ASSET PURCHASE AGREEMENT

EXHIBIT 10.1

ASSET PURCHASE AGREEMENT

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THIS AGREEMENT is entered into as of September ___, 2004 by and among

INK SOURCE, INC., a Wisconsin corporation ("Seller"), MICHAEL SLOAN

("Shareholder") and NOR-COTE INTERNATIONAL INC., an Indiana corporation

("Purchaser").

PREAMBLE

Subject to the terms and conditions hereof, Purchaser desires to

purchase and Seller desires to sell substantially all of the assets and rights

relating to or used or useful in connection with Seller's business of

manufacturing and selling UV curable printing inks and coatings (the

"Business");

AGREEMENT

NOW, THEREFORE, in order to consummate said purchase and sale and in

consideration of the mutual agreements set forth herein, the parties hereto

agree as follows:

SECTION 1

PURCHASE AND SALE OF ASSETS

1.1 Sale of Assets. Subject to the provisions of this Agreement, Seller

agrees to sell and Purchaser agrees to purchase, on such date (the "Closing

Date"), all of Seller's right, title and interest in and to substantially all of

its assets of every kind and description, tangible and intangible, personal or

mixed, and wherever located, including but not limited to Seller's goodwill,

backlog, customer lists, customer deposits, telephone numbers, trade and product

names (including, but not limited to, all rights to the name "Ink Source" and

any derivatives thereof), proprietary property and products, prepaid expenses,

formulas, technologies, software, web page and rights therein, furniture,

equipment, machinery and other intellectual property, except in each case

Excluded Assets (as defined below). All of the assets described or referred to

in this Section 1.1 (except Excluded Assets) are hereinafter referred to as the

"Subject Assets" and include, without limitation, those assets set forth below:

(a) All furniture, equipment and machinery as set forth in Schedule

1.1(a);

(b) All Intellectual Property (as defined in Section 2.6);

(c) All accounts receivable (the "Accounts Receivable"),

work-in-process and all intangible assets each of which is set forth in Schedule

1.1(c);

(d) All cash and cash equivalents as set forth in Schedule 1.1(d); and

(e) All inventory in Seller's actual or constructive possession as set

forth in Schedule 1.1(e); and

(f) To the extent permitted by the terms of each Assumed Contract (as

defined below) and applicable law, all outstanding sales proposals, purchase

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orders, agreements or contracts to provide or receive goods and/or services, all

customer agreements, vendor agreements, commitments, agreements and licenses

relating to the Intellectual Property, as set forth in Schedule 1.1(f) (the

"Assumed Contracts").

1.2 Excluded Assets. Purchaser and Seller agree and acknowledge that,

Seller is not transferring to Purchaser and Purchaser is not purchasing the

corporate minute book or other corporate records that are not necessary for the

continued operation of the Business (hereinafter referred to as the "Excluded

Assets").

1.3 Assumption of Liabilities. It is expressly understood and agreed

that Purchaser is not assuming or becoming liable for any liabilities of Seller

of any kind or nature at any time existing or asserted, whether known or

unknown, fixed, contingent or otherwise not specifically assumed herein by

Purchaser. Notwithstanding the foregoing, upon the sale and purchase of the

Subject Assets, Purchaser shall accept and assume and, as the case may be, pay,

discharge, perform and observe in the ordinary course, the following, and only

the following liabilities, duties and obligations (the "Assumed Liabilities"):

(a) Seller's current liabilities set forth in Schedule 1.3(a) in an

amount not to exceed $80,000.00.

(b) Seller's liabilities to F&M Bank in an amount not to exceed

$159,747.00.

(c) All of Seller's rights and executory obligations under the Assumed

Contracts to be performed after the Closing Date (excluding any obligations or

liabilities of Seller under any Assumed Contract that were to have been

performed, fulfilled or satisfied on or prior to the Closing Date).

1.4 Excluded Liabilities. The liabilities and obligations of Seller,

whether fixed, contingent, known or unknown and whether existing as of the

Closing Date or arising thereafter which are not specifically assumed by

Purchaser under Section 1.3 of this Agreement are hereinafter referred to as the

"Excluded Liabilities." Seller hereby acknowledges and agrees that, except for

the Assumed Liabilities, Purchaser is not assuming or becoming liable for, and

Seller shall remain exclusively liable for, all of the Excluded Liabilities.

1.5 Purchase Price. In consideration of the sale by Seller to Purchaser

of the Subject Assets, and subject to the other terms and conditions contained

herein, Purchaser agrees to pay, the sum of Two Hundred Thirty Nine Thousand

Seven Hundred Forty Seven Dollars ($239,747.00) (the "Purchase Price") to

Seller. This Purchase Price shall be paid by Purchaser assuming the liabilities

set forth in Schedules 1.3(a) and 1.3(b). No cash shall be paid.

Purchaser and Seller hereby agree to allocate the Purchase Price, as

set forth on Schedule 1.5 among the classes of Subject Assets and to file its

federal income tax returns and its other tax returns reflecting such allocation,

including Form 8594 and any other reports required by Section 1060 of the

Internal Revenue Code of 1986, as amended ("Code").

