e10vkza

2006 at Fiscal 2005 levels. To replace these lost sales, we are focusing our marketing efforts on more profitable portions of the business. In the business imaging product line, management believes that engineering/wide format rolls and point of purchase rolls have the greatest potential for growth.

The entrance into the bottled water business is significant as we begin the diversification of our product offerings outside of the hardcopy imaging products. The introduction of water into our paper business is an ideal companion sale as the distribution model for our water products is substantially similar to our paper products. Many of the customers who are currently purchasing business imaging supplies from us also buy bottled water. The weight and dimensions of a pallet of water and paper, and therefore the costs, are also similar. The introduction of water should expand our sales to our existing customers. The bottled water business has experienced phenomenal growth in the past few years.

In the water industry we plan to effectively compete in the wholesale market by offering competitive price points on our water products and bundled distribution strategies. We have also targeted the small to mid range size private label market as the niche for us to gain market share in the bottled water industry. The size and configuration of our operations accommodates smaller batch runs of individualized labels, which may be economically disadvantageous for larger companies. We believe the growing trend of businesses offering their clientele bottled water with their name on the label as promotional giveaway or for resale will contribute to the increased sales in the bottled water division.

SEASONALITY

Hotsheet.com revenues are partially generated by retail sales which are typically stronger during the Christmas holiday season.

TST may be subject to certain seasonal fluctuations in that orders for products may decline over the summer months. If the market for finished goods decreases, then the adverse impact of the seasonal fluctuations on the Company will be greater.

The bottled water business is subject to seasonal fluctuations with its demand cycle greatest in summer months.

TST’S BACKLOG

The dollar value of TST’s order backlog as of August 31, 2005 and 2004 was approximately $1.8 million and $2.8 million, respectively. TST’s ability to fill orders is directly impacted by the general cyclical pattern of the paper industry and its ability to purchase the raw materials and finished goods necessary to fill customer orders. The decrease in backlog is related to TST’s decreased net sales and reduction in the number of branded lines TST offers.

TST’S COMPETITION

Our businesses operate in markets that are highly competitive, and the Company faces competition on the basis of price, product quality, speed of delivery, customer service. Some of our competitors have greater sales, assets and financial resources than our company. These competitive pressures could affect prices or customers’ demand for our products, impacting our profit margins and/or resulting in a loss of customers and market share.

TST currently competes principally with manufacturers that distribute their products through dealers, resellers and/or retailers and, to a lesser extent, manufacturers who distribute their own products directly to

end-users. Weak industry conditions in the past few years have caused the major direct-selling companies, which are much larger than TST, to sell direct and to dealers. In some cases, this has led to TST’s customers reducing their selling prices to compete with these dealers. This has also caused increased competition among companies selling products through dealers. In addition, vertical consolidation among entities in the paper industry has created tougher conditions for TST, because certain of TST’s suppliers have subsidiaries that compete with TST and these suppliers generally support the efforts of their subsidiaries.

We believe that TST effectively competes on the basis of the following: its nationwide distribution network, which enables products to be delivered to its customers in most major cities in the United States within 24 hours; providing customers cost-effective, efficient purchasing and volume discounts; and by providing high-quality products and customer-oriented services.

In the water industry we plan to effectively compete in the wholesale market by offering competitive price points on our water products. We have also targeted the small to mid range size private label market as the niche for us to gain market share in the bottled water industry. The size of our operations accommodates smaller batch runs of individualized labels, which is economically disadvantageous for larger companies. We believe the growing trend of businesses offering their clientele bottled water with their name on the label as promotional giveaway or for resale will contribute to the increased sales in the bottled water division.

TRADEMARKS

TST uses the trademark IMPRESO, a Spanish word meaning “printed matter”, on certain products it manufactures and distributes. The trademark and service mark is registered in the United States. These registrations are effective until August 2009 and May 2010, respectively.

The IMPRESO trademark is also registered in Canada, Italy, and Great Britain. These foreign registrations are effective until July 2007, November 2010 and October 2007, respectively. Management believes that the IMPRESO trademark has significant name recognition and is important in marketing and achieving visibility of TST’s products. The goodwill value associated with the name IMPRESO has been pledged as an asset to TST’s current primary secured lender under TST’s revolving line of credit.

TST also has a trademark registration in the United States for “Lazer Cut Sheets^®” and “Lazer Bond^®” effective until May 2007. Each of the Lazer Cut Sheet and Lazer Bond trademarks are applied only to one specific product that TST manufactures.

The United States service mark registration obtained on Hotsheet, our subsidiary’s proprietary Internet portal, is effective until January 2008. The European Community Trademark registration for Hotsheet.com is effective until February 2010. The United States service mark registration for Shopsheet^®, a sub portal of Hotsheet.com, is effective until February 2010.

SERVICE AND SUPPORT

We believe that customer service is an important factor in product sales and customer satisfaction. Service and support include TST’s own in-house trucking which back-hauls goods for other entities, which reduces transportation costs and improves customer service. Our in-house graphics department can design and prepare layouts of packaging and can produce negatives, which allows TST speed and flexibility when bringing new products or packaging into the marketplace. TST also sells its graphics capabilities to its customers. TST’s customer service department can expedite service because its computer system sends a bill of lading by facsimile to the appropriate distributing warehouse and an order acknowledgment to the

receiving customer when an order is entered by a customer service representative. TST’s computer system automatically calculates inventory levels at each warehouse and the amount of raw materials it must purchase, and identifies which of its plant locations will manufacture an order.

TST also has a collection and credit department. The staff evaluates extensions of credit and makes written and verbal requests for payment from those customers whose invoices are not paid within agreed payment terms. In-house counsel is available to assist the credit department in difficult collections.

TST offers a 120-day warranty on all of its products. To date, warranty expense has been minimal.

ENVIRONMENTAL REGULATION

We believe that compliance with any environmental regulations that may be applicable to us will not have a material adverse effect on our capital expenditures, earnings or competitive position.

EMPLOYEES

We had 191 full-time employees at August 31, 2005 of whom approximately 68% are engaged in manufacturing TST’s products. None of our employees are currently covered by a collective bargaining agreement. We consider our employee relations to be fair as a result of recent reductions of wages and employee benefits. However, approximately 16% of our employees have 20 years or more length of service.

ITEM 2. PROPERTIES

TST operates four hardcopy imaging manufacturing plants encompassing an aggregate of approximately 690,000 square feet of space, and one natural spring water bottling facility with approximately 34,200 square feet. The Coppell, Texas, facility, where our executive offices are located, is approximately 75,000 square feet. TST owns two of its hardcopy imaging manufacturing plants, Coppell, Texas and Itasca, Illinois. The Coppell plant mortgage matures in 2011, and the Itasca facility matures in 2009. In April 2004, the Company sold its two buildings in Fontana, California to an unrelated party as part of a sales-leaseback transaction. The transaction has been accounted for as a sale, although the gain associated with the sale has been deferred in accordance with sales-leaseback accounting and is being amortized over 60 months, which represents the life of the related lease agreement. TST leased the two adjacent buildings in Fontana, California, for concurrent five year terms ending 2009. The Company also leases the Chambersburg, Pennsylvania facility with an initial term which expires in 2017, and executed a lease in December 2004 on the Mt. Ida, Arkansas natural spring water bottling facility, with an initial term expiring in 2014. The Fontana, Chambersburg and Mt. Ida leases all have options to extend. In Fiscal 2004, TST exited two facilities that it owned, Kearneysville, West Virginia and Greencastle, Pennsylvania, and placed the buildings on the market to be sold. In Fiscal 2005, the Greencastle location was sold. In Fiscal 2005, TST was also leasing under an annual lease warehouse space in Dallas, Texas. Annual mortgage payments and minimum lease payments relating to these facilities were approximately $1.6 in Fiscal 2005 and Fiscal 2004. Costs incurred for the 49 public distribution and two storage warehouses TST utilizes throughout the United States and in Quebec, Canada was approximately $540,000 for Fiscal 2005. Costs incurred for the 50 public distribution and seven storage warehouses TST utilized throughout the United States and in Quebec, Canada in Fiscal 2004 was approximately $751,000.

We believe the current facilities are in good condition, and are suitable and adequate for current business needs. We estimate that, as of August 31, 2005, TST was operating at approximately 50% capacity for all of the products it manufactures, which will allow it to increase production to meet increased demand, if any, with no immediate capital investment.

Our Hotsheet operation is currently operating from our headquarters at the Coppell, Texas facility and through its internet service providers located in Dallas, Texas and Providence, Rhode Island.

ITEM 3. LEGAL PROCEEDINGS

Legal-

On September 18, 2002, TST filed a lawsuit against a vendor in the United States District Court for the Northern District of Texas — Dallas Division. TST’s general claim is that the vendor breached a Distributor Agreement entered into with TST in several material respects, including the vendor’s late delivery of paper products, the vendor’s delivery of defective product, and the vendor’s failure to properly credit TST’s accounts based upon these and other alleged breaches. The vendor responded to TST’s demand for arbitration by generally denying TST’s claims and asserting a counterclaim seeking to recover disputed accounts receivable and damages related to TST’s alleged interference with the vendor’s relationship with its lender. The Trial is set for May 2006.

On November 5, 2003, the Company discovered the Company’s payroll administrator was fraudulently diverting Company funds into her personal bank accounts. The investigation revealed a loss of approximately $627,000 over a period starting in September 2000 until October 2003. In November 2004, the Company and the insurer at the time the loss was discovered executed a partial settlement without waiving each party’s rights to proceed to suit or defend on the balance of the Company’s losses. Management believes recent legal developments could be persuasive in litigating different interpretations of defined terms within the policy, and therefore recovering the balance of up to $500,000 of the Company’s claim as filed with the Insurer. The fraudulently diverted funds were recorded in the Registrant’s consolidated financial statements for fiscal years ended August 31, 2001, 2002 and 2003, as salary expense. Partial reimbursement from the insurance company and the embezzler is recorded as a separate line item under operating income, embezzlement recovery, for the year ended August 31, 2005. In August 2005, we filed suit in Dallas County to pursue our claims against potentially liable parties for losses incurred. The parties are currently conducting discovery.

In April 2004, TST filed a lawsuit in the 68^th judicial district Dallas County against a former outside sales representative, alleging breach of fiduciary duty, tortuous interference with existing and prospective business relations, and civil conspiracy. The lawsuit seeks to enforce the duties of loyalty owed to TST by its sales agent. The defendant filed a counter claim alleging business disparagement and tortious interference with existing and prospective business relations. Trial is set for April 2006.

On July 9, 2004, TST received a preference claim demand from the Trustee of the estate of a former customer in the amount of $1.2 million. On June 2, 2005, TST was served with the preference lawsuit. The suit is based upon a gross preference demand and the Company believes subsequent to a full preference analysis and the Company’s utilization of various defenses, any resulting liability should be lowered to a materially reduced amount.

The Company’s Corporate Income Tax Returns for the fiscal years ending August 31, 2001, 2002, and 2003, were under examination by the Internal Revenue Service (“IRS”). The IRS had proposed adjustments to the fiscal years under examination. The matter was sent to the Appeals Division of the IRS, who has indicated they will concede all issues and no adjustments will be made to those fiscal years under examination. Subsequent to the end of Fiscal 2005, the Company received notice that the

Company’s Corporate Income Tax Return for the fiscal year ended August 31, 2004 is going to be examined by the IRS.

In June 2005, TST was served with a preference lawsuit from the Trustee of the estate of a former customer in the amount of approximately $194,000. The suit is based upon a gross preference demand and the Company believes subsequent to a full preference analysis and the Company’s utilization of various defenses, any resulting liability should be lowered to a materially reduced amount.

In June 2005, a shareholder filed an action in the Court of Chancery of the state of Delaware seeking the books and records of the Company. We responded to the suit, executed an appropriate confidentiality agreement, and allowed the shareholder access to the requested documentation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock trades on the NASDAQ Capital Market (“NCM”) under the symbol ZCOM. The high and low closing prices for the common stock, as reported on the NCM are as follows:


2005 Fiscal Year	Price Range
	High		Low
First Quarter (Sept.- Nov.)	$	3.160	$	2.120
Second Quarter (Dec.- Feb.)		2.840		1.600
Third Quarter (Mar.- May)		1.950		1.000
Fourth Quarter (June- Aug.)		1.970		1.030


2004 Fiscal Year	Price Range
	High		Low
First Quarter (Sept. — Nov.)	$	2.140	$	1.800
Second Quarter (Dec. — Feb.)		2.700		1.830
Third Quarter (Mar. – May)		3.600		2.110
Fourth Quarter (June — Aug.)		2.690		2.140

On November 25, 2005, the closing price for the common stock on the NCM was $ 1.080 and the common stock was held by approximately 91 holders of record.

We have not paid any dividends on our common stock since inception, and we do not intend to pay dividends to our stockholders in the foreseeable future. Any such dividends will be declared in compliance

with the restrictive covenants of our subsidiary’s lender that no cash dividends paid during any one calendar year shall exceed current year’s net profit. We also intend to reinvest earnings, if any, in the development and expansion of our businesses. The declaration of dividends in the future will be at the discretion of the Board of Directors and will depend upon the earnings, capital requirements and our financial position, general economic conditions and other pertinent factors.

ITEM 6. SELECTED FINANCIAL DATA

The following is a summary of our selected financial data as of and for the five years ended Fiscal 2005. The historical financial data has been derived from our audited financial statements. This data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements appearing elsewhere in this document.

SELECTED FINANCIAL DATA (a)
Years Ended August 31,


	2001		2002		2003		2004(b)		2005
Operations Data:
Net Sales	$	94,177,290	$	119,525,362	$	117,222,957	$	103,989,229	$	77,727,971
Net Income (loss)		1,246,945		1,676,442		617,831		1,013,595		(2,909,328	)


Earnings (loss) per common share:

Net Income (loss)		0.24		0.32		0.12		0.19		(0.55	)


Consolidated Balance Sheet Data:

Total assets		62,202,597		66,971,864		56,336,300		51,753,520		41,793,418
Long-term debt (excluding current maturities)		6,328,454		10,609,790		9,571,934		8,391,917		7,774,361
Stockholders’ Equity	$	14,712,643	$	16,416,612	$	17,040,890		18,054,485		15,145,156

(a)		This schedule should be read in conjunction with our audited Consolidated Financial Statements and related notes thereto.

(b)		Earnings per share increase partially due to a non-recurring event, a deferred gain benefit resulting from the sale of our California facility. See Form 10-K for the year ended August 31, 2004, page F-10, Other Expense (Income), Net.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

The accounting policies described below are those the Company considers critical in preparing its consolidated financial statements. These policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on historical experience, the Company’s observation of trends in the industry, information provided by customers and

information available from other outside sources, as appropriate and available at the time the estimates are made. However, as described below, these estimates could change materially if different information or assumptions were used. The Company believes that of its significant accounting policies, the following may involve a higher degree of judgment or estimation than other accounting policies.

Accounts Receivable (doubtful accounts) Allowance

The Company provides for losses on accounts receivable based upon their current status, historical experience and management’s evaluation of existing economic conditions. Significant changes in customer profitability or general economic conditions may have a significant effect on the Company’s allowance for doubtful accounts.

Revenue Recognition

TST records sales of hardcopy imaging and bottled water products when products are shipped to customers. Our revenue recognition policy complies with the required four revenue recognition criteria: Our customers’ purchase orders or on line authorizations and our order acknowledgments include the terms of the sale and are binding on the customer, persuasive evidence that a transaction exits; Delivery has occurred, as risk of loss of the product has passed to the customer; The purchase orders, on line authorizations and order acknowledgments make our price to our customer fixed or determinable; Finally, we assess the likelihood of collecting credit accounts prior to revenue recognition and are reasonably assured the sales are collectible due to our credit policies and collection methods. The Company reserves against doubtful accounts based upon historical experience and management’s evaluation of existing economic conditions. Consistent monitoring of the accounts receivable allows us to determine if an account’s collection is becoming compromised. We reinvestigate delinquent customers to see if there may be a slow pay trend or an economic condition affecting this customer. Subsequent to this inquiry, we evaluate our doubtful account reserve and if the information reflects additional exposure, we increase our reserve accordingly.

Hotsheet.com, Inc. generates its revenue by click through fee advertising revenues and commissions earned. Click through fees are generated when traffic is sent from the Hotsheet.com website, via a link, to a vendors website. Commissions are generated when the linked traffic makes purchases. The revenue is recognized upon receipt, which at this time does not differ significantly from accrual basis.

Inventories

Inventories are valued at the lower of cost or market, cost being determined on the first-in, first-out method. Reserves for slow moving, obsolete products, or bad (damaged) products are based on historical experience, acquisition activities, secured lender policies and analysis of inventories on hand. The Company evaluates, and if necessary, adjusts reserves quarterly.

Until 2001, the Company had not typically reserved for slow moving, obsolete or bad inventories, because substantially all of its slow moving products can be repackaged into different formats or labels. Potential obsolete products are monitored and scheduled production of these items is adjusted accordingly. If damage is caused to a product it is most often minor in value and expensed as damage occurs. Due to acquisition activities in 2001 and 2002, the Company implemented a reserve against the purchased inventories.

Typically, returns are not material, therefore, generally, we record reductions in revenue when products are returned and they are not accrued for with sales reduced to reflect estimated returns. On occasion a customer may request authorization for an extraordinary return of product. Such request is analyzed and if material, accrued for with the estimated return applied as a reduction of sales.

Our return policy is to accept all products back for full credit if the product was shipped in error or for product that fails to meet acceptable quality standards. Returns of this nature must comply with the following: samples of defective product must be sent in to the Customer Service Returns Coordinator for evaluation prior to decision and disposition of product; claims must be submitted to customer service within one week of product being delivered; return authorization is valid for 30 days only; and we will not accept collect shipments on product being returned.

We will also accept hardcopy imaging product back for credit subject to a restocking charge (20% on Impreso brand; 30% on IBM brand) for product that was, for example, ordered in error by the customer and is in re-saleable condition, returned within 4 months of original purchase and has not been discontinued from the product line. Products with a shorter shelf-life, such as carbonless paper and thermal products must be returned within 3 months of original purchase. Once a return has been authorized and the product returned to our warehouse or plant, the customer is issued a credit, according to the type of return, against their account. This credit is then booked to the returns and allowances account and a reduction in revenue is taken.

Rebates, Advertising Allowances and Independent Sales Commissions

The Company accrues for rebates and advertising allowances paid to certain customers and commissions paid to independent sales representatives, based on specific contractual agreements. These accruals are calculated based upon the volume of purchases by customers and sales by independent sales representatives, which are adjusted monthly to reflect increases and decreases. Advertising allowances provided to our customers must be used for advertising of our products and services and can not be used for any other purposes.

For the year ended August 31, 2004 and August 31, 2005, we recorded customer rebates in the amount of $5.2 million and $4.7, respectively. The customer rebates are recorded as a decrease to sales.

For the year ended August 31, 2004 and August 31, 2005, we recorded advertising allowances in the amount of $1.0 million and $1.1 million, respectively. The advertising allowances are recorded as an SG&A expense.

For the year ended August 31, 2004 and August 31, 2005, we recorded independent sales commissions in the amount of $375,000 and $119,000, respectively. The independent sales commissions are recorded as an SG&A expense.

In the years ended August 31, 2004 and 2003, we re-classed independent sales commissions from cost of goods sold to selling, general, and administrative expenses in the amount of $375,000 and 296,000, respectively.

Contingent liabilities

The Company is subject to lawsuits, investigations and other claims related to wage and hour/labor, securities, environmental, product and other matters, and is required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made when losses are determined to be probable and after considerable analysis of each individual issue. These reserves may change in the future

due to changes in the Company’s assumptions, the effectiveness of strategies, or other factors beyond the Company’s control.

SEGMENT ANALYSIS

SFAS No. 131,” Disclosures about Segments of an Enterprise and Related Information” establishes standards for reporting information about operating segments. Our operations are segregated into operating segments according to product category. Under this standard, as of August 31, 2005, we had two reportable operating segments: hardcopy imaging products and natural spring bottled water products. We evaluate the performance of each segment using pre-tax income or loss from continuing operations. The table below presents information as to our net sales, operating earnings and total assets for all reportable segments.


