ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT

BY AND AMONG

ODIMO INCORPORATED

WORLDOFWATCHES.COM, INC.

AND

ILS HOLDINGS, LLC

1

Dated as of December 1, 2006
TABLE OF CONTENTS

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APPENDICES, EXHIBITS AND SCHEDULES

 

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (the “ Agreement ”) is made and entered into this 1st day of December, 2006, by and between ILS Holdings, LLC, a Florida limited liability company (the “ Purchaser ”) and Odimo Incorporated, a Delaware corporation (“ Odimo ”), and Worldofwatches.com, Inc., a Delaware corporation (collectively referred to herein together with Odimo, as “ Seller ”). Certain capitalized terms used in this Agreement are defined on Appendix A hereto.

RECITALS

WHEREAS, Seller owns the website www.worldofwatches.com (the “ WOW Website ” together with certain data, software, furniture and equipment used in connection with the operation of the WOW Website and on the WOW Website is engaged in the online retail sale of watches (the “ WOW Business ”);

WHEREAS, Purchaser desires to purchase from Seller and Seller desires to sell to Purchaser certain of the assets of, or related to, the WOW Business on the terms and conditions set forth herein; and

WHEREAS, concurrent with and as a condition to the execution of this Agreement, the individuals listed on Exhibit A will enter into confidentiality and non-competition agreements in favor of Purchaser.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual representations, warranties, covenants and promises contained herein, the adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

AGREEMENT

ARTICLE 1.

THE TRANSACTION

1.1 Purchased Assets . Subject to the terms and conditions of this Agreement, at the Closing, Seller hereby sells, transfers, conveys, assigns and delivers to Purchaser, and Purchaser hereby purchases from Seller, all of Seller’s right, title and interest in, to and under the following assets, properties, goodwill and rights of Seller used in the conduct of the WOW Business, free and clear of any Encumbrances (collectively, the “Purchased Assets”):

(a)  Machinery and Equipment . The machinery and equipment listed on Schedule 1.1(a) (the “ Machinery and Equipment ”);

(b)  Intellectual Property/Telephone Numbers . The WOW Intellectual Property and internet domain names, databases, telephone numbers and directory listings used by Seller primarily in the conduct of the WOW Business, as listed on Schedule 1.1(b) ;

(c)  Transferred Contracts . All rights of Seller under Contracts listed on Schedule 1.1(c) (the “ Transferred Contracts ”);

(d)  Governmental Approvals . All Governmental Approvals (and pending applications therefor), including the Governmental Approvals listed on Schedule 1.1(d) ;

(e)  Books and Records . True and correct copies of all books, files, papers, agreements, correspondence, databases, information systems, programs, documents, records and documentation thereof reasonably requested by Purchaser including without limitation, customer information and historical sale records stored as computer data bases, customer lists, price lists, files, sales correspondence and other records, marketing information and other records, sales literature and similar information related to the WOW Business, any of the Purchased Assets, or used in the conduct of the WOW Business, on whatever medium (the “ Books and Records ”), including but not limited to the information described on Schedule 1.1(e) , which shall be provided in forms or formats as agreed to by Seller and Purchaser;

(f)  Goodwill . All goodwill related to the WOW Business including customer and supplier lists and the goodwill associated with the WOW Intellectual Property; it being understood that any goodwill of the business operated on the www.ashford.com website (the “ Ashford Business ”) shall remain the property of Seller, it being further understood that by way of example, to the extent both the WOW Business and the Ashford Business use the same supplier lists, then both Purchaser and Seller shall have the respective right to use such lists (which for the avoidance of doubt shall have both Purchaser’s and Seller’s respective right to sell or otherwise transfer such lists).

(g)  Accounts Receivable . Accounts receivable associated with sales and transactions entered into on the WOW Website after the Transfer Time;

(h)  Deposits and Advances . All performance and other bonds, security and other deposits, advances, advance payments, prepaid credits and deferred charges (the “ Deposits and Advances ”) associated with transactions entered into or orders placed on the WOW Website after the Transfer Time;

(i)  Rebates and Credits . All rights in, to and under claims for refunds, rebates or other discounts due from suppliers or vendors and rights to offset in respect thereof (the “ Rebates and Credits ”) associated with transactions entered into or orders placed with respect to the WOW Business after the Transfer Time; and

(j)  Corporate Packaging Materials . All stocks of shipping and packaging materials used or held for use in connection with the WOW Business (the “ Corporate Packaging ”), including all items of packaging, bags, boxes, wrapper and other material used in the WOW Business.

