MEMBERSHIP INTEREST PURCHASE AGREEMENT

EXHIBITS

Exhibit A – Employment Agreement between the Company and Celia

Exhibit B – Employment Agreement between the Company and Wayne Celia, Jr.

Exhibit C – Employment Agreement between the Company and Michael Derr

Exhibit D – Employment Agreement between the Company and Rosalind Nathanial

Exhibit E – Employment Agreement between the Company and Harvey Goodman

Exhibit F – Employment Agreement between the Company and Scott Lyddon

APPENDIX I

INDEX OF DEFINITIONS

The following index indicates the Sections (or the recitals) of this Agreement containing the definitions of certain terms used in this Agreement:

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT, dated as of July 9, 2009 by and among SPONGETECH DELIVERY SYSTEMS, INC., a Delaware corporation, having its principal office at 43 West 33 ^rd Street, Suite 600, New York, New York 10001 (the " Purchaser "), DICON TECHNOLOGIES, LLC, a New Jersey limited liability company having its principal office at 100 Dicon Drive, Black Creek, Georgia 31308 (the “ Company ”), and WAYNE M. CELIA (“ Celia ”), having an address at 242 Purdue Court, Paramus, NJ 07652, SAM GINSBERG (“ Ginsberg ”) having an address at 6 Woodsford Bend, Briarcliff Manor, NY 10510, CLYDE WILLIAMS (“ Williams ”) having an address at 4726 36 ^th Street N.W., Washington, DC 20008, ROY GERONEMUS (“ Geronemus ”) having an address at 1725 York Avenue, New York, NY 10128, and JOHN SCHEIB (“ Scheib ”) having an address at 3024 Waters Road, Amsterdam, NY 12010, (Celia, Ginsberg, Williams, Geronemus and Scheib are collectively referred to herein as the “ Sellers ”).

WHEREAS, the Sellers are the record and beneficial owners of all of the issued and outstanding membership interests (the “ Membership Interests ”) of the Company; and

WHEREAS, the Company is in the business of developing and manufacturing products derived from “Hydrophilic Urethane Chemistry” (the “ Business ”); and

WHEREAS, the Sellers desire to sell to the Purchaser, and the Purchaser desires to acquire from the Sellers, all of the Membership Interests, on the terms and conditions hereinafter set forth; and

NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.1            Sale and Purchase of Membership Interests .  Subject to the terms and conditions of this Agreement and on the basis of and in reliance upon the representations, warranties, obligations and agreements set forth herein, on the Closing Date, the Sellers shall sell, assign, transfer, convey and deliver to the Purchaser, and the Purchaser shall purchase from the Sellers, all of the Membership Interests for the consideration set forth below.

2.1            Purchase Price .  In consideration of the sale, assignment, transfer, issuance, conveyance and delivery to the Purchaser of the Membership Interests, the Purchaser shall pay to the Sellers Two Million Three Hundred Fifty Thousand ($2,350,000) Dollars by wire transfer to the Ellis, Painter, Ratterree & Adams, LLP Escrow Account at the Closing (the " Purchase Price ").

2.2            Additional Funds .     The Purchaser agrees to provide the following funding to the Company:

(a)            Equipment Purchase Amount .    Following the Closing, the Purchaser agrees to provide to the Company, upon the Company’s written request, up to $250,000 (the “ Equipment Purchase Funds ”) for the Company’s purchase of specifically identified and agreed upon manufacturing equipment which, when delivered and installed, shall constitute a second production line dedicated for the manufacturing of Purchaser’s products.

(b)            Working Capital Line of Credit .      The Purchaser agrees to provide to the Company an additional $270,000.00 in the form of an inter-company credit line (the “ Working Capital Line of Credit ”), which shall be used by the Company for its general working capital needs.

2.3            Payoff of Wachovia Note .       The Purchaser shall pay by wire transfer at the Closing to Wachovia Bank the full payment of all outstanding principal and interest under that certain promissory note dated December 3, 2008 in the original principal amount of $2,500,000 (the “ Wachovia Note ”).

(a)         On the Closing Date, the only interest bearing and non-interest bearing liabilities and obligations for borrowed money or other amounts due to the Sellers or other Affiliates of the Company or to third parties  that the Purchaser will assume are those set forth on Schedule 2.4 attached hereto (collectively, the “ Retained Liabilities ”).  The Company and the Sellers represent and warrant to the Purchaser that all Contracts evidencing the previously mentioned Retained Liabilities are set forth on Schedule 2.4 hereto.

(b)           The Company shall be responsible for obtaining and/or confirming cancellation on or prior to the Closing Date of that certain “Officer Loan” dated June 12, 2009, which has an outstanding amount due of $412,332.42, and all other interest bearing and non-interest bearing liabilities and obligations for borrowed money or other amounts due to the Sellers or other Affiliates of the Company or to third parties and any other liabilities or obligations not specifically set forth in Section 2.4(a) (collectively, the “ Retired Indebtedness and Obligations ”).

3.1            Time and Place of Closing .  The closing (the " Closing ") of the sale and purchase of the Membership Interests shall take place by the Parties making all deliveries required under this Article III in escrow through their respective counsel on or before July 9, 2009 (the “Closing Date”).  For all purposes, the Closing will be deemed to have occurred at 12:01 a.m., Eastern Standard Time, on the Closing Date.

3.2            Deliveries by the Company and the Sellers .  On the Closing Date, the Company and the Sellers shall deliver, or cause to be delivered, the following:

(a)           Certificates representing the Membership Interests, representing 100% of the issued and outstanding Membership Interests of the Company, duly endorsed in blank for transfer, or with appropriate powers in blank attached;

(b)           The membership interest book, membership interest ledger, minute books, and corporate seal of the Company;

(c)           An Employment Agreement between the Company and Celia substantially in the form of Exhibit A attached hereto (the “ Celia Employment Agreement ”);

(d)           An Employment Agreement between the Company and each of Wayne Celia, Jr., Michael Derr, Rosalind Nathanial, Harvey Goodman and Scott Lyddon, substantially in the forms of Exhibits B, C, D, E and F , respectively, attached hereto;

(e)           Evidence satisfactory to the Purchaser that the “Officer Loan” has been cancelled;

(f)           An acknowledgement from H.H. Brown Shoe Technologies, LLC (“ H.H. Brown ”) to the sale of the Membership Interests to the Purchaser, and an acknowledgement and confirmation from H.H. Brown that the Intellectual Property License Agreement effective November 30, 2007 by and between H.H. Brown and the Company (the “ H.H. Brown License Agreement ”) remains in force and effect as of the Closing Date, and that as of the Closing Date, the Company is not in breach of any of its material obligations under the H. H. Brown License Agreement.

