ASSET PURCHASE AGREEMENT

any environmental, health or safety matter or condition (including on-site or off-site contamination, occupational safety and health and regulation of any chemical substance or product);

any fine, penalty, judgment, award, settlement, legal or administrative proceeding, damages, loss, claim, demand or response, remedial or inspection cost or expense arising under any Environmental Law or Occupational Safety and Health Law;

financial responsibility under any Environmental Law or Occupational Safety and Health Law for cleanup costs or corrective action, including any cleanup, removal, containment or other remediation or response actions (“Cleanup”) required by any Environmental Law or Occupational Safety and Health Law (whether or not such Cleanup has been required or requested by any Governmental Body or any other Person) and for any natural resource damages; or

any other compliance, corrective or remedial measure required under any Environmental Law or Occupational Safety and Health Law. The terms “removal,” “remedial” and “response action” include the types of activities covered by the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA).

advising appropriate authorities, employees or the public of intended or actual Releases of pollutants or hazardous substances or materials, violations of discharge limits or other prohibitions and the commencement of activities, such as resource extraction or construction, that could have significant impact on the Environment;

preventing or reducing to acceptable levels the Release of pollutants or hazardous substances or materials into the Environment;

reducing the quantities, preventing the Release or minimizing the hazardous characteristics of wastes that are generated;

assuring that products are designed, formulated, packaged and used so that they do not present unreasonable risks to human health or the Environment when used or disposed of;

protecting resources, species or ecological amenities;

reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil or other potentially harmful substances;

cleaning up pollutants that have been Released, preventing the Threat of Release or paying the costs of such clean up or prevention; or

making responsible parties pay private parties, or groups of them, for damages done to their health or the Environment or permitting self-appointed representatives of the public interest to recover for injuries done to public assets.

nation, state, county, city, town, borough, village, district or other jurisdiction;

federal, state, local, municipal, foreign or other government;

governmental or quasi-governmental authority of any nature (including any agency, branch, department, board, commission, court, tribunal or other entity exercising governmental or quasi-governmental powers);

multinational organization or body;

body exercising, or entitled or purporting to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; or

official of any of the foregoing.

that individual is actually aware of that fact or matter; or

a prudent individual could be expected to discover or otherwise become aware of that fact or matter in the course of conducting a reasonably comprehensive investigation regarding the accuracy of any representation or warranty contained in this Agreement.

is consistent in nature, scope and magnitude with the past practices of such Person and is taken in the ordinary course of the normal, day-to-day operations of such Person;

does not require authorization by the board of directors or Shareholder of such Person (or by any Person or group of Persons exercising similar authority) and does not require any other separate or special authorization of any nature; and

is similar in nature, scope and magnitude to actions customarily taken, without any separate or special authorization, in the ordinary course of the normal, day-to-day operations of other Persons that are in the same line of business as such Person.

each other member of such individual’s Family;

any Person that is directly or indirectly controlled by any one or more members of such individual’s Family;

any Person in which members of such individual’s Family hold (individually or in the aggregate) a Material Interest; and

any Person with respect to which one or more members of such individual’s Family serves as a director, officer, partner, executor or trustee (or in a similar capacity).

any Person that directly or indirectly controls, is directly or indirectly controlled by or is directly or indirectly under common control with such specified Person;

any Person that holds a Material Interest in such specified Person;

each Person that serves as a director, officer, partner, executor or trustee of such specified Person (or in a similar capacity);

any Person in which such specified Person holds a Material Interest; and

any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity).

Interpretation. In this Agreement, unless a clear contrary intention appears:

the singular number includes the plural number and vice versa;

reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

reference to any gender includes each other gender;

reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;

reference to any Legal Requirement means such Legal Requirement as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Legal Requirement means that provision of such Legal Requirement from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

“hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof;

“including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term;

“or” is used in the inclusive sense of “and/or”;

with respect to the determination of any period of time, “from” means “from and including” and “to” means “to and including;” and

references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP.

Legal Representation of the Parties. This Agreement was negotiated by the parties with the benefit of legal representation, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction or interpretation hereof.

all Tangible Personal Property, including those items described in Exhibit “A”;

all Inventories; including but not limited to Exhibit “A”

all Seller Contracts, including those listed in Exhibit “B”, and all outstanding offers or solicitations made by or to Seller to enter into any Contract;

all Governmental Authorizations and all pending applications therefore or renewals thereof, in each case to the extent transferable to Buyer, including those listed in Exhibit “C”;

all data and Records related to the operations of Seller, including client and customer lists and Records, referral sources, research and development reports and Records, production reports and Records, service and warranty Records, equipment logs, operating guides and manuals, financial and accounting Records, creative materials, advertising materials, promotional materials, studies, reports, correspondence and other similar documents and Records and, subject to Legal Requirements, copies of all personnel Records and other Records described in Section 2.2 and certification documentation for the Inventory;

all of the intangible rights and property of Seller, including Intellectual Property Assets, company name, going concern value, goodwill, telephone, telecopy and e-mail addresses and listings and those items listed in Exhibits “D”;

all insurance benefits, including rights and proceeds, arising from or relating to the Assets or the Assumed Liabilities prior to the Closing, unless expended in accordance with this Agreement;

all claims of Seller against third parties relating to the Assets, whether choate or inchoate, known or unknown, contingent or noncontingent, including all such claims listed in Exhibit “E”; and

all rights of Seller relating to deposits and prepaid expenses, claims for refunds and rights to offset in respect thereof that are not listed in Exhibit “F”. As reflected in Exhibit “F”, Seller and the Shareholder may be entitled to certain Income Tax Refunds relating to the operations of Seller. Such Income Tax Refunds are not included in the Assets.

all cash, cash equivalents and short-term investments;

all minute books, stock Records and corporate seals;

the shares of capital stock of Seller held in treasury;

all Accounts Receivable;

all rights of Seller under this Agreement, the Bill of Sale, the Assignment and Assumption Agreement, the Secured Promissory Note, the Security Agreement and all other documents to be delivered in connection with the Contemplated Transactions; and

the property and assets expressly designated in Exhibit “F”, including but not limited to the Income Tax Refunds and real property owned by Seller or its affiliates.

