Exhibit 10.1

Execution Version

ASSET PURCHASE AGREEMENT

Dated as of July 2, 2008

Between

Cellu Tissue Holdings, Inc., as Buyer

and

Atlantic Paper & Foil Corp. of N.Y., Atlantic Lakeside Properties, LLC, Atlantic Paper & Foil, LLC, Atlantic Paper & Foil of Georgia, LLC and Consumer Licensing Corporation, as Sellers

TABLE OF CONTENTS

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APPENDICES

EXHIBITS

SCHEDULES

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ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement dated as of July 2, 2008 (as amended or otherwise modified, this “ Agreement ”) is between Cellu Tissue Holdings, Inc., a Delaware corporation (the “ Buyer ”), and Atlantic Paper & Foil Corp. of N.Y., Atlantic Lakeside Properties, LLC, Atlantic Paper & Foil, LLC, Atlantic Paper & Foil of Georgia, LLC and Consumer Licensing Corporation, as Sellers (each a “ Seller ” and collectively, the “ Sellers ”).

RECITALS

WHEREAS, the Sellers own and operate a business manufacturing, distributing, and marketing a broad line of hygienic tissue, polystyrene foam plates, aluminum foil, and plastic food wrap products for the at-home and away-from-home markets (the “ Business ”); and

WHEREAS, the Sellers wish to sell and assign to the Buyer, and the Buyer wishes to purchase and assume from the Sellers, certain assets and liabilities specified herein which relate to such business, all on the terms and conditions set forth in this Agreement; and

WHEREAS, Yahya Gabbay, Helen Gabbay, Shaun Gabbay, Egal Gabbay and Dan Gabbay, as the owners of the Sellers (the “ Individual Owners ”), are on this day each executing and delivering to the Buyer a Support Agreement and a Guaranty Agreement.

AGREEMENT

NOW THEREFORE, in consideration of the premises and mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, the Buyer and the Sellers hereby agree as follows:

1.          DEFINITIONS.

Capitalized terms used in this Agreement but not defined herein shall have the meanings given to them in Appendix A .

2.          PURCHASE AND SALE OF ASSETS; ASSIGNMENT AND ASSUMPTION OF LIABILITIES.

2.1.          The Purchase and Sale; Assignment and Assumption .

2.1.1             Purchase and Sale .  Upon the terms and subject to the conditions contained herein, at the Closing, the Sellers will sell, assign, transfer, convey and deliver to the Buyer, and the Buyer shall purchase from the Sellers, the Acquired Assets, free and clear of any Encumbrances except for Permitted Encumbrances, in exchange for the payment of the Purchase Price and the assumption by the Buyer of the Assumed Liabilities.

2.1.2             Retained Assets .  The Retained Assets shall be excluded from the Acquired Assets to be sold, assigned, transferred, conveyed and delivered to the Buyer hereunder and, to the extent in existence on the Closing Date, shall be retained by the Sellers.

2.1.3             Assumed Liabilities .  Upon the terms and subject to the conditions contained herein, at the Closing, the Buyer will assume, effective as of the Closing, the Assumed Liabilities.

2.1.4             Excluded Liabilities .  The Buyer will not assume or perform any Liabilities of any of the Sellers not specifically assumed by the Buyer under Section 2.1.3, and the Sellers shall retain and satisfy, and perform as and when due, all Excluded Liabilities.

2.2.          Purchase Price .  The aggregate consideration payable by Buyer to the Sellers for the Acquired Assets shall be (i) the assumption of the Assumed Liabilities by the Buyer, (ii) $61,700,000.00 in cash (subject to adjustment pursuant to Section 2.5) (the “ Cash Purchase Price ”) which such amount shall be paid to the Sellers in accordance with the instructions delivered under Section 2.4(a)(ii) and (iii) one note in the form attached as Exhibit 2.2 with an aggregate principal amount of $6,300,000.00 which shall be issued to Atlantic Paper & Foil Corp. of N.Y. (the “ Note ” and, together with the Cash Purchase Price, the “ Purchase Price ”).

2.3.          The Closing .  The purchase and sale of the Acquired Assets and the assumption of the Assumed Liabilities (the “ Closing ”) will take place on the date hereof at the offices of Ropes & Gray LLP in New York, New York.

2.4.          Closing Deliveries .  The parties shall take the actions set forth in this Section 2.4 at the Closing.

(a)        The Buyer will deliver (i) to the Escrow Agent, $1,500,000 by wire transfer of immediately available federal funds to the account designated in the Escrow Agreement for purposes of satisfying amounts owed to the Buyer Indemnified Parties pursuant to Section 8.1 (the “ Indemnity Escrow Account ”), (ii) to the Sellers, (A) the Cash Purchase Price, less the aggregate amount delivered to the Escrow Agent per clause (i) by wire transfer of immediately available federal funds to the accounts designated in writing to the Buyer not fewer than two Business Days prior to the scheduled Closing Date and (iii) the Note.

(b)        The Buyer and the Sellers will execute one or more bills of sale, in a form reasonably acceptable to the parties, with respect to all personal property included in the Acquired Assets.

(c)        The Buyer and the Sellers will execute an Assignment of Trademarks in a form registrable or recordable in the United States Patent and Trademark Office or applicable foreign offices to the extent necessary to assign the trademarks included in the Acquired Assets in a form reasonably acceptable to the parties.

(d)        The parties shall execute such other instruments as shall be reasonably requested by the Buyer to vest in the Buyer title in and to the Acquired Assets, in accordance with the provisions hereof.

(e)        The Buyer and the Sellers will execute an instrument of assumption in a form reasonably acceptable to the parties with respect to the Assumed Liabilities.

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(f)         The parties will deliver the various certificates, instruments and documents required of each of them under Sections 6 and 7.

(g)        The Sellers shall deliver to Buyer a letter, in form and substance reasonably satisfactory to Buyer, signed by Ocean Associates in which Ocean Associates acknowledges and agrees that the Buyer and its Affiliates have and shall have no liability to Ocean Associates whatsoever with respect to any liability that any of the Sellers may have to Ocean Associates and that Ocean Associates has no rights whatsoever to any equipment or other asset included in the Acquired Assets.

