DATED AS OF

Exhibit No. 2.1

ASSET PURCHASE AGREEMENT

DATED AS OF

FEBRUARY 27, 1998

BY AND AMONG

XXXXXXXXX INDUSTRIES, INC.

AND

INTEGRATED TECHNOLOGY HOLDINGS CORP.

AND

INTEGRATED TECHNOLOGY CORP.

AND

XXXXXX XXXXXXX

ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT, dated as of February 27, 1998 (this
"AGREEMENT"), by and among (i) Xxxxxxxxx Industries, Inc., a Delaware
corporation ("XXXXXXXXX"), (ii) Integrated Technology Holdings Corp., a Delaware
corporation and a wholly-owned subsidiary of Xxxxxxxxx ("XXXXXXXXX SUBSIDIARY"),
(iii) Integrated Technology Corp., a New Jersey corporation (the "COMPANY"), and
(iv) Xxxxxx Xxxxxxx, an individual residing at 00 Xxxxxxxx Xxxxx, Xxxxxxx, Xxx
Xxxxxx 00000 (the "PRINCIPAL").

RECITALS:

WHEREAS, Xxxxxxxxx, through Xxxxxxxxx Subsidiary, desires to purchase
and the Company desires to sell substantially all of the assets used by the
Company in the operation of its business (the "BUSINESS"), upon the terms and
subject to the conditions set forth in this Agreement;

WHEREAS, the Company and the Principal have determined that it is in
the best interest of the Company, and in furtherance of its purposes, to sell to
Xxxxxxxxx Subsidiary, and Xxxxxxxxx and Xxxxxxxxx Subsidiary have determined
that it is in the best interest of Xxxxxxxxx and Xxxxxxxxx Subsidiary to
purchase from the Company, substantially all assets, real and personal and
mixed, tangible and intangible, owned or leased by the Company and associated
with or employed in the operations of the Business, and substantially all other
related operations owned or leased by the Company subject to the assumption by
Xxxxxxxxx Subsidiary of those liabilities of the Company as are more fully
described herein.

NOW, THEREFORE, in consideration of the mutual promises and agreements
hereinafter contained, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

The following terms shall have the following respective meanings for
all purposes of this Agreement:

"ACQUISITION" shall mean the purchase and sale of the Assets pursuant
to the terms of this Agreement.

"AFFILIATE" shall mean, with respect to any Person, any other Person
that, directly or indirectly, controls or is controlled by or is under common
control with such Person. As used in this definition, the term "control" and any
derivatives

thereof mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
ownership of voting securities, by contract, or otherwise.

"AFFILIATED OBLIGATIONS" means amounts owed to the Company by the
Principal and his Affiliates, other than FSI.

"ADDITIONAL PAYMENTS" has the meaning set forth in Section 2.03.

"ADDITIONAL PAYMENTS SCHEDULE" has the meaning set forth in Section
2.03.

"AGREEMENT" shall mean this Asset Purchase Agreement, as it may be from
time to time amended.

"ASSETS" has the meaning set forth in Section 2.01.

"ASSIGNED CONTRACTS" has the meaning set forth in Section 2.01.

"BALANCE SHEET DATE" has the meaning set forth in Section 3.07.

"BUSINESS DAY" shall mean any day, other than a Saturday, Sunday or a
legal holiday under the Federal laws of the United States.

"CLOSING" shall mean the consummation of the Acquisition pursuant to
this Agreement.

"CLOSING DATE" has the meaning set forth in Section 2.06.

"CODE" shall mean the Internal Revenue Code of 1986, as amended.

"CONFIDENTIAL INFORMATION" shall mean all trade secrets and other
confidential information concerning the Company including, without limitation,
information regarding the operations, future plans, projected and historical
sales, marketing, costs, production, growth and distribution, any customer
lists, customer information, information relating to governmental relations, and
information relating to the products or services, whether patentable or not.

"DEBT FINANCING" has the meaning set forth in Section 7.10.

"DECEMBER 31 BALANCE SHEET" has the meaning set forth in Section 3.06.

"DECEMBER 31 FINANCIAL STATEMENTS" has the meaning set forth in Section
3.06.

"EMPLOYEE PLAN" has the meaning set forth in Section 3.17.

"EMPLOYMENT AGREEMENT" shall mean the Employment Agreement by and
between Xxxxxxxxx Subsidiary and the Principal dated as of the date of this
Agreement, in substantially the form of EXHIBIT A hereto.

"ENVIRONMENTAL LAWS" shall mean all laws, rules, regulations, statutes,
ordinances, decrees or orders of any governmental entity relating to (a) the
control of any potential pollutant or protection of the air, water or land, (b)
solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation, and (c) exposure to hazardous, toxic or other
substances alleged to be harmful, and includes without limitation final and
binding requirements related to the foregoing imposed by (i) the terms and
conditions of any license, permit, approval or other authorization by any
governmental entity, and (ii) applicable judicial, administrative or other
regulatory decrees, judgments and orders of any governmental entity. The term
"Environmental Laws" shall include, but not be limited to the following statutes
and the regulations promulgated thereunder as currently in effect: the Clean Air
Act, 42 U.S.C. ss. 7401 ET SEQ., the Clean Water Act, 33 U.S.C. ss. 1251 ET
SEQ., the Resource Conservation Recovery Act ("RCRA"), 42 U.S.C. ss. 6901 ET
SEQ., the Superfund Amendments and Reauthorization Act, 42 U.S.C. ss. 11011 ET
SEQ., the Toxic Substances Control Act, 15 U.S.C. ss. 2601 ET SEQ., the Water
Pollution Control Act, 33 U.S.C. ss. 1251, ET SEQ., the Safe Drinking Water Act,
42 U.S.C. ss. 300f ET SEQ., the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 ET SEQ., and any
similar state, federal or local statute or ordinance.

"ENVIRONMENTAL LIABILITIES" shall mean any and all liabilities,
responsibilities, claims, suits, losses, costs (including remediation, removal,
response, abatement, clean-up, investigative and/or monitoring costs and any
other related costs and expenses, including without limitation Environmental
Remediation Costs), other causes of action recognized now or at any later time,
damages, settlements, expenses, charges, assessments, liens, penalties, fines,
pre-judgment and post-judgment interest, attorney fees and other legal fees (a)
pursuant to any agreement, order, notice, directive (including directives
embodied in Environmental Laws), injunction, judgment or similar documents
(including settlements), or (b) pursuant to any claim by a governmental entity
or other person for personal injury, property damage, damage to natural
resources, remediation or similar costs or expenses incurred or asserted by such
governmental entity or person pursuant to common law or statute.

"ENVIRONMENTAL REMEDIATION COSTS" shall mean all costs and expenses of
actions or activities to (a) clean-up or remove Hazardous Materials from the
environment, (b) prevent or minimize the movement, leaching or migration of
Hazardous Materials into the environment, (c) prevent, minimize or mitigate the
Release or threatened Release of Hazardous Materials into the environment, or
injury or damage from such Release, and (d) comply with the requirements of any

Environmental Laws. Environmental Remediation Costs include, without limitation,
costs and expenses payable in connection with the foregoing for legal,
engineering or other consultant services, for investigation, testing, sampling
and monitoring, for boring, excavation and construction, for removal,
modification or replacement of equipment or facilities, for labor and material,
and for proper storage, treatment and disposal of Hazardous Materials.

"EQUITY OR EQUITY EQUIVALENT SECURITIES" has the meaning set forth in
Section 7.10.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.

"ERISA AFFILIATE" shall mean any person, firm or entity (whether or not
incorporated) which, by reason of its relationship with the Company, is required
to be aggregated with the Company under Section 414(b), 414(c) or 414(m) of the
Code, or which together with the Company is a member of a controlled group
within the meaning of Section 4001(a) of ERISA.

"ESCROW AGENT" shall mean Xxxxxxx Bank, N.A.

"ESCROW AGREEMENT" shall mean the Escrow Agreement by and among
Xxxxxxxxx Subsidiary, the Company and the Escrow Agent dated as of the Closing
Date in substantially the form of Exhibit B hereto.

"EXCLUDED ASSETS" has the meaning set forth in Section 2.02.

"FSI" shall mean Flight Support, Inc. a Connecticut corporation in
which the Principal owns a 49% equity interest.

"FSI OFFER TERMINATION DATE" shall mean the date on which the right of
first refusal of FSI to purchase the FSI Stock under the FSI Stockholders'
Agreement has been waived or expires under the terms of the FSI Stockholders'
Agreement.

"FSI STOCK" has the meaning set forth in Section 7.10.

"FSI STOCKHOLDERS AGREEMENT" means the Stockholders' Agreement, dated
April 1, 1997, by and among FSI, the Principal and Xxxxx X. Xxxxx.

"HAZARDOUS MATERIALS" shall mean any (a) toxic or hazardous materials
or substances; (b) solid wastes, including asbestos, buried contaminants,
chemicals, flammable or explosive materials; (c) radioactive materials; (d)
petroleum wastes and spills or releases of petroleum products; and (e) any other
chemical, pollutant, contaminant, substance or waste that is regulated by any
governmental entity under any Environmental Law.

"HSR" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976, as
amended, and the rules and regulations promulgated thereunder.

"INTELLECTUAL PROPERTY" has the meaning set forth in Section 2.01.

"INTERIM BALANCE SHEET" has the meaning set forth in Section 3.07.

"INTERIM PERIOD TAX DISTRIBUTION" shall mean a distribution to the
Principal of 41% of the Company's Net Profit Before Tax (as defined in SCHEDULE
2.03(a)) for the period from January 1, 1998 through the Closing Date.

"INVENTORIES" has the meaning set forth in Section 2.01.

"IRS" shall mean the Internal Revenue Service.

"XXXXXXXXX DETERMINATION" has the meaning set forth in Section 2.03.

"LIABILITY" shall mean any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.

"LICENSE" has the meaning set forth in Section 2.01.

"LIENS" means liens, charges, claims, pledges, security interests and
encumbrances of any nature whatsoever.

"MATERIAL ADVERSE EFFECT" shall mean, with respect to any Person, a
material adverse effect on the business, prospects, results of operations,
financial condition or assets of such Person and its subsidiaries taken as a
whole. In determining whether any individual event would result in a Material
Adverse Effect, notwithstanding that such event does not of itself have such
effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then existing events would result
in a Material Adverse Effect.

"MATERIAL ADVERSE EVENT" shall mean an occurrence, event or development
which has had or is reasonably likely to have a Material Adverse Effect.

"OBJECTION NOTICE" has the meaning set forth in Section 2.03.

"OPTION CLOSING DATE" has the meaning set forth in Section 7.10.

"PERMITTED LIENS" shall mean:

(a) Liens for taxes, assessments or other governmental charges not
delinquent or being contested in good faith and by appropriate

proceedings and with respect to which proper reserves have
been taken by the Company;

(b) Liens disclosed in the Financial Statements;

(c) deposits or pledges to secure obligations under worker's
compensation, social security or similar laws, or under
unemployment insurance;

(d) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of the Company's
business; and

(e) judgment Liens that have been stayed or bonded and mechanics',
workers', materialmen's or other like Liens arising in the
ordinary course of the Company's business with respect to
obligations which are not due or which are being contested in
good faith by the Company.

"PERSON" shall mean an individual, partnership, corporation, limited
liability company, joint venture, unincorporated organization, cooperative or a
governmental entity or agency thereof.

"REGULATORY AUTHORITY" shall mean any foreign, United States Federal or
state government or governmental authority.

"RELEASE" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment.

"TAX" shall mean any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty or addition thereto, whether disputed or not.

"TAX RETURN" shall mean any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.

"TREASURY REGULATIONS" means the regulations promulgated under the
Code.

ARTICLE II

PURCHASE AND SALE

SECTION 2.021. ASSETS CONVEYED. At the Closing, and upon the basis of
the representations, warranties, covenants and agreements contained herein, the
Company shall sell, transfer, assign, convey and deliver to Xxxxxxxxx Subsidiary
all of the Company's right, title and interest in and to the Assets (as defined
below) free and clear of all Liens. The "ASSETS" shall mean all those personal,
tangible and intangible properties, and the real property and improvements of
the Company, used in connection with the operation of the Business as set forth
below other than Excluded Assets including without limitation, those more
particularly described in the Schedules to this Section 2.01, including the
going concern value of the Business:

(a) all the rights and benefits accruing to the Company under all
agreements, contracts, arrangements, leases with respect to personal property,
guarantees, commitments and orders, whether written or oral, between the Company
and any third party, including without limitation, the contracts listed in
SCHEDULE 2.01(a) hereto (the "ASSIGNED CONTRACTS");

(b) all of the Company's inventories of raw materials, engines
(including engines held for lease), parts, work-in-process, intermediates and
finished goods, if any, including, without limitation the engines and aircraft
set forth on SCHEDULE 2.01(b) hereto ("INVENTORIES");

(c) all manufacturing, production, maintenance and testing machinery
and equipment, computers, computer hardware and software, tools, supplies,
furniture, vehicles, and other tangible personal property and assets of the
Company related to the Business, including, without limitation, the items listed
on SCHEDULE 2.01(c) hereto;

(d) all the interest of and the rights and benefits accruing to the
Company as lessee under the leases or rental agreements covering machinery,
equipment, computers, computer hardware and software, vehicles and other
tangible personal property as described in SCHEDULE 2.01(d) hereto;

(e) all accounts and notes receivable (including without limitation,
any claims, remedies and other rights related thereto) evidencing rights to
payment for services rendered through the Closing Date, except for Affiliated
Obligations (it being understood and agreed that such Affiliated Obligations
shall be repaid prior to the Closing Date);

(f) all operating data and records of the Company relating to the
Business, including, without limitation, client lists and records, referral
sources, production reports and records, equipment logs, operating guides and
manuals, projections,

copies of financial, accounting and personnel records, correspondence and other
similar documents and records;

(g) all claims, warranty rights, causes of action and other similar
rights granted or owing to the Company arising out of the Business to the extent
the same are assignable;

(h) all of the Company's rights, to the extent of such rights, to use
the names set forth on SCHEDULE 2.01(h) and all variations on any thereof for
any and all purposes;

(i) all the intellectual property of the Company, including, without
limitation, all software and software libraries, processes, formulae, methods,
plans, research data, marketing plans and strategies, forecasts, patents and
patent applications, inventions, discoveries, know-how, trade secrets and ideas
(including those in the possession of third parties, but which are the property
of the Company), CONFIDENTIAL INFORMATION, and all drawings, records, books or
other indicia of the foregoing, trademarks, servicemarks, tradenames, licenses,
copyrights, operating rights, permits and other similar intangible property and
rights (the "INTELLECTUAL PROPERTY");

(j) all licenses, permits, approvals, qualifications, consents and
other authorizations (the "LICENSES") necessary for the lawful conduct,
ownership and operation of the Business, including those described on SCHEDULE
2.01(j), to the extent the same are transferrable;

(k) all prepaid expenses and cash and cash equivalents of the Company;

(l) all goodwill and going-concern value of the Company and the
Business; and

(m) all other assets and properties of any nature whatsoever held by
the Company, either directly or indirectly, and used in, allocated to, or
required for the conduct of the Business, but excluding the Excluded Assets (as
defined in Section 2.02 below).

SECTION 2.022. EXCLUDED ASSETS. Anything to the contrary in Section
2.01 notwithstanding, the Assets shall exclude and Xxxxxxxxx Subsidiary shall
not purchase (i) all tax books of the Company other than those relating to
sales, use and other state and local taxes, (ii) all books and ledgers relating
to the ownership interests in the Company, and minutes of meetings of, and
actions taken by, the Company's shareholders, (iii) the rights which accrue or
will accrue to the Company under this Agreement, (iv) any Employee Plan, (v)
Affiliated Obligations, and (vi) the assets set forth on SCHEDULE 2.02 hereto
(collectively, the "EXCLUDED ASSETS").

SECTION 2.023. PURCHASE PRICE.

(a) The aggregate purchase price (the "PURCHASE PRICE") to be paid for
the Assets shall consist of (i) $20,225,000, payable at Closing as provided by
Section 2.03(b) which shall be a joint and several obligation of Xxxxxxxxx and
Xxxxxxxxx Subsidiary, (ii) such additional payments (the "ADDITIONAL PAYMENTS"),
if any, which may be made as described in SCHEDULE 2.03(A) hereto (the
"ADDITIONAL PAYMENTS SCHEDULE") which shall be a joint and several obligation of
Xxxxxxxxx and Xxxxxxxxx Subsidiary, and (iii) the assumption by the Xxxxxxxxx
Subsidiary of the Assumed Liabilities.