	Year Ended August 31, 2005						Year Ended August 31, 2004
	AMOUNT			PERCENT			AMOUNT		PERCENT
NET SALES BY INDUSTRY SEGMENT
Hardcopy imaging products	$	77,525,787			99.74	%	$	103,989,229		100.00	%
Bottled water	$	202,184			0.26	%	$	0		0.00	%

Total	$	77,727,971			100.00	%	$	103,989,229		100.00	%

PRE TAX PROFIT FROM CONTINUING OPERATIONS
Hardcopy imaging products	$	(3,839,898	)		-85.22	%	$	1,688,166		100.00	%
Bottled water	$	(666,056	)		-14.78	%	$	0		0.00	%

Total	$	(4,505,954	)		-100.00	%	$	1,688,166		100.00	%

	As Of August 31, 2005						As Of August 31, 2004
TOTAL ASSETS BY INDUSTRY SEGMENT
Hardcopy imaging products	$	39,043,670			93.42	%	$	49,642,564		95.92	%
Bottled water	$	2,749,748			6.58	%	$	2,110,956		4.08	%

Total	$	41,793,418			100.00	%	$	51,753,520		100.00	%

RESULTS OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2005, AS COMPARED TO THE YEAR ENDED AUGUST 31, 2004

As a result of the decrease in volume of purchases by key customers in January 2005, representing sales of approximately 29%, or $30 million of Fiscal 2004 revenue, the Company began a plan to downsize its operations and reduce costs to return to profitability. In the second and third quarter we were successful in completing and implementing a majority of the plan’s key elements; however the plan’s impact to the profitability of operations was offset by historically unprecedented extraordinary increases in our freight costs. The increased freight costs are attributable to increases in fuel costs, but in addition, the freight industry ratio of available trucks to requested routes fell to a historical low. The trend, which began at the end of Fiscal 2004, has continued through our first quarter of the year ending August 31, 2006. We have instituted revised freight policies to address this expense; however we believe that the freight cost increases may continue to have a material adverse effect on our financial position and results of operations in Fiscal 2006.

On December 1, 2004 TST and IBM terminated the Trademark Licensee Agreement. Net sales and revenue attributable to IBM branded products gradually declined until the agreement was concluded in August 2005. Substantially all of the products we sold under the IBM brand are also sold under the Impreso brand. We initiated a marketing program that converted our customers who were purchasing our IBM branded products to our proprietary brand, Impreso. The loss of sales of IBM branded products did not materially impact our liquidity, capital resources and results of operations due to this event.

The cessation of sales of continuous business forms to key customers has had a material impact on our net sales and revenues, and adversely affected our liquidity, capital resources and results of operations. We are currently working to replace this business with other volume purchasers of this product. We have also been successful in introducing other product lines to some of these customers.

The decline in the market of continuous feed business forms has begun to materially impact our net sales and revenues. Management has partially compensated for the maturity and decline of this hardcopy imaging category by branching into other hardcopy imaging products such as cut sheet, value added, and add roll products to replace the lost revenue from the sales of continuous feed products. However, the increase in revenue attributable to these categories has not increased in proportion to the decline of the continuous feed business forms sales.

The most recent addition to our product line, a complimentary item to hardcopy imaging products for office products distributors, is bottled spring water which started generating sales in Fiscal 2005. Bottled spring water did not utilize our existing equipment and during the start up phase necessitated the acquisition of new equipment, thereby depleting capital resources and reducing liquidity. Our operating loss, combined with this and other events, collectively adversely impacted operations. However, the long term investment in this product category will maximize the efficiency of our selling force, administration, and distribution infrastructure due to opposite seasonal cycles of consumption. Whereas in the summer months, hardcopy imaging products may slow, the bottled water business is at its peak.

Net Sales-— Net Sales decreased from $104 million in Fiscal 2004 to $78 million in Fiscal 2005, a decrease of $26 million, or 25%. The decrease resulted from partial and total losses of key Customers.

Gross Profit —Gross Profit decreased from $13.7 in Fiscal 2004 to $4.2 in Fiscal 2005, a decrease of $9.5 or 70%. Our gross profit percentage decreased from 13.2% for Fiscal 2004 to 5.4% for Fiscal 2005. The gross profit percentage decrease was primarily the result of a reduction of net sales of higher margin products and increased hardcopy imaging component costs, and freight and fuel costs that were not fully transferred to our customers. Our gross profit percentage decreased by 0.6% as a result of losses associated with the start up of our natural spring bottled water division.

Selling, General and Administrative Expenses—SG&A expenses for Fiscal 2005 were $9 million or 11.7% of net sales, as compared to $10.9 million, or 10.5% of net sales for Fiscal 2004. SG&A as a dollar amount, decreased by $1.9 million, approximately 20%, however as a result of reduced net sales and fixed overhead costs, SG&A increased as a percentage of net sales in Fiscal 2005.

Interest Expense—Interest expense increased from $1.1 million for Fiscal 2004 to $1.2 million for Fiscal 2005, an increase of $158,000 or 14.5%. This increase is attributable to increases in interest rates and financing of equipment related to our natural spring water bottling facility.

Income Taxes—Income tax expense was $674,571 for Fiscal 2004 as compared to a tax benefit of $1.6 million for Fiscal 2005. The decrease in tax expense resulted primarily from decreased profits, as well as utilization of NOL carry-backs and establishing NOL carry-forwards.

RESULTS OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2004, AS COMPARED TO THE YEAR ENDED AUGUST 31, 2003

Net Sales-— Net Sales decreased from $117.2 million in Fiscal 2003 to $104 million in Fiscal 2004, a decrease of $13.2 million, or 11.3%. The decrease resulted from lower sales of branded products.

Gross Profit —Gross Profit decreased from $13.8 million in Fiscal 2003 to $13.7 in Fiscal 2004, a decrease of $85,000 or 1%. Our gross profit percentage increased from 11.8% for Fiscal 2003 to 13.2% for Fiscal 2004. The gross profit percentage increase was primarily the result of decreased costs associated with the shipping and storing of excess inventory. The decreased costs was due to the consolidation of our Kearneysville, West Virginia and Greencastle Pennsylvania plants, and four raw material storage warehouses into our 414,000 square foot leased facility in Chambersburg, Pennsylvania.

Selling, General and Administrative Expenses—SG&A expenses for Fiscal 2004 were $10.9 million or 10.5% of net sales, as compared to $11.3 million, or 9.6% of net sales for Fiscal 2003. SG&A increased as a percentage of net sales in Fiscal 2004, due to the rising cost of employee health benefits, bad debt write off and advertising expense.

Interest Expense—Interest expense decreased from $1.8 million for Fiscal 2003 to $1.1 million for Fiscal 2004, a decrease of $705,000 or 39.4%. This decrease is attributable to the lowering of TST’s line of credit and the sale of the California building.

Income Taxes—Income tax expense was $400,100 for Fiscal 2003 as compared to $674,571 for Fiscal 2004. The increase in tax expense resulted primarily from increased profits and the taxable gain on the sales of the California buildings.

LIQUIDITY AND CAPITAL RESOURCES

We define liquidity as the ability to generate adequate funds to meet our operating and capital needs. Our cash requirements are primarily for working capital, capital expenditures, and interest and principal payments on our debt and capital lease obligations. Historically, these needs for cash have been met by cash flows from operations and borrowings under our revolving credit facility.

Effective June 8, 2005, TST amended its loan agreement with a commercial financial corporation to amend the termination date from November 2005 to November 2007. The amended agreement provides for a $15 million line of credit and an inventory sub-limit of $12 million. The amended loan, is secured by, among other things, inventory, trade receivables, and equipment.

Available borrowings under this line of credit, which accrued interest at prime plus 0.25%, 4.25 % and 6.5%, respectively, as of August 31, 2004 and August 31, 2005, are based upon specified percentages of eligible accounts receivable and inventories. As of August 31, 2005, there was a $3.5 million borrowing capacity remaining under the $15 million revolving line of credit, adequate available capital to operate our business.

Borrowings under our line of credit decreased from $6.9 million at August 31, 2004, to $6.3 million at August 31, 2005, a decrease of $545,000, or 8.0%. The decreased borrowing primarily resulted from a decrease in inventory.

Upon completion of the 34,500 foot expansion of our Itasca, Illinois building, on September 22, 2004, we consolidated the existing mortgage and the construction loan executing a five-year, $4.5 million loan with the current mortgagee of the building.

Net Cash Provided by/Used in Operating, Investing, and Financing Activities

Cash provided by our operating activities was $334,000 in Fiscal 2005 and $10.4 million for year ended August 31, 2004. Operating cash flows in Fiscal 2005 were used primarily to finance our operating loss in Fiscal 2005.

Cash used in investing activities was $351,000 for Fiscal 2005. Cash used in investing activities was $1.7 million for the year ended August 31, 2004. Cash used in investing activities for Fiscal 2005 was due to expenditures for property, plant and equipment, offset by proceeds received from the sale of the Pennsylvania facility.

Cash used in financing activities was $156,000 for Fiscal 2005. Cash used in financing activities was $8.6 million for the year ended August 31, 2004. Cash used in financing activities for Fiscal 2005 resulted from decreased borrowings on our line of credit, and debt repayments.

Capital Expenditures

During Fiscal 2005, we incurred capital expenditures of $937,000 consisting of equipment purchases associated with our new bottled spring water plant in the amount of $794,000 and $143,000 in expenditures to upgrade our computer systems and hardcopy imaging operations. During the year ended August 31, 2004, our capital expenditures were $3.7 million, consisting of equipment purchases associated with our bottled spring water operations. We plan to make total capital expenditures of approximately $400,000 during Fiscal 2006.

Future Liquidity

The cessation of sales of continuous business forms to key customers which decreased our receivables; start up operations at our spring water bottling facility; and escalating freight, fuel, and certain material costs which have not been fully passed through to our customers has adversely impacted our liquidity and capital resources in the year ended August 31, 2005. Although one empty building was sold in August 2005, one building remains empty and on the market to be sold. As of the date of filing this Form 10-K, no contract is pending on this facility. Management is contemplating the sale of another owned facility, with a possible lease- back or move to another less expensive location. The water bottling facility is operating and we are selling water product. Absent unforeseen circumstances these known trends and uncertainties indicates that our performance should start improving in our fiscal 2006 year.

Based upon current levels of operations and planned improvements in our operating performance, management believes that cash flow from operations together with the potential liquidation of our buildings, and available borrowings under our revolving line of credit should be adequate to meet our anticipated requirements for working capital and debt service through the end of fiscal 2006. Such belief is based on certain assumptions, including the continuation of the state of current operations, and there can be no assurance that such assumptions are correct. The expansion of our operations into diversified products may require us to obtain additional capital. We anticipate that the funds required will be generated through an increase in our revolving line of credit.

Our current level of profitability affects our ability to obtain additional financing or react quickly to changes in our industry. We will continue to assess our liquidity position and potential sources of supplemental liquidity in light of our operating performance and other relevant circumstances. Should we determine, at anytime, that it is necessary to seek additional short-term liquidity, we will evaluate our alternatives and take appropriate steps to obtain sufficient additional funds. There can be no assurance that any additional financing will be available if needed, or, if available, will be on acceptable terms. We have not identified any sources of long term liquidity.

As of August 31, 2005, we did not own derivative or other financial instruments for trading or speculative purposes. We do not use financial instruments and, therefore, the implementation of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” did not have a material impact on our financial position or results of operations.

At August 31, 2005, the Company had the following contractual obligations and other commercial commitments*:


			Less than 1
	Total		year		1-3 years		4-5 years		After 5 years
Long-Term Debt**	$	9,204,610	$	1,537,037	$	1,789,875	$	4,879,875	$	997,823

Operating Leases		11,124,059		1,286,914		2,556,116		2,108,659		5,172,370

Deferred Compensation		296,463		189,675		106,788		—		—

Total Obligations & Commitments	$	20,625,132	$	3,013,626	$	4,452,779	$	6,988,534	$	6,170,193


*		This table does not include the balance on the revolving line of credit.

**		Excludes related interest amounts.

SUBSEQUENT EVENTS

Subsequent to the end of Fiscal 2005, the Company received notice that Company’s Corporate Income Tax Return for the fiscal year ended August 31, 2004 is going to be examined by the IRS.

IMPACT OF INFLATION

Inflation is not expected to have a significant impact on our business.

FORWARD-LOOKING STATEMENTS

Management’s Discussion and Analysis of Financial Condition and the Results of Operations and other sections of this Form 10-K contain “forward-looking statements” about our prospects for the future, including but not limited to our ability to generate sufficient working capital, our ability to continue to maintain sales to justify capital expenses, and our ability to generate additional sales to meet business expansion. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected, including availability of raw materials, availability of thermal facsimile, computer, laser and color ink jet paper, to the cyclical nature of the industry in which we operate,

the potential of technological changes which would adversely affect the need for our products, price fluctuations which could adversely impact the large inventory we require, loss of any significant customer, and termination of contracts essential to our business. Parties are cautioned not to rely on any such forward-looking statements or judgments in making investment decisions.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are not exposed to market risks such as foreign currency exchange rates, but are exposed to risks such as variable interest rates. Market risk is the potential loss arising from adverse changes in market prices and rates. Our subsidiaries do not have supply contracts with any of their foreign vendors. All foreign vendors are paid in United States currency. In addition, TST’s international sales of finished goods are insignificant. Accordingly, there are not sufficient factors to create a material foreign exchange rate risk; therefore, we do not use exchange commitments to minimize the negative impact of foreign currency fluctuations.

We had both fixed-rate and variable-rate debts as of February 28, 2005. The fair market value of long-term variable interest rate debt is subject to interest rate risk. Our exposure to interest risks is not material. Generally the fair market value of variable interest rate debt will decrease as interest rates fall and increase as interest rates rise.

The estimated fair value of our total long-term fixed rate and floating rate debt approximates carrying value. See Note 2 to Consolidated Financial Statements. Based upon our market risk sensitive debt outstanding at August 31, 2005, there was no material exposure to our financial position or results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


Index to Consolidated Financial Statements		F-1

Report of Independent Registered Public Accounting Firm		F-2
Blackman Kallick Bartelstein, LLP

Consolidated Balance Sheets as of August 31, 2005 and 2004		F-3, F-4

Consolidated Statements of Operations for the Years Ended August 31, 2005, 2004 and 2003		F-5

Consolidated Statements of Stockholders’ Equity for the Years Ended August 31, 2005, 2004 and 2003		F-6

Consolidated Statements of Cash Flows for the Years Ended August 31, 2005, 2004 and 2003		F-7

Notes to Consolidated Financial Statements		F-8

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

The conclusions of the Company’s Chief Executive Officer and Chief Financial Officer concerning the effectiveness of the Company’s disclosure controls and procedures and changes in internal controls as of August 31, 2005 are as follows:

a) They have concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

b) There were no changes in the Company’s internal controls during the quarter ended August 31, 2005 that have materially affected or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

We have adopted a code of ethics that applies to all of our principal executive officers and senior financial officers. This code of ethics is posted on our Website. The Internet address for our Website is http://www.tstimpreso.com, and the code of ethics may be found as follows:

1) From our main Web page, first click on “Corporate Info”.

2) then click on “Corporate Compliance”.

Or for a mailed copy call (972) 462-0100 ext 1117.

We intend to satisfy the disclosure requirement required under Item 10 of Form 8-K regarding an amendment to, or waiver from, a provision of this code of ethics by posting such information on our website, at the address and location specified above.

The remaining information required by this item is incorporated herein by reference in the Company’s definitive proxy statement to be filed with the Commission not later than 120 days after August 31, 2005.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference in the Company’s definitive proxy statement to be filed with the Commission not later than 120 days after August 31, 2005.

ITEM. 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated herein by reference in the Company’s definitive proxy statement to be filed with the Commission not later than 120 days after August 31, 2005.

ITEM. 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated herein by reference in the Company’s definitive proxy statement to be filed with the Commission not later than 120 days after August 31, 2005.

ITEM. 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated herein by reference in the Company’s definitive proxy statement to be filed with the Commission not later than 120 days after August 31, 2005.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) 1. Financial Statements:

The financial statements of the Company filed in this Annual Report on Form 10-K is listed in Item 8.

2. Financial Statement Schedules:

The financial statement schedules of the Company filed in this Annual Report on Form 10-K are listed in the attached Index to Financial Statement Schedules.

3. Exhibits:

The exhibits required to be filed as part of this Annual Report on Form 10-K is listed in the attached Index to Exhibits.

INDEX TO EXHIBITS


Exhibit No.		Description of Exhibits
2.1		Plan and Agreement of Merger, dated as of December 1, 1999, among TST/Impreso, Inc., Impreso, Inc. and TST Merger Corp. (incorporated by reference to Appendix A of the Company’s Registration Statement on Form S-4, No. 333-92381)

2.2(a)		Asset Purchase Agreement by and between TST/Impreso, Inc. and Durango Georgia Converting LLC dated as of April 5, 2001 (incorporated by reference to Exhibit 2.1 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended May 31, 2001)

2.2(b)		Asset Purchase Agreement by and between TST/Impreso, Inc. and Bank of America, N.A. and consented to by United Computer Supplies, Inc., United Computer Supplies-East, Inc. and John R. Zimmerman dated as of March 19, 2002 (incorporated by reference to Exhibit 2.1 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended May 31, 2002)

2.2(c)		Real Estate Purchase and Sale Agreement by and between United Computer Supplies, Inc. and TST/Impreso, Inc. dated as of March 15, 2002 (incorporated by reference to Exhibit 2.21 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended May 31, 2002)

3.1		Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3(a) to the Company’s Registration Statement on Form S-4, No. 333-92381)

3.2		By-laws of the Company (incorporated by reference to Exhibit 3(b) to the Company’s Registration Statement on Form S-4, No. 333-92381)

4.1		Form of Underwriters’ Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1, No. 33-93814)

10.1		1995 Stock Option Plan (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1, No. 33-93814)

10.2		Employment Agreement dated January 27, 1999, between the Company and Marshall Sorokwasz (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1, No. 33-93814)

10.3+		IBM Brand Paper Trademark Licensing Agreement, effective as of April 30, 1997 and Amendment No. 1 thereto, between TST/Impreso, Inc. and International Business Machines Corporation (incorporated by reference to Exhibit 10(c) of the Company’s Quarterly Report on Form 10-Q/A, dated July 15, 1997) [Confidential treatment has been granted for certain portions of this Exhibit]


Exhibit No.		Description of Exhibits
10.4		Amendment Number 2 to the IBM Brand Paper Trademark Licensing Agreement, dated March 5, 1999, between TST/Impreso, Inc. and International Business Machines Corporation (incorporated by reference to Exhibit 10(d) of the Company’s amended Quarterly Report on Form 10-Q/A, dated June 17, 1999) [Confidential treatment has been granted for certain portions of this Exhibit]

10.5		Crayola License Agreement made as of February 6, 2002, with an effective date of March 1, 2002, by and between Binney & Smith Properties, Inc. and TST/Impreso, Inc. (incorporated by reference to Exhibit 10(e) of the Company’s amended Quarterly Report on Form 10-Q/A dated May 1, 2002) [Confidential treatment has been granted for certain portions of this Exhibit]

10.6		Employment Agreement dated January 27, 2004, between the Company and Marshall Sorokwasz (incorporated by reference to Exhibit 10(f) to the Company’s Quarterly Report on Form 10-Q, dated February 29, 2004).

10.7		Equipment Lease Agreement, dated October 26, 2004 between Alexa Springs, Inc. and General Electric Capital Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated October 26, 2004).

10.8		Real Estate Lease Agreement between Alexa Springs, Inc. and Alexa Springs Water Company. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated December 1, 2004).

10.9		Water Supply Agreement between Alexa Springs, Inc. and Alexa Springs Water Company. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated December 1, 2004).

10.10		Amended and Restated Loan and Security Agreement, and First, Second, and Third Amendments by and between Congress Financial Corporation (Southwest) and TST/Impreso, Inc. and TST/Impreso of California, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated December 14, 2004.)

10.11		Fourth Amendment by and between Congress Financial Corporation (Southwest) and TST/Impreso, Inc. and TST/Impreso of California, Inc. to Amended and Restated Loan and Security Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A, dated December 14, 2004.)

10.12		Amendment to Equipment Lease Agreement dated October 26, 2004 between Alexa Springs, Inc. and General Electric Capital Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A, dated December 21, 2004.

