Document:

EXHIBIT
10.1

 

ASSET
PURCHASE AGREEMENT

BY
AND AMONG

ALAN
JAMES GROUP, LLC,

AJG-NB,
LLC,

AJG-BI
BRANDS, LLC,

AJG-GNC,
LLC,

THE
OWNERS OF EACH OF THE FOREGOING,

AJG
BRANDS, INC.

AND

INTERLEUKIN
GENETICS, INC.

August 17,
2006

 

 

 

TABLE
OF CONTENTS

	
  ARTICLE I

  	
   

  	
  DEFINITIONS

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  PURCHASE AND SALE OF ASSETS; ASSUMED LIABILITIES

  	
   

  	
  9

  
	
  2.1

  	
   

  	
  Purchased Assets

  	
   

  	
  9

  
	
  2.2

  	
   

  	
  Excluded Assets

  	
   

  	
  11

  
	
  2.3

  	
   

  	
  Assumed
  Liabilities

  	
   

  	
  11

  
	
  2.4

  	
   

  	
  Excluded
  Liabilities

  	
   

  	
  11

  
	
  2.5

  	
   

  	
  Collection of
  Receivables

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  PURCHASE PRICE OF ASSETS

  	
   

  	
  12

  
	
  3.1

  	
   

  	
  Purchase Price

  	
   

  	
  12

  
	
  3.2

  	
   

  	
  Payment of
  Purchase Price.

  	
   

  	
  12

  
	
  3.3

  	
   

  	
  Net Working
  Capital Adjustment.

  	
   

  	
  15

  
	
  3.4

  	
   

  	
  Closing

  	
   

  	
  16

  
	
  3.5

  	
   

  	
  Purchase Price
  Allocation

  	
   

  	
  16

  
	
  3.6

  	
   

  	
  Transfer Taxes

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
  REPRESENTATIONS AND WARRANTIES OF SELLERS AND OWNERS

  	
   

  	
  17

  
	
  4.1

  	
   

  	
  Organization and
  Qualification; Subsidiaries.

  	
   

  	
  17

  
	
  4.2

  	
   

  	
  Articles of
  Organization; Operating Agreement

  	
   

  	
  17

  
	
  4.3

  	
   

  	
  Capitalization.

  	
   

  	
  18

  
	
  4.4

  	
   

  	
  Authority of
  Seller; Enforceability

  	
   

  	
  18

  
	
  4.5

  	
   

  	
  No Conflict;
  Required Filings and Consents.

  	
   

  	
  19

  
	
  4.6

  	
   

  	
  Assigned
  Agreements.

  	
   

  	
  20

  
	
  4.7

  	
   

  	
  Compliance

  	
   

  	
  20

  
	
  4.8

  	
   

  	
  Financial
  Statements.

  	
   

  	
  20

  
	
  4.9

  	
   

  	
  Absence of
  Certain Changes or Events

  	
   

  	
  21

  
	
  4.10

  	
   

  	
  No Undisclosed
  Liabilities

  	
   

  	
  23

  
	
  4.11

  	
   

  	
  Absence of
  Litigation

  	
   

  	
  23

  
	
  4.12

  	
   

  	
  Employee Benefit
  Plans.

  	
   

  	
  24

  
	
  4.13

  	
   

  	
  Employment and
  Labor Matters.

  	
   

  	
  26

  
	
  4.14

  	
   

  	
  Certain Business
  Practices

  	
   

  	
  27

  
	
  4.15

  	
   

  	
  Absence of
  Restrictions on Business Activities

  	
   

  	
  27

  
	
  4.16

  	
   

  	
  Real Property.

  	
   

  	
  27

  
	
  4.17

  	
   

  	
  Purchased
  Assets.

  	
   

  	
  28

  
	
  4.18

  	
   

  	
  Taxes

  	
   

  	
  29

  
	
  4.19

  	
   

  	
  Environmental
  Matters

  	
   

  	
  31

  
	
  4.20

  	
   

  	
  Intellectual
  Property.

  	
   

  	
  31

  
	
  4.21

  	
   

  	
  Insurance

  	
   

  	
  33

  
	
  4.22

  	
   

  	
  Permits

  	
   

  	
  34

  
	
  4.23

  	
   

  	
  Brokers

  	
   

  	
  34

  
	
  4.24

  	
   

  	
  Interested Party
  Transactions.

  	
   

  	
  34

  
	
  4.25

  	
   

  	
  Customers

  	
   

  	
  36

  
	
  4.26

  	
   

  	
  Suppliers

  	
   

  	
  36

  
	
  4.27

  	
   

  	
  Products

  	
   

  	
  36

  

 

 i
 

 

 

	
  4.28

  	
   

  	
  FDA Regulation

  	
   

  	
  36

  
	
  4.29

  	
   

  	
  Purchase For
  Investment

  	
   

  	
  37

  
	
  4.30

  	
   

  	
  Inventory

  	
   

  	
  37

  
	
  4.31

  	
   

  	
  Disclosure of
  Material Information

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
  REPRESENTATIONS AND WARRANTIES OF PURCHASER

  	
   

  	
  38

  
	
  5.1

  	
   

  	
  Organization and
  Qualification

  	
   

  	
  38

  
	
  5.2

  	
   

  	
  Capitalization

  	
   

  	
  38

  
	
  5.3

  	
   

  	
  Authority;
  Enforceability

  	
   

  	
  38

  
	
  5.4

  	
   

  	
  No Conflict;
  Required Filings and Consents.

  	
   

  	
  39

  
	
  5.5

  	
   

  	
  Parent Reporting

  	
   

  	
  39

  
	
  5.6

  	
   

  	
  Parent Financial
  Statements

  	
   

  	
  40

  
	
  5.7

  	
   

  	
  Compliance

  	
   

  	
  40

  
	
  5.8

  	
   

  	
  Absence of
  Litigation

  	
   

  	
  40

  
	
  5.9

  	
   

  	
  Certain Business
  Practices

  	
   

  	
  40

  
	
  5.10

  	
   

  	
  Brokers

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
  COVENANTS

  	
   

  	
  41

  
	
  6.1

  	
   

  	
  Performance

  	
   

  	
  41

  
	
  6.2

  	
   

  	
  Regulatory and
  Other Authorizations; Notices and Consents.

  	
   

  	
  41

  
	
  6.3

  	
   

  	
  Conduct of the
  Business Prior to the Closing.

  	
   

  	
  42

  
	
  6.4

  	
   

  	
  Access.

  	
   

  	
  42

  
	
  6.5

  	
   

  	
  Notification.

  	
   

  	
  43

  
	
  6.6

  	
   

  	
  Standstill

  	
   

  	
  44

  
	
  6.7

  	
   

  	
  Bulk Transfer
  Laws

  	
   

  	
  44

  
	
  6.8

  	
   

  	
  Change of Names

  	
   

  	
  44

  
	
  6.9

  	
   

  	
  Consents

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
  EMPLOYEE MATTERS

  	
   

  	
  45

  
	
  7.1

  	
   

  	
  Offer of
  Employment

  	
   

  	
  45

  
	
  7.2

  	
   

  	
  Transfer and
  Assumption of the Employee Plans; Contributions for Periods Prior to Closing

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  	
  CONDITIONS PRECEDENT TO CLOSING; TERMINATION

  	
   

  	
  45

  
	
  8.1

  	
   

  	
  Conditions
  Precedent to Obligations of Parent and Purchaser

  	
   

  	
  45

  
	
  8.2

  	
   

  	
  Conditions
  Precedent to the Obligations of Sellers and Owners

  	
   

  	
  47

  
	
  8.3

  	
   

  	
  Termination.

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  	
  INDEMNIFICATION

  	
   

  	
  50

  
	
  9.1

  	
   

  	
  Survival of Representations,
  Warranties and Covenants

  	
   

  	
  50

  
	
  9.2

  	
   

  	
  Definitions

  	
   

  	
  51

  
	
  9.3

  	
   

  	
  Indemnification
  Generally; Limitations.

  	
   

  	
  52

  
	
  9.4

  	
   

  	
  Assertion of
  Claims

  	
   

  	
  53

  
	
  9.5

  	
   

  	
  Notice and
  Defense of Third Party Claims

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  55

  
	
  10.1

  	
   

  	
  Notices

  	
   

  	
  55

  
	
  10.2

  	
   

  	
  Entire Agreement

  	
   

  	
  56

  
	
  10.3

  	
   

  	
  Binding Effect

  	
   

  	
  56

  
	
  10.4

  	
   

  	
  Assignment

  	
   

  	
  56

  

 

 ii
 

 

 

	
  10.5

  	
   

  	
  Modifications
  and Amendments

  	
   

  	
  56

  
	
  10.6

  	
   

  	
  Waivers and
  Consents

  	
   

  	
  56

  
	
  10.7

  	
   

  	
  No Third Party
  Beneficiary

  	
   

  	
  57

  
	
  10.8

  	
   

  	
  Severability

  	
   

  	
  57

  
	
  10.9

  	
   

  	
  Publicity

  	
   

  	
  57

  
	
  10.10

  	
   

  	
  Governing Law

  	
   

  	
  57

  
	
  10.11

  	
   

  	
  Jurisdiction

  	
   

  	
  57

  
	
  10.12

  	
   

  	
  Counterparts

  	
   

  	
  57

  
	
  10.13

  	
   

  	
  Headings

  	
   

  	
  58

  
	
  10.14

  	
   

  	
  Expenses

  	
   

  	
  58

  

 

EXHIBITS

	
  EXHIBIT A

  	
   

  	
  Form of Bill of Sale

  
	
  EXHIBIT B

  	
   

  	
  Form of Assignment and Assumption Agreement

  
	
  EXHIBIT C

  	
   

  	
  Form of Opinion of Counsel to Sellers and Owners

  
	
  EXHIBIT D-1

  	
   

  	
  Form of Seller Non-Competition and Non-Solicitation
  Agreement

  
	
  EXHIBIT D-2

  	
   

  	
  Form of Owner Non-Competition and Non-Solicitation
  Agreement

  
	
  EXHIBIT E-1

  	
   

  	
  Form of Employment Agreement (Richerson)

  
	
  EXHIBIT E-2

  	
   

  	
  Form of Employment Agreement (Finkelstein)

  
	
  EXHIBIT F

  	
   

  	
  Form of Consent to Assignment

  
	
  EXHIBIT G

  	
   

  	
  Form of Opinion of Counsel to Parent and Purchaser

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 2.2(e)

  	
   

  	
  Excluded Assets

  
	
  SCHEDULE 2.3(b)

  	
   

  	
  Assumed Liabilities

  
	
  SCHEDULE 7.2

  	
   

  	
  Adopted Employee Plans

  
	
  SCHEDULE 8.2

  	
   

  	
  Parent Financing

  

 

 iii

ASSET
PURCHASE AGREEMENT

This
Asset Purchase Agreement (the “Agreement”) is entered into as of
August 17, 2006 by and among Alan James Group, LLC,
a Florida limited liability company (“AJG”), AJG-NB, LLC,
a Florida limited liability company (“AJG-NB”), AJG-BI
Brands, LLC, a Florida limited liability company (“AJG-BI”), AJG-GNC, LLC, a Florida limited liability company (“AJG-GNC”
and, together with AJG, AJG-NB and AJG-BI, the “Sellers” and each a “Seller”),
Timothy J. Richerson (“Richerson”)
and David A. Finkelstein (“Finkelstein”
and, together with Richerson, the “Owners” and each an “Owner”),
the sole owners of membership interests of the Sellers, AJG Brands,
Inc. a Delaware corporation (the “Purchaser”), and Interleukin Genetics, Inc., a Delaware corporation (the “Parent”).

WHEREAS, the Sellers are engaged
in the business of developing,
marketing and distributing healthcare focused consumer products (including,
without limitation, nutraceuticals, so-called “OTCeuticals” and preventative
healthcare products) and other activities related thereto (together with
any other business activities engaged in by the Sellers prior to the Closing,
the “Business”);

WHEREAS, Owners are the members
of each Seller owning, in the aggregate, all of the issued and outstanding
membership or other equity interests of each Seller;

WHEREAS, Sellers desire to sell
to Purchaser, and Purchaser desires to purchase from Sellers, substantially all
of the assets of Sellers and Purchaser is willing to assume certain liabilities
of Sellers relating to the Business, all upon the terms and conditions set
forth herein;

WHEREAS, the managers of each
Seller have approved, and declared it to be advisable and in the best interests
of such Seller’s owners for such Seller to sell substantially all of the assets
of such Seller to Purchaser upon the terms and subject to the conditions set
forth herein;

WHEREAS, Owners have approved
the sale of substantially all of the assets of each Seller to Purchaser upon
the terms and subject to the conditions set forth herein; and

WHEREAS, as additional
consideration, and a material inducement to each party to enter into this
Agreement and to consummate the transactions contemplated hereby, Sellers and
Owners, on the one hand, and Parent and Purchaser, on the other hand, desire to
make certain representations, warranties, indemnities, covenants and agreements
relating to the sale and purchase of the Purchased Assets (as defined below)
and the other transactions contemplated hereby.

NOW, THEREFORE, in consideration
of the premises and the mutual covenants, representations and warranties herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged, the parties hereto
hereby agree as follows:

 

ARTICLE I

DEFINITIONS

In addition to terms defined elsewhere in this
Agreement, the following terms when used in this Agreement shall have the
respective meanings set forth below:

“Acquisition Proposal”
has the meaning set forth in Section 6.6.

“Action” means any claim, demand, action, cause
of action, chose in action, right of recovery, right of set-off, suit,
arbitration, inquiry or proceeding, or any investigation by or before any
Governmental Authority.

“Adopted Employee Plans”
has the meaning set forth in Section 7.2.

“Affiliate” means, with respect to a specified
Person, any other Person which, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with such
Person, and without limiting the generality of the foregoing, includes, with
respect to the specified Person:  (a) any
other Person which beneficially owns or holds 10% or more of the outstanding
voting securities or other securities convertible into voting securities of
such Person, (b) any other Person of which the specified Person beneficially
owns or holds 10% or more of the outstanding voting securities or other
securities convertible into voting securities, or (c) any director, officer or
manager of such Person.

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

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

“AJG-BI” has the meaning set forth in the
preamble.

“AJG-GNC” has the meaning set forth in the
preamble.

“AJG-NB” has the meaning set forth in the
preamble.

“Ancillary Agreements” means the Bill of Sale,
the Assumption Agreement, the Non-Competition Agreements and the Employment
Agreements.

“Approvals” has the meaning specified in
Section 4.1(a).

“Assigned Agreement” has the meaning set forth
in Section 4.6(a).

“Associated Persons” has the meaning set forth
in Section 4.24(e).

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

“Assumption Agreement” has the meaning set
forth in Section 2.3.

“Base NWC” has the meaning specified in
Section 3.3.

 2
 

 

“Bill of Sale” has the meaning set forth in
Section 2.1.

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

“Business Day” means any day other than a
Saturday, Sunday or other day on which banks are required or authorized to be
closed in the State of Delaware.

“Cash” means all cash and cash equivalents
(including marketable securities and short-term investments) on hand or in
banks or other depositories calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.

“Closing” has the meaning set forth in
Section 3.4.

“Closing Certificate” has the meaning specified
in Section 3.3.

“Closing Date” has the meaning set forth in
Section 3.4

“Closing Date Statement” has the meaning
specified in Section 3.3.

“Closing Payment” has the meaning specified in
Section 3.2(b)(i).

“CERCLA” means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended through the date
hereof and any regulations promulgated thereunder.

“COBRA Coverage” has the meaning set forth in
Section 4.12(d).

“Code” shall mean the Internal Revenue Code of
1986, as amended.

“Confidentiality Agreement” means the
Confidential Disclosure Agreement, dated as of April 11, 2006, between Parent
and AJG.

“Consent” has the meaning set forth in
Section 4.6(a).

“Contract” means any contract, plan,
undertaking, understanding, agreement, license, lease, note, mortgage or other
binding commitment, whether written or oral.

“Copyrights” mean all copyrights (registered or
otherwise) and registrations and applications for registration thereof, and all
rights therein provided by multinational treaties or conventions.

“Court” means any court or arbitration tribunal
of the United States, any domestic state, or any foreign country, and any
political subdivision thereof.

“Database” means all data and other information
recorded, stored, transmitted and retrieved in electronic form.

“Disclosure Schedule” means a schedule dated
the date hereof from Seller and delivered to Purchaser upon the execution
hereof.  The Disclosure Schedule shall be
arranged in sections

 3
 

 

and
subsections corresponding to the numbered and lettered sections and subsections
contained in Article IV.

“Documents” means this Agreement together with
the Ancillary Agreements, the Schedules and Exhibits hereto and thereto, the
Disclosure Schedule and the other agreements, documents and instruments
executed in connection herewith.

“Employee Plans” has the meaning set forth in
Section 4.12(a).

“Environmental Law” means any Law or Regulation
pertaining to: (i) the protection of health, safety and the indoor or outdoor
environment; (ii) the conservation, management or use of natural resources and
wildlife; (iii) the protection or use of surface water and ground water; (iv)
the management, manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, emission, discharge, release,
threatened release, abatement, removal, remediation or handling of, or exposure
to, any Hazardous Material; or (v) pollution (including any emission, discharge
or release to air, land, surface water and ground water); and includes, without
limitation, the Comprehensive Environmental, Response, Compensation, and
Liability Act of 1980, as amended, and the Regulations promulgated thereunder
and the Solid Waste Disposal Act, as amended, 42 U.S.C. §§ 6901 et seq.

“Employment Agreements” has the meaning set
forth in Section 8.1(i).

“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended.

“Estimated NWC” has the meaning specified in
Section 3.3.

“Exchange Act” means the United States
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

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

“Excluded Liabilities” has the meaning set
forth in Section 2.4.

“Foreign Competition Laws” means any non-United
States statutes, rules, Regulations, Orders, administrative and judicial
directives, and other non-United States Laws, that are designed or intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization, lessening of competition or restraint of trade.

“GAAP” means United States generally accepted
accounting principles and practices in effect from time to time consistently
applied.

“Governmental Authority” means any governmental
or legislative agency or authority (other than a Court) of the United States,
any state within the United States, or any country, and any political
subdivision or agency thereof, and includes any authority having governmental
or quasi-governmental powers, including any administrative agency or
commission.

 4
 

 

“Hardware” means all mainframes, midrange
computers, personal computers, notebooks, servers, switches, printers, modems,
drives, peripherals and any component of any of the foregoing.

“Hazardous Substance” means any “Hazardous
Substance” (as defined in CERCLA) and any other substance, chemical, compound,
product, solid, gas, liquid, waste, by-product, pollutant, contaminant or
material which is hazardous or toxic and is regulated under any Environmental
Law, and includes without limitation, asbestos or any substance containing
asbestos, polychlorinated biphenyls or petroleum (including crude oil or any
fraction thereof);.

“HSR Act” means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder.

“Indemnified Person” has the meaning set forth
in Section 9.4.

“Indemnifying Person” has the meaning set forth
in Section 9.4.

“Information System” means any combination of
Hardware, Software and/or Database(s) employed primarily for the creation,
manipulation, storage, retrieval, display and use of information in electronic
form or media.

“Intellectual Property” means (a) inventions,
whether or not patentable, whether or not reduced to practice or whether or not
yet made the subject of a pending Patent application or applications, (b) ideas
and conceptions of potentially patentable subject matter, including, without
limitation, any patent disclosures, whether or not reduced to practice and
whether or not yet made the subject of a pending Patent application or
applications, (c) Patents, (d) Trademarks, 
(e) Copyrights, (g) Software, (h) trade secrets and confidential,
technical or business information (including ideas, formulas, compositions,
inventions, and conceptions of inventions whether patentable or unpatentable
and whether or not reduced to practice), (i) whether or not confidential,
technology (including know-how and show-how), manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information, (j) copies
and tangible embodiments of all the foregoing, in whatever form or medium, (k)
all rights to obtain and rights to apply for Patents, and to register
Trademarks and Copyrights, (l) all rights under the License Agreements and any
licenses, registered user agreements, technology or materials, transfer
agreements, and other agreements or instruments with respect to items in (a) to
(k) above; and (m) all rights to sue and recover and retain damages and costs
and attorneys’ fees for present and past infringement of any of the
Intellectual Property rights hereinabove set out.

“Inventories” means all inventories, including,
without limitation, merchandise, raw materials, work-in-process, finished
goods, replacement parts and office supplies related to the Business,
maintained, held or stored by or for any Seller, at any location whatsoever and
any prepaid deposits for any of the same.

“IRS” shall mean the United States Internal
Revenue Service.

 5
 

 

“Knowledge” means (a) in the case of an
individual, knowledge of a particular fact or other matter if (i) such
individual is actually aware of such fact or other matter, or (ii) a prudent
individual could be expected to discover or otherwise become aware of such fact
or other matter in the course of conducting a reasonable investigation
concerning the existence of such fact or other matter, and (b) in the case of a
Person (other than an individual), such Person will be deemed to have Knowledge
of a particular fact or other matter if any individual who is serving, or has
at any time served, as a director, officer, partner, member, executor, or
trustee of such Person (or in any similar capacity) has, or at any time had,
Knowledge of such fact or other matter.

“Law” means all laws, statutes, ordinances and
Regulations of any Governmental Authority including all decisions of Courts
having the effect of law in each such jurisdiction.

“Liabilities” means any and all debts,
liabilities and obligations, whether accrued or fixed, absolute or contingent,
matured or unmatured or determined or determinable, including, without
limitation, those arising under any Law (including, without limitation, any
Environmental Law), Action or Order, Liabilities for Taxes and those Liabilities
arising under any Contract.

“License Agreements” has the meaning set forth
in Section 4.20(c).

“Licensed Intellectual Property” means all
Intellectual Property licensed or sublicensed by any Seller from a third party,
including the License Agreements.

“Lien” means any mortgage, pledge, security
interest, attachment, encumbrance, lien (statutory or otherwise), option,
conditional sale agreement, right of first refusal, first offer, termination,
participation or purchase or charge of any kind (including any agreement to
give any of the foregoing); provided, however, that the term “Lien”
shall not include (i) statutory liens for Taxes, which are not yet due and
payable or are being contested in good faith by appropriate proceedings, (ii)
statutory or common law liens to secure landlords, lessors or renters under
leases or rental agreements confined to the premises rented, (iii) deposits or
pledges made in connection with, or to secure payment of, workers’
compensation, unemployment insurance, old age pension or other social security
programs mandated under applicable Laws, and (iv) statutory or common law liens
in favor of carriers, warehousemen, mechanics and materialmen, to secure claims
for labor, materials or supplies and other like liens.

“Litigation” means any suit, action,
arbitration, cause of action, claim, complaint, criminal prosecution,
investigation, inquiry, demand letter, governmental or other administrative
proceeding, whether at law or at equity, before or by any Court, Governmental
Authority, arbitrator or other tribunal.

“Losses” has the meaning set forth in
Section 9.2(a).

“Material Adverse Effect” means, with respect
to any Person, any fact, event, change, circumstance or effect that is
materially adverse to the business, condition (financial or otherwise),
operations, results of operations, assets, liabilities or prospects of such
Person.

“Multiemployer Plan” has the meaning set forth in Section 3(37) of ERISA.

 6
 

 

“Non-Competition Agreements” has the meaning
set forth in Section 8.1(h).

“Objection Period” has the meaning specified in
Section 3.3.

“Order” shall mean any judgment, order, writ,
injunction, ruling, stipulation, determination, award or decree of or by, or
any settlement under the jurisdiction of, any Court or Governmental Authority.

“Ordinary Course of Business” means the
ordinary course of the Business consistent with the past practice of Sellers.

“Owned Intellectual Property” means all
Intellectual Property in or to which any Seller has, or has a right to hold,
right, title and interest.

“Owner” and “Owners” have the respective
meanings set forth in the preamble.

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

“Purchaser Disclosure Schedule” means a
schedule dated the date hereof from Purchaser and delivered to Sellers upon the
execution hereof.  The Purchaser
Disclosure Schedule shall be arranged in sections and subsections corresponding
to the numbered and lettered sections and subsections contained in Article V.

“Parent SEC Reports” has the meaning set forth
in Section 5.4.

“Parent Shares” means shares of the common
stock, $0.001 par value per share, of Parent.

“Patent” means all national (including the
United States) and multinational statutory invention registrations, patents,
patent registrations and patent applications, including all reissues,
divisions, continuations, continuations-in-part, extensions and reexaminations,
and all rights therein provided by multinational treaties or conventions and
all improvements to the inventions disclosed in each such registration, patent
or application.

“Person” means any natural person, corporation,
limited liability company, unincorporated organization, partnership,
association, joint stock company, joint venture, trust or any other entity.