1.2 Excluded Assets . Other than as provided in Section 1.1, all other assets of Seller (the “Excluded Assets”) shall not be included in the Purchased Assets. The Excluded Assets shall include:

(a)  Cash . Cash, cash equivalents, merchant deposits in transit, deposits with credit card companies and marketable securities;

(b)  Accounts Receivable . Accounts receivable associated with sales and transactions entered into prior to the Transfer Time;

(c)  All Debt . Any intercompany or intracompany receivable cash balances between Seller and any of its Affiliates or between any of its Affiliates;

(d)  Inventory . All Inventory of Seller Products;

(e)  Corporate Documents . Corporate seals, certificates of incorporation, minute books, stock transfer records, or other records related to the corporate organization of Seller;

(f)  Insurance Policies . All insurance policies;

(g)  Deposits and Advances . Deposits and Advances associated with transactions entered into or orders placed prior to the Transfer Time;

(h)  Rebates and Credits . All rights in, to and under Rebates and Credits associated with transactions entered into or orders placed prior to the Transfer Time;

(i)  Claims . All claims, choses-in-action, rights in action, rights to tender claims or demands to Seller’s insurance companies, rights to any insurance proceeds, and other similar claims (the “ Seller Claims ”); and

(j)  Rights Under Certain Agreements . All rights under any Transaction Agreement.

1.3 Assumed Liabilities . Purchaser assumes no Liabilities of Seller, except at the Closing, Purchaser shall assume and agree to pay, discharge or perform, as appropriate, only to the extent and as provided in this Section 1.3, the following (collectively, the “Assumed Liabilities”):

(a) the liabilities and obligations of Seller in respect of the Transferred Contracts only with respect to those Liabilities that arise thereunder from and after the Closing Date, with no Liabilities assumed for accrued or contingent obligations as of the Closing Date; and

(b) the obligations of Seller to honor the discount coupons and promotions listed on Schedule 4.31 in accordance with their terms.

For clarity, Purchaser shall not assume Liability for liabilities or obligations arising out of any breach (or alleged breach) by Seller of any provision of any agreement, Contract, commitment or lease, including, but not limited to, liabilities or obligations arising out of Seller’s failure (or alleged failure) to perform any agreement, Contract, commitment or lease in accordance with its terms prior to the Closing.

1.4 Retained Liabilities . Other than the Assumed Liabilities, Purchaser shall assume no liabilities and shall not be liable or responsible for any Liability of Seller, any direct or indirect subsidiary of Seller (each, a “Subsidiary”) or any Affiliate of Seller (collectively, the “Retained Liabilities”). Without limiting the foregoing, the Retained Liabilities shall include, and Purchaser shall not be obligated to assume, and does not assume, and hereby disclaims any of the following Liabilities of Seller, its Subsidiaries or its Affiliates:

(a) Any Liability attributable to any assets, properties or Contracts that are not included in the Purchased Assets, except Liabilities attributable to Non-Assignable Assets, for which Seller and Purchaser have reached a mutually acceptable arrangement pursuant to Section 1.5(b);

(b) Any Liability for breaches of any Transferred Contract on or prior to the Closing Date and for breaches of any other Transferred Contract or any Liability for payments or amounts due under any Contract on or prior to the Closing Date and for payments or amounts due under any other contract;

(c) Any Liability to GSI Commerce, Inc. under the Asset Purchase Agreement by and between Seller and Ashford.com dated December 6, 2002 or any Liability to Ice.com, Inc. or Ice Diamond, LLC or their respective successors or assigns, under the Asset Purchase Agreement by and among Seller, Ice.com, Inc. and Ice Diamond, LLC, dated May 11, 2006 (the “ Ice Agreement ”), or any of the agreements entered into in connection therewith;

(d) Any Liability for Taxes attributable to or imposed upon Seller or its Affiliates for any period, or attributable to or imposed upon the Purchased Assets on or prior to the Closing Date, including any Transfer Taxes;

(e) Any Liability for or with respect to any loan, other indebtedness, or account payable, including any such Liabilities owed to Affiliates of Seller;

(f) Any Liability arising from accidents, occurrences, misconduct, negligence, breach of fiduciary duty or statements made or omitted to be made (including libelous or defamatory statements) on or prior to the Closing Date, whether or not covered by workers’ compensation or other forms of insurance;

(g) Any Liability arising as a result of any legal or equitable action or judicial or administrative proceeding initiated at any time, to the extent related to any action or omission on or prior to the Closing Date, including any Liability for (i) infringement or misappropriation of any Intellectual Property Rights or any other rights of any Person (including any right of privacy or publicity); (ii) breach of product warranties; (iii) injury, death, property damage or other losses arising with respect to or caused by Seller Products or the manufacturer or design thereof; or (iv) violations of any Legal Requirements (including federal and state securities laws);

(h) Any Liability incurred in connection with the making or performance of this Agreement and the Transaction;

(i) Any Liability incurred in connection with a violation of or arising under any environmental laws;

(j) Any Liability for expenses and fees incurred by Seller incidental to the preparation of the Transaction Agreements, preparation or delivery of materials or information requested by Purchaser, and the consummation of the Transaction, including all broker, counsel and accounting fees and Transfer Taxes;

(k) Any Liability arising out of transactions, commitments, infringements, acts or omissions not in the ordinary course of business;

(l) Any Liability arising out of any Seller Benefit Plan or contract of insurance for employee group medical, dental or life insurance plans;

(m) Any Liability for making payments of any kind to employees (including as a result of the Transaction, the termination of an employee by Seller, or other claims arising out of the terms of employment with Seller) or with respect to payroll taxes;

(n) Any Legal Requirement applicable to Seller, the Purchased Assets or the Retained Liabilities on or prior to the Closing Date or any Liability for a violation of such a Legal Requirement;

(o) Any Liability to any stockholders of Seller;

(p) Any Liability for credit balances, credit memos and all other amounts due to dealers, distributors and customers;

(q) Any Liability related to or arising from the acquisition of the WOW Business by Seller;

(r) Any Liability associated with the Federal CAN-SPAM Act or violations of Seller’s privacy policies associated with collection, retention, use, transfer or sale of customer information;

(s) Any costs or expenses associated with the contracts with MSN or NextJump set forth on Schedule 4.31 of the Seller Disclosure Schedule;

(t) Any Liability arising out of or in connection with the sale of any decoded inventory by Seller; or

(u) Any costs or expenses incurred in connection with shutting down, deinstalling and removing equipment not purchased by Purchaser and any costs or expenses associated with any Contracts not assumed by Purchaser hereunder.

