MERGER AGREEMENT

Exhibit 10.4

MERGER AGREEMENT

BY AND AMONG

UNITED NATURAL FOODS, INC.,

UNFI MERGER SUB, INC.,

DISTRIBUTION HOLDINGS, INC.,

AND

MILLBROOK DISTRIBUTION SERVICES INC.

Dated as of October 5, 2007

MERGER AGREEMENT

THIS MERGER AGREEMENT (this “ Agreement ”), dated as of October 5, 2007, by and among UNITED NATURAL FOODS, INC., a Delaware corporation (“ Buyer ”), UNFI MERGER SUB, INC., a Delaware corporation (“ Merger Sub ”), DISTRIBUTION HOLDINGS, INC., a Delaware corporation (the “ Holding Company ”), and MILLBROOK DISTRIBUTION SERVICES INC., a Delaware corporation (the “ Company ”).

RECITALS

WHEREAS , Buyer desires to acquire by merger the Holding Company, the sole asset of which is 100% of the issued and outstanding common stock of the Company, and Buyer has organized and capitalized Merger Sub for the purpose of effecting such acquisition;

WHEREAS , the respective Boards of Directors of Buyer, Merger Sub, the Holding Company and the Company have approved and declared advisable the merger of Merger Sub with and into the Holding Company, with the Holding Company being the surviving corporation, upon the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE , in consideration of the premises and the mutual representations, warranties, covenants, and promises set forth in this Agreement, and intending hereby to be legally bound subject to the terms and conditions set forth in this Agreement, Buyer, Merger Sub, the Holding Company and the Company hereby agree as follows:

ARTICLE I

DEFINITIONS

Capitalized words and phrases used and not otherwise defined in this Agreement shall have the following meanings:

Affiliate :  means any Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise and, in any event and without limitation of the previous sentence, any Person owning more than 10% of the voting securities of a second Person shall be deemed to control that second Person.

Aggregate Merger Consideration :  means $84,000,000 less all principal, fees, charges and accrued and unpaid interest which is outstanding under (i) the Credit Agreement (other than the letters of credit issued under the Credit Agreement for which Back-to-Back LCs will be provided pursuant to Section 9.10 hereof) and (ii) the Buyer Loan Agreements as of the Effective Time.

Back-to-Back LCs :  shall have the meaning set forth in Section 9.10.

Business :  means warehousing and distribution of food and health and beauty products, and, in the case of general merchandise, the distribution of general merchandise to supermarkets and retail grocery stores.

Business Day :  means any other day than Saturday, Sunday or any day on which commercial banks in New York are authorized or required to close.

Buyer Disclosure Schedule :  shall have the meaning set forth in Article IV.

Buyer Indemnified Parties :  shall have the meaning set forth in Section 11.03(a).

Buyer Loan Agreements :  means, collectively, (i) the Holding Company’s Secured Promissory Note issued to the Buyer in the original principal amount of $5,000,000 (the “Note”); (ii) the Holding Company’s Pledge Agreement of the common stock of the Company for the benefit of the Buyer; (iii) the Guaranty of the Company guaranteeing such Note and (iv) the Mortgage and Security Agreement of the Company securing the Guaranty.

Cap :  shall have the meaning set forth in Section 11.03(c).

Capital Stock :  means the Common Stock and the Preferred Stock, in each case on a fully diluted basis, assuming the exercise of all options and warrants and conversion of all equity interests in the Holding Company into shares of Common Stock or Preferred Stock, as the case may be.

Certificate of Merger :  means the Certificate of Merger by and among Buyer, Merger Sub and the Holding Company, substantially in the form of Exhibit A attached hereto.

Certificates :  shall have the meaning set forth in Section 2.11(b).

Claim Notice :  means written notification pursuant to Section 11.04(a) of a Third Party Claim as to which indemnification under Section 11.03(a) or 11.03(b), as the case may be, is sought by an Indemnified Party, enclosing a copy of all material papers served, if any, and specifying in reasonable detail the nature of and basis for such Third Party Claim and for the Indemnified Party’s claim against the Indemnifying Party under Section 11.03(a) or 11.03(b), as the case may be, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such Third Party Claim.

Closing :  shall have the meaning set forth in Section 2.03.

Closing Date :  shall have the meaning set forth in Section 2.03.

COBRA :  means the Consolidated Omnibus Budget Reconciliation Act of 1986, codified at Part 6 of Title I of ERISA and section 4980B of the Code, and similar applicable state Laws.

Code :  means the Internal Revenue Code of 1986, as amended.

Common Stock :  means the common stock, par value $0.01 per share, of the Holding Company.

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Common Stock Conversion Amoun t:  means the Aggregate Merger Consideration less the sum of the Series A Liquidation Payment and the Series B Liquidation Payment, with the difference divided by the number of shares of Common Stock issued and outstanding immediately prior to the Effective Time.

Common Stockholders :  means the record holders of the issued and outstanding shares of Common Stock.

Companies :  means the Holding Company and the Company as they are sometimes referred to collectively.

Company Disclosure Schedule :  shall have the meaning set forth in Article III, as it shall be amended in accordance with this Agreement.

Confidentiality Agreement :  shall have the meaning set forth in Section 7.03(b).

Contract :  means any agreement, license, sublicense, sales order, commitment, lease, evidence of Indebtedness, mortgage, indenture, security agreement or other contract, instrument, understanding or arrangement, oral or written, that is binding on any Person or any of its property under applicable Laws. Purchase orders are specifically excluded from this definition.

Credit Agreement :  means the Credit Agreement, dated as of February 22, 2007, by and among the Company, the lenders that are a party thereto and JPMorgan Chase Bank, N.A., as administrative agent, as amended.

Current Site :  shall have the meaning set forth in Section 3.09(b).

DGCL :  means the Delaware General Corporation Law, as amended.

Dispute Period :  means the period ending thirty (30) days following receipt by an Indemnifying Party of either a Claim Notice or an Indemnity Notice.

Dissenting Shares :  shall have the meaning set forth in Section 2.09(a).

Effective Time :  shall have the meaning set forth in Section 2.02.

Environmental Claim :  means any and all administrative or judicial actions, suits, orders, claims, liens, notices of violations, investigations (by any Governmental or Regulatory Authority), complaints, or proceedings, whether criminal or civil, by any Person (including, but not limited to, any Governmental or Regulatory Authority based upon, relating to, alleging, asserting, or claiming any actual or potential (i) violation of or liability under any Environmental Law, (ii) violation of any environmental Permit, or (iii) liability for investigatory costs, cleanup costs, removal costs, remedial costs, response costs, natural resource damages, property damage, personal injury, fines, or penalties arising out of, based on, resulting from, or related to the presence, Release, or threatened Release into the environment, of any Hazardous Materials at any location, including, but not limited to, any off-site location to which Hazardous Materials were sent for handling, storage, treatment, or disposal.

