ASSET PURCHASE AGREEMENT

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This Asset Purchase Agreement (“ Agreement ”) is made as of November 21, 2006 by OAKLEY, INC., a Washington corporation (“ Buyer Parent ”); MERLITA ACQUISITION CORPORATION, a Delaware corporation (“ Buyer ”); EYE SAFETY SYSTEMS, INC., a Delaware corporation (“ Target ”); the stockholders of Target identified on Schedule I hereto (“ Target Stockholders ” and, collectively with Target, the “ Sellers ”) and JOHN D. DONDERO, a resident of the State of Idaho, in his capacity as Stockholders’ Representative (“ Stockholders’ Representative ”). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in Exhibit A .

WHEREAS, Buyer and Buyer Parent desire to purchase, and Target desires to sell, the assets which Target uses in the conduct of the Business (as defined below), for the consideration and on the terms set forth in this Agreement.

NOW, THEREFORE, in consideration of their mutual promises and intending to be legally bound, the Parties agree as follows:

1.     PURCHASE AND SALE OF ASSETS; CLOSING.

1.1    Transfer of Assets . At the Closing, on the terms and subject to the conditions set forth in this Agreement, Target shall sell, convey, transfer, assign and deliver to Buyer, and Buyer shall acquire from Target, all of Target’s right, title and interest in and to the properties, assets and rights of any kind, whether tangible or intangible, real or personal and constituting, or used or useful in connection with, or related to, the Business owned by Target or in which Target has any interest, including without limitation all of Target’s right, title and interest in the following (the “Assets”), but excluding the Excluded Assets (the “ Purchase ”):

(a)    all accounts and notes receivable (whether current or noncurrent), refunds, deposits, prepayments or prepaid expenses (excluding any prepaid insurance premiums relating to Excluded Assets) of Target;

(b)    all Assumed Contracts;

(c)    all Real Property;

(d)    all equipment, fixtures and other intangible assets;

(e)    all inventory, whether held by Target or a third party

(f)    all books and records of Target relating to the Assets, excluding the Excluded Assets;   

(g)    all Target IP;

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(h)    all rights to use, or sell products under, Certification Marks;

(i)    all Governmental Authorizations with respect to the Business to the extent Target is permitted under Applicable Law to transfer such rights;

(j)    all computers and software;

(k)    all available supplies, sales literature, promotional literature, customer, supplier and distributor lists, art work, display units, telephone and fax numbers and purchasing records related to the Business;

(l)    all rights under or pursuant to all warranties, representations and guarantees made by suppliers in connection with the Assets or services furnished to Target pertaining to the Business or affecting the Assets, to the extent such warranties, representations and guarantees are assignable;

(m)    all deposits and prepaid expenses of Target; and

(n)    all claims, causes of action, choses in action, rights of recovery and rights of set-off of any kind, against any person or entity, including without limitation any liens, security interests, pledges or other rights to payment or to enforce payment in connection with products delivered by Seller on or prior to the Closing Date.

1.2    Assumption of Liabilities . Upon the terms and subject to the conditions contained herein, at the Closing, Buyer shall assume the following, and only the following, Liabilities of Target (the “ Assumed Liabilities ”):

(a)    all Liabilities under the Assumed Contracts solely to the extent arising out of or relating to events or conditions, occurring after the Closing;

(b)    all Liabilities with respect to the Assets to the extent relating to the operation or conduct of the Business after the Closing;

(c)    all accounts payable set forth on the Interim Balance Sheet or incurred after the date of the Interim Balance Sheet (i) in the ordinary course of business, (ii) consistent with amounts historically incurred, (iii) in compliance with the terms of this Agreement and (iv) not delinquent as of the Closing Date; and

(d)    liabilities for product repairs and replacements pursuant to Target’s warranty obligations in the ordinary course of business.

1.3    Excluded Liabilities . Notwithstanding any other provision in this Agreement, except for the Assumed Liabilities expressly specified in Section 1.2, Buyer shall not assume, or otherwise be responsible for, any Liabilities of Target, whether liquidated or unliquidated, or known or unknown, whether arising out of occurrences prior to, at or after the date hereof (“ Excluded Liabilities ”), which Excluded Liabilities shall include, without limitation:

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(a)    any Liability to or in respect of any employees or former employees of Target including without limitation (i) any employment agreement, whether or not written, between Target and any person, and (ii) any claim arising out of or related to the employment of any of Target’s employees prior to the Closing, including any claim of an unfair labor practice, or any claim under any state unemployment compensation or worker’s compensation law or regulation or under any federal or state employment discrimination law or regulation, which shall have been asserted on or prior to the Closing Date or is based on acts or omissions which occurred on or prior to the Closing Date;

(b)    any Liability under, relating to or with respect to any Target Employee Plan;

(c)    any Liability of Target in respect of any Tax;

(d)    any Liability arising from any injury to or death of any person or damage to or destruction of any property, whether based on negligence, breach of warranty, strict liability, enterprise liability or any other legal or equitable theory arising from defects in products manufactured or from services performed by or on behalf of Target or any other person or entity on or prior to the Closing Date (other than product repairs or replacements pursuant to warranty obligations in the ordinary course of business);

(e)    any Liability of Target arising out of or related to any Action against Target or any Action which adversely affects the Assets and which shall have been asserted on or prior to the Closing Date or to the extent the basis of which shall have arisen on or prior to the Closing Date;

(f)    any costs and expenses of Target relating to the transactions contemplated by this Agreement (including the fees and expenses of Target’s legal, accounting, financial and other advisors relating to the transactions contemplated hereby), (ii) the accrued stockholder bonus, (iii) accrued dividends and (iv) change-in-control bonuses to be paid to Company Employees in connection with the consummation of the Purchase (collectively, the “ Transaction Liabilities ”);

(g)    any liabilities or obligations arising out of any breach prior to the Closing by Target of any provision of any Contract, including liabilities or obligations arising out of the failure by Target to perform any such Contract in accordance with its terms prior to the Closing and any liability arising out of the assignment to Buyer of any such Contract in violation of the terms thereof; and

(h)    any Liability of Seller that relates to any Excluded Asset.

1.4    Purchase of Assets Only . This is a purchase of assets and Buyer shall not assume or be bound by or responsible for any obligations or liabilities of Target, its predecessors or its stockholders of any kind or nature, known or unknown, contingent or otherwise, other than those obligations and liabilities expressly assumed by Buyer pursuant to Section 1.2. EXCEPT AS SPECIFICALLY SET FORTH IN SECTION 1.2, BUYER SHALL NOT ASSUME OR BE RESPONSIBLE FOR ANY DEBTS, LIABILITIES OR OBLIGATIONS OF TARGET, INCLUDING ANY LIABILITIES OR OBLIGATIONS OF ANY NATURE WHATSOEVER WITH RESPECT TO TAXES AND LIABILITIES OR OBLIGATIONS OF ANY NATURE WHATSOEVER

1.5    Purchase Price; Adjustment Amount .

(a)    The consideration for Target’s sale of the Assets to Buyer shall be (i) One Hundred and Ten Million Dollars ($110,000,000) in cash, plus (ii) an amount (which may be a positive or negative number) equal to the Net Working Capital as of the Closing Date minus the Net Working Capital Target (the “ Adjustment Amount ”) (the “ Purchase Price ”). The Adjustment Amount shall be calculated without giving effect to the transactions contemplated by this Agreement. The Adjustment Amount shall be determined for the purpose of the Payment (as defined in Section 1.8(b)) in accordance with Section 1.5(b) and shall be subject to adjustment after the Closing Date in accordance with Section 1.9.

(b)    On the fifth (5 ^th ) business day prior to the Closing Date, Target shall deliver to Buyer Parent (i) an estimate, as of the Closing Date, of the components of the Adjustment Amount (the “ Adjustment Amount Estimate ”) and (ii) a certificate, in form and substance reasonably satisfactory to Buyer Parent, executed by the Chief Executive Officer and the Chief Financial Officer of Target, stating that the Adjustment Amount Estimate has been prepared in good faith and in accordance with GAAP (subject to the absence of footnotes) and on a basis consistent with the accounting policies, practices, procedures and principles used in preparing the audited balance sheets included in the Financial Statements. Buyer Parent and its Representatives shall be given timely access to all supporting work papers, payoff letters, invoices (to the extent not subject to an attorney-client privilege) and any other documentation used in preparation of the Adjustment Amount Estimate and other estimates provided for in this Section 1.5(b) for the purpose of verifying their accuracy and compliance with the definitions herein. With the consent of Buyer Parent, which consent shall not be unreasonably withheld, conditioned or delayed, Target may submit, prior to the Closing, a revised Adjustment Amount Estimate, together with the supporting work papers, payoff letters, invoices and other documentation described above as well as the corresponding certificate of the Chief Executive Officer and the Chief Financial Officer provided for above, in which case such revised Adjustment Amount Estimate and other estimates shall be used in calculating the Payment called for by Section 1.8(b).