(b) PAYMENT OF PURCHASE PRICE. At the Closing, Xxxxxxxxx and Xxxxxxxxx
Subsidiary, jointly and severally, shall pay the Company $18,225,000 by wire
transfer of immediately available funds and shall deposit $2,000,000 with the
Escrow Agent pursuant to the terms of the Escrow Agreement.

(c) RIGHT TO CONTEST CALCULATION OF THE ADDITIONAL PAYMENTS. In
connection with the adjustment to the Purchase Price which may be made pursuant
to clause (a) above based on the calculation of the Additional Payments, the
Principal shall be entitled to:

(i) at his own expense, have his certified public
accountants review Xxxxxxxxx Subsidiary's calculation of PBT (as defined in the
Additional Payments Schedule) and determination of any Additional Payment (the
"XXXXXXXXX DETERMINATION") in order to confirm the calculation thereof. The
Principal shall complete his review as promptly as possible but in no event
later than forty-five (45) days following receipt of the Xxxxxxxxx Determination
and payment, if any, of the Additional Payment due therewith.

(ii) If, within forty-five (45) days (or such
shorter period) following receipt by the Principal of the Xxxxxxxxx
Determination, the Principal objects to any part thereof, the Principal shall
notify in writing (an "OBJECTION NOTICE") Xxxxxxxxx, specifying in reasonable
detail the nature of the objections. If the Principal does not deliver an
Objection Notice within such 45-day period, the calculation of the applicable
PBT and Additional Payment shall be deemed final and binding. If the Principal
does timely deliver an Objection Notice, the Principal and Xxxxxxxxx shall
promptly seek to agree upon any disputed matters. If full agreement is not
reached within ten (10) business days following the date of the Objection
Notice, the parties shall jointly designate a firm of independent certified
public accountants having no past or current affiliation with Xxxxxxxxx, the
Principal or any of their respective affiliates to resolve any disputed matters
in accordance with this paragraph and, if the parties cannot jointly agree on
the designation of such a firm within ten (10) business days following the date
of the Objection Notice, the parties shall jointly request the American
Institute of Certified Public Accountants promptly to designate a firm of
independent certified public accountants having no past or

current affiliation with Xxxxxxxxx, the Principal or any of their respective
affiliates. The firm so designated shall, within thirty (30) days thereafter,
determine all unresolved issues between Xxxxxxxxx Subsidiary and the Principal
in accordance with generally accepted accounting principles in the United States
consistently applied and certify in writing the resolution thereof to the
Principal and Xxxxxxxxx Subsidiary. The costs and expenses of such firm shall be
borne by the Principal unless the firm designated in the preceding sentence
determines that the Additional Payments due amount to 115% or more of the amount
objected to by the Principal, in which case such costs shall be borne by
Xxxxxxxxx or Xxxxxxxxx Subsidiary. The applicable PBT and Additional Payment
with such changes as are agreed upon between the Principal and Xxxxxxxxx
Subsidiary or their respective accountants or as so determined by the
independent firm appointed pursuant to the terms hereof, shall be deemed final
and binding.

(iii) Xxxxxxxxx and Xxxxxxxxx Subsidiary
covenant and agree to (A) keep reasonably detailed records relating to the
results of operations of the RR-JT8 Division and the calculation of the
Additional Payments and provide the Company and its accountants reasonable
access to such detailed records and reasonable opportunity to speak with
employees of Xxxxxxxxx involved in the accounting department of Xxxxxxxxx so as
to enable the Company and its accountants to review and analyze the Xxxxxxxxx
Determination following an Objection Notice, (B) provide the Company and the
Principal with the calculation of Gross Margin of the RR-JT8 Division within
forty-five (45) days of the end of each calendar quarter and (C) provide
reasonable back-up information along with the delivery of the Xxxxxxxxx
Determination.

SECTION 2.024. LIABILITIES ASSUMED BY XXXXXXXXX AND XXXXXXXXX
SUBSIDIARY. In further consideration for the sale of the Assets, on the Closing
Date Xxxxxxxxx and Xxxxxxxxx Subsidiary, jointly and severally, shall assume and
agree to pay, perform and discharge the Assumed Liabilities. For purposes of
this Agreement, the term "ASSUMED LIABILITIES" shall mean (a) all the
Liabilities of the Company set forth in the December 31 Balance Sheet, (b) all
liabilities of the Company that have arisen after December 31, 1997 in the
ordinary course of business and consistent with past practice or accruing from
and after December 31, 1997 pursuant to the Assigned Contracts and (c) the other
liabilities specifically set forth on SCHEDULE 2.04, but shall exclude (a) any
Liabilities for transactional and advisory costs, including, without limitation,
attorneys' and accountants' fees and expenses, incurred in connection with the
transactions contemplated hereby or the proposed sale of the Company or any
equity interest therein (collectively, "TRANSACTION COSTS"), (b) Taxes measured
by income owing by the Company to any governmental agency or other taxing
authority, (c) any Employee Plan, (d) any Liabilities arising out or relating to
the Excluded Assets, and (e) any Liabilities resulting from, arising out of, or
caused by any facts or circumstances which would constitute a breach of the
representations and warranties of the Company set forth herein for which the
Company and the Principal would be required to indemnify Xxxxxxxxx or Xxxxxxxxx
Subsidiary under the terms of this Agreement. Nothing in this Section 2.04 shall
in any way limit the right of

Xxxxxxxxx or Xxxxxxxxx Subsidiary to indemnification under this Agreement.
Notwithstanding anything to the contrary contained herein, neither Xxxxxxxxx nor
Xxxxxxxxx Subsidiary shall assume, pay, discharge, become liable for or perform
when due, and the Company shall not cause Xxxxxxxxx or Xxxxxxxxx Subsidiary so
to assume, pay, discharge, become liable for or perform, any Liabilities, debts,
contracts, commitments and other obligations of the Company of any nature
whatsoever not expressly assumed pursuant to this Section 2.04.

SECTION 2.025. INSTRUMENTS OF CONVEYANCE AND TRANSFER OF BOOKS AND
RECORDS. At the Closing, the Company shall deliver to Xxxxxxxxx Subsidiary, such
deeds, bills of sale, endorsements, assignments and other instruments of sale,
conveyance, transfer and assignment, satisfactory in form and substance to
Xxxxxxxxx Subsidiary and its counsel, as may be reasonably requested by
Xxxxxxxxx Subsidiary, in order to convey to Xxxxxxxxx Subsidiary good and
marketable title to the Assets, free and clear of all Liens except for Permitted
Liens. The Company shall pay all sales, use, transfer or stamp taxes, or similar
charges, payable by reason of the sale hereunder.

SECTION 2.026. THE CLOSING.

Assuming the satisfaction or the waiver of satisfaction of the
conditions contained herein, the Closing will take place at the offices of
Fulbright & Xxxxxxxx L.L.P., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as soon
as possible but in no event later than three Business Days following the receipt
of HSR clearance but no later than June 30, 1998. The date the Closing takes
place is the "CLOSING DATE."

ARTICLE III

REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY AND THE PRINCIPAL

Each of the Company and Principal, jointly and severally, represents
and warrants to Xxxxxxxxx and Xxxxxxxxx Subsidiary that the statements contained
in this Article III are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this Article III), except as set forth in the schedules delivered by
the Principal to Xxxxxxxxx and Xxxxxxxxx Subsidiary on the date hereof (the
"SCHEDULES").

SECTION 3.031. ORGANIZATION, ETC. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey and has full corporate power and authority to conduct its Business as
it is now being conducted and to own, operate or lease the properties and assets
it currently owns, operates or holds under lease. The Company is duly qualified
or licensed to do business and is in good standing as a foreign corporation in
each jurisdiction

where the character of its Business or the nature of its properties makes such
qualification or licensing necessary, except where the failure to so qualify or
be licensed would not have a Material Adverse Effect, all of which jurisdictions
are set forth on SCHEDULE 3.01. The Company has heretofore delivered to
Xxxxxxxxx true and correct copies of its Certificate of Incorporation and
By-laws as in effect on the date hereof.

SECTION 3.032. SUBSIDIARIES. The Company has no equity interest in any
corporation, partnership, joint venture or other legal entity.

SECTION 3.033. CAPITALIZATION. The Principal is the sole stockholder of
the Company. No contract, commitment or undertaking of any kind has been made
for the issuance of any additional capital stock or other interests in the
Company; nor is there in effect or outstanding any subscription, option, warrant
or preemptive or other right to acquire any of such capital stock or other
instruments convertible into or exchangeable for any of such capital stock.

SECTION 3.034. OWNERSHIP OF ASSETS. The Company is the legal and
beneficial owner of the Assets, free and clear of any Liens except for Permitted
Liens; the Company has full right, power and authority to sell, transfer,
assign, convey and deliver all of the Assets to be sold by it hereunder; and
delivery thereof will convey to Xxxxxxxxx Subsidiary good, absolute and
marketable title to said Assets, free and clear of any Liens except for
Permitted Liens, except in each case for Assets which are not material in value
or otherwise material to the Business.

SECTION 3.035. AUTHORITY AND NO CONFLICT; CONSENTS. (a) The Company has
the full right, power and authority to execute, deliver and carry out the terms
of this Agreement and all other documents and agreements to be entered into in
connection herewith or necessary to give effect to the provisions of this
Agreement (the "OTHER AGREEMENTS"), and this Agreement and the Other Agreements
have been duly authorized, executed and delivered by the Company. Except to the
extent that consents are required as set forth on SCHEDULE 3.05, the execution
and delivery of this Agreement and the Other Agreements by the Company does not,
and the consummation of the transactions contemplated hereby will not, (i)
conflict with, or result in any violation of or default or loss of any benefit
under, any provision of the Company's governing instruments; (ii) conflict with,
or result in any violation of or default or loss of any material benefit under,
any permit, concession, grant, franchise, law, rule or regulation, or any
judgment, decree or order of any court or other Regulatory Authority to which
the Company or its assets or Business is a party or to which the Company is
subject; (iii) conflict with, or result in a breach or violation of or default
or loss of any material benefit under, or accelerate the performance required
by, the terms of any material agreement, contract, indenture or other instrument
to which the Company is a party or to which the Company's assets or Business is
subject, or constitute a default or loss of any material right thereunder or the
creation of any material Liens upon the Company's assets; or (iv) result in any
suspension, revocation, impairment, forfeiture or nonrenewal of any material

License. All action and other authorizations prerequisite to the execution of
this Agreement and the consummation of the transactions contemplated hereby have
been taken or obtained by the Company and the Principal. This Agreement is the
valid and binding agreement of the Company enforceable in accordance with its
terms (except as such enforceability may be limited by any applicable
bankruptcy, insolvency or other laws affecting creditors' rights generally or by
general principles of equity, regardless of whether such enforceability is
considered in equity or at law).

(b) Other than as set forth on SCHEDULE 3.05 hereto, the execution,
delivery and performance by the Company of this Agreement, and the performance
of the transactions contemplated by this Agreement, do not require the
authorization, consent, approval, certification, license or order of, or any
filing with, any Regulatory Authority or any other third party except for such
authorizations, consents, approvals, certifications, licenses and orders that
have been obtained.

SECTION 3.036. FINANCIAL STATEMENTS; BOOKS AND RECORDS. A copy of the
balance sheet of the Company at December 31, 1997 has been attached as SCHEDULE
3.06 hereto (the "DECEMBER 31 BALANCE SHEET"). Also attached hereto as SCHEDULE
3.06 are the related statements of operations, stockholders' equity and cash
flows of the Company for the fiscal year ended December 31, 1997 (together with
the December 31 Balance Sheet, the "DECEMBER 31 FINANCIAL STATEMENTS"). Also
attached hereto as SCHEDULE 3.06 are unaudited financial statements of the
Company for the month ended January 31, 1998 (the "INTERIM FINANCIAL
STATEMENTS"), which financial statements have been prepared on the same basis as
the December 31 Financial Statements, subject to normal year-end adjustments and
accruals (none of which is expected to be material). (The December 31 Financial
Statements and the Interim Financial Statements are collectively referred to as
the "FINANCIAL STATEMENTS.") The book value of the assets set forth in the
Financial Statements, when calculated in accordance with United States generally
accepted accounting principles, is not less than stated in the Financial
Statements and are consistent with the books and records of the Company and the
Financial Statements represent the financial condition and results of operations
of the Company as at and for the periods reflected therein which is no worse
than the financial condition and results of operations which would have been
presented in financial statements prepared in accordance with United States
generally accepted accounting principles.

SECTION 3.037. NO UNDISCLOSED LIABILITIES. Except as set forth in the
notes to the Financial Statements or on SCHEDULE 3.07 hereto, the Liabilities on
the balance sheet included in the Interim Financial Statements (the "INTERIM
BALANCE SHEET") consist solely of accrued obligations and Liabilities incurred
by the Company in the ordinary course of business to Persons which are not
Affiliates of the Company. There are no Liabilities of the Company of any kind
whatsoever, whether or not accrued and whether or not contingent or absolute,
determined or determinable or otherwise, including without limitation
documentary or standby letters of credit, bid or performance bonds, or customer
or third party guarantees, and no existing condition, situation or set of
circumstances that could reasonably result in such a

Liability, other than (i) Liabilities disclosed on SCHEDULE 3.07, in the notes
to the Financial Statements or in the Interim Financial Statements, and (ii)
Liabilities which have arisen after January 31, 1998 (the "BALANCE SHEET DATE")
in the ordinary course of business and consistent with past practice (none of
which is a Liability for breach of contract, breach of warranty, tort,
infringement claim or lawsuit) which, whether individually or in the aggregate,
could or could reasonably be expected to have a Material Adverse Effect. There
are no asserted claims for indemnification by any Person against the Company
under any law or agreement or pursuant to the Company's Certificate of
Incorporation or By-laws and neither the Company nor the Principal is aware of
any facts or circumstances that might reasonably give rise to the assertion of
such a claim against the Company thereunder.

SECTION 3.038. CORPORATE ACTION. All corporate action of the Board of
Directors and of the stockholders of the Company taken on or prior to the date
hereof has been duly authorized, adopted or ratified in accordance with
applicable law and the Certificate of Incorporation and By-laws of the Company,
and has been duly recorded in its corporate minute books (which have been made
available for inspection by Xxxxxxxxx).

SECTION 3.039. ABSENCE OF CHANGES. Except as disclosed on SCHEDULE 3.09
hereto or otherwise approved in writing by Xxxxxxxxx, since the Balance Sheet
Date there has not been, with respect to the Company, any (a) transaction by the
Company except in the ordinary course of business as conducted during the
12-month period ending on that date; (b) capital expenditures exceeding $100,000
or Inventories expenditures exceeding $500,000, in each case in the aggregate;
(c) Material Adverse Event or Material Adverse Effect; (d) destruction, damage
to, or loss of any asset (whether or not covered by insurance) that,
individually or in the aggregate has a Material Adverse Effect; (e) labor
trouble or other event or condition relating to employment or labor matters of
any character that, individually or in the aggregate, could have a Material
Adverse Effect; (f) increase in compensation payable to, or any employment,
bonus or compensation agreement entered into with, any employees or consultants
of the Company (other than those made after consultation with Xxxxxxxxx); (g)
change in accounting methods or practices (including, without limitation,
changes in depreciation or amortization policies or rates) by the Company; (h)
revaluation of the Company's assets; (i) sale or transfer of any asset of the
Company except in the ordinary course of business; (j) amendment or termination
of any material contract, agreement, or license to which the Company is a party;
(k) loan or other investment by the Company to or in any person or entity, or
guaranty of any loan other than travel or other job-related expenses advanced to
employees in the ordinary course of business not exceeding $30,000 in the
aggregate; (l) commitment to borrow money or any mortgage, pledge, or other
encumbrance of any asset of the Company or grant or commitment to grant a
mortgage, pledge, or other encumbrance of any asset of the Company; (m) waiver
or release of any right or claim of the Company except in the ordinary course of
business; (n) material obligation or liability (absolute or contingent) incurred
by the Company or to which it has become subject except

current liabilities incurred in the ordinary course of business and obligations
under contracts entered into in the ordinary course of business; (o) write-off
in excess of reserves as uncollectible of any accounts or notes receivable; (p)
issue or split-up of, or grant of any option or other right to acquire, any
security of the Company; (q) amendment of the Company's Certificate of
Incorporation or By-laws; (r) dividend or distribution on or with respect to
shares of capital stock or other equity securities of the Company, or any other
distribution to the Principal or his Affiliates other than (i) payments for
salaries, bonuses and regular Business expenses listed on SCHEDULE 3.09(R)
hereto and (ii) the distribution to the Principal of the Interim Period Tax
Distribution; (s) issuance, grant, sale or pledge of any shares of, or rights of
any kind to acquire any shares of, capital stock, or purchase, redemption or
other acquisition of any shares of such capital stock or other equity
securities; (t) cancellation of current insurance (or reinsurance) policies or
termination of any of the coverage thereunder; (u) any payment or provision with
respect to any employee benefit plan, except in the ordinary course of the
administration of such plans; (v) grants of any stock options, restricted stock
grants, stock appreciation rights or similar instruments or rights; (w) new
employment agreement or other contract or arrangement with respect to the
performance of personal services which is not terminable without liability by
the Company on not more than 30 days' notice; or (x) oral or written agreement,
contract, arrangement or understanding with respect to any of the foregoing.