(h)        The Sellers shall deliver to the Buyer originals or copies of all books and records relating to the Acquired Assets.  For the avoidance of doubt, such books and records shall not include all corporate seals, minute books, charter documents, corporate stock record books, registers of other securities, copies of original tax records of the Sellers, and such other books and records as pertain only to the organization, existence, share capitalization or debt financing of the Sellers.

2.5.          Working Capital Adjustment .

2.5.1             Estimated Balance Sheet, Estimated Working Capital .  The Sellers acknowledge and confirm that prior to the Closing Date they have, in good faith, prepared or caused to be prepared, and provided to the Buyer an estimated consolidated balance sheet of the Purchased Business as of the Closing Date (the “ Estimated Balance Sheet ”), together with a written statement setting forth in reasonable detail their estimate of the Working Capital on the Closing Date as reflected on the Closing Balance Sheet (the “ Estimated Working Capital Statement ”).  The Sellers acknowledge and confirm that the Estimated Balance Sheet and the Estimated Working Capital Statement were prepared in accordance with GAAP and in accordance with the methodology set forth on Exhibit 2.5.1 , provided , that, in the event of a conflict between GAAP and the methodology set forth on Exhibit 2.5.1 , the methodology set forth on Exhibit 2.5.1 shall control (collectively, the “ Accounting Principles ”).  If the Estimated Working Capital exceeds the Working Capital Target, then the Cash Purchase Price to be delivered by the Buyer to the Sellers at the Closing pursuant to Section 2.2 will be increased by such excess.  If the Estimated Working Capital is less than the Working Capital Target, then the Cash Purchase Price to be delivered by the Buyer to the Sellers at the Closing pursuant to Section 2.2 will be decreased by such shortfall.

2.5.2             Closing Balance Sheet and Closing Working Capital .  Within ninety calendar days after the Closing Date, the Buyer will prepare or cause to be prepared, and will provide to the Sellers’ Representative, a consolidated balance sheet of the Purchased Business as of the Closing Date (the “ Closing Balance Sheet ”), together with a written statement setting forth in reasonable detail its determination of the Working Capital on the Closing Date as reflected on the Closing Balance Sheet (the “ Closing Working Capital Statement ”).  The Closing Balance Sheet and the Closing Working Capital Statement will be prepared in accordance with the Accounting Principles.  The Sellers’ Representative and the Sellers’ professional advisors shall have reasonable access to all documentation reasonably requested by them from the Buyer in order to review the

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Closing Balance Sheet and the Closing Working Capital Statement, including the work papers used by the Buyer in the preparation of the Closing Balance Sheet and the Closing Working Capital Statement.

2.5.3             Dispute Notice .  The Closing Balance Sheet and the Closing Working Capital Statement, and the determination of Working Capital thereon, will be final, conclusive and binding on the parties unless the Sellers’ Representative provides a written notice (a “ Dispute Notice ”) to the Buyer no later than the twentieth Business Day after delivery of the Closing Balance Sheet and the Closing Working Capital Statement setting forth in reasonable detail any item on the Closing Balance Sheet and/or the Closing Working Capital Statement which the Sellers’ Representative believes has not been prepared in accordance with the Accounting Principles and the correct amount of such item in accordance with the Accounting Principles; provided , however , that such twenty Business Day period shall be extended by one business day for each business day after delivery of the Closing Balance Sheet and the Closing Working Capital Statement by Buyer to the Sellers’ Representative during which Buyer denies the Sellers’ Representative or his professional advisors reasonable access to documentation reasonably requested by them from the Buyer in order to review the Closing Balance Sheet and the Closing Working Capital Statement pursuant the Sellers’ Representatives rights under Section 2.5.2 and this Section 2.5.3.  Any item or amount to which no dispute is raised in the Dispute Notice will be final, conclusive and binding on the parties.

2.5.4             Resolution of Disputes .  The Buyer and the Sellers’ Representative will attempt to resolve the matters raised in a Dispute Notice in good faith.  If the Buyer and the Sellers’ Representative shall not have resolved the matters raised in the Dispute Notice within twenty Business Days after delivery of the Dispute Notice, either the Buyer or the Sellers’ Representative may provide written notice to the other that it elects to submit the disputed items to Grant Thornton LLP or, if such firm is unable or unwilling to serve, another nationally recognized independent accounting firm chosen jointly by the Buyer and the Sellers’ Representative (the “ Referee ”).  The Referee will promptly, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, review only those items and amounts specifically set forth and objected to in the Dispute Notice and resolve the dispute with respect to each such specific item and amount in accordance with the Accounting Principles, but within the positions taken by the Closing Balance Sheet and/or Closing Working Capital Statement and the Dispute Notice.  The Referee shall allocate its costs and expenses, and the reasonable legal and accounting costs and expenses of the Buyer and the Sellers’ Representative, between the Buyer and the Sellers based upon the percentage of the contested amount submitted to the Referee that is ultimately awarded to each of the Buyer and the Sellers such that each of the Buyer and the Sellers bear a percentage of such costs and expenses equal to the percentage of the contested amount awarded to the other.  For example, if the Sellers claim Working Capital is $1,000 greater than the amount determined by the Buyer, and the Buyer contests only $500 of the amount claimed by the Sellers, and if the Referee ultimately resolves the dispute by awarding the Sellers $300 of the $500 contested, then the applicable costs and expenses shall be allocated 60% (i.e. 300/500) to the Buyer and 40% (i.e. 200/500) to the Sellers.  The decision of the Referee with respect to the items of the Closing Balance Sheet and the Closing Working Capital Statement submitted to it

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will be final, conclusive and binding on the parties.  Each of the parties to this Agreement agrees to use its commercially reasonable efforts to cooperate with the Referee and to cause the Referee to resolve any dispute no later than thirty Business Days after selection of the Referee.