1.5 Non-Assignable Assets .

(a) Notwithstanding the foregoing, if any of the Transferred Contracts or other Purchased Assets are not assignable or transferable (each, a “ Non-Assignable Asset ”) without the consent of, or waiver by, a third party (each, an “ Assignment Consent ”), either as a result of the provisions thereof or applicable Legal Requirements, and any of such Assignment Consents have not been obtained by Seller on or prior to the date hereof, Purchaser may elect to either: (i) have Seller permanently retain the Non-Assignable Asset and all Liabilities relating thereto at the Closing; or (ii) have Seller continue its best efforts to obtain the Assignment Consents after Closing, and, in either case, this Agreement and the related instruments of transfer shall not constitute an assignment or transfer of such Non-Assignable Assets, and Purchaser shall not assume Seller’s rights or obligations under such Non-Assignable Asset (and such Non-Assignable Asset shall not be included in the Purchased Assets). If Purchaser elects item (ii) above, without limiting Seller’s obligations under Section 3.2(r) , Seller shall use its best efforts to obtain all such Assignment Consents as soon as reasonably practicable after the Closing Date and thereafter assign to Purchaser such Non-Assignable Assets. Following any such assignment, such assets shall be deemed Purchased Assets for purposes of this Agreement.

(b) After the Closing, Seller shall cooperate with Purchaser in any reasonable arrangement designed to provide Purchaser with all of the benefits of the Non-Assignable Assets as if the appropriate Assignment Consents had been obtained, including by establishing arrangements whereby Purchaser shall undertake the work necessary to perform under Transferred Contracts.

ARTICLE 2.

CONSIDERATION FOR TRANSFER

2.1 Purchase Price and Payment,

(a)  Purchased Asset Purchase Price . Subject to the terms of this Agreement, as full consideration for the sale, assignment, transfer and delivery of the Purchased Assets and the execution and delivery of the Transaction Agreements by Seller to Purchaser, Purchaser shall pay to Seller, at the Closing, a purchase price of $410,000 (the “ Purchased Assets Purchase Price ”) in exchange for the Purchased Assets, payable in immediately available funds by wire transfer.

(b)  Purchase Price Adjustments . If Purchaser makes any repairs, accepts any returns or grants any allowances from and after the Closing Date, in compliance with the return or warranty policy of Seller published by Seller on or prior to the Closing Date, relating to any product produced or sold by Seller on or prior to the Closing Date, Purchaser shall do so as agent of Seller without any liability to Seller or anyone else by so acting, and the costs associated with such returns, repairs or allowances shall be promptly reimbursed by Seller on the Purchase Price Adjustment Date. With respect to any return, the costs associated with such return to be credited to Purchaser shall be equal to the excess of (I) the sum of (a) the retail price to be credited to the customer plus (b) any merchant costs associated with crediting the customer, plus (c) any return shipping costs covered or reimbursed (together with (a) and (b) the “ Full Retail Cost ”) over (II) the Net Inventory Cost for the returned item. For purposes hereof, “ Net Inventory Cost ” for any returned item shall equal the “cost of goods sold” for that item. The costs of repairs shall be the actual out of pocket costs incurred by Purchaser in making such repair. In the event that Purchaser shall reasonably determine that any items returned are broken, damaged or unable to be sold as new (such items “ Damaged Goods ”), Seller shall indemnify Purchaser for the Full Retail Cost of such items and upon return of any Damaged Goods to Purchaser, Purchaser shall deliver the Damaged Goods to Seller at Seller’s expense. Notwithstanding anything contained herein or in any Transaction Agreement to the contrary, Seller shall be permitted through the date which is the 30 ^th day following the Purchase Price Adjustment Date (as herein defined) to liquidate the Damaged Goods on Odimo’s Ebay clearance site, provided, that Seller shall not reference Purchaser, www.worldofwatches.com , or the WOW Business in connection with the liquidation of such Damaged Goods. Purchaser and Seller shall use their respective commercially reasonable best efforts to work together on repairs, returns and allowances for all items returned for credit, exchange or repairs. On or before the last day of each month following the Closing Date (or, if such date is not a Business Day, the first Business Day thereafter) (each such date, a “ Purchase Price Adjustment Date ”) continuing until 180 days following the Closing Date, Purchaser shall present Seller with a schedule of all returns, repairs and allowances that have been transacted by Purchaser hereunder during the immediately preceding month (the “ Return and Repair Schedule ”) and Seller shall reimburse Purchaser for any amount amounts owed to Purchaser under this Section 2.1(b) . Notwithstanding the foregoing, Seller shall not be required to reimburse Purchaser for any amounts related to returns or warranty repairs of SWI watches.