The consideration for the Assets (the “Purchase Price”) will be (a) Two million five hundred thousand dollars ($2,500,000.00) plus or minus the Adjustment Amount and (b) the issuance of Three million five hundred thousand shares (3,500,000 shares) pursuant to Section 4(2) of the Securities Act of Buyer’s Preferred Stock, the subsequent transfer of which is restricted, in whole for a minimum of one year or in part for a minimum of two years, in accordance with Section 144 of the Securities Act and the assumption of the Assumed Liabilities. In accordance with Section 2.7(b), at the Closing, the Purchase Price, prior to adjustment on account of the Adjustment Amount, shall be delivered by Buyer to Seller as follows:

One million dollars ($ 1,000,000.00) by means of one Secured Subordinated Promissory Note bearing an interest rate of eight percent (8%) per annum and shall mature on November 1, 2006; and will be retired as soon as practical through the receipt of funds raised through the sale of debentures or proceeds from a Private Placement Memorandum.

the balance as adjusted payable in the form of a second Secured Subordinated Promissory Note bearing an interest rate of eight percent (8%) per annum which shall mature no later than December 31, 2006 (Attached as Exhibit “H”) and will be retired as soon as practical through the receipt of funds raised through the sale of debentures or proceeds from a Private Placement Memorandum. The security for the Secured Subordinated Promissory Note is defined in Section 2.7(b)(ii). The Adjustment Amount shall be paid in accordance with Section 2.8.

Issued at the time of Closing, Three million five hundred thousand (3,500,000) shares of Preferred Stock (“Shares”), pursuant to Section 4(2) of the Securities Act of Buyer’s Preferred Stock, the subsequent transfer of which is restricted, in whole for a minimum of one year or in part for a minimum of two years, in accordance with Section 144 of the Securities Act, commencing from the date that consideration is provided for the Shares. After the Shares have been held for a minimum of one (1) year they shall become eligible for sale at the rate of one percent (1%) per quarter of the Company’s total outstanding shares provided that the Company and the eligible sale of Shares meet the conditions of Section 144 of the Securities Act.

Assumed Liabilities. On the Closing Date, but effective as of the Closing, Buyer shall assume and agree to discharge only the following Liabilities of Seller (the “Assumed Liabilities”):

any Liability to Seller’s customers incurred by Seller in the Ordinary Course of Business for nondelinquent orders outstanding as of the Closing reflected on Seller’s books (other than any Liability arising out of or relating to a Breach that occurred prior to the Closing); and

any liability to Seller’s suppliers for unfilled purchase orders, provided that such unfilled purchase orders shall be for a quantity of parts that will be sold in the Ordinary Course of Business for a cost consistent with prevailing market cost.

Retained Liabilities. The Retained Liabilities shall remain the sole responsibility of and shall be retained, paid, performed and discharged solely by Seller. “Retained Liabilities” shall mean every Liability of Seller other than the Assumed Liabilities, including:

any Liability arising out of or relating to products of Seller sold prior to the Closing other than to the extent assumed under Section 2.4(a)(iii);

any Liability under any Contract assumed by Buyer pursuant to Section 2.4(a) that arises after the Closing but that arises out of or relates to any Breach that occurred prior to the Closing;

any Liability for Taxes, including (A) any Taxes arising as a result of Seller’s operation of its business or ownership of the Assets prior to the Closing, (B) any Taxes that will arise as a result of the sale of the Assets pursuant to this Agreement and (C) any deferred Taxes of any nature;

(iv) any Liability under any Contract not assumed by Buyer under Section 2.4(a), including any Liability arising out of or relating to Seller’s credit facilities or any security interest related thereto;

any Environmental, Health and Safety Liabilities arising out of or relating to the operation of Seller’s business or Seller’s leasing, ownership or operation of real property;

any Liability under the Employee Plans or relating to payroll, vacation, sick leave, workers’ compensation, unemployment benefits, pension benefits, employee stock option or profit-sharing plans, health care plans or benefits or any other employee plans or benefits of any kind for Seller’s employees or former employees or both;

any Liability under any employment, severance, retention or termination agreement with any employee of Seller or any of its Related Persons;

any Liability arising out of or relating to any employee grievance whether or not the affected employees are hired by Buyer;

any Liability of Seller to any Shareholder or Related Person of Seller or any Shareholder;

any Liability to indemnify, reimburse or advance amounts to any officer, director, employee or agent of Seller;

any Liability to distribute to Shareholder or otherwise apply all or any part of the consideration received hereunder;

any Liability arising out of any Proceeding pending as of the Closing;

any Liability arising out of any Proceeding commenced after the Closing and arising out of or relating to any occurrence or event happening prior to the Closing;

any Liability arising out of or resulting from Seller’s compliance or noncompliance with any Legal Requirement or Order of any Governmental Body;

any Liability of Seller under this Agreement or any other document executed in connection with the Contemplated Transactions; and

any Liability of Seller based upon Seller’s acts or omissions occurring after the Closing.

