PURCHASE PRICE ADDENDUM AGREEMENT
THIS PURCHASE PRICE ADDENDUM AGREEMENT (this “Agreement”), dated as of 12 August, 2005, is by and among S-2-S Acquisition Corporation, a Delaware corporation (together with its successors and assigns, “S-2-S Acquisition”), Next, Inc., a Delaware corporation and the sole parent of S-2-S Acquisition (“Next”), Allen Gaddis (“Gaddis”) and Gaddco, Inc., a Kentucky corporation (“Gaddco”).
WHEREAS, Gaddis has transferred all of his equity interests in Sports-2-School, LLC, a Kentucky limited liability company (“Sports-2-School”), to Buck Swindle Associates, Inc., a Kentucky corporation (“BSA”), pursuant to that certain member interest purchase agreement dated August 12, 2005 between Sports-2-School and BSA (the “Transfer Agreement”);
WHEREAS, Sports-2-School has transferred to Gaddco the inventory set forth in Exhibit A attached hereto (the “Inventory”); and
WHEREAS, S-2-S Acquisition, pursuant to an Asset Purchase Agreement by and among S-2-S Acquisition, Sports-2-School and BSA (the “Purchase Agreement”), has acquired from Sports-2-School substantially all of its assets (other than the Inventory) and assumed certain of its liabilities (the “Transaction”).
IN CONSIDERATION of the premises and the representations, warranties, covenants and agreements contained herein, the receipt and legal sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
Share Issuance; Purchase Price Consideration . In consideration for the execution and delivery of the this Agreement and the Transfer Agreement and as purchase price consideration for the Transaction, Next shall issue to Gaddis 25,000 shares of its common stock (“Shares”) to Gaddis. The 25,000 Shares shall be delivered to Gaddis on the effective date of the Transaction.
Vendor Number . Gaddis and Gaddco, in contemplation of the agreement within, shall, as part of the transfer agreement referenced above, release the Wal-Mart vendor number 403451 and the related Wal-Mart “retail link”access information “the Vendor Number” to Sports-2-School, LLC, which shall thereafter be transferred to Next, Inc. and S-2-S Acquisition. Gaddis agrees to execute and deliver such other agreements, documents and certificates as may be reasonably requested by Next or S-2-S Acquisition to effect the transfer of ownership of Sports-2-Schools, LLC and therefore the Wal-Mart vendor number and “retail link” access information to Next, Inc. Gaddis further agrees to reasonably assist Next and S-2-S Acquisition with respect to any dealings with Walmart related to the use of the Vendor Number by Next or S-2-S Acquisition, including without limitation obtaining any consent related thereto from Walmart.
Sales; Inventory .
Following the effective date hereof and for a period of six months, S-2-S Acquisition and Next agree to use commercially reasonable efforts to cause the sale of the Gaddco Inventory to Walmart.
In connection with any sales or attempted sales of Gaddco Inventory to Walmart, Gaddco shall be liable or responsible for any and all expenses of decoration, embellishment, packaging, finishing and shipment of the Inventory.
With respect to all sales of Gaddco Inventory to Walmart, Next or S-2-S Acquisition shall be compensated by 24% of the net sales price and Gaddco 76% of the sales price of all Inventory, which payment shall be made on the same basis as the sales orders from Walmart with respect to such Inventory. Gaddco shall not be liable or responsible, and no adjustments to compensation shall be made for any chargebacks or returns from Wal-Mart except for returns of merchandise containing defects resulting from the printing, packaging, distribution and any other items under the control of Gaddco production process.
All sales of Gaddco Inventory to Walmart shall satisfy all standards and specifications of Walmart.
Additional consideration may be earned by Gaddco in conjuction with S-2-S Acquisition after completion if additional sales to Walmart with margins reasonably acceptable to Next and S-2-S Acquisition in an amount of $100,000 are shipped within one year as a result of Gaddis’ efforts, Next shall issue an additional 25,000 Shares to Gaddis as earnout consideration; provided, however, that such sales have not overlapped, competed with or otherwise interfered with the sales efforts of S-2-S Acquisition or Next, as defined in written instructions to be provided to Gaddco on or before September 1, 2005. Acceptance of any order by Next and/or S-2-S Acquisition shall be deemed approval of same, and said order shall be therefore deemed not to have overlapped, competed with or otherwise interfered with the sales efforts of S-2-S Acquisition or Next, Inc.
Sales Representation . Following the first anniversary of the effective date of this Agreement, Next and Gaddis may enter into negotiations related to continued sales representation by Gaddis or Gaddco of Next or S-2-S Acquisition.
Representations and Warranties . Gaddis and Gaddco represent and warrant to Next and S-2-S Acquisition as follows:
Subject to the execution and delivery of the Transfer Agreement, Gaddis does not hold any member interests, other equity securities or options, warrants or other rights to acquire member interests in Sports-2-School.
Gaddis and Gaddco have all requisite power, corporate or otherwise, and authority to enter into this Agreement, to perform all of their obligations hereunder and to consummate the transactions contemplated hereby without the approval of any third party. The execution and delivery of this Agreement, the performance by Gaddis and Gaddco of their respective obligations hereunder and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary limited liability company action on the part of Gaddco including, without limitation, approval of Gaddco’s directors and shareholders. There are no corporate, contractual, statutory or other restrictions of any kind upon the power and authority of Gaddis and Gaddco to execute and deliver this Agreement and to consummate the transactions contemplated hereby and no action, waiver or consent by any government or any agency, bureau, board, commission,