kl02023_ex10-1.htm

 

    
      

    

     

    Exhibit 10.1

     

     

    EXECUTION
VERSION

     

     

     

     

     

     

     

    STOCK
PURCHASE AGREEMENT

     

    


     

    by and
between


     

    


     

    STEVEN
MADDEN, LTD.

    


     

    and

    


     

    The Sole
Shareholder

    


     

    of

    


     

    BIG
BUDDHA, INC.

     

     

    
 

     

    Dated as
of February 10, 2010

     

     

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

     

    TABLE
OF CONTENTS

    
       

      
        
          	 	 	Page
	 	 	 
	ARTICLE
      I 	Certain Definitions	1
	 	 	 
	ARTICLE
      II 	Purchase and
      Sale	8 
	

                      2.1

                	Purchase and Sale of
      Company Shares	8 
	    2.2	Cash Purchase
      Price.	8 
	    2.3 	Post-Closing
      Adjustment.	9 
	    2.4 	Release of Holdback
      Amount	11 
	 	 	 
	ARTICLE
      III 	Closing	12 
	    3.1	Closing
    Date	12 
	    3.2 	Certain Actions at
      Closing	12 
	 	 	 
	ARTICLE
      IV 	Representations and
      Warranties of Seller	13 
	    4.1	Organization and
      Good Standing	13 
	    4.2 	Capitalization.	13 
	    4.3 	Authorization.	14 
	    4.4 	No Conflicts;
      Consents	14 
	    4.5 	Financial
      Statements; Undisclosed Liabilities; Promotions and Allowances;
      Inventory.	14
	    4.6 	Taxes.	15 
	    4.7 	Real and Personal
      Property.	16 
	    4.8 	Intellectual
      Property.	18
	    4.9 	Contracts and
      Agreements.	20 
	    4.10 	Insurance	22 
	    4.11 	Litigation	23 
	    4.12 	Condition and
      Sufficiency of Assets	23 
	    4.13 	Compliance with Law;
      Licenses; Customs.	23 
	    4.14 	Employees.	24 
	    4.15 	Employee Benefit
      Plans.	27 
	    4.16 	Environmental
      Matters.	30 
	    4.17 	Bank Accounts and
      Powers of Attorney	31 
	    4.18 	Absence of Certain
      Changes	31 
	    4.19 	Books and
      Records	33 
	    4.20 	Transactions with
      Affiliated Persons	33 
	    4.21 	Customer and
      Supplier Relationships.	34 
	    4.22 	Absence of Certain
      Business Practices	34 
	    4.23 	Brokers and
      Finders	34 
	    4.24 	Restrictions on
      Business Activities	34 
	    4.25 	Payables	35 
	    4.26 	Receivables	35 
	    4.27 	Business
      Relations	35 
	    4.28 	Disclosure	35 
	 	 	 
	ARTICLE
      IV 	Representations and
      Warranties of Madden	35 
	    5.1 	Organization and
      Good Standing	35 


        

         

         

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	    5.2 	Authorization	36
	    5.3 	No Conflicts;
      Consents	36
	    5.4 	Litigation	36
	    5.5 	Brokers and
      Finders	36
	    5.6	Investment
      Intent	36
	 	 	 
	ARTICLE
      VI 	Covenants of
      Seller	36
	    6.1	Ordinary
      Course	37
	    6.2 	Conduct of
      Business	37
	    6.3 	Certain
      Filings	39
	    6.4 	Consents and
      Approvals	40
	    6.5 	Efforts to Satisfy
      Conditions	40 
	    6.6 	Further
      Assurances	40 
	    6.7 	Notification of
      Certain Matters	40 
	    6.8 	Closing Date
      Debt	40 
	    6.9 	Brokers and
      Finders	40 
	 	 	 
	ARTICLE
      VII 	Covenants of
      Madden	40
	    7.1	Certain
      Filings	41
	    7.2 	Efforts to Satisfy
      Conditions	41
	    7.3 	Further
      Assurances	41
	    7.4 	Notification of
      Certain Matters	41
	 	 	 
	ARTICLE
      VII 	Certain Other
      Agreements	41 
	    8.1	Certain Tax
      Matters	41 
	    8.2 	Employee
      Matters	45
	 	 	 
	ARTICLE
      IX 	Conditions Precedent
      to Obligations of Madden	46
	    9.1 	Representations and
      Warranties	46 
	    9.2 	Compliance with
      Covenants	46 
	    9.3 	Lack of Adverse
      Change	46 
	    9.4 	Update
      Certificate 	46 
	    9.5 	Balance
    Sheet	47
	    9.6 	Regulatory
      Approvals	47 
	    9.7 	Consents of Third
      Parties	47 
	    9.8 	FIRPTA
      Affidavit	47 
	    9.9 	No Violation of
      Orders	47 
	    9.10 	Employment
      Agreement	47 
	    9.11 	Transaction
      Documents	47 
	    9.12 	Other Closing
      Matters	47 
	 	 	 
	ARTICLE X	Conditions Precedent
      to Obligations of Seller	48
	    10.1	Representations and
      Warranties	48 
	    10.2 	Compliance with
      Covenants	48 
	    10.3 	Update
      Certificate	48 
	    10.4 	Regulatory
      Approvals	48 
	    10.5 	No Violation of
      Orders	48 
	    10.6 	Transaction
      Documents	48
	    10.7 	Other Closing
      Matters	48 


         

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	ARTICLE XI	[Intentionally
      omitted]	49
	 	 	 
	ARTICLE
XII	Indemnification	49
	    12.1	Survival of
      Representations, Warranties and Covenants	49 
	    12.2 	Indemnification by
      Seller.	49 
	    12.3 	

                Indemnification
      by Madden. 

              	50 
	    12.4 	Additional Seller
      Indemnification.	51 
	    12.5 	Assumption of
      Defense	52 
	    12.6 	Non-Assumption of
      Defense	52 
	    12.7 	Indemnified Party’s
      Cooperation as to Proceedings	53 
	    12.8 	Calculation of
      Losses	53 
	    12.9 	Payments Treated as
      Purchase Price Adjustment	53 
	    12.10 	Limitation on
      Indemnification	53 
	 	 	 
	ARTICLE
      XIII 	Miscellaneous	53
	    13.1 	Expenses	53 
	    13.2 	Entirety of
      Agreement	53 
	    13.3 	Notices	54
	    13.4 	Amendment	54 
	    13.5 	Waiver	54 
	    13.6 	Counterparts;
      Facsimile	54 
	    13.7 	Assignment; Binding
      Nature; No Beneficiaries	54 
	    13.8 	Headings	55 
	    13.9 	Governing Law;
      Jurisdiction	55 
	    13.10 	

                Construction 

              	55 
	    13.11 	Negotiated
      Agreement	55 
	    13.12 	Public
      Announcements	55 
	    13.13 	Remedies
      Cumulative	55 
	    13.14 	Severability	55 
	    14.15 	WAIVER OF JURY
      TRIAL	56 
	    13.16 	Right of
      Set-Off.	56
	    13.17 	Arbitration	57
	 	 	 
	 	 	 


      

    

     

     

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    STOCK
PURCHASE AGREEMENT

     

    THIS
STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of February 10, 2010, is
entered into by and between Steven Madden, Ltd., a Delaware corporation
(“Madden”), on the one hand, and Jeremy Bassan (“Seller”), on the other
hand.

     

    RECITALS

     

    WHEREAS,
Seller owns all of the issued and outstanding shares of capital stock of Big
Buddha, Inc., a California corporation (the “Company”); and

     

    WHEREAS,
Madden desires to acquire all of the issued and outstanding shares of capital
stock of the Company, and Seller desires to sell the same, on the terms and
conditions contained herein and in the Earn-Out Agreement (as defined
below).

     

    NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
agreements hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:

     

    ARTICLE
I


     

    Certain
Definitions

     

    “338(h)(10)
Election” has the meaning set forth in Section 8.1(b)(i).

     

    “338(h)(10)
Grossed-Up Payment” has the meaning set forth in Section
8.1(b)(iii).

     

    “AAA”
means the American Arbitration Association.

     

    “Additional
Working Capital Consideration” has the meaning set forth in Section
2.3(b)(i).

     

    “Adjustment
Payment Date” means a date which is within three (3) Business Days after the
Final Closing Date Balance Sheet is final, binding and conclusive.

     

    “Affiliate
Loans” means loans made to Affiliated Persons by the Company.

     

    “Affiliated
Person” means Seller, any Immediate Family Member of Seller, or any other Person
(other than the Company) that, directly or indirectly, alone or together with
others, controls, is controlled by or is under common control with the Company,
Seller or any Immediate Family Member of Seller.

     

    “Agreement”
has the meaning set forth in the preamble.

     

    “Balance
Sheet” means the unaudited balance sheet of the Company as of December 31,
2009.

     

     

     

    
      
        
        

      

      
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    “Business
Day” means any day that is not a Saturday or Sunday or a legal holiday on which
banks are authorized or required by law to be closed in New York, New
York.

     

    “Cash-On-Hand”
means all cash or cash equivalents held by the Company.

     

    “Cash
Purchase Price” has the meaning set forth in Section 2.2(a).

     

    “Closing”
has the meaning set forth in Section 3.1.

     

    “Closing
Date” has the meaning set forth in Section 3.1.

     

    “Closing
Date Balance Sheet” means the balance sheet of the Company as of the close of
business on the Closing Date.

     

    “Closing
Date Net Working Capital” has the meaning set forth in Section
2.3(a)(i).

     

    “Closing
Payment” has the meaning set forth in Section 2.2(a).

     

    “COBRA”
means Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the
Code.

     

    “Code”
means the U.S. Internal Revenue Code of 1986, as amended.

     

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

     

    “Company
IP Rights” has the meaning set forth in Section 4.8(a).

     

    “Company
Liens” has the meaning set forth in Section 2.1.

     

    “Company
Products” means all products sold, designed, marketed, licensed and/or
distributed (whether at wholesale or retail) by the Company.

     

    “Company
Shares” has the meaning set forth in Section 2.1.

     

    “Confidentiality
Agreement” means that certain Confidentiality Agreement, dated June 6, 2009,
between the Company and Madden.

     

    “Contracts”
has the meaning set forth in Section 4.9(a).

     

    “Customs
Resolution” has the meaning set forth in Section 2.4(c).

     

    “Customs
Resolution Date” has the meaning set forth in Section 2.4(c).

     

    “Debt”
means the aggregate amounts of long term and short term debt of the Company,
including, without limitation, any amounts outstanding or owing under capital
leases, notes payable to financial institutions, lines of credit, notes or
dividends payable, other than dividends set forth on Schedule 6.2(iv) of the
Disclosure Schedule, amounts due to Seller, any other notes payable, and any
prepayment penalties or expenses associated with the foregoing.

     

     

    
      
        
        

      

      
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    “Delivery
Date” has the meaning set forth in Section 2.3(a)(ii).

     

    “Disclosure
Schedule” means the disclosure schedules of Seller accompanying this
Agreement.

     

    “Dispute”
has the meaning set forth in Section 13.17.

     

    “Dispute
Notice” has the meaning set forth in Section 2.3(a)(ii).

     

    “Disputing
Party” has the meaning set forth in Section 13.17.

     

    “Earn-Out
Agreement” means the Earn-out Agreement among the Company, Seller and Madden,
which has been executed and delivered prior to or simultaneously with the
execution and delivery of this Agreement and which shall become effective as of
the Closing, attached hereto as Exhibit
A.

     

    “Earn-Out
Payment” has the meaning set forth in Section 2.2(a).

     

    “Employee
Benefit Plan” has the meaning set forth in Section 4.15(a).

     

    “Employment
Agreement” means the employment agreement between Madden and Seller, which has
been executed and delivered prior to or simultaneously with the execution and
delivery of this Agreement and which shall become effective as of the Closing,
attached hereto as Exhibit
B.

     

    “Encumbrance”
means any lien, pledge, mortgage, security interest, charge, restriction,
adverse claim or other encumbrance of any kind or nature
whatsoever.

     

    “Environment”
means soil, surface water, ground water, land, stream sediments, surface or
subsurface strata, ambient air and any environmental medium.

     

    “Environmental
Claim” means any allegation, notice of violation, action, claim, Encumbrance,
demand, order or direction (conditional or otherwise) by any Governmental Body
or any Person for personal injury (including sickness, disease or death),
property damage, damage to the Environment, nuisance, pollution, contamination
or other adverse effects on the Environment, or for fines, penalties or
restrictions resulting from or based upon (i) the existence, or the continuation
of the existence, of a Release of any Hazardous Material or other substance,
material, pollutant, contaminant, odor, audible noise, or other Release in, into
or onto the Environment; (ii) the transportation, storage, treatment or disposal
of Hazardous Materials; or (iii) the violation, or alleged violation, of any
Environmental Laws, or Licenses of or from any Governmental Body relating to
environmental matters.

     

    “Environmental
Law” means any Law that governs protection or improvement of human health or the
Environment.

     

    “ERISA”
has the meaning set forth in Section 4.15(a).

     

    “ERISA
Affiliate” has the meaning set forth in Section 4.15(a).

     

     

    
      
        
        

      

      
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    “Final
Allocation” has the meaning set forth in Section 8.1(b)(ii).

     

    “Final
Closing Date Balance Sheet” has the meaning set forth in Section
2.3(a)(iii).

     

    “Final
Prepaid Inventory Schedule” has the meaning set forth in Section
2.2(c).

     

    “Financial
Statements” means the unaudited balance sheets and statements of earnings,
shareholders’ equity and cash flows of the Company as of, and for each of the
fiscal years ended, December 31, 2009, 2008 and 2007, respectively.

     

    “GAAP”
means U.S. generally accepted accounting principles, as in effect on the date of
this Agreement, consistently applied.

     

    “Governmental
Body” means any governmental or regulatory body, agency, authority, commission,
department, bureau, court, tribunal, arbitrator or arbitral body (public or
private), or political subdivision, in any jurisdiction.

     

    “Hazardous
Materials” means without regard to amount or concentration (a) any element,
compound, gas or chemical that is defined, listed, classified or regulated as
hazardous or toxic under any Environmental Law, including, without limitation,
any material or substance that is defined as a “hazardous waste,” “hazardous
material,” “hazardous substance,” “extremely hazardous waste,” “restricted
hazardous waste,” “subject waste,” “contaminant,” “toxic waste,” “toxic
substance” or similar term under any provision of any Environmental Law; (b)
petroleum, petroleum-based or petroleum-derived products; and (c) any substance
containing polychlorinated biphenyls, asbestos, lead, urea formaldehyde or radon
gas.

     

    “Hired
Employees” has the meaning set forth in Section 8.2.

     

    “Holdback
Amount” has the meaning set forth in Section 2.2(a).

     

    “Immediate
Family Member”, with respect to any Person who is an individual, means each of
such Person’s spouse, children (whether by blood or adoption), parents and
siblings.

     

    “Indemnification
Obligations” means the respective indemnification obligations of Seller or
Madden under Article XII.

     

    “Independent
Accounting Firm” means an independent accounting firm mutually acceptable to
Madden and Seller (which accounting firm has not, within the prior twenty-four
(24) months, provided services to Madden, Seller or the Company, or any
affiliate of any of them).  If Madden and Seller are unable to agree
upon an independent accounting firm within thirty (30) days after Seller’s
delivery of a Dispute Notice to Madden, an independent accounting firm selected
by Madden (which accounting firm has not, within the prior twenty-four (24)
months, provided services to Madden or the Company, or any affiliate of either
of them) and an independent accounting firm selected by Seller (which accounting
firm has not, within the prior twenty-four (24) months, provided services to
Seller or the Company, or any affiliate of either of them) shall select an
independent accounting firm (which accounting firm has not, within
the

     

     

     

    
      
        
        

      

      
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     prior
twenty-four (24) months, provided services to Madden, Seller or the Company, or
any affiliate of any of them) and such independent accounting firm shall be the
Independent Accounting Firm.

     

    “Initial
Prepaid Inventory Schedule” has the meaning set forth in Section
2.2(c).

     

    “Intellectual
Property Rights” means all intellectual property rights,
including  trademarks, service marks, internet domain names, slogans,
logos, trade names, and the goodwill associated therewith, patents, copyrights,
in both published and unpublished works, and all registrations and applications
for any of the foregoing, rights of publicity/privacy, franchises, licenses,
proprietary know-how, proprietary trade secrets, proprietary customer lists,
proprietary vendor lists, proprietary information, proprietary processes,
proprietary formulae, proprietary computer programs and applications,
proprietary layouts, proprietary specifications, proprietary designs,
proprietary patterns, proprietary inventions, proprietary development tools and
all documentation and media constituting, describing or relating to the above,
including manuals, memoranda and records wherever created throughout the
world.

     

    “IRS”
means the U.S. Internal Revenue Service.

     

    “Knowledge”
means, (i) with respect to Seller and the Company, the knowledge, after
reasonable inquiry and at any time, of Seller; and (ii) in the case of Madden,
Edward Rosenfeld and Awadhesh Sinha.

     

    “Law”
means any law (including common law), statute, code, ordinance, rule,
regulation, permit, order, decree or other legal requirement in any
jurisdiction.

     

    “Licenses”
has the meaning set forth in Section 4.13(b).

     

    “Loss”,
in respect of any matter, means any loss, liability, cost, expense, judgment,
settlement or damage arising as a result of such matter, including reasonable
attorneys’, consultants’ and other advisors’ fees and expenses, reasonable costs
of investigating or defending any claim, action, suit or proceeding or of
avoiding the same or the imposition of any judgment or settlement and reasonable
costs of enforcing any Indemnification Obligations.

     

    “Madden”
has the meaning set forth in the preamble.

     

    “Madden
Indemnified Parties” has the meaning set forth in Section 12.2(a).

     

    “Material
Adverse Effect” means any material adverse effect on the business, operations,
assets, condition (financial or otherwise), liabilities, or results of
operations of the Company taken as a whole, other than, in each case, such
effects as may result from changes in (i) general industry conditions, but only
to the extent that the change or effect thereof on the Company is not
disproportionately more adverse than the change or effect thereof on comparable
companies or businesses in the industry in which the Company competes,
(ii) general economic conditions (including prevailing interest rates and
financial market conditions), but only to the extent that the change or effect
thereof on the Company is not disproportionately more adverse than the change or
effect thereof on comparable companies or business in the industry in
which

     

     

    
      
        
        

      

      
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    the
Company competes, (iii) applicable Laws, (iv) applicable accounting principles,
(v) acts of war or terrorism, or (vi) the public announcement of this
Agreement.

     

    “Net
Working Capital” means (x) the current assets of the Company (including, without
limitation or duplication, Cash-On-Hand, inventory (including Prepaid
Inventory), accounts receivable and prepaid expenses), less customary reserves
such as allowance for uncollectible accounts and slow-moving or obsolete
inventory, minus (y)
the current liabilities of the Company (including, without limitation or
duplication, Debt, accounts payable, accrued employee expenses, taxes payable
other than any Taxes attributable in whole or in part to a 338(h)(10) Election
or analogous elections, and the Remaining Cash), in each case, if not otherwise
defined herein, as such terms have the meanings assigned to them by
GAAP.

     

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

     

    “Notice
of Set-Off Dispute” has the meaning set forth in Section 13.16(b).

     

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

     

    “Permitted
Encumbrances” has the meaning set forth in Section 4.7(c).

     

    “Person”
means an individual, partnership, venture, unincorporated association,
organization, syndicate, corporation, limited liability company, or other
entity, trust, trustee, executor, administrator or other legal or personal
representative or any government or any agency or political subdivision
thereof.

     

    “Post-Closing
Working Capital Adjustment” has the meaning set forth in Section
2.3(b).

     

    “Pre-Closing
Period” means all taxable periods ending on or before the Closing Date and the
portion ending on or before the Closing Date of any taxable period that includes
(but does not begin or end on) the Closing Date.

     

    “Prepaid
Inventory” has the meaning set forth in Section 2.2(c).

     

    “Prepaid
Inventory Expenses” has the meaning set forth in Section 2.2(c).