In addition to any other documents to be delivered under other provisions of this Agreement, at the Closing:

Seller and Shareholder, as the case may be, shall deliver to Buyer, together with funds sufficient to pay (i) all sales taxes, and (ii) all other Taxes necessary for the transfer, filing or recording thereof:

a bill of sale for all of the Assets that are Tangible Personal Property in the form of Exhibit 2.7(a)(i) (the “Bill of Sale”) executed by Seller;

assignments of all Intellectual Property Assets and separate assignments of all registered Marks, Patents and Copyrights in the form of Exhibit 2.7(a)(ii) executed by Seller;

such other deeds, bills of sale, assignments, certificates of title, documents and other instruments of transfer and conveyance as may reasonably be requested by Buyer, each in form and substance satisfactory to Buyer and its legal counsel and executed by Seller;

the lease for the Premises in the form of Exhibit 2.7(a)(iv) (the “Lease”);

a certificate executed by Seller and the Shareholder as to the accuracy of their representations and warranties as of the date of this Agreement and as of the Closing in accordance with Section 7.1 and as to their compliance with and performance of their covenants and obligations to be performed or complied with at or before the Closing in accordance with Section 7.2 (Exhibit 2.7(a)(v));

an opinion of counsel for the Seller and the Shareholder in form and substance satisfactory to Buyer and its legal counsel (Exhibit 2.7(a)(vi)) ;

a certificate of the Secretary of Seller certifying, as complete and accurate as of the Closing (Exhibit 2.7(a)(vii)), attached copies of the Governing Documents of Seller, certifying and attaching all requisite resolutions or actions of Seller’s board of directors and Shareholder approving the execution and delivery of this Agreement and the consummation of the Contemplated Transactions and the change of name contemplated by Section 5.9 and certifying to the incumbency and signatures of the officers of Seller executing this Agreement and any other document relating to the Contemplated Transactions and accompanied by the requisite documents for amending the relevant Governing Documents of Seller required to effect such change of name in form sufficient for filing with the appropriate Governmental Body;

the Consulting Agreement in the form of Exhibit 2.7(b)(v);

an assignment of all of the Assets that are intangible personal property in the form of Exhibit 2.7(a)(ix), which assignment shall also contain Buyer’s undertaking and assumption of the Assumed Liabilities (the “Assignment and Assumption Agreement”) executed by Seller; and

the Allocation of Purchase Price, in the form of Exhibit 2.7(a)(x).

Buyer shall deliver to Seller and Shareholder, as the case may be, documentation necessary for the Seller to pay all sales taxes necessary for the transfer, filing or recording thereof:

a Promissory Note executed by Buyer and payable to Seller in the principal amount of One million dollars ($1,000,000.00) in the form of Exhibit “G” (the “Secured Subordinated Promissory Note”). The Secured Subordinated Promissory Note shall be secured with a subordinated lien on the Assets, which subordinated lien will be evidenced by the Security Agreement. The Seller will agree to execute a commercially reasonable subordination agreement proffered by lenders to Buyer either contemporaneous with or subsequent to the Closing, and will execute whatever documents may be reasonably necessary to make Seller’s security interest in the Assets subordinate to Buyer’s lenders;

the Security Agreement (Exhibit 2.7(b)(iii)) and Financing Statement necessary to perfect Seller’s security interest in the Assets, subject to the limitations in Section 2.7(b)(ii);

the Assignment and Assumption Agreement, as such term is defined in Section 2.7(a)(ix) above;

the Employment Agreement in the form of Exhibit 2.7(b)(v);

a certificate executed by Buyer as to the accuracy of its representations and warranties as of the date of this Agreement and as of the Closing in accordance with Section 8.1 and as to its compliance with and performance of its covenants and obligations to be performed or complied with at or before the Closing in accordance with Section 8.2 (Exhibit 2.7(b)(vi));

an opinion of counsel for the Buyer in form and substance satisfactory to Seller and Stockholder (Exhibit 2.7(b)(vii));

a certificate of the Secretary of Buyer certifying, as complete and accurate as of the Closing (Exhibit 2.7(b)(viii)), attached copies of the Governing Documents of Buyer and certifying and attaching all requisite resolutions or actions of Buyer’s board of directors approving the execution and delivery of this Agreement and the consummation of the Contemplated Transactions and certifying to the incumbency and signatures of the officers of Buyer executing this Agreement and any other document relating to the Contemplated Transactions;

the executed Lease; and

the Allocation of Purchase Price, in the form of Exhibit 2.7(a)(x).

“Working Capital” as of a given date shall mean the amount calculated by subtracting the Assumed Liabilities as of that date from the sum of (i) all Accounts Receivable, regardless of the aging thereof, and (ii) Inventory included in the Assets as of that date.

The Agreed Working Capital Amount is $ _____________.00.

The day before Closing, Seller shall deliver to Buyer (i) a list of its Accounts Receivable as of that date showing the aging thereof, (ii) a statement of its Inventory value as of that date, and (iii) a list of the Assumed Liabilities as of that date. Buyer shall then determine the Working Capital as of the Closing by subtracting the Assumed Liabilities as of that date from the sum of the Accounts Receivable as of that date and the Inventory as of that date (the “Closing Working Capital”).

The Adjustment Amount shall be determined by subtracting the Closing Working Capital from the Agreed Working Capital.

If there are any Material Consents that (set forth in Schedule 1 ) have not yet been obtained (or otherwise are not in full force and effect) as of the Closing, in the case of each Seller Contract as to which such Material Consents were not obtained (or otherwise are not in full force and effect) (the “Restricted Material Contracts”), Buyer may waive the closing conditions as to any such Material Consent and either:

elect to have Seller continue its efforts to obtain the Material Consents; or

elect to have Seller retain that Restricted Material Contract and all Liabilities arising therefrom or relating thereto, on a cost neutral basis to Seller.