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Environmental Law :  means any applicable Law that relates primarily to the environment (including indoor and outdoor air, water vapor, surface water, groundwater, wetlands, drinking water supply, surface or subsurface land), preservation or reclamation of natural resources, or to the management, Release or threatened Release of Hazardous Materials.

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

ERISA Affiliate :  means any Person which is (or at any relevant time was or will be) a member of a “controlled group of corporations” with, under “common control” with, or a member of an “affiliate service group” with the Companies as such terms are defined in Section 414(b), (c), (m) or (o) of the Code.

Escrow Agent :  means the Person from time to time serving as the escrow agent under the Escrow Agreement.

Escrow Agreement :  means the Escrow Agreement, dated as of the Closing Date, by and among the Stockholders’ Representative, Buyer and the Escrow Agent, substantially in the form of Exhibit B attached hereto.

Escrow Amount :  means $12,500,000.

Escrow Fund :  shall have the meaning set forth in Section 2.10(a).

GAAP :  means United States generally accepted accounting principles, consistently applied.

Governmental or Regulatory Authority :  means any government or governmental or regulatory authority or body thereof, or political subdivision thereof, whether Federal, state, local or foreign, or any agency, instrumentally or authority thereof, or any court.

Hazardous Materials :  means (i) any and all radioactive materials or wastes, petroleum (including crude oil or any fraction thereof) or petroleum distillates, asbestos or asbestos containing materials, urea formaldehyde foam, and (ii) any other wastes, materials, chemicals or substances regulated pursuant to any Environmental Law.

HSR Act:   means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

Indebtedness :  of any Person means all obligations (i) of such Person (A) for borrowed money, (B) evidenced by notes, bonds, debentures, letters of credit, drafts or similar instruments, (C) for the deferred purchase price of goods or services, (D) under capital leases, (E) accrued interest with respect to any of the items described in clauses (A) through (D) above, or (F) in the nature of guarantees of the obligations described in clauses (A) through (E) above of any other Person, or (ii) of any other Person secured by a Lien on the property or assets of such first Person. Indebtedness does not include trade payables or other accounts payable incurred in the ordinary course of business.

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Indemnified Party :  means any Person claiming indemnification under any provision of Article X or XI.

Indemnifying Party :  means any Person against whom a claim for indemnification is being asserted under any provision of Article X or XI.

Indemnity Notice :  means written notification pursuant to Section 11.04 of a claim for indemnity under Article XI by an Indemnified Party, specifying the nature of and basis for such claim, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such claim.

Intellectual Property Rights :  shall have the meaning set forth in Section 3.17.

Intended Uses :  shall have the meaning set forth in Section 3.15(a).

IRS :  means the Internal Revenue Service.

Knowledge of the Company :  means the actual conscious knowledge, or the knowledge that would be expected to have been obtained after reasonable inquiry, of either of the Principal Stockholders, Mr. Reuven Har-Evan, James A. Cohen, Esq. and Elizabeth Ganss.

Laws :  means all laws, common law, statutes, rules, regulations, ordinances, constitutions, treaties, compacts, directives, codes, Orders, Permits, authorizations, variances, rules, judicial decisions, governmental agreements and other pronouncements having the effect of law of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental or Regulatory Authority.

Lease :  shall have the meaning set forth in Section 3.15(b).

Liabilities :  means any and all debts, liabilities, commitments and obligations, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or not accrued, known or unknown, whenever or however arising (including whether arising out of any Contract or tort based on negligence or strict liability) and whether or not the same would be required by GAAP to be reflected in any financial statements or disclosed in the notes thereto.

Liens :  means any mortgage, pledge, assessment, security interest, lease, lien, equity interest, adverse claim, levy, charge or other encumbrance, of every kind and character.

Loss :  means any and all Liabilities, damages, fines, penalties, deficiencies, losses and out-of-pocket expenses (including without limitation interest, court costs, reasonable fees of attorneys, accountants and other experts or other reasonable expenses of litigation or other proceedings).

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Material Adverse Effect :  means any change, effect, event, circumstance, occurrence, state of facts or development that is materially adverse to the Business, assets, liabilities, results of operation, condition (financial or otherwise), properties or prospects of the Companies, taken as a whole, or a material impairment of or delay in the ability of the Companies to perform their obligations hereunder and consummate the Merger and the other transactions contemplated hereby; provided , however , that a Material Adverse Effect will not be deemed to result from or arise out of any of the following unless such adverse effect disproportionately impacts the Companies, either individually or together: (a) any change in the general economic conditions in the United States or any other country in which the Business is conducted by the Company; (b) any adverse change generally affecting businesses operating in the industries or markets in which the Company operates; (c) any change in the accounting requirements applicable to the Business; (d) any change in any Law applicable to the Business, including, without limitation, the proposal or adoption of any new Law or any change in the interpretation or enforcement of any existing Law; or (e) any change resulting from the execution of this Agreement or the consummation of the Merger and any of the other transactions contemplated hereby, including, without limitation, any change resulting from or arising out of any announcement relating to this Agreement.

Merger :  shall have the meaning set forth in Section 2.01.

Order :  means any writ, judgment, decree, injunction, award, settlement or stipulation, decision, determination, ruling, subpoena or verdict or similar order entered, issued, made or rendered by any Governmental or Regulatory Authority (in each such case whether preliminary or final).

Paying Agent :  means a nationally-recognized commercial banking institution reasonably satisfactory to Buyer and the Stockholders’ Representative, which shall act as the paying agent for the Payment Fund.

Payment Fund :  shall have the meaning set forth in Section 2.11(a).

Permit :  means all licenses, permits, orders, consents, approvals, registrations and authorizations under all Laws and Governmental or Regulatory Authorities.

Permitted Liens :  means (i) Liens securing the liens of materialmen, carriers, landlords and like persons, all of which are not yet due and payable, (ii) Liens for Taxes not yet due and payable or that are being contested in good faith and for which appropriate reserves have been established in accordance with GAAP, and (iii) Liens set forth in Section 3.22 of the Company Disclosure Schedule.

Person :  means any natural person, corporation, general partnership, limited partnership, limited liability company, proprietorship, other business organization, trust, union, association or Governmental or Regulatory Authority.

Plan :  means any pension, profit-sharing or other retirement, bonus, deferred compensation, incentive compensation, equity purchase, equity appreciation, restricted equity, equity option or other equity-based (whether real or phantom), vacation pay, sick pay, severance or termination pay, retention, disability, death benefit, retention, hospitalization, fringe benefit, medical, dental, vision, life or other insurance or other plan, program, policy, arrangement or Contract established, maintained, contributed to or required to be established, maintained or contributed to by the Companies or any ERISA Affiliate, in each case, providing or intended to provide benefits to any employee, and in each case whether written or oral, informal or formal, and subject to ERISA or not.

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Pre-Closing Tax Period   means any Tax period ending on or before the Closing Date; and, with respect to a Tax period that begins on or before the Closing Date and ends thereafter, the portion of such Tax period ending on and including the Closing Date.