10.13		Real Estate Lease Agreement dated August 15, 2003, between Chambersburg Business Park, LLP and TST/Impreso, Inc.

21		Subsidiaries of the Registrant (incorporated by reference to Exhibit 21 to the Company’s Annual Report on Form 10-K, dated August 31, 2004)

31.1		Certificate Pursuant to Section 302 of Sarbanes – Oxley Act of 2002 for CEO.

31.2		Certificate Pursuant to Section 302 of Sarbanes – Oxley Act of 2002 for CFO.

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1		Value, Inc. Fairness Opinion (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, dated December 1, 2004)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


		Page
Report of Independent Registered Public Accounting Firm		F-2
Blackman Kallick Bartelstein, LLP

Consolidated Balance Sheets as of August 31, 2005 and 2004		F-3, F-4

Consolidated Statements of Operations for the Years Ended August 31, 2005, 2004 and 2003		F-5

Consolidated Statements of Stockholders’ Equity for the Years Ended August 31, 2005, 2004 and 2003		F-6

Consolidated Statements of Cash Flows for the Years Ended August 31, 2005, 2004 and 2003		F-7

Notes to Consolidated Financial Statements		F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders of Impreso, Inc.:

We have audited the accompanying consolidated balance sheets of Impreso, Inc. (a Delaware corporation) and subsidiaries as of August 31, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended August 31, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control or financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Impreso, Inc. and subsidiaries as of August 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 2005 in conformity with accounting principles generally accepted in the United States of America.

Blackman Kallick Bartelstein, LLP
Chicago, Illinois

November 17, 2005

F-2

IMPRESO, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS


	August 31,			August 31,
	2005			2004
Current assets:
Cash and cash equivalents	$	-0-		$	173,313
Trade accounts receivable, net of allowance for doubtful accounts of $1,414,042 as of August 31, 2005 and $1,130,315 as of August 31, 2004		8,996,319			12,666,433
Income tax receivable		1,255,294			—
Inventories, net of allowances		16,753,921			22,643,558
Prepaid expenses and other		217,183			330,039
Assets held for sale		1,278,872			—
Deferred income tax assets		828,092			736,810


Total current assets		29,329,681			36,550,153


Property, plant and equipment, at cost		27,174,188			29,417,303
Less-Accumulated depreciation		(14,784,634	)		(14,295,714	)


Net property, plant and equipment		12,389,554			15,121,589


Noncurrent assets
Other assets		74,183			81,778


Total assets	$	41,793,418		$	51,753,520

The accompanying notes are an integral part of the consolidated financial statements

F-3

IMPRESO, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

LIABILITIES AND STOCKHOLDERS’ EQUITY


	August 31,			August 31,
	2005			2004
Current liabilities:
Accounts payable	$	8,182,928		$	12,711,758
Accrued liabilities		796,834			987,921
Accrued commissions		954,231			1,863,698
Current maturities of long-term debt		1,718,028			1,407,070
Line of credit		6,306,354			6,851,479
Current maturities of prepetition debt		8,684			8,384


Total current liabilities		17,967,059			23,830,310

Deferred income tax liability		295,016			680,012
Deferred gain		611,826			796,796
Long-term debt, net of current maturities		7,562,876			8,171,228
Long-term portion of prepetition debt, net of current maturities		211,485			220,689


Total liabilities		26,648,262			33,699,035


Stockholders’ equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized; 0 shares issued and outstanding		—			—
Common stock, $.01 par value; 15,000,000 shares authorized; 5,292,780 issued and 5,278,780 outstanding		52,928			52,928
Treasury stock (14,000 shares, at cost)		(38,892	)		(38,892	)
Additional paid-in capital		6,353,656			6,353,656
Retained earnings		8,777,464			11,686,793


Total stockholders’ equity		15,145,156			18,054,485


Total liabilities and stockholders’ equity	$	41,793,418		$	51,753,520

The accompanying notes are an integral part of the consolidated financial statements

F-4

IMPRESO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


	Years Ended August 31,
	2005			2004			2003
Net sales	$	77,727,971		$	103,989,229		$	117,222,957
Cost of sales		73,551,166			90,283,782			103,432,569


Gross profit		4,176,805			13,705,447			13,790,388

Gain on sale of assets		(554,374	)		—			—
Embezzlement recovery		(290,840	)		—			—
Selling, general and administrative expense		9,055,980			10,879,310			11,297,995


Operating (loss) income		(4,033,961	)		2,826,137			2,492,393


Other expenses (income) :
Interest expense		1,240,794			1,083,289			1,787,950
Extinguishment of debt		(489,645	)		—			—
Other expense (income), net		(279,156	)		54,682			(313,489	)


Total other expense		471,993			1,137,971			1,474,461


(Loss) income before income tax expense		(4,505,954	)		1,688,166			1,017,932


Income tax (benefit) expense:
Current		(1,120,348	)		1,177,802			388,319
Deferred		(476,278	)		(503,231	)		11,782

Total income tax (benefit) expense		(1,596,626	)		674,571			400,101


Net (loss) income	($	2,909,328	)	$	1,013,595		$	617,831


Net (loss) income per common share (basic and diluted)	$	(0.55	)	$	0.19		$	0.12


Weighted average shares outstanding (basic)		5,292,780			5,292,780			5,292,780


Weighted average shares outstanding (diluted)		5,286,389			5,301,493			5,291,322

The accompanying notes are an integral part of these consolidated financial statements.

F-5

IMPRESO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


	Common Stock				Additional
	$.01 Par Value				Paid-In		Retained			Treasury
	Shares		Amount		Capital		Earnings			Stock			Total
Balance, August 31, 2002		5,292,780	$	52,928	$	6,347,209	$	10,055,367		$	(38,892	)	$	16,416,612
Expired Warrants		—		—		6,447		—			—			6,447
Net Income		—		—		—		617,831			—			617,831


Balance, August 31, 2003		5,292,780		52,928		6,353,656		10,673,198			(38,892	)		17,040,890
Net Income		—		—		—		1,013,595			—			1,013,595


Balance, August 31, 2004		5,292,780		52,928		6,353,656		11,686,793			(38,892	)		18,054,485
Net Loss		—		—		—		(2,909,329	)		—			(2,909,329	)


Balance, August 31, 2005		5,292,780	$	52,928	$	6,353,656	$	8,777,464		$	(38,892	)	$	15,145,156

The accompanying notes are an integral part of these consolidated financial statements.

F-6

IMPRESO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Years Ended August 31,
	August 31,			August 31,			August 31,
	2005			2004			2003
Cash Flows From Operating Activities
Net (loss) income	$	(2,909,329	)	$	1,013,595		$	617,831
Adjustments to reconcile net (loss) income to net cash provided by operating activities-
Depreciation and amortization		1,476,536			1,419,715			1,438,791
Bad debt expense		726,488			753,774			684,459
Increase (decrease) in Provision for Losses of Inventory		153,877			—			—
Gain on sale of property, plant and equipment		(367,609	)		—			—
Change in deferred gain on sale of property		(184,970	)		796,796			—
Deferred income tax (benefit) expense		(476,278	)		(503,231	)		11,782
Decrease (increase) in trade accounts receivable		2,943,626			(1,275,472	)		3,034,355
Increase in income tax receivable		(1,255,294	)		—			—
Decrease in inventories		5,735,760			5,818,533			5,648,924
Decrease (increase) in prepaid expenses and other		112,856			(186,421	)		116,046
Decrease in noncurrent assets		7,595			—			—
(Decrease) increase in accounts payable		(4,528,830	)		1,609,085			(5,199,128	)
(Decrease) increase in accrued liabilities		(1,100,554	)		958,933			(1,803,705	)


Net cash provided by operating activities		333,874			10,405,307			4,549,355


Cash Flows From Investing Activities:
Additions to property, plant, and equipment		(937,042	)		(3,760,684	)		(335,765	)
Proceeds from sale of property, plant and equipment		586,205			2,053,405			2,048


Net Cash used in investing activities		(350,837	)		(1,707,279	)		(333,717	)


Cash Flows From Financing Activities:
Net payments on line of credit		(545,125	)		(7,503,966	)		(3,506,379	)
Payments on prepetition debt		(8,904	)		(8,161	)		(7,866	)
Payments on postpetition debt		(1,603,248	)		(1,107,717	)		(809,073	)
Proceeds from issuance of debt		2,000,927			—			—


Net cash used in financing activities		(156,350	)		(8,619,844	)		(4,323,318	)


Net (decrease) increase in cash and cash equivalents		(173,313	)		78,184			(107,680	)

Cash and cash equivalents, beginning of period		173,313			95,129			202,809


Cash and cash equivalents, end of period	$	—		$	173,313		$	95,129

The accompanying notes are an integral part of these consolidated financial statements.

F-7

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND NATURE OF BUSINESS:

Impreso, Inc., a Delaware corporation (referred to collectively with its subsidiaries as the “Company”), is the parent holding company of TST/Impreso, Inc. (“TST”), a manufacturer and distributor to dealers and other resellers of paper and film products for commercial and home use in domestic and international markets, Hotsheet.com, Inc., the owner and operator of the Hotsheet.com web portal, and Alexa Springs, Inc. a natural spring water bottler. Currently, TST has one wholly owned subsidiary, TST/Impreso of California, Inc., which was formed to support the activities of the paper converting segment of the Company’s business. For the years ended August 31, 2005, 2004 and 2003, net sales of Hotsheet.com, Inc. amounted to $172,276, $138,239, and $158,755, respectively. For the year ended August 31, 2005, net sales of Alexa Springs, Inc. (“Alexa”) amounted to $202,000. Alexa did not have sales for the years ended August 31, 2004 and 2003.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The consolidated financial statements include Impreso, Inc. and the accounts of its subsidiaries. All significant intercompany accounts and transactions with its consolidated subsidiaries have been eliminated in consolidation.

Use of Estimates and Concentration of Credit

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

TST sells its paper and film products to dealers and resellers for commercial and home use. TST reviews all existing customers’ financial condition periodically and monitors average days outstanding in trade accounts receivable. Receivables are generally due 30 days from the date of sale.

One TST customer accounted for approximately 24%, 30% and 22% of gross sales, and 28%, 34% and 26% of accounts receivable for the years ended August 31, 2005, 2004 and 2003, respectively. Beginning in August 2004, this major customer substantially decreased purchasing certain products. The reduction of future sales to this customer is expected to approximate $20 million annually. Management believes that this reduction in sales has materially adversely affected our financial position, results of operations and cash flows in Fiscal 2005.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Accounts Receivable (doubtful accounts) Reserves

F-8

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Inventories

Inventories are stated at the lower of cost, on a first-in, first-out basis, or market, and include material, labor and factory overhead.

Valuation allowances for slow moving, obsolete products, or bad (damaged) products are based on historical experience, acquisition activities and analysis of inventory on hand. The Company evaluates and, if necessary, adjusts these allowances quarterly.

Property, Plant and Equipment

Property, plant and equipment are stated at acquisition or construction cost. Expenditures for maintenance, repairs and improvements that do not extend the useful lives of assets are charged to appropriate expense accounts in the year incurred. Upon disposition of an asset, cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in the results of operations. Depreciation is computed on the straight-line basis using the estimated useful lives of the respective assets: five years for furniture and fixtures, seven years for equipment and thirty years for buildings.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, the Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities.

Revenue Recognition

TST records sales of hardcopy imaging and bottled water products when products are shipped to customers. Our revenue recognition policy complies with the required four revenue recognition criteria: our customers’ purchase orders or on line authorizations and our order acknowledgments include the terms of the sale and are binding on the customer, persuasive evidence that a transaction exits; delivery has occurred, as risk of loss of the product has passed to the customer; The purchase orders, on line authorizations and order acknowledgments make our price to our customer fixed or determinable; finally, we assess the likelihood of collecting credit accounts prior to revenue recognition and are reasonably assured the sales are collectible due to our credit policies and collection methods. The Company reserves against doubtful accounts based upon historical experience and management’s evaluation of existing economic conditions. Consistent monitoring of the accounts receivable allows us to determine if an account’s collection is becoming compromised. We reinvestigate delinquent customers to see if there may be a slow pay trend or economic condition affecting this customer. Subsequent to this inquiry, we evaluate our doubtful account allowance and, if the information reflects additional exposure, we increase our allowance accordingly.

Hotsheet.com, Inc. generates its revenue by click through fee advertising revenues and commissions earned.

F-9

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Click through fees are generated when traffic is sent from the Hotsheet.com website, via a link, to a vendor’s website. Commissions are generated when the linked traffic makes purchases. The revenue is recognized upon receipt, which at this time does not differ significantly from accrual basis.

Rebates, Advertising Allowances and Independent Sales Commissions

The 2003 consolidated financial statements reflect the reclassification of customer rebates to sales from cost of sales in the amount of $3,237,913. The 2003 consolidated financial statements reflect the reclassification of sales commissions and advertising discounts to selling, general and administrative expenses from cost of sales in the amount of $1,085,068.

Advertising

Advertising costs are expensed as incurred. Advertising costs were approximately $1.1 million, $2.2 million, and $1.8 million for the years ended August 31, 2005, 2004 and 2003, respectively, and are included in selling, general and administrative expenses in the accompanying consolidated financial statements.

Other (Income) Expense, Net

Other (income) expense, net, consists primarily of billboard lease income at the Itasca, Illinois facility, minority interest expense, and settlement of legal contingencies.

Cash Flow Information

Cash paid for interest during fiscal years 2005, 2004 and 2003 was $1.2 million, $1.1 million and $1.8 million, respectively.

Cash paid for income taxes during fiscal years 2005, 2004 and 2003 was $56,000, $1,010,639 and $801,377, respectively.

Stock Based Compensation

In October 1995, the FASB issued SFAS No. 123, “Accounting for Stock-Based Compensation,” which requires entities to measure compensation costs related to awards of stock-based compensation using either the fair value method or the intrinsic value method. Under the fair value method, compensation expense is measured as of the grant date based on the fair value of the award. Under the intrinsic value method, compensation is equal to the excess, if any, of the quoted market price of the stock at the grant date over the amount the employee must pay to acquire the stock. Entities electing to measure compensation costs using the intrinsic value method must make pro forma disclosures of net income and earnings per share as if the fair value method had been applied.

The Company accounts for the Incentive Stock Option Plan under the recognition and measurement

F-10

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. No stock-based compensation costs are reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation.


August 31	2005			2004		2003
Net Earnings

As reported	$	(2,909,329	)	$	1,013,595	$	617,831

Pro forma		(2,911,329	)		1,009,095		575,831

Stock-Based Employee
Compensation Expense, Net of Tax

As reported		—			—		—

Pro forma		2,000			4,500		42,000

Net Earnings per Common and Common Equivalent Share:
Basic — As reported		(0.55	)		0.19		0.12
Diluted — As reported		(0.55	)		0.19		0.12

Basic — Pro forma		(0.55	)		0.19		0.11
Diluted — Pro forma	$	(0.55	)	$	0.19	$	0.11

In determining the pro forma stock compensation expense, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in Fiscal 2005, 2004 and 2003, respectively: expected volatility of 58%, 70.5% and 80%; risk-free interest rate of 3.73%, 3.10% and 5.23%; expected lives of five years; and no expected dividends.

Net Income Per Share

Basic net income per share is based on the weighted-average number of common shares outstanding. Common share equivalents have not been included in the computation of diluted net income per share to the extent that they are anti-dilutive. Excluded from the computation of diluted net income per share are options to purchase 331,695, 324,700 and 377,200 shares of common stock as of August 31, 2005, 2004 and 2003, respectively. These options were excluded because the option exercise price was greater than the average market price of the common stock. Dilutive common share equivalents did not have a material effect on the income per share calculation.

Disclosures about Fair Value of Financial Instruments

In accordance with SFAS No.107, “Disclosures About Fair Value of Financial Instruments,” the following

F-11

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and cash equivalents, accounts receivable, investments, accounts payable and long-term debt - the carrying amount approximates fair value.

New Financial Accounting Pronouncements

In January 2003, the FASB issued Interpretation 46 (“FIN 46”), “Consolidation of Variable Interest Entities,” an Interpretation of ARB 51, which expands upon and strengthens existing accounting guidance concerning when a company should include in its financial statements the assets, liabilities and activities of another entity. A variable interest entity (“VIE”) does not share economic risk and reward through typical equity ownership arrangements; instead, contractual or other relationships distribute economic risks and rewards among equity holders and other parties. Once an entity is determined to be a VIE, the party with the controlling financial interest, the primary beneficiary, is required to consolidate it. FIN 46 also requires disclosures about VIEs that the Company is not required to consolidate but in which it has a significant variable interest. The adoption of this statement did not have a material impact on the Company’s consolidated financial statement.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R, “Share-Based Payment” (“SFAS 123R”). Under this new standard, companies will no longer be able to account for share-based compensation transactions using the intrinsic method in accordance with APB 25. Instead, companies will be required to account for such transactions using a fair-value based method and to recognize the expense over the service period. SFAS 123R allows for several alternative transition methods. On April 14, 2005, the Securities and Exchange Commission announced the adoption of a rule that defers the required effective date of SFAS 123R for registrants to the beginning of the first fiscal year beginning after June 15, 2005. Accordingly the Company will implement this new standard in the first quarter of its fiscal year 2006.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs” (“SFAS 151”), an amendment of ARB No. 43, Chapter 4. SFAS 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material. SFAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company does not believe the adoption of SFAS 151 will have a material effect on its consolidated financial position, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets—an amendment of APB Opinion No. 29 (“FAS 153”). The guidance in APB Opinion No. 29, Accounting for Non-monetary Transactions (“APB 29”) , is based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged. However, the guidance in APB 29 included certain exceptions to that principle. FAS 153 amends APB 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The adoption of FAS 153 did not have a material impact on the Company’s consolidated financial statements.

On March 29, 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107 (SAB 107) regarding the Staff’s interpretation of SFAS 123(R). This interpretation expresses the views of the Staff regarding the interaction between SFAS 123(R) and certain SEC rules and regulations and provides the Staff’s views regarding the valuation of share-based payment arrangements by public

F-12

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

companies. In particular, this SAB provides guidance related to share-based payment transactions with non-employees, the transition from nonpublic to public entity status, valuation methods, the accounting for certain redeemable financial instruments issued under share-based payment arrangements, the classification of compensation expense, non-GAAP financial measures, first-time adoption of SFAS 123(R) in an interim period, capitalization of compensation cost related to share-based payment arrangements, the accounting for income tax effects of share-based payment arrangements upon adoption of SFAS 123(R), the modification of employee share options prior to adoption of SFAS 123(R) and disclosures in Management’s Discussion and Analysis subsequent to adoption of SFAS 123(R). The Company will adopt SAB 107 in connection with its adoption of SFAS 123(R). The Company has not determined the impact, if any, that this statement will have on its consolidated financial position or results of operations.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

3. INVENTORIES:

Inventories consisted of the following:


	August 31,
	2005			2004
Finished goods	$	9,408,114		$	11,920,405
Raw materials		6,327,885			9,866,736
Supplies		1,385,293			1,047,748
Work-in-process		95,233			117,396
Allowance for slow moving, obsolete, and damaged inventory		(462,604	)		(308,727	)

Total	$	16,753,921		$	22,643,558

4. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment are comprised of the following:


	August 31			August 31
	2005			2004
Buildings and equipment	$	22,860,479		$	27,100,375
Equipment under capital lease		1,938,291			—
Furniture, fixtures and other		2,375,418			2,316,928

		27,174,188			29,417,303
Less-Accumulated depreciation		(14,784,634	)		(14,295,714	)

Net property, plant and equipment	$	12,389,554		$	15,121,589

Accumulated depreciation on equipment under capital lease was $245,198 as of August 31, 2005.

5. ACCOUNTING FOR LONG-LIVED ASSETS:

In the year ended August 31, 2005, the Company ceased depreciating its Kearneysville, West Virginia and

F-13

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Greencastle, Pennsylvania buildings and building improvements and reclassified the net book value of the land, building and building improvements in the amount of $2.1 million to assets held for sale. On August 31, 2005, the Company sold the Greencastle, Pennsylvania facility which reduced the amount of assets held for sale to $1.3 million. A contract on the West Virginia buildings was terminated prior to close in accordance with its provisions. The West Virginia buildings remain on the market to be sold.

The Company has determined the plan of sale criteria in the statement of Financial Accounting Standards No. 144, ‘Accounting for the Impairment or Disposal of Long-Lived Assets’ has been met. Accordingly, the assets held for sale are classified as current and are carried at the lower of their carrying or fair value, less costs to sell. There were no write downs of inventory as a result of this valuation.

6. EXTINGUISHMENT OF DEBT:

TST was a defendant in a suit filed in Fiscal 2003 for the collection of sums due under two promissory notes. The liability of $577,145 was included on the Company’s balance sheet. TST asserted various defenses and the parties settled. TST has completed all payments associated with the settlement and recorded a gain on extinguishment of debt in the amount of $489,645. See Footnote 7.