If there are any Consents not listed on Exhibit 7.3 necessary for the assignment and transfer of any Seller Contracts to Buyer (the “Nonmaterial Consents”) which have not yet been obtained (or otherwise are not in full force and effect) as of the Closing, Buyer shall elect at the Closing, in the case of each of the Seller Contracts as to which such Nonmaterial Consents were not obtained (or otherwise are not in full force and effect) (the “Restricted Nonmaterial Contracts”), whether to:

accept the assignment of such Restricted Nonmaterial Contract, in which case, as between Buyer and Seller, such Restricted Nonmaterial Contract shall, to the maximum extent practicable and notwithstanding the failure to obtain the applicable Nonmaterial Consent, be transferred at the Closing pursuant to the Assignment and Assumption Agreement as elsewhere provided under this Agreement; or

reject the assignment of such Restricted Nonmaterial Contract, in which case, notwithstanding Sections 2.1 and 2.4, (A) neither this Agreement nor the Assignment and Assumption Agreement nor any other document related to the consummation of the Contemplated Transactions shall constitute a sale, assignment, assumption, conveyance or delivery or an attempted sale, assignment, assumption, transfer, conveyance or delivery of such Restricted Nonmaterial Contract, and (B) Seller shall retain such Restricted Nonmaterial Contract and all Liabilities arising therefrom or relating thereto.

ORGANIZATION AND GOOD STANDING

Complete and accurate copies of the Governing Documents of Seller, as currently in effect, are attached to Exhibit 3.1(b).

Seller has no Subsidiary and, except as disclosed in Exhibit 3.1(c), does not own any shares of capital stock or other securities of any other Person.

This Agreement constitutes the legal, valid and binding obligation of Seller and each Shareholder, enforceable against each of them in accordance with its terms. Upon the execution and delivery by Seller and Shareholder of the Consulting Agreement, the Noncompetition Agreement and each other agreement to be executed or delivered by any or all of Seller and Shareholder at the Closing (collectively, the “Seller’s Closing Documents”), each of Seller’s Closing Documents will constitute the legal, valid and binding obligation of each of Seller and the Shareholder, enforceable against each of them in accordance with its terms. Seller has the absolute and unrestricted right, power and authority to execute and deliver this Agreement and the Seller’s Closing Documents to which it is a party and to perform its obligations under this Agreement and the Seller’s Closing Documents, and such action has been duly authorized by all necessary action by the Shareholder and board of directors. Each Shareholder has all necessary legal capacity to enter into this Agreement and the Seller’s Closing Documents to which such Shareholder is a party and to perform his obligations hereunder and thereunder.

Except as set forth in Exhibit 3.2(b), neither the execution and delivery of this Agreement, nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time):

Breach (A) any provision of any of the Governing Documents of Seller or (B) any resolution adopted by the board of directors or the Shareholder;

Breach or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under any Legal Requirement or any Order to which Seller or the Shareholder, or any of the Assets, may be subject;

contravene, conflict with or result in a violation or breach of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by Seller or that otherwise relates to the Assets or to the business of Seller;

cause Buyer to become subject to, or to become liable for the payment of, any Tax, other than one-half of all sales taxes necessary for the transfer, filing or recording of and of the Assets;

Breach any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or payment under, or to cancel, terminate or modify, any Seller Contract;

result in the imposition or creation of any Encumbrance upon or with respect to any of the Assets; or

result in any shareholder of the Seller having the right to exercise dissenters’ appraisal rights.

Except as set forth in Exhibit 3.2(c), neither Seller nor the Shareholder is required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.

an unaudited balance sheet of Seller as of 2005 (the “Balance Sheet”), and the related unaudited statement of income for the year then ended;

unaudited balance sheets of Seller as of the year end 2005 in each of the fiscal years 2004 through 2005, and the related unaudited statement of income for each of the fiscal years then ended; and

an unaudited balance sheet of Seller as of June 30, 2006, 2006, (the “Interim Balance Sheet”) and the related unaudited statement of income for the three (3) months then ended. Such financial statements fairly present (and the financial statements delivered pursuant to Section 5.8 will fairly present) the financial condition and the results of operations of Seller as at the respective dates of and for the periods referred to in such financial statements. The financial statements referred to in this Section 3.4 and delivered pursuant to Section 5.8 reflect and will reflect the consistent application of accounting principles throughout the periods involved, except as disclosed in the notes to such financial statements. The financial statements have been and will be prepared from and are in accordance with the accounting Records of Seller.

CONDITION OF FACILITIES

Use of the Facilities for the various purposes for which it is presently being used is permitted as of right under all applicable zoning legal requirements and is not subject to “permitted nonconforming” use or structure classifications. All Improvements are in compliance with all applicable Legal Requirements, including those pertaining to zoning, building and the disabled, are in good repair and in good condition, ordinary wear and tear excepted, and are free from latent and patent defects. No part of any Improvement encroaches on any real property not included in the Facilities, and there are no buildings, structures, fixtures or other Improvements primarily situated on adjoining property which encroach on any part of the Land. The Land for each owned Facility abuts on and has direct vehicular access to a public road or has access to a public road via a permanent, irrevocable, appurtenant easement benefiting such Land and comprising a part of the Facilities, is supplied with public or quasi-public utilities and other services appropriate for the operation of the Facilities located thereon and is not located within any flood plain or area subject to wetlands regulation or any similar restriction. To Seller’s knowledge, after reasonable investigation, there is no existing or proposed plan to modify or realign any street or highway or any existing or proposed eminent domain proceeding that would result in the taking of all or any part of any Facility or that would prevent or hinder the continued use of any Facility as heretofore used in the conduct of the business of Seller.