2.5.5                                        Purchase Price Adjustment .  Promptly, and in any event no later than the fifth Business Day after final determination of the Working Capital in accordance with Section 2.5, all payments under this Section 2.5.5 shall be made by wire transfer in immediately available funds, provided that, if a Dispute Notice is delivered pursuant to Section 2.5.3, any portion of the purchase price adjustment which is not in dispute shall be paid promptly after the delivery of such Dispute Notice, and in any event no later than the fifth Business Day after such delivery.

(a)                          If the Final Working Capital exceeds the Estimated Working Capital, then the Buyer will pay an amount equal to such excess to the Sellers.

(b)                         If the Final Working Capital is less than the Estimated Working Capital, then the Sellers shall pay to the Buyer an amount equal to such shortfall.

2.5.6                                        Right to Set-off Against the Note .  In the event that the Sellers do not pay to the Buyer any amount required by Section 2.5.5 within the required time specified therein, the Buyer may elect, in its sole discretion, in lieu of receiving such amount in cash, to reduce its remaining payment obligations under one or more of the Subordinated Notes by an amount equal in the aggregate for all Subordinated Notes to such amount (provided that any such offset shall be made against all Subordinated Notes pro rata based on their respective outstanding principal amounts at the time of such offset).  In such event, the Buyer shall also be (x) entitled to repayment of any and all interest that has accrued and been paid on an amount of principal of the Subordinated Notes equal in the aggregate to such amount from the date of issuance of the Note until the date of satisfaction of such amount, and the Buyer may, in its sole discretion, elect to satisfy such repayment obligation by either further reducing future its future payment obligations under one or more of the Subordinated Notes in an amount equal in the aggregate for all Subordinated Notes to the amount of such interest or requiring the Sellers to pay back to the Buyer all such interest in cash and (y) relieved of the obligation to pay any and all interest that has accrued but not yet been paid on an amount of principal of the Subordinated Notes equal in the aggregate to such amount from the date of issuance of the Note until the date of satisfaction of such amount.  The Buyer may elect, in its sole discretion, to exercise its set-off rights under this Section 2.5.6 against the principal or interest of the Subordinated Notes or any combination thereof (provided that it makes the same election as to all Subordinated Notes and that any such offset shall be made against all Subordinated Notes pro rata based on their respective outstanding principal amounts at the time of such offset).  This Section 2.5.6 shall not in any way limit the remedies available to the Buyer should the Sellers breach their obligations under Section 2.5.5.  The term “ Subordinated Notes ” shall mean one or more subordinated notes, in the form of the Note, which may be issued in respect of any permitted transfer or assignment of the Note or any Subordinated Note.  It is expressly acknowledged and agreed that the Note is the only Subordinated Note being issued or required to be issued at the Closing.

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2.6.                               Allocation of Purchase Price .  Set forth as Exhibit 2.6 hereto is the allocation of the Purchase Price with respect to the Acquired Assets consisting of property, plant and equipment (“ PP&E ”) proposed by the Sellers (the “ Sellers’ Proposed Allocation ”).  Following the Closing, the Buyer shall engage, at its expense, a third party accounting, investment banking or valuation firm of national or regional reputation to perform an appraisal with respect to the PP&E included in the Acquired Assets (such appraisal, the “ Buyer’s Third Party Appraisal ”) so as to permit the Buyer and its Affiliates to prepare financial statements in accordance with Financial Accounting Standard Board Statement No. 141 (Business Combinations) and United Stated Generally Accepted Accounting Principles.  The parties agree that such Buyer’s Third Party Appraisal shall be performed by BDO Seidman, LLP, or an affiliate thereof, provided the Buyer is able to engage such firm for such work on reasonable terms and that the Buyer may not engage a different firm unless (x) BDO Seidman, LLP and/or such affiliate (as the case may be) declines the engagement or requires terms and conditions for the engagement which are commercially unreasonable or not customary for engagements of this type or (y) another firm offers to perform the work on substantially better terms than BDO Seidman, LLP and/or such affiliate (as the case may be).  The Buyer shall use commercially reasonable efforts to cause the Buyer’s Third Party Appraisal to be completed within 30 calendar days following the Closing Date and shall provide a copy of any written materials provided to the Buyer pursuant to the appraisal engagement by the firm engaged to perform the appraisal, including the final Buyer’s Third Party Appraisal, to the Sellers’ Representative within a reasonable period of time (not to exceed two Business Days) after its receipt by the Buyer, provided that the Sellers’ Representative has provided to the firm who prepared such materials all access letters and/or waivers reasonably requested by such firm as a condition thereto.  If such final Buyer’s Third Party Appraisal indicates that the aggregate appraised value of the PP&E included in the Acquired Assets (the “ Covered Assets ”) is greater than the value assigned thereto in the Sellers’ Proposed Allocation, then the Sellers’ Representative shall have a period of three Business Days after its receipt of such final Buyer’s Third Party Appraisal to notify the Buyer in writing of the Sellers’ Representative’s determination to engage, at the Sellers’ own expense, a different third party accounting, investment banking or valuation firm of comparable reputation and qualifications as the firm who prepared the Buyer’s Third Party Appraisal to perform a separate appraisal of the Covered Assets (such appraisal, the “Sellers’ Third Party Appraisal”). Both the Buyer’s Third Party Appraisal and the Sellers’ Third Party Appraisal shall be required to be rendered in writing.  The Sellers’ Representative shall use commercially reasonable efforts to cause the Sellers’ Third Party Appraisal to be completed within 30 calendar days following the date on which the Sellers’ Representative’s notification above is delivered to the Buyer and shall provide a copy of any written materials provided to the Seller’s Representative pursuant to the appraisal engagement by the firm engaged to perform the appraisal, including the final Sellers’ Third Party Appraisal, to the Buyer within a reasonable period of time (not to exceed two Business Days) after its receipt by the Sellers’ Representative, provided that the Buyer has provided to the firm who prepared such materials all access letters and/or waivers reasonably requested by such firm as a condition thereto, and in connection therewith the Buyer will give reasonable access to the PP&E included in the Acquired Assets to the firm engaged to perform the Seller’s Third Party Appraisal solely to the extent necessary to perform such appraisal.  The Sellers’ Representative shall then have the right to designate by written notice to the Buyer either the Buyer’s Third Party Appraisal

