EX-2.1: ASSET PURCHASE AGREEMENT

Asset Purchase Agreement

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HAIGHTS CROSS COMMUNICATIONS, INC. | HAIGHTS CROSS OPERATING COMPANY | OPI ACQUISITION CO., INC. | OPTIONS PUBLISHING, INC.

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Title: EX-2.1: ASSET PURCHASE AGREEMENT
Governing Law: New Hampshire Date: 12/6/2004
Law Firm: Goodwin, Procter LLP; Wiggin & Nourie, P.A.

EX-2.1: ASSET PURCHASE AGREEMENT, Parties: haights cross communications inc. , haights cross operating company , opi acquisition co. inc. , options publishing inc.

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EXHIBIT 2.1

EXECUTION VERSION

ASSET PURCHASE AGREEMENT

BY AND AMONG

HAIGHTS CROSS COMMUNICATIONS, INC.

AS "HCCI"

HAIGHTS CROSS OPERATING COMPANY

AS "HCOC"

OPI ACQUISITION CO., INC.

AS "BUYER"

AND

OPTIONS PUBLISHING, INC.

AS "SELLER"

BARBARA RUSSELL AND ROY MAYERS

AS THE "STOCKHOLDERS"

DATED AS OF NOVEMBER 11, 2004

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ASSET PURCHASE AGREEMENT

TABLE OF CONTENTS

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PAGE

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SECTION 1 - PURCHASE AND SALE OF ASSETS......................................................................... 1

1.1 Sale of Assets..................................................................................... 1

1.2 Excluded Assets.................................................................................... 3

1.3 Assumption of Liabilities.......................................................................... 4

1.4 Excluded Liabilities............................................................................... 4

1.5 Purchase Price and Payment......................................................................... 6

1.6 [Intentionally Omitted]............................................................................ 6

1.7 Time and Place of Closing.......................................................................... 6

1.8 Further Assurances................................................................................. 6

1.9 Allocation of Purchase Price....................................................................... 6

1.10 Transfer Expenses, Costs and Taxes................................................................ 7

1.11 Use of Name....................................................................................... 7

1.12 Delivery of Contracts and Records................................................................. 7

SECTION 2 - REPRESENTATIONS AND WARRANTIES OF SELLER AND THE STOCKHOLDERS....................................... 7

2.1 Making of Representations and Warranties........................................................... 7

2.2 Organization....................................................................................... 8

2.3 Subsidiaries....................................................................................... 8

2.4 Capital Stock of Seller; Beneficial Ownership...................................................... 8

2.5 Authority of Seller; No Conflicts.................................................................. 8

2.6 Leased Property; Liens; Condition of Properties.................................................... 9

2.7 Financial Statements............................................................................... 10

2.8 Taxes.............................................................................................. 11

2.9 Accounts Receivable; Accounts Payable; Inventory................................................... 12

2.10 Absence of Undisclosed Liabilities................................................................ 13

2.11 Absence of Certain Developments................................................................... 13

2.12 Intellectual Property............................................................................. 14

2.13 Certain Contracts and Arrangements................................................................ 15

2.14 Litigation........................................................................................ 16

2.15 Compliance with Laws.............................................................................. 17

2.16 Insurance Coverage................................................................................ 17

2.17 Approvals......................................................................................... 17

2.18 Employee Benefit Programs; ERISA.................................................................. 17

2.19 Environmental Matters............................................................................. 18

2.20 Employees; Labor Matters.......................................................................... 18

2.21 Customers, Distributors and Partners.............................................................. 19

2.22 Suppliers......................................................................................... 19

2.23 Certain Payments.................................................................................. 19

2.24 Transactions with Affiliates...................................................................... 19

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2.25 No Brokers or Finders............................................................................. 20

2.26 Privacy of Customer Information................................................................... 20

2.27 Disclosures....................................................................................... 20

SECTION 3 - REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS...................................................... 20

3.1 Making of Representations and Warranties........................................................... 20

3.2 Authority of Stockholder........................................................................... 20

3.3 Beneficial Ownership............................................................................... 21

3.4 No Brokers or Finders.............................................................................. 21

SECTION 4 - REPRESENTATIONS AND WARRANTIES OF BUYER, HCOC AND HCCI.............................................. 21

4.1 Making of Representations and Warranties........................................................... 21

4.2 Organization....................................................................................... 21

4.3 Authority; No Conflicts............................................................................ 21

4.4 No Brokers or Finders.............................................................................. 22

4.5 Litigation......................................................................................... 22

SECTION 5 - INTERIM COVENANTS OF SELLER AND THE STOCKHOLDERS.................................................... 22

5.1 Conduct of Business................................................................................ 22

5.2 Access to Books and Records; Access to Customers and Employees..................................... 23

5.3 Notice of Default.................................................................................. 23

5.4 Consummation of Agreement; Consents................................................................ 24

5.5 Financial Information.............................................................................. 24

5.6 Leased Real Property............................................................................... 24

5.7 Cooperation of Seller.............................................................................. 25

5.8 Hart-Scott-Rodino.................................................................................. 25

5.9 No Solicitation of Other Offers.................................................................... 25

5.10 Confidentiality................................................................................... 26

5.11 Distributions..................................................................................... 26

5.12 Updated Disclosure................................................................................ 26

SECTION 6 - INTERIM COVENANTS OF BUYER, HCOC AND HCCI........................................................... 27

6.1 Notice of Default.................................................................................. 27

6.2 Consummation of Agreement.......................................................................... 27

6.3 Hart-Scott-Rodino.................................................................................. 27

6.4 Confidentiality.................................................................................... 28

SECTION 7 - CLOSING CONDITIONS.................................................................................. 29

7.1 Conditions to the Obligations of Buyer, HCOC and HCCI.............................................. 29

7.2 Conditions to Obligations of Seller................................................................ 32

SECTION 8 - INDEMNIFICATION..................................................................................... 34

8.1 Survival of Representations and Warranties......................................................... 34

8.2 Indemnification by Seller and the Stockholders..................................................... 35

8.3 Indemnification by Buyer, HCOC and HCCI............................................................ 35

8.4 Notice and Opportunity to Defend................................................................... 36

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8.5 Cooperation........................................................................................ 36