“Products” has the meaning set forth in
Section 4.27.

“Purchase Price” has the meaning set forth in
Section 3.1.

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

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

“Purchaser Event of Indemnification” has the
meaning set forth in Section 9.2(b).

“Purchaser Indemnified Person” has the meaning
set forth in Section 9.2(c).

 7

 

“Purchaser Indemnifying Person” has the meaning
set forth in Section 9.2(d).

“Receivables” means any and all accounts
receivable, notes, book debts and other amounts due or accruing due to any
Seller in connection with the Business, whether or not in the ordinary course,
together with any unpaid financing charges accrued thereon and the benefit of
all security for such accounts, notes and debts.

“Regulation” shall mean any rule or regulation
of any Governmental Authority.

“Securities Act” means the United States
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.

“Seller” and “Sellers” have the
respective meanings set forth in the preamble.

“Seller Event of Indemnification” has the
meaning set forth in Section 9.2(e).

“Seller Fees” means the costs and expenses of
Sellers and Owners (including fees and expenses of any broker, investment
banker, financial advisor, legal advisor or accountant), whether incurred by
them or on their behalf, in connection with this Agreement and the Ancillary
Agreements and the transactions contemplated hereby and thereby;

“Seller Financial Statements” has the meaning
set forth in Section 4.8.

“Seller Indemnified Person” has the meaning set
forth in Section 9.2(f).

“Seller Indemnifying Person” has the meaning
set forth in Section 9.2(g).

“Seller Organizational Documents” has the
meaning set forth in Section 4.2.

“Software” means any and all (a) computer
programs, including any and all software implementations of algorithms, models
and methodologies, whether in source code or object code, (b) databases and
compilations, including any and all data and collections of data, whether
machine readable or otherwise, (c) descriptions, flow-charts and other work
product used to design, plan, organize and develop any of the foregoing, (d)
the technology supporting any Internet site(s) operated by or on behalf of
Sellers and (e) all documentation, including user manuals and training
materials, relating to any of the foregoing.

“Subsidiary” or “Subsidiaries” of a
specified Person means any other Person in which such Person owns, directly or
indirectly, more than 50% of the outstanding voting securities or other
securities convertible into voting securities, or which may effectively be
controlled, directly or indirectly, by such Person.

“Survival Date” has the meaning set forth in
Section 9.1.

“Tax” or “Taxes” means any and all
United States federal, state and local, or non-United States, taxes, fees,
levies, duties, tariffs, imposts, and other charges of any kind (together with
any and all interest, penalties, additions to tax and additional amounts
imposed with respect thereto) imposed by any Governmental Authority or other
taxing authority, including, without

 8
 

 

limitation:
taxes or other charges on or with respect to income, franchises, windfall or
other profits, business, occupation, gross receipts, property, sales, use,
capital stock, payroll, employment, disability, social security, workers’
compensation, unemployment compensation, or net worth; taxes or other charges
in the nature of excise, withholding, ad valorem, stamp, transfer, value added,
or gains taxes; license, registration and documentation fees; and customs’
duties, tariffs, and similar charges, whether computed on a separate or
consolidated, unitary or combined basis or in any other manner, whether
disputed or not and including any obligation to indemnify or otherwise assume
or succeed to the Tax liability of any other Person.

“Tax Returns” means returns, reports and
information statements, including any schedule or attachment thereto, with
respect to Taxes required to be filed with the IRS or any other Governmental
Authority or other taxing authority or agency, wherever located throughout the
world, including consolidated, combined and unitary tax returns.

“Third Party Claim” has the meaning set forth
in Section 9.5.

“Trademarks” mean all trademarks, service
marks, trade dress, logos, trade names and corporate names, whether or not
registered, including all common law rights, and registrations and applications
for registration thereof, including, but not limited to, all marks registered
in the United States Patent and Trademark Office, the trademark offices of the
states and territories of the United States of America, and the trademark
offices of other nations throughout the world, and all rights therein provided
by multinational treaties or conventions.

ARTICLE II

PURCHASE AND SALE OF ASSETS; ASSUMED LIABILITIES

2.1           Purchased Assets.  Upon the terms and subject to the conditions
set forth in this Agreement, at the Closing, Sellers agree to sell, assign,
transfer, convey and deliver to Purchaser pursuant to a Bill of Sale (the “Bill
of Sale”) in substantially the form of Exhibit A
attached hereto, and Purchaser agrees to purchase from Sellers, free and clear
of all Liens, all of the assets and property used in connection with or
otherwise relating to the Business (other than the Excluded Assets), whether
real or personal, tangible or intangible, of every kind and description and
wherever situated (collectively, the “Purchased Assets”), all with the
intention that the Business shall be transferred to Purchaser as a going
concern, including without limitation, the following:

(a)           Leases of Real
Property.  All rights of any Seller
(whether as lessor or lessee) under leases of real property, together with all
leasehold improvements relating thereto, under the leases listed in Section 4.16
of the Disclosure Schedule;

(b)           Machinery, Equipment
and Furniture.  All furniture,
fixtures, equipment, machinery and other tangible personal property used or
held for use by any Seller at the locations at which the Business is conducted,
or otherwise owned or held by any Seller at the Closing Date for use in the
conduct of the Business;

(c)           Inventories.  All Inventories;

 9
 

 

(d)           Accounts Receivable.  All Receivables;

(e)           Books and Records.  All books and records relating to the
Business or the Purchased Assets (other than those required by law to be
retained by Sellers, copies of which will be provided to Purchaser) including,
without limitation, customer lists, sales records, price lists and catalogues,
sales literature, advertising material, manufacturing data, production records,
employee manuals, personnel records, supply records, inventory records and
correspondence files (together with, in the case of any such information which
is stored electronically, the media on which the same is stored);

(f)            Goodwill.  The goodwill of Sellers relating to the
Business together with the exclusive right for Purchaser to represent itself as
carrying on the Business in succession to Sellers and the right to use any
words indicating that the Business is so carried on;

(g)           Intellectual
Property.  All Sellers’ right, title
and interest in, to and under the Licensed Intellectual Property and the Owned
Intellectual Property;

(h)           Claims and Causes of
Action.  All Actions of any kind
(including rights to insurance proceeds and rights under and pursuant to all
warranties, representations and guarantees made by suppliers of products,
materials or equipment, or components thereof) pertaining to or arising out of
the Business, and inuring to the benefit of any Seller, together with any and
all Liens granted or otherwise available to any Seller as security for
collection of any of the foregoing;

(i)            Prepaid Expenses.  All prepaid expenses of each Seller;

(j)            Contracts.  All rights under the Contracts of or relating
to the Business that are listed in Section 4.6(a) of the Disclosure
Schedule together with all of Sellers’ claims or rights of action now existing
or hereafter arising thereunder;

(k)           Securities.  All securities owned legally or beneficially
by any Seller;

(l)            Hardware and
Software.  All of Sellers’
Information Systems and other Hardware, Software and Databases, including,
without limitation, all rights under licenses and other agreements or
instruments related thereto;

(m)          Permits.  To the extent transferable, all Approvals
held or used by any Seller in connection with, or required for or useful for,
the Business;

(n)           Adopted
Employee Plans.  All rights in and with respect to the assets
associated with the Adopted Employee Plans;

(o)           URLs.  All of each Seller’s right, title and
interest in, to and under any domain name registrations and URLs used in
connection with any aspect of the Business; and

(p)           Phone/Fax
Numbers.  All telephone and facsimile
numbers used in connection with the Business.

 10
 

 

2.2           Excluded Assets.  Notwithstanding the provisions of
Section 2.1, the Purchased Assets shall not include any of the following
property or assets of Sellers (collectively, the “Excluded Assets”):

(a)           Cash.  All Cash;

(b)           Inter-Seller Debt.  All indebtedness of any Owner or any of their
Affiliates to Seller;

(c)           Income
Taxes.  All income tax installments paid by Sellers
and the right to receive any refund of income taxes paid by Sellers;

(d)           Corporate Records.  All corporate records, including, but not
limited to, Sellers’ minute books and stock record books (but not including
records of the Business relating to operation of the Business described in
Section 2.1(f)); and

(e)           Certain Other Assets.  The specific assets listed on Schedule 2.2(e)
attached hereto.

2.3           Assumed Liabilities.  At the Closing, Purchaser shall execute and
deliver the Assignment and Assumption Agreement substantially in the form of Exhibit B attached hereto (the “Assumption
Agreement”), pursuant to which, subject to the provisions of
Section 2.4, it shall assume and agree to pay, perform and discharge only
the following Liabilities of Sellers (the “Assumed Liabilities”):

(a)           Liabilities arising
under the Contracts included in the Purchased Assets from and after the Closing
Date (other than liabilities or obligations attributable to any failure by any
Seller to comply with the terms thereof); and

(b)           The specific
Liabilities set forth on Schedule 2.3(b) attached hereto.

2.4           Excluded Liabilities.  Sellers shall retain, and shall be jointly
and severally responsible for paying, performing and discharging when due, and
Purchaser shall not assume or have any responsibility for, any and all
Liabilities of any Seller other than the Assumed Liabilities (the “Excluded
Liabilities”).  Without limiting the
generality of the foregoing, none of the following shall be Assumed Liabilities
and each shall be an Excluded Liability for the purposes of this Agreement:

(a)           any Liabilities of any
Seller for Taxes (including any Taxes that arise as a result of the
transactions contemplated by this Agreement);

(b)           except to the extent
expressly provided in Section 2.3(b), any Liabilities relating to employee
benefits or compensation arrangements existing as of the end of the day on the
day immediately preceding the Closing Date, including, without limitation, (i)
any Liabilities under any of any Seller’s employee benefit agreements, plans or
other arrangements listed on Schedule 7.2 and (ii) any “stay” or “retention”
bonus or payment obligations;

 11
 

 

(c)           any Liabilities for any
damages or injuries to persons or property or for any tort or strict liability
arising from events, actions or inactions or the operation of the Business
through the Closing Date, including without limitation the sale or use of any
Product;

(d)           any Liability arising
out of any pending or threatened Litigation;

(e)           any Liabilities arising
under Environmental Laws or relating to Hazardous Substances;

(f)            any Liabilities
arising under (x) the MPG Consulting Agreement, the Wachovia Loan and the
Glocap Agreement (each as defined in Section 4.9 of the Disclosure
Schedule), and (y) the Agreement for Philanthropic Support between AJG and
AJG-BI (as successors to Boehringher Ingelheim Pharmaceuticals, Inc.) and
Harvard Medical School Osher Institute and Division for Research and Education
in Complementary Integrative Medical Therapies;

(g)           any Liabilities
relating to an Excluded Asset; and

(h)           any Seller Fees and any
indebtedness of any Seller to any Owner or any Affiliate of any Owner.

2.5           Collection of
Receivables.  Each Seller agrees
that, from and after the Closing Date, Purchaser shall have the right and
authority to collect for its own account the Receivables, subject to the
provisions hereof, and to endorse with the name of such Seller all checks
received on account of the Receivables. 
Each Seller agrees that it will, within five Business Days of its
receipt thereof, transfer, assign and deliver to Purchaser all cash and other
property which it may receive with respect to any Receivable from and after the
Closing Date, and pending any such delivery to Purchaser of any such property,
such Seller shall hold any such property in trust for the benefit of Purchaser.

ARTICLE III

PURCHASE PRICE OF ASSETS

3.1           Purchase Price.  As consideration for the purchase of the Purchased Assets, upon the terms and
subject to the conditions set forth in this Agreement, Purchaser will (i) pay
to Sellers the aggregate purchase price in accordance with Section 3.2
below and subject to adjustment in
accordance with the terms and conditions of this Agreement (the “Purchase
Price”) and (ii) assume the Assumed Liabilities.

3.2           Payment of Purchase
Price.

(a)           Purchaser shall pay
Sellers the Purchase Price as follows:

(i)            Closing
Consideration: delivery at the Closing of the Closing Payment in cash by
wire transfer of immediately available funds and delivery, within ten (10)
business days following the earlier of (x) the date of completion of Parent’s
independent auditors’ audit of Parent’s consolidated financial statements

 12
 

 

as at and for the year ended December 31,
2007 or (y) March 31, 2008 of (A) the Holdback Cash in cash by wire transfer of
immediately available funds and (B) the Holdback Shares;

(ii)           First
Earn-Out: delivery, within ten (10) business days following the earlier of
(x) the date of completion of Parent’s independent auditors’ audit of Parent’s
consolidated financial statements as at and for the year ended December 31,
2007 or (y) March 31, 2008, of (A) an amount equal to 27.91% of the Earn-Out
Amount for such Earn-Out Period in cash by wire transfer of immediately
available funds and (B) a number of Parent Shares equal to the result (rounded
to the nearest whole number) obtained by dividing
72.09% of the Earn-Out Amount for such Earn-Out Period by the Closing Parent Share Price; and

(iii)          Second
Earn-Out: delivery, within ten (10) business days following the earlier of
(x) the date of completion of Parent’s independent auditors’ audit of Parent’s
consolidated financial statements as at and for the year ended December 31,
2008 or (y) March 31, 2009, of (A) an amount equal to 13.95% of the Earn-Out
Amount for such Earn-Out Period in cash by wire transfer of immediately
available funds and (B) a number of Parent Shares equal to the result (rounded
to the nearest whole number) obtained by dividing
86.05% of the Earn-Out Amount for such Earn-Out Period by the Closing Parent Share Price;

(iv)          Third
Earn-Out: delivery, within ten (10) business days following the earlier of
(x) the date of completion of Parent’s independent auditors’ audit of Parent’s
consolidated financial statements as at and for the year ended December 31,
2009 or (y) March 31, 2010, of a number of Parent Shares equal to the result
(rounded to the nearest whole number) obtained by dividing the Earn-Out Amount for such Earn-Out Period by the Closing Parent Share Price; and

(v)           Earn-Out
Make-Up: If the sum of EBITDA for all of the Earn-Out Periods exceeds the
Cumulative EBITDA Target, then the delivery, within ten (10) business days
following the earlier of (x) the date of completion of Parent’s independent
auditors’ audit of Parent’s consolidated financial statements as at and for the
year ended December 31, 2009 or (y) March 31, 2010, of an amount equal to the
amount, if any, by which the sum of the Maximum Earn-Out Amounts for each of
the Earn-Out Periods exceeds the sum of the Earn-Out Amounts for each of the
Earn-Out Periods, payable in a combination of cash (by wire transfer of
immediately available funds) and Parent Shares (valued at the Closing Parent
Share Price) that, when taken together with payments required pursuant to
clauses (iii), (iv) and (v) of this Section 3.2(b), as nearly as practicable
approximates the combination that would have been required pursuant to clauses
(iii), (iv) and (v) of this Section 3.2(b) had the Maximum Earn-Out Amount been
earned in each of the Earn-Out Periods.

(b)           Certain Definitions.  For purposes of this Section 3.2 and except
as expressly provided otherwise herein, all financial measurements shall be
determined in

 13
 

 

accordance
with GAAP, as applied to Purchaser’s and Parent’s consolidated financial
statements.  When used herein, the terms:

(i)            “Closing
Payment” means $7,000,000, less
(A) the amount of the Holdback Cash, (B) less
the amount, if any, by which the Base NWC exceeds the Estimated NWC (as
reported on the Closing Certificate), and (C) plus the amount, if any, by which the Estimated NWC
exceeds the Base NWC (as reported on the Closing Certificate);

(ii)           “Closing
Parent Share Price” means $5.6783, as adjusted from time to time after the
date hereof for any stock dividend, stock split, combination, reorganization,
recapitalization, reclassification, or other similar event involving a change
in the capital structure of the Parent Shares;

(iii)          “Cumulative
EBITDA Target” means $17,250,000;

(iv)          “Earn-Out
Amount” means, for each Earn-Out Period: (A) if EBITDA for such Earn-Out
Period is greater than or equal to the EBITDA Target for such Earn-Out Period,
then the Maximum Earn-Out Amount, (B) if
EBITDA for such Earn-Out Period is less than the EBITDA Target for such
Earn-Out Period and greater than fifty percent (50%) of the EBITDA Target for
such Earn-Out Period, then the Maximum Earn-Out Amount multiplied by a
fraction, the numerator of which is equal to the amount by which EBITDA
for such Earn-Out Period exceeds fifty percent (50%) of the EBITDA Target for
such Earn-Out Period and the denominator of which is equal to fifty
percent (50%) of the EBITDA Target for such Earn-Out Period, and (C) if EBITDA for such Earn-Out Period is not
greater than fifty percent (50%) of the EBITDA Target for such Earn-Out Period,
then zero;

(v)           “Earn-out
Periods” means: (A) the one year period beginning on January 1, 2007 and
ending on December 31, 2007 (the “First Earn-Out Period”), (B) the one
year period beginning January 1, 2008 and ending on December 31, 2008 (the “Second
Earn-Out Period”), and (C) the one year period beginning January 1, 2009
and ending on December 31, 2009 (the “Third Earn-Out Period”); and “Earn-Out
Period” means each of the Earn-Out Periods;

(vi)          “EBITDA”
means, for any period, earnings before interest, taxes, depreciation and
amortization for the Business, as conducted by the Purchaser during such period
and exclusive of the effect of the results of any other business acquired
following the Closing Date, with only such adjustments as may be mutually
agreed by the Parent and the Sellers and, in addition to any such agreed upon adjustments,
for purposes of calculating EBITDA hereunder, (A) compensation expense in
respect of the employment of the Owners shall be reflected only in an amount
equal to fifty percent (50%) of their actual compensation, and (B) there shall
be no allocation to the Business of general and administrative expenses of
Parent;

 14
 

 

(vii)         “EBITDA
Target” means: (x) for the First Earn-Out Period, $2,250,000, (y) for the
Second Earn-Out Period, $6,000,000, and (x) for the Third Earn-Out Period,
$9,000,000;

(viii)        “Holdback
Cash” means $250,000;

(ix)           “Holdback
Shares” means a number of Parent Shares equal to the result (rounded to the
nearest whole number) obtained by dividing
$500,000 by the Closing
Parent Share Price; and

(x)            “Maximum
Earn-Out Amount” means, for each Earn-Out Period, $3,583,000.

(c)           Deferral of Payments
if Indemnification Claims Outstanding; Method of Payment.  If, at any time that Purchaser is obligated
to make any payment or delivery of Purchase Price hereunder, there are one or
more outstanding claims for indemnification under Article IX, then Purchaser
shall be entitled to withhold that portion first, of the Holdback Cash and the
Holdback Shares, pro rata, and second, the
Earn-Out Amount for the First Earn-Out Period and any subsequent Earn-Out Period,
as necessary, equal to the amount of the asserted claim(s).  Any Parent Shares so withheld shall be valued
at the Closing Parent Share Price for such payment.  Upon final resolution of all such
indemnification claim(s), any portion of the withheld payment not offset by
allowed indemnification claim(s) shall be promptly paid by Purchaser, as
applicable, in accordance with this Section 3.2.

(d)           Revision of Earn-Out
Targets.  In the event that prior to
the end of any Earn-Out Period the Parent or the Purchaser (i) sells, assigns
or otherwise transfers for value any material portion of the Business or (ii)
materially reduces the capital resources made available to the Business other
than in response to the failure of the Business to perform according to projections,
then in such event the Parent and the Sellers agree to negotiate in good faith
such revisions to the provisions of this Section 3.2 (as the same apply to
Earn-Out Periods ending after the date of such event) as the parties shall
agree are appropriate to reflect the changed circumstances; provided, however,
that in no event shall the aggregate Maximum Earn-Out Amounts for the remaining
Earn-Out Periods be increased.

3.3           Net Working Capital Adjustment.

(a)           The
parties acknowledge and agree that the aggregate amount of
the Purchase Price has been established in part with reference to the net
working capital of Sellers (calculated with reference only to Purchased Assets
and Assumed Liabilities) in the amount of $1,967,000 (the “Base NWC”).  At the Closing, Sellers shall deliver to
Purchaser a certificate (the “Closing Certificate”) detailing the
calculation of the estimated net working capital of Sellers as of July 31, 2006
(the “Estimated NWC”) which estimate shall be prepared by Sellers in
accordance with GAAP applied consistently with the Seller Financial Statements
(calculated with reference only to Purchased Assets and Assumed
Liabilities).  As promptly as
practicable, but in any event within ninety (90) days after the Closing Date,
Purchaser shall deliver to Sellers a statement of the net working capital of
Sellers as of the Closing Date (the “Closing Date Statement”), which
shall be prepared by Purchaser in accordance with GAAP (calculated with

 15
 

 

reference only
to Purchased Assets and Assumed Liabilities). 
The Closing Date Statement shall be conclusive and binding upon the
parties hereto, unless Sellers object in writing to any item or items shown on
the Closing Date Statement within twenty (20) days after delivery to Sellers of
the Closing Date Statement (the “Objection Period”).  During the Objection Period, Sellers shall
have reasonable access during normal business hours to all work papers of
Purchaser’s accountant that were used in the preparation of the Closing Date
Statement.  If Purchaser and Sellers
shall be unable to resolve any dispute with respect to the Closing Date
Statement within twenty (20) days after delivery of Sellers’ written
objections, the matter or matters in dispute shall be submitted (at the equal
expense of Purchaser and Sellers) to such firm of independent certified public
accountants as Purchaser and Sellers may mutually agree.  The decision of such firm of independent
certified public accountants shall be conclusive and binding upon Purchaser and
Sellers.  The net working capital of
Sellers as of the Closing Date conclusively determined as aforesaid is
sometimes referred to herein as the “Closing NWC”.

(b)           Promptly following the
conclusive determination of Closing NWC, the Purchase Price shall be adjusted
as follows:

(i)            In
the event that the Estimated NWC exceeds the Closing NWC, then the Purchase
Price shall be adjusted downward in an amount equal to such excess, and Sellers
shall promptly pay to Purchaser, by wire transfer of immediately available
funds to an account designated by Purchaser, an amount equal to such excess;
and

(ii)           In
the event that Closing NWC exceeds the Estimated NWC, then the Purchase Price
shall be adjusted upward in an amount equal to such excess and the Purchaser
shall promptly pay to Sellers by wire transfer of immediately available funds
to an account designated by Sellers, an amount equal to such excess.

3.4           Closing.  Subject to the terms and conditions of this
Agreement, the closing of the transactions contemplated by this Agreement (the “Closing”)
shall take place at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., One Financial Center, Boston, Massachusetts at 10:00 a.m. Boston,
Massachusetts time, on the later of (i) August 17,
2006 and (ii) the fifth Business Day following the later to occur of (A)
the expiration or termination of all applicable waiting periods under the HSR
Act and any applicable Foreign Competition Laws, and (B) the satisfaction or
waiver of all other conditions to the obligations of the parties set forth in
Article VIII, or at such other place or time or on such other date as
Sellers and Purchaser may mutually agree upon in writing (the day on which the
Closing takes place being the “Closing Date”).

3.5           Purchase Price
Allocation.  Purchaser shall prepare an allocation of the Purchase Price, the
Assumed Liabilities and all other capitalized costs among the Purchased Assets
and the Non-Competition Agreements in accordance with Code §1060 and the
Treasury regulations thereunder (and any similar provision of state, local or
foreign law, as appropriate).  Purchaser
shall deliver such allocation to Sellers within sixty (60) days after the
Closing Date.  Such allocation shall be
binding upon Seller and Purchaser subject to Sellers’ consent which shall not
be unreasonably withheld or delayed. 
Owners and Purchaser and their respective Affiliates shall

 16
 

 

report and file Tax Returns (including, but not limited to Internal
Revenue Service Form 8594), and shall act, in all respects and for all purposes
consistent with such allocation.  Sellers
and the Owners shall timely and properly prepare, execute, file and deliver all
such documents, forms and other information as Purchaser may reasonably request
to give effect to such allocation. 
Neither Sellers, the Owners nor Purchaser shall take any position
(whether in audits, Tax Returns or otherwise) which is inconsistent with such
allocation unless required to do so by applicable Law.

3.6           Transfer Taxes.  Sellers shall be liable for and shall pay all
federal and state sales Taxes (including any retail sales Taxes and land
transfer Taxes) and all other Taxes, duties, fees or other like charges of any
jurisdiction properly payable in connection with the transfer of the Purchased
Assets by Sellers to Purchaser.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLERS AND
OWNERS

As an inducement to Purchaser to enter into this
Agreement and to consummate the transactions contemplated hereby, Sellers and the Owners, jointly and severally,
represent and warrant to Purchaser as follows:

4.1           Organization and Qualification; Subsidiaries.

(a)           Each Seller is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Florida and has all the requisite power and
authority, and is in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, waivers, qualifications, certificates,
and approvals (collectively, “Approvals”) necessary to own, lease and
operate its properties and to carry on its business as it is now being
conducted.  Each Seller is duly qualified
or licensed as a foreign limited liability company to do business, and is in
good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so
qualified could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on Sellers taken as a whole or on the
Business.

