AGREEMENT AND PLAN OF MERGER

 

Exhibit 10.85

 

                          AGREEMENT and PLAN OF MERGER

 

         This Agreement and Plan of Merger (this "Agreement") is dated February

10, 2004, between Headwaters Incorporated, a Delaware corporation ("Parent"),

ISG Liberty, Inc. a Utah corporation ("Purchaser"), VFL Technology Corporation,

a Pennsylvania corporation ("Company"), Richard W. Patton, an individual

residing in Florida ("Patton") and Louis M. Ruggiano, an individual residing in

Florida ("Ruggiano"). Patton and Ruggiano shall be collectively referred to

herein as the "Equityholders". The Purchaser, the Parent and the Equityholders

may be individually referred to as a "Party" or collectively as the "Parties".

 

                                    RECITALS

 

         WHEREAS, the respective boards of directors of each of Parent, the

Purchaser and the Company have approved this Agreement, pursuant to which the

Purchaser will merge with and into the Company (the "Merger").

 

         WHEREAS, the Equityholders have, as sole shareholders of the Company,

each approved this Agreement.

 

         WHEREAS, the issued and outstanding shares of capital stock of the

Company shall be referred to collectively herein as the "Common Shares" and

individually as a "Common Share".

 

         WHEREAS, the Parent, the Purchaser, the Company and the Equityholders

desire to make certain representations, warranties, covenants and agreements in

connection with this Agreement.

 

         WHEREAS, unless otherwise defined in this Agreement, the capitalized

terms used in this Agreement have the meanings given in Article 9 below.

References to any section in this Agreement shall be in reference to the Article

and then the Section (or subsection) within the Article (for example reference

to Section 1.2.1 shall mean Article 1, Section 2, subsection 1).

 

         NOW, THEREFORE, in consideration of the mutual covenants and agreements

set forth herein, and for other good and valuable consideration, the receipt and

sufficiency of which are hereby acknowledged, the Parties agree as set forth

herein, intending to be legally bound.

 

                                    ARTICLE 1

 

1. THE MERGER, EFFECT OF THE MERGER

 

         1.1. The Merger. Upon the terms and subject to the conditions hereof,

and in accordance with the Utah Revised Business Corporation Act (the "URBC")

and the Pennsylvania Business Corporation Law of 1988, as amended (the "PBCL"),

the Purchaser shall be merged with and into the Company at the Effective Time.

Following the Merger, the separate corporate existence of the Purchaser shall

cease and the Company shall continue as the surviving corporation (the

"Surviving Corporation") and shall succeed to and assume all the rights and

obligations of the Purchaser and the Company in accordance with the URBC and the

PBCL.

 

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         1.2. Closing. The closing (the "Closing") of the Merger shall take

place at 10:00 a.m. on a date to be specified by the Parties, which date shall

be no earlier than the second business day and no later than the fifth business

day after satisfaction or waiver of the conditions set forth in Article 5 (other

than those conditions that by their nature are to be satisfied at the Closing,

but subject to the fulfillment or waiver of those conditions at Closing) at the

offices of the Company in West Chester, Pennsylvania, unless another date, time

or place is agreed to in writing by the Parties (the "Closing Date").

 

         1.3. Effective Time. The Merger shall become effective (the "Effective

Time") when a Certificate of Merger and the Articles of Merger (collectively,

the "Merger Filings"), executed in accordance with the relevant provisions of

the URBC and the PBCL, are duly filed with the Division of Corporations and

Commercial Code of the State of Utah and the Secretary of State of the

Commonwealth of Pennsylvania, or at such other time as the Purchaser and the

Company shall agree should be specified in the Merger Filings. The Merger

Filings shall be made contemporaneously with or as promptly as practicable after

the Closing.

 

         1.4. Effects of the Merger. The Merger shall have the effects set forth

in the URBC and the PBCL.

 

         1.5. Articles of Incorporation and Bylaws; Officers and Directors.

 

                  1.5.1. The Articles of Incorporation of the Company, as in

          effect immediately prior to the Effective Time, shall be the Articles

         of Incorporation of the Surviving Corporation until thereafter changed

         or amended as provided therein or by applicable law.

 

                  1.5.2. The Bylaws of the Company, as in effect immediately

         prior to the Effective Time, shall be the Bylaws of the Surviving

         Corporation until thereafter changed or amended as provided therein, by

         the Articles of Incorporation of the Surviving Corporation or by

         applicable law.

 

                  1.5.3. The directors of the Company shall resign at and as of

         the Effective Time and the directors of the Purchaser immediately prior

         to the Effective Time shall become the directors of the Surviving

         Corporation, until the next annual meeting of stockholders (or the

         earlier of their resignation or removal) and until their respective

         successors are duly elected and qualified, as the case may be.

 

                   1.5.4. The officers of the Company shall resign at and as of

         the Effective Time and the officers of the Purchaser immediately prior

         to the Effective Time shall become the officers of the Surviving

         Corporation until the earlier of their resignation or removal and until

         their respective successors are duly elected and qualified, as the case

         may be.

 

         1.6. Effect of the Merger on the Stock of the Company; Exchange of

Certificates.

 

                  1.6.1 Effect on Capital Stock. As of the Effective Time, by

         virtue of the Merger and without any action on the part of the Parent,

         the Purchaser, the Company or the Equityholders, each of the following

         shall occur:

 

                   1.6.2 Common Stock. Each share of the Common Stock of the

         Company (each a "Common Share") issued and outstanding immediately

         prior to the Effective Time shall be converted into the right to

         receive the following (collectively, the "Merger Consideration"): (i)

         an amount equal to $5,000 in cash per share or $2,000,000 in the

         aggregate all of which is allocated to the purchase of the fixed assets

         of the Company as partial payment therefore (the "Cash Payment"), plus

 

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         (ii) $32,500 per share or $13,000,000 in the aggregate payable in

         accordance with the terms of the promissory note (the "Initial Note")

         attached hereto as Exhibit A, secured by a pledge to the Equityholders

          of all New Shares (as defined hereinbelow) of the Company under a stock

         pledge agreement in the form attached hereto as Exhibit B (the "Stock

         Pledge Agreement"), plus (iii) $7,500 per share or $3,000,000 in the

         aggregate payable in accordance with the terms of the promissory note

         (the "Secured Note") attached hereto as Exhibit C, secured by an

         irrevocable letter of credit in the form attached hereto as Exhibit D

         (the "Letter of Credit"), plus (iv) $7,500 per share or $3,000,000 in

         the aggregate payable in accordance with the terms of the promissory

         note (the "Unsecured Note") attached hereto as Exhibit E, plus (v) the

         Estimated Tax Payment payable in accordance with Section 8.5. At the

         Effective Time, (a) all Common Shares shall cease to be outstanding,

         shall be canceled and retired and shall cease to exist, and (b) each

         certificate formerly representing a Common Share shall thereafter cease

          to have any rights with respect to the Common Shares, except as

         provided herein or by law.

 

                  1.6.3 Capital Stock of the Purchaser. Each issued and

         outstanding share of capital stock of the Purchaser, immediately prior

         to the Effective Time, shall be converted into one share of Common

         Stock of the Surviving Corporation (collectively, the "New Shares").

 

                  1.6.4 Exchange Procedure1.6.1. . Promptly after the Effective

         Time each Equityholder shall surrender his Common Shares to the Parent

         and shall receive in exchange therefor the Merger Consideration.

