MEMBERSHIP INTEREST PURCHASE AGREEMENT

LLC Membership Agreement

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SPORTSMANS GUIDE INC | TGW ACQUISITION CORPORATION | THE GOLF WAREHOUSE, L.L.C., | SPORTS CAPITAL PARTNERS, LP, | SPORTS CAPITAL PARTNERS (CEV) LLC,

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Title: MEMBERSHIP INTEREST PURCHASE AGREEMENT
Governing Law: New York Date: 7/13/2004
Industry: RTMAIL Law Firm: Fulbright & Jaworski LLP; Foulston Siefkin LLP; Foulston Siefkin LLP Sector: SERVIC

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EXHIBIT 2.1

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MEMBERSHIP INTEREST PURCHASE AGREEMENT

DATED AS OF

JUNE 29, 2004

BY AND AMONG

TGW ACQUISITION CORPORATION

THE GOLF WAREHOUSE, L.L.C.,

SPORTS CAPITAL PARTNERS, LP,

SPORTS CAPITAL WAREHOUSE, L.P.,

SPORTS CAPITAL PARTNERS (CEV) LLC,

MARNEY ENTERPRISES, INC.,

MARK S. MARNEY,

R. MICHAEL MARNEY,

AND

RICHARD D. MARNEY

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TABLE OF CONTENTS

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ARTICLE I PURCHASE AND SALE................................................................ 1

Section 1.1 Purchase and Sale of Membership Interests............................... 1

Section 1.2 Purchase Price.......................................................... 1

Section 1.3 Purchase Price Adjustments.............................................. 2

Section 1.4 Payment of Purchase Price; Escrow Release............................... 2

Section 1.5 Post-Closing Adjustments................................................ 3

Section 1.6 Tax Characterization.................................................... 4

Section 1.7 Allocation.............................................................. 4

Section 1.8 Payment of Bank Borrowings and Cash Distribution to the Sellers......... 5

ARTICLE II THE CLOSING...................................................................... 5

Section 2.1 The Closing............................................................. 5

Section 2.2 Deliveries at the Closing............................................... 5

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................... 5

Section 3.1 Organization and Corporate Power........................................ 6

Section 3.2 Authorization of Transactions........................................... 6

Section 3.3 Noncontravention........................................................ 6

Section 3.4 Insider Interests....................................................... 6

Section 3.5 Brokers' Fees........................................................... 7

Section 3.6 Capitalization.......................................................... 7

Section 3.7 Subsidiaries and Investments............................................ 7

Section 3.8 Financial Statements.................................................... 7

Section 3.9 Events Subsequent to the Latest Balance Sheet........................... 7

Section 3.10 Absence of Undisclosed Liabilities...................................... 8

Section 3.11 Legal Compliance........................................................ 8

Section 3.12 Title to Assets......................................................... 8

Section 3.13 Title to Property....................................................... 8

Section 3.14 Tax Matters............................................................. 9

Section 3.15 Intellectual Property................................................... 9

Section 3.16 Contracts and Commitments............................................... 10

Section 3.17 Insurance............................................................... 11

Section 3.18 Litigation.............................................................. 11

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Section 3.19 Employees............................................................... 11

Section 3.20 Employee Benefits....................................................... 11

Section 3.21 Environmental, Health and Safety Matters................................ 12

Section 3.22 Suppliers............................................................... 12

Section 3.23 Inventory............................................................... 12

Section 3.24 Customer List........................................................... 12

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS.................................... 13

Section 4.1 Organization of the Sports Capital Entities and Enterprises............. 13

Section 4.2 Authorization of Transaction............................................ 13

Section 4.3 Noncontravention........................................................ 13

Section 4.4 Brokers' Fees........................................................... 13

Section 4.5 Title to Membership Interests........................................... 13

ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER.......................................... 13

Section 5.1 Organization of Buyer................................................... 13

Section 5.2 Authorization of Transaction............................................ 13

Section 5.3 Noncontravention........................................................ 14

Section 5.4 Brokers' Fees........................................................... 14

Section 5.5 Available Funds......................................................... 14

Section 5.6 Investment.............................................................. 14

ARTICLE VI COVENANTS........................................................................ 14

Section 6.1 Affirmative Covenants Concerning the Company............................ 14

Section 6.2 Negative Covenants Concerning the Company............................... 15

Section 6.3 Certain Other Covenants................................................. 15

