sub or Buckeye to perform any of their respective obligations
      under this Agreement required to be performed by them prior to or on the Closing
      Date;

     

    (c) by
      the
      Stockholders or the Company, on the one hand, or by Buckeye or the Acquisition
      Sub, on the other hand, if a material breach or default shall be made by the
      other parties in the observance or in the due and timely performance of any
      of
      the covenants or agreements contained herein, and the curing of such breach
      or
      default shall not have been made before the earlier of (i) ten business days
      after receipt of notice specifying the breach and requesting that such breach
      be
      cured and (ii) the Closing Date; or by the Stockholders or the Company, if
      the
      conditions set forth in Article
      8
      have not
      been satisfied or waived as of the Closing Date; or by Buckeye, if the
      conditions set forth in Article
      9
      have not
      been satisfied or waived as of the Closing Date.

     

    12.2 Liabilities
      in Event of Termination.
      The
      termination of this Agreement will in no way limit any obligation or liability
      of any party based on or arising from a breach or default by such party with
      respect to any of its representations, warranties, covenants or agreements
      contained in this Agreement including, but not limited to, legal and audit
      costs
      and out of pocket expenses.

     

    
      
         

      

      
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    ARTICLE
      13

    SECURITIES
      LAWS REPRESENTATIONS AND COVENANTS

     

    13.1 Compliance
      with Law.
      Each
      Stockholder acknowledges that the shares of Buckeye Stock to be delivered to
      such Stockholder pursuant to or in connection with this Agreement or any of
      the
      agreements or documents executed and/or delivered in connection with this
      Agreement (including without limitation any Promissory Notes) or the
      transactions contemplated hereby or thereby have not been and will not be
      registered under the 1933 Act or any state securities laws and may not be resold
      without compliance with the 1933 Act and any applicable state securities laws.
      Each Stockholder further represents, warrants and covenants that (a) the shares
      of Buckeye Stock to be acquired by such Stockholder pursuant to or in connection
      with this Agreement or any of the agreements or documents executed and/or
      delivered in connection with this Agreement (including without limitation any
      Promissory Notes) or the transactions contemplated hereby or thereby are being
      acquired solely for his own account, for investment purposes only, and with
      no
      present intention of distributing, selling or otherwise disposing of it in
      connection with a distribution, and (b) none of the shares of Buckeye Stock
      issued to such Stockholder will be offered, sold, assigned, pledged,
      hypothecated, transferred or otherwise disposed of except after full compliance
      with all of the applicable provisions of the 1933 Act and the rules and
      regulations of the SEC and after full compliance with any applicable state
      securities laws. Each Stockholder acknowledges that all the Buckeye Stock shall
      bear the following legend:

     

    THE
      SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
      OF
      1933, AS AMENDED (THE “1933 ACT”), OR UNDER ANY STATE SECURITIES LAWS, AND MAY
      ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE
      1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

     

    13.2 Economic
      Risk; Sophistication.
      Each
      Stockholder represents and warrants that such Stockholder (a) is an “accredited
      investor” as such term is defined in Regulation D promulgated under the
      1933 Act, (b) is able to bear the economic risk of an investment in the Buckeye
      Stock to be acquired pursuant to or in connection with this Agreement or any
      of
      the agreements or documents executed and/or delivered in connection with this
      Agreement (including without limitation any Promissory Notes) or the
      transactions contemplated hereby or thereby, (c) can afford to sustain a total
      loss of such investment, and (d) has such knowledge and experience in financial
      and business matters that he is capable of evaluating the merits and risks
      of
      the proposed investment in the Buckeye Stock. Each Stockholder further
      represents and warrants that such Stockholder has been supplied with, or had
      access to, information to which a reasonable investor would attach significance
      in making investment decisions and, without limiting the generality of the
      foregoing, has had an adequate opportunity to ask questions and receive answers
      from the officers of Buckeye and its subsidiaries concerning any and all matters
      relating to Buckeye and its subsidiaries and the transactions described herein,
      including the background and experience of the current and proposed officers
      and
      directors of Buckeye and its subsidiaries, the plans for the operations of
      the
      business of Buckeye and its subsidiaries, and any plans for additional
      acquisitions and the like. Each Stockholder represents and warrants that such
      Stockholder has asked any and all questions in the nature described in the
      preceding sentence and all questions have been answered to his satisfaction
      and
      further that such Stockholder is aware that Buckeye has a very limited operating
      history.

     

    13.3 Tax
      Matters.
      EACH
      PARTY ACKNOWLEDGES AND AGREES THAT THE TRANSACTION CONTEMPLATED BY THIS
      AGREEMENT IS EXPECTED TO BE A TAXABLE TRANSACTION AND THAT NONE OF THE PARTIES
      HERETO HAVE MADE ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE POTENTIAL
      OR
      ACTUAL FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THIS TRANSACTION AND EACH
      PARTY HAS CONSULTED AND RELIED SOLEY UPON THEIR OWN TAX ADVISORS WITH SUCH
      MATTERS AND ASSUMED ALL RISKS RELATED THERETO.

     

    
      
         

      

      
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    ARTICLE
      14

    ARBITRATION

     

    14.1 Dispute.
      Any
      dispute, controversy or claim arising out of or relating to this Agreement
      or
      its breach, interpretation, termination or validity, including any question
      whether a matter is subject to arbitration hereunder, is referred to herein
      as a
“Dispute.”

     

    14.2 Arbitration.
      If the
      parties fail to settle any Dispute within thirty (30) days after any party
      has
      given notice to the other parties hereto of the claimed existence of a Dispute,
      the Dispute shall be resolved by a confidential, binding arbitration. All such
      Disputes shall be arbitrated pursuant to the Comprehensive Arbitration Rules
      and
      Procedures of J.A.M.S. Endispute before an arbitrator or arbitrators selected
      in
      the manner provided in such rules and procedures, except that (a) the number
      of
      calendar days referred to in the second sentence of Rule 6(a) shall be
      twenty-one (21) instead of fourteen (14), (b) the number of calendar days
      referred to throughout Rule 9 shall be twenty-one (21) instead of fourteen
      (14),
      and (c) the “Final Offer (or Baseball)” Arbitration Option shall not be used
      unless otherwise agreed in writing.

     

    14.3 Arbitration
      Procedures.
      Judgment upon any award rendered by the arbitrators may be entered in any court
      having jurisdiction, and each party hereto consents and submits to the
      jurisdiction of such court for purposes of such action. The statute of
      limitations, estoppel, waiver, laches and similar doctrines, which would
      otherwise be applicable in any action brought by a party, shall be applicable
      in
      any arbitration proceeding, and the commencement of an arbitration proceeding
      shall be deemed the commencement of an action for those purposes. The Federal
      Arbitration Act shall apply to the construction, interpretation and enforcement
      of this arbitration provision. Each party shall bear its own expenses (including
      without limitation the fees and expenses of legal counsel and accountants)
      in
      connection with such arbitration and Buckeye and the Stockholders shall each
      bear one-half of the arbitrators’ fees and expenses, provided that the arbitral
      award shall allocate such fees and expenses of counsel, accountants, other
      advisors and the arbitrators according to the relative success of the contesting
      parties in the arbitration, as determined by the arbitrators. The arbitrators
      shall award an amount equal to the actual monetary damages suffered by each
      contesting party, which may include interest costs incurred by such party and,
      in the case of the Surviving Corporation, actual reductions in earnings before
      interest, taxes, depreciation and amortization for the period in which they
      occur, but the arbitrators shall not have the authority to award punitive
      damages.

     

    ARTICLE
      15

    GENERAL

     

    15.1 Cooperation.
      On and
      after the Closing Date, each Stockholder, Buckeye and the Acquisition Sub shall
      each deliver or cause to be delivered to the other parties hereto such
      additional documents, releases, assignments and instruments as the others may
      reasonably request for the purpose of carrying out the purposes of this
      Agreement. The Stockholders will cooperate and use their reasonable efforts
      to
      have the present officers, directors and employees of the Company cooperate
      with
      Buckeye and the Surviving Corporation on and after the Closing Date in
      furnishing information, evidence, testimony and other assistance in connection
      with any Return filing obligations, actions, proceedings, arrangements or
      disputes of any nature with respect to matters pertaining to all periods prior
      to the Closing Date.

     

    
      
         

      

      
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    15.2 Successors
      and Assigns.
      This
      Agreement and the rights and obligations of the parties hereunder may not be
      assigned (except by operation of law) without the prior written consent of
      the
      other parties hereto and shall be binding upon and shall inure to the benefit
      of
      the parties hereto, the successors of Buckeye, the Acquisition Sub and the
      Company, the heirs and legal representatives of each Stockholder and any
      permitted assigns of the parties.

     

    15.3 Entire
      Agreement.
      This
      Agreement (including the Schedules and Exhibits attached hereto) and the
      documents delivered pursuant hereto constitute the entire agreement and
      understanding among the Stockholders, the Company, the Acquisition Sub and
      Buckeye, and supersede any and all prior agreements and understandings, relating
      to the subject matter of this Agreement.

     

    15.4 Counterparts.
      This
      Agreement may be executed simultaneously in two or more counterparts, each
      of
      which shall be deemed an original and all of which together shall constitute
      but
      one and the same instrument.

     

    15.5 Brokers
      and Agents.
      Each
      party represents and warrants that, except as set forth on Schedule
      15.5,
      it
      employed no broker or agent in connection with this transaction, and agrees
      to
      indemnify the other parties hereto against all loss, cost, damages or expense
      arising out of claims for fees or commission of brokers employed or alleged
      to
      have been employed by such indemnifying party.

     

    15.6 Expenses;
      Taxes.
      Whether
      or not the transactions herein contemplated shall be consummated (except as
      otherwise provided in Section
      12.2),
      (a)
      each of Buckeye and the Acquisition Sub will pay their respective fees, expenses
      and disbursements (including without limitation attorneys’ fees) incurred in
      connection with the subject matter of this Agreement, including all costs and
      expenses incurred in the performance and compliance with all conditions to
      be
      performed by such corporation under this Agreement and (b) the Stockholders
      will
      pay the fees, expenses and disbursements (including without limitation
      attorneys’ fees) incurred by any of them or the Company in connection with the
      subject matter of this Agreement, including all costs and expenses incurred
      in
      the performance and compliance with all conditions to be performed by the
      Stockholders and the Company under this Agreement (i.e.,
      the
      Company will not bear any fees, expenses or disbursements incurred by the
      Stockholders or the Company in connection with the subject matter of this
      Agreement) ; provided, however, that if the Company has already paid, or Buckeye
      permits the Surviving Corporation to pay, any such fees, expenses or
      disbursements required to be paid by the Stockholders pursuant to this Section,
      the obligation of the Stockholders to reimburse the Company may be recorded
      as,
      and shall be, a receivable evidencing a joint and several obligation of the
      Stockholders to be paid upon demand of Buckeye or Surviving Corporation or,
      at
      the election of Buckeye, offset or deducted against any amounts owed to any
      of
      the Stockholders. The Stockholders shall pay all sales, use, transfer, real
      property transfer, recording, gains, stock transfer and other similar taxes
      and
      fees (“Transfer Taxes”) imposed in connection with the Merger. Each Stockholder
      shall file, or cause to be filed, all necessary documentation and Returns with
      respect to such Transfer Taxes. In addition, each Stockholder acknowledges
      that
      he, and not the Company, Buckeye or the Acquisition Sub, will pay all taxes
      due
      upon receipt of the consideration payable pursuant to Section
      2.4,
      and
      will assume all tax risks and liabilities in connection with the transactions
      contemplated hereby.