(g)           An incumbency certificate for the Company dated the Closing Date, including specimen signatures, together with copies, certified by the Secretary or the Assistant Secretary of the Company, of (i) the Company's articles of organization, as in effect on the Closing Date; (ii) the Company's operating agreement, as in effect on the Closing Date; (iii) resolutions of the Company’s Board of Managers authorizing the execution, delivery and performance by the Company of this Agreement and the documents, instruments, certificates and other agreements being executed and delivered by the Company pursuant to the terms hereof;

(h)           A good standing certificate for the Company, dated not more than 30 days prior to the Closing Date, issued by the Secretary of State of the State of New Jersey stating that the Company is validly existing and/or in good standing under the laws of such jurisdiction;

(i)           Written consent from the Development Authority of Bryan County, the lessor under that certain Lease dated as of August 1, 2008, to waive, until September 30, 2009, the requirement contained in Section 6.13(a) therein to present audited financial statements of the Company within 180 days after the fiscal year end; and

(j)           All other documents, instruments and writings required to be delivered by the Sellers at or prior to the Closing pursuant to this Agreement or otherwise required in connection herewith.

3.3            Deliveries by the Purchaser .  On the Closing Date, the Purchaser shall deliver, or cause to be delivered, the following:

(a)           Payment to the Sellers of the Purchase Price;

(b)           The Celia Employment Agreement;

(c)           Payment to Wachovia Bank of the outstanding principal and interest of the Wachovia Note;

(d)           An incumbency certificate for the Purchaser dated the Closing Date, including specimen signatures, together with copies, certified by the Secretary or the Assistant Secretary of the Purchaser, of (i) the Purchaser's certificate of incorporation, as in effect on the Closing Date, and (ii) resolutions of the Purchaser's Board of Directors authorizing the execution, delivery and performance by the Purchaser of this Agreement and the documents, instruments, certificates and other agreements being executed and delivered by the Purchaser pursuant to the terms hereof;

(e)           A good standing certificate for the Purchaser, dated not more than 30 days prior to the Closing Date, issued by the Secretary of State of Delaware, stating that the Purchaser is validly existing and/or in good standing under the laws of such state; and

(f)           All other documents, instruments and writings required to be delivered by the Purchaser at or prior to the Closing pursuant to this Agreement or otherwise required in connection herewith.

The Company and the Sellers, jointly and severally, hereby make the following representations and warranties to the Purchaser and, with respect to those representations and warranties regarding the Company, the Sellers hereby acknowledge that they have reviewed all relevant books and records of the Company, made all necessary inquiries of the officers, members and management of the Company and performed such other investigations as the Sellers deemed necessary to be able to so represent and warrant:

4.1            Organization and Qualification .  The Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of New Jersey with full power and authority to own its properties and to carry on its business as now conducted.  The Company is duly qualified or licensed and has all permits necessary to transact business, and is in good standing in each jurisdiction wherein the nature of the business conducted by the Company or its ownership, leasing or use of real property requires it to be so qualified or licensed or to hold such permits.

4.2            Membership Interests; Company Books .

(a)           The Membership Interests are the only membership interests in the Company and there are no other interests, units or securities of the Company which are issued or outstanding.  There are no outstanding subscriptions, options, warrants, rights, calls, contracts, commitments, understandings or agreements to purchase or otherwise acquire, or relating to the issuance of, any interests, units or other securities of the Company, including, without limitation, any rights of conversion or exchange under any outstanding securities or instruments, other than this Agreement.

(b)           The copies of the articles of organization and operating agreement of the Company, certified by the Secretary or the Assistant Secretary thereof, which have been previously delivered to the Purchaser, are true, complete and correct in all respects.  No manager or officer of the Company has taken any action on behalf of the Company, nor authorized the Company to take any action, other than such items which are set forth on the Schedules attached hereto or which otherwise have been disclosed to the Purchaser prior to the execution hereof.

4.3            Title to Membership Interests .  The Sellers are the lawful record and beneficial owners of the Membership Interests, each having the percentage ownership of the Company set forth opposite his or her name on Schedule 4.3 .  Each of the Sellers has good and marketable title to his or her Membership Interests, free and clear of all pledges, liens, encumbrances, claims and other charges thereon of any kind or nature, including, without limitation, any agreements, subscriptions, options, warrants, calls, commitments or rights of any character granting to any Person any interest or right to acquire from the Sellers at any time, or upon the happening of any stated event, any of the Membership Interests.  The Membership Interests have been validly issued in full compliance with applicable federal, state and other securities and other laws in accordance with the Company’s articles of organization, and without any violation of any preemptive rights, and are fully paid and non-assessable.

4.4            Binding Obligation . This Agreement constitutes the legal, valid and binding obligation of the Sellers and the Company enforceable against each of them in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights generally and to general equitable principles.

4.5            No Defaults or Consents .  The execution and delivery of this Agreement and the Exhibits by the Sellers and the Company and the performance by the Sellers and the Company of their obligations hereunder and thereunder will not violate any provision of law or any judgment, award, or decree or any indenture, agreement, or other instrument to which the Sellers and/or the Company is a party, or by which the properties or assets of the Sellers or the Company is bound or affected, or conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, any such indenture, agreement, or other instrument, in each case except to the extent that such violation, default, or breach could not reasonably be expected to delay or otherwise significantly impair the ability of the parties to consummate the transactions contemplated hereby.