8.6 Indemnification Limits............................................................................. 37

8.7 Payment of Claims.................................................................................. 38

SECTION 9 - TERMINATION......................................................................................... 38

9.1 Termination........................................................................................ 38

9.2 Effect of Termination.............................................................................. 39

9.3 Right to Proceed................................................................................... 39

9.4 Buyer's Right to Specific Performance.............................................................. 39

9.5 Seller's Right to Liquidated Damages............................................................... 39

9.6 Waiver............................................................................................. 40

SECTION 10 - POST-CLOSING RIGHTS AND OBLIGATIONS................................................................ 40

10.1 Collection of Assets.............................................................................. 40

10.2 Payment of Obligations............................................................................ 40

10.3 Assumed Liabilities............................................................................... 40

10.4 Adjustment of Operating Expenses.................................................................. 40

10.5 Non-competition by Seller......................................................................... 41

10.6 Employees......................................................................................... 42

SECTION 11 - DEFINITIONS........................................................................................ 42

11.1 Certain Definitions............................................................................... 42

SECTION 12 - MISCELLANEOUS...................................................................................... 44

12.1 Fees and Expenses................................................................................. 44

12.2 Governing Law; Jurisdiction; Venue................................................................ 44

12.3 Notices........................................................................................... 45

12.4 Entire Agreement.................................................................................. 46

12.5 Assignability; Binding Effect..................................................................... 46

12.6 Captions and Gender............................................................................... 46

12.7 Execution in Counterparts......................................................................... 46

12.8 Amendments........................................................................................ 47

12.9 Publicity and Disclosures......................................................................... 47

12.10 Bulk Sales Law................................................................................... 47

12.11 Dispute Resolution............................................................................... 47

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EXHIBITS

Exhibit A Employment Agreement for Barbara Russell

Exhibit B-1 Noncompetition Agreement for Barbara Russell

Exhibit B-2 Noncompetition Agreement for Roy Mayers

Exhibit C Form of Indemnification Escrow Agreement

Exhibit D Form of Bill of Sale and General Assignment

Exhibit E Form of Seller Legal Opinion

Exhibit F Form of Agreement of Assumption of Liabilities

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SCHEDULES

Schedule 1.1(b) Personal Property

Schedule 1.1(c)-1 Acquired Contracts

Schedule 1.1(c)-2 Excluded Contracts

Schedule 1.1(j) Computer Equipment, Software and Licenses

Schedule 1.1(n) Schedule of Cash Balances

Schedule 1.2 Excluded Assets

Schedule 1.4(f) Phantom Stock Payments

Schedule 2.2 Foreign Jurisdictions

Schedule 2.4 Ownership of Seller Capital Stock

Schedule 2.5(b) Defaults; Required Consents

Schedule 2.6(b) Leased Real Property

Schedule 2.6(c) Certain Matters Concerning the Leased Real Property

Schedule 2.6(e) Claims on Purchased Assets

Schedule 2.7(a) Unaudited Financial Statements

Schedule 2.8(h) Audits

Schedule 2.8(i) Tax Sharing Agreements

Schedule 2.8(j) Certain Tax Liabilities

Schedule 2.9(a) Accounts Receivable from Affiliates

Schedule 2.10 Certain Liabilities

Schedule 2.11 Certain Developments Since December 31, 2003

Schedule 2.12(a) Seller Patents, Seller Marks and Seller Copyrights

Schedule 2.12(b) Third-Party Software Used in Seller's Business

Schedule 2.13 Certain Contracts

Schedule 2.14 Litigation, Proceedings and Investigations

Schedule 2.16 Insurance Matters

Schedule 2.17 Required Approvals

Schedule 2.18 Employee Benefit Programs

Schedule 2.19 Environmental Matters

Schedule 2.20(a) List of Employees

Schedule 2.20(b) Employment Matters

Schedule 2.21 List of Customers, Distributors and Partners

Schedule 2.22 List of Suppliers

Schedule 2.24 Affiliated Transactions

Schedule 3.2 Defaults; Required Consents

Schedule 3.3 Ownership of Seller Capital Stock

Schedule 4.4 Brokers and Finders

Schedule 5.11 Estimated Tax Payments

Schedule 10.6 2005 Employee Bonus Plan

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ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of

November 11, 2004 by and among Haights Cross Communications, Inc., a Delaware

corporation ("HCCI"), Haights Cross Operating Company, a Delaware corporation

and a wholly owned subsidiary of HCCI ("HCOC"), OPI Acquisition Co., Inc., a

Delaware corporation and a wholly owned subsidiary of HCOC ("BUYER"), Options

Publishing, Inc., a New Hampshire corporation ("SELLER"), and Barbara Russell

and Roy Mayers, the principal stockholders of Seller (the "STOCKHOLDERS").

Capitalized terms used herein and not defined where used shall have the meanings

given them in Section 11.