(b)           Each Seller does not (i) own of record or beneficially, directly
or indirectly, (A) any shares of capital stock or securities convertible
into capital stock of any other corporation or (B) any participating
interest in any partnership, joint venture or other non-corporate
business enterprise or (ii) control, directly or indirectly, any other
entity.

4.2           Articles of Organization; Operating Agreement.  True, correct and complete copies of each of
(a) the Articles of Organization, operating agreement, and any other similar
organizational documents of each Seller, each as amended and in effect on the
date hereof (collectively, the “Seller Organizational Documents”), and
(b) the minute books of each Seller have been previously delivered to
Purchaser.  Such minute books contain
complete and accurate records of all meetings and other corporate actions of
the managers and members of each Seller

 17
 

 

from the date
of its organization to the date hereof and have been maintained in a manner
consistent with good business practices.

4.3           Capitalization.

(a)           Section 4.3(a)
of the Disclosure Schedule sets forth a true, complete and correct detailed
list of all membership interests of each Seller that are authorized, issued,
reserved for issuance or outstanding (collectively, the “Seller Membership
Interests”) and the identity of the holder thereof.  Except as set forth in the Seller
Organizational Documents, no Seller Membership Interests are subject to, nor
were they issued in violation of, any purchase option, call option, right of first
refusal, preemptive right, subscription right or any similar right.  All outstanding Seller Membership Interests
are duly authorized, validly issued, fully paid and nonassessable and not
subject to any kind of preemptive (or similar) rights, except as set forth in
the Seller Organizational Documents. 
There are no bonds, debentures, notes or other indebtedness of any
Seller with voting rights (or convertible into, or exchangeable for, securities
with voting rights) on any matters on which members of any Seller may
vote.  All of the issued and outstanding
Seller Membership Interests were issued in compliance with applicable federal
and state securities laws.

(b)           There are no
outstanding securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind (contingent or otherwise) to which any
Seller is a party or by which any Seller is bound obligating any Seller to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
membership interests of any Seller or obligating any Seller to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking, except as set forth in the
Seller Organizational Documents.  There
are no outstanding contractual obligations of any Seller to repurchase, redeem
or otherwise acquire any membership interests (or options to acquire any such
membership interests) or other security or equity interest of any Seller.  There no stock-appreciation rights,
security-based performance units, “phantom” stock or other security rights or
other agreements, arrangements or commitments of any character (contingent or
otherwise) pursuant to which any Person is or may be entitled to receive any
payment or other value based on the revenues, earnings or financial
performance, security price performance or other attribute of any Seller or
assets or calculated in accordance therewith or to cause any Seller to file a
registration statement under the Securities Act, or which otherwise relate to
the registration of any securities of any Seller.

(c)           There are no voting
trusts, proxies or other agreements, commitments or understandings of any
character to which any Seller or any of the members of any Seller, is a party
or by which any of them is bound with respect to the issuance, holding,
acquisition, voting or disposition of any securities, membership interests or
other equity interests of any Seller.

4.4           Authority of Seller; Enforceability.  Each Seller has all necessary power and
authority to execute and deliver this Agreement, each Ancillary Agreement to
which it is a party and each instrument required to be executed and delivered
by it at the Closing, and to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby.  The execution and delivery by each Seller of
this Agreement and each Ancillary Agreement to which it is a party, the
performance of its obligations hereunder and thereunder,

 18
 

 

and the
consummation by each Seller of the transactions contemplated hereby and
thereby, have been duly and validly authorized and approved by all necessary
action and no other proceedings on the part of any Seller or Owner are
necessary to authorize this Agreement or any Ancillary Agreement to which any
Seller or Owner is a party or to consummate the transactions contemplated
herein and therein.  This Agreement and
each of the Ancillary Agreements to which any Seller or Owner is a party have
been duly and validly executed and delivered by each Seller and Owner party
thereto and, assuming the due authorization, execution and delivery thereof by
Purchaser, constitutes the legal, valid and binding obligation of each Seller
and Owner party thereto, enforceable in accordance with its terms, except that
the enforcement thereof may be limited by (A) bankruptcy, insolvency,
reorganization, moratorium or other similar law now or hereafter in effect
relating to creditors’ rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity
or at law).

4.5           No Conflict; Required Filings and Consents.

(a)           The execution and
delivery by each Seller and each Owner of this Agreement, the Ancillary
Agreements to which they are a party and
any instrument required by this Agreement to be executed and delivered by any
Seller or any Owner at the Closing do not, the performance of this Agreement,
the Ancillary Agreements to which they are a party or any instrument required
by this Agreement to be executed and delivered by any Seller or any Owner at
the Closing will not, and the consummation of the transactions contemplated
hereby will not, (i) conflict with or violate the Seller Organizational
Documents, (ii) conflict with or violate any Law or Order in each case
applicable to any Seller or any Owner or by which their properties are bound or
affected, or (iii) result in any breach or violation of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or impair any Seller’s rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any of
the properties or assets of any Seller pursuant to, any note, bond, mortgage,
indenture, Contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which any Seller is a party or by which any Seller
or its or any of its properties are bound or affected, except as set forth in Section
4.5(a) of the Disclosure Schedule.

(b)           The execution and
delivery by each Seller and each Owner of this Agreement, the Ancillary
Agreements to which they are a party or any instrument required by this
Agreement to be executed and delivered by any Seller or any Owner at the
Closing do not, and the performance of this Agreement, the Ancillary Agreements
to which they are a party and any
instrument required by this Agreement to be executed and delivered by any
Seller or any Owner at the Closing, shall not, require any Seller or any Owner
to, except as set forth in Section 4.5(b) of the Disclosure Schedule,
obtain any Approval of any Person or Approval of, observe any waiting period
imposed by, or make any filing with or notification to, any Governmental
Authority, domestic or foreign, except for (A) compliance with the pre-Merger
notification requirements of the HSR Act, or any Foreign Competition Laws, or
(B) where the failure to obtain such Approvals, or to make such filings or
notifications, could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Sellers taken as a whole or on
the Business.

 19

 

4.6           Assigned Agreements.

(a)           Section
4.6(a) of the Disclosure Schedule sets forth a true and complete list, and,
if oral, an accurate and complete summary, of all Contracts to which any Seller
is a party or by which it or any of its properties or assets may be
(collectively, the “Assigned Agreements”).  True and complete copies of all written
Assigned Agreements have been delivered to Purchaser by Sellers and Section 4.6(a)
of the Disclosure Schedule contains an accurate summary of all Assigned
Agreements which are not in writing. 
Except as set forth on Section 4.6(a) of the Disclosure
Schedule, each Assigned Agreement is freely and fully assignable to Purchaser
without penalty or other adverse consequences and no consent of or notice to
any third party (a “Consent”) is required in order to validly assign and
transfer the Assigned Agreements to Purchaser.

(b)           Each
Assigned Agreement is in full force and effect, is a valid and binding
obligation of each Seller party thereto and, to the Sellers’ Knowledge, of each
other party thereto and is enforceable against such Seller in accordance with
its terms and, to the Sellers’ Knowledge, is enforceable against each other
party thereto, in each case except that the enforcement thereof may be limited
by (i) the effects of bankruptcy, insolvency, reorganization, moratorium or
other similar law now or hereafter in effect relating to creditors’ rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law), and such
Assigned Agreements will continue to be valid, binding and enforceable in
accordance with their respective terms and in full force and effect immediately
following the consummation of the transactions contemplated hereby with no material
alteration or acceleration or increase in fees or liabilities.  No Seller is or has been alleged to be and,
to the Sellers’ Knowledge, no other party is or is alleged to be in default
under, or in breach or violation of, any Assigned Agreement and, to the Sellers’
Knowledge, no event has occurred which (whether with or without notice or lapse
of time or both) would constitute such a default, breach or violation.

4.7           Compliance.  Each Seller is in compliance with, and is not
in default or violation of, (i) Seller Organizational Documents, (ii) any Law
or Order by which any of its assets or properties are bound or affected, or
(iii) any note, bond, mortgage, indenture, Contract, permit, franchise or other
instruments or obligations to which it is a party or by which it or any of its
assets or properties are bound or affected, except, as to clauses (ii) and
(iii) above, where such noncompliance, default or violation would not have a
Material Adverse Effect on Sellers taken as a whole or on the Business.  Each Seller is in compliance in all material
respects with the terms of all Approvals. 
No Seller has received notice of any revocation or modification of any
Approval of any federal, state, local or foreign Governmental Authority that is
material to any Seller.

4.8           Financial Statements.

(a)           Attached
to Section 4.8(a) of the Disclosure Schedule are the (i) audited
combined Balance Sheet of Sellers as of December 31, 2005 and 2004 and the
footnotes attached thereto, Income Statement of Sellers for the years ended
December 31, 2005 and 2004, and the Statement of Cash Flows of Sellers for the
years ended December 31, 2005 and 2004 and (ii) unaudited combined Balance
Sheet of Sellers as of July 31, 2006, Income Statement of Seller for

 20
 

 

the seven months ended July 31, 2006, and the
Statement of Cash Flows of Seller for the seven months ended July 31, 2006
(together, the “Seller Financial Statements”), together with all related
compilations, reviews and other reports issued by Sellers’ independent
certified public accountants with respect thereto, all of which statements
(including the notes thereto) are complete and correct in all material respects
and (i) were prepared in accordance with the books of account and other
financial records of Sellers, (ii) were prepared in accordance with GAAP
(except as may otherwise be indicated in the notes thereto), and (iii) present
fairly the assets, liabilities and financial position of Sellers on the date of
such statements, and the results of operations and changes in the financial
condition of Sellers for the periods covered thereby, subject, in the case of
unaudited financial statements, to normal recurring year-end adjustments (the
effect of which shall not, individually or in the aggregate, have a Material
Adverse Effect on Sellers taken as a whole or the Business) and the absence of
notes that, if presented, would not differ materially from those included in
the audited combined Balance Sheet of Sellers for the year ended December 31,
2005.

(b)           Section
4.8(b) of the Disclosure Schedule contains an aged list of the Receivables
as of June 30, 2006.  Except as set forth
on Section 4.8(b) of the Disclosure Schedule, all Receivables reflected
on the Seller Financial Statements arose from, and the Receivables existing on
the Closing Date will have arisen from, the delivery of products in the
Ordinary Course of Business, consistent with past practice, to Persons not
affiliated with any Seller and, except as reserved against on the Balance
Sheet, constitute or will constitute, as the case may be, only valid,
undisputed claims of Seller not subject to valid claims of set-off or other
defenses or counterclaims.  All
Receivables reflected on the Seller Financial Statements or arising from the
date thereof until the Closing (subject to the reserve for bad debts, if any,
reflected on the Seller Financial Statements) are owned by Sellers free and
clear of any Liens and, to Seller’s Knowledge, are or will be good and have
been collected or will be collectible in the aggregate face amounts thereof,
without resort to litigation or extraordinary collection activity, within
ninety (90) days of the Closing Date.

(c)           Each
Seller maintains, or causes another Seller to maintain on its behalf, a system
of internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management’s general and
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP, and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

4.9           Absence of Certain Changes or Events.  Except for the transactions expressly
contemplated hereby or disclosed on Section 4.9 of the Disclosure
Schedule, since December 31, 2005, the Sellers have not:

(a)           issued,
sold, redeemed or repurchased any membership interests, bonds or other
securities (including without limitation convertible securities) or any rights,
options or warrants with respect thereto, or amended any of the terms
(including without limitation the vesting of) any such securities, rights,
options or warrants;

 21
 

 

(b)           split,
combined or reclassified any of its membership interests, or declared, set
aside or paid any dividend or other distribution with respect to any membership
interests of Seller, whether in cash, securities or property, or any
combination thereof;

(c)           made
any loan, advance or capital contribution to or investment in any person;

(d)           borrowed
any amount or incurred or become subject to any liabilities (absolute or
contingent) except current liabilities incurred in the Ordinary Course of
Business;

(e)           discharged
or satisfied any claim or encumbrance or paid any obligation or liability
(absolute or contingent), other than current liabilities paid in the Ordinary
Course of Business;

(f)            amended
any of the Seller Organizational Documents;

(g)           instituted
or settled any Litigation;

(h)           mortgaged
or pledged any of its assets, tangible or intangible, or subjected itself or
any portion of its assets, tangible or intangible, to any claim, except claims
for current property taxes not yet due and payable;

(i)            acquired
or sold, assigned, transferred or otherwise disposed of any amount of tangible
assets, except the sale of Inventory to unaffiliated third parties in the
Ordinary Course of Business, or canceled any debts or claims;

(j)            sold,
assigned, licensed, sublicensed or transferred any intangible asset or
intellectual property right, or disclosed any proprietary or confidential
information to any person or entity not associated with the Sellers, unless
such person or entity, prior to such disclosure executed and delivered a
non-disclosure agreement in favor of the Sellers;

(k)           suffered
any non-operating loss in excess of $10,000, or aggregate non-operating losses
in excess of $20,000, in either case regardless of whether in the Ordinary
Course of Business or covered by insurance;

(l)            waived
any right of value in excess of $10,000, or aggregate rights in excess of
$20,000 (including any insurance policy naming it as a beneficiary or a loss
payable payee);

(m)          suffered
any labor trouble, or any event or condition of any character, having a
Material Adverse Effect on the business or plans of any Seller;

(n)           materially
decreased expenditures with respect to maintenance and repairs;

(o)           made
any single capital expenditure or commitment therefor in excess of $10,000, or
aggregate capital expenditures or commitments therefor in excess of $20,000;

 22
 

 

(p)           done
any of the following: (A) entered into, adopted or amended any employee benefit
plan, (B) made any grant of any severance or termination pay to any director,
officer, employee or individual providing services to any Seller, (C) entered
into any employment, deferred compensation, change in control or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer, employee or individual providing services to any Seller, (D) increased
benefits payable under any existing severance or termination pay policies or
employment agreements, or (E) increased compensation, bonus or other benefits
payable to directors, officers, employees or individuals providing services to
any Seller or any of their Affiliates, other than, in the case of clause (B),
with respect to non-executive employees, and in the case of clause (E), in the
Ordinary Course of Business;

(q)           entered
into any joint venture, partnership or similar arrangement;

(r)            amended,
modified or terminated any Contract, understanding, commitment or agreement
referred to in or required to be set forth in Section 4.6(a) of the
Disclosure Schedule, other than in the Ordinary Course of Business, except for
any such item that terminated in accordance with its terms, or taken any action
that would constitute a violation of or default under any material Contract;

(s)           changed
its accounting methods, principles or practices, or revalued any of its assets
(including without limitation the writing down of the value of inventory or the
writing off of notes or accounts receivable other than in the Ordinary Course
of Business);

(t)            taken
any action that would have required the consent of Purchaser pursuant to
Section 6.3 had such action or event occurred after the date hereof and prior
to the Closing;

(u)           taken,
or failed to take, any action which could reasonably be expected to prevent,
hinder or materially delay the ability of Sellers to consummate the
transactions contemplated by this Agreement or the Ancillary Agreements to
which it is a party;

(v)           entered
into any other transaction other than in the Ordinary Course of Business or entered
into any other material transaction, whether or not in the Ordinary Course of
Business; or

(w)          agreed
in writing or otherwise to take any of the foregoing actions.

4.10         No Undisclosed Liabilities.  No Seller has any liabilities or obligations
of any nature (whether known, unknown, asserted, unasserted, accrued,
unaccrued, absolute, fixed, contingent, liquidated, unliquidated, due, to
become due, or otherwise), and there is no existing fact, condition or
circumstance which could reasonably be expected to result in such liabilities
or obligations, except liabilities or obligations reflected in the Seller
Financial Statements to the extent so reflected.

4.11         Absence of Litigation.  There is no Litigation or investigation
pending or, to the Knowledge of any Seller, threatened against or otherwise
adversely affecting any Seller or any of their respective properties, assets or
rights, before or subject to any Court or Governmental Authority, nor does
there exist any reasonable basis for any such Litigation.  No Seller is subject

 23
 

 

to any outstanding Litigation or Order which,
individually or in the aggregate, would prevent, hinder or delay any Seller
from consummating the transactions contemplated by this Agreement.  There is no Litigation pending or, to the Knowledge
of any Seller, threatened that might call into question the validity of this
Agreement or any action taken or to be taken pursuant hereto, nor does there
exist any reasonable basis for any such Litigation.

4.12         Employee Benefit Plans.

(a)           All
“employee benefit plans” (as defined in Section 3(3) of ERISA) and all bonus,
stock or other security option, stock or other security purchase, stock or
other security appreciation rights, incentive, deferred compensation,
retirement or supplemental retirement, severance, golden parachute, vacation,
cafeteria, dependent care, medical care, employee assistance program, education
or tuition assistance programs, insurance and other similar fringe or employee
benefit plans, programs or arrangements, and any employment or executive
compensation or severance agreements, written or otherwise, which are sponsored
or maintained by any Seller, or any trade or business (whether or not
incorporated) which is a member of a controlled group or which is under common
control with any Seller, within the meaning of Section 414 of the Code (an “ERISA
Affiliate”), on the date hereof are listed in Section 4.12(a) of the
Disclosure Schedule (together, the “Employee Plans”).  With respect to an Employee Plan that is a “group
health plan” (within the meaning of Code Section 5000(b)(1)), Sellers have
provided to Purchaser correct and complete copies of (where and if applicable)
(1) the most recent plan document, summary plan description, summary of
material modifications and amendments related to such plans, (2) the two most
recent Form 5500 Annual Reports and summary annual reports and (3) the most
recent agreement or insurance contract which implement each such Employee Plan.

(b)           To
Sellers’ Knowledge, (1) there has been no “prohibited transaction,” as such
term is defined in Section 406 of ERISA and Section 4975 of the Code, with
respect to any Employee Plan; (2) there are no claims pending (other than
routine claims for benefits) or threatened against any Employee Plan or against
the assets of any Employee Plan, nor are there any current or threatened Liens
on the assets of any Employee Plan; (3) all Employee Plans conform to, and in
their operation and administration are in all material respects in compliance
with the terms thereof and requirements prescribed by any and all statutes
(including ERISA and the Code), orders, or governmental rules and regulations
currently in effect with respect thereto (including without limitation all
applicable requirements for notification, reporting and disclosure to
participants or the Department of Labor, IRS or Secretary of the Treasury), and
each Seller and their ERISA Affiliates, if any, have performed all obligations
required to be performed by them under, are not in default under or violation of,
and have no knowledge of any default or violation by any other party with
respect to, any of the Employee Plans; and (4) each Employee Plan intended to
qualify under Section 401(a) of the Code and each corresponding trust exempt
under Section 501 of the Code has received or is the subject of a favorable
determination or opinion letter from the IRS, and nothing has occurred which
may be expected to cause the loss of such qualification or exemption.  The transactions contemplated herein will not
directly or indirectly result in an increase of benefits, acceleration of
vesting or acceleration of timing for payment of any benefit to any participant
or beneficiary under any Employee Plan.

 24
 

 

(c)           Seller
has no liability with respect to, and has never sponsored, maintained, made or
been required to make contribution to any “multi-employer plan” as such term is
defined in Section 3(37) of ERISA).

(d)           Each
Employee Plan that is a “group health plan” (within the meaning of Code Section
5000(b)(1)) has been operated in material compliance with all laws applicable
to such plan, its terms, and with the group health plan continuation coverage
requirements of Section 4980B of the Code and Sections 601 through 608 of ERISA
(“COBRA Coverage”), Section 4980D of the Code and Sections 701 through
707 of ERISA, and such plan’s terms.  No
Employee Plan or written or oral agreement exists which obligates any Seller or
any of their ERISA Affiliates, if any, to provide health care coverage,
medical, surgical, hospitalization, death or similar benefits (whether or not
insured) to any employee, former employee or director of any Seller or any of
their ERISA Affiliates, if any, following such employee’s, former employee’s or
director’s termination of employment with any Seller or any of their ERISA
Affiliates, if any, other than COBRA Coverage.

(e)           Section
4.12(e) of the Disclosure Schedule sets forth a true and complete list of
each current or former employee, officer, director or investor of any Seller
who holds, as of the date hereof, any option, warrant or other right to
purchase membership interests of any Seller, if any, together with the number
of membership interests, if any, subject to such option, warrant or right, the
date of grant or issuance of such option, warrant or right, the extent to which
such option, warrant or right is vested and/or exercisable, the exercise price
of such option, warrant or right, whether such option is intended to qualify as
an incentive stock option within the meaning of Section 422(b) of the Code, and
the expiration date of each such option, warrant and right.  Section 4.12(e) of the Disclosure
Schedule also sets forth the total number of such options, warrants and
rights.  True and complete copies of each
agreement (including all amendments and modifications thereto) between any
Seller and each holder of such options, warrants and rights relating to the
same have been furnished to Purchaser and are listed in Section 4.3(c)
of the Disclosure Schedule.

(f)            All
contributions due and payable on or before the Closing Date in respect of any
Employee Plan have been made in full and proper form and adequate accruals in
accordance with generally accepted accounting principles have been provided for
in the Seller Financial Statements for all other contributions or amounts in
respect of the Employee Plans for periods ending on the Closing Date.

(g)           Except
as set forth on Section 4.12(g) of the Disclosure Schedule, no Employee
Plan, with the exception of a retirement plan qualified under Section 401(a) of
the Code with respect to a trust, and a health flexible spending account or
dependent care flexible spending account with respect to self-funding, is
funded by a trust, voluntary employees’ beneficiary association or other
self-funded arrangement.

(h)           To
Sellers’ Knowledge, the consummation of the transactions contemplated by this
Agreement will not: (A) entitle any individual to severance or separation pay,
or (B) accelerate the time of payment or vesting, or increase the amount, of
compensation due to any individual.  No
payment made or contemplated under any Employee Plan or other

 25
 

 

compensation or benefit arrangement
constitutes an “excess parachute payment” within the meaning of Section 280G of
the Code.

(i)            To
Sellers’ Knowledge, all Employee Plans and compensation or benefit arrangements
which provide nonqualified deferred compensation covered by Section 409A of the
Code are in “good faith” compliance with Section 409A of the Code and the
guidance issued pursuant to Section 409A of the Code including, but not limited
to, United States Treasury Notice 2005-1.

4.13         Employment and Labor Matters.

(a)           Section
4.13(a) of the Disclosure Schedule identifies all employees and consultants
employed or engaged by any Seller and sets forth each such individual’s rate of
pay or annual compensation, job title and date of hire.  Except as set forth in Section 4.13(a)
of the Disclosure Schedule, there are no employment, consulting, severance pay,
continuation pay, termination or indemnification agreements or other similar
agreements of any nature (whether in writing or not) between any Seller and any
current or former shareholder, officer, director, employee, or any
consultant.  Except as set forth in Section
4.13(a) of the Disclosure Schedule, no individual will accrue or receive
additional benefits, service or accelerated rights to payments under any
Employee Plan or any of the agreements set forth in Section 4.13(a) of
the Disclosure Schedule, including the right to receive any parachute payment,
as defined in Section 280G of the Code, or become entitled to severance,
termination allowance or similar payments as a result of the transactions
contemplated herein that could result in the payment of any such benefits or
payments.  Each Seller is not delinquent
in payments to any of its employees or consultants for any wages, salaries,
commissions, bonuses or other compensation for any services.  None of any Seller’s employment policies or
practices is currently being audited or investigated by any Governmental
Authority.  There are no pending or, to
the Knowledge of any Seller, threatened Actions alleging claims against any
Seller brought by or on behalf of any employee or other individual or any
Governmental Authority with respect to employment practices.

(b)           Except
as set forth in Section 4.13(b) of the Disclosure Schedule, there are no
controversies pending or, to the Knowledge of any Seller, threatened, between
any Seller and any of its employees; each Seller is not a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by such Seller nor are there any activities or proceedings of
any labor union to organize any such employees of such Seller.  Since the date of each Seller’s organization,
there have been no strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of such Seller.  No Seller has and at the Closing no Seller
will have any obligation under the Worker Adjustment and Retraining
Notification Act.  Each Seller is in
material compliance with all applicable state, local, federal and foreign
employment, wage and hour, labor, occupational safety and other applicable
laws.