     

    15.7 Notices.
      All
      notices required or permitted hereunder shall be in writing and shall be deemed
      to have been duly given (a) as of the date delivered if delivered personally,
      by
      courier or by courier service, (b) on the date of telephone or electronic
      confirmation of receipt if sent by telex, telecopier, facsimile or other
      electronic transmission, or (c) three business days after deposit in the United
      States mail, registered or certified mail, postage prepaid, return receipt
      requested, to the parties at the following addresses:

     

    
      
         

      

      
        -38-

        
          

        

      

      
         

      

    

    (a) If
      to
      Buckeye, the Acquisition Sub or the Surviving Corporation, addressed as
      follows:

     

    Buckeye
      Ventures, Inc.

    4455
      Lamont Street, Suite 3

    San
      Diego, CA 92109

    Telecopier
      No.: (858) 272-3880 

    Confirm
      No.: (858) 272-6600

    Attn: President

     

    (b) If
      to the
      Company, addressed as follows prior to the Merger and addressed to the address
      set forth for Buckeye after the Merger:

     

    Energy
      King, Inc.

    1717
      Kathleen Ave., Suite A

    Sacramento,
      CA 95815

    Telecopier
      No.: (916) 925-7433

    Confirm
      No.: (916) 925-7611

    Attn: President

     

    (c) If
      to any
      Stockholder, addressed to him at the address set forth in Schedule
      15.7,

     

    or
      to
      such other address or number as any party hereto shall specify for itself by
      notice given pursuant to this Section
      15.7
      from
      time to time; provided,
      however,
      that
      notices of any change in an address or number shall not be effective until
      receipt.

     

    15.8 GOVERNING
      LAW.
      THIS
      AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
      LAWS (AND NOT THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF
      DELAWARE.

     

    15.9 VENUE.
      EACH OF
      THE PARTIES HERETO AGREES THAT ANY DISPUTE ARISING OUT OF, UNDER OR IN
      CONNECTION WITH THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING
      STATEMENTS OR ACTIONS RELATING TO THIS AGREEMENT THAT IS NOT SUBJECT ARBITRATION
      AS PROVIDED IN ARTICLE 14 OF THIS AGREEMENT SHALL BE LITIGATED ONLY IN THE
      FEDERAL OR STATE COURTS LOCATED IN SACRAMENTO COUNTY, CALIFORNIA (AND IN THE
      CASE OF APPEALS IN THE COURTS IN WHICH APPEALS FROM SUCH COURTS ARE TO BE
      HEARD). EACH OF THE PARTIES HERETO IRREVOCABLY SUBMITS TO THE PERSONAL
      JURISDICTION OF SUCH COURTS, AND WAIVES ANY OBJECTION THEY MAY HAVE CONCERNING
      THE VENUE OR CONVENIENCE OF SUCH FORUM. NOTWITHSTANDING THE FOREGOING, HOWEVER,
      ANY PARTY MAY COMMENCE ANY ACTION OR PROCEEDING TO ENFORCE ANY JUDGMENT OBTAINED
      AGAINST ANOTHER PARTY IN COMPLIANCE WITH THE FOREGOING PROVISIONS IN ANY
      APPROPRIATE JURISDICTION OR COURT.

     

    
      
         

      

      
        -39-

        
          

        

      

      
         

      

    

    15.10 Interpretation.
      The
      representations, warranties, covenants and agreements of the parties made herein
      and at the time of the Closing or in writing delivered pursuant to the
      provisions of this Agreement shall survive the consummation of the transactions
      contemplated hereby until the applicable Expiration Date. Consummation of the
      transactions contemplated herein shall not be deemed a waiver of a breach of
      or
      inaccuracy in any representation, warranty, covenant or agreement or of any
      party’s rights and remedies with regard thereto. No specific representation,
      warranty, covenant or agreement contained herein shall limit the applicability
      of a more general representation, warranty, covenant or agreement contained
      herein. A breach of or inaccuracy in any representation, warranty, covenant
      or
      agreement shall not be affected by the fact that any more general or less
      general representation, warranty, covenant or agreement was not also breached
      or
      inaccurate. In any case where the concept of materiality is applied more than
      once to qualify any provision of this Agreement (whether by cross-referencing
      or
      incorporation or otherwise), such provision shall be interpreted as if only
      one
      such materiality qualification applied to it.

     

    15.11 Exercise
      of Rights and Remedies.
      Except
      as otherwise provided herein, no delay of or omission in the exercise of any
      right, power or remedy accruing to any party as a result of any breach or
      default by any other party under this Agreement shall impair any such right,
      power or remedy, nor shall it be construed as a waiver of or acquiescence in
      any
      such breach or default, or of any similar breach or default occurring later;
      nor
      shall any waiver of any single breach or default be deemed a waiver of any
      other
      breach or default occurring before or after that waiver.

     

    15.12 Reformation
      and Severability.
      In case
      any provision of this Agreement shall be invalid, illegal or unenforceable,
      it
      shall, to the extent possible, be modified in such manner as to be valid, legal
      and enforceable but so as to most nearly retain the intent of the parties,
      and
      if such modification is not possible, such provision shall be severed from
      this
      Agreement, and in either case the validity, legality and enforceability of
      the
      remaining provisions of this Agreement shall not in any way be affected or
      impaired thereby.

     

    15.13 Remedies
      Cumulative.
      No
      right, remedy or election given by any term of this Agreement shall be deemed
      exclusive but each shall be cumulative with all other rights, remedies and
      elections available at law or in equity.

     

    15.14 Effect
      of Investigation.
      Any due
      diligence review, audit or other investigation or inquiry undertaken or
      performed by or on behalf of any of the parties hereto shall not limit, qualify,
      modify or amend the representations, warranties or covenants or agreements
      of,
      or indemnities by, made or undertaken pursuant to this Agreement, irrespective
      of the knowledge and information received (or which should have been received)
      therefrom by such party.

     

    15.15 Captions.
      The
      headings of this Agreement are inserted for convenience only, shall not
      constitute a part of this Agreement or be used to construe or interpret any
      provision hereof.

     

    15.16 Amendments
      and Waivers.
      Except
      as expressly provided in this Agreement, this Agreement may be amended, modified
      or supplemented but only in writing signed by each of the parties hereto. Any
      term of this Agreement may be waived only with the written consent of the party
      sought to be bound.

     

    15.17 No
      Third Party Beneficiaries.
      Except
      as provided in Section
      15.2,
      this
      Agreement is solely for the benefit of the parties hereto and no provision
      of
      this Agreement shall be deemed to confer upon any third parties any remedy,
      claim, liability, reimbursement, cause of action or other right.

     

    
      
         

      

      
        -40-

        
          

        

      

      
         

      

    

    15.18 Stockholders’
      Representative.
      Each
      Stockholder constitutes and appoints Varin Larson, with full power of
      substitution, as its true and lawful agent, attorney-in-fact and representative
      (the “Stockholders’ Representative”), with full power and authority in his or
      her name, place and stead to take any and all actions on behalf of such
      Stockholder, including without limitation to amend this Agreement, to act on
      his
      or her behalf and to execute and deliver all notices and other instruments
      which
      may be provided under this Agreement or in connection with the transactions
      contemplated by this Agreement and otherwise act as the Stockholders’
Representative as required under this Agreement. Varin Larson hereby accepts
      such appointment as the Stockholders’ Representative. Each Stockholder agrees to
      be bound by any and all actions taken by the Stockholders’ Representative. Any
      action by the Stockholders’ Representative shall be deemed to be authorized and
      approved by the Stockholders and neither Buckeye, the Acquisition Sub, the
      Surviving Corporation, the Company nor any other person shall be required to
      inquire as to whether any such action has been approved by the Stockholders
      or
      to deal with any of the Stockholders (except as expressly provided herein).
      The
      foregoing power of attorney is hereby declared to be irrevocable and a power
      coupled with an interest, in recognition of the fact that each Stockholder,
      Buckeye, the Acquisition Sub, the Surviving Corporation and the Company will
      be
      relying upon the power of such Stockholders’ Representative to act as
      contemplated by this Section
      15.18,
      and it
      shall survive and not be affected by the subsequent incapacity of any
      Stockholder or the Merger or any other transactions contemplated hereby or
      the
      transfer of all or any portion of any Stockholder’s Buckeye Stock and shall
      extend to each Stockholder’s heirs, successors, assigns and personal
      representatives. In the case of the resignation, death or inability of the
      Stockholders’ Representative to serve as such, a successor Stockholders’
Representative shall be designated by the Stockholders. Any such designation
      shall be evidenced by a writing signed by the Stockholders and shall take effect
      when an executed copy thereof has been delivered to Buckeye, the Acquisition
      Sub
      and the Company on or prior to the Merger, or to Buckeye and the Surviving
      Corporation after the Merger, together with an acceptance by such
      successor.

     

    
      
         

      

      
        -41-

        
          

        

      

      
         

      

    

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

     

    

    
      	
              BUCKEYE
                VENTURES, INC.

               

               

               

              By:_____________________________________

                   
                Alan J. Mintz

                   
                President

               

            	
              EK
                ACQUISITION CORP.

               

               

               

              By:_____________________________________

                   
                Alan J. Mintz

                    President

               

            
	 
	
              ENERGY
                KING, INC.

               

               

               

              By:_____________________________________

                   
                Varin Larson

                   
                President

               

            	
              THE
                STOCKHOLDERS:

               

               

              _____________________________________

              Alan
                Hardwick

               

               

              _____________________________________

              Varin
                Larson

               

               

              _____________________________________

              Deanna
                Larson

               

            

    

    

     

    -42-Exhibit 10.1

                     SECURITY, PLEDGE AND GUARANTY AGREEMENT

     SECURITY,  PLEDGE AND GUARANTY  AGREEMENT (this  "Agreement"),  dated as of
January 19, 2007 by and among PHS Group Inc., a  Pennsylvania  corporation  (the
"Borrower"), and Synergy Brands Inc., (the "Parent Company"), and SYBR.Com Inc.,
a New Jersey  corporation,  Gran  Reserve  Corporation,  a Florida  corporation,
Dealbynet.com Inc., a New York corporation,  Quality Food Brands, Inc., a Nevada
corporation,  NYCE North America Inc., a New Jersey  corporation,  Net Cigar.Com
Inc.,  a  Florida  corporation,  (each  of  the  foregoing  a  "Subsidiary"  and
collectively  referred to herein as the "Subsidiaries") and Lloyd I. Miller, III
and  Milfam  I L.P.  (collectively  referred  to  herein  as the  "Purchasers").
Together the Borrower,  the Parent Company and the  Subsidiaries are referred to
herein as the  "Debtors".  Certain  defined  terms are set forth in  Article  10
hereof.