W I T N E S S E T H

WHEREAS, subject to the terms and conditions hereof, Seller and the

Stockholders desire to sell substantially all of Seller's properties and assets

to Buyer;

WHEREAS, subject to the terms and conditions hereof, Buyer desires to

purchase such properties and assets of Seller for the consideration specified

herein and the assumption by Buyer of certain liabilities and obligations of

Seller; and

WHEREAS, Buyer and Barbara Russell have entered into an Employment

Agreement in the form of Exhibit A hereto and a Noncompetition Agreement in the

form of Exhibit B-1 hereto, and Buyer and Roy Mayers have entered into a

Noncompetition Agreement in the form Exhibit B-2 hereto, which agreements shall

be effective upon the Closing (as defined below)

NOW, THEREFORE, in order to consummate such 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, assign, transfer and deliver to Buyer and Buyer agrees to

purchase from Seller, at the Closing (as defined below), all legal and

beneficial right, title and interest of Seller in and to all of the assets and

properties of every kind used in or relating to the conduct of operating and

administering the business of Seller or otherwise owned or used by Seller, other

than the Excluded Assets (such assets and properties, collectively, the

"PURCHASED ASSETS"), in each case free and clear of any and all mortgages,

liens, pledges, security interests, charges, encumbrances, claims, easements,

rights of way, covenants, conditions or restrictions or any other adverse

claims, rights or encumbrances of any kind or nature whatsoever ("CLAIMS"). The

Purchased Assets shall include, without limitation, the following:

(a) Accounts Receivable. All of Seller's accounts receivable (the

"ACCOUNTS RECEIVABLE");

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(b) Equipment and Other Tangible Personal Property. All of Seller's

office supplies, machinery, office equipment, furniture, furnishings,

fixtures, tools, instruments and other tangible personal property

(collectively, the "PERSONAL PROPERTY"), including, without limitation,

the Personal Property listed on Schedule 1.1(b) hereto (but excluding the

equipment and other tangible personal property to be acquired under the

Merrimack Purchase Agreement as defined below);

author contracts and licenses), agreements, leases, commitments, claims

and rights, all as listed on Schedule 1.1(c)-1 hereto (the "ACQUIRED

CONTRACTS"), which Acquired Contracts shall not include the contracts

listed on Schedule 1.1(c)-2 hereto (the "EXCLUDED CONTRACTS");

(d) Inventory. All of Seller's inventory, wherever located and

whether in the possession of Seller or any customer or potential customer

or any supplier;

(e) Prepaids; Credits; Deposits. All prepaid expenses, deposits and

similar items;

(f) Third Party Claims and Rights. All rights and claims against

third parties, including, without limitation, all rights under express or

implied warranties from suppliers;

(g) Customers and Customer Lists. All of Seller's past and present

lists of customers, lists of prospective customers, mailing lists, pending

new business, and customer files and records;

(h) Marketing and Editorial Materials. All advertising, editorial,

marketing promotional and ancillary materials and sources, information

pertaining to planned products or services (if any) and all rights related

thereto, including, without limitation, any and all films, negatives and

electronic files of books and publications;

(i) Permits and Licenses. All of Seller's Approvals (as defined in

Section 2.17 below) which are assignable or otherwise transferable,

together with, if any, all rights of renewal and amenities thereto;

(j) Computer Equipment and Software. All computer equipment and

computer software, including source code to the extent in Seller's

possession, whether completed or under development, and software licenses,

including, without limitation, those listed on Schedule 1.1(j) hereto;

(k) Record Books. Copies of all books and records of Seller for

periods commencing January 1, 2000, including, without limitation,

financial statements, journals and ledgers, repair and maintenance

records, correspondence related to the operation of Seller's business and

correspondence and materials related to Seller's tax returns, including

any declarations, reports or statements;

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(l) Other Intellectual Property. All right, title and interest in

and to all trade names (including exclusive rights to use "Options

Publishing" or any variants of any of the foregoing), trademarks and

trademark applications, service marks and service mark applications,

patents and patent applications, copyrights and copyright applications (in

any such case, whether registered or to be registered in the United States

of America or elsewhere) applied for, issued or owned, and all goodwill

related thereto, all intangible assets, and all processes, inventions,

trade secrets, engineering or technical drawings, data and designs,

formulas, internet domain names and Web sites, and all goodwill and other

intangibles;

(m) Personnel Records. All of Seller's personnel files and records

with respect to employees of Seller who become employees of Buyer

following the Closing; and

(n) Seller Cash. All cash and cash equivalents of Seller as of the

Closing (with a schedule of the weekly cash balances of Seller for the

period from October 1, 2004 through the date hereof, and the final cash

balance as of the date hereof, being set forth on Schedule 1.1(n) hereto);

(o) Other Assets. All other assets of Seller that are used or usable

in Seller's business.

Seller and Buyer acknowledge and agree that certain assets, including the

building, land, equipment and fixtures used in Seller's business, are owned by

Merrimack M&R Realty LLC ("MERRIMACK") and are being acquired by Buyer under a

separate purchase agreement with Merrimack (the "MERRIMACK PURCHASE AGREEMENT").