ARTICLE VII CONDITIONS TO CLOSING............................................................ 16

Section 7.1 Conditions to Closing Obligations of Buyer.............................. 16

Section 7.2 Conditions to Closing Obligations of the Sellers........................ 17

ARTICLE VIII TERMINATION...................................................................... 18

Section 8.1 Termination............................................................. 18

Section 8.2 Effect of Termination................................................... 19

ARTICLE IX SURVIVAL; INDEMNIFICATION........................................................ 19

Section 9.1 Survival................................................................ 19

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Section 9.2 Indemnification by the Sellers.......................................... 19

Section 9.3 Indemnification by Buyer................................................ 20

Section 9.4 Third-Party Claims...................................................... 21

Section 9.5 Objections to Claims for Indemnification................................ 21

Section 9.6 Resolution by the Parties............................................... 21

Section 9.7 Arbitration............................................................. 21

ARTICLE X ADDITIONAL AGREEMENTS............................................................ 22

Section 10.1 Press Releases.......................................................... 22

Section 10.2 Transaction Expenses.................................................... 22

Section 10.3 Transfers and Other Taxes............................................... 22

Section 10.4 Further Assurances...................................................... 22

Section 10.5 Transition Assistance................................................... 22

Section 10.6 Certain Tax Matters..................................................... 23

Section 10.7 Noncompetition, Nonsolicitation and Confidentiality..................... 24

ARTICLE XI DEFINITIONS...................................................................... 25

ARTICLE XII MISCELLANEOUS.................................................................... 28

Section 12.1 No Third Party Beneficiaries............................................ 28

Section 12.2 Entire Agreement........................................................ 28

Section 12.3 Successors and Assigns.................................................. 28

Section 12.4 Counterparts............................................................ 28

Section 12.5 Headings................................................................ 28

Section 12.6 Notices................................................................. 28

Section 12.7 Governing Law........................................................... 30

Section 12.8 Amendments and Waivers.................................................. 30

Section 12.9 Incorporation of Exhibits and Schedules................................. 30

Section 12.10 Construction............................................................ 30

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MEMBERSHIP INTEREST PURCHASE AGREEMENT

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement") is

made as of June 29, 2004, by and among TGW Acquisition Corporation, a Delaware

corporation ("Buyer"), The Golf Warehouse, L.L.C., a Delaware limited liability

company (the "Company"), Sports Capital Partners, LP, a Delaware limited

partnership, Sports Capital Warehouse, L.P., a Delaware limited partnership, and

Sports Capital Partners (CEV), LLC, a Delaware limited liability company,

(collectively, the "Sports Capital Entities"), Marney Enterprises, Inc., a

Kansas corporation ("Enterprises"), and Mark S. Marney, R. Michael Marney and

Richard D. Marney (collectively, the "Founders"). The Sports Capital Entities,

Enterprises and the Founders are collectively referred to herein as the

"Sellers", and Buyer, the Sports Capital Entities, Enterprises and the Founders

are collectively referred to herein as the "Parties".

WHEREAS, the Sports Capital Entities own 7,065 Class A Units of the

Company in the aggregate; and

WHEREAS, Marney Enterprises owns 524 Class A Units and 1,920 Class B

Units of the Company; and

WHEREAS, the Founders own 270 Class C Units of the Company in the

aggregate (the Class A Units, the Class B Units and the Class C Units are

referred to collectively herein as the "Membership Interests" or "Units"); and

WHEREAS, this Agreement contemplates a transaction in which Buyer

will purchase from the Sellers, and the Sellers will sell to Buyer, all of the

outstanding Membership Interests of the Company in return for cash consideration

set forth below.

NOW, THEREFORE, in consideration of the mutual promises herein made,

and in consideration of the representations, warranties, and covenants herein

contained, the Parties, intending to be legally bound, agree as follows:

ARTICLE I

PURCHASE AND SALE

Section 1.1 Purchase and Sale of Membership Interests. On and

subject to the terms and conditions of this Agreement, Buyer agrees to purchase

from the Sellers, and the Sellers agree to sell to Buyer, all of the issued and

outstanding Membership Interests for the cash consideration specified below in

Section 1.2.

Section 1.2 Purchase Price. Subject to adjustments in accordance

with Section 1.3, Buyer shall pay to the Sellers in the aggregate $30,000,000

(the "Purchase Price") for all the issued and outstanding Membership Interests.