(c)    The Purchase Price shall be allocated among the Assets in accordance with a schedule which shall be prepared by Buyer and Target working together in good faith and will be delivered by Buyer to Target (the “ Allocation ”), which Allocation shall be delivered within a reasonable time after Closing. The Allocation will be made in accordance with Section 1060 of the Code and the Treasury regulations promulgated thereunder. Target and Buyer agree to (A) be bound by the Allocation, (B) act in accordance with the Allocation in the filing of all Tax Returns (including, without limitation, filing Form 8594 with the United States federal income Tax Return for the Tax period that includes the Closing Date) and in the course of any Tax audit, Tax review, or Tax litigation relating thereto, and (C) take no position and cause their Affiliates to take no position inconsistent with the Allocation for income Tax purposes, including United States federal and state income Tax and foreign income Tax, unless otherwise required pursuant to a determination within the meaning of Section 1313(a) of the Code. Not later than thirty (30)

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days prior to the filing of their respective Forms 8594 relating to this transaction, each Party shall deliver to the other Party a copy of its Form 8594.

(d)    Buyer Parent shall be responsible for any documentary and transfer taxes and any sales, use or other taxes or costs imposed by reason of the transfers of Assets provided hereunder and any deficiency, interest or penalty asserted with respect thereto, up to $100,000. Target shall be responsible for all documentary and transfer taxes and any sales, use or other taxes or costs imposed by reason of the transfers of Assets provided hereunder and any deficiency, interest or penalty asserted with respect thereto, in excess of $100,000. Target shall file on a timely basis all transfer Tax Returns relating to the periods including the transfers of Assets pursuant to this Agreement but shall give Buyer Parent a reasonable opportunity to review and comment on drafts of such Tax Returns before they are filed and shall make any changes reasonably requested by Buyer Parent. Buyer Parent shall pay to Target on or before the filing of each such Tax Return the amount of transfer Tax shown as due on such Tax Return that relates to the transfers of Assets pursuant to this Agreement, provided Target has complied with its obligations set forth in this Section 1.5(d) and provided further that Buyer Parent shall not be obligated to pay more than the $100,000 of such Taxes.

1.6    Closing . Subject to Section 9.1, the closing of the Purchase provided for in this Agreement (the “ Closing ”) shall take place at the offices of Latham & Watkins LLP (or by the exchange of documents and instruments by mail, courier, facsimile or telecopy and wire transfer to the extent mutually acceptable to Buyer Parent and Target, on the fifth business day following the date as of which all of the conditions set forth in Articles 7 and 8 shall have been satisfied or duly waived, or at such other time and place as Buyer Parent and Target may agree (such date, the “ Scheduled Closing Date ”). Subject to the provisions of Section 9.1, a Party’s failure to consummate the Purchase provided for in this Agreement on the date and at the place determined pursuant to this Section 1.6 shall not result in the termination of this Agreement and shall not relieve any Party of any obligation under this Agreement.

1.7    Closing Obligations. At the Closing:

(a)    In respect of Buyer’s purchase of the Assets:

(i)    Target shall deliver to Buyer and Buyer Parent:

(1)    one or more bills of sale, in a form to be mutually agreed upon by the Parties hereto, conveying in the aggregate all of Target’s owned personal property included in the Assets;

2)    Assignments of Lease, in a form to be mutually agreed upon by the Parties hereto, with respect to leasehold real property;

(3)    Assignments of the Assumed Contracts, in a form to be mutually agreed upon by the Parties hereto, with respect to the Assumed Contracts, except as contemplated by Section 7.9 and Section 6.5(b) as it relates to Government Contracts;

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(4)    a Supply Agreement, in a form to be mutually agreed upon by the Parties hereto, if called for pursuant to Section 7.9;

(5)    all permits (subject to Section 1.1(j)) and any other third party consents required for the valid transfer of the Assets;

(6)    fully executed and acknowledged or notarized assignment documents, in form ready for filing or recording with the appropriate Governmental Body and reasonably acceptable to Buyer, with respect to any Registered IP held in the name of John D. Dondero or any other employee or contractor of Target;

(7)    fully executed and acknowledged or notarized assignments of Target IP, each in a form to be mutually agreed upon by the Parties hereto, in form ready for filing or recording with the appropriate Governmental Body and reasonably acceptable to Buyer;

(8)    such other instruments as shall be requested by Buyer to vest in Buyer title in and to the Assets in accordance with the provisions hereof; and

(9)    a certificate executed by Target certifying that, as of the Closing Date, the conditions set forth in Article 7 have been satisfied and representing and warranting to Buyer and Buyer Parent that Target’s representations and warranties in this Agreement is accurate in all respects as of the Closing Date as if made on the Closing Date, except for inaccuracies that could not reasonably be expected to have a Material Adverse Effect, it being understood that, for purposes of determining the accuracy of such representations and warranties, all “Material Adverse Effect” qualifications and other materiality qualifications shall be disregarded, and except for such representations and warranties that address matters only as of a certain date, which need only be accurate as of such certain date;

(ii)    Buyer shall, and Buyer Parent shall cause Buyer to:

(1)    deliver to Target an instrument of assumption, in a form to be mutually agreed upon by the Parties hereto, evidencing Buyer’s assumption, pursuant to Section 1.2, of the Assumed Liabilities;

(2)    deliver to Target the Supply Agreement, in a form to be mutually agreed upon by the Parties hereto, if called for pursuant to Section 7.9

(3)    deliver to Target a certificate executed by a duly authorized officer of Buyer certifying that, as of the Closing Date, the conditions set forth in Article 8 have been satisfied and representing

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(4)    deliver to Target a certificate executed by a duly authorized officer of Buyer Parent certifying that, as of the Closing Date, the conditions set forth in Article 8 have been satisfied and representing and warranting to Target that each of Buyer Parent’s representations and warranties in this Agreement was accurate in all respects as of the date of this Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date, except for inaccuracies that could not reasonably be expected to have a Material Adverse Effect, it being understood that, for purposes of determining the accuracy of such representations and warranties, all “Material Adverse Effect” qualifications and other materiality qualifications shall be disregarded; and

(5)    make the payments required to be made in accordance with Section 1.8 of this Agreement.

(b)    Buyer, Buyer Parent and Target shall enter into the Escrow Agreement with Wells Fargo Bank, National Association (the “ Escrow Agent ”) and Buyer shall, and Buyer Parent shall cause Buyer to, fund the Escrow Account by delivering to the Escrow Agent the amount described in Section 1.8(a).

1.8    Payments at Closing . Subject to the terms of this Agreement, at the Closing Buyer shall, and Buyer Parent shall cause Buyer to, pay an amount equal to the Purchase Price in cash, by wire transfer of immediately available funds, as follows:

(a)    Ten Million Dollars ($10,000,000) (the “ Escrow Amount ”) payable to the Escrow Agent in accordance with and subject to the Escrow Agreement;

(b)    the remaining balance of the Purchase Price to Target (the “ Payment ”).

