Document:

Exhibit
10.43

AMENDMENT NO. 1 TO

CONSULTING SERVICES AGREEMENT

This Amendment No.
1 to the Consulting Services Agreement between Synopsys, Inc. (“Synopsys”) and
A. Richard Newton (“Consultant”) dated November 1, 2001 (the “Agreement”) is
hereby entered into and effective on September 6, 2006.

WHEREAS, Synopsys and Consultant are party to the Agreement by which Consultant provides
advice concerning long-term technology strategy and industry development issues, as well as assistance in identifying opportunities
for partnerships with academia.

WHEREAS, Synopsys
and Consultant wish to amend the Agreement in order to reduce the compensation
payable to Consultant thereunder.

NOW THEREFORE, in
exchange for good and sufficient consideration, the parties agree as follows:

1.               Amendment of Exhibit B. Exhibit B to the Agreement is hereby
deleted and replaced with Exhibit B hereto.

2.               No Other Amendment. Except as amended hereby, all terms of the
Agreement shall continue in full force and effect.

The
parties have executed this amendment on the date set forth above.

 

	
  CONSULTANT

  	
  SYNOPSYS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ A. Richard Newton

  	
   

  	
  By: 

  	
  /s/ Christopher K. Sadeghian

  	
   

  
	
  A. Richard Newton

  	
   

  
	
   

  	
  Title:

  	
  Assistant Secretary

  	
   

  
							

 

EXHIBIT B

Compensation

During the term of this Agreement, Consultant shall be paid a fee of
$8,333.34 per month.Exhibit 10.12

EQUITY PURCHASE AGREEMENT

This Equity Purchase Agreement (“Agreement”) is made
as of May 16, 2006, by Zumiez
Inc., a Washington corporation (“Buyer”), Gerald R. Anderson, an
individual resident in Texas (“Anderson”), Brandon C. Batton, an
individual resident in Texas (“Batton”), AC Fast Forward LLC, a
Texas limited liability company (“ACFF”), and AC
Fast Forward Mgt., LLC, a Texas limited liability company (“ACFF Mgt”).
Batton, Anderson, ACFF and ACFF Mgt. are referred to herein collectively as “Sellers”.

RECITALS

Sellers desire to sell, and Buyer desires to purchase,
all of the issued and outstanding general and limited partnership interests
(the “Partnership Units”) of Action Concepts Fast Forward,
Ltd., a Texas limited partnership (the “Company”), for the consideration and on the
terms set forth in this Agreement.

AGREEMENT

The parties, intending to be legally bound, agree as
follows: 

1.             DEFINITIONS

For purposes of this Agreement, the following terms
have the meanings specified or referred to in this Section 1:

“Adjustment Escrow Amount” is
defined in Section 2.4(c).

“Aggregate Deemed Sales Price” means
an amount resulting from the Election, determined pursuant to Treasury
Regulation Section 1.338-4.

“Agreement” means
this Equity Purchase Agreement.

“Accounts Receivable” is
defined in Section 3.8.

“Applicable Contracts” means
any Contract (a) under which the Company has or may acquire any rights, (b)
under which the Company has or may become subject to any obligation or
liability, or (c) by which the Company or any of the assets owned or used by it
is or may become bound.

“Asset Sale After Tax Amount” means
an amount equal to the remainder of (i) the total consideration to be paid to
the Sellers by Buyer minus (ii) the total amount of taxes to be incurred by the
Sellers as a result of the transactions contemplated hereby, and assuming that
the Election is made and that the Sellers are subject to income taxation at the
highest marginal tax rate applicable to individual taxpayers.

“Balance Sheets” is
defined in Section 3.4.

 

 

“Best Efforts” means
the efforts that a prudent Person desirous of achieving a result would use in
similar circumstances to ensure that such result is achieved as expeditiously
as possible.

“Breach” means a
breach of a representation, warranty, covenant, obligation, or other provision
of this Agreement or any instrument delivered pursuant to this Agreement. A “Breach”
will be deemed to have occurred if there is or has been (a) any inaccuracy in
or breach of, or any failure to perform or comply with, such representation,
warranty, covenant, obligation, or other provision, or (b) any claim (by any
Person) or other occurrence or circumstance that is or was inconsistent with
such representation, warranty, covenant, obligation, or other provision, and
the term “Breach” means any such inaccuracy, breach, failure, claim,
occurrence, or circumstance.

“Buyer” is defined
in the first paragraph of this Agreement.

“Buyer’s Advisors” is
defined in Section 5.1.

“Buyer’s Closing Documents” is
defined in Section 4.2(a).

“Closing” is
defined in Section 2.3.

“Closing Date” means
the date and time as of which the Closing actually takes place.

“Company” as
defined in the Recitals of this Agreement.

“Consent” means any
approval, consent, ratification, waiver, or other authorization (including any
Governmental Authorization).

“Contemplated Transactions” means
all of the transactions contemplated by this Agreement, including:

(a)           the sale
of the Membership Interests/Units by Sellers to Buyer;

(b)           the execution,
delivery, and performance of the Noncompetition Agreements, the Sellers’
Releases, and the Escrow Agreement;

(c)           the
performance by Buyer and Sellers of their respective covenants and obligations
under this Agreement; and

(d)           Buyer’s
acquisition and ownership of the Partnership Units and exercise of control over
the Company.

“Contract” means
any agreement, contract, obligation, promise, or undertaking (whether written
or oral and whether express or implied) that is legally binding.

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“Copyrights” is defined
in Section 3.22(a)(iii).

“Damages” is
defined in Section 11.2.

“Deemed Sales Price Allocation” means
the allocation of Aggregate Deemed Sales Price among the assets of the Company
in accordance with the principles of Treasury Regulation Sections 1.338-6 and
1.338-7.

“Disclosure Letter” means
the Disclosure Letter delivered by Sellers to Buyer concurrently with the
execution and delivery of this Agreement.

“Election” is
defined in Section 7.3(d).

“Election Price Adjustment Amount” shall
be equal to sum of (i) the difference between the Partnership Unit Sale After
Tax Amount and Asset Sale After Tax Amount plus (ii) an additional full “gross-up”
payment to compensate the Sellers for the fact that the payment relating to the
additional tax liabilities and the “gross-up” payment, shall also be subject to
taxation. The parties intend that this amount place the Sellers in the same
after-tax position that they would have been in had the Election not been made.

“Encumbrance” means
any charge, claim, community property interest, condition, equitable interest,
lien, option, pledge, security interest, right of first refusal, or restriction
of any kind, including any restriction on use, voting, transfer, receipt of
income, or exercise of any other attribute of ownership.

“Environment” means
soil, land surface or subsurface strata, surface waters (including navigable
waters, ocean waters, streams, ponds, drainage basins, and wetlands),
groundwaters, drinking water supply, stream sediments, ambient air (including
indoor air), plant and animal life, and any other environmental medium or
natural resource.

“Environmental, Health, and Safety
Liabilities” means any cost, damages, expense, liability,
obligation, or other responsibility arising from or under Environmental Law or
Occupational Safety and Health Law and consisting of or relating to:

(a)           any
environmental, health, or safety matters or conditions (including on-site or
off-site contamination, occupational safety and health, and regulation of
chemical substances or products);

(b)           fines,
penalties, judgments, awards, settlements, legal or administrative proceedings,
damages, losses, claims, demands and response, investigative, remedial, or inspection
costs and expenses arising under Environmental Law or Occupational Safety and Health
Law;

(c)           financial
responsibility under Environmental Law or Occupational Safety and Health Law
for cleanup costs or corrective action, including any investigation, cleanup, removal,
containment, or other remediation or response actions (“Cleanup”) required
by

 3
 

 

applicable
Environmental Law or Occupational Safety and Health Law (whether or not such
Cleanup has been required or requested by any Governmental Body or any other
Person) and for any natural resource damages; or

(d)           any other
compliance, corrective, investigative, or remedial measures required under
Environmental Law or Occupational Safety and Health Law.

The
terms “removal,” “remedial,” and “response
action,” include the types of activities covered by the United
States Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. § 9601 et seq., as amended (“CERCLA”).

“Environmental Law” any
Legal Requirement that requires or relates to:

(a)           advising
appropriate authorities, employees, and the public of intended or actual
releases of pollutants or hazardous substances or materials, violations of
discharge limits, or other prohibitions and of the commencement of activities,
such as resource extraction or construction, that could have significant impact
on the Environment;

(b)           preventing
or reducing to acceptable levels the release of pollutants or hazardous
substances or materials into the Environment;

(c)           reducing the
quantities, preventing the release, or minimizing the hazardous characteristics
of wastes that are generated;

(d)           assuring
that products are designed, formulated, packaged, and used so that they do not
present unreasonable risks to human health or the Environment when used or disposed
of;

(e)           protecting
resources, species, or ecological amenities;

(f)            reducing
to acceptable levels the risks inherent in the transportation of hazardous
substances, pollutants, oil, or other potentially harmful substances;

(g)           cleaning
up pollutants that have been released, preventing the threat of release, or
paying the costs of such clean up or prevention; or

(h)           making
responsible parties pay private parties, or groups of them, for damages done to
their health or the Environment, or permitting self-appointed representatives
of the public interest to recover for injuries done to public assets.

“ERISA” means the Employee Retirement
Income Security Act of 1974 or any successor law, and regulations and rules
issued pursuant to that Act or any successor law.

“Escrow Agreement” is defined in Section
2.4(c).

“Escrow Income” shall have the meaning set
forth in the Escrow Agreement.

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“Estimated Working Capital” is defined in
Section 2.5(a). 

“Estimated Working Capital Excess Amount” is
defined in Section 2.5(a)(ii). 

“Estimated Working Capital Statement” is
defined in Section 2.5(a). 

“Final Working Capital Statement” is
defined in Section 2.5(b).

“Facilities” means
any real property, leaseholds, or other interests currently or formerly owned
or operated by the Company and any buildings, plants, structures, or equipment
(including motor vehicles, tank cars, and rolling stock) currently or formerly
owned or operated by the Company.

“Firm” means the
Los Angeles, California office of Houlihan Lokey Howard & Zukin or, if not
available, another nationally recognized consulting or valuation firm mutually
and reasonably satisfactory to the Buyer and the Members. If the Buyer and the
Members are unable to agree on the choice of a consulting firm with expertise
in financial analysis, they will select a nationally or regionally recognized
consulting firm with expertise in financial analysis by lot after each of (i)
the Buyer and (ii) the Members have submitted two proposed firms, and then
excluded one firm selected by the other.

“GAAP” means
generally accepted United States accounting principles applied on a basis
consistent with the basis on which the Balance Sheets and the other financial
statements referred to in Section 3.4(b) were prepared.

“Governmental Authorization” means
any approval, consent, license, permit, waiver, or other authorization issued,
granted, given, or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.

“Governmental Body” means
any:

(a)           nation,
state, county, city, town, village, district, or other jurisdiction of any
nature;

(b)           federal,
state, local, municipal, foreign, or other government;

(c)           governmental
or quasi-governmental authority of any nature (including any governmental
agency, branch, department, official, or entity and any court or other
tribunal);

(d)           multi-national
organization or body; or

(e)           body
exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory, or taxing authority or power of any nature.

 5
 

 

“Hazardous Activity” means
the distribution, generation, handling, importing, management, manufacturing,
processing, production, refinement, Release, storage, transfer, transportation,
treatment, or use (including any withdrawal or other use of groundwater) of
Hazardous Materials in, on, under, about, or from the Facilities or any part
thereof into the Environment.

“Hazardous Materials” means
any waste or other substance that is listed, defined, designated, or classified
as, or otherwise determined to be, hazardous, radioactive, or toxic or a
pollutant or a contaminant under or pursuant to any Environmental Law,
including any admixture or solution thereof, and specifically including
petroleum and all derivatives thereof or synthetic substitutes therefor and
asbestos or asbestos-containing materials.

“Indemnification Escrow Amount” is
defined in Section 2.4(c).

“Indemnified Persons” is
defined in Section 11.2.

“Intellectual Property Assets” is defined in Section 3.22(a).

“Interim Balance Sheets” is
defined in Section 3.4.

“IRC” means the
Internal Revenue Code of 1986 or any successor law and regulations issued by
the IRS pursuant to the Internal Revenue Code or any successor law.

“IRS” means the
United States Internal Revenue Service or any successor agency, and, to the
extent relevant, the United States Department of the Treasury.

“Knowledge” means
that an individual will be deemed to have “Knowledge” of a particular fact or
other matter if:

(a)           such
individual is actually aware of such fact or other matter; or

(b)           a prudent
individual could be expected to discover or otherwise become aware of such fact
or other matter in the course of conducting a reasonably comprehensive investigation
concerning the existence of such fact or other matter.

A
Person (other than an individual) will be deemed to have Knowledge of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, member, partner, executor, or trustee
of such Person (or in any similar capacity) has, or at any time had, Knowledge
of such fact or other matter.

“Leases” is defined
in Section 3.6.

“Legal Requirement” means
any federal, state, local, municipal, foreign, international, multinational, or
other administrative order, constitution, law, ordinance, principle of common
law. regulation, statute, or treaty.

 6
 

 

 

“Long Term Debt” means
the amount owed at Closing pursuant to that certain WMCA Reducing Revolver SM No. 552-07108 and Security
Agreement dated October 27, 2005 between Merrill Lynch Business Financial
Services Inc. and Action Concepts Fast Forward, Ltd.

“Marks” is defined
in Section 3.22(a)(i).

“Noncompetition Agreements” is
defined in Section 2.4(a)(iv).

“Occupational Safety and Health Law” means
any Legal Requirement designed to provide safe and healthful working conditions
and to reduce occupational safety and health hazards, and any program, whether
governmental or private (including those promulgated or sponsored by industry
associations and insurance companies), designed to provide safe and healthful
working conditions.

“Order” means any
award, decision, injunction, judgment, order, ruling, subpoena, or verdict
entered, issued, made, or rendered by any court, administrative agency, or
other Governmental Body or by any arbitrator.

“Ordinary Course of Business” means
that an action taken by a Person will be deemed to have been taken in the “Ordinary
Course of Business” only if:

(a)           such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person;

(b)           such
action is not required to be authorized by the board of directors of such
Person (or by any Person or group of Persons exercising similar authority); and

(c)           such
action is similar in nature and magnitude to actions customarily taken, without
any authorization by the board of directors (or by any Person or group of
Persons exercising similar authority), in the ordinary course of the normal
day-to-day operations of other Persons that are in the same line of business as
such Person.

“Organizational Documents” means
(a) the articles or certificate of incorporation and the bylaws of a
corporation; (b) the partnership agreement and any statement of partnership of
a general partnership; (c) the limited partnership agreement and the
certificate of limited partnership of a limited partnership; (d) the limited
liability company agreement and the certificate of formation of a limited
liability company; (e) any charter or similar document adopted or filed in
connection with the creation, formation, or organization of a Person; and (f)
any amendment to any of the foregoing.

“Partnership Units” is
defined in the Recitals of this Agreement.

“Partnership Unit Sale After Tax
Amount” means an amount equal to the remainder of the total
consideration to be paid to the Sellers by Buyer, minus the total amount of
taxes to be incurred by the Sellers as a result of the transactions
contemplated hereby, and assuming that the Election is not made, and that the
difference between the total consideration paid to the Sellers

 7
 

 

by
Buyer and the adjusted basis of the Partnership Units is taxed to the Sellers
as a long-term capital gain at the maximum rate applicable thereto.