The Purchase Price shall be allocated among the Sellers as set forth in Schedule

1.2, which the Sellers agree is in accordance with Section 5.2 of the Company's

Limited Liability Company Agreement.

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Section 1.3 Purchase Price Adjustments.

(a) On or before the Closing Date, the Company shall prepare

and deliver to Buyer a preliminary unaudited consolidated balance sheet of

the Company as of the Closing Date showing a good faith estimate of the

amount of the Company's Working Capital as of the Closing Date (the

"Reference Balance Sheet") accompanied by a certificate of the chief

financial officer of the Company to that effect. The Reference Balance

Sheet shall (i) be prepared in accordance with GAAP consistently applied,

subject to the absence of footnotes thereto and subject to normal year-end

adjustments, and (ii) incorporate all accounting methods utilized by the

Company in connection with the preparation of the consolidated balance

sheet of the Company as of the Latest Balance Sheet included as part of

the Financial Statements (which balance sheet was prepared on the basis of

revenue recognition upon the shipment of products); provided, however,

that for purposes of preparing the Reference Balance Sheet, the Reference

Balance Sheet shall not reflect any liabilities that are to be paid on or

prior to the Closing. The Cash amount included in the Working Capital

amount on the Reference Balance Sheet shall be at least Three Hundred

Thousand Dollars ($300,000).

(b) If the Company's Working Capital amount set forth on the

Reference Balance Sheet is less than One million Five Hundred Thousand

Dollars ($1,500,000) (the amount by which the Working Capital is less than

$1,500,000 is referred to herein as the "Working Capital Shortfall"), then

the Purchase Price will be reduced by the exact amount of the Working

Capital Shortfall. If the Company's Working Capital amount set forth on

the Reference Balance Sheet is greater than One Million Five Hundred

Thousand Dollars ($1,500,000) (the amount by which the Working Capital is

greater than $1,500,000 is referred to as the "Working Capital Surplus"),

then the Purchase Price will be increased by the exact amount of the

Working Capital Surplus.

Section 1.4 Payment of Purchase Price; Escrow Release.

(a) On the Closing Date, Buyer will (i) pay or cause to be

paid to the Sellers (or to such third parties as the Sellers may

designate) an aggregate amount equal to the Purchase Price after

adjustments as set forth in Section 1.3 less Four Million Dollars

($4,000,000) (the "Escrow Amount"), and (ii) deposit with the escrow agent

(the "Escrow Agent") identified in the form of the Escrow Agreement

attached hereto as Exhibit 1.4(a) (the "Escrow Agreement") the Escrow

Amount, which shall be held in an escrow account (the "Escrow Fund") and

disbursed in accordance with the terms of the Escrow Agreement. All

payments shall be made by wire transfer of immediately available funds to

such bank accounts as shall be designated in writing by the Sellers or the

Escrow Agent, as applicable, at least one business day prior to the

Closing Date.

(b) (i) On the 90th day after the Closing Date, the Escrow

Agent shall distribute from the Escrow Fund to the Sellers on a pro

rata basis $500,000 or the balance of the Escrow Fund if such

balance on such date is less than $500,000.

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(ii) On the 180th day after the Closing Date, the

Escrow Agent shall distribute from the Escrow Fund to the Sellers on

a pro rata basis $500,000 or the balance of the Escrow Fund if such

balance on such date is less than $500,000.

(iii) On the first anniversary of the Closing Date, the

Escrow Agent shall distribute from the Escrow Fund to the Sellers on

a pro rata basis $1,500,000 or the balance of the Escrow Fund if

such balance on such date is less than $1,500,000.

(iv) The funds remaining in the Escrow Fund on the

540th day after the Closing Date shall be paid by the Escrow Agent

to the Sellers.

(v) All payments to the Sellers under this paragraph

(b) shall be made in accordance with and subject to the Escrow

Agreement.

and Section 1.5 shall be made pro rata to the Sellers in accordance with

their pro rata percentage of the Purchase Price received by them as set

forth on Schedule 1.4(c).

Section 1.5 Post-Closing Adjustments.