2.2 Allocation of Purchase Price . The purchase price for the Purchased Assets shall be allocated as set forth in Schedule 2.2 attached hereto and made a part hereof, subject to the Purchase Price adjustment as described in Section 2.1(b) above. The parties hereto agree to follow such allocations for federal and state income tax purposes.

ARTICLE 3.

CLOSING AND CLOSING DELIVERIES

3.1 Closing; Time and Place . The closing of the purchase and sale provided for in this Agreement (the “Closing”) shall occur at the offices of Greenberg Traurig, P.A., 401 East Las Olas Boulevard, Suite 2000, Fort Lauderdale, Florida 33301 (or such other place as the parties may designate in writing) on the date of execution of this Agreement (the “Closing Date”).

3.2 Deliveries by Seller . On the Closing Date, Seller will take all reasonable steps necessary to place Purchaser in actual possession and operating control of the Purchased Assets and deliver the following items, duly executed by Seller as applicable, all of which shall be in a form and substance reasonably acceptable to Purchaser and Purchaser’s counsel:

(a)  Bill of Sale . Bill of Sale covering all of the applicable Purchased Assets, substantially in the form attached hereto as Exhibit B ;

(b)  Assignment and Assumption Agreement . Assignment and Assumption Agreement covering the Transferred Contracts, substantially in the form attached hereto as Exhibit C .

(c)  Intellectual Property Assignment . Any and all documents necessary to properly record the assignment to Purchaser of all of Seller’s right, title and interest in and to the WOW Intellectual Property, including the intellectual property assignment, substantially in the form of Exhibit D attached hereto;

(d)  Other Conveyance Instruments . Such other specific instruments of sale, transfer, conveyance and assignment as Purchaser may request;

(e) Reserved.

(f)  Support Agreements . Support Agreements covering at least 50% of the outstanding shares of capital stock of Seller, in substantially the form attached as Exhibit E .

(g)  Notice Letter to State of Delaware/Certificate of Amendment . Certificate of Amendments of Certificates of Incorporation of WORLDOFWATCHES.COM, Inc. as filed with the Delaware Secretary of State changing the name of WORLDOFWATCHES.COM, Inc. to Odimo Two Subsidiary, Inc. and a letter to the Secretary of State of the State of Delaware consenting to the use of the name WORLDOFWATCHES.COM by Purchaser or any of its Affiliates;

(h)  Transferred Contracts . Originals of all Transferred Contracts;

(i)  Request for Reconveyance of Deed of Trust; Payoff and Release Letters . Payoff and release letters from creditors of Seller together with UCC-3 termination statements with respect to any financing statements filed against any of the Purchased Assets, terminating all Encumbrances (including Tax liens) on any of the Purchased Assets;

(j)  Books and Records . The Books and Records, provided that Purchaser and Seller hereby agree that the customer records associated with the WOW Business shall continue to be made available to Purchaser for inspection on or prior to the Closing Date and provided further that an electronic copy of all customer records shall be provided to Purchaser in ASCII electronic format on a mobile hard drive on or prior to the date which is 30 days from the Closing Date;

(k)  Officer’s Certificate . A Certificate executed on behalf of Seller by its Chief Executive Officer, certifying that (i) all of the representations and warranties of Seller in this Agreement are true and correct in all material respects (considered collectively and individually) as of the date of this Agreement (or, to the extent such representations and warranties speak as of an earlier date, they shall be true and correct in all material respects as of such earlier date) and (ii) all of the representations and warranties of Seller in this Agreement that contain an express materiality qualification shall have been true and correct in all respects (considered collectively and individually) as of the date of this Agreement;

(l)  Secretary’s Certificate . A certificate of the Secretary of the Seller setting forth a copy of the resolutions adopted by the Board of Directors of Seller authorizing and approving the execution and delivery of the Agreement and the consummation of the transactions contemplated hereby;

(m)  Opinion of Seller’s Counsel . Opinion in form and substance acceptable to Purchaser.

(n)  Delaware Law Opinion . Opinion from Delaware counsel, in form and substance acceptable to Purchaser, confirming that Seller is not required under Delaware law to seek the approval of its shareholders in order to complete the Transaction;

(o)  Valuation . Copy of valuation from Capitalink, L.C. confirming the market value of the Purchased Assets.

(p)  Fairness Opinion. Copy of opinion from Capitalink, L.C. to Seller which confirms Capitalink’s view that as of the date of the opinion, the consideration to be received by Seller in connection with the sale of the Purchased Assets is fair, from a financial point of view, to the shareholders of Seller;

(q)  Certificates of Good Standing . A certificate from the Secretary of State of each of Delaware, Florida and each other jurisdiction where the WOW Business is conducted as to Seller’s good standing and payment of all applicable taxes;

(r)  Consents . All Assignment Consents and other Consents required (i) for the transfer of the WOW Business and the Purchased Assets; (ii) for the consummation of the Transaction; or (iii) to prevent a breach or termination of any Contract;

(s)  Non-Competition Agreements . Non-competition agreements in form and substance acceptable to Purchaser and its counsel with each of the persons listed on Exhibit B.