                                    Recitals

     WHEREAS, the Borrower, the Parent Company and the Purchasers are parties to
a Securities  Purchase  Agreement  dated as of the date hereof (the  "Securities
Purchase Agreement"); and

     WHEREAS,  as a condition to the  Purchasers'  obligation  to enter into the
Securities  Purchase  Agreement and to extend credit to the Borrower  thereunder
that the  Debtors  execute  and  deliver  this  Security,  Pledge  and  Guaranty
Agreement as security for the payment and  performance of all obligations of the
Borrower  and  Parent  Company to the  Purchasers  and to  guarantee  all of the
obligations  of the Borrower and Parent  Company under the  Securities  Purchase
Agreement:

     NOW,  THEREFORE,  in consideration of the premises contained herein and for
other good and valuable consideration,  the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

                                   ARTICLE 1.

                                GRANT OF SECURITY

     Section 1.1 Grant of Security. The Debtors hereby grant to the Purchasers a
lien and continuing  security  interest  ("Security  Interest") in and to, and a
right of set-off against, all of the following personal property and fixtures of
the  Debtors,  whether  now owned by or owing to, or  hereafter  acquired  by or
arising in favor of, such Debtor  (including  under any trade  names,  styles or
derivations thereof), and whether owned or consigned by or to, or leased from or
to, such Debtor, and regardless of where located (all of which being hereinafter
collectively referred to as the "Collateral"):

     (a) all Accounts;

     (b) all Chattel Paper;

     (c) all documents;

<PAGE>

     (d) all General Intangibles (including Marks, Copyrights,  Patents, payment
intangibles, Proprietary Information and Trade Secrets);

     (e) all Goods (including Inventory, Equipment and Fixtures);

     (f) all Instruments;

     (g) all Investment Property,  including (i) all shares of the capital stock
or membership interests of each subsidiary owned or held by each Debtor, whether
now owned or hereafter formed or acquired (those shares and membership interests
being listed and described on Schedule A attached hereto), and all substitutions
and  additions  to such shares  (herein,  the  "Pledged  Securities"),  (ii) all
dividends,  distributions,  and sums  distributable  or payable from, upon or in
respect of the Pledged  Securities,  and (iii) all  other rights and  privileges
incident to the  Pledged  Securities  (all of the  foregoing  being  hereinafter
referred to collectively as the "Stock Collateral");

     (h) all Deposit  Accounts of such Debtor,  including all blocked  accounts,
concentration  accounts,  disbursement accounts, and all other bank accounts and
all deposits therein;

     (i) all money, cash or cash equivalents of such Debtor;

     (j) all Supporting Obligations and Letter-of-Credit Rights of such Debtor;

     (k) the commercial tort claims identified on Schedule B hereto; and

     (l) to the  extent not  otherwise  included,  all  Proceeds,  tort  claims,
insurance  claims and other  rights to payments  not  otherwise  included in the
foregoing and products of the foregoing and all accessions to, substitutions and
replacements  for, and rents and profits of, each of the foregoing and all other
tangible and intangible personal property whatsoever of any Debtor including all
cash, products,  offspring, rents, revenues, issues, profits, royalties, income,
benefits,  accessions,  additions,  substitutions and replacements of and to any
and all of the  foregoing,  including all Proceeds of and to any of the property
of any of the Debtors described in the preceding  paragraphs of this Section 1.1
(including, without limitation, any loss proceeds or other Proceeds of insurance
thereon (whether or not any Purchaser is loss payee thereof), and any indemnity,
warranty or  guarantee,  payable by any reason of loss or damage to or otherwise
with  respect to any of the  foregoing,  and all  causes of  action,  claims and
warranties  now or  hereafter  held by any Debtor in respect of any of the items
listed above).

     Notwithstanding  the  foregoing,  a security  interest in the assets of the
Borrower is not granted  under this  Agreement  if and to the extent that such a
grant of a security interest is prohibited by the terms of that certain Loan and
Security Agreement,  entered into as of November 11, 2002 (as amended,  the "IIG
Loan and Security  Agreement")  by and between the Borrower and IIG Capital LLC;
provided,  however, that from and after the date upon which all obligations owed
by the Borrower to IIG Capital LLC under the IIG Loan and Security Agreement are
paid in full  the  exclusion  of a grant  under  this  Agreement  of a  security

                                       2

<PAGE>

interest  in the  assets  of the  Borrower,  that is  called  for  above,  shall
immediately  cease to have any force and effect and the assets of Borrower shall
immediately be subject to the grant of a security interest under this Agreement,
without any action being  required on the part of any party to this Agreement or
any other person or entity.  Additionally, a security interest in 288,000 shares
(the  "Interline  Shares") of common stock of Interline  Travel & Tour,  Inc., a
Texas corporation, owned by SYBR.com Inc. is not granted under this Agreement if
and to the extent that such a grant of a security  interest is prohibited by the
terms of certain outstanding  promissory notes (the "Interline Notes") issued by
the Borrower to Lawrence K.  Fleischman,  Edmond  O'Donnell,  and DBMK Partners,
Ltd. (collectively,  the "Interline Holders");  provided, however, that from and
after the date upon which all obligations  owed by the Borrower to the Interline
Holders  under the  Interline  Notes are paid in full the  exclusion  of a grant
under this  Agreement of a security  interest in the Interline  Shares,  that is
called for above,  shall  immediately cease to have any force and effect and the
Interline  Shares  shall  immediately  be  subject  to the  grant of a  security
interest under this Agreement,  without any action being required on the part of
any party to this Agreement or any other person or entity.

     Section 1.2  Security  for  Obligations.  This  Agreement  and the Security
Interest shall secure the payment and performance of the Obligations.

                                   ARTICLE 2.

                GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS

     Each Debtor  represents,  warrants and  covenants,  which  representations,
warranties and covenants shall survive execution and delivery of this Agreement,
as follows:

     Section 2.1  Necessary  Filings.  All  financing  statements  necessary  or
appropriate  to perfect  the  security  interest  granted by each  Debtor to the
Purchasers  hereby in respect of the  Collateral,  which can be perfected by the
filing of a  financing  statement,  have been  filed and the  Security  Interest
granted to the Purchasers  pursuant to this Agreement in and to such  Collateral
constitutes a perfected  Security  Interest therein (to the extent that the same
can be perfected by filing) prior to the rights of all other persons or entities
therein (other than any such rights pursuant to the Permitted Liens) and subject
to no other  Liens  (other  than  Permitted  Liens) and is  entitled  to all the
rights,  priorities and benefits afforded by the Uniform  Commercial Code of the
State of New York to perfected security interests.

     Section 2.2 No Liens.  Each Debtor is, and as to Collateral  acquired by it
from time to time after the date  hereof  such  Debtor will be, the owner of all
Collateral  pledged  by it  hereunder  free  from any Lien,  security  interest,
encumbrance  or other  right,  title or interest of any person or entity  (other
than Permitted Liens),  and each Debtor shall defend the Collateral  against all
claims and demands of all persons or entities at any time  claiming  the same or
any interest  therein (other than in connection with Permitted Liens) adverse to
the Purchasers.

     Section  2.3 Other  Financing  Statements.  To the best  knowledge  of each
Debtor,  as of the date  hereof,  there is no  financing  statement  covering or
purporting to cover any interest of any kind in the  Collateral  (other than (i)
the  financing  statements  filed in  respect  of  Permitted  Liens and (ii) the

                                       3

<PAGE>

financing  statements  identified  in  Schedule C hereof  for which  termination
statements  will be  filed  prior  to the  date  hereof  or on the  date of this
Agreement),  and so long as any  Obligations  are  outstanding,  no Debtor  will
execute or authorize to be filed in any public  office any  financing  statement
(or  similar  statement  or  instrument  of  registration  under  the law of any
jurisdiction)  or  statements  relating  to  the  Collateral,  except  financing
statements  filed  or to be  filed  in  respect  of and  covering  the  security
interests granted hereby by such Debtor or in connection with Permitted Liens.

     Section 2.4 Chief Executive Office; Records.

     (a) As of the date  hereof,  the chief  executive  office of each Debtor is
located at the address indicated on Schedule D hereto for such Debtor. No Debtor
will move its chief executive  office except to such new location as such Debtor
may  establish  in  accordance  with the last  sentence of this  Section  2.4. A
complete  set of books of account  and  records of each  Debtor  relating to the
Accounts, Chattel Paper and Documents are, and will continue to be, kept at such
chief executive  office,  at one or more of the other record locations set forth
on Schedule D hereto for such Debtor or at such new locations as such Debtor may
establish in accordance with the last sentence of this Section 2.4.

     (b) All Accounts,  Chattel Paper and Documents of each Debtor are, and will
continue to be, maintained at, and controlled and directed  (including,  without
limitation,   for  general  accounting  purposes)  from,  the  office  locations
described  above or such new location  established  in accordance  with the last
sentence of this Section 2.4. No Debtor shall  establish  new locations for such
offices until (a) it shall have given to the  Purchasers  not less than 30 days'
prior written  notice of its  intention to do so,  clearly  describing  such new
location and providing  such other  information  in connection  therewith as the
Purchasers may reasonably request and (b) with respect to such new location,  it
shall  have taken all  action  reasonably  satisfactory  to the  Purchasers,  to
maintain the security  interest of the Purchasers in the Collateral  intended to
be granted hereby at all times fully perfected and in full force and effect.

     Section 2.5 Location of Inventory and Equipment. As of the date hereof, all
Inventory and  Equipment  held by each Debtor is located at one of the locations
shown on Schedule E hereto.  Each Debtor agrees that all Inventory and Equipment
now  held or  subsequently  acquired  by it  shall  be kept at (or  shall  be in
transport to) any one of the locations  shown on Schedule E hereto,  or such new
location as such Debtor may  establish in  accordance  with the last sentence of
this Section 2.5.  Each Debtor may  establish a new location for  Inventory  and
Equipment in a  jurisdiction  in which such Debtor  currently  does business and
with respect to which the Purchasers have a first perfected security interest in
such  Inventory  and  Equipment  (subject to Permitted  Liens).  Each Debtor may
establish a new location  outside of a  jurisdiction  in which it currently does
business  and  with  respect  to which  the  Purchasers  have a first  perfected
security  interest in such  Inventory  and  Equipment  only if (a) it shall have
given to the  Purchasers  not less  than 30 days'  prior  written  notice of its
intention so to do,  clearly  describing  such new location and  providing  such
other  information  in connection  therewith as the  Purchasers  may  reasonably
request  and (b) with  respect  to such new  location,  it shall  have taken all
action  reasonably  satisfactory  to the  Purchasers  to maintain  the  security
interest of the  Purchasers in the  Collateral  intended to be granted hereby at
all times fully perfected and in full force and effect.

                                       4

<PAGE>

     Section 2.6  Recourse.  This  Agreement is made with full  recourse to each
Debtor and pursuant to and upon all the warranties,  representations,  covenants
and agreements on the part of each Debtor  contained  herein,  in the Securities
Purchase Agreement and otherwise in writing in connection herewith or therewith.