1.2 EXCLUDED ASSETS. Notwithstanding Section 1.1 to the contrary, Seller

is not selling, and Buyer is not purchasing, any of the following assets owned

by Seller, all of which shall be retained by Seller and shall not constitute

Purchased Assets (the "EXCLUDED ASSETS"):

(a) Rights Under this Agreement. The rights which accrue or will

accrue to Seller under this Agreement;

(b) Record Books. Originals of Seller's financial statements,

journals and ledgers, correspondence and materials related to Seller's tax

returns, including any declarations, reports or statements, stock record

books, record books containing minutes of meetings of directors and

stockholders and such other records as have to do exclusively with

Seller's organization or capitalization (collectively, the "CORPORATE

RECORDS"), provided, however, that following the Closing, Seller will

permit Buyer to have access to the original Corporate Records as Buyer may

from time to time reasonably request;

third parties relating to the Excluded Assets or the Excluded Liabilities

(as defined below);

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(d) Loans to Affiliated Entities. All rights of Seller with respect

to amounts, including accrued interest, owed to Seller by Merrimack; and

(e) Excluded Property. All of the assets and property listed on

Schedule 1.2 hereto.

1.3 ASSUMPTION OF LIABILITIES. Subject to Section 1.4, upon the sale and

purchase of the Purchased Assets, Buyer shall assume and agree to pay or

discharge when due or perform in accordance with their respective terms only the

liabilities of Seller reflected on its balance sheet as of September 30, 2004 as

such liabilities may be increased or decreased in the ordinary course of

business between September 30, 2004 and the Closing Date (as defined below)

(collectively, the "ASSUMED LIABILITIES"), which Assumed Liabilities shall

include:

(a) Current Liabilities. All of the liabilities or obligations for

trade accounts payable, accrued expenses and other current liabilities

which have been incurred by Seller in the ordinary course of business in

accordance with the terms of this Agreement prior to the Closing Date;

(b) Liabilities Under Acquired Contracts. All of the liabilities or

obligations for payment or performance arising after the Closing under the

Acquired Contracts; and

state or local jurisdiction due in respect of the operation of the

business of Seller prior to the Closing to the extent withheld or

collected by Seller as of the Closing.

The assumption of the Assumed Liabilities by Buyer shall not enlarge any

rights of third parties under contracts or arrangements with Buyer or Seller and

nothing herein shall prevent any party from contesting in good faith with any

third party any of such Assumed Liabilities.

1.4 EXCLUDED LIABILITIES. Except for the Assumed Liabilities, Buyer shall

not assume or be bound by all obligations or liabilities of Seller of any kind

or nature, known or unknown, accrued, absolute, contingent or otherwise,

whatsoever (the "EXCLUDED LIABILITIES"), which Excluded Liabilities shall

include, without limitation, all of the following:

(a) Liabilities Relating to this Agreement. Any liabilities or

obligations incurred by Seller in connection with this Agreement and the

transactions provided for herein, including, without limitation, counsel

and accountant's fees (except as provided under Section 12.1 below), and

expenses pertaining to the performance by Seller of its obligations

hereunder;

(b) Liabilities Relating to the Excluded Assets. Any liabilities or

obligations relating to or arising out of the Excluded Assets;

Contracts, and, to the extent not reflected and reserved against on

Seller's balance sheet as of September 30, 2004, any liabilities or

obligations that arise prior to the Closing Date

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in connection with any breach of, or any penalty payments Seller is

required to make in connection with the provisions of, any agreement to

which it is a party, including with respect to any Acquired Contract, in

each case in respect of actions taken by Seller prior to the Closing Date;

(d) Tax Liabilities. Except as provided in Section 1.3(c) above, any

liabilities or obligations of Seller, the Stockholders or any of its or

their respective Affiliates for Taxes (whether relating to periods before

or after the transactions contemplated in this Agreement or incurred by

Seller in connection with this Agreement and the transactions provided for

herein), including, without limitation, any liability for (i) corporate

income or franchise Taxes of Seller or any of its Affiliates, (ii) sales

and use Taxes relating to periods prior to the Closing Date which may be

assessed on or after the Closing Date as a result of investigations or

audits performed by applicable taxing authorities, and (iii) Taxes arising

out of the inclusion of Seller or any of its Affiliates in any group

filing consolidated, combined or unitary tax returns or arising out of any

transferee liability;

(e) Debt Obligations. Any liabilities or obligations in respect of

indebtedness for borrowed money;

(f) Phantom Stock Payments. Any liabilities or obligations under

Seller's Key Employee Performance Share Plan, all as listed on Schedule

1.4(f) hereto;

(g) Certain Accrued Expenses. Other than accrued but unpaid salary

payments to the Stockholders in respect of employment services for the

current pay period, any liabilities or obligations for accrued expenses,

whether or not reflected in the Financial Statements, the Audited

Financial Statements and/or the Quarterly Reviews (each as defined below),

relating to any amounts payable to the Stockholders or any related Person

or Affiliate of Seller or a Stockholder, including, without limitation, in

connection with the Excluded Contracts; and

(h) Other Liabilities. Any liabilities or obligations arising in

connection with or relating to all actions, suits, claims, proceedings,

demands, assessments and judgments, costs, losses, liabilities, damages,

deficiencies and expenses (whether or not arising out of third-party

claims), including, without limitation, interest, penalties, reasonable

attorneys' and accountants' fees and all amounts paid in investigation,

defense or settlement of any of the foregoing, which liabilities or

obligations relate to (i) the use or ownership of the Purchased Assets or

the operation of Seller's business prior to the Closing Date, (ii) any

actions taken by Seller or the Stockholders on or prior to the Closing

Date, or (iii) any continuing business activities of Seller or the

Stockholders or any of their respective Affiliates following the Closing

Date.