7. LONG-TERM DEBT AND LINE OF CREDIT:

The following is a summary of long-term debt and line of credit:


	August 31,		August 31,
	2005		2004
Line of Credit with a commercial financial corporation under revolving credit line, Maturing November 2007, secured by inventories, trade accounts receivable, equipment, and goodwill associated with TST’s trademark “IMPRESO” (no value on financial statements), interest payable monthly at prime plus 0.25% (6.5% and 4.25%, as of August 31, 2005 and August 31, 2004, respectively).	$	6,306,354	$	6,851,479

Note payable to a commercial financial corporation, secured by real property and equipment, payable in monthly installments of $4,457 (including interest at 8.50%), maturing November 2008.		184,645		222,039

Note payable to a commercial financial corporation, secured by real property and equipment, payable in monthly installments of $10,843 (including interest at 8.50%), maturing July 2010. Revolving lender’s blanket lien subordinated to note’s collateral.		511,580		599,536

Note payable to a commercial financial corporation, secured by real property, payable in monthly installments of $2,834 (including interest at 5.5%), maturing October 2010.		149,972		175,978

Notes payable to various commercial financial corporations, secured by equipment, interest rates ranging from 5.25% to 13.8%, maturing at various dates from September 2004 through July 2008.		96,428		140,069

Notes payable to a commercial financial corporation, secured by real property and a personal guarantee by the trustee of a trust which is a principal stockholder of the Company, payable in monthly installments of $21,407 (including interest at 8%), maturing March 2011.	$	1,182,378	$	1,944,381

F-14

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


	August 31,			August 31,
	2005			2004
Acquisition note payable, unsecured, payable in quarterly installments of $15,000 (including interest at 8%), maturing April 2006. (See Footnote 6)	$	—		$	225,000

Acquisition note payable, secured by equipment, payable in monthly installments of $16,024, no interest, matured May 2003. (See Footnote 6)		—			352,145

Note payable to a commercial financial corporation, secured by real property and a personal guarantee by the trustee of a trust which is a principal stockholder of the Company, payable in monthly installments of $22,827 (including a fixed schedule for interest, 6% as of August 31, 2004), maturing April 2007. On September 22, 2004, this note was combined with the construction note, in which the personal guarantee was relinquished by the lender. The combined Note is payable in monthly installments of $40,454.51, including interest at prime plus 1.125% with a cap of 7.5% (7.375% as of August 31, 2005) maturing September 2009.		4,318,812			3,085,043

Construction note payable to a commercial financial corporation, secured by real property, payable in monthly installments of interest only, at 6 %, consolidated into new loan executed September 22, 2004, combined with balance of existing mortgage on the real property. Interest on the new combined loan will be prime plus 1.125%, capped at 7.5%, maturing 5 years from date of execution.		—			1,375,059

Note payable to a commercial financial corporation, secured by equipment, payable in monthly installments of $17,857 including interest at a variable rate equal to 30-day LIBOR plus 350 basis points, (6.77% and 4.5%, respectively as of August 31, 2005 and August 31, 2004), maturing February 2009.		767,857			982,143

Acquisition notes payable, unsecured, payable in monthly installments of $16,666, no interest, maturing February 2007.		296,463			476,905

Capital lease payable to a commercial financial corporation, secured by equipment, payable in monthly installments of $28,320, including interest at 8.51%, maturing October 2011.		1,772,769			—

Prepetition-

Note payable to a commercial financial corporation, secured by real property and equipment and a personal guarantee by the trustee of a trust which is a principal stockholder of the Company, payable in monthly installments of $1,461 (including interest at 4%), maturing April 2008.		220,169			229,073


Total		15,807,427			16,658,850

Less Current Maturities		(8,033,066	)		(8,266,933	)


Long-Term Debt	$	7,774,361		$	8,391,917

F-15

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Prepetition amount listed above represents the renegotiated amounts and terms under the 1993 plan of reorganization.

In June 2005, the Company amended its line of credit to extend the termination date from November 2005 to November 2007. The amended revolving credit line is limited to the lesser of $15 million or a percentage of eligible trade accounts receivable and inventories, as defined. The remaining availability under the revolving credit line was $3.5 million as of August 31, 2005.

The line of credit, as amended, has a restrictive covenant requiring the maintenance of a minimum tangible net worth, as defined in the agreement. For the period ended August 31, 2005, the Company was not in compliance with this covenant and received a waiver from the lender.

One of the notes payable contains restrictive covenants on current and debt to worth ratios, and the payment of cash dividends. As of August 31, 2005, the Company was in compliance with these covenants. Future maturities of long-term debt, other than capital leases, which includes borrowings under the line of credit, at August 31, 2005, are as follows:


2006	$	7,145,015
2007		766,484
2008		835,447
2009		668,918
2010		3,858,101
Thereafter		760,693

	$	14,034,658

The following is a schedule by year of future minimum lease payments under a capital lease together with the present value of the net minimum lease payments as of August 31, 2005:


2006	$	985,740
2007		214,920
2008		214,920
2009		214,920
2010		214,920
Thereafter		250,742

Total Minimum Lease Payments	$	2,096,162
Less amount representing interest		(323,393	)

Present Value of Net Minimum Lease Payments	$	1,772,769

8. REAL ESTATE AND EQUIPMENT LEASE AGREEMENTS:

TST is obligated under real estate and equipment operating leases, which expire at various dates through 2017. Rental expenses under these leases were $1.2 million, $1 million, and $0.5 million for the years ended August 31, 2005, 2004 and 2003, respectively. Related party rental expense under long term real estate lease for the years ended August 31, 2005, 2004 and 2003 were $44,190, $0 and $0, respectively. These expenses do not include the in-out public warehouse charges, which are assessed on each box or pallet as it is brought into and out of the warehouse. Future annual minimum lease payments as of August 31, 2005, are as follows:

F-16

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Year	All Lease Payments Payments		Related Party Lease Payments
2006	$	1,286,914	$	58,920
2007		1,282,498		58,920
2008		1,273,618		58,920
2009		1,163,342		58,920
2010		1,028,192		58,920
Thereafter		5,750,544	$	250,410

	$	11,785,108	$	545,010

In April 2004, the Company sold its two adjacent buildings in Fontana, California to an unrelated party as part of a sales-leaseback transaction. The transaction has been accounted for as a sale, although the gain associated with the sale has been deferred in accordance with sales-leaseback accounting and is being amortized over 60 months, which represents the life of each of the lease agreements. Both leases have annual rent escalations based upon a formula utilizing the Consumer Price Index and are capped each year at 1.75%, which gives the Company an option to renew under substantially the same terms and conditions for a period of 2, 3 or 5 years. The rent associated with the California buildings is recognized as it is incurred, rather than on a straight line basis, due to the immaterial impact on our consolidated financial statements.

Another of the Company’s material lease agreements is for the Chambersburg, Pennsylvania plant. The essential provisions of this real estate lease are a term of thirteen years, beginning in March 2004, with an option to renew for an additional seven; and rent escalations at the beginning of years 6, 11, 14 and 16, in defined amounts. This lease has been accounted for on a straight-line basis.

On December 1, 2004, the Company executed a real estate lease with Alexa Springs Water Company, for the facility located in Mt. Ida, Arkansas. The ten year lease runs concurrently with a water supply agreement on the land and buildings, which house the springs. Both of these agreements have an automatic renewal of second ten year terms if not terminated in accordance with the agreements. The other essential provision of this real estate lease is a landlord option to increase the rent three times in each ten year term, with each escalation not to exceed 10%. See Footnotes 12 and 17.

9. COMMITMENTS AND CONTINGENCIES:

Legal-

On September 18, 2002, TST filed a lawsuit against a vendor in the United States District Court for the Northern District of Texas — Dallas Division. TST’s general claim is that the vendor breached a Distributor Agreement entered into with TST in several material respects, including the vendor’s late delivery of paper products, the vendor’s delivery of defective product, and the vendor’s failure to properly credit TST’s accounts based upon these and other alleged breaches. The vendor responded to TST’s demand by generally denying TST’s claims and asserting a counterclaim seeking to recover disputed accounts receivable and damages related to TST’s alleged interference with the vendor’s relationship with its lender. Jurisdictional issues required that the suit be re-filed in Texas State Court. The Trial is set for May 2006.

On November 5, 2003, the Company discovered that the Company’s payroll administrator was fraudulently diverting Company funds into her personal bank accounts. The investigation revealed a loss of approximately $627,000 over a period starting in September 2000 until October 2003. In November 2004, the Company and the insurer at the time the loss was discovered executed a partial settlement without waiving each party’s rights to proceed to suit or defend on the balance of the Company’s losses.

F-17

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Management believes recent legal developments could be persuasive in litigating different interpretations of defined terms within the policy, and therefore recovering the balance of up to $500,000 of the Company’s claim as filed with the Insurer. The fraudulently diverted funds were recorded in the Registrant’s consolidated financial statements for fiscal years ended August 31, 2001, 2002 and 2003, as salary expense. Partial reimbursement from the insurance company and the embezzler is recorded as a separate line item under operating loss, embezzlement recovery, for the year ended August 31, 2005. In August 2005, we filed suit in Dallas County to pursue our claims against potentially liable parties for losses incurred. The parties are currently conducting discovery.

In April 2004, TST filed a lawsuit in the 68^th judicial district Dallas County against a former outside sales representative, alleging breach of fiduciary duty, tortious interference with existing and prospective business relations, and civil conspiracy. The lawsuit seeks to enforce the duties of loyalty owed to TST by its sales agent. The defendant filed a counter claim alleging business disparagement and tortious interference with existing and prospective business relations. Trial is set for April 2006.

TST’s Significant Contracts-

In April 1997, TST entered into a non-exclusive Trademark Licensing Agreement with International Business Machines Corporation (“IBM”) to manufacture and distribute certain selected products carrying the IBM logo. In March 1999, the Company extended its agreement with IBM from a four year contract with two one-year automatic renewals, to a six year contract with two one-year automatic renewals. In September 2003, the agreement was extended until April 2007. On December 1, 2004 TST and IBM terminated the Trademark Licensing Agreement.

In February 2002, TST entered into a trademark licensing agreement with Binney & Smith Properties, Inc., the owner of the Crayola trademark. The original agreement expired on February 28, 2004, and was amended to extend through December 31, 2004 and expired on that date.

F-18

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. INCOME TAXES:

The Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires among other things, an asset and liability approach for financial accounting and reporting of income taxes. Significant components of deferred income taxes as of August 31, 2005 and 2004, were as follows:


	2005			2004
Deferred income tax assets — Current:
Allowance for doubtful accounts receivable	$	565,617		$	452,126
Allowance for obsolete inventory		185,042			123,491
Accrued vacation		77,434			140,000
Deferred income tax assets-noncurrent:
Deferred gain on sale of building		244,731			318,718
NOL-carry forward		920,539			—
Deferred rent		28,815			—
Other		36,152			21,193
Deferred income tax liability-long term:
Tax over book depreciation and amortization		(1,525,254	)		(998,730	)

Net deferred income tax assets	$	533,076		$	56,798

The Company’s NOL carry-forward will begin to expire in the year 2025. The Company’s effective tax rate was different than the statutory federal income tax rate for the years ended August 31, 2005, 2004 and 2003, as follows:


	2005			2004			2003
Federal income tax (benefit) expense at statutory rate (34%)	$	(1,824,697	)	$	573,976		$	346,097
State taxes, net of federal income tax benefit		66,781			102,295			72,600
Tax effect of nondeductible items		25,027			14,907			19,260
Other		136,263			(16,607	)		(37,856	)

Income tax (benefit) expense	$	(1,596,626	)	$	674,571		$	400,101

11. SEGMENT ANALYSIS:

F-19

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


	Year Ended August 31, 2005						Year Ended August 31, 2004
	AMOUNT			PERCENT			AMOUNT		PERCENT
NET SALES BY INDUSTRY SEGMENT
Hardcopy imaging products	$	77,525,787			99.74	%	$	103,989,229		100.00	%
Bottled water	$	202,184			0.26	%	$	0		0.00	%

Total	$	77,727,971			100.00	%	$	103,989,229		100.00	%

PRE TAX PROFIT FROM CONTIUNING OPERATIONS
Hardcopy imaging products	$	(3,839,898	)		-85.22	%	$	1,688,166		100.00	%
Bottled water	$	(666,056	)		-14.78	%	$	0		0.00	%

Total	$	(4,505,954	)		-100.00	%	$	1,688,166		100.00	%


	As Of August 31, 2005				As Of August 31, 2004
TOTAL ASSETS BY INDUSTRY SEGMENT
Hardcopy imaging products	$	39,043,670	93.42	%	$	49,642,564	95.92	%
Bottled water	$	2,749,748	6.58	%	$	2,110,956	4.08	%

Total	$	41,793,418	100.00	%	$	51,753,520	100.00	%

12. RELATED PARTIES:

The Sorokwasz Irrevocable Trust, whose trustee is Marshall Sorokwasz, the President of the Company, and the Senior Vice President of the Company own 44.2% and 14.9% of the outstanding shares of common stock as of August 31, 2005 and 2004.

A company controlled by the spouse of the Company’s President serves as both a customer of and vendor to the Company. Sales to this related company were $484,003, $751,216 and $802,784 for the years ended August 31, 2005, 2004, and 2003, respectively. Purchases from the related company totaled $214,767, $315,808 and $265,749 for the years ended August 31, 2005, 2004 and 2003, respectively. In the opinion of management, these transactions were consummated on terms equivalent to those that would prevail in arms-length transactions. Accounts receivable balances as of year end related to this company were $28,233, $64,071 and $76,914 for 2005, 2004 and 2003, respectively. For the years ended 2005, 2004 and 2003, the accounts payable balances to the related company were $4,218, $6,552 and $7,531, respectively.

Effective December 1, 2004, the Board authorized the President to execute a long term real estate lease and water supply agreement with a related party entity, Alexa Springs Water Company, a company owned by the President and Senior Vice President. See Footnotes 8 and 11 .

Under the ten year water supply contract we executed with Alexa Springs Water Company, we must purchase all of the production of the springs. We also executed a ten year lease that runs concurrently with the water supply agreement on the land and buildings, approximately 34,200 square feet, which house the springs. Both of these agreements have an automatic renewal of second ten year terms if not terminated in accordance with the agreements.

13. STOCK OPTIONS:

The Company sponsors a stock option plan (the “Plan”) for certain employees and directors of the Company. There are 400,000 shares of common stock reserved for grants of options under the Plan.

F-20

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Options are granted at the sole discretion of the Stock Option Committee of the Board of Directors of the Company. The outstanding options generally vest ratably at various dates through 2015 at an exercise price of not less than the fair market value at the grant date. The options expire 10 years after the grant date.

In addition, the Company granted outside of the Plan options to purchase 196,000 shares of Common Stock to employees in the fiscal years ended August 31, 1999-2001. The option shares vested ratably over two years at various dates through 2003 at an exercise price of not less than fair market value at the grant date. These options expire five years after the grant date.

The following tables summarize information about stock options outstanding as of August 31, 2005.

Options Outstanding


			Weighted Average		Weighted Average
Range of	Number		Remaining Contractual		Exercise Price
Exercise Prices	Outstanding		Life (Years)		Per Share
$1.70-2.20		99,000		1.5	$	1.74
$2.70-3.63		80,500		0.9	$	3.00
$5.38-6.75		228,700		0.2	$	5.96
$8.38-10.38		9,500		1.7	$	9.88
$12.75-12.75		3,000		1.7	$	12.75

Total		420,700			$	4.56

Options Exercisable


			Weighted Average
Range of	Number		Exercisable Price
Exercise Prices	Exercisable		Per Share
$1.70-2.20		96,000	$	1.74
$2.70-3.63		79,500	$	3.00
$5.38-6.75		228,700	$	5.96
$8.38-10.38		9,500	$	9.88
$12.75-12.75		3,000	$	12.75

Total		416,700	$	4.56

The fair value of options granted during the years ended August 31, 2005, 2004 and 2003, calculated using the Black-Scholes option-pricing model, was approximately $2,500 ($0.84 per share); $4,000 ($1.39 per share) and $10,500 ($1.42 per share), respectively. Exercisable options total 416,700, 416,200 and 457,700 shares as of August 31, 2005, 2004 and 2003, respectively. These options are exercisable at a weighted-average exercise price of $4.56, $4.59 and $4.52, as of August 31, 2005, 2004 and 2003, respectively.

F-21

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes stock option activity:


							Weighted
				Available			Average
	Granted			for Grant			Price
August 31, 2002		467,400			78,550		$	4.54
Granted		8,000			(8,000	)	$	2.169
Canceled		—			—			—
Expirations		(8,200	)		8,200		$	6.00


August 31, 2003		467,200			78,750		$	4.48
Granted		3,000			(3,000	)	$	2.70
Canceled		(1,500	)		1,500		$	2.533
Expirations		(49,500	)		49,500		$	3.84


August 31, 2004		419,200			126,750		$	4.55
Retirement		—			(31,500	)		—
Granted		3,000			(3,000	)	$	1.71
Canceled		—			—			—
Expirations		(1,500	)		1,500		$	2.11

August 31, 2005		420,700			93,750		$	4.56

14. EMPLOYEE 401(k) PLAN:

TST has an employee 401(k) plan (the “Plan”) administered by a national brokerage firm. Administrative fees associated with the Plan are funded by the Plan. TST’s contribution is discretionary. In Fiscal 2005, TST did not match participating employees’ contributions to their Plan accounts. Contributions by TST were $2,951 and $35,176 for the years ended August 31, 2004 and 2003, respectively.

15. NON-CASH ACTIVITY:

During 2004, the Company financed real estate improvements by issuing debt in the amount of $1,395,411. During Fiscal 2005, the Company paid $695,073 of debt with the proceeds received from the sale of a building.

16. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):

The following tabulation presents selected results of operations for the years ended August 31, 2005 and 2004:

F-22

IMPRESO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


	Quarters Ended
	November 30			February 29			May 31			August 31
2005
Net Sales	$	19,976,634		$	18,629,137		$	19,829,734		$	19,292,466
Gross Profit		979,858			556,146			1,096,596			1,544,205
Net Loss		(760,037	)		(1,209,018	)		(573,646	)		(366,628	)
Basic and Diluted Earnings per Share	$	(0.14	)	$	(0.23	)	$	(0.11	)	$	(0.07	)

2004
Net Sales	$	26,959,403		$	25,460,177		$	25,475,574		$	26,094,075
Gross Profit		3,679,902			3,326,886			3,516,017			3,182,642
Net Income (Loss)		482,216			262,240			348,051			(78,912	)
Basic and Diluted Earnings per Share	$	0.09		$	0.05		$	0.07		$	(0.02	)

In the quarter ended February 28, 2005, the Company wrote off $180,000 of trade receivables and received $216,000 as part of a settlement with a customer for cost, freight, and quantity variances for the period of January 1, 2000 through December 31, 2002.

17. SUBSEQUENT EVENTS:

Subsequent to the end of Fiscal 2005, the Company received notice that the Company’s Corporate Income Tax Return for the fiscal year ended August 31, 2004 is going to be examined by the IRS.

In October 2005, as part of the cost reduction/savings plan, the Company applied the proceeds of a Letter of Credit, collateral on the lease for the Alexa Springs, Inc. equipment, to reduce the outstanding balance on the lease thereby reducing the monthly payment by approximately $10,000 per month (See Footnote 8). In addition, starting on January 1, 2006, the Company leased a portion of its Chambersburg facility to a subtenant for a period of one year, at an annual rental rate of $206,000.

F-23

INDEX TO FINANCIAL STATEMENT SCHEDULES


	Page
Report of Independent Registered Public Accounting Firm Blackman Kallick Bartelstein, LLP		S -2
Schedule II- Valuation and Qualifying Accounts		S-3

S-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON SUPPLEMENTAL INFORMATION

To the Stockholders of Impreso, Inc.:

We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of Impreso, Inc. and subsidiaries as of August 31, 2005, which are included in this Form 10-K and have issued our report thereon dated November 17, 2005. Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole of Impreso, Inc. and subsidiaries as of August 31, 2005 and 2004, and for each of the three years in the period ended August 31, 2005. The 2005, 2004 and 2003 information listed in the index to consolidated financial statement schedules is the responsibility of the Company’s management and is presented for purposes of complying with the Securities and Exchange Commission’s rules and is not a required part of the basic consolidated financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic 2005, 2004 and 2003 consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.

