ASSET PURCHASE AGREEMENT by and between USM ACQUISITION, LLC and IBF FUND LIQUIDATING LLC

Exhibit 99.1

 

 

 

EXHIBIT A

 

 

 

 

 

 

ASSET PURCHASE AGREEMENT

by and between

USM ACQUISITION, LLC

and

IBF FUND LIQUIDATING LLC

 

 

 

TABLE OF CONTENTS
				Page
SECTION 1.		DEFINED TERMS		1
SECTION 2.		PURCHASE AND SALE OF ASSETS		7
2.1		Purchased Assets		7
2.2		Assets Excluded from Purchase		7
2.3		Assumption of Liabilities		8
2.4		No Implied Warranties		8
2.5		Purchase Price		8
2.6		Adjustments to Purchase Price		10
SECTION 3.		REPRESENTATIONS AND WARRANTIES REGARDING
		SELLER AND THE COMPANY		11
3.1		Status and Authority		11
3.2		No Conflicts, etc		12
3.3		Corporate Status of the Company		13
3.4		Sufficiency of Assets; Title		13
3.5		Books and Records		13
3.6		Financial Statements		13
3.7		Absence of Undisclosed Liabilities		14
3.8		Properties, etc		14
3.9		Employees		15
3.10		Employee Benefit Plans		15
3.11		Independent Contractors		16
3.12		Contracts		16
3.13		Insurance		17
3.14		Litigation; Compliance with Laws		17
3.15		Condition of Tangible Personal Property		18
3.16		Intellectual Property		18
3.17		Taxes		19
3.18		Environmental Matters		20
3.19		Accounts Receivable and Inventory		20
3.20		Product Warranty and Liability		21

TABLE OF CONTENTS
(continued)
				Page
3.21		Permits		22
3.22		Customers and Suppliers		22
3.23		Absence of Changes		22
3.24		Brokers		23
3.25		Disclosure		23
SECTION 4.		REPRESENTATIONS AND WARRANTIES OF BUYER		23
4.1		Status and Authority		23
4.2		No Conflicts, etc		24
4.3		Brokers		24
4.4		Equity Commitment		24
SECTION 5.		PRE-CLOSING OBLIGATIONS OF SELLER		25
5.1		Conduct Pending Closing		25
5.2		Negative Covenants		26
5.3		Access to Information; Confidentiality		27
5.4		Permits and Consents		27
5.5		Sanders Release		27
5.6		Exclusivity		28
5.7		Commercially Reasonable Efforts		28
5.8		Assumed Contracts		28
5.9		Preservation of Records		28
5.10		Notice of Events		28
5.11		Escrow Agreement		29
5.12		Employment Agreements		29
5.13		Assignment and Assumption Agreement		30
5.14		Name Change		30
5.15		Employees		30
SECTION 6.		CERTAIN CONDITIONS PRECEDENT TO BUYER’S
		OBLIGATIONS		31
6.1		Representations and Warranties		31
6.2		Performance of Covenants		31

ii

TABLE OF CONTENTS
(continued)
				Page
6.3		Approvals		31
6.4		Legal Matters		31
6.5		Financial Condition		31
6.6		Employment Agreements		32
6.7		Encumbrances		32
6.8		Court Approval		32
6.9		Opinion of Counsel		32
6.10		Financing		32
6.11		Execution of Transaction Documents		32
6.12		Good Standing		32
SECTION 7.		CERTAIN CONDITIONS PRECEDENT TO SELLER’S
		OBLIGATIONS		33
7.1		Representations and Warranties		33
7.2		Performance of Covenants		33
7.3		Legal Matters		33
7.4		Execution of Transaction Documents		33
7.5		Court Approval		33
7.6		Certificate		33
7.7		Good Standing		34
SECTION 8.		CLOSING		34
8.1		Time and Place of Closing		34
8.2		Deliveries at the Closing		34
SECTION 9.		POST CLOSING COVENANTS		35
9.1		Confidentiality		35
SECTION 10.		TERMINATION AND ABANDONMENT		35
10.1		Termination		36
10.2		Procedure for Termination		36
SECTION 11.		INDEMNIFICATION		37
11.1		Indemnification by Seller		37
11.2		Indemnification by Buyer		37

iii

TABLE OF CONTENTS
(continued)
				Page
11.3		Exclusive Remedy		38
11.4		Claims Procedures		38
11.5		Limitations on Indemnification		40
SECTION 12.		MISCELLANEOUS		42
12.1		Survival of Representations and Warranties		42
12.2		Further Assurances		42
12.3		Costs and Expenses		42
12.4		Public Announcements		43
12.5		Notices		43
12.6		Assignment; No Third Party Beneficiaries		44
12.7		Amendments and Waivers		44
12.8		Governing Law; Consent to Jurisdiction		44
12.9		Waiver of Jury Trial		45
12.10		Section Headings and Defined Terms		45
12.11		Severability		45
12.12		Counterparts		45
12.13		Entire Agreement		45

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ASSET PURCHASE AGREEMENT

      THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”) is entered into as of December 21, 2006, by and between USM ACQUISITION, LLC, a Delaware limited liability company (“ Buyer ”), and IBF FUND LIQUIDATING LLC, a Delaware limited liability company (“ Seller ”), as secured party under the Uniform Commercial Code as codified in the State of New York (the “ UCC ”).

BACKGROUND

      Pursuant to the documents identified on Schedule I hereto and certain other documents, instruments and agreements executed pursuant thereto or in connection therewith (collectively, the “ Loan Documents ”), Seller has made loans to, and made other financial accommodations to or for the benefit of, U.S. Mills, Inc., a Delaware corporation (the “ Company ”), and other parties identified therein (all such loans and other financial accommodations being herein referred to collectively as the “ Loans ”). The Loans and all other obligations of the Company to the Seller, howsoever created, arising or evidenced (collectively, the “ Obligations ”), are secured by, among other things, substantially all of the Company’s assets.