SECTION 3.10. TAXES. Except as specifically set forth in SCHEDULE 3.10:

(a) All Tax Returns required to be filed by or on behalf of the Company
have been properly prepared and duly and timely filed with the appropriate
taxing authorities in all jurisdictions in which such Tax Returns are required
to be filed (after giving effect to any valid extensions of time in which to
make such filings), and all such Tax Returns were true, complete and correct in
all material respects except where the failure to file such a Tax Return would
not have a Material Adverse Effect.

(b) All Taxes for all periods up to the Closing Date that are due and
payable by the Company on or before the Closing Date have been, or on or before
the Closing Date will be, fully and timely paid, and adequate reserves or
accruals for any and all Taxes for which the Company is liable with respect to
any period ending on or before the Closing Date for which Tax Returns have not
yet been filed or for which Taxes are not yet due and owing have been made in
the Financial Statements or are disclosed on SCHEDULE 3.10 hereto.

(c) The Company has timely withheld from employee salaries, wages and
other compensation and paid over to the appropriate taxing authorities all
amounts required to be so withheld and paid over for all periods under all
applicable laws ending on or before the Closing Date.

(d) Xxxxxxxxx has received complete copies of any audit report issued
within the last three years relating to Taxes due from the Company.

(e) The Company has not executed or filed with the IRS or any other
taxing authority any agreement, waiver or other document or arrangement
extending or having the effect of extending the period for assessment or
collection of Taxes (including, but not limited to, any applicable statute of
limitation), except as set forth on SCHEDULE 3.10.

(f) No written claim has been made by a taxing authority in a
jurisdiction where the Company does not file Tax Returns that the Company is or
may be subject to taxation by that jurisdiction, which claim would have a
Material Adverse Effect.

(g) All deficiencies asserted or assessments made as a result of any
examinations by the IRS or any other taxing authority of the Tax Returns of or
covering or including the Company have been fully paid, and there are no other
audits or investigations pending or, to the Company's or the Principal's
knowledge, threatened, by any taxing authority in progress, nor has the
Principal nor the Company received any written notice from any taxing authority
that it intends to conduct such an audit or investigation.

(h) Neither the Company nor any other person (including the Principal
on behalf of the Company) has filed a consent pursuant to Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of
a "subsection (f) asset" (as such term is defined in Section 341(f)(4) of the
Code) owned by the Company.

(i) None of the Assets is (i) property required to be treated as being
owned by another person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, (ii) constitutes "tax-exempt use
property" within the meaning of Section 168(h)(1) of the Code or (iii) is
"tax-exempt bond financed property" within the meaning of Section 168(g) of the
Code.

(j) There are no Liens as a result of any unpaid Taxes upon any of the
Assets.

(k) The Company has properly and timely elected under Section 1362 of
the Code, and under each analogous or similar provision of state or local law in
each jurisdiction where such an election is available and in which the Company
is required to file a Tax Return, to be treated as an "S" corporation for all
taxable periods since its inception. There has not been any voluntary or
involuntary termination or revocation of any such election.

(l) No tax is required to be withheld by Xxxxxxxxx or Xxxxxxxxx
Subsidiary under Section 1445 of the Code as a result of the sale of the Assets.

SECTION 3.11. LEASED PROPERTY.

(a) SCHEDULE 3.11 hereto identifies all leasehold interests in real
property including land and improvements held by the Company which is used or
useful in the conduct of the Business of the Company (the "LEASED PROPERTY").
The Company does not own of record or beneficially any real property. Except as
set forth in SCHEDULE 3.11, none of the leasehold interests are subject to any
Liens (other than Liens for current property taxes and assessments or mechanics
liens, in each case with respect to amounts not in default).

(b) Except as set forth on SCHEDULE 3.11 hereto, there are no
outstanding contracts made by the Company for any improvements to the Leased
Property which have not been fully paid for. At the Closing, the Company shall
cause to be discharged all mechanics' or materialmen's liens arising from any
labor or materials furnished to the Leased Property on behalf of the Company
prior to the time of Closing.

(c) The use and operation of the Leased Property is in full compliance
with all applicable statutes, rules, regulations, ordinances, orders, writs,
injunctions, judgments, decrees, awards and restrictions of every Regulatory
Authority having jurisdiction over any of the Leased Property, the Company or
its Business, and every instrumentality or agency thereof (including, without
limitation, applicable statutes, rules, regulations, orders and restrictions
relating to zoning, land use, safety, health, environment, hazardous substances,
pollution controls, employment and employment practices and access by the
handicapped) (collectively, "LAWS"), and with all covenants, conditions,
restrictions, easements, disposition agreements and similar matters affecting
the Leased Property, except where such non-compliance would not have a Material
Adverse Effect. Effective as of the Closing Date, the Company shall have the
right to continue the use and operation of the Leased Property for its current
uses in the operation of the Company's Business. The Company has not received
any notice of any violation of or investigation regarding any Laws relating to
the use and operation of the Leased Properties, which violation or investigation
would have a Material Adverse Effect.

SECTION 3.12. ENVIRONMENTAL PROTECTION. Except as set forth on SCHEDULE
3.12, (a) no Hazardous Substances are present on or below the surface of the
Leased Property and such real estate has not previously been used by the Company
or the Principal for the manufacture, refining, treatment, storage, or disposal
of any Hazardous Substance; (b) none of the soil, ground water, or surface water
of the Leased Property is contaminated by any Hazardous Substance and the
Company is not aware of any such contamination from neighboring real estate; and
(c) except as consistent with applicable Environmental Laws, no Hazardous
Substances are being emitted, discharged or released from the Leased Property
into the environment,

except for such occurrences or circumstances described in clauses (a) through
(c) which would not have a Material Adverse Effect. Except as set forth on
SCHEDULE 3.12, the Company is not liable for cleanup or response costs with
respect to the emission, discharge, or release of any Hazardous Substance or for
any other matter arising under the Environmental Laws due to its operation of
the Leased Property.

SECTION 3.13. INTELLECTUAL PROPERTY. SCHEDULE 3.13 contains a schedule
of all the Intellectual Property of the Company. The Company has not infringed,
and is not now infringing, any trade name, trademark, service xxxx, copyright,
patent, trade secret or other Intellectual Property right belonging to a third
party, and it has not received any notice of infringement upon or conflict with
the asserted rights of others. Except as set forth on SECTION 3.13 hereto, none
of such Intellectual Property rights are registered with the United States
Patent and Trademark Office or the United States Copyright Office. Except as
disclosed in SCHEDULE 3.13, the Company is not a party to any license,
agreement, or arrangement, whether as licensor, licensee, or otherwise, with
respect to any Intellectual Property right. There are no trade names,
trademarks, service marks, copyrights, patents or applications for patents and
trade secrets other than those listed on SECTION 3.13 which are necessary for
the conduct of the Company's Business. The Company is not a party to any
outstanding options, licenses or agreements of any kind relating to the
foregoing. No partner, officer or employee of the Company or any predecessor has
any interest in any of the foregoing rights.

SECTION 3.14. ASSETS. The Assets constitute in the aggregate, all of
the assets and tangible personal property owned by, in the possession of, or
used by the Company in connection with the Business, and (other than Assets
which are not material in value or otherwise material to the Business) are owned
by the Company free and clear of any Liens, except for Permitted Liens. Except
as disclosed in SCHEDULE 3.14, no personal property used in connection with the
Company's Business is held under any lease, security agreement, conditional
sales contract, or other title retention or security arrangement, or is other
than in its possession and control. All tangible personal property other than
the Inventories is being sold in an "AS IS/WHERE IS" condition.

SECTION 3.15. INVENTORIES. All Inventories of the Company consist, and
at the Closing Date will consist, of a quality and quantity usable and saleable
in the ordinary course of business, except for items of obsolete materials. The
value of the Inventory set forth in the Financial Statements is not less than
stated in the Financial Statements.

SECTION 3.16. PRODUCT WARRANTY. Each product manufactured, sold,
leased, or delivered by the Company has been in conformity with all applicable
contractual commitments and all express and implied warranties, if any, and the
Company does not have any material Liability (and there is no reasonable basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against it giving rise to any material
Liability) for replacement or repair

thereof or other damages in connection therewith, subject only to the reserve
for product warranty claims set forth in the Interim Balance Sheet as adjusted
for the passage of time through the Closing Date in accordance with the past
custom and practice of the Company. No product sold, leased, or delivered by the
Company is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease of such product.

SECTION 3.17. PERSONNEL AND PLANS. SCHEDULE 3.17 comprises a complete
and correct list of (a) the names, titles, length of employment or service and
current annual salary rates and all other compensation and fringe benefits of
each of the employees, officers or consultants of the Company who is engaged in
the conduct of the Business and (b) the amount of accrued bonuses, vacation,
sick leave, maternity leave and other leave for such personnel. The Company is
not in default with respect to any withholding or other employment taxes or
payments with respect to accrued vacation or severance pay on behalf of any
employee for which it is obligated on the date hereof, and the Company will
maintain and continue to make all such necessary payments or adjustments arising
through the Closing Date. There are not in existence or, to the Company's or the
Principal's knowledge, threatened any (y) work stoppages respecting employees of
the Company or (z) unfair labor or practice complaints against the Company. No
representation question exists respecting the employees of the Company and no
collective bargaining agreement is currently being negotiated by the Company
covering employees of the Company, nor is any grievance procedure or arbitration
proceeding pending under any collective bargaining agreement and no claim
therefor has been asserted. The Company has not received notice from any union
or employees setting forth demands for representation, elections or for present
or future changes in wages, terms of employment or working conditions. There
have been no audits of the equal employment opportunity practices of the
Company, and, to the best knowledge of the Company, no basis for such audit
exists. The Company does not have any severance agreement or other arrangement
with respect to severance with any employee of the Company. True and complete
copies of the current written personnel policies, manuals and/or handbooks of
the Company have previously been delivered to Xxxxxxxxx.

SCHEDULE 3.17 lists each of the following plans, contracts, policies
and arrangements which is or, was sponsored, maintained or contributed to by, or
otherwise binding upon the Company or, in the case of an "employee pension plan"
(as defined in Section 3(2) of ERISA), an ERISA Affiliate for the benefit of any
current or former employee, director or other personnel (including any such
plan, contract, policy or arrangement approved or adopted before, but effective
on or after, the date of this Agreement): (a) any "employee benefit plan,"as
such term is defined in Section 3(3) of ERISA, whether or not subject to the
provisions of ERISA, (b) any personnel policy, and (c) any other employment,
consulting, stock option, stock bonus, stock purchase, phantom stock, incentive,
bonus, deferred compensation, retirement, severance, vacation, dependent care,
employee assistance, fringe benefit, medical, dental, sick leave, death benefit,
golden parachute or other compensatory

plan, contract, policy or arrangement that is not an employee benefit plan as
defined in Section 3(3) of ERISA (each such plan, contract, policy and
arrangement being herein referred to as an "EMPLOYEE PLAN"). With respect to
each Employee Plan, the Company has delivered to Xxxxxxxxx true and complete
copies of each contract, plan document, policy statement, summary plan
description and other written material governing or describing the Employee Plan
and/or any related funding arrangements (including, without limitation, any
related trust agreement or insurance company contract) or, if there are no such
written materials, a summary description of the Employee Plan.

There are no Liens against the Assets under Section 412(n) of the Code
or Sections 302(f) or 4068 of ERISA. As of the Closing, neither Xxxxxxxxx nor
Xxxxxxxxx Subsidiary will have any obligation to contribute to, or any liability
in respect of, any Employee Plan. Each "employee benefit plan" of the Company
that has been required to comply with the provisions of Section 4980B of the
Code has substantially complied in all material respects.

SECTION 3.18. INSURANCE. Attached hereto as SCHEDULE 3.18 are
certificates of insurance setting forth all insurance agreements and policies
maintained by the Company, including any and all insurance agreements and
policies covering the Business and any life insurance policies maintained by the
Company on the lives of its employees, officers or directors, and the type and
amounts of coverage thereunder, which SCHEDULE 3.18 reflects all such insurance
which is required by law to be maintained by the Company. During the past three
years, the Company has not been refused insurance in connection with the
Company's Business, nor has any claim in excess of $10,000 been made in respect
of any such agreements or policies, except as set forth in SCHEDULE 3.18 hereto.
Such policies are in full force and effect, and the Company is not delinquent
with respect to any premium payments thereon. The Company maintains the type and
amount of insurance which is adequate to protect its financial condition against
the risks involved in the conduct of the Business.

SECTION 3.19. LITIGATION. Except as disclosed in SCHEDULE 3.19, there
is no suit, action, arbitration, or legal, administrative, or other proceeding,
or governmental investigation pending against or affecting the Company relating
to any of the transactions contemplated by this Agreement or which could have a
Material Adverse Effect. The Company is not in default of any order, writ,
injunction or decree of any Federal, state, local, or foreign court, department,
agency or instrumentality which would have a Material Adverse Effect.

SECTION 3.20. COMPLIANCE WITH LAW. Except as set forth on SCHEDULE 3.20
hereto, the Company has complied with all existing local, state, Federal and
foreign laws, rules, regulations, orders, judgments and decrees applicable to it
and its properties, including, without limitation, all laws, regulations, orders
and requirements relating to consumer protection, currency exchange, equal
opportunity, health, environmental protection, fire, zoning and building,
occupation safety and

pension matters except where such non-compliance would not have a Material
Adverse Effect.

SECTION 3.21. CONTRACTS, OBLIGATIONS AND COMMITMENTS. Except as set
forth on SCHEDULE 3.21 hereto, the Company has no existing contract, obligation
or commitment (written or material oral) of any nature, including, without
limitation, the following: (a) loan or other agreements, notes, indentures, or
instruments relating to or evidencing indebtedness for borrowed money or
mortgaging, pledging or granting or creating a Lien on any of its assets or any
agreement or instrument evidencing any guaranty by the Company of payment or
performance by any other person; (b) any contract or series of contracts with
the same person for the furnishing or purchase of equipment, goods or services
for an excess of $25,000; (c) any joint venture contract or arrangement or other
agreement involving a sharing of profits or expenses to which it is a party or
by which it is bound; (d) agreements which will limit the freedom of the Company
to compete in any line of business or in any geographic area or with any person;
(e) agreements providing for disposition of the assets of the Company other than
in the ordinary course of business or agreements of merger or consolidation to
which it is a party or by which it is bound; (f) any lease under which the
Company is either lessor or lessee relating to any asset of its Business or any
property at which its Business or such assets are located if such lease involves
lease payments in excess of $25,000 per year; or (g) any contract, commitment or
agreement with the federal government or any state or local government or any
agency thereof.

Except as set forth on SCHEDULE 3.21, each contract, agreement,
arrangement, plan, lease, license or similar instrument listed on SCHEDULE 3.21
is a valid and binding obligation of the Company and, to the best of the
Company's knowledge, the other parties thereto, enforceable in accordance with
its terms (except as the enforceability thereof may be limited by any applicable
bankruptcy, insolvency or other laws affecting creditors' rights generally or by
general principles of equity, regardless of whether such enforceability is
considered in equity or at law), and is in full force and effect, and neither
the Company, nor, to the best of such Company's knowledge, any other party
thereto has breached any provisions of, nor is in default in any respect under
the terms of (and, to the best of the Company's knowledge, no condition exists
which, with the passage of time, the giving of notice, or both, would result in
a default under the terms of), any of such contracts, except for such breaches
and defaults which would not have a Material Adverse Effect.