(c)           Each
Seller is in compliance in all material respects with all applicable foreign,
federal, state and local laws, rules, directives and regulations relating to
the employment authorization of its employees (including, without limitation,
the Immigration Reform and Control Act of 1986, as amended and supplemented,
and Section 212(n) and 274A of the Immigration and Nationality Act, as amended
and supplemented, and all implementing regulations relating thereto), and no
Seller has employed or is currently employing any

 26
 

 

unauthorized aliens (as such term is defined
under 8 CFR 274a.1(a)).  No Seller has
received any notice from the United States Immigration and Naturalization
Service (the “INS”) or the U.S. Department of Labor (the “DOL”)
of the disapproval or denial of any visa petition pending before the INS or
labor certification pending before the DOL on behalf of any employee or
prospective employee of any Seller.  Section
4.13(c) of the Disclosure Schedule contains a true, complete and accurate
list of all non-immigrant or immigrant visa petitions pending before the INS
and labor certifications pending before the DOL on behalf of any of the
employees or prospective employees of any Seller.  Since the approval of each of their
respective visa petitions, there has been no material change in the terms and
conditions of employment of any employees of any Seller, provided that it is
acknowledged that certain employees may from time to time unilaterally breach
the terms of their employment with Sellers.

4.14         Certain Business Practices.  As of the date hereof, neither any Seller nor
any director, officer, employee or agent of any Seller has (a) used any funds
for unlawful contributions, gifts, entertainment or other unlawful payments
relating to political activity, (b) made any unlawful payment to any foreign or
domestic government official or employee or to any foreign or domestic
political party or campaign or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or (c) made any other unlawful payment.

4.15         Absence of Restrictions on Business Activities.   Except as set forth in Section 4.15
of the Disclosure Schedule, there is no Assigned Agreement, Order or other
arrangement binding upon any Seller or any of its properties which has had or
could reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of any Seller or the conduct of business by any
Seller as currently conducted or as proposed to be conducted by such
Seller.  Except as set forth in Section 4.15
of the Disclosure Schedule, no Seller is subject to any non-competition or
similar restriction on its businesses.

4.16         Real Property.

(a)           No
Seller owns any real property.

(b)           Section
4.16 of Disclosure Statement sets forth (i) a true and complete list of all
real property leased by any Seller, (ii) the expiration date of each such
lease; (iii) the aggregate monthly rental or other fee payable under each such
lease, and (iv) a description of each contract for the purchase, sale, or
development of real estate to which any Seller is a party.

(c)           Except
as described in Section 4.16 of the Disclosure Schedule, Sellers have
good and defensible title to the properties and assets listed on Section
4.16 of the Disclosure Schedule, free and clear of all Liens, charges and
encumbrances, except statutory Liens for Taxes (as defined below) and securing
payments not yet due and payable which Liens or other imperfections of title,
if any, as do not materially detract from the value of or interfere with the
present use of the property affected thereby or otherwise impair business
operations with respect to such properties and assets.

(d)           Sellers
have delivered to Purchaser complete and accurate copies of the leases and
subleases (as amended to date) listed in Section 4.16 of the Disclosure
Schedule.  With respect to each lease and
sublease listed in Section 4.16 of the Disclosure Schedule:

 27
 

 

(i)            the
lease or sublease is legal, valid, binding, enforceable against each Seller
that is a party thereto and, to the Sellers’ Knowledge, against the other
parties thereto and in full force and effect;

(ii)           the
lease or sublease will continue to be legal, valid, binding, enforceable and in
full force and effect immediately following the Closing in accordance with the
terms thereof as in effect immediately prior to the Closing;

(iii)          neither
any Seller nor, to the Knowledge of any Seller, any other party is in breach or
violation of, or default under, any such lease or sublease, and no event has
occurred, is pending or is threatened, which, after the giving of notice, with
lapse of time, or otherwise, would constitute a breach or default by any Seller
or any other party under such lease or sublease;

(iv)          No
Seller has assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the leasehold or subleasehold;

(v)           No
Seller has any Knowledge of any Lien, easement, covenant or other restriction
applicable to the real property subject to such lease, except for recorded
easements covenants and other restrictions which do not materially impair the
current uses or the occupancy by any Seller of the property subject thereto;
and

(vi)          No
Seller has received notice or otherwise has Knowledge of any pending,
threatened or contemplated condemnation proceeding affecting any premises owned
or leased by any Seller or any part thereof or of any sale or other disposition
of any such owned or leased premises or any part thereof in lieu of
condemnation.  There are no Laws,
conditions of record, or, to the Knowledge of 
any Seller, other impediments which interfere with the intended use by
any Seller of any of the property owned, leased, or occupied by them effective
in accordance with their respective terms, and there is not, under any of such
leases, any existing material default or event of material default (or event
which with notice or lapse of time, or both, would constitute a material
default and in respect of which Sellers have not taken adequate steps to
prevent such a default from occurring) by any Seller or, to the Sellers’
Knowledge, by any other party thereto.

4.17         Purchased Assets.

(a)           Section 4.17(a)
of the Disclosure Schedule lists all items of each Seller’s tangible personal
property and equipment.  Except as set
forth in Section 4.17(a) of the Disclosure Schedule, each Seller
(i) owns, leases or has the legal right to use all the properties and assets
used or intended to be used by it in the conduct of the Business, and (ii) with
respect to contractual rights, is a party to and enjoys the right to the
benefits of such of the Assigned Agreements as are used by it in the conduct of
the Business, all of which properties, assets and rights constitute Purchased
Assets.  Except as set forth in Section 4.17(a)
of the Disclosure Schedule, Sellers have good and marketable title to, or, in
the case of leased or subleased

 28
 

 

Purchased Assets, valid and subsisting
leasehold interests in, all the Purchased Assets, free and clear of all Liens.

(b)           The
Purchased Assets constitute (i)
all of the properties, assets and rights, used, held or intended to be used in
the Business, and (ii) all such properties, assets and rights as are necessary
or useful in the conduct of the Business. 
At all times, Sellers have caused the Purchased Assets to be maintained,
in all material respects, in accordance with good business practice, and all
the Purchased Assets are in good operating condition and repair, ordinary wear
and tear excepted, and are suitable for the purposes for which they are used
and intended to be used.

(c)           Except
as set forth in Section 4.17(c) of the Disclosure Schedule, Sellers
have the complete and unrestricted power and unqualified right to sell, assign,
transfer, convey and deliver the Purchased Assets to Purchaser without penalty
or other adverse consequences.  Following
the consummation of the transactions contemplated by this Agreement and the
execution of the instruments of transfer contemplated by this Agreement,
Purchaser will own, with good, valid and marketable title, or lease, under
valid and subsisting leases, or otherwise acquire the interests of each Seller
in the Purchased Assets, free and clear of all Liens, and without incurring any
penalty or other adverse consequence, including, without limitation, any
increase in rentals, royalties, or license or other fees imposed as a result
of, or arising from, the consummation of the transactions contemplated by this
Agreement.

(d)           Except
as set forth in Section 4.17(d) of the Disclosure Schedule, (i) there
are no financing statements under the Uniform Commercial Code which name any
Seller as debtor or lessee filed in any state, and (ii) except for those no
longer in effect, no Seller has signed any financing statement or any security
agreement under which a secured party thereunder may file any such financing
statement.

4.18         Taxes. 
 Except as set forth in Section
4.18 of the Disclosure Schedule:

(a)           All
federal, state, local and foreign Tax Returns required to be filed (taking into
account extensions) by or on behalf of any Seller and each affiliated,
combined, consolidated or unitary group of which any Seller is or has been a
member have been timely filed, and all such Tax Returns are true, complete and
correct. Sellers have delivered to Purchaser true and complete copies of (i)
all federal income Tax Returns of Sellers for the taxable years ended December
31, 2003, 2004 and 2005, and (ii) any audit report issued within the last three
(3) years (or otherwise with respect to any audit or proceeding in progress)
relating to federal income Taxes of any Seller.

(b)           All
Taxes payable by or with respect to any Seller have been timely paid, or are
adequately reserved for (other than a reserve for deferred Taxes established to
reflect timing differences between book and Tax treatment) in accordance with
GAAP on the Seller Financial Statements, other than such Taxes that are
currently payable without penalty or interest. 
No deficiency for any Taxes has been proposed, asserted or assessed
either orally or in writing against any Seller that is not adequately reserved
for in accordance with GAAP on the Seller Financial Statements, nor are there
any outstanding Tax audits or inquiries. 
All

 29
 

 

assessments for Taxes due and owing by or
with respect to any Seller with respect to completed and settled examinations
or concluded litigation have been fully paid.

(c)           No
claim has been made by a taxing authority in a jurisdiction where any Seller
does not file income or franchise Tax Returns that such Seller is or may be
subject to income or franchise taxation in that jurisdiction.

(d)           No
Seller has requested, or been granted, any waiver of any federal, state, local
or foreign statute of limitations with respect to, or any extension of a period
for the assessment of, any Tax.  No
extension or waiver of time within which to file any Tax Return of, or
applicable to, any Seller has been granted or requested which has not since
expired.

(e)           No
Seller is or has ever been (nor does any Seller have any liability for unpaid
Taxes because it once was) a member of an affiliated, consolidated, combined or
unitary group, and no Seller is a party to any Tax allocation or sharing
agreement or is liable for the Taxes of any other party, as transferee or
successor, by contract, by operation of law, or otherwise.

(f)            There
are no agreements in effect to extend the period of limitations for the
assessment or collection of any Tax for which any Seller may be liable.  Prior to the date hereof, Sellers have
provided Purchaser with written schedules setting forth the taxable years of
each Seller for which the statutes of limitations with respect to foreign,
federal and material state income Taxes have not expired and with respect to
foreign, federal and material state income Taxes, those years for which
examinations have been completed and those years for which examinations are
currently being conducted.

(g)           No
unsatisfied deficiency, delinquency or default for any Tax has been claimed,
proposed or assessed against or with respect to any Seller, nor has any Seller
received notice of any such deficiency, delinquency or default, and there is no
administrative or court proceeding or, to any Seller’s Knowledge, any audit or
investigation pending with respect to any liability of any Seller for Taxes.

(h)           Each
Seller has complied with all applicable Laws relating to the payment and
withholding of Taxes (including, but not limited to, withholding of Taxes
pursuant to Sections 1441, 1442 and 3406 of the Code or similar provisions
under any foreign Laws) and have, within the time and in the manner required by
Law, withheld from employee wages and paid over to the proper Governmental
Authorities all amounts required to be so withheld and paid over under all
applicable Laws.

(i)            No
Seller has executed or entered into any closing agreement under Section 7121 of
the Code (or any similar provision of state, local or foreign law) or has
agreed to make any adjustment to its income or deductions pursuant to Section
481(a) of the Code (or similar provision of state, local or foreign law), in
either case that could affect the Tax liability after the Closing Date to any
material extent.

(j)            No
Seller has agreed to, or is required to, make any adjustment under Section
481(a) of the Code by reason of a change in accounting method or otherwise.

 30

 

(k)           There
are no Liens with respect to Taxes upon any of the assets, properties or
business of any Seller, other than with respect to Taxes arising in the
Ordinary Course of Business and not yet due and payable.

4.19         Environmental Matters.  Except as described in Section 4.19
of the Disclosure Schedule, (i) each Seller has obtained all applicable
permits, licenses and other authorization which are required under foreign,
federal, state or local Laws relating to pollution or protection of the
environment or public health or safety, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants, or
hazardous or toxic materials or wastes into ambient air, surface water, ground
water or land or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants or hazardous or toxic materials or wastes required to
be obtained by such Seller or its agents; (ii) each Seller is in full compliance
with all terms and conditions of such required permits, licenses and
authorizations, and also are in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in such Laws or contained in any Regulation,
code, plan, Order, notice or demand letter issued, entered, promulgated or
approved thereunder; and (iii) as of the date hereof there has not been any
event, condition, circumstance, activity, practice, incident, action or plan
which is reasonably likely to interfere with or prevent continued compliance
with the terms of such permits, licenses and authorizations or which would give
rise to any common law or statutory liability, or otherwise form the basis of
any claim, action, suit or proceeding, based on or resulting from any Seller’s
(or any of its agent’s) manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission, discharge, or
release into the environment, of any pollutant, contaminant or hazardous or
toxic material or waste; and  have taken
all actions necessary under applicable requirements of federal, state or local
laws, rules or regulations to register any products or materials required to be
registered by any Seller  (or any of its
agents) thereunder.  Except as set forth
in Section 4.19 of the Disclosure Schedule, there is no civil,
criminal or administrative action, suit, demand, claim, hearing, notice of
violation, investigation, proceeding, notice or demand letter pending or, to
the Knowledge of any Seller, threatened against any Seller relating in any way
to the Environmental Laws or any Regulation, code, plan, Order, notice or
demand letter issued, entered, promulgated or approved thereunder.

4.20         Intellectual Property.

(a)           Section
4.20(a) of the Disclosure Schedule sets forth, for the Intellectual
Property owned by each Seller, a complete and accurate list of all United
States and foreign (a) patents and patent applications; (b) registered and
unregistered trademarks and pending trademark registration applications; (c)
domain name registrations; and (d) registered copyrights indicating for each,
the applicable jurisdiction, registration number (or application number), and
date issued (or date filed).

(b)           All
Patents owned by any Seller are currently in compliance with all legal
requirements (including the payment of filing, examination and maintenance fees
and proof of working or use with respect to such Patents), are valid and
enforceable, and are not subject to any maintenance fees or actions falling due
within ninety (90) days after the Effective Time.  No Patent or patent application owned by any
Seller is currently involved in any interference,

 31
 

 

reissue, re-examination or opposition proceeding
and no such action has been threatened with respect to any patent or patent
application.  To the Knowledge of
Sellers, there are no potentially conflicting Trademarks or potentially
interfering Patents or patent applications of any third party.

(c)           Section
4.20(c) of the Disclosure Schedule sets forth a complete and accurate list
of all license agreements granting any right to use or practice any rights
under any Intellectual Property (other than software available commercially “off
the shelf” and having an acquisition price of less than $5,000), whether any
Seller is the licensee or licensor thereunder, and any assignments, consents,
term, forbearances to sue, judgments, Orders, settlements or similar
obligations relating to any Intellectual Property to which any Seller is a
party or otherwise bound (collectively, the “License Agreements”),
indicating for each the title, the parties, date executed, whether or not it is
exclusive and the Intellectual Property covered thereby.  The License Agreements are valid and binding
obligations of the Seller party thereto, enforceable in accordance with their
terms, and there exists no event or condition which will result in a violation
or breach of, or constitute (with or without due notice or lapse of time or both)
a default by any Seller under any such License Agreement.

(d)           The
Intellectual Property owned by or licensed to Sellers constitutes all of the
Intellectual Property used in or necessary for the conduct of Sellers’ business
as currently conducted and as currently contemplated to be conducted.

(e)           No
royalties, honoraria or other fees are payable to any third parties for the use
of or right to use any Intellectual Property except pursuant to the License
Agreements set forth in Section 4.20(e) of the Disclosure Schedule.

(f)            Except
as set forth in Section 4.20(f) of the Disclosure Schedule, Sellers
exclusively own, free and clear of all Liens and obligations to license, all
owned Intellectual Property (including Trade Secrets), and have a valid,
enforceable and transferable right to use all of the licensed Intellectual
Property, except as set forth on Section 4.20(f) of the Disclosure
Schedule.

(g)           Each
Seller has taken all necessary steps to protect the Intellectual Property which
it owns.  To the Knowledge of each
Seller, all of its Intellectual Property is valid and enforceable and no third
party has challenged the ownership, use, validity or enforceability of any of
the Intellectual Property of such Seller.

(h)           The
conduct of each Seller’s businesses (including the Business) as currently
conducted does not, and to the Knowledge of the Sellers as currently planned to
be conducted will not, infringe upon any Intellectual Property rights of any
third party.

(i)            There
is no Litigation pending to the Knowledge of any Seller, threatened or may be
threatened alleging that any Seller’s activities or the conduct of its
businesses infringes upon, violates, or constitutes the unauthorized use of the
Intellectual Property rights of any third party nor has any third party brought
or threatened any Litigation challenging the ownership, use, validity or
enforceability of any Intellectual Property of any Seller.

 32
 

 

(j)            To
the Knowledge of each Seller, no third party is misappropriating, infringing,
diluting, or violating any Intellectual Property owned by such Seller and no
such claims have been brought against any third party by any Seller.

(k)           The
consummation of the transactions contemplated hereby will not result in the
loss or impairment of any Seller’s right to own or use any of the Intellectual
Property, nor will they require the consent of any Governmental Authority or
third party in respect of any such Intellectual Property.

(l)            Section 4.20(l)(i)
of the Disclosure Schedule lists all Software (other than generally available,
commercial, off-the-shelf Software used internally by any Seller in accordance
with the applicable license agreements and having an acquisition price of less than
$5,000) which is owned, licensed to or by any Seller, leased to or by any
Seller, or otherwise used by any Seller, and identifies which Software is
owned, licensed, leased or otherwise used, as the case may be.  Section 4.20(l)(ii) of the
Disclosure Schedule lists all Software sold, licensed, leased or otherwise
distributed by any Seller to any third party, and identifies which Software is
sold, licensed, leased, or otherwise distributed as the case may be.  The Software set forth in Sections 4.20(l)(i)
and Section 4.20(l)(ii) of the Disclosure Schedule which Sellers
purport to own was either developed (i) by employees of a Seller within the
scope of their employment; or (ii) by independent contractors who have assigned
their rights to a Seller pursuant to enforceable written agreements.

(m)          All
Software owned by any Seller, and all Software licensed from third parties by
any Seller, is free from any significant software defect or programming or
documentation error, operates and runs in a reasonable and efficient business
manner, conforms to the specifications thereof, if applicable, and, with respect
to the Software owned by any Seller, the applications can be compiled from
their associated source code without undue burden if the failure to be able to
do any one of which could reasonably be expected to have a Material Adverse
Effect on any Seller.  Sellers have
furnished Purchaser with all required documentation relating to use,
maintenance and operation of the Software.

(n)           Sellers
have valid registrations for each of the URLs set forth in Section 4.20(a)
of the Disclosure Schedule.  Sellers’ registration
of each of such URLs is free and clear of any liens, claims or encumbrances and
is in full force and effect.  Sellers
have paid all fees required to maintain each registration.  Neither any Seller’s registration nor use of
any of such URLs has been disturbed or placed “on hold” and no claim (oral or
written) has been asserted against any Seller adverse to its rights to such
URLs.

(o)           Each
item of Software is either: (i) owned by a Seller, (ii) currently in the public
domain or otherwise available for use, modification and distribution by each
Seller without a license from or the approval or consent of any third party, or
(iii) licensed or otherwise used by a Seller pursuant to a License Agreement.

4.21         Insurance.  Section 4.21 of the Disclosure
Schedule sets forth a true and complete list of all material insurance policies
and fidelity bonds (including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product liability and
automobile insurance policies and bond and surety arrangements) covering the
assets,

 33
 

 

business, equipment, properties, operations,
employees, officers and directors of each Seller, the name of the insurer, the
policy number, the type of policy and any coverage limits or applicable
deductibles.  As of the date hereof, no
Seller has received any notice of cancellation or amendment of any such policy
or bond or is in default under any such policy or bond.  There is no claim by any Seller pending under
any of such policies or bonds as to which coverage has been questioned, denied
or disputed by the underwriters of such policies or bonds. Except to the extent
adequately accrued on the Seller Financial Statements, no Seller has any
obligation (contingent or otherwise) to pay in connection with any insurance
policies any retroactive premiums, “retro-premiums,” or similar payments.  All premiums due and payable under all such
policies and bonds have been paid and each Seller is otherwise in full
compliance with the terms of such policies and bonds (or other policies and
bonds providing substantially similar insurance coverage), and Sellers shall
maintain in full force and effect all such insurance during the period from the
date hereof through the Closing Date. To the Knowledge of Sellers as of the
date hereof, there is not any threatened termination of or material premium
increase with respect to any of such policies or bonds.  To the Knowledge of Sellers, each such policy
will continue to be enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing.

4.22         Permits.  Sellers have furnished or made available to
Purchaser true and complete copies of all Approvals used in or otherwise
necessary for the conduct of the Business. 
Except as set forth in Schedule 4.22 of the Disclosure
Schedule, each of such Approvals will be duly and validly transferred to
Purchaser in connection with the consummation of the transactions contemplated
herein. Each Seller is, and at all times has been, in compliance in all
material respects with all conditions and requirements imposed by the Approvals
and no Seller has received any notice, or has any reason to believe, that any
appropriate authority intends to cancel or terminate any of the Approvals or
that valid grounds for such cancellation or termination exist. Each Seller owns
or has the right to use the Approvals in accordance with the terms thereof
without any conflict or alleged conflict or infringement with the rights of any
other Person. To the Knowledge of Sellers, each of the Approvals is valid and
in full force and effect.  Except as set
forth in Schedule 4.22 of the Disclosure Schedule, none of the
Approvals will be terminated or adversely affected by the transactions
contemplated hereby.

4.23         Brokers.  Except as disclosed in Section 4.23
of the Disclosure Schedule, no broker, financial advisor, finder or investment
banker or other Person is entitled to any broker’s, financial advisor’s, finder’s
or other fee, commission or expense reimbursement in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of any Seller or any of its Affiliates and, except as disclosed in Section 4.23
of the Disclosure Schedule, none of the Sellers or any of their Affiliates has
incurred, nor will they incur, directly or indirectly, any liability for any
such fees, commission or expenses in connection with the transaction
contemplated by this Agreement.

4.24         Interested Party Transactions.

(a)           Except
as disclosed in Section 4.24 of the Disclosure Schedule, no Seller
is indebted to any director, officer, employee or agent or any Associated
Person (as defined below) of any Seller (except for amounts due as normal
salaries and bonuses and in reimbursement of ordinary expenses), and no such
Person is indebted to any Seller.

 34
 

 

(b)           Except
as disclosed in Section 4.24 of the Disclosure Schedule, all loans
presently on the books of any Seller to present or former directors or
executive officers of any Seller, or their associates, or any members of their
immediate families, have been made in the Ordinary Course of Business and on
the same terms and interest rates as those prevailing for comparable
transactions with other and do not involve more than the normal risk of
repayment or present other unfavorable features.

(c)           Except
as set forth and described in Section 4.24 of the Disclosure
Schedule, no present or former officer, director, employee or member of any
Seller or any Associated Person (as defined below):

(i)            has
any interest in (A) any property, real or personal, tangible or intangible,
used in or pertaining to the business of any Seller except for the normal
rights of a member; (B) any current competitor, customer, supplier or agent of
any Seller or (C) any person which is currently a party to any material
contract or agreement with any Seller;

(ii)           has
an agreement, understanding, contract, commitment or pending transaction
relating to the purchase, sale or lease of real or personal property, goods,
materials, supplies or services, whether or not in the Ordinary Course of
Business, with any Seller;

(iii)          has
received from any Seller any commitment, whether written or oral, to lend any
funds to any such person;

(iv)          is
owed any amounts by any Seller except for deposits taken in the Ordinary Course
of Business and amounts due for normal compensation or reimbursement of
expenses incurred in furtherance of the business of such person’s employer and
reimbursable according to a policy of such Seller or such Associated Person, as
appropriate, as in effect immediately prior to the date hereof ; and

(v)           is
a party to any transaction or relationship with any Seller.

(d)           The
consummation of the transactions contemplated hereby will not (either alone, or
upon the occurrence of any act or event, the lapse of time, or the giving of
notice and failure to cure) result in any payment (severance or other) or
provision of a benefit becoming due from any Seller or any successor or assign
thereof to any director, officer or employee of any Seller, other than payments
and benefits due under the contracts and agreements set forth in Section 4.24
the Disclosure Schedule.

(e)           “Associated
Person” means (i) any holder of 10% or more of the outstanding membership
interests of any Seller, (ii) any associate (as “associate” is defined at Rule
14a-1(a) under the Exchange Act or relative (“relative” for purposes of this
Section 4.24 is defined as any person having a family relationship with the
subject person, as family relationship is defined in the Instruction to
Paragraph 401(d) of Regulation S-K of a present or former director or executive
officer of any Seller, (iii) any entity controlled, directly, or indirectly,
individually or in the aggregate, by any present or former director or
executive officer of any

 35
 

 

Seller or any relative or associate of any of such persons and (iv) any
entity 25% or more or the equity interests of which are owned individually or
in the aggregate by any present or former director or executive officer of any
Seller or any relative or associate of any of such persons.

4.25         Customers.  Listed in Section 4.25 of the
Disclosure Schedule are the names and addresses of the ten most significant
customers (by revenue) of the Business for each of the year ended December 31,
2005 and the six month period ended June 30, 2006 and the amount for which each
such customer was invoiced during such period. 
Except as set forth in Section 4.25 of the Disclosure
Schedule, no Seller has within the past twelve (12) months received any notice
or has any reason to believe that any significant customer of any Seller has
ceased or will cease, to use or resell the products or goods of any Seller or
has substantially reduced, or will substantially reduce, the use or resale of such
products or goods at any time.