      Seller represents that, as a result of continuing defaults by the Company in the repayment and performance of the Obligations and other liabilities under the Loan Documents, Seller has the right under Section 9-610 of the UCC to sell, lease, license or otherwise dispose of any or all of the collateral securing the Obligations.

      Seller has asked the Company, and the Company has agreed, to surrender possession of such collateral for the purpose of effecting a private sale thereof, and Buyer desires to purchase certain of the assets constituting such collateral, including tangible and intangible assets, used in, or directly related to, the Company’s natural, organic and specialty ready-to-eat cereals, hot cereals, cookies and crackers business (the “ Business ”), on the terms and subject to the conditions set forth herein.

      NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements herein contained, the parties hereto, intending to be legally bound, agree as follows:

SECTION 1.

DEFINED TERMS

The following terms used in this Agreement shall have the meanings ascribed to them below.

      “ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such first Person. As used in this definition, “control” and its correlative uses “controlled” and “controlling” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or voting interests, by contract or otherwise.

     “ Agreement ” has the meaning set forth in the introductory paragraph hereto.

     “ Arbitrator ” has the meaning set forth in Section 2.6(a).

      “ Assumed Contracts ” means all distribution agreements, manufacturing agreements and other Contracts of the Company relating to the Business, except for those specifically identified as Excluded Assets pursuant to Section 2.2 hereof.

     “ Assumed Liabilities ” has the meaning set forth in Section 2.3.

     “ Assumption Agreement ” has the meaning set forth in Section 5.13.

     “ Business ” has the meaning set forth in the recitals hereto.

      “ Business Day ” means any day other than Saturday or Sunday or any other day on which banks in New York, New York are permitted or required to be closed.

     “ Buyer ” has the meaning set forth in the introductory paragraph hereto.

     “ Buyer Indemnified Parties ” has the meaning set forth in Section 11.1.

     “ Buyer Transaction Documents ” has the meaning set forth in Section 4.1.

     “ Buyer’s Adjustment Certificate ” has the meaning set forth in Section 2.6(a).

      “ Claim ” means any action, arbitration, audit, hearing, investigation, cause of action, litigation or suit (whether civil, criminal, administrative, regulatory, judicial or investigative, whether formal or informal, whether public or private).

      “ Closing ” means the consummation of the transactions contemplated by this Agreement.

      “ Closing Date ” means the date on which the Closing occurs, which shall be the third Business Day following the satisfaction or waiver of the conditions set forth in Section 6 and Section 7 of this Agreement or such other date as Buyer and Seller may agree.

      “ Closing Date Working Capital ” has the meaning set forth in Section 2.5(b)(ii).

      “ Code ” means the Internal Revenue Code of 1986, as amended, and any rules or regulations promulgated thereunder.

      “ Commercial IP ” has the meaning set forth in Section 3.16.

      “ Company ” has the meaning set forth in the recitals hereto.

      “ Company Debt ” means the aggregate indebtedness of the Company for borrowed money pursuant to all notes, credit facilities, loan agreements or arrangements of any kind including, without limitation, the Loan Documents.

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      “ Company’s Financial Statements ” means the unaudited financial statements of the Company as of December 31, 2005 and for the year then ended, including a balance sheet and an income statement, and the Company’s Interim Financial Statements.

      “ Company’s Interim Financial Statements ” means the unaudited financial statements of the Company as of September 30, 2006 and for the nine months then ended, including a balance sheet and an income statement.

      “ Confidentiality Agreement ” has the meaning set forth in Section 5.3(b).

      “ Consent ” means any consent or approval of, exemption or declaration by, or registration, notification or filing with, any Governmental Authority, creditor, lessor or other Person.

     “ Contest Notice ” has the meaning set forth in Section 11.4(c).

      “ Contract ” means any contract, agreement, Lease, obligation, promise, plan, commitment or other undertaking (whether written or oral and whether express or implied) to which the Company is a party or otherwise bound.

      “ Court Approval ” means the entry of an order, in form and substance satisfactory to Buyer in its sole discretion, of the United States Bankruptcy Court for the Southern District of New York approving the execution and delivery of this Agreement and the transactions contemplated hereby.

     “ Current Assets ” has the meaning set forth in Section 2.5(b)(iii).

     “ Current Liabilities ” has the meaning set forth in Section 2.5(b)(iv).

     “ Downward Adjustment Amount ” has the meaning set forth in Section 2.6(b).

     “ Employment Agreements ” has the meaning set forth in Section 6.6.

      “ Encumbrance ” means any charge, claim, interest, equitable interest, lien, option, pledge, security interest, mortgage, right of first option, right of first refusal, obligation or other restriction or encumbrance of any kind on title or transfer of any nature whatsoever.

      “ Environmental Laws ” means all Laws concerning or relating to protection of human health, occupational safety or the environment.

     “ Equity Commitment ” has the meaning set forth in Section 4.4.

      “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and any rules or regulations promulgated thereunder.

     “ Escrow Agent ” has the meaning set forth in Section 2.5(d)(i).

     “ Escrow Agreement ” has the meaning set forth in Section 2.5(d)(i).

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     “ Escrow Amount ” means $1,000,000.

     “ Excluded Assets ” has the meaning set forth in Section 2.2.

     “ Excluded Liabilities ” has the meaning set forth in Section 2.3.

     “ Facilities ” has the meaning set forth in Section 3.18.

     “ Final Working Capital ” has the meaning set forth in Section 2.6(b).

      “ GAAP ” means generally accepted accounting principles in the United States, consistently applied.

      “ Governmental Authority ” shall mean (a) the United States of America, (b) any state, commonwealth, territory or possession of the United States of America and any political subdivision thereof (including counties, municipalities, provinces and parishes), (c) any foreign (as to the United States of America) sovereign entity and any political subdivision thereof, and (d) any court, quasi-governmental authority, tribunal, department, commission, board, bureau, agency, authority or instrumentality of any of the foregoing.