4.6            No Company Defaults or Consents .  Neither the execution and delivery of this Agreement nor the carrying out of any of the transactions contemplated hereby will:

(a)           violate or conflict with any of the terms, conditions, or provisions of the Certificate of Organization or Limited Liability Company Agreement of the Company;

(b)           violate, conflict with or constitute a default under the terms, conditions or provisions of the H.H. Brown License Agreement;

(c)           violate any  material Legal Requirements applicable to the Company;

(d)           violate, conflict with, result in a breach of, constitute a default under (whether with or without notice or the lapse of time or both), or accelerate or permit the acceleration of the performance required by, or give any other party the right to terminate, any  material Contract or Permit binding upon or applicable to the Company;

(e)           result in the creation of any Lien on any Properties of the Company; or

(f)           require either the Sellers or the Company to obtain or make any waiver, consent, action, approval, authorization or permit of, or filing with or notification to, any Governmental Authority to the extent that the rules, regulations or orders of such body are binding upon any of the Company or the Sellers or otherwise have the effect of law.

4.7            No Proceedings .  No suit, action, or other proceeding is pending or, to the Knowledge of the Company, threatened before any Governmental Authority seeking to restrain the Company or the Sellers or prohibit their entry into this Agreement or prohibit the Closing, or seeking damages against the Company or its Properties as a result of the consummation of this Agreement.

4.8            Financial Statements and Audit Representation .

(a)           The Sellers have furnished the Purchaser with the unaudited balance sheets of the Company as of May 31, 2009, December 31, 2008 and December 31, 2007 (the “ Balance Sheet ”) and statements of income and operations for the five months ended May 31, 2009, the twelve months ended December 31, 2008 and the period from inception to December 31, 2007 (collectively, the “ Financial Statements ”), certified by Celia, as the President and the representative of the Sellers, and by the Controller of the Company, to be true, correct and complete.  The Financial Statements fairly present the financial position and results of operations for the Company on the date and for the period(s) then ended, in accordance with GAAP applied on a consistent basis as of the end of and for all prior periods since the date of the Company’s formation, except as set forth on Schedule 4.8 attached hereto  The assets of the Company reflected on the Balance Sheet are presented at book value as of the respective dates thereof and have never been written-up or re-valued.

(b)           The Company and the Sellers pledge full cooperation with the Purchaser in connection with an audit of the Financial Statements. To the Knowledge of the Company and the Sellers, the Financial Statements for the fiscal years ended December 31, 2008 and 2007 as well as the 2009 interim stub periods, all of which may be required to be audited and included in various filings by the Purchaser in compliance with rules and regulations of the Securities and Exchange Commission, are “auditable,” and the Company and the Sellers have no knowledge of any state of facts or the occurrence of any event which might render the Financial Statements unauditable.

4.9            Absence of Undisclosed Liabilities .  The Company has no liabilities or obligations, except:

(a)           liabilities or obligations which are reflected, disclosed or reserved against on the Balance Sheet and not heretofore paid or discharged; or

(b)           liabilities or obligations specifically disclosed in any Schedule to this Agreement.

For purposes of this Agreement, the term "liabilities" or "obligations" shall include, without limitation, all direct or indirect indebtedness, guaranties, endorsements, claims, losses, damages, judgments, deficiencies, costs, expenses or responsibilities, known or unknown, fixed or unfixed, choate or inchoate, whether liquidated or unliquidated, secured or unsecured or whether accrued, absolute, contingent or otherwise.

4.10            Absence of Certain Changes or Events .  Except as otherwise set forth on Schedule 4.10(a) attached hereto, since the Balance Sheet date, there has not been:

(a)           any event, circumstance, or change (other than general economic conditions) that had or can reasonably be expected to have a material adverse effect on the business, operations, prospects, Properties, financial condition, or working capital of the Company, taken as a whole (a “ Material Adverse Effect ”);

(i)           any damage, destruction, or loss (whether or not covered by insurance) that had or might have a Material Adverse Effect; or

(ii)          any material adverse change in the Company’s sales patterns, pricing policies, accounts receivable, or accounts payable.

(b)           Except as otherwise set forth on Schedule 4.10(b) attached hereto, since the Balance Sheet date, the Company has not done any of the following:

(i)           merged into or with or consolidated with, any other corporation or acquired the business or assets of any Person;

(ii)          purchased any securities of any Person not in the ordinary course of its business;

(iii)         created, incurred, assumed, guaranteed, or otherwise become liable or obligated with respect to any indebtedness, or made any loan or advance to, or any investment in, any Person, except in each case in the ordinary course of business;

(iv)         made any change in any existing election, or made any new election, with respect to any tax law in any jurisdiction which election could have an effect on the tax treatment of the Company or the Company’s business operations;

(v)          entered into, amended, or terminated any material agreement, including, without limitation, any clearing or custody agreement;

(vi)         sold, transferred, leased, mortgaged, encumbered, or otherwise disposed of, or agreed to sell, transfer, lease, mortgage, encumber, or otherwise dispose of, any Properties except (1) in the ordinary course of business, or (2) pursuant to any agreement specified in Schedule 4.17 attached hereto;

(vii)        settled any claim or litigation, or filed any motions, orders, briefs, or settlement agreements in any proceeding before any Governmental Authority or any arbitrator;

(viii)       incurred or approved, or entered into any agreement or commitment to make, any expenditures in excess of $25,000 (other than those arising in the ordinary course of business or those required pursuant to any agreement specified in Schedule 4.13 attached hereto);

(ix)          maintained its books of account other than in the usual, regular, and ordinary manner in accordance with GAAP and on a basis consistent with prior periods or made any change in any of its accounting methods or practices that would be required to be disclosed under GAAP;

(x)           adopted any Plan or Benefit Program or Agreement, or granted any increase in the compensation payable or to become payable to managers, directors, officers, or employees (including, without limitation, any such increase pursuant to any bonus, profit-sharing, or other plan or commitment), other than merit increases to non-officer employees in the ordinary course of business and consistent with past practice;

(xi)          suffered any extraordinary losses or waived any rights of material value;

(xii)         been notified on any default under the H.H. Brown License Agreement;

(xiii)        made any payment to any Affiliate or forgiven any indebtedness due or owing from any Affiliate to the Company;

(xiv)        (1) accelerated receivables, (2) delayed payables, or (3) changed in any material respect the Company’s practices in connection with the payment of payables and/or the collection of receivables;

(xv)         engaged in any one or more activities or transactions with an Affiliate or outside the ordinary course of business;

(xvi)        declared, set aside, or made any distributions or other payments in respect of its equity securities, or repurchased, redeemed, or otherwise acquired any such securities;

(xvii)       amended its Certificate of Organization or Limited Liability Company Agreement;

(xviii)      issued any Membership Interests or other securities, or granted, or entered into any agreement to grant, any options, convertible rights, other rights, warrants, calls, or agreements relating to its Membership Interests; or

(xix)         committed to do any of the foregoing.