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or the Sellers’ Third Party Appraisal as the governing appraisal (the “ Designated Appraisal ”) no later than three Business Days after the Sellers’ Representative’s receipt of the Sellers’ Third Party Appraisal from the firm who prepared such appraisal, whereupon the Buyer and the Sellers shall, and shall cause their respective Affiliates and equity holders to, file all Tax Returns and take positions in all Tax proceedings in a manner consistent with the information contained in the Designated Appraisal.  In the event that the Sellers’ Representative fails to engage its own appraiser within the period described above, fails to deliver the final Sellers’ Third Party Appraisal to the Buyer within the time period described above or fails to designate one of the appraisals as the Designated Appraisal within the period described above, the Buyer’s Third Party Appraisal shall irrevocably be deemed to be the Designated Appraisal hereunder.  In the event that the Buyer fails to engage its own appraiser within the period described above or fails to deliver the final Buyer’s Third Party Appraisal to the Buyer within the time period described above, the Sellers’ Proposed Allocation shall irrevocably be deemed to be the Designated Appraisal hereunder.  In the event that the final Buyer’s Third Party Appraisal indicates that the appraised value of the Covered Assets is less than or equal to the value assigned thereto in the Sellers’ Proposed Allocation, then the Buyer’s Third Party Appraisal shall irrevocably be deemed to be the Designated Appraisal hereunder.  Notwithstanding anything in this Agreement to the contrary (including any provision of Article VIII hereof (Indemnification)), the Buyer and each of the Sellers, and each of their respective Affiliates and direct or indirect equity holders, each shall have no right to seek recourse against the other, or any of its Subsidiaries and Affiliates or direct or indirect equity holders, arising out of or with respect to (i) the utilization of the Designated Appraisal by the other parties and its Affiliates in accordance with this Section 2.6 or (ii) the purchase price allocation utilized by the other party and its Affiliates as to any of the Acquired Assets other than the Covered Assets, and shall not assert any claim or institute any action against the other parties, or any of their Subsidiaries and Affiliates or direct or indirect equity holders, arising out of or relating to (x) such utilization of the Designated Party Appraisal except in the case of a breach of this Section 2.6 by such other party or (y) the purchase price allocation utilized by the other parties and their Affiliates with respect to any of the Acquired Assets other than the Covered Assets.

3.                               REPRESENTATIONS AND WARRANTIES REGARDING THE BUSINESS.

In order to induce the Buyer to enter into and perform this Agreement and to consummate the Contemplated Transactions, the Sellers hereby jointly and severally represent and warrant to the Buyer as follows:

3.1.                               Organization .  Schedule 3.1 sets forth the jurisdiction of organization for each Seller.  Each Seller is (a) duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and (b) is duly qualified to do business and in good standing in each jurisdiction in which it owns or leases real property and in each other jurisdiction in which the failure to so qualify has not had a Material Adverse Effect. The Sellers have delivered to the Buyer true, accurate and complete copies of the Organizational Documents of each Seller and those portions of the minute books of each Seller which relate to the Contemplated Transactions, including the resolutions of the board of directors (or other applicable governing body) of each Seller authorizing such Seller to enter into this

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Agreement and engage in the Contemplated Transactions.  None of the Sellers has any Subsidiaries.

3.2.                               Power and Authorization .

3.2.1                                        Contemplated Transaction .  The execution, delivery and performance by the Sellers of this Agreement and each Ancillary Agreement to which any Seller is (or will be) a party and the consummation of the Contemplated Transactions are within the power and authority of each Seller and have been duly authorized by all necessary action on the part of each Seller.  This Agreement and each Ancillary Agreement to which any Seller is (or will be) a party (a) has been (or, in the case of Ancillary Agreements to be entered into at or prior to the Closing, will be) duly executed and delivered by the applicable Seller and (b) is (or, in the case of Ancillary Agreements to be entered into at or prior to the Closing, will be) a legal, valid and binding obligation of the applicable Seller, Enforceable against such Seller in accordance with its terms.

3.2.2                                        Conduct of Business .  Each Seller has the full power and authority necessary to own and use its assets and carry on the Business as currently conducted.

3.3.                               Authorization of Governmental Authorities .  Except as disclosed on Schedule 3.3 , no action by (including any authorization, consent or approval), or in respect of, or filing with, any Governmental Authority is required for, or in connection with, the valid and lawful (a) authorization, execution, delivery and performance by the Sellers of this Agreement and each Ancillary Agreement to which any Seller is (or will be) a party or (b) the consummation of the Contemplated Transactions by the Sellers.

3.4.                               Noncontravention .  Except as disclosed on Schedule 3.4 , neither the execution, delivery and performance by each Seller of this Agreement or any Ancillary Agreement to which it is (or will be) a party nor the consummation of the Contemplated Transactions will:

(a)                          assuming the taking of any action by (including any authorization, consent or approval), or in respect of, or any filing with, any Governmental Authority, in each case, as disclosed on Schedule 3.3 , violate any Legal Requirement applicable to any Seller in any material respect;

(b)                         result in a material breach or violation of, or default under, any material Contractual Obligation of any Seller;

(c)                          require any action by (including any authorization, consent or approval) or in respect of (including notice to), any Person under any material Contractual Obligation of any Seller;

(d)                         result in the creation or imposition of a material Encumbrance upon, or the forfeiture of, any material Acquired Asset; or

(e)                          result in a breach or violation of, or default under, the Organizational Documents of any Seller.

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3.5.                               Financial Statements .  Except as disclosed on Schedule 3.5 , the audited financials (including any notes thereto) for the Purchased Business for the years ended December 31, 2007, December 31, 2006 and December 31, 2005 (the “ Audited Financials ”), and the unaudited financials for the Purchased Business for the five (5) months ended May 31, 2008, all of which are attached hereto as Exhibit 3.5 , (a) are complete and correct and have been prepared in accordance with the books and records of the Sellers, (b) have been prepared in accordance with GAAP, consistently applied (subject, in the case of the unaudited financials, to normal year-end audit adjustments), and (c) fairly present the combined financial position of the Sellers as at the respective dates thereof and the combined results of the operations of the Sellers and changes in financial position for the respective periods covered thereby.