1.9    Adjustment Procedure .

(a)    As promptly as possible after the Closing Date, but in no event more than sixty (60) days after the Closing Date, Buyer Parent shall deliver to Target a proposed closing balance sheet of Target prepared as of the Closing Date in accordance with GAAP and on a basis consistent with the accounting policies, practices, procedures and principles used in preparing the Balance Sheets (as such term is defined in Section 2.4), which proposed balance sheet shall include reasonably detailed documentation of the components of the Adjustment Amount set forth in Section 1.5(a)(ii) (the “ Proposed Closing Balance Sheet ”). Target shall deliver to Buyer Parent within thirty (30) days after receiving the Proposed Closing Balance Sheet a detailed

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statement describing all of its objections (if any) thereto, including any objection to the calculation of the components of the Adjustment Amount and a reasonably detailed description of the basis therefor. Failure of Target to so object within such thirty (30) day period to the Proposed Closing Balance Sheet shall constitute acceptance thereof, whereupon such Proposed Closing Balance Sheet shall be deemed to be the “ Final Closing Balance Sheet .” All items on the Final Closing Balance Sheet, including the components of the Adjustment Amount, shall be determined and computed in accordance with GAAP and on a basis consistent with and utilizing the same principles, practices and policies as those used in preparing the Balance Sheets, except to the extent contemplated in the definition of Net Working Capital. Buyer Parent and Target shall use reasonable commercial efforts to resolve any such objections, but if they do not reach a final resolution within thirty (30) days after Buyer Parent has received the statement of objections, Buyer Parent and Target shall select a nationally-recognized independent accounting firm, other than an accounting firm that regularly performs services for Buyer Parent, Target or any of their respective Affiliates, mutually acceptable to them (the “ Neutral Auditors ”) to resolve any remaining objections. If Buyer Parent and Target are unable to agree on the choice of Neutral Auditors, they shall select as Neutral Auditors a nationally-recognized accounting firm by lot (after excluding any accounting firm that regularly performs services for Buyer Parent, Target and their Affiliates). The Neutral Auditors shall determine, within sixty (60) days after their appointment whether the objections (on an objection by objection basis) raised by Target are valid. The Proposed Closing Balance Sheet and documentation of the Adjustment Amount contained therein that is the subject of such objections by Target shall be adjusted in accordance with the Neutral Auditors’ determination and, as so adjusted, shall become the Final Closing Balance Sheet and documentation of the Adjustment Amount. Such determination by the Neutral Auditors shall be conclusive and binding upon Buyer Parent and Target. Buyer Parent and Target shall share equally the fees and expenses of the Neutral Auditors.

(b)    On the fifteenth (15 ^th ) business day following the determination of the Final Closing Balance Sheet (the “ Final Determination Date ”):

(i)    if the Adjustment Amount as reflected in the Final Closing Balance Sheet exceeds the Adjustment Amount Estimate, then Buyer shall, and Buyer Parent shall cause Buyer to, pay an amount equal to such excess to Target;

(ii)    if the Adjustment Amount Estimate exceeds the Adjustment Amount as reflected in the Final Closing Balance Sheet, then Target and Buyer Parent shall direct the Escrow Agent to release from the Escrow Account an amount equal to such excess, by wire transfer to the accounts specified by Buyer or Buyer Parent in writing, notwithstanding the limitations set forth in Section 10.5(a); and

(c)    if neither clause (i) nor clause (ii) of Section 1.9(b) is applicable, the Purchase Price shall not be adjusted.

2.    REPRESENTATIONS AND WARRANTIES OF TARGET.

Except as set forth in the disclosure letter delivered by the Target to Buyer Parent at or prior to the execution of this Agreement (the “ Seller Disclosure Letter ”), Target represents and warrants to Buyer and Buyer Parent as follows:

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2.1    Organization and Good Standing . Target is a corporation duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, with the requisite corporate power and authority to own, lease and operate its property and assets and conduct the business as it is now being conducted. Target is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect. The copies of Target’s Organizational Documents and all unredacted minute books of Target which were previously furnished to Buyer Parent are true, complete and correct copies of such documents as in effect on the date of this Agreement. Target has no Subsidiary.

2.2    Authority; No Conflict .

(a)    This Agreement has been duly authorized, executed and delivered by Target and, assuming that this Agreement has been duly authorized, executed and delivered by Buyer and Buyer Parent, constitutes the legally valid and binding obligation of Target, duly authorized by all requisite corporate action, and enforceable against Target in accordance with its terms, subject to (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting creditors’ rights and remedies generally, and (ii) the effect of equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law). Target has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement.

(b)    Neither the execution and delivery of this Agreement nor the performance by Target of its obligations under this Agreement shall (with or without notice or lapse of time, or both):

(i)    violate any provision of the Organizational Documents of Target;

(ii)    conflict with or violate any Applicable Laws or any Order, or license of any Governmental Body, which is material to Target, and to which any of the assets owned or used by Target, is subject;

(iii)    conflict with, violate or result in a breach of 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 to amend, cancel, terminate, or modify, any material obligation or the loss of any material property, right or benefit under, any Contract listed or required to be listed on Part 2.14(a) of the Seller Disclosure Letter; or

(iv)    result in the imposition or creation of any Encumbrance upon or with respect to any of the equity interests, properties or assets owned by Target (other than as set forth in Part 2.2(b)(iv) of the Seller Disclosure Letter and any Encumbrance contemplated by this Agreement or granted to any lender at the Closing in connection with financing of the Purchase arranged by Buyer or Buyer Parent).

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(c)    Except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the HSR Act and any other required merger control filings, Target shall not be required to give any notice to or obtain any Consent from (i) any Governmental Body or (ii) any Person under any Contract listed or required to be listed on Part 2.14(a) of the Seller Disclosure Letter in connection with the execution and delivery of this Agreement or the consummation of the Purchase.

2.3    Capitalization .

(a)    As of the date of this Agreement:

(i)    the capitalization (including a list of all equity ownership and equity equivalent interest in the ownership or earnings or other similar rights) of Target is set forth on Schedule I to this Agreement; there are no shares of capital stock, membership interest or other voting securities issued and outstanding of Target (including capital stock equivalents) except as so set forth on Part 2.3(a) of the Seller Disclosure Letter; and all of the outstanding shares of capital stock, membership interest or other voting securities of Target are held beneficially and of record by the Persons set forth on Part 2.3(a) of the Seller Disclosure Letter;

(ii)    all of the outstanding shares of capital stock and other securities of Target are free and clear of all Encumbrances; and

(iii)    all of the outstanding shares of capital stock of Target have been duly authorized and validly issued and are fully paid and nonassessable, and were not issued in violation of any preemptive rights.

(b)    None of the outstanding shares of capital stock or other securities of Target was issued in violation of the Securities Act or any other Applicable Laws.

(c)    No bonds, debentures, notes or other indebtedness of Target having the right to vote on any matters on which shareholders or equity holders may vote are issued or outstanding.

2.4    Financial Statements; Books and Records . Target has delivered to Buyer Parent: (a) the audited balance sheets of Target as at December 31, 2004 (restated) and December 31, 2005 (the “ Balance Sheets ”), and the related statements of income, stockholders’ equity, and cash flows for each of the fiscal years then ended, including in each case the notes thereto, together with the auditors’ report thereon of Clothier & Head P.S. (the “ Audited Financial Statements ”); and (b) the unaudited consolidated balance sheet of Target as at October 31, 2006 (the “ Interim Balance Sheet ”) and the related unaudited statement of income for the period then ended (the “Interim Financial Statements” and together with the Audited Financial Statements, the “ Financial   Statements ”). The Audited Financial Statements fairly present the financial condition and the results of operations, changes in stockholders’ equity, and cash flows of Target as at the respective dates of and for the periods referred to in such Audited Financial Statements, and the Interim Financial Statements fairly present the financial condition and the results of operations as at the respective dates of and for the periods referred to in such Interim Financial Statements, in each case all in accordance with GAAP, subject, in the case of the

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Audited Financial Statements, to the qualification set forth in the third paragraph of the auditors’ report of Clothier & Head, P.S. dated February 11, 2006, and subject further, in the case of the Interim Financial Statements, to customary year-end adjustments, which would not reasonably be expected to result in a Material Adverse Effect, and the absence of footnotes and statements of stockholders equity and cash flows. The Financial Statements reflect the consistent application of such accounting principles throughout the periods involved, except as disclosed in the footnotes to the Financial Statements and the qualifications noted above.

2.5    Title to Properties; Encumbrances .

(a)    As of the date of this Agreement, Target does not own any real property. Part 2.5(a) of the Seller Disclosure Letter contains:

(i)    a complete and accurate list as of the date of this Agreement of all leasehold real property, or real property operated or used, or other real property interests owned or held by Target (collectively, the “ Real Property ”);

(ii)    a complete and accurate list as of the date of this Agreement of each item of equipment, fixtures and other tangible assets (other than inventory) owned by Target having a book value greater than five thousand dollars ($5,000); and

(iii)    a complete and accurate list as of the date of this Agreement of each tangible asset currently leased to Target requiring monthly lease payments in excess of five thousand dollars ($5,000).