     

    “Prime
Rate” shall mean the rate of interest of The JPMorgan Chase Bank (or its
successor and assign) announces from time to time as its prime lending rate as
then in effect, or if no such rate is announced by The JPMorgan Chase Bank (or
its successor or assign), the prime lending rate announced by a New York City
money center bank selected by Madden and reasonably acceptable to
Seller.

     

    “Prior
Disclosure” has the meaning set forth in Section 2.4(c).

     

    “Purchase
Price Accounts” has the meaning set forth in Section 2.2(b).

     

    “Real
Property” has the meaning set forth in Section 4.7(a).

     

     

    
      
        
        

      

      
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    “Real
Property Documents” has the meaning set forth in Section 4.7(a).

     

    “Real
Property Interests” has the meaning set forth in Section 4.7(a).

     

    “Release”
means any releasing, spilling, leaching, pumping, leaking, pouring, emitting,
emptying, discharging, depositing, injecting, escaping, dumping, migrating or
disposing, whether intentional or otherwise, of any Hazardous Material into the
Environment.

     

    “Relocation
Payment” has the meaning set forth in Section 8.2.

     

    “Remaining
Cash” means cash in an amount equal to two hundred and twelve thousand five
hundred and forty-six dollars ($212,546), which shall be left in the Company
following the Closing to fund the payment of certain bonuses and severance
amounts, as set forth on a schedule previously provided by Seller to
Madden.

     

    “Returns”
means returns, reports, and information statements with respect to Taxes
required to be filed with the IRS or any other Governmental Body, domestic or
foreign, including consolidated, combined and unitary tax returns, and returns
required in connection with any Employee Benefit Plan.

     

    “Revised
Closing Date Balance Sheet” has the meaning set forth in Section
2.3(a)(ii).

     

    “Rules”
has the meaning set forth in Section 13.17.

     

    “SEC”
means the U.S. Securities and Exchange Commission.

     

    “Securities
Act” means the Securities Act of 1933, as amended.

     

    “Seller”
has the meaning set forth in the preamble.

     

    “Seller
Indemnified Parties” has the meaning set forth in Section 12.3(a).

     

    “Services
Agreement” means the Services Agreement among Seller, the Company and Madden,
which has been executed and delivered prior to or simultaneously with the
execution and delivery of this Agreement and which shall become effective as of
the Closing, attached hereto as Exhibit
C.

     

    “Set-Off
Notice” has the meaning set forth in Section 13.16(b).

     

    “Set-Off
Review Period” has the meaning set forth in Section 13.16(b).

     

    “Straddle
Period” has the meaning set forth in Section 8.1(a)(ii).

     

    “Tax” or
“Taxes” means taxes, fees, levies, duties, tariffs, imposts and governmental
impositions or charges of any kind payable to any Governmental Body in any
jurisdiction, including (i) income, franchise, profits, gross receipts, ad valorem, net worth, value
added, sales, use, service, real or personal property, special assessments,
capital stock, license, payroll, withholding, employment, estimated, social
security, workers’ compensation,

     

     

     

    
      
        
        

      

      
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    unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes, and (ii) interest,
penalties, additional taxes and additions to tax imposed with respect
thereto.

     

    “Total
Prepaid Inventory Amount” has the meaning set forth in Section
2.2(c).

     

    “Transaction
Documents” means this Agreement, the Employment Agreement, the Earn-Out
Agreement and the Services Agreement.

     

    “U.S.”
means the United States of America.

     

    “U.S.
Customs” has the meaning set forth in Section 2.4(c).

     

    “Working
Capital Refund” has the meaning set forth in Section 2.3(b)(ii).

     

    “Working
Capital Settlement” has the meaning set forth in Section 2.4(a).

     

    ARTICLE
II


     

    Purchase and
Sale

     

    2.1   Purchase and Sale of Company
Shares.  Subject to and upon the terms and conditions
hereinafter set forth, at the Closing, and in reliance upon the representations
and warranties contained in this Agreement or made pursuant hereto, Seller
hereby agrees to sell, assign, transfer and deliver to Madden, and Madden hereby
agrees to purchase from Seller, all of the issued and outstanding shares of
capital stock of the Company as set forth in Section 2.1 of the Disclosure
Schedule (collectively the “Company Shares”), free and clear of all
Encumbrances, other than restrictions on transfer under the Securities Act or
other applicable securities laws or the Organizational Documents (collectively,
the “Company Liens”).

     

    2.2   Cash
Purchase Price.

     

    (a)   In
consideration of the aforesaid sale, assignment, transfer and delivery of the
Company Shares, Madden shall, (i) at the Closing, pay or cause to be paid to
Seller an amount (the “Closing Payment”), in cash, equal to (A) eleven million
dollars ($11,000,000), plus (B) the Total Prepaid Inventory Amount, calculated
in accordance with Section 2.2(c) below (clauses (A) and (B) collectively, the
“Cash Purchase Price”), less (C) one million dollars ($1,000,000) (the “Holdback
Amount”), and (ii) at such times as are set forth in the Earn-Out Agreement, pay
to Seller all amounts (collectively, the “Earn-Out Payment”) required to be paid
pursuant to the terms of the Earn-Out Agreement.  The Cash Purchase
Price may be adjusted after payment of the Closing Payment as provided for in
Section 2.3.  The Holdback Amount (which shall be deposited by Madden
in a segregated interest-bearing money market account at a national banking
institution) shall, subject to the provisions hereof, be available as a
nonexclusive means (i) to fulfill Seller’s obligations pursuant to Section 2.3
and (ii) to fulfill Seller’s obligations pursuant to Section 12.4(b) or to reach
a Customs Resolution (as defined below), and shall be released to Seller
pursuant to Section 2.4.

     

     

    
      
        
        

      

      
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    (b)   All
payments of cash pursuant to Section 2.2(a) shall be made in immediately
available funds by wire transfer to an account or accounts (the “Purchase Price
Accounts”) specified by Seller at least two (2) Business Days prior to the date
such payments are to be made.

     

    (c)   No later
than two (2) Business Days prior to the Closing Date, Seller shall deliver to
Madden a schedule reasonably acceptable to Madden (the “Initial Prepaid
Inventory Schedule”) setting forth in reasonable detail all amounts (the
“Prepaid Inventory Expenses”) expected to have been actually paid by Seller as
of the Closing Date in respect of (i) all prepaid deposits for inventory and
(ii) all inventory shipped from the FOB shipping point within ten (10) days
prior to the Closing Date (clauses (i) and (ii) collectively, “Prepaid
Inventory”).  No later than 9:00 a.m., prevailing local time, on the
Closing Date, Seller shall deliver to Madden a schedule reasonably acceptable to
Madden (the “Final Prepaid Inventory Schedule”) setting forth (A) any updates to
the Initial Prepaid Inventory Schedule necessary to make such schedule true and
correct as of the Closing Date and (B) the total amount actually paid by Seller
as of the Closing Date in respect of the Prepaid Inventory Expenses (the “Total
Prepaid Inventory Amount”).

     

    2.3   Post-Closing
Adjustment.

     

    (a)   Closing
Date Balance Sheet.

     

    (i)   Preparation of Closing Date
Balance Sheet.  As promptly as practicable, but in any event
within seventy-five (75) days after the Closing Date, Madden shall prepare and
deliver to Seller (A) the Closing Date Balance Sheet, which shall be prepared as
of the Closing Date in accordance with GAAP applied on a basis consistent with
the preparation of the balance sheet of the Company as of the Closing Date which
was delivered by Seller to Madden on the date hereof, except to the extent that
such balance sheet was not prepared in accordance with GAAP, and (B) a
calculation of Net Working Capital as of the close of business on the Closing
Date based upon the Closing Date Balance Sheet (the “Closing Date Net Working
Capital”), which shall explain in reasonable detail such calculation of Closing
Date Net Working Capital.

     

    (ii)   Closing Date Balance Sheet
Disputes.  Seller may dispute the amount of the Closing Date
Net Working Capital reflected on the Closing Date Balance Sheet by sending
written notice (a “Dispute Notice”) to Madden within thirty (30) days after
Madden’s delivery of the Closing Date Balance Sheet and Closing Date Net Working
Capital calculation to Seller (such delivery date, the “Delivery
Date”).  The Dispute Notice shall identify, in reasonable detail, each
disputed item on the Closing Date Balance Sheet, specifying the amount of such
dispute and setting forth the basis for such dispute.  In the event of
such a dispute, Madden and Seller shall attempt in good faith to reconcile the
items identified in the Dispute Notice and any related items that may arise
during the process described in this Section 2.3(a) (including providing
information that is reasonably requested to the other party), and any resolution
by them as to any disputed items shall be final, binding and conclusive on the
parties and shall be evidenced by a writing signed by Madden and Seller,
including a revised Closing Date Balance Sheet (together with a revised
calculation of the Closing Date Net Working

     

     

    
      
        
        

      

      
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    Capital
based upon such revised Closing Date Balance Sheet, the “Revised Closing Date
Balance Sheet”) reflecting such resolution.  If Madden and Seller are
unable to reach such resolution within twenty (20) days after Seller’s delivery
of the Dispute Notice to Madden, then Madden and Seller shall promptly submit
any remaining disputed items to an Independent Accounting Firm for final binding
resolution.  If any remaining disputed items are submitted to an
Independent Accounting Firm for resolution (A) each party will furnish to the
Independent Accounting Firm such workpapers and other documents and information
relating to the remaining disputed items as the Independent Accounting Firm may
reasonably request and are available to such party, and each party will be
afforded the opportunity to present to the Independent Accounting Firm any
material relating to the disputed items and to discuss the resolution of the
disputed items with the Independent Accounting Firm; (B) each party will use its
good faith commercially reasonable efforts to cooperate with the resolution
process so that the disputed items can be resolved within forty-five (45) days
after submission of the disputed items to the Independent Accounting Firm;
(C) the determination by the Independent Accounting Firm, as set forth in a
written notice to Madden and Seller (which written notice shall include a
Revised Closing Date Balance Sheet), shall, subject to the provisions of Section
2.3(a)(iii), be final, binding and conclusive on the parties absent manifest
error; and (D) the fees and disbursements of the Independent Accounting
Firm shall be allocated by the Independent Accounting Firm between Madden and
Seller in the same proportion that the aggregate dollar amount of the disputed
items submitted to the Independent Accounting Firm that are unsuccessfully
disputed by Seller (as finally determined by the Independent Accounting Firm)
bears to the total amount of all disputed items submitted to the Independent
Accounting Firm.  By way of illustration, if Seller disputes $500,000
of items, and the Independent Accounting Firm determines that Seller’s position
is correct as to $400,000 of the disputed items, then Madden would bear 80
percent and Seller would bear 20 percent of such fees and
disbursements.

     

    (iii)   Final Closing Date Balance
Sheet.  The Closing Date Balance Sheet, or, if one has been
adopted pursuant to Section 2.3(a)(ii), the Revised Closing Date Balance Sheet,
shall be deemed to be final, binding and conclusive on Madden and Seller (the
“Final Closing Date Balance Sheet”) upon the earliest of (A) the failure of
Seller to deliver to Madden the Dispute Notice within thirty (30) days after the
Delivery Date; (B) the resolution by Madden and Seller of all disputes, as
evidenced by the Revised Closing Date Balance Sheet; and (C) the resolution by
the Independent Accounting Firm of all disputes, as evidenced by the Revised
Closing Date Balance Sheet.  Any adjustment to the Cash Purchase Price
based on the Final Closing Date Balance Sheet shall be made in accordance with
Section 2.3(b).

     

    (b)   Post-Closing Working Capital
Adjustment.  Upon the Final Closing Date Balance Sheet being
deemed final, binding and conclusive pursuant to Section 2.3(a)(iii), an
adjustment to the Cash Purchase Price shall be made as follows (the
“Post-Closing Working Capital Adjustment”):

     

    (i)   In the
event that the Closing Date Net Working Capital reflected on the Final Closing
Date Balance Sheet exceeds two million one hundred fifty-seven thousand seven
hundred forty-six dollars and fifty-two cents ($2,157,746.52) (the
“Net

     

     

    
      
        
        

      

      
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    Working
Capital Target”), then Madden shall be obligated to pay Seller on the Adjustment
Payment Date the Additional Working Capital Consideration (as defined below) in
immediately available funds, at Seller’s option, by certified or official bank
check or by wire transfer to an account specified, in writing, by
Seller.  The “Additional Working Capital Consideration” means the
amount by which the Closing Date Net Working Capital reflected on the Final
Closing Date Balance Sheet exceeds the Net Working Capital Target.

     

    (ii)   In the
event that the Closing Date Net Working Capital reflected on the Final Closing
Date Balance Sheet is less than the Net Working Capital Target, then Seller
shall be obligated to pay Madden on the Adjustment Payment Date the Working
Capital Refund (as defined below) in immediately available funds, at Madden’s
option, by certified or official bank check or by wire transfer to an account
specified, in writing, by Madden; provided, however, that any
payments owed by Seller to Madden pursuant to this Section 2.3(b)(ii) shall
first be satisfied by a deduction from the Holdback Amount.  The
“Working Capital Refund” means the amount by which the Closing Date Net Working
Capital on the Final Closing Date Balance Sheet is less than the Net Working
Capital Target.

     

    2.4   Release of Holdback
Amount.  The Holdback Amount (together with any interest or
other income earned thereon) shall be released to Seller as
follows:

     

    (a)   If the
Customs Resolution Date (as hereinafter defined) occurs prior to the final
settlement of the Post-Closing Working Capital Adjustment (the “Working Capital
Settlement”), then (i) five hundred thousand dollars ($500,000) of the Holdback
Amount (together with any interest or other income earned thereon) shall be
released to Seller (or to Seller’s designee) no later than three (3) Business
Days after the Customs Resolution Date and (ii) the remaining five hundred
thousand dollars ($500,000) of the Holdback Amount (together with any interest
or other income earned thereon) shall continue to be held by Madden until the
Working Capital Settlement.  If, pursuant to Section 2.3, the Holdback
Amount exceeds the amount of the Working Capital Refund, then the excess amount
of the Holdback Amount (together with any interest or other income earned
thereon) shall be returned to Seller in accordance with Section 2.2(a) no later
than three (3) Business Days following the Working Capital
Settlement.

     

    (b)   If the
Working Capital Settlement occurs prior to the Customs Resolution Date, then the
Holdback Amount (together with any interest or other income earned thereon)
shall first be used, to the extent necessary, to fulfill Seller’s obligations
pursuant to Section 2.3 and the remaining funds constituting the Holdback Amount
(together with any interest or other income earned thereon) shall continue to be
held by Madden until the Customs Resolution Date and shall be released to Seller
(or to Seller’s designee) within three (3) Business Days following the Customs
Resolution Date.

     

    (c)   For
purposes of this Agreement, the term “Customs Resolution” shall mean the
delivery by Seller to Madden of (i) a copy of a notice received by Seller from
the Fines, Penalties and Forfeiture Office of the U.S. Bureau of Customs and
Border Protection (“U.S. Customs”) stating (A) that U.S. Customs has completed
its investigation relating to that certain

     

     

    
      
        
        

      

      
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    prior
disclosure statement filed by Seller with U.S. Customs on December 4, 2009 (the
“Prior Disclosure”) and that such Prior Disclosure has been accepted and (B) the
total amount of interest and penalties (if any) payable by Seller to U.S.
Customs in resolution of the matter addressed in the Prior Disclosure, or (ii)
to the extent a written notice as described in (i) is not so delivered to
Seller, evidence reasonably satisfactory to Madden that Seller has been
otherwise notified of the matters in clauses (A) and (B) above.  The
term “Customs Resolution Date” shall mean the date on which the Customs
Resolution occurs.

     

    ARTICLE
III


     

    Closing

     

    3.1   Closing
Date.  Subject to the fulfillment or waiver by the beneficiary
thereof of the agreements and conditions precedent set forth in Articles IX and
X, the closing of the transactions contemplated hereby (the “Closing”) shall be
held at any time simultaneous with or following the satisfaction or waiver of
all conditions to closing set forth in Articles IX and X of this Agreement, on
such date as may be agreed upon by Madden and Seller, at 10:00 a.m.,
prevailing local time, at the offices of Kramer Levin Naftalis & Frankel
LLP, 1177 Avenue of the Americas, New York, NY 10036, or on such other date or
at such other time or place as may be agreed to in writing by Madden and
Seller.  The date on which the Closing actually occurs is herein
referred to as the “Closing Date.”

     

    3.2   Certain
Actions at Closing.  At the Closing:

     

    (a)   Seller
shall deliver, or cause to be delivered, to Madden stock certificates
representing all of the Company Shares, accompanied by stock powers duly
endorsed in blank or duly executed instruments of transfer;

     

    (b)   Madden
shall remit the Closing Payment to the Purchase Price Accounts pursuant to the
provisions of this Agreement;

     

    (c)   to the
extent not previously executed and/or delivered to Madden, Seller shall execute
and/or deliver to Madden, or cause to be executed and/or delivered to Madden,
each of the Transaction Documents and any other document, certificate, affidavit
or other instrument required to be executed and/or delivered by Seller and the
Company under this Agreement at or prior to the Closing;

     

    (d)   to the
extent not previously executed and/or delivered to Seller, Madden shall execute
and/or deliver to Seller, each of the Transaction Documents and any other
document, certificate or other instrument required to be executed and/or
delivered by Madden under this Agreement at or prior to the Closing;
and

     

    (e)   Seller
shall be liable for and shall pay all stamp, transfer and similar Taxes, direct
or indirect, if any, attributable to the transfer of the Company Shares and, in
connection therewith, shall affix any necessary transfer stamps to the stock
certificates (or stock transfer powers) evidencing the Company
Shares.

     

     

    
      
        
        

      

      
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    ARTICLE
IV


     

    Representations and
Warranties of Seller

     

    Seller
hereby represents and warrants to Madden as follows:

     

    4.1   Organization and Good
Standing.  The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
California.  The Company has full corporate power and authority to own
or lease its properties and to carry on its business as it is now being
conducted.  The Company is duly qualified to transact business and is
in good standing in each jurisdiction wherein the nature of the business done or
the property owned, leased or operated by it requires such qualification, except
where the failure to be so qualified would not be reasonably likely to have a
Material Adverse Effect.  Copies of the Articles of Incorporation and
Bylaws of the Company (the “Organizational Documents”) that have been made
available to Madden are true, complete and accurate in all
respects.  The corporate minutes and corporate records of the Company
that have been made available to Madden are true, complete and accurate in all
respects.  The stock register and transfer records of the Company that
have been made available to Madden are true, complete and accurate in all
respects.  The Company does not have any direct or indirect
subsidiaries and does not own any ownership or equity interest in any
Person.

     

    4.2   Capitalization.

     

    (a)   The
capitalization of the Company is as set forth in Section 2.1 of the Disclosure
Schedule.  The Company Shares are all of the issued and outstanding
shares of the Company and have been duly authorized and are validly issued and
outstanding, fully paid and non-assessable.  Seller owns, beneficially
and of record, and has valid and marketable title to, and the right to transfer
to Madden, all of the Company Shares set forth in Section 2.1 of the Disclosure
Schedule, free and clear of any and all Encumbrances other than Company
Liens.  At the Closing Madden will own, and will have valid and
marketable title to, all of the issued and outstanding shares of capital stock
of the Company, free and clear of any and all Encumbrances other than the
Company Liens.  No Person other than Madden has any written or oral
agreement, arrangement, understanding or option for, or any right or privilege
(whether by law, preemption or contract) that is or is capable of becoming an
agreement, arrangement, understanding or option for, the purchase or acquisition
from the Company or any Person of any shares of capital stock or other
securities of the Company.

     

    (b)   There are
no outstanding or authorized options, warrants, purchase agreements,
participation agreements, subscription rights, conversion rights, exchange
rights or other securities, contracts, arrangements, understanding or
commitments that could require the Company to issue, sell or otherwise cause to
become outstanding any of its authorized but unissued shares of capital stock or
any securities convertible into, exchangeable for or carrying a right or option
to purchase shares of capital stock, or to create, authorize, issue, sell or
otherwise cause to become outstanding any new class of capital
stock.  None of the issued and outstanding shares of capital stock of
the Company have been issued in violation of any rights of any Person or in
violation of the registration requirements of any applicable jurisdiction’s
securities Laws.