4.11          Real Property .

(a)            Schedule 4.11(a) sets forth a list of all real property or any interest therein (including without limitation, any option or other right or obligation to purchase any real property or any interest therein) currently owned, or owned since the Company’s inception, by the Company, in each case setting forth the street address and legal description of each property covered thereby (the “ Owned Premises ”).

(b)            Schedule 4.11(b) sets forth a list of all current leases, licenses, or similar agreements relating to the Company’s use or occupancy of real estate owned by a third party (“ Leases ”), true, correct, and complete copies of which have previously been furnished to Purchaser, in each case setting forth (i) the lessor and lessee thereof and the commencement date, term, and renewal rights under each of the Leases, and (ii) the street address and legal description of each property covered thereby (the “ Leased Premises ”).  The Leases and all guaranties with respect thereto, are in full force and effect and have not been amended in writing or otherwise, and no party thereto is in default or breach under any such Lease.  To the Knowledge of the Company, no event has occurred which, with the passage of time or the giving of notice or both, would cause a material breach of or default under any of such Leases by the Company.  Other than ordinary annual adjustments for taxes and expenses, neither the Company nor its agents or employees have received written notice of any claimed abatements, offsets, defenses, or other bases for relief or adjustment under any Lease.

(c)           With respect to each Owned Premises and Leased Premises, as applicable:  (i) the Company has good, marketable, and insurable fee simple interest in the Owned Premises and a valid leasehold interest in the Leased Premises, free and clear of any Liens, covenants, easements, or title defects other than Permitted Encumbrances that have had or could reasonably be expected to have a Material Adverse Effect on the Company’s use and occupancy of the Owned Premises and the Leased Premises; (ii) the portions of the buildings located on the Owned Premises and the Leased Premises that are used in the business of the Company are each in reasonable repair and condition, normal wear and tear excepted, and are in the aggregate sufficient to satisfy the Company’s current and reasonably anticipated normal business activities as conducted thereon, and, to the Knowledge of the Company, there is no latent material defect in the improvements on any Owned Premises, structural elements thereof, the mechanical systems (including, without limitation, all heating, ventilating, air conditioning, plumbing, electrical, utility, and sprinkler systems) therein, the utility system servicing each Owned Premises and the roofs which have not been disclosed to the Purchaser in writing prior to the date of this Agreement; (iii) each of the Owned Premises and the Leased Premises (1) has direct access to public roads or access to public roads by means of a perpetual access easement, such access being sufficient to satisfy the current transportation requirements of the business presently conducted at such parcel; and (2) is served by all utilities in such quantity and quality as are necessary and sufficient to satisfy the current normal business activities conducted at such parcel; and (iv) the Company has not received notice of (1) any condemnation, eminent domain, or similar proceeding affecting any portion of the Owned Premises or the Leased Premises or any access thereto, and, to the Knowledge of the Company, no such proceedings are contemplated, (2) any special assessment or pending improvement liens to be made by any Governmental Authority which may affect any of the Owned Premises or the Leased Premises, or (3) any violations of building codes and/or zoning ordinances or other governmental regulations with respect to the Owned Premises or the Leased Premises.

4.12          Taxes, Tax Returns and Other Reports .

(a)           All federal, state and local tax returns, reports and statements (including all income tax, unemployment compensation, social security and hospital insurance (Medicare), payroll, sales and use, excise, privilege, property, ad valorem, franchise, license, school and any other tax under the laws of the United States or any state or municipal or political subdivision thereof) required to be filed by the Company (collectively, the " Tax Returns ") have been filed with the appropriate governmental agencies in all jurisdictions in which the Tax Returns are required to be filed, and all of the Tax Returns are complete and correct in all material respects and properly reflect the tax liabilities of the Company for the periods, properties or events covered thereby.  All federal, state and local taxes, assessments, interest, deficiencies, fees and other governmental charges or impositions which are called for by the Tax Returns, or claimed to be due by a taxing authority from the Company, or upon or required by any of the respective properties, assets or income owned or used by the Company (collectively, the " Taxes ") have been properly accrued or paid.  The accruals for Taxes, if any, contained in the Company Financial Statements are adequate to cover the tax liabilities of the Company as of the dates thereof.  The Sellers have not received any notice of assessment or proposed assessment and there are no tax claims asserted against the Company or any of its assets or properties.  There are no tax liens on any of the assets or properties owned or used by the Company.  The Sellers have no knowledge of any basis for any additional assessment of any Taxes against the Company and the Company is not subject to any extension of a period for the assessment of any Taxes.  All Taxes which the Company is required by law to withhold or collect have been duly withheld or collected and have been timely paid over to the proper authorities.  There are no outstanding agreements or waivers extending the statute of limitations with respect to, and the Company is not now subject to any extension of a period for the assessment of, any federal, state or local income tax or other Taxes.

(b)           There is not currently, and there has never been, an audit or other examination of Taxes by federal, state or local tax authorities.