“Patents” is
defined in Section 3.22(a)(ii).

“Person” means any
individual, corporation (including any non-profit corporation), general or
limited partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or Governmental Body.

“Plan” is defined
in Section 3.13(a).

“Pre-Closing Taxes” means
Taxes attributable to the Pre-Closing Tax Period.

“Pre-Closing Tax Period” means
any Tax period or portion thereof ending on or before the Closing Date.

“Proceeding” means
any action, arbitration, audit, hearing, investigation, litigation, or suit
(whether civil, criminal, administrative, investigative, or informal)
commenced, brought, conducted, or heard by or before, or otherwise involving,
any Governmental Body or arbitrator.

“Proprietary Rights Agreement” is
defined in Section 3.20(b).

“Purchase Price” is
defined in Section 2.2.

“Related Person” means,
with respect to a particular individual:

(a)           each other
member of such individual’s Family;

(b)           any Person
that is directly or indirectly controlled by such individual or one or more
members of such individual’s Family;

(c)           any Person
in which such individual or members of such individual’s Family holds
(individually or in the aggregate) a Material Interest; and

(d)           any Person
with respect to which such individual or one or more members of such individual’s
Family serves as a director, officer, partner, executor, or trustee (or in a similar
capacity).

With respect to a
specified Person other than an individual:

(a)           any Person
that directly or indirectly controls, is directly or indirectly controlled by,
or is directly or indirectly under common control with, such specified Person;

(b)           any Person
that holds a Material Interest in such specified Person;

 8
 

 

(c)            each
Person that serves as a director, officer, partner, executor, or trustee of
such specified Person (or in a similar capacity);

(d)           any Person
in which such specified Person holds a Material Interest;

(e)            any
Person with respect to which such specified Person serves as a general partner
or a trustee (or in a similar capacity); and

(f)            any
Related Person of any individual described in clause (b) or (c).

For
purposes of this definition, (a) the “Family”
of an individual includes (i) the individual, (ii) the individual’s
spouse and former spouses, (iii) any other natural person who is related to the
individual or the individual’s spouse within the second degree, and (iv) any
other natural person who resides with such individual, and (b) “Material Interest” means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 20% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 20% of the
outstanding equity securities or equity interests in a Person.

“Release” means any
spilling, leaking, emitting, discharging, depositing, escaping, leaching,
dumping, or other releasing into the Environment, whether intentional or
unintentional.

“Representative” means
with respect to a particular Person, any director, officer, employee, agent,
consultant, advisor, or other representative of such Person, including legal
counsel, accountants, and financial advisors.

“Securities Act” means
the Securities Act of 1933 or any successor law and regulations and rules
issued pursuant to that Act or any successor law.

“Sellers” is
defined in the first paragraph of this Agreement.

“Sellers’ Closing Documents” is
defined in Section 3.2(a).

“Sellers’ Releases” is
defined in Section 2.4(a)(ii).

“Short Term Debt” means
the amount owed at Closing pursuant to that certain WCMA Line of Credit No.
552-07M38 dated November 11, 2000 between Merrill Lynch Business Financial
Services Inc. and Action Concepts Fast Forward, Ltd., as amended April 29,
2005, but only to the extent loan proceeds were utilized in the ordinary course
of business for non-capital expenditures.

“Subsidiary” means
with respect to any Person (the “Owner”), any corporation or other Person of
which securities or other interests having the power to elect a majority of
that corporation’s or other Person’s board of directors or similar governing
body, or otherwise having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests having
such power only upon the happening of a contingency that has

 9
 

 

not
occurred) are held by the Owner or one or more of its Subsidiaries; when used
without reference to a particular Person, “Subsidiary”
means a Subsidiary of the Company.

“Targeted Working Capital Requirement”
is defined in Section 2.5(a).

“Tax” means any Federal, state,
local, and foreign taxes, assessments and governmental charges of a similar
nature (whether imposed directly or through withholdings), including any
interest, penalties, and additions to tax applicable thereto.

“Tax Return” means
any return (including any information return), report, statement, schedule,
notice, form, or other document or information filed with or submitted to, or
required to be filed with or submitted to, any Governmental Body in connection
with the determination, assessment, collection, or payment of any Tax or in
connection with the administration, implementation, or enforcement of or
compliance with any Legal Requirement relating to any Tax.

“Threat of Release” means
a substantial likelihood of a Release that may require action in order to
prevent or mitigate damage to the Environment that may result from such
Release.

“Threatened” means
that a claim, Proceeding, dispute, action, or other matter will be deemed to
have been threatened if any demand or statement has been made (orally or in
writing) or any notice has been given (orally or in writing), or if any other
event has occurred or any other circumstances exist, that would lead a prudent
Person to conclude that such a claim, Proceeding, dispute, action, or other
matter is likely to be asserted, commenced, taken, or otherwise pursued in the
future.

“Trade Secrets” is
defined in Section 3.22(a)(ii).

“Treasury Regulations” means
the Treasury Regulations promulgated under the IRC, as amended and in effect
(including corresponding provisions of any succeeding regulations).

“Working Capital” is
defined in Section 2.5(a). 

“Working Capital Shortfall Amount” is
defined in Section 2.5(d)(i). 

“Working Capital Excess Amount” is
defined in Section 2.5(d)(ii). 

2.             SALE AND TRANSFER OF PARTNERSHIP UNITS;
CLOSING 

2.1.         Partnership Units.

Subject to the terms and conditions of this Agreement,
at the Closing, Sellers will sell and transfer all of their general and limited
Partnership Units in the Company to Buyer, and Buyer will purchase such
Partnership Units from Sellers.

 10

 

2.2.         Purchase Price.

The purchase price (the “Purchase Price”) for
the Partnership Units will be $14,000,000, including the payment and
satisfaction of the Long Term Debt.

2.3.         Closing.

The purchase and sale (the “Closing”)
provided for in this Agreement will take place at the offices of Buyer’s
counsel at 701 Fifth Avenue, Suite 3600, Seattle, Washington, 98104, at 10:00
a.m. (local time) on the later of (i) May 31, 2006 or (ii) at such other time
and place as the parties may agree. Subject to the provisions of Section 10,
failure to consummate the purchase and sale provided for in this Agreement on
the date and time and at the place determined pursuant to this Section 2.3 will
not result in the termination of this Agreement and will not relieve any party
of any obligation under this Agreement.

2.4.         Closing Obligations.

At the Closing:

(a)           Sellers
will deliver to Buyer:

(i)            certificates
representing the Partnership Units, duly endorsed (or accompanied by duly
executed transfer powers), for transfer to Buyer;

(ii)           releases
in the form of Exhibit 2.4(a)(ii) executed by Sellers (collectively, “Sellers’ Releases”);

(iii)          landlord
consents in the form of Exhibit 2.4(a)(iii), executed by landlords for
all Leases (collectively, “Landlord Consents”);

(iv)          noncompetition
agreements in the form of Exhibit 2.4(a)(iv), executed by Sellers,
B&G Light Speed Industries, L.P., and B&G Light Speed Management, LLC,
a Texas limited liability company (collectively, the “Noncompetition Agreements”); and

(v)           a
certificate executed by Sellers representing and warranting to Buyer that each
of Sellers’ representations and warranties in this Agreement was accurate in
all respects as of the date of this Agreement and is accurate in all respects
as of the Closing Date as if made on the Closing Date (giving full effect to
any supplements to the Disclosure Letter that were delivered by Sellers to
Buyer prior to the Closing Date in accordance with Section 5.5); and

(b)           Buyer will
deliver to Sellers:

(i)            the
complete pay off amount as of the Closing Date of the Long Term Debt and the
Short Term Debt by wire transfer to Merrill Lynch Business Financial Services,
Inc.;

 11
 

 

(ii)           the sum of
$360,000 to the escrow agent referred to in Section 2.4(c) by wire transfer;

(iii)          the
balance of the Purchase Price by wire transfer to accounts specified by
Anderson and Batton, respectively: 50% to Anderson; and 50% to Batton;

(iv)          a
certificate executed by Buyer to the effect that, except as otherwise stated in
such certificate, each of Buyer’s representations and warranties in this
Agreement was accurate in all respects as of the date of this Agreement and is
accurate in all respects as of the Closing Date as if made on the Closing Date;
and

(v)           an option
agreement in the form of Exhibit 2.4(b)(v) executed by Buyer and the Company
(the “Option Agreement”).

(c)           Buyer and
Sellers will enter into an escrow agreement in the form of Exhibit 2.4(c)
(the “Escrow Agreement”) with Bank of America, N.A. The
initial escrow amount will be $360,000 (the “Escrow
Amount”). The initial
Escrow Amount will be reduced to $250,000 when the adjustment referred to in
Section 2.5 has been completed. $250,000 of the Escrow Amount, together with
all Escrow Income, is referred to herein as the “Indemnification Escrow Amount”, and $110,000.00 of the Escrow Amount is referred to herein as
the “Adjustment Escrow Amount”. The Escrow Agreement will terminate
two (2) years after the Closing Date.

2.5.         Purchase Price Adjustment.

(a)           At least
two Business Days prior to the Closing Date, the Company shall deliver to the
Buyer a statement (the “Estimated Working
Capital Statement”) reflecting
its good faith estimate of the Working Capital of the Company as of the Closing
Date (the “Estimated Working Capital”). For this purpose, “Working Capital” shall mean current assets
minus current liabilities (excluding Short Term Debt) determined in accordance
with GAAP.

(i)            If the
Estimated Working Capital is less than $720,000 (such dollar amount, the “Targeted Working Capital Requirement”), the Purchase Price shall be reduced
by one dollar for every dollar by which the Working Capital Requirement exceeds
the Estimated Working Capital.

(ii)           If the
Estimated Working Capital exceeds the amount of the Targeted Working Capital
Requirement, the Purchase Price shall be increased by one dollar for every
dollar by which the Estimated Working Capital exceeds such Targeted Working
Capital Requirement (the “Estimated Working
Capital Excess Amount”). The
Estimated Working Capital Excess Amount shall be paid by Buyer to Sellers in
immediately available funds by wire transfer at Closing.

(b)           Within
thirty (30) days after the Closing Date, the Buyer shall deliver to the Sellers
a draft statement of the Working Capital of the Company as of the close of
business

 12
 

 

on
the Closing Date (the “Final Working Capital
Statement”). The Final Working Capital Statement shall be prepared
in accordance with GAAP applied on a consistent basis, provided, however, that
the valuation of inventory shall be determined as set for in Subsection (e)
below. The Buyer shall deliver to the Sellers the Final Working Capital
Statement, together with worksheets and data that support the Final Working
Capital Statement and any other information that the Sellers may reasonably
request in order to verify the amounts reflected on the Final Working Capital
Statement.

(c)           Following
delivery of the Final Working Capital Statement, the Sellers, upon reasonable
advance notice, may make inquiry of the Representatives of the Company. The Final
Working Capital Statement shall be binding and conclusive upon, and deemed
accepted by, the Sellers unless the Sellers shall have notified the Buyer in
writing on or prior to the date that is sixty (60) Business Days after receipt
of the Final Working Capital Statement, of any objections thereto to the extent
that the Sellers believe any information set forth in the Final Working Capital
Statement is incorrect. If the Buyer and the Sellers cannot mutually agree on
any proposed modifications, the parties shall submit in writing to the Firm
their respective positions with respect to the disputed items or amounts for
purposes of calculating the Working Capital at Closing. In making such
calculation, the Firm shall be instructed to consider only those items or amounts
in the computation of the Working Capital of the Company at Closing in dispute.
The Firm shall deliver to the Buyer and the Sellers as promptly as possible,
but in no event later than twenty (20) Business Days of its appointment, a
report setting forth such calculation. Such report will be final, conclusive
and binding upon the parties. The fees and expenses associated with such a
review shall be borne by the non-prevailing party, which shall be the party
whose written position submitted to the Firm is, in the opinion of the Firm,
farthest from that determined by the Firm.

(d)           Adjustment.

(i)            If the
amount of the Working Capital of the Company as reflected on the Final Working
Capital Statement (the “Final Working Capital”), or as finally determined under
Subsection (c) above, is less than the amount of the Working Capital of the
Companies reflected on the Estimated Working Capital Statement, the Purchase
Price shall be decreased by one dollar for every dollar by which such Estimated
Working Capital exceeds the Final Working Capital. The amount of such excess
(the “Working Capital Shortfall Amount”) shall be paid to the Buyer by the
Escrow Agent from the Adjustment Escrow Amount in immediately available funds
by wire transfer in accordance with the Escrow Agreement. If the Working Capital
Shortfall Amount exceeds the Adjustment Escrow Amount, the difference shall be
paid by Sellers to Buyer in immediately available funds by wire transfer.

(ii)           If the
amount of the Final Working Capital exceeds the amount of the Estimated Working
Capital of the Company reflected on the Estimated Working Capital Statement,
the Purchase Price shall be increased by one dollar for every dollar by which
the Final Working Capital exceeds such Estimated Working Capital (the “Working Capital Excess Amount”). The Working Capital Excess Amount
shall be paid by Buyer to Sellers in immediately available funds by wire
transfer.

 13
 

 

(e)           Taking
of Physical Inventory; Final Inventory Value. The value of the closing
inventory to be included in the Final Working Capital Statement shall be
determined based on a physical inventory to be conducted immediately after the
close of business on the Closing Date. The Company and the Buyer shall cause a
physical count to be taken of the Inventory by Regis Inventory Specialist, the cost
of which shall be borne equally by the parties. The Buyer and the Sellers and
their Representatives may be present during the taking of the physical
inventory and may conduct such reasonable testing of the count during the
course of the physical inventory. The parties agree that no value shall be
assigned to inventory mutually determined unsaleable by the parties or to stock
on consignment, and the Sellers may at their option, remove any such Inventory
to which no value has been assigned. The value of Inventory shall be determined
by such physical count and based on the lower of cost or market or net
realizable value on a first in-first out basis. The value of the inventory as
determined above shall be set forth in a written document by the Firm and shall
be binding on the parties hereto.

2.6.         Post Closing Prorations and
Other Payment Obligations.

Within eighteen (18) months after the Closing Date,
the Buyer shall deliver to the Sellers a statement of post-closing charges or
credits under all of the Leases related to common area maintenance adjustments,
taxes, utilities, percentage rent audits and other adjustments allowed under
each Leases (“Post-Closing Lease Adjustments”). No payments shall be
required by either the Buyer or the Sellers unless such party’s obligation to
make a payment or right to a credit, based such parties prorated amount of all
Post-Closing Lease Adjustments, is in excess of $10,000.00. The Post-Closing
Lease Adjustments shall be prorated as of the close of Business on the Closing
Date. For the period prior to the Closing Date, Sellers shall be responsible
for payment of all charges and shall have a right to receive all credits due
under the Leases. For the period after the Closing Date, Buyer shall be
responsible for payment of all charges and shall have a right to all credits
due under the Leases. If payment is due to Buyer from the Sellers for
Post-Closing Lease Adjustments, the amount of such payment shall be paid to
Buyer by the Escrow Agent from the Escrow Holdback in immediately available
funds by wire transfer in accordance with the Escrow Agreement. If the Escrow
Holdback is less than the amount required for such payment, the Sellers shall
make prompt payment to Buyer of the amount due in immediately available funds
by wire transfer. If payment is due to the Sellers for Post-Closing Lease
Adjustments, Buyer shall make prompt payment to the Sellers of the amount due
in immediately available funds by wire transfer.