     

     

     

    
      
        
        

      

      
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    4.3   Authorization.

     

    (a)   Seller
has full legal capacity to enter into and carry out Seller’s obligations under
this Agreement and the other applicable Transaction Documents, and to consummate
the transactions contemplated hereby and thereby, and is not under any
prohibition or restriction, contractual, statutory or otherwise, against doing
so.  Each of the Transaction Documents has been duly executed and
delivered by Seller and, assuming due authorization, execution and delivery by
the other parties thereto, constitutes legal, valid and binding obligations of
Seller, enforceable against Seller in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other laws affecting the rights of creditors generally
and by general principles of equity.

     

    (b)   The
Services Agreement and the Earn-Out Agreement have been duly executed and
delivered by the Company and, assuming due execution and delivery by the other
parties thereto, constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other laws affecting the rights of creditors generally
and by general principles of equity.

     

    4.4   No Conflicts;
Consents.  Except as set forth in Section 4.4 of the Disclosure
Schedule, neither the execution and delivery by Seller or the Company of this
Agreement or any of the Transaction Documents to which Seller or the Company is
a party, nor the consummation of the transactions contemplated hereby or
thereby, will, with or without notice or lapse of time or both, directly or
indirectly, (i) conflict with or violate the Organizational Documents of, or
resolutions of the directors or shareholders of, the Company, (ii) conflict
with, violate, result in the breach of any term of, result in the acceleration
of performance of any obligation under, constitute a default under, give any
Person the right to cancel, terminate or modify, or require the consent or
approval of or any notice to or filing with any third party or Governmental Body
under (x) any note, mortgage, deed of trust, lease or other agreement or
instrument to which Seller or the Company is a party or by which Seller or the
Company or any of their respective properties or assets are bound, or (y) any
Law, writ, injunction, or License of any Governmental Body having jurisdiction
over Seller, the Company or their respective properties or assets, or (iii)
create an Encumbrance on any of the shares of capital stock or properties or
assets of the Company, including, without limitation, the Company
Shares.

     

    4.5   Financial Statements;
Undisclosed Liabilities; Promotions and Allowances;
Inventory.

     

    (a)   Except as
set forth in Section 4.5(a) of the Disclosure Schedule, the Financial Statements
(true, complete and accurate copies of which have been previously made available
to Madden) (i) have been prepared from the books and records of the Company on a
consistent basis throughout the periods covered thereby, subject, in the case of
any interim Financial Statements, to the absence of footnote disclosure and
normal year-end adjustments and (ii) fairly present in all material respects the
financial condition of the Company as at their respective dates and the results
of operations and cash flows of the Company for the periods covered
thereby.  Except as set forth in Section 4.5(a) of the Disclosure
Schedule, the statements

     

     

    
      
        
        

      

      
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    of
operations included in the Financial Statements do not include any item of
special or non-recurring income, except as specifically identified
therein.

     

    (b)   As of the
date of the Balance Sheet, other than those (i) set forth in Section 4.5(b) of
the Disclosure Schedule or (ii) which are reflected or reserved against on the
Balance Sheet, the Company does not have any liabilities, debts or obligations
(whether absolute, accrued, contingent or otherwise).  Except as set
forth in Section 4.5(b) of the Disclosure Schedule, since the date of the
Balance Sheet, the Company (i) has conducted its business in the ordinary course
of business consistent with past practice and in a commercially reasonable
manner, (ii) has not incurred any liabilities, debts or obligations (whether
absolute, accrued, contingent or otherwise), except for liabilities incurred in
the ordinary course of business consistent with past practice and in a
commercially reasonable manner, which such liabilities are consistent with the
representations and warranties contained in this Agreement and (iii)
notwithstanding anything to the contrary in clause (i) or (ii) of this sentence,
has not incurred any liability, debt or obligation (whether absolute, accrued,
contingent or otherwise) to or of any Affiliated Person or made any Affiliate
Loans.  Since the date of the Balance Sheet, no event has occurred or
facts or circumstances exist which, individually or in the aggregate, has had or
is reasonably likely to result in a Material Adverse Effect.

     

    (c)   Section
4.5(c) of the Disclosure Schedule sets forth the terms of all return, markdown,
promotion, co-op advertising and other similar programs and allowances currently
offered by the Company to any of its customers.  As of the date
hereof, the Company has not established reserves regarding the
foregoing.

     

    (d)   Except as
set forth in Section 4.5(d) of the Disclosure Schedule, the inventory reflected
in the Financial Statements or thereafter acquired has been determined and
valued in accordance with past practice as reflected in the Financial Statements
and the books and records of the Company at the lower of cost or
market.  Except as set forth in Section 4.5(d) of the Disclosure
Schedule:  (i) the inventory of the Company (whether raw materials,
work-in-process, or other inventory) is salable in the ordinary course of
business consistent with past practice without any material problems;
(ii) the finished goods inventories of the Company consist of items which
are good and merchantable (as defined in the Uniform Commercial Code of the
State of New York) at normal mark-up in the ordinary course of business
consistent with past practice; and (iii) no previously sold inventory is subject
to refunds materially in excess of that historically experienced by the
Company.  All commitments or orders for work-in-process were entered
into in the ordinary course of business consistent with past practice and in a
commercially reasonable manner.  The Company does not sell any
inventory on consignment such that unsold products would be subject to return or
have title to or risk of loss with respect to any products in the possession of
others.

     

    4.6   Taxes.

     

    (a)   Except as
set forth in Section 4.6(a) of the Disclosure Schedule, the Company has timely
filed with the appropriate taxing authorities all material Returns required to
be filed by it (taking into account any extension of time to
file).  The information on such Returns is complete and accurate in
all material respects. The Company has paid all material Taxes (whether or not
shown on any Return) due and payable, except for any Taxes that result
by

     

     

    
      
        
        

      

      
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    reason of
a 338(h)(10) Election or analogous elections made pursuant to Section
8.1(b).  Except as set forth in Section 4.6(a) of the Disclosure
Schedule, there are no liens for Taxes (other than for Permitted Encumbrances)
upon the properties or assets of the Company.

     

    (b)   Except as
set forth in Section 4.6(b) of the Disclosure Schedule, no unpaid (or unreserved
in accordance with GAAP) and unresolved deficiencies for Taxes have been
claimed, proposed or assessed, in each case in writing, by any taxing authority
or other Governmental Body with respect to the Company for any Pre-Closing
Period, and, to the Knowledge of Seller and the Company, there are no pending or
threatened audits, investigations, claims or assessments, in each case in
writing, for or relating to any liability in respect of Taxes of or with
respect to the Company.  Except as set forth in Section 4.6(b) of the
Disclosure Schedule, the Company has not requested any extension of time within
which to file any currently unfiled Returns in respect of any Taxes and no
waiver or extension of a statutory period of limitations for the assessment of
any Taxes is in effect with respect to the Company.

     

    (c)   Except as
set forth in Section 4.6(c) of the Disclosure Schedule, (i) except for any Taxes
that result by reason of a 338(h)(10) Election made pursuant to Section 8.1(b),
the Company has made provision for all Taxes payable by it with respect to any
Pre-Closing Period which have not been paid prior to the Closing Date and the
provisions for Taxes with respect to the Company for the Pre-Closing Period
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income); (ii) the Company has withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid to any employee, independent contractor, creditor, shareholder or other
third party; (iii) all material elections with respect to Taxes materially
affecting the Company as of the date hereof are set forth in Section 4.6(c)(iii)
of the Disclosure Schedule; (iv) there are no written advance tax rulings
in respect of any Tax issued to or pending between or with respect to the
Company and any taxing authority or any other written agreements with a taxing
authority with regard to any Tax; (v) the tax year end for the Company is
December 31; (vi) the Company is not liable for Taxes of any other Person, and
is not currently under any contractual obligation to or a party to any tax
sharing agreement or any other agreement providing for payments by the Company
with respect to Taxes; (vii) the Company is not a party to any written
joint venture, partnership or other arrangement or contract which could be
treated as a partnership for income tax purposes; (viii) the Company has not, as
of the Closing Date, agreed and will not be required, as a result of a change in
method of accounting, to include any adjustment under any provision of U.S.,
state, local or foreign law in taxable income for any period after the Closing
Date; (ix) Section 4.6(c)(ix) of the Disclosure Schedule contains a list of all
jurisdictions in which the Company files Returns, and no written claim has ever
been made by a taxing authority in a jurisdiction where the Company does not
currently file Returns that the Company is or may be subject to taxation by that
jurisdiction; (x) the Company has not filed or been included in a combined,
consolidated or unitary return (or substantial equivalent thereof) of any
Person; (xi) the Company has not engaged in any transaction for which its
participation is required to be disclosed under Treasury Regulation
§ 1.6011-4; and (xii) since its inception, the Company has qualified for
and has properly had in effect an election (which has not terminated) to be an S
corporation within the meaning of Section 1361(a)(1) of the Code (and any
corresponding provision of applicable state law).

     

    4.7   Real and Personal
Property.

     

     

    
      
        
        

      

      
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    (a)   Section
4.7(a) of the Disclosure Schedule contains a complete list by address of all
real property owned, leased, operated or used by the Company (collectively, the
“Real Property”), indicating the nature of the interest of the Company therein
(collectively, the “Real Property Interests”).  To the Knowledge of
Seller and the Company, no litigation, condemnation, expropriation, eminent
domain or similar proceeding affecting all or any portion of any Real Property
is pending or threatened.  The Company has furnished to Madden true,
correct and complete copies of all documents relating to the Real Property
Interests, including, without limitation, all leases, licenses, deeds, evidences
of ownership, evidences of possession, amendments, estoppel certificates,
subordination, non disturbance and attornment agreements and assignment and/or
assumption agreements (collectively, the “Real Property Documents”), including
rent rolls and operating expense statements (if applicable).  Except
as set forth in Section 4.7(a) of the Disclosure Schedule, the Company is not a
party to any oral agreements with respect to any Real Property Interest and, to
the Knowledge of Seller and the Company, there are no other oral agreements with
respect to any Real Property Interest.  Except as set forth in Section
4.7(a) of the Disclosure Schedule, no Real Property Document requires that the
consent or approval of any third party be obtained in order to consummate the
transactions contemplated by this Agreement, nor do such transactions violate
any Real Property Document or cause the Company to be in default under any Real
Property Document.  Except as set forth in Section 4.7(a) of the
Disclosure Schedule, neither of the Company nor Seller has given or received any
notice of default under any Real Property Document, and neither the Company nor
Seller is in default thereunder.  Except as set forth in Section
4.7(a) of the Disclosure Schedule, no option to extend, renew, surrender,
terminate or purchase arising under any Real Property Document has been
exercised by the Company or, to the Knowledge of Seller and the Company, by any
other party thereto.  No guaranty or other undertaking with respect to
the performance of any obligation arising under any Real Property Document has
been delivered by the Company.  Except as set forth in Section 4.7(a)
of the Disclosure Schedule, all service, management, leasing and other similar
agreements with respect to any Real Property Interest and to which the Company
is a party are terminable upon no more than thirty (30) days’ prior
notice.

     

    (b)   Except as
set forth in Section 4.7(b) of the Disclosure Schedule, the Company has good and
marketable title to all of the properties and assets, real and personal,
tangible and intangible, it owns or purports to own, including those reflected
on its books and records and on the Balance Sheet (except those sold or disposed
of subsequent to the date thereof in the ordinary course of business consistent
with past practice and in a commercially reasonable manner), free and clear of
all Encumbrances, except for Permitted Encumbrances.  Except as set
forth in Section 4.7(b) of the Disclosure Schedule, the Company has a valid and
enforceable fee, leasehold, license or other interest in all of the other
properties and assets, real or personal, tangible or intangible, which are used
in the operation of the business of the Company as presently conducted as of the
Closing Date, free and clear of all Encumbrances, except for Permitted
Encumbrances.  Except as set forth in Section 4.7(b) of the Disclosure
Schedule, none of the properties or assets owned, leased, operated or used by
the Company is subject to any lease, sublease, license, sublicense or other
agreement granting to any other Person any right to the use, occupancy or
enjoyment of such property or any portion thereof and no leasehold interest
of the Company is proposed to be surrendered or terminated.

     

    (c)   As used
herein, “Permitted Encumbrances” means (i) liens for Taxes not yet due and
payable or which are being diligently contested in good faith by
appropriate

     

     

    
      
        
        

      

      
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    proceedings
and as to which appropriate reserves (to the extent required by GAAP) have been
established in the books and records of the Company; (ii) mechanics’,
materialmen’s, carriers’, warehousemen’s, landlord’s and similar liens securing
obligations not yet delinquent or which are being diligently contested in good
faith by appropriate proceedings and as to which appropriate reserves (to the
extent required by GAAP) have been established in the books and records of the
Company; (iii) such imperfections of title, Encumbrances and easements,
restrictive covenants and rights of way as do not and will not materially
detract from or interfere with the use of the properties subject thereto or
affected thereby, or otherwise materially impair business operations involving
such properties; and (iv) platting, subdivision, zoning, building and other
similar legal requirements affecting the building, structures and other
improvements located on any real property whether or not of record.

     

    (d)   With
respect to each lease of Real Property:  (i) all base rents,
percentage rents (if owing in accordance with the terms of the applicable lease)
and additional rents due and owing as of the date hereof have been paid, (ii) no
waiver, indulgence or postponement of the lessee’s obligations has been granted
by the lessor, (iii) there exists no event of default or event by the Company
or, to the Knowledge of Seller and the Company, by any other party under the
lease, occurrence, condition or act by the Company or, to the Knowledge of
Seller and the Company, by any other party under the lease which, with the
giving of notice, the lapse of time or the happening of any other event or
condition, would become a default under the lease, and (iv) to the Knowledge of
Seller and the Company, all of the covenants to be performed by any other party
under the lease have been fully performed.

     

    4.8   Intellectual
Property.

     

    (a)   Except as
set forth in Section 4.8(a) of the Disclosure Schedule, the Company owns, or has
the valid right to use or license, without Encumbrances, all Intellectual
Property Rights as used in its business as presently conducted and as it is
expected to be conducted as of the Closing (such Intellectual Property Rights
hereinafter referred to as the “Company IP Rights”).  The Company IP
Rights are sufficient to conduct the business of the Company as presently
conducted as of the Closing Date.

     

    (b)   Except as
set forth in Section 4.8(b) of the Disclosure Schedule, the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will not (i) constitute a breach of any instrument or
agreement governing any Company IP Rights, (ii) cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any Company
IP Rights or (iii) impair the right of the Company or, after the Closing,
Madden, to own, use or license any Company IP Rights or portion
thereof.

     

    (c)   Except as
set forth in Section 4.8(c) of the Disclosure Schedule, there are no royalties,
honoraria, fees or other payments payable by the Company to any Person for the
use by the Company of any Company IP Rights.

     

    (d)   Except as
set forth in Section 4.8(d) of the Disclosure Schedule, (i) to the Knowledge of
Seller and the Company, the conduct of the business of the Company, as presently
conducted, does not violate or infringe any Intellectual Property Rights of any
other Person, and (ii) there is no pending or, to the Knowledge of Seller and
the Company, threatened claim or

     

     

    
      
        
        

      

      
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    litigation
contesting the validity, ownership, registrability, right to use or right to
license any Company IP Rights, nor, to the Knowledge of Seller and the Company,
is there any valid or reasonable basis for any such claim, nor has the Company
or Seller received any notice asserting that any Company IP Rights or the
proposed use, registration or license thereof infringes or otherwise violates,
or will infringe or otherwise violate, the rights of such Person.

     

    (e)   Except as
set forth in Section 4.8(e)-1 of the Disclosure Schedule, the Company has taken
reasonable steps to safeguard and maintain the secrecy and confidentiality of
the Company’s trade secrets.  Seller has made available to Madden
true, complete and accurate copies of all agreements that any directors,
officers, employees, consultants or contractors of the Company have executed
regarding (i) the protection of proprietary information, and (ii) the assignment
to the Company of all Intellectual Property Rights arising from the services
performed for the Company by such persons.  Except as set forth in
Section 4.8(e)-2 of the Disclosure Schedule, no current or prior directors,
officers, employees, consultants or contractors of the Company have claimed an
ownership interest in any Company IP Rights; to the Knowledge of Seller and the
Company, there is no valid or reasonable basis for any such claim.

     

    (f)   Section
4.8(f) of the Disclosure Schedule separately lists (i) all licenses and other
agreements under which the Company or any Person granted rights by the Company
uses any Company IP Rights, and (ii) all licenses and other agreements under
which the Company or any Person granted rights by the Company uses any
Intellectual Property of any other Person.  Except as set forth in
Section 4.8(f) of the Disclosure Schedule, all such licenses and other
agreements are valid, enforceable, in full force and effect, and to the
Knowledge of Seller and the Company without breach, and the transactions
contemplated by this Agreement will not cause a change in the rights or
obligations of the Company under such licenses or agreements.

     

    (g)   Except as
set forth in Section 4.8(g) of the Disclosure Schedule, (i) no notice has been
sent, no claim has been made and no action or proceeding has been filed
asserting that any Person’s use of, or application for, any Intellectual
Property Rights infringes upon or otherwise violates any Company IP Rights, and
(ii) to the Knowledge of Seller and the Company, no Person is infringing upon or
otherwise violating any Company IP Rights, or has filed to register any
Intellectual Property Rights which, if used by any third party, would infringe
upon or otherwise violate the Company IP Rights.

     

    (h)   Section
4.8(h) of the Disclosure Schedule sets forth a list of all patents and patent
applications; all registered or applied for trademarks, service marks, trade
dress, copyrights, slogans, trade names, and internet domain names; and all
material unregistered and unapplied for trademarks, service marks, trade dress,
slogans and copyrights, comprising the Company IP Rights, including without
limitation all registrations and applications for any of the foregoing owned,
licensed, used or filed by or on behalf of the Company anywhere in the
world.  With respect each such trademark, Section 4.8(h) of the
Disclosure Schedule identifies the trademark, the jurisdiction, the
registration/application number, the registrant/applicant, the class, the
goods/services, the status (including any rejections and the basis therefor),
and the principal terms of any license governing such trademark.  With
respect to each such internet domain name, Section 4.8(h) of the Disclosure
Schedule identifies the registered domain name, expiration date, registrar,
registrant, and name and contact information for the administrative contact and
the

     

     

    
      
        
        

      

      
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    technical
contact.  All applications, registrations and licenses listed in
Section 4.8(h) of the Disclosure Schedule, unless otherwise indicated, are in
full force and effect and have not been cancelled, expired, rejected or
abandoned.  Except as set forth in Section 4.8(h) of the Disclosure
Schedule, there is no pending, existing or, to the Knowledge of Seller and the
Company, threatened opposition, interference, cancellation, proceeding or other
legal or governmental proceeding before any court or Governmental Body against
or involving the applications or registrations listed in Section 4.8(h) of the
Disclosure Schedule.