(a) As soon as possible and in any event no later than sixty

(60) days following the Closing Date, Buyer shall cause to be prepared and

delivered to the Sellers the final unaudited consolidated balance sheet of

the Company as of the Closing Date showing the amount of the Company's

Working Capital as of the Closing Date (the "Closing Date Balance Sheet")

accompanied by a certificate of the chief financial officer of Buyer to

that effect. The Closing Date Balance Sheet shall (i) be prepared in

accordance with GAAP consistently applied, subject to the absence of

footnotes thereto and subject to normal year-end adjustments, and (ii)

incorporate all accounting methods utilized by the Company in connection

with the preparation of the consolidated balance sheet of the Company as

of the Latest Balance Sheet included as part of the Financial Statements

(which balance sheet was prepared on the basis of revenue recognition upon

the shipment of products); provided, however, that for purposes of

preparing the Closing Date Balance Sheet, the Closing Date Balance Sheet

shall not reflect any liabilities that were paid on or prior to the

Closing.

(b) Unless within thirty (30) calendar days after receipt of

the Closing Date Balance Sheet the Seller Representative shall deliver to

Buyer a statement describing his objections to the Closing Date Balance

Sheet (a "Statement of Objection"), the amount of the Working Capital

reflected on the Closing Date Balance Sheet shall be deemed final and

binding on the parties hereto.

timely Statement of Objection, Buyer and the Seller Representative and

their respective independent accountants shall attempt in good faith to

resolve such dispute within fifteen (15) calendar days after receipt by

Buyer of such Statement of Objection. In the event that such parties are

unable to resolve such dispute within such period, such parties agree

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that KPMG LLP (Chicago office) (or such other nationally recognized

accounting firm mutually agreed to by the parties) (the "Arbitrator")

shall be retained to resolve such dispute as soon as reasonably

practicable. The fees and expenses of the Arbitrator shall be shared

equally by the Sellers on one hand and Buyer on the other hand.

(d) Buyer and the Seller Representative shall direct the

Arbitrator to review the books and records of the Company as necessary in

order to verify the accuracy of the Closing Date Balance Sheet and the

determination of the Working Capital. The determination of the Arbitrator

as to the Working Capital on the Closing Date Balance Sheet shall be final

and binding upon the parties hereto, as well as the Escrow Agent.

(e) After the determination of the final Working Capital

amount on the Closing Balance Sheet in accordance with this Section 1.5:

(i) If the Company's Working Capital amount on the

Closing Date Balance Sheet exceeds the Working Capital amount on the

Reference Balance Sheet (the amount by which the Working Capital on

the Closing Balance Sheet is greater than the Working Capital on the

Reference Balance Sheet is referred to herein as the

"Understatement"), then Buyer shall pay the amount of the

Understatement to the Sellers within ten (10) days after the Working

Capital on the Closing Date Balance Sheet is determined final.

(ii) If the Company's Working Capital amount set forth

on the Closing Date Balance Sheet is less than the Working Capital

amount set forth on the Reference Balance Sheet (the amount by which

the Working Capital on the Closing Balance Sheet is less than the

Working Capital on the Reference Balance Sheet is referred to herein

as the "Overstatement"), then (i) if such Overstatement is $100,000

or less, then the Escrow Agent shall disburse to Buyer the amount of

the Overstatement from the Escrow Fund immediately after the Working

Capital on the Closing Date Balance Sheet is determined final or

(ii) if such Overstatement is more than $100,000, then each of the

Sellers shall pay its or his pro rata amount of the Overstatement

based on the percentages set forth in Schedule 1.4(c) to Buyer

within thirty (30) days after the Working Capital on the Closing

Date Balance Sheet is determined final.

Section 1.6 Tax Characterization. Buyer and the Sellers acknowledge

that the sale of the Units contemplated hereunder is, and shall be treated as a

purchase of the assets of the Company by Buyer for federal, state, local and

foreign income Tax purposes. Buyer and each Seller shall file all of their

respective income Tax Returns in connection therewith in a manner consistent

with such treatment and shall take no position contrary thereto unless required

to do so by applicable Tax laws.

Section 1.7 Allocation. Schedule 1.7 sets forth an allocation of the

Purchase Price (and all other capitalized costs) among the assets of the Company

in accordance with Section 1060 of the Code and the Treasury regulations

thereunder (and any similar provision of state, local or foreign law, as

appropriate). Buyer and the Sellers shall report, act and file Tax Returns

(including, but not limited to IRS Forms 8594) in all respects and for all

purposes

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consistent with Schedule 1.7. Neither Buyer nor any Seller shall take any

position (whether in audits, Tax Returns or otherwise) which is inconsistent

with such allocation unless required to do so by applicable law.