3.             REPRESENTATIONS AND WARRANTIES OF SELLERS

Sellers represent and warrant to Buyer as follows: 

3.1.         Organization and Good Standing.

(a)           Part 3.1
of the Disclosure Letter contains a complete and accurate list for the Company
of its name, its jurisdiction of incorporation, other jurisdictions in which it
is authorized to do business, and its capitalization (including the identity of
each Seller and the number of Partnership Units held by each). The Company is a
limited partnership duly organized, validly existing, and in good standing
under the laws of its jurisdiction of formation, with full power and authority
to conduct its business as it is now being conducted, to own or use

 14
 

 

the
properties and assets that it purports to own or use, and to perform all its
obligations under Applicable Contracts. To the Knowledge of the Sellers and the
Company, the Company is duly qualified to do business as a foreign limited
partnership and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification.

(b)           Sellers
have delivered to Buyer copies of the Organizational Documents of the Company,
as currently in effect.

3.2.         Authority; No Conflict.

(a)           This
Agreement constitutes the legal, valid, and binding obligation of Sellers,
enforceable against Sellers in accordance with its terms. Upon the execution
and delivery by Sellers of the Escrow Agreement, the Sellers’ Releases, the
Noncompetition Agreements, and the Landlord’s Consent (collectively, the “Sellers’ Closing Documents”), the Sellers’ Closing Documents will
constitute the legal, valid, and binding obligations of Sellers, enforceable
against Sellers in accordance with their respective terms. Sellers have the
absolute and unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and the Sellers’ Closing Documents and to perform their
obligations under this Agreement and the Sellers’ Closing Documents.

(b)           Except as
set forth in Part 3.2 of the Disclosure Letter, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):

(i)            contravene,
conflict with, or result in a violation of (A) any provision of the
Organizational Documents of the Company, or (B) any resolution adopted by the
board of directors or the members of the Company;

(ii)           contravene,
conflict with, or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the Contemplated Transactions or to
exercise any remedy or obtain any relief under, any Legal Requirement or any
Order to which the Company or either Seller, or any of the assets owned or used
by the Company, may be subject;

(iii)          contravene,
conflict with, or result in a violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any Governmental Authorization that is held by the
Company or that otherwise relates to the business of, or any of the assets
owned or used by, the Company;

(iv)          cause Buyer
or the Company to become subject to, or to become liable for the payment of,
any Tax (other than expressly provided for herein);

(v)           cause any
of the assets owned by the Company to be reassessed or revalued by any taxing
authority or other Governmental Body;

 15
 

 

(vi)          contravene,
conflict with, or result in a violation or breach of any provision of, or give
any Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any Applicable Contract; or

(vii)         result
in the imposition or creation of any Encumbrance upon or with respect to any of
the assets owned or used by the Company.

Except
as set forth in Part 3.2 of the Disclosure Letter, no Seller or the Company is
or will be required to give any notice to or obtain any Consent from any Person
in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.

3.3.         Capitalization.

The authorized equity of the Company consists of
100,000 Partnership Units, all of which are issued and outstanding and owned as
follows: (a) 49,900 Limited Partnership Units owned by each of Batton and
Anderson; (b) 100 General Partnership Units owned by ACFF Mgt; and (c) 100
General Partnership Units owned by ACFF. Sellers are and will be on the Closing
Date the record and beneficial owners and holders of the Partnership Units,
free and clear of all Encumbrances. All of the outstanding Partnership Units of
the Company are owned free and clear of all Encumbrances. No legend or other
reference to any purported Encumbrance appears upon any certificate
representing Partnership Units of the Company. All of the outstanding
Partnership Units of the Company have been duly authorized and validly issued
and are fully paid and nonassessable. There are no Contracts relating to the
issuance, sale, or transfer of any Partnership Units or other securities of the
Company. None of the outstanding equity securities or other securities of the
Company was issued in violation of the Securities Act or any other Legal
Requirement. The Company does not own, or have any Contract to acquire, any
equity securities or other securities of any Person (other than Company) or any
direct or indirect equity or ownership interest in any other business.

3.4.         Financial Statements.

Sellers have delivered to Buyer: (a) audited balance sheets
(the “Balance Sheets”) of the Company as of December 31 in
each of the years 2003 through 2005, and the related audited statements of
income, changes in members’ equity, and cash flow for each of the fiscal years
then ended, together with the report thereon of Weaver and Tidwell, independent
certified public accountants, and (b) an unaudited balance sheet of the Company
as of the end of each month beginning with February, 2006, (the “Interim Balance Sheets”) and the related unaudited statements
of income, changes in members’ equity, and cash flow for the months then ended,
including in each case the notes thereto or monthly reporting commentary, if
available. Such financial statements and notes fairly present the financial
condition and the results of operations, changes in members’ equity, and cash
flow of the Company at the respective dates of and for the periods referred to
in such financial statements, all in accordance with GAAP; subject, in the case
of interim financial statements, to normal recurring year-end adjustments (the

 16
 

 

effect
of which will not, individually or in the aggregate, be materially adverse) and
the absence of notes (that, if presented, would not differ materially from
those included in the Balance Sheet); the financial statements referred to in
this Section 3.4 reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to
such financial statements. No financial statements of any Person other than the
Company are required by GAAP to be included in the consolidated financial
statements of the Company.

3.5.         Books and Records.

The books of account, minute books, equity record
books, and other records of the Company, all of which have been made available
to Buyer, are complete and correct and have been maintained in accordance with
sound business practices and the requirements of Section 13(b)(2) of the
Securities Exchange Act of 1934, as amended (regardless of whether or not the
Company is subject to that Section), including the maintenance of an adequate
system of internal controls. The minute books of the Company contain accurate
and complete records of all meetings held of, and company action taken by, the
members with or without a meeting. At the Closing, all of those books and
records will be in the possession of the Company.

3.6.         Title to Properties; Encumbrances.

Part 3.6 of the Disclosure Letter contains a complete
and accurate list of all real property leaseholds or other real property
interests therein leased by the Company (the “Leases”).
The Company does not own any real property. The Company owns all the properties
and assets (whether personal or mixed and whether tangible or intangible) that
it purports to own located in the facilities operated by the Company, including
all of the properties and assets reflected in the Balance Sheet and the Interim
Balance Sheet (except for assets held under capitalized leases disclosed or not
required to be disclosed in Part 3.6 of the Disclosure Letter and personal property
sold since the date of the Balance Sheet and the Interim Balance Sheet, as the
case may be, in the Ordinary Course of Business), and all of the properties and
assets purchased or otherwise acquired by the Company since the date of the
Balance Sheet (except for personal property acquired and sold since the date of
the Balance Sheet in the Ordinary Course of Business and consistent with past
practice), which subsequently purchased or acquired properties and assets
(other than inventory and short-term investments) are listed in Part 3.6 of the
Disclosure Letter. All material properties and assets reflected in the Balance
Sheet and the Interim Balance Sheet are free and clear of all Encumbrances
except, with respect to all such properties and assets, (a) security interests
shown on the Balance Sheet or the Interim Balance Sheet as securing specified
liabilities or obligations, with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a default) exists, (b)
security interests incurred in connection with the purchase of property or
assets after the date of the Interim Balance Sheet (such security interests
being limited to the property or assets so acquired), with respect to which no
default (or event that, with notice or lapse of time or both, would constitute
a default) exists, and (c) liens for current taxes not yet due.

 17
 

 

3.7.         Condition and Sufficiency of Assets.

The real property leaseholds, the leasehold
improvements and equipment of the Company are structurally sound, are in good
operating condition and repair, and are adequate for the uses to which they are
being put, and none of such buildings, leasehold improvements or equipment is
in need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The real property leaseholds,
leasehold improvements and equipment of the Company are sufficient for the
continued conduct of the Company’ businesses after the Closing in substantially
the same manner as conducted prior to the Closing.

3.8.         Accounts Receivable.

All accounts receivable of the Company that are
reflected on the Balance Sheets or the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date (collectively, the “Accounts Receivable”) represent or will represent valid
obligations arising from sales actually made, vendor credits, or other
receivables related to leases in the Ordinary Course of Business. Unless paid
prior to the Closing Date, the Accounts Receivable are or will be as of the
Closing Date current and collectible net of the respective reserves shown on
the Balance Sheet or the Interim Balance Sheet or on the accounting records of
the Company as of the Closing Date (which reserves are adequate and calculated consistent
with past practice and, in the case of the reserve as of the Closing Date, will
not represent a greater percentage of the Accounts Receivable as of the Closing
Date than the reserve reflected in the Interim Balance Sheet represented of the
Accounts Receivable reflected therein and will not represent a material adverse
change in the composition of such Accounts Receivable in terms of aging).
Subject to such reserves, each of the Accounts Receivable either has been or
will be collected in full, without any set-off, within ninety (90) days after
the day on which it first becomes due and payable. There is no contest, claim,
or right of set-off, other than returns in the Ordinary Course of Business,
under any Contract with any obligor of an Accounts Receivable relating to the
amount or validity of such Accounts Receivable. Part 3.8 of the Disclosure
Letter contains a complete and accurate list of all Accounts Receivable as of
the date of the Interim Balance Sheet, which list sets forth the aging of such
Accounts Receivable.

3.9.         Inventory.

All inventory of the Company, whether or not reflected
in the Balance Sheet or the Interim Balance Sheet, consists of a quality and
quantity usable and salable in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Balance Sheet or the
Interim Balance Sheet or on the accounting records of the Company as of the
Closing Date, as the case may be. All inventories not written off have been
priced at the lower of cost or market or net realizable value on a first in,
first out basis. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Company. Part 3.9 of the
Disclosure Letter contains a complete and accurate list of all open purchase
orders and the open to buy schedule for the remainder of calendar year 2006.

 18
 

 

3.10.       No Undisclosed Liabilities.

Except as set forth in Part 3.10 of the Disclosure
Letter, the Company has no liabilities or obligations of any nature (whether
known or unknown and whether absolute, accrued, contingent, or otherwise)
except for liabilities or obligations reflected or reserved against in the
Balance Sheet or the Interim Balance Sheet and current liabilities incurred in
the Ordinary Course of Business since the respective dates thereof.

3.11.       Taxes.

(a)            The
Company has filed or caused to be filed all Tax Returns that are or were
required to be filed by or with respect to any of them, either separately or as
a member of a group of corporations, pursuant to applicable Legal Requirements.
Sellers have delivered or made available to Buyer copies of, and Part 3.11 of the
Disclosure Letter contains a complete and accurate list of, all such Tax
Returns relating to income or franchise taxes filed through 2004. The Company
has paid, or made provision for the payment of, all Taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by Sellers or the Company.

(b)           There have
been no audits of any of the United States federal and state franchise Tax
Returns of the Company.

(c)            The
charges, accruals, and reserves with respect to Taxes on the respective books
of the Company are adequate (determined in accordance with GAAP) and are at
least equal to the Company’s liability for Taxes. There exists no proposed tax
assessment against the Company except as disclosed in the Balance Sheet or in
Part 3.11 of the Disclosure Letter. All Taxes that the Company is or was
required by Legal Requirements to withhold or collect have been duly withheld
or collected and, to the extent required, have been paid to the proper Governmental
Body or other Person.

(d)           All Tax
Returns filed by (or that include on a consolidated basis) the Company are
true, correct, and complete in all material respects. There is no tax sharing agreement
that will require any payment by the Company after the date of this Agreement.
The Company is a limited partnership that has elected to be treated as a
corporation for Federal income tax purposes and has an election to be treated
as an “S” corporation.

3.12.       No Material Adverse Change.

Since the date of the Balance Sheet, there has not
been any material adverse change in the business, operations, properties,
prospects, assets, or condition of the Company, and to the Knowledge of Sellers
and the Company no event has occurred or circumstance exists that may result in
such a material adverse change.

 19
 

 

3.13.       Employee Benefits.

(a)           As used in
this Section 3.13, the following terms have the meanings set forth below.

“Company Other Benefit Obligation” means
an Other Benefit Obligation owed, adopted, or followed by the Company or an
ERISA Affiliate of the Company.

“Company Plan” means
all Plans of which the Company or an ERISA Affiliate of the Company is or was a
Plan Sponsor, or to which the Company or an ERISA Affiliate of the Company
otherwise contributes or has contributed, or in which the Company or an ERISA
Affiliate of the Company otherwise participates or has participated. All
references to Plans are to Company Plans unless the context requires otherwise.

“Company VEBA” means
a VEBA whose members include employees of the Company or any ERISA Affiliate of
the Company.

“ERISA Affiliate” means,
with respect to the Company, any other person that, together with the Company,
would be treated as a single employer under IRC § 414.

“Multi-Employer Plan” has
the meaning given in ERISA § 3(37)(A).

“Other Benefit Obligations” means
all obligations, arrangements, or customary practices, whether or not legally
enforceable, to provide benefits, other than salary, as compensation for
services rendered, to present or former directors, employees, or agents, other
than obligations, arrangements, and practices that are Plans. Other Benefit
Obligations include consulting agreements under which the compensation paid
does not depend upon the amount of service rendered, sabbatical policies, severance
payment policies, and fringe benefits within the meaning of IRC § 132.

“PBGC” means the
Pension Benefit Guaranty Corporation, or any successor thereto.

“Pension Plan” has
the meaning given in ERISA § 3(2)(A).

“Plan” has the
meaning given in ERISA § 3(3).

“Plan Sponsor” has
the meaning given in ERISA § 3(16)(B).

“Qualified Plan” means
any Plan that meets or purports to meet the requirements of IRC § 401(a).

“Welfare Plan” has
the meaning given in ERISA § 3(1).

(b)           (i)            Part
3.13(i) of the Disclosure Letter contains a complete and accurate list of all
Company Plans, Company Other Benefit Obligations, and Company VEBAs,

 20

 

and
identifies as such all Company Plans that are (A) defined benefit Pension
Plans, (B) Qualified Plans, (C) Title IV Plans, or (D) Multi-Employer Plans.

(ii)           There are
no ERISA Affiliates of the Company. 

(iii)          Company
has no Multi-Employer Plans.

(iv)          Part
3.13(iv) of the Disclosure Letter sets forth a calculation of the liability of
the Company for post-retirement benefits other than pensions made in accordance
with Financial Accounting Statement 106 of the Financial Accounting Standards
Board, regardless of whether the Company is required by this Statement to
disclose such information.

(v)           Part
3.13(v) of the Disclosure Letter sets forth the financial cost of all
obligations owed under any Company Plan or Company Other Benefit Obligation
that is not subject to the disclosure and reporting requirements of ERISA.