     

    4.9   Contracts and
Agreements.

     

    (a)   Section
4.9(a) of the Disclosure Schedule sets forth a true, complete and accurate list
of each of the following contracts, agreements, arrangements, instruments or
understandings, whether oral or written, to which the Company is a party or by
which the Company or its assets or properties are bound, except for purchase
orders on standard forms entered into by the Company with customers,
manufacturers and suppliers in the ordinary course of business consistent with
past practice (collectively, the “Contracts”):

     

    (i)   each
employment or other similar agreement providing for compensation, severance or a
fixed term of employment in respect of services performed by any employee of the
Company;

     

    (ii)   each
management, consulting, independent contractor, subcontractor, retainer or other
similar type of agreement under which services are provided by any Person to the
Company with a term of more than one (1) year or requiring payments in excess of
$50,000 per annum or $75,000 in the aggregate;

     

    (iii)   each
other agreement or commitment for services and supplies provided by any other
Person to the Company with a term of more than one (1) year or requiring
payments in excess of $50,000 per annum or $75,000 in the
aggregate;

     

    (iv)   each
agreement with sales or commission agents or sales representatives with a term
of more than one (1) year or requiring payments in excess of $25,000 per annum
or $50,000 in the aggregate;

     

    (v)   each
agreement or commitment for the supply of products or services by the Company to
any other Person with a term of more than one (1) year (other than those that
are terminable upon not more than thirty (30) days’ notice by the Company
without penalty) or involving payments in excess of $50,000 per annum or $75,000
in the aggregate;

     

    (vi)   each
agreement that restricts in any manner the operation of the business of the
Company as presently conducted, including each agreement that restricts the
ability of the Company to conduct business in any geographic or product market,
to buy or sell particular goods or services, to buy or sell goods or services
from any other Person or to solicit customers, employees or other service
providers;

     

    (vii)   each
agreement with any officer or director of the Company;

     

     

     

    
      
        
        

      

      
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    (viii)     each
agreement with an Affiliated Person or with any entity in which an officer or
director of the Company holds an interest;

     

    (ix)   each
lease (as lessor, lessee, sublessor or sublessee) of any real
property;

     

    (x)   each
lease (as lessor, lessee, sublessor or sublessee) of any tangible personal
property requiring payment during its term or any extension or renewal thereof
in excess of $25,000;

     

    (xi)   each
license (as licensor, licensee, sublicensor or sublicensee) of any Intellectual
Property Rights (other than licenses of commercially available, “packaged, off
the shelf,” shrink-wrap or click-through computer software), including, without
limitation, each license relating to any Company Products;

     

    (xii)   each
agreement under which any money has been or may be borrowed or loaned, or any
note, bond, factoring agreement, indenture or other evidence of indebtedness has
been issued or assumed, and each guaranty (including “take-or-pay” and
“keepwell” agreements) of any evidence of indebtedness or other obligation, or
of the net worth, of any Person;

     

    (xiii)   each
mortgage agreement, deed of trust, security agreement, purchase money agreement,
conditional sales contract or capital lease;

     

    (xiv)   each
partnership, joint venture or similar agreement;

     

    (xv)   each
agreement relating to securities of the Company, including shareholder
agreements, voting agreements, and any agreements granting preferential rights
to acquire securities of the Company or containing restrictions with respect to
the payment of dividends or other distributions in respect of the capital stock
or securities of the Company;

     

    (xvi)   each
agreement or commitment to make unpaid capital expenditures in excess of
$2,000;

     

    (xvii)   each
agreement containing a change of control provision;

     

    (xviii)   each
manufacturing, distribution or sourcing agreement or arrangement;

     

    (xix)   each
agreement or other arrangement pursuant to which the Company is obligated to
accept returned merchandise or grant credit for unsold merchandise other than as
set forth in standard form, non-negotiated purchase orders or
confirmations;

     

    (xx)   each
agreement or other arrangement relating to any electronic data interchange (EDI)
or similar programs;

     

     

    
      
        
        

      

      
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    (xxi)   each
agreement or other arrangement providing for the development of software for, or
license of software (other than off-the-shelf, shrink-wrap, or click-through
software applications) or other Intellectual Property Rights;

     

    (xxii)   each
agreement with respect to any Company IP Rights;

     

    (xxiii)   each
agreement or arrangement with respect to advertising (including co-op
advertising), marketing or any concept shops or in-store sales environments
(i.e. shop in shops) for any Company Product;

     

    (xxiv)   each
agreement that obligates the Company to indemnify a third party;
and

     

    (xxv)   each
other agreement (or group of related agreements) having an indefinite term or a
fixed term of more than one (1) year (other than those that are terminable upon
not more than thirty (30) days’ notice by the Company without penalty) or
requiring payments in excess of $50,000 per year or $75,000 in the aggregate or
the loss of which could reasonably be expected to have, directly or indirectly,
individually or in the aggregate, a Material Adverse Effect.

     

    Complete
copies of all written (and summaries of all oral) Contracts required to be
disclosed pursuant to this Section 4.9(a), as well as copies of all standard
forms of purchase orders with customers, manufacturers and suppliers used by the
Company, have been previously made available to Madden.

     

    (b)   Each of
the Contracts is legal, valid, binding and in full force and effect and is
enforceable by the Company in accordance with its respective terms, except as
such enforceability may be limited by bankruptcy, insolvency, moratorium and
other similar laws affecting creditors’ rights generally and by general
principles of equity.  The Company is not (with or without the lapse
of time or the giving of notice, or both) in breach of or in default under any
of the Contracts, and, to the Knowledge of Seller and the Company, no other
party to any of the Contracts is (with or without the lapse of time or the
giving of notice, or both) in breach of or in default under any of the
Contracts.

     

    4.10   Insurance.  All
insurance policies currently maintained by the Company, or under which the
Company is insured, are accurately listed in Section 4.10 of the Disclosure
Schedule and complete copies of such policies have been previously made
available to Madden.  Each such insurance policy is in full force and
effect (and to the Knowledge of Seller and the Company, free from any presently
exercisable right of termination on the part of the insurance company issuing
such policy prior to the expiration of the term of such policy) and all premiums
due and payable in respect thereof have been paid.  Except as set
forth in Section 4.10 of the Disclosure Schedule, there are no pending claims
with respect to the Company or its properties or assets under any such insurance
policy. Neither Seller nor the Company has received notice of cancellation or
non-renewal of any such policy.  The transactions contemplated by this
Agreement will not give rise to a right of termination of any such policy by the
insurance company issuing the same prior to the expiration of the term of such
policy.

     

     

    
      
        
        

      

      
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    4.11   Litigation.  Except
as set forth in Section 4.11 of the Disclosure Schedule and with respect to
environmental matters (which are addressed in Section 4.16 of this Agreement),
there is no lawsuit, governmental investigation or legal, administrative or
arbitration action or proceeding pending or, to the Knowledge of Seller and the
Company, threatened against Seller or the Company or any of their respective
properties or assets, or any director, officer or employee of the Company, in
his or her capacity as such, and, to the Knowledge of Seller and the Company,
the Company is not identified as a party subject to any restrictions or
limitations under any judgment, order or decree of any Governmental
Body.

     

    4.12   Condition and Sufficiency of
Assets.  Except as set forth in Section 4.12 of the Disclosure
Schedule, the properties and assets owned, leased, operated and used by the
Company in the conduct or operation of its business are in good operating
condition and repair, normal wear and tear excepted, are reasonably suitable for
the purposes for which they are currently used and are all of the properties and
assets reasonably necessary for the conduct and operation of the businesses of
the Company as currently conducted. Except as set forth in Section 4.12 of the
Disclosure Schedule, the Company is the sole owner of all material properties
and assets, including trademarks, utilized in the conduct or operation of the
business of the Company, except for properties and assets leased or licensed to
the Company pursuant to Contracts listed in Section 4.9(a) of the Disclosure
Schedule, to which the Company has a valid lease or license.

     

    4.13   Compliance with Law;
Licenses; Customs.

     

    (a)   Except as
set forth in Section 4.13(a) of the Disclosure Schedule, the Company is and has
been in compliance in all material respects with all applicable Laws governing
the conduct or operation of its business, and with all of its
Licenses.  Neither the Company nor Seller has received any notice of
any violation of any such Law or License, and to the Knowledge of Seller and the
Company, no such violation has been threatened.

     

    (b)   All
governmental licenses, approvals, authorizations, registrations, consents,
orders, certificates, decrees, franchises and permits (collectively, “Licenses”)
of the Company are listed in Section 4.13(b) of the Disclosure
Schedule.  The Licenses are all of the Licenses necessary for the
ownership and operation of the properties and assets of the Company, the
manufacturing, marketing, sale and distribution of the Company Products by the
Company and the conduct and operation of its business as currently
conducted.  Such Licenses are in full force and effect, and no
proceeding is pending or, to the Knowledge of Seller and the Company,
threatened, seeking the revocation or limitation of any such
License.  To the Knowledge of Seller and the Company, there exists no
state of facts which could cause any Governmental Body to limit, revoke or fail
to renew any License related to or in connection with any business as currently
conducted or operated by the Company.

     

    (c)   Except as
set forth in Section 4.13(c) of the Disclosure Schedule, (i) the Company was not
the importer of record for any product prior to December 19, 2009, and (ii) from
December 19, 2009 through the date hereof, the Company has been the importer of
record for all products imported for sale and distribution by the
Company.

     

    (d)   Except as
set forth in Section 4.13(d) of the Disclosure Schedule, notwithstanding and in
addition to the foregoing, the Company and, to the Knowledge of
Seller

     

     

    
      
        
        

      

      
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    and the
Company, the employees, agents and representatives of the Company are, and at
all times have been, in compliance with all applicable Laws and regulations
relating to importing and exporting, customs and national and international
trade with respect to business conducted by the Company or for which the Company
could be held liable, including, without limitation, the accuracy of all
statements and representations made to any Governmental Body (including, but not
limited to, U.S. Customs, the U.S. Department of Homeland Security, the U.S.
Federal Trade Commission, and the U.S. Consumer Products Safety Commission), the
timely and accurate filing of all reports, schedules and forms required to be
filed with any Governmental Body and the timely and accurate reporting and
payment of all duties, taxes, fees, payments or other governmental
obligations.

     

    (e)   Except as
set forth in Section 4.13(e) of the Disclosure Schedule, the Company and, to the
Knowledge of Seller and the Company, the employees, agents and representatives
of the Company have not provided any assistance, directly or indirectly, to the
maker of any goods the Company has imported, including, without limitation,
equipment or materials, which assistance would be subject to a duty, tax, fee or
other payment, other than such assistance which has been fully and accurately
disclosed to the appropriate Governmental Bodies and for which such duty, tax,
fee or other payment has been fully paid.

     

    (f)   Except as
set forth in Section 4.13(f) of the Disclosure Schedule, the Company and, to the
Knowledge of Seller and the Company, the employees, agents and representatives
of the Company have accurately prepared and maintained all records with respect
to the business conducted by the Company or for which the Company could be held
liable relating to importing and exporting, customs and international trade, as
required by Law.

     

    (g)   Section
4.13(g) of the Disclosure Schedule sets forth all liabilities or obligations
owing by the Company or, to the Knowledge of Seller and the Company, the
employees, agents or representatives of the Company to U.S. Customs or any
Governmental Body in connection with the purchase, importation or attempted
importation of any product by the Company or for which the Company could be held
liable, including but not limited to: duties, taxes, fees and interest thereon;
liquidated damages; penalties; claims and assessments (whether actual or
potential and whether or not yet asserted by U.S. Customs, any Governmental Body
or some third party).

     

    (h)   Except as
set forth in Section 4.13(h) of the Disclosure Schedule, neither the Company nor
Seller has received written notice of any pending audits, inquiries,
investigations, claims, notices or demands for duties, fines, penalties,
seizures, forfeitures, or liquidated damages by any Governmental Body
(including, but not limited to, U.S. Customs, the U.S. Department of Homeland
Security, the U.S. Federal Trade Commission, the U.S. Consumer Products Safety
Commission, the U.S. Department of Justice, any Office of the U.S. Attorney or
any other agency of the U.S. government) arising out of any transactions or
importation of merchandise by or for the Company and, to the Knowledge of Seller
and the Company, the Company has not committed any acts or omissions which could
give rise to any such inquiry, investigation, claim, notice or
demand.

     

    4.14   Employees.

     

     

     

    
      
        
        

      

      
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    (a)   Section
4.14(a) of the Disclosure Schedule sets forth, as of the date hereof, a true,
correct and complete list of all of the employees, officers, independent
contractors and consultants of the Company, and with respect to each such
employee, officer and, to the extent applicable, independent contractor and
consultant, such individual’s:  (i) current annual base salary, (ii)
current guaranteed annual bonus, (iii) any discretionary bonus received by such
individual for the immediately preceding fiscal year of the Company, (iv) all
other compensation and perquisites (including, without limitation, incentive
compensation, fees or other remuneration) received by such individual in the
immediately preceding fiscal year of the Company, (v) accrued vacation, (vi)
current title, (vii) date of hire, (viii) outstanding loans to such individuals
and (ix) with respect to each such independent contractor or consultant, a
summary of any oral commission agreement with such individual. Except as set
forth in Section 4.14(a) of the Disclosure Schedule, all amounts due for all
salary, wages, bonuses, commissions, vacation with pay and other benefits have
either been paid or are accurately reflected on the Balance Sheet.

     

    (b)   The
Company (i) is and has been in compliance in all material respects with all
applicable Laws (including any legal obligation to engage in affirmative
action), agreements and contracts relating to former, current, and prospective
employees, independent contractors and “leased employees” (within the meaning of
Section 414(n) of the Code) of the Company, workplace practices, and terms and
conditions of employment with the Company or retention by the Company, including
all such Laws, agreements and contracts relating to wages, hours, collective
bargaining, employment discrimination and human rights, immigration, disability,
civil rights, fair labor standards, occupational safety and health, workers’
compensation, pay equity, termination of employment or wrongful discharge and
violation of the potential rights of such former, current, and prospective
employees, independent contractors and leased employees, and (ii) has timely
prepared and filed all appropriate forms (including U.S. Immigration and
Naturalization Service Form I-9) required by any relevant Law or Governmental
Body.  The Company is not engaged in any unfair labor
practice.

     

    (c)   No
collective bargaining agreement with respect to the business of the Company is
currently in effect or being negotiated.  The Company does not have
any obligation to negotiate any collective bargaining agreement, and, to the
Knowledge of Seller and the Company, no employees of the Company desire to be
covered by a collective bargaining agreement and there are no pending or, to the
Knowledge of Seller and the Company, threatened union organizing efforts in
connection therewith.

     

    (d)   The
Company generally has good relationships with its employees.  No
strike, slowdown or work stoppage is occurring or has occurred since the
inception of the Company nor, to the Knowledge of Seller and the Company, is
threatened or has been threatened within the one-year period prior to the date
hereof, with respect to the employees of the Company.

     

    (e)   There is
no representation or certification claim or petition pending before any labor
agency or board (including the U.S. National Labor Relations Board) of which the
Company or Seller has been notified and, to the Knowledge of Seller and the
Company, no question concerning representation has been raised or threatened
respecting the employees of the Company.  No union or employee
bargaining agency has applied or, to the Knowledge of Seller

     

     

    
      
        
        

      

      
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    or the
Company, threatened to apply to any labor agency or board to have the Company
declared a common, related or successor employer pursuant to any applicable
Laws.

     

    (f)   Except as
set forth in Section 4.14(f) of the Disclosure Schedule, no notice has been
received by the Company or Seller of any complaint or proceeding filed against
the Company claiming that the Company has or may have violated any applicable
employment standards, human rights or other labor or employment Laws, or of any
complaints or proceedings of any kind involving the Company or, to the Knowledge
of Seller and the Company, against any of the employees of the Company or, to
the Knowledge of Seller and the Company, threatened to be filed against the
Company before any agency, labor relations board or Governmental Body
(including, but not limited to, the U.S. National Labor Relations Board and U.S.
Equal Employment Opportunity Commission).  No notice has been received
by the Company or Seller of the intent of any agency or other Governmental Body
responsible for the enforcement of labor or employment Laws to conduct an
investigation of the Company, and no such investigation is in
progress.

     

    (g)   There are
no outstanding orders or charges against the Company under any occupational
health or safety Laws and, to the Knowledge of Seller and the Company, none have
been threatened.  All material levies, assessments, penalties, fines,
liens and surcharges made against the Company pursuant to all applicable workers
compensation Laws as of the date of the Balance Sheet have been paid or have
been reserved for or accrued on the Balance Sheet by the Company and the Company
has not, as of the Closing Date, been reassessed under any such Laws and there
are no claims or potential claims which may be reasonably expected to adversely
affect the accident cost experience of the Company.  To the Knowledge
of Seller and the Company, no audit of the Company is being performed or
threatened pursuant to any workers’ compensation Laws.  There have
been no levies, assessments or penalties pursuant to any applicable workers
compensation Laws imposed or, to the Knowledge of Seller and the Company,
threatened against the Company since the date of the Balance Sheet.

     

    (h)   The
Company has withheld for all periods all required amounts from its employees,
including, without limitation, for employee income tax withholding, social
security and unemployment taxes in compliance with applicable
Law.  Federal, state, local and foreign returns, as required by
applicable Law, have been filed by the Company for all periods for which returns
were due with respect to employee income tax withholding, social security and
unemployment taxes, and the amounts shown thereof to be due and payable have
been paid, together with any interest and penalties that are due as a result of
the failure of the Company to file such returns when due and pay when due the
amounts shown thereon to be due.

     

    (i)   Section
4.14(i) of the Disclosure Schedule accurately sets forth all severance or
continuing payment obligations of the Company, as well as all unpaid severance
or continuing payments of any kind (other than pursuant to a plan or program
described in Section 4.15) which are due or claimed in writing to be due from
the Company to any Person whose employment with the Company was
terminated.  Except as set forth in Section 4.14(i) of the Disclosure
Schedule, the consummation of the transactions contemplated hereby, either alone
or in combination with another event, with respect to each director, officer,
employee, independent contractor and consultant of the Company, will not result
in (A) any payment (including, without limitation, severance, unemployment
compensation or bonus payments) becoming due under any

     

     

    
      
        
        

      

      
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    Employee
Benefit Plan or agreement, (B) any increase in the amount of compensation,
benefits or fees payable to any such individual or (C) any acceleration of the
vesting or timing of payment of benefits, compensation or fees payable to any
such individual.

     

    (j)   Section
4.14(j) of the Disclosure Schedule accurately sets forth the Company’s policies
with respect to accrued, but unused, vacation time.

     

    (k)   Section
4.14(k) of the Disclosure Schedule sets forth a complete and correct list of all
employment, management, consulting or other agreements with any Persons retained
by the Company as employees, “leased employees” (within the meaning of Section
414(n) or (o) of the Code or other similar Law), management or other independent
consultants, sales representatives, sales or commission agents and distributors,
complete and correct copies of which have been made available to
Madden.  Except as set forth in Section 4.14(k) of the Disclosure
Schedule, each employee of the Company is employed on an at-will basis and
neither Seller nor the Company has any written or oral agreements with any
employees of the Company regarding continued employment or terms of employment
subsequent to the date hereof or the Closing Date, or which would otherwise
interfere with the ability to discharge such employees.  To the
Knowledge of Seller and the Company, no key employee and no group of employees
of the Company has any plans to terminate or modify their status as an employee
or employees of the Company (including upon consummation of the transactions
contemplated hereby), except as contemplated by the Employment
Agreement.

     

    (l)   Neither
Seller nor the Company has promised, made any written or oral statements or
representations or distributed any written material to any employees,
shareholders, directors, officers, consultants, independent contractors, agents,
representatives or other personnel of the Company regarding continued (x)
employment or terms of employment, (y) continued engagement, or (z) continued
receipt of any particular benefit, with or from the Company subsequent to the
date hereof or the Closing Date.

     

    (m)   Section
4.14(m) of the Disclosure Schedule accurately sets forth summaries of the
significant terms and conditions of any and all arrangements (oral or written)
between the Company and sales representatives, sales agents, distributors, and
any other independent contractors.  Such arrangements are in full
force and effect and are enforceable by the Company in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium and other similar laws affecting creditors’ rights
generally and by general principles of equity.  Except as set forth in
Section 4.14(m) of the Disclosure Schedule, the Company is not (with or without
the lapse of time or the giving of notice, or both) in breach of or in default
under, any of the foregoing, and, to the Knowledge of Seller and the Company, no
other party to any of such arrangements is (with or without the lapse of time or
the giving of notice, or both) in breach of or in default under any of such
arrangements.

     

    (n)   To the
Knowledge of Seller and the Company, no contractor, manufacturer or supplier
used by or under contract with the Company is in material violation of any Law
relating to labor or employment matters for its services to or work for the
Company.