Target has made available to Buyer Parent true and complete copies of all Real Property leases or subleases. Each Real Property lease or sublease is valid and binding on Target and, to the Knowledge of Target, on the other parties thereto and is in full force and effect. Target and, to the Knowledge of Target, each of the other parties to each Real Property lease has performed in all material respects all material obligations required to be performed by it thereunder. The Real Property complies with Applicable Laws and is the subject of those material permits or licenses required to be maintained for the use or occupancy by Target of the Real Property. Target has not granted any legal or equitable interests (including without limitation rights to sublease) in respect of the Real Property, except for Permitted Encumbrances.

(b)    Target has good and marketable title to, or has valid leasehold interests in, all material personal property owned or leased by Target and used in the operation of the Business or reflected on the Interim Balance Sheet or acquired after the date of the Interim Balance Sheet, in each case free and clear of all Encumbrances, except for Permitted Encumbrances, and except for personal property and assets sold since the date of the Interim Balance Sheet in the ordinary course of business consistent with past practices. Except as set forth in Part 2.5(b) of the Seller Disclosure Letter, such properties include all properties and assets necessary for the conduct of the Business as presently conducted. With respect to any properties or assets identified on Part 2.5(b) of the Seller Disclosure Letter that are used in the Business (i.e., molds, dyes, applicators and similar items), Target will make available such properties and assets (or replacement properties and assets that are substantially equivalent in

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quality and function) through license, assignment, replacement or other similar means so that Buyer may operate the Business uninterrupted in the manner currently conducted. All assets and properties of Target (including, but not limited to, molds, dies, applicators, tooling machinery and similar items and equipment) owned or leased by Target and necessary for Buyer to conduct the Business in the manner currently conducted by Target are in good operating condition and repair (ordinary wear and tear excepted, and subject to normal and customary maintenance requirements) and are usable in the ordinary course of business and conform in all material respects to all Applicable Laws relating to their use and operation.

2.6    Accounts Receivable .

(a)    All accounts receivable of Target that are reflected on the Interim Balance Sheet and on the Closing Balance Sheets as of the Closing Date (collectively, the “ Accounts Receivable ”) represent or shall represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business consistent with past practices and require or shall require no additional performance by Target to render them valid in accordance with GAAP.

(b)    Unless paid prior to the Closing Date, the Accounts Receivable are or shall be as of the Closing Date current and collectible in the aggregate in the ordinary course of business consistent with past practices, without out-of-pocket collection fees and expenses payable to third parties in collections efforts therefor and net of the aggregate reserves for uncollectible accounts, if any, shown on the Financial Statements and on the Final Closing Balance Sheet (which reserves are, except as noted in the Final Closing Balance Sheet, calculated consistent with past practices).

2.7    No Undisclosed Liabilities . Target has no liabilities except for (i) liabilities reflected or reserved against on the balance sheets included in the Audited Financial Statements or the Interim Balance Sheet, (ii) current liabilities incurred in the ordinary course of business consistent with past practices since the date of the Interim Balance Sheet, and (iii) liabilities incurred after the date hereof and expressly permitted by Section 5.3.

2.8    Payables. 

  Other than with respect to Transaction Liabilities, (i) all accounts payable of Target have arisen in the ordinary course of business consistent with past practice, (ii) all items which are required by GAAP to be reflected as payables on the Interim Balance Sheet and on the books and records of Target are so reflected and have been recorded in accordance with GAAP applied consistently, and (iii) there has been no material adverse change since the Interim Balance Sheet Date in the amount or delinquency of accounts payable of Target, either individually or in the aggregate.

2.9    Taxes . 

(a)    Target has filed or caused to be filed (on a timely basis) all income, franchise and other Tax Returns that are or were required to be filed by it pursuant to Applicable Laws. All such Tax Returns are complete and accurate in all material respects. No claim has been made by any Governmental Body in a jurisdiction where Target does not file Tax Returns that Target is or may be subject to taxation by that jurisdiction. Part 2.9 of the Seller Disclosure

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Letter identifies each current or previously existing permanent establishment of Target in any foreign country, as defined in any applicable Tax treaty or convention between the United States of America and such foreign country. Part 2.9(a) of the Seller Disclosure Letter sets forth each jurisdiction where Target is or has been required to file a Tax Return with respect to each open Tax period, but Target is not making any representation to Buyer or Buyer Parent as to where Buyer may be required to file any Tax Return after the Closing. Sellers have delivered or made available to Buyer Parent copies of all Tax Returns relating to all open Tax periods, and complete and accurate copies of all examination reports and statements of deficiencies assessed against or agreed to by Target or any of the Sellers with respect to Taxes of Target for all open Tax periods. All Taxes due by Target (whether or not shown on a Tax Return) have been paid or will be reserved against on the Final Closing Balance Sheet, and all Taxes of Target due on or prior to the Closing will be timely paid. Such Taxes, if any, as are listed in Part 2.9(a) of the Seller Disclosure Letter are being contested in good faith and, to the extent of such unpaid Taxes, adequate reserves will be provided on the Final Closing Balance Sheet.

(b)    Part 2.9(b) of the Seller Disclosure Letter contains a complete and accurate list of all audits of all United States federal and state franchise or income Tax Returns of Target for Tax periods beginning on or after January 1, 2001. All deficiencies proposed as a result of such audits have been paid, will be reserved against on the Final Closing Balance Sheet, settled, or, as described in Part 2.9(a) of the Seller Disclosure Letter, are being contested in good faith by appropriate proceedings. Neither Target nor any Seller has given waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) of any statute of limitations relating to the payment of Taxes of Target or for which Target may be liable.

(c)    There exists no proposed tax assessment against Target except as disclosed in the Interim Balance Sheet.

(d)    There are no Encumbrances on any of the assets of Target that arose in connection with any failure to pay any Tax.

(e)    All Taxes that Target is or was required by Applicable Laws to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Body or other Person.

(f)    Except as set forth in Part 2.9(f) of the Seller Disclosure Letter, Target has not been a member of an affiliated group filing a consolidated, combined or unitary Tax Return for federal, state, local or foreign Tax purposes. Target does not have any actual or potential liability for the Taxes of any Person (other than Taxes of Target) (i) under Treasury Regulation Section 1.1502-6 (or any similar laws), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise.

(g)    Target has not participated in and is not participating in an international boycott within the meaning of IRC Section 999.

(h)    Target has not entered into or participated in (i) any transaction identified as a “listed transaction” for purposes of Treasury Regulations §§ 1.6011-4(b)(2) or 301.6111-2(b)(2), (ii) any transaction that constitutes a “confidential corporate tax shelter” within the

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meaning of Section 6111(d) of the IRC and Treasury Regulation Section 301.6111-2, as in effect prior to the enactment of the American Jobs Creation Act of 2004, or (iii) any similar transaction required to be disclosed to a Tax authority under applicable Tax Law.

(i)    Target has been an “S Corporation” within the meaning of Section 136l(a)(l) of the IRC (and any comparable provision of state and local law in each jurisdiction in which Target is obligated to file income or franchise Tax Returns) at all times on and after January 1, 2004 and will continue to be an S Corporation through the close of business the day of the Closing Date.

2.10    Employee Benefits .

(a)    For all purposes of this Agreement, the following terms shall have the following respective meanings:

(i)    “ Target Affiliate ” shall mean any person that, together with Target or any present or past Subsidiary of Target, as of any relevant date was or is required to be treated as a single employer under Section 414(b), (c), (m) or (o) of the IRC or Section 4001(a)(14) of ERISA.

(ii)    “ Target Employee ” shall mean any current or former employee, consultant or director of Target or any Target Affiliate.