Section 1.8 Payment of Bank Borrowings and Cash Distribution to the

Sellers. Immediately prior to the Closing, the Sellers will cause the Company

(a) first, to pay in full all borrowings under the Company's line of credit and

bank installment loans ("Bank Facility") set forth on Schedule 1.8 and (b)

second, to pay the Sellers an amount in the aggregate equal to the Seller's good

faith estimate of the consolidated Cash of the Company in excess of $300,000 as

of the Closing. The Sellers may cause the Company to make any such payment to

them in the form of a distribution or any other similar transaction.

ARTICLE II

THE CLOSING

Section 2.1 The Closing. The closing of the transactions

contemplated by this Agreement (the "Closing") shall take place on the 29th day

of June 2004 at 10:00 a.m. New York City time following the satisfaction or

waiver of all conditions to the obligations of the Parties to consummate the

transactions contemplated hereby (other than conditions with respect to actions

the respective Parties will take at the Closing itself) or such other date as

the Parties may mutually determine (the "Closing Date").

Section 2.2 Deliveries at the Closing. Subject to the terms and

conditions set forth herein, at the Closing:

(a) Buyer shall pay the Purchase Price less the Escrow

Amount to the Sellers in accordance with Section 1.4(a);

(b) Buyer shall deposit the Escrow Amount with the Escrow

Agent in accordance with Section 1.4(a)

certificates, instruments and documents referred to in Section 7.2,

and (ii) such other documents required to effect the transactions

contemplated hereby as the Sellers may reasonably request in form

and substance reasonably satisfactory to the Sellers and consistent

with the provisions of this Agreement; and

(d) The Company and/or the Sellers, as the case may be, will

deliver to Buyer (i) the various certificates, instruments and

documents referred to in Section 7.1, (ii) all books and records of

the Company and (iii) such other documents required to effect the

transactions contemplated hereby as Buyer may reasonably request in

form and substance reasonably satisfactory to Buyer and consistent

with the provisions of this Agreement.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Representations and Warranties of the Company. The Company

represents and warrants to Buyer as follows, except as otherwise disclosed in

the Disclosure Schedule. The Disclosure Schedule will be arranged in paragraphs

corresponding to the lettered and numbered paragraphs contained in this Article

III; provided, however, that a matter disclosed in reference to any particular

section or subsection will be deemed to be disclosed for purposes of any other

section or subsections of this Article III, if the matter is disclosed in such a

way to make its relevance to such other sections or subsections reasonably

apparent.

Section 3.1 Organization and Corporate Power. The Company is a

limited liability company duly organized, validly existing and in good standing

under the laws of the State of Delaware and is qualified to do business in every

jurisdiction in which the nature of its business or its ownership of property

requires it to be qualified. Schedule 3.1 lists all of the jurisdictions in

which the Company is qualified to do business as a foreign company. The Company

has full power and authority and all licenses, permits and authorizations

necessary to own, lease and operate its properties and business and to conduct

its business.

Section 3.2 Authorization of Transactions. The Company has full

limited liability company power and authority to execute and deliver this

Agreement and to perform its obligations hereunder. The execution and delivery

of this Agreement and the consummation of the transactions contemplated hereby

has been authorized by all requisite action on the part of the Company, no other

proceedings on the part of the Company are necessary to approve and authorize

the execution and delivery of this Agreement or the consummation of the

transactions contemplated hereby, and this Agreement constitutes the valid and

legally binding obligation of the Company, enforceable against the Company in

accordance with its terms and conditions, subject to the effect of bankruptcy,

insolvency, reorganization or other similar laws and to general principles of

equity (whether considered in proceedings at law or in equity (collectively,

"Bankruptcy Exceptions")).

Section 3.3 Noncontravention. Neither the execution and the delivery

of this Agreement, nor the consummation of the transactions contemplated hereby

will (A) violate any statute, regulation, rule, injunction, judgment, order,

decree, ruling, charge or other restriction of any government, governmental

agency, or court to which the Company is subject, (B) violate any provision of

the Operating Agreement or other constitutive documents or (C) conflict with,

result in a breach of, or constitute a default under, any agreement, contract,

lease, license, instrument or other arrangement to which the Company is a party

or by which the Company is bound, except for any such violations, breaches or

defaults that could not reasonably be expected to have a Material Adverse

Effect. The Company is not required to give any notice to, make any filing with,

or obtain any authorization, consent, or approval of any government or

governmental agency or any other Person in order for the Parties to enter into

this Agreement and to consummate the transactions contemplated by this

Agreement, except for any notice, filing, authorization, consent or approval the

absence of which could not reasonably be expected to have a Material Adverse

Effect.