      “ Hazardous Substance ” means any substance regulated or governed under any Environmental Law, including, without limitation, any substance which is: (a) petroleum, asbestos or asbestos-containing material, or polychlorinated biphenyls; (b) defined, designated or listed as a “Hazardous Substance” pursuant to Sections 307 and 311 of the Clean Water Act, 33 U.S.C. §§1317, 1321, or Section 101(14) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980; (c) listed in the United States Department of Transportation Hazardous Material Tables, 49 C.F.R. §172.101; or (d) defined, designated or listed as a “Hazardous Waste” under Section 1004(5) of the Resource and Conservation and Recovery Act, 42 U.S.C. 6903(5).

     “ Historical Facilities ” has the meaning set forth in Section 3.18.

      “Indemnified Party ” has the meaning set forth in Section 11.4(a).

      “Indemnifying Party ” has the meaning set forth in Section 11.4(a).

      “Indemnity Notice ” has the meaning set forth in Section 11.4(a).

     “ Independent Contractors ” has the meaning set forth in Section 3.11.

     “ Initial Adjustment Certificate ” has the meaning set forth in Section 2.5(c).

     “ Insurance Agreements ” means policies and binders of insurance.

      “ Intellectual Property ” means all intellectual property in which the Company has any right, title or interest (including a licensed right) and which is or has been used, exploited or commercialized by the Company in the conduct of the Business, including but not limited to the Company’s name, all fictitious business names and trade names, all registered and pending

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trademarks and service marks, and all trademark and service mark applications, all designs and logos indicating source and slogans and all goodwill related to the foregoing, all issued patents and reissues, divisions, continuations and extensions of such patents, patents pending and applications for patents, patent disclosures docketed, and inventions and discoveries whether patentable or unpatentable, all copyrights in both published and unpublished works of authorship whether or not registered, Internet addresses, content and domain names, and all know-how, trade secrets, confidential information, customer and supplier lists, software, technical information, data, proprietary formulae and business and marketing plans.

      “ knowledge ” (including any derivation thereof) means (a) with respect to Seller, (i) the actual knowledge of any particular fact or matter by Arthur Steinberg, the Seller’s sole manager, or (ii) the actual knowledge of any particular fact or matter by the Company’s President, Charles T. Verde, or by Cynthia Davis or Steven Geddes, in each case after reasonable inquiry, and (b) with respect to Buyer, the actual knowledge of any particular fact or matter by Scott Feldman, Daniel Werther or Nicholas Maxwell.

      “ Law ” means any law (including, without limitation, principles of common law), statute, code, regulation, treaty, permit, license, certificate, judgment, order, writ, decree, award or other decision or requirement of any arbitrator or Governmental Authority.

      “ Lease ” means any lease or rental agreement, license, right to use or installment and conditional sales agreement.

     “ Loan Documents ” has the meaning set forth in the recitals hereto.

     “ Loans ” has the meaning set forth in the recitals hereto.

     “ Loss ” has the meaning set forth in Section 11.1.

      “ Material Adverse Change ” or “ Material Adverse Effect ” mean any fact, event, change, circumstance or effect that is or is reasonably likely to be, individually or in the aggregate, materially adverse to the business, financial condition, properties, assets or results of operations of the Company, other than facts, events, changes, circumstances or effects: (a) resulting from general economic conditions; (b) resulting from the transactions contemplated by this Agreement or the announcement to third-parties and the public of the transactions contemplated by this Agreement; (c) resulting from changes in Laws after the date hereof; or (d) resulting from an outbreak or escalation of hostilities involving any country where the Company does business, the declaration by any country where the Company does business of a national emergency or war, or the occurrence of any acts of terrorism and any actions or reactions thereto.

     “ Objection Notice ” has the meaning set forth in Section 2.6(a).

     “ Obligations ” has the meaning set forth in the recitals hereto.

      “ Permits ” means any Consent, license, registration, permit, franchise or authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Authority or pursuant to any Law.

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      “ Permitted Encumbrances ” means (i) mechanics’, carriers’, workmen’s, repairmen’s or similar Encumbrances arising or incurred in the ordinary course of the Business consistent with past practice and securing amounts that are not past due; (ii) Encumbrances for Taxes, assessments and any other governmental charges which are not due and payable or which are being contested in good faith by appropriate proceedings and as to which adequate reserves (determined in accordance with GAAP) have been provided in the balance sheet included in the Company’s Interim Financial Statements; (iii) any other Encumbrances that will be terminated at or prior to Closing in accordance with this Agreement; and (iv) Encumbrances relating to the operating leases of equipment set forth in Section 3.8(a) of the Seller’s Disclosure Schedule.

      “ Person ” means any individual, corporation, partnership, limited liability company, business trust, limited liability partnership, joint stock company, trust, unincorporated association or joint venture.

     “ Plans ” has the meaning set forth in Section 3.10.

     “ Purchase Price ” has the meaning set forth in Section 2.5(a).

     “ Purchased Assets ” has the meaning set forth in Section 2.1.

      “ Related Party ” means Seller or any present or former director, officer or stockholder of the Company or any member of the immediate family of any such Person or any Affiliate of such Person.

     “ Required Approvals ” has the meaning set forth in Section 6.3.

     “ Searches ” has the meaning set forth in Section 5.1(a)(vii).

     “ Seller ” has the meaning set forth in the introductory paragraph hereto.

     “ Seller Indemnified Parties ” has the meaning set forth in Section 11.2.

     “ Seller Transaction Documents ” has the meaning set forth in Section 3.1(a).

     “ Seller’s Disclosure Schedule ” has the meaning set forth in Section 3.