 

         1.7. Post Closing Adjustment.

 

                  1.7.1. The Merger Consideration will increase or decrease, on

         a dollar-for-dollar basis, by the amount by which the working capital

         of the Company calculated solely for purposes of this Section 1.7 in

         accordance with the formula attached hereto as Exhibit F (the "Adjusted

         Working Capital"), exceeds or is less than, respectively, three million

         four hundred thousand dollars ($3,400,000) calculated as of the Closing

         Date.

 

                  1.7.2. Within sixty days of the Closing Date, the

         Equityholders will provide the Company with a calculation of the

         Adjusted Working Capital indicating whether an adjustment is due

         pursuant to Section 1.7.1 (the "Calculation"). If the Company, within

         thirty days of receiving the Calculation, disagrees with the

         Calculation, then the Equityholders and the Company will promptly

         engage an independent accounting firm to review the Calculation as of

         the Closing in accordance with GAAP, consistently applied. Within

         forty-five (45) days after the matter is referred to the accounting

         firm, the accounting firm will prepare and deliver a report to the

         Parties which will detail whether a Merger Consideration adjustment is

         necessary. The report will be final and binding on the Parties, absent

         fraud or clear error.

 

                  1.7.3. If the Company agrees with the Calculation, then within

         twenty (20) days after delivery of the Calculation: (i) if the

         Calculation indicates that an upward adjustment is appropriate, the

         Company will deliver to the Equityholders, on a pro-rata basis, cash in

         the amount of the indicated adjustment; or (ii) if the Calculation

         indicates that a downward adjustment is appropriate, the Unsecured Note

         shall be reduced in the amount of the indicated adjustment by applying

 

<PAGE>

 

         the reduction to the principal payment(s) in inverse order of maturity.

         If the Company disagrees with the Calculation then, within twenty (20)

         days after delivery of the report by the independent accounting firm,

         referred to in Section 1.7.2: (i) if the report indicates that an

         upward adjustment is appropriate, the Company will deliver to the

          Equityholders, on a pro-rata basis, cash in the amount of the

         adjustment specified in the report, absent fraud or clear error; or

         (ii) if the report indicates that an downward adjustment is

         appropriate, the Promissory Note shall be reduced as aforesaid in the

         amount of the adjustment specified in the report, absent fraud or clear

         error.

 

                                    ARTICLE 2

 

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE EQUITYHOLDERS

 

          The Equityholders and the Company hereby represent and warrant to the

Purchaser as follows:

 

         2.1. Organization and Qualification. The Company is a corporation duly

organized, validly existing and in good standing under the laws of the state of

Pennsylvania and has full corporate power and authority to conduct its business

as and to the extent now conducted and to own, use and lease its Assets. The

Company is duly qualified, licensed or admitted to do business and is in good

standing in each jurisdiction in which the ownership, use or leasing of its

Assets, or the conduct or nature of its business, makes such qualification,

licensing or admission necessary, except for such failures to be so qualified,

licensed or admitted and in good standing which, individually or in the

aggregate, (i) are not having and could not be reasonably expected to have a

Material Adverse Effect on the business or condition of the Company and (ii)

could not be reasonably expected to have a Material Adverse Effect on the

validity or enforceability of this Agreement or any other agreement to which it

is a party or on the ability of the Equityholders or the Company to perform

their obligations hereunder or thereunder. The Company has delivered to

Purchaser true and complete copies of the certificate or articles of

incorporation and by-laws (or other comparable charter or enabling documents) of

the Company, including all amendments thereto effected through the Closing Date.

Section 2.1 of the Disclosure Schedule sets forth a complete and accurate list

of each jurisdiction in which the Company is qualified to do business.

 

         2.2. Capital Stock. The Common Shares consists of the following number

of shares of capital stock: 240 shares of common stock, par value $1.00 per

share owned by Patton; and 160 shares of common stock, par value $1.00 per share

owned by Ruggiano. The Common Shares constitute all of the issued and

outstanding shares of capital stock of the Company. The shares of Common Shares

are validly issued, fully paid and non-assessable, issued in compliance with all

applicable Laws and no additional shares of capital stock have been reserved for

issuance. There are no outstanding Options with respect to the stock of the

Company or agreements, arrangements or understandings to issue any Options with

respect to the stock of the Company, nor are there any preemptive rights or

agreements, arrangements or understandings to issue preemptive rights with

respect to the issuance or sale of the capital stock of the Company. The

Equityholders are the record and beneficial owners of all of the Common Shares,

free and clear of all Liens. From and after the Closing, neither the

Equityholders nor any other Person (other than the Purchaser) will have any

rights whatsoever with respect to the Common Shares or to any other securities,

or incidents of ownership, of or in the Company.

 

         2.3. Authority Relative to this Agreement. The Company and the

Equityholders have full authority to enter into this Agreement, to perform their

obligations hereunder and to consummate the transactions contemplated hereby.

This Agreement has been duly and validly executed and delivered by the Company

and the Equityholders and constitutes the legal, valid and binding obligations

of the Company and the Equityholders, enforceable against them in accordance

with its terms.

 

<PAGE>

 

         2.4. Subsidiaries; Company; Business. Section 2.4 of the Disclosure

Schedule lists all lines of business in which the Company is participating or

engaged or has participated or engaged in the preceding three years. The name of

each director and officer of the Company, and the position with the Company held

by each, are listed in Section 2.4 of the Disclosure Schedule. Except as set

forth in Section 2.4 of the Disclosure Schedule, the Company holds no equity,

partnership, joint venture or other interest in any Person.

 

         2.5. No Conflicts. The execution and delivery by the Company and by the

Equityholders of this Agreement does not, and the consummation of the

transactions contemplated hereby will not:

 

                  2.5.1. conflict with or result in a violation or breach of any

         of the terms, conditions or provisions of the certificate or articles

         of incorporation or by-laws (or other comparable charter or enabling

         documents) of the Company;

 

                  2.5.2. subject to obtaining the consents, approvals and

         actions, making the filings and giving the notices referred to in

         Section 2.6 below or disclosed in Section 2.6 of the Disclosure

         Schedule, if any, conflict with or result in a violation or breach of

         any term or provision of any Laws or Order applicable to any of the

         Equityholders or to the Company, or any of their Assets; or

 

                   2.5.3. except as disclosed in Section 2.5 of the Disclosure

         Schedule, (i) conflict with or result in a violation or breach of, (ii)

         constitute (with or without notice or lapse of time or both) a default

         under, (iii) require any of the Equityholders or the Company to obtain

         any consent, approval or action of, make any filing with or give any

         notice to any Person as a result or under the terms of, (iv) result in

         or give to any Person any right of termination, cancellation,

         acceleration or modification in or with respect to, (v) result in or

         give to any Person any additional rights or entitlement to increased,

         additional, accelerated or guaranteed payments under, or (vi) result in

         the creation or imposition of any Lien upon the Company or any of its

         Assets under, any Contract or License to which the Equityholders or the

         Company is a party or by which any of their respective Assets is bound.

 

         2.6. Governmental Approvals and Filings. Except as disclosed in Section

2.6 of the Disclosure Schedule, no consent, approval or action of, filing with

or notice to any Governmental or Regulatory Authority on the part of the

Equityholders or the Company is required in connection with the execution,

delivery and performance of this Agreement or the consummation of transactions

contemplated herein.

 

         2.7. Books and Records. The minute books and other similar records of

the Company to be provided to Purchaser upon execution of this Agreement contain

a true and complete record, in all material respects, of all action taken by the

stockholders, the board of directors and committees of the boards of directors

(or other similar governing entities) of the Company.