Blackman Kallick Bartelstein, LLP
Chicago, Illinois
November 17, 2005

S-2

SCHEDULE II

IMPRESO, INC. AND SUBSIDIARIES (a)

VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED AUGUST 31, 2005, 2004, AND 2003


					Additions
	Balance at		Additions		Charged					Balance at
	Beginning		Charged		to other					End of
	of Period		to Income		Accounts		Deductions			Period
August 31, 2005:
Allowance for doubtful accounts	$	1,130,315	$	726,487	$	—	$	(442,760)	(b)	$	1,414,042
Inventory Reserves		308,727		157,160		—		(3,283	)		462,604


Total reserves and allowances	$	1,439,042	$	883,647	$	—		($446,043	)	$	1,876,646


August 31, 2004:
Allowance for doubtful accounts	$	630,916	$	753,774	$	—	$	(254,375	) (b)	$	1,130,315
Inventory Reserves	$	388,118		—		—	$	(79,391	)	$	308,727


Total reserves and allowances	$	1,019,034	$	753,774	$	—	$	(333,766	)	$	1,439,042


August 31, 2003:
Allowance for doubtful accounts	$	515,010	$	684,459	$	—	$	(568,553	) (b)	$	630,916
Inventory Reserves		753,715		191,581		—		(557,178	)		388,118


Total reserves and allowances	$	1,268,725	$	876,040	$	—	$	(1,125,731	)	$	1,019,034


(a)		This schedule should be read in conjunction with the Company’s audited consolidated financial statements and related notes thereto.

(b)		Write-off of uncollectible receivables.

S-3

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


		Impreso, Inc.


		By:		/s/ Marshall D. Sorokwasz
		Marshall D. Sorokwasz, President

Dated: August 25, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


Signature	Title	Date
/s/Marshall D. Sorokwasz	Chairman of the Board,	August 25, 2006

Marshall D. Sorokwasz	President, Principal Executive Officer and Treasurer

/s/ Richard D. Bloom	Senior Vice President of Operations,	August 25, 2006

Richard D. Bloom	Director

/s/ Donald E. Jett	Secretary, Director	August 25, 20065

Donald E. Jett

/s/ Susan M. Atkins	Vice President of Finance,	August 25, 2006

Susan M. Atkins	Principal Financial Officer, Principal Accounting Officer

/s/ Jay W. Ungerman	Director	August 25, 2006

Jay W. Ungerman

/s/ Robert F. Torisio	Director	August 25, 2006

Robert F. Troisio

/s/ Ian Ratner	Director	August 25, 2006

Ian Ratner

EX-10.13 2 d39213exv10w13.htm REAL ESTATE LEASE AGREEMENT exv10w13

Exhibit 10.13

LEASE AGREEMENT

By and Between

Chambersburg Business Park, LP,
a Delaware limited partnership,
as Landlord

and

TST/Impreso, Inc.,
a Delaware corporation,
as Tenant

TABLE OF CONTENTS

FOR

LEASE


Title		Page No.
LEASE AGREEMENT			1
1.	PROPERTY		1
2.	TERM		1
3.	RENT		2
4.	OPERATING LEASE		3
5.	PROJECT MAINTENANCE AND EXPENSES		3
6.	PERMITTED USE		5
7.	ENVIRONMENTAL COMPLIANCE\HAZARDOUS MATERIALS		5
8.	UTILITIES		10
9.	AS-IS CONDITION		10
10.	TENANT’S TAXES AND ASSESSMENTS		10
11.	ALTERNATION OF PREMISES		10
12.	INSURANCE		11
13.	WAIVER, EXCULPATION AND INDEMNITY		13
14.	CONSTRUCTION LIENS		14
15.	QUIET ENJOYMENT		14
16.	LANDLORD’S RIGHT OF ENTRY		14
17.	DESTRUCTION OF BUILDING		15
18.	EMINENT DOMAIN		15
19.	BANKRUPTCY		16
20.	DEFAULT		17
21.	SURRENDER OF PROPERTY		17
22.	HOLDING OVER		18
23.	SURRENDER OF LEASE		18
24.	NOTICE		18
25.	ASSIGNMENT AND SUBLETTING		19
26.	ATTORNEY’S FEES		20
27.	JUDGMENT COSTS		20
28.	BROKERS		20
29.	SUBORDINATION OF LEASE		20
30.	ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS		21
31.	SHORT FORM OF LEASE		21
32.	SIGNS		22
33.	GENERAL PROVISIONS		22
34.	OPTION TO PURCHASE PROPERTY		23


Exhibit A		Site Plan
Exhibit B		Work Letter for Initial Improvements of the Premises
Exhibit B-1		Contract for Roof Repairs
Exhibit B-2		Contract for Air Systems
Exhibit B-3		Contract for Asbetos Abatement

LEASE AGREEMENT

THIS LEASE AGREEMENT (“Lease”), dated as of August 15, 2003 (“Effective Date”), is made by and between Chambersburg Business Park, LP, a Delaware limited partnership (“Landlord”), and TST/Impreso Inc., a Delaware corporation (“Tenant”).

WITNESSETH

1. PROPERTY.

1.1 Property. Landlord owns that certain real property improved with one or more buildings (the “Building”) located at 1002 Wayne Avenue, Borough of Chambersburg, Franklin County, Pennsylvania (collectively, the “Property”). Landlord, for and in consideration of the rents, covenants, agreements, and stipulations contained herein, to be paid, kept and performed by Tenant, leases and rents the Property to Tenant, and Tenant hereby leases and takes from Landlord the Property upon the terms and conditions contained herein.

1.2 Premises means 414,000 rentable square feet of the Building, as verified by Landlord and Tenant’s respective agents, and as outlined on the site plan attached as Exhibit “A”, to which Landlord and Tenant conclusively agree for all purposes of this Lease.

2. TERM.

2.1 Term. The term of the Lease shall be for thirteen (13) years beginning on the Commencement Date (the “Term”), unless extended or sooner terminated pursuant to the terms of this Lease. The term “Lease Year” as used herein shall mean any 365-consecutive-day period beginning on the Commencement Date or any anniversary thereafter.

2.2 Commencement Date. The term “Commencement Date” as used herein shall mean the date Landlord completes the Asbestos Abatement of the Property, as defined and described in Exhibit “B”. Tenant shall be entitled to occupy the Premises after full execution of this Lease but before the Commencement Date, in which event all obligations of this Lease, other than the obligation to pay Base Rent, shall apply. Landlord shall give Tenant written notice when Landlord completes the Asbestos Abatement to confirm the Commencement Date. Tenant shall be entitled to obtain a certificate from an asbestos remediation company reasonably acceptable to Landlord (“Asbestos Certificate”) confirming that all asbestos has been removed from the Premises in accordance with Exhibit “B”. If Tenant elects to obtain an Asbestos Certificate, Landlord shall give Tenant notice of the anticipated completion date of the Asbestos Abatement to allow Tenant to promptly schedule its remediation contractor to inspect the Premises. Although the Commencement Date shall occur when the Asbestos Abatement is completed by Landlord, Base Rent shall be suspended until Tenant obtains the Asbestos Certificate but shall be due and payable retroactively to the date the Asbestos Abatement was actually completed by Landlord.

3. RENT

3.1 Payment of Rent. Rent shall be due and payable in lawful money of the United States in advance on the twenty-fifth (25^th) day of each month preceding the month that Rent is due and payable, commencing on the twenty-fifth (25^th) day of the month immediately following the Commencement Date, and continuing each month thereafter of the Term, and any extension term. Tenant shall pay to Landlord as base rent (“Base Rent”) for the Property, without notice or demand and without abatement, deduction, offset or set off, the amounts set forth below. Upon the Effective Date, Tenant shall pay the first month’s Base Rent and any other charges. Rent shall be pro rated daily for periods less than one month.


LEASE YEAR	MONTHLY BASE RENT		ANNUAL BASE RENT
1—5	$	60,292.50	$	723,510.00
6—10	$	65,167.50	$	782,010.00
11—13	$	70,530.00	$	846,360.00
*14—15	$	78,366.67	$	940,400.00
*16—20	$	84,920.83	$	1,019,050.00


* if Tenant properly exercises the Option to Extend the Lease Term as set forth in Paragraph 35 below.

3.2 Place of Payment. All payments under this Lease to be made by Tenant to Landlord shall be made payable to, and mailed or personally delivered to Landlord at the following address or such other address(es) which Landlord may notify Tenant from time to time: One West Avenue, Larchmont, New York 10538.

3.3 Late Payment. Tenant hereby acknowledges that late payment by Tenant to Landlord of Rent (defined below) pursuant to this Lease will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Accordingly, if any installment of Rent or other payment under this Lease is not received by Landlord, on or before the fifth (5th) day of the month in which such Rent or other payment is due, Tenant shall pay a late charge equal to the amount Landlord is charged for late payments under its mortgage documents pertaining to this Property (currently, five percent (5%) of such overdue amounts). Tenant shall also be responsible for a service fee equal to Fifty Dollars ($50.00) for any check returned for insufficient funds together with such other costs and expenses as may be imposed by Landlord’s bank. The payment to and acceptance by Landlord of such late charge shall in no event constitute a waiver by Landlord of Tenant’s default with respect to such overdue amounts, nor prevent Landlord from exercising any of the other rights and remedies granted at law or in equity or pursuant to this Lease.

3.4 Rent. The term “Rent” or “rent” shall mean the total of all sums due to Landlord from Tenant hereunder, including, but not limited to, Base Rent, Project Expenses and all other fees and charges owed to Landlord as well as all damages, costs, expenses, and sums that Landlord may suffer or incur, or that may become due, by reason of any default of Tenant or failure by Tenant to comply with the terms and conditions of this Lease, and, in the event of

nonpayment, Landlord shall have all the rights and remedies as herein provided for failure to pay Rent.

4. OPERATING LEASE.

In addition to the payment of Base Rent, Tenant shall be directly responsible for the payment of any and all Project Expenses (defined in Paragraph 5.1) and all Utilities (defined in Paragraph 8) with respect to the Property, and Landlord shall have no obligations of any nature with respect to the Property, except as otherwise specifically provided in this Lease. Notwithstanding any other provision of this Lease to the contrary, Tenant shall be responsible for all repair, maintenance, replacement and construction with respect to the Property and, upon expiration of the Term, Tenant shall surrender the Property to Landlord in substantially the same condition as it exists as of the date hereof, reasonable wear and tear excepted, and in accordance with Paragraph 21.

5. PROJECT MAINTENANCE AND EXPENSES.

5.1 Definitions. Tenant shall be responsible for both the performance of and payment of costs associated with all of the following:

5.1.1 For purposes of this Lease, the term “Property Expenses” shall include the aggregate amount of the total costs and expenses connected with or related to (i) the operation, repair and maintenance of the Property, including, without limitation, electricity, gas, water, sewer and other utilities, trash removal, security, snow plowing, landscaping, mowing and weed removal, sweeping and janitorial services, electrical, plumbing, sprinkler and HVAC repair and maintenance, alarm and sprinkler system testing, maintenance and repair, (ii) the maintenance repair, resurfacing and restriping of all parking areas, loading and unloading areas, trash areas, roadways, driveways, walkways, (iii) maintaining the signage, (iv) painting of the Building and Property, (v) fence and gate repair and maintenance, (vi) the repair and replacement of all lighting facilities, (vii) the repair, replacement and maintenance of all roofs, foundations and the structural soundness of the foundation and walls of the Building, except as specifically set forth herein, and (viii) the repair and maintenance of all equipment, facilities and components related to the Property, including but not limited to fixtures, walls (interior), finish work, ceilings, floors, utility connections and facilities, windows, glass, doors, and plate glass, downspouts, gutters, truck doors, dock levelers, bumpers, seals and enclosures, and termite and pest extermination. Tenant shall, in keeping the Property in good working order, condition and repair, exercise and perform good maintenance practices. Except for the Initial Improvements as set forth on Exhibit “B”, Tenant’s obligations shall include restorations, replacements or renewals when necessary to keep the Property and all improvements thereon or a part thereof in good order, condition and state of repair. Tenant agrees to return the Property to Landlord at the expiration, or prior to termination of this Lease, in as good condition and repair as when first received, normal wear and tear excepted, in accordance with Paragraph 21.

5.1.2 For purposes of this Lease, the term “Insurance Expenses” shall include the aggregate amount of the cost of fire, extended coverage, sprinkler, comprehensive public liability, property damage, earthquake and other insurance obtained by Landlord in connection

with the Property, including insurance required pursuant to Paragraph 12 hereof, and the deductible portion of any insured loss otherwise covered by such insurance.

5.1.3 For purposes of this Lease, the term “Taxes” shall include all taxes, assessments and charges levied upon or with respect to the Property or any personal property of Landlord used in the operation thereof, or Landlord’s interest in the Property or such personal property. Additionally, Taxes shall include, without limitation, all general real property taxes and general and special assessments, occupancy taxes, commercial rental taxes, charges, fees or assessments for transit, housing, police, fire or other governmental services or purported benefits to the Property, service payments in lieu of taxes, and any tax, fee or excise on the act of entering into any lease for space in the Property, or on the use or occupancy of the Property or any part thereof, or on the rent payable under any lease or in connection with the business of renting space in the Property that are now or hereafter levied or assessed against Landlord by the United States of America, the state in which the Property is located, or any political subdivision, public corporation, district or other political or public entity, whether due to increased rate and/or valuation, additional improvements, change of ownership, or any other events or circumstances, and shall also include any other tax, fee or other excise, however described, that may be levied or assessed as a substitute for or as an addition to, as a whole or in part, any other Taxes whether or not now customary or in the contemplation of the parties on the date of this Lease. Taxes shall not include franchise, transfer, inheritance or capital stock taxes or income taxes measured by the net income of Landlord from all sources unless, due to a change in the method of taxation, any of such taxes is levied or assessed against Landlord as a substitute for or as an addition to, as a whole or in part, any other tax that would otherwise constitute a Tax. Taxes shall also include reasonable legal fees, costs and disbursements incurred in connection with proceedings to contest, determine or reduce Taxes. If any Taxes are specially assessed by reason of the occupancy or activities of one or more tenants and not the occupancy or activities of the Tenants as a whole, such Taxes shall be allocated by Landlord to the tenant or tenants whose occupancy or activities brought about such assessment. All payments with respect to Taxes shall be made by Tenant to the appropriate taxing authority at least ten (10) days prior to any delinquency date. Tenant shall promptly furnish Landlord with satisfactory evidence that all Taxes have been paid in a complete and timely manner. Tenant shall have the right to contest any Taxes at Tenant’s expense. Landlord will cooperate with Tenant in disputing such Taxes which will include, without limitation, allowing Tenant to appear on behalf of Landlord to contest the Taxes.

5.2 Project Expenses. The Property Expenses, Insurance Expenses and Taxes shall collectively be referred to herein as the “Project Expenses,” all of which shall be paid directly by Tenant. If required by Landlord’s lender, Tenant shall pay Taxes directly to Landlord or Landlord’s lender as part of Rent. Tenant shall be entitled to pay Insurance Expenses directly and change insurance carriers as set forth in Paragraph 12.1. Notwithstanding the foregoing, Tenant’s obligation to pay the premium for Landlord’s commercial liability insurance policy as set forth in Paragraph 12.1 shall be limited for the first five (5) years of the Lease Term to $3,200.00 per year, with annual increases allowed in an amount not to exceed the cost of living increases determined for the area in which the Property is located. There shall be no such limit for the balance of the Lease Term.

6. PERMITTED USE.

Tenant shall use and occupy the Premises throughout the Term of the Lease for warehousing, storage, light manufacturing, distribution and any other lawful uses associated with their business. In particular, no use shall be made or permitted to be made of the Property, nor acts done that could cause a cancellation of any insurance policy covering the Property, or any part thereof. In the operation of its permitted use of the Building, Tenant shall comply with all laws, ordinances, rules, regulations and codes of all municipal, county, state and federal authorities pertaining to the Property. Tenant shall not commit, or suffer to be committed, any waste upon the Property or any public or private nuisance.

7. ENVIRONMENTAL COMPLIANCE\HAZARDOUS MATERIALS.

7.1 Definitions. “Hazardous Materials” shall mean any (i) material, substance or waste that is or has the characteristic of being hazardous, toxic, ignitable, reactive, flammable, explosive, radioactive, mutagenic or corrosive, including, without limitation, petroleum, or any petroleum derivative, solvents, heavy metals, acids, pesticides, paints, printing ink, PCBs, asbestos, materials commonly known to cause cancer or reproductive problems and those materials, substances and/or wastes, including wastes which are or later become regulated by any local governmental authority, the state in which the Premises are located or the United States Government, including, but not limited to, substances defined as “hazardous substances,” “hazardous materials,” “toxic substances” or “hazardous wastes” in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. ‘9601, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. ‘1801, et seq.; the Resource Conservation and Recovery Act; all environmental laws of the state where the Property is located, and any other environmental law, regulation or ordinance now existing or hereinafter enacted, (ii) any other substance or matter which results in liability to any person or entity from exposure to such substance or matter under any statutory or common law theory, and (iii) any substance or matter which is in excess of relevant and appropriate levels set forth in any applicable federal, state or local law or regulation pertaining to any hazardous or toxic substance, material or waste, or for which any applicable federal, state or local agency orders or otherwise requires removal, remediation or treatment. “Hazardous Materials Laws” shall mean all present and future federal, state and local laws, ordinances and regulations, prudent industry practices, requirements of governmental entities and manufacturer’s instructions relating to industrial hygiene, environmental protection or the use, analysis, generation, manufacture, storage, presence, disposal or transportation of any Hazardous Materials, including without limitation the laws, regulations and ordinances referred to in the preceding sentence.

7.2. Use of Premises by Tenant. Except for common cleaning solutions, lubricants and fuels used by Tenant in its ordinary operations, so long as the same are stored in appropriate containers in compliance with all Hazardous Materials Laws, Tenant hereby agrees that Tenant and Tenant’s officers, employees, representatives, agents, consultants, contractors, subcontractors, successors, assigns, subtenants, concessionaires, invitees and any other occupants of the Premises (for purposes of this Paragraph 8, referred to collectively herein as “Tenant Representatives”) shall not cause or permit any Hazardous Materials to be used, generated, manufactured, refined, produced, processed, stored or disposed of, on, under or about the

Premises or the Property or transport to or from the Premises or the Property without the express prior written consent of Landlord. Landlord may, in its sole discretion, place such conditions as Landlord deems appropriate with respect to such Hazardous Materials, including without limitation, rules, regulations and safeguards as may be required by any insurance carrier, environmental consultant or lender of Landlord, or environmental consultant retained by any lender of Landlord, and may further require that Tenant demonstrates to Landlord that such Hazardous Materials are necessary or useful to Tenant’s business and will be generated, stored, used and disposed of in a manner that complies with all Hazardous Materials Laws regulating such Hazardous Materials and with good business practices. Tenant understands that Landlord may utilize an environmental consultant to assist in determining conditions of approval and monitoring in connection with the presence, storage, generation or use of Hazardous Materials on or about the Premises by Tenant, and Tenant agrees that any costs reasonably incurred by Landlord in connection with any such environmental consultant’s services shall be reimbursed by Tenant to Landlord as additional rent upon demand. Unless approved in writing by Landlord, Tenant shall not be entitled to utilize any Hazardous Materials in the Premises. In connection therewith, Tenant shall at its own expense procure, maintain in effect and comply with all conditions of any and all permits, licenses and other governmental and regulatory approvals required for the storage or use by Tenant or any of Tenant’s Representatives of Hazardous Materials on the Premises or the Property, including without limitation, discharge of (appropriately treated) materials or wastes into or through any sanitary sewer serving the Premises or the Property with all required permits.

7.3. Remediation. If at any time during the Lease Term any contamination of the Premises or the Property by Hazardous Materials shall occur where such contamination is caused by the act or omission of Tenant or Tenant’s Representatives (“Tenant’s Contamination”), then Tenant, at Tenant’s sole cost and expense, shall promptly and diligently remove such Hazardous Materials from the Premises, the Property or the groundwater underlying the Premises or the Property to the extent required to comply with applicable Hazardous Materials Laws to restore the Premises or the Property to the same or better condition which existed before the Tenant’s Contamination. Tenant shall not take any required remedial action in response to any Tenant’s Contamination in or about the Premises or the Property, or enter into any settlement agreement, consent, decree or other compromise in respect to any claims relating to any Tenant’s Contamination without first obtaining the prior written consent of Landlord, which may be subject to conditions imposed by Landlord as determined in Landlord’s sole discretion, provided, however, Landlord’s prior written consent shall not be necessary in the event that the presence of Hazardous Materials on, under or about the Premises or the Property (i) poses an immediate threat to the health, safety or welfare of any individual or (ii) is of such a nature that an immediate remedial response is necessary and it is not possible to obtain Landlord’s consent before taking such action. Tenant and Landlord shall jointly prepare a remediation plan in compliance with all Hazardous Materials Laws and the provisions of this Lease. In addition to all other rights and remedies of the Landlord hereunder, if Tenant does not promptly and diligently take all steps to prepare and obtain all necessary approvals of a remediation plan for any Tenant’s Contamination, and thereafter commence the required remediation of any Hazardous Materials released or discharged in connection with Tenant’s Contamination within thirty (30) days after all necessary approvals and consents have been obtained and thereafter continue to prosecute such remediation to completion in accordance with an approved

remediation plan, then Landlord, at its sole discretion, shall have the right, but not the obligation, to cause such remediation to be accomplished, and Tenant shall reimburse Landlord within fifteen (15) business days of Landlord’s demand for reimbursement of all amounts reasonably paid by Landlord (together with interest on such amounts at the highest lawful rate until paid), when such demand is accompanied by reasonable proof of payment by Landlord of the amounts demanded. Tenant shall promptly deliver to Landlord, legible copies of hazardous waste manifests reflecting the legal and proper disposal of all Hazardous Materials removed from the Premises or the Property as part of Tenant’s remediation of any Tenant’s Contamination.