      “ Selling Expenses ” means all costs, fees and expenses incurred by the Company, or by the Company on behalf of Seller, in each case in connection with the consummation of the transactions contemplated hereby (whether incurred prior to or after the date hereof) that are set forth in the schedule provided to Buyer pursuant to Section 2.5(d)(iii) hereof, including, without limitation, any brokerage fees, commissions, finders’ fees or financial advisory fees and the fees and expenses of Kaye Scholer LLP set forth on such schedule.

     “ Target Working Capital ” has the meaning set forth in Section 2.5(b)(i).

      “ Taxes ” means any and all taxes, including, without limitation, federal, state, local and foreign income, profits, franchise, sales, use, payroll, premium, occupancy, property, severance,

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excise, withholding, customs, unemployment, transfer and other taxes, including interest, additions to tax and penalties.

     “ Transaction Documents ” has the meaning set forth in Section 5.1(a)(vi).

     “ Transfer Statement ” has the meaning set forth in Section 8.2(a)(iii).

     “ Transferred Employees ” has the meaning set forth in Section 5.15.

     “ UCC ” has the meaning set forth in the introductory paragraph hereto.

     “ Upward Adjustment Amount ” has the meaning set forth in Section 2.6(c).

     “ Working Capital Estimate ” has the meaning set forth in Section 2.5(c).

     “ Working Capital Overage ” has the meaning set forth in Section 2.5(b)(v).

     “ Working Capital Underage ” has the meaning set forth in Section 2.5(b)(vi).

SECTION 2.

PURCHASE AND SALE OF ASSETS

      2.1 Purchased Assets .Subject to the terms and conditions hereof, and on the basis of and in reliance upon the covenants, agreements, representations and warranties set forth herein, at the Closing, Seller, in its capacity as a secured party under Section 9-610 of the UCC, shall, or shall cause the Company to, sell, transfer, assign, convey and set over to Buyer, free and clear of all Encumbrances other than Permitted Encumbrances, and Buyer shall purchase, acquire and accept, all of the assets of the Company described on Schedule 2.1(a) attached hereto, but excluding the Excluded Assets (the “ Purchased Assets ”).

           (b) All tangible Purchased Assets are, and at the Closing shall be, located at the addresses set forth on Schedule 2.1(b) attached hereto.

      2.2 Assets Excluded from Purchase . The only assets of the Company that shall not be transferred and sold to Buyer pursuant to Section 2.1 above (the “ Excluded Assets ”) shall be the following:all of the Company’s minute books, stock transfer books, seals and tax returns;

          (b) the shares of capital stock of the Company held in treasury;

           (c) all records that the Company is required by Law to retain in its possession; provided, that copies of such records will be provided to Buyer upon request;

           (d) all rights of the Company under this Agreement and the other documents and agreements executed in connection herewith; and

          (e) any other assets identified on Schedule 2.2(e) attached hereto.

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      2.3 Assumption of Liabilities . Subject to the terms and conditions of this Agreement, at the Closing, Buyer shall assume and thereafter pay, perform and discharge, or cause to be paid and discharged, when due, only (a) the accounts payable and accrued expenses of the Business reflected on the Company’s Interim Financial Statements which are unpaid as of the Closing Date and are included in the calculation of Final Working Capital, (b) any accounts payable and accrued expenses of the Business incurred in the ordinary course of business, consistent with past practice, between the date of the Company’s Interim Financial Statements and the Closing Date which are unpaid as of the Closing Date and are included in the calculation of Final Working Capital, (c) the liabilities and obligations of the Company pursuant to the Assumed Contracts, but only to the extent not arising from and not attributable to any breach, default or failure of performance thereunder by the Company or Seller occurring on or prior to the Closing, (d) any liability to the Company’s customers incurred by the Company in the ordinary course of business for nondelinquent orders or performance of services outstanding on the Closing Date (except to the extent the liability arises out of or relates to a breach by the Company that occurred prior to the Closing Date) reflected in the Company’s records and (e) the other liabilities identified on Schedule 2.3(a) attached hereto (collectively, the “ Assumed Liabilities ”). Except for the Assumed Liabilities, the Company shall remain responsible for, and Buyer shall not directly or indirectly, assume, or in any way become liable or responsible for, any liability, obligation, debt or contingency of the Company, Seller, any Affiliate of the Company or Seller, or the Business of any type or nature, whether liquidated or unliquidated, known or unknown, actual or inchoate, accrued, contingent or otherwise, and whether arising from facts existing or events occurring prior to, on or after the date of this Agreement or the Closing, including, without limitation, those items identified on Schedule 2.3(b) attached hereto (collectively, the “ Excluded Liabilities ”).

      2.4 No Implied Warranties . THE BUYER ACKNOWLEDGES AND AGREES THAT (A) THE SELLER MAKES NO REPRESENTATIONS OR WARRANTIES THAT ALL OR A PORTION OF THE PURCHASED ASSETS ARE MERCHANTABLE (IN THE SENSE OF AN IMPLIED WARRANTY OF MERCHANTABILITY UNDER THE UCC) OR FIT FOR A PARTICULAR PURPOSE, IN EACH CASE, EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT; AND (B) THE SOLE REPRESENTATIONS AND WARRANTIES OF THE SELLER REGARDING THE PURCHASED ASSETS ARE THOSE SPECIFICALLY PROVIDED IN THIS AGREEMENT.

2.5 Purchase Price .

          (a) In consideration of the sale, transfer and delivery of the Purchased Assets to the Buyer and the other obligations and covenants of Seller made herein, at the Closing, Buyer shall (x) pay to Seller an aggregate amount in cash equal to $9,000,000, plus the Working Capital Overage or minus the Working Capital Underage, as applicable, and (y) assume the Assumed Liabilities ((x) and (y) being collectively referred to as the “ Purchase Price ”).

(b) For purposes of this Agreement:
		(i) “ Target Working Capital ” shall mean $0.