(iii)    “ Target Employee Plan ” shall mean any plan, program, policy, Contract, agreement or other arrangement providing for compensation, severance, termination pay, deferred compensation, performance awards, bonuses, stock options, stock appreciation or other stock or stock-related awards, fringe benefits, health, life, vision or dental insurance coverage (including, without limitation, any self-insured arrangements), relocation, repatriation, expatriation, workers’ compensation, disability benefits, supplemental unemployment benefits, vacation benefits or retirement benefits, profit sharing or other forms of incentive compensation, or post-retirement insurance, compensation or benefits, or other employee benefits or remuneration of any kind, whether written, unwritten or otherwise, funded or unfunded, including without limitation, each “employee benefit plan,” within the meaning of Section 3(3) of ERISA (whether or not ERISA is applicable to such plan) which is or has been maintained, contributed to, or required to be contributed to, by Target or any Target Affiliate for the benefit of a Target Employee, or with respect to which Target has or may have any Liability or obligation.

(iv)    “Pension Plan” shall mean any “employee pension benefit plan” as defined in Section 3(2) of ERISA (A) which Target or any Target Affiliate maintains, administers, contributes to or is required to contribute to, or, prior to the Closing Date, maintained, administered, contributed to or was required to contribute to, or under which Target or any Target Affiliate may incur any liability and (B) which covers or covered any employee or former employee of Target or any Target Affiliate.

(v)    “ COBRA ” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

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(vi)    “ FMLA ” shall mean the Family Medical Leave Act of 1993, as amended.

(vii)    “ HIPAA ” shall mean the Health Insurance Portability and Accountability Act of 1996, as amended.

(b)    Part 2.10(b) of the Seller Disclosure Letter contains an accurate and complete list as of the date of this Agreement of each Target Employee Plan. Target does not intend nor has it committed to establish or enter into any new Target Employee Plan, or to modify any Target Employee Plan (except to the extent required by Applicable Laws, or to conform any Target Employee Plan to the requirements of Applicable Laws or as expressly required pursuant to the terms of this Agreement).

(c)    Target has made available to Buyer Parent correct and complete copies of (i) all documents setting forth the terms of each Target Employee Plan, including, without limitation, all amendments thereto and, if applicable, all related trust documents and funding instruments (including, without limitation, all insurance contracts), (ii) a complete description of each Target Employee Plan which is not in writing, (iii) the three most recent annual reports (Form Series 5500 and all schedules and financial statements attached thereto), if any, required under ERISA or the IRC in connection with a Target Employee Plan, (iv) if the Target Employee Plan is subject to the minimum funding standards of ERISA Section 302 or Section 412 of the IRC, the most recent annual and periodic accounting of the Target Employee Plan assets, (v) the most recent summary plan description together with the summaries of material modifications thereto, if any, required under ERISA with respect to the Target Employee Plan, (vii) all correspondence, if any, sent to or received from any governmental agency in the last three years relating to a Target Employee Plan, (viii) the most recent IRS determination or opinion letter issued with respect to each Target Employee Plan intended to be qualified under Section 401(a) of the IRC.

(d)    Target has substantially performed all material obligations required to be performed by it under, is not in default or violation of, and has no Knowledge of any default or violation by any other party to, the material terms of a Target Employee Plan, and each Target Employee Plan, if any, has been established and maintained materially in accordance with its terms and in compliance in all material respects with all Applicable Laws, including, without limitation, ERISA and the IRC. Each Target Employee Plan intended to be qualified under Section 401(a) of the IRC has obtained a favorable determination letter (or opinion letter, if applicable) as to its qualified status under the IRC. Neither Target nor any plan fiduciary of any Target Employee Plan which covers or has covered employees or former employees of Target or any Target Affiliate, has engaged in any transaction in violation of Sections 404 or 406 of ERISA or any “prohibited transaction,” as defined in Section 4975 of the IRC, for which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of the IRC, or has otherwise violated the provisions of Part 4 of Title I, Subtitle B of ERISA. Seller has not knowingly participated in a violation of Part 4 of Title I, Subtitle B of ERISA by any plan fiduciary of any Target Employee Plan (or other employee benefit plan subject to ERISA) and has not been assessed any civil penalty under Section 502 of ERISA. Other than routine claims for benefits, there are no Proceedings pending against a Target Employee Plan or against the assets of a Target Employee Plan, and to the Knowledge of Target, (i) no such Proceeding has

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been threatened orally or in writing, and (ii) no event has occurred and no circumstances exist that may give rise to or serve as a basis for the commencement of any such Proceeding. Each Target Employee Plan can be amended, terminated or otherwise discontinued within 30 days after the Closing Date in accordance with its terms, without liability to Buyer, Buyer Parent or Target (other than ordinary administration expenses) and without the vesting or acceleration of any benefits promised by such Target Employee Plan. Neither Target nor any Target Affiliate has incurred or been assessed any penalty or excise tax under Chapter 43 of the IRC. Target has made all contributions and other payments required by and due under the terms of each Target Employee Plan.

(e)    Target has not maintained, established, sponsored, participated in, or contributed to, any Pension Plan. No Target Employee Plan is a Pension Plan.

(f)    Target has never maintained, established, sponsored, participated in, or contributed to a plan or arrangement that is subject to Title IV of ERISA, and Target does not have any liability or obligation under any such plan or arrangement. No Target Employee Plan is subject to Title IV of ERISA.

(g)    Target has never maintained, established, sponsored, participated in, or contributed to any “multiemployer plan” within the meaning of Section (3)(37) of ERISA. No Target Employee Plan is or was a “multiemployer plan”, as defined in Section 3(37) of ERISA.

(h)    No Target Employee Plan provides, or reflects or represents any liability of Target to provide, retiree life insurance, retiree health or other retiree employee welfare benefits to any person for any reason, except as may be required by COBRA or other Applicable Laws. Target has never represented, promised or contracted (whether in oral or written form) to provide retiree life insurance, retiree health or other retiree employee welfare benefit to any Person, except to the extent required by COBRA or similar provisions of Applicable Laws.

(i)    Prior to the Closing Date, Target has complied in all material respects with the requirements of COBRA, the requirements of FMLA, the requirements of HIPAA, and any similar provisions of Applicable Laws.

(j)    There is no Target Employee Plan or other contract, agreement or benefit arrangement covering any current or former employee or independent contractor of Target or any Target Affiliate which, individually or collectively, would give rise to the payment of, or permit any such individual to retain, any amount or benefit which would constitute a “parachute payment” (as defined in Section 280G of the IRC). Except as set forth on Part 2.10(j) of the Seller Disclosure Letter, neither the execution of this Agreement nor the consummation of the Purchase or any of the transactions contemplated hereby (whether alone or upon the occurrence of any additional or subsequent events, including, without limitation, a termination of employment) will (i) result in any obligation or liability (with respect to accrued benefits or otherwise) on the part of Target or any Target Affiliate to any Target Employee Plan, or to any present or former employee, director, officer, shareholder, contractor or consultant of Target or any Target Affiliate or any of their dependents, (ii) be an event under any Target Employee Plan that will result in any payment (whether of severance pay or otherwise) becoming due to any such present or former employee, officer, director, shareholder, contractor, or consultant, or any

(k)    Each Target Employee Plan that is a “non-qualified deferred compensation plan” (as defined under Section 409A(d)(1) of the IRC) has been operated and administered in good faith compliance with Section 409A of the IRC and Internal Revenue Service Notice 2005-1 since January 1, 2005.

2.11    Compliance With Applicable Laws; Governmental Authorizations . Except as to matters which are the subject of Section 2.9 (Taxes), 2.10 (Employee Benefits), 2.18 (Environmental Matters), 2.28 (Government Contracts) and 2.29 (Customs) as to which no representation or warranty is made in this Section 2.11:

(a)    Target is, and has been at all times, in compliance in all material respects with all Applicable Laws that are or were at such times applicable to it, and Target has not received any written or to the Knowledge of Target oral notice or other communication asserting or regarding any violation in respect of any Applicable Laws that has not been fully remedied.

(b)    Part 2.11(b) of the Seller Disclosure Letter sets forth an accurate and complete list of all material Government Authorizations reasonably necessary for the operation of the Business as currently conducted, each of which is valid and in full force and effect. Target is, and has been at all times, in compliance with its respective obligations under such Governmental Authorizations. Target has not received a written notice, which is pending, that challenges, revokes or notifies Target of an intent not to renew any such Governmental Authorizations or that Target requires any Governmental Authorization required for the Business that is not currently held by it.