     

    4.15   Employee Benefit
Plans.

     

     

    
      
        
        

      

      
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    (a)   Section
4.15(a) of the Disclosure Schedule lists all Employee Benefit
Plans.  “Employee Benefit Plan” means any “employee benefit plan” as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended from time to time (“ERISA”) and any other plan, policy, program,
practice, agreement, understanding or arrangement (whether written or oral)
providing compensation or other benefits to any current or former officer,
employee or consultant (or to any dependent or beneficiary thereof), of the
Company or any ERISA Affiliate, which are now, or within the last six (6) years
were, maintained by the Company or any ERISA Affiliate, and with respect to
which the Company or any ERISA Affiliate has or may reasonably be expected to
have any liability, including but not limited to any obligation to contribute,
including all employee pension, profit-sharing, savings, retirement, incentive,
bonus, deferred compensation, vacation, holiday, cafeteria, medical, disability,
life, accident or other insurance, stock purchase, stock option, stock
appreciation right, phantom stock, restricted stock or other equity-based
compensation plans, and any other employee benefit plans, policies, programs,
practices or arrangements.  “ERISA Affiliate” means any entity
(whether or not incorporated) other than the Company that, together with the
Company, is or could reasonably be expected to be deemed to be a member of a
controlled group of corporations within the meaning of Section 414(b) of the
Code, of a group of trades or businesses under common control within the meaning
of Section 414(c) of the Code, or in the case of any Employee Benefit Plan
subject to Part 3 of Subtitle B of Title I of ERISA, of an affiliated service
group within the meaning of Section 414(m) of the Code.

     

    (b)   Section
4.15(b) of the Disclosure Schedule sets forth each Employee Benefit Plan that is
subject to Section 409A of the Code.  Except as set forth in Section
4.15(b) of the Disclosure Schedule, any such Employee Benefit Plan complies in
operation and form with Section 409A and the regulations promulgated
thereunder.

     

    (c)   With
respect to each Employee Benefit Plan, the Company has made available to Madden
to the extent applicable, true and complete copies of (i) each Employee Benefit
Plan including all amendments and written summaries of any unwritten plan or
amendment, and related trust agreements, insurance and other contracts
(including policies), (ii) the summary plan description, any summaries of
material modifications, and all other material communications distributed to
Employee Benefit Plan participants, including COBRA notices and forms, and (iii)
the most recent annual reports on Form 5500 with accompanying schedules and
attachments, the most recent IRS opinion or determination letter, and the most
recent audited financial statements and actuarial valuation
reports.

     

    (d)   Neither
the Company nor any ERISA Affiliate maintains or contributes to or has ever
maintained or contributed to an Employee Benefit Plan (including, without
limitation, any “multiemployer plan” within the meaning of Section 3(37) of
ERISA) subject to Title IV or Section 302 of ERISA and Section 412 of the Code,
and to the Knowledge of Seller and the Company, no condition exists or is
reasonably likely to exist as a result of which the Company could have any
liability under any such sections.  No Employee Benefit Plan is a
“multiple employer plan” as described in Section 3(40) of ERISA or Section
413(c) of the Code.

     

    (e)   Except as
set forth on Section 4.15(e) of the Disclosure Schedule, to the Knowledge of
Seller and the Company, no event has occurred in connection with which the
Company or any Employee Benefit Plan, directly or indirectly, would reasonably
be likely to be

     

     

    
      
        
        

      

      
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    subject
to any liability under ERISA, the Code or any other Law and neither the Company
nor any ERISA Affiliate has agreed to indemnify or is required to indemnify any
person against liability incurred for a violation of such Laws.

     

    (f)   Each
Employee Benefit Plan which is intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter or opinion from the IRS
on which it may properly rely, has timely adopted all amendments required for
continued plan qualification, and to the Knowledge of Seller and the Company,
nothing has occurred and no circumstances exist that adversely affect any such
favorable determination or opinion letter, or which would put issuance of a
favorable determination or opinion letter on a pending application in
doubt.  Each Employee Benefit Plan is and has been maintained in form
and operation in compliance with its terms and all applicable Laws, including,
without limitation, ERISA and the Code.  As of and including the date
of the Closing, the Company shall have made all contributions required to be
made by it up to and including the date of the Closing with respect to each
Employee Benefit Plan, or adequate accruals therefor will have been provided for
and will be properly reflected on the books of the Company.  All
notices, filings and disclosures required by ERISA and the Code have been timely
made.

     

    (g)   With
respect to each Employee Benefit Plan, to the Knowledge of Seller and the
Company, (i) no “party in interest” or “disqualified person” (as defined in
Section 3(14) of ERISA or Section 4975 of the Code, respectively) has at any
time engaged in a transaction which could subject Madden, the Company or Seller,
directly or indirectly, to a tax, penalty or liability for prohibited
transactions imposed by ERISA, the Code or any other applicable law and (ii) no
fiduciary (as defined in Section 3(21) of ERISA) has breached any of the
responsibilities or obligations imposed upon the fiduciary under Title I of
ERISA or any other applicable law.

     

    (h)   Each
Employee Benefit Plan may, by its terms, be amended or terminated at any time,
and no additional liabilities to the Company or to such plan will arise on
account of any such termination (including, but not limited to, retrospective
premium adjustments or early cancellation penalties).

     

    (i)   Each
Employee Benefit Plan which is a “welfare plan” within the meaning of Section
3(1) of ERISA and which provides health, disability or death benefits is fully
insured.

     

    (j)   No
Employee Benefit Plan provides for medical or health benefits or coverage for
any participant or dependent after such participant’s retirement or other
termination of employment, except as may be required by COBRA or any other
similar law.  To the Knowledge of Seller and the Company, there has
been no communication to any person providing services to the Company that could
reasonably be expected to promise or grant any such person any retiree health or
life insurance or any retiree death benefits, except as required by COBRA or any
other similar law.

     

    (k)   The
Company has not proposed, announced or agreed to create any additional Employee
Benefit Plans or to amend or modify any Employee Benefit Plan.

     

    (l)   Except as
contemplated by this Agreement or as set forth in Section 4.15(l) of the
Disclosure Schedule, the consummation of the transactions contemplated by
this

     

     

    
      
        
        

      

      
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    Agreement,
either alone or in combination with any other event, will not result in (i) any
payment (including, without limitation, severance, unemployment compensation,
golden parachute, bonus payments or otherwise) becoming due to any current or
former director, officer, employee or consultant of the Company, (ii) any
increase in the amount of compensation or benefits payable in respect of any
director, officer, employee or consultant of the Company, (iii) any acceleration
of the vesting or timing of payment of any benefits or compensation payable in
respect of any director, officer, employee or consultant of the Company, or
(iv) any “parachute payment” under Section 280G of the Code, whether or not
such amount may be considered reasonable compensation for personal services
rendered.

     

    (m)   To the
Knowledge of Seller and the Company, there are no pending or threatened
investigations by any Governmental Body involving or relating to any Employee
Benefit Plan or pending claims (except for routine claims for benefits payable
in the normal operation of the Employee Benefit Plans), suits or proceedings
against any Employee Benefit Plan, the Company, Seller, or any fiduciary or
trustee of any Employee Benefit Plan.

     

    (n)   Section
4.15(n) of the Disclosure Schedule sets forth annual costs for the last calendar
year associated with the maintenance of each Employee Benefit Plan, including,
without limitation, annual premiums and contributions.

     

    (o)   No
Employee Benefit Plan covers any non-U.S. employees.

     

    4.16   Environmental
Matters.

     

    (a)   Except as
set forth in Section 4.16(a) of the Disclosure Schedule:

     

    (i)   the
Company is and has been in compliance with all applicable Environmental
Laws;

     

    (ii)   no
Environmental Claims have been asserted against the Company or Seller, nor does
the Company or Seller have Knowledge or notice of any pending or threatened
Environmental Claim against the Company or Seller.

     

    (iii)   there has
been no Release of a Hazardous Material at or from any real property owned or
leased by the Company that would reasonably be expected to subject the Company
to liability under any Environmental Law, nor has the Company or Seller received
written notice that it is a potentially responsible party under or otherwise has
potential liability under any Environmental Law; and

     

    (iv)   the
Company has not managed, handled, generated, manufactured, refined, recycled,
discharged, emitted, buried, processed, produced, reclaimed, stored, treated,
transported, or disposed of any Hazardous Substance, except in compliance with
all Environmental Laws.

     

    (b)   Seller
has provided Madden with all environmental audits or assessments in the
possession of the Company relating to the business of, or any property owned or
leased by, the Company.

     

     

     

    
      
        
        

      

      
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    4.17   Bank Accounts and Powers of
Attorney.  Section 4.17 of the Disclosure Schedule sets forth
the name of each bank in which the Company has an account, lock box or safe
deposit box, the number of each such account, lock box and safe deposit box, and
the names of all Persons authorized to draw thereon or have access
thereto.  Except as set forth in Section 4.17 of the Disclosure
Schedule, no Person holds any power of attorney from the Company.

     

    4.18   Absence of Certain
Changes.  Since the date of the Balance Sheet, the Company has
operated its business in the ordinary course consistent with past practice and
in a commercially reasonable manner, and has maintained its relationships with
customers, vendors, suppliers, employees, agents and others in a commercially
reasonable manner, and there has not occurred any event, development or change,
and no facts or circumstances exist, which, individually or in the aggregate,
have had or could be reasonably expected to have a Material Adverse
Effect.  Without limiting the generality of the immediately preceding
sentences, and except as set forth in Section 4.18 of the Disclosure Schedule,
since the date of the Balance Sheet, the Company has not:

     

    (i)   amended
or otherwise modified its Organizational Documents or altered, through merger,
liquidation, reorganization, restructuring or in any other fashion, its
corporate structure or ownership;

     

    (ii)   issued or
sold, or authorized for issuance or sale, or granted any options or made other
agreements, arrangements or understandings of the type referred to in Section
4.2(b) with respect to, any shares of its capital stock or any other of its
securities, or altered any term of any of its outstanding securities or made any
change in its outstanding shares of capital stock or other ownership interests
or its capitalization, whether by reason of a reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, stock dividend or otherwise;

     

    (iii)   mortgaged,
pledged or granted any security interest in any of its assets, except Permitted
Encumbrances and security interests solely in tangible personal property granted
pursuant to any purchase money agreement, conditional sales contract or capital
lease under which, solely with respect to conditional sales contracts and
capital leases, there exists an aggregate future liability not in excess of
$25,000 per contract or lease (which amount was not more than the purchase price
for such personal property and which security interest does not extend to any
other item or items of personal property);

     

    (iv)   declared,
set aside, made or paid any dividend or other distribution to any holder with
respect to its capital stock or other securities;

     

    (v)   redeemed,
purchased or otherwise acquired, directly or indirectly, any of its capital
stock or other securities;

     

    (vi)   increased
the compensation of any of its non-executive employees, except in the ordinary
course of business consistent with past practice and in a commercially
reasonable manner, or increased the compensation of any of its executive
officers;

     

     

     

    
      
        
        

      

      
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    (vii)   adopted
or, except as required by Law, amended, any Employee Benefit Plan;

     

    (viii)   extended,
terminated or modified any Contract, permitted any renewal notice period or
option period to lapse with respect to any Contract or received any written
notice of termination of any Contract, except for terminations of Contracts upon
their expiration during such period in accordance with their terms;

     

    (ix)   incurred
or assumed any indebtedness for borrowed money or guaranteed any obligation or
the net worth of any Person, except for endorsements of negotiable instruments
for collection in the ordinary course of business consistent with past practice
and in a commercially reasonable manner;

     

    (x)   incurred
any liabilities, debts or obligations (whether absolute, accrued, contingent or
otherwise), except for liabilities incurred in the ordinary course of business
consistent with past practice and in a commercially reasonable
manner;

     

    (xi)   incurred
any liability, debt or obligation (whether absolute, accrued, contingent or
otherwise) to or of any Affiliated Person, or made any Affiliate
Loans;

     

    (xii)   discharged
or satisfied any Encumbrance other than those then required to be discharged or
satisfied during such period in accordance with their original
terms;

     

    (xiii)   paid any
obligation or liability (absolute, accrued, contingent or otherwise), whether
due or to become due, except for any current liabilities and the current portion
of any long term liabilities shown on the Financial Statements or incurred since
the date of the Balance Sheet in the ordinary course of business consistent with
past practice and in a commercially reasonable manner;

     

    (xiv)   sold,
transferred, leased to others or otherwise disposed of any assets having a fair
market value in excess of $25,000, except sales of inventory and dispositions of
obsolete assets no longer used or useful in the business of the Company, in each
case in the ordinary course of business consistent with past practice and in a
commercially reasonable manner;

     

    (xv)   cancelled,
waived or compromised any debt or claim;

     

    (xvi)   suffered
any damage or destruction to, loss of, or condemnation or eminent domain
proceeding relating to any of its tangible properties or assets (whether or not
covered by insurance);

     

    (xvii)   lost the
employment services of any employee whose annual salary exceeded
$50,000;

     

     

    
      
        
        

      

      
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    (xviii)   made any
loan or advance to any Person, other than travel and other similar routine
advances to employees in the ordinary course of business consistent with past
practice and in a commercially reasonable manner;

     

    (xix)   purchased
or acquired any capital stock or other securities of any other corporation or
any ownership interest in any other business enterprise or Person;

     

    (xx)   made
capital expenditures or capital additions or betterments in amounts which
exceeded $2,000 in the aggregate;

     

    (xxi)   changed
its method of accounting or its accounting principles or practices, including
any policies or practices with respect to the establishment of reserves for
work-in-process and accounts receivable, utilized in the preparation of the
Financial Statements, other than as required by GAAP;

     

    (xxii)   instituted
or settled any litigation or any legal, administrative or arbitration action or
proceeding before any court or Governmental Body relating to it or any of its
properties or assets;

     

    (xxiii)   made any
new elections or changed any current elections with respect to its
Taxes;

     

    (xxiv)   entered
into any transaction with any Affiliated Person;

     

    (xxv)   entered
into any agreements, commitments or contracts, except those made in the ordinary
course of business consistent with past practice and in a commercially
reasonable manner;

     

    (xxvi)   failed to
maintain reserves at historical levels and consistent with past practice;
or

     

    (xxvii)   entered
into any agreement or commitment to do any of the foregoing.

     

    4.19   Books and
Records.  The books and records of the Company with respect to
the Company, its operations, employees and properties have been maintained in
the usual, regular and ordinary manner, all entries with respect thereto
have been accurately made in all material respects, and all transactions
involving the Company have been accurately accounted for.

     

    4.20   Transactions with Affiliated
Persons.  Except as set forth in Section 4.20 of the Disclosure
Schedule and except (i) for employment relationships between the Company and
employees of the Company, (ii) for remuneration by the Company for services
rendered as a director, officer or employee of the Company, or (iii) as set
forth in Section 4.20 of the Disclosure Schedule, reimbursement of expenses in
the ordinary course of business consistent with past practice to directors,
officers and employees, (A) the Company has not, and has not since its
inception, in the ordinary course of business consistent with past practice or
otherwise, directly or indirectly, purchased, leased or otherwise acquired any
property or obtained any

     

     

    
      
        
        

      

      
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    services
from, or sold, leased or otherwise disposed of any property or furnished any
services to, any Affiliated Person; (B) the Company does not owe any amount to
any Affiliated Person; (C) no Affiliated Person owes any amount to the
Company; and (D) no part of the property or assets of any Affiliated Person is
used by the Company in the conduct or operation of its business.

     

    4.21   Customer and Supplier
Relationships.

     

    (a)   Section
4.21(a) of the Disclosure Schedule lists the ten (10) largest customers of the
Company for the fiscal years ended December 31, 2007, 2008 and
2009.  Except as set forth in Section 4.21(a) of the Disclosure
Schedule, to the Knowledge of Seller and the Company, there are no facts or
circumstances (including the consummation of the transactions contemplated
hereby) that are likely to result in the loss of any one customer or group of
customers of the Company or a material adverse change in the relationship of the
Company with such a customer or group of customers.  The Company
generally has a good relationship with each of its ten (10) largest
customers.

     

    (b)   Section
4.21(b) of the Disclosure Schedule lists the top ten (10) largest
suppliers of products to the Company for the fiscal years ended December 31,
2007, 2008 and 2009.  Except as set forth in Section 4.21(b) of the
Disclosure Schedule, to the Knowledge of Seller and the Company, there are no
facts or circumstances (including the consummation of the transactions
contemplated hereby) that are likely to result in the loss of any one supplier
or group of suppliers of the Company or a material adverse change in the
relationship of the Company with such a supplier or group of
suppliers.  The Company generally has a good relationship with each of
its ten (10) largest suppliers.

     

    4.22   Absence of Certain Business
Practices.  Neither Seller nor the Company, nor any of their
directors or officers, nor, to the Knowledge of Seller and the Company, the
employees or agents of the Company, have, directly or indirectly, (a) made any
contribution or gift which contribution or gift is in violation of any
applicable Law, (b) made any bribe, rebate, payoff, influence payment, kickback
or other payment to any Person, private or public, regardless of form, whether
in money, property or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already
obtained for or in respect of the Company or any Affiliated Person of the
Company, or (iv) in violation of any Law or legal requirement, or (c)
established or maintained any fund or asset of the Company that has not been
recorded in the books and records of the Company.

     

    4.23   Brokers and
Finders.  Except as set forth in Section 4.23 of the Disclosure
Schedule, no broker, finder or investment advisor has been engaged by Seller or
the Company in connection with the transactions contemplated by this
Agreement.

     

    4.24   Restrictions on Business
Activities.  Except as set forth in Section 4.24 of the
Disclosure Schedule, there is no judgment, injunction, order or decree binding
upon the Company or Seller or, to the Knowledge of Seller and the Company,
threatened, that has or could reasonably be expected to have the effect of
prohibiting or impairing the conduct of the business of the Company as currently
conducted or any business practice of the Company,

     

     

     

    
      
        
        

      

      
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    including
the acquisition of property, the sale of products, the provision of services,
the hiring of employees, and the solicitation of customers, in each case either
individually or in the aggregate.

     

    4.25   Payables.  Except
as set forth in Section 4.25 of the Disclosure Schedule, all accounts payable of
the Company have arisen in the ordinary course of business consistent with past
practice.  All items which are required by GAAP to be reflected as
payables in the Financial Statements and on the books and records of the Company
are so reflected and have been recorded in accordance with GAAP and in a
commercially reasonable manner.  There has been no material adverse
change since December 31, 2009 in the amount or delinquency of accounts payable
of the Company, either individually or in the aggregate.

     

    4.26   Receivables.  Except
as set forth in Section 4.26 of the Disclosure Schedule, all accounts receivable
of the Company have arisen in the ordinary course of business consistent with
past practice, represent valid obligations to the Company arising from bona fide
transactions, and, to the Knowledge of Seller and the Company, are not subject
to claims, set-off, or other defenses or counterclaims.  All items
which are required by GAAP to be reflected as receivables in the Financial
Statements and on the books and records of the Company are so reflected and have
been recorded in accordance with GAAP and in a commercially reasonable
manner.

     

    4.27   Business
Relations.  Except as set forth in Section 4.27 of the
Disclosure Schedule, the Company is not required to provide any bonding or any
other financial security arrangements in connection with any transaction with
any customer or supplier.  Since December 31, 2007, neither the
Company nor Seller has received any notice of any disruption (including delayed
deliveries or allocations by suppliers) in the availability of any materials or
products used in the business of the Company, nor do any of them have reason to
believe that any such disruption will occur in connection with the business of
the Company.  There are no sole source suppliers of goods, equipment
or services used by the Company (other than public utilities) with respect to
which practical alternative sources of supply are unavailable.

     

    4.28   Disclosure.  No
representation or warranty by Seller contained in this Agreement or any
Transaction Document or any statement or certificate furnished by Seller to
Madden or its representatives in connection herewith or therewith or pursuant
hereto or thereto contains any untrue statement of a material fact, or omits to
state any material fact required to make the statements herein or therein
contained not misleading, in light of the circumstances in which they were
made.  There is no fact or circumstance known to Seller which could be
reasonably expected to have a Material Adverse Effect.

     

    ARTICLE
V


     

    Representations and
Warranties of Madden

     

    Madden
represents and warrants to Seller as follows:

     

    5.1   Organization and Good
Standing.  Madden is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to enter into and carry out its obligations
under this Agreement and the other Transaction Documents to which Madden is a
party.