SECTION 3.22. LICENSES. The Company has all material Licenses necessary
from all applicable Regulatory Authorities for the lawful conduct of its
Business, all of which are listed on SCHEDULE 2.01(J) hereto, and it is not in
default in any respect under such Licenses, which default would have a Material
Adverse Effect.

SECTION 3.23. NO BROKER. The Company has not dealt with any broker or
finder in connection with any of the transactions contemplated by this Agreement
and

no broker or other person is entitled to any commission or finder's fee in
connection with any of such transactions.

SECTION 3.24. NO ILLEGAL OR IMPROPER TRANSACTIONS. Neither the Company
nor any stockholder, officer or employee of the Company, has directly or
indirectly, used funds or other assets of the Company, or made any promise or
undertaking in such regards, for (a) illegal contributions, gifts, entertainment
or other expenses relating to political activity; (b) illegal payments to or for
the benefit of governmental officials or employees, whether domestic or foreign;
(c) illegal payments to or for the benefit of any person, firm, corporation or
other entity, or any director, officer, employee, agent or representative
thereof; (d) gifts, entertainment or other expenses that materially jeopardize
the normal business relations between the Company and any of its customers; or
(e) the establishment or maintenance of a secret or unrecorded fund which would
violate any material Law. There have been no false or fictitious entries made in
the books or records of the Company, and the Company has records that accurately
and validly reflect transactions and accounting controls sufficient to insure
that such transactions are (i) in all material respects executed in accordance
with management's general or specific authorization and (ii) in all material
respects recorded in conformity with generally accepted accounting principles in
the United States.

SECTION 3.25. RELATED PARTY TRANSACTIONS. Except as set forth in
SCHEDULE 3.25, no current or former stockholder, officer or employee or any
associate (as defined in the rules promulgated under the Securities Exchange Act
of 1934, as amended) or any Affiliate of any of the foregoing of the Company, is
presently, or during the last three fiscal years has been, (a) a party to any
transaction with the Company with respect to the business of the Company
(including, but not limited to, any contract, agreement or other arrangement
providing for the furnishing of services by, or rental of real or personal
property from, or otherwise requiring payments to, any such director, officer,
employee or stockholder or such associate), or (b) the direct or indirect owner
of an interest in any corporation, firm, association or business organization
which is a present (or potential) competitor, supplier or customer of the
Company with respect to the business of the Company, nor does any such person
receive income from any source other than the Company which relates to the
business of, or should properly accrue to, the Company with respect to the
business of the Company.

SECTION 3.26. SUPPLIERS AND CUSTOMERS. (a) SCHEDULE 3.26(A) lists (i)
all suppliers of the Company to which the Company made payments during the year
ended December 31, 1997, or expects to make payments during the year ending
December 31, 1998, in excess of five percent of the combined cost of sales of
the Company for such year and (ii) all customers that paid the Company during
the year ended December 31, 1997 or that the Company expects will pay to the
Company during the year ending December 31, 1998, more than five percent of the
combined revenues of the Company.

(b) The Company has no information which might reasonably indicate that
any of the customers or suppliers listed on the SCHEDULE 3.26(A) intend to cease
purchasing from, selling to or dealing with the Company, nor has any information
been brought to its attention which might reasonably lead it to believe any such
customer or supplier intends to alter in any material respect the amount of such
purchases, sales or the extent of dealings with the Company or would alter in
any material respect such purchases, sales or dealings in the event of the
consummation of the Acquisition. The Company has no information which might
reasonably indicate, or information which has been brought to its attention
which might reasonably lead it to believe that, (i) any supplier will not be
able to fulfill outstanding or currently anticipated purchase orders placed by
the Company which, individually or in the aggregate, exceed $100,000, or (ii)
any customer will cancel outstanding or currently anticipated purchase orders
placed with the Company which, individually or in the aggregate, exceed
$100,000.

SECTION 3.27. ACCOUNTS RECEIVABLE. Except as set forth in SCHEDULE
3.27, each of the accounts receivable of the Company set forth on the Interim
Balance Sheet (a) arose from BONA FIDE sales in the ordinary course of business,
(b) was entered into under circumstances and by methods usual and customary in
the Company's Business in the applicable state and the collection practices used
with respect thereto have been in all respects legal and proper, (c) was entered
into, and credit granted pursuant hereto, consistent with the Company's
historical credit policies and practices and (d) shall be collected within one
hundred eighty (180) days of the Closing Date. The books of the Company
correctly record the principal balance of all accounts receivable and each of
the security instruments securing any account receivable, if any, constitutes a
valid lien in favor of the Company upon the property which it describes, and is
enforceable by the Company and its transferees. The reserves for doubtful
accounts shown or reflected in the Interim Financial Statements are adequate and
were calculated consistent with past practice.

If any account receivable of the Company (other than those for which a
reserve for non-payment has been established) remains uncollected one hundred
eighty (180) days after the Closing Date, the Company or the Principal shall
repurchase such unpaid account receivable from Xxxxxxxxx Subsidiary for the net
face amount thereof upon Xxxxxxxxx Subsidiary's assignment to the Company or the
Principal of the interest therein acquired by Xxxxxxxxx Subsidiary pursuant to
this Agreement and not subject to any lien, claim or encumbrance created
following the Closing Date, other than those of the account debtor relating to
such account receivable. The Company's and the Principal's obligations under the
preceding sentence are conditioned on Xxxxxxxxx Subsidiary acting at all times
in a commercially reasonable manner with respect to such account receivable. The
amount due from FSI to the Company described in Section 3.28 below shall not be
deemed to be an account receivable under this Section 3.27

SECTION 3.28. AMOUNTS OWING FROM FSI. The amount due from FSI to the
Company in the remaining principal amount of $1,600,000 owing to the Company

from FSI shall be collected, either in cash or in the form of services performed
by FSI for the Company, no later than the second anniversary of the Closing
Date. If such amount due uncollected on the second anniversary of the Closing
Date, the Company or the Principal shall repurchase such unpaid amount due from
Xxxxxxxxx Subsidiary for the net face amount thereof upon Xxxxxxxxx Subsidiary's
assignment to the Company or the Principal of the interest therein acquired by
Xxxxxxxxx Subsidiary pursuant to this Agreement and not subject to any lien,
claim or encumbrance created following the Closing Date.

SECTION 3.29. AFFILIATED OBLIGATIONS. As of the Closing Date, all
Affiliated Obligations shall have been repaid in full.

SECTION 3.30. NO MISLEADING STATEMENTS. This Agreement, the information
and schedules referred to herein and the information that has been furnished to
Xxxxxxxxx or Xxxxxxxxx Subsidiary in connection with the transactions
contemplated hereby do not include any untrue statement of a material fact and
do not omit to state any material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL

The Principal represents and warrants to Xxxxxxxxx and Xxxxxxxxx
Subsidiary that the statements contained in this Article IV are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Article IV), except
as set forth in the Schedules attached hereto.

SECTION 4.041. DUE AUTHORIZATION. The Principal has full power and
authority to execute and deliver this Agreement and the Other Agreements to
which the Principal is a party and to perform his obligations hereunder and
thereunder. The Principal has duly executed this Agreement and the Other
Agreements to which the Principal is a party, and this Agreement and the Other
Agreements to which the Principal is a party is, upon execution and delivery
thereof by him, his legal, valid and binding obligation, enforceable against him
in accordance with its terms (except as the enforceability thereof may be
limited by any applicable bankruptcy, insolvency or other laws affecting
creditors' rights generally or by general principles of equity, regardless of
whether such enforceability is considered in equity or at law).

SECTION 4.042. NO CONFLICT; CONSENTS. (a) Except as set forth on
SCHEDULE 4.02, neither the Principal's execution and delivery of this Agreement
and the Other Agreements to which the Principal is a party nor the consummation
of the transactions contemplated hereby or thereby by him will (i) conflict
with, or result

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in any violation of or default or loss of any material benefit under, any
permit, concession, grant, franchise, law, rule or regulation, or any judgment,
decree or order of any court or Regulatory Authority to which the Principal is a
party; or (ii) conflict with, or result in a breach or violation of or default
or loss of any material benefit under, or accelerate the performance required
by, the terms of any material agreement, contract, indenture or other instrument
to which the Principal is a party, or constitute a default or loss of any right
thereunder or an event which, with the lapse of time or notice or both, might
result in a default or loss of any right thereunder or the creation of any
material Lien upon the assets of the Principal.

(b) The execution, delivery and performance by the Principal of this
Agreement, and the performance of the transactions contemplated by this
Agreement, do not require the authorization, consent, approval, certification,
license or order of, or any filing with, any Regulatory Authority or any other
third party except for such authorizations, consents, approvals, certifications,
licenses and orders that have been obtained.

SECTION 4.043. BROKERS. The Principal has not paid or become obligated
to pay any fee or commission to any broker, finder, investment banker or other
intermediary in connection with the transactions contemplated by this Agreement
or the Other Agreements.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF
XXXXXXXXX AND XXXXXXXXX SUBSIDIARY

Xxxxxxxxx and Xxxxxxxxx Subsidiary, jointly and severally, represent
and warrant to the Company and the Principal that the statements contained in
this Article V are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article V).

SECTION 5.051. ORGANIZATION. Each of Xxxxxxxxx and Xxxxxxxxx Subsidiary
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all requisite power and
authority to execute, deliver and perform this Agreement and the Other
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby.

SECTION 5.052. AUTHORITY AND NO CONFLICT. Each of Xxxxxxxxx and
Xxxxxxxxx Subsidiary has the full right, power and authority to execute, deliver
and carry out the terms of this Agreement and the Other Agreements

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to which it is party, and all documents and agreements necessary to give effect
to the provisions of this Agreement and the Other Agreements, and this Agreement
and the Other Agreements to which it is a party have been duly authorized,
executed and delivered by each of Xxxxxxxxx and Xxxxxxxxx Subsidiary. The
execution and delivery of this Agreement and the Other Agreements to which it is
a party by each of Xxxxxxxxx and Xxxxxxxxx Subsidiary does not, and consummation
of the transactions contemplated hereby and thereby will not, (a) conflict with,
or result in any violation of or default or loss of any benefit under, any
provision of Xxxxxxxxx'x or Xxxxxxxxx Subsidiary's governing instruments; (b)
conflict with, or result in any violation of or default or loss of any material
benefit under, any permit, concession, grant, franchise, law, rule or
regulation, or any judgment, decree or order of any court or Regulatory
Authority to which Xxxxxxxxx or Xxxxxxxxx Subsidiary is a party; or (c) conflict
with, or result in a breach or violation of or default or loss of any material
benefit under, or accelerate the performance required by, the terms of any
material agreement, contract, indenture or other instrument to which Xxxxxxxxx
or Xxxxxxxxx Subsidiary is a party, or constitute a default or loss of any right
thereunder or an event which, with the lapse of time or notice or both, might
result in a default or loss of any right thereunder or the creation of any
material Lien upon the assets of Xxxxxxxxx or Xxxxxxxxx Subsidiary. All action
and other authorizations prerequisite to the execution of this Agreement and the
Other Agreements to which it is a party and the consummation of the transactions
contemplated hereby and thereby have been taken or obtained by Xxxxxxxxx and
Xxxxxxxxx Subsidiary. This Agreement and the Other Agreements to which it is a
party are valid and binding agreements of Xxxxxxxxx and Xxxxxxxxx Subsidiary
enforceable against Xxxxxxxxx and Xxxxxxxxx Subsidiary in accordance with their
terms (except as such enforceability may be limited by any applicable
bankruptcy, insolvency or other laws affecting creditor's rights generally or by
general principles of equity, regardless of whether such enforceability is
considered in equity or at law).

SECTION 5.053. CONSENTS. The execution, delivery and performance by
Xxxxxxxxx and Xxxxxxxxx Subsidiary of this Agreement and the Other Agreements to
which it is a party, and the performance of the transactions contemplated hereby
and thereby, do not require the authorization, consent, approval, certification,
license or order of, or any filing with, any Regulatory Authority or any other
third party except for such governmental authorizations, consents, approvals,
certifications, licenses and orders that have been obtained.

SECTION 5.054. REPORTS OF XXXXXXXXX. Xxxxxxxxx has delivered to the
Company and the Principal (a) Xxxxxxxxx'x Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1996; (b) Xxxxxxxxx'x Quarterly Reports for the
fiscal quarters ended March 31, 1997, June 30, 1997 and September 30, 1997; (c)
Xxxxxxxxx'x Definitive Proxy Statement for the Annual Meeting held on August 28,
1997; (d) Xxxxxxxxx'x Current Report on Form 8-K filed January 24, 1997, as
amended on Form 8-K/A filed March 7, 1997 and on Form 8-K/A(2) filed March 31,
1997; (e) Xxxxxxxxx'x Current Report on Form 8-K filed September 23, 1997 as
amended on Form 8-K/A filed November 24, 1997; and (f) Xxxxxxxxx'x Registration
Statement on Form S-3 filed January 9, 1998, as amended (collectively, the "SEC
REPORTS"). The SEC Reports, when filed with the Securities and Exchange

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Commission (the "SEC"), complied as to form in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended. As of their
respective dates, the SEC Reports did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein.
There have been no Forms 8-K filed by Xxxxxxxxx with the SEC since the filing of
Xxxxxxxxx'x Form S-3 on January 9, 1998.

SECTION 5.055. NO MATERIAL ADVERSE EFFECT. Since the filing of
Xxxxxxxxx'x Amendment No. 1 to Form S-3 on February 27, 1998, there has been no
material adverse change in results of operations, financial condition or
Business of Xxxxxxxxx or other material adverse event with respect to
Xxxxxxxxx'x assets, financial condition or prospects.

SECTION 5.056. BROKERS. Except as set forth on SCHEDULE 5.07, neither
Xxxxxxxxx, Xxxxxxxxx Subsidiary nor any of their Affiliates has paid or become
obligated to pay any fee or commission to any broker, finder, investment banker
or other intermediary in connection with the transactions contemplated by this
Agreement.

ARTICLE VI

PRE-CLOSING COVENANTS OF THE COMPANY
AND THE PRINCIPAL

PRE-CLOSING COVENANTS OF ALL PARTIES HERETO

SECTION 6.061. NOTICES AND CONSENTS. Each of the parties hereto, as
promptly as practicable, (a) will make, or cause to be made, all filings and
submissions required under laws, rules and regulations applicable to it, or to
its subsidiaries and Affiliates, as may be required for it to consummate the
transactions contemplated hereby; (b) will use all reasonable efforts to obtain,
or cause to be obtained, all authorizations, approvals, consents and waivers
from all Persons and Regulatory Authorities necessary to be obtained by it, or
its subsidiaries or Affiliates, in order for it so to consummate such
transactions; and (c) will use all reasonable efforts to take, or cause to be
taken, all other actions necessary, proper or advisable in order for it to
fulfill its obligations hereunder.

SECTION 6.062. REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. All
representations and warranties of the parties hereto set forth in this Agreement
will also be true and correct as of the Closing Date as if made on that date,
and the parties hereto shall immediately notify the other parties hereto if any
of them becomes aware of any inaccuracy in any representation or warranty at any
time after the date hereof. The parties hereto will not take, or agree to take,
any action which will result in any representation or warranty being untrue or
incorrect at any time from the date of this Agreement to the Closing Date.

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SECTION 6.063. ESCROW AGENT. The parties agree that, prior to the
Closing, the Company may replace the Escrow Agent with an alternative escrow
agent reasonably acceptable to Xxxxxxxxx so long as the escrow fees would be no
higher than those which would be charged by Xxxxxxx Bank, N.A. In the event of
such replacement, the term "Escrow Agent" shall mean such replacement escrow
agent.

PRE-CLOSING COVENANTS OF THE COMPANY AND THE PRINCIPAL

SECTION 6.064. ACCESS TO PREMISES AND INFORMATION. Subject to the terms
of the Confidentiality Agreement between the Company and Xxxxxxxxx (the
"CONFIDENTIALITY AGREEMENT"), from and after the date hereof until the Closing,
Xxxxxxxxx, Xxxxxxxxx Subsidiary and their counsel, accountants, and other
representatives will continue to have, during normal business hours after
reasonable notice, access to the Business and to all properties, books, accounts
and records, contracts and documents of or relating to the Business. Subject to
the terms of the Confidentiality Agreement, the Company will furnish or cause to
be furnished to Xxxxxxxxx, Xxxxxxxxx Subsidiary and their representatives all
data and information concerning the Business, finances and properties of the
Company and the Business that may be requested.