Preferred Stock :  means the Series A Preferred Stock and the Series B Preferred Stock.

Principal Stockholders :  means Mr. Richard A. Bernstein and Mr. Robert A. Sigel.

Real Estate :  shall have the meaning set forth in Section 3.15(a).

Receivables :  means any and all accounts receivable, notes and other amounts receivable by the Companies arising from the conduct of the Business of the Companies, before the Closing Date, whether or not in the ordinary course, together with all unpaid financing charges accrued thereon.

Release :  means any spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, dumping, pouring, emanation or migration of any Hazardous Material in, into, onto, or through the environment (including ambient air, surface water, ground water, soils, land surface, subsurface strata) or within any building, structure, facility or fixture.

Representatives :  means any officer, director, principal, agent, stockholder, employee, counsel, consultant, independent auditor or other representative of a Person.

Series A Liquidation Payment :  means the amount per share equal to the Liquidation Preference as set forth in Section 7 of the Designation of Series A Preferred Stock attached as Exhibit A to the Certificate of Incorporation of the Holding Company in effect immediately prior to the Effective Time.

Series A Preferred Stock :  means the Series A Preferred Stock, no par value per share, of the Holding Company.

Series B Liquidation Payment :  means the amount per share equal to the Liquidation Preference as set forth in Section 7 of the Designation of Series B Preferred Stock attached as Exhibit B to the Certificate of Incorporation of the Holding Company in effect immediately prior to the Effective Time.

Series B Preferred Stock :  means the Series B Preferred Stock, no par value per share, of the Holding Company.

Stockholder Indemnified Parties :  shall have the meaning set forth in Section 11.03(b).

Stockholders :  means the record holders of the issued and outstanding shares of Capital Stock.

Stockholders’ Representative :  shall have the meaning set forth in Section 7.06(a).

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Subsidiary or Subsidiaries :  means any corporation, limited liability company, partnership, joint venture or any other entity of which a Person (either alone or through or together with any other subsidiary), owns, directly or indirectly, securities or other interests generally entitled to at least 50% of the vote for the election of the board of directors or other similar governing body of such corporation, limited liability company, partnership, joint venture or other legal entity.

Surviving Corporation :  shall have the meaning set forth in Section 2.01.

Tax or Taxes :  means (i) all Federal, state, county, local, municipal, foreign and other taxes, assessments, duties or similar charges of any kind whatsoever, including all corporate franchise, income, sales, use, ad valorem, receipts, value added, profits, license, withholding, payroll, employment, excise, premium, property, customs, net worth, capital gains, transfer, stamp, documentary, social security, environmental, alternative minimum, occupation, recapture and other taxes and any liability under unclaimed property, escheat or similar laws, and including all interest, penalties and additions imposed with respect to such amounts, and all amounts payable pursuant to any agreement or arrangement with respect to Taxes imposed by any Taxing Authority, (ii) liability for the payment of any amount of the type described in clause (i) as a result of being or having been before the Closing Date a member of an affiliated, consolidated, combined or unitary group, or a party to any agreement or arrangement as a result of which liability of any of the Companies to a Taxing Authority is determined or taken into account with reference to the activities of any other Person, and (iii) liability for the payment of any amount as a result of being party to any Tax Sharing Agreement or with respect to the payment of any amount imposed on any Person of the type described in clauses (i) or (ii) as a result of any existing express or implied agreement or arrangement (including, but not limited to, an indemnification agreement or arrangement).

Tax Returns :  means all returns, declarations of estimated tax payments, reports, estimates, information returns and statements, including any related or supporting information with respect to any of the foregoing, filed or to be filed with any Taxing Authority in connection with the determination, assessment, collection or administration of any Taxes.

Taxing Authority :  means the IRS and any other domestic, foreign, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising tax regulatory authority.

Tax Sharing Agreement :  means all existing agreements or arrangements (whether written or not written) binding either of the Companies that provide for the allocation, apportionment, sharing or assignment of any Tax liability or benefit, or the transfer or assignment of income, revenues, receipts or gains for the purpose of determining any Person’s Tax liability.

Third Party Claim :  shall have the meaning set forth in Section 11.04(a).

Third Party Transaction :  shall have the meaning set forth in Section 7.04.

Threshold :  shall have the meaning set forth in Section 11.03(c).

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While “fraud” is not a defined term in this Agreement, for the avoidance of doubt the parties acknowledge that in order to meet the requirements for fraud under this Agreement the action or inaction must be willful and knowing.

ARTICLE II

THE MERGER

2.01         Merger . Subject to the terms and conditions of this Agreement and in accordance with the DGCL, at the Effective Time (a) Merger Sub shall be merged with and into the Holding Company (the “ Merger ”), (b) the separate existence of Merger Sub shall cease, and (c) the Holding Company shall be the surviving corporation (the “ Surviving Corporation ”) and shall continue its legal existence under the DGCL.

2.02         Effective Time . Prior to the Closing, the Holding Company shall prepare, and on the Closing Date the Holding Company shall file with the Secretary of State of the State of Delaware the Certificate of Merger executed in accordance with Section 251 of the DGCL and shall make all other filings or recordings required under the DGCL. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware (the time the Merger becomes effective is referred to herein as the “ Effective Time ”).

2.03         Closing. The closing of the Merger (the “ Closing ”) shall take place at the offices of Covington & Burling, LLP, located at 620 Eighth Avenue, New York, New York 10018-1405, at 10:00 a.m. local time on the second Business Day following the satisfaction or waiver of all conditions to the obligations of the parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective parties will take at the Closing itself), or such other date as the parties may mutually determine (the “ Closing Date ”).

2.04         Effects . At the Effective Time, the effects of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Holding Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, and duties of the Holding Company and Merger Sub shall become the debts, liabilities, obligations and duties of the Surviving Corporation.

2.05         Certificate of Incorporation . The Certificate of Incorporation of the Surviving Corporation shall be amended at the Effective Time to read in the form of Exhibit C attached hereto. As so amended, such Certificate of Incorporation shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided therein and by applicable Law.

2.06         By-Laws . The By-Laws of Merger Sub, as in effect immediately prior to the Effective Time, shall be adopted at the Effective Time as the By-Laws of the Surviving Corporation, until thereafter amended as provided therein and by applicable Law.

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2.07         Directors and Officers . From and after the Effective Time, the Board of Directors and officers of Merger Sub at the Effective Time shall be the Board of Directors and officers of the Surviving Corporation, each to hold office until the earlier of their resignation or removal or their respective successors are duly elected or appointed and qualified.