     Section  2.7  Trade  Names;  Change  of Name.  Each  Debtor's  legal  name,
jurisdiction of organization  and  organizational  number (if any) are correctly
set forth on Schedule F of this Agreement.  No Debtor has transacted business at
any  time  during  the  immediately  preceding  five-year  period,  and does not
currently  transact  business,  under any other legal names or trade names other
than the prior  legal  names and trade  names (if any) set forth on  Schedule  F
attached hereto. No Debtor shall change its jurisdiction of organization without
the Purchasers' prior written consent.  No Debtor shall change its legal name or
transact business under any other trade name without first giving 30 days' prior
written  notice of its intent to do so to the  Purchasers.  With respect to such
new name or  jurisdiction  of  organization,  such  Debtor  shall have taken all
action reasonably requested by the Purchasers, to maintain the Security Interest
at all times fully perfected and in full force and effect.

                                   ARTICLE 3.

                          SPECIAL PROVISIONS CONCERNING
                              ACCOUNTS; INSTRUMENTS

     Section 3.1 Additional  Representations and Warranties. As of the time when
each of its Accounts arises, each Debtor shall be deemed to have represented and
warranted  that such Account,  and all records,  papers and  documents  relating
thereto  are what they  purport to be in all  material  respects,  and that such
Account  will,  to the best  knowledge of each Debtor,  evidence  true and valid
obligations of the account debtor named therein.

     Section 3.2  Maintenance of Records.  Each Debtor will keep and maintain at
its own cost and expense,  records of its Accounts and each Debtor will make the
same available on such Debtor's  premises to the Purchasers for  inspection,  at
such Debtor's own cost and expense, at any and all commercially reasonable times
upon  commercially  reasonable prior notice to such Debtor.  Upon the occurrence
and  during  the  continuance  of an Event of  Default  and at the  commercially
reasonable  request of the  Purchasers,  each Debtor shall,  at its own cost and
expense,  deliver all  tangible  evidence of its  Accounts,  including,  without
limitation,  all documents evidencing the Accounts and such books and records to
the Purchasers or to its representatives (copies of which evidence and books and
records may be retained by each Debtor).  If the Purchasers so direct,  upon the
occurrence and during the continuance of an Event of Default,  each Debtor shall
legend, in form and manner satisfactory to the Purchasers, the Accounts, as well
as books,  records and documents of such Debtor evidencing or pertaining to such
Receivables  and Contracts with an  appropriate  reference to the fact that such
Receivables  and  Contracts  have been assigned to the  Purchasers  and that the
Purchasers have a security interest therein.

     Section 3.3 Direction to Account Debtors;  Contracting  Parties;  Etc. Upon
the  occurrence and during the  continuance  of an Event of Default,  and if the
Purchasers  so direct each Debtor,  each Debtor agrees (a) to cause all payments
on account of the Accounts,  Deposit Accounts or General  Intangibles to be made

                                       5

<PAGE>

directly to the Cash Collateral  Account,  (b) that the Purchasers may, at their
option,  directly  notify the  obligors  with respect to any  Accounts,  Deposit
Accounts  or  General  Intangibles  to make  payments  with  respect  thereto as
provided  in  preceding  clause  (a) and (c) that  the  Purchasers  may  enforce
collection of any such Accounts, Deposit Accounts or General Intangibles and may
adjust,  settle or compromise the amount of payment thereof,  in the same manner
and to the same  extent  as such  Debtor.  Without  notice  to or assent by each
Debtor,  the  Purchasers  may apply any or all  amounts  then in, or  thereafter
deposited in, the Cash Collateral Account which application shall be effected in
the  manner  provided  in this  Agreement.  The  reasonable  costs and  expenses
(including reasonable  attorneys' fees) of collection,  whether incurred by such
Debtor or the Purchasers,  shall be borne by such Debtor.  The Purchasers  shall
deliver a copy of each notice  referred to in the  preceding  clause (b) to such
Debtor; provided,  however, that the failure by the Purchasers to so notify such
Debtor shall not affect the  effectiveness of such notice or the other rights of
the Purchasers created by this Section 3.3.

     Section 3.4  Modification of Terms;  etc. No Debtor shall rescind or cancel
any  indebtedness  evidenced by any Account,  or modify any term thereof or make
any adjustment with respect thereto,  or extend or renew the same, or compromise
or  settle  any  material  dispute,  claim,  suit or legal  proceeding  relating
thereto,  or sell any Account,  or interest  therein,  without the prior written
consent of the Purchasers,  except in accordance with such Debtor's commercially
reasonable business practices.

     Section 3.5  Collection.  Each Debtor  shall  endeavor in  accordance  with
commercially  reasonable  business  practices to cause to be collected  from the
account  debtor  named in each of its  Accounts,  as and  when  due  (including,
without limitation,  amounts which are delinquent,  such amounts to be collected
in accordance with generally accepted lawful collection  procedures) any and all
amounts  owing under or on account of such  Accounts  and apply  forthwith  upon
receipt thereof all such amounts as are so collected to the outstanding  balance
of  such  Account.  The  reasonable  costs  and  expenses  (including,   without
limitation,  attorneys'  fees) of collection,  if incurred by each Debtor or the
Purchasers, shall be borne by such Debtor.

     Section  3.6  Instruments.  If a Debtor  owns or  acquires  any  Instrument
constituting  Collateral,  at Purchasers' request upon the occurrence and during
the continuation of an Event of Default,  such Debtor will promptly deliver such
Instrument  to  the  Purchasers  appropriately  endorsed  to  the  order  of the
Purchasers as further  security  hereunder.  At the  Purchasers'  request,  such
Debtor that owns or acquires any other Instrument  constituting Collateral will,
within  five  (5)  business  days,  promptly  deliver  such  Instrument  to  the
Purchasers  appropriately  endorsed  to the order of the  Purchasers  as further
security hereunder.

                                   ARTICLE 4.

                       SPECIAL PROVISIONS CONCERNING MARKS

     Section  4.1  Additional   Representations  and  Warranties.   Each  Debtor
represents and warrants  that, as of the date hereof,  it is the true and lawful
owner of all right,  title and interest to or otherwise has the right to use the

                                       6

<PAGE>

registered  Marks  listed in  Schedule G hereto and that,  as of the date hereof
said listed Marks constitute all the marks and applications for marks registered
in the United States Patent and Trademark Office that such Debtor presently owns
or uses in connection  with its business.  Each Debtor  represents  and warrants
that it owns,  is licensed to use or otherwise has the right to use all material
Marks that it uses. Each Debtor further warrants that it has no knowledge of any
third  party  claim that any  aspect of such  Debtor's  present or  contemplated
business  operations  infringes or will infringe any trademark,  service mark or
trade name in any respect which could  reasonably be expected to have a material
adverse effect on the business,  operations,  property,  assets,  liabilities or
condition  (financial or otherwise) of such Debtor.  Each Debtor  represents and
warrants  that  except as listed on  Schedule G, as of the date hereof it is the
beneficial  and record owner of all  trademark  registrations  and  applications
listed  in  Schedule  G  hereto  and  that  said  registrations  are  valid  and
subsisting,  and that no Debtor is aware of any  third-party  claim  that any of
said  registrations in respect of any material Mark is invalid or unenforceable.
Each Debtor  hereby grants to the  Purchasers  an absolute  power of attorney to
sign, upon the occurrence and during the continuance of an Event of Default, any
document which may be required by the United States Patent and Trademark  Office
in order to effect an absolute  assignment  of all right,  title and interest in
each Mark, and record the same.

     Section 4.2  Infringements.  Each Debtor  agrees,  promptly  upon  learning
thereof,  to notify the Purchasers in writing of the name and address of, and to
furnish such  pertinent  information  that may be available with respect to, any
party who such Debtor believes is infringing or diluting or otherwise  violating
in any material respect any of such Debtor's rights in and to any material Mark,
or with  respect to any party  claiming  that such  Debtor's use of any material
Mark  violates in any material  respect any property  right of that party.  Each
Debtor  further  agrees to prosecute any Person  infringing any material Mark in
accordance with commercially reasonable business practices.

     Section 4.3  Preservation of Marks.  Each Debtor agrees to use its Marks as
required in each of the applicable  jurisdictions  during the time in which this
Agreement  is  in  effect,   sufficiently   to  preserve  such  Marks  (and  any
registrations  thereto)  as  trademarks  or service  marks under the laws of the
United  States  and any  other  applicable  law;  provided,  that,  prior to any
Default,  no Debtor  shall be  obligated  to preserve any Mark in the event such
Debtor determines,  in its commercially  reasonable business judgment,  that the
preservation of such Mark is no longer desirable in the conduct of its business.

     Section 4.4  Maintenance  of  Registration.  Each Debtor shall,  at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C.  Section 1051 et seq. to maintain trademark  registrations,  including
but  not  limited  to  affidavits  of  use  and  applications  for  renewals  of
registration  in the United States  Patent and  Trademark  Office for all of its
registered Marks pursuant to 15 U.S.C. Section 1058(a), 1059 and 1065, and shall
pay all fees and disbursements in connection therewith and shall not abandon any
such filing of affidavit of use or any such  application of renewal prior to the
exhaustion of all  administrative  and judicial  remedies  without prior written
consent of the Purchasers; provided, that, prior to any Default, no Debtor shall
be obligated to maintain any Mark in the event that such Debtor  determines,  in
its commercially reasonable business judgment, that the maintenance of such Mark
is no longer necessary or desirable in the conduct of its business.

                                       7

<PAGE>

     Section  4.5  Future  Registered  Marks.  If any Mark  registration  issues
hereafter to a Debtor as a result of any  application  now or hereafter  pending
before the United States Patent and Trademark Office,  within 60 days of receipt
of such certificate,  such Debtor shall deliver to the Purchasers a copy of such
certificate,  and an assignment for security in such Mark, to the Purchasers and
at the expense of such Debtor,  confirming  the  assignment for security in such
Mark to the Purchasers hereunder, in such form as may be reasonably satisfactory
to the Purchasers.

     Section 4.6 Remedies. If an Event of Default shall occur and be continuing,
the  Purchasers  may take any or all of the following  actions:  (a) declare the
entire  right,  title and  interest  of such Debtor in and to each of the Marks,
together with all trademark rights and rights of protection to the same,  vested
in the Purchasers for the benefit of the Purchasers,  in which event the rights,
title and interest shall  immediately vest, in the Purchasers for the benefit of
the  Purchasers,  and the Purchasers  shall be entitled to exercise the power of
attorney referred to in Section 4.1 hereof to execute,  cause to be acknowledged
and notarized and record said absolute  assignment  with the applicable  agency;
(b) take and use or sell the Marks and the  goodwill of such  Debtor's  business
symbolized  by the  Marks  and the  right to carry on the  business  and use the
assets of such Debtor in connection with which the Marks have been used; and (c)
direct such Debtor to refrain,  in which event such Debtor shall  refrain,  from
using the Marks in any  manner  whatsoever,  directly  or  indirectly,  and,  if
requested by the  Purchasers,  change such Debtor's  corporate name to eliminate
therefrom any use of any Mark and execute such other and further  documents that
the Purchasers may request to further confirm this and to transfer  ownership of
the Marks and registrations and any pending trademark  application in the United
States Patent and Trademark Office to the Purchasers.