 

         2.8. Financial Statements; Internal Controls; Execution of

Certifications.

 

                  2.8.1. The Equityholders have caused the Company to furnish to

         Purchaser true and complete copies of (i) the audited balance sheets of

         the Company for the periods ending as at December 31, 2000, 2001 and

         2002 and the audited income statements and statements of cash flow for

         the annual periods then ended, together with the audit reports thereon

          of Joseph M. Cahill, Ltd., independent public accountants (ii)

         unaudited balance sheet as at November 30, 2003 and unaudited income

         statement and statements of cash flow for the 11-month period then

         ended certified as true and correct by the chief financial officer of

 

<PAGE>

 

         the Company and the Equityholders. All of these statements, opinions,

         etc. (collectively referred to herein as the "Financial Statements")

         are in accordance with the Books and Records of the Company and fairly

         present the financial position of the Company as of the dates thereof,

         for the periods covered thereby and the results of operations and cash

         flows of the Company for the periods set forth therein, all in

         conformity with GAAP, consistently applied. The Company has no

         liabilities or obligations, secured or unsecured (whether accrued,

         absolute, contingent or otherwise and whether or not required to be

         reflected in the Financial Statements under GAAP) (collectively,

         "Liabilities") not reflected on or adequately reserved against in the

         Financial Statements or the accompanying notes thereto, except for (i)

         Liabilities incurred in the ordinary course of business since the date

         of the Financial Statements which are usual and normal in amount, and

         (ii) Liabilities which would not be required under GAAP to be set forth

         on or reserved against in the Financial Statement or a consolidated

         balance sheet of the Company as of the date hereof, which would not,

         individually or in the aggregate, reasonably be expected to have a

         Material Adverse Effect on the Company.

 

                  2.8.2. The Company maintains a system of internal accounting

         controls sufficient to provide reasonable assurance that (i)

         transactions are executed in accordance with management's general or

         specific authorizations; (ii) transactions are recorded as necessary to

         permit preparation of financial statements in conformity with GAAP,

         consistently applied, and to maintain asset accountability; (iii)

         access to assets is permitted only in accordance with management's

         general or specific authorization; and (iv) the recorded accountability

         for assets is compared with the existing assets at reasonable intervals

         and appropriate action is taken with respect to any differences.

 

                  2.8.3. No officer, director, or employee of the Company or any

         Subsidiary has ever refused to execute any certification, of any nature

         whatsoever, required by law, or requested by any accounting, banking,

         financial or legal firm or entity.

 

          2.9. Absence of Changes. Since December 31, 2002, there has not been

any Material Adverse Change or any event or development, which, individually or

together with other such events, could reasonably be expected to result in a

Material Adverse Change, in the business or condition of the Company and/or the

Assets. In addition, except as expressly contemplated hereby and except as

disclosed in the Financial Statements or in Section 2.9 of the Disclosure

Schedule, there has not occurred since December 31, 2002:

 

                  2.9.1. any declaration, setting aside or payment of any

         dividend or other distribution in respect of the capital stock (or

         other equity interests) of the Company or any direct or indirect

         redemption, purchase or other acquisition by the Company of any such

         capital stock (or other equity interests) of the Company;

 

                  2.9.2. any authorization, issuance, sale or other disposition

         by the Company of any shares of its capital stock (or other equity

         interests), or any modification or amendment of any right of any holder

         of any outstanding shares of capital stock (or other equity interests)

         of the Company;

 

                  2.9.3. any increase in salary, rate of commissions or rate of

         consulting fees of any employee or consultant of the Company; (ii) any

         payment of consideration of any nature whatsoever (other than salary,

         commissions or consulting fees paid to any employee or consultant of

         the Company) to any officer, director, stockholder, employee or

 

<PAGE>

 

         consultant of the Company; (iii) any establishment or modification of

         (A) targets, goals, pools or similar provisions under any Benefit Plan,

         employment contract or other employee compensation arrangement or (B)

         salary ranges, increase guidelines or similar provisions in respect of

         any Benefit Plan, employment contract or other employee compensation

         arrangement; or (iv) any adoption, entering into, amendment,

         modification or termination (partial or complete) of any Benefit Plan;

 

                  2.9.4. incurrences by the Company of (i) Indebtedness or (ii)

         any voluntary purchase, cancellation, prepayment or complete or partial

         discharge in advance of a scheduled payment date with respect to, or

         waiver of any right of the Company under, any Indebtedness of or owing

         to the Company;

 

                  2.9.5. any physical damage, destruction or other casualty loss

         (whether or not covered by insurance) affecting any of the Assets of

         the Company in an aggregate amount exceeding $25,000;

 

                  2.9.6. any write-off or write-down of or any determination to

         write off or write down any of the Assets of the Company;

 

                  2.9.7. any purchase of any Assets of any Person or disposition

         of, or incurrence of a Lien on, any Company Assets, other than

         acquisitions or dispositions of inventory in the ordinary course of

         business by the Company consistent with past practice;

 

                  2.9.8. other than in the ordinary course of business (and in

         each such case disclosed to the Purchaser), any entering into,

         amendment, modification, termination (partial or complete) or granting

         of a waiver under or giving any consent with respect to (i) any

         Contract which is required (or had it been in effect on the date hereof

          would have been required) to be disclosed in the Disclosure Schedule

         pursuant to Section 2.18.1, (ii) any License held by the Company, or

         (iii) any intellectual property rights owned by the Company;

 

                  2.9.9. any capital expenditures or commitments for additions

         to property, plant or equipment of the Company constituting capital

         assets in an aggregate amount exceeding $25,000;

 

                  2.9.10. any commencement, termination or change by the Company

         of any line of business;

 

                  2.9.11. any transaction by the Company with any of its

         officers, directors, stockholders or Affiliates, other than pursuant to

         a Contract or arrangement in effect on December 31, 2002 and disclosed

         to Purchaser pursuant to Section 2.18.A or other than pursuant to any

         Contract of employment and listed pursuant to Section 2.18.A of the

         Disclosure Schedule;

 

                  2.9.12. any entering into of an agreement to do or engage in

         any of the foregoing, including without limitation with respect to any

         merger, sale of substantially all assets or other business combination

         not otherwise restricted by the foregoing paragraphs; or

 

                   2.9.13. any change in the accounting methods or procedures of

         the Company.

 

         2.10. No Undisclosed Liabilities. Except as disclosed in Section 2.10

of the Disclosure Schedule, neither the Company nor any of its Subsidiaries has

any liability, indebtedness, obligation, expense, claim, deficiency, guaranty or

endorsement of any type, whether accrued, absolute, contingent, matured,

unmatured or other (whether or not required to be reflected in Financial

 

<PAGE>

 

Statements in accordance with GAAP), except for those which individually or in

the aggregate (i) have been reflected in the Current Balance Sheet, or (ii) have

arisen in the ordinary course of business consistent with past practices since

the Balance Sheet Date and prior to the date hereof, and there are no

Liabilities relating to or affecting the Company or any of its Assets.

 

         2.11. Taxes. Except as set forth on Section 2.11 of the Disclosure

Schedule:

 

                  2.11.1. The Company has duly filed (or has had filed on its

         behalf) all Tax Returns required to be filed under applicable laws and

         regulations by or with respect to the Company. All such Tax Returns (i)

         were prepared in the manner required by applicable law; (ii) are in

          compliance with applicable laws and regulations and are, to the best

         knowledge of the Company and the Equityholders, true, correct, and

         complete in all material respects, and (iii) accurately reflect the

         liability for Taxes of the Company. No claim (including a notice of

         inquiry or commencement of an audit) has ever been made by any

         authority in a jurisdiction where the Company does not file Tax Returns

         that the Company is or may be subject to taxation by that jurisdiction.