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Section 3.4 Insider Interests. No officer, director, member or, to

the Company's knowledge Affiliate of the Company and, to the knowledge of the

Company, no relative of such an officer, director, member or Affiliate has any

agreement with the Company or any interest in any property (real, personal or

mixed, tangible or intangible) used by or pertaining to the Company, except

solely as a member or Affiliate or employee.

Section 3.5 Brokers' Fees. Except with respect to Thomas Weisel

Partners, the Company has no liability or obligation to pay any fees or

commissions to any broker, finder, or agent with respect to the transactions

contemplated by this Agreement. The fees and expenses owed Thomas Weisel

Partners in connection with the transactions contemplated hereby shall be paid

by the Sellers and not the Company.

Section 3.6 Capitalization. Schedule 3.6 lists the legal and

beneficial owners of Units in the Company, and no other Units or equity

interests in the Company have been authorized, have been issued or are

outstanding. There are no subscription rights or other agreements or commitments

to which the Company is a party or which are binding upon the Company providing

for the issuance, disposition or acquisition of any equity interest in the

Company (other than this Agreement). There are no voting trusts, proxies or

other agreements or understandings the respect to the voting of any equity

interests in the Company. The Company is not subject to any obligation

(contingent or otherwise) to repurchase or otherwise acquire or retire any

equity interests in the Company.

Section 3.7 Subsidiaries and Investments. Schedule 3.7 lists all

Subsidiaries. Other than the Subsidiaries, the Company does not own, directly or

indirectly, any stock, partnership interest, limited liability company interest

or other security or ownership interest in, or any security issued by, any other

Person.

Section 3.8 Financial Statements. Attached hereto as Schedule 3.8

are the following financial statements (collectively the "Financial

Statements"): (i) audited balance sheets and statements of income as of and for

the year ended December 31, 2003, 2002 and 2001 for the Company, and (ii)

unaudited balance sheet and statement of income (the "Recent Financial

Statements") as of and for the three months ended March 31, 2004. The Financial

Statements have been prepared in accordance with GAAP throughout the periods

covered thereby and present fairly the financial condition of the Company as of

such dates and the results of operations and cash flows of the Company for such

periods; provided that the Recent Financial Statements do not contain footnotes

and are subject to normal year-end and audit adjustments. The unaudited balance

sheet of the Company as of March 31, 2004 is referred to herein as the "Latest

Balance Sheet".

Section 3.9 Events Subsequent to the Latest Balance Sheet. Since the

date of the Latest Balance Sheet, there has not been any material adverse change

in the business, assets, financial condition, or operating results of the

Company and the Subsidiaries, taken as a whole (a "Material Adverse Effect").

Since that date:

(a) the Company has not sold, leased, transferred or

assigned any of its assets, tangible or intangible, other than

inventory in the ordinary course of

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business and assets having an aggregate fair market value not in

excess of $100,000

(b) the Company has not entered into any transaction with

any of its directors, officers, employees or Affiliates or any third

party other than in the ordinary course of business and other than

transactions involving amounts that do not exceed $50,000 in the

aggregate per annum;

transaction outside the ordinary course of business involving the

Company and which is material and adverse;

(d) the Company has not redeemed or purchased, directly or

indirectly, any of its equity securities or declared or paid any

distributions;

(e) the Company has not issued, sold or transferred any of

its equity securities;

(f) the Company has not borrowed any amount or issued or

exchanged any notes or other evidences of any Indebtedness or

incurred or become subject to any obligations or liabilities

(whether absolute or contingent), except under the Company's bank

agreement and current liabilities incurred in the ordinary course of

business consistent with past practice; and

(g) the Company has not agreed to do any of the foregoing.

Section 3.10 Absence of Undisclosed Liabilities. The Company has no

liability (whether absolute or contingent, and whether accrued or unaccrued),

except for (a) liabilities reflected on the Latest Balance Sheet, (b)

liabilities under this Agreement and agreements, contracts, purchase orders and

other similar arrangements set forth on Schedule 3.10 attached hereto, (c)

liabilities incurred in the ordinary course of business consistent with past

practice and (d) liabilities under unclaimed property or escheat laws which will

not exceed $25,000 in the aggregate (none of which, alone or in the aggregate,

will have a Material Adverse Effect).