Each item of Tangible Personal Property is in repair and operating condition, ordinary wear and tear excepted, is suitable for immediate use in the Ordinary Course of Business and is free from latent and patent defects. No item of Tangible Personal Property is in need of repair or replacement other than as part of routine maintenance in the Ordinary Course of Business. Except as disclosed in Exhibit 3.8(b), all Tangible Personal Property used in Seller’s business is in the possession of Seller.

ACCOUNTS RECEIVABLE

INVENTORIES

Tax Returns Filed and Taxes Paid. Seller has filed or caused to be filed on a timely basis all Tax Returns and all reports with respect to Taxes that are or were required to be filed pursuant to applicable Legal Requirements. All Tax Returns and reports filed by Seller are true, correct and complete, subject to amendments thereof in connection with the Income Tax Refunds. Seller has paid, or made provision for the payment of, all Taxes that have or may have become due for all periods covered by the Tax Returns or otherwise, or pursuant to any assessment received by Seller, except such Taxes, if any, as are listed in Exhibit 3.12(a) and are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided in the Balance Sheet and the Interim Balance Sheet. Except as provided in Exhibit 3.12(a), Seller currently is not the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made or is expected to be made by any Governmental Body in a jurisdiction where Seller does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Encumbrances on any of the Assets that arose in connection with any failure (or alleged failure) to pay any Tax, and Seller has no Knowledge of any basis for assertion of any claims attributable to Taxes which, if adversely determined, would result in any such Encumbrance.

Delivery of Tax Returns and Information Regarding Audits and Potential Audits. Seller has delivered or made available to Buyer copies of, and Exhibit 3.12(b) contains a complete and accurate list of, all Tax Returns filed since 2002.

Proper Accrual. The charges, accruals and reserves with respect to Taxes on the Records of Seller are adequate (determined in accordance with GAAP) and are at least equal to Seller’s liability for Taxes. There exists no proposed tax assessment or deficiency against Seller except as disclosed in the Balance Sheet or in Exhibit 3.12(c).

Specific Potential Tax Liabilities and Tax Situations.

Withholding. All Taxes that Seller is or was required by Legal Requirements to withhold, deduct or collect have been duly withheld, deducted and collected and, to the extent required, have been paid to the proper Governmental Body or other Person.

Tax Allocation and Indemnity Agreement. Neither Seller nor any Affiliate has any liability or has Knowledge of any facts or circumstances that might give rise to any liability, specifically for withholding (Payroll Taxes) taxes and any failure to withhold or pay any withheld taxes will not result in any liability whatsoever to Buyer. Seller hereby further agrees and shall remain responsible for any Payroll Taxes that may have accrue prior to the Closing Date and pay the same. Seller further agrees to hold harmless, indemnify, and defend Buyer against any liabilities that accrued prior to Closing Date which arising from all Taxes that Seller is or was required by Legal Requirements to withhold, deduct or collect.

Tax Sharing or Similar Agreements. There is no tax sharing agreement, obligation or similar written or unwritten agreement, arrangement, understanding or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other arrangement relating to Taxes) that will require any payment by Buyer.

Consolidated Group. Seller (A) has not been a member of an affiliated group within the meaning of Code Section 1504(a) (or any similar group defined under a similar provision of state, local or foreign law) and (B) has no liability for Taxes of any person (other than Seller and its Subsidiaries) under Treas. Reg. sect. 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor by contract or otherwise.

S Corporation. Seller is an S corporation as defined in Code Section 1361, and Seller is not and has not been subject to either the built-in-gains tax under Code Section 1374 or the passive income tax under Code Section 1375. Exhibit 3.12(d)(iv) lists all the states and localities with respect to which Seller is required to file any corporate, income or franchise tax returns and sets forth whether Seller is treated as the equivalent of an S corporation by or with respect to each such state or locality. Seller has properly filed Tax Returns with and paid and discharged any liabilities for taxes in any states or localities in which it is subject to Tax.

Substantial Understatement Penalty. Seller has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662, if any.

Set forth in Exhibit 3.14(a) is a complete and correct list of all “employee benefit plans” as defined by Section 3(3) of ERISA, all specified fringe benefit plans as defined in Section 6039D of the Code, and all other bonus, incentive-compensation, deferred-compensation, profit-sharing, stock-option, stock-appreciation-right, stock-bonus, stock-purchase, employee-stock-ownership, savings, severance, change-in-control, supplemental-unemployment, layoff, salary-continuation, retirement, pension, health, life-insurance, disability, accident, group-insurance, vacation, holiday, sick-leave, fringe-benefit or welfare plan, and any other employee compensation or benefit plan, agreement, policy, practice, commitment, contract or understanding (whether qualified or nonqualified, currently effective or terminated, written or unwritten) and any trust, escrow or other agreement related thereto that (i) is maintained or contributed to by Seller or any other corporation or trade or business controlled by, controlling or under common control with Seller (within the meaning of Section 414 of the Code or Section 4001(a)(14) or 4001(b) of ERISA) (“ERISA Affiliate”) or has been maintained or contributed to in the last six (6) years by Seller or any ERISA Affiliate, or with respect to which Seller or any ERISA Affiliate has or may have any liability, and (ii) provides benefits, or describes policies or procedures applicable to any current or former director, officer, employee or service provider of Seller or any ERISA Affiliate, or the dependents of any thereof, regardless of how (or whether) liabilities for the provision of benefits are accrued or assets are acquired or dedicated with respect to the funding thereof (collectively the “Employee Plans”). Exhibit 3.14(a) identifies as such any Employee Plan that is (w) a “Defined Benefit Plan” (as defined in Section 414(l) of the Code); (x) a plan intended to meet the requirements of Section 401(a) of the Code; (y) a “Multiemployer Plan” (as defined in Section 3(37) of ERISA); or (z) a plan subject to Title IV of ERISA, other than a Multiemployer Plan. Also set forth on Exhibit 3.14(a) is a complete and correct list of all ERISA Affiliates of Seller during the last six (6) years.