         No extension of time with respect to any date on which a Tax Return was

         or is to be filed by, or related to, the Company is in force, and no

         waiver or agreement by the Company is in force for the extension of

         time for the assessment or payment of any Taxes. The Company has not

         granted a power of attorney to any person with respect to any Taxable

         Period.

 

                  2.11.2. The Company has complied in all respects with the

         provisions of the Code relating to the withholding and payment of

         Taxes, and has, within the time and in the manner prescribed by law,

         withheld and paid over to the proper governmental authorities all

         amounts required to be withheld from employees, independent

         contractors, creditors, stockholders, or other third parties except

         where noncompliance would not result, individually or in the aggregate,

         in any material liability.

 

                   2.11.3. The Company has paid, or caused to be paid, all Taxes

         due by, or related to, the Company, whether or not shown (or required

         to be shown) on a Tax Return. All assessments of Tax made against the

         Company have been paid when due.

 

                  2.11.4. The Financial Statements reflect an adequate reserve

         for the payment of all Taxes due and payable by the Company for all

         Taxable Periods through the date of such Financial Statements. There

         are no Taxes that would be due if asserted by a taxing authority,

         except with respect to which the Company is maintaining adequate

         reserves.

 

                  2.11.5. Since the date of the Financial Statements the Company

         has not: (i) incurred any liability for Taxes other than Taxes arising

         in the ordinary course of business; or (ii) incurred any liability for

         Taxes that would result in a material decrease in the net worth of the

         Company.

 

                   2.11.6. None of the Tax Returns of, or related to, the Company

         have been or are currently being examined by the IRS or relevant state,

         local or foreign taxing authorities. There are no examinations or other

         administrative or court proceedings relating to Taxes in progress or,

         to the Company's and the Equityholders' knowledge, pending nor has the

         Company received a revenue agent's or similar report asserting a tax

         deficiency. There are no threatened actions, suits, proceedings,

         investigations, audits or claims (including notices of inquiry or

         commencement of an audit) relating to or asserted for Taxes of, or

         related to, the Company, whether in writing or otherwise and there is

         no basis for such claim for which the Company is or reasonably should

         be aware.

 

<PAGE>

 

                  2.11.7. There are no proposed reassessments of any real

         property owned by the Company or other proposals that could increase

         the amount of any Tax to which the Company could be subject.

 

                  2.11.8. There are no security interests on any of the Assets

         of the Company that arose in connection with any failure (or alleged

         failure) to pay any Taxes and, except for liens for real and personal

         property Taxes that are not yet due and payable, there are no liens for

         any Tax upon any asset of the Company. The Company has not entered into

         a closing agreement pursuant to ss.7121 of the Code.

 

                  2.11.9. The Company has not been a member of an (i) affiliated

         group (within the meaning of ss.1504 of the Code), or (ii) affiliated,

         combined, consolidated, unitary, or similar group for state, local or

         foreign Tax purposes, other than the group of which the Company is the

         common parent. Except as disclosed in Section 2.4 of the Disclosure

         Schedule, the Company is not a party to any joint venture, partnership,

         or other arrangement that is treated as a partnership for Tax purposes.

 

                  2.11.10. The Company has not been a party to nor is bound by

         any obligations under any tax sharing, tax indemnity, or similar

         agreement or arrangement for any Taxable Period. The Company does not

         have any liability for the Taxes of any person (other than the Company)

         under Treas. Reg. ss. 1.1502-6 (or any similar provision of state,

         local, or foreign law), as a transferee or successor, by contract, or

         otherwise.

 

                  2.11.11. The Company does not have any material deferred

         income reportable for a period ending after the Closing Date but that

         is attributable to a transaction (e.g., an installment sale) occurring

         in, or resulting from a change of accounting method for, a period

         ending on or prior to the Closing Date.

 

                  2.11.12. The Company is not a party to any "safe harbor lease"

         that is subject to the provisions of ss.168(f)(8) of the Code as in

         effect prior to the Tax Reform Act of 1986 or to any "long-term

         contract" within the meaning of ss.460 of the Code.

 

                  2.11.13. The Company is not a party to any contract,

         agreement, plan or arrangement that, individually or in the aggregate,

         or when taken together with any payment that may be made under this

         Agreement or any agreements contemplated hereby, that could reasonably

         give rise to the payment of any "excess parachute payment" within the

         meaning of ss.280G of the Code.

 

                  2.11.14. No consent under ss.341(f) of the Code has been filed

         with respect to the Company.

 

                  2.11.15. The Company has no losses (including, without

         limitation, built-in losses, net operating losses, or capital losses)

         that are subject to (for Tax purposes) any federal income tax

         limitation with respect to the use thereof (other than limitations that

         arise as a result of transactions contemplated by this Agreement).

 

<PAGE>

 

                  2.11.16. The Company has not distributed the stock of any

         corporation in a transaction satisfying the requirements of ss.355 of

         the Code since April 16, 1997. The stock of the Company has not been

         distributed in a transaction satisfying the requirements of ss.355 of

         the Code since April 16, 1997.

 

                  2.11.17. The Company has not agreed nor is required to include

         in income any adjustment under either ss.481(a) or ss.482 of the Code

         (or an analogous provision of state, local, or foreign law) by reason

         of a change in accounting method or otherwise.

 

                   2.11.18. No holder of an interest (other than an interest

         solely as a creditor) in the Company is a foreign corporation, foreign

         partnership, foreign trust or foreign estate (as those terms are

         defined in the Code and Income Tax Regulations) nor a nonresident alien

         for U.S. income tax purposes.

 

                  2.11.19. The Company, and any Subsidiary of the Company, has

         been a validly electing S corporation within the meaning of Code

         ss.ss.1361 and 1362 at all times since December 1, 1986, and the

         Company will be an S corporation up to and including the Closing Date.

 

                  2.11.20. The Company does not have and has never had any

         Subsidiary that is a "qualified subchapter S subsidiary" within the

         meaning of Code ss.1361(b)(3)(B).

 

                  2.11.21. The Company shall not be liable for any Tax under

         Code ss.1374 in connection with the deemed sale of the Company's assets

         (including the assets of any qualified subchapter Subsidiary) caused by

         the Section 338(h)(10) Election. Neither the Company nor any qualified

         subchapter S subsidiary of the Company has, in the past 10 years, (A)

         acquired assets from another corporation in a transaction in which the

         Company's Tax basis for the acquired assets was determined, in whole or

         in part, by reference to the Tax basis of the acquired assets (or any

         other property) in the hands of the transferor or (B) acquired the

         stock of any corporation which is a qualified subchapter S subsidiary.