     

     

    
      
        
        

      

      
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    5.2   Authorization.  The
execution and delivery by Madden of this Agreement and the other Transaction
Documents to which Madden is a party have been duly authorized by all necessary
corporate action required on the part of Madden.  This Agreement and
the other Transaction Documents to which Madden is a party have been duly
executed and delivered by Madden and, assuming due authorization, execution and
delivery by the other parties thereto, constitute legal, valid and binding
obligations of Madden, enforceable against Madden in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or other laws affecting the rights of
creditors generally and by general principles of equity.

     

    5.3   No Conflicts;
Consents.  Neither the execution and delivery by Madden of this
Agreement or any of the Transaction Documents to which Madden is a party nor the
consummation by Madden of the transactions contemplated hereby or thereby will,
with or without notice or lapse of time or both, directly or indirectly
(i) conflict with or violate the charter or by-laws of Madden, or
(ii) conflict with, violate, result in the breach of any term of,
constitute a default under or require the consent or approval of, or any notice
to or filing with any Person under, any note, mortgage, deed of trust or other
agreement or instrument to which Madden is a party or by which Madden is bound,
or any Law, writ or injunction of any Governmental Body having jurisdiction over
Madden, except with respect to clause (ii) where such conflict, violation,
breach or default, or the failure to obtain such consent or approval, give such
notice or make such filing, would not materially adversely impair the ability of
Madden to consummate the transactions contemplated hereby.

     

    5.4   Litigation.  No
lawsuit, governmental investigation or legal, administrative, or arbitration
action or proceeding is pending or, to the Knowledge of Madden, threatened
against Madden, or any director, officer or employee of Madden in his or her
capacity as such, which questions the validity of this Agreement or seeks to
prohibit, enjoin or otherwise challenge the consummation of the transactions
contemplated hereby.

     

    5.5   Brokers and
Finders.  No broker, finder or financial advisor has been
engaged by Madden in connection with the transactions contemplated by this
Agreement.  Madden shall be responsible for and shall pay all fees,
commissions and costs of any such broker, finder or financial
advisor.

     

    5.6   Investment
Intent.  Madden is acquiring all of the Company Shares for its
own account and for investment purposes and not with a view to the sale or other
distribution of any of the Company Shares.

     

    ARTICLE
VI


     

    Covenants of
Seller

     

    Seller
hereby covenants and agrees as follows:

     

     

    
      
        
        

      

      
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    6.1   Ordinary
Course.  From the date hereof until the Closing, other than as
contemplated by this Agreement, Seller will use his commercially reasonable
efforts to (a) cause the Company to (i) maintain its corporate existence in good
standing, (ii) maintain in effect all of its presently existing insurance
coverage (or substantially equivalent insurance coverage), preserve its business
organization substantially intact, keep the services of its present
principal employees and preserve its present business relationships with
its material suppliers and customers, (iii) maintain the lines of
business of the Company, and (iv) in all material respects conduct its business
in the usual and ordinary course consistent with past practice and in a
commercially reasonable manner, without a material change in current operational
policies, subject, in each case, to the restrictions set forth in Section 6.2,
and (b) permit Madden, its accountants, its legal counsel and its other
representatives reasonable access to the management, accountants, legal counsel,
minute books and stock transfer records, other books and records, contracts,
agreements, properties and operations of the Company at all reasonable times
upon reasonable notice (provided that all such parties shall be subject to the
terms of the Confidentiality Agreement).

     

    6.2   Conduct of
Business.  From the date hereof until the Closing, other than
as contemplated by this Agreement or as set forth in Section 6.2 of the
Disclosure Schedule, Seller will cause the Company not to do any of the
following without the prior written consent of Madden:

     

    (i)   amend or
otherwise modify its organizational documents or alter, through merger,
liquidation, reorganization, restructuring or in any other fashion, its
corporate structure or ownership;

     

    (ii)   other
than pursuant to Section 2.1, issue or sell, or authorize for issuance or sale,
or grant any options or make other agreements, arrangements or understandings of
the type referred to in Section 4.2(b) with respect to, any shares of its
capital stock or any other of its securities, or alter any term of any of its
outstanding securities or make any change in its outstanding shares of capital
stock or other ownership interests or its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise;

     

    (iii)   mortgage,
pledge or grant any security interest in any of its assets, except Permitted
Encumbrances and security interests solely in tangible personal property granted
pursuant to any purchase money agreement, conditional sales contract or capital
lease under which, solely with respect to conditional sales contracts and
capital leases, there exists an aggregate future liability not in excess of
$25,000 per contract or lease (which amount is not more than the purchase price
for such personal property and which security interest does not extend to any
other item or items of personal property);

     

    (iv)   declare,
set aside, make or pay any dividend or other distribution to any holder with
respect to its capital stock or other securities, except for the distributions
of cash listed on Schedule 6.2(iv) of the Disclosure Schedule;

     

     

     

    
      
        
        

      

      
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    (v)   redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock
or other securities;

     

    (vi)   increase
the compensation of any of its non-executive employees, except in the ordinary
course of business consistent with past practice and in a commercially
reasonable manner, or increase the compensation of any of its executive
officers;

     

    (vii)   adopt or,
except as otherwise required by Law, amend, any Employee Benefit Plan or enter
into any collective bargaining agreement;

     

    (viii)   extend,
terminate or modify any Contract or permit any renewal notice period or option
period to lapse with respect to any Contract, except for terminations of
Contracts upon their expiration during such period in accordance with their
terms;

     

    (ix)   incur or
assume any indebtedness for borrowed money or guarantee any obligation or the
net worth of any Person, except for endorsements of negotiable instruments for
collection in the ordinary course of business consistent with past
practice;

     

    (x)   incur any
liabilities, debts or obligations (whether absolute, accrued, contingent or
otherwise), except for liabilities incurred in the ordinary course of business
consistent with past practice and in a commercially reasonable
manner;

     

    (xi)   incur any
liability, debt or obligation (whether absolute, accrued, contingent or
otherwise) to or of any Affiliated Person, or make any Affiliate
Loans;

     

    (xii)   discharge
or satisfy any Encumbrance other than those which are required to be discharged
or satisfied during such period in accordance with their original
terms;

     

    (xiii)   pay any
obligation or liability (absolute, accrued, contingent or otherwise), whether
due or to become due, except for any current liabilities, and the current
portion of any long term liabilities shown on the Financial Statements or
incurred since the date of the Balance Sheet in the ordinary course of business
consistent with past practice and in a commercially reasonable
manner;

     

    (xiv)   sell,
transfer, lease to others or otherwise dispose of any of its properties or
assets having a fair market value in excess of $25,000, except sales of
inventory and dispositions of obsolete assets no longer used or useful in its
business, in each case in the ordinary course of business consistent with past
practice and in a commercially reasonable manner;

     

    (xv)   cancel,
waive or compromise any debt or claim;

     

     

    
      
        
        

      

      
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    (xvi)   make any
loan or advance to any Person, other than travel and other similar routine
advances to employees in the ordinary course of business consistent with past
practice and in a commercially reasonable manner;

     

    (xvii)   purchase
or acquire any capital stock or other securities of any other corporation or any
ownership interest in any other business enterprise or Person;

     

    (xviii)   make
capital expenditures or capital additions or betterments in amounts which exceed
$2,000 in the aggregate;

     

    (xix)   change
its method of accounting or its accounting principles or practices, including
any policies or practices with respect to the establishment of reserves for
work-in-process, inventory and accounts receivable, utilized in the preparation
of the Financial Statements, other than as required by GAAP;

     

    (xx)   institute
or settle any litigation or any legal, administrative or arbitration action or
proceeding before any court or Governmental Body relating to it or any of its
properties or assets;

     

    (xxi)   make any
settlements or new elections, or change any current elections, with respect to
its Taxes;

     

    (xxii)   enter
into any agreements, commitments or contracts for any real property
leases;

     

    (xxiii)   enter
into any transaction with any Affiliated Person;

     

    (xxiv)   enter
into any other agreements, commitments or contracts, except those made in the
ordinary course of business consistent with past practice and in a commercially
reasonable manner;

     

    (xxv)   fail to
maintain reserves at historical levels and consistent with past practice;
or

     

    (xxvi)   enter
into any agreement or commitment to do any of the foregoing.

     

    6.3   Certain
Filings.  Seller agrees to make or cause to be made all filings
with Governmental Bodies that are required to be made by Seller or by the
Company to carry out the transactions contemplated by this Agreement, including
as required under any applicable anti-competition Law.  Seller agrees
to assist, and to cause the Company to assist, Madden in making all such
filings, applications and notices as may be necessary or desirable in order to
obtain the authorization, approval or consent of any Governmental Body which may
be reasonably required or which Madden may reasonably request in connection with
the consummation of the transactions contemplated hereby, including as required
under any applicable anti-competition Law.

     

     

    
      
        
        

      

      
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    6.4   Consents and
Approvals.  Seller agrees to use its good faith commercially
reasonable efforts to obtain, or to cause the Company to obtain, as promptly as
practicable, but not later than the Closing in any event, all consents,
authorizations, approvals and waivers required in connection with the
consummation of the transactions contemplated by this Agreement.

     

    6.5   Efforts to Satisfy
Conditions.  Seller agrees to use its good faith commercially
reasonable efforts to satisfy the conditions set forth in Article
IX.

     

    6.6   Further
Assurances.  Seller agrees to execute and deliver, and to cause
the Company to execute and deliver, such additional documents and instruments,
and to perform such additional acts as Madden may reasonably request to
effectuate or carry out and perform all the terms, provisions and conditions of
this Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby and to effectuate the intent and purposes
hereof.

     

    6.7   Notification of Certain
Matters.  Promptly after obtaining knowledge thereof, Seller
shall notify Madden in writing of (a) the occurrence or non-occurrence of
any fact or event which causes or would be reasonably likely to cause (i) any
representation or warranty of Seller contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Closing Date or (ii) any covenant, condition or agreement of Seller in this
Agreement not to be complied with or satisfied in any material respect, and (b)
any failure of Seller to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by Seller hereunder in any material
respect; provided, however, that no such
notification shall affect the representations or warranties of Seller, or the
right of Madden to rely thereon, or the conditions to the obligations of Madden
except as provided in the following sentence.  If Seller notifies
Madden in writing of any matter referred to in the preceding clause (a)(i) and
Madden nevertheless consummates the transactions contemplated hereby, Madden
shall have no claim against Seller for a breach of such representation or
warranty based on the information contained in such notification and the
provisions of Section 12.2 shall not apply with respect to any such
matter.  Seller shall give prompt notice in writing to Madden of any
notice or other communication from any third party alleging that the consent of
such third party is or may be required to be obtained by Seller or the Company
in connection with the transactions contemplated by this Agreement.

     

    6.8   Closing Date
Debt.  Seller shall cause the Company to be free of any and all
Debt as of the Closing Date.

     

    6.9   Brokers and
Finders.  Seller (and not the Company) shall be responsible for
and shall pay all fees, commissions and costs of any such broker, finder or
investment advisor.

     

    ARTICLE
VII


     

    Covenants of
Madden

     

    Madden
hereby covenants and agrees as follows:

     

     

    
      
        
        

      

      
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    7.1   Certain
Filings.  Madden agrees to make or cause to be made all filings
with Governmental Bodies that are required to be made by Madden or its
affiliates to carry out the transactions contemplated by this Agreement,
including as required under any applicable anti-competition Law. Madden agrees
to assist Seller in making all such filings, applications and notices as may be
necessary or desirable in order to obtain the authorization, approval or consent
of any Governmental Body which may be reasonably required or which Seller may
reasonably request in connection with the consummation of the transactions
contemplated hereby, including as required under any applicable anti-competition
Law.

     

    7.2   Efforts to Satisfy
Conditions.  Madden agrees to use its good faith commercially
reasonable efforts to satisfy the conditions set forth in Article X hereof that
are within its control.

     

    7.3   Further
Assurances.  Madden agrees to execute and deliver such
additional documents and instruments, and to perform such additional acts, as
Seller may reasonably request to effectuate or carry out and perform all the
terms, provisions and conditions of this Agreement and the other Transaction
Documents and the transactions contemplated hereby and thereby and to effectuate
the intent and purposes hereof.

     

    7.4   Notification of Certain
Matters.  Promptly after obtaining knowledge thereof, Madden
shall notify Seller of (a) the occurrence or non-occurrence of any fact or
event which causes or would be reasonably likely to cause (i) any representation
or warranty of Madden contained in this Agreement to be untrue or inaccurate in
any material respect at any time from the date hereof to the Closing Date or
(ii) any covenant, condition or agreement of Madden in this Agreement not
to be complied with or satisfied in any material respect and (b) any failure of
Madden to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder in any material respect; provided, however, that no such
notification shall affect the representations or warranties of Madden or
Seller’s right to rely thereon, or the conditions to the obligations of Seller
except as provided in the following sentence.  If Madden notifies
Seller in writing of any matter referred to in the preceding clause (a)(i) and
Seller nevertheless consummates the transactions contemplated hereby, Seller
shall have no claim against Madden for a breach of such representation or
warranty based on the information contained in such notification and the
provisions of Section 12.3 shall not apply with respect to any such
matter.  Madden shall give prompt notice in writing to Seller of any
notice or other communication from any third party alleging that the consent of
such third party is or may be required to be obtained by Madden in connection
with the transactions contemplated by this Agreement.

     

    ARTICLE
VIII


     

    Certain Other
Agreements

     

    8.1   Certain
Tax Matters. The
parties hereby further covenant and agree as follows:

     

    (a)   Tax
Returns and Cooperation.

     

     

    
      
        
        

      

      
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    (i)   Seller
shall, or shall use good faith commercially reasonable efforts to cause the
Company to, prepare and timely file, in a commercially reasonable manner, all
Returns and amendments thereto required to be filed by or for the Company for
all taxable periods ending on or before the Closing Date.  If the due
date (including extensions) to file any such Return is after the Closing Date
and Seller by law is not authorized to sign such Returns on the Company’s
behalf, Madden shall provide a requisite power of attorney to sign such Returns
to Seller not more than five (5) days after Madden’s, the Company’s or any
affiliate’s receipt of any such Returns from Seller.  Madden will be
given a reasonable opportunity to review and comment on all such Returns
required to be filed after the date hereof.

     

    (ii)   Except to
the extent taken into account in determining Closing Date Net Working Capital,
Seller shall be liable for all Taxes of the Company for the Pre-Closing Period
except for any Taxes that will result by reason of a 338(h)(10) Election or
analogous elections made pursuant to Section 8.1(b), grossed-up by Madden for
any additional Taxes on the receipt so that the payment of such Taxes is made on
an after-tax basis (with respect to which Madden will be liable on an after-tax
basis).  Seller shall be liable for all Taxes of Seller for any
taxable year or taxable period, except for any Taxes that result by reason of a
338(h)(10) Election or analogous elections made pursuant to Section 8.1(b),
grossed-up by Madden for any additional Taxes on the receipt so that the payment
of such Taxes is made on an after-tax basis (with respect to which Madden will
be liable on an after-tax basis).  In the case of any taxable period
that includes (but does not begin or end on) the Closing Date (a “Straddle
Period”), the portion of the Taxes of the Company which were incurred in the
ordinary course of its business for such Straddle Period attributable to the
period prior to close of the Closing Date shall be treated as Taxes of a
Pre-Closing Period.  The amount of Straddle Period Taxes of the
Company that are treated as Taxes of a Pre-Closing Period shall be computed (x)
in the case of income, franchise, sales, or similar taxes, pursuant to an
interim closing of the books method by assuming that the Company had a taxable
year or period which ended on the Closing Date, except that exemptions,
allowances or deductions that are calculated on an annual basis, such as the
deduction for depreciation, shall be apportioned on a per-diem basis and (y) in
the case of real property Taxes, personal property taxes and similar ad valorem obligations by
prorating such Taxes owed for the Straddle Period on a per-diem
basis.

     

    (iii)   The
Company shall be liable for any and all Taxes imposed on the Company relating to
or apportioned to any taxable year or portion thereof beginning on or after the
Closing Date and ending after the Closing Date.  Seller shall be
liable for any and all Taxes imposed on the Company relating to or apportioned
to any taxable year or portion thereof beginning prior to the Closing Date and
ending prior the Closing Date.

     

    (iv)   Any Tax
refunds that are received by Madden, the Company or any Affiliate thereof, and
any amounts credited against Tax to which Madden, the Company or any Affiliate
thereof become entitled, that relate to taxable periods (or portions thereof)
ending on or before the Closing Date shall be for the account of Seller and
Madden shall pay over to Seller any such refund or the amount of any such credit
within ten (10) days after receipt or entitlement thereto.  In
addition, to the extent that a

     

     

    
      
        
        

      

      
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    claim for
refund or a proceeding results in a payment or credit against Tax by a taxing
authority to Madden, the Company or any affiliate thereof of any amount accrued
on the most recent Balance Sheet, Madden shall pay such amount to Seller within
ten (10) days after receipt or entitlement thereto.

     

    (v)   Madden
and Seller shall each cooperate fully, as and to the extent reasonably requested
by the other party, in connection with the filing of Returns pursuant to this
Section 8.1(a) and any audit, litigation or other proceeding with respect to
Taxes.  Such cooperation shall include the retention and (upon the
other party’s request) the provision of records, assistance and information
which are reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder.  Seller (before the Closing) and Madden (after the Closing)
shall each cause the Company (A) to retain all books and records with respect to
Tax matters pertinent to it relating to any taxable period beginning before the
Closing Date until the expiration of the statutory period of limitations of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records.

     

    (vi)   Madden
and Seller further agree, upon request, to use good faith commercially
reasonable efforts to obtain any certificate or other document from any
Governmental Body or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby); provided that such certificate
or other document does not increase the Tax of Madden or Seller.

     

    (vii)   Any
amended Return or claim for Tax refund for any Pre-Closing Period (other than a
Straddle Period) shall be filed, or cause to be filed only by
Seller.  If Seller by law is not authorized to sign such amended
Returns, Madden shall provide a requisite power of attorney to sign such Returns
to Seller.  Madden shall not file an amended Return for a Straddle
Period without the consent of Seller, which consent shall not be unreasonably
withheld or delayed.

     

    (viii)   If in
connection with any examination, investigation, audit or other proceeding in
respect to any Return of the Company, any Governmental Body issues to the
Company a written notice of deficiency, a notice of reassessment, a proposed
adjustment, Madden or the Company shall notify Seller of its receipt of such
communication from the Governmental Body within twenty (20) days after receiving
any such notice.  Except as provided below, Seller shall, at his
expense, have the right to control the contest of any such assessment, proposal,
claim, reassessment, demand or other proceedings in connection with any
Pre-Closing Period Return (other than a Straddle Period
Return).  Notwithstanding anything in this Agreement to the contrary,
if any examination, investigation, audit or other proceeding relates to a
Straddle Period Return, Madden and/or the Company shall participate in, control
and resolve such examination, investigation, audit or other proceeding;
provided, however, that if such examination, investigation, audit or other
proceeding relates to the portion of the taxable

     

     

    
      
        
        

      

      
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    period
ending on the Closing Date, then Seller may, at his expense, participate in such
defense.  Madden and/or the Company shall not compromise or settle
such contest or proceeding without the written consent of the Seller which
consent shall not be unreasonably withheld or delayed.

     

    (b)   338(h)(10) Election.

     

    (i)   At the
request of Madden, Madden and Seller shall timely make a joint election under
Section 338(h)(10) of the Code (a “338(h)(10) Election”) with respect to the
purchase of the shares of the Company.  Madden and Seller shall, at
the request of Madden, make any analogous election with respect to state, local
or foreign Taxes, to the extent that such election is separately
available.  Madden and Seller shall exchange completed and executed
copies of (A) IRS Form 8023 and required schedules thereto and (B) to the extent
required, any similar forms with respect to state, local or foreign Taxes, which
shall in each case be completed in a manner consistent with the Final Allocation
(as defined below), as soon after the preparation of the Final Allocation as is
reasonably practicable.