3.6.                               Absence of Certain Developments .  Since the Most Recent Balance Sheet Date, the Business has been conducted in the Ordinary Course of Business and, except for the matters disclosed on Schedule 3.6 :

(a)                          no Seller has amended its Organizational Documents;

(b)                         no Seller has permitted any of the Acquired Assets to become subject to an Encumbrance other than a Permitted Encumbrance;

(c)                          there has been no (i) material loss, destruction, damage or eminent domain taking (in each case, whether or not insured) affecting the Purchased Business or any material Acquired Asset or (ii) shutdown or maintenance of any Facility, converting equipment, foam extruding or foam forming equipment outside of the Ordinary Course of Business;

(d)                         no Seller has increased the Compensation payable or paid, whether conditionally or otherwise, to any Offer Employee, other than in the Ordinary Course of Business and other than any Compensation paid to a stockholder of any of the Sellers;

(e)                          no Seller has (i) made any material change in its methods of accounting or accounting practices (including with respect to reserves) except as required by GAAP or (ii) materially changed its policies or practices with respect to paying payables or billing and collecting receivables;

(f)                            no Seller has terminated or closed any Facility or business included within the Purchased Business;

(g)                         no Seller has written up or written down any Acquired Asset which is material to the Business, or revalued its inventory;

(h)                         no Seller has entered into any Contractual Obligation to do any of the things referred to elsewhere in this Section 3.6; and

(i)                             no event or circumstance has occurred which has had a Material Adverse Effect.

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3.7.                               Assets.

3.7.1                                        Ownership of Assets .  Each Seller has sole and exclusive, good and marketable title to, or, in the case of property held under a lease or other Contractual Obligation, a sole and exclusive, Enforceable leasehold interest in, or right to use, all of its properties, rights and assets, whether real or personal and whether tangible or intangible, including all assets reflected in the Most Recent Balance Sheet or acquired after the Most Recent Balance Sheet Date (except for such assets which (i) are Retained Assets or (ii) have been sold or otherwise disposed of since the Most Recent Balance Sheet Date in the Ordinary Course of Business).  Except as disclosed on Schedule 3.7 , none of the Acquired Assets are subject to any Encumbrance which is not a Permitted Encumbrance.

3.7.2                                        Sufficiency of Assets .  The Acquired Assets comprise all of the assets, properties and rights of every type and description, whether real or personal, tangible or intangible, used to conduct the Business (other than the Retained Assets and individuals employed by the Business).  Except for the Retained Assets and except as disclosed on Schedule 3.7.2 , no Individual Owner or any Affiliate of any Individual Owner (other than a Seller) owns any asset, property or right used to conduct the Business.

3.7.3                                        Books and Records.  Attached as Schedule 3.7.3 is the document retention policy of the Sellers.  The Sellers have complied with such policy and have not destroyed any books and records in contravention of such policy.

3.8.                               Accounts Receivables .  All accounts and notes receivable reflected on the Most Recent Balance Sheet and all accounts and notes receivable arising subsequent to the Most Recent Balance Sheet Date (other than , in each case, those which are Retained Assets) and on or prior to the Closing Date, have arisen or will arise in the Ordinary Course of Business, represent or will represent legal, valid, binding and Enforceable obligations to a Seller and, subject only to consistently recorded reserves for bad debts established as of a date prior to the Closing Date in a manner consistent with past practice.

3.9.                               Property.

3.9.1                                        Schedule 3.9 sets forth a list of addresses of all real property owned, leased, subleased or licensed by, or for which a right to use or occupy has been granted to, each of the Sellers that is used in the Business (the “Real Property”).  Except as described on Schedule 3.9 , there are no written or oral subleases, licenses, concessions, occupancy agreements or other Contractual Obligations granting to any Person the right of use or occupancy of the Real Property and there are not outstanding options, rights of first refusal, rights of first offer or similar rights to purchase the owned Real Property, or any portion thereof or interest therein.  Except as set forth in Schedule 3.9, the Sellers have good and clear, record and marketable fee simple title in and to the owned Real Property, free and clear of all Encumbrances other than Permitted Encumbrances.

3.9.2                                        No Seller is obligated to pay any leasing or brokerage commission as a result of the Contemplated Transaction.  There is no pending or, to Sellers’ Knowledge, threatened eminent domain taking affecting any of the Real Property.

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3.9.3                                        All material Permits necessary in connection with the construction upon, and present use and operation of, the Real Property and the lawful occupancy thereof have been issued by the appropriate Governmental Authorities.  The current use of the Real Property is, in all material respects, in accordance with the certificates of occupancy relating thereto and the terms of any material Permits.  All material Permits which are Transferred Permits will continue in full force and effect immediately after giving effect to the Contemplated Transactions.  The Real Property and its current use, occupancy and operation by the Sellers and the Facilities located thereon do not (a) constitute a nonconforming use under any applicable building, zoning, subdivision or other land use or similar Legal Requirements or (b) otherwise violate or conflict with, in any material respect, any covenants, conditions, restrictions or other Contractual Obligations, including the requirements of any applicable Encumbrances thereto.  Except as set forth on Schedule 3.9 , no Seller, (a) is in violation of any Legal Requirement relating to Real Property, including setback requirements, zoning restrictions and ordinances, building, life, access, safety, health and fire codes and ordinances affecting the Real Property or (b) has received notice of any eminent domain, condemnation or similar proceeding pending, or any Government Order relating thereto.

3.9.4                                        The Sellers have completed the abatement of, and otherwise brought into compliance, each and every violation set forth in the citations issued by OSHA with respect to the New York facility, and have otherwise complied fully with each and every obligation under the Settlement Agreement entered into between the Sellers and OSHA with respect to the New York facility.