4.13          Intangible Rights .  Set forth on Schedule 4.13 attached hereto is a list and description of all material foreign and domestic patents, patent rights, trademarks, service marks, trade names, brands, and copyrights (whether or not registered and, if applicable, including pending applications for registration) owned, Used, licensed, or controlled by the Company and all goodwill associated therewith.  The Company owns or has the right to use and shall as of the Closing Date own or have the right to use any and all information, know-how, trade secrets, patents, copyrights, trademarks, trade names, software, formulae, methods, processes, and other intangible properties that are necessary or customarily Used by the Company for the ownership, management, or operation of its Properties (“ Intangible Rights ”) including, but not limited to, the Intangible Rights listed on Schedule 4.13 .  Except as set forth on Schedule 4.13 , (i) the Company is the sole and exclusive owner of all right, title, and interest in and to all of the Intangible Rights, and has the exclusive right to use and license the same, free and clear of any claim or conflict with the Intangible Rights of others; (ii) no royalties, honorariums, or fees are payable by the Company to any person by reason of the ownership or use of any of the Intangible Rights; (iii) there have been no claims made against the Company asserting the invalidity, abuse, misuse, or unenforceability of any of the Intangible Rights and no grounds for any such claims exist; (iv) the Company has not made any claim of any violation or infringement by others of any of its Intangible Rights or interests therein, and, to the Knowledge of the Company, no grounds for any such claims exist; (v) the Company has not received any notice that it is in conflict with or infringing upon the asserted intellectual property rights of others in connection with the Intangible Rights, and neither the use of the Intangible Rights nor the operation of the Company’s businesses is infringing or has infringed upon any intellectual property rights of others; (vi) the Intangible Rights are sufficient and include all intellectual property rights necessary for the Company to lawfully conduct its business as presently being conducted; (vii) no interest in any of the Company’s Intangible Rights has been assigned, transferred, licensed, or sublicensed by the Company to any person other than the Purchaser pursuant to this Agreement; (viii) to the extent that any item constituting part of the Intangible Rights has been registered with, filed in or issued by, any Governmental Authority, such registrations, filings, or issuances are listed on Schedule 4.13 and were duly made and remain in full force and effect; (ix) to the Knowledge of the Company, there has not been any act or failure to act by the Company or any of its managers, officers, employees, attorneys, or agents during the prosecution or registration of, or any other proceeding relating to, any of the Intangible Rights or of any other fact which could render invalid or unenforceable, or negate the right to issuance of any of the Intangible Rights; (x) to the extent any of the Intangible Rights constitutes proprietary or confidential information, the Company has reasonably safeguarded such information from disclosure; and (xi) all of the Company’s current Intangible Rights will remain in full force and effect following the Closing without alteration or impairment.

4.14          Equipment and Other Tangible Property .  Except as otherwise set forth on Schedule 4.14 attached hereto, the Company’s equipment, furniture, machinery, vehicles, structures, fixtures, and other tangible property included in the Properties (the “ Tangible Company Properties ”), other than Inventory, is suitable for the purposes for which intended and in operating condition and repair consistent with normal industry standards, except for ordinary wear and tear, and except for such Tangible Company Properties as shall have been taken out of service on a temporary basis for repairs or replacement consistent with the Company’s prior practices and normal industry standards.  To the Knowledge of the Company, the Tangible Company Properties are free of any known structural or engineering defects, and since the Company’s inception, there has not been any significant interruption of the Company’s business due to inadequate maintenance or obsolescence of the Tangible Company Properties.

4.15          Books of Account . Except as set forth on Schedule 4.8 , the books of account of the Company reflect all of its items of income and expense, together with its assets, liabilities and accruals required to be reflected therein, all in accordance with GAAP.  None of the Company's records, systems, controls, data or information is recorded, stored, maintained, operated or otherwise wholly or partly dependent upon or held by any means (including any electronic, mechanical or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership and direct control of the Company.

4.16          Litigation .  There are no actions, suits or legal, administrative, arbitration or other proceedings or governmental investigations (collectively, the " Litigation ") pending or, to the knowledge of the Sellers, threatened against the Company before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign and no basis exists for any such action.  The Company is not a party to or subject to the provisions of any judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental or regulatory official, body or authority.  Neither the Sellers nor the Company is engaged in, a party to or, to the knowledge of the Sellers, threatened with any suit, action or legal, administrative, arbitration or other proceeding or governmental investigation which, if adversely determined, would adversely affect or impede the purchase of the Membership Interests by the Purchaser or the transactions contemplated by this Agreement or would have a Material Adverse Effect.

4.17          Commitments .

(a)           Except as otherwise set forth on Schedule 4.17 attached hereto, the Company is not a party to or bound by any of the following, whether written or oral:

(i)           any Contract that cannot by its terms be terminated by the Company with 30 days’ or less notice without penalty or whose term continues beyond one year after the date of this Agreement;

(ii)          Contract or commitment for capital expenditures by the Company in excess of $5,000 per calendar quarter in the aggregate;

(iii)         lease or license with respect to any Properties, real or personal, whether as landlord, tenant, licensor, or licensee;

(iv)         Contract, indenture, or other instrument relating to the borrowing of money or the guarantee of any obligation or the deferred payment of the purchase price of any Properties;

(v)          partnership agreement, joint venture agreement, or limited liability company agreement;

(vi)         Contract with any Affiliate of the Company (including the Sellers) relating to the provision of goods or services by or to the Company;

(vii)        Contract for the sale of any assets that in the aggregate have a net book value on the Company’s books of greater than $25,000;

(viii)       Contract that purports to limit the Company’s freedom to compete freely in any line of business or in any geographic area;

(ix)          preferential purchase right, right of first refusal, or similar Contract;

(x)           Contract or commitment that impacts or is likely to impact the calculation of the Company’s net capital; or

(xi)          other Contract that is material to the business of the Company.

(b)           All of the Contracts listed or required to be listed on Schedule 4.17 are valid, binding, and in full force and effect, and the Company has not been notified or advised by any party thereto of such party’s intention or desire to terminate or modify any such Contract in any respect, except as disclosed on Schedule 4.17 .  Neither the Company nor, to the Knowledge of the Company, any other party is in breach of any of the terms or covenants of any Contract listed or required to be listed on Schedule 4.17 .  Following the Closing, the Company will continue to be entitled to all of the benefits currently held by the Company under each Contract listed or required to be listed on Schedule 4.17 .