     Section 4.7  Collateral  Assignment.  This Agreement is made for collateral
security purposes only. This Agreement and Purchasers'  Security Interest in the
Marks shall continue in full force and effect as long as any  Obligations  shall
be owed to the Purchasers (or any of said  Purchasers).  Upon payment in full of
the  Obligations  and  termination of the Securities  Purchase  Agreement,  this
Agreement shall terminate and Purchasers  shall promptly  execute and deliver to
each Debtor,  at such Debtor's  expense,  all  termination  statements and other
instruments  as may be  necessary or proper to  terminate  Purchasers'  security
interest in the Marks,  subject to any  disposition  thereof which may have been
made  by  Purchasers  pursuant  to this  Agreement  or the  Securities  Purchase
Agreement.

                                   ARTICLE 5.

                          SPECIAL PROVISIONS CONCERNING
                      PATENTS, COPYRIGHTS AND TRADE SECRETS

     Section  5.1  Additional   Representations  and  Warranties.   Each  Debtor
represents and warrants  that, as of the date hereof,  it is the true and lawful
owner  of  all  rights  in  (a)  all  material  Trade  Secrets  and  Proprietary
Information  necessary to operate the  business of such Debtor,  (b) the Patents
listed in Schedule H hereto for the Debtor and that said Patents  constitute all
the patents and applications for patents that the Debtor owns on the date hereof

                                       8

<PAGE>

and (c) the  Copyrights  listed in  Schedule I hereto  and that said  Copyrights
constitute  all  registrations  of  copyrights  and  applications  for copyright
registrations  that such Debtor  owns on the date  hereof.  Each Debtor  further
warrants  that it has no  knowledge  of any third party claim that any aspect of
such Debtor's  present or  contemplated  business  operations  infringes or will
infringe  any patent or any  copyright  or such Debtor has  misappropriated  any
Trade Secret or Proprietary Information, in each case in any respect which could
reasonably  be  expected  to have a  material  adverse  effect on the  business,
operations,  property, assets, liabilities or condition (financial or otherwise)
of such Debtor. Each Debtor hereby grants to the Purchasers an absolute power of
attorney to sign,  upon the occurrence and during the continuance of an Event of
Default,  any  document  which may be required by the United  States  Patent and
Trademark  Office or the United  States  Copyright  Office in order to effect an
absolute  assignment  of all  right,  title  and  interest  in each  Patent  and
Copyright, and to record the same.

     Section 5.2  Infringements.  Each Debtor  agrees,  promptly  upon  learning
thereof,  to furnish the  Purchasers in writing with all  pertinent  information
available  to  such  Debtor  with  respect  to  any  infringement,  contributing
infringement  or active  inducement  to  infringe  in any  material  respect any
material  Patent or  Copyright or to any claim that the practice of any material
Patent or the use of any material Copyright violates in any material respect any
property right of a third party, or with respect to any  misappropriation of any
material  Trade  Secret Right or any claim that  practice of any material  Trade
Secret  Right  violates in any material  respect any  property  right of a third
party.  Each Debtor further agrees,  to the extent  consistent with commercially
reasonable business practices,  to prosecute any Person infringing any Patent or
Copyright or any Person misappropriating any Trade Secret Right.

     Section 5.3 Maintenance of Patents.  At its own expense,  each Debtor shall
make timely  payment of all  post-issuance  fees required  pursuant to 35 U.S.C.
Section 41 to maintain in force rights under each Patent,  absent prior  written
consent  of the  Purchasers;  provided,  that no Debtor  shall be  obligated  to
maintain  any Patent in the event such Debtor  determines,  in its  commercially
reasonable  business judgment,  that the maintenance of such Patent is no longer
necessary or desirable in the conduct of its business.

     Section 5.4  Prosecution of Patent  Application.  At its own expense,  each
Debtor shall  diligently  prosecute all applications for Patents for such Debtor
and  shall  not  abandon  any  such  application  prior  to  exhaustion  of  all
administrative and judicial remedies,  absent written consent of the Purchasers;
provided,  that no Debtor shall be obligated to prosecute any application in the
event such Debtor determines,  in its commercially reasonable business judgment,
that the prosecuting of such  application is no longer necessary or desirable in
the conduct of its business.

     Section 5.5 Other Patents and Copyrights. Within 60 days of the acquisition
or  issuance of a Patent,  registration  of a  Copyright,  or  acquisition  of a
registered copyright, each Debtor shall deliver to the Purchasers a copy of said
Copyright or certificate or  registration  of said Patents,  as the case may be,
with an assignment for security as to such Patent or Copyright,  as the case may
be,  to the  Purchasers  and at the  expense  of  such  Debtor,  confirming  the
assignment for security,  in such form as may be reasonably  satisfactory to the
Purchasers.

                                       9

<PAGE>

     Section 5.6 Remedies. If an Event of Default shall occur and be continuing,
the  Purchasers  may take any or all of the following  actions:  (a) declare the
entire  right,  title,  and  interest  of such Debtor in each of the Patents and
Copyrights vested in the Purchasers for the benefit of the Purchasers,  in which
event such right,  title, and interest shall  immediately vest in the Purchasers
for the  benefit  of the  Purchasers,  in  which  case the  Purchasers  shall be
entitled to exercise the power of attorney  referred to in Section 5.1 hereof to
execute,  cause to be  acknowledged  and  notarized  and to record said absolute
assignment with the applicable agency; (b) take and practice or sell the Patents
and  Copyrights;  and (c) direct  such  Debtor to  refrain,  in which event such
Debtor  shall  refrain,  from  practicing  the Patents and using the  Copyrights
directly or  indirectly,  and such Debtor  shall  execute such other and further
documents as the Purchasers may request  further to confirm this and to transfer
ownership of the Patents and Copyrights to the Purchasers for the benefit of the
Purchasers.

                                   ARTICLE 6.

                 SPECIAL PROVISIONS CONCERNING STOCK COLLATERAL

     Section 6.1 Additional  Representations.  Each Debtor has the right to vote
the Pledged  Securities  and there are no  restrictions  upon the voting  rights
associated  with, or the transfer of, any of the Pledged  Securities,  except as
provided  by  federal  and  state  laws  applicable  to the  sale of  securities
generally  and the terms of this  Agreement.  The Pledged  Securities  have been
validly  issued  and,  except as  described  on  Schedule A,  are fully paid and
non-assessable.  Except as set  forth on  Schedule A,  there are no  outstanding
commitments or other obligations of the issuers of any of the Pledged Securities
to issue,  and no options,  warrants or other rights of any individual or entity
to acquire,  any share of any class or series of capital  stock of such issuers.
The  Pledged  Securities  listed and  described  on  Schedule A attached  hereto
constitute  the percentage of the issued and  outstanding  capital stock of each
series  and  class of the  issuers  thereof  as set forth  thereon  owned by the
relevant  Debtor.  Each Debtor  agrees  that in the event any such issuer  shall
issue  any  additional  capital  stock of any  series or class  (whether  or not
entitled  to vote) to such  Debtor or  otherwise  on  account  of its  ownership
interest therein,  such Debtor will forthwith pledge  hereunder,  or cause to be
pledged hereunder, all such additional shares of such capital stock.

     Section 6.2 Delivery of  Certificates.  The  certificates for all shares or
units of the Pledged Securities evidenced by a certificate shall be delivered by
the relevant  Debtor to the  Purchasers  duly  endorsed in blank for transfer or
accompanied  by an  appropriate  assignment  or  assignments  or an  appropriate
undated  stock  power or powers,  in every case  sufficient  to  transfer  title
thereto.  The  Purchasers  may, at any time after the  occurrence of an Event of
Default,  cause to be transferred  into its name or into the name of its nominee
or nominees any and all of the Pledged  Securities.  The Purchasers shall at all
times have the right to  exchange  the  certificates  representing  the  Pledged
Securities for certificates of smaller or larger denominations.

     Section 6.3  Remedies.  Unless and until an Event of Default  hereunder has
occurred and is  continuing  and  thereafter  until  notified by the  Purchasers
hereof:

                                       10

<PAGE>

     (a) Each Debtor shall be entitled to exercise all voting and/or  consensual
powers pertaining to the Collateral of such Debtor, or any part thereof, for all
purposes not inconsistent with the terms of this Agreement or any other document
evidencing or otherwise relating to any of the Obligations.

     (b) Each Debtor shall be entitled to receive and retain all  dividends  and
distributions  in respect of the Collateral which are paid in cash of whatsoever
nature;  such  dividends and  distributions  representing  stock or  liquidating
dividends  or a  distribution  or return of  capital  upon or in  respect of the
Pledged Securities or any part thereof or resulting from a split-up, revision or
reclassification  of the Pledged  Securities  or any part thereof or received in
addition to, in substitution of or in exchange for the Pledged Securities or any
part thereof as a result of a merger, consolidation or otherwise, shall be paid,
delivered or transferred, as appropriate, directly to the Purchasers immediately
upon the receipt thereof by such Debtor and may, in the case of cash, be applied
by the Purchasers to the Obligations, whether or not the same may then be due or
otherwise  adequately  secured  and  shall,  in the case of all other  property,
together  with any cash  received and not applied as  aforesaid,  be held in the
Cash Collateral  Account as part of the Collateral  pledged under and subject to
the terms of this Agreement.

     (c) In  order  to  permit  each  Debtor  to  exercise  such  voting  and/or
consensual  powers which it is entitled to exercise under  subsection (a)  above
and to receive such  distributions  which such Debtor is entitled to receive and
retain under subsection (b)  above, the Purchasers will, if necessary,  upon the
written  request of such  Debtor,  from time to time execute and deliver to such
Debtor appropriate proxies and dividend orders.

                                   ARTICLE 7.

                      PROVISIONS CONCERNING ALL COLLATERAL

     Section 7.1  Protection of  Purchasers'  Security.  Each Debtor will at all
times keep its Inventory and Equipment  insured in favor of the  Purchasers,  at
such  Debtor's  own  expense to the extent  and in the  manner  provided  in the
Securities Purchase Agreement. All policies or certificates with respect to such
insurance  (a) shall be  endorsed  to the  Purchasers'  commercially  reasonable
satisfaction for the benefit of the Purchasers  (including,  without limitation,
by naming the  Purchasers  as  additional  insured and loss payee) and (b) shall
state that such insurance  policies shall not be canceled without 30 days' prior
written notice thereof by the insurer to the Purchasers Certified copies of such
policies or  certificates  with  respect  thereto  shall be  deposited  with the
Purchasers.  If a Debtor  shall fail to insure its  Inventory  and  Equipment in
accordance  with the preceding  sentence,  or if Debtor shall fail to so endorse
and deposit all policies or certificates  with respect  thereto,  the Purchasers
shall  have the right  (but shall be under no  obligation),  upon prior  written
notice to such  Debtor,  to procure  such  insurance  and each Debtor  agrees to
promptly  reimburse  the  Purchasers  for all  reasonable  costs and expenses of
procuring such insurance. The Purchasers shall, at the time any proceeds of such
insurance are distributed to the  Purchasers,  apply such proceeds in accordance
with Section 9.4 hereof. Each Debtor assumes all liability and responsibility in
connection  with the Collateral  acquired by it and the liability of such Debtor
to pay the  Obligations  shall in no way be affected or  diminished by reason of
the fact that such Collateral may be lost, destroyed, stolen, damaged or for any
reason whatsoever unavailable to such Debtor.