Seller has delivered to Buyer true, accurate and complete copies of (i) the documents comprising each Employee Plan (or, with respect to any Employee Plan which is unwritten, a detailed written description of eligibility, participation, benefits, funding arrangements, assets and any other matters which relate to the obligations of Seller or any ERISA Affiliate); (ii) all trust agreements, insurance contracts or any other funding instruments related to the Employee Plans; (iii) all rulings, determination letters, no-action letters or advisory opinions from the IRS, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation (“PBGC”) or any other Governmental Body that pertain to each Employee Plan and any open requests therefore; (iv) the most recent actuarial and financial reports (audited and/or unaudited) and the annual reports filed with any Government Body with respect to the Employee Plans during the current year and each of the three preceding years; (v) all collective bargaining agreements pursuant to which contributions to any Employee Plan(s) have been made or obligations incurred (including both pension and welfare benefits) by Seller or any ERISA Affiliate, and all collective bargaining agreements pursuant to which contributions are being made or obligations are owed by such entities; (vi) all securities registration statements filed with respect to any Employee Plan; (vii) all contracts with third-party administrators, actuaries, investment managers, consultants and other independent contractors that relate to any Employee Plan, (viii) with respect to Employee Plans that are subject to Title IV of ERISA, the Form PBGC-1 filed for each of the three most recent plan years; and (ix) all summary plan descriptions, summaries of material modifications and memoranda, employee handbooks and other written communications regarding the Employee Plans.

Except as disclosed in Exhibit 3.14(c), full payment has been made of all amounts that are required under the terms of each Employee Plan to be paid as contributions with respect to all periods prior to and including the last day of the most recent fiscal year of such Employee Plan ended on or before the date of this Agreement and all periods thereafter prior to the Closing Date, and no accumulated funding deficiency or liquidity shortfall (as those terms are defined in Section 302 of ERISA and Section 412 of the Code) has been incurred with respect to any such Employee Plan, whether or not waived. The value of the assets of each Employee Plan exceeds the amount of all benefit liabilities (determined on a plan termination basis using the actuarial assumptions established by the PBGC as of the Closing Date) of such Employee Plan. Seller is not required to provide security to an Employee Plan under Section 401(a)(29) of the Code. The funded status of each Employee Plan that is a Defined Benefit Plan is disclosed on Exhibit 3.14(c) in a manner consistent with the Statement of Financial Accounting Standards No. 87. Seller has paid in full all required insurance premiums, subject only to normal retrospective adjustments in the ordinary course, with regard to the Employee Plans for all policy years or other applicable policy periods ending on or before the Closing Date.

Except as disclosed in Exhibit 3.14(d), no Employee Plan, if subject to Title IV of ERISA, has been completely or partially terminated, nor has any event occurred nor does any circumstance exist that could result in the partial termination of such Employee Plan. The PBGC has not instituted or threatened a Proceeding to terminate or to appoint a trustee to administer any of the Employee Plans pursuant to Subtitle 1 of Title IV of ERISA, and no condition or set of circumstances exists that presents a material risk of termination or partial termination of any of the Employee Plans by the PBGC. None of the Employee Plans has been the subject of, and no event has occurred or condition exists that could be deemed, a reportable event (as defined in Section 4043 of ERISA) as to which a notice would be required (without regard to regulatory monetary thresholds) to be filed with the PBGC. Seller has paid in full all insurance premiums due to the PBGC with regard to the Employee Plans for all applicable periods ending on or before the Closing Date.

Neither Seller nor any ERISA Affiliate has any liability or has Knowledge of any facts or circumstances that might give rise to any liability, and the Contemplated Transactions will not result in any liability, (i) for the termination of or withdrawal from any Employee Plan under Sections 4062, 4063 or 4064 of ERISA, (ii) for any lien imposed under Section 302(f) of ERISA or Section 412(n) of the Code, (iii) for any interest payments required under Section 302(e) of ERISA or Section 412(m) of the Code, (iv) for any excise tax imposed by Section 4971 of the Code, (v) for any minimum funding contributions under Section 302(c)(11) of ERISA or Section 412(c)(11) of the Code or (vi) for withdrawal from any Multiemployer Plan under Section 4201 of ERISA.

Seller has, at all times, complied, and currently complies, in all material respects with the applicable continuation requirements for its welfare benefit plans, including (1) Section 4980B of the Code (as well as its predecessor provision, Section 162(k) of the Code) and Sections 601 through 608, inclusive, of ERISA, which provisions are hereinafter referred to collectively as “COBRA” and (2) any applicable state statutes mandating health insurance continuation coverage for employees.

The form of all Employee Plans is in compliance with the applicable terms of ERISA, the Code, and any other applicable laws, including the Americans with Disabilities Act of 1990, the Family Medical Leave Act of 1993 and the Health Insurance Portability and Accountability Act of 1996, and such plans have been operated in compliance with such laws and the written Employee Plan documents. Neither Seller nor any fiduciary of an Employee Plan has violated the requirements of Section 404 of ERISA. All required reports and descriptions of the Employee Plans (including Internal Revenue Service Form 5500 Annual Reports, Summary Annual Reports and Summary Plan Descriptions and Summaries of Material Modifications) have been (when required) timely filed with the IRS, the U.S. Department of Labor or other Governmental Body and distributed as required, and all notices required by ERISA or the Code or any other Legal Requirement with respect to the Employee Plans have been appropriately given.