1.6. Transfer of Subject Assets. On the Closing Date, Seller shall

deliver or cause to be delivered to Purchaser good and sufficient instruments of

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transfer, transferring to Purchaser title to all of the Subject Assets. Such

instruments of transfer (a) shall be in the form and will contain the

warranties, covenants and other provisions (not inconsistent with the provisions

hereof) which are usual and customary for transferring the type of property

involved under the laws of the jurisdictions applicable to such transfers, (b)

shall be in form and substance reasonably satisfactory to Purchaser and its

counsel, and (c) except as otherwise provided in this Agreement, shall

effectively vest in Purchaser good and marketable title to all the Subject

Assets free and clear of all licenses, liens, encumbrances, mortgages and

security interests whatsoever (collectively "Liens") other than Assumed

Liabilities.

SECTION 2

SELLER'S AND SHAREHOLDER'S REPRESENTATIONS AND WARRANTIES

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Seller and Shareholder hereby jointly and severally represent and

warrant to Purchaser as of the date of this Agreement as follows:

2.1 Organization of Seller. Seller is a corporation duly organized,

validly existing and in good standing under the laws of Wisconsin. Seller is

duly qualified to conduct the Business in all states in which the failure to so

qualify would have a material adverse effect on this Agreement or the assets

purchase hereunder.

2.2 Authority of Seller and Shareholder. Seller and Shareholder have

the full right, authority and power to enter into this Agreement and each

agreement, document and instrument to be executed and delivered by or on behalf

of Seller or Shareholder pursuant to this Agreement (the "Seller Documents") and

to carry out the transactions contemplated hereby and thereby. The execution,

delivery and performance by Seller and Shareholder of this Agreement and Seller

Documents have been duly authorized by all necessary action of Seller and

Shareholder and no other action on the part of Seller or Shareholder is required

in connection therewith. This Agreement and Seller Documents executed and

delivered by Seller and Shareholder pursuant to this Agreement constitute, or

when executed and delivered will constitute, valid and binding obligations of

Seller and Shareholder enforceable in accordance with their respective terms,

except as such enforceability may be limited by applicable bankruptcy,

insolvency or other similar laws affecting creditors' rights. The execution,

delivery and performance by Seller and Shareholder of this Agreement, Seller

Documents and the consummation of the transactions contemplated hereby or

thereby:

(a) Does not and will not violate any provision of the Articles of

Incorporation or Bylaws of Seller, in each case as amended to date;

(b) Does not and will not violate any laws of the United States, or any

state or other jurisdiction applicable to Seller or require Seller to obtain any

approval, consent or waiver of, or make any filing with, any person or entity

(governmental or otherwise) that has not been obtained or made;

(c) Does not and will not result in a breach of, constitute a default

under, accelerate any obligation under, or give rise to a right of termination

of any indenture, loan or credit agreement or any other agreement, contract

instrument mortgage, lien, lease, permit authorization, order, writ, judgment,

injunction, decree, determination or arbitration award to which Seller is a

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party or by which any of the property of Seller is bound or affected, or result

in the creation or imposition of any Lien (except for Assumed Liabilities) on

any of the Subject Assets. The officers or agents of Seller who execute this

Agreement and Seller Documents contemplated hereby on behalf of Seller have and

shall have all requisite power to do so in the name of and on behalf of Seller.

2.3 Absence of Restrictions. Neither Seller or Shareholder has made any

other agreement with any other party with respect to the sale or any other

disposition or encumbrance of the Business or the Subject Assets.

2.4 Title to Assets. Except as set forth in Schedule 2.4, Seller has

good, marketable and indefeasible title to all of the Subject Assets, free and

clear of all claims, liabilities, restrictions and Liens. Upon the sale,

assignment, transfer and delivery of the Subject Assets to Purchaser under and

in accordance with this Agreement and Seller Documents, there will be vested in

Purchaser good, marketable and indefeasible title to the Subject Assets, free

and clear of all Liens. The Subject Assets: (i) include all assets and

properties used or held for use by Seller to conduct the Business as currently

conducted; and (ii) include all assets and properties necessary for Purchaser to

operate the Business in the same manner as Seller.

2.5 Liabilities Related to Assets. Except as specifically stated in

this Agreement and/or Seller Documents, Seller has no liabilities of any nature,

whether accrued, absolute, contingent or otherwise, asserted or unasserted,

known or unknown (including without limitation liabilities as guarantor or

otherwise with respect to obligations of others, or liabilities for taxes due or

then accrued or to become due or contingent or potential liabilities relating to

activities of the Business or the conduct of the Business) which will materially

and adversely affect the Subject Assets subsequent to Closing.

2.6 Intellectual Property.

(a) Seller has exclusive ownership of, or valid license or authority to

use, all trade secrets, know how, computer software, licenses, trademarks, trade

or product names, company names, logos, customer lists, mailing lists, sales and

advertising material, formulas, technology, drawings and designs, customer

specifications, supplier information, systems, data compilations, research

results or other proprietary rights, (collectively, "Intellectual Property")

sold under this Agreement, including but not limited to those set forth in

Schedule 2.6(a). Seller has the non-exclusive right to use, free and clear of

claims or rights of other persons, all of the Intellectual Property without

payments to or consents from any other party.