(a)   At the Effective Time, by virtue of the Merger and without any action on the part of the Holding Company or the Stockholders:

(i)             each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation;

(ii)            each share of Capital Stock held in the treasury of the Holding Company and each share of Capital Stock owned by Buyer shall be canceled without any conversion thereof and no payment or distribution shall be made with respect thereto; and

(iii)          the then issued and outstanding shares of Capital Stock shall be converted into the sum in cash equal to the Aggregate Merger Consideration to be distributed in accordance with this Article II, without interest or dividends. Subject to the provisions of Section 2.09, each share of Capital Stock issued and outstanding immediately prior to the Effective Time (other than (A) shares canceled in accordance with Section 2.08(a)(ii) and (B) Dissenting Shares) shall be converted as follows:

(A)             each share of Common Stock shall be converted into the right to receive an amount in cash, without interest or dividends, equal to the Common Stock Conversion Amount;

(B)             each share of Series A Preferred Stock shall be converted into the right to receive an amount in cash, without interest or dividends, equal to the Series A Liquidation Payment; and

(C)             each share of Series B Preferred Stock shall be converted into the right to receive an amount in cash, without interest or dividends, equal to the Series B Liquidation Payment.

In no event shall the aggregate consideration payable by Buyer, Merger Sub or the Surviving Corporation to the Stockholders in connection with the Merger or the other transactions contemplated hereby exceed the Aggregate Merger Consideration.

(b)   After the Effective Time, all such shares of Capital Stock shall no longer be outstanding and shall automatically be canceled and retired, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto other than the right to receive the cash consideration to be paid in consideration therefor upon the surrender of such certificate.

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(a)   Notwithstanding any provision of this Agreement to the contrary, shares of Capital Stock that are outstanding immediately prior to the Effective Time and which are held by Stockholders who shall not have voted in favor of the Merger or consented thereto in writing and who shall have demanded properly in writing appraisal for such shares in accordance with Section 262 of the DGCL (collectively, the “ Dissenting Shares ”) shall not be converted into or represent the right to receive the consideration set forth in Section 2.08. Such Stockholders shall be entitled to receive such consideration as is determined to be due with respect to such Dissenting Shares in accordance with the provisions of Section 262 of the DGCL; provided , however , that all Dissenting Shares held by Stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such shares under Section 262 of the DGCL shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the consideration specified in Section 2.08, without any interest thereon, upon surrender, in the manner provided in Section 2.11, of the certificate or certificates that formerly evidenced such Dissenting Shares (less, in the case of Common Stockholders, the cash allocable to such Common Stockholder to be deposited in the Escrow Fund).

(b)   Prior to the Effective Time, the Holding Company shall (i) give to the Buyer prompt notice of any demands for appraisal received by the Holding Company, withdrawals of such demands, and any other instruments served pursuant to the DGCL and received by the Holding Company, and (ii) direct all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Holding Company shall not, except with the prior written consent of Buyer, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands.

(a)   As of the Effective Time, Buyer shall deposit with the Escrow Agent an aggregate amount in cash equal to the Escrow Amount, such deposit to constitute an escrow fund (the “ Escrow Fund ”). The Escrow Fund shall be held and disbursed by the Escrow Agent in accordance with the Escrow Agreement. The Escrow Fund shall be held as a trust fund and shall be available to satisfy any amounts duly owed to Buyer pursuant to Article X or Article XI of this Agreement.

(b)   The Buyer will be deemed to have deposited with the Escrow Agent the Escrow Amount. Each Common Stockholder shall be required to execute and deliver to the Paying Agent (for the benefit of Buyer) an acknowledgement in which, as a condition to receiving any portion of the Aggregate Merger Consideration, such Common Stockholder acknowledges and agrees to (i) be bound by the indemnification obligations pursuant to Article X and Article XI of this Agreement, and (ii) the deposit by Buyer of such Common Stockholder’s pro rata portion of the Escrow Amount into the Escrow Fund for use to satisfy any amounts duly owed to Buyer pursuant to Article X or Article XI of this Agreement.

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2.11         Exchange Procedures; Distributions with Respect to Unexchanged Shares; Stock Transfer Books .

(a)   As of the Effective Time, Buyer shall deposit with the Paying Agent for the benefit of the holders of shares of Capital Stock, cash in an amount sufficient to permit the payment of the Aggregate Merger Consideration into which shares of Capital Stock are converted (other than Dissenting Shares) less the amount to be deposited with the Escrow Agent pursuant to Section 2.10(a) (such amount deposited with the Paying Agent is referred to as the “ Payment Fund ”).

(b)   As soon as practicable prior to the Effective Time, Stockholders’ Representative shall send to each Person who was, at the Effective Time, a holder of record of certificates which represented outstanding shares of Capital Stock (the “ Certificates ”) which shares were converted into the right to receive the consideration per share specified in Section 2.08, a letter of transmittal which (i) shall specify that delivery shall be effected and risk of loss and title to such Certificates shall pass, only upon actual delivery thereof to the Paying Agent, and (ii) shall contain instructions for use in effecting the surrender of the Certificates. Upon surrender to the Paying Agent of all Certificates held by a holder of Capital Stock for cancellation, together with such letter of transmittal duly executed, such holder shall be entitled to receive in exchange therefor cash equal to the product of (x) the applicable consideration per share specified in Section 2.08 and (y) the number of shares of Capital Stock represented by the surrendered Certificate (less, with respect to the Common Stockholders, such holder’s pro rata portion of the cash to be deposited in the Escrow Fund on such holder’s behalf pursuant to Section 2.10), and the Certificates so surrendered shall then be canceled. Until surrendered as contemplated by this Section 2.11(b), each Certificate, from and after the Effective Time, shall be deemed to represent only the right to receive, upon such surrender, the cash into which such Capital Stock shall have been converted.

(c)   If any cash is to be issued or paid to any Person other than the registered holder of the Certificate surrendered in exchange therefore, it shall be a condition to such exchange that such surrendered Certificate shall be properly endorsed and otherwise in proper form for transfer and such Person either (i) shall pay to the Paying Agent any transfer or other taxes required as a result of the distribution of such cash payment to such Person, or (ii) shall establish to the reasonable satisfaction of the Paying Agent that such tax has been paid or is not applicable. Buyer or the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts as Buyer or the Paying Agent are required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign Tax law. To the extent that amounts are so withheld by Buyer or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made by Buyer or the Paying Agent. All amounts in respect of Taxes received or withheld by Buyer shall be disposed of by Buyer in accordance with the Code or such state, local or foreign Tax law, as applicable.

(d)   If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and subject to such other reasonable conditions as the Board of Directors of the Surviving Corporation may impose, the Paying Agent shall pay any cash in respect of such Certificate to

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which the holder is entitled. When authorizing payment of any such cash in exchange for such Certificate, the Board of Directors of the Surviving Corporation (or any authorized officer thereof) may, in its reasonable discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificate to give the Surviving Corporation a bond in such sum as the Board of Directors may direct as indemnity against any claim that may be made against the Paying Agent, Buyer or the Surviving Corporation with respect to the Certificate alleged to have been lost, stolen or destroyed.