3.10.                         Equipment.   All of the fixtures and other improvements to the Real Property (including any Facilities) and all of the tangible personal property other than inventory included in the Acquired Assets (the “ Equipment ”) are in good working order, except for normal wear and tear.

3.11.                         Intellectual Property.

3.11.1                                  The Sellers are the sole owners of or have the right to use all Company Technology, and none of the Company Technology owned or purported to be owned by a Seller is in the possession, custody, or control of any Person other than the Sellers.

3.11.2                                  No Seller, to the Seller’s Knowledge, (a) has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of third parties or (b) has received any charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation (including any claim that a Person must license or refrain from using any Intellectual Property rights of any third party in connection with the conduct of the Purchased Business or the use of the Company Technology), in each case except where any such infringement is not material.  To the Sellers’ Knowledge, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Company Technology.

3.11.3                                  Schedule 3.11 identifies (a) all registered Intellectual Property which has been issued to a Seller and is an Acquired Asset, (b) each pending application for

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registration which any Seller has made with respect to any Company Technology that is an Acquired Asset, (c) each Contractual Obligation and under which a Seller has granted any license to any third party with respect to any Company Technology of (a) or (b) above.  True, accurate and complete copies of all such registrations, applications and Contractual Obligations, in each case, as amended, or otherwise modified and in effect, have been made available to the Buyer, as well as true, accurate and complete copies of all other written documentation evidencing ownership (if applicable) of each such item.  Each such registration is valid and subsisting.

3.11.4                                  With respect to each item of Company Technology that is owned by a Seller and constitutes an Acquired Asset:

(a)                          a Seller possesses all right, title, and interest in and to such item, free and clear of any Encumbrance;

(b)                         such item is not subject to any outstanding Government Order, and no Action is pending, which challenges the legality, validity, enforceability, use or ownership of such item; and

(c)                          except as disclosed on Schedule 3.11 , no Seller has agreed or has a Contractual Obligation to indemnify any Person for or against any interference, infringement, misappropriation or other conflict with respect to such item except to the extent such obligation is an Excluded Liability.

3.11.5                                  The Sellers’ use and dissemination of any and all data and information concerning consumers of its products or users of any web sites operated by any Seller is in compliance with all applicable material privacy policies, terms of use, and laws.  The transactions contemplated to be consummated hereunder as of the Closing will not violate any privacy policy, terms of use, or Legal Requirements relating to the use, dissemination, or transfer of such data or information.

3.12.                         Permits .  Each Seller has been duly granted all material Permits under all Legal Requirements necessary for the conduct of the Purchased Business.  Schedule 3.12.1 lists each Transferred Permit, together with the Governmental Authority or other Person responsible for issuing such Permit.  Except as disclosed on Schedule 3.12.2 , (a) the Transferred Permits are valid and in full force and effect, (b) no Seller is in material breach or violation of, or default under, any such Transferred Permit and (c) the Transferred Permits will continue to be valid and in full force and effect, on identical terms immediately following the consummation of the Contemplated Transactions.

3.13.                         Employee Benefit Plans .

3.13.1                                  With respect to each Transferred Plan, the Sellers have delivered to the Buyer true, accurate and complete copies of each of the following:  (a) if the plan has been reduced to writing, the plan document together with all amendments thereto, (b) if the plan has not been reduced to writing, a written summary of all material plan terms, (c) if applicable, copies of any trust agreements, custodial agreements, insurance policies, administrative agreements and similar agreements, and investment management or

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investment advisory agreements, (d) copies of any summary plan descriptions, employee handbooks or similar employee communications, (e) in the case of any plan that is intended to be qualified under Code Section 401(a), a copy of the most recent determination letter from the IRS and any related correspondence, and a copy of any pending request for such determination, (f) in the case of any funding arrangement intended to qualify as a VEBA under Code Section 501(c)(9), a copy of the IRS letter determining that it so qualifies and (g) in the case of any plan for which Forms 5500 are required to be filed, a copy of the two most recently filed Forms 5500, with schedules attached.

3.13.2                                  Each Transferred Plan that is intended to be qualified under Code Section 401(a) is so qualified.  Each Transferred Plan, including any associated trust or fund, has been administered in accordance with its terms and with applicable Legal Requirements, and nothing has occurred with respect to any Company Plan that has subjected or could subject a Seller to a penalty under Section 502 of ERISA or to an excise tax under the Code, or that has subjected or could subject any participant in, or beneficiary of, a Company Plan to a tax under Code Section 4973.  Each Transferred Plan that is a qualified contribution plan is an “ERISA Section 404(c) Plan” within the meaning of the applicable Department of Labor regulations.

3.13.3                                  All required contributions to, and premium payments on account of, each Transferred Plan have been made on a timely basis.

3.13.4                                  There is no pending or, to the Sellers’ Knowledge, threatened Action relating to a Transferred Plan, other than routine claims in the Ordinary Course of Business for benefits provided for by the Transferred Plans.  No Transferred Plan is or, within the last six years, has been the subject of an examination or audit by a Governmental Authority, is the subject of an application or filing under, or is a participant in, a government-sponsored amnesty, voluntary compliance, self-correction or similar program.

3.13.5                                  Except as required under Section 601 et seq . of ERISA, no Transferred Plan provides benefits or coverage in the nature of health, life or disability insurance following retirement or other termination of employment.

3.14.                         Environmental Matters .  Except as set forth in Schedule 3.14 , (a) each of the Sellers are, and have been, in compliance with all Environmental Laws, (b) there has been no release or threatened release of any pollutant, petroleum or any fraction thereof, contaminant or toxic or hazardous material (including toxic mold), substance or waste (each a “ Hazardous Substance ”) on, upon, into or from any site currently or heretofore owned, leased or otherwise used by a Seller, (c) there have been no Hazardous Substances generated by a Seller that have been disposed of or come to rest at any site that has been included in any published U.S. federal, state or local “superfund” site list or any other similar list of hazardous or toxic waste sites published by any Governmental Authority in the United States, (d) there are no underground storage tanks located on, no PCBs (polychlorinated biphenyls) or PCB-containing Equipment used or stored on, and no hazardous waste as defined by the Resource Conservation and Recovery Act stored on, any site owned or operated by a Seller,

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except for the storage of hazardous waste in compliance with Environmental Laws and (e) the Sellers have made available to the Buyer true, accurate and complete copies of all material environmental records, reports, notifications, certificates of need, permits, pending permit applications, correspondence, engineering studies, and environmental studies or assessments in their possession or under their control, in each case as amended and in effect.