SECTION 6.065. CONDUCT OF BUSINESS IN ORDINARY COURSE. From and after
the date hereof until the Closing, the Company will carry on its Business in the
ordinary course and in substantially the same manner as such Business has
previously been carried out, and will not make or institute any material
purchase, sale, lease, management, accounting policy or operation that will vary
materially from those methods used by it during the 12-month period ending on
the date of this Agreement.

Without limiting the foregoing, from the date hereof until the Closing
Date, the Company will (a) not increase any compensation payable to any
employees or consultants (except in the ordinary course of business); (b) not
create any material obligation or Liability (absolute or contingent) except
Liabilities incurred in the ordinary course of business and obligations under
contracts entered in the ordinary course of business; (c) not enter into, amend
or terminate any material contract, agreement, permit or lease without the prior
written consent of Xxxxxxxxx other than in the ordinary course of business; (d)
not amend the Certificate of Incorporation or the By-laws of the Company; (e)
not enter into any commitment to borrow money or mortgage, pledge, or subject to
Lien, any assets or properties except in the ordinary course of business and not
exceeding $1,000,000; (f) not sell or transfer any of the Assets or cancel any
debt or claim except in the ordinary course of conduct of the Business or as
contemplated hereunder; (g) keep in full force and effect all insurance relating
to the Business comparable in amount and scope of coverage to that now
maintained; (h) perform in all material respects all its obligations under
contracts, leases and documents relating to or affecting conduct of the
Business, all in the same manner as heretofore performed; (i) use reasonable
efforts to maintain and preserve the Assets, the Business, the good will and
relationships with its present customers,

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officers, employees, suppliers, staff and others having a business relationship
with it, and maintain all material licenses and permits requisite to the conduct
of the Business; (j) not commit to capital expenditures exceeding $100,000 or
purchases of Inventories exceeding $500,000, in each case in the aggregate; (k)
maintain in working condition all buildings, equipment, fixtures and other
property, reasonable wear and tear excepted; (l) duly and timely file all Tax
and information returns with the appropriate Regulatory Authorities and promptly
pay when due all Taxes, assessments, charges, penalties and interest lawfully
levied assessed upon it or any of its property; (m) make no material change in
its existing banking and safe deposit arrangements or grant any powers of
attorney except in the ordinary course of business; (n) not distribute, spend,
commit or otherwise transfer any interest in the moneys paid to the Company
except in the ordinary course of business except for the Interim Tax
Distribution; (o) issue or split up, or grant any option or other right to
acquire, any equity interest or other interest or any other security of the
Company; or (p) make any declaration, set aside for payment or other dividend or
distribution on or with respect to shares of capital stock or other equity
securities of the Company, or make any direct or indirect redemption, purchase
or other acquisition of any interest in the Company except for the Interim Tax
Distribution.

SECTION 6.066 FURTHER EMPLOYMENT. Subject to Section 7.08 below,
Xxxxxxxxx Subsidiary agrees to offer employment to all current employees of the
Company from and after the Closing Date. To the extent permitted by law and
Xxxxxxxxx'x employee benefits plans, all employees of the Company shall be
permitted to roll over all pension and profit sharing assets into the applicable
employee benefits plans of Xxxxxxxxx or Xxxxxxxxx Subsidiary.

SECTION 6.067. NAME CHANGE. At the Closing, the Company will change its
name to a name that is not confusingly similar to its current name.

SECTION 6.068. FURTHER AUTHORIZATION. The Company will take, or cause
to be taken, such further actions as may be necessary or appropriate to
authorize the execution, delivery and performance of this Agreement by it.

SECTION 6.069. SCHEDULES. The Company and Principal acknowledge that
this Agreement was executed by Xxxxxxxxx and Xxxxxxxxx Subsidiary prior to
delivery of any of the Schedules referred to in this Agreement. Within three
Business Days of the execution of this Agreement, the Company and the Principal
shall deliver to Xxxxxxxxx a full and complete set of Schedules to this
Agreement which shall be satisfactory to Xxxxxxxxx and Xxxxxxxxx Subsidiary in
all respects.

ARTICLE VII

POST-CLOSING COVENANTS

POST-CLOSING COVENANTS OF ALL PARTIES HERETO

SECTION 7.071. GENERAL. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement and the Other Agreements, each of the parties hereto will take such
further action (including the execution and delivery of such further instruments
and documents) as any other party hereto reasonably may request. The Principal
acknowledges and agrees that from and after the Closing Xxxxxxxxx Subsidiary
will be entitled to possession of all documents, books, records, agreements, and
financial data of any sort relating to the Company except for the Excluded
Assets.

SECTION 7.072. MAINTENANCE OF AGREEMENTS. Xxxxxxxxx and Xxxxxxxxx
Subsidiary agree (a) to keep all material documents, books, records, agreements
and financial data included as part of the Assets for at least 3 years after the
Closing Date, (b) to make available to the Principal such documents, books,
records, agreements, and financial data for review at such times during normal
business hours, upon reasonable notice, as the Principal may reasonably request,
for the purpose of responding to or defending against claims (or asserting
counterclaims) or dealing with tax matters or governmental or regulatory
inquiries or investigations and to permit the Principal to make copies of any of
such documents, books, records, agreements and financial data (at the
Principal's expense) as may be reasonably necessary for any such purpose, and
(c) to give the Principal at least 30 days notice prior to discarding or
destroying any of such documents, books, records, agreements, and financial
data, and to permit the Principal to take delivery of such items that were
proposed to be discarded, if the Principal gives Xxxxxxxxx Subsidiary notice
within such 30 day period that the Principal desires to take possession of any
of the documents, books, records, agreements and financial data that are
proposed to be discarded or destroyed.

(a) COOPERATION ON TAX MATTERS.

(i) Xxxxxxxxx, Xxxxxxxxx Subsidiary, the Company and the
Principal shall cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing of Tax Returns pursuant to this
Section and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder.

(ii) Xxxxxxxxx, Xxxxxxxxx Subsidiary and the Principal further
agree, upon request, to use their reasonable best efforts to obtain any
certificate or other document from any Regulatory Authority or any other Person
as may be necessary to mitigate, reduce or eliminate any Tax that could be
imposed (including, but not limited to, with respect to the transactions
contemplated hereby).

(b) ALLOCATION OF PURCHASE PRICE. Xxxxxxxxx, in its sole discretion,
shall determine an allocation of the Purchase Price in its entirety among the
Assets and the non-competition provisions of Section 7.09 hereof as required by
Section 1060 of the Code and Treasury Regulations promulgated thereunder. It is
understood and agreed by the parties that (x) $5 million of the Purchase Price
will be allocated to goodwill and (y) any Additional Payments made under Section
2.03 are to be allocated to goodwill, in each case under United States generally
accepted accounting principles. The Company, the Principal and Xxxxxxxxx or
Xxxxxxxxx Subsidiary shall file all required information and tax returns (and
any amendments thereto) in a manner consistent with such allocation and comply
with the applicable information reporting requirements of Section 1060 of the
Code and Treasury Regulations promulgated thereunder. If, contrary to the intent
of the parties hereto as expressed in this Section 7.02, any taxing authority
makes or proposes an allocation different from that agreed upon pursuant to this
Section 7.02, the Company and Xxxxxxxxx or Xxxxxxxxx Subsidiary shall cooperate
with each other in good faith to contest such taxing authority's allocation (or
proposed allocation), PROVIDED, HOWEVER, that, after consultation with the party
adversely affected by such allocation (or proposed allocation), another party
hereto may file such protective claims or returns as may reasonably be acquired
to protect its interests.

(c) CERTAIN TAXES. All transfer (including, without limitation, any
real estate transfer taxes), documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement and the transactions contemplated hereby, shall
be paid by the Company when due, and the Company will, at its expense, file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, and the Company will, and will cause its Affiliates
to, join in the execution of any such Tax Returns and other documentation.

SECTION 7.073. XXXXXXXXX SUBSIDIARY TO ACT AS AGENT FOR THE COMPANY.
This Agreement shall not constitute an agreement to assign any contract right
included among the Assets if any attempted assignment of the same without the
consent of the other party thereto would constitute a breach thereof or in any
way adversely affect the rights of the Company thereunder. If such consent is
not obtained or if any attempted assignment would be ineffective or would
adversely affect the Company's rights thereunder so that Xxxxxxxxx Subsidiary
would not in fact receive all such rights, then Xxxxxxxxx Subsidiary shall act
as the agent for the Company in order to obtain for Xxxxxxxxx Subsidiary the
benefits thereunder and to

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assume the liabilities thereunder. Nothing herein shall be deemed to make
Xxxxxxxxx Subsidiary the Company's agent in respect of the Excluded Assets.

SECTION 7.074. DELIVERY OF PROPERTY RECEIVED BY THE COMPANY OR
XXXXXXXXX SUBSIDIARY AFTER CLOSING. From and after the Closing, Xxxxxxxxx
Subsidiary shall have the right and authority to collect, for the account of
Xxxxxxxxx Subsidiary, all assets which shall be transferred or are intended to
be transferred to Xxxxxxxxx Subsidiary as part of the Assets as provided in this
Agreement, and to endorse with the name of the Company (without recourse or
warranty except to the extent set forth herein) any checks or drafts received on
account of any such assets. The Company agrees that it will transfer or deliver
to Xxxxxxxxx Subsidiary promptly after the receipt thereof, any cash or other
property which the Company receives after the Closing Date in respect of any
assets transferred or intended to be transferred to Xxxxxxxxx Subsidiary as part
of the Assets under this Agreement. In addition, Xxxxxxxxx Subsidiary agrees
that it will transfer or deliver to the Company, promptly after receipt thereof,
any cash or other property which Xxxxxxxxx Subsidiary receives after the Closing
Date in respect of any assets not transferred or intended to be transferred to
Xxxxxxxxx Subsidiary as part of the Assets under this Agreement.

SECTION 7.075. XXXXXXXXX SUBSIDIARY APPOINTED ATTORNEY FOR THE COMPANY.
The Company, effective at the Closing Date, hereby constitutes and appoints
Xxxxxxxxx Subsidiary, and its successors and assigns, the true and lawful
attorney of the Company, in the name of Xxxxxxxxx Subsidiary or the Company (as
Xxxxxxxxx Subsidiary shall determine in its sole discretion) but for the benefit
of Xxxxxxxxx Subsidiary: (a) to institute and prosecute all proceedings which
Xxxxxxxxx Subsidiary may deem proper in order to collect, assert or enforce any
claim, right or title of any kind in or to the Assets as provided for in this
Agreement; (b) to defend or compromise any and all actions, suits or proceedings
in respect of any of the Assets, and to do all such acts and things in relation
thereto as Xxxxxxxxx Subsidiary shall deem advisable; and (c) to take all action
which Xxxxxxxxx Subsidiary, its successors or assigns may reasonably deem proper
in order to provide for Xxxxxxxxx Subsidiary, its successors or assigns, the
benefits under any of the Assets where any required consent of another party to
the sale or assignment thereof to Xxxxxxxxx Subsidiary pursuant to this
Agreement shall not have been obtained. The Company acknowledges that the
foregoing powers are coupled with an interest and shall be irrevocable.
Xxxxxxxxx Subsidiary shall be entitled to retain for its own account any amounts
collected pursuant to the foregoing powers, including any amounts payable as
interest in respect thereof. Xxxxxxxxx Subsidiary agrees to act in good faith in
seeking to collect, assert or enforce any claim against any third party in
accordance with this Section 7.05. Notwithstanding the foregoing, the power of
attorney set forth in this Section 7.05 shall not apply in the event that the
Company or the Principal has an indemnification obligation under Article X and
is complying with such obligation.

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SECTION 7.076. PAYMENT OF LIABILITIES. Following the Closing Date each
of Xxxxxxxxx Subsidiary and the Company agrees to discharge in accordance with
their terms the Assumed Liabilities and the Excluded Liabilities, respectively.

SECTION 7.077. SUBSEQUENT LIABILITY. If, subsequent to the Closing
Date, any liability for Taxes measured by the income of the Company relating to
the Assets or the conduct of the Business is imposed on Xxxxxxxxx or Xxxxxxxxx
Subsidiary with respect to any period prior to and through the Closing Date
which has not otherwise been assumed by Xxxxxxxxx or Xxxxxxxxx Subsidiary
pursuant to this Agreement, then the Company and the Principal, jointly and
severally, shall indemnify and hold Xxxxxxxxx and Xxxxxxxxx Subsidiary harmless,
from and against, and shall pay, the full amount of such Tax liability,
including any interest, additions to tax and penalties thereon, together with
interest on such additions to tax or penalties (as well as reasonable attorneys'
or other fees and disbursements of Xxxxxxxxx and Xxxxxxxxx Subsidiary incurred
in determination thereof or in connection therewith), or the Company and the
Principal shall, at their sole expense and in their reasonable discretion,
either settle any Tax claim that may be the subject of indemnification under
this Section 7.07 at such time and on such terms as they shall deem appropriate
or assume the entire defense thereof, PROVIDED, HOWEVER, that the Company and
the Principal shall not in any event take any position in such settlement or
defense that subjects Xxxxxxxxx or Xxxxxxxxx Subsidiary to any civil fraud or
any civil or criminal penalty. Notwithstanding the foregoing, neither the
Company nor the Principal shall consent, without the prior written consent of
Xxxxxxxxx Subsidiary, which prior written consent shall not be unreasonably
withheld, delayed or conditioned, to any change in the treatment of any item
which would adversely affect the tax liability of Xxxxxxxxx or Xxxxxxxxx
Subsidiary for a period subsequent to the Closing Date.

SECTION 7.078. EMPLOYEE MATTERS.

(a) The Company acknowledges that it has no information that Xxxxxxxxx
Subsidiary would not qualify for successor status under Internal Revenue Service
Revenue Procedure 96-60. Pursuant to that pronouncement, the parties agree
Xxxxxxxxx Subsidiary will file (with the federal government and the state, where
appropriate) a single W-2 for the 1998 taxable year for each employee of the
Company who becomes an employee of Xxxxxxxxx Subsidiary, reporting the wages
paid by both Xxxxxxxxx Subsidiary and the Company to any such employee. The
Company will provide Xxxxxxxxx Subsidiary any information not available to
Xxxxxxxxx Subsidiary relating to periods ending on or prior to the Closing Date
necessary for Xxxxxxxxx Subsidiary to prepare and distribute Forms W-2 for the
year ending December 31, 1998 to any such employees. In addition, both parties
will file Forms 941 for the quarter during which the sale takes place,
reflecting the wages and deposits made during its period of ownership.

(b) No term of this Agreement shall be deemed to create any contract
between Xxxxxxxxx or Xxxxxxxxx Subsidiary and any current employee of the

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Company which gives the employee the right to be retained in the employment of
Xxxxxxxxx Subsidiary or any related employer, or to interfere with Xxxxxxxxx
Subsidiary's right to terminate employment of any employee at any time or to
change its policies regarding salaries, benefits and other employment matters at
any time or from time to time. The representations, warranties, covenants and
agreements contained herein are for the sole benefit of the parties hereto, and
employees are not intended to be and shall not be construed as beneficiaries
hereof.

(c) Neither Xxxxxxxxx nor Xxxxxxxxx Subsidiary shall assume the
sponsorship of, or the responsibility for contributions to, or any liability in
connection with, any Employee Plan. Without limiting the foregoing, the Company
shall be liable for any continuation coverage (including any penalties, excise
taxes or interest resulting from the failure to provide continuation coverage)
required by Section 4980B of the Code due to qualifying events that occur on or
before the Closing Date, and the Company shall otherwise retain all obligations
and liabilities under the Employee Plans.

(d) With respect to any employee of the Company hired by Xxxxxxxxx or
Xxxxxxxxx Subsidiary, the Company shall retain and shall defend, indemnify and
hold Xxxxxxxxx and Xxxxxxxxx Subsidiary harmless from and against (i) all
liabilities and obligations arising under any group life, accident, medical,
dental or disability plan (whether or not insured) to the extent that such
liability or obligation relates to claims or expenses incurred (whether or not
then reported) on or prior to the Closing Date, (ii) all liabilities and
obligations arising under any worker's compensation arrangement to the extent
such liability or obligation arises out of an illness or injury that originated
prior to the Closing Date, including liability for any retroactive worker's
compensation premiums attributable to such period, and (iii) all other
liabilities and obligations arising under or in connection the Employee Plans to
the extent any such liability or obligation relates to services performed or
events occurring during any period on or prior to the Closing Date.