 

         2.12. Legal Proceedings.

 

                  2.12.1. Except as disclosed in Section 2.12 of the Disclosure

         Schedule (with paragraph references corresponding to those set forth

         below):

 

                           2.12.1.1. there are no actions or proceedings pending

                  or, to the knowledge of the Equityholders or the Company,

                  threatened against, relating to or affecting the Company, or

                  any of its Assets which (A) could reasonably be expected to

                  result in the issuance of an Order restraining, enjoining or

                  otherwise prohibiting or making illegal any of the

                  transactions contemplated by this Agreement or otherwise

                  result in a material diminution of the benefits contemplated

                  by this Agreement to Purchaser, or (B) if determined adversely

                  to the Company or the Equityholders, could reasonably be

                  expected to result in (x) any injunction or other equitable

                  relief against the Company or the Equityholders, or (y) Losses

                  by the Company, individually or in the aggregate with Losses

                  in respect of other such actions or proceedings, exceeding

                  $25,000;

 

                           2.12.1.2. there are no facts or circumstances known

                  to the Equityholders or to the Company that could reasonably

                  be expected to give rise to any action or proceeding that

                  would be required to be disclosed pursuant to clause 2.12.1.1.

                  above;

 

<PAGE>

 

                            2.12.1.3. neither the Equityholders nor the Company

                  have received notice, or are aware of any Orders or lawsuits

                  outstanding against the Company; and

 

                           2.12.1.4. neither the Equityholders nor the Company

                  have received notice or are aware of any defects, dangerous or

                  substandard conditions in the products or materials

                  manufactured, sold, distributed, or to be manufactured, sold

                   or distributed by the Company that could cause bodily injury,

                  sickness, disease, death, or damage to property, or result in

                  loss of use of property, or any claim, suit, demand for

                  arbitration or notice seeking damages for bodily injury,

                  sickness, disease, death, or damage to property, or loss of

                  use or property.

 

                           2.12.2. Prior to the execution of this Agreement, the

                   Equityholders and the Company have delivered all responses of

                  counsel for the Company to auditors' requests for information

                  regarding actions or proceedings pending or threatened

                  against, relating to or affecting the Company during the

                  period commencing January 1, 2000. Section 2.12.2 of the

                  Disclosure Schedule sets forth all actions or proceedings

                  relating to or affecting the Company or its Assets filed,

                  presented, brought, or in any manner active or outstanding,

                  during the period commencing January 1, 2001 through the date

                  hereof.

 

         2.13. Compliance with Laws and Orders. Except as disclosed in Section

2.13 of the Disclosure Schedule, neither the Equityholders nor the Company have

received at any time since January 1, 2000 any notice that the Company is or has

been at any time since such date, in violation of or in default under, any Law

or Order applicable to the Company or any of its Assets. In furtherance and not

limitation of the foregoing, neither the Equityholders nor the Company have

violated any federal or state securities law in connection with the offer, sale

or purchase of any securities.

 

         2.14. Benefit Plans; ERISA.

 

                  2.14.1. Section 2.14.1 of the Disclosure Schedule sets forth

         each "employee benefit plan," whether written or unwritten, as defined

         in Section 3(3) of the Employee Retirement Income Security Act of 1974,

         as amended ("ERISA") (excluding equity-based plans and workers'

         compensation, unemployment compensation and similar government-mandated

         programs) currently or at any time within the past five (5) years

         maintained, contributed to or entered into by the Company for the

         benefit of any current or former employee, consultant or director of

         the Company under which the Company has any present or future

         obligation or liability (collectively, the "Employee Plans"). Current,

         accurate and complete copies of all Employee Plans (and, if applicable,

         related trust agreements or other funding instruments), and all

         amendments thereto and related summary plan descriptions and for the

         three (3) most recent years (i) Forms 5500 and attached schedules and

         (ii) audited financial statements have been made available to the

         Purchaser. Section 2.14.1 of the Disclosure Schedule sets forth all

         discrimination testing results for either a qualified plan under

         Section 401(a) and a flexible benefits plan under Code ss.125 or

         self-insured plan under Section 105(h), and all such results have been

         made available to the Purchaser.

 

                  2.14.2. Except as set forth in Section 2.14.2 of the

         Disclosure Schedule, neither the Company nor any ERISA Affiliate

         sponsors or has sponsored, within the last five (5) years, any employee

         benefit plan which, individually or collectively, constitute(s) (i) an

         "employee pension benefit plan," as defined in Section 3(2) of ERISA,

         that is subject to ss.412 of the Code or ss.302 or Title IV of ERISA,

         or (ii) a "multiemployer plan," as defined in ss.3(37) of ERISA.

 

<PAGE>

 

                  2.14.3. Each Employee Plan that is intended to be qualified

         under ss.401(a) of the Code has received a favorable determination,

         advisory and/or opinion letter, as applicable, from the Internal

         Revenue Service and is so qualified.

 

                  2.14.4. The Company has furnished or made available to the

         Purchaser copies or descriptions of each severance or other similar

         contract, arrangement or policy and each plan, agreement, policy or

         arrangement (written or oral) providing for insurance coverage

         (including any self-insured arrangements), vacation benefits,

         disability benefits, early retirement benefits, death benefits,

         hospitalization benefits, retirement benefits, deferred compensation,

         profit-sharing, bonuses, stock options, stock purchase, phantom stock,

         stock appreciation or other forms of compensation or post-retirement

         benefits that (i) is not an Employee Plan, (ii) is entered into,

         maintained or contributed to, as the case may be, by the Company or any

         of its Subsidiaries and (iii) covers any employee, former employee,

         director, consultant or independent contractor of the Company. Such

         contracts, plans and arrangements as are described in this Section are

         herein referred to collectively as the "Benefit Arrangements."

 

                  2.14.5. Except as set forth in Section 2.14.5 of the

         Disclosure Schedule and except for continued "COBRA" health coverage

         required pursuant to Code ss.4980B, the Company is not a party to any

         Employee Plan or other agreement, contract, arrangement or policy, that

          requires the Company to provide, at any cost to the Company, any health

         or life insurance coverage to any former employee of the Company.

 

                  2.14.6. Each Employee Plan and Benefit Arrangement has been

         maintained in substantial and material compliance with its terms and

         complies in all material respects with all applicable requirements of

         (i) the Age Discrimination in Employment Act of 1967, as amended, and

         the regulations thereunder, (ii) any applicable provisions of the Code,

         including ss.4980B thereof, and (iii) ERISA.

 

                  2.14.7. There is no pending or threatened litigation or action

         relating to any Employee Plan or Benefit Arrangement and there are no

          facts or circumstances that could reasonably be expected to give rise

         to any such litigation or action. No investigation, audit or other

         administrative proceeding by the Department of Labor, the Pension

         Benefit Guaranty Corporation, the Internal Revenue Service or other

         governmental agencies are pending, in progress or, to the Knowledge of

         the Company, threatened. All contributions due under each Employee Plan

         or Benefit Arrangement have been paid or accrued on the books of the

         Company in accordance with Department of Labor Regulation

         2510.3-102(b), to the extent applicable.

 

                  2.14.8. To the Knowledge of the Company, no "prohibited

         transaction" (as such term is defined in ERISA ss.406 or Code ss.4975)

         has occurred with respect to any Employee Plan and neither the Company

         nor any ERISA Affiliate has engaged in a transaction described in

         Section 4069 or 4212(c) of ERISA. No circumstances exist pursuant to

         which the Company or any ERISA Affiliate could reasonably be expected

         to incur any material liability for any Tax imposed under ss.ss.4971

         through 4980B of the Code or any liability under ss.ss.502(i) or (l) of

         ERISA.

 

                  2.14.9. Except as set forth on Section 2.14.9 of the

         Disclosure Schedule, neither the Company nor any ERISA Affiliate has

         any accumulated funding deficiency under ss.412 of the Code or any

         termination or withdrawal liability under Title IV of ERISA.