(t)  Termination of Licenses . To the extent there are any licenses, Contracts or rights that grant any subsidiary of the Seller the right to use the WOW Intellectual Property, such licenses, contracts and rights shall be terminated as of the Closing Date and Seller shall provide Purchaser executed copied of all termination agreements effecting such terminations.

3.3 Deliveries by Purchaser and Seller . At the Closing, Purchaser and Seller shall deliver such other certificates, instruments or documents required pursuant to the provisions of this Agreement or otherwise necessary or appropriate to transfer the Purchased Assets in accordance with the terms hereof and consummate the Transaction, and to vest in Purchaser and its successors and assigns full, complete, absolute, legal and equitable title to the Purchased Assets, free and clear of all Encumbrances, including such certificates, instruments and documents to be executed or delivered by Seller pursuant to Article 3 hereof.

ARTICLE 4.

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as specifically set forth on Schedule 4 (the “ Seller Disclosure Schedule ”) attached to this Agreement (the parts of which are numbered to correspond to the individual Section numbers of this Article 4), Seller hereby represents and warrants (without limiting any other representations or warranties made by Seller in this Agreement or any other Transaction Agreement) to Purchaser as follows:

4.1 Organization, Good Standing, Qualification . Schedule 4.1 sets forth Seller’s jurisdiction of organization and each state or other jurisdiction in which Seller is qualified to do business. Seller (i) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (ii) is duly qualified to conduct business and is in corporate and tax good standing under the laws of each jurisdiction in which the nature of its business (including the WOW Business), the operation of its assets (including the Purchased Assets) or the ownership or leasing of its properties (including the Personal Property) requires such qualification; and (iii) has full power and authority required to own, lease and operate its assets and to carry on its business (including the WOW Business) as now being conducted and as presently proposed to be conducted.

4.2 Authority; Binding Nature of Agreements . Seller has all requisite power and authority to execute and deliver this Agreement and all other Transaction Agreements to which it is a party and to carry out the provisions of this Agreement and the other Transaction Agreements. The execution, delivery and performance by Seller of this Agreement and the other Transaction Agreements have been approved by all requisite action on the part of Seller.

This Agreement has been duly and validly executed and delivered by Seller. Each of this Agreement and the other Transaction Agreements constitutes, or upon execution and delivery, will constitute, the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms.

4.3 No Conflicts; Required Consents . Except as set forth on Schedule 4.3, the execution, delivery and performance of this Agreement or any other Transaction Agreement by Seller does not and will not (with or without notice or lapse of time):

(a) conflict with, violate or result in any breach of (i) any of the provisions of Seller’s Certificate of Incorporation or bylaws; (ii) any resolutions adopted by the Board of Directors or stockholders of Seller; (iii) any of the terms or requirements of any Governmental Approval held by Seller or any of its employees or that otherwise relates to the WOW Business or any of the Purchased Assets; or (iv) any provision of any Material Contract;

(b) give any Governmental Authority or other Person the right to (i) challenge the Transaction; (ii) exercise any remedy or obtain any relief under any Legal Requirement or any Order to which Seller, or any of the Purchased Assets, is subject; (iii) declare a default of, exercise any remedy under, accelerate the performance of, cancel, terminate, modify or receive any payment under any Material Contract; or (iv) revoke, suspend or modify any Governmental Approval;

(c) cause Seller or Purchaser to become subject to, or to become liable for the payment of, any Tax, or cause any of the Purchased Assets to be reassessed or revalued by any Tax Authority or other Governmental Authority;

(d) result in the imposition or creation of any Encumbrance upon or with respect to any of the Purchased Assets; or

(e) require any Seller to obtain any Consent or make or deliver any filing or notice to any Person or to a Governmental Authority.

4.4 Subsidiaries . To the extent the Purchased Assets are owned by any subsidiary of Odimo or any other Entity, or any portion of the WOW Business is conducted by any subsidiary of Odimo or any other Entity, such Purchased Assets are set forth on Schedule 4.4 next to the subsidiary that is the owner thereof.

4.5 Financial Statements .

(a) Seller has previously delivered to Purchaser the following financial statements (collectively, the “ Financial Statements ”): (i) the audited consolidated balance sheets, and the related statements of operations, changes in stockholders’ equity, and cash flows, of Seller as of and for the fiscal years ended December 31, 2005, 2004 and 2003, together with the notes thereto; and (ii) the unaudited consolidated balance sheets, and the related unaudited statements of operations, changes in stockholder’s equity, and cash flows, of Odimo Incorporated (the “ Interim Balance Sheet ”) as of and for the period ended September 30, 2006 (the “ Interim Balance Sheet Date ”).

(b) All of the Financial Statements (i) are true, accurate and complete in all respects; (ii) are consistent with the Books and Records of Seller; (iii) present fairly and accurately the financial condition of Seller as of the respective dates thereof and the results of operations, changes in stockholder’s equity and cash flows of Seller for the periods covered thereby; and (iv) have been prepared in accordance with GAAP, applied on a consistent basis throughout the periods covered; provided , however , that the Interim Balance Sheet is subject to year-end adjustments consistent with past practice (which will not be material individually or in the aggregate) and do not contain all of the footnotes required by GAAP. All reserves established by Seller and set forth in the Interim Balance Sheet are adequate for the purposes for which they were established.