7.4. Disposition of Hazardous Materials. Except as discharged into the sanitary sewer in strict accordance and conformity with Paragraph 8.2 herein and all applicable Hazardous Materials Laws, if Tenant causes any and all Hazardous Materials to be removed from the Premises and the Property (including without limitation all Hazardous Materials removed from the Premises as part of the required remediation of Tenant’s Contamination), such removal shall be transported solely by duly licensed haulers to duly licensed facilities for recycling or final disposal of such materials and wastes. Tenant is and shall be deemed to be the “operator” “in charge” of Tenant’s “facility” and the “owner,” as such terms are used in the Hazardous Materials Laws, of all Hazardous Materials and any wastes generated or resulting therefrom. Tenant shall be designated as the “generator,” as such terms are used in the Hazardous Materials Laws, on all manifests relating to such Hazardous Materials or wastes.

7.5. Notice of Hazardous Materials Matters. Tenant shall immediately notify Landlord in writing of: (i) any enforcement, clean up, removal or other governmental or regulatory action instituted, contemplated or threatened concerning the Premises pursuant to any Hazardous Materials Laws; (ii) any claim made or threatened by any person against the Tenant or the Premises relating to damage contribution, cost recovery, compensation, loss or injury resulting from or claimed to result from any Hazardous Materials on or about the Premises; (iii) any reports made to any environmental agency arising out of or in connection with any Hazardous Materials in or removed from the Premises including any complaints, notices, warnings or asserted violations in connection therewith, all upon receipt by Tenant of actual knowledge of any of the foregoing matters; and (iv) any spill, release, discharge or disposal of any Hazardous Materials in, on or under the Premises, the Property, or any portion thereof. Tenant shall also supply to Landlord as promptly as possible, and in any event within five (5) business days after Tenant first receives or sends the same, with copies of all claims, reports, complaints, notices, warnings or asserted violations relating in any way to the Premises or Tenant’s use thereof.

7.6. Indemnification by Tenant. Tenant shall indemnify, defend (by counsel reasonably acceptable to Landlord), protect, and hold Landlord, and each of Landlord’s employees, representatives, agents, attorneys, successors and assigns, and its directors, officers, partners, representatives, any lender having a lien on or covering the Premises or any part thereof, and any entity or person named or required to be named as an additional insured in Paragraph 14.2 of this Lease free and harmless from and against any and all claims, actions (including, without limitation, the cost of investigation and testing, consultant’s and attorneys’ fees, remedial and enforcement actions of any kind, administrative (informal or otherwise) or judicial proceedings and orders or judgments arising therefrom), causes of action, liabilities,

penalties, forfeitures, damages (including, but not limited to, damages for the loss or restriction or use of rentable space or any amenity of the Premises or the Property, or damages arising from any adverse impact on marketing of space in the Premises or the Property), diminution in the value of the Premises or the Property, fines, injunctive relief, losses or expenses (including, without limitation, reasonable attorneys’ fees and costs) or death of or injury to any person or damage to any property whatsoever, arising from or caused in whole or in part, directly or indirectly by (i) any Tenant’s Contamination, (ii) Tenant’s or Tenant’s Representatives’ failure to comply with any Hazardous Materials Laws with respect to the Premises, or (iii) offsite disposal or transportation of Hazardous Materials on, from, under or about the Premises or the Property by Tenant or Tenant’s Representatives. Tenant’s obligations hereunder shall include without limitation, and whether foreseeable or unforeseeable, all costs of any required or necessary repair, clean up or detoxification or decontamination of the Premises, and the preparation and implementation of any closure, remedial action or other required plans in connection therewith. For purposes of the indemnity provisions hereof, any acts or omissions of Tenant, or by employees, agents, assignees, contractors or subcontractors of Tenant or others acting for or on behalf of Tenant (whether or not they are negligent, intentional, willful or unlawful), shall be strictly attributable to Tenant.

7.7. Indemnification by Landlord for Pre-Existing Asbestos. Landlord shall indemnify, defend (by counsel reasonably acceptable to Tenant), protect, and hold Tenant, and each of Tenant’s employees, representatives, agents, attorneys, successors and assigns, free and harmless from and against any and all claims, actions, causes of action (including, without limitation, remedial and enforcement actions of any kind, administrative or judicial proceedings, and orders or judgments arising therefrom), liabilities, penalties, forfeitures, losses or expenses (including, without limitation, reasonable attorneys’ fees and costs) or death of or injury to any person or damage to any property whatsoever, to the extent arising from or caused in whole or in part, directly or indirectly by (i) the presence of any pre-existing friable and non-friable asbestos in the Premises, and (ii) any contamination caused by Landlord in violation of a Hazardous Material Law. Landlord’s obligations hereunder shall include without limitation, and whether foreseeable or unforeseeable, all costs of any required or necessary repair, clean up or detoxification or decontamination of the Premises, and the preparation and implementation of any closure, remedial action or other required plans in connection therewith. This indemnity shall be specifically limited to affirmative acts of Landlord, and shall not include the acts or omissions of any other tenants of the Property or other persons.

7.8. Tenant Certifications. Within ninety (90) days prior to the expiration of the Lease Term, Tenant shall certify to Landlord in writing that, to the best of its knowledge, (i) the Premises is free from all Hazardous Materials caused by Tenant or Tenant’s Representatives, and (ii) no such Hazardous Materials exist on, under or about the Premises other than as specifically identified to Landlord by Tenant in writing. If Landlord reasonably believes that such certification is inaccurate, or if an environmental report is required by law, Landlord shall give notice to Tenant within thirty (30) days after receipt of Tenant’s certification that Tenant shall have the Premises thoroughly inspected by an environmental consultant acceptable to Landlord for purposes of determining whether the Premises is free from all Hazardous Materials. If Landlord fails to timely give such notice, the requirement for an environmental inspection report is not required of Tenant unless such report is otherwise required by Tenant under this Paragraph

8. Landlord’s failure to request an environmental inspection report shall in no way alter, abridge or limit Tenant’s indemnity obligation hereunder. Tenant shall deliver to Landlord a copy of the environmental consultant’s report forty-five (45) days prior to the expiration of the Lease. In the event the report discloses the existence of any Hazardous Materials, requires any clean up or any other form of response (collectively “Clean up”), Tenant shall perform such immediately and deliver the Premises with the conditions specified in the report “cleaned up”, to the full satisfaction of Landlord. In the event the conditions specified in the report require Clean up which cannot be completed prior to the expiration of the Lease Term, Tenant shall be obligated to pay Landlord a per diem amount of the hold-over rent in Paragraph 22 below, until Tenant completes Clean up.

7.9. Exclusivity. The allocations of responsibility between, obligations and liabilities undertaken by, and indemnifications given by Landlord and Tenant under this Paragraph 7, shall be the exclusive provisions under this Lease, applicable to the subject matter treated in this Paragraph 7, and any other conflicting or inconsistent provisions contained in this Lease shall not apply with respect to the subject matter.

7.10. Compliance with Environmental Laws. Tenant shall at all times and in all respects comply with all Hazardous Materials Laws. All reporting obligations imposed by Hazardous Materials Laws are strictly the responsibility of Tenant to the extent Tenant’s actions or inactions prompt such reporting. Tenant and Landlord have been informed that certain judicial decisions have held that, notwithstanding the specific language of a lease, courts may impose the responsibility for complying with legal requirements and for performing improvements, maintenance and repairs on a landlord or tenant based on the court’s assessment of the parties’ intent in light of certain equitable factors. Tenant and Landlord have each been advised by their respective legal counsel about the provisions of this Lease allocating responsibility for compliance with laws and for performing improvements, maintenance and repairs between Tenant and Landlord. Tenant and Landlord expressly agree that the allocation of responsibility for compliance with laws and for performing improvements, maintenance and repairs set forth in this Lease represents Tenant’s and Landlord’s intent with respect to this issue.

7.11. Limitation of Liability. Landlord confirms that as of the Effective Date, and to the best of Landlord’s current, actual knowledge, except as disclosed in any report delivered to Tenant prior to the Effective Date, there are no Hazardous Materials located on, in, about or under the Property or the Building in material violation of any applicable Hazardous Materials Laws. In connection with the preceding sentence, Landlord shall have no liability for any claim, cause of action or other liability arising out of or relating to the presence of Hazardous Materials on the Property that exceeds Fifty Thousand Dollars ($50,000.00) in the aggregate, inclusive of, without limitation, reasonable attorneys’ fees, costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal, or restoration work required by any federal, state, or local governmental agency or political subdivision because of Hazardous Materials present in the soil, the Building and the ground water on or under the Building, but excluding the cost of removal or abatement of any asbestos in the Building which is Landlord’s responsibility.

7.12. Survival and Duration of Obligations. All covenants, representations, warranties, obligations and indemnities made or given under this Paragraph 7 shall survive the

expiration or earlier termination of this Lease.

8. UTILITIES.

Tenant shall pay all service charges, and all initial utility deposits and all fees, for water, electricity, sewage, janitorial, trash removal, gas, telephone, pest control and any other utility services furnished to the Property during the Term of this Lease (“Utilities”). Tenant shall pay for all Utilities in addition to Rent and Project Expenses. Tenant shall cause each of the Utilities to be separately metered or billed and shall be responsible for any fees or deposits required in connection therewith.

9. AS-IS CONDITION.

Except for the Asbestos Abatement and the Landlord Improvements to be performed by Landlord as set forth in Exhibit “B” attached hereto, Tenant accepts the Property in its present “As-Is”, “Where-Is” and “With-All-Faults” condition and specifically acknowledges that the Premises and the Property are suited for the uses intended by Tenant. Landlord represents and warrants that the Premises contain a sprinkler system that satisfies code requirements for the Premises as of the Commencement Date; receipt of a certificate of occupancy on or about the Commencement Date shall conclusively satisfy this representation and warranty.

10. TENANT’S TAXES AND ASSESSMENTS.

Tenant covenants and agrees to pay promptly, when due, all personal property taxes or other taxes and assessments levied and assessed by any governmental authority upon the removable property of Tenant in, upon or about the Property.

11. ALTERATION OF PREMISES.

Tenant shall not alter, repair or change the Property at a cost in excess of $25,000.00 (“Material Alterations”) without the prior written consent of Landlord, which consent shall not be unreasonably withheld. All alterations, improvements or changes shall remain a part of and be surrendered with the Property, unless Landlord directs its removal under Paragraph 21 of this Lease.

11.1 Construction Plans. If Tenant elects to make Material Alterations or improvements as provided in this Paragraph 11, Tenant shall retain an architect, space planner and contractor, all reasonably approved by Landlord to prepare the construction drawings, and engineering consultants to prepare all plans and working drawings and other Tenant work in the Premises (collectively, “Construction Plans”). Tenant shall obtain, at its sole cost and expense, all necessary building permits and certificates of occupancy for the Premises; provided, however, Landlord shall cooperate with Tenant in executing permit applications and performing ministerial acts reasonably necessary to enable Tenant to obtain any such permits or certificates, so long as Landlord shall have no obligation to expend costs associated therewith. All Construction Plans shall comply with Landlord’s reasonable requirements and shall be approved by Landlord prior to the commencement of construction of any tenant improvements or

alterations. No changes or alterations to the approved Construction Plans shall be made without the prior written consent of Landlord, which consent shall not be unreasonably withheld.

11.1 Requirements. All alterations shall be constructed in strict compliance with applicable state law provisions, and if applicable, with approved Construction Plans and with all additional requirements propounded by Landlord at the time Landlord approves the Construction Plans. Tenant’s indemnity of Landlord as set forth in the Lease shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to any act or omission of Tenant or Tenant’s agents or anyone employed by any of them (including the Contractors, as defined in Exhibit “B”) arising out of the construction of any alterations. Such indemnity by Tenant, as set forth in the Lease, shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to Landlord’s performance of any ministerial acts reasonably necessary to permit Tenant to complete any tenant improvements, and to enable Tenant to obtain any building permit or certificates for the Premises. All of Tenant’s agents, contractors, subcontractors, engineers and the like shall carry worker’s compensation insurance covering all of their respective employees, and shall also carry commercial general liability coverage and property damage insurance, all with limits, in form and with companies as are required to be carried by Tenant as set forth in the Lease, and the policies therefor shall insure Landlord and Tenant, as their interests may appear. Tenant shall carry “Builder’s All Risk” insurance in an amount approved by Landlord covering the construction of any Material Alterations, and such other insurance as Landlord may reasonably require at the time Landlord approves the Construction Plans. Tenant shall be responsible for assuring that all alterations are completed in a lien-free manner. Tenant agrees to give Landlord written notice not less than ten (10) days in advance of the commencement of any construction, alteration, addition, improvement, installation or repair costing in excess of Twenty-five Thousand Dollars ($25,000.00) in order that Landlord may post appropriate notices of Landlord’s non-responsibility. Promptly after the tenant improvements are completed, Tenant shall file an appropriate Notice of Completion.

12. INSURANCE.

12.1. Landlord’s Insurance. Landlord shall maintain in full force and effect throughout the entire term of this Lease commercial general liability insurance for the Building and common areas and general fire and extended coverage insurance, including vandalism and special form or such other broader coverage as may from time to time be customary on the Building and the common areas and other areas of land within which the Building are located in such amounts determined by Landlord. Copies of all such insurance policies or certificates thereof endorsed to show payment of the premium shall be available for inspection by Tenant and such policies and certificates shall show Landlord and the beneficiary of any mortgage or deed of trust on the Premises to be additional insureds as their interests may exist (or a mortgagee loss payable endorsement). Such insurance may be provided by a blanket insurance policy covering the Premises, so long as the coverage on the Premises is at all times at least as great as required by this Paragraph. The insurance obtained by Landlord under this Paragraph shall constitute an item of “Insurance Expenses” under Paragraph 5.1.2. Landlord shall submit the invoice for insurance to Tenant who shall pay directly and confirm payment to Landlord. If Tenant fails to timely pay any invoice, Landlord may pay the invoice to avoid lapse of coverage and obtain reimbursement from Tenant. Tenant shall be entitled to use an alternate insurance

carrier to provide the insurance for Landlord contemplated under this Lease, provided, however, (i) the carrier and the terms and conditions of such coverage are reasonably acceptable to Landlord and Landlord’s lender, and (ii) there is no lapse in coverage.

12.2. Tenant’s Insurance. Tenant agrees to take out and keep in force during the term hereof, without expense to Landlord, with an insurance company with general policy holder’s rating of not less than B+V, as rated in the most current Best’s Insurance Reports, or other company acceptable to Landlord, the policies of insurance as set forth below. Tenant shall be permitted to obtain the insurance required under this Paragraph 12 by providing a blanket policy of insurance reasonably acceptable to Landlord, so long as the coverage required hereunder is not reduced or diminished and the requirements set forth in this Lease shall otherwise be satisfied by such blanket policy or policies. All such insurance policies shall name Landlord and any property manager of Landlord as additional named insureds.

12.2.1. Commercial general liability insurance, in the name of Tenant, insuring against any liability for injury to or death of persons resulting from any occurrence in or about the Building and for damage to property in such amounts as may from time to time be customary with respect to similar properties in the same area, but in any event not less than $3,000,000.00 per occurrence. The amounts of such insurance required hereunder shall be adjusted from time to time as requested by Landlord based upon Landlord’s determination as to the amounts of such insurance generally required at such time for comparable premises and buildings in the general geographical area of the Premises. In addition, such policy of insurance shall include the ordinary and usual coverage for any additional liability as coverage for any potential liability arising out of or because of any construction, work of repair or alterations done on or about the Premises by or under the control or direction of Tenant.

12.2.2 Personal property insurance covering the personal property and trade fixtures of Tenant in an amount equal to the replacement value of the personal property and trade fixtures, as such replacement value may vary from time to time.

12.2.3 Workers compensation insurance as required by law and employer liability insurance with limits of not less than $1,000,000.00.

12.3. Certificates of Insurance. All policies of insurance set forth in Paragraph 12.2 above, shall provide that copies of the policies or certificates thereof showing the premium thereon to have been paid, shall be delivered to Landlord prior to the Commencement Date and thereafter fifteen (15) days prior to each renewal date. All such policies shall provide that they shall not be canceled nor coverage reduced by the insurer without first giving at least thirty (30) days prior written notice to Landlord. If Tenant fails to procure and keep in force such insurance, Landlord may procure it, and the cost thereof with interest at the maximum lawful rate shall be payable immediately by Tenant to Landlord as additional rent. Such insurance may be provided by a blanket insurance policy covering the Premises, so long as the coverage on the Premises is at all times at least as great as required by this Paragraph 12.

13. WAIVER, EXCULPATION AND INDEMNITY.

13.1 Definitions. For purposes of this Paragraph 13, (i) “Tenant Parties” shall mean, singularly and collectively, Tenant and Tenant’s officers, directors, shareholders, partners, members, managers, trustees, agents, employees, and independent contractors as well as to all persons and entities claiming through any of the foregoing persons or entities, and (ii) “Landlord Parties” shall mean singularly and collectively, Landlord and Landlord’s officers, directors, shareholders, partners, members, managers, trustees, agents, employees, and independent contractors as well as to all persons and entities claiming through any of the foregoing persons or entities.

13.2 Exculpation. Except for Landlord’s obligations with respect to asbestos removal provided in Exhibit “B”, Tenant, on behalf of itself and of all Tenant Parties, and as a material part of the consideration to be rendered to Landlord under this Lease, hereby waives, to the fullest extent permitted by law, all claims against Landlord for loss, theft or damages to goods, wares, merchandise or other property (whether tangible or intangible) in and about the Property, for loss or damage to Tenant’s business or other economic loss (whether direct or consequential), and for the injury or death to any persons in, on or about the Property.

13.3 Tenant’s Indemnity. Tenant shall to the fullest extent permitted by law, at Tenant’s sole cost and expense, indemnify, defend (by an attorney of Landlord’s choice, reasonably acceptable to Tenant), reimburse, protect and hold harmless Landlord and all Landlord Parties from and against all Claims (as defined below in this Paragraph 13.3) from any cause, arising from or related (directly or indirectly) to this Lease, the tenancy created under this Lease, or the Premises, Tenant’s conducting of its business, any alterations, activities, work or things done, omitted, permitted, allowed or suffered by Tenant or Tenant Parties in, at or about the Premises or Building, including the violation of or failure to comply with any applicable laws, statutes, ordinances, standards, rules, regulations, orders, decrees or judgments in existence on the Commencement Date hereof or enacted, promulgated, or issued after the date of this Lease, any breach of default in performance of any obligation on Tenant’s part to be performed under this Lease, including obligations which survive expiration or earlier termination of this Lease under the terms of this Lease, the acts or omissions or negligence of Tenant or any Tenant Parties or of any invitee, guest or licensee of Tenant in, on or about the Property, relating to their use, possession, or occupancy of the Property or, Tenant’s obligations under this Lease, or to any work done, permitted or contracted for by any of them on or about the Premises. If Landlord shall, without fault on its part, be made a party to any litigation commenced by or against Tenant or any Tenant Parties, Tenant shall pay all costs and reasonable attorney’s fees incurred by such litigation, unless such costs and fees are covered by Landlord’s insurance. For purposes of this Lease, the term “Claims” means any and all claims, losses, costs, damage, expenses, liabilities, liens, actions, causes of action (whether in tort or contract, law or equity, or otherwise), charges, assessments, fines and penalties of any kind (including consultant and expert expenses, court costs and attorney fees actually incurred).

13.4 Waiver of Subrogation. No party shall have any right or claim against the Landlord by way of subrogation or assignment and Tenant hereby waives and relinquishes any such right. Tenant shall request its insurance carriers to endorse all applicable policies

waiving the carrier’s right of recovery under subrogation or otherwise against Landlord and provide a certificate of insurance verifying this waiver.