                                       11

<PAGE>

     Section 7.2 Further  Actions.  Each Debtor will, at its own expense,  make,
execute, endorse,  acknowledge,  file and/or deliver to the Purchasers from time
to time such lists,  descriptions and designations of its Collateral,  warehouse
receipts,  receipts  in the  nature  of  warehouse  receipts,  bills of  lading,
documents of title, vouchers,  invoices,  schedules,  confirmatory  assignments,
conveyances,  transfer endorsements,  powers of attorney, certificates,  reports
and other  assurances or instruments and take such further steps relating to the
Collateral and other property or rights covered by the security  interest hereby
granted,  which the  Purchasers  deem  reasonably  appropriate  or  advisable to
perfect, preserve or protect its security interest in the Collateral.

     Section 7.3  Financing  Statements;  Etc. Each Debtor agrees to execute and
deliver to the Purchasers such further agreements, assignments, instruments, and
documents,  and to do all such other things,  as the  Purchasers  may reasonably
deem  necessary or  appropriate  to assure the  Purchasers its lien and Security
Interest hereunder, including, without limitation, (i) such financing statements
or other  instruments  and  documents  as the  Purchasers  may from time to time
reasonably  require to comply  with the  Uniform  Commercial  Code and any other
applicable  law,  (ii) such  agreements  with  respect to  patents,  trademarks,
copyrights,  and similar intellectual property rights as the Purchasers may from
time to time  reasonably  require to comply with the filing  requirements of the
United  States  Patent and  Trademark  Office and the  United  States  Copyright
Office,  and (iii) such  control  agreements  with respect to Deposit  Accounts,
Investment Property,  Letter-of-Credit Rights, and electronic Chattel Paper, and
to cause the relevant depository  institutions,  financial  intermediaries,  and
issuers to execute and deliver such control  agreements,  as the  Purchasers may
from time to time reasonably  require.  Each Debtor hereby agrees that a carbon,
photographic  or other  reproduction  of this  Agreement  or any such  financing
statement is sufficient  for filing as a financing  statement by the  Purchasers
without  notice  thereof to such Debtor  wherever the  Purchasers  in their sole
discretion desire to file the same. Each Debtor hereby authorizes the Purchasers
to file any and all  financing  statements  covering the  Collateral or any part
thereof as the Purchasers may require, including financing statements describing
the  Collateral  as "all  assets" or "all  personal  property"  or words of like
meaning.  In the event for any reason the law of any jurisdiction other than New
York becomes or is applicable to the  Collateral or any part thereof,  or to any
of the  Obligations,  each  Debtor  agrees  to  execute  and  deliver  all  such
agreements,  assignments,  instruments,  and  documents and to do all such other
things as the Purchasers  reasonably  deem necessary or appropriate to preserve,
protect,  and enforce the security  interest of the Purchasers  under the law of
such other jurisdiction.

                                   ARTICLE 8.

                                    GUARANTEE

     Section  8.1 The  Guarantee.  To induce  the  Purchasers  to enter into the
Securities  Purchase  Agreement  and in  consideration  of benefits  expected to
accrue to the  Borrower  and the  Parent  Company  by  reason of the  Securities
Purchase  Agreement  and for other good and valuable  consideration,  receipt of

                                       12

<PAGE>

which is hereby  acknowledged,  the Parent Company and the  Subsidiaries  hereby
unconditionally  and  irrevocably   guarantees  jointly  and  severally  to  the
Purchasers,  the due and punctual payment of all present and future Obligations,
in each case as and when the same  shall  become  due and  payable,  whether  at
stated maturity,  by acceleration,  or otherwise,  according to the terms hereof
and  thereof  (including  interest  which,  but for the filing of a petition  in
bankruptcy,  would otherwise  accrue on any such  indebtedness,  obligation,  or
liability).  In case of failure by the Borrower or other  obligor  punctually to
pay any Obligations  guaranteed  hereby, the Parent Company and the Subsidiaries
hereby  unconditionally  agrees to make such payment or to cause such payment to
be made punctually as and when the same shall become due and payable, whether at
stated maturity, by acceleration, or otherwise, and as if such payment were made
by the Borrower or such obligor.

     Section 8.2 Guarantee Unconditional.  The obligations of the Parent Company
and the Subsidiaries  under this Article 8 shall be  unconditional  and absolute
and,  without  limiting the generality of the foregoing,  shall not be released,
discharged, or otherwise affected by:

     (a) any extension, renewal, settlement,  compromise,  waiver, or release in
respect of any  obligation of the Borrower,  the Parent Company or other obligor
or of any other  guarantor  under  this  Agreement  or the  Securities  Purchase
Agreement or by operation of law or otherwise;

     (b) any modification or amendment of or supplement to this Agreement or the
Securities Purchase Agreement;

     (c) any change in the corporate existence,  structure,  or ownership of, or
any  insolvency,   bankruptcy,   reorganization,  or  other  similar  proceeding
affecting,  the  Borrower,  the  Parent  Company  or other  obligor,  any  other
guarantor,  or any of their  respective  assets,  or any  resulting  release  or
discharge of any obligation of the Borrower, the Parent Company or other obligor
or of any other guarantor contained in this Agreement or the Securities Purchase
Agreement;

     (d) the existence of any claim, set-off, or other rights which the Borrower
or other  obligor  or any  other  guarantor  may have at any  time  against  the
Purchasers  or any other person or entity,  whether or not arising in connection
herewith;

     (e) any failure to assert,  or any assertion of, any claim or demand or any
exercise  of, or  failure  to  exercise,  any  rights or  remedies  against  the
Borrower, the Parent Company or other obligor, any other guarantor, or any other
person or entity or property;

     (f) any application of any sums by whomsoever paid or howsoever realized to
any obligation of the Borrower or other obligor,  regardless of what obligations
of the Borrower or other obligor remain unpaid;

     (g) any invalidity or unenforceability  relating to or against the Borrower
or other obligor or any other  guarantor for any reason of this  Agreement or of
the  Securities  Purchase  Agreement  or  any  provision  of  applicable  law or
regulation  purporting  to prohibit the payment by the Borrower or other obligor
or any other  guarantor of the  principal of or interest on the Secured Notes or

                                       13

<PAGE>

Obligations or any other amount payable under the Securities Purchase Agreement;
or

     (h)  any  other  act or  omission  to  act or  delay  of  any  kind  by the
Purchasers,  or any other person or entity or any other circumstance  whatsoever
that might,  but for the  provisions  of this  paragraph,  constitute a legal or
equitable   discharge  of  the   obligations  of  the  Parent  Company  and  the
Subsidiaries under this Article 8.

     Section 8.3 Discharge Only upon Payment in Full;  Reinstatement  in Certain
Circumstances.  The  Parent  Company  and  Subsidiaries  obligations  under this
Article 8 shall  remain in full force and effect until the  Securities  Purchase
Agreement is  terminated  and the principal of and interest on the Secured Notes
and all other  amounts  payable by the Borrower  under the  Securities  Purchase
Agreement  and this Security  Agreement  shall have been paid in full. If at any
time any payment of the  principal  of or  interest on the Secured  Notes or any
Obligation  or any other amount  payable by the Borrower or other obligor or the
Parent Company or the Subsidiaries  under the Securities  Purchase  Agreement or
this  Agreement is rescinded or must be otherwise  restored or returned upon the
insolvency, bankruptcy, or reorganization of the Borrower, the Parent Company or
other  obligor or of any  guarantor,  or otherwise,  the Parent  Company and the
Subsidiaries obligations under this Article 8 with respect to such payment shall
be  reinstated  at such time as though  such  payment had become due but had not
been made at such time.

     Section 8.4  Subrogation.  The Parent Company and  Subsidiaries  each agree
that it will not exercise any rights which it may acquire by way of  subrogation
by any payment made hereunder,  or otherwise,  until all the  Obligations  shall
have been  paid in full and  subsequent  to the  termination  of the  Securities
Purchase  Agreement and related Loan  Documents.  If any amount shall be paid to
the  Subsidiary on account of such  subrogation  rights at any time prior to the
later of  (x) the  payment  in full of the  Obligations  and all  other  amounts
payable by the Borrower  hereunder  and the  Securities  Purchase  Agreement and
(y) the termination of the Securities  Purchase Agreement,  such amount shall be
held in trust for the benefit of the Purchasers  and shall  forthwith be paid to
the Purchasers or be credited and applied upon the Obligations.

     Section 8.5 Waivers. The Parent Company and Subsidiaries  irrevocably waive
acceptance hereof, presentment, demand, protest, and any notice not provided for
herein,  as well as any requirement  that at any time any action be taken by the
Purchasers, or any other person or entity against the Borrower or other obligor,
another guarantor, or any other person or entity.

     Section 8.6 Limit on Recovery.  Notwithstanding any other provision hereof,
the right of recovery against the Parent Company and the Subsidiaries under this
Article 8 shall not exceed $1.00 less than the lowest  amount which would render
the Parent Company or such Subsidiary's obligations under this Article 8 void or
voidable  under  applicable  law,  including,  without  limitation,   fraudulent
conveyance law.

     Section 8.7 Stay of  Acceleration.  If acceleration of the time for payment
of any amount  payable by the Borrower or other obligor under this  Agreement or
the Securities Purchase Agreement, is stayed upon the insolvency,  bankruptcy or

                                       14

<PAGE>

reorganization  of the  Borrower or such  obligor,  all such  amounts  otherwise
subject to  acceleration  under the terms of this  Agreement  or the  Securities
Purchase  Agreement,  shall  nonetheless  be payable  by the  Parent  Company or
Subsidiaries hereunder forthwith on demand by the Purchasers.

     Section 8.8 Benefit to Subsidiaries and Parent Company.  The Borrower,  the
Parent  Company  and the  Subsidiaries  are  engaged in related  businesses  and
integrated to such an extent that the financial  strength and flexibility of the
Borrower  has a direct  impact on the  success  of the  Parent  Company  and the
Subsidiaries.  The Parent Company and the Subsidiaries  will derive  substantial
direct and indirect benefit from the extensions of credit hereunder.

     Section 8.9 Subsidiaries Covenants. The Subsidiaries shall take such action
as the Parent  Company  and  Borrower is  required  by the  Securities  Purchase
Agreement or this Agreement to cause the Subsidiaries to take, and shall refrain
from taking such  action as the Parent  Company and  Borrower is required by the
Securities  Purchase  Agreement or this  Agreement to prohibit the  Subsidiaries
from taking.