Section 3.11 Legal Compliance. The Company has complied and is in

compliance with all applicable laws, rules and regulations, except where failure

to so comply would not have a Material Adverse Effect, and no action, suit,

proceeding, hearing, investigation, complaint, claim, demand, or notice has been

filed or pending, or to the Company's knowledge threatened, against the Company

alleging any failure to so comply.

Section 3.12 Title to Assets. The Company owns good and marketable

title, free and clear of all Liens (other than Liens for current taxes not yet

due and payable) to all of the properties and assets reflected on the Latest

Balance Sheet, except for the properties and assets which have been disposed of

in the ordinary course of business and the properties leased by the Company. To

the Company's knowledge, the facilities, machinery, equipment and other tangible

assets of the Company are in good operating condition and repair (except

ordinary wear and tear), are fit for their particular purpose, and are usable in

the ordinary course of business.

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The Company owns or leases under valid leases all of the assets necessary to

allow the Company to conduct its business as it is currently conducted in all

material respects.

Section 3.13 Title to Property.

(a) The Company owns no real property.

(b) Schedule 3.13 sets forth a list of all of the leases and

subleases ("Leases") and each leased and subleased parcel of real property

in which the Company has a leasehold and subleasehold interest (the

"Leased Real Property"). Each of the Leases is in full force and effect

and the Company holds a valid and existing leasehold or subleasehold

interest under each of the Leases. With respect to each Lease: (i) subject

to Bankruptcy Exceptions, the Lease is legal, valid, binding, enforceable

and in full force and effect; (ii) subject to Bankruptcy Exceptions, the

Lease will continue to be legal, valid, binding, enforceable and in full

force and effect following the Closing; and (iii) neither the Company nor,

to the Company's knowledge any other party to the Lease is in breach or

default, and no event has occurred which, with notice or lapse of time,

would constitute such a breach or default or permit termination,

modification or acceleration under the Lease.

Section 3.14 Tax Matters. (a) The Company has timely filed all Tax

Returns which are required to be filed and has paid all Taxes due and payable by

the Company on such Tax Returns or otherwise, except where the failure to file

such Tax Returns or to pay such Taxes would not have a Material Adverse Effect;

(b) all such Tax Returns are true, complete and accurate in all material

respects; (c) the Company has made available to Buyer copies of all such Tax

Returns for taxable periods ended on or after December 31, 2000; (d) no action,

suit, proceeding or audit regarding Taxes is now in progress or proposed in

writing against the Company; (e) the Company has not requested or been granted

an extension of the time for filing any Tax Return which has not yet been filed;

(f) the Company has not waived any statute of limitations in respect of Taxes or

agreed to any extension of time with respect to a Tax assessment or deficiency;

(g) the Company has withheld and paid all Taxes required to have been withheld

and paid, including Taxes withheld and paid in connection with amounts paid or

owing to any member, employee, independent contractor, creditor or other third

party; (h) the Company is not a party to any Tax sharing or similar agreement;

and (i) the Company has been treated as a partnership and not as an association

taxable as a corporation for federal income tax purposes since its inception.

Schedule 3.14 sets forth a list of all states and foreign countries in which the

Company files Tax Returns.

Section 3.15 Intellectual Property.

(a) Schedule 3.15 contains a complete and accurate list of

all (1) patented or registered Intellectual Property Rights owned, filed

or used by or on behalf of the Company, (2) pending patent applications

and applications for registrations of other Intellectual Property Rights

filed by the Company, (3) trade names and corporate names and unregistered

trademarks and service marks owned or used by the Company, (4) computer

software owned and/or used by the Company (other than mass-marketed

software with a license fee of less than $50,000), and (5) licenses or

similar agreements

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or arrangements for Intellectual Property Rights to which the Company is a

party, either as licensee or licensor. The loss or expiration of any

Intellectual Property Right or related group of Intellectual Property

Rights owned or used by the Company or any of its Subsidiaries would not

reasonably be expected to have a Material Adverse Effect.

(b) (1) The Company owns or has a license to use all of

the Intellectual Property Rights necessary for the operation of the

business of the Company as such business is currently conducted, except

for any failure to so own or have a license to use that could not

reasonably be expected to have a Material Adverse Effect, (2) no claim by

any third party contesting the validity, enforceability, use or ownership

of any of the Intellectual Property Rights has been received by the

Company or is outstanding or, to the Company's knowledge, threatened, and

(3) the Company has not received any notices of any alleged infringement

or misappropriation by any third party with respect to the Intellectual

Property.