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1.5 PURCHASE PRICE AND PAYMENT. In consideration of the sale by Seller to

Buyer of the Purchased Assets, and upon the assumption by Buyer of the Assumed

Liabilities, at the Closing:

(a) Buyer will pay, or cause to be paid, to Seller an amount in cash

equal to (i) $50,000,000 (the "PURCHASE PRICE"), minus (ii) the Escrow

Amount (as defined below) (collectively, the "CLOSING CASH PAYMENT"), such

Closing Cash Payment to be paid by wire transfer of immediately available

funds to an account designated in writing by Seller; and

(b) Buyer will pay, or cause to be paid, to Mellon Trust of New

England, N.A., as escrow agent ("ESCROW AGENT"), an amount equal to

$2,000,000 (the "ESCROW AMOUNT") to secure the indemnification obligations

of Seller and the Stockholders under Section 8 hereof. The Escrow Agent

shall hold the Escrow Amount, together with accrued interest and other

earnings thereon, until March 31, 2006 in accordance with the terms and

conditions of the Indemnification Escrow Agreement between Seller, Buyer,

HCOC, HCCI and the Escrow Agent, in the form attached hereto as Exhibit C,

which shall be executed on the Closing Date.

1.6 [INTENTIONALLY OMITTED].

1.7 TIME AND PLACE OF CLOSING. The closing of the purchase and sale

provided for in this Agreement (herein called the "CLOSING") shall be held at

the offices of Goodwin Procter LLP, Exchange Place, Boston, MA, at 10:00 a.m.,

Boston time, on (a) the later of (i) the date which is forty-five (45) days

following the date hereof, and (ii) the date which is ten (10) days following

the delivery by Seller to Buyer of Seller's Audited Financial Statements and

Quarterly Reviews (as defined herein), or (b) such other date and at such other

place or time as may be fixed by mutual agreement of Buyer and Seller (the

"CLOSING DATE"); provided, however, that if any of the conditions set forth in

Section 7.1 or Section 7.2 have not been satisfied or waived prior to the

Closing Date (except for any such conditions that are intended to be satisfied

at the Closing), then the party hereto for whose benefit such conditions have

been imposed may postpone the Closing by written notice to the other parties

hereto specifying the condition(s) not so satisfied until five (5) business days

after such condition or conditions shall have been satisfied or waived, which

date shall then become the Closing Date.

1.8 FURTHER ASSURANCES. Each party from time to time after the Closing at

the request of any other party and without further consideration shall execute

and deliver further instruments of transfer and assignment and take such other

action as such other party may reasonably require to more effectively carry out

the terms and conditions of, and the transactions contemplated by, this

Agreement.

1.9 ALLOCATION OF PURCHASE PRICE. On or before the date which is five (5)

days prior to the Closing, Seller shall prepare an allocation of the Purchase

Price (and all other capitalized costs) among the Purchased Assets sold (or

deemed sold for federal income tax purposes) by Seller to Buyer in accordance

with Section 1060 of the Internal Revenue Code of 1986, as amended (the "CODE")

and the Treasury regulations thereunder (and any similar provision of

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state, local or foreign law, as appropriate), which allocation shall be subject

to Buyer's reasonable approval and shall, in any event, value Seller's existing

tangible assets consistently with the values set forth in Seller's Audited

Financial Statements. Buyer and Seller and their Affiliates shall report, act

and file Tax Returns (as defined below) (including, but not limited to, Internal

Revenue Service Form 8594) in all respects and for all purposes consistent with

such allocation prepared by Seller and approved by Buyer. Neither Buyer nor

Seller nor their affiliates shall take any position (whether in audits, Tax

Returns or otherwise) which is inconsistent with such allocation unless required

to do so by applicable law.

1.10 TRANSFER EXPENSES, COSTS AND TAXES. Seller and Buyer shall bear

equally all transfer taxes, duties and charges applicable to the transfer of the

Purchased Assets in connection with this Agreement; provided that Seller and the

Stockholders shall be responsible for any other Taxes imposed upon Seller and/or

the Stockholders (including, without limitation, any income or other Taxes

imposed on Seller and/or the Stockholders with respect to the Purchase Price) in

connection with the transactions contemplated hereby, which shall be the sole

and exclusive responsibility of Seller and/or Stockholders. Any payment or

reimbursement from Buyer to Seller or Seller to Buyer required under this

Section 1.10 shall be made within ten (10) business days after any such valid

request for payment or reimbursement.

1.11 USE OF NAME. As of the Closing, Seller shall cease all use of the

names "Options" or "Options Publishing" (or any variant thereof) and, on the

Closing, shall take all necessary action under New Hampshire law to change its

corporate name to a name that does not include the names "Options" or "Options

Publishing" (or any variant thereof).

1.12 DELIVERY OF CONTRACTS AND RECORDS. Seller shall deliver to Buyer

at the premises of the business on the Closing Date copies of all business

records, tax returns, books, and other data included within the Purchased

Assets, and Seller shall take all reasonably requisite steps to put Buyer in

actual possession and operating control of the Purchased Assets being sold by

Seller. For a period of five years after the Closing, Seller and the

Stockholders shall afford to Buyer and its accountants and attorneys reasonable

access, during normal business hours and upon reasonable advance notice, to the

books and records of Seller delivered to Buyer under this Section and shall

permit Buyer, at Buyer's expense, to make extracts and copies therefrom to the

extent reasonably requested.

SECTION 2 - REPRESENTATIONS AND WARRANTIES OF SELLER AND THE STOCKHOLDERS

On or prior to the date hereof, Seller has delivered to Buyer the

schedules referenced in this Section 2 setting forth items of disclosure that

are necessary in response to an express disclosure requirement contained in a

provision hereof or as an exception to one or more representations or warranties

contained in this Section 2. Capitalized terms used in the schedules but not

defined therein shall have the meanings assigned to such terms in this

Agreement.