4.26         Suppliers.  Listed in Section 4.26 of the
Disclosure Schedule are the names and addresses of the ten most significant
suppliers (by gross payments made) of the Business for each of the year ended
December 31, 2005 and the six month period ended June 30, 2006 and the amount
of payments made to such supplier during such period.  Except as set forth in Section 4.26
of the Disclosure Schedule, there has not, to the Knowledge of any Seller, been
any material change in any Seller’s business relationship with any of such
suppliers and no Seller has since January 1, 2005 received notice from any of
such suppliers that said supplier intends to terminate or materially change its
business relationship with any Seller. 
Except as set forth in Section 4.26 of the Disclosure
Schedule, no supplier to any Seller is the sole source for any of the products
or materials supplied to such Seller by such supplier.

4.27         Products.  Each of the products produced or sold by any
Seller (“Products”) (a) is, and at all times has been, in compliance in
all material respects with all applicable Laws and (b) is, and at all relevant
times has been, fit for the ordinary purposes for which it is intended to be
used and conforms to any promises or affirmations of fact made on the container
or label for such Product or in connection with its sale.  To the Knowledge of Sellers, there is no
design defect with respect to any Products and each of such Products contains
adequate warnings, presented in a reasonably prominent manner, in accordance
with applicable Laws and current industry practice with respect to its contents
and use.  No Seller has Products placed
with its customers under an understanding permitting their return to any Seller
other than pursuant to a breach of warranty. 
Copies of all correspondence relating to Products received or sent by or
on behalf of any Seller during the past five (5) years, from or to any
Governmental Authority have been previously delivered to Purchaser.

4.28         FDA Regulation.  Except as described in Section 4.28 of
the Disclosure Schedule, each Seller possesses and has performed its
obligations with respect to all Approvals required by the United States Food
and Drug Administration (the “FDA”) and any other federal, state or foreign
agencies or bodies engaged in the regulation of the Business.  No Seller has received notification of any
proceeding relating to revocation or modification of any such Approval or has
any reason to believe that any such Approval will not be renewed or that it is
not in compliance with the Federal Food, Drug and Cosmetic Act, related
Regulations and guidance documents issued by the FDA or the Laws and guidance
documents issued by similar Governmental Authorities.

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4.29         Purchase For Investment.  Each Seller (and the Owners beneficially) are
acquiring the Parent Shares for investment for their own account and not with a
view to the distribution or public offering thereof within the meaning of the
Securities Act.  Each Seller and the
Owners understand that the Parent Shares have not been registered under the
Securities Act and may not be sold or transferred without such registration or
an exemption therefrom.  Each Seller and
the Owners are sufficiently experienced in financial and business matters to be
capable of evaluating the risk of investment in the Parent Shares and to make
an informed decision relating thereto. 
Each Seller and the Owners have the financial capability for making the
investment in the Parent Shares, can afford a complete loss of such investment,
and such investment is a suitable one for Sellers and the Owners.  Each Seller and each Owner is an “Accredited
Investor” as defined in Regulation D under the Securities Act.  Prior to the execution and delivery of this
Agreement, each Seller and each Owner has had the opportunity to ask questions
of and receive answers from representatives of Parent.

4.30         Inventory.  The Inventory consists only of items of a
quality and quantity usable or saleable by the Business in the ordinary course
of business, and within a reasonable period of time, as first quality goods.
Subject to amounts reserved therefor on the Seller Financial Statements, all
Inventory is valued on the Seller Financial Statements at the lower of cost,
determined by the first in first-out method of accounting, or market value, in
accordance with GAAP.  The Seller has
good and marketable title to the Inventory, free and clear of all Liens, except
as set forth in Section 4.30 of the Disclosure Schedule. The
Inventory does not consist of, in any material amount, items that are obsolete
or damaged. The Inventory does not include any items held on consignment. The
Inventory is on the date hereof, and will be on the Closing Date, at normal and
adequate levels for the continuation of the Business in the ordinary course of
business.  To the Knowledge of the
Sellers, the Sellers are not under any obligation or liability with respect to
accepting returns of items of Inventory or merchandise in the possession of its
customers other than in the ordinary course of business consistent with past
practice.

4.31         Disclosure of Material Information.  The Sellers have not failed to disclose to
Purchaser any facts which are material to the business, results of operations,
assets, liabilities, condition (financial or other) of any Seller.  No representation or warranty contained in
this Agreement, and no statement contained in the Disclosure Schedule, the
Confidential Information Memorandum dated May 2006 (including any such updated
projections subsequently delivered by Sellers to Purchaser prior to the date
hereof), or in any certificate, list or other writing furnished to Purchaser
pursuant to any provision of this Agreement or in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances in which
they were made, not misleading.  The
projections of Seller’s combined future operations included within the
aforementioned Confidential Information Memorandum (as updated prior to the
date hereof and provided to Purchaser by any Seller), were prepared by the
Sellers in good faith based on the best Knowledge of the Sellers and the
Owners.  The basis on which such
projections were made were reasonable when made, and since the date when made
there have been no occurrences, developments or facts which would cause any
Seller or any Owner to believe either that such projections are not reasonable or
that the assumptions on which they are based are incorrect.

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ARTICLE V

REPRESENTATIONS
AND WARRANTIES OF PURCHASER

As
an inducement to Sellers and Owners to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser and Parent represent
and warrant, jointly and severally, to Sellers and Owners as follows:

5.1           Organization and Qualification.  Each of Purchaser and Parent is a corporation
duly formed, validly existing and in good standing under the laws of the State
of Delaware.  Each of Purchaser and
Parent has all the requisite corporate power and authority, and is in
possession of all Approvals necessary to carry on its businesses as they are
now being conducted, except where the failure to be so qualified, existing and
in good standing or to have such power, authority and Approvals could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent.

5.2           Capitalization.  Section 5.2 of the Purchaser
Disclosure Schedule sets forth as of the date hereof: (a) the authorized
capital stock of Parent; (b) the number of shares of capital stock of Parent
issued and outstanding; (c) the number of shares of capital stock issuable
pursuant to Parent’s equity incentive plans; and (d) the number of shares of
capital stock issuable and reserved for issuance pursuant to securities
exercisable for, or convertible into or exchangeable for any shares of capital
stock of Parent.  All of the issued and
outstanding shares of Parent’s capital stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of statutory or
contractual preemptive rights.  Parent is
the sole owner of all of the issued and outstanding capital stock of Purchaser.  Except as set forth on Section 5.2 of
the Purchaser Disclosure Schedule, there are no outstanding warrants, options,
convertible securities or other rights, agreements, or arrangements of any
character under which Parent or any of its Subsidiaries (including Purchaser)
is or may be obligated to issue any equity securities of any kind.

5.3           Authority; Enforceability.  Each of Purchaser and Parent has all
requisite corporate power and authority to execute and deliver this Agreement,
the Ancillary Agreements to which it is a party and each instrument required
hereby to be executed and delivered by it at the Closing, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.  The
execution and delivery by each of Purchaser and Parent of this Agreement, each
of the Ancillary Agreements to which it is a party and each instrument required
hereby to be executed and delivered by it at the Closing and the performance of
its obligations hereunder and thereunder have been duly and validly authorized
by their respective Boards of Directors and, to the extent required under the
Delaware General Corporation Law, by Parent as the sole stockholder of
Purchaser.  The Parent Shares issuable
pursuant to Section 3.2 hereof have been duly authorized and, when issued in
accordance with the terms hereof, will be validly issued, fully-paid and
non-assessable and will be free and clear of all Liens.  No other proceedings on the part of Purchaser
or Parent are necessary to authorize the consummation of the transactions
contemplated hereby.  This Agreement and
each of the Ancillary Agreements executed and delivered by Purchaser or Parent
at the Closing have been duly executed and delivered by Purchaser and Parent,
as applicable, and, assuming due authorization, execution and delivery hereof
by each Seller and each Owner, constitutes a legal,

 38
 

 

valid and binding obligation of such
Purchaser and Parent, enforceable against it in accordance with its terms, in
each case except that the enforcement thereof may be limited by (A) bankruptcy,
insolvency, reorganization, moratorium or other similar law now or hereafter in
effect relating to creditors’ rights generally and (B) general principles of
equity (regardless of whether enforceability is considered in a proceeding in equity
or at law).

5.4           No Conflict; Required Filings and Consents.

(a)           Except as set forth in Section
5.4 of the Purchaser Disclosure Schedule, the execution and delivery by
each of Purchaser and Parent of this Agreement, the Ancillary Agreements to
which they are a party and any instrument required by this Agreement to be
executed and delivered by either of them do not, the performance by each of
Purchaser and Parent of this Agreement and each of the Ancillary Agreements
executed and delivered by them will not, and the consummation of the
transactions contemplated hereby will not, (i) conflict with or violate their
respective certificates of incorporation or by-laws, (ii) conflict with or
violate any Law or Order in each case applicable to Purchaser or Parent, or
(iii) result in any breach or violation of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair Purchaser’s or Parent’s rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any of
the properties or assets of Purchaser or Parent pursuant to, any note, bond,
mortgage, indenture, Contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which any Purchaser or Parent is a party or
by which Purchaser or Parent or any of their respective properties are bound or
affected.

(b)           Except as set forth in Section
5.4 of the Purchaser Disclosure Schedule, the execution and delivery by
each of Purchaser and Parent of this Agreement and each of the Ancillary
Agreements to which they are a party or any instrument required by this
Agreement to be executed and delivered by them at the Closing do not, and the
performance by each of Purchaser and Parent of this Agreement, the Ancillary
Agreements to which they are a party and any instrument required by this
Agreement to be executed and delivered by them at the Closing will not, require
Purchaser or Parent to obtain any Approval of any Person or Approval of,
observe any waiting period imposed by, or require any filing with or
notification to, any Governmental Authority, domestic or foreign, except where
the failure to obtain such Approvals, or to make such filings or notifications,
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent.

5.5           Parent Reporting.  Parent
has timely filed all forms, reports and documents required to be filed by
Parent with the SEC since January 1, 2006, including, without limitation, all
exhibits required to be filed therewith, and has made available to Sellers or
their counsel true, complete and correct copies of all of the same so filed
(including any forms, reports and documents filed after the date hereof and
prior to the Closing, the “Parent SEC Reports”), other than the
unredacted version of documents for which confidential treatment has been
granted by the SEC or for which such treatment has been applied for and is
pending.  The Parent SEC Reports: (i) at
the time filed complied (or will comply when filed, as the case may be) in all
material respects with the applicable requirements of the Securities Act and/or
the Exchange Act; and (ii) did not at the time they were filed (or, if later
filed, amended or superseded, then on the date of such later filing) contain
any untrue statement of a material fact or omit to state a material

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fact required to be stated therein or necessary in order to make the
statements contained therein, in the light of the circumstances under which
they were made, not misleading.  To the
Knowledge of Parent and Purchaser, Parent is in compliance with all applicable
(i) provisions of the Sarbanes-Oxley Act of 2002, as amended, and (ii) listing
and maintenance requirements of the American Stock Exchange.

5.6           Parent Financial Statements.  Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the Parent
SEC Reports, complied or will comply, as the case may be, as to form in all
material respects with the applicable published rules and regulations of the
SEC with respect thereto, was or will be prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved except as may
otherwise be indicated in the notes thereto or, in the case of unaudited
interim financial statements, as permitted by Form 10-Q promulgated by the SEC,
and fairly presented or will fairly present, as the case may be, in all material
respects, the consolidated financial position of Parent and its Subsidiary as
at the respective dates and the consolidated results of operations and cash
flows for the periods therein indicated, except, in the case of the unaudited
interim financial statements, for the absence of footnotes and normal year-end
adjustments which were not and will not be material in amount.  The appropriate officers of Parent have made
the certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act
of 2002 and the Regulations of the SEC promulgated thereunder with respect to
the Parent SEC Reports.

5.7           Compliance.  Each of Purchaser and Parent is in compliance
with, and is not in default or violation of, (i) its Certificate of
Incorporation and By-laws, or (ii) any Law or Order by which any of its assets
or properties are bound or affected and where such noncompliance, default or
violation would not have a Material Adverse Effect on Purchaser and Parent
taken as a whole.

5.8           Absence of Litigation.  There is no Litigation or investigation
pending or, to the Knowledge of Parent, threatened against or otherwise
adversely affecting Purchaser or Parent or any of their respective properties,
assets or rights, before or subject to any Court or Governmental Authority, nor
does there exist any reasonable basis for any such Litigation.  Neither Parent nor Purchaser is subject to
any outstanding Litigation or Order which, individually or in the aggregate,
would prevent, hinder or delay Parent or Purchaser from consummating the
transactions contemplated by this Agreement. 
There is no Litigation pending or, to the Knowledge of Parent nor
Purchaser, threatened that might call into question the validity of this
Agreement or any action taken or to be taken pursuant hereto, nor does there
exist any reasonable basis for any such Litigation.

5.9           Certain Business Practices.  As of the date hereof, neither Parent or
Purchaser nor any director, officer, employee or agent of Parent or Purchaser
has (a) used any funds for unlawful contributions, gifts, entertainment or
other unlawful payments relating to political activity, (b) made any unlawful
payment to any foreign or domestic government official or employee or to any
foreign or domestic political party or campaign or violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended, or (c) made any other
unlawful payment.

5.10         Brokers.  Except as disclosed in Section 5.10
of the Purchaser Disclosure Schedule, no broker, financial advisor, finder or
investment banker or other Person is entitled to

 40
 

 

any broker’s, financial advisor’s, finder’s
or other fee, commission or expense reimbursement in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Purchaser or any of their Affiliates and, except as
disclosed in Section 5.10 of the Purchaser Disclosure Schedule,
none of Parent or Purchaser or any of their Affiliates has incurred, nor will
they incur, directly or indirectly, any liability for any such fees, commission
or expenses in connection with the transaction contemplated by this Agreement.

ARTICLE
VI

COVENANTS

6.1           Performance.  Subject to the terms and conditions provided
in this Agreement, each of the parties to this Agreement shall use its
respective best efforts in good faith to take or cause to be taken as promptly
as practicable all reasonable actions that are within its power to cause to be
performed and fulfilled those of the conditions precedent to its obligations to
consummate the transactions contemplated by this Agreement that are dependent
upon its actions, including obtaining all necessary approvals, to the end that
the transactions contemplated hereby will be fully and timely consummated.

6.2           Regulatory and Other Authorizations; Notices and
Consents.

(a)           Each
Seller and each Owner will use their best efforts to obtain all authorizations,
consents, orders and approvals of all Governmental Authorities and officials
that may be or become necessary for its execution and delivery of, and the
performance of its obligations pursuant to, this Agreement and the other
Documents and will cooperate fully with Purchaser in promptly seeking to obtain
all such authorizations, consents, orders and approvals.

(b)           Each
Seller shall promptly give such notices to third parties and use its best
efforts to obtain such third party consents and estoppel certificates as
Purchaser may in its reasonable discretion deem necessary or desirable in
connection with the consummation of the transactions contemplated by this
Agreement and the other Documents, including, without limitation, all Consents
described in Section 4.6(a) of the Disclosure Schedule and all
consents required to transfer to Purchaser all of the Licensed Intellectual
property.  Purchaser shall cooperate and
use its commercially reasonable efforts to assist Sellers in giving such
notices and obtaining such consents and estoppel certificates; provided,
however, that Purchaser shall have no obligation to give any guarantee
or other consideration of any nature in connection with any such notice,
consent or estoppel certificate or to consent to any change in the terms of any
Assigned Agreement which Purchaser in its reasonable discretion may deem
adverse to the interests of Purchaser or the Business.

(c)           Anything
in this Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement to assign any Purchased Asset or any claim or right or
any benefit arising thereunder or resulting therefrom if an attempted
assignment thereof, without the consent of a third party thereto, would
constitute a breach or other contravention thereof or in any way adversely
affect the rights of Purchaser or any Seller thereunder.  Each Seller will use its best efforts to
obtain the consent of the other parties to any such Purchased Asset or any
claim or right or any benefit arising thereunder for the assignment thereof to

 41

 

Purchaser as Purchaser may reasonably
request.  If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
adversely affect the rights of any Seller thereunder so that Purchaser would
not in fact receive all such rights, each Seller and Purchaser will cooperate
in a mutually agreeable arrangement under which Purchaser would obtain the
benefits and assume the obligations thereunder in accordance with this
Agreement, including subcontracting, sub-licensing, or sub-leasing to
Purchaser, or under which each Seller would enforce for the benefit of
Purchaser, with Purchaser assuming such Seller’s obligations, any and all
rights of each Seller against a third party thereto.  Each Seller will promptly pay to Purchaser
when received all monies received by such Seller under any Purchased Asset or
any claim or right or any benefit arising thereunder, except to the extent the
same represents an Excluded Asset.  In
such event, each Seller and Purchaser shall, to the extent the benefits and
obligations of any Purchased Asset have not been provided to Purchaser by
alternative arrangements satisfactory to Purchaser, negotiate in good faith a
reduction in the Purchase Price.

6.3           Conduct of the Business Prior to the Closing.

(a)           Each
Seller covenants and agrees that, between the date hereof and the Closing,
except as expressly required or permitted by this Agreement or unless Purchaser
shall otherwise agree in writing, each Seller shall conduct the Business only
in the Ordinary Course of Business consistent with past practice. By way of
elaboration, and without in any way limiting, the preceding sentence, each
Seller shall:  (i) preserve intact the
business organization of such Seller and the business organization, properties,
assets and rights of the Business; (ii) operate the Business according to plans
and budgets provided to Purchaser; (iii) keep available the services of the
present officers, employees and consultants of such Seller; (iv) maintain in
effect all Assigned Agreements and to preserve the present relationships of
such Seller with advertisers, sponsors, customers, licensees, suppliers and
other Persons with which such Seller has business relations; (v) maintain, with
financially sound and reputable insurers, insurance for the Purchased Assets
and the Business against such casualties and contingencies and of such types
and in such amounts as is customary for companies similarly situated, (vi)
exercise any rights of renewal pursuant to the terms of any of lease which by
its terms would otherwise expire; and (vii) not engage in any practice, take
any action, fail to take any action or enter into any transaction which could
cause any representation or warranty of any Seller to be untrue or result in a
breach of any covenant made by Seller in this Agreement.

(b)           Each
Seller will pay and discharge the Excluded Liabilities as and when the same
become due and payable.

(c)           Each Seller shall cause to be prepared and
timely filed, at its sole expense, all of its required Tax Returns for all
periods up to and including the Closing Date. 
Each Seller shall be responsible for the payment of all Taxes due or
assessed which related to the operations of the Business for all periods up to
and including the Closing Date.

6.4           Access.

(a)           From
the date hereof until the Closing, upon reasonable notice, each Seller shall
and shall cause each of such Seller’s officers, managers, employees, agents,
accountants and counsel to: (i) afford the officers, employees and authorized
agents, accountants, counsel,

 42
 

 

financing sources and representatives of
Purchaser reasonable access, during normal business hours, to the offices,
properties, plants, other facilities, books and records of each Seller and to
those officers, directors, employees, agents, accountants and counsel of each
Seller who have any knowledge relating to any Seller or the Business and (ii)
furnish to the officers, employees and authorized agents, accountants, counsel,
financing sources and representatives of Purchaser such additional financial and
operating data and other information regarding the Business and the assets,
properties and goodwill of each Seller as Purchaser may from time to time
reasonably request.

(b)           In
order to facilitate the resolution of any claims made by or against or incurred
by Purchaser after the Closing or for any other reasonable purpose, for a
period of seven years following the Closing, each Seller shall (i) retain all
books and records of such Seller which are not transferred to Purchaser
pursuant to this Agreement and which relate to such Seller, its operations or
the Business for periods prior to the Closing and which shall not otherwise
have been delivered to Purchaser; and (ii) upon reasonable notice, afford the
officers, employees and authorized agents and representatives of Purchaser,
reasonable access (including the right to make photocopies at the expense of
Purchaser), during normal business hours, to such books and records.

(c)           Purchaser
shall keep all information obtained pursuant to Section 6.4(a) confidential
in accordance with the terms and conditions of the Confidentiality Agreement.

6.5           Notification.

(a)           From
the date hereof until the Closing, each Seller and each Owner shall promptly
notify Purchaser in writing of the occurrence, or pending or (to the Knowledge
of any Seller or Owner) threatened occurrence, of (a) any event that would
constitute a breach or violation of this Agreement by any Seller or any Owner
or that could reasonably be anticipated to cause any representation or warranty
made by any Seller or any Owner in this Agreement to be false or misleading in
any material respect (including without limitation, any event or circumstance
which would have been required to be disclosed on the Disclosure Schedule if
such event or circumstance occurred or existed on or prior to the date of this
Agreement), and (b) all other material developments affecting the assets,
liabilities, business, financial condition, operations, results of operations,
customer or supplier relations, employee relations, projections or prospects of
any Seller or the Business.  Any such
notification shall not limit or alter any of the representations, warranties or
covenants of the parties set forth in this Agreement nor any rights or remedies
a party may have with respect to a breach of any representation, warranty or
covenant.

(b)           From
the date hereof until the Closing, Parent and Purchaser shall promptly notify
Sellers in writing of the occurrence, or pending or (to the Knowledge of Parent
or Purchaser) threatened occurrence, of (a) any event that would constitute a
breach or violation of this Agreement by Parent or Purchaser or that could
reasonably be anticipated to cause any representation or warranty made by
Parent or Purchaser in this Agreement to be false or misleading in any material
respect (including without limitation, any event or circumstance which would
have been required to be disclosed on the Disclosure Schedule if such event or
circumstance occurred or existed on or prior to the date of this Agreement),
and (b) all other

 43
 

 

material developments affecting the assets,
liabilities, business, financial condition, operations, results of operations,
customer or supplier relations, employee relations, projections or prospects of
Parent or Purchaser.  Any such
notification shall not limit or alter any of the representations, warranties or
covenants of the parties set forth in this Agreement nor any rights or remedies
a party may have with respect to a breach of any representation, warranty or
covenant.

6.6           Standstill.  From the date hereof until the
earlier of the Closing or the termination of this Agreement in accordance with
its terms, the Sellers and the Owners shall not, nor shall they permit any of
their Affiliates to, nor shall they authorize or permit any of their, officers,
directors, employees, representatives or agents (collectively, the “Seller
Representatives”), directly or indirectly, to (a) solicit, facilitate,
initiate, entertain, encourage or take any action to solicit, facilitate,
initiate, entertain or encourage, any inquiries or communications or the making
of any proposal or offer that constitutes or may constitute an Acquisition
Proposal (as defined herein), or (b) participate or engage in any discussions
or negotiations with, or provide any information to or take any other action
with the intent to facilitate the efforts of, any Person concerning any
possible Acquisition Proposal or any inquiry or communication which might
reasonably be expected to result in an Acquisition Proposal.  For purposes of this Agreement, the term “Acquisition
Proposal” shall mean any inquiry, proposal or offer from any Person (other
than Purchaser or any of its Affiliates) relating to any merger, consolidation,
recapitalization, liquidation or other direct or indirect business combination
or reorganization involving any Seller, the sale, transfer, lease, exchange,
license or other disposition of any of the Purchased Assets, other than sales
of Inventory in the Ordinary Course of Business, or any other transaction, the
consummation of which could reasonably be expected to impede, interfere with,
prevent or materially delay the consummation of the transactions contemplated
by this Agreement or which would reasonably be expected to diminish
significantly the benefits to Purchaser or Parent of the transactions
contemplated hereby.  The Sellers and the
Owners shall immediately cease and cause to be terminated, and shall cause all
Seller Representatives to immediately cease and cause to be terminated, all
existing discussions or negotiations with any Persons conducted heretofore with
respect to, or that could reasonably be expected to lead to, an Acquisition
Proposal.  The Sellers shall promptly
notify each Seller Representative of its obligations under this
Section 6.6.  Without limiting the foregoing,
it is agreed that any violation of the restrictions set forth above by any
Seller Representative or any Affiliate of any Seller or any Owner, whether or
not such Person is purporting to act on behalf of any Seller or any Owner,
shall be deemed to be a breach of this Section 6.6 by each Seller.

6.7           Bulk Transfer Laws.  Prior to Closing, each Seller shall comply
with the requirements of all applicable bulk sale, bulk transfer or similar
laws in all jurisdictions.