3.15.                         Contracts.

3.15.1                                  Except as disclosed on Schedule 3.15 , no Seller is bound by or a party to:

(a)                          any Contractual Obligation (or group of related Contractual Obligations) for the purchase or sale of inventory, raw materials, commodities, supplies, goods, products, equipment or other personal property, or for the furnishing or receipt of services, in each case, the performance of which will extend over a period of more than one year or which provides for annual payments to or by the Sellers in the aggregate in excess of $50,000;

(b)                         (i) any capital lease or (ii) any other lease or other Contractual Obligation relating to the Equipment providing for annual rental payments in excess of $10,000, under which any Equipment is held or used by one or more Sellers;

(c)                          any Contractual Obligation, other than Real Property leases or leases relating to the Equipment, relating to the lease or license of any Acquired Asset, including Technology and Intellectual Property, that is not included on Schedule 3.11 ;

(d)                         any Contractual Obligation relating to the acquisition or disposition of (i) any business of a Seller (whether by merger, consolidation or other business combination, sale of securities, sale of assets or otherwise) or (ii) any asset other than in the Ordinary Course of Business;

(e)                          any Contractual Obligation concerning or consisting of a partnership, limited liability company or joint venture agreement;

(f)                            any Contractual Obligation (or group of related Contractual Obligations) under which a Seller has permitted any Acquired Asset to become Encumbered;

(g)                         any Contractual Obligation under which any other Person has guaranteed any Debt of a Seller;

(h)                         any Contractual Obligation, whether the Seller is subject to or the beneficiary of such obligations, which (i) relates to confidentiality or (ii) limits or purports to limit the ability of any Person to compete in any line of business, with any other Person or in any geographic area;

(i)                             any Contractual Obligation under which a Seller is, or may become, obligated to incur any severance pay or special Compensation obligations which

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would become payable by reason of, this Agreement or the Contemplated Transactions;

(j)                             any Contractual Obligation providing for the employment or consultancy with an individual on a full-time, part-time, consulting or other basis or otherwise providing Compensation or other benefits to any officer, director, employee or consultant (other than an Employee Plan);

(k)                          any agency, dealer, distributor, sales representative, marketing or other similar agreement;

(l)                             any Contractual Obligation that contains most favored customer pricing provisions or grants any exclusive rights, rights of first refusal, rights of first negotiation or similar rights to any Person; and

(m)                       any Contractual Obligation with any Governmental Authority.

The Sellers have delivered to the Buyer true, accurate and complete copies of each written Contractual Obligation required to be listed on Schedule 3.15 or which is otherwise a Transferred Contract, Transferred Lease or Transferred Insurance, in each case, as amended or otherwise modified and in effect.  The Sellers have delivered to the Buyer a written summary setting forth the terms and conditions of each oral Contractual Obligation required to be listed on Schedule 3.15 or which is otherwise a Transferred Contract, Transferred Lease or Transferred Insurance.

3.15.2                                  To the Sellers’ Knowledge, each Contractual Obligation which is a Transferred Contract, Transferred Lease or Transferred Insurance is Enforceable against the Seller that is party to such Contractual Obligation and, to the Seller’s Knowledge, against each other Person party thereto, is in full force and effect and, subject to obtaining any necessary consents disclosed in Schedule 3.4 , will continue to be so Enforceable and in full force and effect immediately following the consummation of the Contemplated Transactions.  No Seller or, to the Sellers’ Knowledge, any other party to any Transferred Contract, Transferred Lease or Transferred Insurance is in material breach or violation of, or default under any Transferred Contract, Transferred Lease or Transferred Insurance.

3.16.                         Affiliate Transactions .  Except for the matters disclosed on Schedule 3.16 , no Individual Owner or any Affiliate of any Individual Owner is an officer, director, employee, consultant, competitor, creditor, debtor, customer, distributor, supplier or vendor of, or is a party to any Contractual Obligation with, a Seller.

3.17.                         Customers and Suppliers .  The Sellers have previously provided to the Buyer a list of (a) the 15 largest customers of the Purchased Business (measured by aggregate billings) during the fiscal year ended on December 31, 2007 and (b) the 15 largest suppliers of materials, products or services to the Purchased Business (measured by the aggregate amount purchased by the Purchased Business) during the fiscal year ended on December 31, 2007.  Except with respect to the specific supplier set forth on Schedule 3.17 to the extent provided thereon, as of the date of this Agreement, the relationships of the Purchased Business with the customers and suppliers referred to above are good commercial working

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relationships and none of such customers or the suppliers has canceled, terminated or otherwise materially altered (including any material reduction in the rate or amount of sales or purchases or material increase in the prices charged or paid, as the case may be) or notified the Sellers of any intention to do any of the foregoing or otherwise threatened in writing to cancel, terminate or materially alter (including any material reduction in the rate or amount of sales or purchases or material increase in the prices charged or paid, as the case may be) its relationship with the Purchased Business.  The Sellers or any of their Affiliates, and/or the Individual Owners or any of their Affiliates have not directly or indirectly, given, or agreed to give, any one or more gifts, contributions, payments or similar benefits in connection with the sale of products or otherwise to any customer or supplier, either directly or indirectly, or to any officer, director, shareholder, employee or agent of any customer or supplier, which in the case of any single customer or supplier, and its officers, directors, shareholders employees or agents, taken together, is in excess of $2,500 in the aggregate during a twelve month period which is not reflected in the Financials.