2.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement to

Buyer, HCOC and HCCI to enter into this Agreement and consummate the

transactions contemplated

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hereby, Seller and the Stockholders, jointly and severally, hereby make to

Buyer, HCOC and HCCI the representations and warranties contained in this

Section 2.

2.2 ORGANIZATION. Seller is a corporation duly incorporated, validly

existing and in good standing under the laws of the State of New Hampshire with

full corporate power and authority to own or lease its properties and to conduct

its business in the manner and in the places where such properties are owned or

leased or such business is currently conducted. Seller is duly licensed or

qualified to do business as a foreign corporation in each jurisdiction listed on

Schedule 2.2 hereto, which jurisdictions are the only jurisdictions wherein the

character of its property, or the nature of the activities presently conducted

by it, makes such qualification necessary, except any such jurisdiction where

the failure to be so licensed or qualified would not be reasonably likely to

have a Material Adverse Effect on Seller. Seller is not in violation or conflict

with any provisions of its articles of incorporation or bylaws.

2.3 SUBSIDIARIES. Seller does not own or control, directly or indirectly,

any interest in any other Person.

2.4 CAPITAL STOCK OF SELLER; BENEFICIAL OWNERSHIP. The authorized capital

stock of Seller consists of 1,000,000 shares of common stock, no par value, of

which 100,000 shares have been duly and validly issued and are fully paid and

non-assessable. All outstanding shares of common stock of Seller are held,

beneficially and of record, as set forth on Schedule 2.4 hereto. There are no

outstanding subscriptions, options, warrants, commitments, preemptive rights,

agreements, arrangements or commitments of any kind relating to the issuance or

sale of, or outstanding securities convertible into or exercisable or

exchangeable for, capital stock of Seller.

2.5 AUTHORITY OF SELLER; NO CONFLICTS.

(a) Seller has full right, authority and power to enter into this

Agreement and the Transaction Documents (as defined below) executed and

delivered by Seller pursuant to this Agreement and to carry out the

transactions contemplated hereby and thereby. The execution, delivery and

performance by Seller of this Agreement and each such Transaction Document

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

directors and stockholders, and no other action on the part of Seller or

its directors and stockholders is required in connection therewith. For

purposes of this Agreement, "Transaction Documents" means the

Indemnification Escrow Agreement and the asset transfer and other

documents or agreements required to be executed and delivered in

connection with the Closing.

(b) This Agreement and the Transaction Documents constitute, or,

when executed and delivered by Seller, will constitute, valid and binding

obligations of Seller enforceable against Seller in accordance with their

terms, except as the enforcement thereof may be limited by applicable

bankruptcy, insolvency, reorganization, moratorium or similar laws

affecting the rights of creditors and subject to general principles of

equity. Except as set forth on Schedule 2.5(b), the execution, delivery

and performance by Seller of this Agreement and each Transaction Document:

(i) do not and will not violate, conflict with or result in a default

(whether after the giving

<PAGE>

of notice, lapse of time or both) under any material contract or

obligation to which it is a party or by which it or its assets are bound,

or any provision of its articles of incorporation or bylaws, or cause the

creation of any Claim upon any of the Purchased Assets, (ii) do not and

will not violate, conflict with or result in a default (whether after the

giving of notice, lapse of time or both) under, any provision of any law,

regulation or rule, or any order of, or any restriction imposed by any

court or other governmental agency applicable to it, (iii) require from it

any notice to, declaration or filing with, or consent or approval of any

governmental authority or other third party, except those required under

Section 7.1(e), or (iv) accelerate any obligation under, or give rise to a

right of termination of, any agreement, permit, license or authorization

to which it is a party or by which it is bound.

2.6 LEASED PROPERTY; LIENS; CONDITION OF PROPERTIES.

(a) Seller does not own any real property.

(b) Except as set forth on Schedule 2.6(b) hereto, Seller has

a valid and enforceable leasehold interest in the properties listed on

Schedule 2.6(b) (the "LEASED REAL PROPERTY"), subject only to the right of

reversion of the landlord or lessor under the leases to which the Leased

Real Property is subject (the "LEASES"), and, except as set forth in the

Leases, free and clear of all other prior or subordinate interests or

other Claims. Except as otherwise set forth on Schedule 2.6(b):

(i) the Leases are in full force and effect and have not been

modified, amended, or altered, in writing or otherwise;

(ii) all obligations of the landlord or lessor under the

Leases which have accrued have been performed, and, to the knowledge

of Seller, no landlord or lessor is in default under the Leases; and

(iii) all obligations of Seller, and any other tenant or

lessee under the Leases, which have accrued have been performed, and

no tenant or lessee is in default under the Leases, and, to the

knowledge of Seller, no circumstance presently exists which, with

notice or the passage of time, or both, would give rise to a default

by any tenant or lessee.

of Seller, there are no material defects in the physical condition of any

improvements constituting a part of the Leased Real Property, including,

without limitation, structural elements, mechanical systems, roofs, or

parking and loading areas, and all of such improvements are in good

operating condition and repair and have been well maintained. To the

knowledge of Seller, all water, sewer, gas, electric, telephone, drainage,

and other utilities required by law or necessary for the current or

planned operation of the Leased Real Property have been installed and

connected pursuant to valid permits, and such utilities are sufficient to

service the Leased Real Property.