(c)  Schedule 4.5(c) sets forth an accurate, correct and complete breakdown and aging of each of Seller’s accounts payable (including to all of its suppliers) as of the Interim Balance Sheet Date.

4.6 Absence of Undisclosed Liabilities . Neither Seller nor the WOW Business has any Liabilities other than (i) those set forth in the Interim Balance Sheet; (ii) those incurred in the ordinary course of business and not required to be set forth in the Interim Balance Sheet under GAAP; (iii) those incurred in the ordinary course of business since the date of the Interim Balance Sheet; and (iv) those incurred in connection with the execution of any of the Transaction Agreements.

4.7 Absence of Changes . Except as set forth on Schedule 4.7, Since the Interim Balance Sheet Date, (i) Seller has conducted the WOW Business in the ordinary course of business and (ii) no event or circumstance has occurred that could reasonably have a Material Adverse Effect on Seller or the WOW Business.

4.8 Transactions with Affiliates . Except as set forth in the Financial Statements, no Affiliate (a) has any direct or indirect interest in any asset (including the Purchased Assets), property or other right used in the conduct of or otherwise related to the WOW Business; or (b) is a party to any Material Contract or has had any direct or indirect interest in, any Material Contract, transaction or business dealing of any nature involving Seller.

4.9 Material Contracts .

(a)  Schedule 4.9 sets forth an accurate, correct and complete list of all Contracts associated with the WOW Business or the Purchased Assets to which any of the descriptions set forth below may apply (the “ Material Contracts ”):

(i) Personal Property Leases, Insurance, Contracts affecting any WOW Intellectual Property or Seller’s information systems or software, Contracts with employees or contractors, Seller Benefit Plans and Governmental Approvals;

(ii) Any Contract for capital expenditures or for the purchase of goods or services in excess of $5,000;

(iii) Any Contract obligating Seller to sell or deliver any product or service by or through the WOW Business at a price which does not cover the cost (including labor, materials and production overhead) plus the customary profit margin associated with such product or service;

(iv) Any Contract involving financing or borrowing of money, or evidencing indebtedness, any liability for borrowed money, any obligation for the deferred purchase price of property in excess of $5,000 or guaranteeing in any way any Contract in connection with any Person;

(v) Any joint venture, partnership, cooperative arrangement or any other Contract involving a sharing of profits;

(vi) Any advertising or marketing Contract not terminable without payment or penalty on five days notice;

(vii) Any Contract with respect to the discharge, storage or removal of effluent, waste or pollutants;

(viii) Any Contract affecting any right, title or interest in or to real property;

(ix) Any Contract relating to any license or royalty arrangement;

(x) Any power of attorney, proxy or similar instrument;

(xi) The Charter, Bylaws and other organizational or constitutive documents of Seller and any Contract among stockholders of Seller;

(xii) Any Contract for the manufacture, service or maintenance of any product of the WOW Business;

(xiii) Any Contract for the purchase or sale of any assets other than in the ordinary course of business or for the option or preferential rights to purchase or sell any assets;

(xiv) Any requirement or output Contract;

(xv) Any Contract to indemnify any Person or to share in or contribute to the liability of any Person;

(xvi) Any Contract for the purchase or sale of foreign currency or otherwise involving foreign exchange transactions;

(xvii) Any Contract containing covenants not to compete in any line of business or with any Person in any geographical area;

(xviii) Any Contract related to the acquisition of a business or the equity of any other Entity;

(xix) Any other Contract which (i) provides for payment or performance by either party thereto having an aggregate value of $5,000 or more; (ii) is not terminable without payment or penalty on five (5) days (or less) notice; or (iii) is between, inter alia, an Affiliate and Seller;

(xx) Any other Contract that involves future payments, performance of services or delivery of goods or materials to or by Seller of an aggregate amount or value in excess of $5,000, on an annual basis, or that otherwise is material to the WOW Business or prospects of Seller

(xxi) Any Contract which is material to the WOW Business; and

(xxii) Any proposed arrangement of a type that, if entered into, would be a Contract described in any of (i) through (xxi) above.

(b) Seller has delivered to Purchaser accurate, correct and complete copies of all Material Contracts (or written summaries of the material terms thereof, if not in writing), including all amendments, supplements, modifications and waivers thereof. All nonmaterial contracts of Seller do not, in the aggregate, represent a material portion of the Liabilities of Seller.

(c) Each Material Contract is currently valid and in full force and effect, and is enforceable by Seller in accordance with its terms.

(d) Seller is not in default, and no party has notified Seller that it is in default, under any Contract. No event has occurred, and no circumstance or condition exists, that might (with or without notice or lapse of time) (a) result in a violation or breach of any of the provisions of any Material Contract; (b) give any Person the right to declare a default or exercise any remedy under any Material Contract; (c) give any Person the right to accelerate the maturity or performance of any Material Contract or to cancel, terminate or modify any Material Contract; or (d) otherwise have a Material Adverse Effect on Seller in connection with any Material Contract; and

(e) Seller has not waived any of its rights under any Material Contract.