(c)           Sellers
have delivered to Buyer, or will deliver to Buyer within ten (10) days of the
date of this Agreement:

(i)            all
documents that set forth the terms of each Company Plan, Company Other Benefit
Obligation, or Company VEBA and of any related trust, including (A) all plan
descriptions and summary plan descriptions of Company Plans for which Sellers
or the Company are required to prepare, file, and distribute plan descriptions
and summary plan descriptions, and (B) all summaries and descriptions furnished
to participants and beneficiaries regarding Company Plans, Company Other
Benefit Obligations, and Company VEBAs for which a plan description or summary
plan description is not required;

(ii)           all
personnel, payroll, and employment manuals and policies;

(iii)          all
collective bargaining agreements pursuant to which contributions have been made
or obligations incurred (including both pension and welfare benefits) by the
Company and the ERISA Affiliates of the Company, and all collective bargaining
agreements pursuant to which contributions are being made or obligations are
owed by such entities;

(iv)          a written
description of any Company Plan or Company Other Benefit Obligation that is not
otherwise in writing;

(v)           all
registration statements filed with respect to any Company Plan; 

(vi)          all
insurance policies purchased by or to provide benefits under the Company Plan;

(vii)         all
contracts with third party administrators, actuaries, investment managers, consultants,
and other independent contractors that relate to any Company Plan, Company
Other Benefit Obligation, or Company VEBA;

 21
 

 

(viii)        all
reports submitted within the four (4) years preceding the date of this
Agreement by third party administrators, actuaries, investment managers,
consultants, or other independent contractors with respect to any Company Plan,
Company Other Benefit Obligation, or Company VEBA;

(ix)           all
notifications to employees of their rights under ERISA § 601 et seq. and IRC §
4980B;

(x)            the Form
5500 filed in each of the most recent three (3) plan years with respect to each
Company Plan, including all schedules thereto and the opinions of independent
accountants;

(xi)          all notices
that were given by the Company or any ERISA Affiliate of the Company or any
Company Plan to the IRS, the PBGC, or any participant or beneficiary, pursuant
to statute, within the four years preceding the date of this Agreement,
including notices that are expressly mentioned elsewhere in this Section 3.13;

(xii)          all
notices that were given by the IRS, the PBGC, or the Department of Labor to the
Company, any ERISA Affiliate of the Company, or any Company Plan within the
four (4) years preceding the date of this Agreement; and

(xiii)         with
respect to Qualified Plans and VEBAs, the most recent determination letter for
each Plan of the Company that is a Qualified Plan; and

(xiv)        with
respect to Title IV Plans, the Form PBGC-1 filed for each of the three (3) most
recent plan years.

(d)           Except as
set forth in Part 3.13(vi) of the Disclosure Letter:

(i)            The
Company has performed all of its obligations under all Company Plans, Company
Other Benefit Obligations, and Company VEBAs. The Company has made appropriate
entries in its financial records and statements for all obligations and
liabilities under such Plans, VEBAs, and Obligations that have accrued but are
not due.

(ii)           No
statement, either written or oral, has been made by the Company to any Person
with regard to any Plan or Other Benefit Obligation that was not in accordance
with the Plan or Other Benefit Obligation and that could have an adverse
economic consequence to the Company or to Buyer, and with any applicable
collective bargaining agreement.

(iii)          The
Company, with respect to all Company Plans, Company Other Benefits Obligations,
and Company VEBAs, are, and each Company Plan, Company Other Benefit
Obligation, and Company VEBA is, in full compliance with ERISA, the IRC, and
other applicable Laws including the provisions of such Laws expressly mentioned
in this Section 3.13.

 22
 

 

(A)          No transaction
prohibited by ERISA § 406 and no “prohibited transaction” under IRC § 4975(c)
have occurred with respect to any Company Plan.

(B)           No Seller
or the Company has any liability to the IRS with respect to any Plan, including
any liability imposed by Chapter 43 of the IRC.

(C)           No Seller
or the Company has any liability to the PBGC with respect to any Plan or has
any liability under ERISA § 502 or § 4071.

(D)          All filings
required by ERISA and the IRC as to each Plan have been timely filed, and all
notices and disclosures to participants required by either ERISA or the IRC
have been timely provided.

(E)           All
contributions and payments made or accrued with respect to all Company Plans,
Company Other Benefit Obligations, and Company VEBAs are deductible under IRC §
162 or § 404. No amount, or any asset of any Company Plan or Company VEBA, is
subject to tax as unrelated business taxable income.

(iv)          Each
Company Plan can be terminated within thirty (30) days, without payment of any
additional contribution or amount and without the vesting or acceleration of
any benefits promised by such Plan.

(v)           Since
December 31, 2003, there has been no establishment or amendment of any Company
Plan, Company Other Benefit Obligations, and Company VEBAs.

(vi)          No event
has occurred or circumstance exists that could result in a material increase in
premium costs of the Company Plans and Company Other Benefit Obligations that
are insured, or a material increase in benefit costs of such Plans and
Obligations that are self-insured.

(vii)         Other
than claims for benefits submitted by participants or beneficiaries, no claim
against, or legal proceeding involving, any Company Plan, Company Other Benefit
Obligation, and Company VEBA is pending or, to Sellers’ Knowledge, is
Threatened.

(viii)        No
Company Plan is a stock or equity bonus, pension, or profit-sharing plan within
the meaning of IRC § 401(a).

(ix)           Each
Qualified Plan of the Company is qualified in form and operation under IRC §
401(a); each trust for each such Plan is exempt from federal income tax under
IRC § 501(a). Each Company VEBA is exempt from federal income tax. No event has
occurred or circumstance exists that will or could give rise to
disqualification or loss of tax-exempt status of any such Plan or trust.

 23
 

 

(x)            The
Company and each ERISA Affiliate of the Company has met the minimum funding
standard and has made all contributions required, under ERISA § 302 and IRC
§402.

(xi)           No Company
Plan is subject to Title IV of ERISA.

(xii)          The
Company has paid all amounts due to the PBGC pursuant to ERISA § 4007.

(xiii)         Neither
the Company nor any ERISA Affiliate of the Company has ceased operations at any
facility or has withdrawn from any Title IV Plan in a manner that would subject
to any entity or Sellers to liability under ERISA § 4062(e), § 4063, or § 4064.

(xiv)        Neither
the Company nor any ERISA Affiliate of the Company has filed a notice of intent
to terminate any Plan or has adopted any amendment to treat a Plan as
terminated. The PBGC has not instituted proceedings to treat any Company Plan
as terminated. No event has occurred or circumstance exists that may constitute
grounds under ERISA § 4042 for the termination of, or the appointment of a
trustee to administer, any Company Plan.

(xv)         No amendment
has been made, or is reasonably expected to be made, to any Plan that has
required or could require the provision of security under ERISA § 307 or IRC §
401(a)(29).

(xvi)        No
accumulated funding deficiency, whether or not waived, exists with respect to
any Company Plan; no event has occurred or circumstance exists that may result
in an accumulated funding deficiency as of the last day of the current plan
year of such Plan.

(xvii)       The
actuarial report for each Pension Plan of the Company and each ERISA Affiliate of
the Company fairly presents the financial condition and the results of
operations of each such Plan in accordance with GAAP.

(xviii)      Since
the last valuation date for each Pension Plan of the Company and each ERISA
Affiliate of the Company, no event has occurred or circumstance exists that
would increase the amount of benefits under any such Plan or that would cause
the excess of Plan assets over benefit liabilities (as defined in ERISA § 4001)
to decrease, or the amount by which benefit liabilities exceed assets to
increase.

(xix)         No
reportable event (as defined in ERISA § 4043 and in regulations issued
thereunder) has occurred.

(xx)          No Seller
or the Company has Knowledge of any facts or circumstances that may give rise
to any liability of any Seller, the Company, or Buyer to the PBGC under Title
IV of ERISA.

 24
 

 

(xxi)         Neither
the Company nor any ERISA Affiliate of the Company has ever established,
maintained, or contributed to or otherwise participated in, or had an
obligation to maintain, contribute to, or otherwise participate in, any
Multi-Employer Plan.

(xxii)        Neither
the Company nor any ERISA Affiliate of the Company has withdrawn from any
Multi-Employer Plan with respect to which there is any outstanding liability as
of the date of this Agreement. No event has occurred or circumstance exists
that presents a risk of the occurrence of any withdrawal from, or the
participation, termination, reorganization, or insolvency of, any
Multi-Employer Plan that could result in any liability of either the Company or
Buyer to a Multi-Employer Plan.

(xxiii)       Neither
the Company nor any ERISA Affiliate of the Company has received notice from any
Multi-Employer Plan that it is in reorganization or is insolvent, that
increased contributions may be required to avoid a reduction in plan benefits
or the imposition of any excise tax, or that such Plan intends to terminate or
has terminated.

(xxiv)      No
Multi-Employer Plan to which the Company or any ERISA Affiliate of the Company
contributes or has contributed is a party to any pending merger or asset or
liability transfer or is subject to any proceeding brought by the PBGC.

(xxv)       Except
to the extent required under ERISA § 601 et seq. and IRC § 4980B, the Company
does not provide health or welfare benefits for any retired or former employee
or is obligated to provide health or welfare benefits to any active employee
following such employee’s retirement or other termination of service.

(xxvi)       The
Company has the right to modify and terminate benefits to retirees (other than
pensions) with respect to both retired and active employees.

(xxvii)      Sellers
and the Company have complied with the provisions of ERISA § 601 et seq. and
IRC § 4980B.

(xxviii)    No
payment that is owed or may become due to any director, officer, employee, or
agent of the Company will be non-deductible to the Company or subject to tax
under IRC § 280G or § 4999; nor will the Company be required to “gross up” or
otherwise compensate any such person because of the imposition of any excise
tax on a payment to such person.

(xxix)       The
consummation of the Contemplated Transactions will not result in the payment,
vesting, or acceleration of any benefit.

3.14.       Compliance with Legal Requirements; Governmental
Authorizations.

(a)           Except as
set forth in Part 3.14 of the Disclosure Letter:

(i)            the
Company is, and at all times has been, in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
its

 25
 

 

business
or the ownership or use of any of its assets except where such failure would
not have a material adverse effect on the Company;

(ii)           to the
Knowledge of Sellers and the Company, no event has occurred or circumstance
exists that (with or without notice or lapse of time) (A) may constitute or
result in a violation by the Company of, or a failure on the part of the
Company to comply with, any Legal Requirement, or (B) may give rise to any
obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature; and

(iii)          the
Company has not received, at any time, any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of the Company to undertake, or
to bear all or any portion of the cost of, any remedial action of any nature.

(b)           Part 3.14
of the Disclosure Letter contains a complete and accurate list of each
Governmental Authorization that is held by the Company or that otherwise
relates to the business of, or to any of the assets owned or used by, the
Company. Each Governmental Authorization listed or required to be listed in Part
3.14 of the Disclosure Letter is valid and in full force and effect. Except as
set forth in Part 3.14 of the Disclosure Letter:

(i)            the
Company is, and at all times since January 1, 2003 has been, in full compliance
with all of the terms and requirements of each Governmental Authorization
identified or required to be identified in Part 3.14 of the Disclosure Letter
except where such failure would not have a material adverse effect on the
Company;

(ii)           to the
Knowledge of Sellers and the Company, no event has occurred or circumstance
exists that may (with or without notice or lapse of time) (A) constitute or
result directly or indirectly in a violation of or a failure to comply with any
term or requirement of any Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Letter, or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any Governmental Authorization listed
or required to be listed in Part 3.14 of the Disclosure Letter;

(iii)          the
Company has not received, at any time since January 1, 2003, any notice or
other communication (whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and

(iv)          all
applications required to have been filed for the renewal of the Governmental
Authorizations listed or required to be listed in Part 3.14 of the Disclosure
Letter have been duly filed on a timely basis with the appropriate Governmental
Bodies, and all other filings required to have been made with respect to such
Governmental Authorizations have been

 26
 

 

duly
made on a timely basis with the appropriate Governmental Bodies except where
such failure would not have a material adverse effect on the Company.

The
Governmental Authorizations listed in Part 3.14 of the Disclosure Letter
collectively constitute all of the Governmental Authorizations necessary to
permit the Company to lawfully conduct and operate their businesses in the
manner they currently conduct and operate such businesses and to permit the
Company to own and use their assets in the manner in which they currently own
and use such assets.

3.15.       Legal Proceedings; Orders.

(a)           Except as
set forth in Part 3.15 of the Disclosure Letter, there is no pending
Proceeding:

(i)            that has
been commenced by or against the Company or that otherwise relates to or may
affect the business of, or any of the assets owned or used by, the Company; or

(ii)           that
challenges, or that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated Transactions.

To
the Knowledge of Sellers and the Company, (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding.
Sellers have delivered to Buyer copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed in Part 3.15 of the
Disclosure Letter. The Proceedings listed in Part 3.15 of the Disclosure Letter
will not have a material adverse effect on the business, operations, assets,
condition, or prospects of the Company.

(b)           Except as
set forth in Part 3.15 of the Disclosure Letter:

(i)            there is
no Order to which any of the Company, or any of the assets owned or used by the
Company, is subject;

(ii)           neither
Seller is subject to any Order that relates to the business of, or any of the
assets owned or used by, the Company; and

(iii)          to
the Knowledge of Sellers and the Company, no member, agent, or employee of the
Company is subject to any Order that prohibits such member, agent, or employee
from engaging in or continuing any conduct, activity, or practice relating to
the business of the Company.

(c)           Except as
set forth in Part 3.15 of the Disclosure Letter:

 27
 

 

(i)            the
Company is, and at all times since January 1, 2003 has been, in full compliance
with all of the terms and requirements of each Order to which it, or any of the
assets owned or used by it, is or has been subject;

(ii)           to the
Knowledge of Sellers and the Company, no event has occurred or circumstance
exists that may constitute or result in (with or without notice or lapse of
time) a violation of or failure to comply with any term or requirement of any
Order to which the Company, or any of the assets owned or used by the Company,
is subject; and

(iii)          the
Company has not received, at any time since January 1, 2003, any notice or
other communication (whether oral or written) from any Governmental Body or any
other Person regarding any actual, alleged, possible, or potential violation
of, or failure to comply with, any term or requirement of any Order to which
the Company, or any of the assets owned or used by the Company, is or has been
subject.

3.16.       Absence of Certain Changes and Events.

Except as set forth in Part 3.16 of the Disclosure
Letter, since the date of the Balance Sheet, the Company has conducted the
business only in the Ordinary Course of Business and there has not been any:

(a)           change in
the Company’s authorized or issued Partnership Units; grant of any options or
right to purchase Partnership Units of the Company; issuance of any security convertible
into such Partnership Units; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by the Company of any Partnership Units; or
declaration or payment of any dividend or other distribution or payment in
respect of Partnership Units;

(b)           amendment
to the Organizational Documents of the Company;

(c)           payment or
increase by the Company of any bonuses, salaries, or other compensation to any
member, or (except in the Ordinary Course of Business) employee or entry into
any employment, severance, or similar Contract with any member, or employee;

(d)           adoption
of, or increase in the payments to or benefits under, any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement, or other employee
benefit plan for or with any employees of the Company;

(e)           damage to
or destruction or loss of any asset or property of the Company, whether or not
covered by insurance, materially and adversely affecting the properties,
assets, business, financial condition, or prospects of the Company, taken as a
whole;

(f)            entry
into, termination of, or receipt of notice of termination of (i) any license,
distributorship, dealer, sales representative, joint venture, credit, or
similar agreement, or (ii) any Contract or transaction (other than inventory or
merchandise transactions) involving a total remaining commitment by or to the
Company of at least $10,000.00;

 28
 

 

(g)           sale
(other than sales of inventory in the Ordinary Course of Business), lease, or
other disposition of any material asset or property of the Company or mortgage,
pledge, or imposition of any lien or other encumbrance on any material asset or
property of the Company, including the sale, lease, or other disposition of any
of the Intellectual Property Assets;

(h)           cancellation
or waiver of any claims or rights with a value to the Company in excess of $12,000.00;

(i)            material
change in the accounting methods used by the Company; or

(j)            agreement,
whether oral or written, by the Company to do any of the foregoing.