 

<PAGE>

 

                  2.14.10. All contributions, premiums or other payments due

         from the Company to (or under) any Plan have been fully paid or

         adequately provided for on the books and financial statements of the

         Company. All accruals (including, where appropriate, proportional

         accruals for partial periods) have been made in accordance with prior

         practices.

 

                  2.14.11. The Company has not, since January 1, 1997,

         terminated, suspended, discontinued contributions to or withdrawn from

         any Employee Plan subject to Title IV of ERISA, including (without

         limitation) any multiemployer plan, as defined in ss.3(37) of ERISA.

 

         2.15. Real Property.

 

                  2.15.1. Section 2.15.1 of the Disclosure Schedule contains a

         true and correct list of (i) each parcel of real property owned (the

         "Owned Real Property") by the Company, (ii) each parcel of real

         property leased or subleased or otherwise occupied by the Company as

         tenant or subtenant (the "Leased Real Property"; together with the

         Owned Real Property, the "Real Property") together with a true and

         correct list of all such leases, subleases or other similar agreements

         and any amendments, modifications or extensions thereto (the "Real

         Property Leases"), and (iii) all Liens relating to or affecting any

         parcel of Real Property, in each case identifying the owner, lessor and

         lessee thereof.

 

                  2.15.2. The Company has good and marketable title to its Owned

         Real Property, free and clear of all Liens, other than as specifically

         listed in Section 2.15.2 of the Disclosure Schedule.

 

                  2.15.3. Subject to the terms of its leases, the Company has a

         valid and subsisting leasehold estate in and the right to quiet

         enjoyment to the Leased Real Property for the full term of the lease

         thereof. Each Real Property Lease is a legal, valid and binding

         agreement, enforceable in accordance with its terms, of the Company and

         of each other Person that is a party thereto, and except as set forth

         in Section 2.15.3 of the Disclosure Schedule, there is no, and neither

         the Equityholders nor the Company, have knowledge of any, or has

         received any, notice of any uncured default (or any condition or event

         which, after notice or lapse of time or both, would constitute a

         default) thereunder. The Company has not assigned, sublet, transferred,

         hypothecated or otherwise disposed of its interest in any Real Property

         Lease. No penalties are accrued and unpaid under any Real Property

         Lease.

 

                  2.15.4. The Equityholders shall deliver to Purchaser upon the

         execution of this Agreement true and complete copies of all (i) title

         policies, mortgages, deeds of trust, deeds, leases, easements,

         restrictive covenants, certificates of occupancy, and similar

         documents, and all amendments thereto concerning the Owned Real

         Property, and (ii) Real Property Leases and, to the extent reasonably

         available, all other documents referred to in clause (i) of this

         paragraph with respect to the Leased Real Property.

 

                  2.15.5. Except as disclosed in Section 2.15.5 of the

         Disclosure Schedule, the improvements on the Real Property are in good

         operating condition and in a state of good maintenance and repair,

         ordinary wear and tear excepted, are adequate and suitable for the

         purposes for which they are presently being used and, to the knowledge

         of each of the Equityholders and of the Company, there are no

         condemnation or appropriation proceedings pending or threatened against

         Real Property or the improvements thereon.

 

<PAGE>

 

                  2.15.6. Neither the Equityholders nor the Company has any

         knowledge of any claim, action or proceeding, actual or threatened,

         against the Company, the Real Property by any Person which would

         materially affect the future use, occupancy or value of the Real

          Property or any part thereof.

 

         2.16. Tangible Personal Property. The Company is in possession of and

has good and marketable title to, or has valid leasehold interests in or valid

rights under contract to use, all tangible personal property used in the conduct

of its business, including all tangible personal property reflected on the

Financial Statements and tangible personal property acquired since December 31,

2001 other than property disposed of since such date in the ordinary course of

business consistent with past practice and the terms of this Agreement. All such

tangible personal property is free and clear of all Liens, other than Liens

disclosed in Section 2.16 of the Disclosure Schedule, and, as of the Closing

Date, is adequate and suitable for the current use by the Company of the

business presently conducted by it, and is in working order and condition,

ordinary wear and tear excepted, and its use complies in all material respects

with all applicable Laws.

 

         2.17. Intellectual Property Rights.

 

                  2.17.1. Section 2.17.1 of the Disclosure Schedule contains a

         true and complete list of all patents, trademark registrations, service

         mark registrations, and copyright registrations, and, with respect to

          each of the foregoing, applications (including provisional

         applications) owned by the Company (the "Company IP"), and lists any

         proceedings or actions pending as of the date hereof before any court

         or tribunal (including the United States Patent and Trademark Office or

         equivalent authority anywhere in the world) related to the foregoing

         such intellectual property.

 

                  2.17.2. Except as set forth in Schedule 2.17.2 of the

         Disclosure Schedule, the Company has the right to use, sell, or license

         the Company IP.

 

                  2.17.3. Section 2.17.3 of the Disclosure Schedule lists all

         written contracts and licenses (including all inbound licenses) to

         which the Company is a party with respect to (i) any Company IP, or

         (ii) any intellectual property owned by any other Person and used by

         the Company (except licenses to standard, off-the-shelf software or

         mass-marketed software with a license fee of less than $10,000).

 

                  2.17.4. The operation of the business of the Company as

         currently conducted does not, to the Equityholders' and/or the

         Company's knowledge, (i) infringe or misappropriate the intellectual

         property of any other Person (ii) violate any term or provision of any

         license or contract concerning such intellectual property, or (iii)

         violate the privacy or publicity rights of any Person, and the Company

         has not received written notice from any Person alleging any of the

         foregoing (including notice of third party patent or other intellectual

         property rights from a potential licensor of such rights).

 

                  2.17.5. With respect to each item of Company IP that the

         Company uses or would expect to use in the operation of its business,

         all necessary registration, maintenance, renewal fees, annuity fees,

         and taxes in connection with such Company IP have been paid and all

         necessary documents and certificates in connection with such Company IP

         have been filed with the relevant patent, copyright, trademark, or

         other authorities in the United States or foreign jurisdictions, as the

         case may be, for the purposes of maintaining such Company IP.

 

<PAGE>

 

                  2.17.6. There are no contracts or licenses between the Company

         and any other Person with respect to Company IP under which there is

         any dispute regarding the scope of such contract or license, or

         performance under such contract or license, including with respect to

         any payments to be made or received by the Company thereunder.

 

                  2.17.7. To the knowledge of the Company and/or the

         Equityholders, no Person is infringing or misappropriating any Company

         IP.

 

                  2.17.8. The Company has taken commercially reasonable steps to

         protect and preserve ownership of its rights in Company IP and

         confidential information and trade secrets of the Company.

 

                  2.17.9. No Company IP is subject to any order, action, or

         proceeding, that restricts in any manner the use, transfer, or

         licensing of any Company IP or that affects the validity, use, or

         enforceability of such Company IP.

 

                  2.17.10. The Company's products comply in all material

         respects with all applicable standards and with the feature

         specifications and performance standards set forth in product data

         sheets of the Company. There are no outstanding claims for breach of

         warranties by the Company in connection with the foregoing.

 

         2.18. Contracts and Default.

 

                  2.18.1. Section 2.18.1 of the Disclosure Schedule contains a

         true and complete list of every Contract (true and complete copies, or,

         if none, reasonably complete and accurate written descriptions of

         which, together with all amendments and supplements thereto and all

         waivers of any terms thereof, of which have been delivered to Purchaser

         prior to the execution of this Agreement), to which the Company is a

         party, a guarantor or by which any of its Assets is bound which

         involves any commitment by, or benefit to, the Company valued, in the

         aggregate, in excess of $10,000.00 per year.