(f) Each Person against which Seller has or may acquire any rights under any Material Contract is (i) Solvent and (ii) able to satisfy such Person’s material obligations and liabilities to Seller.

(g) The performance of the Transferred Contracts will not result in any violation of or failure by Seller to comply with any Legal Requirement.

(h) The Material Contracts constitute all of the Contracts necessary to enable Seller to conduct the WOW Business in the manner in which such WOW Business is currently being conducted and in the manner in which such WOW Business is proposed to be conducted.

4.10 Insurance . The Schedule 4.10 sets forth an accurate and complete list of all insurance policies, self-insurance arrangements and fidelity bonds, currently in effect, that insure the WOW Business and/or the Purchased Assets (collectively, the “Insurance Policies”). Seller has delivered to Purchaser true, correct and complete copies of all Insurance Policies. Each Insurance Policy is valid, binding, and in full force and effect. Seller is not in breach of any Insurance Policy, and no event has occurred which, with notice or the lapse of time, would constitute such a breach, or permit termination, modification, or acceleration, of any Insurance Policy. Seller has not received any notice of cancellation or non-renewal of any Insurance Policy. The consummation of the Transaction will not cause a breach, termination, modification, or acceleration of any Insurance Policy. There is no claim under any Insurance Policy that has been improperly filed or as to which any insurer has questioned, disputed or denied liability. Seller has not received any notice of, nor does Seller have any Knowledge of any facts that might result in, a material increase in the premium for any Insurance Policy. All sales of products by the WOW Business prior to the closing date are covered under the Insurance Policies.

4.11 Title; Sufficiency; Condition of Assets .

(a) Seller has good and marketable title to, is the exclusive legal and equitable owner of, and has the unrestricted power and right to sell, assign and deliver the Purchased Assets. The Purchased Assets are free and clear of all Encumbrances of any kind or nature, except (a) restrictions imposed in any Governmental Approval and (b) Encumbrances disclosed on Schedule 4.11 which are being removed and released concurrently with the Closing on the date thereof. Upon Closing, Purchaser will acquire exclusive, good and marketable title or license to (as the case may be) the Purchased Assets and no restrictions will exist on Purchaser’s right to resell, license or sublicense any of the Purchased Assets or engage in the WOW Business.

(b) Except for such inventory as may be necessary to operate the WOW Business, the Purchased Assets include all the assets necessary to permit Purchaser to conduct the WOW Business after the Closing in a manner substantially equivalent to the manner as it is being conducted on the date of this Agreement in compliance with all Legal Requirements.

(c) All Purchased Assets are (i) in good operating condition and repair, ordinary wear and tear excepted; (ii) suitable and adequate for continued use in the manner in which they are presently being used; (iii) adequate to meet all present and reasonably anticipated future requirements of the WOW Business; and (iv) free of defects (latent and patent).

4.12 Reserved .

4.13 Intellectual Property .

(a)  Schedule 1.1(b) lists all WOW Intellectual Property, specifying in each case whether such WOW Intellectual Property is owned or controlled by or for, licensed to, or otherwise held by or for the benefit of Seller, including all Registered Intellectual Property Rights owned by, filed in the name of or applied for by Seller and used in the WOW Business (the “ WOW Registered Intellectual Property Rights ”).

(b) Each item of WOW Intellectual Property (i) is valid, subsisting and in full force and effect, (ii) has not been abandoned or passed into the public domain and (iii) is free and clear of any Encumbrances.

(c) The WOW Intellectual Property constitutes all the Intellectual Property Rights used in and/or necessary to the conduct of the WOW Business as it is currently conducted, and as it is currently planned or contemplated to be conducted by Seller prior to the Closing and by Purchaser following the Closing, including the design, development, manufacture, use, import and sale of the Seller Products (including those currently under development).

(d) Each item of WOW Intellectual Property either (i) is exclusively owned by Seller and was written and created solely by employees of Seller acting within the scope of their employment or by third parties, all of which employees and third parties have validly and irrevocably assigned all of their rights, including Intellectual Property Rights therein, to Seller, and no third party owns or has any rights to any such WOW Intellectual Property, or (ii) is duly and validly licensed to Seller for use in the manner currently used by Seller in the conduct of the WOW Business and, as it is currently planned or contemplated to be used by Seller in the conduct of the WOW Business prior to the Closing and by Purchaser following the Closing.

(e) In each case in which Seller has acquired any Intellectual Property Rights from any Person, Seller has obtained a valid and enforceable assignment sufficient to irrevocably transfer all rights in such Intellectual Property Rights (including the right to seek past and future damages with respect thereto) to Seller. No Person who has licensed Intellectual Property Rights to Seller has ownership rights or license rights to improvements made by Seller in such Intellectual Property Rights. Seller has not transferred ownership of, or granted any exclusive license of or right to use, or authorized the retention of any exclusive rights to use or joint ownership of, any Intellectual Property Rights that is or was WOW Intellectual Property to any Person.