<PAGE>

(d) Seller has not received a notice from any governmental

authority of any violation of any law, ordinance, regulation, license,

permit, or authorization issued with respect to the Leased Real Property

that has not been corrected heretofore, and, to the knowledge of Seller,

no such violation on the part of Seller now exists which could have a

Material Adverse Effect on the operation or value of the Leased Real

Property. To the knowledge of Seller, (i) all improvements constituting a

part of the Leased Real Property are in compliance, in all material

respects, with all applicable laws, ordinances, regulations, licenses,

permits, and authorizations, and there are presently in effect all

licenses, permits, and authorizations required by law, ordinance, or

regulation, (ii) the transfer of the Leased Real Property to Buyer shall

include all rights to the use of any off-site facilities, if any,

necessary to ensure compliance with all such laws, ordinances, codes, and

regulations, and (iii) there is at least the minimum access required by

applicable subdivision or similar law to the Leased Real Property. There

is no pending, and Seller has not received a notice of any threatened,

real estate tax deficiency or reassessment or condemnation of all or any

portion of any of the Leased Real Property.

(e) Seller has good and marketable title to all of the

Purchased Assets. Except to the extent described on Schedule 2.6(e)

attached hereto, all of the Purchased Assets are free and clear of

restrictions on or conditions to transfer or assignment, and free and

clear of Claims. All of the Purchased Assets are in good operating

condition (ordinary wear and tear excepted) and are sufficient for the

conduct of Seller's business as currently conducted. The Purchased Assets,

together with the assets to be acquired from Merrimack under the Merrimack

Purchase Agreement, constitute all of the assets of Seller used or useable

in the operation of Seller's business, other than the Excluded Assets.

2.7 FINANCIAL STATEMENTS.

(a) Attached hereto as Schedule 2.7(a) are the following

financial statements of Seller (the "UNAUDITED FINANCIAL STATEMENTS"):

(i) Balance sheets of Seller as of December 31, 2003,

2002, 2001 and statements of income, stockholder's equity (deficit)

and cash flows of Seller for each year in the three (3) year period

ended December 31, 2003, in each case reviewed by Robert J. Consaga,

Jr., C.P.A. (the December 31, 2003 balance sheet being referred to

herein as the "BASE BALANCE SHEET"); and

(ii) An unaudited balance sheet of Seller as of

September 30, 2004 and unaudited statements of income, stockholder's

equity (deficit) and cash flows for the nine (9) month period then

ended, certified by Seller's chief executive officer.

(b) The Unaudited Financial Statements have been prepared,

from books and records maintained by Seller, in accordance with Seller's

Accounting Principles consistently applied during the periods covered

thereby, are complete and correct in all material respects and present

fairly in all material respects the financial

<PAGE>

condition of Seller at the dates of such statements and the results of its

operations for the periods covered thereby.

December 31, 2004, Seller will have Product Development Expenses (as

defined herein) of at least $2.4 million. The foregoing projection

represents the good faith estimate of Seller based upon assumptions made

by Seller which Seller believes in good faith were reasonable when made

and continue to be reasonable; provided, however, that the foregoing is

not a guarantee by Seller that such projected result will be achieved.

2.8 TAXES.

(a) Seller (including any predecessor thereto) has paid all

federal, state, local, foreign or other taxes, including, without

limitation, income taxes, estimated taxes, excise taxes, sales taxes, use

taxes, gross receipts taxes, franchise taxes, employment and payroll

related taxes, withholding taxes, stamp taxes, transfer and property

taxes, or other tax of any kind whatsoever, whether or not measured in

whole or in part by net income, including any interest, penalty, or

addition thereto, whether disputed or not (individually, a "TAX",

collectively, "TAXES") required to be paid by it through the date hereof.

(b) All Taxes and other assessments and levies that Seller is

required to withhold or collect have been withheld and collected and have

been, or will be, paid over to the proper governmental authorities when

due.

accordance with applicable law, timely and properly filed all federal,

state, local and foreign tax returns, declarations, reports, claims for

refund, information returns or statements relating to Taxes (collectively,

"TAX RETURNS") required to be filed by it through the date hereof,

including, without limitation, all Tax Returns with respect to sales and

use Taxes for any state, local or other jurisdiction in which Seller has

established nexus in accordance with the tax laws of such jurisdiction.

All such Tax Returns were correct and complete in all material respects.

Seller is not currently the beneficiary of any extension of time within

which to file any Tax Return.

(d) Neither the Internal Revenue Service nor any other

governmental authority is now asserting or, to the knowledge of Seller,

threatening to assert against Seller any deficiency or claim for

additional Taxes.

(e) No claim has ever been made in writing by an authority in

a jurisdiction where Seller (including any predecessor thereto) does not

file Tax Returns that Seller (including any predecessor thereto) is or may

be subject to taxation by that jurisdiction.

(f) Seller has not waived any statute of limitations in

respect of Taxes or agreed to any extension of time with respect to a Tax

assessment or deficiency.

<PAGE>

(g) There are no Claims encumbering any of the assets of

Seller that arose in connection with any failure (or alleged failure) to

pay any Taxes (except where such Claims arise as a matter of law prior to

the due date for paying the related Taxes).

(h) Except as set forth on Schedule 2.8(h) attached hereto,

there has never been any audit of any Tax Return filed by Seller

(including any predecessor thereto), no such audit is in progress and

Seller (including any predecessor thereto) has not been notified by any

Tax authority that any such audit is contemplated or pending.

(i) Except as set forth in Section 1.9 and Section 1.10 and on

Schedule 2.8(i), Seller is not a party to any Tax allocation, Tax sharing

or similar agreement.