(c)           Except as otherwise set forth on Schedule 4.17(c) attached hereto, the Company is not a party to or bound by any Contract or Contracts the terms of which were arrived at by or otherwise reflect less-than-arm’s-length negotiations or bargaining.

4.18          Insurance .   Schedule 4.18 attached hereto is a list of all insurance policies (including, without limitation, fire, liability, product liability, workers’ compensation, and vehicular) presently in effect that relate to the Company or its Properties, including the amounts of such insurance and annual premiums with respect thereto, all of which have been in full force and effect from and after the date(s) set forth on Schedule 4.18 .  Such policies are sufficient for compliance by the Company with all applicable Legal Requirements and all material Contracts.  None of the insurance carriers has indicated to the Company an intention to cancel any such policy or to materially increase any insurance premiums (including, without limitation, workers’ compensation premiums), or that any insurance required to be listed on Schedule 4.18 will not be available in the future on substantially the same terms as currently in effect.  The Company has no claim pending or anticipated against any of its insurance carriers under any of such policies, and, to the Knowledge of the Company, there has been no actual or alleged occurrence of any kind which could reasonably be expected to give rise to any such claim.  Since the Company’s inception, all notices required to have been given by the Company or the Sellers to any insurance company have been timely and duly given, and no insurance company has asserted that any claim is not covered by the applicable policy relating to such claim.

4.19          Compliance with Laws; Permits .

(a)           The Company has received no notice of, and the Sellers have no knowledge of any state of facts or the occurrence of any event which reasonably might form the basis for alleging, any violation by the Company of any federal, state or local law, statute, rule or regulation applicable to the Company, its assets or properties or its business as now conducted or any of the Permits which would have a Material Adverse Effect.  The Company has complied with each and every, and is not in violation of any, judgment, order, writ, injunction or decree of any governmental authority, court or administrative authority having jurisdiction over the Company, its assets or properties or applicable to its business as now or heretofore conducted.

(b)           The Company has all permits, rights, approvals, licenses, authorizations, legal status, orders, certificates of occupancy or Contracts under any Legal Requirement or otherwise granted by any Governmental Authority (collectively, the " Permits ") which are necessary to enable it to conduct the Business as now conducted and has not failed to adhere to the requirements thereof.  The Company has taken all steps necessary to maintain all of the Permits, all of which are valid, in good standing and in full force and effect.  A complete and correct list of all Permits is attached hereto as Schedule 4.19(b) and true and correct copies thereof have been delivered to the Purchaser.

(c)           No notice to, filing with or consent from any governmental body, authority or agency is required as a result of the change in ownership of the Membership Interests contemplated by this Agreement, nor will any Permit otherwise be terminated, modified, or impaired or rendered invalid by reason of such change of ownership.

4.20          Absence of Questionable Payments .  Neither the Company nor any manager, officer, employee or agent of, nor any consultant to, the Company has unlawfully offered, paid, or agreed to pay, directly or indirectly, any money or anything of value to, or for the benefit of, or unlawfully received or agreed to receive, directly or indirectly, any money or anything of value from, or on behalf of, any vendor, supplier, wholesaler, contractor, distributor or manufacturer or any other Person, or any officer or employee thereof or any individual who is or was a candidate for public office, or any public official or employee of any governmental or regulatory body or authority.  No payments have been made by or on behalf of the Company which could give rise to a civil cause of action to void any customer Contracts, material Commitments or Permits of the Company as having been illegally obtained.

4.21          Hazardous Substances; Hazardous Wastes and Pollutants .

(a)           The Company, to the knowledge of the Sellers, has complied with each and every, and is not in material violation of any, federal, state or local ordinance, rule, regulation and statute governing or in any way applicable to the generation, transport, storage, treatment, handling, release, emission, discharge and disposal of solid or hazardous wastes, hazardous substances or pollutants.  The Company has not received any notice, report or other information regarding any actual or alleged violation of Environmental Laws, or any liabilities or potential liabilities (whether accrued, absolute, contingent, unliquidated or otherwise), including any investigatory, remedial or corrective obligations, relating to the Company or their respective facilities arising under Environmental Laws.

(b)           For purposes of this Agreement, “ Environmental Laws ” shall mean all federal, state or local laws, ordinances, rules, regulations, orders or directives or under common law relating to the environment, health or safety, including, without limitation, claims arising under (i) the Comprehensive Environmental Response, Compensation and Liability Act and all rules and regulations promulgated thereunder, or any similar federal, state or local law, rule or regulation, (ii) the Resource Conservation and Recovery Act and all rules and regulations promulgated thereunder, or any similar federal, state or local law, rule or regulation, (iii) the Clean Air Act and all rules and regulations promulgated thereunder, or any similar federal, state or local law, rule or regulations, (iv) the Toxic Substance Control Act and all rules and regulations promulgated thereunder or (vi) any other federal, state or local law, rule or regulation relating to the emission or discharge of any material into the environment or at common law, all as presently in effect and as the same may hereafter be amended.

4.22          Conditions Affecting Business .  Except for normal competitive pressures, there are no conditions existing with respect to the Company's markets, products, services, clients, customers, facilities, personnel or suppliers which are known to the Sellers, which would be expected to result in a Material Adverse Effect.

4.23          Debt Instruments .  Except for the Retained Liabilities, the Company has no liabilities or debts.

4.24          Suppliers and Customers .   Schedule 4.24 sets forth (i) the ten principal suppliers of the Company during each of the fiscal years ended December 31 since the Company’s inception, together with the dollar amount of goods purchased by the Company from each such supplier during each such period, and (ii) the ten principal customers of the Company during each of the fiscal years ended December 31since the Company’s inception, together with the dollar amount of goods and/or services sold by the Company to each such customer during each such period.  Except as otherwise set forth on Schedule 4.24 attached hereto, the Company maintains good relations with all suppliers and customers listed or required to be listed in Schedule 4.24 as well as with governments, partners, financing sources, and other parties with whom the failure to maintain good relations could have a Material Adverse Effect and no such party has canceled, terminated, or made any threat to the Company to cancel or otherwise terminate its relationship with the Company or to materially decrease its services or supplies to the Company or its direct or indirect purchase or usage of the products or services of the Company.