13.5 Survival and Duration of Obligations. All representations, warranties, obligations and indemnities made or given under this Paragraph 13 shall survive the expiration or earlier termination of this Lease.

14. CONSTRUCTION LIENS.

Tenant shall not suffer or permit any construction liens, mechanic’s liens or materialman’s liens to be filed against the Property. Landlord shall have the right at all reasonable times to post and keep posted at the Property, any notices which it deems necessary for protection from such liens. Tenant shall have the right to contest by proper proceedings any such construction liens, mechanic’s liens or materialman’s liens, provided that Tenant shall prosecute such contest diligently and in good faith and such contest shall not expose Landlord to any civil or criminal penalty or liability. Upon Landlord’s demand, Tenant shall furnish Landlord a surety bond or other adequate security satisfactory to Landlord sufficient both to indemnify Landlord against liability and hold the Property free from adverse effect in the event the contest is not successful. If such liens are so filed and Tenant does not properly contest such liens, Landlord, at its election, and upon not less than ten (10) days prior written notice to Tenant, may pay and satisfy same and, in such event the sums so paid by Landlord, with interest thereon at the rate of twelve percent (12%) per annum from the date of payment, and all actual and other expenses, including reasonable attorney’s fees, so paid by Landlord, shall be deemed to be a Property Expense, payable as additional rent, due and payable by the Tenant at once without notice or demand.

15. QUIET ENJOYMENT.

Landlord covenants and agrees that Tenant, upon making all of Tenant’s payments of Rent as and when due under the Lease, and upon performing, observing and keeping the covenants, agreements and conditions of this Lease on its part to be kept, shall peaceably and quietly hold, occupy and enjoy the Property during the Term of this Lease, subject to the terms and provisions of this Lease.

16. LANDLORD’S RIGHT OF ENTRY.

Landlord and his agents shall have no right to enter the Premises, except in the following circumstances: (i) any emergencies at the Building, (ii) any requests by Landlord’s lender or in order for Landlord to respond to any lender requests, and (iii) in the last six (6) months of the then-current Term upon reasonable notice in order to examine or to show the Building and Premises to prospective tenants or buyers and to place “For Rent” or “For Sale” signs on or about the Property. Upon receipt of reasonable advance notice from Landlord, Tenant may arrange to have a designated representative accompany Landlord in entering the Property. Landlord’s right of reentry shall not be deemed to impose upon Landlord any obligation, responsibility, or liability for the care, supervision or repair of the Property other than as herein provided; provided, however, that Landlord shall use reasonable care to prevent loss or damage to Tenant’s property resulting from Landlord’s entry. Notwithstanding the foregoing, Landlord shall have

the right to enter the Property without first giving notice to the Tenant in the event of an emergency where the nature of the emergency will not reasonably permit the giving of notice.

17. DESTRUCTION OF BUILDINGS

17.1 Partial Destruction. In the event of a partial destruction of the building containing the Premises during the term of this Lease from any cause, Landlord shall forthwith repair the same, provided such repair can reasonably be made within ninety (90) days from the happening of such destruction under applicable laws and regulations. During such period, Tenant shall be entitled to a proportionate reduction of rent to the extent such repairs unreasonably interfere with the business carried on by Tenant in the Premises. If Tenant fails to remove its goods, wares or equipment within a reasonable time and as a result the repair or restoration is delayed, or if such damage or destruction is caused primarily by the negligence or willful act of Tenant, or its employees, invitees or agents, there shall be no reduction in rent during such delay. In the event that such repair cannot reasonably be made within ninety (90) days from the happening of such destruction under applicable laws and regulations, Landlord shall have the right to terminate this Lease by notifying Tenant in writing within sixty (60) days from the happening of such destruction of Landlord’s decision not to repair such building in which event this Lease shall be deemed terminated. If Landlord fails to give such written notice of Landlord’s decision not to repair such building within such sixty (60) days, then Landlord shall be required to commence the repair of the building promptly and thereafter diligently complete the repairs. In addition to the above, in the event that such building is partially destroyed and (i) the cost of repairing such building exceeds thirty-three and one-third percent (33-1/3%) of the replacement cost thereof, or (ii) the damage caused by the partial destruction of such building cannot reasonably be repaired within a period of ninety (90) days from the happening of such damage, Landlord may elect to terminate this Lease, whether or not such building is insured, by written notice to Tenant given within sixty (60) days from the happening of such destruction. If Landlord fails to give such written notice of Landlord’s decision not to repair such building within such sixty (60) days, then Landlord shall be required to repair such building within ninety (90) days from the happening of such destruction, if it can be reasonably repaired in such time, or as soon thereafter as reasonably practical if it cannot reasonably be repaired in such earlier period of time.

17.2 Total Destruction. A total destruction of the building containing the Premises shall terminate this Lease. A total destruction of such building means the cost of repairing such building exceeds seventy-five percent (75%) of the replacement cost of such building.

18. EMINENT DOMAIN.

18.1 Definitions. For purposes of this Lease, the word “condemned” is co-extensive with the phrase “right of eminent domain”, that is, the right of the government to take property for public use, and shall include the intention to condemn expressed in writing as well as the filing of any action or proceeding for condemnation.

18.2 Exercise of Condemnation. If any action or proceeding is commenced for the condemnation of the Property or any portion thereof, or if Landlord is advised in writing by any

government (federal, state or local) agency or department or bureau thereof, or any entity or body having the right or power of condemnation, of its intention to condemn all or any portion of the Property at the time thereof, or if the Property or any part or portion thereof be condemned through such action, then and in any of such events Landlord shall promptly notify Tenant and may, without any obligation or liability to Tenant, and without affecting the validity and existence of this Lease other than as hereafter expressly provided, agree to sell and/or convey to the condemnor, without first requiring that any action or proceeding be instituted, or if such action or proceeding shall have been instituted, without requiring any trial or hearing thereof, and Landlord is expressly empowered to stipulate to judgment therein, the part and portion of the Property sought by the condemnor, free from this Lease and the rights of Tenant hereunder; provided, however, Tenant shall have the right to institute proceedings, at its sole cost and expense, to halt any such action and Landlord agrees to reasonably cooperate with Tenant at no cost or expense to Landlord. Tenant shall have no claim against Landlord nor be entitled to any part or portion of the amount that may be paid or awarded as a result of the sale, for the reasons as aforesaid, or condemnation of the Premises or any part or portion thereof, except that Tenant shall be entitled to pursue an action to recover from the condemnor and Landlord shall have no claim thereto for Tenant’s relocation costs, loss of goodwill, for Tenant’s trade fixtures, any removable structures and improvements erected and made by Tenant to or upon the Property or the Building which Tenant is or may be entitled to remove at the expiration of this Lease and Tenant’s leasehold estate hereunder.

18.3 Effect on Lease. If the entire Property is condemned, this Lease shall terminate as of the earlier of such taking or loss of possession. If only a part of the Property is condemned and taken, then Landlord and Tenant shall cooperate to determine whether the remaining portion thereof significantly interferes with Tenant’s business and use of the Premises, and if so, Tenant shall have the option to terminate this Lease effective as of the earlier of such taking or loss of possession. If by such condemnation and taking only a part of the Property is taken, and the remaining part thereof is in Tenant’s reasonable discretion suitable for the purposes for which Tenant has leased the Property, this Lease shall continue, but the Base Rent shall be reduced in an amount proportionate to the percentage that the floor area of that portion of the Property physically taken by eminent domain bears to the floor area of all the Building located on the Property.

19. BANKRUPTCY.

If a general assignment is made by Tenant for the benefit of creditors, or any action is taken by or against Tenant under any insolvency or bankruptcy statute or law, or if a receiver is appointed to take possession of all or substantially all of the assets of Tenant (and Tenant fails to terminate such receivership within sixty (60) days after such appointment), or if any action is taken by a creditor of Tenant under any insolvency or bankruptcy statute or law, and such action is not dismissed or vacated within thirty (30) days after the date of such filing, then this Lease shall terminate at the option of Landlord upon the occurrence of any such contingency and shall expire as fully and completely as if the day of the occurrence of such contingency was the date specified in this Lease for the expiration thereof. In such event, Tenant shall then quit and surrender the Property to Landlord.

20. DEFAULT.

If Tenant fails to pay any Rent or other sum due hereunder at the time set forth in this Lease, or in the event Tenant fails to perform any other covenant to be performed by Tenant under this Lease and continues to fail to perform the same for a period of thirty (30) days after receipt of written notice from Landlord pertaining thereto (or a reasonable period of time, using due diligence, if any non-monetary default cannot be cured within such thirty (30)-day period, but not to exceed sixty (60) days), then Tenant shall be deemed to have breached this Lease and Landlord, in addition to other rights or remedies it may have, may:

20.1 Continue this Lease in effect by not terminating Tenant’s right to possession of the Property, and thereby be entitled to enforce all Landlord’s rights and remedies under this Lease, including the right to recover the Rent specified in this Lease as it becomes due under this Lease; or

20.2 Terminate Tenant’s right to possession of the Property, thereby terminating this Lease, and recover from Tenant:

20.2.1 The worth at the time of award of the unpaid Rent which had been earned at the time of termination of the Lease;

20.2.2 The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination of the Lease until the time of award exceeds the amount of rental loss that Tenant proves could have been reasonably avoided;

20.2.3 The worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of rental loss that Tenant proves could be reasonably avoided; and

20.2.4 Any other amount necessary to compensate Landlord for all detriment proximately caused by Tenant’s failure to perform its obligations under this Lease; or

20.3 In lieu of, or in addition to, bringing an action for any or all of the recoveries described in Paragraph 20.2 above, bring an action to recover and regain possession of the Property in the manner provided by the laws of unlawful detainer then in effect in the state where the Property is located. If Landlord makes any expenditure required of Tenant hereunder, or if Tenant fails to make any payment or expenditure required of Tenant hereunder, such amount shall be payable by Tenant to Landlord as Rent together with interest from the date due at the rate of eighteen percent (18%) per annum, but not to exceed the maximum amount allowed by law, and Landlord shall have the same remedies as on the default in payment of Rent. The payment of interest required hereunder shall be in addition to the late charge set forth in Paragraph 3.3.

21. SURRENDER OF PROPERTY.

On or before the expiration of the Lease Term, Tenant shall vacate the Property and the

Building located thereon in broom clean condition and otherwise in the same condition as existed on the Commencement Date, ordinary wear and tear excepted, except that any improvements made within the Building by Tenant shall remain, in the same condition and repair as when constructed or installed, reasonable wear and tear excepted, unless Landlord gives Tenant at least thirty (30) days prior written notice, which, if any, of such improvements in the Building are to be removed. Landlord’s failure to timely give notice to Tenant to remove any such improvements shall not relieve Tenant of its obligation to remove any such improvements requested to be removed by Landlord. In addition, Tenant shall remove from the Property all Tenant’s personal property and trade fixtures in order that Landlord can repossess the Property and all the Building and improvements located thereon on the day this Lease expires or is sooner terminated. Any removal of the Tenant’s improvements, Tenant’s property and/or trade fixtures by Tenant shall be accomplished in a manner which will minimize any damage or injury to the Property, and any such damage or injury shall be repaired by Tenant at its sole cost and expense with thirty (30) days after Tenant vacates.

22. HOLDING OVER.

Should Tenant hold over and remain in possession of the Property after the expiration of this Lease, without the written consent of Landlord, such possession shall be as a month-to-month tenant. Unless Landlord agrees otherwise in writing, Base Rent during the hold-over period shall be payable in an amount equal to one hundred thirty-five percent (135%) of the Base Rent paid for the last month of the Term hereof until Tenant vacates the Property. All other terms and conditions of this Lease shall continue in full force and effect during such hold-over tenancy, which hold-over tenancy shall be terminable by either party delivering at least one (1) month’s written notice, before the end of any monthly period. Such hold-over tenancy shall terminate effective as of the last day of the month following the month in which the termination notice is given.

23. SURRENDER OF LEASE.

The voluntary or other surrender of this Lease by Tenant, or mutual cancellation thereof, shall not work a merger and may, at the option of Landlord, operate to terminate this Lease and/or all or any existing subleases or subtenancies or may operate as an assignment of any or all such subleases or subtenancies to Landlord.

24. NOTICE.

All notices, demands or requests required or permitted under this Lease shall be in writing and delivered personally, or mailed postage prepaid by registered or certified mail, return receipt requested, or sent by Federal Express, addressed as set forth below. Any party may designate a different address by notice similarly given. Any notice, demand or request so given, delivered or made by United States mail shall be deemed to have been given or delivered or made on the third business day following the day on which the same is deposited in the United States mail as registered or certified mail, return receipt requested, addressed as above provided, with postage thereon fully prepaid. Any such notice, demand or document not given, delivered or made by registered or certified mail as aforesaid, shall be deemed to be given, delivered or

made on receipt of the same by the party to whom the same is to be given, delivered or made, addressed as follows:


TO LANDLORD:		One West Avenue
		Larchmont, New York 10538
		Attn: Stuart Lichter
		Telephone (914) 834-2600
		FAX (914) 834-2002

with a required copy to:		Fainsbert, Mase & Snyder, LLP
		11835 West Olympic Blvd., Suite 1100
		Los Angeles, California 90064
		Attn: John A. Mase, Esq.
		Telephone (310) 473-6400
		FAX (310) 473-8702

TO TENANT:		TST/Impreso
		652 Southwestern Blvd.
		Coppell, Texas 75019
		Attn: Marshall Sorokwasz, Esq.
		Telephone (972) 462-0100, ext.1103
		FAX (972) 462-7764

with a required copy to:		TST/Impreso
		652 Southwestern Blvd.
		Coppell, Texas 75019
		Attn: Tammy Yahiel, Esq.
		Telephone (972) 462-0100, ext.1117
		FAX (972) 393-5692

25. ASSIGNMENT AND SUBLETTING.

25.1 No Assignment. Tenant shall not directly or indirectly, voluntarily or by operation of law, sell, assign, encumber, pledge or otherwise transfer or hypothecate all or any part of the Property or Tenant’s leasehold estate hereunder (collectively, “Assignment) without Landlord’s prior written consent in each instance, which consent may not be unreasonably withheld by Landlord. Tenant shall be entitled to sublease less than the entire Property (“Sublease”) without requiring the consent of Landlord. Landlord’s consent to an Assignment shall not be deemed to have been unreasonably withheld if the proposed assignee intends to use the Property in a manner that would violate current zoning regulations or applicable laws or in a manner that would increase the use of, or the possibility of disturbance of, Hazardous Materials on the Property.

25.2 No Relief of Obligations. Consent by Landlord to any Assignment or Sublease by Tenant shall not relieve Tenant of any obligation to be performed by Tenant under this Lease, whether arising before or after the Assignment or Sublease. The consent by Landlord

to any Assignment or Sublease shall not relieve Tenant of the obligation to obtain Landlord’s express written consent to any other Assignment or Sublease. Any Assignment or Sublease that is not in compliance with this Paragraph 25 shall be void and, at the option of Landlord, shall constitute a material default by Tenant under this Lease. The acceptance of Rent by Landlord from a proposed assignee or subtenant shall not constitute the consent by Landlord to such Assignment or Sublease. Each Transferee under an Assignment shall assume all obligations of Tenant under this Lease and shall be and remain liable jointly and severally with Tenant for the payment of Base Rent, additional rent and other charges, and for the performance of all other provisions of this Lease. Each Transferee under a Sublease, other than Landlord, shall be subject to this Lease.

26. ATTORNEY’S FEES.

In the event of any legal or equitable action arising out of this Lease, the prevailing party shall be entitled to recover all reasonable fees, costs and expenses, together with reasonable attorney’s fees incurred in connection with such action. The fees, costs and expenses so recovered shall include those incurred in prosecuting or defending any appeal. The prevailing party shall also be entitled to reasonable attorney’s fees incurred to collect or enforce the judgment.

27. JUDGMENT COSTS.

Should Landlord, without fault on Landlord’s part, be made a party to any litigation instituted by or against Tenant, or by or against any person holding the Property by license of Tenant, or for foreclosure of any lien for labor or material furnished to or for Tenant, or any such person, or otherwise arising out of or resulting from any act or transaction of Tenant, or of any such person, Tenant covenants to pay to Landlord, the amount of any judgment rendered against Landlord or the Property or any part thereof, and all costs and expenses, including reasonable attorney’s fees incurred by Landlord in connection with such litigation.

28. BROKERS.

Tenant warrants that it has had no dealings with any real estate broker or agent in connection with the Property and this Lease, and that it knows of no real estate broker or agent who is or might be entitled to a commission in connection with this Lease other than John Van Buskirk, SIOR, NAI/CIR. Landlord shall only pay the real estate brokerage commission due to any real estate broker or agent entitled to a commission in connection with this Lease if claimed through the actions of Landlord and pursuant to a separate agreement. Tenant shall pay any other commission or finder’s fee due if claimed through the actions of Tenant.

29. SUBORDINATION OF LEASE.

This Lease is subject and subordinate to any mortgages which may now or hereafter be placed upon or affect the property or Building of which the Premises are a part, and to all renewals, modifications, consolidations, replacements and extensions hereof, provided that the holder(s) of such mortgage(s) shall agree in writing not to disturb the possession of the Premises

by Tenant or the rights of Tenant under this Lease so long as Tenant is not in material default (subject to applicable notice and cure rights in favor of Tenant as contained in this Lease) in the performance of its obligations thereunder and, in the event of foreclosure, Tenant agrees to look solely to the mortgagee’s interest in the Property for the payment and discharge of any obligations imposed upon the mortgagee or Landlord under this Lease. In the event that a Successor Landlord, as hereinafter defined, takes title to the Property, (i) Successor Landlord shall be bound to Tenant under all of the terms and conditions of this Lease, (ii) Tenant shall recognize and attorn to Successor Landlord as Tenant’s direct landlord under this Lease, and (iii) this Lease shall continue in full force and effect, in accordance with its terms, as a direct lease between Successor Landlord and Tenant. This clause shall be self-operative, and no further instrument or subordination shall be necessary unless requested by a mortgagee or the insuring title company, in which event Tenant shall sign, within five (5) business days after requested, such instruments and/or documents as the mortgagee and/or insuring title company reasonably request be signed (“SNDA”). In the event Tenant fails to execute an SNDA or an estoppel certificate as provided herein, Tenant hereby constitutes and appoints Landlord as its attorney-in-fact, with full power of substitution, to sign, execute, certify, acknowledge, deliver or record, where required or appropriate, in the name, place and stead of Tenant, all such SNDAs and estoppel certificates for and on behalf of Tenant as may be required.

30. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.

30.1 Estoppel Certificate. Tenant shall, at any time and from time to time, upon not less than ten (10) days’ prior request by Landlord, execute, acknowledge and deliver to Landlord, or to such other persons who may be designated in such request, a statement in writing certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the modifications) and, if so, the dates to which the rent and any other charges have been paid in advance, and such other items requested by Landlord, including without limitation, the lease commencement date and expiration date, rent amounts, and that no offsets or counterclaims are present. It is intended that any such statement delivered pursuant to this Paragraph may be relied upon by any prospective purchaser or encumbrancer (including assignee) of the Property.

30.2 Financial Statements. If Landlord desires to finance, refinance, or sell the Property, or any part thereof, Tenant shall deliver to Landlord, or to such potential lender or purchaser designated by Landlord, such financial information regarding Tenant, as may reasonably be required to establish Tenants’ creditworthiness. All financial information provided by Tenant to Landlord or any lender or potential purchaser shall be held by the recipient in strict confidence and may not be used or disclosed by the recipient except for the purpose of determining Tenants’ creditworthiness in connection with Tenants’ obligations under this Lease.

31. SHORT FORM OF LEASE.

Tenant agrees to execute, deliver and acknowledge, at the request of Landlord, a short form of this Lease satisfactory to counsel for Landlord, and Landlord may in its sole discretion record this Lease or such short form in the County where the Property is located. Tenant shall not record this Lease, or a short form of this Lease, without Landlord’s prior written consent,

which shall not be unreasonably withheld. In the event of any conflict between the terms of this Lease and any short form of this Lease, the terms of this Lease shall prevail.

32. SIGNS.

Tenant may install signs on the exterior of the Property and at the entrance to the Property, provided, however, that Tenant’s signs shall comply with any applicable laws and regulations affecting the Property. Tenant shall maintain any such signs installed on the Property.

33. GENERAL PROVISIONS.

33.1 Governing Law. This Lease shall be governed by the laws of the Commonwealth of Pennsylvania and the parties hereto agree that venue shall be proper in any state or federal court located within the state.