Each Employee Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS, and Seller has no Knowledge of any circumstances that will or could result in revocation of any such favorable determination letter. Each trust created under any Employee Plan has been determined to be exempt from taxation under Section 501(a) of the Code, and Seller is not aware of any circumstance that will or could result in a revocation of such exemption. Each Employee Welfare Benefit Plan (as defined in Section 3(1) of ERISA) that utilizes a funding vehicle described in Section 501(c)(9) of the Code or is subject to the provisions of Section 505 of the Code has been the subject of a notification by the IRS that such funding vehicle qualifies for tax-exempt status under Section 501(c)(9) of the Code or that the plan complies with Section 505 of the Code, unless the IRS does not, as a matter of policy, issue such notification with respect to the particular type of plan. With respect to each Employee Plan, no event has occurred or condition exists that will or could give rise to a loss of any intended tax consequence or to any Tax under Section 511 of the Code.

There is no material pending or threatened Proceeding relating to any Employee Plan, nor is there any basis for any such Proceeding. Neither Seller nor any fiduciary of an Employee Plan has engaged in a transaction with respect to any Employee Plan that, assuming the taxable period of such transaction expired as of the date hereof, could subject Seller or Buyer to a Tax or penalty imposed by either Section 4975 of the Code or Section 502(l) of ERISA or a violation of Section 406 of ERISA. The Contemplated Transactions will not result in the potential assessment of a Tax or penalty under Section 4975 of the Code or Section 502(l) of ERISA nor result in a violation of Section 406 of ERISA.

Seller has maintained workers’ compensation coverage as required by applicable state law through purchase of insurance and not by self-insurance or otherwise except as disclosed to Buyer on Exhibit 3.14(j).

Except as required by Legal Requirements and as provided in Section 10.1(d), the consummation of the Contemplated Transactions will not accelerate the time of vesting or the time of payment, or increase the amount, of compensation due to any director, employee, officer, former employee or former officer of Seller. There are no contracts or arrangements providing for payments that could subject any person to liability for tax under Section 4999 of the Code.

Except for the continuation coverage requirements of COBRA, Seller has no obligations or potential liability for benefits to employees, former employees or their respective dependents following termination of employment or retirement under any of the Employee Plans that are Employee Welfare Benefit Plans.

None of the Contemplated Transactions will result in an amendment, modification or termination of any of the Employee Plans. No written or oral representations have been made to any employee or former employee of Seller promising or guaranteeing any employer payment or funding for the continuation of medical, dental, life or disability coverage for any period of time beyond the end of the current plan year (except to the extent of coverage required under COBRA). No written or oral representations have been made to any employee or former employee of Seller concerning the employee benefits of Buyer.

With respect to any Employee Plan that is a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA (“Multiemployer Plan”), and any other Multiemployer Plan to which Seller has at any time had an obligation to contribute:

all contributions required by the terms of such Multiemployer Plan and any collective bargaining agreement have been made when due; and

Seller would not be subject to any withdrawal liability under Part 1 of Subtitle E of Title IV of ERISA if, as of the date hereof, Seller were to engage in a “complete withdrawal” (as defined in ERISA Section 4203) or a “partial withdrawal” (as defined in ERISA Section 4205) from such Multiemployer Plan.

Except as set forth in Exhibit “C”:

Seller is, and at all times since January 1, 2001, has been, in full compliance with each Legal Requirement that is or was applicable to it or to the conduct or operation of its business or the ownership or use of any of its assets;

no event has occurred or circumstance exists that (with or without notice or lapse of time) (A) may constitute or result in a violation by Seller of, or a failure on the part of Seller to comply with, any Legal Requirement or (B) may give rise to any obligation on the part of Seller to undertake, or to bear all or any portion of the cost of, any remedial action of any nature; and

Seller has not received, at any time since _________, 200_, any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged, possible or potential violation of, or failure to comply with, any Legal Requirement or (B) any actual, alleged, possible or potential obligation on the part of Seller to undertake, or to bear all or any portion of the cost of, any remedial action of any nature.

Exhibit “C” contains a complete and accurate list of each Governmental Authorization that is held by Seller or that otherwise relates to Seller’s business or the Assets. Each Governmental Authorization listed or required to be listed in Exhibit “C” is valid and in full force and effect. Except as set forth in Exhibit “C”:

Seller is, and at all times since January 1, 2001, has been, in full compliance with all of the terms and requirements of each Governmental Authorization identified or required to be identified in Exhibit “C”;

no event has occurred or circumstance exists that may (with or without notice or lapse of time) (A) constitute or result directly or indirectly in a violation of or a failure to comply with any term or requirement of any Governmental Authorization listed or required to be listed in Exhibit “C” or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation or termination of, or any modification to, any Governmental Authorization listed or required to be listed in Exhibit “C”;

Seller has not received, at any time since January 1, 2001, any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged, possible or potential violation of or failure to comply with any term or requirement of any Governmental Authorization or (B) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination of or modification to any Governmental Authorization; and

all applications required to have been filed for the renewal of the Governmental Authorizations listed or required to be listed in Exhibit “C” have been duly filed on a timely basis with the appropriate Governmental Bodies, and all other filings required to have been made with respect to such Governmental Authorizations have been duly made on a timely basis with the appropriate Governmental Bodies. The Governmental Authorizations listed in Exhibit “C” collectively constitute all of the Governmental Authorizations necessary to permit Seller to awfully conduct and operate its business in the manner in which it currently conducts and operates such business and to permit Seller to own and use its assets in the manner in which it currently owns and uses such assets.