4.25          Employee Benefit Matters .

(a)            Schedule 4.25(a) provides a description of each of the following, if any, which is sponsored, maintained, or contributed to by the Company for the benefit of the employees or agents of the Company, which has been so sponsored, maintained, or contributed to with respect to which the Company has or may have any actual or contingent liability:

(i)           every “employee benefit plan,” as such term is defined in Section 3(3) of ERISA, including, but not limited to, employee benefit plans, such as foreign plans, which are not subject to the provisions of the Employment Retirement Income Security Act of 1974, and the rules and regulations promulgated thereunder (collectively, “ ERISA ”) (each, a “ Plan ”); and,

(ii)           each personnel policy, employee manual, or other written statements of rules or policies concerning employment, stock option plan, collective bargaining agreement, bonus plan or arrangement, incentive award plan or arrangement, vacation and sick leave policy, severance pay policy or agreement, deferred compensation agreement or arrangement, consulting agreement, employment contract and each other employee benefit plan, agreement, arrangement, program, practice, or understanding which is not described in Section 4.25(a)(i) (each, a “ Benefit Program or Agreement ”).

(b)  True, correct, and complete copies of the Plans (if any), and related trusts, if applicable, including all amendments thereto, have been furnished to the Purchaser.  There has also been furnished to the Purchaser, with respect to each Plan required to file such report and description, the three most recent reports on Form 5500 and the summary plan description.  True, correct, and complete copies or descriptions of all Benefit Programs or Agreements have also been furnished to Purchaser.

(c)  Except as otherwise set forth on Schedule 4.25(c) attached hereto:

(i)           Neither the Sellers nor the Company contributes to or has an obligation to contribute to, and neither the Sellers nor the Company has at any time since the inception of the Company contributed to or had an obligation to contribute to, and do not have any actual or contingent liability under a multiemployer plan within the meaning of Section 3(37) of ERISA (“ Multiemployer Plan ”) or a multiple employer plan within the meaning of Section 413(b) and (c) of the Code.

(ii)          Each of the Sellers and the Company has substantially performed all obligations, whether arising by operation of law or by contract, required to be performed by it in connection with all the Plans and Benefit Programs and Agreements to which it is a Party or otherwise bound, and, to the Knowledge of the Company, there have been no defaults or violations by any other party to any Plans or Benefit Programs or Agreements;

(iii)         All material reports and disclosures relating to the Plans required to be filed with or furnished to the applicable Governmental Authority, Plan participants, or Plan beneficiaries have been filed or furnished in accordance with applicable law in a timely manner, and each Plan and each Benefit Program or Agreement has been administered in substantial compliance with its governing documents;

(iv)         Each of the Plans intended to be qualified under Section 401 of the Code satisfies the requirements of such section and has received a favorable determination letter from the Internal Revenue Service regarding such qualified status and has not, since receipt of the most recent favorable determination letter, been amended or operated in a way which could adversely affect such qualified status;

(v)          There are no actions, suits, or claims pending (other than routine claims for benefits) or, to the Knowledge of the Company, threatened against, or with respect to, any of the Plans, Benefit Programs, or Agreements, or their assets;

(vi)         All contributions required to be made to the Plans pursuant to their terms and provisions and applicable law have been made timely;

(vii)        The Company does not maintain any Plan subject to Title IV of ERISA;

(viii)       Neither any of the Plans nor any trust created thereunder or with respect thereto has engaged in any “prohibited transaction” or “party-in-interest transaction” as such terms are defined in Section 4975 of the Code and Section 406 of ERISA which could subject any Plan, the Sellers, or any officer, manager, director, or employee thereof to a tax or penalty on prohibited transactions or party-in-interest transactions pursuant to Section 4975 of the Code or Section 502(i) of ERISA;

(ix)          To the knowledge of the Sellers, there is no matter pending (other than routine qualification determination filings) with respect to any of the Plans or Benefit Programs or Agreements before the Internal Revenue Service, the Department of Labor, or the PBGC;

(x)           Each trust funding a Plan, which is intended to be exempt from federal income taxation pursuant to Section 501(c)(9) of the Code, satisfies the requirements of such section and has received a favorable determination letter from the Internal Revenue Service regarding such exempt status and has not, since receipt of the most recent favorable determination letter, been amended or operated in a way which would adversely affect such exempt status.

(xi)          The Company does not have any obligation to provide health benefits or death benefits to former employees, except as specifically required by law;

(xii)           Neither the execution and delivery of this Agreement by the Company or by the Sellers nor the consummation of any or all of the transactions contemplated hereby will: (1) entitle any current or former employee of the Company to severance pay, unemployment compensation, or any similar payment, (2) accelerate the time of payment or vesting or increase the amount of any compensation due to any such employee or former employee, or (3) directly or indirectly result in any payment made to or on behalf of any person to constitute a “parachute payment” within the meaning of Section 280G of the Code;

(xiii)        Neither the Sellers nor the Company has incurred any liability or taken any action, and, to the Knowledge of the Company, no action or event has occurred, that could cause the Company to incur any liability (1) under Section 412 of the Code or Title IV of ERISA with respect to any “single-employer plan” within the meaning of Section 4001(a)(15) of ERISA that is not a Plan, or (2) to any Multiemployer Plan, including without limitation an account of a partial or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA.

(xiv)        Since the Company’s inception, other than ordinary course grievances, and disputes, none of which had a material impact on the Company, there have not been any (1) work stoppages, labor disputes, or other significant controversies between the Company and its employees, (2) labor union grievances or organizational efforts, or (3) unfair labor practice or labor arbitration proceedings pending or threatened.

(xv)         Except as set forth on Schedule 4.25(d) attached hereto, the Company is not a party to any agreement, and has not established any policy or practice, requiring the Company to make a payment or provide any other form or compensation or benefit to any person performing services for the Company upon termination of such services which would not be payable or provided in the absence of the consummation of the transactions contemplated by this Agreement.