3.17.       Contracts; No Defaults.

(a)           Part
3.17(a) of the Disclosure Letter contains a complete and accurate list, and
Sellers have delivered to Buyer true and complete copies, of:

(i)            each
Applicable Contract that involves performance of services or delivery of goods
or materials by the Company of an amount or value in excess of $10,000.00;

(ii)           each
Applicable Contract that involves performance of services or delivery of goods
or materials to the Company of an amount or value in excess of $10,000.00;

(iii)          each
Applicable Contract that was not entered into in the Ordinary Course of
Business and that involves expenditures or receipts by the Company in excess of
$10,000.00;

(iv)          each lease,
rental or occupancy agreement, license, installment and conditional sale
agreement, and other Applicable Contract affecting the ownership of, leasing
of, title to, use of, or any leasehold or other interest in, any real or
personal property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate payments of
less than $10,000.00 and with terms of less than one year);

(v)           each
licensing agreement or other Applicable Contract with respect to patents,
trademarks, copyrights, or other intellectual property, including agreements
with current or former employees, consultants, or contractors regarding the
appropriation or the non­disclosure of any of the Intellectual Property Assets;

(vi)          each
collective bargaining agreement and other Applicable Contract to or with any
labor union or other employee representative of a group of employees;

(vii)         each
joint venture, partnership, and other Applicable Contract (however named)
involving a sharing of profits, losses, costs, or liabilities by the Company
with any other Person;

 29
 

 

(viii)        each
Applicable Contract containing covenants that in any way purport to restrict
the business activity of the Company or any Affiliate of the Company or limit
the freedom of the Company or any Affiliate of the Company to engage in any
line of business or to compete with any Person;

(ix)           each
Applicable Contract providing for payments to or by any Person based on sales,
purchases, or profits, other than direct payments for goods;

(x)            each
power of attorney that is currently effective and outstanding;

(xi)           each
Applicable Contract entered into other than in the Ordinary Course of Business
that contains or provides for an express undertaking by the Company to be
responsible for consequential damages;

(xii)          each
Applicable Contract for capital expenditures in excess of $10,000.00;

(xiii)        each
written warranty, guaranty, and or other similar undertaking with respect to
contractual performance extended by the Company other than in the Ordinary
Course of Business; and

(xiv)        each
amendment, supplement, and modification (whether oral or written) in respect of
any of the foregoing.

Part
3.17(a) of the Disclosure Letter sets forth reasonably complete details
concerning such Contracts, including the parties to the Contracts, the amount
of the remaining commitment of the Company under the Contracts, and the Company’s
office where details relating to the Contracts are located.

(b)           Except as
set forth in Part 3.17(b) of the Disclosure Letter:

(i)            neither
Seller (and no Related Person of either Seller) has or may acquire any rights
under, and neither Seller has or may become subject to any obligation or
liability under, any Contract that relates to the business of, or any of the
assets owned or used by, the Company; and

(ii)           to the
Knowledge of Sellers and the Company, no member, agent, employee, consultant,
or contractor of the Company is bound by any Contract that purports to limit
the ability of such member, agent, employee, consultant, or contractor to (A)
engage in or continue any conduct, activity, or practice relating to the
business of the Company, or (B) assign to the Company or to any other Person
any rights to any invention, improvement, or discovery.

(c)           Except as
set forth in Part 3.17(c) of the Disclosure Letter, each Contract identified or
required to be identified in Part 3.17(a) of the Disclosure Letter is in full
force and effect and is valid and enforceable in accordance with its terms.

 30

 

(d)           Except as
set forth in Part 3.17(d) of the Disclosure Letter:

(i)            the
Company is, and at all times since January 1, 2003 has been, in full compliance
with all material terms and requirements of each Contract under which the
Company has or had any obligation or liability or by which the Company or any
of the assets owned or used by the Company is or was bound;

(ii)           each other
Person that has or had any obligation or liability under any Contract under
which the Company has or had any rights is, and at all times since January 1,
2003 has been, in full compliance with all material terms and requirements of
such Contract;

(iii)          no
event has occurred or circumstance exists that (with or without notice or lapse
of time) may contravene, conflict with, or result in a violation or breach of,
or give the Company or other Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to
cancel, terminate, or modify, any Applicable Contract; and

(iv)          the Company
has not given to or received from any other Person, at any time since January
1, 2003, any notice or other communication (whether oral or written) regarding
any actual, alleged, possible, or potential material violation, breach of, or
default under, any Applicable Contract.

(v)           there are
no renegotiations of, attempts to renegotiate, or outstanding rights to
renegotiate any material amounts paid or payable to the Company under current
or completed Contracts with any Person and, to the Knowledge of Sellers and the
Company, no such Person has made written demand for such renegotiation.

(e)           The
Contracts relating to the sale, design, manufacture, or provision of products
or services by the Company have been entered into in the Ordinary Course of
Business and have been entered into without the commission of any act alone or
in concert with any other Person, or any consideration having been paid or
promised, that is or would be in violation of any Legal Requirement.

3.18.       Insurance.

(a)           Sellers
have delivered to Buyer:

(i)            true and
complete copies of all policies of insurance to which the Company is a party or
under which the Company, or any director of the Company, is or has been covered
at any time within the five (5) years preceding the date of this Agreement;

(ii)           true and
complete copies of all pending applications for policies of insurance; and

 31
 

 

(iii)          any
statement by the auditor of the Company’s financial statements with regard to
the adequacy of such entity’s coverage or of the reserves for claims.

(b)           Part
3.18(b) of the Disclosure Letter describes:

(i)            any
self-insurance arrangement by or affecting the Company, including any reserves
established thereunder;

(ii)           any
contract or arrangement, other than a policy of insurance, for the transfer or
sharing of any risk by the Company; and

(iii)          all
obligations of the Company to third parties with respect to insurance
(including such obligations under leases and service agreements) and identifies
the policy under which such coverage is provided.

(c)           Part
3.18(c) of the Disclosure Letter sets forth, by year, for the current policy
year and each of the five (5) preceding policy years:

(i)            a summary
of the loss experience under each policy;

(ii)           a
statement describing each claim under an insurance policy for an amount in
excess of $10,000.00, which sets forth:

(A)          the name of
the claimant;

(B)           a
description of the policy by insurer, type of insurance, and period of
coverage; and

(C)           the amount
and a brief description of the claim; and

(iii)          a
statement describing the loss experience for all claims that were self-insured,
including the number and aggregate cost of such claims.

(d)           Except as
set forth on Part 3.18(d) of the Disclosure Letter:

(i)            All
policies to which the Company is a party or that provide coverage to either
Seller, the Company, or any member of the Company:

(A)          are valid,
outstanding, and enforceable;

(B)           are issued
by an insurer that is financially sound and reputable;

(C)           taken
together, provide adequate insurance coverage for the assets and the operations
of the Company for all risks normally insured against by a Person carrying on
the same business or businesses as the Company;

 32
 

 

(D)          are
sufficient for compliance with all Legal Requirements and Contracts to which
the Company is a party or by which any of them is bound;

(E)           will continue
in full force and effect following the consummation of the Contemplated
Transactions; and

(F)           do not
provide for any retrospective premium adjustment or other experienced-based
liability on the part of the Company.

(ii)           No Seller
or the Company has received (A) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy is no longer in
full force or effect or will not be renewed or that the issuer of any policy is
not willing or able to perform its obligations thereunder.

(iii)          The
Company has paid all premiums due, and has otherwise performed all of its
respective obligations, under each policy to which the Company is a party or
that provides coverage to the Company or director thereof.

(iv)          The Company
has given notice to the insurer of all claims that may be insured thereby.

3.19.       Environmental Matters.

Except as set forth in Part 3.19 of the Disclosure
Letter:

(a)           The
Company is, and at all times has been, in full compliance with, and has not
been and is not in violation of or liable under, any Environmental Law. Neither
Seller nor the Company has any basis to expect, nor has any of them or any
other Person for whose conduct they are or may be held to be responsible
received, any actual or Threatened order, notice, or other communication from
(i) any Governmental Body or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with any Environmental Law, or of any
actual or Threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which Sellers or the Company has had an interest, or with respect to any property
or Facility at or to which Hazardous Materials were generated, manufactured, refined,
transferred, imported, used, or processed by Sellers or the Company, or any
other Person for whose conduct they are or may be held responsible, or from
which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received by or on behalf of the Company.

(b)           There are
no pending or, to the Knowledge of Sellers and the Company, Threatened claims,
Encumbrances, or other restrictions of any nature, resulting from any Environmental,
Health, and Safety Liabilities or arising under or pursuant to any
Environmental

 33
 

 

Law,
with respect to or affecting any of the Facilities or any other properties and
assets (whether real, personal, or mixed) in which Sellers or the Company has
or had an interest.

(c)           Neither
Seller nor the Company has Knowledge of any basis to expect, nor has any of
them or any other Person for whose conduct they are or may be held responsible,
received, any citation, directive, inquiry, notice, Order, summons, warning, or
other communication that relates to Hazardous Activity, Hazardous Materials, or
any alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets
(whether real, personal, or mixed) in which Sellers or the Company had an
interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used, or
processed by Sellers, the Company, or any other Person for whose conduct they
are or may be held responsible, have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.

(d)           No Seller
or the Acquired Company, or any other Person for whose conduct they are or may
be held responsible, has any Environmental, Health, and Safety Liabilities with
respect to the Facilities or, to the Knowledge of Sellers and the Company, with
respect to any other properties and assets (whether real, personal, or mixed)
in which Sellers or the Company (or any predecessor), has or had an interest,
or at any property geologically or hydrologically adjoining the Facilities or
any such other property or assets.

(e)           Except as
set forth on Part 3.19(e) of the Disclosure Letter, there are no Hazardous
Materials from Company’s operations present on or in the Environment at the Facilities
or at any geologically or hydrologically adjoining property, including any
Hazardous Materials contained in barrels, above or underground storage tanks,
landfills, land deposits, dumps, equipment (whether moveable or fixed) or other
containers, either temporary or permanent, and deposited or located in land, water,
sumps, or any other part of the Facilities or such adjoining property, or
incorporated into any structure therein or thereon. Neither Seller nor the
Company, any other Person for whose conduct they are or may be held
responsible, or to the Knowledge of Sellers and the Company, any other Person,
has permitted or conducted, or is aware of, any Hazardous Activity conducted by
the Company with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which Sellers or the Company has or had
an interest except in full compliance with all applicable Environmental Laws.

(f)            There has
been no Release or, to the Knowledge of Sellers and the Company, Threat of
Release of any Hazardous Materials at or from the Facilities or at any other locations
where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed by the Company or from or
at any other properties and assets (whether real, personal, or mixed) in which
Sellers or the Company has or had an interest, or to the Knowledge of Sellers
and the Company, any geologically or hydrologically adjoining property, whether
by Sellers, the Company, or any other Person.

(g)           Sellers
have delivered to Buyer true and complete copies and results of any reports,
studies, analyses, tests, or monitoring possessed or initiated by Sellers or
the

 34
 

 

Company
pertaining to Hazardous Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance by Sellers, the Company, or any other
Person for whose conduct they are or may be held responsible, with
Environmental Laws.

3.20.       Employees.

(a)           Part 3.20
of the Disclosure Letter contains a complete and accurate list of (i) all store
managers and (ii) all home office employees with current compensation in excess
of $30,000 with the following information for each such employee or member of
the Company, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any change
in compensation since January 1, 2003; vacation accrued; and service credited
for purposes of vesting and eligibility to participate under the Company’s
pension, retirement, profit-sharing, thrift-savings, deferred compensation,
stock bonus, stock option, cash bonus, employee equity ownership (including
investment credit or payroll equity ownership), severance pay, insurance,
medical, welfare, or vacation plan, other Employee Pension Benefit Plan or
Employee Welfare Benefit Plan, or any other employee benefit plan or any
Director Plan.

(b)           No
employee or director of the Company is a party to, or is otherwise bound by,
any agreement or arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or director and any other
Person (“Proprietary Rights Agreement”) that in any way
adversely affects or will affect (i) the performance of his duties as an
employee or director of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with Sellers
or the Company by any such employee or director. To Sellers’ Knowledge, no
member, or other key employee of the Company intends to terminate his
employment with the Company (other than as specifically disclosed in writing to
Buyer).

(c)           Part 3.20
of the Disclosure Letter also contains a complete and accurate list of the
following information for each retired employee or director of the Company, or
their dependents, receiving benefits or scheduled to receive benefits in the
future: name, pension benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other benefits.

3.21.       Labor Relations; Compliance.

The Company has not been or is not a party to any collective
bargaining or other labor Contract. There has not been, there is not presently
pending or existing, and to Sellers’ Knowledge there is not Threatened, (a) any
strike, slowdown, picketing, work stoppage, or employee grievance process, (b)
any Proceeding against or affecting the Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting the Company or its
premises, or (c) any application for certification of a collective bargaining
agent. To Sellers’ Knowledge, no event has occurred or circumstance exists that

 35
 

 

could
provide the basis for any work stoppage or other labor dispute. There is no
lockout of any employees by the Company, and no such action is contemplated by
the Company. The Company has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. The Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.

3.22.       Intellectual
Property.

(a)           Intellectual
Property Assets—The term “Intellectual Property
Assets” includes:

(i)            the
name “Fast Forward,” all fictional business names, trading names, registered
and unregistered trademarks, service marks, and applications (collectively, “Marks”);

(ii)           all
patents, patent applications, and inventions and discoveries that may be
patentable (collectively, “Patents”);

(iii)          all
copyrights in both published works and unpublished works (collectively, “Copyrights”); and

(iv)          all
know-how, trade secrets, confidential information, customer lists, software,
technical information, data, process technology, plans, drawings, and blue
prints (collectively, “Trade Secrets”);
owned, used, or licensed by the Company as licensee or licensor.

(v)           all
web-site registrations, technical information, data, process technology,
related thereto (collectively, “Web-Site Rights”);

(b)           Agreements—Part
3.22(b) of the Disclosure Letter contains a complete and accurate list and
summary description, including any royalties paid or received by the Company, of
all Contracts relating to the Intellectual Property Assets to which the Company
is a party or by which the Company is bound, except for any license implied by
the sale of a product and perpetual, paid-up licenses for commonly available
software programs with a value of less than $100.00 under which the Company is
the licensee. There are no outstanding and, to Sellers’ Knowledge, no
Threatened disputes or disagreements with respect to any such agreement.

(c)           Know-How
Necessary for the Business

(i)            The
Intellectual Property Assets are all those necessary for the operation of the
Company’s businesses as they are currently conducted. The Company is the owner
of all right, title, and interest in and to each of the Intellectual Property
Assets, free and

 36
 

 

clear
of all liens, security interests, charges, encumbrances, equities, and other
adverse claims, and has the right to use without payment to a third party all
of the Intellectual Property Assets.

(ii)           Except for
those employees as set forth in Part 3.22(c) of the Disclosure Letter, no
former or current employees of the Company need to assign to the Company rights
to any inventions, improvements, discoveries, or information relating to the
business of the Company. No employee of the Company has entered into any
Contract that restricts or limits in any way the scope or type of work in which
the employee may be engaged or requires the employee to transfer, assign, or
disclose information concerning his work to anyone other than the Company.