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                (ii) “ Closing Date Working Capital ” shall mean the Current Assets of the Company as of the Closing Date minus the Current Liabilities of the Company as of the Closing Date (without giving effect to the consummation of the transactions contemplated by this Agreement).

                (iii) “ Current Assets ” shall mean the book value of those items identified as “Current Assets” on Schedule 2.5(b)(iii) attached hereto to the extent they are included in the Purchased Assets, calculated in accordance with GAAP.

                (iv) “ Current Liabilities ” shall mean the book value of those items identified as “Current Liabilities” on Schedule 2.5(b)(iv) attached hereto to the extent they are included in the Assumed Liabilities, calculated in accordance with GAAP.

                (v) A “ Working Capital Overage ” shall exist when (and shall be equal to the amount by which) the Working Capital Estimate exceeds the Target Working Capital.

                (vi) A “ Working Capital Underage ” shall exist when (and shall be equal to the amount by which) the Working Capital Estimate is less than the Target Working Capital.

      (c) The amount of the adjustment to the Purchase Price pursuant to this Section 2.5 shall, for the purposes of the payment to be made by Buyer at the Closing, be estimated in good faith by Seller after consultation with Buyer. At least three days prior to the Closing Date, Seller shall deliver to Buyer a certificate executed by a duly authorized member of Seller (the “ Initial Adjustment Certificate ”) setting out Seller’s good faith estimate (the “ Working Capital Estimate ”) of Closing Date Working Capital and indicating in detail the basis for the estimate, including an estimate of the Current Assets and Current Liabilities as of the Closing Date and any resulting Working Capital Overage or Working Capital Underage. Such certificate shall be accompanied by appropriate documentation supporting the estimates contained therein. The good faith estimate of any Working Capital Overage or Working Capital Underage, as applicable, in the Initial Adjustment Certificate shall be conclusive for the purposes of the payment to be made by Buyer at the Closing, but shall be subject to adjustment after the Closing in accordance with the provisions of Section 2.6.

     (d) The cash portion of the Purchase Price will be paid by Buyer at Closing as follows

               (i) The Escrow Amount shall be delivered by wire transfer of immediately available funds into an interest bearing escrow account with Boston Private Bank & Trust Company, or a mutually acceptable independent escrow agent (the “ Escrow Agent ”) to be held, pursuant to an escrow agreement substantially in the form of Exhibit A hereto (the “ Escrow Agreement ”), as security for any right to indemnification Buyer may have hereunder in accordance with and subject to the terms of the Escrow Agreement;

                (ii) Buyer will pay to Seller all amounts owing under the Obligations by wire transfer of immediately available funds pursuant to instructions given by Seller to Buyer at least two Business Days prior to Closing for that purpose; provided, however , that Buyer’s

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obligation to make such payments shall be reduced or eliminated to the extent that they, together with the payment contemplated by Section 2.5(d)(i), would exceed the Purchase Price;

                (iii) Buyer will pay to the Persons entitled thereto all of the Selling Expenses in accordance with a schedule provided to Buyer by Seller on or prior to the Closing Date; provided, however , that Buyer’s obligation to make such payments shall be reduced or eliminated to the extent that they, together with the payments contemplated by Sections 2.5(d)(i) and 2.5(d)(ii), would exceed the Purchase Price;

                (iv) Buyer shall pay the balance of the Purchase Price, if any, to Seller by wire transfer of immediately available funds pursuant to instructions given by Seller to Buyer at least two Business Days prior to Closing for that purpose.

     2.6   Adjustments to Purchase Price .

         (a) Within 90 days after the Closing, Buyer will deliver to Seller a certificate the “ Buyer’s Adjustment Certificate ”), showing Buyer’s final determination of the Closing Date Working Capital, Current Assets and Current Liabilities, which certificate will be accompanied by appropriate documentation supporting the amounts and numbers proposed in such certificate. Each party will provide the other reasonable access to all records in its possession that were used in the preparation of the Initial Adjustment Certificate and Buyer’s Adjustment Certificate or that may otherwise be necessary for the preparation thereof. Seller will review the Buyer’s Adjustment Certificate and will give written notice (an “ Objection Notice ”) to Buyer of any objections Seller has to the calculations shown in the Buyer’s Adjustment Certificate within 30 days after receipt. Such notice will set forth Seller’s proposal as to each item to which Seller objects together with appropriate support for such objections. If Seller does not deliver an Objection Notice within such 30 day period, then the Buyer’s Adjustment Certificate, and the amount of the Closing Date Working Capital set forth therein, shall be deemed to be conclusive, final and binding on the parties. Buyer and Seller will endeavor in good faith to resolve any objections within 30 days after the receipt by Buyer of Seller’s timely Objection Notice. If such objections or disputes have not been resolved at the end of such 30 day period, the disputed portion only of the items contained in the Buyer’s Adjustment Certificate will be determined within the following 90 days by a national independent accounting firm that is mutually acceptable to Buyer and Seller (the “ Arbitrator ”), which shall be the exclusive means for resolution of such dispute. The determination of the Arbitrator will, with respect to each item in dispute, be limited to the range for such item as proposed by Buyer in the Buyer’s Adjustment Certificate and Seller in the Objection Notice. The fees and expenses of the Arbitrator incurred in connection with such determination shall be equitably apportioned by such Arbitrator between Buyer and Seller based upon the extent to which Buyer and Seller are determined by such Arbitrator to be the prevailing party. All determinations made by the Arbitrator shall be deemed to be conclusive, final and binding on the parties.

           (b) If Closing Date Working Capital (as finally determined pursuant to Section 2.6(a), “ Final Working Capital ”) is less than the Working Capital Estimate, then the Purchase Price will be adjusted downward by the amount of such shortfall (the “ Downward Adjustment Amount ”), and Seller shall pay to the Buyer, by wire transfer of immediately

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available funds, to an account designated in writing by Buyer, an amount in cash equal to the Downward Adjustment Amount. The Downward Adjustment Amount shall be paid to Buyer within two Business Days from the date on which the Final Working Capital is determined pursuant to Section 2.6(a).