(e)   At the Effective Time, the stock transfer books of the Holding Company shall be closed and thereafter there shall be no further registration of transfers of shares of Capital Stock on the records of the Holding Company. From and after the Effective Time, the holders of shares of Capital Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares except as otherwise provided herein or by applicable Law.

2.12         Return of Payment Fund . Any portion of the Payment Fund which remains undistributed to the former holders of Capital Stock for eighteen (18) months after the Effective Date shall be delivered to Buyer, upon its request, and any such former holders who have not theretofore surrendered to the Paying Agent their Certificates in compliance herewith shall thereafter look only to Buyer for payment of their claim for cash in respect of such Certificates. Neither Buyer nor the Holding Company shall be liable to any former holder of Capital Stock for any such cash held in the Payment Fund which is delivered to a public official pursuant to an official request under any applicable abandoned property, escheat or similar law. If any Certificate has not been surrendered prior to five years after the Effective Time (or immediately prior to such earlier date on which the portion of the Aggregate Merger Consideration in respect of such Certificate would otherwise escheat to or become the property of any Governmental or Regulatory Authority), any such shares, cash, dividends or distributions in respect of such Certificate shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any Person previously entitled thereto.

2.13         No Further Ownership Rights in Capital Stock . All cash delivered upon the surrender for exchange of any Certificate in accordance with the terms hereof shall be deemed to have been delivered (and paid) in full satisfaction of all rights pertaining to the Capital Stock previously represented by such Certificate.

2.14         Further Assurances . If at any time after the Effective Time the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of either of the Companies or Merger Sub, the Surviving Corporation and its proper officers and directors or their designees shall be authorized to execute and deliver, in the name and on behalf of the Holding Company or Merger Sub, all such deeds, bills of sale, assignments and assurances and do, in the name and on behalf of the Holding Company or Merger Sub, all such other acts and things necessary, desirable or proper to vest, perfect or confirm its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of the Companies or Merger Sub, as applicable, and otherwise to carry out the purposes of this Agreement.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANIES

Except as set forth in the Company Disclosure Schedule attached hereto and incorporated herein (the “ Company Disclosure Schedule ”), the Companies, jointly and severally, represent and warrant to Buyer and Merger Sub as of the date hereof, as follows:

(a)            Each of the Companies is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware, with full power and authority to own, lease and operate its assets and properties and in the case of the Company to carry on its Business as now being and as heretofore conducted, and, in the case of the Holding Company, to own all of the issued and outstanding common stock of the Company. Each of the Companies is duly qualified to transact business as a foreign corporation in each jurisdiction in which such qualification is required by Law, except where the failure to be qualified to transact business would not, individually or in the aggregate, have a Material Adverse Effect.

(b)            The Companies have previously provided to Buyer true and complete copies of their respective Certificate of Incorporation and By-Laws as presently in effect. Neither of the Companies is in default in the performance, observation or fulfillment of its Certificate of Incorporation or By-Laws, and no amendments to the Certificate of Incorporation or By-Laws of either of the Companies are currently pending.

(c)            The minute books and other corporate records of the Companies are complete and accurate in all material respects and contain all resolutions and other appropriate documents ratifying the actions of the Companies to the date of this Agreement.

(a)   Each of the Companies has the requisite corporate power and authority and full legal capacity to enter into, execute and deliver this Agreement, to perform fully its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by each of the Companies and the consummation of the Merger and the other transactions contemplated hereby have been duly and validly authorized by each of the Companies by all necessary corporate actions or proceedings and all other requisite actions. The Merger has been approved by the requisite shareholder action of the Holding Company as is required by applicable Delaware Law.

(b)   No other action by the Companies is necessary to execute, deliver or perform this Agreement or to effectuate the Merger or consummate the other transactions contemplated hereby, other than the waiver or exemption of any waiting period under HSR and the filing of the Certificate of Merger with the Secretary of State of Delaware. This Agreement has been duly executed and delivered by each of the Companies and constitutes a valid and binding obligation of each of the Companies, enforceable against each of the Companies in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar Laws of general applicability relating to or affecting creditors’ rights and to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or Law).

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(c)   The execution, delivery and performance of this Agreement by each of the Companies and the consummation of the Merger and the other transactions contemplated hereby by the Companies will not conflict with, violate or result in the breach of (i) any provision of the Certificate of Incorporation or By-Laws of either of the Companies; (ii) any material Contract to which either of the Companies is a party or by which either of the Companies is bound; or (iii) any Permit, Law or Order applicable to either of the Companies.

(a)   The capitalization of the Holding Company consists of 1,000,000 shares of Capital Stock being authorized, of which 900,000 shares are designated as Common Stock, and 100,000 shares are designated as Preferred Stock. There are 152,080 shares of Common Stock issued and outstanding and 24,875 shares of Series A Preferred Stock and 1,000 shares of Series B Preferred Stock issued and outstanding. All shares of Common Stock and Preferred Stock have been duly authorized and each outstanding share is validly issued, fully paid and nonassessable and was not issued in violation of the preemptive rights of any Person.

(b)   The Holding Company owns 100% of the issued and outstanding common stock of the Company, which is the sole asset of the Holding Company. Such common stock is the only class of capital stock of the Company that is issued and outstanding, and is owned directly, beneficially and of record by the Holding Company free and clear of any and all Liens, other than as set forth on Section 3.03(b) of the Company Disclosure Schedule. All such common stock has been duly authorized and is validly issued, fully paid and nonassessable and was not issued in violation of the preemptive rights of any Person.

(c)   Except for this Agreement, there are no outstanding rights, subscriptions, warrants, calls, preemptive rights, options, claims, subscriptions, convertible or exchangeable securities or other arrangements or agreements of any kind (contingent or otherwise) pursuant to which the Holding Company and/or the Company is or may become obligated to issue, sell, transfer, otherwise dispose of, register, purchase, return or redeem any stock or other securities of the Holding Company and/or the Company or other securities convertible into, exchangeable for or evidencing the right to subscribe for or purchase any capital stock or other securities of the Holding Company and/or the Company, and no capital stock of the Holding Company and/or the Company is reserved for issuance for any purpose. Except as set forth in Section 3.03(c) of the Company Disclosure Schedule, there are no shareholder agreements, voting trusts, proxies or other agreements, instruments or understandings with respect to the capital stock or any other equity interest of the Holding Company and/or the Company, and neither the Holding Company nor the Company is a party to any agreement relating to the issuance, sale, redemption, transfer, acquisition or other disposition of the capital stock or any other equity interest of the Holding Company and/or the Company.

3.04         Subsidiaries . The Holding Company has no Subsidiaries other than the Company. The Company has no Subsidiaries. Section 3.04 of the Company Disclosure Schedule sets forth any other equity interest or any interest which maybe convertible into any equity interest in any Person (other than the Companies) owned beneficially and of record by either of

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the Companies. The Companies have previously provided to Buyer true, correct and complete copies of any agreements relating to such interests.