(e) No provision of this Agreement shall create any third party
beneficiary or other rights in any employee or former employee (including any
beneficiary or dependent thereof) of the Company in respect of employment with
Xxxxxxxxx or Xxxxxxxxx Subsidiary or in respect of any benefits that may be
provided, directly or indirectly, under any employee benefit plan, contract,
policy or arrangement which may be established by Xxxxxxxxx or Xxxxxxxxx
Subsidiary. No provision of this Agreement shall constitute a limitation on
rights to amend, modify or terminate after the Closing Date any such plans,
contracts, policies or arrangements of Xxxxxxxxx or Xxxxxxxxx Subsidiary.

POST-CLOSING COVENANTS OF THE COMPANY AND THE PRINCIPAL

SECTION 7.079. NON-COMPETITION. Each of the Company and the Principal
agrees that neither of them nor any of their Affiliates will, for a period of
five (5) years from the Closing Date, in the United States or elsewhere in the
world

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directly or indirectly (a) own, invest in, assist in the development of, or have
any management role in, any firm, corporation, business or other organization or
enterprise engaged, directly or indirectly, in the purchasing, refurbishing,
manufacturing, marketing or distribution of jet, turbo prop or other aircraft
engines or jet, turbo prop or other aircraft engine parts, or any other aircraft
part, without prior written consent of Xxxxxxxxx, (b) solicit for employment any
employee of Xxxxxxxxx or Xxxxxxxxx Subsidiary or any of their Affiliates, or (c)
interfere with, disrupt or attempt to disrupt the relationship between Xxxxxxxxx
or Xxxxxxxxx Subsidiary or any of their Affiliates, on the one hand, and any of
their respective employees, customers or suppliers, on the other hand. Nothing
herein contained, however, shall restrict the Company or the Principal from:

(x) making any investments in any company (but without otherwise
participating in the activities of such company) whose stock is listed on a
national securities exchange or actively traded in the over-the-counter market,
as long as such investment does not give him the right to control or influence
the policy decisions of any such business or enterprise which is or might be
directly or indirectly in competition with any of such business operations or
activities of Xxxxxxxxx or Xxxxxxxxx Subsidiary and does not involve the record
or beneficial ownership of more than 2% of the equity interests in such business
or enterprise;

(y) owning the FSI Stock and serving as a director or as an officer of
FSI so long as the Principal's acting as a shareholder, director or officer of
FSI do not, together with any activities under clause (z) below, materially
interfere with the Principal's duties and obligations under the Employment
Agreement, and the Principal shall not invest in any Debt Financing or any
Equity or Equity Equivalent Securities of FSI other than his investment in the
FSI Stock, without the prior written consent of Xxxxxxxxx; and

(z) owning an equity interest (without otherwise being materially
involved so long as such non-material involvement, together with any activities
under clause (y) above, does not materially interfere with the Principal's
duties and obligations under the Employment Agreement) in any entity which owns
rights to the so-called "AirFoil Recast" technology so long as such entity is
not utilizing the AirFoil Recast technology in connection with the refurbishing
or repair of jet, turbo prop or other aircraft engines or jet, turbo prop or
other aircraft engine parts, or any other aircraft parts.

Termination of the Employment Agreement, or the non-competition
provisions contained therein, shall in no way affect or diminish the obligations
of the Principal pursuant to this Section 7.09. Notwithstanding the foregoing or
anything else in this Agreement to the contrary, (a) in the event that it is
finally determined under the procedures set forth in Section 2.03, or agreed to
by Xxxxxxxxx that Xxxxxxxxx is required to pay the Company Additional Payments
and Xxxxxxxxx is in default of such payments or (b) the Principal leaves the
employ of Xxxxxxxxx for good

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reason (as defined in Section 5(d) of the Employment Agreement), the
non-competition provisions contained herein shall terminate.

If any court determines that any of the restrictive covenants set forth
in this Section 7.09, or any part of such covenants, is unenforceable because of
the duration of such provision or the area covered thereby, such court shall
have the power to reduce the duration or area of such provision and, in its
reduced form, such provision shall then be enforceable and shall be enforced.

SECTION 7.10. OPTION TO PURCHASE STOCK OF FSI.

(a) In consideration of Xxxxxxxxx Subsidiary assuming the Consulting
Agreement, dated April 1, 1997, between the Company and Xxxxx X. Xxxxx as part
of the Assigned Contracts, effective as of the Closing Date, the Principal
hereby grants to Xxxxxxxxx (or any subsidiary of Xxxxxxxxx) the right, subject
to the terms and conditions set forth below, to purchase 2,458 shares (the "FSI
Stock") of common stock, no par value, of FSI, representing 49% of the
outstanding capital stock of FSI. The option shall be exercisable at any time by
Xxxxxxxxx or any subsidiary of Xxxxxxxxx until the third anniversary of the
Closing Date by delivering written notice thereof to the Principal. The closing
of the purchase of the FSI Stock shall be subject to the right of first refusal
of FSI with respect to the FSI Stock set forth in Section 4 of the FSI
Stockholders Agreement and shall take place three Business Days following the
FSI Offer Termination Date (such date, the "Option Closing Date"). The aggregate
purchase price for the FSI Stock shall be five million dollars ($5,000,000)
payable one million dollars ($1,000,000) in cash on the Option Closing Date and
one million dollars ($1,000,000) in cash on each of the four yearly
anniversaries following the Option Closing Date. In addition, the Principal
hereby assigns to Xxxxxxxxx or Xxxxxxxxx Subsidiary all compensation which may
be paid to the Principal, during the term of the option granted under this
Section 7.10, under his employment agreement with FSI, dated as of April 1,
1997.

(b) In the event that the outstanding shares of common stock, no par
value, of FSI, are changed into or exchanged for a different number or kind of
shares or other securities of FSI or of another corporation by reason of any
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or dividends payable in capital stock,
appropriate adjustment shall be made in the number and kind of shares as to
which this option shall be exercisable, to the end that the proportionate
interest of Xxxxxxxxx shall be maintained as before the occurrence of such
event; such adjustment in the option shall be made without change in the total
price applicable to the option and with a corresponding adjustment in the
exercise price per share. In addition, in the event that FSI distributes
dividends in the form of cash or other property during the term of the option
granted hereunder, and Xxxxxxxxx subsequently exercises the option and purchases
the FSI Stock the Principal shall deliver to Xxxxxxxxx on the Option Closing
Date an amount equal to the sum of (i) the cash distributed to the Principal
plus (ii) the fair market value of the property distributed to the Principal, in
each case plus interest accrued from

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the date of distribution at the fixed rate of six percent (6%) per annum. The
fair market value of property received shall be determined by an investment
banker agreed to by Xxxxxxxxx and the Principal with no past or current
affiliation with Xxxxxxxxx, the Principal or any of their respective affiliates.

(c) The Principal shall provide Xxxxxxxxx with all financial, operating
and other data relating to FSI, whether received by the Principal in his
capacity as a shareholder or director of FSI, or otherwise, promptly upon
receipt thereof by the Principal and shall use reasonable efforts to obtain such
other information as shall be reasonably requested from time to time by
Xxxxxxxxx.

(d) Principal, as a stockholder of FSI, shall not agree to any (i)
amendments to the FSI Stockholders' Agreement, the certificate of incorporation
or the by-laws of FSI or (ii) any other matter requiring the consent of the
Principal as a stockholder of FSI without the prior written consent of Xxxxxxxxx
which may withheld in Xxxxxxxxx'x sole discretion. In addition, neither the
Principal nor his replacement designee on the board of directors of FSI will
approve the incurrence of indebtedness for borrowed money ("Debt Financing") by
FSI or the issuance of any equity securities or any, options, warrants,
convertible securities, call, rights, commitments or agreements of any character
which may obligate FSI to issue equity securities (collectively, "Equity or
Equity Equivalent Securities") unless Xxxxxxxxx has been previously granted the
right of first refusal to provide such Debt Financing or to purchase such Equity
or Equity Equivalent Securities on no less favorable terms and Xxxxxxxxx has
declined such opportunity following a period of thirty (30) days from receiving
written notice of the proposed terms of the Debt Financing or Equity or Equity
Equivalent Securities. Notwithstanding the foregoing, neither the Principal nor
the Principals replacement designee, if applicable, shall be obligated to cause
FSI to xxxxx Xxxxxxxxx the right of first refusal described in the previous
sentence if Principal or such designee receives an opinion of his counsel to the
effect that causing FSI to grant such right of first refusal would constitute a
breach of Principal's or such designee's fiduciary obligations as a director of
FSI.

(e) Except as set forth on SCHEDULE 7.10, the Principal has full right,
power and authority to sell, transfer, assign and deliver the FSI Stock. There
are no outstanding and, as long as the option is outstanding, Principal will not
grant, any options, warrants, convertible securities, calls, rights,
commitments, or agreements or instruments or understandings of any character
obligating him to deliver or sell, or cause to be delivered or sold,
contingently or otherwise, any shares of the FSI Stock or any securities or
obligations convertible into or exchangeable for such shares. As of the Option
Closing Date, the Principal will deliver to Xxxxxxxxx or any subsidiary of
Xxxxxxxxx good and marketable title to the FSI Stock, free and clear of all
Liens.

(f) In the event that FSI exercises its right of first refusal with
respect to the FSI Stock and purchases the FSI Stock, Principal will not
subsequently acquire

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any equity interest, or any options, warrants or other rights to acquire any
Equity or Equity Equivalent Securities of FSI, for a period of five years from
the date of such purchase.

(g) The Principal represents that the FSI Stock represents 49% of the
outstanding capital stock of FSI. The foregoing representation is based on the
representations and warranties provided to the Principal under the Stock
Purchase Agreement dated as of April 1, 1997, by and among FSI, Xxxx X. Xxxxx,
Xxxxx X. Xxxxx and the Principal. In the event that the FSI Stock represents
less than 49% of the outstanding capital stock of FSI, the Principal shall
diligently pursue the rights and remedies available to the Principal under such
agreement to ensure that the FSI Stock represents at least 49% of the
outstanding capital stock of FSI. There are no outstanding options, warrants,
convertible securities, calls rights, commitments, or agreements or instruments
or understandings of any character outstanding obligating FSI to issue and sell
shares of capital stock.

POST-CLOSING COVENANTS OF XXXXXXXXX

SECTION 7.11. RELOCATION. The Principal acknowledges that Xxxxxxxxx may
relocate the Business following the Closing. Xxxxxxxxx and Xxxxxxxxx Subsidiary
agree that the Business will not be relocated for a period of six months
following the Closing Date. Xxxxxxxxx and Xxxxxxxxx Subsidiary further agree
that if the Company's operations are subsequently moved from New Jersey they
will provide the Principal during the term of the Employment Agreement
(including any renewals thereof) with a New Jersey office and support personnel
commensurate with his operational needs.

SECTION 7.12. EARN-OUTS. Subject in all instances to Xxxxxxxxx'x good
faith business judgment, Xxxxxxxxx will act in good faith to operate the RR-JT8
Division in a manner conducive to enabling the Principal to meet the Target
Amounts set forth in the Additional Payments Schedule, including the commitment
of a reasonable amount of personnel and financial resources to the RR-JT8
Division.

ARTICLE VIII

CONDITIONS PRECEDENT TO XXXXXXXXX'X AND XXXXXXXXX
SUBSIDIARY'S PERFORMANCE.

The obligations of Xxxxxxxxx and Xxxxxxxxx Subsidiary under this
Agreement are subject to the satisfaction, at or before the Closing, of all the
conditions set out below. Xxxxxxxxx and Xxxxxxxxx Subsidiary may waive any or
all of these conditions in whole or in part without prior notice; PROVIDED,
HOWEVER, that no such waiver of a condition shall constitute a waiver by
Xxxxxxxxx or Xxxxxxxxx Subsidiary of any of their other rights or remedies, at
law or in equity, if the Company or the Principal is in default of any of

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the representations, warranties or covenants contained in this Agreement, except
to the extent that such defaults are expressly waived.

SECTION 8.081. ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties by the Company and the Principal in this
Agreement or in the Other Agreements or in any written statement that is
delivered to Xxxxxxxxx pursuant to this Agreement will be true and accurate on
and as of the Closing Date as though made on that date.

SECTION 8.082. PERFORMANCE. The Company and the Principal will have
performed, satisfied and complied in all material respects with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with by them on or before the Closing Date.

SECTION 8.083. NO MATERIAL ADVERSE EFFECT. There shall have been no
Material Adverse Event or event having a Material Adverse Effect with respect to
the Company.

SECTION 8.084. CERTIFICATION BY THE COMPANY. Xxxxxxxxx will have a
received certificate, dated the Closing Date, signed by the president or vice
president and secretary or assistant secretary of the Company, certifying, in
such detail as Xxxxxxxxx and its counsel may reasonably request, that the
conditions specified in Sections 8.01 through 8.03 and 8.06 and 8.07 hereof have
been fulfilled, including, but not limited to, certified copies of all
resolutions of the Company pertaining to the authorization of the execution,
delivery and performance of this Agreement.

SECTION 8.085. CERTIFICATION BY THE PRINCIPAL. Xxxxxxxxx will have
received certificates, dated the Closing Date, signed by the Principal
certifying, in such detail as Xxxxxxxxx and its counsel may reasonably request,
that the conditions specified in Sections 8.01 through 8.03 and 8.06 and 8.07
hereof have been fulfilled.

SECTION 8.086. ABSENCE OF LITIGATION. No action, suit, or proceeding
before any court or any governmental body or authority, pertaining to the
transactions contemplated by this Agreement or to their consummation, will have
been instituted and served or threatened against the Company, the Principal, any
Affiliate of any of the foregoing or the Assets on or before the Closing Date.

SECTION 8.087. GOVERNMENT AUTHORIZATION. All agreements and consents
necessary to permit the consummation of the transactions contemplated by this
Agreement, including without limitation any waivers or approvals necessary to
satisfy the requirements of HSR, shall have been obtained by the Company and the
Principal, and no Federal, state or other authority having jurisdiction over the
transactions contemplated hereby shall have taken any action to enjoin or
prevent the consummation of such transactions.

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SECTION 8.088. OPINION OF THE COMPANY'S COUNSEL. Xxxxxxxxx shall have
received from counsel to the Company and the Principal its favorable opinion,
dated the Closing Date, in a form reasonably acceptable to counsel for
Xxxxxxxxx.

SECTION 8.089. NAME CHANGE. The Company shall have changed its name to
a name that is not confusingly similar to its current name.

SECTION 8.10. AGREEMENTS. At the Closing Date:

(a) the Employment Agreement shall have been executed and delivered by
the Principal; and

(b) the Escrow Agreement shall have been executed and delivered by the
Company and the Escrow Agent.

SECTION 8.11. ALLOCATION TO GOODWILL. KPMG Peat Marwick LLP,
independent auditors of Xxxxxxxxx, shall have agreed that the allocation of $5
million of the Purchase Price to goodwill is in accordance with United States
generally accepted accounting principles.

ARTICLE IX

CONDITIONS PRECEDENT TO THE COMPANY'S
AND THE PRINCIPAL'S PERFORMANCE.

The obligations of the Company and the Principal under this Agreement
are subject to the satisfaction, at or before the Closing, of all the following
conditions. The Company and the Principal may waive any or all of these
conditions in whole or in part without prior notice; PROVIDED, HOWEVER, that no
such waiver of a condition shall constitute a waiver of any of the Company's
other rights or remedies, at law or in equity, if Xxxxxxxxx or Xxxxxxxxx
Subsidiary is in default of any of the representations, warranties or covenants
contained in this Agreement, except to the extent that such defaults are
expressly waived.

SECTION 9.091. ACCURACY OF XXXXXXXXX'X AND XXXXXXXXX SUBSIDIARY'S
REPRESENTATIONS AND WARRANTIES. All representations and warranties by Xxxxxxxxx
and Xxxxxxxxx Subsidiary contained in this Agreement or in any written statement
delivered by Xxxxxxxxx under this Agreement will be true and accurate on and as
of the Closing Date as though such representations and warranties were made on
and as of that date.

SECTION 9.092. PERFORMANCE. Xxxxxxxxx and Xxxxxxxxx Subsidiary will
have performed, satisfied and complied in all material respects with all

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covenants, agreements and conditions required by this Agreement to be performed
or complied with by them on or before the Closing Date.

SECTION 9.093. NO MATERIAL ADVERSE EFFECT. There shall have been no
Material Adverse Event or event having a Material Adverse Effect with respect to
Xxxxxxxxx.