           (c) If Final Working Capital is greater than the Working Capital Estimate, then the Purchase Price will be adjusted upward by the amount of such excess (the “ Upward Adjustment Amount ”), and Buyer shall pay to Seller, by wire transfer of immediately available funds, to an account designated in writing by the Seller, an amount in cash equal to the Upward Adjustment Amount. The Upward Adjustment Amount shall be paid to Seller within two Business Days from the date on which the Final Working Capital is determined pursuant to Section 2.6(a).

           (d) If the Final Working Capital is equal to the Working Capital Estimate, there shall be no adjustment to the Purchase Price pursuant to this Section 2.6.

SECTION 3.

REPRESENTATIONS AND WARRANTIES
REGARDING SELLER AND THE COMPANY

      Except as set forth in the written disclosure schedule prepared by Seller and delivered to Buyer (the “ Seller’s Disclosure Schedule ”), Seller hereby represents and warrants to Buyer that all of the statements contained in this Section 3 are true and correct as of the date of this Agreement (or, if made as of a different specified date, as of such date). Each exception set forth in the Seller’s Disclosure Schedule and each other response to this Agreement set forth in the Seller’s Disclosure Schedule is identified by reference to, or has been grouped under a heading referring to, a specific individual section of this Agreement and shall be deemed to have been disclosed for all purposes of this Agreement in response to every other representation or warranty in this Agreement to which it is reasonably apparent such disclosure is applicable. The inclusion of any matter, information or item in the Seller’s Disclosure Schedule shall not be deemed to constitute an admission of any liability by the Seller to any third party or otherwise imply that any such matter, information or item is material or creates a measure for materiality for the purposes of this Agreement.

     3.1   Status and Authority .

          (a) Seller is a limited liability company organized and validly existing under the laws of the State of Delaware and has full legal right, power and authority to execute and deliver this Agreement and each of the other agreements, instruments and documents required to be delivered by it prior to or at the Closing (together with this Agreement, the “ Seller Transaction Documents ”), and to perform its obligations hereunder and thereunder, including, without limitation, causing the sale and delivery of the Purchased Assets to Buyer. Seller holds a valid and enforceable security interest in the Purchased Assets and is authorized by the UCC to convey the Purchased Assets to Buyer in its capacity as a secured party under Article 9 of the UCC. The conveyance contemplated herein fully complies with all requirements of Article 9 of the UCC. Seller’s execution, delivery and performance of this Agreement and the other Seller

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Transaction Documents have been duly authorized by its sole manager, which constitutes all necessary action on the part of Seller for such authorization, other than as set forth in the Seller’s Disclosure Schedule. This Agreement has been duly and validly executed and delivered by Seller and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. When executed and delivered as contemplated herein, each of the other Seller Transaction Documents shall constitute the legal, valid and binding obligation of Seller, enforceable against it in accordance with its terms. Seller had full power and authority to remove the members of the Company’s board of directors and appoint new directors to the Company’s board when it took such action on October 23, 2006, and Seller continues to have full power and authority to appoint individuals to serve in each authorized seat on the Company’s board of directors, to replace or remove each member of the Company’s board of directors and to otherwise cause the Company to comply with the terms of this Agreement as contemplated hereby.

      (b) The Company is a corporation organized and validly existing under the laws of the State of Delaware and has full legal right, power and authority to execute and deliver the agreements, instruments and documents required to be delivered by it prior to or at the Closing (the “ Company Transaction Documents ”), and to perform its obligations thereunder. The Company's execution, delivery and performance of the Company Transaction Documents has been duly authorized by all necessary action on the part of Company and its stockholders for such authorization, other than as set forth in the Seller's Disclosure Schedule. When executed and delivered as contemplated herein, each of the Company Transaction Documents shall constitute the legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms.

     3.2   No Conflicts, etc .

          (a) Except as otherwise set forth in this Agreement or in the Seller’s Disclosure Schedule, the execution, delivery and performance of this Agreement and the other Seller Transaction Documents by Seller or the Company Transaction Documents by the Company will not result in (i) any conflict with the operating agreement of Seller or the charter documents or by-laws of the Company, (ii) any breach or violation of or default under any Law or any mortgage, agreement, deed of trust, indenture or any other instrument to which Seller or the Company is a party or by which either of them or any of their respective properties or assets are bound, or (iii) the creation or imposition of any Encumbrance on the assets of the Company.

          (b) The Seller’s Disclosure Schedule sets forth a complete and accurate list of each Consent, approval or authorization of, or filing with, any third party (including, without limitation, the board of directors or stockholders of the Company or any of its Affiliates) or Governmental Authority that is required on the part of Seller in connection with the execution, delivery and performance of the Seller Transaction Documents and the Company in connection with the execution, delivery and performance of the Company Transaction Documents. As a condition to the consummation of the transactions contemplated by this Agreement, the Court Approval shall be required.

     3.3 Corporate Status of the Company . The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with

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full corporate power and authority to conduct its business and to own or lease its properties, as now conducted, owned or leased. Seller has heretofore delivered to the Buyer complete and correct copies of the Company’s certificate of incorporation and bylaws as currently in effect. The Company is duly qualified to do business in each jurisdiction in which the failure to be so qualified would have a Material Adverse Effect on the Company. The Company has no subsidiaries or equity interests in any other corporation or other entity.

      3.4 Sufficiency of Assets; Title . Except as set forth in the Seller’s Disclosure Schedule, the Purchased Assets (a) constitute all of the assets, tangible and intangible, of any nature whatsoever, necessary to operate the Business in the manner currently and historically operated by the Company and (b) include all of the operating assets of the Company. Upon transfer of the Purchased Assets to Buyer as provided in this Agreement, Buyer will acquire good and marketable title thereto, free and clear of all Encumbrances other than Permitted Encumbrances.