(c)    All material reports, documents, claims, notices or approvals required to be filed, obtained, maintained, or furnished to any Governmental Body by Target have been so filed, obtained, maintained or furnished. All such reports, documents, claims and notices were complete and correct in all material respects on the date filed (or were corrected in or supplemented by a subsequent filing).

(d)    Neither Target, nor, to the Knowledge of the Target, its officers, directors or managing employees, have engaged in any activities in their capacity as an officer, director or managing employee, as applicable, which are prohibited under federal or state criminal or civil laws or the regulations promulgated pursuant to such laws.

2.12    Legal Proceedings; Orders .

(a)    There are no Proceedings by or before any Governmental Body pending or, to the Knowledge of Target, threatened in writing against Target relating to Target or its Business, Assets or property or seeking to enjoin the Purchase. Target is not a party to any litigation (and Target has not been threatened in writing with any litigation) which would reasonably be expected to affect or prohibit the consummation of the Purchase. To the Knowledge of Target, no demand or statement has been threatened or made (orally or in writing) or any notice has been given (orally or in writing)

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that could reasonably be expected to result in any litigation being brought against the Target, its Business or any of the Assets owned or used by Target.

(b)    There is no Order to which Target, or any of the assets owned or used by Target, is subject, and, to the Knowledge of Target, no officer or director is subject to any Order that prohibits such officer or director from engaging in or continuing any conduct, activity, or practice material to the Business.

2.13    Absence Of Certain Changes And Events . As of the date of this Agreement, there has not been any transaction or occurrence since the date of the Interim Balance Sheet that (i) has had or would reasonably be expected to result in a Material Adverse Effect or (ii) would constitute a breach of Section 5.2(a) or 5.3 as if such transaction or occurrence had taken place after the date hereof and prior to Closing.

2.14    Contracts; No Defaults .

(a)    Part 2.14(a) of the Seller Disclosure Letter contains a complete and accurate list of the following contracts or agreements to which Target is a party as of the date of this Agreement:

(i)    each Contract that involves performance of services or delivery of goods or materials by or to Target (including all distributor and dealer agreements) of an annual amount or value in excess of ten thousand dollars ($10,000); provided, that the Seller Disclosure Letter need not list any fulfilled purchase order entered into by Target prior to January 1, 2005;

(ii)    each Contract that was not entered into in the ordinary course of business consistent with past practices and that involves annual expenditures or receipts by or to Target in excess of ten thousand dollars ($10,000);

(iii)    each lease, rental or occupancy agreement, license, installment and conditional sale agreement to which Target is a party, and other Contract affecting the ownership of, leasing of, title to, use of, or any leasehold or other interest in, any real or personal property of Target having a value per item or annual payments in excess of ten thousand dollars ($10,000);

(iv)    each currently effective licensing agreement or other Contract regarding Target IP, including agreements with current or former employees, consultants, or contractors regarding the ownership of Target IP;

(v)    Each Target Employee Plan, each Contract relating to management and consulting services, each subcontractor, retainer or other similar type of agreement and all bonus, profit sharing, compensation, severance, termination, stock option, pension, retirement, deferred compensation, employment or other employee benefit agreements, trusts, plans, funds or other arrangements for the benefit or welfare of any director, officer or employee of any of Target;

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(vi)    each joint venture, partnership, and other similar Contract (however named) involving a sharing by Target with any other Person of profits, losses, costs, or liabilities in an amount that has exceeded or is reasonably expected to exceed ten thousand dollars ($10,000) in any year;

(vii)    each Contract containing covenants that purport to restrict the scope or location of business activity of Target;

(viii)    each Contract providing for payments to or by any Person based on sales, purchases, or profits, other than (x) direct payments for goods and (y)  Contracts which are not reasonably likely to result in payments of greater than ten thousand dollars ($10,000) during the twelve (12) months after the Closing other than distribution or dealer agreements entered into the ordinary course of business consistent with past practices;

(ix)    each power of attorney of Target that is currently effective;

(x)    each Contract for capital expenditures not provided for in Target’s 2006 - 2007 capital budget (which has previously been made available to Buyer and Buyer Parent in Target’s electronic data room) and that exceed ten thousand dollars ($10,000) in the aggregate;

(xi)    each Contract under which Target is obligated with respect to Indebtedness for borrowed money or has a right or obligation to incur any such Indebtedness;

(xii)    all agreements with brokers that are not terminable by Target upon sixty (60) days’ notice without penalty or liability;

(xiii)    any other agreement material to the Business or under which the consummation of the transactions contemplated by this Agreement would constitute a default thereunder (with or without notice or lapse of time, or both) without the prior consent of another party thereto;

(xiv)    each agreement, including any lease agreement and supplier agreement, that contains an assignment provision applicable to Target;

(xv)    each agreement that obligates Target to indemnify a third party, other than such agreements that were made in the ordinary course of business consistent with past practice or that do not have the primary purpose of indemnifying a third party;

(xvi)    each other agreement not identified above, the loss of which could reasonably be expected to have, directly or indirectly, individually or in the aggregate, a Material Adverse Effect on Target; and

(xvii)    each binding amendment, supplement and modification in respect of any of the foregoing.

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(b)    As of the date of this Agreement, Target has made available to Buyer Parent true and complete copies of the Contracts identified in Part 2.14(a) of the Seller Disclosure Letter. Each Contract identified or required to be identified in Part 2.14(a) of the Seller Disclosure Letter is legally valid, binding, enforceable against Target and, to the Knowledge of Target, against each other Person party to such Contract (except, in each case, as such enforceability may be limited by (i) bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditors’ rights generally and (ii) the general principles of equity, regardless of whether asserted in a proceeding in equity or at law) and is in full force and effect).

(c)    Neither Target nor, to the Knowledge of Target, any other party is in material breach or default, and no event has occurred which with notice or lapse of time could constitute a material breach or default or permit termination, modification or acceleration, under any Contract identified or required to be identified in Part 2.14(a) of the Seller Disclosure Letter, and Target has not received any notice of termination with respect to any Contract identified or required to be identified in Part 2.14(a) of the Seller Disclosure Letter.

(d)    Target has designated the manufacturers or assemblers of components for parts to be used by its significant manufacturer in the manufacture of finished products for Target, and such manufacturer has used such designated manufacturers or assemblers.

2.15    Title to Assets; Sufficiency of Assets . Target has, and at the Closing, Target will deliver to Buyer, good and valid title to or, in the case of licensed assets, a valid and binding license to or rights under (as the case may be), all of the Assets (except as contemplated by the proviso of Section 7.9) free and clear of all Encumbrances other than Permitted Encumbrances. Except as disclosed in Part 2.14(a) of the Seller Disclosure Letter, as of the date of this Agreement, the Assets include all material assets, properties, contract rights and other rights (both material and non-material) that are necessary for Buyer to conduct the Business in the manner currently conducted by the Target. Target has (i) included in the Assets as of the date of this Agreement all non-material assets, properties, contract rights and other rights necessary for Buyer to conduct the Business in the manner currently conducted by the Target or (ii) disclosed in Part 2.15 of the Seller Disclosure Letter the absence of or exclusion from the Assets of any such assets, properties, contract rights or other rights. Other than the Assets and the Excluded Assets and except as disclosed in Part 2.15 of the Seller Disclosure Letter, neither Target nor any Affiliate of Target or any other Person owns or possesses any assets, properties or rights, wherever such assets, properties and rights may be located, and whether real, personal or mixed, tangible or intangible, and whether or not any of such assets, properties or rights have any value for accounting purposes or are carried or reflected on or specifically referred to in the books or financial statements of Target, that are used primarily (or exclusively) in connection with the Business or that relate primarily (or exclusively) to the Business.

2.16    Assumed Contracts . The Assumed Contracts include all contracts, agreements, understandings and arrangements related to the Business to which Target is a party, except as contemplated by Section 6.5(b) and Section 7.9. Target and, to the Knowledge of Target, any other party thereunder, has performed in all material respects the obligations required to be performed by such party under the Assumed Contracts.