(d)           Patents

(i)            Part
3.22(d) of the Disclosure Letter contains a complete and accurate list and
summary description of all Patents. One or more of the Company is the owner of
all right, title, and interest in and to each of the Patents, free and clear of
all liens, security interests, charges, encumbrances, entities, and other
adverse claims.

(ii)           All of the
issued Patents are currently in compliance with formal legal requirements
(including payment of filing, examination, and maintenance fees and proofs of
working or use), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety (90) days after
the Closing Date.

(iii)          No
Patent has been or is now involved in any interference, reissue, reexamination,
or opposition proceeding. To Sellers’ Knowledge, there is no potentially
interfering patent or patent application of any third party.

(iv)          No Patent
is infringed or, to Sellers’ Knowledge, has been challenged or Threatened in any
way. None of the products manufactured and sold, nor any process or know-how
used, by the Company infringes or is alleged to infringe any patent or other
proprietary right of any other Person.

(v)           Except as
provided in Part 3.22(d)(v) of the Disclosure Letter, all products made, used,
or sold under the Patents have been marked with the proper patent notice.

(e)           Trademarks

(i)            Part
3.22(e) of Disclosure Letter contains a complete and accurate list and summary
description of all Marks, including expiration dates. The Company is the owner
of all right, title, and interest in and to each of the Marks, free and clear
of all liens, security interests, charges, encumbrances, equities, and other
adverse claims.

(ii)           All Marks
that have been registered with the United States Patent and Trademark Office
are currently in compliance with all formal legal requirements (including the
timely post-registration filing of affidavits of use and incontestability and
renewal

 37
 

 

applications),
are valid and enforceable, and are not subject to any maintenance fees or taxes
or actions falling due within ninety (90) days after the Closing Date.

(iii)          No
Mark has been or is now involved in any opposition, invalidation, or
cancellation and, to Sellers’ Knowledge, no such action is Threatened with the
respect to any of the Marks.

(iv)          To Sellers’
Knowledge, there is no potentially interfering trademark or trademark
application of any third party.

(v)           No Mark is
infringed or, to Sellers’ Knowledge, has been challenged or Threatened in any
way. None of the Marks used by the Company infringes or is alleged to infringe
any trade name, trademark, or service mark of any third party.

(vi)          All
products and materials containing a Mark bear the proper federal registration
notice where permitted by law.

(f)            Copyrights

(i)            The
Company does not own any Copyrights.

(ii)           The
Company does not need any Copyrights to carry on its business.

(g)           Trade
Secrets

(i)            With
respect to each Trade Secret, the documentation relating to such Trade Secret
is current, accurate, and sufficient in detail and content to identify and
explain it and to allow its full and proper use without reliance on the
knowledge or memory of any individual.

(ii)           Sellers
and the Company have taken all reasonable precautions to protect the secrecy,
confidentiality, and value of their Trade Secrets.

(iii)          The
Company has good title and an absolute (but not necessarily exclusive) right to
use the Trade Secrets. The Trade Secrets are not part of the public knowledge
or literature, and, to Sellers’ Knowledge, have not been used, divulged, or
appropriated either for the benefit of any Person (other than the Company) or
to the detriment of the Company. No Trade Secret is subject to any adverse
claim or has been challenged or Threatened in any way.

(h)           Web Site
Rights

(i)            Part
3.22(h) of the Disclosure Letter contains a complete and accurate list and
summary description of all Web Site Rights. The Company is the owner of all
right, title, and interest in and to each of the Web Site Rights, free and clear
of all liens, security interests, charges, encumbrances, equities, and other
adverse claims.

 38
 

 

(ii)           All the
Web Site Rights have been registered and are currently in compliance with
formal legal requirements, are valid and enforceable, and are not subject to
any maintenance fees or taxes or actions falling due within ninety (90) days
after the date of Closing.

3.23.       Certain Payments.

Neither the Company nor any partner of the Company,
nor to Sellers’ Knowledge any agent, employee or other Person associated with
or acting for or on behalf of the Company, has directly or indirectly (a) made
any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or
other payment to any Person, private or public, regardless of form, whether in
money, property, or services (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, (iii) to
obtain special concessions or for special concessions already obtained, for or
in respect of the Company or any Affiliate of the Company, or (iv) in violation
of any Legal Requirement, (b) established or maintained any fund or asset that
has not been recorded in the books and records of the Company.

3.24.       Disclosure.

(a)           No
representation or warranty of Sellers in this Agreement and no statement in the
Disclosure Letter omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.

(b)           No notice
given pursuant to Section 5.5 will contain any untrue statement or omit to
state a material fact necessary to make the statements therein or in this
Agreement, in light of the circumstances in which they were made, not
misleading.

(c)           There is
no fact known to either Seller that has specific application to either Seller
or the Company (other than general economic or industry conditions) and that materially
adversely affects or, as far as either Seller can reasonably foresee,
materially threatens, the assets, business, prospects, financial condition, or
results of operations of the Company (on a consolidated basis) that has not
been set forth in this Agreement or the Disclosure Letter.

3.25.       Relationships with Related Persons

No Seller or any Related Person of Sellers or of the
Company has, or since the first day of the next to last completed fiscal year
of the Company has had, any interest in any property (whether real property
leaseholds, personal or mixed and whether tangible or intangible), used in or
pertaining to the Company’s business. Except as set forth in Part 3.25 of the
Disclosure Letter, no Seller or any Related Person of Sellers or of the Company
is, or since the first day of the next to last completed fiscal year of the
Company has owned (of record or as a beneficial owner) an equity interest or
any other financial or profit interest in, a Person that has (i) had business
dealings or a material financial interest in any transaction with the Company
other than business dealings or transactions conducted in the Ordinary Course
of Business with the Company at substantially prevailing market prices and on
substantially prevailing market

 39
 

 

terms,
or (ii) engaged in competition with the Company with respect to any line of the
products or services of the Company (a “Competing
Business”) in any
market presently served by the Company except for less than one percent of the
outstanding capital stock of any Competing Business that is publicly traded on
any recognized exchange or in the over-the-counter market. Except as set forth
in Part 3.25 of the Disclosure Letter, no Seller or any Related Person of
Sellers or of the Company is a party to any Contract with, or has any claim or
right against, the Company.

3.26.       Brokers or Finders.

Sellers and their agents have incurred no obligation
or liability, contingent or otherwise, for brokerage or finders’ fees or agents’
commissions or other similar payment in connection with this Agreement.

4.             REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer
represents and warrants to Sellers as follows:

4.1.         Organization and Good Standing.

Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Washington.

4.2.         Authority; No Conflict.

(a)           This
Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms. Upon the execution and delivery by
Buyer of the Escrow Agreement (the “Buyer’s
Closing Documents”), the
Buyer’s Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Buyer’s Closing
Documents and to perform its obligations under this Agreement and the Buyer’s
Closing Documents.

(b)           Except as
set forth in Exhibit 4.2, neither the execution and delivery of this
Agreement by Buyer nor the consummation or performance of any of the
Contemplated Transactions by Buyer will give any Person the right to prevent,
delay, or otherwise interfere with any of the Contemplated Transactions
pursuant to:

(i)            any
provision of Buyer’s Organizational Documents;

(ii)           any resolution
adopted by the board of directors or the stockholders of Buyer;

(iii)          any
Legal Requirement or Order to which Buyer may be subject; or

 40

 

(iv)          any
Contract to which Buyer is a party or by which Buyer may be bound.

Except
as set forth in Exhibit 4.2, Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.

4.3.         Investment Intent.

Buyer is acquiring the Membership Interests/Units for
its own account and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act.

4.4.         Certain Proceedings.

There is no pending Proceeding that has been commenced
against Buyer and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer’s Knowledge, no such Proceeding has been
Threatened.

4.5.         Brokers or Finders.

Buyer and its officers and agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders’
fees or agents’ commissions or other similar payment in connection with this
Agreement and will indemnify and hold Sellers harmless from any such payment
alleged to be due by or through Buyer as a result of the action of Buyer or its
officers or agents.

5.             COVENANTS OF SELLERS

5.1.         Access and Investigation.

Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company and its Representatives to, (a)
afford Buyer and its Representatives and prospective lenders and their
Representatives (collectively, “Buyer’s Advisors”) full and free access to the Company’s
personnel, properties, contracts, books and records, and other documents and
data, (b) furnish Buyer and Buyer’s Advisors with copies of all such contracts,
books and records, and other existing documents and data as Buyer may
reasonably request, and (c) furnish Buyer and Buyer’s Advisors with such
additional financial, operating, and other data and information as Buyer may
reasonably request.

5.2.         Operation of the Business of the Company.

Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company to:

 41
 

 

(a)           conduct
the business of the Company only in the Ordinary Course of Business;

(b)           use their
Best Efforts to preserve intact the current business organization of the Company,
keep available the services of the current members, employees, and agents of the
Company, and maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Company;

(c)            confer
with Buyer concerning operational matters of a material nature; and

(d)           otherwise
report periodically to Buyer concerning the status of the business, operations,
and finances of the Company.

5.3.         Negative Covenant.

Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Sellers
will not, and will cause the Company not to, without the prior consent of
Buyer, take any affirmative action, or fail to take any reasonable action within
their or its control, as a result of which any of the changes or events listed
in Section 3.16 is likely to occur.

5.4.         Required Approvals.

As promptly as practicable after the date of this
Agreement, Sellers will, and will cause the Company to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company to, (a) cooperate with Buyer
with respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining all consents identified in Exhibit 4.2.

5.5.         Notification.

Between the date of this Agreement and the Closing
Date, each Seller will promptly notify Buyer in writing if such Seller or the
Company becomes aware of any fact or condition that causes or constitutes a
material Breach of any of Sellers’ representations and warranties as of the
date of this Agreement, or if such Seller or the Company becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Disclosure Letter if the Disclosure Letter were dated the date of the
occurrence or discovery of any such fact or condition, Sellers will promptly
deliver to Buyer a supplement to the Disclosure Letter specifying such change.
During the same period, each Seller will promptly notify Buyer of the
occurrence of any Breach of any covenant of Sellers in this Section 5 or of

 42
 

 

the
occurrence of any event that may make the satisfaction of the conditions in
Section 8 impossible or unlikely.

5.6.         Payment of Indebtedness by Related Persons.

Except as expressly provided in this Agreement,
Sellers will cause all indebtedness owed to the Company by either Seller or any
Related Person of either Seller to be paid in full prior to Closing.

5.7.         No Negotiation.

Until such time, if any, as this Agreement is
terminated pursuant to Section 10, Sellers will not, and will cause the Company
and each of their Representatives not to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer) relating
to any transaction involving the sale of the business or assets (other than in
the Ordinary Course of Business) of the Company, or any of the equity interest
of the Company, or any merger, consolidation, business combination, or similar
transaction involving the Company.

5.8.         Best Efforts.

Between the date of this Agreement and the Closing
Date, Sellers will use their Best Efforts to cause the conditions in Sections 8
and 9 to be satisfied.

6.             COVENANTS OF BUYER

6.1.         Approvals of Governmental Bodies.

As promptly as practicable after the date of this
Agreement, Buyer will, and will cause each of its Related Persons to, make all
filings required by Legal Requirements to be made by them to consummate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Buyer will, and will cause each Related Person to, cooperate with Sellers
with respect to all filings that Sellers are required by Legal Requirements to
make in connection with the Contemplated Transactions, and (ii) cooperate with
Sellers in obtaining all consents identified in Part 3.2 of the Disclosure
Letter; provided that this Agreement will not require Buyer to dispose of or
make any change in any portion of its business or to incur any other burden to
obtain a Governmental Authorization.

6.2.         Best Efforts.

Except as set forth in the proviso to Section 6.1,
between the date of this Agreement and the Closing Date, Buyer will use its
Best Efforts to cause the conditions in Sections 8 and 9 to be satisfied.

 43
 

 

7.             ADDITIONAL CONTINUING COVENANTS.

7.1.         Payment
of Transfer Taxes and Other Charges. The Sellers shall be responsible for
and shall pay all transfer Taxes, sales Taxes, documentary stamp Taxes,
recording charges, and other similar Taxes (“Transfer Taxes”), if
any, arising in connection with the transfer and assignment of Partnership
Units contemplated by this Agreement; provided, however, that Buyer shall be responsible
for any Transfer Tax arising as a result of an election under Section
338(h)(10) or under any comparable provision of state or local law.

7.2.         Nondisclosure
of Proprietary Data. Neither Seller shall, at any time after the Closing,
make use of, or except as required by law, divulge or otherwise disclose,
directly or indirectly, to any person other than the Buyer, any trade secret or
other confidential or proprietary data (including, but not limited to, any
confidential customer list, know-how, secret processes, personnel information,
technical data, record or financial information) concerning the Businesses or
the Company which may have been disclosed or made available to such Seller The
foregoing covenant shall not, however, apply with respect to any data or other
information which is or becomes generally available to the public other than as
a result of disclosure by one of the Sellers.

7.3.         Certain
Tax Matters.

(a)            Liability
For Taxes. The Sellers shall be liable for all Pre-Closing Taxes to the
extent that an adequate reserve therefor has not already been provided for in
the Company’s books or financial statements, and shall indemnify the Buyer
against Taxes arising as a result of any breach of the representation contained
in Section 3.11 and the covenants contained in this Section 7.3.

(b)           Allocation
of Liability for Taxes. In the case of any Taxes that are attributable to a
taxable period which begins before the Closing Date and ends after the Closing Date,
the amount of Taxes attributable to the Pre-Closing Tax Period shall be
determined as follows:

(1)           In the
case of franchise or similar Taxes imposed on Company and Subsidiaries based on
their capital (including net worth or long-term debt) or number of shares of stock
authorized, issued or outstanding, the portion attributable to the Pre-Closing
Tax Period shall be the amount of such Taxes for the entire taxable period
multiplied by a fraction, the numerator of which is the number of days in such
taxable period that fall within the Pre-Closing Tax Period and the denominator
of which is the number of days in the entire taxable period.

(2)           In the
case of all other Taxes, the portion attributable to the Pre-Closing Tax Period
shall be determined on the basis of an interim closing of the books of the Company
and Subsidiaries as of the Closing Date, and the determination of the
hypothetical Tax for such Pre-Closing Tax Period shall be determined on the
basis of such interim closing of the books, without annualization. Taxes
attributable to the Pre-Effective Date Period shall be determined under the
same method of accounting used by Company and Subsidiaries during that period.

 44
 

 

(c)           Tax
Returns. The Sellers shall cause to be prepared and timely filed, subject
to the Buyer’s review and approval, when due (taking into account all
extensions properly obtained) all Tax Returns that are required to be filed by
or with respect to the Company and the Subsidiaries for tax periods actually
ending on or prior to the Closing Date, and all other Tax Returns required to
be filed prior to the Closing Date which have not been so filed. All Tax
Returns described in this Section 7.3(c) shall be prepared and filed in a
manner consistent with past practice of the Company and the Subsidiaries and,
on such Tax Returns, no position shall be taken, elections made or method
adopted without the written consent (which shall not be unreasonably withheld)
of the Buyer that is inconsistent with positions taken, elections made or
methods used in preparing and filing similar Tax Returns in prior periods. The Sellers
and the Buyer agree to consult and resolve in good faith any issue arising as a
result of the review of such Tax Return and mutually to consent to the filing
as promptly as possible of such Tax Return.