 

                  2.18.2. Each Contract disclosed in Section 2.18.1 of the

         Disclosure Schedule is in full force and effect and constitutes a

         legal, valid and binding agreement, enforceable in accordance with its

         terms, of each party thereto; and except as disclosed in Section 2.18.2

         of the Disclosure Schedule, neither the Company nor, to the knowledge

         of any the Equityholders, any other party to such Contract is, or has

         received notice that it is, in violation or breach of or default under

         any such Contract (or with notice or lapse of time or both, would be

         violation or breach of or default under any such Contract).

 

                  2.18.3. Except as disclosed in Section 2.18.3 of the

         Disclosure Schedule, the Company is not a party to or bound by any

         Contract that has been or could reasonably be expected to be,

         individually or in the aggregate with any other such Contracts,

         materially adverse to the business or condition of the Company.

 

                  2.18.4. To the extent any of the guaranties for the benefit of

         the Company or any of its Assets are not integrated with Contracts

         disclosed in Section 2.18.1 to the Disclosure Schedule, each such

         guaranty is in full force and effect and constitutes a legal, valid and

         binding agreement, enforceable in accordance with its terms, or each

         party thereto; and neither the guarantor thereunder nor, to the

         knowledge of the Equityholders or the Company or any other party to

         such guaranty is, or has received notice that it is, in violation or

         breach of or default under any such guaranty (or with notice or lapse

         of time or both, would be in violation or breach of default under any

         such guaranty).

 

<PAGE>

 

                  2.18.5. The Company has performed in all respects, or is now

         performing in all respects, the obligations of, and none are in default

         (or would by the lapse of time and/or the giving of notice be in

         default in any respect) the Company in respect of every Contract,

         except for any failure to perform or default which would not,

         individually or in the aggregate, reasonably be expected to have an

         adverse effect on the Company. No third party has notified the Company

          of any material claim, dispute or controversy with respect to any of

         the Contracts of the Company, nor has the Company received notice or

         warning of alleged nonperformance, delay in delivery or other

         noncompliance by the Company with respect to its obligations under any

         of those contracts, nor are there any facts which exist indicating that

         any of those contracts may be totally or partially terminated or

         suspended by the other parties thereto.

 

                   2.18.6. Except as set forth in Section 2.18.1 of the

         Disclosure Schedule, the execution and delivery by the Company of this

         Agreement does not, and the consummation by the Company of the

         transactions and compliance by it with the provisions hereof, will not,

         directly or indirectly (with or without notice or lapse of time)

         trigger any change of control, prohibition upon assignment or similar

         provision of, or breach any provision of, or give any Person the right

         to declare a default or exercise any remedy under, or to accelerate the

         maturity or performance of, or payment under, or to cancel, terminate

         or modify any Contract.

 

         2.19. Licenses. Section 2.19 of the Disclosure Schedule contains a true

and complete list of all Licenses used in and material to the business or

operations of the Company, setting forth the owner, the function and the

expiration and renewal date of each. Prior to the execution of this Agreement,

the Equityholders or the Company have delivered to Purchaser true and complete

copies of all such Licenses. Except as disclosed in Section 2.19 of the

Disclosure Schedule:

 

                  2.19.1. the Company owns or validly holds all Licenses that

         are material to its respective business or operations;

 

                  2.19.2. each license listed in Section 2.19 of the Disclosure

         Schedule is valid, binding and in full force and effect;

 

                  2.19.3. neither the Equityholders nor the Company is, or has

         received any notice that it is in default (or with the giving of notice

         of lapse of time or both, would be in default) under any such License;

         and

 

                  2.19.4. the transactions contemplated in this Agreement will

         not violate any such License or give any other party thereto rights to

         terminate the License or change the terms thereof.

 

         2.20. Insurance. Section 2.20 of the Disclosure Schedule contains a

true and complete list (including the names of the insurers, the expiration

dates thereof, the period of time covered thereby and a brief description of the

interests insured thereby) of all liability, property, workers' compensation,

directors' and officers' liability and other insurance policies currently in

effect, and in effect since January 1, 2000, that insure the business,

operations or employees of the Company or affect or relate to the ownership, use

or operation of any of the Assets of the Company and that (i) have been issued

to the Company, or (ii) have been issued to any Person (other than the Company)

for the benefit of the Company. Each policy listed in Section 2.20 of the

 

<PAGE>

 

Disclosure Schedule is valid and binding and in full force and effect, all

premiums due thereunder have been paid when due and neither the Equityholders

nor the Company or the Person to whom such policy has been issued has received

any notice of cancellation or termination in respect of any such policy or is in

default thereunder, and the Company does not know of any reason or state of

facts that could lead to the cancellation of such policies. The insurance

policies listed in Section 2.20 of the Disclosure Schedule (i) in light of the

business, operations and Assets of the Company are in amounts and have coverages

that are reasonable and customary for Persons engaged in such businesses and

operations and having such Assets and (ii) are in amounts and have coverages as

required by any Contract to which the Company is a party. Section 2.20 of the

Disclosure Schedule contains a list of all claims made under any insurance

policies covering the Company since January 1, 2000. Neither the Equityholders

nor the Company have received notice that any insurer under any policy referred

to in this Section is denying liability with respect to a claim thereunder or

defending under a reservation of rights clause.

 

         2.21. Affiliate Transactions. Except as disclosed in the Financial

Statements or in Section 2.21 of the Disclosure Schedule, there are no

Liabilities between the Company and any current or former officer, director,

stockholder, Affiliate of the Company or any Affiliate of any such officer,

director, stockholder or Affiliate, and the Company does not provide or cause to

be provided any assets, services or facilities to any such current or former

officer, director, stockholder or Affiliate.

 

         2.22. Employees; Labor Relations. Except as disclosed in Section 2.22

of the Disclosure Schedule, the Company is not a party to or otherwise bound by

any collective bargaining agreement, contract or other agreement or

understanding with a labor union or labor organization. To the knowledge of the

Equityholders and/or the Company, there are no activities or proceedings of any

labor union to organize any employees of the Company, and there are no strikes,

material slowdowns, work stoppages or lockouts, or, to the Knowledge of the

Company, threats thereof, by or with respect to any employees of the Company.

The Company is and has been in compliance in all material respects with all

applicable laws regarding employment practices, terms and conditions of

employment, and wages and hours (including, without limitation, ERISA, WARN or

any similar state or local law). The Company has not received any notice from

any of its employees that any such employee is terminating, or will terminate,

as a result of the transactions contemplated by this Agreement, his or her

employment with the Company. Section 2.22 of the Disclosure Schedule sets forth

the Company's workers' compensation claims history since January 1, 2000.

 

         2.23. Environmental Matters.

 

                  2.23.1. The Company has obtained and holds all Environmental

         Permits necessary to operate and conduct its business.