(j) Seller is, and at all times during its existence has been,

properly classified and taxed as an "S" corporation for federal, state,

local, and foreign income tax purposes. Except as set forth on Schedule

2.8(j), Seller (including any predecessor thereto) (i) is not and has not

been a member of an affiliated group filing a consolidated federal income

Tax Return, (ii) does not have any liability for the Taxes of any other

Person under Treasury Regulations Section 1.1502-6 (or any similar

provision of state, local or foreign law), and (iii) does not have any

liability for the Taxes of any other Person as a transferee or successor,

by contract, or otherwise.

(k) Seller is not a United States real property holding

corporation within the meaning of the Code.

2.9 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE; INVENTORY.

(a) All of the accounts receivable of Seller (including,

without limitation, the Accounts Receivable) were incurred in the ordinary

course of business of Seller and are valid and enforceable claims and, to

the knowledge of Sellers, subject to no setoff or counterclaim and, except

as disclosed in the Unaudited Financial Statements, the Audited Financial

Statements and/or the Quarterly Reviews, are, to the knowledge of Seller,

collectible in accordance with their terms. Seller has no accounts or

loans receivable from any person, firm or corporation which is affiliated

with Seller or from any director, officer or employee of Seller, except as

disclosed on Schedule 2.9(a). Any reserve reflected in the Unaudited

Financial Statements, the Audited Financial Statements and/or the

Quarterly Reviews is adequate to account for any Accounts Receivable which

may later be uncollectible.

(b) All accounts payable of Seller arose in bona fide arm's

length transactions in the ordinary course of business and no such account

payable or note payable is delinquent by more than thirty (30) days in its

payment. Since December 31, 2003, Seller has paid its accounts payable in

the ordinary course of its business and in a manner consistent with its

past practices.

quantity salable in the ordinary course of its business, except as

disclosed in the Unaudited Financial

<PAGE>

Statements, the Audited Financial Statements and/or the Quarterly Reviews.

The values of the inventories stated in the Base Balance Sheet reflect the

normal inventory valuation policies of Seller and were determined in

accordance with Seller's Accounting Principles consistently applied during

the periods covered thereby. Since December 31, 2003, no inventory items

have been sold or disposed of except through sales in the ordinary course

of business at profit margins consistent with Seller's experience in prior

years, and all sales commitments made for Seller's products are at prices

not less than inventory values plus selling expenses and said profit

margins.

2.10 ABSENCE OF UNDISCLOSED LIABILITIES. Seller does not have any

liability or obligation of any nature, whether accrued, absolute, contingent or

otherwise, asserted or unasserted, known or unknown, except liabilities or

obligations (a) stated or adequately reserved for on the Base Balance Sheet, (b)

incurred as a result of or arising out of the transactions contemplated by this

Agreement, or (c) set forth on Schedule 2.10. Except as set forth on Schedule

2.10, Seller has not assumed, guaranteed, endorsed or otherwise become directly

or contingently liable on or for any indebtedness of any other person.

2.11 ABSENCE OF CERTAIN DEVELOPMENTS. Since December 31, 2003, except as

set forth on Schedule 2.11 attached hereto or in the Unaudited Financial

Statements, Seller has conducted its business only in the ordinary course

consistent with past practice and there has been:

(a) no material adverse change in the condition (financial or

otherwise) of Seller or in the assets, liabilities, business or prospects

of Seller;

(b) no declaration, setting aside or payment of any dividend

or other distribution with respect to, or any direct or indirect

redemption or acquisition of, any of the capital stock of Seller;

of any material debt or claim held by Seller;

(d) no increase in the compensation paid or payable to any

officer, director, employee or agent of Seller, other than normal merit

increases made in the ordinary course of business consistent with Seller's

past practices;

(e) no loss, destruction or damage to any property of Seller,

whether or not insured, having an effect in excess of $5,000;

(f) no labor dispute involving Seller and no change in the

personnel of Seller or the terms and conditions of their employment other

than in the ordinary course of business;

(g) no acquisition or disposition of any assets (or any

contract or arrangement therefore), including any Seller Intellectual

Property Assets, nor any other transaction by Seller, in each case other

than for fair value in the ordinary course of business;

<PAGE>

(h) no change in accounting methods or practices of Seller,

including any changes in its revenue recognition or accrual and reserve

policies and practices;

(i) no reduction in any accrued expenses or other liabilities,

except for payments related to the expense or liability for which the

accrual was originally established;

(j) no amendment or termination of any contract or agreement

to which Seller is a party or by which it is bound which is expected or

estimated to result, or actually results, in a loss of revenues to Seller

in excess of $10,000;

(k) no distribution, commission or payment of any kind to a

Stockholder or any Affiliate of a Stockholder, pursuant to the Excluded

Contracts or otherwise, other than salary payments to the Stockholders in

respect of employment services; and

(l) no commitment (contingent or otherwise) to do any of the

foregoing.

2.12 INTELLECTUAL PROPERTY.

(a) Schedule 2.12(a) contains a complete and accurate list of

all Patents owned by Seller or otherwise used in Seller's business

("SELLER PATENTS"), Marks owned by Seller or otherwise used in Seller's

business ("SELLER MARKS") and Copyrights owned by Seller or otherwise used

in and, in either case, material to Seller's business ("SELLER

COPYRIGHTS"). Except as set forth on Schedule 2.12(a):

(i) Seller exclusively owns or possesses adequate and

enforceable rights to use, without payment to a third party, all of

the Intellectual Property Assets necessary for the operat

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