      3.5 Books and Records . The books of account and other financial records of the Company, all of which have been made available to Buyer, are complete and correct and represent actual, bona fide transactions and have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls.

      3.6 Financial Statements . Seller has delivered to Buyer the Company’s Financial Statements. Except as otherwise set forth in the Seller’s Disclosure Schedule, the Company’s Financial Statements are complete and correct in all material respects and present fairly, for the periods covered therein, the financial condition, results of operations and changes in financial position of the Company, as of the dates and for the periods indicated, subject in the case of the Company’s Interim Financial Statements to normal, recurring year-end adjustments, and, in the case of the Company’s Financial Statements, subject to the absence of notes, and have been prepared in accordance with GAAP, except as noted therein. To the knowledge of Seller, no event has occurred since the preparation of the Company’s Financial Statements which would require a restatement of the Company’s Financial Statements under GAAP other than by reason of a change in GAAP. Except as noted in any reports contained in the applicable Company’s Financial Statements or in the Seller’s Disclosure Schedule, the Company’s Financial Statements were rendered without qualification or exception and were not subject to any contingency. Except as disclosed in the Seller’s Disclosure Schedule, the Company’s Interim Financial Statements reflect reserves or other appropriate provisions at least equal to reasonably anticipated liabilities, losses and expenses of the Company as of the date thereof.

      3.7 Absence of Undisclosed Liabilities . Except for liabilities specifically reflected or reserved against in the Company’s Interim Financial Statements or reflected in the Seller’s Disclosure Schedule, the Company has no liabilities or obligations, whether absolute, accrued, contingent or otherwise, of the type required to be disclosed as a liability on a balance sheet prepared in accordance with GAAP, except for liabilities incurred in the ordinary course of the Business since the date of the Company’s Interim Financial Statements.

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     3.8 Properties, etc .

          (a) The Seller’s Disclosure Schedule lists all items of real property owned or leased by the Company. Except as otherwise set forth in the Seller’s Disclosure Schedule, the Company has (i) good and valid title to the real property listed in the Seller’s Disclosure Schedule as owned by it, (ii) valid and subsisting leasehold estates in the real property listed in the Seller’s Disclosure Schedule as leased by it and (iii) good and valid title to all of its tangible personal property reflected in the Company’s Interim Financial Statements (except for properties disposed of since the date of the Company’s Interim Financial Statements in the ordinary course of the Business), in each case subject to no Encumbrances, except (x) Encumbrances specifically identified in the Seller’s Disclosure Schedule, and (y) Permitted Encumbrances.

          (b) With respect to each item of real property leased or subleased by the Company, except as set forth in the Seller’s Disclosure Schedule: (i) the Company is in compliance in all material respects with such Leases or subleases; (ii) each Lease or sublease is in full force and effect in accordance with its terms; (iii) the Company has accepted complete possession of all of the leased or subleased properties, is the actual occupant in possession thereof and has not sublet or assigned or otherwise transferred all or any portion of the Company’s leasehold interest in any of such properties; (iv) all improvements constructed on or in such properties by the Company or the landlord thereof have been completed to the reasonable satisfaction of the Company or, to Seller’s knowledge, the landlord, as the case may be, and have been accepted by the Company and any tenant construction allowances have been paid in full; (v) all material duties of an inducement nature required of the landlord under any lease or sublease have been fulfilled; (vi) to the Seller’s knowledge, all of the landlords’ obligations that have accrued prior to the date hereof have been performed in all material respects; (vii) there exists no breach or default, nor state of facts nor condition which, with notice, the passage of time, or both, would result in a breach or default on the part of the Company or, to Seller’s knowledge, any landlord to such properties; and (viii) to Seller’s knowledge, no material claim, controversy, dispute, quarrel or disagreement exists between the Company and any landlord.

          (c) Except as set forth in the Seller’s Disclosure Schedule, to Seller’s knowledge, there are no physical or structural defects or conditions in or of any of item of real property owned or leased by the Company or any improvements thereon that (i) materially interfere with the Company’s use of, or conduct of the Business at, such property or (ii) would require that the Company to expend more than $10,000 to repair in the aggregate.

      3.9 Employees . The Seller’s Disclosure Schedule lists: (a) the names and titles of all current employees of the Company, whether such employees are full or part time employees or temporary employees with each of their hourly rates or target salaries (including amounts subject to performance criteria) and the current annual salary payable to each such employee as of the date hereof, and (b) the aggregate amount of such remuneration for each such employee for 2005. Except as set forth in the Seller’s Disclosure Schedule, the Company has not agreed (whether orally or in writing) to any increase in the compensation or benefits payable to, or otherwise materially modified the terms of employment of, any employee from those in effect as of September 30, 2006. Except as set forth in the Seller’s Disclosure Schedule, all employees of the Company are “at will” under oral agreement. Except as set forth on the Seller’s Disclosure Schedule, there are no employment agreements, arrangements or understandings by which the

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Company is bound. The Company is not bound by any union or collective bargaining agreement or other agreement, written or oral, with any trade or labor union, employees’ association or similar organization nor is the Company subject to any pending or, to the knowledge of the Seller, threatened labor dispute or organization activity. Except as set forth on the Seller’s Disclosure Schedule, there are no pending claims or actions that have been asserted or instituted with respect to workers compensation or asserting employment discrimination, disability, wage and hour, wrongful discharge, harassment, breach of contract, defamation, invasion of privacy, unemployment compensation, employee safety or other similar claims under which the Company may have liability, contingent or otherwise. There are no present or, to Seller’s knowledge, threatened actions, work stoppages or other labor difficulties relating to the Company. Except as set forth on Seller’s Disclosure Schedule, no unfair labor practice, wrongful termination, or race, sex, age, disability or other discrimination, complaint is pending, nor, to Seller’s knowledge, is any such complaint threatened, against the Company before the National Labor Relations Board, Equal Employment Opportunity Commission or any other Governmental Authority, and no grievance is pending, nor, to Seller’s knowledge, is any grievance threatened against the Company.