(d)   Schedule 4.25(d) sets forth by number and employment classification of employees employed by the Company as of the date of this Agreement, and, except as set forth therein, none of said employees are subject to union or collective bargaining agreements with the Company.   Schedule 4.25(d) also sets forth for each such employee and independent registered representative, his current compensation, his deferred compensation, and his payout and expense charge backs, advances, and amounts due to each such employee or independent registered representative, as applicable, as of the end of the month preceding the date of this Agreement and as of the Closing Date.  The Sellers shall have no liability on or after the Closing Date for any obligation of the Company accruing prior to the Closing Date for the payment of compensation or the provision of benefits to any employee or independent registered representative under any Plan, Benefit Program, or Agreement.  It is understood, that the Company shall be responsible for paying all accrued but unpaid compensation and benefits arising prior to the Closing Date.

(e)   There has been no material violation by any sponsor, trustee, or administrator of any Plan of any provision of ERISA or the Code in connection with the establishment, operation, or administration of any Plan.

(f)    All of the Company’s employees and independent contractors have been appropriately classified for federal and state labor law purposes and federal and state income and employment tax purposes and the Company has withheld and timely paid all necessary taxes with respect to each of its employees and independent contractors.  In this regard, all independent registered representatives have been classified as independent contractors and not employees and the Company has not received any notice from any Governmental Authority concerning such classification.

4.26        Bank Accounts .   Schedule 4.26 sets forth (a) the name of each bank or financial institution in which the Company has or maintains an account (whether checking, savings or otherwise), lock box or safe deposit box, the numbers (or other means of identification) of all such accounts, lock boxes or safe deposit boxes and the names of all persons authorized to draw thereon or to have access thereto, and (b) the names of all persons holding powers of attorney from the Company, together with true, correct and complete copies of such powers of attorney.

4.27        Full Disclosure .  The representations and warranties of the Company and the Sellers in this Agreement are on the date hereof, and will be on the Closing Date, true, correct and complete in all material respects.  No representation or warranty by the Sellers or the Company in this Agreement or in any statement, list, certificate or instrument furnished or to be furnished pursuant hereto or in connection with the negotiation, execution or performance of this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state any fact necessary to make any statement herein or therein not misleading.

The Purchaser hereby represents and warrants to the Sellers as follows:

5.1           Organization .  The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to own its properties and to carry on its business as now conducted.

5.2           Authority .  The Purchaser has all requisite power and authority to execute, deliver and perform this Agreement and the transactions contemplated herein.  The Purchaser's execution, delivery and performance of this Agreement, and the transactions contemplated herein, have been duly authorized by its Board of Directors and no other action is required for such execution, delivery and performance by law, the Purchaser's certificate of incorporation or bylaws or otherwise.  This Agreement constitutes the legal, valid and binding obligation of, and is enforceable against, the Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights generally and to general equitable principles.

5.3           No Violations .  The authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated herein by the Purchaser do not and will not, with or without the giving of notice or passage of time or both, (a) violate, result in the breach of any term or provision of, or require any notice, filing or consent under (i) the certificate of formation or operating agreement of the Purchaser, (ii) any statutes, laws, rules, regulations, ordinances, licenses or permits of any governmental body, authority or agency applicable to the Purchaser or (iii) any judgment, decree, writ, injunction, order or award of any arbitrator, court or governmental body, authority or agency binding upon the Purchaser or any of its properties or assets; (b) result in the breach of any term or provision of, require any notice or consent under, give rise to a right of termination of, constitute a default under, result in the acceleration of, or give rise to a right to accelerate any obligation under any loan agreement, mortgage, indenture, financing agreement, lease or any other agreement or instrument to which the Purchaser is a party or by which its properties or assets are bound; or (c) result in any lien, claim, encumbrance or restriction on any of the properties or assets of the Purchaser.

6.1           Indemnification of the Purchaser .  From and after the Closing, (i) the Sellers shall, jointly and severally, reimburse, indemnify and hold harmless the Purchaser and its Affiliates, stockholders, members, officers, directors, managers, employees, agents, representatives, successors and assigns from and against and in respect of each of the following (collectively, the " Purchaser's Indemnification Events "):

(a)           any and all damages, losses, deficiencies, liabilities, claims, demands, charges, costs and expenses of every nature and character whatsoever, including, without limitation, reasonable attorneys’ fees and costs (collectively, the " Losses ") that result from, relate to or arise out of any misrepresentation or breach of warranty, covenant or agreement of the Sellers in this Agreement or any omission from any agreement, document, statement, list, certificate or instrument furnished by or on behalf of the Sellers or Company in connection with the negotiation, execution or performance of this Agreement and the transactions contemplated herein;

(b)           any and all Losses that result from, relate to or arise out of the conduct of the Business or the acts or omissions of the prior to the Closing Date; and

(c)           any and all actions, suits, claims, proceedings, investigations, demands, assessments, audits, fines, judgments, costs and other expenses (including, without limitation, reasonable legal fees and expenses) incident to any of the foregoing or to the successful enforcement of this Section.

6.2           Indemnification of the Sellers .  From and after the Closing, the Purchaser shall reimburse, indemnify and hold harmless the Sellers and their agents, representatives, heirs, legal representatives, successors and assigns from and against and in respect of each of the following (collectively, the " Sellers’ Indemnification Events "):

(a)           any and all Losses that result from, relate to or arise out of any misrepresentation or breach of warranty, covenant or agreement of the Purchaser in this Agreement or any omission from any agreement, document, statement, list, certificate or instrument furnished by or on behalf of the Purchaser in connection with the negotiation, execution or performance of this Agreement and the transactions contemplated herein;

(b)           any and all Losses that result from, relate to or arise out of the conduct of the Business or the acts or omissions of the Company after the Closing Date; and

(c)           any and all actions, suits, claims, proceedings, investigations, demands, assessments, audits, fines, judgments, costs and other expenses (including, without limitation, reasonable legal fees and expenses and costs o