(a)   The Companies have previously delivered to Buyer audited consolidated financial statements (balance sheet, statement of operations and statement of cash flows) of the Companies for the fiscal year ended March 31, 2007 (the “ Financial Statements ”).

(b)   The Financial Statements (i) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods referenced therein, (ii) have been prepared from, and are in accordance with, the books and records of the Companies, and (iii) present fairly, in all material respects, the financial position and the results of operations of the Companies (taken as a whole) as of the dates and for the periods indicated.

3.06         Absence of Undisclosed Liabilities . As of March 31, 2007, except as set forth in Section 3.06 of the Company Disclosure Schedule, the Companies have no Liabilities (including, without limitation, liabilities as guarantor or otherwise with respect to obligations of others or liabilities for Taxes due or then accrued or to become due) other than Liabilities (i) adequately reflected or reserved for in the Financial Statements, (ii) incurred since March 31, 2007 in the ordinary course of business consistent with past practice, or (iii) disclosed in this Agreement or the Company Disclosure Schedule, in all such cases which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(a)   Except as set forth in Section 3.07(a) of the Company Disclosure Schedule, since March 31, 2007, there has not been, with respect to the Companies, any change, event, occurrence or circumstance that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b)   Since March 31, 2007, the Companies have not received any notice of termination of or intention not to renew any Contract, Lease or other agreement, the termination of non-renewal of which has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or suffered any damage, destruction or Loss, whether or not covered by insurance, that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(c)   Since March 31, 2007, except as set forth in Section 3.07(c) of the Company Disclosure Schedule, neither of the Companies has engaged in any transaction outside the ordinary course of business, including, without limitation, any of the following:

(i)             entered into, relinquished, terminated or effected a material modification of, any Contract or other right having a value of or involving aggregate payments in excess of $100,000;

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(ii)            redeemed or acquired any of its capital stock or declared, set aside, or paid any dividend or distribution of any kind with respect to any of its shares of capital stock;

(iv)           made any increase in compensation, bonus or other benefits payable or to become payable to any employee, other than regularly scheduled increases in salary or wages in the ordinary course of business consistent with past practice;

(v)            granted any severance or termination pay or rights to any employee or increased the benefits payable under existing severance or termination pay policies or employment agreements;

(vi)           established, adopted, entered into, amended or terminated any Plan (other than as may be required by the terms of an existing Plan or as may be required by applicable law or in order to qualify under Sections 401 and 501 of the Code), or any new employment or consulting arrangement providing for annual compensation in excess of $100,000;

(vii)         adopted or changed any accounting method, policy or practice, or any depreciation or amortization policy or rate, except as required by GAAP;

(viii)        made any loan or advance of money or other property to any Person, other than for expense advances to employees consistent with past practice;

(ix)           acquired, sold, abandoned, leased, assigned or otherwise disposed of any assets, rights or properties except in the ordinary course of business consistent with past practice;

(x)            made any changes in its selling, distribution, advertising or promotion practices other than in the ordinary course of business consistent with past practice, or made any changes in its terms of sale or collection, purchase or payment practices;

(xi)           borrowed or guaranteed any amount, or incurred, assumed or become subject to, or paid or discharged any Liability, except for Liabilities incurred, paid or discharged in the ordinary course of business consistent with past practice;

(xii)         mortgaged, pledged or subjected any portion of its assets, rights or properties to any Lien (except for Permitted Liens);

(xiii)        entered into any partnership, joint venture or similar agreement;

(xiv)        written off as uncollectible any notes or accounts receivable, except write-downs and write-offs in the ordinary course of business consistent with past practice;

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(xv)          received any notice of any new labor union organizing activity, any actual or threatened employee strikes, work stoppages, slowdowns or lockouts, or any material adverse change in its relations with any of its employees, agents, partners or other co-owners in any venture, customers, suppliers, consultants, subcontractors or independent contractors;

(xvi)        suffered any extraordinary Losses, waived any rights of material value, or settled or compromised any litigation;

(xvii)       issued, sold or transferred any of its (i) capital stock, other equity securities or securities containing equity features, or (ii) securities, options or other rights to acquire its capital stock, other equity securities or securities containing equity features;

(xviii)      entered into any agreement, arrangement or understanding to do any of the foregoing; or

(xix)        made, changed, or revoked any Tax election, filed any amended Tax Return, entered into any Tax closing agreement or settlement, consented to any Tax Claim or assessment, incurred any obligation to make any payment of, or in respect of, any Taxes, except in the ordinary course of business, or agreed to extend or waive the statutory period of limitations for the assessment or collection of Taxes.

(a)   Except as set forth on Section 3.08(a) of the Company Disclosure Schedule, (i) each of the Companies has filed or caused to be filed in a timely manner (within any applicable extension periods) all U.S. federal income and other Tax Returns required to be filed by applicable Tax Laws, (ii) such Tax Returns were correct and complete in all material respects when filed, (iii) all material Taxes with respect to taxable periods covered by such Tax Returns, and all other Taxes for which each of the Companies is or might otherwise be liable have been timely paid in full or will be timely paid in full by the due date thereof and the Financial Statements reflect an adequate reserve for all Taxes payable by the Companies for all taxable periods and portions thereof through the date of such Financial Statements, and (iv) there are no material Liens for Taxes with respect to any of the assets or properties of either of the Companies.

(b)   No Tax Return of either of the Companies is to the knowledge of the Company under audit or examination by any Taxing Authority, and no notice of such an audit or examination has been received by the Companies in writing.

(c)   Since January 1, 1997: (i) Each material deficiency resulting from any audit or examination relating to Taxes by any Taxing Authority has been timely paid or settled and (ii) no material issues relating to Taxes were raised by any relevant Taxing Authority in any completed audit or examination that can reasonably be expected to recur in a later taxable period.

(d)   (i) No property of the Companies is “tax exempt use property” within the meaning of Section 168(h) of the Code, and (ii) neither of the Companies is a party to any lease made pursuant to Section 168(f)(8) of the Code as in effect prior to its repeal.

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(e)   Except as set forth in Section 3.08(e) of the Company Disclosure Schedule, (i) there are no outstanding agreements or waivers extending, or having the effect of extending, the statutory period of limitation applicable to the assessment of any Tax with respect to either of the Companies, (ii) neither of the Companies has requested any extension of time within which to file any Tax Return, which Tax Return has not yet been filed, and (iii) no power of attorney with respect to any Taxes has been executed or filed with any Taxing Authority by or on behalf of either of the Companies.

(f)   Each of the Companies has complied in all respects with all applicable Laws relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the Code or any comparable provision of any state or local laws) and have, within the time and in the manner prescribed by applicable Law, withheld from and paid over to the proper Taxing Authorities all amounts required to be so withheld and paid over under applicable Laws.

(g)   Each of the Companies has made available to Buyer for inspection true and complete copies of all Tax Returns relating to Taxes for all taxable periods for which the applicable statute of limitations for the assessment of any Tax has not yet expired.