      3.10 Employee Benefit Plans . The Seller’s Disclosure Schedule lists each of the Company’s employee pension, profit sharing, deferred compensation, severance, cafeteria, stock option, stock purchase, incentive, golden parachute, bonus, group or individual medical and health benefits, welfare, insurance or other employee benefit plan, program or arrangement (the “ Plans ”), which is maintained or contributed to by the Company on behalf of the employees of the Company. Complete and correct copies of all such Plans have been made available to Buyer for its review. Except as set forth in the Seller’s Disclosure Schedule, there is no Plan, nor has the Company at any time maintained, administered, contributed or been required to contribute to any “employee pension benefit plan” as defined in Section 3(2) of ERISA, which is subject to the minimum funding requirements of Section 412 of the Code or Section 302 of ERISA, or the provisions of Title IV of ERISA. None of the Plans is a “multiemployer pension plan” within the meaning of Section 3(37) of ERISA. Each Plan and any related trust agreement that is intended to be qualified under the provisions of Section 401(a) of the Code has received a favorable determination from the IRS to that effect, and, to Seller’s knowledge, no circumstance exists that will or could reasonably be expected to result in revocation of any such favorable determination letter. Each Plan and any related trust agreement complies in all material respects and has been maintained in material compliance with its terms and, both as to form and in operation, with the requirements prescribed by any and all Laws that are applicable to such plans, including but not limited to ERISA and the Code. Except as set forth in the Seller’s Disclosure Schedule, the Company does not have any obligation to make any payment to or with respect to any former employee pursuant to any severance agreement or retiree medical benefit or other Plan. Except as disclosed in Seller’s Disclosure Schedule, the Company would not have any obligation to make any severance or other payments to any employee if such employee was terminated prior to, at or after the Closing. Except as set forth in Seller’s Disclosure Schedule, no benefit, payment or other entitlement under any Plan, or under any agreement relating to the employment of employees of the Company, will be established or become accelerated, vested, payable or funded by reason of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. Except as set forth on Seller’s Disclosure Schedule, there are no Claims pending, or to the knowledge of the Seller, threatened

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with respect to any Plan, other than Claims for the payment of benefits in the ordinary course of operation of such Plan.

      3.11 Independent Contractors . Seller’s Disclosure Schedule: (a) lists the names and titles of all current independent contractors, including, but not limited to, sales representatives and distributors (“ Independent Contractors ”) that have entered into contracts with the Company, (b) contains a list of such contracts with each Independent Contractor, and (c) lists the aggregate compensation and commissions paid to each Independent Contractor in the fiscal year ended December 31, 2005 and a brief summary of the compensation arrangements for such Independent Contractor for 2006; provided , however , that a description of compensation shall not be required if the Independent Contractor may be terminated by the Company without penalty, severance or similar payment upon no more than 30 days written notice by the Company. Except as set forth on Seller’s Disclosure Schedule, there are no other contracts or obligations by which the Company is bound with respect to any Independent Contractors. Except as set forth on Seller’s Disclosure Schedule, there are no pending Claims that have been instituted by or relating to an Independent Contractor under which the Company may have liability, contingent or otherwise. To Seller’s knowledge, there are no threatened Claims relating to the Company and an Independent Contractor.

     3.12 Contracts .

          (a) The Seller’s Disclosure Schedule lists all Contracts of the following types to which the Company is a party or by which the Company or any of its properties is bound as of the date hereof (other than Leases and labor or employment-related agreements, which are disclosed pursuant to Sections 3.8 and 3.9, respectively, of the Seller’s Disclosure Schedule): (i) joint venture and partnership agreements, (ii) mortgages, indentures, loan or credit agreements, security agreements and other agreements and instruments relating to the borrowing of money including, without limitation, all agreements and instruments evidencing Company Debt and (iii) other Contracts which in any case require payment by the Company after the date hereof of more than $10,000 individually or $50,000 in the aggregate. Complete and correct copies of all such Contracts have been delivered to the Buyer for review.

          (b) Each Assumed Contract to which the Company is a party or by which it or its assets are bound is in full force and effect and is valid, binding and enforceable against the parties thereto in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization and other laws affecting the enforcement of creditors’ rights generally and by general principles of equity. The Company has performed in all material respects all obligations required to be performed by it under each such Assumed Contract, and to the Seller’s knowledge, no condition exists or event has occurred that, with or without notice or lapse of time, would constitute a default or a basis for delay or non-performance by the Company or, to the Seller’s knowledge, by any other party thereto.

      3.13 Insurance . The Seller’s Disclosure Schedule lists (a) all Insurance Agreements owned by the Company and, except as indicated therein, all premiums have been paid on such Insurance Agreements, no notice of termination or threatened termination of any of such Insurance Agreements has been received by the Company and such Insurance Agreements are in full force and effect, (b) true and correct copies of such Insurance Agreements have been made

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available to Buyer for its review, and (c) all claims that have been asserted under such Insurance Agreements (other than claims in respect of workers’ compensation and health and dental benefits) since January 1, 2005 and the status of such claims.

      3.14 Litigation; Compliance with Laws . Except as otherwise set forth in the Seller’s Disclosure Schedule, there are no judicial, regulatory or administrative actions, proceedings or investigations pending or, to the Seller’s knowledge, threatened in writing, before any federal, state, local or foreign court or other Governmental Authority, and there is no judgment, decree, award or order outstanding against the Company, the Business or the Purchased Assets that are material to the Business, individually or in