SECTION 9.094. CERTIFICATES. The Company and the Principal will have
received certificates, dated the Closing Date, signed by the president or vice
president and secretary or assistant secretary of Xxxxxxxxx, certifying, in such
detail as the Company and its counsel may reasonably request, that the
conditions specified in Sections 9.01 through 9.03 and 9.05 through 9.07 hereof
have been fulfilled, including, but not limited to, certified copies of all
resolutions of Xxxxxxxxx and Xxxxxxxxx Subsidiary pertaining to corporate
authorization of the execution, delivery and performance of this Agreement.

SECTION 9.095. ABSENCE OF LITIGATION. No action, suit, or proceeding
before any court or any governmental body or authority pertaining to the
transactions contemplated by this Agreement or to their consummation, will have
been instituted and served or threatened in writing on or before the Closing
Date.

SECTION 9.096. GOVERNMENT AUTHORIZATION. All agreements and consents
necessary to permit the consummation of the transactions contemplated by this
Agreement shall have been obtained by Xxxxxxxxx and Xxxxxxxxx Subsidiary and
delivered to the Company, and no Federal, state or other authority having
jurisdiction over the transactions contemplated hereby shall have taken any
action to enjoin or prevent the consummation of such transactions.

SECTION 9.097. CONSENTS. Consents (if any) in form and substance
reasonably satisfactory to the Company, the Principal and their counsel, to the
consummation by Xxxxxxxxx and Xxxxxxxxx Subsidiary of the transactions
contemplated hereby shall have been obtained.

SECTION 9.098. PAYMENT. Xxxxxxxxx Subsidiary shall have delivered the
consideration required to be delivered at the Closing as set forth in Section
2.03.

SECTION 9.099. OPINION OF XXXXXXXXX'X COUNSEL. The Company and the
Principal shall have received from counsel to Xxxxxxxxx its favorable opinion
dated as of the Closing Date in a form reasonably acceptable to counsel for the
Company.

SECTION 9.10. AGREEMENTS. At the Closing Date:

(a) the Employment Agreement shall have been executed and delivered by
Xxxxxxxxx and Xxxxxxxxx Subsidiary; and

(b) the Escrow Agreement shall have been executed and delivered by
Xxxxxxxxx Subsidiary and the Escrow Agent.

SECTION 9.11. ALLOCATION TO GOODWILL. KPMG Peat Marwick LLP,
independent auditors of Xxxxxxxxx shall have agreed that the allocation of $5
million of the Purchase Price to goodwill is in accordance with United States
generally accepted accounting principles.

ARTICLE X

INDEMNIFICATION

SECTION 10.101. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties contained in this Agreement shall survive the
Closing hereunder and continue in full force and effect for a period of
twenty-four (24) months, regardless of any investigation made by Xxxxxxxxx,
Xxxxxxxxx Subsidiary, the Company or the Principal or on their behalf; PROVIDED,
HOWEVER, that the representations and warranties contained in Sections 3.10,
3.12 and 3.17, relating to Taxes, environmental matters and ERISA, respectively,
shall survive and remain in full force and effect for the periods equal to the
applicable statutes of limitation relating thereto.

SECTION 10.102. INDEMNIFICATION PROVISIONS FOR BENEFIT OF XXXXXXXXX AND
XXXXXXXXX SUBSIDIARY. In the event the Company or the Principal breaches (or in
the event any third party alleges facts that, if true, would mean the Company,
or the Principal has breached) any of their representations, warranties,
agreements and covenants contained herein, then the Company and the Principal,
jointly and severally (and severally as to Article IV) agree to indemnify
Xxxxxxxxx and Xxxxxxxxx Subsidiary from and against all damages, costs,
liabilities, losses and expenses, including reasonable attorneys' fees and
expenses, which Xxxxxxxxx or Xxxxxxxxx Subsidiary may suffer through and after
the date of the claim for indemnification resulting from, arising out of,
relating to, in the nature of or caused by the breach (or the alleged breach).
Notwithstanding anything contained herein to the contrary, (i) Xxxxxxxxx and
Xxxxxxxxx Subsidiary shall not seek indemnification from the Company or the
Principal relating to a products liability claim to the extent (and only to the
extent) that Xxxxxxxxx and Xxxxxxxxx Subsidiary are entitled to coverage
(following any deductible) under a product liability insurance policy, if any,
maintained by either of them, it being understood and agreed that neither
Xxxxxxxxx nor Xxxxxxxxx Subsidiary shall be under any obligation whatsoever to
maintain any such product liability insurance policy and (ii) Xxxxxxxxx and
Xxxxxxxxx Subsidiary shall not have the right to be indemnified against damages,
costs, liabilities and expenses that result from, arise out of, relate to, or
are in the nature of or caused by an action or inaction of Xxxxxxxxx or
Xxxxxxxxx Subsidiary that occurs or continues after the Effective Date, even if
Xxxxxxxxx and Xxxxxxxxx Subsidiary are entitled hereunder to be indemnified for
damages, costs, liabilities and expenses arising out

of similar or equivalent action or inaction of the Company or the Principal with
respect to a time prior to the Effective date.

SECTION 10.103. INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE COMPANY
AND THE PRINCIPAL. In the event Xxxxxxxxx or Xxxxxxxxx Subsidiary breaches (or
in the event any third party alleges facts that, if true, would mean Xxxxxxxxx
or Xxxxxxxxx Subsidiary has breached) any of its representations, warranties,
agreements and covenants contained herein, then Xxxxxxxxx and Xxxxxxxxx
Subsidiary, jointly and severally, agree to indemnify the Company and the
Principal from and against the entirety of all damages, costs, liabilities,
losses and expenses, including reasonable attorneys' fees and expenses, which
the Company or the Principal may suffer through and after the date of the claim
for indemnification resulting from, arising out of, relating to, in the nature
of or caused by the breach (or the alleged breach).

SECTION 10.104. MATTERS INVOLVING THIRD PARTIES. (a) If any third party
shall notify any party (the "INDEMNIFIED PARTY") with respect to any matter (a
"THIRD PARTY CLAIM") which may give rise to a claim for indemnification against
any other party hereto (the "INDEMNIFYING PARTY") under this Article X, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; PROVIDED, HOWEVER, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.

(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party notifies the Indemnified party in writing within fifteen (15) days after
the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party assume the defense of the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder and (iii) the Indemnifying Party conducts
the defense of the Third Party Claim actively and diligently.

(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 10.04(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (ii) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld, delayed or conditioned unreasonably),
and (iii) the Indemnifying Party will not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (not to be withheld, delayed or
conditioned unreasonably); PROVIDED, HOWEVER, that (x) the

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Indemnified Party shall have the right to employ its counsel in any action and
the fees and expenses of such counsel shall be at the expense of the
Indemnifying Party in the event that the Indemnified Party shall have reasonably
concluded that there may be a conflict of interest between the Indemnified Party
and the Indemnifying Party in the conduct of such defense of such action (in
which case the Indemnifying Party shall not have the right to direct the defense
of such action on behalf of the Indemnified Party) and (y) in the event that the
Indemnified Party withholds consent to the entry of any judgment or entering
into of any settlement requiring in either case only the payment of money
damages and the Third Party Claim subsequently results in the entry of a
judgment or the entering into of a settlement requiring the payment of a greater
amount of money damages, then the Indemnifying Party shall not be responsible
for the payment of such excess.

(d) In the event any of the conditions in Section 10.04(b) above is or
becomes unsatisfied, (i) the Indemnified Party may defend against, and consent
to the entry of any judgment or enter into any settlement with respect to, the
Third Party Claim in any manner it reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (ii) the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Party will remain responsible for all
damages, costs, liabilities, losses and expenses, including reasonable
attorneys' fees and expenses, which the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim to the fullest extent provided in this Article X.

SECTION 10.105. LIMITATIONS ON INDEMNITY AND LIABILITY. Neither
Xxxxxxxxx nor Xxxxxxxxx Subsidiary shall be entitled to (i) make any claim for
indemnity under this Article X for the Company's or the Principal's breaches of
representations and warranties or (ii) make any claim against any of the Company
or the Principal under this Agreement for any reason, until such time as all
damages on account thereof total two hundred thousand dollars ($200,000) at
which time and thereafter Xxxxxxxxx and Xxxxxxxxx Subsidiary shall be entitled
to recover all such damages. The maximum amount that may be claimed against the
Company and the Principal shall be in an amount equal to the Purchase Price
actually received by the Company and the Principal. Notwithstanding the
foregoing, indemnification for a breach of the representation set forth in
Section 3.28 shall not be subject to the limitations set forth in this Section
10.05.

SECTION 10.106. OTHER INDEMNIFICATION PROVISIONS. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
equitable remedy any party hereto may have for breach of representation,
warranty or covenant. The Principal hereby agrees that he will not make any
claim for indemnification against the Company by reason of the fact that he was
a stockholder, director, officer, employee or agent of any such entity or was
serving at the request of any such entity as a partner, trustee, director,
officer, employee or agent of another entity (whether

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such claim is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses or otherwise and whether such claim is pursuant to
any statute, charter document, bylaw, agreement or otherwise) with respect to
any action, suit, proceeding, complaint, claim or demand brought by Xxxxxxxxx or
Xxxxxxxxx Subsidiary against the Principal (whether such action, suit,
proceeding, complaint, claim or demand is pursuant to this Agreement, applicable
law or otherwise).

ARTICLE XI

TERMINATION

SECTION 11.111. TERMINATION OF AGREEMENT. Certain of the parties may
terminate this Agreement as provided below:

(a) Xxxxxxxxx and the Principal may terminate this Agreement by mutual
written consent at any time prior to the Closing;

(b) Xxxxxxxxx may terminate this Agreement by giving written notice to
the Principal (i) at any time prior to the Closing (A) in the event the Company
or the Principal has breached any representation, warranty or covenant contained
in this Agreement and such breach has not been cured within five (5) Business
Days of receiving notice of such breach or (B) if the Closing shall not have
occurred on or before the date three Business Days following the receipt of HSR
clearance and in no event later than June 30, 1998, by reason of the failure of
any condition precedent under Article VIII hereof (unless the failure results
primarily from Xxxxxxxxx itself breaching any representation, warranty or
covenant contained in this Agreement) and (ii) within fourteen (14) days
following the execution and delivery of this Agreement if Xxxxxxxxx or Xxxxxxxxx
Subsidiary is not satisfied with the results of its continuing legal due
diligence regarding the Company and the Business or the Schedules delivered by
the Company and the Principal pursuant to Section 6.09; and

(c) the Company and the Principal may terminate this Agreement by
giving written notice to Xxxxxxxxx at any time prior to the Closing (i) in the
event Xxxxxxxxx has breached any representation, warranty or covenant contained
in this Agreement and such breach has not been cured within five (5) Business
Days of receiving notice of such breach or (ii) if the Closing shall not have
occurred on or before the date three Business Days following the receipt of HSR
clearance and in no event later than June 30, 1998, by reason of the failure of
any condition precedent under Article IX hereof (unless the failure results
primarily from any of the Company or the Principal themselves breaching any
representation, warranty or covenant contained in this Agreement).

SECTION 11.112. EFFECT OF TERMINATION. If any party terminates this
Agreement pursuant to SECTION 11.01 above, all rights and obligations of the
parties hereunder shall terminate without any Liability of any party

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hereto to any other party hereto (except for any Liability of any party then in
breach, it being understood that the parties not in breach shall be entitled in
such case to any statutory, equitable or common law remedy available under
applicable law; provided, however, that the Company and the Principal shall not
be deemed to be in breach solely as a result of Xxxxxxxxx terminating this
Agreement pursuant to Section 11.01(b)(ii) if the Company and the Principal are
not otherwise in breach).

ARTICLE XII

MISCELLANEOUS

SECTION 12.121. EFFECT OF DUE DILIGENCE. No investigation by or on
behalf of Xxxxxxxxx or Xxxxxxxxx Subsidiary into the Business, operations,
prospects, assets or condition (financial or otherwise) of the Company shall
diminish in any way the effect of any representations or warranties made by
Principal or the Company in this Agreement or shall relieve Principal or the
Company of any of their obligations under this Agreement.

SECTION 12.122. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Neither the
Company nor the Principal shall issue any press release or make any public
announcement relating to the subject matter of this Agreement. Xxxxxxxxx will
consult with the Company prior to issuing a press release with respect to the
Acquisition, provided that Xxxxxxxxx may make any public disclosure it believes
in good faith is required by applicable law.

SECTION 12.123. NO THIRD PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other than the parties hereto and
their respective successors and permitted assigns.

SECTION 12.124. ENTIRE AGREEMENT. This Agreement and the Other
Agreements constitute the entire agreement among the parties hereto and
supersedes any prior understandings, agreements or representations by or among
the parties hereto, written or oral, to the extent they related in any way to
the subject matter hereof and thereof.

SECTION 12.125. SUCCESSION AND ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties named herein and their
respective successors and permitted assigns. No party may assign either this
Agreement or any of his or its rights, interests, or obligations hereunder
without the prior written approval of Xxxxxxxxx and the Principal; PROVIDED,
HOWEVER, that (a) Xxxxxxxxx may (i) assign any or all of its rights and
interests hereunder to one or more of its Affiliates and (ii) designate one or
more of its Affiliates to perform its obligations hereunder (in any or all of
which cases Xxxxxxxxx nonetheless shall remain responsible for the performance
of all of its obligations hereunder) and (b) the

46
48

Company may assign its right to receive any or all of the purchase price to the
parties set forth in the Additional Payments Schedules.

SECTION 12.126. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.

SECTION 12.127. HEADINGS. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.

SECTION 12.128. NOTICES. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request, demand,
claim or other communication hereunder shall be deemed duly given (a) on the
date of delivery, if delivered to the persons identified below, (b) two Business
Days after it is sent by registered or certified mail, return receipt requested,
postage prepaid or (c) on the next Business Day if sent by Federal Express or
similar carrier, and addressed to the intended recipient as set forth below:

If to the Company
or the Principal: Xxxxxx Xxxxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxxxx 00000

Copy to: Xxxxxxx Xxxx LLP
000 Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: F. Xxxx Xxxxx, Esq.

If to Xxxxxxxxx Xxxxxxxxx Industries, Inc.
or Xxxxxxxxx Subsidiary: 00000 X.X. 0xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Zivi X. Xxxxxx

Copy to: Fulbright & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.

Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it

47
49

actually is received by the intended recipient. Any party may change the address
to which notices, requests, demands, claims, and other communications hereunder
are to be delivered by giving the other parties notice in the manner herein set
forth.

SECTION 12.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.

SECTION 12.11. AMENDMENTS TO SCHEDULES. Anything contained in this
Agreement to the contrary notwithstanding, in the event that Xxxxxxxxx has been
advised in writing by the Principal of a misrepresentation or breach of warranty
prior to the Closing, the Principal shall be permitted to amend the appropriate
Schedule(s) to cure such misrepresentation or breach prior to the Closing. In
any such case, Xxxxxxxxx shall not be obligated to consummate the transactions
contemplated hereby. If Xxxxxxxxx elects not to consummate the transactions
contemplated hereby in accordance with provisions of the preceding sentence,
such election will be treated as a termination of this Agreement pursuant to
Article XI hereof. If Xxxxxxxxx elects to consummate the transactions
contemplated hereby notwithstanding a revision to the Schedules hereto, the
Schedules, as so revised, will be deemed to have been reinstated as of the date
hereof as if they had been originally attached to this Agreement.

SECTION 12.12. AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Xxxxxxxxx, the Company and Principal. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.

SECTION 12.13. SEVERABILITY. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.

SECTION 12.14. EXPENSES. Each of Xxxxxxxxx and Xxxxxxxxx Subsidiary and
the Principal will bear his or its own Transaction Costs, and the Principal
shall bear the Transaction Costs of the Company, in each case incurred in
connection with this Agreement and the transactions contemplated hereby. The
Principal agrees that the Company has not borne and will not bear any of the
Principal's Transaction Costs in connection with this Agreement or the Other
Agreements or any of the transactions contemplated hereby or thereby.

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50

SECTION 12.15. CONSTRUCTION. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The parties intend
that each representation, warranty and covenant contained herein shall have
independent significance. If any party has breached any representation, warranty
or covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.

SECTION 12.16. INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The
Exhibits and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.

SECTION 12.17. SPECIFIC PERFORMANCE. Each of the parties acknowledges
and agrees that the other parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the parties
agrees that the other parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the parties and the matter, in addition to any other remedy to
which they may be entitled, at law or in equity.