Section 3.16 Contracts and Commitments. Schedule 3.16 sets forth a

list of all material contracts of the Company (each, a "Material Contract").

Other than the Material Contracts, the Company is not a party to or bound by,

whether written or oral any:

(a) (i) contract for the employment of any officer,

individual employee, or other person or entity on a full-time,

part-time, consulting or other basis or (ii) agreement relating to

loans to or from officers, directors or Affiliates;

(b) agreement or indenture relating to the borrowing of

money or to the mortgaging, pledging or otherwise placing a Lien on

any asset or group of assets of the Company;

otherwise;

(d) agreement with respect to the lending or investing of

funds;

(e) lease or agreement under which it is lessee of or holds

or operates any property, real or personal, owned by any other

party;

(f) lease or agreement under which it is lessor of or

permits any third party to hold or operate any property, real or

personal, owned or controlled by it;

(g) assignment, license, indemnification or agreement with

respect to any form of intangible property, including any patent,

trademark, trade name, copyright, know-how, trade secret or

confidential information;

(h) except for purchase orders for inventory in the ordinary

course of business, contract or group of related contracts with the

same party for the purchase or sale of products or services or for

future expenditures of the Company in excess of $100,000;

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(i) contract relating to the distribution, marketing or

sales of its products other than purchase orders, customer orders

and contracts involving aggregate consideration in any 12-month

period of less than $100,000; and

(j) any other agreement not entered into in the ordinary

course of business which obligates the Company in excess of $50,000

per annum or has a term remaining beyond one year from the Closing

Date.

Subject to Bankruptcy Exceptions, each Material Contract is, and will continue

to be immediately following the Closing, legal, valid, binding, enforceable and

in full force and effect. The Company, and to the Company's knowledge each other

party to the Material Contract, has performed all obligations required to be

performed by it and is not in default under or in breach of nor in receipt of

any claim of default or breach under any Material Contract, except for any such

nonperformance, breach or default that could not reasonably be expected to have

a Material Adverse Effect; and to the Company's knowledge no event has occurred

which with the passage of time or the giving of notice would result in a

default, breach or event of noncompliance under any such agreement and would

allow any other party to such agreement to terminate, modify or accelerate any

rights under any such agreement.

Section 3.17 Insurance. Schedule 3.17 lists each insurance policy

maintained by the Company with respect to its properties, assets and business.

All of such insurance policies are in full force and effect, the Company has

paid all premiums due thereon through the date of this Agreement and through the

Closing Date, and the Company is not in default with respect to its obligations

under any of such insurance policies and has not received any notification of

cancellation of any of such insurance policies. All insurance policies

applicable to the matters described in Schedule 3.17 will continue to be made

available to the Company following the Closing.

Section 3.18 Litigation. Other than routine, immaterial claims by

customers relating to customer purchases, there are no claims actions, suits,

proceedings, orders, governmental investigations or inquiries or claims pending

or, to the Company's knowledge, threatened against the Company, the Company's

assets or the equity interests of the Company, before or by any court,

governmental department, commission, board, bureau, agency or instrumentality.

The Company is in compliance with all of its obligations under any settlement

agreements pertaining to litigation settled by the Company within the last three

years, except for any non-compliance of such obligations that could not

reasonably be expected to have a Material Adverse Effect.

Section 3.19 Employees.

(A) The Company has complied and is in compliance in all material

respects with all laws relating to the employment of labor, including provisions

thereof relating to wages, hours, equal opportunity, collective bargaining and

the payment of social security and other taxes, and (B) to the Company's

knowledge no current or former employee of the Company has any claim against the

Company for (x) overtime pay, wages, salary or bonus, excluding current payroll

periods; (y) vacation time, excluding time earned in the current payroll

periods; or (z) any violation of any statute, ordinance or regulation relating

to wages, maximum hours or other

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terms or conditions of employment of such employee, including, without

limitation, any claim, or basis thereof for any action or proceeding against the

Company relating to an unfair labor practice, discrimination in employment,

sexual harassment or occupational and health safety standards. There is not now

pending any charge or complaint against the Company or any of the Company's

employees, officers or directors by the National Labor Relations Board, any

state or local labor or employment agency or any representative thereof.

Section 3.20 Employee Benefits. Neither the Company nor any

Affiliates has at any time maintained, contributed to or had any liability

(under or with respect to) and does not currently maintain, contribute to