     

    (ii)   Unless
Madden determines that it will not make a 338(h)(10) Election and within fifteen
(15) days after the date hereof provides to Seller written notice thereof,
Madden shall, within sixty (60) days after the Closing, determine and provide to
Seller the allocation of the purchase price, as determined for United States
federal income Tax purposes, among the assets deemed acquired for United States
federal income Tax purposes assuming a 338(h)(10) Election was made with respect
to the Company Shares (the “Final Allocation”).  The Final Allocation
shall be made in accordance with the Code and any applicable Treasury
Regulations and any allocation to inventory will be equal to the fully adjusted
tax basis.  The Final Allocation shall be redetermined, consistent
with the principles set forth above, upon the happening of any event reasonably
requiring such redetermination, including, without limitation, any adjustments
to taxable income, post-closing adjustments pursuant to Section 2.3(b) and the
payment to Seller of the Earn-Out Payment pursuant to the Earn-Out
Agreement.  The Final Allocation, once determined, shall be annexed to
this Agreement as Exhibit D, and any
redetermination of the Final Allocation pursuant to the preceding sentence shall
likewise be annexed to this Agreement with an appropriate
designation.  The Final Allocation (and any redetermination thereof)
shall be binding on Seller and Madden for all Tax and financial reporting
purposes.

     

    (iii)   Notwithstanding
anything herein to the contrary, Madden shall reimburse Seller for the increased
Taxes, if any, incurred by Seller with respect to the year in which the Closing
occurs and/or any subsequent year as a result of any 338(h)(10) Election or
analogous elections made (taking into account the Final Allocation) (as
grossed-up for additional Taxes of Seller and/or the Company on the receipt of
such payment) such that Seller will receive the same after-tax proceeds with
respect to the year in which the Closing occurs and/or any subsequent year as if
Seller had sold stock and no 338(h)(10) Election or analogous elections had been
made (“338(h)(10) Grossed-Up Payment”).  Within thirty (30) days after
determination of the Final Allocation, Seller shall provide to Madden a
schedule, with supporting workpapers, which shall be based

     

     

    
      
        
        

      

      
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    upon the
Final Allocation, setting forth (A) the amount of Taxes incurred by Seller with
respect to the year in which the Closing occurs from the sale of the Company
Shares with respect to which a 338(h)(10) Election or analogous election is made
taking into account a receipt of the 338(h)(10) Grossed-Up Payment and (B) the
amount of Taxes that would have been incurred by Seller with respect to the year
in which the Closing occurs from the sale of such Company Shares determined as
if no such election were made.  In the event that Madden’s payment of
all or a portion of the 338(h)(10) Grossed-Up Payment (or portions thereof) to
Seller occurs (or will occur) after the end of the year in which the Closing
occurs (including the years in which the Earn-Out Payment is made), then Seller
shall provide Madden with a recomputed schedule, with supporting workpapers,
setting forth the amount of any additional Taxes incurred by Seller with respect
to such year following the year in which the Closing occurs as a result of a
338(h)(10) Election or any analogous election.  Unless Madden disputes
the schedule by providing written notice to Seller within fifteen (15) days
after the receipt thereof, Seller’s schedule shall be final, binding and
conclusive on the parties for all Tax purposes.  If Madden and Seller
cannot agree on the proper amount that Madden is required to pay Seller,
pursuant to this Section 8.1(b)(iii) within twenty (20) days after the provision
of written notice to Seller, such dispute shall be settled, within thirty (30)
days after its submission, by the Independent Accounting Firm, and the amount
that the Independent Accounting Firm determines is required to be paid pursuant
to this Section 8.1(b)(iii) shall be final, binding and conclusive on the
parties for all Tax purposes.  Madden and Seller shall submit the
dispute to the Independent Accounting Firm within twenty (20) days after the
receipt by Seller of the written objection.  Seller’s schedule and the
determination of any amounts required to be paid pursuant to this Section
8.1(b)(iii) shall be consistent with and based upon, inter alia, the principles,
statements and, if applicable, assumptions set forth in Exhibit D-1 attached
hereto, which shall also be applied by the Independent Accounting Firm in
settling any dispute hereunder.  Madden shall pay the amounts required
to be paid pursuant to this Section 8.1(b)(iii) on or before the date Seller is
required to pay Taxes as a result of the 338(h)(10) Election or analogous
election.

     

    (iv)   In
addition to the foregoing, Madden shall reimburse Seller for any reasonable
documented out-of-pocket professional fees and expenses incurred by Seller in
connection with determining the parties’ obligations, if any, under clause (iii)
above.

     

    (v)   Madden
shall promptly provide written notice to Seller of any audit or other
investigation that may be initiated in connection with a 338(h)(10) Election or
any analogous election.

     

    8.2   Employee
Matters.  On the Closing Date, Madden shall offer employment to
those individuals listed under the heading “Hired Employees” in Section 8.2 of
the Disclosure Schedule (the “Hired Employees”), which employment shall be on
such terms and with such compensation and benefits as are comparable to
similarly situated employees of Madden; provided that, to the extent that each
such Hired Employee accepts employment with Madden, such Hired Employee shall
initially receive compensation in an amount no less than the amount set forth
opposite such Hired Employee’s name on Section 8.2 of the Disclosure Schedule,
Madden shall pay to each such Hired Employee a lump sum equal to the amount set
forth opposite such Hired Employee’s name on Section 8.2 of the Disclosure
Schedule in respect of

     

     

    
      
        
        

      

      
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    such
Hired Employee’s relocation to the New York metropolitan area (the “Relocation
Payment”), which Relocation Payment shall be deemed compensation to each such
Hired Employee, and each such Hired Employee shall receive benefits based on the
date such Hired Employee started employment at the Company as set forth opposite
such Hired Employee’s name on Schedule 8.2 of the Disclosure Schedule. Except as
set forth in Section 8.2 of the Disclosure Schedule, Madden agrees to pay
severance to each individual listed under the heading “Terminated Employees” in
Section 8.2 of the Disclosure Schedule in an amount equal to one month of such
Terminated Employee’s annual salary as of the date hereof as set forth opposite
such Terminated Employee’s name on Section 8.2 of the Disclosure Schedule,
provided that each such Terminated Employee shall be required to sign a release
before they will be eligible to receive any severance
payment.  Notwithstanding the foregoing, and without limiting the
provisions of Section 13.7 hereof, this Section 8.2 shall not confer any rights
or remedies upon any Person other than the parties hereto and their respective
heirs, personal representatives, legatees, successors and permitted
assigns.

     

    ARTICLE
IX


     

    Conditions Precedent to
Obligations of Madden

     

    The
obligations of Madden under Article II and Article III shall be subject to the
satisfaction at or prior to the Closing of the following conditions, any one or
more of which may be waived by Madden:

     

    9.1   Representations and
Warranties.  Each and every representation and warranty of
Seller contained in this Agreement, and any schedule or any certificate
delivered pursuant hereto, shall have been true and correct when made and shall
be repeated at the Closing and (a) if qualified by materiality (or any variation
of such term), shall be true and correct (as so qualified) as of the Closing
Date, except that any such representation or warranty that is made as of a
specified date shall only be required to be true and correct as of that date,
and (b) if not qualified by materiality (or any variation of such term), shall
be true and correct in all material respects as of the Closing Date, except that
any such representation or warranty that is made as of a specified date shall
only be required to be true and correct in all material respects as of that
date.

     

    9.2   Compliance with
Covenants.  Seller shall have performed and observed all
covenants and agreements to be performed or observed by Seller under this
Agreement at or before the Closing.

     

    9.3   Lack of Adverse
Change.  Since the date of the Balance Sheet, there shall not
have occurred any circumstance or event which, individually or in the aggregate,
has had or is reasonably likely to result in a Material Adverse Effect,
including a material decrease in the revenue of the Company.

     

    9.4   Update
Certificate.  Madden shall have received a favorable
certificate, dated the Closing Date, signed by Seller as to the matters set
forth in Sections 9.1, 9.2 and 9.3.

     

     

    
      
        
        

      

      
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    9.5   Balance
Sheet.  Madden shall have received an unaudited balance sheet
of the Company as of the Closing Date, reflecting that, as of the Closing Date,
the Company is free of any and all Cash-On-Hand and Debt as of the Closing Date,
other than the Remaining Cash.

     

    9.6   Regulatory
Approvals.  All approvals and consents of Governmental Bodies
required to carry out the transactions contemplated by this Agreement shall have
been obtained.

     

    9.7   Consents of Third
Parties.  Except as set forth in Section 9.7 of the Disclosure
Schedule, all consents from third parties to Contracts or otherwise that are
required to be listed in Section 4.4 of the Disclosure Schedule in order to
avoid a misrepresentation under Section 4.4 shall have been obtained in
writing.

     

    9.8   FIRPTA
Affidavit.  Seller shall have provided to Madden a duly sworn
affidavit dated as of the Closing Date that Seller is not a “foreign person,”
setting forth Seller’s taxpayer identification number and otherwise meeting the
requirements of Section 1445(b)(2) of the Code and the Treasury Regulations
promulgated thereunder.

     

    9.9   No Violation of
Orders.  No preliminary or permanent injunction or other order
issued by any Governmental Body, nor any statute, rule, regulation, decree or
executive order promulgated or enacted by any Governmental Body, that declares
this Agreement invalid or unenforceable in any material respect or that prevents
or delays the consummation of the transactions contemplated hereby or which
imposes or will impose restrictions on Madden’s right or ability to operate the
business of the Company shall be in effect; and no action or proceeding before
any Governmental Body shall have been instituted or, to the Knowledge of Seller
and the Company, threatened by any Governmental Body, or by any other Person,
which seeks to prevent or delay the consummation of the transactions
contemplated by this Agreement or which challenges the validity or
enforceability of this Agreement or which seeks to impose restrictions on
Madden’s right or ability to operate the business of the Company, or seeks to
require Madden to dispose of any of its businesses, operations, properties or
assets or any claim relating to the equity of the Company.

     

    9.10   Employment
Agreement.  Madden and Seller shall have entered into the
Employment Agreement, and the Employment Agreement shall be in full force and
effect with no notice that Seller does not intend to honor such Employment
Agreement.

     

    9.11   Transaction
Documents.  The Company and Seller shall have entered into each
of the other Transaction Documents to which they are a party.

     

    9.12   Other Closing
Matters.  Madden shall have received such other supporting
information in confirmation of the representations, warranties, covenants and
agreements of Seller and the satisfaction of the conditions to Madden’s
obligation to close hereunder as Madden or its counsel may reasonably
request.

     

     

     

    
      
        
        

      

      
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    ARTICLE
X


     

    Conditions Precedent to
Obligations of Seller

     

    The
obligations of Seller under Article II and Article III shall be subject to the
satisfaction at or prior to the Closing of the following conditions, any one or
more of which may be waived by Seller:

     

    10.1   Representations and
Warranties.  Each and every representation and warranty of
Madden contained in this Agreement, and any schedule or any certificate
delivered pursuant hereto, shall have been true and correct when made and shall
be repeated at the Closing and (a) if qualified by materiality (or any variation
of such term), shall be true and correct as of the Closing Date (as so
qualified), except that any such representation or warranty that is made as of a
specified date shall only be required to be true and correct as of that date,
and (b) if not qualified by materiality (or any variation of such term), shall
be true and correct in all material respects as of the Closing Date, except that
any such representation or warranty that is made as of a specified date shall
only be required to be true and correct in all material respects as of that
date.

     

    10.2   Compliance with
Covenants.  Madden shall have performed and observed all
covenants and agreements to be performed or observed by it under this Agreement
at or before the Closing.

     

    10.3   Update
Certificate.  Seller shall have received a favorable
certificate, dated the Closing Date, signed by Madden as to the matters set
forth in Sections 10.1 and 10.2.

     

    10.4   Regulatory
Approvals.  All material approvals and consents of Governmental
Bodies required to carry out the transactions contemplated by this Agreement
shall have been obtained.

     

    10.5   No Violation of
Orders.  No preliminary or permanent injunction or other order
issued by any Governmental Body, nor any statute, rule, regulation, decree or
executive order promulgated or enacted by any Governmental Body, that declares
this Agreement invalid or unenforceable in any material respect or that prevents
the consummation of the transactions contemplated hereby or which would impose
restrictions on the ability of the Company to operate in accordance with the
terms of the Earn-Out Agreement shall be in effect.

     

    10.6   Transaction
Documents.  Madden shall have entered into each of the other
Transaction Documents to which it is a party.

     

    10.7   Other Closing
Matters.  Seller shall have received such other supporting
information in confirmation of the representations, warranties, covenants and
agreements of Madden and the satisfaction of the conditions to Seller’s
obligations to close hereunder as Seller or its counsel may reasonably
request.

     

     

    
      
        
        

      

      
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    ARTICLE
XI


     

    [Intentionally
omitted]

     

    


    ARTICLE
XII


     

    Indemnification

     

    12.1   Survival of Representations,
Warranties and Covenants.  The parties to this Agreement hereby
agree that the remedy for any breach or inaccuracy of a representation or
warranty, covenant or agreement contained in this Agreement or the Earn-Out
Agreement shall be the indemnification provisions set out in this Article XII;
provided, however, that nothing
in this Section 12.1 shall prohibit any party from seeking specific performance
or injunctive relief against any other party in respect of a breach by such
other party of any covenant hereunder; and provided further, that nothing
in this Section 12.1 shall limit any party’s remedies for a breach of a covenant
occurring prior to the Closing nor limit the exercise of any other remedies
expressly set forth in the Earn-Out Agreement.

     

    (a)   The
representations and warranties of the parties contained in this Agreement, any
schedule or any certificate delivered pursuant hereto, shall survive the Closing
and shall continue in full force and effect (a) in the case of the
representations and warranties of Seller and Madden contained in Sections 4.6,
4.15, 4.16, 4.23 and 5.5 until thirty (30) days following the expiration of
the applicable statutory period of limitations with respect to the matter to
which the claim relates, as such limitation period may be extended from time to
time, (b) in the case of the representations and warranties of Seller and Madden
contained in Sections 4.1, 4.2, 4.3, 4.20, 5.1 and 5.2, indefinitely, and (c) in
the case of all other representations and warranties of the parties contained in
this Agreement, and in any schedule or any certificate delivered pursuant
hereto, until eighteen (18) months after the Closing Date.  Each party
hereto shall be entitled to rely on any such representation or warranty
regardless of any independent knowledge of such party or any inquiry or
investigation made by or on behalf of such party. Notwithstanding the foregoing,
any representation or warranty in respect of which indemnity may be sought
hereunder shall survive the time at which it would otherwise terminate pursuant
to this Section 12.1 if notice of the breach thereof shall have been given to
the party against whom such indemnity may be sought prior to the expiration of
the applicable survival period.

     

    (b)   The
parties’ covenants and agreements under this Agreement shall survive the Closing
indefinitely unless a shorter period of performance is specified with respect to
such covenant or agreement.

     

    12.2   Indemnification by
Seller.

     

    (a)   Subject
to Section 12.2(b), 12.9 and 12.10, Seller shall indemnify and hold harmless
Madden, the Company, and each of their respective stockholders, directors,
officers, employees, agents and representatives, and the successors and assigns
of each of the foregoing (collectively, the “Madden Indemnified Parties”) from
and against any and all Losses incurred or suffered by such Person as a result
of or arising from, without duplication:

     

     

    
      
        
        

      

      
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    (i)   a breach
by Seller or an inaccuracy of any representation or warranty made by Seller in
this Agreement, the Earn-Out Agreement or any schedule or certificate delivered
pursuant hereto or thereto (in each case, as of the Closing Date, except to the
extent such representations and warranties shall have been expressly made as of
an earlier date, in which case as of such date); and

     

    (ii)   a failure
by Seller to perform or comply with any covenant or agreement on the part of
Seller contained herein or in the Earn-Out Agreement.

     

    Any
amount paid pursuant to this Section 12.2(a) shall be paid to Madden or, at
Madden’s election, to the Company and shall be the amount required to put Madden
or the Company, as the case may be, in the position it would have been in had
such representation, warranty, covenant or agreement not been
breached.

     

    (b)   Notwithstanding
Section 12.2(a):

     

    (i)   Seller
shall not have any obligation to indemnify the Madden Indemnified Parties from
and against any Loss under clause (i) of Section 12.2(a) until the Madden
Indemnified Parties have suffered aggregate Losses, by reason of all such
breaches, in excess of one hundred twenty-five thousand dollars ($125,000);
provided that once the aggregate Losses covered by Section 12.2(a) exceeds such
threshold, Seller shall be liable for all such Losses only to the extent such
Losses exceed sixty-two thousand five hundred dollars ($62,500); and provided
further that such threshold shall not apply to any Loss as a result of, arising
from or in connection with a breach by Seller of a representation or warranty
contained in Sections 4.1, 4.2, 4.3, 4.6, 4.20 or 4.23; and

     

    (ii)   Seller
shall not have any obligation to indemnify the Madden Indemnified Parties from
and against any Loss under clause (i) of Section 12.2(a) to the extent the
aggregate Losses the Indemnified Parties have suffered by reason of all such
breaches exceed three million five hundred thousand dollars ($3,500,000);
provided that such aggregate limit shall not apply to any Loss as a result of,
arising from or in connection with a breach by Seller of a representation or
warranty contained in Sections 4.1, 4.2, 4.3, 4.6, 4.20 or 4.23.

     

    (iii)   For the
avoidance of doubt, Seller shall not have any obligation to indemnify the Madden
Indemnified Parties from and against any Loss under clause (i) of Section
12.2(a) arising or resulting from the actions of the Company undertaken at
Madden’s request or the intellectual property rights of third parties with
respect to such actions, to the extent such actions or intellectual property
rights are disclosed in Section 4.8 of the Disclosure Schedule.

     

    (c)   Notwithstanding
anything to the contrary contained in Section 12.2(b) or anywhere else in this
Agreement, Seller shall indemnify and hold harmless the Madden Indemnified
Parties, without limitation, from and against any and all Losses incurred or
suffered by such Person after the Closing Date as a result of or arising from
any fraudulent act or willful or intentional misconduct by the Company prior to
the Closing Date or by Seller.

     

    12.3   Indemnification by
Madden.

     

     

    
      
        
        

      

      
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    (a)   Madden
shall indemnify and hold harmless Seller and each of his agents and
representatives, and the successors and assigns of each of the foregoing (the
“Seller Indemnified Parties”), from and against any Loss incurred or suffered by
such Person as a result of or arising from:

     

    (i)   a breach
by Madden or an inaccuracy of any representation or warranty made by Madden in
this Agreement, the Earn-Out Agreement or in any schedule or certificate
delivered pursuant hereto or thereto (in each case, as of the Closing Date,
except to the extent such representations and warranties shall have been
expressly made as of an earlier date, in which case as of such date);
and

     

    (ii)   a failure
by Madden to perform or comply with any covenant or agreement on the part of
Madden contained herein or in the Earn-Out Agreement.

     

    Any
amount paid pursuant to this Section 12.3(a) shall be the amount required to put
Seller in the position Seller would have been in had such representation,
warranty, covenant or agreement not been breached.

     

    (b)   Notwithstanding
anything to the contrary contained in this Agreement, Madden shall indemnify and
hold harmless the Seller Indemnified Parties from and against any Loss incurred
or suffered by Seller after the Closing Date as a result of or arising from any
fraudulent act or willful misconduct by Madden. The Seller Indemnified Parties
shall not take any action the purpose or intent of which is to prejudice the
defense of any claim subject to indemnification hereunder or to induce a third
party to assert a claim subject to indemnification hereunder.

     

    12.4   Additional Seller
Indemnification.

     

    (a)   Product
Liability.  Seller shall indemnify and hold harmless the Madden
Indemnified Parties from and against any and all Losses incurred or suffered by
such Person as a result of or arising from any claims made for failure to comply
with Proposition 65 (i) in respect of any non-compliance occurring prior to the
Closing Date or (ii) related to any and all products of the Company
manufactured, produced, sold or distributed prior to the Closing
Date.