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the date set forth above.

XXXXXXXXX INDUSTRIES,INC.

By: /s/ ZIVI X. XXXXXX
------------------------------
Zivi X. Xxxxxx
President and
Chief Executive Officer

INTEGRATED TECHNOLOGY
HOLDINGS CORP.

By: /s/ ZIVI X. XXXXXX
------------------------------
Zivi X. Xxxxxx
President

INTEGRATED TECHNOLOGY CORP.

By: /s/ XXXXXX XXXXXXX
------------------------------
Title:
----------------------------

/s/ XXXXXX XXXXXXX
----------------------------------
XXXXXX XXXXXXX

TABLE OF CONTENTS

PAGE
----

ARTICLE I

DEFINITIONS............................................................................................ 1

ARTICLE II

PURCHASE AND SALE...................................................................................... 6
Section 2.01. Assets Conveyed................................................................... 6
Section 2.02. Excluded Assets................................................................... 8
Section 2.03. Purchase Price.................................................................... 8
Section 2.04. Liabilities Assumed by Xxxxxxxxx Subsidiary....................................... 9
Section 2.05. Instruments of Conveyance and Transfer of
Books and Records................................................................. 10
Section 2.06. The Closing....................................................................... 10

ARTICLE III

REPRESENTATIONS AND WARRANTIES CONCERNING THE
COMPANY AND THE PRINCIPAL.............................................................................. 10
Section 3.01. Organization, etc................................................................. 11
Section 3.02. Subsidiaries...................................................................... 11
Section 3.03. Capitalization.................................................................... 11
Section 3.04. Ownership of Assets............................................................... 11
Section 3.05. Authority and No Conflict; Consents............................................... 11
Section 3.06. Financial Statements; Books and Records........................................... 12
Section 3.07. No Undisclosed Liabilities........................................................ 12
Section 3.08. Corporate Action.................................................................. 13
Section 3.09. Absence of Changes................................................................ 13
Section 3.10. Taxes............................................................................. 14
Section 3.11. Leased Property................................................................... 16
Section 3.12. Environmental Protection.......................................................... 17
Section 3.13. Intellectual Property............................................................. 17
Section 3.14. Assets............................................................................ 17
Section 3.15. Inventories....................................................................... 17
Section 3.16. Product Warranty.................................................................. 18
Section 3.17. Personnel and Plans............................................................... 18
Section 3.18. Insurance......................................................................... 19
Section 3.19. Litigation........................................................................ 19
Section 3.20. Compliance with Law............................................................... 20
Section 3.21. Contracts, Obligations and Commitments............................................ 20
Section 3.22. Licenses.......................................................................... 20
Section 3.23. No Broker......................................................................... 21

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Section 3.24. No Illegal or Improper Transactions......................................... 21
Section 3.25. Related Party Transactions.................................................. 21
Section 3.26. Suppliers and Customers..................................................... 21
Section 3.27. Accounts Receivable......................................................... 22
Section 3.28. Affiliated Obligations...................................................... 22
Section 3.29. No Misleading Statements.................................................... 22

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL.................................................. 23
Section 4.01. Due Authorization........................................................... 23
Section 4.02. No Conflict; Consents....................................................... 23
Section 4.03. Brokers..................................................................... 24

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF XXXXXXXXX AND
XXXXXXXXX SUBSIDIARY............................................................................. 24
Section 5.01. Organization................................................................ 24
Section 5.02. Authority and No Conflict................................................... 24
Section 5.03. Consents.................................................................... 25
Section 5.04. Issuance of Xxxxxxxxx Common Stock.......................................... 25
Section 5.05. Reports of Xxxxxxxxx........................................................ 25
Section 5.06. No Material Adverse Effect.................................................. 25
Section 5.07. Brokers..................................................................... 26

ARTICLE VI

PRE-CLOSING COVENANTS OF THE COMPANY AND THE PRINCIPAL........................................... 26
Section 6.01. Notices and Consents........................................................ 26
Section 6.02. Representations and Warranties True at Closing.............................. 26
Section 6.03. Access to Premises and Information.......................................... 26
Section 6.04. Conduct of Business in Ordinary Course...................................... 27
Section 6.06. Name Change................................................................. 28
Section 6.07. Further Authorization....................................................... 28

ARTICLE VII

POST-CLOSING COVENANTS........................................................................... 28
Section 7.01. General..................................................................... 28
Section 7.02. Tax Matters................................................................. 28
Section 7.03. Xxxxxxxxx Subsidiary to Act as Agent for
the Company............................................................... 29
Section 7.04. Delivery of Property Received by the Company
or Xxxxxxxxx Subsidiary After Closing..................................... 29
Section 7.05. Xxxxxxxxx Subsidiary Appointed Attorney for

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the Company............................................................... 30

Section 7.06. Payment of Liabilities...................................................... 30
Section 7.07. Subsequent Liability........................................................ 30
Section 7.08. Employee Matters............................................................ 31
Section 7.09. Non-Competition............................................................. 32
Section 7.10. Securities Representation................................................... 33
Section 7.11. Relocation.................................................................. 34
Section 7.12. Registration Rights......................................................... 34

ARTICLE VIII

CONDITIONS PRECEDENT TO XXXXXXXXX'X AND XXXXXXXXX
SUBSIDIARY'S PERFORMANCE........................................................................... 34
Section 8.01. Accuracy of Representations and Warranties.................................. 34
Section 8.02. Performance................................................................. 35
Section 8.03. No Material Adverse Effect.................................................. 35
Section 8.04. Certification by the Company................................................ 35
Section 8.05. Certification by the Principal.............................................. 35
Section 8.06. Absence of Litigation....................................................... 35
Section 8.07. Government Authorization.................................................... 35
Section 8.08. Opinion of the Company's Counsel............................................ 35
Section 8.09. Name Change................................................................. 35
Section 8.10. Agreements.................................................................. 36

ARTICLE IX

CONDITIONS PRECEDENT TO THE COMPANY'S AND THE
PRINCIPAL'S PERFORMANCE............................................................................ 36

Section 9.01. Accuracy of Xxxxxxxxx'x and Xxxxxxxxx Subsidiary's
Representations and Warranties.............................................. 36
Section 9.02. Performance................................................................. 36
Section 9.03. No Material Adverse Effect.................................................. 36
Section 9.04. Certificates................................................................ 36
Section 9.05. Absence of Litigation....................................................... 37
Section 9.06. Government Authorization.................................................... 37
Section 9.07. Consents.................................................................... 37
Section 9.08. Payment..................................................................... 37
Section 9.09. Opinion of Xxxxxxxxx'x Counsel.............................................. 37
Section 9.10. Agreements.................................................................. 37

ARTICLE X

INDEMNIFICATION.................................................................................... 38
Section 10.01. Survival of Representations and Warranties.................................. 38
Section 10.02. Indemnification Provisions for Benefit of Xxxxxxxxx......................... 38
Section 10.03. Indemnification Provisions for Benefit of the

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Company and the Principal................................................. 38
Section 10.04. Matters Involving Third Parties............................................. 39
Section 10.05. Limitations on Indemnity and Liability...................................... 40
Section 10.06. Other Indemnification Provisions............................................ 40

ARTICLE XI

TERMINATION........................................................................................ 40
Section 11.01. Termination of Agreement.................................................... 41
Section 11.02. Effect of Termination....................................................... 41

ARTICLE XII

MISCELLANEOUS...................................................................................... 41
Section 12.01. Effect of Due Diligence..................................................... 41
Section 12.02. Press Releases and Public Announcements..................................... 41
Section 12.03. No Third Party Beneficiaries................................................ 42
Section 12.04. Entire Agreement............................................................ 42
Section 12.05. Succession and Assignment................................................... 42
Section 12.06. Counterparts................................................................ 42
Section 12.07. Headings.................................................................... 42
Section 12.08. Notices..................................................................... 42
Section 12.10. Governing Law............................................................... 43
Section 12.11. Amendments to Schedules..................................................... 43
Section 12.12. Amendments and Waivers...................................................... 44
Section 12.13. Severability................................................................ 44
Section 12.14. Expenses.................................................................... 44
Section 12.15. Construction................................................................ 44
Section 12.16. Incorporation of Exhibits, Annexes, and Schedules........................... 44
Section 12.17. Specific Performance........................................................ 45

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SCHEDULE 2.03(A)

18. The Company shall be entitled to certain additional payments (the
"ADDITIONAL PAYMENTS"), if any, calculated in accordance with this Schedule
2.03(a). The term "PAYMENT YEARS" shall mean each of the three twelve-month
periods ending December 31, 1998, 1999 and 2000. The term "Net Profit Before
Tax" ("PBT") shall be as described in APPENDIX X to this Schedule 2.03(a).

If PBT is equal to or less than 50% of the target amount listed in the
table below, no Additional Payment shall be made for the applicable Payment
Year.

The actual amount of the Additional Payment payable by Xxxxxxxxx
Subsidiary will be computed in accordance with the formula below to the extent
that the PBT exceeds 50% of the target amount for the applicable Payment Year as
listed below:

PAYMENT YEAR TARGET AMOUNT
------------ -------------

1998 $7,480,000
1999 $8,600,000
2000 $9,900,000

To the extent the PBT is greater than 50% of the target amount in any
Payment Year, the Additional Payment would be:

Additional Payment = (2PBT - TARGET AMOUNT) x $3,333,333
Target Amount

PROVIDED, HOWEVER, that the maximum Additional Payment for each Payment Year
shall be $3,333,333.

Additional Payments, if any, shall be paid in cash.

On or before March 31, 1999, 2000 and 2001, Xxxxxxxxx Subsidiary shall
deliver to the Company or its permitted assignee the determination of PBT and
the Additional Payment, if any, for the applicable Payment Year together with
payment of the Additional Payment.

19. The Company may assign the right to receive Additional Payments
under this Schedule 2.03(a) to Xxxxxx Xxxxxxx.

20. Notwithstanding anything to the contrary contained in this
Agreement or the Employment Agreement, dated the Closing Date, between Xxxxxx
Xxxxxxx and Xxxxxxxxx Subsidiary (the "Employment Agreement"), in the event that

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(i) Xxxxxx Xxxxxxx'x employment under the Employment Agreement is terminated
under Section 5(c)(i), (ii) or (iii) of the Employment Agreement, all rights to
receive Additional Payments not yet received relating to Payment Years ending
after the date of any such termination shall be null and void and of no further
force or effect, and (ii) if Xxxxxx Xxxxxxx'x employment under the Employment
Agreement is terminated under Section 5(c)(iv) of the Employment Agreement or
Xxxxxx Xxxxxxx terminates his employment under the Employment Agreement other
than under Section 5(d) thereof, the right to contest the Xxxxxxxxx
Determination under Section 2.03(c) of this Agreement shall terminate with
respect to Additional Payments relating to Payment Years ending after the date
of either such termination.

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APPENDIX X

Method for calculating
Net Profit Before Tax

Subject to the defined terms and other provisions set forth below, Net
Profit Before Tax ("PBT") shall mean the earnings before taxes of the RR-JT8
Division derived from the sale and lease of Eligible Inventory, and earnings
before taxes shall be defined as Gross Margin, less Selling Expenses, less
General and Administrative Expenses, less Interest Cost, less Other Expenses.

For the purpose of this Schedule 2.03(a):

"COST OF GOODS SOLD" relating to (x) sales of Eligible Inventory shall mean the
book value of the Eligible Inventory, which shall be the purchase price of the
Eligible Inventory plus all direct charges relating to the refurbishment of such
Eligible Inventory and (y) the lease of Eligible Inventory shall mean the
depreciation expenses for such Eligible Inventory.

"ELIGIBLE INVENTORY" shall mean RR-JT8 Inventory, plus any non-RR-JT8 Inventory
included as part of the Initial Inventory, but Eligible Inventory shall not
include any RR-JT8 Inventory owned by Xxxxxxxxx Commercial Aircraft Division and
currently under lease as of the Closing Date, until such current lease or leases
terminate.

"GENERAL AND ADMINISTRATIVE EXPENSES" shall mean

(x) so long as the operation of the Business is conducted at the current
facility of the Company, all corporate and overhead expenses relating to
the operation of the current facility; provided that no material
expenditure proposed by Xxxxxxxxx shall be charged to General and
Administrative Expenses if such material expenditure would cause General
and Administrative Expenses as a percentage of Revenues for the applicable
Payment Year to exceed the percentage that General and Administrative
Expenses represented of Revenues for 1997 in the event that the Principal
objects to such material expenditure in writing within 30 days of
Xxxxxxxxx informing the Principal of such proposed expenditure; provided
further that the Principal shall not unreasonably object to such material
expenditure and that the Principal's objection shall not prevent Xxxxxxxxx
from causing such material expenditure to be made; and

(y) in the event that the operation of the Business is relocated to
another facility of Xxxxxxxxx, an amount which, taken as a percentage of
Revenues for such Payment Year is no greater than the percentage that
General and Administrative Expenses represented of the Revenues of the
Company for 1997.

"GROSS MARGIN" shall mean Revenues less Cost of Goods Sold.

"INTEREST COST" shall mean all interest charges relating to indebtedness of the
Company as of the Closing Date plus interest charges relating to indebtedness
incurred for the purchase

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59

of Eligible Inventory subsequent to the Closing Date, plus interest charges
relating to indebtedness on Eligible Inventory of Xxxxxxxxx Commercial Aircraft
Division which becomes Eligible Inventory following the Closing Date pursuant to
the definition of Eligible Inventory, valued at the then book value of such
Eligible Inventory. Interest Cost shall not include interest charges on debt
incurred by Xxxxxxxxx to pay the Purchase Price for the Acquisition, but shall
include interest charges on indebtedness of the Company as of the Closing Date,
whether or not repaid by Xxxxxxxxx. Interest charges shall be calculated at the
interest rate charged to Xxxxxxxxx from time to time by Xxxxxxx Bank N.A. (or
such other financial institution as shall then be Xxxxxxxxx'x senior lender).

"INITIAL INVENTORY" shall mean any jet or turbo prop engine and/or jet or turbo
prop engine parts and aircraft parts included as part of the Inventory as of the
Closing Date.

"OTHER EXPENSES" shall mean any extraordinary expenses.

"RR-JT8 DIVISION" shall mean the division of Xxxxxxxxx that sells Eligible
Inventory.

"RR-JT8 INVENTORY" shall mean all models of Rolls Royce jet engines and JT-8
engines and engine parts purchased for sale or lease, including those
constituting part of the Initial Inventory.

"REVENUES" shall mean the consolidated revenues from (x) the sale of Eligible
Inventory (defined as gross sales, less sales discounts, allowances and returns)
and (y) lease revenues derived from Eligible Inventory.

"SELLING EXPENSES" shall mean all direct costs associated with the sale or lease
of Eligible Inventory other than Cost of Goods Sold, e.g. sales commissions;
provided that no material expenditure proposed by Xxxxxxxxx shall be charged to
Selling Expenses if such material expenditure would cause Selling Expenses as a
percentage of Revenues for the applicable Payment Year to exceed the percentage
that Selling Expenses represented of Revenues for 1997 in the event that the
Principal objects to such material expenditure in writing within 30 days of
Xxxxxxxxx informing the Principal of such proposed expenditure; provided further
that the Principal shall not unreasonably object to such material expenditure
and that the Principal's objection shall not prevent Xxxxxxxxx from causing such
material expenditure to be made.

Notwithstanding anything set forth in this Schedule 2.03(a) to the
contrary:

(i) for the first Payment Year, PBT shall consist of the sum of (x) the
earnings before taxes of the Company from January 1, 1998 up to and
through the Closing Date plus (y) the earnings before taxes of the RR-JT8
Division from the sale and lease of the Eligible Inventory for the period
after the Closing Date through December 31, 1998;

(ii) in calculating the earnings before taxes of the Company from January
1, 1998 through the Closing Date, the Gross Margin for all sales and
leases during such period shall be assumed to be 35%;

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(iii) there shall be excluded from the calculation of PBT and all the
defined terms set forth above, the results of operations of any business
acquired by Xxxxxxxxx following the Closing Date which is in the business
of selling RR-JT8 Inventory;

and (iv) there shall not be included in the computation of PBT the
amortization of goodwill arising from the acquisition effectuated under
this Agreement.

All of the above shall be determined by the independent auditors of
Xxxxxxxxx, in conformity with generally accepted accounting principles and
practices in the United States applied on a consistent basis with prior periods
of Xxxxxxxxx Industries, Inc.

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