6.8           Change of Names.  Immediately following the Closing, Sellers
shall make amendments to the Seller Organizational Documents and make all
filings and take all other steps required in any applicable jurisdiction in
order to change the name of each Seller to a name which does not include the words
“Alan,” “James,” “Group,” “AJG” or any combination or derivation of any of the
foregoing.  Sellers shall deliver
evidence of such filings to Purchaser within five business days following the
Closing.  In addition Sellers shall
cooperate as reasonably requested by Purchaser in connection with Purchaser’s
qualification to conduct business as a foreign corporation in any of such
jurisdictions.

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6.9           Consents.  As soon as reasonably practicable following
the Closing, and in any event not later than December 31, 2006, Sellers shall
obtain and deliver to Purchaser the Consents listed on Schedule 4.6(a) of the
Disclosure Schedule with respect to Assigned Agreements in substantially the
form attached as Exhibit F
hereto.

ARTICLE
VII

EMPLOYEE
MATTERS

7.1           Offer of Employment.  As of the Closing Date, Purchaser may offer
employment to any or all of the then current employees of any Seller.

7.2           Transfer and Assumption of the Employee Plans;
Contributions for Periods Prior to Closing.  On
the Closing Date, Purchaser shall adopt the Employee Plans, if any, listed on Schedule 7.2
(together, the “Adopted Employee Plans”) and the related trusts and
contracts, and Seller shall cause all right, title, interest, duties and
authorities of Sellers in, to and under the Adopted Employee Plans and the
related trusts to be transferred to Purchaser in accordance with applicable
Law.  At the Closing, the parties shall
execute and deliver such documents and instruments as may be required to effect
such an assumption and transfer and to reflect the parties’ intent that the
Adopted Employee Plans not be deemed to be terminated, or partially terminated,
as a result of this Agreement or the transactions contemplated herein and that
all assets of the Adopted Employee Plans, as the same exist immediately prior
to the Closing Date, shall be transferred with the Adopted Employee Plans as
provided in this Section 7.2.  Prior
to the Closing Date, Sellers shall cause each employer under the Adopted Employee
Plans to make a pro rata contribution to the Adopted Employee Plans for the
portion of the current plan year which will be completed as of the Closing
Date.

ARTICLE
VIII

CONDITIONS
PRECEDENT TO CLOSING; TERMINATION

8.1           Conditions Precedent to Obligations of Parent and
Purchaser.  The obligation
of Parent and Purchaser to consummate the transactions described in this
Agreement and any and all liability of Purchaser to Sellers or Owners shall be
subject to the fulfillment on or before the Closing of the following conditions
precedent, each of which may be waived by Purchaser in its sole discretion:

(a)           Representations,
Warranties and Covenants.  The
representations and warranties of Sellers and Owners contained in this Agreement shall have been true and
correct when made and shall be true and correct in all material respects as of
the Closing (other than such representations and warranties that are qualified
by materiality, which shall be true and correct as of the Closing), with the
same force and effect as if made as of the Closing Date, other than such
representations and warranties that are expressly made as of another date,
which shall have been true and correct as of that date, and the covenants and
agreements contained in this Agreement to be complied with by any Seller or any Owner on or before the
Closing shall have been complied with, and Purchaser shall have received a
certificate from each Seller to such effect signed by a duly authorized officer
thereof.

 45
 

 

(b)           No
Adverse Change.  No events or
conditions shall have occurred which individually or in the aggregate, have
had, or may reasonably be anticipated by Purchaser to give rise to, any
Material Adverse Effect on Sellers, taken as a whole, or the Business.

(c)           Governmental
Approvals.  All approvals from
Governmental Authorities required for the lawful consummation of the
transactions contemplated by this Agreement and the other Documents shall have
been obtained.

(d)           Opinion
of Counsel.  Purchaser shall have
received from Broad and Cassel, counsel to Sellers and the Owners, an opinion
dated the Closing Date, in substantially the form attached hereto as Exhibit C hereto.

(e)           No
Actions, Suits or Proceedings.  No
Order of any Court or Governmental Authority shall have been issued
restraining, prohibiting, restricting or delaying, the consummation of the
transactions contemplated by this Agreement and the other Documents.  No Litigation shall be pending or, to the
Knowledge of the parties to this Agreement, threatened, before any Court or
Governmental Authority (i) to restrain, prohibit, restrict or delay, or to
obtain damages or a discovery order in respect of this Agreement or the
consummation of the transactions contemplated hereby, or (ii) which has had or
may reasonably be expected to have a Material Adverse Effect on Sellers, taken
as a whole, or the Business.  No
insolvency proceeding of any character including, without limitation,
bankruptcy, receivership, reorganization, dissolution or arrangement with
creditors, voluntary or involuntary, affecting any Seller shall be pending, and
no Seller shall have taken any action in contemplation of, or which would
constitute the basis for, the institution of any such proceedings.

(f)            Delivery
of Purchased Assets.  Sellers shall have delivered possession of
the Purchased Assets to Purchaser, and shall have made all intangible Purchased
Assets available to Purchaser.

(g)           Closing
Documents.  Each Seller and each
Owner shall have delivered to Purchaser the resolutions, certificates,
documents and instruments set forth below:

(i)            each
of the Ancillary Agreements to which it is a party;

(ii)           a
copy of the resolutions duly and validly adopted by the manager and members of
each Seller certified by such Seller’s Secretary, authorizing and approving the execution
and delivery and performance of this Agreement, the Ancillary Agreements and
the other Documents and the transactions contemplated hereby and thereby and
the acts of the officers and employees of Seller in carrying out the terms and
provisions hereof;

(iii)          all
of the books, data, documents, instruments and other records relating to the
Business of each Seller described in Section 2.1(f) that have not been
provided prior to the Closing Date;

(iv)          certificates
issued by the Secretary of State or other similar appropriate governmental
department, as of a reasonable date prior to the Closing, as to the good
standing of each Seller in its jurisdiction of incorporation and in

 46
 

 

each other jurisdiction in which it is qualified to do business, and,
as to its jurisdiction of incorporation, certifying its Articles of
Incorporation;

(v)           a
certificate of the Secretary or an Assistant Secretary of each Seller
certifying the names and signatures of the officers of Seller authorized to
sign this Agreement and the Documents;

(vi)          the
certificate of each Seller referred to in Section 8.1(a); and

(vii)         such
other documents and instruments as Purchaser or its counsel may reasonably
request.

(h)           Non-Competition Agreements. 
Each Seller and each Owner shall have delivered to Purchaser an executed
non-competition and non-solicitation agreement in the respective forms attached
hereto as Exhibit D-1 and Exhibit D-2 (the “Non-Competition
Agreements”) which agreements shall not have been anticipatorily breached
or repudiated by such parties.

(i)            Employment Agreements. 
The Owners shall have delivered to Purchaser executed employment
agreements in the respective forms attached hereto as Exhibit E-1
and Exhibit E-2 (the “Employment
Agreements”) which agreements shall not have been anticipatorily breached
or repudiated by such employees.

(j)            Consents.  The Consents listed on Schedule 8.1(j)
hereto with respect to Assigned Agreements shall have been obtained in
substantially the form attached as Exhibit F
hereto.

(k)           Release
of Liens.  The Sellers shall have
caused all obligations under the Wachovia Loan (as defined in Section 4.9 of
the Disclosure Schedule) to have been paid in full at the Closing and all
corresponding liens on the Purchased Assets released to the satisfaction of
Purchaser.

8.2           Conditions Precedent to the Obligations of Sellers and Owners.  The obligation of Sellers and Owners to consummate the
transactions described in this Agreement and any and all liability of Sellers and Owners to Purchaser shall be
subject to the fulfillment on or before the Closing Date of the following
conditions precedent, each of which may be waived by Sellers in their sole discretion:

(a)           Representations,
Warranties and Covenants.  The
representations and warranties of Purchaser and Parent contained in this
Agreement shall have been true and correct when made and shall be true and
correct in all material respects as of the Closing (other than such
representations and warranties that are qualified by materiality, which shall
be true and correct as of the Closing), with the same force and effect as if made
as of the Closing Date, other than such representations and warranties that are
expressly made as of another date, which shall be true and correct as of that
date, and the covenants and agreements contained in this Agreement to be
complied with by Purchaser or Parent on or before the Closing shall have been
complied with, and Sellers shall have received a certificate from Purchaser to
such effect signed by a duly authorized officer thereof.

 47
 

 

(b)           Governmental
Approvals.  All approvals from
Governmental Authorities required for the lawful consummation of the
transactions contemplated by this Agreement and the other Documents shall have
been obtained.

(c)           Opinion
of Counsel.  Sellers shall have
received from Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel to
Parent and Purchaser, an opinion dated the Closing Date, in substantially the
form attached hereto as Exhibit G
hereto.

(d)           No
Actions, Suits or Proceedings.  No
Order of any Court or Governmental Authority shall have been issued restraining,
prohibiting, restricting or delaying, the consummation of the transactions
contemplated by this Agreement and the other Documents.  No Litigation shall be pending or, to the
Knowledge of the parties to this Agreement, threatened, before any Court or
Governmental Authority (i) to restrain, prohibit, restrict or delay, or to
obtain damages or a discovery order in respect of this Agreement or the
consummation of the transactions contemplated hereby, or (ii) which has had or
may reasonably be expected to have a Material Adverse Effect on Parent and
Purchaser, taken as a whole.  No
insolvency proceeding of any character including without limitation,
bankruptcy, receivership, reorganization, dissolution or arrangement with
creditors, voluntary or involuntary, affecting Purchaser or Parent shall be
pending, and neither Purchaser nor Parent shall have taken any action in
contemplation of, or which would constitute the basis for, the institution of
any such proceedings.

(e)           Closing
Payment.  Purchaser shall have delivered,
or caused to be delivered, the Closing Payment to be delivered at the Closing
as provided in Section 3.2.

(f)            Closing
Documents.  Parent and Purchaser
shall have delivered to Sellers the resolutions, certificates, documents and
instruments set forth below:

(i)            each
of the Ancillary Agreements to which it is a party;

(ii)           a
copy of the resolutions duly and validly adopted by the Board of Directors of
Parent and the Board of Directors and stockholder of Purchaser, certified by
their respective Secretary, authorizing and approving the execution and
delivery and performance of this Agreement, the Ancillary Agreements and the
other Documents and the transactions contemplated hereby and thereby and the
acts of the officers and employees of Purchaser and Parent in carrying out the
terms and provisions hereof;

(iii)          certificates
issued by the Secretary of State or other similar appropriate governmental
department, as of a reasonable date prior to the Closing, as to the good
standing of each of Purchaser and Parent in its jurisdiction of incorporation
and in each other jurisdiction in which it is qualified to do business, and, as
to its jurisdiction of incorporation, certifying its Certificate of Incorporation;

(iv)          a
certificate of the Secretary or an Assistant Secretary of each of Purchaser and
Parent certifying the names and signatures of the officers of Purchaser and
Parent authorized to sign this Agreement and the Documents;

 48
 

 

(v)           the
certificate of Purchaser and Parent referred to in Section 8.2(a); and

(vi)          such
other documents and instruments as Sellers or their counsel may reasonably
request.

(g)           Employment
Agreements.  Parent shall have
delivered to each Owner his executed Employment Agreement, which agreements
shall not have been anticipatorily breached or repudiated by Parent or
Purchaser.

(h)           Financing.  Parent shall have consummated the financing
described on Schedule 8.2(h) hereto.

8.3           Termination.

(a)           Right
to Terminate.  This Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any
time prior to the Closing as follows:

(i)            by
mutual written consent duly authorized by the parties hereto;

(ii)           by
either Purchaser or Sellers if the Closing shall not have occurred on or before
August 31, 2006, provided,
however, that the right to terminate this Agreement under this
Section 8.3(a)(ii) shall not be available to any party whose failure (or
whose Affiliate’s failure) to fulfill any material obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
have occurred on or before such date;

(iii)          by
either Purchaser or Sellers, if a Court or Governmental Authority shall have
issued an Order or taken any other action, in each case, which has become final
and non-appealable and which restrains, enjoins or otherwise prohibits the
consummation of the transactions contemplated by this Agreement;

(iv)          by
Purchaser, if Purchaser is not in material breach of its obligations under this
Agreement, if (A) at any time any of the representations and warranties of any
Seller or any Owner herein are
or become untrue or inaccurate such that Section 8.1(a) would not be
satisfied (treating such time as if it were the Closing for purposes of this
Section 8.3(a)(iv) or (B) there has been a breach on the part of any
Seller or any Owner of any of their
covenants or agreements contained in this Agreement such that
Section 8.1(a) would not be satisfied (treating such time as if it were
the Closing for purposes of this Section 8.3(a)(iv)), and, in both case
(A) and case (B), such breach (if curable) has not been cured within 15 days
after written notice to Sellers;

(v)           by
Sellers, if Sellers are not in material breach of their obligations under this
Agreement, and if (A) at any time the representations and warranties of Parent
or Purchaser herein become untrue or inaccurate such that Section 8.2(a)
would not be satisfied (treating such time as if it were the Closing for
purposes of

 49
 

 

this Section 8.3(a)(v)), or (B) there has been a breach on the
part of Parent or Purchaser of any of its covenants or agreements contained in
this Agreement such that Section 8.2(a) would not be satisfied (treating
such time as if it were the Closing for purposes of this
Section 8.3(a)(v)), and, in both case (A) and case (B), such breach (if
curable) has not been cured within 15 days after written notice to Parent or
Purchaser;

(vi)          by
Purchaser if, between the date hereof and the time scheduled for the Closing:
(A) an event or condition occurs that has resulted in or that may be expected to
result in a Material Adverse Effect on any Seller; or (B) any Seller makes a
general assignment for the benefit of creditors, or any proceeding shall be
instituted by or against Seller seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up or reorganization, arrangement,
adjustment, protection, relief or composition of its debts under any Law
relating to bankruptcy, insolvency or reorganization; or

(vii)         by Sellers if, between
the date hereof and the time scheduled for the Closing: (A) an event or
condition occurs that has resulted in or that may be expected to result in a
Material Adverse Effect on either or Parent or Purchaser; or (B) either Parent
or Purchaser makes a general assignment for the benefit of creditors, or any proceeding
shall be instituted by or against Parent or Purchaser seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, winding up or reorganization,
arrangement, adjustment, protection, relief or composition of its debts under
any Law relating to bankruptcy, insolvency or reorganization.

(b)           Effect
of Termination.  Except as provided
in this Section 8.3(b), in the event of the termination of this Agreement
pursuant to Section 8.3(a), this Agreement (other than this
Section 8.3(b), Article IX and Article X, which shall survive
such termination) will forthwith become void, and there will be no liability on
the part of Purchaser, on the other hand, or Sellers and the Owners, on the other hand, or any of their respective
officers, managers or directors (as the case may be), to the other parties, and
all rights and obligations of any party hereto will cease, provided, that
nothing herein will relieve any party from liability for any breach of any
representation, warranty, covenant or agreement contained in this Agreement
which occurred prior to termination of this Agreement in accordance with its
terms.  No termination of this Agreement
shall affect the obligations of the parties contained in the Confidentiality
Agreement, which shall survive the termination of this Agreement.

ARTICLE
IX

INDEMNIFICATION

9.1           Survival of Representations, Warranties and Covenants.  The representations and warranties contained
in this Agreement and the other Documents, shall survive the Closing and any
investigation at any time made by or on behalf of any party until the earlier
of (x) the date of the completion of Parent’s independent auditors’ audit of
Parent’s consolidated financial statements for the First Earn-Out Period or (y)
March 31, 2008; provided, however, that notwithstanding the
foregoing, the applicable statute of limitations, including any valid

 50
 

 

extensions thereof, shall be the survival
period for any matter relating to (each of the following an “Exceptional
Claim”): (a) claims of fraud, willful, intentional or reckless
misrepresentation or willful omission of a material fact in connection with
this Agreement and the transactions contemplated hereby, (b) any liability
relating to personal injury, (c) any alleged or actual violation of the
representations and warranties made in Sections 4.4, 4.5, 4.8, 4.15, 4.19,
4.23, 4.24, 5.2, 5.3, 5.5 or 5.6 of this Agreement, or (d) any matter disclosed
or referenced in Section 4.11, Section 4.18 or Section 4.19
of the Disclosure Schedule.  Any claims
for indemnification asserted in writing as provided for in this Article IX
prior to the expiration date applicable to the representation or warranty with
respect to which such claim for indemnification is made shall survive until
finally resolved and satisfied in full. For convenience of reference, the date
upon which any representation and warranty contained herein shall terminate is
referred to herein as the “Survival Date.”  No third party other than the Indemnified
Persons shall be a third party or other beneficiary of such representations and
warranties and no such third party shall have any rights of contribution with
respect to such representations or warranties or any matter subject to or
resulting in indemnification under this Article IX or otherwise.  All covenants and agreements contained in
this Agreement (and in the corresponding covenants and agreements set forth in
any of the Documents) shall survive the Closing and continue in full force
until fully performed in accordance with their terms.

9.2           Definitions.  As used in this Agreement, the following
terms shall have the following meanings:

(a)           “Losses”
shall mean any and all losses, claims, damages, liabilities, expenses
(including reasonable attorneys’ and accountants’ fees), assessments, or Taxes
(including interest or penalties thereon) sustained, suffered or incurred by
any Indemnified Person arising from or in connection with any such matter that
is the subject of indemnification under Section 9.3 hereof.

(b)           “Purchaser
Event of Indemnification” shall mean the following:

(i)            the
untruth, inaccuracy or breach by any Seller or any Owner of any representation
or warranty by such party contained in this Agreement or in any of the other
Documents;

(ii)           the
breach by any Seller or any Owner of any agreement or covenant by such party
contained in this Agreement or in any of the other Documents; or

(iii)          any
Liability of any nature whatsoever relating to (A) any Seller, (B) the Business
or the Purchased Assets prior to the Closing Date, other than the Assumed
Liabilities, or (C) the Excluded Liabilities.

(c)           “Purchaser
Indemnified Persons” shall mean and include Purchaser, Parent and their
respective Affiliates, successors and permitted assigns, and the respective
officers, directors, agents and employees of each of the foregoing.

(d)           “Purchaser
Indemnifying Persons” shall mean and include Purchaser and Parent, jointly
and severally, and their respective successors and assigns.

 51

 

(e)           “Seller
Event of Indemnification” shall mean the following:

(i)            the
untruth, inaccuracy or breach by Purchaser or Parent of any representation or
warranty by such party contained in this Agreement or in any of the other
Documents;

(ii)           the
breach by Purchaser or Parent of any agreement or covenant by such party
contained in this Agreement or in any of the other Documents; or

(iii)          any Liability of any
nature whatsoever relating to (A) the Business or the Purchased Assets from and
after the Closing Date, or (B) the Assumed Liabilities from and after the
Closing Date.

(f)            “Seller
Indemnified Persons” shall mean and include Sellers and Owners, and their respective Affiliates, successors and
permitted assigns and the respective officers, members, managers, agents and
employees of each of the foregoing.

(g)           “Seller
Indemnifying Persons” shall mean and include each Seller, each Owner and their respective successors and
assigns.

9.3           Indemnification Generally; Limitations.

(a)           Indemnification
of Purchaser Indemnified Persons. 
Seller Indemnifying Persons shall jointly and severally indemnify
Purchaser Indemnified Persons from and against any and all Losses arising from
or in connection with any Purchaser Event of Indemnification with respect to
Purchaser Indemnified Persons, which shall be paid promptly by Seller
Indemnifying Persons; provided, however, that except with respect
to Exceptional Claims, Seller Indemnifying Persons will have no liability
hereunder for indemnification with respect to Losses arising under clause (i)
of the definition of Purchaser Event of Indemnification (i) until the aggregate
amount of all such Losses exceeds $50,000.00 and then only for the amount by
which the aggregate amount of all such Losses exceeds $50,000.00 or (ii) in an
aggregate amount in excess of $1,500,000. 
The provisions of this Section 9.3(a) shall be the sole remedy of the
Purchaser Indemnified Persons for a Purchaser Event of Indemnification.  Notwithstanding the foregoing, nothing
contained in this Section 9.3 shall in any way limit, impair, modify or
otherwise affect the rights of Purchaser Indemnified Persons, nor shall there
be any limitation of liability of Seller Indemnifying Persons in connection
with any of such rights of Purchaser Indemnified Persons (A) to bring any
claim, demand, suit or cause of action otherwise available to Purchaser
Indemnified Persons based upon an allegation or allegations that Seller
Indemnifying Persons, or any of them, had an intent to defraud or made a
willful, intentional or reckless material misrepresentation or willful omission
of a material fact in connection with this Agreement and the transactions
contemplated hereby or (B) to enforce any judgment of a court of competent
jurisdiction which finds or determines (by final, non-appealable order) that
Seller Indemnifying Persons, or any of them, had an intent to defraud or made a
willful material misrepresentation or omission of a material fact in connection
with this Agreement and the transactions contemplated hereby.

(b)           Indemnification
of Seller Indemnified Persons. 
Purchaser Indemnifying Persons shall jointly and severally indemnify
Seller Indemnified Persons from and against any

 52
 

 

and all Losses arising from or in connection with any Seller Event of
Indemnification with respect to Seller Indemnified Persons, which shall be paid
promptly by Purchaser Indemnifying Persons; provided, however,
that except with respect to Exceptional Claims, Purchaser Indemnifying Persons
will have no liability hereunder for indemnification with respect to Losses
arising under clause (i) of the definition of Seller Event of Indemnification
(i) until the aggregate amount of all such Losses exceeds $50,000.00 and then
only for the amount by which the aggregate amount of all such Losses exceeds
$50,000.00 or (ii) in an aggregate amount in excess of $1,500,000.  The provisions of this Section 9.3(b) shall
be the sole remedy of the Seller Indemnified Persons for a Seller Event of
Indemnification.  Notwithstanding the
foregoing, nothing contained in this Section 9.3 shall in any way limit,
impair, modify or otherwise affect the rights of Seller Indemnified Persons,
nor shall there be any limitation of liability of Purchaser Indemnifying
Persons in connection with any of such rights of Seller Indemnified Persons (A)
to bring any claim, demand, suit or cause of action otherwise available to
Seller Indemnified Persons based upon an allegation or allegations that
Purchaser Indemnifying Persons, or any of them, had an intent to defraud or
made a willful, intentional or reckless material misrepresentation or willful
omission of a material fact in connection with this Agreement and the
transactions contemplated hereby or (B) to enforce any judgment of a court of
competent jurisdiction which finds or determines (by final, non-appealable
order) that Purchaser Indemnifying Persons, or any of them, had an intent to
defraud or made a willful material misrepresentation or omission of a material
fact in connection with this Agreement and the transactions contemplated
hereby.

(c)           For
purposes of this Article IX, in determining whether or not a representation or
warranty has been breach and the amount of Losses resulting therefrom, any
qualification in such representation or warranty as to “materially” or “material”
or “Material Adverse Effect” shall be disregarded.

9.4           Assertion of Claims.  No claim shall be brought under
Section 9.3 hereof unless the party seeking indemnification (the “Indemnified
Persons”), at any time prior to the applicable Survival Date, gives the
party or parties from whom indemnification is sought (the “Indemnifying
Persons”) (a) written notice of the existence of any such claim, specifying
the nature and basis of such claim and the amount thereof, to the extent known,
or (b) written notice pursuant to Section 9.5 of any Third Party Claim,
the existence of which might give rise to such a claim; but the failure so to
provide such notice to the Indemnifying Persons will not relieve the
Indemnifying Persons from any liability which they may have to the Indemnified Persons
under this Agreement or otherwise (unless and only to the extent that such
failure results in the loss or compromise of any rights or defenses of the
Indemnifying Persons and the Indemnifying Persons did not have Knowledge of
such action or claim).  Upon the giving
of such written notice as aforesaid, the Indemnified Persons, or any of them,
shall have the right to commence legal proceedings prior or subsequent to
(subject to applicable statutes of limitations) the Survival Date for the
enforcement of their rights under Section 9.3 hereof.

9.5           Notice and Defense of Third Party Claims.  Losses resulting from the assertion of
liability by third parties (each, a “Third Party Claim”) shall be
subject to the following terms and conditions:

 53
 

 

(a)           The
Indemnified Persons shall promptly give written notice to the Indemnifying
Persons of any Third Party Claim that might give rise to any Loss by the
Indemnified Persons, stating the nature and basis of such Third Party Claim,
and the amount thereof to the extent known. 
Such notice shall be accompanied by copies of all relevant documentation
with respect to such Third Party Claim, including, without limitation, any
summons, complaint or other pleading that may have been served, any written
demand or any other document or instrument. 
Notwithstanding the foregoing, the failure to provide notice as
aforesaid to the Indemnifying Persons will not relieve the Indemnifying Persons
from any liability which they may have to the Indemnified Persons under this
Agreement or otherwise (unless and only to the extent that such failure
directly results in the loss or compromise of any rights or defenses of the
Indemnifying Persons and the Indemnifying Persons did not have Knowledge of
such action or claim).