(d)           338
Election. At the sole election of Buyer, Buyer and Sellers shall timely file
an election under IRC Section 338(h)(10) and under any comparable provisions of
state or local law with respect to the purchase of the Partnership Units (the “Election”). The purpose of the Election shall be to confer
a benefit to Buyer that otherwise would not be available to it in the absence
of the Election. If the Election is made, (i) Buyer shall pay to the Sellers,
in the manner provided for below, an amount equal to the Election Price
Adjustment Amount, and (ii) Buyer and Sellers shall report, in connection with
the determination of income taxes, the transactions contemplated by this
Agreement in a manner consistent with the Election, the computation of the Aggregate
Deemed Sales Price and the Deemed Sales Price Allocation. The Election Price Adjustment
Amount shall be treated for tax purposes by the parties as additional purchase
price paid by Buyer as consideration for the Partnership Units.

(1)           Documentation
and Delivery.

(a)           No
later than December 1, 2006, the Sellers shall promptly provide Buyer with such
information as shall be necessary to compute the adjusted basis of their
Partnership Units and such other information that is necessary to file the
Election. After the delivery of such information, if Buyer desires to make the
Election, Buyer shall deliver to the Sellers a written notice of its intention
to file the Election, together with such documents or forms as are required
properly to complete the Election, including Buyer’s calculation of (A) the
Aggregate Deemed Sales Price, (B) the Deemed Sales Price Allocation, (C) the
Election Price Adjustment Amount. Buyer shall be responsible for the
preparation and filing of all forms and documents required in connection with
the Election (the “Section 338  Forms”). Buyer shall prepare a completed set of IRS Form 8023 (and any
comparable forms required to be filed under state or local tax law) and any additional
data or materials required to be attached to Form 8023 pursuant to the Treasury
Regulations promulgated under IRC Section 338 consistent with Buyer’s
calculations prepared as provided for above.

(b)          If
the Sellers agree with Buyer’s calculation of the Election Price Adjustment
Amount, then, within 30 days after receipt of Buyer’s calculations, the Sellers
shall execute and deliver the Section 338 Forms to Buyer, subject to the
payment by Buyer of the Election Price Adjustment Amount as provided for below.
Alternatively,

 45
 

 

Sellers shall submit to
Buyer, within 30 days of receipt of Buyer’s calculations, a written notice
advising Buyer of the disagreement and setting forth their calculation of the
Election Price Adjustment Amount. Within 15 days after receipt of such a notice
from the Sellers, Buyer shall provide the Sellers with written notice of its agreement
with the Sellers’ calculation, or, if it does not agree, advising the Sellers
that the disagreement is to be referred to an independent accounting firm for
resolution. The fees and expenses charged by said accounting firm shall be paid
by Buyer. Buyer shall thereafter prepare revised Section 338 Forms consistent
with said determination, and the Sellers shall execute and return such Section
338 Forms to Buyer within five days after receipt thereof, subject to the
payment by Buyer of the Election Price Adjustment Amount as provided below.

(2)           Payment;
Filing. Buyer shall pay the Election Price Adjustment Amount to the Sellers
upon delivery of the executed Section 338 Forms by the Sellers. Said amount
shall be allocated among the Sellers in proportion to the additional tax
liabilities incurred by each Seller as a result of the Election.

(3)           Indemnity.
In addition to any other indemnification obligations under this Agreement, upon
written notice from the Sellers, Buyer agrees to indemnify each Seller for all
additional tax liabilities incurred by the Seller under this Agreement or
otherwise that are attributable to the making of the Election and which are not
otherwise compensated for by the Election Price Adjustment Amount paid to the
Sellers. The foregoing indemnity shall include a “gross-up” payment to fully
compensate the Sellers for the fact that the payment of such amount is also
subject to taxation and shall be paid no later than 10 days after demand by the
Sellers. The indemnity provided for herein shall survive indefinitely.

(e)           S
Corporation Status. The Sellers will not revoke the election to treat the Company
as an S corporation within the meaning of Section 1361 of the Code. The Company
and the Members will not take nor allow any action (other than the sale of the
Partnership Units pursuant to this Agreement) that would result in the
termination of the Company’s status as validly electing S corporation within
the meaning Section 1361 of the Code.

(f)            Contest
Provisions. Promptly after receipt by the Buyer or any Seller of written
notice of the assertion or commencement of any claim, audit, examination or
other proposed change or adjustment by any Tax Authority relating to Taxes of
the Company with respect to a Pre-Closing Tax Period (a “Tax
Claim”), the recipient shall promptly notify the Buyer or the
Sellers, as applicable. Such notice shall contain factual information (to the
extent known) describing the asserted Tax Claim in reasonable detail and shall
include copies of any notice or other document received from any taxing
authority in respect of any such asserted Tax Claim. The Sellers shall have the
right to represent the Company’s interests in any Tax audit or administrative
or court proceeding relating to Pre-Closing Tax Periods as to any issues that
could materially affect the Sellers’ liability for Taxes or indemnification
obligations, and to employ counsel (reasonably acceptable to the Buyer) of the
Sellers’ choice at its expense; provided, however, that Buyer and
its Representatives shall be permitted, at their expense, to be present at any
such audit or proceeding and to participate in any such audit or proceeding to
the extent such audit or proceeding could affect the Tax liability of the
Buyer. The Sellers shall not be entitled to settle, either administratively or
after the commencement of litigation, any claim for Taxes

 46
 

 

which
would materially adversely affect the liability for Taxes of the Buyer or the
Company for any period after the Closing Date without the prior written consent
of the Buyer unless adequate provision to indemnify the Buyer against the
effects of any such settlement is made by the Sellers; provided, however, if
Buyer does not consent to a settlement agreed to in principal by the IRS and
the Sellers, and additional Tax liability results to the Sellers as a result of
failing to accept the terms of such settlement, then the Buyer shall indemnify
the Sellers against such additional Tax liability no later than 10 days after
demand by the Sellers. The indemnity provided for herein shall survive
indefinitely.

(g)           Assistance
and Cooperation. After the Closing Date, each of the Sellers and the Buyer
shall, to the extent reasonable and necessary:

(i)            timely
sign and deliver such certificates or forms as may be necessary or appropriate
to establish an exemption from (or otherwise reduce) sales, transfer and
similar Taxes;

(ii)           assist the
other party in preparing any Tax Returns which such other party is responsible
for preparing and filing in accordance with Section 7.3(c);

(iii)          cooperate
fully in preparing for any audits of, or disputes with taxing authorities
regarding, any Tax Returns of the Company;

(iv)          make
available to the other and to any taxing authority as reasonably requested all
information, records, and documents relating to Taxes of the Company.

8.             CONDITIONS PRECEDENT TO BUYER’S OBLIGATION
TO CLOSE

Buyer’s obligation to purchase the Partnership Units
and to take the other actions required to be taken by Buyer at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Buyer, in whole or in
part):

8.1.         Accuracy of Representations.

(a)           All of Sellers’
representations and warranties in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement, and
must be accurate in all material respects as of the Closing Date as if made on
the Closing Date, without giving effect to any supplement to the Disclosure
Letter.

(b)           Each of
Sellers’ representations and warranties in Sections 3.3, 3.4, 3.12, and 3.24
must have been accurate in all respects as of the date of this Agreement, and
must be accurate in all respects as of the Closing Date as if made on the
Closing Date, without giving effect to any supplement to the Disclosure Letter.

 47
 

 

8.2.         Sellers’ Performance.

(a)           All of the
covenants and obligations that Sellers are required to perform or to comply
with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), must have been duly performed and complied with in all material
respects.

(b)           Each
document required to be delivered pursuant to Section 2.4 must have been
delivered, and each of the other covenants and obligations in Sections 5.4 and
5.8 must have been performed and complied with in all respects.

8.3.         Consents.

Each of the Consents identified in Section
2.4(a)(iii), and each Consent identified in Exhibit 4.2, must have been
obtained and must be in full force and effect.

8.4.         Additional Documents.

Seller
shall have caused the following documents to be delivered to Buyer:

(a)           a complete
report of Seller’s open-to-buy plan, reflecting product planning and trend
planning for the period ending 12/31/06 and a complete report of Seller’s
historical product lines and sales results reflecting product trends for the 24
month period preceding the Closing Date;

(b)           an
unaudited balance sheet of the Company at the end of April, 2006, and the
related unaudited statements of income, changes in members’ equity, and cash
flow for the month then ended, including the notes thereto or monthly reporting
commentary, if available.

(c)           such other
documents as Buyer may reasonably request for the purpose of (i) evidencing the
accuracy of any of Sellers’ representations and warranties, (ii) evidencing the
performance by either Seller of, or the compliance by either Seller with, any
covenant or obligation required to be performed or complied with by such
Seller, (iii) evidencing the satisfaction of any condition referred to in this
Section 8, or (iv) otherwise facilitating the consummation or performance of
any of the Contemplated Transactions.

8.5.         No Proceedings.

Since the date of this Agreement, there must not have
been commenced or Threatened against Buyer, or against any Person affiliated
with Buyer, any Proceeding (a) involving any challenge to, or seeking damages
or other relief in connection with, any of the Contemplated Transactions, or
(b) that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with any of the Contemplated Transactions.

 48
 

 

8.6.         No Claim Regarding Partnership Units Ownership
or Sale Proceeds.

There must not have been made or Threatened by any
Person any claim asserting that such Person (a) is the holder or the beneficial
owner of, or has the right to acquire or to obtain beneficial ownership of, any
Partnership Units of, or any other voting, equity, or ownership interest in,
any of the Company, or (b) is entitled to all or any portion of the Purchase
Price payable for the Partnership Units.

8.7.         No Prohibition.

Neither the consummation nor the performance of any of
the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental
Body.

9.             CONDITIONS PRECEDENT TO SELLERS’
OBLIGATION TO CLOSE

Sellers’ obligation to sell the Partnership Units and
to take the other actions required to be taken by Sellers at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Sellers, in whole or in part):

9.1.         Accuracy of Representations.

All of Buyer’s representations and warranties in this
Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all material
respects as of the date of this Agreement and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date.

9.2.         Buyer’s Performance.

(a)           All of the
covenants and obligations that Buyer is required to perform or to comply with
pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered individually),
must have been performed and complied with in all material respects.

(b)           Buyer must
have delivered each of the documents required to be delivered by Buyer pursuant
to Section 2.4 and must have made the cash payments required to be made by Buyer
pursuant to Section 2.4(b)(iii).

9.3.         Consents/Releases.

(a)           Each of
the Consents identified in Section 2.4(a)(iii) must have been obtained and must
be in full force and effect.

 49
 

 

(b)           In those
situations regarding leases or debt obligations where Sellers have personal
liability, Buyer shall use commercially reasonable efforts to obtain releases
of such personal liability or indemnify Sellers for any post-Closing liability
pursuant to any such lease or debt obligation.

9.4.         Additional Documents.

Buyer must have caused such other documents as Sellers
may reasonably request for the purpose of (i) evidencing the accuracy of any
representation or warranty of Buyer, (ii) evidencing the performance by Buyer
of, or the compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (iii) evidencing the satisfaction of any
condition referred to in this Section 9, or (iv) otherwise facilitating the
consummation of any of the Contemplated Transactions.

9.5.         No Injunction.

There must not be in effect any Legal Requirement or
any injunction or other Order that (a) prohibits the sale of the Partnership Units
by Sellers to Buyer, and (b) has been adopted or issued, or has otherwise
become effective, since the date of this Agreement.

10.          TERMINATION

10.1.       Termination Events.

This Agreement may, by notice given prior to or at the
Closing, be terminated:

(a)           by either
Buyer or Sellers if a material Breach of any provision of this Agreement has
been committed by the other party, and such Breach has not been waived;

(b)           (i) by
Buyer if (A) any of the conditions in Section 8 has not been satisfied as of
the Closing Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement), and Buyer has not waived such condition on
or before the Closing Date; or (B) if the condition imposed by a landlord in
connection with satisfying the requirements of Section 9.3(b) result in a
material adverse economic effect to the Buyer; or (ii) by Sellers, if (A) any
of the conditions in Section 9 has not been satisfied of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Sellers to comply with their obligations under this Agreement);
or (B) if the condition imposed by a landlord in connection with satisfying the
requirements of Section 9.3(b) result in a material adverse economic effect to
Sellers, and Sellers have not waived such condition on or before the Closing
Date;

(c)           by mutual
consent of Buyer and Sellers; or

(d)           by either
Buyer or Sellers if the Closing has not occurred (other than through the
failure of any party seeking to terminate this Agreement to comply fully with
its

 50

 

obligations
under this Agreement) on or before June 11, 2006, or such later date as the
parties may agree upon.

10.2.       Effect of Termination.

Each party’s right of termination under Section 10.1
is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 10.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 12.1 and 12.3 will survive; provided, however,
that if this Agreement is terminated by a party because of the Breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party’s obligations under this Agreement is not satisfied as a
result of the other party’s failure to comply with its obligations under this
Agreement, the terminating party’s right to pursue all legal remedies will
survive such termination unimpaired.

11.          INDEMNIFICATION; REMEDIES

11.1.       Survival; Right to Indemnification Not Affected
by Knowledge.

All representations, warranties, covenants, and
obligations in this Agreement, the Disclosure Letter, the supplements to the
Disclosure Letter, the certificate delivered pursuant to Section 2.4(a)(v), and
any other certificate or document delivered pursuant to this Agreement will
survive the Closing. The right to indemnification, payment of Damages or other
remedy based on such representations, warranties, covenants, and obligations
will not be affected by any investigation conducted with respect to, or any
Knowledge acquired (or capable of being acquired) at any time, whether before
or after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.

11.2.       Indemnification and Payment of Damages by
Sellers.

Sellers, jointly and severally, will indemnify and hold
harmless Buyer, the Company, and their respective Representatives,
stockholders, controlling persons, and affiliates (collectively, the “Indemnified Persons”) for, and will pay to
the Indemnified Persons the amount of, any loss, liability, claim, damage
(including incidental and consequential damages), expense (including costs of
investigation and defense and reasonable attorneys’ fees) or diminution of
value, whether or not involving a third-party claim (collectively, “Damages”), arising, directly or indirectly,
from or in connection with:

(a)           any Breach
of any representation or warranty made by Sellers in this Agreement (without
giving effect to any supplement to the Disclosure Letter), the Disclosure
Letter, the supplements to the Disclosure Letter, or any other certificate or
document delivered by Sellers pursuant to this Agreement;

 51
 

 

(b)            any
Breach of any representation or warranty made by Sellers in this Agreement as
if such representation or warranty were made on and as of the Closing Date without
giving effect to any supplement to the Disclosure Letter, other than any such
Breach that is disclosed in a supplement to the Disclosure Letter and is
expressly identified in the certificate delivered pursuant to Section 2.4(a)(v)
as having caused the condition specified in Section 8.1 not to be satisfied;

(c)           any Breach
by either Seller of any covenant or obligation of such Seller in this
Agreement;

(d)           any claim
by any Person for brokerage or finder’s fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by any such
Person with either Seller or the Company (or any Person acting on their behalf)
in connection with any of the Contemplated Transactions.