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2.17    Insurance . As of the date of this Agreement, Target maintains in effect the general liability and other insurance policies covering the Business that are set forth in Part 2.17 of the Seller Disclosure Letter (the “ Policies ”), and such Policies (or substantially equivalent renewals or replacements thereof, except as market conditions may otherwise not reasonably allow and as disclosed in Part 2.17 of the Seller Disclosure Letter) shall be maintained in effect by Target through the Closing Date. Part 2.17 of the Seller Disclosure Letter sets forth the type and amount of coverage and the expiration dates of each of the Policies. Target has paid all premiums due, and has otherwise performed all of its obligations, under the Policies. The Policies are valid and enforceable in accordance with their terms, are in full force and effect and insure Target against the risks usually insured against by Persons operating similar businesses or properties of similar size in the localities (including third party locations where inventory, molds, dies, applicators, tolling machinery and similar items and equipment are located) where such businesses or properties are located and provide coverage as may be required by any and all Contracts that Target is a party to and have been issued by insurers of recognized responsibility. There is no material claim by Target pending under any of such Policies or bonds as to which coverage has been denied or is being materially disputed by the underwriters of such policies or bonds. Target has not received any written notice relating to or threatening any termination of, or material premium increase with respect to, any of such Policies.

2.18    Environmental Matters .

(a)    Target is not liable for any Environmental, Health and Safety Liability, including without limitation any response costs or natural resource damages under Section 107(a) of Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), or under any other so-called “superfund” or “superlien” law or similar Environmental Law.

(b)    Target is, and at all times has been, in material compliance with any applicable Environmental Law or any Occupational Safety and Health Law, which compliance includes, without limitation, the possession by Target of all applicable Governmental Authorizations.

(c)    Target has not received any notice or other communication (in writing or otherwise) from any Governmental Body or other Person regarding any actual or alleged Environmental, Health and Safety Liability arising from or relating to the presence, generation, manufacture, production, transportation, importation, use, treatment, refinement, processing, handling, storage, discharge, Release, emission or disposal of any Hazardous Material or arising from or relating to any Hazardous Activity at any of the acquired facilities or facilities for which Target may be held responsible. No Person or Governmental Body has commenced or, to the Knowledge of Target, threatened in writing to commence any contribution action or other Proceeding against Target in connection with any such actual, alleged, possible or potential Environmental, Health and Safety Liability; and to the Knowledge of Target no event has occurred, and no condition or circumstance exists, that may result in Target becoming subject to, any such Environmental, Health and Safety Liability.

(d)    There are no pending or, to the Knowledge of Target, threatened claims, Encumbrances, or other restrictions of any nature, resulting from any Environmental, Health and

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Safety Liabilities or arising under or pursuant to any Environmental Law or any Occupational Safety and Health Law.

(e)    Target has not permitted any Hazardous Material to be discharged, Released or disposed of (whether lawfully or unlawfully) in a manner which could give rise to any Environmental, Health and Safety Liabilities:

(i)    on or beneath the surface of any real property that is, or has at any time been, owned by or leased to Target;

(ii)    in or into any surface water, groundwater, soil or air associated with or adjacent to any real property that previously was owned by or leased to Target; or

(iii)    in or into any well, pit, pond, lagoon, impoundment, ditch, landfill, building, structure, facility, improvement, installation, equipment, pipe, pipeline, vehicle or storage container that is or was located on or beneath the surface of any such real property or that has at any time been owned by or leased to Target.

(f)    To the Knowledge of Target, all property that is owned by or leased to Target, and all surface water, groundwater, soil and air associated with such property, is free of any Hazardous Material and any harmful chemical or physical conditions that could result in any Environmental, Health and Safety Liability.

2.19    Labor Relations; Compliance .

(a)    Target is not a party to any collective bargaining agreement or other labor union contract applicable to persons employed by Target and currently there is no organizing activity involving the employees of Target pending or, to the Knowledge of Target, threatened in writing by any labor union or group of employees.

(b)    There are no strikes, organized slowdowns or organized work stoppages pending or threatened in writing against Target, and Target has not experienced any such strike, organized slowdown or organized work stoppage within the past three (3) years.

(c)    Except as would not reasonably be expected to have a Material Adverse Effect, there are no unfair labor practice charges, grievances, claims, or complaints pending or, to the Knowledge of Target, threatened in writing against Target by or on behalf of any employee of Target or before any Governmental Body.

2.20    Intellectual Property .

(a)    IP Disclosures .

(i)    Registered IP . Part 2.20(a)(i) of the Seller Disclosure Letter accurately identifies as of the date of this Agreement (1) each item of Registered IP in which Target has an ownership interest of any nature (whether exclusively, jointly with another Person, or otherwise); (2) the jurisdiction in which such item of Registered

IP has been registered or filed and the applicable registration or serial number; and (3) any other Person that has an ownership interest in such item of Registered IP and the nature of such ownership interest.

(ii)    Third Party IP and Inbound Licenses . Part 2.20(a)(ii) of the Seller Disclosure Letter accurately identifies (1) all Intellectual Property Rights or Intellectual Property licensed to Target (other than any non-customized software that (A) is so licensed solely in executable or object code form pursuant to a non-exclusive, internal use software license, (B) is not incorporated into, or used directly in the development, manufacturing, or distribution of, any of Target’s products or services, and (C) is generally available on standard terms for less than five thousand dollars ($5,000) in licensing and related maintenance fees per annual license period); and (2) the corresponding Contract or Contracts pursuant to which such Intellectual Property Rights or Intellectual Property is licensed to Target; and (3) whether the license or licenses granted to Target are exclusive or non-exclusive. Seller is not required to pay any royalties or other compensation for any Intellectual Property or Intellectual Property Rights licensed from a third party, including without limitation the items listed on Section 2.20(a)(ii) of the Seller Disclosure Letter.

(iii)    Outbound Licenses . Part 2.20(a)(iii) of the Seller Disclosure Letter accurately identifies each Contract pursuant to which any Person has been granted any license under, or otherwise has received or acquired any right (whether or not currently exercisable) or interest in, any Target IP. Other than as set forth in Contracts identified in Part 2.20(a)(iii) of the Seller Disclosure Letter, Target is not bound by, and no Target IP is subject to, any Contract containing any covenant or other provision that limits or restricts the ability of Target to use, exploit, assert, or enforce Target IP.

(iv)    Other IP . Part 2.20(a)(iv) of the Seller Disclosure Letter accurately identifies each material trademark, service mark or trade name that is not registered.

(v)    Certification Marks . Part 2.20(a)(v) of the Seller Disclosure Letter accurately identifies each Certification Mark used by Target in connection with any products sold by Target.

(b)    Target IP .

(i)    No Encumbrances . The Target IP other than Excluded Assets that consist of Target IP is free and clear of any Encumbrances (other than (w) infringements by third parties not within the Knowledge of Target, (x) Encumbrances securing the Indebtedness of Target disclosed on the Interim Balance Sheet or disclosed in Part 2.7 of the Seller Disclosure Letter, (y) Permitted Encumbrances or (z) the Intellectual Property Rights exclusively licensed by Target as specifically identified in Section 2.20(a)(iii) of the Seller Disclosure Letter).

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(ii)    Employees and Contractors . Each Person who has participated in the authorship, invention or creation of Intellectual Property Rights purported to be owned by Target has entered into an agreement with Target assigning all rights, title and interests in such Intellectual Property Rights to Target. To the Knowledge of Target, no current or former stockholder, officer, director, or employee of Target has any claim, right (whether or not currently exercisable), or interest to or in Target IP. To the Knowledge of Target, no employee of Target is (1) bound by or otherwise subject to any Contract restricting him or her from performing his or her duties for Target or (2) in breach of any Contract with any former employer or other Person concerning Intellectual Property Rights or confidentiality.

(iii)    Protection of Proprietary Information . Target has taken reasonable steps to maintain the confidentiality of and otherwise protect and enforce its rights in all proprietary information that Target holds, or purports to hold, as confidential and proprietary or as a trade secret.

(iv)    Government Rights . No funding, facilities, or personnel of any Governmental Body were used to develop or create, in whole or in part, Target IP and no Governmental Body has any claim of ownership or exclusive rights in Target IP.

(v)    Standards Bodies . Target is not a party to, nor has it ever signed or entered into, an agreement with any industry standards body or similar organization that could require or obligate Target to grant or offer to any other Person any license or right to Target IP.