3.18.         Employees .  Except as disclosed on Schedule 3.18 , there is no pending, or to the Sellers’ Knowledge, threatened work slowdown, lockout, stoppage, picketing or strike pending between the Sellers on the one hand, and their employees, on the other hand, and there have been no such troubles since January 1, 2000.  Except as disclosed on Schedule 3.18 , (a) no employee of a Seller is represented by a labor union, (b) no Seller is a party to, or otherwise subject to, any collective bargaining agreement or other labor union contract, (c) no petition has been filed or proceedings instituted by an employee or group of employees of a Seller with any labor relations board seeking recognition of a bargaining representative and (d) there is no organizational effort currently being made or threatened by, or on behalf of, any labor union to organize employees of a Seller and no demand for recognition of employees of a Seller has been made by, or on behalf of, any labor union.   Schedule 3.18 describes any inspection requests or correspondence from any Governmental Authority since January 1, 2006 received by any Seller relating to the identity, Social Security number, or employment authorization of any Transferred employee.  The Sellers have, in a timely matter, acted upon or responded to any matter required to be set forth on Schedule 3.18 pursuant to the preceding sentence.

3.19.         Litigation; Governmental Orders.

3.19.1            Litigation .  Except as disclosed on Schedule 3.19.1 , as of the date of this Agreement, there is no pending, or to the Sellers’ Knowledge, threatened Action to which a Seller is a party (either as plaintiff or defendant) or to which the Acquired Assets are subject, which may affect the Purchased Business or a Seller’s ownership of any Acquired Asset or the use or exercise by the Buyer of any Acquired Asset.

3.19.2            Governmental Orders .  Except as disclosed on Schedule 3.19.2 , no Governmental Order has been issued which is applicable to, or otherwise affects, the Acquired Assets or the Purchased Business.

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3.20.         Product Warranties; Defects; Liability.

3.20.1            No Seller has any material Liability for any damages in connection with any Products, other than product warranty claims which constitute Excluded Liabilities.

3.20.2            Except as disclosed in Schedule 3.20 , no Product is subject to any guaranty, warranty, or other indemnity beyond the applicable standard terms and conditions of sale, lease or license which are set forth on Schedule 3.20 .

3.20.3            Except as disclosed on Schedule 3.20 , there is no Action to which a Seller is a party pending, or to the Sellers’ Knowledge, threatened relating to alleged defects in the Products or services provided by a Seller, or the failure of any such Products or services to meet certain specifications, other than product warranty claims which constitute Excluded Liabilities.  Schedule 3.20 sets forth all concluded Actions (including the disposition thereof) against a Seller since January 1, 2005 relating to, or otherwise involving, alleged defects in the Products or services provided by a Seller, or the alleged failure of any such services or Products to meet certain specifications, other than product warranty claims resulting in payment obligations of any Sellers (or multiple Sellers taken together) not in excess of $50,000, all of which constitute Excluded Liabilities.  No Seller has any Liability arising out of any injury to any Person or property as a result of any services provided by a Seller, or the ownership, possession, or use of the Products.

3.21.         No Brokers .  No Seller has any Liability of any kind to, or is subject to any claim of, any broker, finder or agent in connection with the Contemplated Transactions other than those which will be borne by the Sellers.

3.22.         Insurance .  The Sellers have made available to the Buyer true, accurate and complete copies of all policies which are Transferred Insurance, in each case, as amended or otherwise modified and in effect.  Except as disclosed on Schedule 3.22 , no insurer with respect to the Transferred Insurance (a) has questioned, denied or disputed (or otherwise reserved its rights with respect to) the coverage of any pending claim or (b) has threatened to cancel any Transferred Insurance.  Except as disclosed on Schedule 3.22 , to the Sellers’ Knowledge, no insurer with respect to any Transferred Insurance plans to raise the premiums for, or materially alter the coverage thereunder.  Except as disclosed on Schedule 3.22 , the Transferred Insurance is transferable to the Buyer without the need for any consent, notice or filing.  Schedule 3.22 describes any self-insurance arrangements affecting the Purchased Business.

4.           REPRESENTATIONS AND WARRANTIES OF THE BUYER.

The Buyer represents and warrants to the Sellers that:

4.1.           Organization .  The Buyer is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization.

4.2.           Power and Authorization .  The execution, delivery and performance by the Buyer of this Agreement and each Ancillary Agreement to which it is (or will be) a party and the consummation of the Contemplated Transactions are within the power and authority of the Buyer and have been duly authorized by all necessary action on the part of the Buyer.  This Agreement and each Ancillary Agreement to which the Buyer is (or will be) a party (a) has

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been (or, in the case of Ancillary Agreements to be entered into at or prior to the Closing, will be) duly executed and delivered by the Buyer and (b) is (or in the case of Ancillary Agreements to be entered into at or prior to the Closing, will be) a legal, valid and binding obligation of the Buyer, Enforceable against the Buyer in accordance with its terms.

4.3.           Authorization of Governmental Authorities .  Except as disclosed on Schedule 4.3 , no action by (including any authorization, consent or approval), or in respect of, or filing with, any Governmental Authority is required for, or in connection with, the valid and lawful (a) authorization, execution, delivery and performance by the Buyer of this Agreement and each Ancillary Agreement to which it is (or will be) a party or (b) the consummation of the Contemplated Transactions by the Buyer.

4.4.           Noncontravention .  Except as disclosed on Schedule 4.4 , neither the execution, delivery and performance by the Buyer of this Agreement or any Ancillary Agreement to which it is (or will be) a party nor the consummation of the Contemplated Transactions will:

(a)         assuming the taking of any action by (including any authorization, consent or approval) or in respect of, or any filing with, any Governmental Authority, in each case, as disclosed on Schedule 4.3 , violate any provision of any Legal Requirement applicable to the Buyer;

(b)         result in a breach or violation of, or default under, any Contractual Obligation of the Buyer;

(c)         require any action by (including any authorization, consent or approval) or in respect of (including notice to), any Person under any Contractual Obligation; or

(d)         result in a breach or violation of, or default under, the Buyer’s Organizational Documents.

4.5.           No Brokers .  The Buyer has no Liability of any kind to any broker, finder or agent with respect to the Contemplated Transactions for which the Sell