 

                  2.23.2. Except as disclosed in Section 2.23.2 of the

         Disclosure Schedule:

 

                           2.23.2.1. The Company is, and at all times has been,

                  in full compliance with, and has not been and is not in

                  violation of or liable under, any Environmental Law. Neither

                  the Equityholders nor the Company has any basis to expect, nor

                  has any of them or any other Person for whose conduct they may

                   be held to be responsible received, any actual or threatened

                  Order, notice, or other communication from (A) any

                  Governmental Body or private citizen acting in the public

                  interest, or (B) the current or prior owner or operator of any

                  Facilities, of any actual or potential violation or failure to

 

<PAGE>

 

                  comply with any Environmental Law, or of any actual or

                  threatened obligation to undertake or bear the cost of any

                  Environmental, Health, and Safety Liabilities with respect to

                  any of the Facilities or any other properties or assets

                  (whether real, personal, or mixed) in which the Company has

                   had an interest, or to the knowledge of the Equityholders

                  and/or the Company, with respect to any property or Facility

                  at or to which Hazardous Materials were generated,

                  manufactured, refined, transferred, imported, used, or

                  processed by the Company or any other Person for whose conduct

                  they are or may be held responsible, or from which Hazardous

                  Materials have been transported, treated, stored, handled,

                  transferred, disposed, recycled, or received;

 

                           2.23.2.2. There are no pending or, to the knowledge

                  of the Equityholders or the Company, threatened claims,

                  encumbrances, or other restrictions of any nature, resulting

                  from any Environmental, Health, and Safety Liabilities or

                  arising under or pursuant to any Environmental Law, with

                  respect to or affecting any of the Facilities or any other

                  properties and assets (whether real, personal, or mixed) in

                  which the Equityholders or the Company has or had an interest;

 

                           2.23.2.3. Neither the Equityholders nor the Company

                  has knowledge of, nor has any of them or any other Person for

                  whose conduct they are or may be held responsible received any

                  citation, directive, inquiry, notice, Order, summons, warning,

                  or other communications that relates to Hazardous Activity,

                  Hazardous Materials, or any alleged, actual, or potential

                  violation or failure to comply with any Environmental Law, or

                  of any Environmental, Health, and Safety Liabilities with

                  respect to any of the Facilities or any other Assets in which

                  the Company had an interest, or, to the knowledge of the

                  Equityholders and/or the Company, with respect to any Facility

                  to which Hazardous Materials generated, manufactured, refined,

                  transferred, imported, used, or processed by the

                  Equityholders, the Company, or any other Person for whose

                  conduct it or they are or may be held responsible, have been

                  transported, treated, stored, handled, transferred, disposed,

                  recycled, or received; and

 

                           2.23.2.4. Neither the Company, the Equityholders nor

                  any other Person for whose conduct it or they may be held

                  responsible, has any Environmental, Health, and Safety

                  Liabilities with respect to the Facilities, any other Assets

                  (whether real, personal, or mixed) in which the Company or the

                  Equityholders (or any predecessor thereof), has or had an

                  interest, or , to the knowledge of the Equityholders and/or

                   the Company, at any property geologically or hydrologically

                  adjoining the Facilities or any such Assets;

 

                  2.23.3. There are no Hazardous Materials present on or in the

         Environment at the Facilities or, to the knowledge of the Equityholders

         and/or the Company, at any geologically or hydrologically adjoining

         property, including any Hazardous Materials contained in barrels, above

         or underground storage tanks, landfills, land deposits, dumps,

         equipment (whether moveable or fixed) or other containers, either

         temporary or permanent, and deposited or located in land, water, sumps,

         or any other part of the Facilities or such adjoining property, or

         incorporated into any structure therein or thereon. Neither the Company

         nor any other Person for whose conduct it may be held responsible, or

         any other Person, has permitted or conducted, or is aware of, any

         Hazardous Activity conducted with respect to the Facilities or any

         other properties or assets (whether real, personal, or mixed) in which

         the Equityholders or the Company has or had an interest except in full

         compliance with all applicable Environmental Laws.

 

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                  2.23.4. To the knowledge of the Equityholders and/or of the

         Company, there has been no Release or any threat of Release of any

         Hazardous Materials (i) at or from the Facilities, or (ii) at any other

         locations where any Hazardous Materials were generated, manufactured,

         refined, transferred, produced, imported, used, or processed from or by

         the Facilities, or (iii) from or by any other properties and assets

         (whether real, personal, or mixed) in which the Company has or had an

         interest, or (iv) at any geologically or hydrologically adjoining

         property.

 

                  2.23.5. The Equityholders have caused the Company to deliver

         to Purchaser true and complete copies and results of any reports,

         studies, analyses, tests, and monitoring possessed or initiated by the

         Equityholders or the Company pertaining to Hazardous Materials or

         Hazardous Activities in, on, or under the Facilities, or concerning

         compliance by the Equityholders, the Company or any other Person for

         whose conduct it or they are or may be held responsible, with

         Environmental Laws.

 

                  2.23.6. There are no Liens arising under or pursuant to any

         Environmental Law on any Owned Real Property, Leased Real Property and

         there are no facts, circumstances, or conditions that could reasonably

         be expected to restrict, encumber, or result in the imposition of

          special conditions that could reasonably be expected to restrict,

         encumber, or result in the imposition of special conditions under any

         Environmental Law with respect to the ownership, occupancy,

         development, use, or transferability of any Real Property.

 

                  2.23.7. There are no (i) underground storage tanks, active or

         abandoned, (ii) polychlorinated biphenyl containing equipment, or (iii)

         asbestos containing material, at any Owned Real Property, or, to the

         knowledge of the Equityholders and/or the Company, at any Leased Real

         Property.

 

                  2.23.8. There have been no environmental investigations,

         studies, audits, tests, reviews or other analyses conducted by, on

         behalf of, or which are in the possession of the Equityholders or the

         Company with respect to any Asset of, or property that is adjacent to

         an Asset of the Company which have not been delivered to Purchaser

         prior to execution of this Agreement.

 

         2.24. Substantial Customers and Suppliers. Section 2.24.1 of the

Disclosure Schedule lists the ten (10) largest customers of the Company on the

basis of revenues for goods sold or services provided for the twelve month

period ending December 31, 2003. Section 2.24.2 of the Disclosure Schedule lists

the ten (10) largest suppliers of the Company on the basis of cost of goods or

services purchased during the twelve month period ending December 31, 2003.

Except as disclosed in Section 2.24.3 of the Disclosure Schedule, to the

knowledge of the Equityholders and the Company, no such customer or supplier is

insolvent or threatened with bankruptcy or insolvency.

 

         2.25. Accounts Receivable. Except as set forth in Section 2.25 of the

Disclosure Schedule, the accounts and notes receivable of the Company reflected

on the balance sheets included in the Financial Statements, and all accounts and

notes receivable arising subsequent to such date, (i) arose from bona fide sales

transactions in the ordinary course of business consistent with past practice

and are payable on ordinary trade terms, (ii) are legal, valid and binding

obligations of the respective debtors enforceable in accordance with their

respective terms, subject to applicable bankruptcy, insolvency, moratorium or

similar laws for the relief of debtors, (iii) to the knowledge of the

Equityholders and/or the Company are not subject to any valid set-off or

counterclaim, (iv) do not represent obligations for goods sold on consignment,

 

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on approval or on a sale-or-return basis or subject to any other repurchase or

return arrangements, and (v) are not subject of any Actions or Proceedings

brought by or on behalf of the Company. Section 2.25 of the Disclosure Schedule

sets forth (x) a description of any security arrangements and collateral

securing the repayment or other satisfaction of receivables of the Company and

(y) all jurisdictions in which the records relating to accounts and notes

receivable are located.

 

         2.26. Other Negotiations; Brokers. Neither the Equityholders, nor the

Company, nor any of their respective Affiliates (nor any investment banker,

financial advisor, attorney, accountant or other Person retained by or acting

for or on