                                   ARTICLE 9.

                  REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT

     Section 9.1 Remedies;  Obtaining the Collateral  Upon Default.  Each Debtor
agrees that, if an Event of Default shall have occurred and be continuing,  then
and in every  such  case,  the  Purchasers,  in  addition  to any  rights now or
hereafter  existing  under  applicable  law,  shall have all rights as a secured
creditor under the UCC in all relevant jurisdictions and may:

     (a) personally,  or by agents or attorneys,  immediately take possession of
the  Collateral  or any part  thereof,  from the Debtors or any other Person who
then has  possession  of any part thereof  with or without  notice or process of
law, and for that purpose may enter upon such Debtor's premises where any of the
Collateral  is  located  and  remove  the same and use in  connection  with such
removal  any and all  services,  supplies,  aids and  other  facilities  of such
Debtor;

     (b) instruct the obligor or obligors on any agreement,  instrument or other
obligation  (including,  without  limitation,  the  Accounts)  constituting  the
Collateral  to make  any  payment  required  by the  terms  of  such  agreement,
instrument or other obligation directly to the Purchasers;

     (c) withdraw all monies,  securities and instruments in the Cash Collateral
Account  and/or in any other cash  collateral  account  for  application  to the
Obligations in accordance with Section 9.4 hereof;

     (d) sell, assign or otherwise liquidate any or all of the Collateral or any
part thereof in  accordance  with  Section 9.2 hereof,  or direct such Debtor to
sell,  assign or otherwise  liquidate  any or all of the  Collateral or any part
thereof,  and, in each case, take possession of the proceeds of any such sale or
liquidation;

                                       15

<PAGE>

     (e) take possession of the Collateral or any part thereof, by directing the
Debtors in writing to deliver the same to the  Purchasers at any place or places
reasonably designated by the Purchasers, in which event such Debtor shall at its
own expense:

     (i)  forthwith  cause  the  same to be  moved to the  place  or  places  so
designated by the Purchasers and there delivered to the Purchasers;

     (ii) store and keep any  Collateral so delivered to the  Purchasers at such
place or places pending  further action by the Purchasers as provided in Section
9.2 hereof; and

     (iii) while the Collateral shall be so stored and kept, provide such guards
and  maintenance  services  as shall be  necessary  to  protect  the same and to
preserve and maintain them in good condition; and

     (f) license or sublicense,  whether on an exclusive or nonexclusive  basis,
any Marks, Patents or Copyrights included in the Collateral for such term and on
such conditions and in such manner as the Purchasers shall in their commercially
reasonable judgment determine;

it being  understood that each Debtor's  obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity  having  jurisdiction,  the  Purchasers  shall be  entitled to a
decree requiring  specific  performance by each Debtor of said  obligation.  The
Purchasers  agree that this Agreement may be enforced by holders of the majority
in outstanding principal amount of Secured Notes, it being understood and agreed
that such rights and remedies may be exercised by the Purchasers for the benefit
of the Purchasers upon the terms of this Agreement.

     Section  9.2  Remedies:  Disposition  of  the  Collateral.  Any  Collateral
repossessed  by the  Purchasers  under or pursuant to Section 9.1 hereof and any
other Collateral  whether or not so repossessed by the Purchasers,  may be sold,
assigned,  leased or otherwise  disposed of under one or more contracts or as an
entirety,  and  without  the  necessity  of  gathering  at the place of sale the
property to be sold,  and in general in such manner,  at such time or times,  at
such place or places and on such terms as the Purchasers may, in compliance with
any mandatory  requirements  of  applicable  law,  determine to be  commercially
reasonable.  Any of the Collateral may be sold, leased or otherwise disposed of,
in the condition in which the same existed when taken by the Purchasers or after
any overhaul or repair at the expense of each Debtor which the Purchasers  shall
determine to be commercially  reasonable.  Any such disposition which shall be a
private sale or other private  proceedings  permitted by such requirements shall
be made upon not less than 10 days' written notice to each Debtor specifying the
time at which  such  disposition  is to be made and the  intended  sale price or
other consideration  therefor,  and shall be subject,  for the 10 days after the
giving of such notice, to the right of each Debtor or any nominee of each Debtor
to acquire the Collateral involved at a price or for such other consideration at
least equal to the intended sale price or other consideration so specified,  but
in no event in an amount  greater  than the  Obligations  then  outstanding  and
provision  for  any  contingent   Obligations   reasonably   acceptable  to  the
Purchasers.  Any such disposition which shall be a public sale permitted by such
requirements  shall be made upon not less than 10 days'  written  notice to each

                                       16

<PAGE>

Debtor  specifying  the time and  place of such  sale  and,  in the  absence  of
applicable  requirements  of law,  shall be by public auction (which may, at the
Purchasers' option, be subject to reserve),  after publication of notice of such
auction  not less  than 10 days  prior  thereto  in two  newspapers  in  general
circulation  in  New  York,  New  York.  To the  extent  permitted  by any  such
requirement  of law, the  Purchasers may bid for and become the purchaser of the
Collateral or any item thereof, offered for sale in accordance with this Section
without  accountability  to the Debtors.  If, under  mandatory  requirements  of
applicable  law, the  Purchasers  shall be required to make  disposition  of the
Collateral within a period of time which does not permit the giving of notice to
the Debtors as hereinabove specified,  the Purchasers need give the Debtors only
such notice of  disposition  as shall be reasonably  practicable in view of such
mandatory requirements of applicable law.

     Section  9.3  Waiver  of  Claims.  Except  as  otherwise  provided  in this
Agreement or prohibited by applicable  law, (a) THE DEBTORS HEREBY WAIVE, TO THE
EXTENT  PERMITTED BY APPLICABLE LAW,  NOTICE AND JUDICIAL  HEARING IN CONNECTION
WITH THE PURCHASERS' TAKING POSSESSION OR THE PURCHASERS'  DISPOSITION OF ANY OF
THE  COLLATERAL,  INCLUDING,  WITHOUT  LIMITATION,  ANY AND ALL PRIOR NOTICE AND
HEARING FOR ANY  PREJUDGMENT  REMEDY OR  REMEDIES  AND ANY SUCH RIGHT WHICH SUCH
DEBTOR WOULD OTHERWISE HAVE UNDER THE  CONSTITUTION OR ANY STATUTE OF THE UNITED
STATES OR OF ANY STATE,  (b) the Debtors  hereby  further  waive,  to the extent
permitted by law:

     (a) all damages  occasioned by such taking of possession except any damages
which are determined by a final,  non-appealable court order to have been caused
by the Purchasers' gross negligence or willful misconduct; and

     (b) all other requirements as to the time, place and terms of sale or other
requirements  with  respect  to  the  enforcement  of  the  Purchasers'   rights
hereunder; and

     (c) all rights of redemption,  appraisement,  valuation, stay, extension or
moratorium  now or  hereafter  in force  under  any  applicable  law in order to
prevent or delay the  enforcement  of this Agreement or the absolute sale of the
Collateral or any portion thereof,  and each Debtor,  for itself and all who may
claim under it,  insofar as it or they now or  hereafter  lawfully  may,  hereby
waives the benefit of all such laws.

Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral  shall operate to divest all right,  title,  interest,  claim and
demand,  either at law or in equity,  of the Debtors  therein and  thereto,  and
shall be a  perpetual  bar both at law and in equity  against  the  Debtors  and
against  any and all persons or entities  claiming  or  attempting  to claim the
Collateral  so sold,  optioned  or realized  upon,  or any part  thereof,  from,
through and under the Debtors.

     Section 9.4 Application of Proceeds.

     (a)  All  monies  collected  by the  Purchasers  upon  any  sale  or  other
disposition of the  Collateral,  together with all other moneys  received by the
Purchasers hereunder, shall be applied to the payment of the Obligations.

                                       17

<PAGE>

     (b) It is understood and agreed that each Debtor shall remain liable to the
extent of any  deficiency  between the amount of the proceeds of the  Collateral
hereunder and the aggregate amount of the Obligations.

     Section 9.5 Remedies  Cumulative.  Each and every  right,  power and remedy
hereby  specifically given to the Purchasers shall be in addition to every other
right, power and remedy specifically given under this Agreement,  the Securities
Purchase  Agreement,  the Loan Documents or now or hereafter existing at law, in
equity  or by  statute  and each and  every  right,  power  and  remedy  whether
specifically  herein given or otherwise  existing may be exercised  from time to
time or simultaneously and as often and in such order as may be deemed expedient
by the Purchasers.  All such rights, powers and remedies shall be cumulative and
the  exercise  or the  beginning  of the  exercise  of one shall not be deemed a
waiver of the right to exercise any other or others. No delay or omission of the
Purchasers in the exercise of any such right,  power or remedy and no renewal or
extension of any of the Obligations shall impair any such right, power or remedy
or shall be  construed  to be a waiver of any  Default or Event of Default or an
acquiescence  therein.  No notice to or demand on the  Debtors in any case shall
entitle  it to any  other or  further  notice  or  demand  in  similar  or other
circumstances  or constitute a waiver of any of the rights of the  Purchasers to
any other or further action in any  circumstances  without notice or demand.  In
the event that the Purchasers  shall bring any suit to enforce any of its rights
hereunder  and shall be entitled to judgment,  then in such suit the  Purchasers
may recover reasonable expenses,  including reasonable  attorneys' fees, and the
amounts thereof shall be included in such judgment.

     Section 9.6  Discontinuance  of Proceedings.  In case the Purchasers  shall
have instituted any proceeding to enforce any right,  power or remedy under this
Agreement by foreclosure,  sale,  entry or otherwise,  and such proceeding shall
have been discontinued or abandoned for any reason or shall have been determined
adversely  to the  Purchasers,  then and in every  such  case the  Debtors,  the
Purchasers and each holder of any of the Obligations  shall be restored to their
former positions and rights hereunder with respect to the Collateral  subject to
the Security Interest created under this Agreement, and all rights, remedies and
powers  of the  Purchasers  shall  continue  as if no such  proceeding  had been
instituted.

     Section 9.7 Attorney-in-Fact. Without limiting any rights or powers granted
by this Agreement to the Purchasers,  while no Event of Default has occurred and
is continuing,  upon the  occurrence and during the  continuance of any Event of
Default the Purchasers are hereby appointed the  attorney-in-fact of the Debtors
for the purpose of carrying out the  provisions of this Agreement and taking any
action  and  executing  any  instruments  which may be  reasonably  required  to
accomplish  the  purposes  hereof,  which  appointment  as  attorney-in-fact  is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, the Purchasers shall have the right and power to receive, endorse and
collect all checks made  payable to the order of the  Debtors  representing  any
dividend, payment or other distribution in respect of the Collateral or any part
thereof and give full discharge for the same.

                                       18

<PAGE>

                                  ARTICLE 10.