(b)           The
Indemnifying Persons shall have the right to assume the defense of any such
Third Party Claim.  Notwithstanding the
foregoing, the Indemnifying Persons may not assume the defense of any such
Third Party Claim if the claim (i) is reasonably likely to result in
imprisonment of the Indemnified Persons, (ii) is reasonably likely to result in
a criminal penalty or fine against the Indemnified Persons, the consequences of
which would be reasonably likely to have a Material Adverse Effect on the
Indemnified Persons unrelated to the size of such penalty or fine, or (iii) is
reasonably likely to result in an equitable remedy which would be reasonably
likely to have a Material Adverse Effect on the Indemnified Persons.  If Indemnifying Persons assume the defense of
such Third Party Claim, such Indemnifying Persons shall conduct such defense
diligently, shall have full and complete control over the conduct of such
proceeding on behalf of the Indemnified Persons and shall, in their sole
discretion, have the right to decide all matters of procedure, strategy,
substance and settlement relating to such proceeding, provided, however,
that (A) any counsel chosen by such Indemnifying Persons to conduct such
defense shall be reasonably satisfactory to the Indemnified Persons and (B) the
Indemnifying Persons will not, without the written consent of the Indemnified
Persons, 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 Persons from all
liability with respect thereto.  The
Indemnified Persons may participate in such proceeding and retain separate
co-counsel at their sole cost and expense, provided, however,
that the Indemnifying Persons shall be responsible for the fees and expenses of
one separate co-counsel for the Indemnified Persons to the extent the
Indemnified Persons are advised by counsel that either (1) the counsel the
Indemnifying Persons have selected has a conflict of interest or (2) there are
legal defenses available to the Indemnified Persons that are different from or
additional to those available to the Indemnifying Persons.  The failure of the Indemnifying Persons to
notify the Indemnified Persons of their election to defend any such Third Party
Claim within 30 calendar days after written notice of the Third Party Claim
shall have been given to such Indemnifying Persons by the Indemnified Persons
shall be deemed a waiver by such Indemnifying Persons of their right to defend
such claim or action.

(c)           If
no Indemnifying Persons are permitted to, or elect to, assume or pursue the
defense of, a Third Party Claim, the Indemnified Persons shall diligently
defend against such Third Party Claim in such manner as they may deem
appropriate and, in such event, the Indemnifying Persons shall promptly
reimburse the Indemnified Persons for all reasonable out-of-pocket costs and
expenses, legal or otherwise, incurred by the Indemnified Persons in

 54
 

 

connection with the defense against such
Third Party Claim, as such costs and expenses are incurred; provided, however,
that the Indemnified Persons will not, without the written consent of the
Indemnifying Persons, consent to the entry of any judgment or enter into any
settlement with respect to the matter, which consent shall not be unreasonably
withheld.  Any counsel chosen by such
Indemnified Persons to conduct such defense must be reasonably satisfactory to
the Indemnifying Persons and only one counsel shall be retained to represent
all Indemnified Persons 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 is pending).

ARTICLE X

MISCELLANEOUS

10.1         Notices.  All notices, requests, consents and other
communications hereunder shall be in writing, shall be addressed to the
receiving party’s address set forth below or to such other address as a party
may designate by notice hereunder, and shall be either (i) delivered by hand,
(ii) made by facsimile transmission, (iii) sent by recognized overnight
courier, or (iv) sent by certified mail, return receipt requested, postage
prepaid.

	
  

  	
  If to Parent or

  	
   

  
	
   

  	
  Purchaser, to:

  	
  Interleukin Genetics, Inc.

  
	
   

  	
   

  	
  135 Beaver
  Street

  
	
   

  	
   

  	
  Waltham, MA
  02452

  
	
   

  	
   

  	
  Telephone: (781)
  398-0700

  
	
   

  	
   

  	
  Telecopier:
  (781) 398-0720

  
	
   

  	
   

  	
  Attention: Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
  Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

  
	
   

  	
   

  	
  One Financial
  Center

  
	
   

  	
   

  	
  Boston,
  Massachusetts  02111

  
	
   

  	
   

  	
  Attention:  Daniel H. Follansbee, Esq.

  
	
   

  	
   

  	
  Telephone:  (617) 542-6000

  
	
   

  	
   

  	
  Telecopier:  (617) 542-2241

  
	
   

  	
   

  	
   

  
	
   

  	
  If to the
  Sellers or

  	
   

  
	
   

  	
  the Owners, to:

  	
  Alan James Group, LLC

  
	
   

  	
   

  	
  2101 NW
  Corporate Blvd.; Suite 410

  
	
   

  	
   

  	
  Boca Raton, FL  33431-7306

  
	
   

  	
   

  	
  Attention:  Manager

  
	
   

  	
   

  	
  Telephone:  (561) 939-2500

  
	
   

  	
   

  	
  Telecopier:  (561) 939-2501

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
  Broad and Cassel

  
	
   

  	
   

  	
  7777 Glades
  Road; Suite 300

  
	
   

  	
   

  	
  Boca Raton,
  Florida  33434

  

 

 55
 

 

 

	
  

  	
   

  	
  Attention:  Nina S. Gordon, P.A.

  
	
   

  	
   

  	
  Telephone:  (561) 218-8856

  
	
   

  	
   

  	
  Telecopier:  (561) 218-8978

  

 

All
notices, requests, consents and other communications hereunder shall be deemed
to have been (a) if by hand, at the time of the delivery thereof to the
receiving party at the address of such party set forth above, (b) if sent by
facsimile transmission, at the time receipt has been acknowledged by electronic
confirmation or otherwise, (c) if sent by overnight courier, on the next
business day following the day such notice is delivered to the courier service,
or (d) if sent by certified mail, on the fifth business day following the day
such mailing is deposited in the United States mail.

10.2         Entire Agreement.  The Documents and the Confidentiality
Agreement embody the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersedes all prior oral
or written agreements and understandings relating to the subject matter hereof,
including without limitation the letter agreement between the Buyer, Seller and
the Owners dated as of June 14, 2006.  No
statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in the Documents shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this Agreement.

10.3         Binding Effect.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
heirs, personal representatives, legal representatives, and permitted assigns.

10.4         Assignment.  Neither this Agreement, nor any right
hereunder, may be assigned by any of the parties hereto without the prior
written consent of the other parties.

10.5         Modifications and Amendments.  The terms and provisions of this Agreement
may be modified or amended only by written agreement executed by all parties
hereto.

10.6         Waivers and Consents.  The terms and provisions of this Agreement
may be waived, or consent for the departure therefrom granted, only by written
document executed by the party entitled to the benefits of such terms or
provisions.  No such waiver or consent
shall be deemed to be or shall constitute a waiver or consent with respect to
any other terms or provisions of this Agreement, whether or not similar.  Each such waiver or consent shall be
effective only in the specific instance and for the purpose for which it was
given, and shall not constitute a continuing waiver or consent.  No failure or delay by a party hereto in
exercising any right, power or remedy under this Agreement, and no course of
dealing between the parties hereto, shall operate as a waiver of any such
right, power or remedy of the party.  No
single or partial exercise of any right, power or remedy under this Agreement
by a party hereto, nor any abandonment or discontinuance of steps to enforce
any such right, power or remedy, shall preclude such party from any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder.  The election of any remedy by
a party hereto shall not constitute a waiver of the right of such party to
pursue other available remedies.  No
notice to or demand on a party not expressly required under this Agreement
shall entitle the party receiving such notice or demand to any other or further
notice or demand in similar or other circumstances or constitute a

 56
 

 

waiver of the rights of the party giving such
notice or demand to any other or further action in any circumstances without
such notice or demand.

10.7         No Third Party Beneficiary.  Except as provided in Section 9.3, nothing
expressed or implied in this Agreement is intended, or shall be construed, to
confer upon or give any Person other than the parties hereto and their
respective successors and permitted assigns, any rights or remedies under or by
reason of this Agreement.

10.8         Severability.  If any term or other provision of this
Agreement is determined to be invalid, illegal or incapable of being enforced
by any rule of law, or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party. 
Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.

10.9         Publicity.  No party to this Agreement shall make, or
cause to be made, any press release or public announcement in respect of this
Agreement or the transactions contemplated hereby or otherwise communicate with
any news media without the prior written consent of the other parties, except
as may be required by Law, in which case the party proposing to issue such
press release or make such public announcement shall use reasonable efforts to
consult in good faith with the other party before issuing any such press
release or making any such public announcement. The parties shall cooperate as
to the timing and contents of any such press release or public announcement.

10.10       Governing Law.  This Agreement and the rights and obligations
of the parties hereunder shall be construed in accordance with and governed by
the Law of the State of Delaware without giving effect to the conflict of law
principles thereof.

10.11       Jurisdiction.  Any legal action or proceeding with respect
to this Agreement shall be brought in the courts of the State of Delaware and,
more particularly, to the fullest extent such Court shall have subject matter
jurisdiction over the matter, the Court of Chancery of the State of Delaware,
or of the United States of America located in the State of Delaware.  By execution and delivery of this Agreement,
each of the parties hereto accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts for
purposes of matters arising under or pursuant to this Agreement.  The parties hereby irrevocably waive an
objection or defense that they now or hereafter have to the assertion of
personal jurisdiction by any court in any such action or to the laying of the
venue of any such action in any such court, and hereby waive, to the extent not
prohibited by law, and agree not to assert, by way of motion, as a defense, or
otherwise, in any such proceeding, any claim that it is not subject to the
jurisdiction of the above-named courts for such proceedings.

10.12       Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.

 57
 

 

10.13       Headings.  The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.

10.14       Expenses.  Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.

REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

 

 58

 

IN WITNESS WHEREOF, the parties
hereto have each executed and delivered this Agreement as of the day and year
first above written.

	
  

  	
  SELLERS:

  	
  ALAN JAMES GROUP, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Timothy J.
  Richerson

  	
   

  
	
   

  	
   

  	
  Name: Timothy J.
  Richerson

  
	
   

  	
   

  	
  Title: Manager
  and President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AJG-NB,
  LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Timothy J.
  Richerson

  	
   

  
	
   

  	
   

  	
  Name: Timothy J.
  Richerson

  
	
   

  	
   

  	
  Title: Manager
  and President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AJG-GNC,
  LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Timothy J.
  Richerson

  	
   

  
	
   

  	
   

  	
  Name: Timothy J.
  Richerson

  
	
   

  	
   

  	
  Title: Manager
  and President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AJG-BI
  BRANDS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Timothy J.
  Richerson

  	
   

  
	
   

  	
   

  	
  Name: Timothy J.
  Richerson

  
	
   

  	
   

  	
  Title: Manager
  and President

  
	
   

  	
   

  	
   

  
	
   

  	
  OWNERS:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Timothy J.
  Richerson

  	
   

  
	
   

  	
   

  	
  Name: Timothy J.
  Richerson

  
	
   

  	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ David A.
  Finkelstein

  	
   

  
	
   

  	
   

  	
  Name: David A.
  Finkelstein

  
	
   

  	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
							

 

 

 

 

	
  

  	
  PARENT:

  	
  INTERLEUKIN
  GENETICS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Kenneth S.
  Kornman

  	
   

  
	
   

  	
   

  	
  Name: Kenneth S.
  Kornman

  
	
   

  	
   

  	
  Title: President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PURCHASER:

  	
  AJG
  BRANDS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Kenneth S.
  Kornman

  	
   

  
	
   

  	
   

  	
  Name: Kenneth S.
  Kornman

  
	
   

  	
   

  	
  Title: President
  and Chief Executive OfficerEXHIBIT 10.2

 

STOCK PURCHASE
AGREEMENT

BETWEEN

INTERLEUKIN
GENETICS, INC.

AND

PYXIS INNOVATIONS
INC.

Dated as of August
17, 2006

 

 

TABLE OF CONTENTS

	
  ARTICLE 1. DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2. PURCHASE AND SALE; CLOSING

  	
  2

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Authorization

  	
  2

  
	
  2.2

  	
  Sale

  	
  2

  
	
  2.3

  	
  Closing

  	
  2

  
	
  2.4

  	
  Registration Rights

  	
  2

  
	
  2.5

  	
  Working Capital Loans

  	
  3

  
	
   

  	
  2.5.1     Strategic
  Relationships

  	
  3

  
	
   

  	
  2.5.2     Note Purchase
  Agreement

  	
  3

  
	
  2.5.3

  	
  Reductions in Available
  Credit

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE
  COMPANY

  	
  3

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Organization, Good Standing
  and Qualification

  	
  3

  
	
  3.2

  	
  Authorization;
  Enforceability

  	
  3

  
	
  3.3

  	
  Capitalization

  	
  4

  
	
  3.4

  	
  Consents

  	
  4

  
	
  3.5

  	
  Delivery of SEC Filings;
  Business

  	
  4

  
	
  3.6

  	
  No Material Adverse Change

  	
  5

  
	
  3.7

  	
  SEC Filings; Private Placements

  	
  5

  
	
   

  	
  3.7.1     1934 Act Filings

  	
  5

  
	
   

  	
  3.7.2     1933 Act Filings

  	
  5

  
	
   

  	
  3.7.3     Sarbanes-Oxley

  	
  5

  
	
   

  	
  3.7.4     Private
  Placements

  	
  6

  
	
  3.8.

  	
  No Conflict, Breach,
  Violation or Default

  	
  6

  
	
  3.9.

  	
  Tax Matters

  	
  6

  
	
  3.10

  	
  Title to Properties

  	
  6

  
	
  3.11

  	
  Certificates, Authorities
  and Permits

  	
  6

  
	
  3.12

  	
  No Labor Disputes

  	
  6

  
	
  3.13

  	
  Environmental Matters

  	
  6

  
	
  3.14

  	
  Litigation

  	
  7

  
	
  3.15

  	
  Financial Statements

  	
  7

  
	
  3.16

  	
  Insurance Coverage

  	
  7

  
	
  3.17

  	
  Brokers and Finders

  	
  7

  
	
  3.18

  	
  Exemption

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF
  INVESTOR

  	
  7

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Organization and Existence

  	
  7

  
	
  4.2

  	
  Authorization

  	
  8

  
	
  4.3

  	
  Purchase Entirely for Own
  Account

  	
  8

  
	
  4.4

  	
  Investment Experience

  	
  8

  
	
  4.5

  	
  Disclosure of Information

  	
  8

  
	
  4.6

  	
  Restricted Securities

  	
  8

  
	
  4.7

  	
  Legends

  	
  8

  
	
  4.8

  	
  Regulation D

  	
  9

  
	
  4.9

  	
  Brokers and Finders

  	
  9

  

 

 i
 

 

 

	
  ARTICLE 5. COVENANTS

  	
  9

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Restrictions on Transfer

  	
  9

  
	
  5.2

  	
  Fiduciary Duties

  	
  9

  
	
  5.3

  	
  Expenses

  	
  9

  
	
  5.4

  	
  Press Releases

  	
  9

  
	
  5.5

  	
  No Conflicting Agreements

  	
  9

  
	
  5.6

  	
  Closing Conditions

  	
  9

  
	
  5.7

  	
  Stock Purchase Agreement
  Amendment

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6. CLOSING CONDITIONS

  	
  10

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Company Conditions

  	
  10

  
	
   

  	
  6.1.1     Agreements

  	
  10

  
	
   

  	
  6.1.2     Opinion of
  Company Counsel

  	
  10

  
	
   

  	
  6.1.3     Secretary
  Certificate

  	
  10

  
	
   

  	
  6.1.4     Corporate
  Proceedings

  	
  10

  
	
   

  	
  6.1.5     Other Documents

  	
  10

  
	
   

  	
  6.1.6     Due Diligence
  Investigation of Alan James Group LLC

  	
  10

  
	
   

  	
  6.1.7     Acquisition of
  the Assets of Alan James Group LLC

  	
  10

  
	
  6.2

  	
  Investor Conditions

  	
  11

  
	
   

  	
  6.2.1     Agreements

  	
  11

  
	
   

  	
  6.2.2     Payment

  	
  11

  
	
   

  	
  6.2.3     Pyxis Secretary Certificates

  	
  11

  
	
   

  	
  6.2.4     Other Documents

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7. GENERAL

  	
  11

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Survival

  	
  11

  
	
  7.2

  	
  Successors and Assigns

  	
  11

  
	
  7.3

  	
  Counterparts

  	
  12

  
	
  7.4

  	
  Notices

  	
  12

  
	
  7.5

  	
  Amendments and Waivers

  	
  12

  
	
  7.6

  	
  Severability

  	
  12

  
	
  7.7

  	
  Entire Agreement

  	
  12

  
	
  7.8

  	
  Further Assurances

  	
  13

  
	
  7.9

  	
  Applicable Law

  	
  13

  

 

Exhibits

A             -               Amendment No. 5 to Note Purchase Agreement

B             -               Form of Promissory Notes

C             -               Opinion of Counsel to the Company

Disclosure
Schedules

 ii

 

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (“Agreement”) is made as of the 17th day of August, 2006 by
and between INTERLEUKIN GENETICS, INC., a Delaware corporation (the “Company”), and Pyxis Innovations Inc., a Delaware
corporation (“Investor”).

RECITALS

A.            The Company wishes to raise an aggregate of
approximately $30,000,000 from the issuance of equity securities, debt
securities or a combination of the foregoing in order to provide working
capital for the Company (the “Proposed Financing”);

B.            Investor has a right to participate pro rata in the Proposed Financing (subject to certain
limitations) under the Stock Purchase Agreement dated March 5, 2003 between the
Company and Investor (the “2003 Purchase Agreement”);

C.            Investor desires to purchase, and the Company
wishes to sell and issue to Investor, upon the terms and conditions stated in
this Agreement, the Common Shares (as defined below), representing Investor’s pro rata potion of the Proposed Financing;

D.            As a condition to Investor’s willingness to
enter into the transactions contemplated hereby, Investor requires, and the
Company desires, that the Company offer to its existing stockholders (other
than Investor) the opportunity to acquire shares of Common Stock pursuant to a “rights
offering” at the same price per share that Investor is acquiring the Common
Shares (the “Rights Offering”);

E.             Investor desires to extend certain credit
facilities to the Company to provide the balance of the Proposed Financing
subject to reduction by the amount raised in the Rights Offering; and

F.             The Company and Investor are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Section 4(2) of the 1933 Act (as defined below).

The parties agree as follows:

ARTICLE 1.  DEFINITIONS

In addition to those terms defined above and elsewhere in this
Agreement, for the purposes of this Agreement, the following terms shall have
the meanings here set forth:

1.1           “Acquisition” means the Company’s acquisition of all or
substantially all of the assets of Alan James Group LLC and its affiliates.

1.2           “Affiliate”
means, with respect to any Person, any other Person that directly or indirectly
Controls, is Controlled by, or is under common Control with, such Person.

1.3           “Agreements”
means this Agreement and Amendment No. 5.

1.4           “Amendment No. 5”
means Amendment No. 5 to the Note Purchase Agreement in the form attached as Exhibit A.

 1
 

 

1.5           “Contemplated Transactions”
means those transactions and actions contemplated by the Agreements, including
the issuance of the Common Shares and the Conversion Shares.

1.6           “Common Stock”
means the Company’s common stock, $0.001 par value per share.

1.7           “Control” means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

1.8           “Conversion Shares”
means Common Stock of the Company to be issued upon conversion of any notes
issued under Section 2.5 of this Agreement.

1.9           “Material Adverse Effect”
means a material adverse effect on the condition (financial or otherwise),
business, assets, prospects, or results of operations of the Company as a
whole.

1.10         “Note Purchase Agreement”
means the Note Purchase Agreement, dated October 23, 2002, between the Company
and Investor, as amended.

1.11         “Notes” means
any promissory notes issued evidencing loans made under the Loan Commitment.

1.12         “Person” means
an individual, corporation, partnership, trust, business trust, association,
joint stock company, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization, governmental authority or any other form of entity
not specifically listed herein.

1.13         “Securities”
means the Common Shares, the Notes, and the Conversion Shares.

1.14         “1933 Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

1.15         “1934 Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

ARTICLE 2.  PURCHASE AND SALE; CLOSING

2.1           Authorization.  The
Company has authorized the sale and issuance to the Investor of the Common
Shares.

2.2           Sale. 
Subject to the terms and conditions of this Agreement, Investor agrees
to purchase at the Closing, and the Company agrees to sell and issue to
Investor at the Closing, 2,750,037 shares of Common Stock (the “Common Shares”) for the aggregate purchase price of
$15,615,537 ($5.6783 per share) (the “Purchase Price”).

2.3           Closing.  The
purchase and sale of the Common Shares (the “Closing”)
shall take place at the same place and time as the closing of the Acquisition,
or at such other time and place as the Company and Investor mutually agree (the
“Closing Date”).  The Closing shall be conditioned on and
concurrent with the closing of the Acquisition. 
At the Closing, the Company shall deliver to Investor a certificate
representing the Common Shares against payment of the Purchase Price by wire
transfer.

2.4           Registration Rights.  The
Company and the Investor agree that the Common Shares and any Conversion Shares
shall be additional “Registrable Securities” subject to the Registration Rights

 2
 

 

Agreement dated March 5, 2003 between the Company and
Investor (the “Registration Rights Agreement”),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and applicable state securities laws; provided,
however, that Investor agrees that the
Company shall have no obligation to register any of the Common Shares or
Conversion Shares under the Registration Rights Agreement for a period of one
year following the Closing.

2.5           Credit Facility.

2.5.1        Available Financing.  At
any time prior to the second anniversary of the date of this Agreement, upon
the request of the Company, Investor shall loan to the Company up to
$14,384,463 (in the aggregate), subject to adjustment under Section 2.5.3 (the “Loan Commitment”). 
Loan requests shall be made in increments of not less than $1,000,000.

2.5.2        Note Purchase Agreement.  Any
loan made pursuant to Section 2.5 of this Agreement shall be made as an
additional loan under, and subject to the terms and conditions, including
interest rate and maturity, of, the Note Purchase Agreement, as amended.  Accordingly, at the Closing, each party will
execute and deliver Amendment No. 5 to the Note Purchase Agreement in the form
attached as Exhibit A.

2.5.3        Reductions in Available Credit.  The
aggregate amount of the credit available under Section 2.5.1 of this Agreement
shall be reduced dollar-for-dollar by the sum of:

(a)                                  The proceeds of the sale of shares by the
Company in the Rights Offering; and

(b)                                 The dollar amount of any loans previously
made by Investor under the Loan Commitment.

ARTICLE 3.  REPRESENTATIONS AND
WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Investor that, except as
set forth on the Disclosure Schedules to this Agreement:

3.1           Organization, Good Standing and
Qualification.  Each of the Company and its subsidiaries is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to carry on its business as now conducted and own its
properties.  Each of the Company and its
subsidiaries is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property makes such qualification or licensing
necessary unless the failure to so qualify could not reasonably be expected to
have a Material Adverse Effect on the Company. 
The Company’s subsidiaries, all of which are wholly owned, are reflected
on Schedule 3.1.  Except as set forth on Schedule 3.1,
the Company does not own or control, directly or indirectly, any equity
interest in any other Person.

3.2           Authorization; Enforceability.  The
Company has full power and authority and has taken all requisite action on the
part of the Company, its officers, directors and stockholders necessary for (a)
the authorization, execution and delivery of the Agreements, (b) authorization
of the performance of all obligations of the Company under the Agreements, and
(c) the authorization, issuance, and delivery of the Common Shares and
Conversion Shares.  On or before the date
of this Agreement, the Company’s board of directors, at a meeting duly called
and held, has (a) determined that the Agreements and the Contemplated
Transactions are fair to, advisable and in the best interests of the Company
and the

 3
 

 

stockholders of the Company, (b) approved the
Agreements and Contemplated Transactions, and (c) acted with due care and
satisfied its fiduciary duties to the Company. 
Section 203 of the Delaware General Corporate Law does not apply to this
Agreement or the Contemplated Transactions. No other state takeover,
antitakeover, moratorium, fair price, interested stockholder, business
combination or similar statute or rule is applicable to the Contemplated
Transactions.  The Agreements constitute
the legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms. 
The Company has duly and validly authorized and reserved
2,533,234Conversion Shares for issuance upon conversion of the Notes, which
number is sufficient to permit the conversion of all of such Notes, and such
shares will, upon such conversion and issuance, be validly issued, fully paid
and non-assessable.