(b) Seller's use of any Intellectual Property does not infringe any

rights of any other person. Seller is not making unauthorized use of any

confidential information or trade secrets of any person, including without

limitation any former employer or any past or present employee of Seller.

2.7 Assumed Contracts. All of the Assumed Contracts have been entered

into in the ordinary course of business, are in full force and effect and have

not been amended, extended or otherwise modified (whether orally or in writing),

except for amendments, extensions, and modifications made in the ordinary course

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of business consistent with past practices. Neither Seller nor any other party

thereto is in default under any such Assumed Contracts (a "default" being

defined for purposes hereof as an actual default, other than late payment of an

Account Receivable, or any set of facts which would, upon receipt of notice or

passage of time or both, constitute a default, other than late payment of an

Account Receivable). Seller is not a party to or subject to any contract or

agreement that will impose any material obligations on Purchaser (except for the

obligations to be performed under the Assumed Contracts in the ordinary course

of business) or otherwise materially impair the value of the Subject Assets

after the Closing Date. All of the terms of each Assumed Contract as amended,

are set forth in writing and true and complete written copies of all of the

Assumed Contracts have been provided to Purchaser.

2.8 No Litigation; Compliance. There is no litigation or governmental

or administrative proceeding or investigation pending or, to Seller's knowledge,

threatened against Seller or any of its affiliates which may have an adverse

effect on the Subject Assets subsequent to Closing, or which would prevent the

consummation of the transactions contemplated by this Agreement or the Seller

Documents. Seller has not received notice of any violation or alleged violation

of any applicable statute, ordinance, order, rule or regulation.

2.9 Taxes. Seller has paid or caused to be paid any and all federal,

state, local, foreign and other taxes, and all deficiencies, or other additions

to tax, interest, fines and penalties that are due and payable by Seller through

the Closing Date, whether disputed or not. Seller has, in accordance with all

applicable law, filed all federal, state, local, foreign and other tax returns

required to be filed by Seller through the Closing Date, and all such returns

correctly and accurately set forth the amount of any taxes relating to the

applicable period. There is no unassessed tax deficiency proposed or threatened

against Seller. None of the Subject Assets are or will be subject to any lien or

encumbrance for taxes which are past due or which became payable or accrued on

or prior to the Closing Date.

2.10 Warranty or Other Claims. There are no existing or threatened

errors or omissions, warranty or other similar claims against Seller or any

Subject Asset. Seller shall be responsible for any errors or omissions claims,

warranty claims or any other claims relating to products or services that it

sold or provided prior to the Closing Date.

2.11 Environmental Matters.

(a) (i) Seller has no liability under, nor has it violated, any

Environmental Law; (ii) Seller has never entered into or been subject to any

judgment, consent decree, compliance order, or administrative order with respect

to any environmental or health and safety matter or received any request for

information, notice, demand letter, administrative inquiry, or formal or

informal complaint or claim with respect to any environmental or health and

safety matter or the enforcement of any Environmental Law, and (iii) none of the

items enumerated in clause (ii) of this subsection will to the knowledge of

Seller be forthcoming.

(b) Schedule 2.11(b) attached hereto and made a part hereof sets forth

copies of all documents, records and information available to Seller concerning

any environmental or health and safety matter relevant to Seller, whether

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generated by Seller or others, including without limitation environmental

audits, environmental risk assessments, site assessments, documentation

regarding off-site disposal of Hazardous Materials, spill control plans and

reports, correspondence, permits, licenses, approvals, consents and other

authorizations related to environmental or health and safety matters issued by

any governmental agency.

(c) For purposes of this Section, (i) "Hazardous Material" shall mean

and include any hazardous waste, hazardous material, hazardous substance,

petroleum product, oil, toxic substance, pollutant, contaminant or other

substance which may pose a threat to the environment or to human health or

safety, as defined or regulated under any Environmental Law; (ii) "Hazardous

Waste", shall mean and include any hazardous waste as defined or regulated under

any Environmental Law; (iii) "Environmental Law" shall mean any environmental or

health and safety-related law, regulation, rule, ordinance, or by-law at the

foreign, federal, state, or local level, whether existing as of the date hereof,

previously enforced, or subsequently enacted; and (iv) "Seller" shall mean and

include Seller and all other entities for whose conduct Seller is or may be held

responsible under any Environmental Law.

2.12 Transactions with Interested Persons. Neither Seller nor any

principal, officer, supervisory employee or director of Seller or any of their

respective spouses or family members owns directly or indirectly, on an

individual or joint basis, any material interest in, or serves as an officer or

director or in another similar capacity of, any competitor or supplier of

Seller, or any organization which has a material contract or arrangement with

Seller.

2.13 Accounts Receivable. All of the Accounts Receivable of Seller are

bona fide, valid and enforceable claims not subject to any setoffs or

counterclaims . Seller has no accounts or loans receivable from any person