     

    (b)   Customs
Liability.  Seller shall indemnify and hold harmless the Madden
Indemnified Parties from and against any and all Losses incurred or suffered by
any such Madden Indemnified Party as a result of or arising from (i) any actions
or omissions by Seller or the Company prior to the Closing Date in connection
with the importation of goods into the United States, (ii) any failure of Seller
or the Company to comply in all respects with applicable customs Laws prior to
the Closing Date, including without limitation any failure of Seller or the
Company to have timely and accurately paid all duties, taxes, fees, payments or
other governmental charges due to U.S. Customs, the United States government or
any subdivision or agency thereof, (iii) any deficiencies in any entries,
reports, schedules, forms, declarations or any other documents or materials
filed with U.S. Customs by Seller or,  prior to the Closing Date, by
the Company, or (iv) any investigation or inquiry, or any fines or penalties
assessed (whether criminal, civil or administrative, and whether monetary or
non-monetary), by U.S. Customs or other governmental agency or subdivision
relating to any of the foregoing.

     

     

    
      
        
        

      

      
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    12.5   Assumption of
Defense.  An indemnified party shall promptly give notice to
each indemnifying party after obtaining knowledge of any matter as to which
recovery may be sought against such indemnifying party because of the indemnity
set forth above, and, if such indemnity shall arise from the claim of a third
party, shall permit such indemnifying party to assume the defense of any such
claim or any proceeding resulting from such claim; provided, however, that failure
to give any such notice promptly shall not affect the indemnification provided
under this Article XII, except to the extent such indemnifying party shall have
been actually and materially prejudiced as a result of such
failure.  Notwithstanding the foregoing, an indemnifying party may not
assume the defense of any such third-party claim if it does not demonstrate to
the reasonable satisfaction of the indemnified party that it has adequate
financial resources to defend such claim and pay any and all Losses that may
result therefrom, or if the claim (i) is reasonably likely to result in
imprisonment of the indemnified party, (ii) is reasonably likely to result in an
equitable remedy which would materially impair the indemnified party’s ability
to exercise its rights under this Agreement, or impair Madden’s right or ability
to operate the Company, or (iii) names both the indemnifying party and the
indemnified party (including impleaded parties) and representation of both
parties by the same counsel would create a conflict.  If an
indemnifying party assumes the defense of such third party claim, such
indemnifying party shall agree prior thereto, in writing, that it is liable
under this Article XII to indemnify the indemnified party in accordance with the
terms contained herein in respect of such claim, shall conduct such defense
diligently, shall have full and complete control over the conduct of such
proceeding on behalf of the indemnified party and shall, subject to the
provisions of this Section 12.5, have the right to decide all matters of
procedure, strategy, substance and settlement relating to such proceeding; provided, however, that any
counsel chosen by such indemnifying party to conduct such defense shall be
reasonably satisfactory to the indemnified party, such consent not to be
unreasonably withheld or delayed, and the indemnifying party will not without
the written consent of the indemnified party consent to the entry of any
judgment or enter into any settlement with respect to the matter which does not
include a provision whereby the plaintiff or the claimant in the matter releases
the indemnified party from all liability with respect thereto or which may
reasonably be expected to have an adverse effect on the indemnified
party.  The indemnified party may participate in such proceeding and
retain separate co-counsel at its sole cost and expense.  Failure by
an indemnifying party to notify the indemnified party of its election to defend
any such claim or proceeding by a third party within thirty (30) days after
notice thereof shall be deemed a waiver by such indemnifying party of its right
to defend such claim or action.

     

    12.6   Non-Assumption of
Defense.  If no indemnifying party is permitted or elects to
assume the defense of any such claim by a third party or proceeding resulting
therefrom, the indemnified party shall diligently defend against such claim or
litigation in such manner as it may deem appropriate and, in such event, the
indemnifying party or parties shall promptly reimburse the indemnified party for
all reasonable out-of-pocket costs and expenses, legal or otherwise, incurred by
the indemnified party and its affiliates in connection with the defense against
such claim or proceeding, as such costs and expenses are
incurred.  Any counsel chosen by such indemnified party to conduct
such defense must be reasonably satisfactory to the indemnifying party or
parties, and only one counsel shall be retained to represent all indemnified
parties in an action (except that if litigation is pending in more than one
jurisdiction with respect to an action, one such counsel may be retained in each
jurisdiction in which such litigation

     

     

    
      
        
        

      

      
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    is
pending).  The indemnified party shall not settle or compromise any
such claim without the written consent of the indemnifying party, which consent
shall not be unreasonably withheld.

     

    12.7   Indemnified Party’s
Cooperation as to Proceedings.  The indemnified party will at
its own expense cooperate in all reasonable respects with any indemnifying party
in the conduct of any proceeding as to which such indemnifying party assumes the
defense.  For the cooperation of the indemnified party pursuant to
this Section 12.7, the indemnifying party or parties shall promptly reimburse
the indemnified party for all reasonable out-of-pocket costs and expenses, legal
or otherwise, incurred by the indemnified party or its affiliates in connection
therewith, as such costs and expenses are incurred.

     

    12.8   Calculation of
Losses.  In calculating amounts payable to an indemnified
party, the amount of any indemnified Losses shall be determined without giving
effect to any “materiality” or “Material Adverse Effect” qualifications set
forth in any representations or warranties the inaccuracy or breach of which
forms any part of the basis for the related indemnification claim (but such
qualifications shall be given effect for purposes of determining whether there
has been an inaccuracy or breach).

     

    12.9   Payments Treated as Purchase
Price Adjustment.  Any payment by Madden, the Company or Seller
under this Article XII will be treated for Tax purposes as an adjustment to the
consideration hereunder for the Company Shares.

     

    12.10   Limitation on
Indemnification.  The amount of any indemnification made or
payable under this Agreement shall be reduced by any amounts when and as
recovered by (net of any expenses of recovery) any indemnified party with
respect to the matter giving rise to such Loss under insurance policies, except
to the extent by which premiums (or other retroactive adjustments or
reimbursements to the insurer) of such policies have increased primarily as a
result of such recovery.

     

    ARTICLE
XIII


     

    Miscellaneous

     

    13.1   Expenses.  Except
as otherwise explicitly set forth herein, whether or not the transactions
contemplated hereby are consummated, each party hereto shall pay all costs and
expenses incurred by such party in respect of the transactions contemplated
hereby; provided, however, that all
expenses incurred by the Company with respect to the transactions contemplated
hereby for the benefit of Seller prior to the Closing, including, without
limitation, expenses for legal and investment advisory services, shall be paid
by Seller.

     

    13.2   Entirety of
Agreement.  This Agreement (including the Disclosure Schedule
and all other schedules and exhibits hereto), together with the other
Transaction Documents and certificates and other instruments delivered hereunder
and thereunder, state the entire agreement of the parties, merge all prior
negotiations, agreements and understandings, if any, and state in full all
representations, warranties, covenants and agreements which have induced this
Agreement.  Each party agrees that in dealing with third parties, no
contrary representations will be made.  Notwithstanding anything
to the contrary in this Section 13.2,

     

     

    
      
        
        

      

      
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    unless
and until the Closing occurs, the Confidentiality Agreement shall continue in
full force and effect.

     

    13.3   Notices.  All
notices, demands and communications of any kind which any party hereto may be
required or desire to serve upon another party under the terms of this Agreement
shall be in writing and shall be given by:  (a) personal service upon
such other party; (b) mailing a copy thereof by certified or registered mail,
postage prepaid, with return receipt requested; (c) sending a copy thereof by
Federal Express or equivalent courier service; or (d) sending a copy thereof by
facsimile, in each case to the parties at the respective addresses and facsimile
numbers set forth on the signature pages hereto.  In case of service
by Federal Express or equivalent courier service or by facsimile or by personal
service, such service shall be deemed complete upon delivery or transmission, as
applicable.  In the case of service by mail, such service shall be
deemed complete on the fifth Business Day after mailing.  The
addresses and facsimile numbers to which, and persons to whose attention,
notices and demands shall be delivered or sent may be changed from time to time
by notice served as hereinabove provided by any party upon any other
party.

     

    13.4   Amendment.  This
Agreement may be modified or amended only by an instrument in writing, duly
executed by all of the parties hereto.

     

    13.5   Waiver.  No
waiver by any party of any term, provision, condition, covenant, agreement,
representation or warranty contained in this Agreement (or any breach thereof)
shall be effective unless it is in writing executed by the party against which
such waiver is to be enforced.  No waiver shall be deemed or construed
as a further or continuing waiver of any such term, provision, condition,
covenant, agreement, representation or warranty (or breach thereof) on any other
occasion or as a waiver of any other term, provision, condition, covenant,
agreement, representation or warranty (or of the breach of any other term,
provision, condition, covenant, agreement, representation or warranty) contained
in this Agreement on the same or any other occasion.

     

    13.6   Counterparts;
Facsimile.  For the convenience of the parties, any number of
counterparts hereof may be executed, each such executed counterpart shall be
deemed an original and all such counterparts together shall constitute one and
the same instrument.  Facsimile or electronic transmission of any
signed original counterpart and/or retransmission of any signed facsimile or
electronic transmission shall be deemed the same as the delivery of an
original.

     

    13.7   Assignment; Binding Nature;
No Beneficiaries.  This Agreement may not be assigned by any
party hereto without the written consent of Madden and Seller; provided, however, that Madden
may assign its rights hereunder to any affiliate of Madden which assumes the
obligations of Madden hereunder, but no such assignment shall relieve Madden of
any such obligations.  Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective heirs, personal representatives,
legatees, successors and permitted assigns.  Except as otherwise
expressly provided in Article XII, this Agreement shall not confer any rights or
remedies upon any Person other than the parties hereto and their respective
heirs, personal representatives, legatees, successors and permitted
assigns.

     

     

    
      
        
        

      

      
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    13.8   Headings.  The
headings in this Agreement are inserted for convenience only and shall not
constitute a part hereof.

     

    13.9   Governing Law;
Jurisdiction.  This Agreement and all of the transactions
contemplated hereby, and all disputes between the parties under or related to
this Agreement or the facts and circumstances leading to its execution, whether
in contract, tort, or otherwise, shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York including,
without limitation, Section 5-1401 of the New York General Obligations Law and
New York Civil Practice Laws and Rules 327.

     

    13.10   Construction.  In
this Agreement (i) words denoting the singular include the plural and vice
versa, (ii) “it” or “its” or words denoting any gender include all genders,
(iii) the word “including” shall mean “including without limitation,”
whether or not expressed, (iv) any reference to a statute shall mean the statute
and any regulations thereunder in force as of the date of this Agreement or the
Closing Date, as applicable, unless otherwise expressly provided, (v) any
reference herein to a Section, Article, Schedule or Exhibit refers to a Section
or Article of or a Schedule or Exhibit to this Agreement or the Disclosure
Schedule, as applicable, unless otherwise stated, and (vi) when calculating the
period of time within or following which any act is to be done or steps taken,
the date which is the reference day in calculating such period shall be excluded
and if the last day of such period is not a Business Day, then the period shall
end on the next day which is a Business Day.

     

    13.11   Negotiated
Agreement.  Madden and Seller acknowledge that they have been
advised and represented by counsel in the negotiation, execution and delivery of
this Agreement and the Transaction Documents and accordingly agree that if an
ambiguity exists with respect to any provision of this Agreement or the
Transaction Documents, such provision shall not be construed against any party
because such party or its representatives drafted such provision.

     

    13.12   Public
Announcements.  Neither Madden nor Seller shall issue any press
release or make any other public announcement concerning this Agreement or the
transactions contemplated hereby without the prior written approval of Madden,
in the case of an announcement by Seller, and Seller, in the case of an
announcement by Madden; provided, however, that Madden
or its affiliates may, upon written notice to Seller, describe this Agreement
and the transactions contemplated hereby in any press release or filing with the
SEC or other Governmental Body it is required to make under applicable
Law.

     

    13.13   Remedies
Cumulative.  The remedies provided for or permitted by this
Agreement shall be cumulative and the exercise by any party of any remedy
provided for herein shall not preclude the assertion or exercise by such party
of any other right or remedy provided for herein.

     

    13.14   Severability.  If
any provision of this Agreement or the application of any such provision to any
party or circumstances shall be determined by any arbitrator to be invalid or
unenforceable to any extent, the remainder of this Agreement, or the application
of such provision to such person or circumstances other than those to which it
is so determined to be invalid or unenforceable, shall not be affected thereby,
and each provision hereof shall be

     

     

    
      
        
        

      

      
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    enforced
to the fullest extent permitted by law.  If the final determination of
any arbitrator declares that any item or provision hereof is invalid or
unenforceable, the parties hereto agree that the arbitrator making the
determination of invalidity or unenforceability shall have the power, and is
hereby directed, to reduce the scope, duration or area of the term or provision,
to delete specific words or phrases and to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so
modified.

     

    13.15   WAIVER OF JURY
TRIAL.  MADDEN AND SELLER HEREBY IRREVOCABLY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT
OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

     

    13.16   Right of
Set-Off.

     

    (a)   Notwithstanding
any provision of this Agreement or the Earn-Out Agreement to the contrary, the
parties hereby acknowledge and agree that, in addition to any other right
hereunder or under the Earn-Out Agreement or otherwise, Madden shall have the
right, but not the obligation, from time to time to set off against any amounts
otherwise required to be paid by Madden to Seller pursuant to this Agreement or
the Earn-Out Agreement any amounts owed at such time by Seller to the Company,
Madden or any other Madden Indemnified Party under this Agreement or the
Earn-Out Agreement.

     

    (b)   If Madden
elects to exercise its set-off rights hereunder against any amounts otherwise
required to be paid by Madden to Seller pursuant to this Agreement or the
Earn-Out Agreement, it shall give Seller written notice of such election (the
“Set-Off Notice”), which Set-Off Notice shall include the amount to be set-off
and a reasonable description of the circumstances giving rise to Madden’s
entitlement to such set-off.  Seller shall have thirty (30) days after
receipt of such Set-Off Notice to review such Set-Off Notice (the “Set-Off
Review Period”), and in the event that Seller has any objections or challenges
to the exercise of the set-off right of Madden, Seller shall submit a single
written notice of set-off dispute (“Notice of Set-Off Dispute”) to Madden during
such Set-Off Review Period, specifying in reasonable detail the nature of any
asserted objections or challenges.  In the event of any such dispute,
Seller and Madden shall negotiate in good faith to resolve such dispute for
thirty (30) days after receipt by Madden of the Notice of Set-Off
Dispute.  If Seller and Madden are unable to resolve such dispute
within such 30-day period, the amount payable by Madden to Seller shall
automatically be reduced by the amount set forth in the Set-Off
Notice.  In the event that there is a final determination that Seller
did not owe the Company, Madden or any Madden Indemnified Party the amount that
has been set-off, Madden shall promptly refund to Seller all such amounts that
are so determined to have been incorrectly set-off, plus interest, calculated
from the date of set-off until the date such amount is paid to Seller, at a rate
per annum equal to the Prime Rate, calculated and payable monthly, compounded
monthly.  For purposes of this Section 13.16, a determination shall be
final if any and all appeals therefrom shall have been resolved or if
thirty

     

     

    
      
        
        

      

      
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    (30) days
shall have passed from the rendering of such determination (or of any
determination of appeal therefrom) and no party shall have commenced any appeal
therefrom.

     

    (c)   In the
case of any such set-off by Madden pursuant to this Section 13.16, Seller’s
obligation to make such payment (or any portion thereof) shall be deemed
satisfied and discharged to the extent of such set-off.  The exercise
of such right of set-off by Madden in good faith, whether or not finally
determined to be justified, will not constitute a breach under this Agreement or
the Earn-Out Agreement.

     

    13.17   Arbitration.  Except
as otherwise set forth in Section 2.3(a)(ii) or Section 8.1(b)(iii), if any
dispute or difference of any kind whatsoever shall arise between the parties to
this Agreement (each a “Disputing Party”) in connection with or arising out of
this Agreement, or the breach, termination or validity thereof (a “Dispute”),
then, on the demand of any Disputing Party, the Dispute shall be finally and
exclusively resolved by arbitration in accordance with the Commercial
Arbitration Rules of the AAA (the “Rules”) then in effect, except as modified
herein.  The arbitration shall be held, and the award shall be issued
in, the State of New York.  There shall be one neutral arbitrator
appointed by agreement of the Disputing Parties within thirty (30) days after
receipt by respondent of the demand for arbitration.  If such
arbitrator is not appointed within the time limit provided herein, on the
request of any Disputing Party, an arbitrator shall be appointed by the AAA by
using a list striking and ranking procedure in accordance with the
Rules.  Any arbitrator appointed by the AAA shall be a retired federal
judge or a practicing attorney with no less than fifteen years of experience and
an experienced arbitrator with no less than five completed prior arbitrations
relating to the purchase and sale of a wholesale business.  By
agreeing to arbitration, the Disputing Parties do not intend to deprive any
court of its jurisdiction to issue a pre-arbitral injunction, pre-arbitral
attachment, or other order in aid of arbitration proceedings and the enforcement
of any award.  Without prejudice to such provisional remedies as may
be available under the jurisdiction of a court, the arbitrator shall have full
authority to grant provisional remedies and to direct the Disputing Parties to
request that any court modify or vacate any temporary or preliminary relief
issued by such court, and to award damages for the failure of any Disputing
Party to respect the arbitrator’s orders to that effect.  Any
arbitration proceedings, decisions or awards rendered hereunder and the
validity, effect and interpretation of this arbitration agreement shall be
governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq.  In
arriving at a decision, the arbitrator shall be bound by the terms and
conditions of this Agreement and shall apply the governing law of this Agreement
as designated in Section 13.9.  The arbitrator is not empowered to
award damages in excess of compensatory damages, and each Disputing Party hereby
irrevocably waives any right to recover punitive, exemplary or similar damages
with respect to any Dispute.  The award shall provide that the fees
and expenses of the arbitration (including the fees of the AAA, the fees and
expenses of the arbitrator and attorneys’ fees) shall be allocated based on the
proportion that the aggregate amount of disputed items submitted to arbitration
that are unsuccessfully disputed by each Disputed Party (as finally determined
by the arbitrator) bears to the total amount of all disputed items submitted to
arbitration.  The award, which shall be in writing and shall, on the
written request of any Disputing Party, state the findings of fact and
conclusions of law upon which it is based, shall be final and binding on the
Disputing Parties and shall be the sole and the exclusive remedy between the
Disputing Parties regarding any claims, counterclaims, issues or accountings
presented to the arbitral tribunal.  Judgment upon any award may be
entered in any

     

     

     

    
      
        
        

      

      
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    court of
competent jurisdiction located in the State of New York, and the parties hereby
consent to the exclusive jurisdiction of the courts located in the State of New
York.

     

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    IN WITNESS WHEREOF, the
parties hereto have duly executed and delivered this Agreement as of the date
first set forth above.

     

    
      	 
      	
              STEVEN
      MADDEN, LTD.

               

            
	
              Address:

              52-16
      Barnett Ave.

              Long
      Island City, New York  11104

              Attention:  Awadhesh
      Sinha

              Facsimile
      No.: (718) 446-5599

            	
              By:      /s/ Edward
      Rosenfeld

              Name:
      Edward Rosenfeld

              Title:   Chief
      Executive Officer

            
	 
      	 
      
	
              with
      copies to:

               

            	 
      
	
              Kramer
      Levin Naftalis & Frankel LLP

              1177
      Avenue of the Americas

              New
      York, New York  10036

              Attention:  James
      A. Grayer, Esq.

              Facsimile
      No.: (212) 715-8000

            	 
      


    

    


    


    
      	 
      	
              SELLER

            
	
               

              Address:

              208
      Woodrow Avenue

              Santa
      Cruz, California 95060

            	
               

              /s/ Jeremy Bassan

              Jeremy
      Bassan

               

            
	 
      	 
      
	 
      	 
      
	
              with
      copies to:

               

              Sonnenschein
      Nath & Rosenthal LLP

              525
      Market Street, 26th
      Floor

              San
      Francisco, California 94105

              Attention:  Stafford
      Matthews, Esq.

              Facsimile
      No.: (415) 882-0300