                                   DEFINITIONS

     Capitalized  terms  used in this  Agreement  without  definition  have  the
respective meanings ascribed to such terms in the Securities Purchase Agreement.
All other  capitalized  terms contained in this Security  Agreement,  unless the
context  indicates  otherwise,  have the  meanings  provided  for by the Uniform
Commercial Code as in effect in the State of New York to the extent the same are
used or  defined  therein.  In  addition,  the  following  terms  shall have the
meanings herein specified.  Such definitions shall be equally  applicable to the
singular and plural forms of the terms defined.

     "Agreement" shall mean this Security,  Pledge and Guaranty Agreement as the
same may be modified,  supplemented  or amended from time to time in  accordance
with its terms.

     "Cash Collateral Account" shall mean a non-interest bearing cash collateral
account maintained with, and in the sole dominion and control of, the Purchasers
for the benefit of the Purchasers.

     "Copyrights"  shall mean any United States  copyright  owned (or subject to
the rights of ownership)  by each Debtor,  including  any  registrations  of any
copyright, in the United States Copyright Office, as well as any application for
a copyright  registration now or hereafter made with the United States Copyright
Office by such Debtor.

     "Default"  shall mean any event  which,  with  notice or lapse of time,  or
both, would constitute an Event of Default.

     "Event of Default"  shall mean any Event of Default  under,  and as defined
in,  the  Securities  Purchase  Agreement  and  shall  in  any  event,   without
limitation,  include any  payment  default on any of the  Obligations  after the
expiration of any applicable grace period.

     "Loan  Documents"  shall  have the  meaning  set  forth  in the  Securities
Purchase Agreement

     "Marks"  shall mean any United States  trademarks,  service marks and trade
names now owned,  subject to a right of ownership or hereafter  acquired by each
Debtor,  including any  registration  of, or application for, any trademarks and
service marks in the United States  Patent and Trademark  Office,  and any trade
dress including logos and/or designs used by either of the Debtors in the United
States.

     "Obligations"  shall mean (a) the full and prompt payment when due (whether
at the stated  maturity,  by  acceleration  or otherwise) of all obligations and
liabilities of the Debtors now existing or hereafter incurred under, arising out
of or in connection with the Securities  Purchase Agreement or Loan Documents as
such relates to the Secured Notes issued  thereunder and the due performance and
compliance by the Debtors with the terms of the Loan Documents;  (b) any and all
sums advanced by the  Purchasers in accordance  with the terms of this Agreement
or the  Securities  Purchase  Agreement in order to preserve the  Collateral  or
preserve their security interest in the Collateral;  and (c) in the event of any
proceeding for the  collection or enforcement of any  obligations or liabilities

                                       19

<PAGE>

referred to in clause (a),  after an Event of Default shall have occurred and be
continuing, the reasonable expenses of re-taking, holding, preparing for sale or
lease,  selling or otherwise disposing of or realizing on the Collateral,  or of
any  exercise  by the  Purchasers  of  their  rights  hereunder,  together  with
reasonable attorneys' fees and court costs.

     "Patents" shall mean any United States patent owned,  subject to a right of
ownership  by  or  hereafter   acquired  by  the  Debtors  and  any   divisions,
continuations, reissues, reexaminations, extensions or renewals thereof, as well
as any application for a United States patent now or hereafter made by either of
the Debtors or subject to a right of ownership in such Debtor.

     "Permitted Liens" shall mean any Liens set forth on Schedule J hereto.

     "Proceeds" shall have the meaning  provided in the Uniform  Commercial Code
as in effect in the State of New York on the date hereof or under other relevant
law and,  in any event,  shall  include,  but not be limited to, (a) any and all
proceeds  of any  insurance,  indemnity,  warranty  or  guaranty  payable to the
Purchasers  or  the  Debtors  from  time  to  time  with  respect  to any of the
Collateral,  (b) any and all payments (in any form  whatsoever)  made or due and
payable to the Debtors  from time to time in  connection  with any  requisition,
confiscation,  condemnation,  seizure  or  forfeiture  of all or any part of the
Collateral  by any  governmental  authority (or any person acting under color of
governmental authority) and (c) any and all other amounts from time to time paid
or payable under or in connection with any of the Collateral.

     "Proprietary  Information"  means all information  and know-how  worldwide,
including, without limitation,  technical data, manufacturing data, research and
development  data,  manufacturing  data,  research and  development  data,  data
relating  to  compositions,   processes  and  formulations,   manufacturing  and
production  know-how and experience,  management  know-how,  training  programs,
manufacturing,  engineering  and  other  drawings,  specifications,  performance
criteria,  operating instructions,  maintenance manuals,  technology,  technical
information,  software,  engineering and computer data and databases, design and
engineering  specifications,  catalogs,  promotional  literature  and financial,
business and marketing plans, inventions and invention disclosures.

     "Secured Notes" shall have the meaning set forth in the Securities Purchase
Agreement.

     "Termination  Date" shall have the meaning provided in Section 11.8 of this
Agreement.

     "Trade  Secrets"  means any secretly  held existing  engineering  and other
data,  information,  production  procedures and other  know-how  relating to the
design, manufacture, assembly, installation, use, operation, marketing, sale and
servicing of any products or business of the Debtors  worldwide  whether written
or not written.

                                  ARTICLE 11.

                                  MISCELLANEOUS

     Section 11.1 Notices.  Except as otherwise  specified herein,  all notices,
requests,  demands or other  communications  to or upon the  respective  parties
hereto shall be deemed to have been duly given or made when personally delivered

                                       20

<PAGE>

to the party to which such notice,  request,  demand or other  communication  is
required or  permitted  to be given or made under this  Agreement,  addressed as
follows:

(a)      if to the Borrower, the Parent Company or any Subsidiary:

                           Attn:  Mair Faibish
                           223 Underhill Blvd.
                           Syosset, New York 11791
                           Telephone:  516-714-8200
                           Facsimile:  801-340-6434
                           E-mail:  mf@sybr.com

                           with a copy to:

                           Randall J. Perry, Esq.
                           44 Union Avenue
                           P.O. Box 108
                           Rutherford, NJ 07070
                           Facsimile:  201-939-7348

     (b) if to any  Purchaser,  at such  address  as such  Purchaser  shall have
specified in the Securities Purchase Agreement, with a copy to:

                           Andrews Kurth LLP
                           450 Lexington Ave., 15th Floor
                           New York, New York 10017
                           Attention:  Paul N. Silverstein, Esq.

     or at such other  address as shall  have been  furnished  in writing by any
person or entity described above to the party required to give notice hereunder.

     Section 11.2 Waiver;  Amendment.  None of the terms and  conditions of this
Agreement may be changed,  waived,  modified or varied in any manner  whatsoever
unless in writing duly signed by each Debtor and the Purchasers.

     Section 11.3 Obligations Absolute. The obligations of the Debtors hereunder
shall  remain in full  force and  effect  without  regard  to,  and shall not be
impaired  by,  (a)  any  bankruptcy,  insolvency,  reorganization,  arrangement,
readjustment,  composition,  liquidation  or the like of the  Debtors  except as
required by  applicable  law;  (b) any  exercise or  non-exercise  of any right,
remedy, power or privilege under or in respect of this Agreement, the Securities
Purchase  Agreement,  the Secured  Notes issued  thereunder or any waiver of any
right,  remedy,  power  or  privilege  under  any  other  agreement;  or (c) any
amendment  to  or  modification  of  this  Agreement,  the  Securities  Purchase
Agreement,  the Secured  Notes issued  thereunder or any security for any of the
Obligations, other than amendments or modifications of this Agreement.

                                       21

<PAGE>

     Section 11.4  Successors and Assigns.  This Agreement shall be binding upon
the Debtors and their  successors  and assigns and shall inure to the benefit of
the Purchasers and their  respective  successors  and assigns.  All  agreements,
statements,  representations and warranties made by the Debtors herein or in any
certificate or other instrument  delivered by the Debtors or on its behalf under
this  Agreement  shall be considered to have been relied upon by the  Purchasers
and shall survive the execution and delivery of this  Agreement,  the Securities
Purchase  Agreement or the Secured  Notes issued  thereunder  regardless  of any
investigation made by the Purchasers or on their behalf.

     Section 11.5 Headings Descriptive.  The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.

     Section 11.6 Governing  Law. THIS AGREEMENT AND THE RIGHTS AND  OBLIGATIONS
OF THE PARTIES  HEREUNDER  SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK  WITHOUT  REGARD  FOR  CONFLICTS  OF LAWS OF
CHOICE OF LAWS PRINCIPLES.

     Section 11.7  Debtor's  Duties.  It is expressly  agreed,  anything  herein
contained to the contrary notwithstanding,  that the Debtors shall remain liable
to perform all of the  obligations,  if any,  assumed by it with  respect to the
Collateral and the Purchasers shall not have any obligations or liabilities with
respect to any  Collateral  by reason of or arising out of this  Agreement,  nor
shall the  Purchasers  be  required  or  obligated  in any  manner to perform or
fulfill  any of the  obligations  of the  Debtors  under or with  respect to any
Collateral.

     Section  11.8  Termination;  Release.  After  the  Termination  Date,  this
Agreement  shall  terminate  (provided  that all  indemnities  set  forth in the
Securities   Purchase   Agreement  shall  survive  such   termination)  and  the
Purchasers, at the request and expense of the Debtors, will promptly execute and
deliver to the Debtors a proper  instrument or  instruments  (including  Uniform
Commercial  Code  termination   statements  on  form  UCC-3)  acknowledging  the
satisfaction and termination of this Agreement,  and will duly assign,  transfer
and deliver to the Debtors (without  recourse and without any  representation or
warranty)  such of the  Collateral as may be in the possession of the Purchasers
and has not theretofore been sold or otherwise  applied or released  pursuant to
this  Agreement.  As used in this Agreement,  "Termination  Date" shall mean the
date upon which all  Obligations  then due and payable have been paid in full in
cash and no SecuredNote is outstanding.

     Section 11.9 Counterparts.  This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts,  each
of which when so executed and delivered  shall be an original,  but all of which
shall together  constitute one and the same  instrument.  A set of  counterparts
executed  by all the  parties  hereto  shall be lodged  with the Debtors and the
Purchasers.

                                       22

<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed and  delivered by their duly  authorized  officers as of the date first
above written.

                                         DEBTORS:

                                            SYNERGY BRANDS INC.

                                            By:
                                            Name:
                                            Title:

                                            SYBR.COM INC.

                                            By:
                                            Name:
                                            Title:

                                            GRAN RESERVE CORPORATION

                                            By:
                                            Name:
                                            Title:

                                            DEALBYNET.COM INC.

                                            By:
                                            Name:
                                            Title:

                                            QUALITY FOOD BRANDS, INC.

                                            By:
                                            Name:
                                            Title:

                                            NYCE NORTH AMERICA INC.

                                            By:
                                            Name:
                                            Title:

                                            NET CIGAR.COM INC.

                                            By:
                                            Name:
                                            Title:

                                 Signature page

<PAGE>

PURCHASERS:

MILFAM I L.P.

By:  Milfam LLC
Its:  General Partner

By:
Name:  Lloyd I. Miller, III
Title:  Manager

LLOYD I. MILLER, III

By:
Name: Lloyd I. Miller, III

                                 Signature page

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