(h)   Neither of the Companies is a “U.S. real property holding company” within the meaning of Section 897(c)(2) of the Code.

(i)   Neither of the Companies is required to include in income any material adjustment pursuant to Section 481(a) of the Code (or any similar provision of any applicable Law) by reason of a change in accounting method, and no Taxing Authority has proposed any such adjustment or change in accounting method. Neither of the Companies will be required to include for a Post-Closing Tax Period taxable income attributable to income economically realized in a Pre-Closing Tax Period, including as a result of the installment method of accounting under Section 453 of the Code (or any similar provision of any applicable Law).

(j)   Neither of the Companies nor any Subsidiary has participated in any “listed transactions” described in Section 1.6011-4(b)(2) of the Treasury Regulations or any similar provision of any applicable Law.

(k)   Schedule 3.08(k) of the Company Disclosure Schedule contains a list of all jurisdictions to which any Tax is properly payable by the Companies.

(l)   Except as set forth in Section 3.08(l) of the Company Disclosure Schedule, neither of the Companies is party to any Tax Sharing Agreement or to any other agreement or arrangement referred to in clause (ii) or (iii) of the definition of “Tax”. No amount of the type described in clause (ii) or (iii) of the definition of “Tax” is currently payable by either of the Companies, regardless of whether such Tax is imposed on either of the Companies.

(m)   Except as set forth in Section 3.08(m) of the Company Disclosure Schedule, no net operating loss carryforward, capital loss carryforward or similar Tax attribute is subject to a limitation under Section 382 or Section 383 of the Code or similar provision of applicable Tax Law.

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(a)   The Companies and their operation of the Business as currently conducted are not in violation of any applicable Law, Order or other requirement of any Governmental or Regulatory Authority, except where such violations would not, individually or in the aggregate, have a Material Adverse Effect. During the preceding five (5) years, except as set forth in Section 3.09(a) of the Company Disclosure Schedule, neither of the Companies has received notice of, and there has not been any citation, fine or penalty imposed against either of the Companies for, any such violation or alleged violation.

(b)   Without limiting the generality of Section 3.09(a) hereof, except as set forth in section 3.09(b) of the Company Disclosure Schedule:

(i)             the Companies have obtained and hold, and are in compliance with all Environmental Laws and Permits applicable to the Business, except where the failure to comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;

(ii)            no site currently owned, or to the Knowledge of the Company no site leased or used by the Companies (“ Current Site ”) is a treatment, storage or disposal facility, as defined in and regulated under the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq ., is or, to the Knowledge of the Company, is listed or is proposed for listing on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §9601 et seq ., or on any similar state list of sites requiring investigation or cleanup;

(iii)          the Companies have not received any notice or entered into any written agreement with respect to any Current Site from or with any Governmental or Regulatory Authority that remains pending or outstanding alleging that the Companies are not in compliance with any Environmental Law except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;

(iv)           there has been no Release of any Hazardous Materials at, from, in, to, on or under any Current Site or at any other property for which it is alleged the Companies are liable, and no Hazardous Materials are present in, on, about or, to the Knowledge of the Company, migrating to or from any Current Site that could reasonably be expected to give rise to an Environmental Claim against the Companies;

(v)            there are no pending or outstanding corrective actions requested or being conducted by any Governmental or Regulatory Authority for the investigation, remediation or cleanup of any Current Site, and there have been no such corrective actions within the last five (5) years, whether still pending or otherwise, that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;

(vi)           there are no outstanding past or pending, or to Knowledge of the Company threatened Environmental Claims against the Companies, and to the Knowledge of the Company there are no facts or circumstances relating to any Current

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Site that could reasonably be expected to form the basis for any Environmental Claim against the Companies except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;

(vii)         the Companies have not transported or arranged for the treatment, storage, handling, disposal, or transportation of any Hazardous Materials to any off-site location from any Current Site that could reasonably be expected to result in an Environmental Claim against the Companies except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;

(viii)        to the Knowledge of the Company, there are no (1) underground storage tanks, active or abandoned, (2) polychlorinated biphenyl containing equipment, or (3) asbestos containing material at any Current Site;

(ix)           since January 1, 1997, there have been no environmental investigations, studies, audits, tests, reviews or other analysis (which have been reduced to writing) conducted by, on behalf of, and which are otherwise in the possession of the Companies with respect to any Current Site or any transportation, handling or disposal of any Hazardous Material which have not been delivered to or made available to Buyer prior to execution of this Agreement; and

(x)            to the Knowledge of the Company, the representations set forth in subsections (i) through (ix) above with respect to all Current Sites are true and correct with respect to all sites not currently owned, leased or used by the Companies (including any predecessor(s) thereof) but for which the Companies would be liable for contribution or otherwise pursuant to any Environmental Law.

3.10         No Breach. The execution, delivery and performance of this Agreement by the Companies and the performance by the Companies of their obligations under this Agreement, and the consummation by the Companies of the Merger and the other transactions contemplated hereby, will not (i) conflict with, violate or result in the breach of any provision of the Certificate of Incorporation or the By-Laws of either of the Companies; (ii) violate, conflict with or result in the breach of any of the terms or conditions of, result in modification of the effect of, or result in any liability or obligation under, or otherwise give any other contracting party (other than either of the Companies) the right to terminate, cancel or accelerate, or constitute (or with notice or lapse of time or both constitute) a default under, any material Contract to which either of the Companies is a party or is subject or by which either of the Companies assets thereof is bound; (iii) conflict with or result in a violation or breach of any material Permit, Law or Order applicable to either of the Companies; or (iv) give rise to a right of termination, modification, cancellation or acceleration of any obligation or Loss of a benefit under, require any consent under, entitle any party to exercise any right of first refusal, first offer, preemptive right or other option right under or result in the creation of any Lien or other encumbrance on the assets, properties or securities of either of the Companies, except for such conflict, violation or breach under clauses (ii) or (iv) that would not, individually or in the aggregate, have a Material Adverse Effect.

3.11         Governmental Approvals and Filings. Section 3.11 of the Company Disclosure Schedule contains a true, complete and accurate list of each consent, approval or

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action of, filing with or notice to any Governmental or Regulatory Authority on the part of the Companies, that is required in connection with the execution, delivery and performance of this Agreement, the Merger or the consummation of the transactions contemplated hereby.

3.12         Actions and Proceedings . Except as set forth in Section 3.12 of the Company Disclosure Schedule: (a) there are no outstanding Orders against either of the Companies or any of their respective material assets or properties; (b) there are no actions, suits, arbitrations, grievances, investigations or claims or legal, administrative proceedings pending or, to the Knowledge of the Company, threatened against either of the Companies or any of their respective material assets or properties; and (c) to the Knowledge of the Company, there is no fact, event or circumstance that was or is now in existence that reasonably could be expected to give rise to any action with respect thereto, except for such action which would not, individually or in the aggregate, have a Material Adverse Effect.