The remedies provided in
this Section 11.2 will not be exclusive of or limit any other remedies that may
be available to Buyer or the other Indemnified Persons.

11.3.       Indemnification and Payment of Damages by
Sellers – Environmental Matters.

In addition to the provisions of Section 11.2,
Sellers, jointly and severally, will indemnify and hold harmless Buyer, the
Company, and the other Indemnified Persons for, and will pay to Buyer, the
Company, and the other Indemnified Persons the amount of, any Damages
(including costs of cleanup, containment, or other remediation) arising,
directly or indirectly, from or in connection with:

(a)           any
Environmental, Health, and Safety Liabilities arising out of or relating to:
(i) (A) the ownership, operation, or condition at any time on or prior to the
Closing Date of the Facilities or any other properties and assets (whether
real, personal, or mixed and whether tangible or intangible) in which Sellers
or the Company has or had an interest, or (B) any Hazardous Materials or other
contaminants that were present on the Facilities or such other properties and
assets at any time on or prior to the Closing Date; or (ii) (A) any Hazardous Materials
or other contaminants, wherever located, that were, or were allegedly,
generated, transported, stored, treated, Released, or otherwise handled by
Sellers or the Company or by any other Person for whose conduct they are or may
be held responsible at any time on or prior to the Closing Date, or (B) any
Hazardous Activities that were, or were allegedly, conducted by Sellers or the
Company or by any other Person for whose conduct they are or may be held
responsible; or

(b)           any bodily
injury (including illness, disability, and death, and regardless of when any
such bodily injury occurred, was incurred, or manifested itself), personal
injury, property damage (including trespass, nuisance, wrongful eviction, and
deprivation of the use of real property), or other damage of or to any Person,
including any employee or former employee of Sellers or the Company or any
other Person for whose conduct they are or may be held

 52
 

 

responsible,
in any way arising from or allegedly arising from any Hazardous Activity
conducted or allegedly conducted with respect to the Facilities or the
operation of the Company prior to the Closing Date, or from Hazardous Material that
was (i) present or suspected to be present on or before the Closing Date on or
at the Facilities (or present or suspected to be present on any other property,
if such Hazardous Material emanated or allegedly emanated from any of the
Facilities and was present or suspected to be present on any of the Facilities
on or prior to the Closing Date) or (ii) Released or allegedly Released by
Sellers or the Company or any other Person for whose conduct they are or may be
held responsible, at any time on or prior to the Closing Date.

Buyer
will be entitled to control any Cleanup, any related Proceeding, and, except as
provided in the following sentence, any other Proceeding with respect to which
indemnity may be sought under this Section 11.3. The procedure described in
Section 11.9 will apply to any claim solely for monetary damages relating to a
matter covered by this Section 11.3.

11.4.       Indemnification and Payment of Damages by Buyer.

Buyer will indemnify and hold harmless Sellers, and
will pay to Sellers the amount of any Damages arising, directly or indirectly,
from or in connection with (a) any Breach of any representation or warranty
made by Buyer in this Agreement or in any certificate delivered by Buyer
pursuant to this Agreement, (b) any Breach by Buyer of any covenant or
obligation of Buyer in this Agreement, or (c) any claim by any Person for
brokerage or finder’s fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such Person with Buyer
(or any Person acting on its behalf) in connection with any of the Contemplated
Transactions.

11.5.       Time Limitations.

If the Closing occurs, Sellers will have no liability
(for indemnification or otherwise) with respect to (i) any representation or
warranty, or covenant or obligation to be performed and complied with prior to
the Closing Date, other than those in Sections 3.2, 3.3, 3.11, 3.13, and 3.19,
unless on or before June 1, 2008, Buyer notifies Sellers of a claim specifying
the factual basis of that claim in reasonable detail to the extent then known
by Buyer; and (ii) any claim with respect to Section 3.11, 3.13, or 3.19, or a
claim for indemnification or reimbursement not based upon any representation or
warranty or any covenant or obligation to be performed and complied with prior
to the Closing Date, unless such claim is made within ninety (90) days
following the expiration of the applicable statute of limitations, provided,
however, that a claim with respect to Sections 3.2 or 3.3 may be made at any
time. If the Closing occurs, Buyer will have no liability (for indemnification
or otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, unless
on or before June 1, 2008, Sellers notify Buyer of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Sellers.

 53
 

 

11.6.       Limitations on Amount – Sellers.

Sellers will have no liability (for indemnification or
otherwise) with respect to the matters described in clause (a), clause (b) or,
to the extent relating to any failure to perform or comply prior to the Closing
Date, clause (c) of Section 11.2:

(a)            unless
and until the total of all Damages with respect to each such matter exceeds $10,000.00,
and then only for the amount by which the aggregate of such Damages exceed
$80,000.00; or

(b)           to the
extent the Damages exceed $4,000,000.00.

However,
this Section 11.6 will not apply to (i) any claim with respect to
representations and warranty contained in Sections 3.2, 3.3, 3.11, 3.13 and
3.19; or (ii) any Breach of any of Sellers’ representations and warranties of
which either Seller had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional Breach by either Seller
of any covenant or obligation or matters covered in Section 10.2, and Sellers
will be jointly and severally liable for all Damages with respect to such
Breaches.

11.7.       Limitations on Amount – Buyer.

Buyer will have no liability (for indemnification or
otherwise) with respect to the matters described in clause (a) or (b) of
Section 11.4 until the total of all Damages with respect to each such matter
exceeds $10,000.00, and then only for the amount by which the aggregate of such
Damages exceed $80,000.00. However, this Section 11.7 will not apply to any
Breach of any of Buyer’s representations and warranties of which Buyer had
Knowledge at any time prior to the date on which such representation and
warranty is made or any intentional Breach by Buyer of any covenant or
obligation, and Buyer will be liable for all Damages with respect to such
Breaches.

11.8.       Escrow Claims.

Upon notice to Sellers specifying in reasonable detail
the basis for a Claim, Buyer may give notice of a Claim in such amount under
the Escrow Agreement. The exercise of nor the failure to give a notice of a
Claim under the Escrow Agreement will constitute an election of remedies or
limit Buyer in any manner in the enforcement of any other remedies that may be
available to it.

11.9.       Procedure for Indemnification — Third Party
Claims.

(a)           Promptly
after receipt by an indemnified party under Section 11.2, 11.4, or (to the
extent provided in the last sentence of Section 11.3) Section 11.3 of notice of
the commencement of any Proceeding against it, such indemnified party will, if
a claim is to be made against an indemnifying party under such Section, give
notice to the indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any indemnified party, except to the

 54
 

 

extent
that the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party’s failure to give such notice.

(b)           If any
Proceeding referred to in Section 11.9(a) is brought against an indemnified
party and it gives notice to the indemnifying party of the commencement of such
Proceeding, the indemnifying party will, unless the claim involves Taxes, be
entitled to participate in such Proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable assurance
to the indemnified party of its financial capacity to defend such Proceeding
and provide indemnification with respect to such Proceeding), to assume the
defense of such Proceeding with counsel satisfactory to the indemnified party
and, after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to the indemnified
party under this Section 10 for any fees of other counsel or any other expenses
with respect to the defense of such Proceeding, in each case subsequently
incurred by the indemnified party in connection with the defense of such
Proceeding, other than reasonable costs of investigation. If the indemnifying
party assumes the defense of a Proceeding, (i) it will be conclusively
established for purposes of this Agreement that the claims made in that Proceeding
are within the scope of and subject to indemnification; (ii) no compromise or settlement
of such claims may be effected by the indemnifying party without the
indemnified party’s consent unless (A) there is no finding or admission of any
violation of Legal Requirements or any violation of the rights of any Person
and no effect on any other claims that may be made against the indemnified
party, and (B) the sole relief provided is monetary damages that are paid in
full by the indemnifying party; and (iii) the indemnified party will have no liability
with respect to any compromise or settlement of such claims effected without
its consent. If notice is given to an indemnifying party of the commencement of
any Proceeding and the indemnifying party does not, within ten days after the
indemnified party’s notice is given, give notice to the indemnified party of
its election to assume the defense of such Proceeding, the indemnifying party
will be bound by any determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.

(c)           Notwithstanding
the foregoing, if an indemnified party determines in good faith that there is a
reasonable probability that a Proceeding may adversely affect it or its affiliates
other than as a result of monetary damages for which it would be entitled to indemnification
under this Agreement, the indemnified party may (at its own expense), by notice
to the indemnifying party, assume the exclusive right to defend, compromise, or
settle such Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).

(d)           Buyer and
Sellers hereby consent to the non-exclusive jurisdiction of any court in which
a Proceeding is brought against any Indemnified Person for purposes of any
claim that an Indemnified Person may have under this Agreement with respect to
such Proceeding or the matters alleged therein, and agree that process may be
served on Sellers with respect to such a claim anywhere in the world.

 55
 

 

11.10.    Procedure for Indemnification — Other Claims.

A claim for indemnification for any matter not
involving a third-party claim may be asserted by notice to the party from whom
indemnification is sought.

12.          GENERAL PROVISIONS

12.1.       Expenses.

Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, Representatives, counsel, and accountants. Sellers will cause the
Company not to incur any out-of-pocket transaction expenses in connection with
this Agreement other than out-of-pocket transaction expenses that are incurred
as of the Closing Date. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another party.

12.2.       Public Announcements.

Any public announcement or similar publicity with
respect to this Agreement or the Contemplated Transactions will be issued, if
at all, at such time and in such manner as Buyer determines. Unless consented
to by Buyer in advance or required by Legal Requirements, prior to the Closing
Sellers shall, and shall cause the Company to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
Sellers and Buyer will consult with each other concerning the means by which
the Company’s employees, customers, and suppliers and others having dealings
with the Company will be informed of the Contemplated Transactions, and Buyer
will have the right to be present for any such communication.

12.3.       Confidentiality.

Between the date of this Agreement and the Closing
Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, members, employees, agents, and advisors of Buyer and the
Company to maintain in confidence, and not use to the detriment of another
party or the Company] any [written, oral, or other information obtained in
confidence from] [written information stamped “confidential” when originally
furnished by another party or the Company in connection with this Agreement or
the Contemplated Transactions, unless (a) such information is already known to
such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such information is
required by or necessary or appropriate in connection with legal proceedings.

 56
 

 

If the Contemplated Transactions are not consummated,
each party will return or destroy as much of such written information as the
other party may reasonably request. Whether or not the Closing takes place,
Sellers waive, and will upon Buyer’s request, cause the Company to waive, any
cause of action, right, or claim arising out of the access of Buyer or its
representatives to any Trade Secrets or other confidential information of the
Company except for the intentional competitive misuse by Buyer of such Trade
Secrets or confidential information.

12.4.       Notices.

All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):

Notices to Buyer

 

Zumiez Inc.

6300 Merrill Creek
Parkway, Suite B

Everett, WA 98203

Attention: Richard M.
Brooks

Email: rick@zumiez.com

Telecopy: (425) 551-1555

 

with a copy (which
shall not constitute notice) to:

 

Carney Badley Spellman

701 5th Avenue, Suite
3600

Seattle WA 98104-7010

Attn: Steven J. Hopp

Email: hopp@carneylaw.com

Telecopy: 206 467-8215

 

Notices to Seller:

 

Gerald R. Anderson

116 Vermilion Court

Southlake, Texas 76092

E-mail: gra2219@aol.com

Tel. 817.946.8678

 57
 

 

Brandon C. Batton

22 Royal Oaks Blvd.

Hickory Creek, TX 75065

E-mail: relais@aol.com

Tel: 940.321.4944

 

with a copy to:

 

Rice M. Tilley, Jr.

Haynes and Boone, LLP

201 Main Street, Suite
2200

Fort Worth, Texas 76102

E-mail:
Rice.Tilley@haynesboone.com

Fax:  817.348.2384

Phone: 817.347.6611

12.5.       Dispute Resolutions.

Any dispute, claim or controversy arising out of or
relating to this Agreement or the breach, termination, enforcement,
interpretation or validity thereof, including the determination of the scope or
applicability of this Agreement to arbitrate, shall be determined (exclusively)
by arbitration in Seattle, Washington, before one arbitrator. The arbitration
shall be administered by JDR pursuant to its then applicable Arbitration Rules
and Procedures. Any award by the arbitrator may be entered as a judgment in any
court having jurisdiction. This clause shall not preclude parties from seeking
provisional remedies in aid of arbitration from a court of appropriate
jurisdiction. The arbitrator may, in the judgment, allocate all or part of the
costs of the arbitration, including the fees of the arbitrator and the
reasonable attorneys’ fees of the prevailing party.

12.6.       Jurisdiction; Service of Process.

Subject to Section 12.5, any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Washington, County of King, or, if it has or can acquire jurisdiction, in
the United States District Court for the Western District of Washington, and each
of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred
to in the preceding sentence may be served on any party anywhere in the world.

12.7.       Further Assurances.

The parties agree (a) to furnish upon request to each
other such further information, (b) to execute and deliver to each other such
other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.

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12.8.       Waiver.

The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.

12.9.       Entire Agreement and Modification.

This Agreement supersedes all prior agreements between
the parties with respect to its subject matter (including the Letter of Intent
between Buyer and Sellers dated March 22, 2006) and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive statement of
the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.

12.10.    Disclosure Letter.

(a)           The
disclosures in the Disclosure Letter, and those in any Supplement thereto, must
relate only to the representations and warranties in the Section of the
Agreement to which they expressly relate and not to any other representation or
warranty in this Agreement.

(b)           In the
event of any inconsistency between the statements in the body of this Agreement
and those in the Disclosure Letter (other than an exception expressly set forth
as such in the Disclosure Letter with respect to a specifically identified
representation or warranty), the statements in the body of this Agreement will
control.

12.11.    Assignments, Successors, and No Third-Party Rights.

Neither party may assign any of its rights under this
Agreement without the prior consent of the other parties, except that Buyer may
assign any of its rights under this Agreement to any Subsidiary of Buyer.
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties. Nothing expressed or referred to in this Agreement will
be construed to give any Person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and

 59
 

 

all
of its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and assigns.

12.12.    Severability.

If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.

12.13.    Section Headings, Construction.

The headings of Sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to “Section” or “Sections” refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word “including” does not
limit the preceding words or terms.

12.14.    Time of Essence.

With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.

12.15.    Governing Law.

This Agreement will be governed by the laws of the
State of Washington without regard to conflicts of laws principles.

12.16.    Counterparts.

This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.

[The balance of this page left intentionally blank, Signature page
follows.]

 60

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

	
  BUYER:

  	
  SELLERS:

  
	
  Zumiez
  Inc.

  	
   

  
	
   

  	
   

  
	
  /s/ Richard M.
  Brooks

  	
   

  	
  /s/ Gerald R.
  Anderson

  
	
  Richard M.
  Brooks

  Its President and CEO

  	
   

  	
  Gerald R.
  Anderson, as his separate property

  
	
   

  	
   

  
	
   

  	
  /s/ Brandon C.
  Batton

  
	
   

  	
  Brandon C.
  Batton, as his separate property

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AC Fast Forward,
  LLC, a Texas limited

  liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Brandon C.
  Batton

  
	
   

  	
  Brandon C.
  Batton, Its Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AC Fast Forward
  Mgt., LLC, a Texas

  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Gerald R.
  Anderson

  
	
   

  	
  Gerald R.
  Anderson, Its Member

  

 

 61

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