(vi)    Sufficiency . Except where the failure to have such rights would not reasonably be expected to have a Material Adverse Effect, Target owns or otherwise has, and immediately after the Closing Buyer shall have, all Intellectual Property Rights that are needed to conduct its Business as currently conducted except with respect to Excluded Assets that consist of Target IP. To the Knowledge of Target, after the Closing, Buyer will have all Intellectual Property Rights necessary for Buyer or Buyer Parent to manufacture the products sold by Target as of the Closing Date, subject to the terms of and except for those products covered by the patents licensed pursuant to the Contracts set forth in that certain letter agreement dated as of the date hereof between Buyer, Buyer Parent and Target (the “ Letter Agreement ”).

(vii)    Trademarks . No trademark, service mark or trade name owned, used, or applied for by Target has been the matter of an unresolved dispute made in writing to Target due to an actual or alleged conflict or interference with any trademark or trade name owned, used, or applied for by any other Person.

(viii)    Applicable Laws and Deadlines . Except where the failure to have done so would not reasonably be expected to have a Material Adverse Effect, Target has used commercially reasonable efforts to prosecute and maintain each item of Target IP that is Registered IP, and such prosecution and maintenance is and at all times has been in compliance with all Applicable Laws. All filings, payments, and other actions required by the applicable United States Governmental Body to be made or taken to maintain such item of Target IP used in the Business as of the Closing Date in full force and effect prior to the Closing Date have been made or taken

by the applicable deadline. No application for a patent or a copyright, or trademark registration regarding Listed Target IP filed by or on behalf of Target has been abandoned, allowed to lapse, or rejected.

(c)    Interference Proceedings and Similar Claims . No interference, opposition, reissue, reexamination, or other Proceeding is pending or, to the Knowledge of Target, threatened in writing, in which the scope, validity, or enforceability of Registered IP is being or has been, contested or challenged.

(d)    Third-Party Infringement of Target IP . To the Knowledge of Target, no Person has infringed, misappropriated, or otherwise violated any Registered IP or any material non-registered Target IP.

(e)    Effects of This Transaction . Neither the execution, delivery, or performance of this Agreement nor the consummation of the Purchase shall, with or without notice or lapse of time, result in, or give any other Person the right or option to cause or declare: (i) a loss of, or Encumbrance on, any of the Target IP; (ii) subject to Section 7.9, a breach of any license agreement listed or required to be listed in Part 2.20(a)(iii) of the Seller Disclosure Letter; (iii) the release, disclosure, or delivery of Target IP by or to any escrow agent or other Person; or (iv) the grant, assignment, or transfer to any other Person of any license or other right or interest under, to, or in any of the Target IP.

(f)    Infringement Claims and Liability .

(i)    No Infringement of Third Party IP Rights . To the Knowledge of Target, it has never infringed (directly, contributorily, by inducement, or otherwise), misappropriated, or otherwise violated any Intellectual Property Right of any other Person.

(ii)    Infringing Acts . To the Knowledge of Target, no product, information, or service ever manufactured, produced, distributed, published, used, provided, or sold by or on behalf of Target has infringed, misappropriated, or otherwise violated the Intellectual Property Rights of any other Person.

(iii)    Infringement Claims . No infringement, misappropriation, or similar claim or Proceeding is pending with written notice to Target. To the Knowledge of Target, Target is not subject to nor has it received actual notice of an on-going dispute regarding any actual, alleged, or suspected infringement, misappropriation, or violation by Target of any Intellectual Property Rights of another Person.

(iv)    Other Infringement Liability . Target is not bound by any Contract to indemnify, defend, hold harmless, or reimburse any other Person with respect to any Intellectual Property infringement, misappropriation, or similar claim. Target has not assumed, or agreed to discharge or otherwise take responsibility for, any existing or potential liability of another Person for infringement, misappropriation, or violation of any Intellectual Property Right.

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2.21    Absence of Certain Practices . Neither Target nor any of its Representatives has, in connection with the operation of the Business, (i) paid, offered or promised to pay, or authorized the payment, directly or indirectly, through any other Person or firm, any monies of anything of value to any Person or firm employed by or acting for or on behalf of any Person, whether private or governmental, or any governmental official or employee of any political party or candidate for political office, in each case for the purpose of illegally inducing or rewarding any action by any official favorable to Target in connection with the Business, (ii) taken any other act that, if taken by a Person subject to United States law, would violate Section 30A of the Exchange Act, (iii) accepted or received any unlawful contribution, payment, gift or expenditure; or (iv) established or maintained any fund or asset of Target that has not been recorded in the books and records of Target.

2.22    Sale of Products .

(a)    Part 2.22(a) of the Seller Disclosure Letter sets forth a list of all civil, criminal or administrative actions, suits, demands, claims, hearings, notices of violation, proceedings or demand letters, and, to the Knowledge of the Company, all investigations undertaken by a Governmental Body, in each case relating to any alleged hazard or alleged defect in design, manufacture, materials or workmanship, including any failure to warn or alleged breach of express or implied warranty or representation, relating to any product manufactured, distributed or sold by or on behalf of Target that were pending or, to the Knowledge of Target, threatened in writing at any time during the past three (3) years. None of the matters set forth on Part 2.22(a) of the Seller Disclosure Letter has had or is reasonably expected to have a Material Adverse Effect.

(b)    Except with respect to policies and procedures disclosed in Part 2.22(b) of the Seller Disclosure Letter:

(i)    There is not pending (nor in the past three (3) years has there been) any recall or post-sale warning (collectively, a “ Recall ”) conducted by or on behalf of Target concerning any products sold, manufactured, produced, or distributed by Target; and

(ii)    To the Knowledge of Target, there is not pending (nor in the past three (3) years has there been) any Recall conducted by or on behalf of any other Person as a result of any alleged defect in any product supplied by Target.

(c)    Certifications and Testimonials . Target has the right to use each Certification Mark used by Target in connection with a product sold by Target. Each product sold by Target that is described in any advertising or marketing, promotional or sales material as being “certified” or “compliant” by a third party has in fact been certified by such third party and Target is authorized to make such representation. All products that are represented as having been “Manufactured in the U.S.A.” or similar language comply with any requirements under any applicable law, regulation or rule of any state or federal Governmental Body in the United States. Target has all necessary rights to use and publicize the testimonials used or publicized by Target regarding its products.

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2.23    Relationships With Related Persons . No Seller or, to the Knowledge of Target or such Seller, no Related Person of such Seller:

(a)    has, or since January 1, 2005 has had, any interest in any property (whether real, personal, or mixed and whether tangible or intangible), used in or pertaining to the Business; or

(b)    owns, or since January 1, 2005 has owned (of record or as a beneficial owner) an equity interest or any other financial or profit interest in a Person that has had business dealings or a material financial interest in any transaction with Target other than business dealings or transactions conducted in the ordinary course of business consistent with past practices with Target at substantially prevailing market prices and on substantially prevailing market terms. To the Knowledge of Target, except as set forth in Part 2.23 of the Seller Disclosure Letter, no Seller or any Related Person of Sellers is a party to any Contract (other than a Target Employee Plan) with, or has any claim or right against, Target, except for accrued and unpaid compensation and benefits in connection with such Person’s employment arrangement with Target in accordance with customary corporate policy and practices.

2.24    Brokers or Finders . Target has not incurred any obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with this Agreement, except with Wachovia Capital Markets, LLC.

2.25    Inventory . Except as set forth on Part 2.25 of the Seller Disclosure Letter, the inventory reflected in the Interim Balance Sheet or thereafter acquired has been determined and valued in accordance with GAAP as reflected in the Interim Balance Sheet and Target’s books and records. Target’s inventories (whether raw materials, work-in-process, or other inventory), other than as set forth on Part 2.25 of the Seller Disclosure Letter and other than obsolete inventory reserved for in the Interim Balance Sheet is salable in the ordinary course of business consistent with past practice; Target’s finished goods inventories consist of items which are merchantable in all material respects in the ordinary course of business and all raw materials will be consumed in the ordinary course of business; and, to the Knowledge of Seller, no previously sold inventory is subject to refunds materially in excess of that historically experienced by Target. All material commitments or orders for work-in-process were entered into in the ordinary course of business consistent with past practice.

2.26    Books and Records . The books, records and accounts that Target has made and kept (and given Buyer Parent access to) are true, correct and complete in all material respects and, in reasonable detail, accurately and fairly reflect the activities of Target. The minute books of Target previously made available to Buyer Parent accurately and adequately reflect all material action previously taken by the shareholders, me