(f) There are no facts, circumstances or information that (i) would render any WOW Intellectual Property invalid or unenforceable, (ii) would adversely affect any pending application for any WOW Registered Intellectual Property Right, or (iii) would adversely affect or impede the ability of Seller to use any WOW Intellectual Property in the conduct of the WOW Business as it is currently conducted or as it is currently planned or contemplated to be conducted by Seller prior to Closing or by Purchaser following the Closing. Seller has not misrepresented, or failed to disclose, and has no Knowledge of any misrepresentation or failure to disclose, any fact or circumstances in any application for any WOW Registered Intellectual Property Right that would constitute fraud or a misrepresentation with respect to such application or that would otherwise affect the validity or enforceability of any WOW Registered Intellectual Property Right.

(g) All necessary registration, maintenance and renewal fees in connection with each item of WOW Registered Intellectual Property Rights have been paid and all necessary documents and certificates in connection with such WOW Registered Intellectual Property Rights have been filed with the relevant patent, copyright, trademark, domain name registries or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such WOW Registered Intellectual Property Rights. There are no actions that must be taken by Seller within one hundred twenty (120) days following the Closing Date, including the payment of any registration, maintenance or renewal fees or the filing of any responses to office actions, documents, applications or certificates for the purposes of obtaining, maintaining, perfecting, preserving or renewing any WOW Registered Intellectual Property Rights. To the maximum extent provided for by, and in accordance with, applicable laws and regulations or registration requirements, Seller has recorded in a timely manner each such assignment of a WOW Registered Intellectual Property Right assigned to Seller with the relevant governmental authority and domain name registries, including without limitation the United States Patent and Trademark Office (the “ PTO ”), the U.S. Copyright Office or their respective counterparts in any relevant foreign jurisdiction, as the case may be.

(h) Seller has taken all necessary action to maintain and protect (i) the WOW Intellectual Property, and (ii) the secrecy, confidentiality, value and Seller’s rights in the Confidential Information and Trade Secrets of Seller and those provided by any Person to Seller, including by having and enforcing a policy requiring all current and former employees, consultants and contractors of Seller to execute appropriate confidentiality and assignment agreements. All copies thereof shall be delivered to Purchaser at Closing. Seller has no Knowledge of any violation or unauthorized disclosure of any Trade Secret or Confidential Information related to the WOW Business, the Purchased Assets, or obligations of confidentiality with respect to such. Only the individuals named in the Seller Disclosure Schedule, which describes their relationship with Seller, have had access to such Trade Secrets and Confidential Information, and each such individual has signed a confidentiality agreement with respect thereto.

(i) The operation of the WOW Business as it is currently conducted, or as it is currently planned or contemplated to be conducted by Seller prior to the Closing, including but not limited to the design, development, use, import, branding, advertising, promotion, marketing, manufacture and sale of the Seller Products (including any currently under development), does not and will not, and will not when operated by Purchaser substantially in the same manner following the Closing, infringe or misappropriate any Intellectual Property Rights of any Person, violate any right of any Person (including any right to privacy or publicity), defame or libel any Person or constitute unfair competition or trade practices under the laws of any jurisdiction, and Seller has not received notice from any Person claiming that such operation or any Seller Product (including any currently under development) infringes or misappropriates any Intellectual Property Rights of any Person (including any right of privacy or publicity), or defames or libels any Person or constitutes unfair competition or trade practices under the laws of any jurisdiction (nor does Seller have Knowledge of any basis therefor).

(j) To Seller’s Knowledge, no Person is violating, infringing or misappropriating any WOW Intellectual Property Right.

(k) There are no Proceedings before any Governmental Authority (including before the PTO) anywhere in the world related to any of the WOW Intellectual Property, including any WOW Registered Intellectual Property Rights.

(l) No WOW Intellectual Property or Seller Product is subject to any Proceeding or any outstanding decree, order, judgment, office action or settlement agreement or stipulation that restricts in any manner the use, transfer or licensing thereof by Seller or that may affect the validity, use or enforceability of such WOW Intellectual Property or Seller Product.

(m)  Schedule 1.1(c) lists all Transferred Contracts affecting any WOW Intellectual Property Rights. Seller is not in breach of, nor has Seller failed to perform under, any such Transferred Contracts and, to Seller’s Knowledge, no other party to any such Transferred Contracts, is in breach thereof or has failed to perform thereunder.

(n) To the extent not listed on Schedule 1.1(c) , the Seller Disclosure Schedule lists all Transferred Contracts under which Seller has agreed to, or assumed, any obligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur any obligation or liability, or provide a right of rescission, with respect to the infringement or misappropriation by Seller or such other person of the WOW Intellectual Property Rights of any Person other than Seller.

(o) There is no Material Contract affecting any WOW Intellectual Property under which there is any dispute regarding the scope of such Material Contract, or performance under such Material Contract, including with respect to any payments to be made or received by Seller thereunder.

(p) All WOW Intellectual Property will be fully transferable, alienable or licensable by Purchaser without restriction and without payment of any kind to any third party. The consummation of the Transaction as contemplated hereby will not result in any loss of, or the diminishment in value of, any WOW Intellectual Property or the right to use any WOW Intellectual Property.

(q) Neither this Agreement nor the Transaction, including the assi