3.13         Contracts and Other Agreements. Section 3.13 of the Company Disclosure Schedule contains a true, complete and accurate list of all of the following Contracts to which either of the Companies is a party or by which any of their assets or properties are bound:

(a)   Contracts for the purchase or sale of services, materials, products or supplies which involve aggregate payments by the Companies of more than $100,000 for each such Contract or involve aggregate payments to the Companies of more than $100,000 for each such Contract;

(b)   Contracts providing for stock or other equity options or stock or other equity purchases, bonuses, pensions, deferred or incentive compensation, retirement or severance payments, profit-sharing, insurance or other benefit plans or programs for any officer, consultant, director or employee of either of the Companies, other than pursuant to the Plans;

(c)   Contracts for construction or for the purchase, acquisition, sale or other disposition of (or right to acquire, sell or otherwise dispose of) real estate, improvements, fixtures, equipment, machinery and other items which under GAAP constitute capital expenditures and involve aggregate payments by the Companies in excess of $50,000;

(d)   Contracts under which either of the Companies is lessee of, or holds or operates any personal property owned by any other party, for which the annual rent exceeds $50,000;

(e)   Contracts under which either of the Companies is the lessor of or permits any third party to hold or operate any property, real or personal, for which the annual rental exceeds $50,000;

(f)   Contracts relating in any way to the borrowing of money or to mortgaging, pledging or otherwise placing a Lien on any portion of the property or assets of either of the Companies;

(g)   Guaranties of any obligation for borrowed money or other guaranty or surety or other Contract wherein either of the Companies have agreed to be contingently or secondarily liable for the obligation of any Person;

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(h)   Contracts restricting either of the Companies or any of their respective executive officers from engaging in any line of business or competing with any Person or entity or in any geographical area, or from using or disclosing any information in its possession;

(i)   Contracts with respect to Proprietary Rights;

(j)   Contracts providing for joint venture or collaboration agreements or other agreements involving a sharing of profits, revenue, cash flow or expenses of either of the Companies;

(k)   Contracts with any employee which are not terminable at will, without obligation, by either of the Companies;

(l)   Collective bargaining or other Contracts with any labor union;

(m)   Contracts pursuant to which either of the Companies is obligated to provide indemnification obligations;

(n)   Contracts with respect to any completed or pending business acquisition, investment or disposition by the Companies since January 1, 2002;

(o)   Contracts between the Companies, on the one hand, and any of the Principal Stockholders or any of their Affiliates, on the other hand; and

(p)   Contracts containing a provision involving a change of control of the Companies or requiring the consent of a third party to such change of control.

True and complete copies of all Contracts (and all amendments, waivers (except with respect to subsections (a) and (c), which are limited to written waivers) or other modifications thereto) set forth in Section 3.13 of the Company Disclosure Schedule have been furnished to Buyer. Each of such Contracts is valid, in full force and effect, and binding upon the Companies, as the case may be, and, to the Knowledge of the Company, are binding upon the other parties thereto in accordance with their terms (subject in each case to the application of general principles of equity or by the effect of bankruptcy, insolvency, reorganization, moratorium or similar Laws generally affecting creditors’ rights). None of the Companies, nor, to the Knowledge of the Company, any other party to any such Contract is or is alleged to be in default under the terms thereof, nor, to the Knowledge of the Company, does any condition exist that with notice or lapse of time or both would constitute a default thereunder. Except as disclosed in Section 3.13 of the Company Disclosure Schedule, no notice to or consent or approval of any party to a Contract is required in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, except for those consents or approvals the failure of which to obtain would not, individually or in the aggregate, have a Material Adverse Effect.

Without limiting the generality of Section 3.13, following the Effective Time, the Company shall continue to have all of the rights it currently possesses under that certain Stock Purchase Agreement by and between R.A.B. Holdings and McKesson Corporation, dated as of February 21, 1997, with respect to indemnification against McKesson Corporation for Environmental Claims.

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3.14         Bank Accounts and Powers of Attorney. Section 3.14 of the Company Disclosure Schedule identifies all bank and brokerage accounts of the Companies, lists the respective signatories therefore and lists the names of all Persons holding a power of attorney from the Companies, together with a summary of the terms of any such power of attorney.

(a)   Section 3.15(a) of the Company Disclosure Schedule sets forth a true, correct and complete description of all real estate and improvements owned by the Companies (the “ Real Estate ”). Except as set forth in Section 3.15(a) of the Company Disclosure Schedule:

(i)             The Companies have valid title to the Real Estate, free and clear of any Liens except for Permitted Liens, and such Permitted Liens do not impair the current use and occupancy of the Real Estate as a warehousing and distribution facility (the “ Intended Uses ”);

(ii)            there are no (1) pending or, to the Knowledge of the Company, threatened condemnation proceedings relating to the Real Estate or any portion thereof, (2) pending or, to the Knowledge of the Company, threatened actions, suits, arbitrations, grievances, investigations or claims relating to the Real Estate or any portion thereof, or (3) to the Knowledge of the Company, other matters which may have a Material Adverse Effect on the Intended Uses and/or occupancy of the Real Estate or any portion thereof;

(iii)          the buildings and improvements may be used as of right under applicable zoning and land use laws for the Intended Uses, and are not in violation of zoning laws, the violation of which may interfere with the Intended Uses;

(iv)           there are no leases, subleases, licenses or agreements, written or oral, granting to any party or parties the right of use or occupancy of any portion of the Real Estate;

(v)            there are no outstanding options or rights of first refusal to purchase the Real Estate, or any portion thereof or interest therein;

(vi)           all facilities located on the Real Estate are supplied with utilities and other services necessary for the current operation of such facilities, including gas, electricity, water, telephone, sanitary sewer and storm sewer, all of which services are reasonably adequate for the Intended Uses and in accordance with all applicable Laws;

(vii)         the Companies have not received notice of, and to the Knowledge of the Company, there is no proposed or pending proceeding to change or redefine the zoning classification of all or any portion of the Real Estate;

(viii)        the improvements constructed on the Real Estate are in all material respects in good condition and all mechanical and utility systems servicing such

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improvements are in all material respects in good condition and proper working order, free of material defects, in each case ordinary wear and tear excepted; and

(ix)           the Companies have not received notice of any requirement of any insurance carrier requiring any modifications or work to be performed on the Real Estate as a condition to the maintenance or renewal of any policies or insurance in respect of the Real Estate.

(b)   A true and complete copy of each real property lease to which either of the Companies is a party (and any amendments or supplements thereto), including summaries of any oral lease (each, a “ Lease ”) has been delivered to Buyer and each such Lease is listed in Section 3.15(b) of the Company Disclosure Schedule.

(c)   Except as disclosed in Section 3.15(c) of the Company Disclosure Schedule, with respect to each Lease: (i) such Lease is legal, binding, enforceable by the Companies and in full force and effect; (ii) subject i