3.3           Capitalization.  Set
forth on Schedule 3.3 is (a) the amount of the
authorized capital stock of the Company; (b) the number of shares of capital
stock issued and outstanding; (c) the number of shares of capital stock
issuable pursuant to the Company’s stock plans; (d) the number of shares of
capital stock issuable and reserved for issuance pursuant to securities
exercisable for, or convertible into or exchangeable for any shares of
Preferred Stock, Common Stock, Notes, or other securities; and (e) the name of
each holder of options and warrants for capital stock, the term of such
agreement or instrument, the number of shares for which such options and
warrants are exercisable with respect to each holder, along with the applicable
vesting schedule, if any, and the exercise price.  All of the issued and outstanding shares of
the Company’s capital stock have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights.  There are no contractual or statutory
preemptive rights, rights of first refusal, put or call rights or obligations
or anti-dilution rights with respect to the issuance, sale or redemption of the
Company’s capital stock, other than rights set forth herein or in the
Registration Rights Agreement or the 2003 Purchase Agreement.  The Company has no obligation to purchase,
redeem, or otherwise acquire any of its capital stock or any interests therein.  Except as set forth on Schedule 3.3 or as contemplated by this Agreement,
there are no outstanding warrants, options, convertible securities or other
rights, agreements or arrangements of any character under which the Company or
any of its subsidiaries is or may be obligated to issue any equity securities
of any kind and except as contemplated by this Agreement, neither the Company
nor any of its subsidiaries is currently in negotiations for the issuance of
any equity securities of any kind. 
Except as set forth on Schedule 3.3,
the Company has no knowledge of any voting agreements, buy-sell agreements,
option or right of first purchase agreements or other agreements of any kind
among any of the security holders of the Company relating to the securities of
the Company held by them.  Except as set
forth on Schedule 3.3 (which Schedule shall set
forth the holders and number of shares for which the Company remains obligated
to such registration rights), the Company has not granted any Person other than
Investor the right to require the Company to register any securities of the
Company under the 1933 Act, whether on a demand basis or in connection with the
registration of securities of the Company for its own account or for the
account of any other Person.

3.4           Consents.  The
execution, delivery and performance by the Company of the Agreements and the
offer, issuance and sale of the Common Shares and the Conversion Shares require
no consent of, action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than filings that have been made
pursuant to applicable state securities laws and post-sale filings pursuant to
applicable state and federal securities laws, which the Company undertakes to
file within the applicable time periods.

3.5           Delivery of SEC Filings; Business.  The
Company has provided Investor with copies of the Company’s most recent Annual
Report on Form 10-K for the fiscal year ended December 31, 2005, and all other
reports filed by the Company pursuant to the 1934 Act since the filing of the
Annual Report on Form 10-K and prior to the date hereof (collectively, the “SEC Filings”); which are all of the filings required of the
Company pursuant to the 1934 Act for such period.  The Company is engaged only in the

 4
 

 

business described in the SEC Filings and the SEC
Filings contain a complete and accurate description of the business of the
Company.

3.6           No Material Adverse Change. 
Since the filing of the Company’s most recent Annual Report on Form 10-K
or as otherwise identified and described in subsequent reports filed by the
Company pursuant to the 1934 Act there has not been:  (a) any change in the consolidated assets,
liabilities, financial condition or operating results of the Company from that
reflected in the financial statements included in the Company’s most recent
Quarterly Report on Form 10-Q, except changes in the ordinary course of
business which have not had, in the aggregate, a Material Adverse Effect; (b)
any declaration or payment of any dividend, or any authorization or payment of
any distribution, on any of the capital stock of the Company, or any redemption
or repurchase of any securities of the Company; (c) any material damage,
destruction or loss, whether or not covered by insurance to any assets or
properties of the Company; (d) any waiver by the Company of a valuable right or
of a material debt owed to it not in the ordinary course of business; (e) any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company, except in the ordinary course of business and which
is not material to the assets, properties, financial condition, prospects,
operating results or business of the Company taken as a whole (as such business
is presently conducted and as it is proposed to be conducted); (f) any material
change or amendment to a material contract or arrangement by which the Company
or any of its assets or properties is bound or subject; (g) any material labor
difficulties or labor union organizing activities with respect to employees of
the Company; (h) any transaction entered into by the Company other than in the
ordinary course of business; or (i) any other event or condition of any
character that might have a Material Adverse Effect.

3.7           SEC Filings; Private Placements.

3.7.1        1934 Act Filings.  As
of their respective dates, the SEC Filings complied as to form in all material
respects with the requirements of the 1934 Act and did not contain at the time
they were filed any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.

3.7.2        1933 Act Filings. 
During the preceding one year, each registration statement and any
amendment thereto filed by the Company pursuant to the 1933 Act and the rules
and regulations thereunder, as of the date such statement or amendment became
effective, complied as to form in all material respects with the 1933 Act and
did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading; and each prospectus filed pursuant to Rule 424(b) under
the 1933 Act, as of its issue date and as of the closing of any sale of
securities pursuant thereto did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.

3.7.3        Sarbanes-Oxley.  The
Chief Executive Officer and the Chief Accounting Officer of the Company have
signed, and the Company has furnished to the SEC, all certifications required
by the Sarbanes-Oxley Act of 2002; such certifications contain no
qualifications or exceptions to the matters certified therein, except as to
knowledge, and have not been modified or withdrawn; and neither the Company nor
any of it officers has received notice from any governmental entity questioning
or challenging the accuracy, completeness, content, form or manner of filing or
submission of such certifications.

 5
 

 

3.7.4        Private Placements. 
During the preceding one year, the Company has not furnished any private
placement memorandum or similar offering document to offerees of the Company’s
securities.

3.8           No Conflict, Breach, Violation or
Default.  The execution, delivery and performance of
the Agreements by the Company and the issuance and sale of the Common Shares
and Conversion Shares will not conflict with or result in a breach or violation
of, or trigger the vesting or acceleration of, any of the terms and provisions
of, or constitute a default under:  (a)
the Company’s Certificate of Incorporation or the Company’s Bylaws, both as in
effect on the date hereof, (b) any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any of its properties, or (c) any material
agreement or instrument to which the Company is a party or by which the Company
is bound or to which any of the properties of the Company is subject.

3.9           Tax Matters.  The
Company has timely prepared and filed all tax returns required to have been
filed by the Company with all appropriate governmental agencies and timely paid
all taxes owed by it.  The charges,
accruals and reserves on the books of the Company in respect of taxes for all
fiscal periods are adequate in all material respects, and there are no material
unpaid assessments against the Company nor, to the knowledge of the Company,
any basis for the assessment of any additional taxes, penalties or interest for
any fiscal period or audits by any federal, state or local taxing authority
except such as which are not material. 
All material taxes and other assessments and levies that the Company is
required to withhold or to collect for payment have been duly withheld and
collected and paid to the proper governmental entity or third party when
due.  There are no tax liens or claims
pending or threatened against the Company or any of its respective assets or
property.  There are no outstanding tax
sharing agreements or other such arrangements between the Company and any other
Person.

3.10         Title to Properties. 
Except with respect to Investor, the Company has good and marketable
title to all real properties and all other properties and assets owned by it,
in each case free from liens, encumbrances and defects that would materially
affect the value thereof or materially interfere with the use made or currently
planned to be made thereof by them; and the Company holds any leased real or
personal property under valid and enforceable leases with no exceptions that
would materially interfere with the use made or currently planned to be made
thereof by them.

3.11         Certificates, Authorities and
Permits.  The Company possesses adequate certificates,
authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by it and has not received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company,
would individually or in the aggregate have a Material Adverse Effect.

3.12         No Labor Disputes.  No
material labor dispute with the employees of the Company exists or, to the
knowledge of the Company, is imminent.

3.13         Environmental Matters.  The
Company is not in violation of any statute, rule, regulation, decision or order
of any governmental agency or body or any court, domestic or foreign, relating
to the use, disposal or release of hazardous or toxic substances or relating to
the protection or restoration of the environment or human exposure to hazardous
or toxic substances (collectively, “Environmental Laws”),
does not own or operate any real property contaminated with any substance that
is subject to any Environmental Laws, is not liable for any off-site disposal
or contamination pursuant to any Environmental Laws, and is not subject to any
claim relating to any Environmental Laws, which violation, contamination,
liability or claim would individually or in the aggregate have a Material
Adverse Effect; and the Company is not aware of any pending investigation that
might lead to such a claim.  For the
purposes of this Section, the “Company” includes the Company and its
subsidiaries.

 6

 

3.14         Litigation.  Schedule 3.15 sets forth a list of all litigation involving
or (to the Company’s knowledge) threatened by or against the Company in the
past five years, along with the resolution of such matter.  There are no pending actions, suits or proceedings
against or affecting the Company, its subsidiaries or any of its or their
properties and to the Company’s knowledge, no such actions, suits or
proceedings are threatened or contemplated.

3.15         Financial Statements.  The
financial statements and related notes included in each SEC Filing present
fairly and accurately in all material respects the consolidated financial
position of the Company as of the dates shown and its consolidated results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis, except (i) that the unaudited interim financial
statements were or are subject to normal and recurring year-end audit adjustments,
(ii) as may be otherwise indicated in the notes to the financial statements or
(iii) in the case of the unaudited statements as may be permitted by the SEC on
Form 10-Q under the Exchange Act.  Except
(a) as set forth in the financial statements of the Company included in the SEC
Filings, and (b) for liabilities and obligations (absolute, accrued, contingent
or otherwise) incurred in the ordinary course of business and consistent with
past practice since the date of such SEC Filing, the Company does not have any
material liability or obligation of any nature, whether or not accrued,
contingent or otherwise that would be required by GAAP to be disclosed on a
balance sheet of the Company or in the notes thereto. The Company has not
created any entities or entered into any transactions or created any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, for the purpose of avoiding disclosure required by GAAP.

3.16         Insurance Coverage.  The
Company maintains in full force and effect insurance coverage that is customary
for comparably situated companies for the business being conducted and
properties owned or leased by the Company, and the Company reasonably believes
such insurance coverage to be adequate against all liabilities, claims and
risks against which it is customary for comparably situated companies to
insure.

3.17         Brokers and Finders.  The
Company has no commitment or agreement for payment of any commissions,  finders’ fees, or other similar fees to any
Person in connection with the Contemplated Transactions.

3.18         Exemption. The offer, issuance, sale and delivery of
the Common Shares is, and the issuance of the Conversion Shares in accordance
with the terms of the Notes contemplated in Amendment No. 5 will be, exempt
from the registration requirements of the 1933 Act and the qualification or
registration provisions of applicable state securities laws.  Neither the Company nor its authorized agents
have taken or will take any action that would cause the loss of such
exemption.  Neither the Company nor any
of its Affiliates, nor any Person acting on its or their behalf has, directly
or indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would adversely affect reliance
by the Company on Section 4(2) for the exemption from registration for the
Contemplated Transactions or would require registration of the Common Shares or
the Conversion Shares under the 1933 Act.

ARTICLE 4.  REPRESENTATIONS AND WARRANTIES OF INVESTOR

Investor hereby represents
and warrants to the Company that:

4.1           Organization and Existence. 
Investor is a validly existing corporation and has all requisite
corporate power and authority to invest in the Securities pursuant to this
Agreement and any Affiliate of Investor signing one or more of the Agreements
(each an “Affiliate Party”) is a validly

 7
 

 

existing corporation and has all requisite corporate
power and authority to execute and perform the agreement that it is signing.

4.2           Authorization.  The
execution, delivery and performance by Investor and each Affiliate Party of the
Agreements have been duly authorized and the Agreements each constitute the
valid and legally binding obligation of Investor and each Affiliate Party,
enforceable against Investor and each Affiliate Party in accordance with their
terms.

4.3           Purchase Entirely for Own Account.  The
Securities to be received by Investor hereunder will be acquired for Investor’s
own account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof, and Investor has no present intention of
selling, granting any participation in, or otherwise distributing the
same.  The Investor is not a registered
broker dealer or an entity engaged in the business of being a broker dealer.

4.4           Investment Experience. 
Investor acknowledges that it can bear the economic risk and complete
loss of its investment in the Securities and has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits
and risks of the investment contemplated hereby.

4.5           Disclosure of Information. 
Investor has had an opportunity to receive documents related to the
Company and to ask questions of and receive answers from the Company regarding
the Company, its business and the terms and conditions of the offering of the
Securities.  Investor acknowledges
receipt of the SEC Filings and any other filings which it requested be made by
the Company with the SEC.  Neither such
inquiries nor any other due diligence investigation conducted by Investor shall
modify, amend or affect Investor’s right to rely on the Company’s
representations and warranties contained in this Agreement.

4.6           Restricted Securities. 
Investor understands that the Securities are characterized as “restricted
securities” under the U.S.  federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may not be resold without registration
under the 1933 Act except in certain limited circumstances.

4.7           Legends.  It
is understood that, until any sale of Common Shares or Conversion Shares
pursuant to an effective registration statement under the 1933 Act, or such
time as such shares become eligible for resale under Rule 144(k), certificates
evidencing the Common Shares and Conversion Shares, as the case may be, will
bear one or more restrictive legends, substantially as follows:

“The shares represented by
this certificate have not been registered under the Securities Act of 1933, as
amended (the “Securities Act”) and may not be transferred (i) without the
opinion of counsel satisfactory to the corporation that such transfer may
lawfully be made without registration under the Securities Act or (ii) pursuant
to an effective registration statement under the Securities Act, in each case
in accordance with applicable securities laws of any state of the United
States.”

“The Corporation is authorized to issue more than one
class or series of stock.  The
Corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative, participating, optional, or
other special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.”

 8
 

 

“The shares represented by this Certificate are
subject to restrictions on transfer as set forth in the Stock Purchase
Agreement dated as of August 17, 2006 by and between the Corporation and Pyxis
Innovations Inc.  A copy of such Stock
Purchase Agreement is available for inspection at the offices of the
Corporation and will be provided to the holder upon request.”

If
required by the authorities of any state in connection with the issuance or
sale of the Common Shares and Conversion Shares, then the certificate(s)
representing such shares shall bear the legend required by such state
authority.  Upon resale pursuant to the
Registration Rights Agreement or upon Rule 144(k) becoming available, the
Company shall promptly cause certificates evidencing the Common Shares and
Conversion Shares, as the case may be, to be replaced with certificates that do
not bear such restrictive legends.

4.8           Regulation D. 
Investor is an accredited investor as defined in Rule 501(a) of
Regulation D, as amended, under the 1933 Act. 
Investor did not learn of the investment in the Securities as a result
of any public advertising or general solicitation.

4.9           Brokers and Finders. 
Investor has made no commitment for payment of any commissions or
finders’ fees to any third party in connection with the Contemplated
Transactions.

ARTICLE 5.  COVENANTS

5.1           Restrictions on Transfer.  In
addition to restrictions imposed upon Investor under the Registration Rights
Agreement, for a period of two years following the date of the Closing,
Investor will not sell or otherwise transfer its Common Shares or any
Conversion Shares to any Person who is not an Affiliate of Investor.  In addition, Investor will not sell or
otherwise transfer any shares of the Company’s Series A Preferred Stock or any
shares of Common Stock issued or issuable upon conversion thereof to any Person
who is not an Affiliate of Investor prior to March 5, 2009.

5.2           Fiduciary Duties.  The
Directors of the Company have executed and will execute their fiduciary duties
to the Company in good faith in the negotiation, deliberation, and consummation
of this Agreement and the Contemplated Transactions, regardless of any
affiliation with Investor.  No Director
of the Company is under a contractual obligation to vote in favor of or
otherwise effectuate any of the Contemplated Transactions.

5.3           Expenses.  The
Company shall pay the reasonable fees, disbursements, and expenses of counsel
to Investor and any other reasonable out-of-pocket expenses of Investor in
connection with the Contemplated Transactions (except for the Purchase Price).

5.4           Press Releases.  Any
press release concerning this Agreement shall be submitted to Investor for
comment at least two business days prior to issuance, unless the release is
required to be issued within a shorter period of time by law or pursuant to the
rules of a national securities exchange.

5.5           No Conflicting Agreements.  The
Company will not take any action, enter into any agreement or make any
commitment that would conflict or interfere in any material respect with the
obligations to Investor under the Agreements.

5.6           Closing Conditions.  The
Company will use its best efforts to cause the conditions in Article 6 to be
satisfied.

 9
 

 

5.7           Stock Purchase Agreement Amendment.  The Stock Purchase Agreement
dated March 5, 2003 between the parties to this Agreement is amended to provide
in Section 6.7:

“6.7
        Advisors.  All selections of legal counsel, accountants,
investment bankers and other professional advisors to the Company shall be
subject to approval of the Board of Directors or a duly authorized Committee of
the Board of Directors.  The Board of
Directors may delegate to the officers of the Company authority to select and
engage advisors within parameters specified by the Board of Directors.  In addition, the Series A Directors shall be
entitled to retain, at the cost and expense of the Company, the services of an
investment banking firm of national reputation of their choice and one law firm
of their choice to advise them in their capacity as directors with respect to
any matter on which the directors, as a group, are required or permitted to act
hereunder.

ARTICLE 6.  CLOSING CONDITIONS

6.1   Company Conditions.  The obligations of Investor to the Company
under this Agreement are subject to the fulfillment, on or before the Closing,
of each of the following conditions, unless otherwise waived:

6.1.1        Agreements.  The
Company and Investor shall have entered into the Agreements.

6.1.2        Opinion of Company Counsel.  The
Investors shall have received from counsel for the Company, an opinion, dated
as of the Closing, in form and substance reasonably acceptable to Investor,
generally to the effect provided in Exhibit C.

6.1.3        Secretary Certificate.  The Company shall have delivered a certificate
of its Secretary certifying as to (i) the actions of the Board of Directors to
approve the Agreements and the transactions contemplated thereby; (ii) the
Bylaws of the Company, in effect as of the Closing Date; (iii) the Certificate
of Incorporation of the Company, issued by the State of Delaware; and (iv) the
incumbency of all officers authorized to execute the Agreements and the
promissory notes on behalf of the Company.

6.1.4        Corporate Proceedings.  The
Company shall have provided to Investor copies of resolutions of its Board of
Directors, or committees thereof, authorizing the execution, delivery, and
performance of the Agreements and any other documents provided for in or
contemplated by this Agreement.

6.1.5        Other Documents.  The
Company shall have delivered to Investor such other documents as reasonably
requested by Investor to carry out and effectuate the intent and purposes of
this Agreement.

6.1.6        Due Diligence Investigation of
Alan James Group LLC.  No later than five days prior to the Closing,
the Company shall have presented to Investor the due diligence investigation
report of Grant Thornton LLP regarding Alan James Group LLC and its affiliates,
and Investor shall be reasonably satisfied with the report and its contents.

6.1.7        Acquisition of the Assets of Alan
James Group LLC.  Concurrently with the execution of this
Agreement, the Company shall have consummated the acquisition of all or
substantially all of the assets of the Alan James Group LLC and its affiliates.

 10
 

 

6.2           Investor Conditions.  The obligations of the Company to Investor
under this Agreement are subject to the fulfillment, on or before the Closing,
of each of the following conditions, unless otherwise waived:

6.2.1        Agreements.  The Company and Investor shall have entered
into the Agreements.

6.2.2        Payment.  Investor shall have made full payment to the
Company of the purchase price for the Common Shares by wire transfer of
$15,615,537 in immediately available funds.

6.2.3        Pyxis Secretary Certificates.  Investor shall have delivered a certificate
of its Secretary certifying as to (i) the actions of its Board of Directors to
approve the Agreements and the transactions contemplated thereby; (ii) the
Bylaws of the Investor in effect as of the Closing Date; (iii) the Certificate
of Incorporation of the Investor issued by its state of domicile; and (iv) the
incumbency of all officers authorized to execute the Agreements on behalf of
the Investor.

6.2.4        Other Documents.  Investor shall have delivered to Company such
other documents as reasonably requested by the Company to carry out and
effectuate the intent and purposes of this Agreement.

ARTICLE 7.  GENERAL

7.1           Survival.  All
representations, warranties, covenants and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants and
agreements as of the date hereof and shall survive the execution and delivery
of this Agreement and the Closing provided that all representations and
warranties shall terminate two years following the Closing.  No investigation by or knowledge of a party
or its representatives, before or after the date of this Agreement, will affect
in any manner the representations, warranties, covenants or agreements of
another party set forth in this Agreement (or in any document to be delivered
in connection with the consummation of the transactions contemplated by this
Agreement) or the rights to rely thereon, and such representations, warranties,
covenants and agreements will survive any such investigation.

7.2           Successors and Assigns.  This
Agreement may not be assigned by a party hereto without the prior written
consent of the other party hereto, except that without the consent of the
Company, but after notice duly given, Investor may assign its rights and
delegate its duties hereunder to an Affiliate of the Investor or, after the
second anniversary of the Closing of this Agreement, to a third party acquiring
some portion or all of the Common Shares or Conversion Shares in a private
transaction, provided that in each case the Affiliate or third party agrees in
writing to be bound by the terms of this Agreement, and without the prior
written consent of Investor, but after notice duly given and in compliance with
this Agreement, the Company may assign its rights and delegate its duties
hereunder to any successor-in-interest corporation in the event of a merger or
consolidation of the Company with or into another corporation, or any merger or
consolidation of another corporation with or into the Company that results
directly or indirectly in an aggregate change in the ownership or control of
more than 50% of the voting rights of the equity securities of the Company, or
the sale of all or substantially all of the Company’s assets.  The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective permitted
successors and assigns of the parties. 
Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.

 11
 

 

7.3           Counterparts.  This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

7.4           Notices. 
Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given only
upon delivery to each party to be notified by (i) personal delivery, (ii)
electronic mail or telecopier, upon receipt of confirmation of complete
transmittal, or (iii) an internationally recognized overnight air courier,
addressed to the party to be notified at the address as follows, or at such
other address as such party may designate by ten days’ advance written notice
to the other party:

	
  If to the Company:

  	
  Interleukin Genetics, Inc.

  
	
   

  	
  135 Beaver
  Street, 2nd Floor

  
	
   

  	
  Waltham, MA
  02452

  
	
   

  	
  Attn: Chief
  Executive Officer

  
	
   

  	
  Fax:
  781/398-0720

  
	
   

  	
   

  
	
  with a copy to:

  	
  Mintz Levin Cohn Ferris Glovsky Popeo PC

  
	
   

  	
  One Financial
  Center

  
	
   

  	
  Boston, MA 02111

  
	
   

  	
  Attn:

  	
  Daniel H. Follansbee

  
	
   

  	
  Fax:

  	
  617/542-2241

  
	
   

  	
   

  	
   

  
	
  If to Investor:

  	
  Pyxis Innovations, Inc.

  
	
   

  	
  7575 Fulton
  Street East

  
	
   

  	
  Ada, Michigan
  49355-0001

  
	
   

  	
  Attn:

  	
  Thomas R. Curran, Jr.

  
	
   

  	
  Fax:

  	
  616/787-7813

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
  Warner Norcross & Judd LLP

  
	
   

  	
  900 Fifth Third
  Center

  
	
   

  	
  111 Lyon Street
  NW

  
	
   

  	
  Grand Rapids, Michigan 49503-2487

  
	
   

  	
  Attn:

  	
  Gordon R. Lewis

  
	
   

  	
  Fax:

  	
  616/752-2500

  

 

7.5           Amendments and Waivers.  Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investor.  Any amendment or waiver
effected in accordance with this paragraph shall be binding upon Investor, each
future holder of all the Common Shares or Conversion Shares, and the Company.

7.6           Severability.  If
one or more provisions of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded from this Agreement and the
balance of this Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.

7.7           Entire Agreement.  This
Agreement, including the Exhibits and Schedules hereto, and the Agreements
constitute the entire agreement among the parties hereof with respect to the
subject matter hereof and thereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter hereof and thereof.  The
Note Purchase Agreement shall continue in full force and effect, except as
amended as part of the Contemplated Transactions.

 12
 

 

7.8           Further Assurances.  The
parties shall execute and deliver all such further instruments and documents
and take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.

7.9           Applicable Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to principles of conflicts of laws.

IN WITNESS WHEREOF, the
parties have executed this Stock Purchase Agreement as of the date first above
written.

	
  The Company:

  	
  INTERLEUKIN GENETICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Kenneth S. Kornman

  	
   

  
	
   

  	
   

  	
  Name: Kenneth S.
  Kornman

  
	
   

  	
   

  	
  Title: Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Investor:

  	
  PYXIS INNOVATIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Kim S. Mitchell

  	
   

  
	
   

  	
   

  	
  Name: Kim S.
  Mitchell

  
	
   

  	
   

  	
  Title: Assistant
  Secretary

  

 

 13

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