Except as set forth in Exhibit 3.16(a), there is no pending or, to Seller’s Knowledge, threatened Proceeding:

by or against Seller or that otherwise relates to or may affect the business of, or any of the assets owned or used by, Seller; or

(ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, any of the Contemplated Transactions.

Except as set forth in Exhibit 3.16(b):

there is no Order to which Seller, its business or any of the Assets is subject; and

to the Knowledge of Seller, no officer, director, agent or employee of Seller is subject to any Order that prohibits such officer, director, agent or employee from engaging in or continuing any conduct, activity or practice relating to the business of Seller.

Except as set forth in Exhibit 3.16(c):

Seller is, and has been in compliance with all of the terms and requirements of each Order to which it or any of the Assets is or has been subject;

no event has occurred or circumstance exists that is reasonably likely to constitute or result in (with or without notice or lapse of time) a violation of or failure to comply with any term or requirement of any Order to which Seller or any of the Assets is subject; and

Seller has not received any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding any actual, alleged, possible or potential violation of, or failure to comply with, any term or requirement of any Order to which Seller or any of the Assets is or has been subject.

change in Seller’s authorized or issued capital stock, grant of any stock option or right to purchase shares of capital stock of Seller or issuance of any security convertible into such capital stock;

amendment to the Governing Documents of Seller;

payment (except in the Ordinary Course of Business) or increase by Seller of any bonuses, salaries or other compensation to any shareholder, director, officer or employee or entry into any employment, severance or similar Contract with any director, officer or employee;

adoption of, amendment to or increase in the payments to or benefits under, any Employee Plan;

damage to or destruction or loss of any Asset, whether or not covered by insurance;

entry into, termination of or receipt of notice of termination of (i) any license, distributorship, dealer, sales representative, joint venture, credit or similar Contract to which Seller is a party, or (ii) any Contract or transaction involving a total remaining commitment by Seller;

sale (other than sales of Inventories in the Ordinary Course of Business), lease or other disposition of any Asset or property of Seller (including the Intellectual Property Assets) or the creation of any Encumbrance on any Asset;

cancellation or waiver of any claims or rights with a value to Seller;

indication by any customer or supplier of an intention to discontinue or change the terms of its relationship with Seller;

material change in the accounting methods used by Seller; or

Contract by Seller to do any of the foregoing.

Exhibit “B” contains an accurate and complete list, and Seller has delivered to Buyer accurate and complete copies, of:

each Seller Contract that involves performance of services or delivery of goods or materials by Seller;

each Seller Contract that involves performance of services or delivery of goods or materials to Seller;

each Seller Contract that was not entered into in the Ordinary Course of Business and that involves expenditures or receipts of Seller;

each Seller Contract affecting the ownership of, leasing of, title to, use of or any leasehold or other interest in any real or personal;

each Seller Contract with any labor union or other employee representative of a group of employees relating to wages, hours and other conditions of employment;

each Seller Contract (however named) involving a sharing of profits, losses, costs or liabilities by Seller with any other Person;

each Seller Contract containing covenants that in any way purport to restrict Seller’s business activity or limit the freedom of Seller to engage in any line of business or to compete with any Person;

each Seller Contract providing for payments to or by any Person based on sales, purchases or profits, other than direct payments for goods;

each power of attorney of Seller that is currently effective and outstanding;

each Seller Contract entered into other than in the Ordinary Course of Business that contains or provides for an express undertaking by Seller to be responsible for consequential damages;

each Seller Contract for capital expenditures;

each Seller Contract not denominated in U.S. dollars;

each written warranty, guaranty and/or other similar undertaking with respect to contractual performance extended by Seller other than in the Ordinary Course of Business; and

each amendment, supplement and modification (whether oral or written) in respect of any of the foregoing. Exhibit “B” sets forth reasonably complete details concerning such Contracts, including the parties to the Contracts, the amount of the remaining commitment of Seller under the Contracts and the location of Seller’s office where details relating to the Contracts are located.

Except as set forth in Exhibit “B”, Shareholder does not have nor may he acquire any rights under, and Shareholder does not have nor may he become subject to any obligation or liability under, any Contract that relates to the business of Seller or any of the Assets.

Except as set forth in Exhibit “B”:

each Contract identified or required to be identified in Exhibit “B” and which is to be assigned to or assumed by Buyer under this Agreement is in full force and effect and is valid and enforceable in accordance with its terms;

each Contract identified or required to be identified in Exhibit “B” and which is being assigned to or assumed by Buyer is assignable by Seller to Buyer without the consent of any other Person; and

to the Knowledge of Seller, no Contract identified or required to be identified in Exhibit “B” and which is to be assigned to or assumed by Buyer under this Agreement will upon completion or performance thereof have a material adverse affect on the business, assets or condition of Seller or the business to be conducted by Buyer with the Assets.

Except as set forth in Exhibit “B”:

Seller is and, has been, in compliance with all applicable terms and requirements of each Seller Contract which is being assumed by Buyer;

each other Person that has or had any obligation or liability under any Seller Contract which is being assigned to Buyer is and, has been, in full compliance with all applicable terms and requirements of such Contract;

no event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with or result in a Breach of, or give Seller or other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or payment under, or to cancel, terminate or modify, any Seller Contract that is being assigned to or assumed by Buyer;

no event has occurred or circumstance exists under or by virtue of any Contract that (with or without notice or lapse of time) would cause the creation of any Encumbrance affecting any of the Assets; and

Seller has not given to or received from any other Person, at any time since January 1, 2001, any notice or other communication (whether oral or written) regarding any actual, alleged, possible or potential violation or Breach of, or de