33.2 Waiver. The waiver by Landlord of any breach of any term, covenant, or condition herein contained shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition contained herein. The acceptance of rent hereunder shall not be construed to be a waiver of any breach by Tenant of any term, condition or covenant of this Lease.

33.3 Remedies Cumulative. It is understood and agreed that the remedies herein give to Landlord shall be cumulative, and the exercise of any one remedy of Landlord shall not be to the exclusion of any other remedy.

33.4 Successors and Assigns. The covenants and conditions herein contained shall, subject to the provisions as to assignment, apply to and bind the heirs, successors, executors, administrators and assigns of all of the parties hereto; if Landlord or Tenant is comprised of multiple parties, each of such parties hereto shall be jointly and severally liable hereunder.

33.5 Entire Agreement. This Lease, the exhibits herein referred to, and any addendum executed concurrently herewith, are the final, complete and exclusive agreement between the parties and cover in full each and every agreement of every kind or nature, whatsoever, concerning the Property and all preliminary negotiations and agreements of whatsoever kind or nature, are merged herein. Landlord has made no representations or promises whatsoever with respect to the Property, except those contained herein, and no other person, firm, partnership or corporation has at any time had any authority from Landlord to make any representations or promises on behalf of Landlord, and Tenant expressly agrees that if any such representations or promises have been made by others, Tenant hereby waives all right to rely thereon. No verbal agreement or implied covenant shall be held to vary the provisions hereof, any statute, law or custom to the contrary notwithstanding. Unless otherwise provided herein, no supplement, modification, or amendment of this Lease shall be binding unless executed in writing by the parties.

33.6 Captions. The captions of paragraphs of this Lease are for convenience only, and do not in any way limit or amplify the terms and provisions of this Lease.

33.7 Partial Invalidity. If any term, covenant, condition or provision of this Lease is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

33.8 Authority. The person(s) executing this Lease warrants that he or she has the authority to execute this Lease and has obtained or has the requisite corporate or other authority to do the same.

33.9 Approvals. Any consent or approval required hereunder shall not be unreasonably withheld, conditioned or delayed by the party from whom such consent or approval is requested unless this Lease expressly provides otherwise.

33.10 Counterparts. This Lease may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

33.11 Joint and Several Obligations. The obligations of the persons signing as Tenant under this Lease shall be joint and several in all respects.

34. OPTION TO PURCHASE PROPERTY.

34.1 Exercise. At any time during either the fifty-fifth (55^th) month through the sixtieth (60^th) month (“First Exercise Period”), or during the one hundred fifteenth (115^th) month through the one hundred twentieth (120^th) month (“Second Exercise Period”) (either, an “Exercise Period”) of the Lease Term, Tenant shall have the right to exercise an option to purchase the Property and any related personal property located on the Property (“Purchase Option”), for an amount equal to $8,039,000.00. Tenant’s purchase of the Property shall be upon and subject to the terms as set forth in this Paragraph 34 and subject to such other reasonable terms agreed to between Landlord and Tenant. The Purchase Option shall be exercised by Tenant, if at all, in the following manner: (i) Tenant shall not be in default under the Lease on the delivery date of the Purchase Option Notice (as defined below), and (ii) Tenant shall deliver to Landlord: (a) written notice (“Purchase Option Notice“) to Landlord no later than the last day of the Exercise Period stating that Tenant desires to exercise the Purchase Option, and (b) the deposit in the amount of Twenty Five Thousand and no/100 Dollars ($25,000) (“Deposit”), which Landlord shall place into escrow with an Escrow Holder (defined in Paragraph 34.2.1 below). Thereafter, Tenant, as Buyer, and Landlord, as Seller, shall enter into a purchase and sale agreement on a standard form, which shall be reasonably based on the terms of purchase and sale set forth in this Paragraph 34. Buyer shall provide Seller with no less than thirty (30) days’ notice of the contemplated close of escrow (the “Closing”), and with respect to the first Purchase Option, such Closing shall occur during the sixty-first (61^st) through sixty-sixth (66^th) months of the Lease Term; with respect to the second Purchase Option, the Closing shall occur no later than during the one hundred twenty-first (121^st) through the one

hundred twenty-sixth (126^th) months of the Lease Term. Until the sale of the Property closes, this Lease shall remain in full force and effect according to the terms hereof. Tenant’s failure to deliver the Purchase Option Notice on or before the last day of the First Exercise Period or Second Exercise Period, as applicable, shall be deemed to constitute Tenant’s election not to exercise the Purchase Option.

34.2 Purchase of the Property.

34.2.1 The purchase price shall be $8,039,000. If Tenant exercises the Purchase Option in the First Exercise Period, Tenant shall have elected to purchase the entire Property and Tenant shall be entitled to a purchase price reduction of $200,000 if such Closing occurs before expiration of the sixty-sixth (66^th) month of the Lease Term. If Tenant exercises the Purchase Option in the Second Exercise Period, the Seller shall sell and the Buyer shall purchase the Property excluding approximately one and one-half acres of land with frontage on Wayne Avenue as mutually agreed upon by Landlord and Tenant which shall be retained by Landlord (the “Retained Land”), provided, however, Landlord shall not be entitled to select any portion of the land where the existing parking lot is currently located as the Retained Land unless Landlord reasonably agrees to construct a replacement parking lot for Tenant reasonably acceptable to Tenant and the replacement parking lot is completed before the construction on the Retained Land. Seller shall not be allowed primary access for ingress and egress over the balance of the Property purchased by Buyer for the benefit of the Retained Land. Buyer and Seller shall, however, be allowed to create any easements required by city regulations or requirements in subdividing the Property to allow the other party secondary access over such other party’s land for fire trucks or other purposes. Upon the mutual execution of a purchase and sale agreement, which Landlord shall deliver to Buyer promptly upon receipt of Tenant’s Purchase Option Notice, escrow shall be opened upon the mutual execution and delivery to escrow of the purchase and sale agreement. Escrow will be opened and title shall be ordered with First American Title Company, Los Angeles, as title company and escrow holder (“Escrow Holder”). The Deposit shall be held by Escrow Holder in an interest-bearing account insured by the federal government in an institution as directed by Landlord. If the purchase and sale of the Property is consummated as contemplated hereunder, the Deposit plus all interest accrued thereon shall be paid to Seller and credited against the Purchase Price. If the purchase and sale of the Property is not consummated because of any reason except for a default under this Agreement on the part of Seller, then the Deposit plus all interest accrued thereon shall be immediately refunded to Seller. If the purchase and sale of the Property is not consummated because of a default by Seller under the purchase and sale agreement, then the Deposit plus all interest accrued thereon shall be paid to and retained by Buyer. Buyer shall deposit the balance of the Purchase Price in cash with Escrow Holder before Close of Escrow in accordance with the requirements of the Escrow Holder. Seller and Buyer shall negotiate in good faith to execute a purchase and sale agreement within a timely manner, as time is of the essence, on the terms and conditions set forth herein.

34.2.2 Title to the Property will be conveyed to Buyer by special warranty deed on close of escrow subject to matters of title approved by Buyer. Title shall be conveyed subject to no monetary liens except for the payment of non-delinquent real property taxes. Title insurance shall be provided by First American Title Company, Los Angeles. Seller shall pay the

premium for the title policy of a standard coverage owner’s policy, and Buyer shall pay any additional title insurance costs associated with Buyer obtaining an ALTA or other extended coverage owner’s policy (including an updated ALTA survey of the Property, any lender’s policy of title insurance, and the cost of any title endorsements that Seller elects to obtain).

34.2.3 All other closing costs, transfer taxes, title insurance policy costs, recording fees and the like shall be shared equally by Buyer and Seller.

34.2.4 Buyer shall have twenty-one (21) days following receipt of a preliminary title report and underlying documents (including, to the extent easily obtainable, any easement plot plans) (“Contingency Date”) to approve the condition of title for the Property. If Buyer notifies Seller in writing by the Contingency Date that one or more items are disapproved, Seller will have the right to (i) cure any unacceptable item prior to the Closing, or (ii) elect to immediately terminate the escrow and the purchase and sale agreement. If Seller is unable or unwilling to cure any disapproved exception to title or if escrow is terminated as provided in this paragraph, then Buyer shall have the right to terminate the purchase and sale agreement and any Deposit made by Buyer as of that date, less Buyer’s escrow costs, will be returned to Buyer, provided Buyer is not in default under the Lease Agreement. Alternatively, Buyer may elect to waive the objection to title and proceed to closing. Buyer shall have up to thirty days (30) days following the Contingency Date (the “Financing Contingency Date”) to obtain financing for the Property in an amount not to exceed 85% of the purchase price (“Financing Contingency”). Buyer shall give written notice to Seller before expiration of the Financing Contingency Date if Buyer has failed to satisfy the Financing Contingency. Buyer’s failure to timely give notice to Seller of Buyer’s failure to satisfy the Financing Contingency shall be deemed Buyer’s satisfaction or waiver the Financing Contingency and the purchase and sale transaction shall proceed towards Closing.

34.2.5 Buyer is purchasing property “AS IS” and will have until the Contingency Date to investigate and approve or disapprove the Property for Buyer’s intended use, which investigation will include, but not be limited to economic feasibility, zoning, building condition, availability of utilities, permits, soils, geology and environmental conditions, certificate of occupancy or final inspection card, a copy of Seller’s current title insurance policy, and other governmental approvals and reports (“Contingent Items”). The investigation of the Property will be conducted at Buyer’s sole expense. Buyer may request prior to Buyer’s exercise of the Purchase Option but Seller shall not be obligated to provide to Buyer until after Seller’s receipt of Buyer’s Purchase Option Notice, and to the extent in Seller’s possession, the following: one (1) set of copies of documents relating to the Property, including any maintenance records, prior soils and engineering reports, Certificate of Occupancy, final inspection card, and property improvement plans to the extent any such documents are in Seller’s possession. If Seller delivers any such reports or Property information, it shall be without any representation or warranty by Seller as to accuracy or completeness. Buyer shall indemnify Seller and its contractors agents from and against all claims, actions, losses, liabilities, damages, costs and expenses (including, but not limited to, attorneys’ fees and costs) incurred, suffered by, or claimed against the Seller, etc. or any of them, by reason of any reliance on any information contained in the reports delivered to Buyer prior to the Effective Date, damage to the Property or injury to persons caused by Buyer and/or its agents, representatives or consultants in investigating the Property.

The foregoing provisions shall survive the Closing or any termination of the purchase and sale agreement.

34.2.6 The parties shall represent and warrant that neither party has incurred any obligations for each real estate broker’s commissions, finder’s fees or any similar fees in connection with the transaction contemplated by the sale of the Property except for a commission, if any, due pursuant to a separate commission agreement. If any person asserts a claim for commission or finder’s fee based upon any contact or dealings with Buyer or Seller, the party through whom that person makes his claim will indemnify, hold harmless and defend that other party from such claim and all expenses, including reasonable attorneys’ fees, incurred by the other party in defending the claim.

35. Option to Extend. Landlord hereby grants to Tenant one option to extend the Lease Term for the Premises for an additional seven (7) years, upon each and all of the terms and conditions of this Lease as amended below; provided, however, that Tenant shall not be in default of this Lease on the date of exercise of the option, as extended. Tenant shall provide Landlord with written notice on or prior to nine (9) months before expiration of the then-current Lease Term of the exercise of the option to extend this Lease for such additional term, time being of the essence. If notice of exercise of the option is not timely given, this option shall automatically expire. The rent for the extended Lease Term shall consist of Base Rent for the Premises for the extended Lease Term in the amount of $78,366.67 per month for the 157th through 180th months, inclusive, of the extended Lease Term, inclusive, and $84,920.83 for the 181^st through 240^th months, inclusive, of the extended Lease Term, the Tenant’s Share of Project Expenses under Paragraph 5, and any other charges under this Lease.

[Signatures on following page]

IN WITNESS WHEREOF, the parties hereto have executed this Lease Agreement in duplicate as of the day and year first above written.

LANDLORD:

CHAMBERSBURG BUSINESS PARK, LP,
a Delaware limited partnership


By:	S. L. Chambersburg, Inc.
	a Delaware corporation, its general partner

	By:

		Stuart Lichter, President

TENANT:

TST/IMPRESO INC.,
a Delaware corporation


By:

Its:

EXHIBIT “A”

SITE PLAN

EXHIBIT “B”

WORK LETTER

for

INITIAL IMPROVEMENTS OF THE PREMISES

This Work Letter sets forth the terms and conditions agreed to by Landlord and Tenant relating to improvement work consisting of the Asbestos Abatement and the Landlord Improvements (collectively, “Initial Improvements”) at the Property, as described below and in the Lease, to which this Work Letter is attached. This Work Letter is hereby incorporated into the Lease by reference and all obligations of the parties hereunder shall be obligations of the parties under the Lease. It is intended that the work will be constructed to meet the specifications and criteria developed and approved by Landlord, and performed by Tenant’s designated contractors, as described below.

1. Defined Terms. Capitalized terms used in this work letter and not defined shall have the meanings given to such terms in the Lease.

2. Contract Approval. Tenant shall be entitled to approve all contracts on all repairs in this work letter, including, without limitation, the Contract for Roof Repairs attached to the Lease as Exhibit B-1 and the Air Systems Contract attached to the Lease as Exhibit B-2, whose approval shall not be unreasonably withheld or delayed. All contracts shall conform to the most recent specifications submitted to Tenant. Tenant’s failure to approve such contracts within five days after the date of this Lease shall be deemed approval thereof.

Asbestos Abatement. Landlord shall retain contractors to perform certain asbestos remediation or abatement work to the Property described below (“Asbestos Abatement”), at Landlord’s sole cost and expense, which shall be performed in accordance with all applicable Hazardous Materials Laws. Landlord shall remove all asbestos material from the Premises, including, but not limited to, the following:

	A.		Remove any asbestos-containing materials located in the roof that will be repaired/replaced in accordance with Paragraph 3 of this Exhibit “B”.

	B.		Remove any asbestos floor tiles in the offices.

	C.		Remove asbestos from the boiler room.

3. Landlord Improvements. Landlord shall construct certain improvements to the Premises, at Landlord’s sole cost and expense, as more fully described below (the “Landlord Improvements”). The Landlord Improvements shall consist of the following work:

	1.		Replace the roof membrane over the Premises (the actual roofing materials exclusive of the roofing structure and plywood), excluding approximately 30,000 square feet which was recently re-roofed.

	2.		Replace the current heating system and install air-rotation units. The cost of this work shall not exceed $230,000.00.

4. As-Is. Except as specifically set forth herein, Tenant accepts the Property in its present “As-Is”, “Where-Is” and “With-All-Faults” condition.

5. Initial Improvements to be Performed by Landlord. With respect to the Initial Improvements to be performed by Landlord, Landlord will make reasonable efforts to minimize the inconvenience and disturbance caused thereby, but shall not be liable or responsible for business interruption or damage to the Property that results from Landlord’s work to the Building.

5. Additional Allowance. Landlord shall provide Tenant with an additional allowance of $25,000 to refurbish the office portion of the Premises. If the total cost of the Landlord Improvements is less than $1,539,000, Landlord shall provide Tenant with a further allowance to be used for office refurbishment to the extent the total cost of the Landlord Improvements is less than $1,539,000, but no more than an additional $25,000, for a total additional allowance of $50,000 under this Paragraph 5.

EX-31.1 3 d39213exv31w1.htm CERTIFICATION PURSUANT TO SECTION 302 - CEO exv31w1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Marshall D. Sorokwasz, certify that:

1.		I have reviewed the annual report on Form 10-K for the year ended August 31, 2005 of Impreso, Inc. (the “Report”);

2.		Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the Report;

3.		Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the Report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

	a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in the Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by the Report based on such evaluation; and

	c)		Disclosed in the Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

	a)		All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 25, 2006		/s/ Marshall D. Sorokwasz Marshall D. Sorokwasz
		Chief Executive Officer and President

EX-31.2 4 d39213exv31w2.htm CERTIFICATION PURSUANT TO SECTION 302 - CFO exv31w2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Susan M. Atkins, certify that:

1.		I have reviewed the annual report on Form 10-K for the year ended August 31, 2005 of IMPRESO, INC. (the “Report”);

2.		Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the Report;

3.		Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the Report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

	a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in the Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by the Report based on such evaluation; and

	c)		Disclosed in the Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

	a)		All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 25, 2006		/s/ Susan M. Atkins Susan M. Atkins
		Chief Financial Officer

EX-32.1 5 d39213exv32w1.htm CERTIFICATION OF CEO PURSUANT TO SECTION 906 exv32w1

Exhibit 32.1

IMPRESO, INC.

CERTIFICATE PURSUANT TO SECTION 906
OF SARBANES – OXLEY ACT OF 2002

The undersigned, Marshall D. Sorokwasz, Chief Executive Officer and President of IMPRESO, INC. (the “Company”), DOES HEREBY CERTIFY that:

	1.		The Company’s Annual Report on Form 10-K for the year ended August 31, 2005 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

	2.		Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.

IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed August 25, 2006.


Name:		/s/ Marshall D. Sorokwasz Marshall D. Sorokwasz
Title:		Chief Executive Officer and President

* A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2 6 d39213exv32w2.htm CERTIFICATION OF CFO PURSUANT TO SECTION 906 exv32w2

Exhibit 32.2

IMPRESO, INC.

CERTIFICATE PURSUANT TO SECTION 906
OF SARBANES – OXLEY ACT OF 2002

The undersigned, Susan M. Atkins, Chief Financial Officer of IMPRESO, INC. (the “Company”), DOES HEREBY CERTIFY that:

	1.		The Company’s Annual Report on Form 10-K for the year ended August 31, 2005 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

	2.		Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.

IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed August 25, 2006.


Name:		/s/ Susan M. Atkins Susan M. Atkins
Title:		Chief Financial Officer

-----END PRIVACY-ENHANCED MESSAGE-----

•		Business Forms Dealers — Businesses that primarily buy and resell various types of business forms. Examples include Vanguard Direct, American Business Forms and Better Business Forms.

•		Wholesale Stationers — Businesses that supply a large variety of office products to office product dealers. Wholesale stationers generally do not sell directly to the end user. Examples include United Stationers, and SP Richards.

•		Office Products Dealers — Businesses that generally purchase a majority of their products from wholesale stationers, but often negotiate directly with manufacturers. Examples include Navrat’s Office Products and Crest Office Supply.

•		Paper Merchants — Businesses that sell all types of papers to printers and dealers and directly to end users. Examples include Unisource, Xpedx and Ris Paper.

•		Consumer Electronics Stores — Businesses that sell retail to the end user in a broad spectrum electronics environment. Examples include Fry’s Electronic and Best Buy.

•		Mass Merchants — Discount department stores with retail sections that sell computer, copier and facsimile related supplies. Examples include Shopko.

•		Grocery and Drug Store Chains — Businesses that sell computer consumables as a convenience to its customer and secondary sale to its primary target product. Examples include Walgreen’s, Kroger and Rite-Aid.

•		Wholesale Clubs/Office Superstores — Businesses that sell large quantities of inventory at or near wholesale prices to end users and dealers. These stores generally do not provide the credit, delivery and other types of services and support to the extent that wholesale stationers provide their customers. Examples include Staples, Costco and BJ’s.

•		Buying Groups — Groups of dealers, ranging from ten to 400 members, that combine their buying power to receive, among other things, volume discount pricing and rebate incentives from manufacturers. Examples include Independent Stationers, Association of Independent Printing Paper Merchants, and Trimega.

•		Computer Aided Design (CAD) Supply Dealers — Dealers that typically sell wide format supplies and papers to architects and engineers.

•		Contract Stationers — Companies that offer a complete catalog of office and business supplies generally to large corporations. In many cases, various types of products are bundled and sold under contract. Examples include Corporate Express, Boise Cascade Office Products and Staples.

•		Cash Register Supply Dealers — Dealers that sell cash register systems and point of sale supplies to businesses such as restaurants and retail vendors. Examples include Impact Paper, Paper Rolls Plus and Systems Supply.


þ		Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended August 31, 2005


o		Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from to


Delaware (State or other jurisdiction of incorporation or organization)		75-2849585 (I.R.S. Employer Identification No.)


652 Southwestern Blvd., Coppell, Texas (Address of principal executive offices)		75019 (Address of (Zip code)


PART I
	ITEM 1. BUSINESS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
	ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
	ITEM 6. SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	ITEM 9A. CONTROLS AND PROCEDURES
PART III
	ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM. 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
	ITEM. 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	ITEM. 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
INDEX TO EXHIBITS
SIGNATURES
Real Estate Lease Agreement
Certification Pursuant to Section 302 - CEO
Certification Pursuant to Section 302 - CFO
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906